Integrated Circuits Agreement - Lucent Technologies Inc. and CD Radio Inc.
LUCENT TECHNOLOGIES / CD RADIO
AMENDED AND RESTATED
INTEGRATED CIRCUITS AGREEMENT*
THIS AMENDED AND RESTATED AGREEMENT, dated as of February 1, 1999 (this
"Agreement"), is made by and between Lucent Technologies Inc., a Delaware
corporation, acting through its Microelectronics Group, having an office at Two
Oak Way, Berkeley Heights, New Jersey 07922 ("Lucent") and CD Radio Inc., a
Delaware corporation, having its principal place of business at 1221 Avenue of
the Americas, 37th Floor, New York, New York 10036 ("CD Radio"). The effective
date of this Agreement is as of February 1, 1999.
Lucent and CD Radio are parties to that certain Integrated Circuits Agreement,
dated as of April 24, 1998 (the "Existing Agreement"). Lucent has completed
sufficient work under Phase 1 of the Existing Agreement to further detail the
efforts required to implement the intent of Phases 2 and 3 of this Agreement. As
a result, both Lucent and CD Radio desire to amend and restate the Existing
Agreement as provided in this Agreement.
IN CONSIDERATION OF the mutual covenants set forth hereinbelow, the parties
agree to the following terms and conditions:
PART 1: BUSINESS TERMS
1.0 BACKGROUND
This is an agreement between Lucent and CD Radio to develop a systems
engineering specification for the communications link of a Satellite Digital
Audio Radio Service ("S-DARS"), and a specification for a set of integrated
circuits ("ICs") for a receiver. Such ICs shall be comprised of (a) analog radio
frequency chip(s) used to covert the S-band signals to some intermediate
frequency; (b) analog intermediate frequency chip(s) used to convert the analog
signals to lower frequency analog signals; (c) conversion signal processor
chip(s) used to convert the encoded channel analog signals to digital and the
audio signal from digital to analog; and (d) baseband signal processor chip(s)
used to filter, decode the encoded channel and output the digital audio signal
and other channel data (such chips constitute the "chip set"). Upon the mutual
acceptance of the chip set specification by CD Radio and Lucent, Lucent shall
fabricate and deliver to CD Radio a prototype of the proposed receiver to verify
the communications link performance and thereafter design and manufacture first
prototypes and then production chip sets. It is Lucent's understanding that the
objective of the project is to develop a chip set for a low cost, addressable
receiver for CD Radio's broadcasts. The details given herein are a baseline,
with further details to evolve as the project proceeds.
-----------------
* This agreement is subject to a confidential treatment request. The
confidential portions have been omitted from this Form 8-K and have been
replaced by asterisks (*). The confidential portions have been filed
separately with the Commission as provided pursuant to Rule 24b-2 under the
Securities Exchange Act of 1934.
2.0 THREE PROJECT PHASES
2.1 The Lucent part of the project shall be completed in three phases:
1. authorship and delivery of a systems engineering document and the development
of a chip set requirement;
2. the specification of a chip set and the planning of the implementation of
this chip set and the fabrication and delivery of discrete and/or integrated
prototype receivers using existing components from one or more integrated
circuit ("IC") vendors to meet both engineering and marketing needs of CD Radio;
and
3. the design, layout, fabrication, and delivery of prototype ICs and, after
approval by CD Radio, production ICs for use in the consumer electronics
original equipment manufacturer's ("CE-OEM's") prototypes and production
units.1/
2.2. Lucent's IC development shall facilitate the implementation by CD
Radio of potential products which are capable of receiving CD Radio broadcasts,
including, without limitation, the following five products:
A radio, which shall include S-DARS capability, for installed car sound systems.
The antenna unit shall be hard-wired to the receiver;
A "Plug 'n' Play" ("PnP") adapter for a subscriber's tape cassette car sound
system;
A PnP adapter for a subscriber's compact disk ("CD") car sound system;
*
An adapter, suitable for mounting in the trunk, glove compartment or other area
of a vehicle, which will be capable of interfacing, either directly or by means
of FM modulation, with installed car sound systems. The antenna unit shall be
hard wired to the adapter unit.
Bringing these products to market requires a division of labor between Lucent,
CD Radio, and the CE-OEM. This Agreement outlines the roles and responsibilities
of each.
The chips for all potential products are similar and can be pursued in parallel.
However, Lucent and CD Radio recognize that the products identified in
paragraphs (b), (c) and
--------
1 There will be more than one CE-OEM. For the sake of brevity, in this Agreement
CE-OEM shall mean "consumer electronics original equipment manufacturers".
(d) above will require extra effort in a few critical areas of the design
dealing with the wireless antenna and low-power operation.
3.0 STATEMENT OF WORK
3.1 PHASE 1 - SYSTEMS ENGINEERING
The first task of Phase 1 shall be for Lucent and CD Radio to define and agree
on an overall system level specification.
The deliverables from the systems engineering phase are the communications link
systems engineering document, chip set requirements, a system simulator
(together with a non-exclusive, royalty free license to use Lucent provided
models), and applicable documentation.
The documents and simulator can be considered a prototype of a portion of the
earth station transmitter. This will enable CD Radio's studio/earth station
contractor to build a mission-critical version of the encoder that will connect
both (a) digital audio feeds from the CD Radio studio and (b) receiver command
and control output from CD Radio's customer center to (c) the satellite up-link
transmitter.
Note that the Lucent systems engineering work will not cover satellite tracking,
telemetry and control, nor the studios, nor the design and positioning of
terrestrial repeaters nor the billing of subscriber accounts.
CD Radio shall review and approve the work in Phase 1. After such review and
approval, Lucent shall not be responsible in the case that the communications
link does not meet CD Radio's need.
3.2 PHASE 2 - PROTOTYPE RECEIVER
To verify the systems engineering concepts, a prototype receiver will be built
by Lucent and delivered to CD Radio. Lucent shall build limited quantities
(approximately twelve (12)) of such prototype receiver by obtaining and
assembling existing parts from one or more component vendors. The prototype
receiver will enable early verification of the air interface specification and
receiver design, but may contain parts that are higher in cost/power/size than
the chip sets in a production receiver. As part of the prototype receiver
development, Lucent shall identify certain critical non-Lucent manufactured
components (oscillators and filters) and shall create specifications and
identify approved manufacturers for such components. Lucent shall make the
prototype receiver and the component specifications referred to in the preceding
sentence available to a CE-OEM for engineering into a product at CD Radio's
request. Making the prototype receiver into a product may require the CE-OEM to
modify the design to lower the implementation
cost and/or size and/or power. In such a case, Lucent agrees to grant a
royalty-bearing, non-exclusive license, on commercially reasonable terms, to CD
Radio and/or the CE-OEM under any issued patent owned by Lucent (to the extent
Lucent has a right to grant such license) which is infringed by such design. No
further payment by CD Radio is necessary if such patent rights are already
exhausted in the sale by Lucent to CD Radio and/or the CE-OEM of a Lucent
integrated circuit. Such a patent license will be limited to the specific field
of use in which the Lucent integrated circuits are intended to be used, namely
CD Radio's satellite digital audio broadcasting service and its associated
terrestrial repeaters. Specifically, the license will forbid the use of such
patents in the field of wholly terrestrial broadcasting.
CD Radio and its CE-OEM shall test, review, and approve the work in Phase 2.
After such review and approval, Lucent shall not be responsible in the case that
the communications link does not meet CD Radio's need.
After approval, the chip set design will proceed to Phase 3.
3.3 PHASES 1 AND 2 - PAYMENT SCHEDULE
CD Radio shall pay Lucent an aggregate of $15,250,000 in connection with the
development work associated with Phase 1 and Phase 2 of the Project (such
amount, the "Phase 1 and 2 NRE"). The Phase 1 and 2 NRE shall not include any
amounts payable to Lucent for the Studio Perceptual Audio Coder Encoder
("SPACE").
The Phase 1 and 2 NRE shall only be payable by CD Radio to Lucent on the
following dates or, with respect to payments which are subject to the
achievement of a milestone, upon satisfaction of the following milestones and,
in each case, in the amount set forth opposite such milestone.
