Exhibit 10.5
DBS DISTRIBUTION AGREEMENT
BETWEEN
XXXXXX COMMUNICATIONS
GALAXY, INC.
AND
NATIONAL RURAL TELECOMMUNICATIONS
COOPERATIVE
=============================================
CONFIDENTIAL INFORMATION
------------------------
This document is the subject of a
confidentiality agreement. Do not disclose
any of the contents without ascertaining that
disclosure is in full compliance with Xxxxxx'
obligations.
=============================================
DOCUMENT TAB
---------------------------------------------------------------------------------------------------
HCG/NRTC DBS Distribution Agreement 1
Addendum to DBS Distribution Agreement (Defined Terms) 2
Exhibits to DBS Distribution Agreement
1.01(a)-1 Members 3
1.01(a)-2 Early Sign Up Incentive Plan 4
1.01(b)(i) RSAs 4
1.01(b)(iii)(4) MSA Parts (to be delivered by NRTC) 6
1.01(b)(v)-1 Financial Institutions 7
1.01(b)(v)-2 Form of Escrow Agreement 8
2.02 TT&C Services Statement of Work 9
2.03(a) Access Control Services Statement of Work 10
2.03(b) Transmission Services Statement of Work 11
2.04-1 Subscriber Terminal Equipment Pricing 12
2.04-2 Subscriber Terminal Equipment Performance Specifications 13
2.04-3 Subscriber Terminal Equipment Manufacturing Production
Commencement Date 14
2.06 Security Services Statement of Work 15
3.04 Security Services Fee 16
3.08 Form of Irrevocable, Standby Letter of Credit 17
4.04 Acceptance 18
7.01 Minimum Requirements 19
7.07 Program Services 20
19 Modifications to Agreement 21
Attachments to Exhibit 19:
Attachment 2.01(c) Transponder Components 22
Attachment 7.02 Xxxx of Sale 23
Attachment 10.05 Priority to Spares 24
Attachment 10.08 Transponder Performance Specifications 25
Attachment 20 High Power Option 26
Exhibits to DBS Distribution Agreement (cont'd.)
19-A Form of Relief Notice 27
19-B Form of Relief Notice Assignment or Fulfillment Assignment 28
HCG Side Letter Regarding XXXX 00
XXX Xxxx Letter Regarding Financing 30
Member Contract 31
Member Contract Summary 32
First Amendment to DBS Distribution Agreement 33
Second Amendment to DBS Distribution Agreement 34
2
DBS
DISTRIBUTION
AGREEMENT
BETWEEN
XXXXXX COMMUNICATIONS
GALAXY, INC.
AND
NATIONAL RURAL
TELECOMMUNICATIONS
COOPERATIVE
TABLE OF CONTENTS
Page
1. Business Relationships............................................... 3
1.01 NRTC Role...................................................... 3
1.02 HCG Role....................................................... 9
1.03 Contract Decision Process...................................... 10
1.04 Progress Certification and Core Cable Programming.............. 11
1.05 Conditions Precedent........................................... 12
2. The DBS Distribution Services........................................ 13
2.01 Transponder Capacity........................................... 13
2.02 TT&C Services.................................................. 13
2.03 Ground Services................................................ 13
2.04 Subscriber Terminal Equipment Availability..................... 14
2.05 Development of Ground System................................... 14
2.06 Security Services.............................................. 15
2.07 Programming Services........................................... 15
2.08 NRTC Right to Independent Business System...................... 17
2.09 Eligible Commercial Establishments............................. 18
3. Payment Terms........................................................ 18
3.01 Transponder Capacity Fee....................................... 18
3.02 TT&C Fee....................................................... 18
3.03 Ground Services Fees........................................... 20
3.04 Security Services Fee.......................................... 21
3.05 Programming Fees............................................... 22
3.06 NRTC Revenue Fee............................................... 23
3.07 Place of Payment............................................... 24
3.08 Letter of Credit, HCG Priority to Payment...................... 24
3.09 Prompt Repayment............................................... 24
3.10 HCG Suspension of Services..................................... 25
3.11 Late Payment and Interest...................................... 26
3.12 Other Fees..................................................... 26
4. Service Commencement, Service Term and Related Matters............... 26
4.01 Service Commencement Date...................................... 26
4.02 Late Commencement Payments..................................... 28
4.03 [Intentionally Omitted.]....................................... 28
4.04 Acceptance..................................................... 28
4.05 Ownership of Service Equipment................................. 29
4.06 Service Term: Programming Renewal; Design of Satellite......... 29
i
TABLE OF CONTENTS
(continued)
Page
5. Marketing Rights..................................................... 30
5.01 Marketing of DBS Distribution Services in NRTC Territories..... 30
5.02 Marketing DirecTv Programming Services......................... 32
5.03 Cross-Marketing and Promotions................................. 34
5.04 Advertising.................................................... 34
5.05 Non-NRTC Territories........................................... 34
6. Representations and Warranties....................................... 35
6.01 Authority...................................................... 35
6.02 Corporate Action............................................... 35
6.03 FCC and Other Authorizations................................... 35
6.04 Litigation..................................................... 36
6.05 No Broker...................................................... 36
6.06 Notification of Significant Events............................. 36
7. Additional Representations, Warranties and Obligations of HCG........ 37
7.01 Minimum Requirements........................................... 37
7.02 [Intentionally Omitted]........................................ 37
7.03 Government Regulations......................................... 37
7.04 Laws........................................................... 37
7.05 Indemnification................................................ 38
7.06 Assurances of HCG.............................................. 38
7.07 Sale and Use of Transponders................................... 38
7.08 Cessation of Program Services.................................. 41
7.09 Patents, Trademarks and Copyrights............................. 43
7.10 Insurance...................................................... 43
8. Additional Representations, Warranties and Obligations of NRTC....... 43
8.01 Uplinking...................................................... 43
8.02 Laws........................................................... 43
8.03 Indemnification................................................ 44
8.04 Use of Transponder Capacity.................................... 44
8.05 Non-Conforming Uses............................................ 46
9. Preemptive Rights to Protect Overall Satellite Performance........... 47
10. Service Outages...................................................... 47
10.01 Outage/Outage Period.......................................... 47
10.02 Outage Credit................................................. 48
10.03 Outage Termination Rights..................................... 49
ii
TABLE OF CONTENTS
(continued)
Page
11. Termination Rights................................................... 50
11.01 Termination by NRTC........................................... 50
11.02 Termination by HCG............................................ 53
11.03 Automatic Termination......................................... 56
11.04 HCG's Right to Deny Access.................................... 56
11.05 Right to Use Service Equipment................................ 57
12. Force Majeure........................................................ 57
12.01 Failure to Deliver............................................ 57
12.02 Failure of Performance........................................ 58
13. Limitation of Liability.............................................. 58
14. Limitations on Transfer.............................................. 59
14.01 Transfers..................................................... 59
14.02 Financing Transaction......................................... 59
14.03 Affiliate(s).................................................. 59
15. NRTC's Right of First Refusal: Successor Satellites.................. 59
15.01 Right of First Refusal........................................ 59
15.02 Terms of Successor ROFR....................................... 60
15.03 Successor Satellite Defined................................... 60
16. Progress Reports, Inspections and Access to Work in Progress......... 60
16.01 Progress Reports.............................................. 60
16.02 Inspection Rights of NRTC..................................... 61
16.03 After Delivery Reports........................................ 61
17. Confidentiality and Press Releases................................... 61
17.01 Confidentiality............................................... 61
17.02 Subscriber Information........................................ 62
17.03 Press Releases................................................ 63
17.04 Confidentiality Survival...................................... 63
18. Miscellaneous........................................................ 63
18.01 Interest...................................................... 63
18.02 Applicable Law; Entire Agreement; Modification................ 63
18.03 Notices....................................................... 64
18.04 Severability.................................................. 66
iii
TABLE OF CONTENTS
(continued)
Page
18.05 Taxes......................................................... 66
18.06 Successors, Assignment........................................ 66
18.07 Headings...................................................... 66
18.08 Survival of Representations and Warranties.................... 66
18.09 No Third-Party Beneficiary.................................... 67
18.10 Non-Waiver of Breach.......................................... 67
18.11 Counterparts.................................................. 67
18.12 Documents..................................................... 67
18.13 Arbitration................................................... 67
18.14 DBS Transponder Capacity...................................... 68
18.15 Rescission Option............................................. 68
19. Modifications of Agreement in Certain Circumstances.................. 68
iv
DBS DISTRIBUTION AGREEMENT
This DBS Distribution Agreement (the "Agreement") (all such defined
terms herein are so capitalized and referenced in Addendum I) is made and
entered into as of this 10th day of April, 1992 (the "Execution Date"), by and
between Xxxxxx Communications Galaxy, Inc. ("HCG"), a corporation organized and
existing under the laws of the State of California, and National Rural
Telecommunications Cooperative ("NRTC"), a corporation organized and existing
under the laws of the District of Columbia.
RECITALS
WHEREAS, HCG and its Affiliates are in the business of, among other
things, designing, constructing and operating satellites, and providing
transponder capacity thereon;
WHEREAS, HCG has been granted Federal Communications Commission
("FCC") authority to construct, launch and operate two Ku-band direct broadcast
service ("DBS") satellites for a total of 27 FCC channels at the 101degrees X.X.
orbital location, and to sell or lease Transponders or provide capacity on each
such satellite on a private, non-common carrier basis;
WHEREAS, HCG intends to construct, launch and operate one or more
satellite(s) containing Ku-band DBS Transponder capacity at the 101degrees X.X.
orbital location (the "101degrees Satellite(s)");
WHEREAS, HCG has sold to United States Satellite Broadcasting Company,
Inc. ("USSB") a payload consisting of five Ku-band DBS transponders that,
subject to FCC consent, will be located on the 101degrees Satellite(s) and will
utilize the FCC channels assigned to USSB at the 101degrees X.X. orbital
location;
WHEREAS, the twenty-seven FCC channels licensed to HCG at the
101degrees X.X. orbital location (the "HCG Frequencies") and the five FCC
channels licensed to USSB at the 101degrees X.X. orbital location constitute all
the DBS channels now authorized by the FCC for such 101degrees X.X. orbital
location;
WHEREAS, HCG and/or DirecTv, an Affiliate of HCG, intends to use the
101degrees Satellite(s) to operate its own DBS business and to use reasonable
efforts to provide sports, movie and other entertainment and information
programming on those Satellite(s) (as determined by HCG and/or DirecTv in its
sole discretion) for distribution to consumers;
WHEREAS, HCG currently anticipates that the services transmitted on
the HCG Frequencies will consist primarily of entertainment and information
programming;
WHEREAS, HCG and Thomson Consumer Electronics, Inc. ("TCE") have
entered into a "Signal Processing Segment Developer Agreement" (the "SPS
Developer Agreement"), dated February 2, 1992, whereby TCE shall, subject to the
terms and conditions therein, design, test, initially manufacture, construct and
distribute the "Subscriber Terminal Equipment" (meaning the hardware to be
developed by TCE under the SPS Developer Agreement and utilized by subscribers
to receive DBS service from the 101 degrees Satellite(s)) and certain other
components of the system used to process and distribute DBS signals;
WHEREAS, HCG and News Data Security Products Limited ("NDSPL") have
entered into a "Conditional Access Segment Developer Agreement", dated February
2, 1992, whereby NDSPL shall, subject to the terms and conditions therein,
design, test, manufacture and install the conditional access segment ("CAS") to,
among other things, control the encryption and decryption of the DBS signals
transmitted on the 101 degrees Satellite(s) so as to provide controlled access
to DBS programming;
WHEREAS, HCG and NDSPL have entered into a "Conditional Access
Security Services Agreement", dated February 2, 1992 (the "CAS Security
Agreement"), whereby NDSPL shall, subject to the terms and conditions therein,
provide CAS security services, including periodic replacement of conditional
access module ("CAM") units and certain activities designed to prevent and/or
respond to security breaches;
WHEREAS, HCG and News Datacom, Inc. ("NDI") have entered into a
"Conditional Access Management Center Services Agreement", dated February 2,
1992, whereby NDI shall, subject to the terms and conditions therein, provide
certain personnel to operate the conditional access management center ("CAMC");
WHEREAS, HCG desires to provide to NRTC, and NRTC desires to have HCG
provide and to compensate HCG for providing, certain DBS Distribution Services,
consisting of the provision of Transponder Capacity, TT&C Services, Ground
Services, Subscriber Terminal Equipment Availability, Security Services and
Programming Services;
WHEREAS, NRTC intends to market and sell the rights to distribute the
DBS Distribution Services to Members (as defined in Section 1.01(a)) and to
other persons and entities as permitted in this Agreement who in turn intend to
distribute such services to persons and entities who reside in the NRTC
Territories (as provided in this Agreement);
WHEREAS, NRTC intends to market and sell the DBS Distribution Services
to persons and entities who reside outside the NRTC Territories through
programming distribution rights that may be obtained independently by NRTC;
WHEREAS, HCG and NRTC intend that any Member who is interested in
distributing all or part of the DBS Distribution Services must execute a Member
Contract by and between NRTC and such Member (with HCG as an intended third
party
2
beneficiary), pursuant to which such DBS Distribution Services will be made
available for such Member for distribution, and that any other person or entity
whom NRTC (pursuant to the terms hereof) wishes to allow to distribute all or
part of the DBS Distribution Services must execute a similar agreement to be
agreed upon by HCG and NRTC;
WHEREAS, each of HCG and NRTC desires to provide the other with
certain marketing rights with respect to the programming services to be
transmitted on the 101 degrees Satellite(s);
WHEREAS, HCG and Xxxxxx Communications Satellite Services, Inc.