Date or Milestone Amount
----------------- ------
Upon execution of the Existing *
Agreement
Upon execution of this Agreement *
Upon delivery to CD Radio of completed *
documents relating to CD Radio systems
engineering architecture (which is
expected to be accomplished in March
1999)
March 1, 1999 *
Upon delivery to CD Radio of a detailed *
implementation plan relating to CD Radio
systems engineering architecture (which is
expected to be accomplished in April
1999)
May 1, 1999 *
June 1, 1999 *
July 1, 1999 *
Upon delivery to CD Radio of the *
hardware specification for the prototype
receiver (which is expected to be
accomplished in August 1999)
October 1, 1999 *
November 1, 1999 *
Upon delivery to CD Radio of a *
completed prototype receiver (which is
expected to be accomplished in December
1999)
Total $15,250,000
In the event that at any time Lucent becomes aware that the costs to Lucent of
the development work contemplated by Phase 1 and Phase 2 of this Agreement are
reasonably expected to exceed $15,250,000, Lucent shall promptly notify CD Radio
in writing and seek approval from CD Radio to incur such additional costs. If CD
Radio approves such additional costs, CD Radio will be invoiced by Lucent
monthly for the costs to Lucent of any additional time and materials that may be
required to complete the development work contemplated by Phase 1 and Phase 2 of
this Agreement. All invoices for additional costs to Lucent of any additional
time and materials that may be required to complete the development work
contemplated by Phase 1 and Phase 2 of this Agreement shall be accompanied by
information reasonably required to support and justify such additional costs.
Upon completion of a milestone described above, Lucent shall deliver to
CD Radio a certificate, signed by a responsible manager of Lucent, stating that
such milestone has been achieved and attaching information reasonably necessary
to support such statement. Within fifteen (15) days of receipt by CD Radio of
such certificate, CD Radio shall notify Lucent whether or not CD Radio agrees
that such milestone has been achieved. If CD Radio disputes that such milestone
has been achieved, CD Radio shall inform Lucent in writing of the reasons why it
believes such milestone has not been achieved. No amount shall be due and
payable with respect to any milestone until CD Radio agrees that such milestone
has been achieved. If CD Radio agrees that the applicable milestone has been
achieved, then CD Radio shall wire transfer in immediately available funds the
portion of the Phase 1 and 2 NRE related to such milestone within twenty (20)
days of receipt by CD Radio of the certificate relating to such milestone.
Ten (10) days prior to the due date of any payment which is not a
milestone payment, Lucent shall deliver to CD Radio an invoice with respect to
such payment. Each such invoice shall be accompanied by information reasonably
required to support and justify the payment.
Any funds paid to Lucent for development work during Phase 1 and Phase
2 of this Agreement and not spent by Lucent on such work shall be refunded to CD
Radio at the earlier of the conclusion of Phase 2 or the termination of this
Agreement.
3.4 PHASE 3 -- IC DEVELOPMENT AND PROTOTYPE PRODUCTION
CD Radio shall pay Lucent an aggregate of $11,700,000 in connection with the
development work associated with Phase 3 of the Project (such amount, the "Phase
3 NRE"). The Phase 3 NRE shall include all amounts due to Lucent for the design
and development of the integrated circuit chip set. The Phase 3 NRE shall not
include any amounts payable to Lucent for the SPACE.
The Phase 3 NRE shall only be payable by CD Radio to Lucent on the
following date or, with respect to payments which are subject to the achievement
of a milestone, upon satisfaction of the following milestones and, in each case,
in the amount set forth opposite such milestone.
Date or Milestone Amount
----------------- ------
Upon delivery to CD Radio of the completed *
specifications for the chip set (which is expected
to be accomplished in August 1999)
January 15, 2000 *
Mask approval by CD Radio of chip set (which *
is expected to be achieved in February 2000)
March 1, 2000 *
Upon delivery to CD Radio of first silicon of *
chip set (which is expected to be achieved in
April 2000)
April 15, 2000 *
June 1, 2000 *
Upon delivery to CD Radio of second silicon *
chip sets (which is expected to be achieved in
June 2000)
Total $11,700,000
In the event that at any time Lucent becomes aware that the costs to Lucent of
the development work contemplated by Phase 3 of this Agreement are reasonably
expected to exceed $11,700,000, Lucent shall promptly notify CD Radio in writing
and seek approval from CD Radio to incur such additional costs. If CD Radio
approves such additional costs, CD Radio will be invoiced by Lucent monthly for
the costs to Lucent of any additional time and materials that may be required to
complete the development work contemplated by Phase 3 of this Agreement. All
invoices for additional costs to Lucent of any additional time and materials
that may be required to complete the development work contemplated by Phase 3 of
this Agreement shall be accompanied by information reasonably required to
support and justify such additional costs.
Upon completion of a milestone described above, Lucent shall deliver to
CD Radio a certificate, signed by a responsible manager of Lucent, stating that
such milestone has been achieved and attaching information reasonably necessary
to support such statement. Within fifteen (15) days of receipt by CD Radio of
such certificate, CD Radio shall notify Lucent whether or not CD Radio agrees
that such milestone has been achieved. If CD Radio disputes that such milestone
has been achieved, CD Radio shall inform Lucent in writing of the reasons why it
believes such milestone has not been achieved. No amount shall be due and
payable with respect to any milestone until CD Radio agrees that such milestone
has been achieved. If CD Radio agrees that the applicable milestone has been
achieved, then CD Radio shall wire transfer in immediately available funds the
portion of the Phase 3 NRE related to such milestone within twenty (20) days of
receipt by CD Radio of the certificate relating to such milestone.
Ten (10) days prior to the due date of any payment which is not a
milestone payment, Lucent shall deliver to CD Radio an invoice with respect to
such payment. Each such invoice shall be accompanied by information reasonably
required to support and justify the payment.
Any funds paid to Lucent for development work during Phase 3 of this
Agreement and not spent by Lucent on such work shall be refunded to CD Radio at
the earlier of the conclusion of Phase 3 or the termination of this Agreement.
3.5 DESIGN HAND-OFF REQUIREMENTS
CD Radio shall review Phase 3 of the project at a chip set specification meeting
and a Firmware Sign-off meeting. Review and approval by CD Radio at these two
points plus signature of the post-layout mask sign off sheet (including
prototype IC acceptance criteria) shall constitute the Design Hand-Off
Requirements mentioned below in Part 3 of this Agreement.
3.6 PRODUCTION IC PRICING
Definitive production IC pricing is unknown at this time. Lucent agrees that the
purchase price for each chip set generated from second silicon (which for
purposes of this Agreement shall mean first silicon base layers with one or more
new metal layers), after giving effect to any discounts required by this
Agreement, shall have a target price of $55 per chip set, but in no event shall
the purchase price exceed $95 per chip set, so long as such chip set does not
include any field programmable gate arrays. Prior to commencing production of
chip sets, Lucent will discuss with CD Radio a means to achieve (a) a purchase
price of the chip sets generated from second silicon that meets the cost
constraints of CE-OEMs (including, the possibility of adjusting the discount
applicable to chip sets); and (b) a purchase price of chip sets generated from
second silicon that is reasonable in relation to Lucent's costs to produce such
chip sets. At or before the completion of Phase 2, Lucent and CD Radio shall
establish a definitive pricing plan for commercially produced quantities of the
chip set generated from second silicon and the second generation of the chip set
(which for the purpose of this Agreement shall mean all new base layers of a
more highly optimized chip set), based on the method outlined in Part_3, Section
12. Based on the outcome of this pricing plan, the period of exclusivity
outlined in Section 6.0 will be determined.
Notwithstanding anything to the contrary contained in this Agreement, Lucent
agrees that CD Radio, or any CE-OEM designated by CD Radio, shall be entitled to
a discount (which is described in the table below) from the purchase price for
chip sets until such time as the number of chip sets purchased by CD Radio,
and/or any CE-OEMs designated by CD Radio, multiplied by the dollar amount of
the discount applicable to each chip set equals the sum of all payments by CD
Radio to Lucent on account of Phase 1 and 2 NRE, Phase 3 NRE and the reimbursed
costs of all third-party contractors engaged by Lucent to assist in the
development effort with respect to the project. The discount applicable to each
chip set is set forth below:
Quantity of Chip Sets Percentage Discount
--------------------- -------------------
--------------------------------------- ---------------------------------------
* *
--------------------------------------- ---------------------------------------
* *
--------------------------------------- ---------------------------------------
* *
--------------------------------------- ---------------------------------------
More than * *
--------------------------------------- ---------------------------------------
CD Radio intends to use the jointly owned chip specification to seek competitive
bids on the chip set and to use any responses for the purposes of comparison
with the price based on the method outlined in Part 3, Section 12.