("HCSS"), an Affiliate of HCG, shall perform and/or provide certain satellite
operational services on the terms and conditions specified herein and HCG and/or
other Affiliates of HCG, or subcontractors for or assignees of HCG, may perform
and/or provide any or al1 of the other DBS Distribution Services; and
WHEREAS, HCG and NRTC intend that this Agreement shall become
effective only upon the occurrence of the condition precedent of agreeing upon
the form of Member Contract.
AGREEMENT
NOW, THEREFORE, in consideration of the mutual promises set forth
below, and for other good and valuable consideration, the adequacy and receipt
of which are hereby acknowledged, HCG and NRTC hereby mutually agree as follows:
1. Business Relationships.
----------------------
This Section 1 outlines the basic business relationship between NRTC and
HCG. The roles, rights, obligations and responsibilities of HCG and NRTC (as
appropriate) are identified below. The contract decision process, which
determines the applicability of Exhibit 19 regarding modifications to this
Agreement in certain circumstances, also is set forth in this Section 1.
Finally, the conditions precedent to the effectiveness of this Agreement are
identified.
1.01 NRTC Role. NRTC shall complete each of the following tasks and
---------
responsibilities:
(a) Marketing to Members. NRTC shall market and attempt to sell the
--------------------
right to distribute the DBS Distribution Services (as defined below in Section
2) to all Members of NRTC. The term "Members" means (i) the members of NRTC
listed on Exhibit 1.01(a)-1, which Exhibit is current as of this date and may be
amended by NRTC from time to time to reflect additions and deletions of such
members, (ii) certain non-locally owned and operated telephone or utility
companies that serve the NRTC Territories and are listed on Exhibit 1.01(a)-1,
and (iii) prospective members of NRTC
3
that are mutually agreed upon by the parties and are listed on Exhibit
1.01(a)-1. NRTC shall encourage and promote each such Member's execution of a
Member Contract (defined below in Section 1.01(b)). The Member Contract shall be
executed by Committed Members in substantially identical form and shall include
the provisions set forth in Section 1.01(b). NRTC may use persons and entities
other than Members to distribute the DBS Distribution Services; provided that
any such distributor shall be bound by an agreement between NRTC and such
distributor (with HCG as an intended third party beneficiary) substantially
similar to the Member Contract, whose form shall be agreed to by HCG and NRTC in
each party's sole discretion and executed (or agreed to, as applicable) by HCG,
NRTC and such distributor in each party's sole discretion (such discretion of
HCG and NRTC not to be arbitrarily exercised). Any such distributor bound by
such an agreement shall be deemed a "Committed Member" for all purposes of this
Agreement. NRTC shall consult with HCG with respect to, and provide HCG with
information regarding, any such marketing efforts and provide HCG with
reasonable notice of and an opportunity to participate in such efforts. In any
case, however, such marketing shall be conducted in NRTC's sole discretion and
NRTC shall be solely responsible for such marketing obligations. As part of such
marketing efforts, NRTC shall encourage early execution of the Member Contract
by Members through the implementation of an "early sign-up" incentive plan as
set forth in Exhibit 1.01(a)-2.
(b) Member Contract. The contract by which a Member commits to
---------------
distribute the DBS Distribution Services (the "Member Contract") (each such
contractually committing Member being referred to herein as a "Committed
Member") shall be drafted by NRTC and shall include and provide, among other
additional obligations to be agreed upon by HCG and NRTC, the following:
(i) RSA Areas. With respect to rural service areas identified in
---------
Exhibit l.01(b)(i) ("RSAs") in which a Committed Member wishes to
distribute the DBS Distribution Services, the Committed Member shall pay to
NRTC an amount (a "Committed Member Payment") (which amount may be financed
by National Rural Utilities Cooperative Finance Corporation ("CFC") or
other lenders or obtained from other sources), equal to the amount
specified under one of the following options (as selected by NRTC and/or
the relevant Committed Member):
(1) The product of (x) Thirty-Five Dollars ($35),
multiplied by (y) the number of Eligible Residences to which such
-------------
Committed Member wishes to distribute the DBS Distribution Services,
with such Eligible Residences specifically identified pursuant to
Sections l.01(b)(ix) and 1.01(b)(xvi) in an exhibit to the Member
Contract (the "RSA Residences Option");
(2) The product of (x) Thirty-One Dollars and Fifty Cents
($31.50), multiplied by (y) the number of all Eligible Residences
-------------
within a specified county or counties in one or more RSA(s) (based
upon the 1990 U.S. Census figures for such county(ies)), with such
county(ies)
4
and number of Eligible Residences identified in an exhibit to the
Member Contract (the "RSA Territory Option"); or
(3) The product of (x) Thirty-Five Dollars ($35),
multiplied by (y) the number of all Non-Cabled Eligible Residences
-------------
within a specified county or counties in one or more RSA(s), with such
county(ies) and number of Non-Cabled Eligible Residences identified in
an exhibit to the Member Contract (the "RSA Non-Cabled Territory
Option").
(ii) MSA Parts. With respect to MSA Parts identified by zip code
---------
on Exhibit l.0l(b)(iii)(4) in which a Committed Member wishes to
distribute the DBS Distribution Services, the Committed Member shall pay a
Committed Member Payment equal to the amount specified under one of the two
following options (as selected by NRTC and/or the relevant Committed
Member):
(1) The product of (x) Thirty-Five Dollars ($35),
multiplied by (y) the number of Eligible Residences to which such
-------------
Committed Member wishes to distribute the DBS Distribution Services,
with such Eligible Residences specifically identified pursuant to
Sections l.01(b)(ix) and 1.01(b)(xvi) in an exhibit to the Member
Contract (the "MSA Residences Option"); or
(2) The product of (x) Thirty-Five Dollars ($35) multiplied
----------
by (y) the number of all Non-Cabled Eligible Residences within
--
applicable, specified zip code(s) that represent MSA Parts, with such
zip code(s) and number of Non-Cabled Eligible Residences identified in
an exhibit to the Member Contract (the "MSA Non-Cabled Territory
Option").
(iii) The following defined terms shall be included within Member
Contracts and apply as set forth in this Agreement:
(1) "Committed Member Residences" means (x) under the RSA
Residences Option or the MSA Residences option, all Eligible
Residences for which a Committed Member Payment has been made; and (y)
under the RSA Territory Option, all Eligible Residences (then or
thereafter existing) within the specified county(ies); and (z) under
the RSA Non-Cabled Territory Option and/or the MSA Non-Cabled
Territory Option, all Non-Cabled Eligible Residences (then or
thereafter existing) within the specified county(ies) or zip code(s),
as applicable.
(2) "Eligible Residence(s)" means any household(s) located
within the NRTC Territories. The Eligible Residences within any MSA
Part shall not be located outside the geographic area (by zip code)
set forth in the final form of Exhibit 1.01(b)(iii)(4).
5
(3) "Non-Cabled Eligible Residences" means only those
Eligible Residences within specified county(ies) (or zip code(s) in
the case of MSA Parts) that do not have available cable television
service (i.e., are not "passed" by cable television service). The
----
number of Non-Cabled Eligible Residences as to any county (or zip
code) as to which payment shall be made under the RSA Non-Cabled
Territory Option and/or the MSA Non-Cable Territory Option shall be
based upon Xxxxxx Publishing (Spring 1992 version, "Data for All
Operating U.S. Cable Systems") figures for such county or zip code and
identified in an exhibit to the Member Contact.
(4) The "NRTC Territory(ies)" means (x) all RSA(s) and (y)
those zip code(s) within metropolitan statistical areas ("MSA Parts")
in which any electric or telephone utility service is currently
provided by a Member, all as specifically identified on Exhibit
1.0l(b)(iii)(4). The identification on Exhibit 1.01(b)(iii)(4) of MSA
Parts in which electric or telephone utility service is currently
provided by a Member may be amended by NRTC within one hundred twenty
(120) days from the date hereof to correct omissions from such list,
provided that such amendments are not inconsistent with the numeric
and geographic limitations (by zip code) set forth in the final form
of Exhibit 1.01(b)(iii)(4) and it is understood that such amendments
shall reflect only those MSA Parts in which such service LS provided
as of the Execution Date.
(iv) In no event shall the aggregate amount of the Committed
Member Payments paid to HCG exceed $250 million. Each Committed Member
Payment paid to HCG will reflect payment for the provision of the
Transponder Capacity and for the Ground Capital Fee, in amounts allocated
pursuant to Sections 3.01 and 3.03(a).
(v) All Committed Member Payments paid to NRTC before December
1, 1992, shall be promptly deposited into an interest-bearing escrow
account (the "Escrow Account") with any one of the financial institutions
selected by NRTC from the list contained in Exhibit l.01(b)(v)-1 (the
"Escrow Agent"), pursuant to an escrow agreement in substantially the same
form as Exhibit 1.01 (b) (v)-2 (the "Escrow Agreement"). Promptly upon
receipt of such escrowed Committed Member Payments, the Escrow Agent shall
notify HCG in writing and such Committed Member Payments (excluding any
interest accrued thereon) shall thereafter be deemed "Escrowed Committed
Member Payments." NRTC shall be responsible for the payment of all costs
and fees required by the Escrow Agent.
(vi) All Committed Member Payments paid to NRTC on or after
December 1, 1992, shall promptly be remitted in full by NRTC to HCG; except
only as set forth in Section 1.04(a).
6
(vii) The Member Contract shall provide the Committed Member
with the option, with respect to Member Contracts executed after December
11, 1992, to either (xx) pay the full Committed Member Payment to HCG
through NRTC upon execution of the Member Contract, or (yy) pay 50% of the
Committed Member Payment to HCG through NRTC upon execution of the Member
Contract, and commit to pay to HCG through NRTC upon Acceptance, the
remaining 50% of such Committed Member Payment (the "Second Payment") as
well as commit to pay interest on such Second Payment, at the rate set
forth in Section 18.01, from the date of the Member Contract until the date
of Acceptance, as set forth in Section 4.04. In all cases as provided
above, any and all such payments to NRTC (and any applicable interest
thereon) shall be promptly paid to HCG. If any Second Payment (plus
interest) is not timely paid to NRTC (by the Committed Member) or to HCG
(by NRTC), then the provisions of Section 3.10 shall apply. In addition, if
any Second Payment is not timely made by a Committed Member (or by NRTC as
provided in Section 3.10(b)) and the fifteen (15) day cure period has
expired without a cure, then (A) HCG shall have the right and option to
require NRTC to (and NRTC shall) terminate the Member Contract, and if the
Member Contract is so terminated, the Committed Member shall have no
further rights thereunder, and (B) regardless of whether the Member
Contract is so terminated and, in addition to having the right to collect
the full amount of the Second Payment (less any amounts reasonably
mitigated by HCG as required under the California Uniform Commercial Code)
and Expenses associated therewith, HCG shall be entitled to retain (as
liquidated damages) the 50% of the Committed Member Payment already paid to
HCG, and unless and until the provisions of Exhibit 19 apply, NRTC shall
have no rights whatsoever to market and sell the DBS Distribution Services
to the Committed Member Residences associated with such Committed Member.
(viii) It is expressly understood and agreed that NRTC may obtain
payments from a Committed Member in excess of Committed Member Payments to
satisfy NRTC's marketing and other requirements, but that such additional
amounts paid to NRTC shall not be considered Committed Member Payments for
any purposes of this Agreement.
(ix) The Committed Member Residences associated with a
Committed Member exercising the RSA Residences Option and/or the MSA
Residences Option shall be identified by NRTC and such Committed Member to
HCG (and to the HCG billing system and the CAMC) by xxxxxx xxxxxxx, xxxx,
xxxxxx, xxxxx, and zip code in an exhibit to, and be determined as of the
date of, and as a deliverable under, the respective Member Contract. Such
information about Committed Member Residences will be treated by HCG as
Confidential Information under Section 17.
(x) The Member Contract shall contain an acknowledgment that
the right to distribute a Programming Service (as defined below in Section
2.07(a)) to Committed Member Residences that have available cable
television
7
service will be governed by the provisions of the Programming Agreement for
such Programming Service, and that such agreement may not include rights to
distribute such Programming Service to such Committed Member Residences.