4.0 ENGINEERING RISK
Lucent shall not be held liable by CD Radio or its subsidiaries, affiliates,
CE-OEM suppliers, subcontractors and customers, nor by any of their officers,
shareholders, employees, representatives, agents, attorneys and any other such
persons if the engineering objectives involved in this project are not met, so
long as Lucent's
engineering work has been performed in a professional manner in accordance with
generally understood industry standards.
5.0 SCHEDULE
5.1 Lucent acknowledges that CD Radio desires to launch limited service
in the first half of 2000. Lucent shall evaluate several methods to determine if
a prototype version of the CD Radio receiver can be engineered and produced with
minimum impact to the production chip set. Additionally, Lucent will exercise
continuous diligence to optimize the overall development of the chip set to
achieve earlier availability of the production chip set. Specifically, Lucent
will explore the following methods, in parallel, to achieve such goal: (i)
assess the practicality of the CE-OEM manufacturing the receiver prototype
developed in Phase 2 into a product for a June 1, 2000 service launch; and (ii)
continuously evaluating the ability to optimize the implementation phase of the
project to improve the schedule.
5.2 Notwithstanding anything contained above, Lucent shall use
commercially reasonable efforts to deliver production chip sets contemplated by
Phase 3 of this Agreement to CD Radio and/or one or more CE-OEMs identified by
CD Radio no later than June 1, 2000. In addition, Lucent shall use commercially
reasonable efforts to complete the following tasks in the development of chip
sets for CD Radio on or before the date set forth opposite the applicable item.
Timetable
---------
Delivery to CD Radio of completed documents March 1999
relating to CD Radio systems engineering
architecture
Delivery to CD Radio of the completed August 1999
specifications for the chip set
Delivery to CD Radio of completed prototype December 24, 1999
receiver
Mask approval by CD Radio of chip set February 2000
Delivery to CD Radio of first silicon of chip set April 2000
Delivery to CD Radio of second silicon of chip set June 2000
Both Lucent and CD Radio recognize that the schedule set forth above is
aggressive and is based upon the ability of Lucent to accomplish portions of the
development work contemplated by Phase 1, Phase 2 and Phase 3 of this Agreement
in parallel. Lucent and CD Radio acknowledge and agree that Lucent shall have no
liability as a result of the failure to meet the timetable set forth above.
Lucent agrees that it shall continually evaluate the development work
contemplated by Phase 1, Phase 2 and Phase 3 of this Agreement in an effort to
achieve the schedule set forth above.
6.0 ONE WAY EXCLUSIVITY AND GUARANTEED MINIMUM PURCHASE
CD Radio and its CE-OEM shall make Lucent their exclusive supplier of CD Radio's
SDARS receiver chip sets, for a limited period, as described below.
Nothing in this Agreement prevents Lucent from supplying the same or
similar chips incorporating any of CD Radio's Intellectual Property Rights
("IPRs") to any other of its present or future customers, including but not
limited to CD Radio's competitor(s), so long as such customers have entered into
a license agreement with CD Radio and a suitable royalty is paid to CD Radio (as
discussed under "Intellectual Property" below). Use of existing CD Radio IPR by
Lucent in serving non-CD Radio customers in the S-DARS application area is
contingent on CD Radio deciding to license any such IPR as may be used in such
ICs. Use of existing CD Radio IPR by Lucent in serving the designated CE-OEM is
hereby granted royalty free during the exclusivity period described below. Use
of existing CD Radio IPR by Lucent in serving any CD Radio customers after the
exclusivity period has ended is hereby granted royalty free.
The exclusivity arrangement shall be defined by the table below. The
pricing in the table does not constitute a quote. The start date shall be the
date that the 1,000th receiver built from the second generation of the chip set
is sold. Lucent agrees that the target price for the second generation of the
chip set shall be $35 per chip set. All prices contained in the chart identified
below shall be prior to giving effect to any discounts required by Section 3.6
of this Agreement.
Initial Production Unit Exclusivity period
Selling Price (months)
-------------------------- ----------- ---------- ----------------------
>= * *
-------------------------- ----------- ---------- ----------------------
-------------------------- ----------- ---------- ----------------------
>= * and< * *
-------------------------- ----------- ---------- ----------------------
>= * and< * *
-------------------------- ----------- ---------- ----------------------
>= * and< * *
-------------------------- ----------- ---------- ----------------------
>= * and< * *
-------------------------- ----------- ---------- ----------------------
< * *
-------------------------- ----------- ---------- ----------------------
CD Radio may cancel the exclusivity arrangement if Lucent fails to
deliver to orders prototype ICs within fifteen (15) months from the date of the
first payment by CD Radio or any CE-OEM toward production chip sets.
Thereafter, CD Radio may cancel any exclusivity remaining if Lucent
fails to deliver on orders a minimum of one (1) million production chip sets
during the twelve (12) months following the start date, with a minimum of 75,000
in any given month.
Thereafter, CD Radio may cancel any exclusivity remaining if Lucent
fails to deliver on orders a minimum of 450,000 chip sets in any given month.
Notwithstanding the above three (3) paragraphs, CD Radio shall not have
the right to cancel the exclusivity arrangement if Lucent halts delivery due to
non-payment of Lucent invoices for previously delivered services or products
relating to this project.
If CD Radio or the CE-OEM does not order and pay for a minimum of
1,000,000 delivered chip sets within the exclusivity period, CD Radio will
compensate Lucent in the amount of $2,000,000 minus $2 per chip set actually
ordered, delivered and paid for.
7.0 TERMINATION FOR CONVENIENCE
Either party may terminate this Agreement without cause upon six (6)_months
written notice to the other party. Upon termination of this Agreement without
cause, neither party shall be liable to the other, either for compensation or
for damages of any kind or character whatsoever, whether on account of the loss
by Lucent or CD Radio of present or prospective profits on sales or anticipated
sales, or expenditures, investments or commitments made in connection therewith,
or on account of any other cause or thing whatsoever, except that termination
shall not prejudice or otherwise affect the rights or liabilities of the parties
with respect to any indebtedness then owing by either party to the other.
In the event that Lucent terminates this Agreement pursuant to this
Section, Lucent shall, at its sole cost and expense, transfer all technology
developed by Lucent prior to the termination of this Agreement (including all
documentation and specifications relating to the project) as soon as reasonably
practicable prior to such termination to not more than two vendors selected by
CD Radio. Lucent agrees, at its sole cost and expense, to cooperate with CD
Radio and not more than two vendors selected by CD Radio to facilitate such
technology transfer as soon as reasonably practicable.
Effective on the date that Lucent delivers notice to CD Radio of the
termination of this Agreement pursuant to this Section, CD Radio shall be
relieved of all of its future obligations to pay Lucent pursuant to this
Agreement. Notwithstanding the foregoing, in the event that Lucent terminates
this Agreement because it has determined that the engineering goals of this
Agreement cannot be achieved, then CD Radio shall be obligated to pay Lucent
pursuant to this Agreement until the date of termination of this Agreement. If
CD Radio terminates this Agreement for convenience pursuant to this Section,
then CD Radio shall be obligated to pay Lucent pursuant to this Agreement until
the date of termination of this Agreement.
8.0 CONSUMER ELECTRONICS ORIGINAL EQUIPMENT MANUFACTURER (CE-OEM)
Lucent agrees to assist CD Radio in its efforts to arrange one or more CE-OEMs,
including any contract manufacturers engaged by CD Radio, to manufacture devices
capable of receiving CD Radio broadcasts. The Lucent chip set shall include all
Lucent designed ICs done specifically for the CD Radio receiver, and exclude any
CE-OEM or original equipment manufacturer unique devices.
9.0 THE PROJECT MANAGER
Lucent shall at all times assign, on a full-time basis, a project
manager (the "Project Manager") to oversee the development work contemplated by
this Agreement. The Project Manager shall be a senior Lucent employee reasonably
acceptable to CD Radio. The Project Manager shall regularly consult with CD
Radio personnel regarding the status, budget and schedule of the development
efforts contemplated by this Agreement. In addition, the Project Manager shall
regularly consult with CD Radio personnel regarding such other matters related
to the development work contemplated by this Agreement as CD Radio may
reasonably request. Within fifteen (15) days of the end of each calendar
quarter, the Project Manager shall deliver to CD Radio a written report which
shall include: (i) a summary of the development work undertaken during the
preceding calendar quarter;
(ii) a reasonable summary of what the funds expended on the development effort
during the preceding calendar quarter were used for; (iii) a summary of all
development milestones achieved during the preceding calendar quarter; and (iv)
a projection of the development work accomplishments and expenditures for the
current calendar quarter.
PART 2: TERMS AND CONDITIONS APPLYING TO PHASES ONE AND TWO PURSUANT TO THIS
AGREEMENT
1.0 BINDING EFFECT
This Agreement is comprised of Parts 1, 2, and 3. The terms set forth in Parts 1
and 2 shall govern Phases 1 and 2, while the terms set forth in Parts 1 and 3
(as Part 3 may be amended by the parties before initiation of Phase 3) shall
govern Phase_3, if Phase 3 is initiated by CD Radio in its sole discretion. In
either case, Part 1 is incorporated by reference and the terms set forth in Part
1 shall prevail in the event of any conflict.
2.0 CONFIDENTIALITY
2.1 All information furnished or disclosed by one disclosing party to
the other receiving party which is marked with a restrictive notice or otherwise
tangibly designated as proprietary (hereinafter "Information") shall be deemed
the property of the disclosing party and shall be returned to the disclosing
party upon request. Unless such Information:_(a) was previously known to the
receiving party free of any obligation to keep it confidential, or (b) has been
or is subsequently made public by the disclosing party or a third party under no
obligation of confidentiality, or (c) is independently developed by the
receiving party, then the receiving party shall, for a period ending three (3)
years after the conclusion of this Agreement, use the same degree of care, but
no less than a reasonable standard of care, as it uses with regard to its own
proprietary information to prevent disclosure, use or publication thereof.
Except as set forth in section 2.2 below, information furnished hereunder may be
used by either party only for performance under this Agreement and may be used
for other purposes only upon such terms and conditions as may be mutually agreed
upon in writing
2.2 Neither party shall disclose any of the terms and conditions of
this Agreement without the prior written consent of the other party.
Notwithstanding the foregoing, Lucent agrees that CD Radio may disclose a
summary of the material terms and conditions of this agreement in its reports,
registration statements and other documents required to be filed with the
Securities and Exchange Commission and as otherwise may be required by the rules
and regulations of the SEC or any other applicable regulatory agencies. To the
extent practicable, CD Radio will afford Lucent a reasonable opportunity to
review and comment on any such public disclosure prior thereto and shall
consider in good faith any proposed modification of such disclosure suggested in
writing by Lucent a reasonable period of time prior to the time public
disclosure is required to be made by CD Radio. At the request of Lucent, CD
Radio will apply for confidential treatment of any portions of this Agreement
which Lucent designates as being a "trade secret" within the meaning of the
Freedom of Information
Act and will diligently pursue obtaining an exemption from any such disclosure
requirements.
2.3 The parties agree that their obligations under this Section 2.0
shall survive and continue after any termination of this Agreement.
3.0 OWNERSHIP OF INTELLECTUAL PROPERTY
3.1 All intellectual property developed or created prior to the
effective date of this Agreement ("Existing Intellectual Property") is and shall
remain the property of the party who made, developed or created or presently
owns such Existing Intellectual Property and, unless otherwise expressed in this
Agreement, no license is implied or granted herein to any Existing Intellectual
Property by virtue of this Agreement. The parties acknowledge and agree that, as
between them, any new intellectual property that is jointly developed or created
during Phases 1 and 2 and after the effective date of this Agreement ("New
Intellectual Property") shall be the joint property of the parties and each
party shall be free to use and exploit such jointly owned New Intellectual
Property without accounting in any way to the other party. In particular, the
systems engineering documents and the chip set specification jointly developed
under Phases 1 and 2 will be jointly owned by Lucent and CD Radio.
3.2 The IPR in the software simulator and emulator, and the prototype
receiver developed in Phases 1 and 2 will be solely owned by Lucent, but CD
Radio shall be granted a royalty-free license to use Lucent provided models in
the course of development of CD Radio's S-DARS.
4.0 LICENSES AND RIGHTS
No title or other ownership rights in any licensed products or any copies
thereof shall pass to CD Radio by virtue of any performance hereunder. CD Radio
agrees that it will not alter any notices on, prepare derivative works based on,
or reproduce, reverse engineer, disassemble or de-compile any software embodied
in licensed products or recorded in the purchased products furnished hereunder.
5.0 TERMS OF PAYMENT
CD Radio shall pay any amounts invoiced pursuant to the schedule and amounts set
forth in Part 1 pertaining to Phases 1 and 2 in accordance with the terms of
Section 3.3 of Part I. Delinquent payments are subject to an interest charge at
the rate of one and one-half percent (1 1/2%) per month, or portion thereof (but
not to exceed the maximum lawful rate).
6.0 TAXES
Any tax or related charge that Lucent shall be required to pay to or collect for
any government upon or with respect to services rendered hereunder shall be
billed to CD Radio as a separate item and paid by CD Radio, unless a valid
exemption certificate is furnished by CD Radio to Lucent.
7.0 EXPORT CONTROL
CD Radio acknowledges that technical information transmitted in connection
herewith may be subject to export restrictions under applicable law, including
the U.S. Department of Commerce Export Administration Regulations
("Regulations"), and CD Radio agrees to comply fully with same. CD Radio assures
Lucent that it will not transmit, sell, transfer or convey any products,
technical information or software, or goods produced through the use of same, to
any country, or citizen or resident of a country, other than the United States
without first securing the written consent, if required, of the U.S. Department
of Commerce. Lucent agrees to assist CD Radio in any efforts to secure from the
United States government, including the Department of Commerce, the right to
export chip sets to CE-OEM production and manufacturing facilities.
8.0 LIMITATION OF LIABILITY
NOTWITHSTANDING ANY OTHER PROVISION HEREOF, EXCEPT AS MAY ARISE OUT OF
INTENTIONAL MISCONDUCT OR GROSS NEGLIGENCE, LUCENT SHALL NOT BE LIABLE FOR
INCIDENTAL, INDIRECT, SPECIAL OR CONSEQUENTIAL DAMAGES OR FOR LOST PROFITS,
SAVINGS OR REVENUES OF ANY KIND, WHETHER OR NOT LUCENT HAS BEEN ADVISED OF THE
POSSIBILITY OF SUCH DAMAGES. THIS PROVISION SHALL SURVIVE FAILURE OF AN
EXCLUSIVE REMEDY.
9.0 ASSIGNMENT
Except to any entity that succeeds it as the result of a strategic merger,
acquisition, or other corporate reorganization, CD Radio shall not assign this
Agreement or any rights or obligations hereunder without the prior written
consent of Lucent, which shall not be unreasonably withheld. Any such attempted
assignment without Lucent's consent shall be void and ineffective.
10.0 NON-WAIVER
No course of dealing or failure of either party to strictly enforce any term,
right or condition of this Agreement shall be construed as a waiver of such
term, right or condition. If these terms and conditions conflict with terms and
conditions of a purchase order or procurement document issued by CD Radio, the
terms and conditions contained
herein shall govern. Lucent's acceptance of CD Radio's order is conditioned upon
CD Radio's acceptance of these terms and conditions in writing. Lucent's failure
to object to provisions contained in any communication from CD Radio shall not
be deemed a waiver of the provisions herein.
11.0 NO POWER TO BIND LUCENT TECHNOLOGIES
CD Radio specifically assures Lucent that it will not extend, directly or
indirectly, any warranty or representation in the name of Lucent or purport to
bind Lucent in any way.
12.0 TERMINATION FOR CAUSE
12.1 Either party may initiate termination of this Agreement for cause
by giving to the other party sixty (60) days prior written notice specifying the
reason for termination, which termination shall occur unless such reason for
termination is cured within such sixty (60) day period. A right to terminate
under this section shall arise upon the happening of any of the following
events:
12.1.1 a party becomes the subject of a bankruptcy petition filed in a
court in any jurisdiction, whether voluntary or involuntary; or
12.1.2 a receiver or a trustee is appointed for all or a substantial
portion of a party's assets; or
12.1.3 a party makes an assignment for the benefit of its creditors; or
12.2 a party fails to perform substantially any material covenant,
obligation, representation or warranty under this Agreement including but not
limited to the timely payment of any fees or other charges specified under this
Agreement.