(xi) The Committed Member shall warrant that it will pay for
programming fees, if applicable and required under the Programming
Agreement(s) (as provided in Section 2.07(a)), based on a minimum number of
NRTC Subscribers with respect to each program service provided under the
Programming Services, in an amount equal to the product of (x) the number
of its Committed Member Residences, multiplied by (y) the minimum NRTC
---------- --
Subscriber commitment percentage agreed to in each respective Programming
Agreement. "NRTC Subscriber(s)" means Committed Member Residences that
subscribe to all or a portion of the DBS Distribution Services as set forth
in Section 3. It is expressly understood and agreed that HCG may rely upon
such minimum NRTC Subscriber commitments by each Committed Member in HCG's
negotiation and execution of the Programming Agreements (as defined below)
and as the basis for HCG's commitment therein (if any) to provide a minimum
number of NRTC Subscribers for each Programming Service. Each Committed
Member shall be responsible for (i) a pro-rata portion (based on the
percentage of its Committed Member Residences specified above and
identified in the Programming Agreements) of any payment or other
obligations due under the Programming Agreements which are applicable and
relevant to such Committed Member and attributable to a minimum NRTC
Subscriber commitment and (ii) any Programming Fees due and owing to HCG
for Programming Services utilized by such Committed Member's NRTC
Subscribers.
(xii) The Committed Member shall promote to its Committed Member
Residences, and distribute to its NRTC Subscribers, the DBS Distribution
Services.
(xiii) Each Committed Member shall be responsible for any Ground
Services Fees, TT&C Fees, Security Services Fees and Programming Fees due
and owing to HCG for the provision of DBS Distribution Services provided to
such Committed Member in an amount allocable to such Committed Member under
the Member Contract.
(xiv) The Committed Member shall be obligated to make monthly
payments to NRTC (for payment to HCG or directly to HCG if applicable
pursuant to Section 3.10) for Ground Services, TT&C Services, Security
Services and Programming Services in an amount allocable to such Committed
Member under the Member Contract.
(xv) The Member Contract shall specifically provide that HCG
may (subject to the provisions of Section 3.10) cease providing (and/or not
commence) any and/or all of the DBS Distribution Services to such Committed
Member and/or any or all of its NRTC Subscribers upon non-payment by such
8
Committed Member of any amounts payable by such Committed Member pursuant
to the Member Contract, subject to NRTC's right to cure as provided in
Section 3.10(b). The Committed Member shall explicitly agree to and
acknowledge HCG's right not to commence and/or cease providing the DBS
Distribution Services pursuant to Section 3.10. In any case, HCG shall also
have the right as an intended third party beneficiary to seek payment from,
and seek any available judicial remedy, or the right to seek arbitration,
against the Committed Member for non-payment.
(xvi) The Member Contract shall be executed by the Committed
Member and NRTC; and HCG shall be an intended third-party beneficiary
thereto. An original copy of each such executed Member Contract shall be
provided to HCG concurrently with delivery to HCG, or the deposit of such
monies into the Escrow Account, as appropriate, of the Committed Member
Payment. In addition, in cases where the RSA Residences Option and/or the
MSA Residences Option is exercised, the executed Member Contract shall be
accompanied by a list (in electronic media form (based on industry standard
and compatible with the requirements of the HCG billing system and the CAMC
databases) of all Committed Member Residences, as set forth above in
Section l.01(b)(ix). HCG shall not be obligated in any way to provide any
DBS Distribution Services to a Member or its NRTC Subscribers until and
unless the full Committed Member Payment (including the Second Payment owed
by such Committed Member), the electronic media list described above, and
an executed Member Contract are received by HCG.
(xvii) The Member Contract shall include provisions relative to
the obligations and rights under Section 3.10 and HCG's agreement with NRTC
to deliver the DBS Distribution Services directly to Committed Members
pursuant to Section 11.02(e) if NRTC breaches this Agreement.
(c) Member Administration. NRTC shall administer the Member Contracts
---------------------
as follows: NRTC shall (1) use its reasonable best efforts to collect any and
all monies owed by Committed Members under the Member Contracts and shall
deposit such monies with the Escrow Agent (as appropriate) or pay to HCG the
payments contemplated by Section 1.01(b); and (2) provide all accounting
services relative to such collection process. NRTC shall keep records with
respect to such accounting.
(d) CFC or Other Lender Coordination. NRTC shall coordinate with and
--------------------------------
assist CFC and other lenders with respect to financing the Committed Member
Payment of any potential Committed Member.
1.02 HCG Role. HCG shall be responsible for the acquisition, availability
--------
and/or provision (as applicable) of the DBS Distribution Services, as defined in
and pursuant to Section 2.
9
1.03 Contract Decision Process. On December 11, 1992, and again on May 1,
-------------------------
1993 and/or July 31, 1993 (if the May Extension and/or the July Extension
apply), decisions will be made regarding (a) the termination of this Agreement;
(b) the unmodified continuation of this Agreement; and/or (c) the modification
of this Agreement as set forth below in Section 19.
(a) If, on or before December 11, 1992, NRTC has paid HCG $250
million in aggregate Committed Member Payments pursuant to Section 1.01(b), then
this Agreement shall be modified as set forth in Section 19.
(b) If, on December 11, 1992, NRTC has paid HCG at least $100
million, but less than $250 million, in aggregate Committed Member Payments,
then NRTC shall automatically be granted an extension until May 1, 1993 to pay
HCG (and/or have Committed Members commit to pay HCG, as applicable, in Second
Payments) $250 million in aggregate Committed Member Payments (the "May
Extension"). If the May Extension has been granted and if on or before May 1,
1993, NRTC has paid HCG (and/or Committed Members have committed to pay HCG, as
applicable, in Second Payments) $250 million in aggregate Committed Member
Payments, then this Agreement shall be modified as set forth in Section 19;
otherwise this Agreement shall continue unmodified by Exhibit 19, unless a July
Extension is granted pursuant to Section 1.03(c), below.
(c) If the May Extension has been granted and if on or before May 1,
1993, NRTC has paid HCG (and/or Committed Members have committed to pay HCG, as
applicable, in Second Payments) at least $175 million (but less than $250
million) in aggregate Committed Member Payments, then NRTC shall automatically
be granted an extension until July 31, 1993 to pay HCG (and/or have Committed
Members commit to pay MCG, as applicable, in Second Payments) $250 million in
aggregate Committed Member Payments (the "July Extension"); otherwise, this
Agreement shall continue unmodified by Exhibit 19.
(d) If the July Extension has been granted and if on or before July
31, 1993, NRTC has paid HCG (and/or Committed Members have committed to pay HCG,
as applicable, in Second Payments) $250 million in aggregate Committed Member
Payments, then this Agreement shall be modified as set forth in Section 19;
otherwise this Agreement shall continue unmodified by Exhibit 19.
(e) If, on December 11, 1992, NRTC has paid HCG less than $100
million in aggregate Committed Member Payments, then the applicable provisions
of Section 1.04(a) shall apply.
(f) NRTC may make payments to HCG and/or the Escrow Agent (if still
applicable) for HCG's benefit to meet the $100 million, $175 million and/or $250
million targets, as appropriate and as specified in this Section 1.03 in excess
of aggregate Committed Member Payments actually paid or owed to HCG as Second
Payments, where
10
applicable, by Committed Members and any and all such amounts shall be deemed
part of the Committed Member Payments for all purposes of this Agreement.
1.04 Progress Certification and Core Cable Programming.
-------------------------------------------------
(a) If, on December 1, 1992, (i) the December Conditions (as defined
below) have occurred and (ii) the aggregate Escrowed Committed Member Payments
equal at least $100 million, then HCG may instruct the Escrow Agent pursuant to
the Escrow Agreement to release all Escrowed Committed Member Payments,
including any accrued interest thereon, to HCG. If, however, on December 1,
1992, the December Conditions have occurred, but the aggregate Escrowed
Committed Member Payments are less than $100 million, then the release of such
amounts to HCG shall be delayed until December 11, 1992, or such earlier date as
the aggregate Escrowed Committed Member Payments equal or exceed $100 million as
a result of additional deposits of Committed Member Payments by NRTC into the
Escrow Account by such date. If, on December 11, 1992, (i) the December
Conditions have occurred, but (ii) the aggregate Escrowed Committed Member
Payments are still less than $100 million, then this Agreement shall
automatically terminate ten (10) days later unless HCG, in its sole discretion,
grants NRTC the July Extension by such date. If this Agreement so terminates,
then NRTC may instruct the Escrow Agent pursuant to the Escrow Agreement to
release the Escrowed Committed Member Payments, including any accrued interest
thereon, to NRTC. If HCG so grants the July Extension, then HCG may instruct the
Escrow Agent pursuant to the Escrow Agreement to release the Escrowed Committed
Member Payments, including any interest thereon, to HCG and this Agreement shall
not be subject to termination under this Section 1.04 because the aggregate
Escrowed Committed Member Payments are less than $100 million. The "December
Conditions" mean (a) HCG having obtained the contract rights to distribute the
Core Cable Programming to Eligible Residences (specifically excluding, unless
applicable in the relevant Programming Agreement, households that have available
cable television service as of the execution date of the relevant Programming
Agreement) (the "Core Cable Rights"), and (b) HCG having provided NRTC with a
certification by the Chief Executive Officer of HCG, under oath or affirmation,
stating that, based on then-existing facts, the Transponder Capacity, TT&C
Services, Ground Services, Security Services and Subscriber Terminal Equipment
Availability development process is proceeding in a manner that, in HCG's
reasonable judgment, will allow the provision of the Transponder Capacity and
such services no later than ninety (90) days following the Scheduled Service
Commencement Date (the "HCG Certification"). Such HCG Certification shall be
accompanied by a status report on work completed and a schedule of remaining
projects. "Core Cable Programming" means four program services from different
program categories that are identified as "Priority 1" in Exhibit 7.07.
"Priority 2" and "Priority 3" program services are also identified on Exhibit
7.07.
(b) (i) If, on December 1, 1992, HCG has obtained the Core Cable
Rights, but has not provided NRTC with the HCG Certification, then each of
NRTC and HCG shall have the right to terminate this Agreement on or before
December 11, 1992 by providing written notice to the other, or such right
will
11
expire. Upon such timely termination NRTC may instruct the Escrow Agent
pursuant to the Escrow Agreement to release all Escrowed Committed Member
payments, including any interest thereon, to NRTC.
(ii) If, on December 1, 1992, HCG has provided the HCG
Certification, but has not obtained the Core Cable Rights, then NRTC shall
have the right to terminate this Agreement by providing written notice to
HCG by December 11, 1992, or such right will expire. If NRTC so terminates
this Agreement, then NRTC may instruct the Escrow Agent pursuant to the
Escrow Agreement to release all Escrowed Committed Member Payment,
including any interest thereon, to NRTC. If NRTC does not so terminate this
Agreement, then NRTC shall have the right, on or before March 1, 1993, to
deliver to HCG the Relief Notice (as defined in Section 19(b)) and HCG
shall have the right, after delivery of the Relief Notice, to instruct the
Escrow Agent pursuant to the Escrow Agreement to release all Escrowed
Committed Member Payments, including any interest thereon, to HCG. If NRTC
delivers the Relief Notice by March 1, 1993, then this Agreement shall
continue; if not, this Agreement automatically shall terminate as of March
1, 1993 and NRTC may instruct the Escrow Agent pursuant to the Escrow
Agreement to release all Escrowed Committed Member Payments, including any
interest thereon, to NRTC.
(iii) If both of the December Conditions have not occurred on
December 1, 1992, then each of NRTC and HCG shall have the right to
terminate this Agreement on or before December 11, 1992 by providing
written notice to the other, or such right will expire. Upon such timely
termination, NRTC may instruct the Escrow Agent pursuant to the Escrow
Agreement to release all Escrowed Committed Member Payments, including any
interest thereon, to NRTC.
1.05 Conditions Precedent. The following conditions precedent to the
--------------------
effectiveness of this Agreement must be met on or before May 11, 1992; and, if
it is not timely met, this Agreement automatically shall be deemed to have no
force or effect and neither HCG nor NRTC shall have any obligations to the other
hereunder:
(a) The final form of the Member Contract must be agreed to by HCG
and NRTC in each party's sole discretion and completed.
(b) NRTC shall initially provide (and each party shall approve in its
sole discretion) the final form of Exhibit l.01(b)(iii)(4), which Exhibit shall
specify (i) those MSA Parts, identified by zip code(s), in which electric or
telephone utility service is currently provided by a Member and (ii) the number
of Non-Cabled Eligible Residences within each zip code that represents an MSA
Part.
12
2. The DBS Distribution Services
-----------------------------
The products and services to be provided under this Agreement
(collectively, the "DBS Distribution Services") consist of the Transponder
Capacity, TT&C Services, Ground Services, Subscriber Terminal Equipment
Availability, Security Services and Programming Services, all as defined and as
provided below.
2.01 Transponder Capacity. Prior to Satellite launch, HCG will designate
--------------------
sufficient Transponder capacity to distribute twenty (20) Program Channels to
NPTC Subscribers, regardless of video compression rates that may be achieved for
the DBS Distribution Services (the "Transponder Capacity"). Subject to the
provisions of this Agreement, HCG shall provide the Transponder Capacity in
compliance with Section 4.04 below. The term "Transponder" means a specified set
of components of the Satellite which, for a particular frequency band, receives,
amplifies, translates frequency and retransmits radio signals. The term "Program
Channel" means a single, digitally-compressed NTSC-source signal having the
performance characteristics set forth in Exhibit 7.01. The term "Satellite"
means the 101 degrees Satellite(s) on which the Transponder Capacity is located.
If a launch failure of the Satellite occurs and HCG elects to launch a
replacement Satellite, then HCG will designate replacement Transponder Capacity
for NRTC on the replacement Satellite. Subject to HCG's continued rights to use
Transponder Capacity on the failed Satellite, and subject to such capacity being
able to meet the Minimum Requirements, HCG will attempt to provide to NRTC
(pursuant to Sections 4.04 and 4.01(b)) the Transponder Capacity on the failed
Satellite to the fullest extent possible until such time as the replacement
Satellite is available.
2.02 TT&C Services. The "TT&C Services" may be provided by HCSS, an
-------------
Affiliate of HCG, or a subcontractor to or an assignee of HCG hereunder, and
means telemetry, tracking and control services necessary to monitor the status
of the Satellite and to maintain the Satellite's operational condition. A
statement of work for the TT&C Services is set forth in Exhibit 2.02.
2.03 Ground Services. The term "Ground Services" means Access Control
---------------
Services and Transmission Services, all as defined and provided below.
(a) Access Control Services. The term "Access Control Services" means
-----------------------
services performed on NRTC's behalf that (i) control NRTC Subscriber access to
programming and other services transmitted over the Transponder Capacity, and
(ii) provide report-back information related to NRTC Subscribers, including NRTC
Subscriber program purchase data. Such services may be provided by HCSS, an
Affiliate of HCG, or a subcontractor to or an assignee of HCG hereunder. A
statement of work for the Access Control Services is set forth in Exhibit
2.03(a).
(b) Transmission Services. The term "Transmission Services" means
---------------------
services, including uplinking services, that (i) provide access to the original
satellite feed of the source material for the Program Channels (including,
without limitation, satellite receive facilities), (ii) process such source
signals into Program Channels (including,
13
without limitation, the compression, encryption and modulation of such signals
and commercial insertion services), and (iii) transmit the Program Channels to
the Transponder Capacity for subsequent retransmission by the Satellite.
Transmission Services shall also include the transmission of certain data
signals to the Transponder Capacity, as described in Exhibit 2.03(b) (the "Data
Services"). Transmission Services may be provided by HCSS or another Affiliate
of HCG or a subcontractor to or an assignee of HCG hereunder. A statement of
work for the Transmission Services is set forth in Exhibit 2.03(b).
2.04 Subscriber Terminal Equipment Availability. Subscriber Terminal
------------------------------------------
Equipment Availability means HCG's representation on the date hereof that, under
the SPS Developer Agreement, TCE has represented to HCG that (i) the price that
TCE will charge for the sale of Subscriber Terminal Equipment on an original
equipment manufacturer basis will not exceed the pricing as set forth in Exhibit
2.04-1 for purchases on the terms set forth therein; (ii) TCE's suggested retail
price to a retailer for the Subscriber Terminal Equipment will not exceed Seven
Hundred Dollars ($700.00) per unit; (iii) the Subscriber Terminal Equipment will
meet the specific performance specifications set forth in Exhibit 2.04-2; and
(iv) manufacturing production of the Subscriber Terminal Equipment is scheduled
to commence no later than the date set forth on Exhibit 2.04-3. It is expressly
agreed and understood by the parties (x) that HCG does not guarantee the
availability of any quantities of any Subscriber Terminal Equipment from TCE to
NRTC (which only TCE can guarantee); and (y) that the performance specifications
of Exhibit 2.04-2 may be modified or expanded by HCG from time-to-time to
reflect modifications or expansions reasonably agreed upon by HCG and TCE that
do not substantially and adversely affect such performance specifications, and
that HCG shall promptly provide written notice to NRTC of any such modifications
or expansions. The development status of the Subscriber Terminal Equipment shall
be included in the progress reports provided to NRTC pursuant to Section 16.01.
NRTC may negotiate directly with TCE to seek to obtain volume shipments, price
discounts, and design changes or equipment additions that NRTC may need for its
own DBS business; provided that any such design changes or equipment additions
shall not eliminate or degrade any of the Subscriber Terminal Equipment
specifications contained in Exhibit 2.04-2 or otherwise adversely affect HCG's
ability to operate its DBS business or to perform its obligations under this
Agreement. NRTC shall bear the full cost of any such design changes or equipment
additions and NRTC agrees that any such changes or additions may not be
implemented in a way that could delay the development, shipment dates, quantity,
or manufacture of, or degrade the performance of, the Subscriber Terminal
Equipment under the SPS Developer Agreement. HCG shall provide NRTC with a
contract summary of the SPS Developer Agreement, compiled by HCG and TCE, and
shall use its reasonable best efforts to provide such summaries within forty-
five (45) days of the Execution Date.
2.05 Development of Ground System. HCG shall provide NRTC with the
----------------------------
opportunity, upon reasonable request, to express its view regarding the ongoing
development of the ground system used to provide the DBS Distribution Services
(the
14
"Ground System") NRTC shall be kept abreast by HCG of any developments relating
thereto. NRTC shall have the right to consult with HCG regarding, and may
provide HCG with suggestions related to, the development of the Ground System,
and HCG will consider incorporating any suggestions from NRTC that do not
adversely affect the price, development schedule, marketability, or performance
of such system and that do not otherwise adversely affect HCG's agreements with
the developers of such system, but any decisions about the development of the
Ground System shall remain in HCG's sole and absolute discretion.
2.06 Security Services. The term "Security Services" means the
-----------------
implementation of certain procedures and activities designed to prevent and/or
respond to and remedy Security Breaches (as defined in Exhibit 2.06). A
statement of work for the Security Services is set forth in Exhibit 2.06. HCG
shall provide NRTC with contract summaries of the Conditional Access Segment
Developer Agreement, the CAS Security Agreement and the Conditional Access
Management Center Services Agreement, compiled by HCG and NDSPL (or NDI, as
applicable), and shall use its reasonable best efforts to provide such summaries
within forty-five (45) days of the Execution Date.
2.07 Programming Services.
--------------------
(a) Subject to Sections 4.06(b), 7.08 and 19, HCG shall provide
Programming Services. The term "Programming Service(s)" means HCG's provision of
Cable Programming for transmission over the Transponder Capacity to NRTC
Subscribers. The term "Cable Programming" means a package of 20 program services
selected from Exhibit 7.07, including (x) at least twelve (12) Priority 1
program services from any program categories, (y) no more than five (5) Priority
2 program services from any program categories, and (z) at least three (3)
program services from program category 5, all as set forth on such Exhibit.
Prior to executing a Programming Agreement (as defined below) for the
seventeenth (17th) such program service, HCG shall so notify NRTC in writing.
NRTC shall have the right at any time prior to such notice and for a period of
fifteen (15) days from receipt of such notice, in its sole discretion, to
require that "ABC," "CBS," and "NBC" be included as part of the Cable
Programming. In any event, if HCG or NRTC elects to provide any or all of "ABC,"
"CBS," and "NBC" as part of the Programming Services, then (xx) NRTC will be
able to designate the source of any or all of the "ABC"/"CBS"/"NBC" programming
and (yy) NRTC will provide and pay for the additional costs of delivery of the
signal, if any, from such designated source to the transmission facilities. If
the provisions of 00 Xxxxxx Xxxxxx Code (S) 111 or (S) 119 (or similar statutes)
are not available to HCG for purposes of distributing "ABC," "CBS," or "NBC" as
part of the Cable Programming under a compulsory copyright license, then HCG
shall have no obligation to include "ABC," "CBS," or "NBC" as part of the Cable
Programming, but will use reasonable efforts at NRTC's written request to
attempt to include such services as part of the Cable Programming from such
sources and at such prices as are reasonably acceptable to NRTC. HCG shall be
responsible for acquiring the rights to distribute Cable Programming to all
Eligible Residences that do not have available cable television service (as of
the execution date of the relevant Programming Agreement, but in no event later
than the Scheduled Service Commencement Date)
15
through agreements with the holders of such rights (collectively, the
"Programming Agreements") and/or compulsory copyright licenses. HCG shall use
reasonable efforts to obtain the rights to distribute Cable Programming to
Eligible Residences that have cable television service available (as of the
execution date of the relevant Programming Agreement, but in no event later than
the Scheduled Service Commencement Date), but NRTC and HCG acknowledge that such
rights may not be possible to obtain on commercially reasonable terms, if at
all, and that HCG's failure to obtain such rights shall not constitute a breach
of this Agreement. The terms and conditions of such Programming Agreements shall
be based upon cable industry standards for C-band TVRO satellite delivery and
the pricing will be based substantially on accepted cable industry rate cards
for each service. If the Programming Agreements require a guarantee as to
minimum subscriber levels, then NRTC and HCG shall mutually agree on the amount
of any such guarantee, but agree that, in any event, a minimum subscriber
commitment level of five percent (5%) (with respect to Committed Member
Residences) by the third anniversary of the Service Commencement Date is
acceptable. Unless and until the Relief Notice Assignment or the Fulfillment
Assignment is executed, NRTC shall not be liable for any penalties, guarantees
or costs under the Programming Agreements for any period prior to the Service
Commencement Date. If a material term of any such potential Programming
Agreement would significantly differ from such standards, then the parties shall
discuss such term, and may agree to accept such term, prior to HCG's final
agreement with the program rights holder. NRTC shall have the right to consult
with HCG regarding, and to review, all potential Programming Agreements prior to
execution and, shall, if requested by HCG, assist HCG in related negotiations or
discussions. The Programming Agreements shall be assignable by HCG to NRTC and
HCG shall provide a copy of each such agreement, exclusive only of provisions
regarding distribution rights in non-NRTC Territories, to NRTC promptly after
execution.
(b) NRTC expressly acknowledges and agrees that HCG may independently
negotiate for and/or obtain program distribution rights to non-NRTC Territories
for Cable Programming and other program services carried on the Transponder
Capacity, in addition to entering into the Programming Agreements and that HCG
may distribute some or all of the DBS Distribution Services to such non-NRTC
Territories.
(c) If required by any person or entity granting program distribution
rights to HCG (a "Rights Holder"), HCG shall have the option, but not the
obligation, upon ten (10) business days' notice to NRTC, not to transmit (or
allow to be transmitted) (a "Blackout") Sports Programming that otherwise would
be transmitted by a Superstation carried on the Transponder Capacity if HCG or
any other User will carry such Sports Programming on the HCG Frequencies on a
premium basis (e.g., pay TV) simultaneously with such Superstation's planned
----
transmission. Notwithstanding the foregoing sentence, if the provisions of any
Programming Agreement would allow NRTC to compensate the Rights Holder, HCG,
and/or any other appropriate person or entity as determined by HCG, and thereby
avoid the need to Blackout certain Sports
16
Programming; then HCG shall advise NRTC of such provisions, and, to the extent
permitted under the Programming Agreements and after NRTC's timely satisfaction
of any requirements any Rights Holder or other person or entity may establish to
waive such Blackout requirement with respect to certain Sports Programming, HCG
will not Blackout such Sports Programming on the Transponder Capacity. In
addition, and to the extent permitted by Law, NRTC shall have the right to
insert or substitute other programming during such Blackouts. NRTC shall be
responsible for any additional costs incurred by HCG in receiving and/or
transmitting such substitute programming. "Sports Programming" means any video
entertainment or information services that consist primarily of the transmission
of an athletic or sporting event or activity. "Superstation" has the meaning
provided in 00 Xxxxxx Xxxxxx Code (S) 119(d)(9) or any similar or any successor
statute. The term "User" means any owner of a Transponder on a Satellite,
including HCG if there remain any unsold Transponders, or any permitted lessee,
licensee, user or assignee of such Transponder, but shall not include NRTC or
its successors or assigns.
(d) NRTC expressly acknowledges and agrees that if HCG acquires the
rights to provide as part of the Cable Programming the transmission of any
television broadcast station owned by, operated by, or affiliated with, ABC,
CBS, NBC, Fox or PBS, through a compulsory copyright license under 17 United
States Code (S) 119 (or any similar or successor statute), that such services
may be provided only to households who qualify as "Unserved Households" (as
defined in 17 U.S.C. (S) 119(d)(10) (or any similar or successor statute)). To
this end, NRTC agrees to provide to HCG promptly upon request (and in any event
within ten (10) days) a list (in electronic media form based on industry
standards) and compatible with the requirements of HCG's billing provider and
the CAMC databases) identifying all NRTC Subscribers who receive such services
by address, county and zip code, as well as any other information that may be
required by Law to be provided to the holders of the rights for such program
services. The information contained in such list will be deemed Confidential
Information for purposes of Section 17, except that HCG shall have the right to
provide such list to the relevant network and/or the Copyright Royalty Tribunal
as required by such (S) 119, or as otherwise required by Law, without seeking
confidential treatment.