13.0 USE OF TRADEMARKS
The parties recognize each other's rights in their respective trademarks,
service marks, trade names and logos. Except as permitted by United States
trademark law and except as expressly provided herein, nothing in this Agreement
shall imply the grant by one party to the other of a license to use (i) any
trademark, service mark, trade name or logo of that party or any of its
affiliates in connection with advertising, licensing, marketing or any other
use, or (ii) any trademark, service mark, trade name or logo that is confusingly
similar to a name or mark used by that party or any of its affiliates.
14.0 FORCE MAJEURE
Except with respect to CD Radio's obligation to make timely payments when due,
neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, explosion, war, strike, embargo, government requirement, civil or
military authority, act of God, nature or the public enemy, inability to secure
material or transportation facilities, act or omission of carriers or any other
causes beyond its reasonable control.
15.0 CHOICE OF LAW
The construction, interpretation and performance of this Agreement shall be
governed by the substantive laws, but not the conflicts of law, of the State of
New York. The U.N. Convention on Contracts for the International Sales of Goods
shall not apply hereto.
16.0 NOTICES
Unless otherwise provided, any notice required or permitted hereunder shall be
given in writing and shall be deemed effectively given upon: (i) personal
delivery to the party to be notified; (ii) seven (7) days after deposit in the
mail, by registered or certified mail, postage prepaid, return receipt
requested, (iii) on the day following facsimile transmission, with confirmed
transmission; or (iv) on the second day following deposit with a reputable
overnight courier service, in any case addressed to the party to be notified at
the address indicated for such party on the first page hereof, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other party.
17.0 PARTIAL INVALIDITY
If any paragraph, provision, or clause thereof in this Agreement shall be found
or be held to be invalid or unenforceable in any jurisdiction in which this
Agreement is being performed, the remainder of this Agreement shall be valid and
enforceable and the parties shall negotiate, in good faith, a substitute, valid
and enforceable provision which most nearly effects the parties' intent in
entering into this Agreement.
18.0 COUNTERPARTS
This Agreement may be executed in two or more counterparts, all of which, taken
together, shall be regarded as one and the same instrument.
19.0 SECTION HEADINGS
The section headings contained in this Agreement are for reference purposes only
and shall not affect in any way the meaning or interpretation of this Agreement.
20.0 RELATIONSHIP OF PARTIES
The parties to this Agreement are independent contractors. There is no
relationship of agency, partnership, joint venture, employment or franchise
between the parties. Neither party has the authority to bind the other or to
incur any obligation on its behalf.
21.0 DISPUTE RESOLUTION
21.1 If a dispute arises out of or relates to this Agreement, or its
breach, and if such dispute cannot be settled through good faith negotiations
within thirty (30) days, the parties agree to submit the dispute to a sole
mediator selected by the parties or, at any time at the option of a party, to
mediation by a mediator selected by the American Arbitration Association
("AAA"). The parties agree to make good faith efforts to resolve disputes by
mediation within thirty (30) days. If not thus resolved, it shall be referred to
a sole arbitrator selected by the parties within thirty (30) days of the
mediation, or in the absence of such selection, to AAA arbitration which shall
be governed by the United States Arbitration Act. The mediator or arbitrator
selected by the parties shall be knowledgeable in the law and technology and the
rules and regulations of the AAA. Such mediation or arbitration shall be
non-binding on the parties. In the event such dispute is not resolved either by
mediation or arbitration, then either party may initiate suit in the federal or
state courts in the State of New York.
21.2 The mediation or arbitration, if any, shall be held in New York
City. The requirement for mediation or arbitration shall not be deemed a waiver
of any right of termination under this Agreement and the mediator or arbitrator
is not empowered to act or make any award other than based solely on the rights
and obligations of the parties prior to any such termination.
21.3 The mediator or arbitrator may not limit, expand or otherwise
modify the terms of this Agreement.
21.4 Each party shall bear its own expenses but those related to the
compensation and expenses of the mediator or arbitrator shall be borne equally.
21.5 The mediator or arbitrator shall not have authority to award
punitive, exemplary or other damages in excess of compensatory damages and each
party irrevocably waives any claim thereto. The award shall be made within two
(2) months after selection of the mediator or arbitrator and may be entered in
any court.
21.6 The parties, their representatives, other participants and the
mediator and arbitrator shall hold the existence, content and result of
mediation or arbitration in confidence.
22.0 ENTIRE AGREEMENT
Except for any written agreement between the parties relating to confidentiality
of proprietary information, the terms and conditions contained in this Agreement
supersede all prior oral or written understandings between the parties and
shall constitute the entire Agreement between the parties with respect to the
subject matter of this Agreement. This Agreement shall not be modified or
amended except by a writing signed by CD Radio and Lucent.
LUCENT TECHNOLOGIES INC. CD RADIO INC.
By: /s/ Judith A. Sheft By: /s/ Andrew J. Greenebaum
----------------------- ----------------------------
Name: Judith A. Sheft Name: Andrew J. Greenebaum
Title: Intellectual Property & Title: Executive Vice President and
Compliance Vice President Chief Financial Officer
PART 3: TERMS AND CONDITIONS APPLYING TO PHASE THREE PRODUCTION PURSUANT TO
THIS AGREEMENT
1.0 AGREEMENT
This Agreement, effective as of the date of latest execution by a party hereto
shown hereon, applies to one or more products (hereinafter "Device(s)") that are
identified in Lucent's Business Terms to which these terms and conditions are
attached and any additional Agreement that references this Agreement,
(hereinafter "Agreement"). As used herein, "Agreement" refers to these terms and
conditions and those parts of Part 1: Business Terms (the "Business Terms") that
refer to Phase 3 of the project. This Agreement, together with the Business
Terms, supersedes all prior oral or written understandings between the parties,
and constitutes the entire agreement between the parties, with respect to all
transactions relating to the subject matter of the Business Terms. In the event
of a conflict between the applicable Business Terms and these terms and
conditions, the terms and conditions of the Business Terms shall prevail.
Additional or differing terms appearing on any purchase order or other
procurement document do not apply. This Agreement may not be modified or amended
except by a writing signed by both parties.
2.0 CHANGE OF BUSINESS TERMS
Proposed prices, fees and charges are valid only for the parameters or other
particulars relating to the Device as stated in the Business Terms. If any
changes in such parameters or particulars become necessary, including but not
limited to revision or redefinition of the specification or variations in
quantities, functional description, package type, or testing requirements, upon
mutual agreement the parties may revise such prices by amendment to the Business
Terms. Other proposed fees and charges are valid only for the respective
particulars stated in the Business Terms. The parties may also amend the
Business Terms with respect to any of such indicated fees and charges to make
adjustments for changes in CD Radio's requirements. Any such amendments to the
Business Terms shall reference the Business Terms and shall be further
identified by their respective dates and shall be signed by both parties.
3.0 PROTOTYPE IC APPROVAL
Within ninety (90) days after receipt of prototype ICs for any Device covered by
this Agreement, CD Radio may return any claimed non-conforming prototype ICs to
Lucent with a written rejection statement specifying the alleged failure or
failures of the prototype ICs to meet the acceptance criteria as provided in the
mask order sign off sheet or mutually agreed modifications thereof (the
"Acceptance Criteria"). If CD Radio does not return the prototype ICs with a
written rejection statement within such ninety (90)
day period, then the design and prototype ICs shall be deemed to have been
approved by CD Radio and development work shall be deemed to have been completed
by Lucent.
If any prototype IC does not meet the Acceptance Criteria and is
rejected by CD Radio, Lucent shall use commercially reasonable efforts to
replace it with one which does comply with the Acceptance Criteria. Lucent shall
not, however, be obligated to replace any non-complying prototype ICs of which
it has not been notified within ninety (90) days of shipment of same to CD
Radio. If Lucent, within ninety (90) days after receipt of CD Radio's timely
written rejection report, is unable to supply CD Radio with conforming prototype
ICs, then either party may by written notice to the other terminate this
Agreement as to such Device. Provided CD Radio has fulfilled all "Design
Hand-Off Requirements," as defined in the Business Terms, if so terminated,
unless otherwise provided in the Business Terms, all moneys paid by CD Radio to
Lucent with respect to such Device will be refunded in full within thirty (30)
days. Such refund of moneys shall be CD Radio's sole and exclusive remedy and
Lucent's entire liability with respect to non-conforming prototype ICs.