2.08 NRTC Right to Independent Business System. Subject to the provisions
-----------------------------------------
on marketing set forth in Section 5 (which provisions supersede this Section
2.08 to the extent they are inconsistent), nothing herein shall infringe on the
right of NRTC to establish and operate its own partitioned and independent DBS
business. Such business includes the right to control NRTC Subscriber access to
programming and other services transmitted over the 101 degrees Satellite(s),
but only to the extent such access control occurs through Subscriber Terminal
Equipment utilized by such NRTC Subscribers that is owned by NRTC or Committed
Members. HCG agrees to reasonably cooperate with NRTC to provide such control.
Nothing herein shall prevent NRTC from negotiating on its own behalf with Users
to combine NRTC's business system with the system(s) of such Users.
Notwithstanding the foregoing, the parties expressly acknowledge and agree that,
if HCG has the right to distribute programming distributed or carried by USSB or
other
17
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.
Users, then such programming will be deemed DirecTv Programming and may be
distributed to Eligible Residences (including Committed Member Residences and
NRTC Subscribers) in the same manner as other DirecTv Programming may be so
distributed, and HCG will have the same Subscriber Terminal Equipment access
rights, and the same marketing rights and obligations, as provided under Section
5.02.
2.09 Eligible Commercial Establishments.
----------------------------------
HCG and NRTC acknowledge that it may be mutually advantageous to allow
NRTC to distribute the DBS Distribution Services to commercial establishments
(e.g., hotels, bars, restaurants) in the RSAs ("Eligible Commercial
Establishments"), as well as to Committed Member Residences. The parties
therefore agree to negotiate in good faith to determine the terms and conditions
pursuant to which NRTC may provide DBS Distribution Services to Eligible
Commercial Establishments. HCG shall use reasonable efforts to obtain
Programming Agreements that allow the distribution of Cable Programming to
Eligible Commercial Establishments.
3. Payment Terms
-------------
The following fees shall be paid by NRTC to HCG as set forth below:
3.01 Transponder Capacity Fee. The fee for the provision of the Transponder
------------------------
Capacity (the "Transponder Capacity Fee") is equal to the product of (x) the
aggregate of the Committed Member Payments, multiplied by (y) [**]. If
----------
HCG on its own accord, and in its sole discretion, enhances the technical
quality or information capacity of a Program Channel, then NRTC shall have no
obligation to compensate HCG. HCG shall have no obligation to provide or attempt
any such enhancement, nor to provide more than twenty (20) Program Channels
(except as otherwise provided in Exhibit 19 if applicable).
3.02 TT&C Fee.
--------
(a) The fee for the provision of the TT&C Services (the "TT&C Fee")
for any given month shall be equal to the product of (x) the TT&C Base Amount,
multiplied by (y) the number of Authorized Subscribers calculated for such
---------- --
month. The initial "TT&C Base Amount" shall be determined on May 1, 1993 (or on
July 1, 1993 if the July Extension is applicable), and be based on the aggregate
amount of Committed Member Payments actually paid to HCG or owed to HCG as
Second Payments under Section 1.01(b)(iv) as of such date as follows:
18
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.
Committed Member Payments TT&C Base Amount
------------------------- ----------------
$0 to $149,999,999.99 [**]
$150,000,000 to $199,999,999.99 [**]
$200,000,000 to $249,999,999.99 [**]
$250,000,000 [**]
"Authorized Subscribers" means any and all NRTC Subscribers that are authorized
by the CAMC as of the 15th day of any given billing month to receive any or all
of the DBS Distribution Services. The TT&C Fee is subject to adjustment as the
TT&C Base Amount is adjusted under Section 3.02(b). The TT&C Fee shall be
payable within thirty (30) days following HCG's invoice; provided that such
invoice shall not be submitted to NRTC prior to the 16th day of the given
billing month. The TT&C Fee shall begin to apply on and as of the Service
Commencement Date.
(b) (i) Beginning on the tenth one-year anniversary of the Service
Commencement Date and on each subsequent yearly anniversary, the TT&C Base
Amount shall be adjusted to an amount calculated pursuant to the following
formula: the sum of (i) the then-current TT&C Base Amount plus (ii) the
----
product of (x) the then-current TT&C Base Amount multiplied by (y) the
-------------
lesser of five percent (5%) or the percentage increase in the Consumer
Price Index as of such anniversary as compared with the Consumer Price
Index as of the last such anniversary. The "Consumer Price Index" means
that certain consumer price index rate for all urban consumers U.S. City
Average published by the United States Department of Labor. If the Consumer
Price Index ceases to be published, or the basis of calculation thereof is
significantly altered, HCG and NRTC shall negotiate in good faith to
determine a mutually acceptable, and reasonable equivalent, substitute
inflation index.
(ii) At such time as the aggregate amount of the TT&C Fees paid by
NRTC to HCG meets or exceeds the "Accrued TT&C Expenses" for all program
Channels, then NRTC's payment for TT&C Services shall be converted from a
per Authorized Subscriber fee to a fixed fee (the "TT&C Fixed Fee
Conversion"). Upon the TT&C Fixed Fee Conversion, the TT&C Base Amount
shall be [**] per Program Channel per month (and may be adjusted under
Section 3.02(b)(i)), regardless of the number of Authorized Subscribers or
the number of program services distributed by Committed Members. The
"Accrued TT&C Expenses" for a given Program Channel means the product of
(x) [**], multiplied by (y) the total number of months for which TT&C
-------------
Services have been provided for such Program Channel during the period from
the Service Commencement Date to and including the month of such
calculation. HCG will provide written notice to NRTC of such TT&C Fixed Fee
Conversion and NRTC shall continue to be responsible for coordinating and
collecting Committed Members' payments of such fees.
19
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.
(iii) If NRTC partially terminates this Agreement as to any Program
Channel under Section 10.03 prior to the TT&C Fixed Fee Conversion, then
the TT&C Base Amount shall be reduced to an amount calculated pursuant to
the following formula: the product of (x) the then-current TT&C Base
Amount, multiplied by (y) the number of Program Channels immediately
-------------
following such termination, divided by (z) the number of Program Channels
------- --
immediate preceding such termination. If NRTC partially terminates this
Agreement as to any Program Channel under Section 10.03 after the TT&C
Fixed Fee Conversion, then no TT&C Fee shall be due for the terminated
Program Channel.
3.03 Ground Services Fees. The fees for the provision of the Ground
--------------------
Services shall consist of payments for ground service equipment capital costs
(the "Ground Capital Fee") and fees for operating expenses (the "Ground Services
Fee") as set forth below.
(a) The Ground Capital Fee is equal to the product of (x) the
aggregate of the Committed Member Payments, multiplied by (y) [**].
-------------
(b) The Ground Services Fee for any given month shall be equal to
the product of (x) the Ground Services Base Amount, multiplied by (y) the number
---------- --
of Authorized Subscribers calculated for such month. The initial "Ground
Services Base Amount" shall be determined on May 1, 1993 (or on July 1, 1993 if
the July Extension is applicable), and shall be based on the aggregate amount of
Committed Member Payments actually paid to HCG or owed to HCG as Second Payments
under Section 1.01(b)(iv) as of such date as follows:
Ground Services
Committed Member Payments Base Amount
------------------------- ---------------
$0 to $149,999,999.99 [**]
$150,000,000 to $199,999,999.99 [**]
$200,000,000 to $249,999,999.99 [**]
$250,000,000 [**]
The Ground Services Fee is subject to adjustment as the Ground Services Base
Amount is adjusted under Section 3.03(c). The Ground Services Fee shall be
payable within thirty (30) days following HCG's invoice; provided that such
invoice shall not be submitted to NRTC prior to the 16th day of the given
billing month. The Ground Services Fee shall begin to apply on and as of the
Service Commencement Date.
(c) (i) Beginning on the third one-year anniversary of the Service
Commencement Date and on each subsequent yearly anniversary thereafter, the
Ground Services Base Amount shall be adjusted to an amount calculated
pursuant to the following formula: the sum of (i) the then-current Ground
Services Base Amount plus (ii) the product of (x) the then-current Ground
----
Services Base
20
Amount, multiplied by (y) the lesser of five percent (5%) or the percentage
-------------
increase in the Consumer Price Index as of such anniversary as compared
with the Consumer Price Index as of the last such anniversary (or as of the
Execution Date in the case of the first adjustment to be made).
(ii) If NRTC partially terminates this Agreement as to any
Program Channel under Section 10.03 prior to the Ground Services Fixed Fee
Conversion (if applicable and as set forth in Exhibit 19), then the Ground
Services Base Amount shall be reduced to an amount calculated pursuant to
the following formula: the product of (x) the then-current Ground Services
Base Amount, multiplied by (y) the number of Program Channels immediately
---------- --
following such termination, divided by (z) the number of Program Channels
------- --
immediately preceding such termination. If NRTC partially terminates this
Agreement as to any Program Channel under Section 10.03 after the Ground
Services Fixed Fee Conversion (if applicable), then no Ground Services Fee
shall be due for the terminated Program Channel.
(d) If the Service Equipment used to provide the Ground Services is
used to provide any satellite services over transponder capacity other than the
Transponder Capacity; then, subject to the limitations in the next sentence of
this Section 3.03(d), (i) HCG shall reduce the amount of the Ground Services Fee
to reflect, in its reasonable discretion, the shared operating expenses
attributable to such shared usage; and (ii) HCG shall reduce the amount of the
Ground Services Fee to reflect, in its reasonable discretion, the prorated,
amortized costs for the Service Equipment used by such user and shared with
NRTC. No reduction shall be made under this Section 3.03(d) with respect to any
Service Equipment that is dedicated exclusively to providing the DBS
Distribution Services or for any operating expenses that are attributable to
providing the DBS Distribution Services and not shared with other users. HCG
shall notify NRTC after any adjustment of the Ground Services Fee under this
Section 3.03(d) and shall accompany such notification with (x) a list of all
Service Equipment that is shared and with respect to which the Ground Services
Fee is to be adjusted, and (y) a written explanation of the basis for the
adjustment, certified by the Chief Financial Officer of HCG. NRTC shall have the
right to inspect any such shared Service Equipment during normal business hours
upon reasonable notice to HCG.
3.04 Security Services Fee.
---------------------
(a) The fee for the provision of the Security Services (the
"Security Services Fee") is set forth in Exhibit 3.04. HCG represents and
warrants that the Security Services Fee to be paid by NRTC to HCG for any
subscriber shall be no more than One Hundred Twenty Percent (120%) of the total
HCG Security Costs for such subscriber. The "HCG Security Costs" means, with
respect to any subscriber, the sum of (x) the fees to be paid for such
subscriber to NDSPL under the CAS Security Agreement or to any subsequent
service provider under a subsequent security service agreement (less any
royalties, discounts, payments or other consideration received by HCG from NDSPL
with respect to such subscriber), plus (y) the charges for telephone usage
----
between the
21
Subscriber Terminal Equipment and the CAMC. If NRTC (or a Committed Member)
initially registers a Committed Member Residence with the CAMC (an "NRTC-
Registered Subscriber"), then, between HCG and NRTC, NRTC shall be solely
responsible for the Security Services Fee for such NRTC-Registered Subscriber.
If, on the other hand, a person or entity other than NRTC (or a Committed
Member) initially registers a subscriber with the CAMC, then, between HCG and
NRTC, such other person or entity shall be solely responsible for the Security
Services Fee for such subscriber. Finally, if a Committed Member Residence is
either (xx) initially registered by the CAMC simultaneously for both DBS
Distribution Services and DirecTv Programming services or (yy) later subscribes
to both such services by adding the other package (a "Joint Subscriber"), then
each of HCG and NRTC shall be responsible for 50% of such Security Services Fee
for such Joint Subscriber. The Security Services Fee due from NRTC to HCG in a
billing month shall be calculated by HCG using the number of NRTC-Registered
Subscribers and Joint Subscribers calculated for such month. The Security
Services Fee shall be payable within thirty (30) days following HCG's invoice;
provided that such invoice shall not be submitted to NRTC prior to the 16th day
of the given billing month. NRTC recognizes and understands that the HCG
Security Costs may be increased or decreased due to (i) HCG's renegotiation with
NDSPL pursuant to the CAS Security Agreement, (ii) HCG's use of another service
provider upon termination of the CAS Security Agreement, and/or (iii) increases
or decreases in the charges for telephone usage. As a consequence, HCG may, upon
written notice to NRTC, adjust such Security Services Fee in an amount
commensurate with any such increase or decrease in the HCG Security Cost;
provided, however, that such adjustment will not result in a Security Service
Fee of more than One Hundred Twenty percent (120%) of the total HCG Security
Costs. The Security Services Fee shall begin to apply on and as of the Service
Commencement Date.