In the event that delivered prototype ICs comply with the Acceptance
Criteria, but do not function in CD Radio's application (e.g., logic design
error, change in required function, etc., not attributable to Lucent), CD Radio
shall pay all charges incurred for the development of the Device and then CD
Radio and Lucent may negotiate a mutually agreeable redesign schedule and price.
4.0 ORDERS
No order for production quantities of the Device shall be placed by CD Radio or
accepted by Lucent unless and until CD Radio has approved the prototype ICs for
the Device, paid all fees then due under the Business Terms and made any other
payments due to Lucent under any order based on this Agreement. All orders for
the design of the Device, for changes, for technical assistance, for production
quantities of the Device or for any other service by Lucent relating to this
Agreement shall be in writing, shall reference the Business Terms by its number
and date and any current amendments thereto by their respective dates, and shall
be signed by CD Radio. Lucent shall acknowledge all orders in writing.
5.0 RESCHEDULING OF ORDERS
CD Radio may reschedule an order pursuant to the following schedule:
Days.....Time between date of reschedule request and current factory promise
date.
DAYS RESCHEDULE
---- ----------
Within 30 days (0-30) No rescheduling
31 days to lead-time One time reschedule by up to 90 days beyond
factory promised date is permitted with no further
reschedule or cancellation.
Beyond lead-time Reschedules and cancellations without limits.
PULL-IN WITHIN AGREED DELIVERY DATE
CD Radio request date ("RD") may be pulled in as desired by CD Radio.
Lucent will make reasonable efforts to meet the new RD.
If improvement of the acknowledged date is possible, a new acknowledged date
will be issued.
If improvement cannot be made, the current acknowledged date will be retained;
in all cases, the requested pull-in date will be maintained with the order
history in the event an improvement can be made at a later date.
6.0 CANCELLATION OF ORDERS
Should CD Radio cancel any order which has been acknowledged and a shipping date
assigned, either in whole or in part, such cancellation shall be upon terms and
conditions that will compensate Lucent for any loss or damage resulting from
such cancellation. Notwithstanding the foregoing, Lucent shall use its best
efforts to mitigate any loss or damage resulting from such cancellation. Lucent
shall not be obligated to permit a cancellation if a reschedule has been
previously negotiated at CD Radio's request.
Compensation by CD Radio for production quantities of the Device shall be
according to the following schedule:
Days.....Time between date of cancellation and current factory promise date.
Liability.....Liability is the percentage of aggregate purchase price of the
canceled portion of the order.
DAYS PERCENT OF LIABILITY
---- --------------------
0 to lead-time 100
Greater than lead-time 0
7.0 WARRANTY
Lucent warrants the Device as a production item ("Item"), but not related
services or prototypes of any such Items, to be free from defects in material
and workmanship and to be in conformance with the written specification
contained in the Business Terms and amendments thereto, if any, and referenced
in an order by CD Radio. With respect to prototype ICs, Lucent shall use
commercially reasonable efforts to ensure freedom from defects and conformity
with written specifications, if any. If any defect in material or workmanship or
failure to conform to such specification ("Defect") is suspected in any such
Items, CD Radio, after obtaining a Returned Material Authorization Number from
Lucent, shall ship suspected defective samples of the Items to Lucent, following
Lucent's instructions regarding the return. No product will be accepted for
repair, replacement, credit or refund without the written authorization of and
in accordance with Lucent's instructions, which authorization and instructions
shall not be unreasonably withheld or delayed. Lucent shall analyze the
failures, making use, when appropriate, of technical information provided by CD
Radio relating to the circumstances surrounding the failures. Lucent will verify
whether any Defect appears in the Items. If Lucent determines that the returned
products are not defective, CD Radio may seek evaluation by a competent and
disinterested third party approved by Lucent (which approval shall not be
unreasonably withheld). If such third party determines that the returned
products are not defective, CD Radio shall pay Lucent all costs of handling,
inspection, repairs and transportation at Lucent's then prevailing rates. Lucent
shall, at Lucent's option, either credit or refund the purchase price or repair
or replace the defective product with the same or equivalent product without
charge at Lucent's manufacturing or repair facility provided: (i) CD Radio
notifies Lucent in writing of the claimed Defect within thirty (30) days after
CD Radio knows or reasonably should know of the claimed Defect and (ii)
Lucent's and/or the disinterested third party's examination of the Items
discloses that the claimed Defect actually exists. In the event of a
replacement, Lucent shall ship the replacing Items FOB point of origin, freight
prepaid to CD Radio's destination. Any replaced Item shall become Lucent's
property. The method of disposition of any replaced Items will be as mutually
agreed by both parties in writing. Lucent shall not be responsible for
de-installation or reinstallation of any Item or for the expenses thereof.
Repairs and replacements covered by the above warranty are warranted to be free
from defects as set forth above. Inspection and acceptance of Items by CD Radio
and/or payment therefor shall not relieve Lucent of responsibilities hereunder.
The above warranty does not apply to, and Lucent makes no warranties
with respect to products that: are software programs (except for software
programs Lucent developed and incorporated into the Device), experimental
products or prototypes (all of which are provided "AS IS") or to Items which
have been subjected to misuse, neglect, accident or abuse or operating or
environmental conditions that materially deviate from the parameters established
in applicable specifications; or have been improperly installed, stored,
maintained, repaired or altered by anyone other than Lucent; or have had their
serial numbers or month and year of manufacture or shipment removed, defaced or
altered. This warranty does not extend to any system into which a Device is
incorporated. This warranty applies only to CD Radio and its successors and may
not be assigned or extended by CD Radio to any of its customers or other users
of the Items. Lucent will not accept returns from CD Radio's customers or users
of CD Radio's products.
EXCEPT AS STATED IN THE SECTION ENTITLED WARRANTY, LUCENT, ITS SUBSIDIARIES AND
AFFILIATES, SUBCONTRACTORS AND SUPPLIERS MAKE NO WARRANTIES, EXPRESS OR IMPLIED,
AND SPECIFICALLY DISCLAIM ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A
PARTICULAR PURPOSE. CD RADIO'S SOLE AND EXCLUSIVE REMEDY SHALL BE LUCENT'S
OBLIGATION TO REPAIR OR REPLACE OR CREDIT OR REFUND AS SET FORTH ABOVE.
8.0 PROPRIETARY RIGHTS IN TECHNICAL INFORMATION
Unless otherwise agreed in writing, CD Radio-supplied design information
relating to the Device, as incorporated in circuit design information, test
vectors, test tapes, and special requirements specifications shall remain the
property of CD Radio. CD Radio hereby authorizes Lucent to use such information
and results solely and exclusively for the design, manufacture and sale of the
Device to CD Radio and in providing related production services. The systems
engineering documents and the chip set specification jointly developed under
Phases 1 and 2 will be jointly owned by Lucent and CD Radio. Lucent retains all
ownership rights in Lucent's processing information, mask works,
mask sets, macro cells, and the like used in design, production or in filling
orders placed by CD Radio hereunder. CD Radio has no rights in or to such
processing information, mask works, mask sets, macro cells, and the like.
If and to the extent CD Radio in its sole discretion, during the term
of this Agreement, reaches any agreement with a third party to license
intellectual property rights that are solely CD Radio's in the field of digital
broadcasting, it shall either: (a) negotiate with Lucent the grant of a
non-exclusive license to such intellectual property rights (with royalty terms
dependent on the agreement reached with the third party or parties) or (b)
provide in such third-party license (or licenses) for the grant of a sublicense
(with the terms of the sublicense to be as set forth in the third-party license
or exhibit thereto), in both cases for the purpose of permitting Lucent to make,
have made, use, lease, sell and import chip sets and receivers for the purposes
of commercializing digital broadcasting. In either case (license or sublicense),
Lucent shall be limited to supplying such Devices only to authorized CD Radio
licensees.
IPR developed by Lucent under Phase 3, as detailed herein, will be
owned exclusively by Lucent.
9.0 INTELLECTUAL PROPERTY INDEMNITY
Lucent will indemnify and hold harmless CD Radio from and against any claim by a
third party against CD Radio alleging that any Device furnished under this
Agreement directly infringes any patent, copyright or trademark of such third
party. Lucent shall have the obligation, at its own expense, to defend or settle
all such claims, subject to CD Radio's reasonable participation, at its own
expense, in the conduct of any such proceeding or settlement. Lucent shall
reimburse CD Radio for any costs incurred at Lucent's written request relating
to such claim and shall pay damages and costs assessed by final judgment against
CD Radio, or resulting from settlement, and attributable to such claim.
In addition, Lucent will have the right, at any time and at its option
and expense to: (i) procure for CD Radio the right to continue using such
Device; (ii) replace or modify any such Device provided or to be provided to
render it free of the infringement, while maintaining equivalent functionality
and complete compatibility with CD Radio's products; or (iii) require return of
such Device and refund the purchase price.
Lucent's obligations hereunder are conditioned upon: (i) CD Radio
giving Lucent written notice within thirty (30) days of any such claim asserted
against it; (ii) Lucent having complete control of the defense and settlement
thereof, subject to CD Radio's reasonable participation and consent (in the case
of settlement or litigation decisions affecting CD Radio); (iii) CD Radio
cooperating fully with Lucent, at Lucent's expense,
to facilitate the defense or settlement of such claim; and (iv) CD Radio's
substantial compliance with the material terms of this Agreement.
Notwithstanding the foregoing, Lucent shall have no obligation to
defend or settle any claim, and CD Radio shall indemnify and save harmless
Lucent and its suppliers and affiliated companies from all costs, expenses,
liabilities and claims, for any such claim: (i) arising from Lucent's compliance
with CD Radio's specifications, designs or instructions; or (ii) relating to any
Device furnished hereunder in combination with item(s), whether or not furnished
by Lucent, even if such combination results from the Device's necessary or
inherent use or the use for which the device is purchased.
The sale of any Device by Lucent shall not in any way confer upon CD
Radio, or upon anyone claiming under CD Radio, any license (expressly, by
implication, by estoppel or otherwise) under any patent claim of Lucent or
others covering or relating to any combination, machine or process in which such
Device is or might be used, or to any process or method of making such Device.
THE FOREGOING STATES THE SOLE AND EXCLUSIVE REMEDY AND OBLIGATION OF THE PARTIES
HERETO FOR INFRINGEMENT OR OTHER VIOLATION OF ANY INTELLECTUAL PROPERTY RIGHTS
ARISING OUT OF THIS AGREEMENT AND IS IN LIEU OF ALL WARRANTIES, EXPRESS, IMPLIED
OR STATUTORY, IN REGARD THERETO.
10.0 NONDISCLOSURE
During performance of this Agreement, the parties may disclose or furnish to
each other proprietary marketing, technical, or business information, including,
without limitation, products and/or software ("information"), relating to the
subject of this Agreement.
Information provided in tangible form shall be clearly marked as
proprietary. With respect to any devices, any technical information, including
but not limited to circuit layout, design, or software, embedded in any such
device is proprietary information notwithstanding the absence of any proprietary
marking on such device. Information provided orally will be considered
proprietary, if the disclosing party says it is proprietary at the time of oral
disclosure and summarizes it in a proprietary writing provided to the other
party within 20 (twenty) days of the oral disclosure.
The receiving party shall: (a) hold information in confidence using the
same degree of care as it normally exercises to protect its own proprietary
information; (b) restrict disclosure and use of information to employees
(including any contractors or consultants) with a need-to-know, and not disclose
it to any other parties; (c) advise those employees, contractors and consultants
of their obligations with respect to the information; (d) not copy, duplicate,
reverse engineer or decompile information; (e) use
the information only in furtherance of performance under this Agreement; and (f)
upon expiration or termination of this Agreement, return all information to the
disclosing party or at the request of the disclosing party, destroy such
information.
The receiving party shall have no obligation to keep confidential
information that: (a) was previously known to it free of any confidentiality
obligation; (b) was independently developed by it; (c) is or becomes publicly
available other than by unauthorized disclosure; (d) is disclosed to third
parties by the disclosing party without restriction; or (e) is received from a
third party without violation of any confidentiality obligation.
If a party is faced with legal action or a requirement under government
regulations to disclose or make available proprietary information received
hereunder, such party shall forthwith notify the furnishing party and, upon
request of the latter, cooperate in contesting such action or requirement at the
requesting party's expense. Neither party shall be liable for damages for any
disclosure or unauthorized access pursuant to legal action or government
regulations or for inadvertent disclosure, access, or use if the customary
degree of care as it uses with respect to its own proprietary information has
been exercised and if, upon discovery of such inadvertent disclosure, access, or
use the furnishing or receiving party has endeavored to prevent any further
(inadvertent or otherwise) disclosure or use.
Obligations imposed by this Section 10 shall survive for a period of
five (5) years after termination or expiration of this Agreement.
11.0 TERM OF AGREEMENT
The term of this Agreement as related to any specific Device covered by this
Agreement shall expire at the end of the purchase period specified in the
Business Terms and any agreed extensions thereto. Lucent reserves the right to
discontinue the supply of any Device(s) hereunder, subject to providing CD Radio
six (6) months written notice of discontinuation, during which period CD Radio
may place orders for reasonable quantities calling for delivery within lead-time
of the Device, and subject to the immediate termination of the exclusivity
period provided for in Part 1, if such period has not already concluded.
12.0 PRICE AND PAYMENT TERMS
Lucent and CD Radio will collect market price data on ICs with comparable
functions and volumes to the ICs in the chip set, for example, ICs used in IS-95
cellular telephones. Both parties will work together to estimate the difference
in value the actual ICs have with respect to the open market ICs. After
allowances are made for differences
in function and performance, the price Lucent charges for the chip sets shall
not exceed that of comparable ICs at comparable cumulative volume.
CD Radio shall pay the invoiced amount within thirty (30) days from the
date of Lucent's invoice. Payment terms for all design and development
activities of Lucent are as specified in the Business Terms. Lucent may exercise
an option to assess an interest charge of up to one and one-half percent (1
1/2%) per month on all amounts which are not timely paid (but not to exceed the
maximum lawful rate). CD Radio hereby grants to Lucent a purchase money security
interest in the product to secure the purchase price of the product until the
purchase price is paid in full. CD Radio agrees to execute and deliver all
documents reasonably requested by Lucent to perfect and maintain Lucent's
security interest. Orders are subject to a maximum outstanding credit limit
(measured counting all outstanding invoices, whether or not past due, combined
with the value of all accepted orders) as reasonably determined by Lucent.
Lucent may refuse to accept purchase orders, if such acceptance would result in
CD Radio exceeding such credit limit. The amount of credit or terms of payment
may be changed or credit withdrawn by Lucent at any time upon reasonable advance
notice to CD Radio. Each shipment shall constitute an independent transaction
and CD Radio shall pay for same in accordance with the specified payment terms.
Lucent will invoice CD Radio upon shipment. If shipments are delayed by CD
Radio, Lucent may invoice CD Radio when Lucent is prepared to ship. Lucent may
invoice CD Radio immediately upon termination or cancellation of any order.
Prices shall be quoted and invoices shall be rendered and paid in United States
currency.
13.0 DELIVERY, TITLE, RISK OF LOSS AND TRANSPORTATION
Unless otherwise agreed to by Lucent in writing as part of the Business Terms or
any amendment thereto referenced by CD Radio in an order, (a) delivery terms on
shipments to any point in the United States shall be F.O.B. point of origin, and
(b) delivery terms on shipments to any point outside of the United States shall
be pursuant to Incoterms 1990 (FCA, country of export). Where, in order to meet
CD Radio's requests, Lucent ships or packs the Device or other materials in
other than its normal manner for shipment, additional billing may be rendered.
risk of loss shall pass to CD Radio upon delivery.
14.0 PRODUCT CHANGES
Lucent may at any time make changes in the Devices (i) that do not materially
affect physical or functional interchangeability or performance or (ii) when
required for purposes of safety. In the case of (ii), Lucent shall ensure that
such changes do not adversely affect the functionality of the Device or its
compatibility with CD Radio's products. No changes by Lucent may result in any
price increase.
15.0 MANUFACTURING FACILITY
Notwithstanding anything contained herein to the contrary, Lucent reserves the
right to manufacture the Device in any Lucent-qualified facility. Lucent also
reserves the right to transfer production from one qualified facility to another
or to manufacture at multiple qualified facilities.