(b) If a Security Breach (as defined in Exhibit 2.06) occurs, and
such breach has not been Cured (as defined in Exhibit 2.06) within 30 days after
the Security Breach Date (as defined in Exhibit 2.06) (the "Fee Suspension
Date"), then the Security Service Fee shall be suspended from and after the Fee
Suspension Date until the Security Breach is Cured; provided, however, that such
suspension shall not relieve NRTC of its obligation to pay to HCG the amount of
any Security Service Fee due and payable to HCG for services provided prior to
such Fee Suspension Date nor relieve NRTC of any other payment obligation
hereunder.
3.05 Programming Fees. NRTC shall pay HCG all the programming fees
----------------
required to be paid by HCG under the Programming Agreements or required to be
paid by HCG under the compulsory copyright licenses for Program Services
provided to NRTC Subscribers and/or any fees, guarantees, penalties or costs due
under the Programming Agreements that are attributable to a failure to provide a
minimum subscriber level of Committed Member Residences as provided in Section
2.07 (the "Programming Fees"). The Programming Fee shall begin to commence on
and as of the Service Commencement Date.
22
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.
3.06 NRTC Revenue Fee.
----------------
(a) From the second anniversary of the Service Commencement Date
through the expiration, termination or cancellation of this Agreement (the "NRTC
Revenue Fee Termination Date"), NRTC will pay HCG, on or before the dates set
forth in Section 3.06(b), an "NRTC Revenue Fee" equal to [**] of Gross NRTC
Revenue. "Gross NRTC Revenue" means gross revenue due to NRTC from Members or
other persons or entities that is generated by NRTC's sale and/or provision of
the DBS Distribution Services (provided under or pursuant to this Agreement, but
exclusive of payments received for the provision of the Transponder Capacity,
the Ground Capital Fee, NRTC's provision of subscriber billing and/or
authorization services to Committed Members, or for the sale of Subscriber
Terminal Equipment) or any other services that utilize the Transponder Capacity
to NRTC Subscribers and other consumers (e.g., it shall exclude revenues from
---
intra-NRTC/Member load control services and intra-NRTC/Member Data Services),
excluding only sales taxes, gross receipt taxes and similar taxes imposed by any
Governmental Body on NRTC's sale or provision of such services. In no event
shall Gross NRTC Revenue for the relevant period be less than the aggregate
amounts paid by NRTC to HCG under this Agreement for TT&C Fees, Ground Services
Fees, Security Services Fees and Programming Fees in that same period. Services
shall be deemed to have been sold or provided by NRTC when invoiced, or if not
invoiced, when actually provided, or when paid for if paid for before the
provision of service.
(b) The NRTC Revenue Fee shall be payable annually, with the first
payment due on the third anniversary of the Service Commencement Date and each
subsequent payment due on each one-year anniversary thereafter, and, in any
event, no later than sixty (60) days after the NRTC Revenue Fee Termination
Date. On each such payment date, NRTC shall furnish to HCG: (x) a statement
certified by the Chief Financial Officer of NRTC of the amount of the Gross NRTC
Revenue during the twelve-month period ending on the close of the immediately
preceding calendar quarter with detail sufficient to permit the computation of
the NRTC Revenue Fee due for such period pursuant to Section 3.06(a), and the
amount of such NRTC Revenue Fee due (the "Yearly Statement"); and (y) payment
drawn on a United States bank in immediately available funds in the amount of
the NRTC Revenue Fee due for such period. Acceptance by HCG of any NRTC Revenue
Fee payment under this Section 3.06(b) shall not constitute acceptance of the
contents of the accompanying statement.
(c) NRTC shall provide HCG with monthly statements detailing the NRTC
Revenue Fee owing to HCG for the prior month. Such statement shall be due no
later than the tenth calendar day of the month subsequent to the month for which
information is being provided (e.g., the statement which covers NRTC's revenue
----
for the period January 1995 shall be due no later than February 10, 1995). The
statement shall contain detail sufficient to permit the computation of the NRTC
Revenue Fee for such period.
23
(d) Should HCG fail to timely pay to NRTC the amount of any DirecTv
Fee as provided in Section 5.02(b), then NRTC shall have the right to offset
such amount against, and to deduct such amount from, any NRTC Revenue Fee
payable to HCG under this Section 3.06.
3.07 Place of Payment. All payments by NRTC shall be made to HCG at HCG's
----------------
principal place of business, as designated in Section 18.03, and shall be deemed
to be made only upon actual receipt by HCG. All refunds by HCG shall be made to
NRTC at NRTC's principal place of business as designated in Section 18.03, and
shall be deemed to be made only upon actual receipt by NRTC.
3.08 Letter of Credit, HCG Priority to Payment. NRTC shall deliver to HCG
-----------------------------------------
an irrevocable letter of credit, in substantially the identical form as Exhibit
3.08 (the "Letter of Credit") from CFC or a financial institution identified on
Exhibit 1.01(b)(v)-1 or such other financial institution as mutually agreed to
the reasonable satisfaction of both parties, to secure NRTC's payment
obligations hereunder. The Letter of Credit shall be delivered on or before the
Service Commencement Date and such Letter of Credit or a Replacement Letter of
Credit, as allowed below, shall remain in place until the expiration,
cancellation or termination of this Agreement. The amount of the Letter of
Credit shall equal the total amount of TT&C Fees, Ground Services Fees, Security
Service Fees, Programming Fees and NRTC Revenue Fees payable to HCG for an
immediately preceding three month period (and to determine the initial amount,
it shall be such amounts expected to be paid for the three months after the
Service Commencement Date), as calculated by HCG (the "LC Amount"). In any case,
the minimum number of NRTC Subscribers, for purposes of calculating the LC
Amount, shall be One Hundred Thousand (100,000). The Letter of Credit shall be
irrevocable, and subject only to an adjustment every six months (beginning with
the period ending six months after the Service Commencement Date) to reflect the
new LC Amount. If the Letter of Credit is not reinstated as provided in Section
4 therein, or is not renewed or is not adjusted as provided in Section 5
therein; then NRTC shall promptly deliver to HCG a replacement irrevocable
letter of credit in a form substantially identical to Exhibit 3.08 (the
"Replacement Letter of Credit," which shall be deemed the Letter of Credit for
all purposes of this Agreement); and, in any case, from and after such non-
reinstatement, non-adjustment or non-renewal, (a) HCG may retain any monies
payable to NRTC hereunder as a deposit against any non-payment under this
Agreement (a "Deposit"), up to the LC Amount, until a Replacement Letter of
Credit is properly delivered by NRTC to HCG, at which time HCG shall promptly
remit the amount of such Deposit to NRTC; and (b) HCG may draw down whatever
amount remains under the existing Letter of Credit and may hold such amount as a
Deposit until a Replacement Letter of Credit is properly delivered by NRTC to
HCG, at which time HCG shall promptly remit the amount of such Deposit to NRTC.
After the Deposit is applied to any due and unpaid obligations under this
Agreement, any unused amounts of the Deposit shall be promptly refunded by HCG
to NRTC after the expiration, cancellation or termination of this Agreement.
3.09 Prompt Repayment. All refunds provided for in this Agreement to be
----------------
made by HCG shall be made without interest within fifteen (15) business days
following
24
notification to HCG of the occurrence of the event giving rise to such refund;
provided, however, that any such late payment not made within such time period
by HCG to NRTC shall bear interest calculated at the rate set forth in Section
18.01, calculated from the date payment was due until the date it is received by
NRTC.
3.10 HCG Suspension of Services.
--------------------------
(a) If NRTC receives full payment of any fees described in this
Section 3 (including any Second Payments described in Section 1.01(b)) from a
Committed Member and NRTC does not pay HCG such fees as required under this
Agreement, then HCG shall not have the right to suspend services (and/or, in the
case of a failure to make Second Payments, HCG shall not have the right to
refuse to commence services) to any such paying Committed Member but (i) shall
have any and all rights under this Agreement, and at law or in equity, to
collect such sums and any damages (as limited by Section 13), costs,
liabilities, and expenses (including without limitation, court costs and
reasonable attorney and other third party fees) (collectively, "Expenses")
associated therewith from NRTC and (ii) shall have the further right,
thereafter, to require the Committed Member to pay all such fees (including any
Second Payments) directly to HCG rather than NRTC and (iii) upon the expiration
of the relevant cure period in Section 11.02, HCG shall have the right to draw
down on the Letter of Credit pursuant to Section 3.08 in an amount equal to
(and, if applicable, use the Deposit for) all such fees.
(b) If HCG does not receive full, timely payment from NRTC of any
portion of the fees described in this Section 3 (including any Second Payments
described in Section 1.01(b)) because a Committed Member has not paid NRTC, then
(i) NRTC shall as promptly as possible and, in any case, within ten (10) days,
identify in writing to HCG any and all Committed Members that are delinquent in
paying their allocated portion of such fees and/or their Second Payments, (ii)
HCG may, at its sole discretion, after written notice to any such identified
Committed Member at an address supplied by NRTC followed by a fifteen (15) day
period to cure (it being expressly understood that a cure may consist of NRTC's
identifying facially incorrect amounts on an HCG invoice and that NRTC may cure
any such non-payment itself and if it does so, may have rights under the Member
Contract to assume all rights and obligations of such delinquent Committed
Member under such Member Contract) cease providing (and/or, in the case of a
failure to make Second Payments, HCG shall also have such right not to commence)
any or all of the DBS Distribution Services to such identified Committed Member
and/or any or all of its NRTC Subscribers and shall have the further right to
commence judicial action, at law and in equity, to collect such sums and
Expenses associated therewith from such identified Committed Member directly
(and the Member Contract shall contain provisions to this effect); and (iii)
upon the expiration of the relevant cure period in Section 11.02, HCG shall have
the right to draw down on the Letter of Credit in an amount equal to (and, if
applicable, use the Deposit for) all overdue fees owed by such delinquent
Committed Member to NRTC and all fees attributable or allocable to such
Committed Member (and, if applicable, use the Deposit for) through the 15th day
of such cure period that are not yet overdue.
25
(c) If NRTC does not timely identify the Committed Members who are
not paying their fees and/or their Second Payments and NRTC does not timely pay
the fees and/or Second Payments owed by NRTC to HCG, then HCG shall have any and
all rights under this Agreement, and at law or in equity, to collect such sums
and Expenses associated therewith from NRTC, and upon the expiration of the
relevant cure period in Section 11.02, HCG shall have the right to draw down on
the Letter of Credit in an amount equal to (and, if applicable, use the Deposit
for) all such fees, and shall have the right to require all Committed Members to
pay all such fees and/or their Second Payments directly to HCG rather than NRTC.
(d) Notwithstanding anything to the contrary in this Agreement, if
(a) HCG has suspended (and/or not commenced) any DBS Distribution Services to a
Committed Member and/or its NRTC Subscribers pursuant to this Section 3.10, and
(b) NRTC is due a Complete Refund and/or Partial Refund under this Agreement;
then HCG shall have the right to offset and deduct from the amount of such
refund(s) the total or pro-rata (as appropriate) amounts due and owing as
described above, plus interest on such amounts. If the period of suspended
(and/or non-commenced) service to any Committed Member under this Section 3.10
exceeds sixty (60) days, then HCG shall have the termination rights set forth in
Section 11.02(f). If NRTC does not identify delinquent Committed Members as
contemplated by this Section 3.10 and does not timely pay any fees and/or Second
Payments owed by NRTC to HCG, or receives full payment of any fees (including
any Second Payments) from a Committed Member but does not pay HCG such fees
and/or Second Payments as required under this Agreement, then HCG shall have the
termination rights set forth under Section l1.02(e)(i), in addition to those
rights set forth above.
3.11 Late Payment and Interest. Any late payments by NRTC to HCG shall be
-------------------------
with interest calculated at the rate set forth in Section 18.01, payable with
the amount due and calculated from the date payment was due until the date it is
received by HCG. In no event shall interest paid on any Committed Member
Payment, Second Payment, and/or Escrowed Committed Member Payment be deemed part
of any such Committed Member Payment, Second Payment or Escrowed Committed
Member Payment.
3.12 Other Fees. If NRTC markets and/or sells the DBS Distribution
----------
Services to persons or entities in non-NRTC Territories, then NRTC shall
compensate HCG for the provision of such DBS Distribution Services (except only
Transponder Capacity if Exhibit 19 applies) on a per subscriber basis in amounts
equal to those provided for in this Section 3 for the provision of such services
to NRTC Territories.
4. Service Commencement, Service Term and Related Matters.
------------------------------------------------------
4.01 Service Commencement Date.
-------------------------
(a) The "Service Commencement Date" shall mean the date upon which
HCG commences the provision of the DBS Distribution Services, with all such
services having completed Acceptance pursuant to Section 4.04. The "Scheduled
Service
26
Commencement Date" is April 1, 1994 and is based upon a scheduled launch date of
the Satellite in December 1993 (the "Scheduled Launch Date"). HCG has a
contract with Arianespace for the launch of the Satellite, and Arianespace has
scheduled the launch of the Satellite for December 1993. HCG shall use its
reasonable best efforts to cause the Service Commencement Date to occur no later
than 90 days after the Scheduled Launch Date. HCG shall use its reasonable best
efforts to cause the launch of the Satellite to occur on or about the Scheduled
Launch Date; provided, however, that HCG shall have the right to determine, in
its sole discretion, which launch vehicle to use, and shall have the right to
change the Scheduled Launch Date as required by the availability of launch
reservations and launch services and by such other events as HCG determines
require changes in such date, and HCG shall not be required to pay for launch
services at commercially unreasonable rates, based on prevailing launch market
rates, to obtain a particular launch date. The Scheduled Service Commencement
Date shall not change as a result of any change in the Scheduled Launch Date.
The only consequence of HCG's failure to meet the Scheduled Service Commencement
Date shall be as set forth in Sections 4.01(b), 4.02, 11.01 and 11.02. If the
Service Commencement Date does not occur on or before the Scheduled Service
Commencement Date, HCG shall use its reasonable best efforts to make the Service
Commencement Date occur as soon thereafter as possible. Notwithstanding the
above, HCG shall have the right in any case to make the Service Commencement
Date occur earlier than April 1, 1994; provided that HCG shall obtain the
consent of NRTC (which NRTC may grant or withhold) to such early Service
Commencement Date if such date is to occur before December 1, 1993.
(b) If the Transponder Capacity is not Available (as defined below),
but HCG is able to provide a portion of the twenty (20) Program Channels (a
"Partial Delivery"), then HCG shall notify NRTC of the Partial Delivery (the
"Partial Delivery Notice") and NRTC may reject such Partial Delivery by
providing written notice to HCG within ninety (90) days after receipt of the
Partial Delivery Notice. If NRTC accepts (or does not timely reject) such
Partial Delivery, then (i) this Agreement shall be terminated with respect to
any non-provided Program Channels and NRTC's obligation to pay the TT&C Fees,
Ground Services Fees, and Programming Fees associated with such non-provided
Program Channels shall terminate; (ii) NRTC shall receive a pro-rata refund of
the Committed Member Payments attributable to such non-provided Program Channels
as set forth in Section 11.01(c); (iii) the Service Commencement Date shall be
deemed to occur when all other portions of the DBS Distribution Services can be
provided and Acceptance of such other portions has been completed; (iv) NRTC
shall have no rights to any Late Commencement Fees and shall not have any other
termination rights under this Agreement with respect to such non-provided
Program Channels; and (v) HCG shall have no further obligations to provide such
non-provided Program Channels to NRTC. If NRTC timely notifies HCG that it does
not accept Partial Delivery, then the Service Commencement Date shall not be
deemed to occur unless and until HCG is able to provide all twenty (20) Program
Channels; and, if HCG is not able to do so before the Rescission Date, then NRTC
and HCG shall have the termination rights set forth in Sections 11.01 and 11.02,
respectively. Transponder Capacity is "Available" if such capacity is capable
of providing twenty (20) Program Channels that meet the Minimum
27
Requirements. Except only as provided in Exhibit 19, if applicable, HCG shall
have the option, but not the obligation, to provide additional or replacement
Transponder Capacity or utilize spare equipment if Transponder Capacity is not
Available to provide all twenty (20) Program Channels.
4.02 Late Commencement Payments. If the Service Commencement Date has not
--------------------------
occurred on or before December 31, 1994, and this Agreement has not been
terminated or cancelled earlier and has not expired, then HCG shall pay to NRTC,
on a monthly basis, as a late fee (the "Late Commencement Fee") an amount equal
to product of (x) 0.000000 multiplied by (y) the aggregate amount of the
-------------
Committed Member Payments actually paid to HCG (and specifically excluding any
Second Payments owing to HCG). The first payment of the Late Commencement Fee
(if any) shall be made on March 31, 1995, with any subsequent payments made at
the end of each subsequent month thereafter. Payment of the Late Commencement
Fee shall continue until the earliest to occur of (i) the Service Commencement
Date or (ii) such time as the total Late Commencement Fee paid equals the
product of (xx) 0.000000, multiplied by (yy) the aggregate Committed Member
-------------
Payments actually paid to HCG (and specifically excluding any Second Payments
owing to HCG). Any Late Commencement Fee amount due at the end of a month in
which the Service Commencement Date occurs shall be pro-rated. No Late
Commencement Fees shall be due or payable if the failure or delay in the
performance by HCG of its obligations hereunder results from any acts or
omissions of NRTC or its Members or Affiliates.
4.03 [Intentionally Omitted.]
4.04 Acceptance. HCG shall test the performance of the Transponder
----------
Capacity, Ground System, and Security Services in accordance with an acceptance
test plan to be prepared by HCG and delivered to NRTC at least 180 days prior to
the Scheduled Service Commencement Date. NRTC shall have the right to be
present at and observe all acceptance testing and HCG shall provide NRTC with
written test results relevant to the DBS Distribution Services promptly
thereafter. A summary outline of the acceptance test plan, including a
description of the test phases and methods used to demonstrate compliance with
the Minimum Requirements set forth in Exhibit 7.01, is set forth in Exhibit
4.04. "Acceptance" of the DBS Distribution Services shall be deemed to have
occurred when (a) the DBS Distribution Services meet the Minimum Requirements
(and, in the case of Subscriber Terminal Equipment Availability, upon HCG's
representation to NRTC that TCE's production capability is in place and that TCE
is ready to commence production of Subscriber Terminal Equipment (or that
Subscriber Terminal Equipment is in production); provided, however, that the
only consequences of HCG's inability to provide such representation prior to the
Rescission Date are that, unless and until such representation is waived by NRTC
or produced by HCG, the Service Commencement Date shall not occur and Late
Commencement Fees may be payable under Section 4.02); and (b) HCG has notified
NRTC in writing that HCG is ready to commence the immediate provision of all the
DBS Distribution Services and HCG anticipates continuous service under the terms
of this Agreement.
28
4.05 Ownership of Service Equipment. The Transponder Capacity and all
------------------------------
other equipment and property utilized by HCG, its Affiliates and/or its
subcontractors or assignees to provide the DBS Distribution Services and other
services (if any) to NRTC hereunder (the "Service Equipment") shall remain the
sole and exclusive property of HCG, its Affiliates and/or its subcontractors or
assignees (as appropriate), and NRTC shall have no rights in or to such Service
Equipment except for (i) NRTC's contractual rights to have DBS Distribution
Services and other services (if any) provided over such equipment under this
Agreement, and (ii) any Subscriber Terminal Equipment and any other Service
Equipment not contemplated by this Agreement that NRTC or Committed Members have
independently purchased from third parties. Nothing in this Section 4.05 shall
modify HCG's obligation, under Section 3.03(d), to reduce the Ground Services
Fee in certain circumstances as set forth therein.
4.06 Service Term: Programming Renewal; Design of Satellite.
------------------------------------------------------
(a) Service Term. Except for Programming Services (as set forth below
------------
in Section 406(b)) or as such obligation may be modified by other provisions of
this Agreement, and unless this Agreement is terminated, is cancelled, or
expires earlier, HCG shall provide the DES Distribution Services until the
Satellite Expiration Date. The "Satellite Expiration Date" means the date on
which HCG, after the conditions referred to in either clause (i) or clause (ii),
below, have occurred, in its sole discretion, removes the Satellite from its
assigned orbital location. Subject to any FCC Rules which may exist, the
Satellite Expiration Date shall not occur until such time as (i) the remaining
fuel on board the Satellite is less than 6% of the initial fuel mass prior to
launch, including reasonable provision for uncertainty in estimation of fuel, or
(ii) there are fewer than eight (8) Transponders on the Satellite capable of
meeting the transponder performance specifications of the respective Users or
capable of providing Transponder Capacity that meets the Minimum Requirements.
Upon the Satellite Expiration Date, HCG will have no further obligations under
this Agreement (except any unfulfilled obligations under Section 15) and this
Agreement will terminate. HCG will, to the extent possible, provide NRTC with
ninety (90) days' notice prior to the scheduled Satellite Expiration Date.
Nothing in this Section 4.06 modifies NRTC's rights, if applicable, to terminate
this Agreement pursuant to Section 11.01(d) and obtain a Partial Refund.
(b) Programming Renewal. Unless this Agreement is terminated,
-------------------
cancelled or expires earlier, and except as such obligation may be modified by
other provisions of this Agreement, HCG shall provide each of the program
services provided under the Programming Services until the termination,
expiration or cancellation of the Programming Agreement (or, in the case of
Programming Services provided under a compulsory copyright license, until the
earlier to occur of three years or once such license is not available) pursuant
to which HCG provides such program service. On or before the 365th day prior to
the scheduled expiration of each Programming Agreement (a "Programming Renewal
Date"), after consultation with NRTC, HCG shall notify NRTC whether HCG, in its
sole discretion, will seek renewal of such Programming Agreement. If HCG
indicates that it will seek renewal of a Programming Agreement, and is able to
obtain such renewal, then HCG's provision of a program service under such
29
Programming Agreement shall be extended in accordance with the provisions of the
renewal agreement. The standards set forth in Section 2.07, as then-existing at
the time of renewal, shall apply to any such renewal unless NRTC and HCG
otherwise agree in writing. If HCG elects not to seek renewal, or if HCG seeks
renewal but is unable to obtain such renewal by the 180th day following HCG's
notice to NRTC, then NRTC shall have the right to directly seek renewal rights
of such Programming Agreement. In such an event, HCG's obligations to provide
the program service provided under such Programming Agreement shall terminate
upon the relevant Programming Renewal Date. In all cases, NRTC's and/or the
Committed Member's obligations to pay for the Security Services, Ground Services
and TT&C Services under this Agreement shall continue after the Programming
Renewal Date(s) for so long as such services are provided hereunder.
(c) Satellite Design. HCG will design the Satellite so that its
----------------
propulsion tanks have the capacity to hold an amount of fuel that is sufficient,
when applying fuel usage projections for launch operations and on-station
operations established prior to launch using standard engineering practices, to
(a) launch the Satellite into its assigned orbital slot; (b) operate the
Satellite for 12 years or more; and (c) boost the Satellite out of orbit as
anticipated under Section 4.06(a). In addition, all critical electronic devices
on the Satellite shall have a design life of 12 years or more. The Satellite is
designed to provide CONUS DBS service and, subject to FCC consent, will operate
in that manner. The parties acknowledge, however, that (1) the Satellite's
design and all other decisions concerning the Satellite, including the amount of
fuel with which the Satellite is launched, will be made by HCG in its sole
discretion and (2) NRTC's sole remedies shall be as set forth in Section 10 and
Section 11.01(d), regardless of whether HCG designed the Satellite in compliance
with the provisions of this Section 4.06(c). If any decisions are made by HCG
that will have a material effect on the operational life of the Satellite, then
HCG shall promptly notify NRTC of such decisions and their effects.
5. Marketing Rights
----------------
5.01 Marketing of DBS Distribution Services in NRTC Territories.
----------------------------------------------------------
(a) HCG grants NRTC the exclusive right to market and sell the DBS
Distribution Services to Members for distribution to Committed Member Residences
or directly to Committed Member Residences; it being expressly agreed and
understood that any rights as to Programming Services shall extend only as to
the extent and for the duration as may be provided under the relevant
Programming Agreements. For purposes of Sections 5.01(a) and 5.01(b), Committed
Member Residences shall be determined based upon Member Contracts executed as of
December 11, 1992 (or May 1, 1993 or July 31, 1993, if applicable). NRTC shall
have the sole and exclusive right to determine the terms and conditions upon
which it will market the DBS Distribution Services to such Members and Committed
Member Residences, and subject to the provisions of Section 3, shall be entitled
to all revenues from such marketing.
(b) (i) Beginning on December 11, 1992 (or May 1, 1993 or July 31,
1993, if applicable), HCG shall have the exclusive right to market and sell
the
30
DBS Distribution Services, and any other program services transmitted on
the Transponder Capacity for distribution to the Non-Committed Member
Residences. "Non-Committed Member Residences" means all Eligible Residences
that are not Committed Member Residences, as determined pursuant to Section
5.01(a) as of December 11, 1992 (or May 1, 1993 or July 31, 1993, if
applicable). HCG shall have the sole and exclusive right to determine the
terms and conditions upon which it will market the DBS Distribution
Services to such Non-Committed Member Residences, and shall be entitled to
all revenues from such marketing. HCG's rights under this Section 5.01(b)
shall not be adversely affected by NRTC's taking control of the Programming
Agreements under Section 4.06(b).
(ii) Prior to marketing the DBS Distribution Services to any Non-
Committed Member Residences, HCG shall provide NRTC with the one-time
opportunity to obtain from HCG (and provide to Committed Members, in NRTC's
discretion) the right to distribute DBS Distribution Services to the Non-
Committed Member Residences in RSAs that are in or immediately adjacent to
the territories any Committed Members serve (the "Expansion Opportunity").