16.0 EXCLUSIVE REMEDIES AND LIMITATIONS OF LIABILITY
A. For purposes of the exclusive remedies and limitations of liability
set forth in this section, Lucent shall be deemed to include Lucent Technologies
Inc., its subsidiaries and affiliates and the directors, officers, employees,
agents, representatives, subcontractors and suppliers of all of them; and
"Damages" shall be deemed to refer collectively to all injury, damage, loss or
expense incurred.
B. Lucent's entire liability and CD Radio's exclusive remedies against
Lucent for any damages caused by any Device defect or failure, or arising from
the performance or non-performance of any work, regardless of the form of
action, whether in contract, tort, including negligence, strict liability or
otherwise, except as may arise from intentional misconduct or gross negligence,
shall be:
1. For infringement, the remedies set forth in the section entitled
Intellectual Property Indemnity;
2. For failure to deliver conforming prototypes, CD Radio's sole and
exclusive remedy and Lucent's entire liability shall be CD Radio's right to a
refund of moneys paid by CD Radio as provided in Section 3 of this Part 3. For
any other failure of the Device or work performed, the remedies stated in the
section entitled Warranty;
3. For delays in delivery of production quantities, Lucent shall have
no liability unless the delivery is delayed by more than thirty (30) days by
causes not attributable either to CD Radio or to conditions beyond Lucent's
reasonable control, in which case CD Radio shall have the right, as its sole
remedy, to cancel the order without incurring cancellation charges;
4. For bodily injury or death to any person proximately caused by
Lucent, CD Radio's right to proven direct damages; and
5. For claims other than set forth above, Lucent's liability shall be
limited to direct damages that are proven, in an amount not to exceed one
hundred thousand ($100,000) dollars.
C. Notwithstanding any other provision of this Agreement, Lucent shall
not be liable for incidental, indirect, special, exemplary or consequential
damages or for lost profits, savings or revenues of any kind, whether or not
Lucent has been advised of the possibility of such damages. This provision shall
survive failure of an exclusive remedy.
17.0 CD RADIO'S DESIGNATED EMPLOYEES ON SELLER'S PREMISES
CD Radio's personnel shall, while on any location of Lucent or any of its
affiliates, comply with rules and regulations with regard to safety and security
at such location. Lucent shall inform such personnel of such rules and
regulations. CD Radio shall have full control over such personnel and shall be
entirely responsible for their complying with such rules and regulations. CD
Radio agrees to indemnify and save Lucent and any of its affiliates harmless
from any claims or demands, including the costs, expenses and reasonable
attorney's fees incurred on account thereof, that may be made by (i) anyone for
injuries to persons or damage to property resulting from the acts or omissions
of CD Radio's personnel or (ii) CD Radio's personnel under Worker's Compensation
or similar laws. CD Radio agrees to defend Lucent and its affiliates, at
Lucent's request, against any such claim or demand.
18.0 EXPORT CONTROL
The parties acknowledge that any products, software, and technical information
(including, but not limited to, services and training) provided under this
Agreement are subject to U.S. exports laws and regulations and any use or
transfer of such products, software, and technical information must be
authorized under those regulations. The parties agree that they will not use,
distribute, transfer, or transmit the products, software, or technical
information (even if incorporated into other products) except in compliance with
U.S. export regulations. If requested by Lucent, CD Radio also agrees to sign
written assurances and other export-related documents as may be required for
Lucent to comply with U.S. export regulations.
19.0 ASSIGNMENT
Except for Lucent's right to assign this Agreement to any of its affiliates and
CD Radio's right to assign this Agreement to any entity that succeeds it as the
result of a strategic merger, acquisition, or other corporate reorganization,
neither party shall have the right to assign this Agreement except upon the
prior written consent of the other and any such purported assignment shall be
void and ineffective.
20.0 IDENTIFICATION
Except as permitted by United States trademark law and except as expressly
provided herein, neither Lucent nor CD Radio shall use any identification of, or
reference to, any code, drawing, specification, trade name, trademark, trade
device, insignia, service mark, symbol, or any abbreviation, contraction, or
simulation thereof, of the other party in any advertising or promotional efforts
without such other party's prior approval.
21.0 EXCUSE OF PERFORMANCE
Except with respect to CD Radio's obligation to make timely payments when due,
neither party shall be held responsible for any delay or failure in performance
of any part of this Agreement to the extent such delay or failure is caused by
fire, flood, explosion, war, strike, embargo, government requirement, civil or
military authority, act of God, nature or the public enemy, inability to secure
material or transportation facilities, inadequate yield of products despite
Lucent's reasonable efforts, act or omission of carriers or any other causes
beyond its reasonable control. After conclusion of the exclusivity period
provided for in Part 1, Lucent may, in the event of any such circumstance,
allocate in a fair and reasonable manner, taking into account Lucent's
contractual commitments, its available production output among itself and its
other customers, including at Lucent's option those not under contract.
22.0 NON-WAIVER
No course of dealing or failure of either party to strictly enforce any term,
right or condition with respect to any transaction or order hereunder shall be
construed as a waiver of such term, right or condition.
23.0 TAXES
Any tax or related charge which Lucent shall be required to pay to or collect
for any government upon or with respect to services rendered or the sale, use or
delivery of the Device or other materials shall be billed to the CD Radio as a
separate item and paid by CD Radio, unless a valid exemption certificate is
furnished by CD Radio to Lucent.
24.0 CHOICE OF LAW
The construction, interpretation, and performance of this Agreement and any
transaction hereunder shall be governed by the substantive laws, but not the
conflicts of law rules, of the State of New York. The U.N. Convention on
Contracts for the International Sales of Goods shall not apply to the sale of
product hereunder.
25.0 MEDICAL AND LIFE SUPPORT APPLICATIONS
Lucent does not recommend the use of any Devices for medical or life support
applications wherein a failure or malfunction of the Device may directly
threaten life or cause injury and Lucent will not knowingly sell its Devices for
such use except pursuant to a written exception to this policy granted on a
case-by-case basis. No warranty is made with respect to any such medical or life
support use of any Device.
26.0 DISPUTES
26.1 If a dispute arises out of or relates to this Agreement, or its
breach, and if such dispute cannot be settled through good faith negotiations
within thirty (30) days, the parties agree to submit the dispute to a sole
mediator selected by the parties or, at any time at the option of a party, to
mediation by a mediator selected by the American Arbitration Association
("AAA"). The parties agree to make good faith efforts to resolve disputes by
mediation within thirty (30) days. If not thus resolved, it shall be referred to
a sole arbitrator selected by the parties within thirty (30) days of the
mediation, or in the absence of such selection, to AAA arbitration which shall
be governed by the United States Arbitration Act. The mediator or arbitrator
selected by the parties shall be knowledgeable in the law and technology and the
rules and regulations of the AAA. Such mediation or arbitration shall be
non-binding on the parties. In the event such dispute is not resolved either by
mediation or arbitration, then either party may initiate suit in the federal or
state courts in the State of New York.
26.2 The mediation or arbitration, if any, shall be held in New York
City. The requirement for mediation or arbitration shall not be deemed a waiver
of any right of termination under this Agreement and the mediator or arbitrator
is not empowered to act or make any award other than based solely on the rights
and obligations of the parties prior to any such termination.
26.3 The mediator or arbitrator may not limit, expand or otherwise
modify the terms of this Agreement.
26.4 Each party shall bear its own expenses but those related to the
compensation and expenses of the mediator or arbitrator shall be borne equally.
26.5 The mediator or arbitrator shall not have authority to award
punitive, exemplary or other damages in excess of compensatory damages and each
party irrevocably waives any claim thereto. The award shall be made within two
(2) months after selection of the mediator or arbitrator and may be entered in
any court.
26.6 The parties, their representatives, other participants and the
mediator and arbitrator shall hold the existence, content and result of
mediation or arbitration in confidence.
THE PARTIES, agreeing to the above terms and conditions, including by reference
all terms and conditions contained in the Business Terms, and intending to be
legally bound thereby, have caused the signatures of their respective authorized
representatives to be affixed below on the date so written.
LUCENT TECHNOLOGIES INC. CD RADIO INC.
By: /s/ Judith A. Sheft By: /s/ Andrew J. Greenebaum
----------------------- ----------------------------
Name: Judith A. Sheft Name: Andrew J. Greenebaum
Title: Intellectual Property & Title: Executive Vice President and
Compliance Vice President Chief Financial Officer