Within sixty (60) days following HCG's notice to NRTC of the Expansion
Opportunity, NRTC may propose to HCG the terms and conditions on which, and
the specific Non-Committed Member Residences as to which, NRTC wishes to
obtain such distribution rights. For a period of sixty (60) days following
NRTC's proposal, HCG and NRTC shall negotiate in good faith to establish
mutually agreeable terms and conditions for such distribution rights. If
the parties are not able to so agree within such time period, HCG shall
have no further obligations under this Section 5.01(b)(ii).
(c) (i) If HCG enters into a definitive agreement to provide
the DBS Distribution Services to any other person or entity who desires to
provide, or if HCG itself provides, all of the Programming Services to Non-
Committed Member Residences in RSAs (a "Full Service Distributor") on
prices, terms, conditions, benefits and obligations (including, without
limitation, capital contributions, interest and other payments, volume and
amount of capacity and usage, programming and/or service commitments) that,
taken as a whole, are more favorable than those by which the DBS
Distribution Services are provided to NRTC hereunder, then HCG shall
promptly offer NRTC the opportunity to obtain such more favorable prices,
terms, conditions, benefits and obligations, taken as a whole, contained in
the agreement that HCG has entered into with such Full Service Distributor.
(ii) If HCG enters into a definitive agreement to provide the DBS
Distribution Services to any other person or entity who desires to provide,
or if HCG itself provides, some, but not all, of the Programming Services
to Non-Committed Member Residences in RSAs (a "Partial Service
Distributor") on prices, terms, conditions, benefits and obligations
(including, without limitation, capital contributions, interest and other
payments, volume and amount of capacity
31
Information below, marked with [**], has been omitted pursuant to a request for
confidential treatment. A complete copy of this document has been supplied to
the Securities and Exchange Commission under separate cover.
and usage, programming and/or service commitments) that, taken as a whole,
are more favorable than those by which that same portion of the Programming
Services is provided to NRTC hereunder (on a pro-rata basis based on twenty
program services), then HCG shall promptly offer NRTC the opportunity to
obtain such Programming Services on the more favorable prices, terms,
conditions, benefits and obligations, taken as a whole, contained in the
agreement that HCG has entered into with such Partial Service Distributor;
provided, however, that no such offer shall relieve NRTC of any of its
obligations hereunder with respect to the DBS Distribution Services and all
the Programming Services provided prior to such offer, including, without
limitation, NRTC's obligations (if any) to provide minimum NRTC Subscriber
levels for a program service that is part of the Programming Services.
5.02 Marketing DirecTv Programming Services.
--------------------------------------
(a) To the fullest extent HCG may grant such right, HCG hereby grants
NRTC the non-exclusive right to market and sell "DirecTv Programming" (defined
as any video programming that HCG or its Affiliates has the right to distribute
and that is transmitted over the 101 degrees Satellite(s)) to Committed Members
for distribution to Committed Member Residences and directly to Committed Member
Residences. HCG and NRTC acknowledge and agree that HCG does not now have the
right to distribute DirecTv Programming to Eligible Residences or anywhere else
and that, although HCG intends to use reasonable efforts to obtain such rights,
HCG shall have no obligation to NRTC to obtain such rights. Nothing in this
Agreement (including, without limitation, Section 2.08) shall restrict HCG's
ability or rights to market and sell DirecTv Programming to Eligible Residences
(including Committed Member Residences and NRTC Subscribers) itself or through
other persons or entities, or to access and address the Subscriber Terminal
Equipment utilized by such Eligible Residences (including Committed Member
Residences and NRTC Subscribers) for purposes of providing such DirecTv
Programming.
(b) (i) In consideration for NRTC making available NRTC-Registered
Subscribers and/or Joint Subscribers for subscription to DirecTv
Programming, HCG shall pay NRTC an amount equal to [**] (the "DirecTv Fee")
of the gross receipts paid to HCG by any NRTC-Registered Subscribers and/or
Joint Subscribers for DirecTv Programming (excluding only any sales taxes,
gross receipt taxes or similar taxes imposed by any Governmental Body on
HCG's provision of such programming) ("DirecTv Revenue"). If NRTC collects
any fees paid by NRTC-Registered Subscribers or Joint Subscribers for
DirecTV Programming, then NRTC shall be entitled to retain [**] of such
gross receipts (excluding only any sales taxes, gross receipt taxes or
similar taxes imposed by any Governmental Body on HCG's or NRTC's provision
of such programming) in consideration for NRTC making available to HCG such
NRTC Registered Subscribers and/or Joint Subscribers for subscription to
DirecTv Programming. HCG acknowledges that NRTC will be entitled to
additional compensation for the services that it provides with respect to
32
DirecTv Programming subscribers, and agrees to negotiate in good faith with
NRTC to establish the additional terms and conditions and payments by HCG
to NRTC associated with other marketing services and any billing, invoicing
and/or collecting services NRTC may provide. Such additional terms and
conditions shall be incorporated as mutually-agreed-to amendments to this
Agreement. If the parties are unable to agree upon such terms and
conditions by October 1, 1993, then either party may submit any and all
outstanding issues or conditions to arbitration pursuant to Section 18.13.
(ii) The DirecTv Fee shall be payable annually, with the first
payment due on the first anniversary of the Service Commencement Date and
each subsequent payment due on each one-year anniversary thereafter, and,
in any event, no later than sixty (60) days after the expiration,
cancellation or termination of this Agreement. On each such payment date,
HCG shall furnish to NRTC: (x) a statement certified by the Chief
Financial Officer of HCG of the amount of the DirecTv Revenue during the
twelve-month period ending on the close of the immediately preceding
calendar quarter with detail sufficient to permit the computation of the
DirecTv Fee due for such period pursuant to Section 5.02(b)(i), and the
amount of such DirecTv Fee due (the "DirecTv Yearly Statement"); and (y)
payment drawn on a United States bank in immediately available funds in the
amount of the DirecTv Fee due for such period. Acceptance by NRTC of any
NRTC Revenue Fee payment under this Section 5.02(b) (ii) shall not
constitute acceptance of the contents of the accompanying statement.
(iii) HCG shall provide NRTC with monthly statements detailing
the DirecTv Revenue Fee owing to NRTC for the prior month. Such statement
shall be due no later than the tenth calendar day of the month subsequent
to the month for which information is being provided (e.g., the statement
----
which covers HCG's DirecTv Revenue for the period January 1995 shall be due
no later than February 10, 1995). The statement shall contain detail
sufficient to permit the computation of the DirecTv Fee for such period.
(iv) Should NRTC fail to timely pay to HCG any NRTC Revenue Fee
as provided in Section 3.06, then HCG shall have the right to offset such
amount against, and deduct such amount from, any DirecTv Fee payable to
NRTC under this Section 5.02(b).
(c) If HCG enters into a definitive agreement to provide the right to
distribute DirecTv Programming to any other person or entity (including without
limitation any agent) who desires to provide such services to end users (a
"DirecTv Distributor") on prices, terms, conditions, benefits and obligations
that, taken as a whole, are more favorable than the prices, terms, conditions,
benefits and obligations by which such DirecTv Programming is provided to NRTC,
then HCG shall promptly offer NRTC such more favorable prices, terms, conditions
and benefits, taken as a whole, contained in the agreement that HCG has entered
into with such DirecTv Distributor.
33
5.03 Cross-Marketing and Promotions. HCG and NRTC shall reasonably
------------------------------
cooperate and coordinate their efforts with respect to consumer promotions,
marketing, media promotions, collateral materials, telephone referrals, data
processing, and other agreed-to areas of cross-marketing and general promotion
of the DBS Distribution Services, DirecTv Programming, and other proramming or
services provided by HCG/DirecTv or NRTC over the 101 degrees Satellite(s). HCG
shall, at NRTC's request, include promotional information regarding NRTC's
provision of the DBS Distribution Services to Committed Member Residences in all
channel listings, program and/or electronic guides and other materials supplied
by HCG/DirecTv to its HCG Subscribers, subject to NRTC's payment to HCG or
DirecTv of its proportionate share of the cost of such provision of materials.
"HCG Subscriber(s)" means households that subscribe through HCG and/or DirecTv
to all or any portion of DirecTv Programming. In addition, the parties shall
cooperate in the provision and distribution of any such promotional materials by
either party and if the other party's participation or promotion can be done at
no or low cost, then that party shall pass on such cost benefits. Further, the
parties shall coordinate in good faith to provide each party with any financial
or other benefits from economies of scale (e.g., discounts from national
----
programming agreements and volume purchases). HCG shall provide NRTC with a
license to use the DirecTv name and logo at no additional cost to NRTC upon such
terms and conditions as may reasonably be required by HCG.
5.04 Advertising. HCG shall have the exclusive right to market, sell and
-----------
determine the pricing and terms of any and all advertising inserted into the
Programming Services as permitted by the Programming Agreements with respect to
all programming transmitted over the Transponder Capacity (the "Advertising").
HCG shall pay for all marketing and selling expenses related thereto (the
"Marketing Expenses"). At HCG's request, NRTC shall reasonably cooperate with,
and assist HCG in, such Advertising efforts. HCG shall provide NRTC with a
prorated share (based upon the number of NRTC Subscribers) of all collected
Advertising revenues, less Marketing Expenses, all as reasonably calculated by
HCG. HCG shall provide NRTC with a monthly payment of such amount, with
documentation setting forth HCG's calculations.
5.05 Non-NRTC Territories
--------------------
(a) NRTC shall have the non-exclusive right to market and sell the
DBS Distribution Services to persons and entities who reside outside the NRTC
Territories through programming distribution rights that may be obtained
independently by NRTC. NRTC shall be entitled to all revenues from such
marketing and sale, subject to NRTC's obligation to compensate HCG as provided
in Section 3.12.
(b) HCG shall have the non-exclusive right to market and sell the DBS
Distribution Services to persons and entities who reside outside the NRTC
Territories and shall be entitled to all revenues from such marketing and sale.
34
6. Representations and Warranties
------------------------------
HCG and NRTC each, except as expressly indicated herein, represent and
warrant to, and agree with, the other that:
6.01 Authority. It has the right, power and authority to enter into, and
---------
perform its obligations under, this Agreement. Subject to the terms and
conditions of any FCC authorizations, this Agreement is binding upon and
enforceable against it.
6.02 Corporate Action. It has taken all requisite corporate action to
----------------
approve the execution, delivery and performance of this Agreement, and this
Agreement constitutes a legal, valid and binding obligation upon itself in
accordance with its terms.
6.03 FCC and Other Authorizations.
----------------------------
(a) HCG represents to NRTC as follows: HCG has obtained from the FCC
the authority to construct, launch and operate two DBS satellites with a total
of 27 transponders among both satellites, and to sell or lease Transponders and
provide capacity on such satellites on a private, non-common carrier basis. HCG
has obtained from the FCC the authority to place these two satellites (known as
"DBS I" and "DBS II") in geostationary orbit at the 101 degrees X. X. orbital
location. HCG has been authorized by the FCC to provide full contiguous United
States ("CONUS") DBS service from these satellites, subject to modification or
rescission based on the technical showings submitted in HCG's Modification
Request (as defined below).
(b) NRTC acknowledges that HCG has filed an application for
modification of HCG's FCC authority to construct, launch and operate DBS I and
DBS II ("HCG's Modification Request"), a copy of which has been provided to
NRTC. NRTC shall support HCG's Modification Request; provided, however, that
all reasonable expenses (in excess of relatively minimal costs to NRTC) incurred
by NRTC at HCG's request shall be paid by HCG. HCG's Modification Request
includes requests for authorization (i) to construct, launch, and operate DBS I
and DBS II in the configuration described herein; (ii) in addition to existing
authorizations for transmission technologies, to utilize digital compression
transmission technology in connection with the operation of DBS I and DBS II;
and (iii) to operate DBS I and DBS II in accordance with their technical
performance specifications, including using the 120 watt power levels described
herein.
(c) HCG and NRTC acknowledge that the transactions contemplated by
this Agreement with respect to the construction, launch and operation of the
Satellite may be challenged before the FCC or a court of competent jurisdiction
or by other persons or entities not parties hereto. HCG and NRTC agree that, in
the event of a challenge to HCG's FCC authority to construct, launch and operate
the Satellite or to HCG's Modification Request, HCG and NRTC shall each use its
reasonable best efforts before the FCC and the appellate courts to support HCG's
FCC authority and/or HCG's Modification Request, and HCG and NRTC shall fully
cooperate with each other in these
35
endeavors; provided, however, that all reasonable expenses (in excess of
relatively minimal costs to NRTC) incurred by NRTC at HCG's request shall be
paid by HCG.
(d) NRTC acknowledges that HCG's FCC authority to construct and
launch the Satellite as provided herein (assuming HCG's Modification Request is
granted) will expire on December 7, 1994 unless further extended. NRTC also
acknowledges that the FCC currently issues a DBS satellite license only for a
term of five (5) years and, therefore, HCG's authority to operate the Satellite
will be valid only for a term of five (5) years, unless it is extended or
renewed by the FCC. HCG shall use its reasonable best efforts before the FCC and
the appellate courts to obtain renewals or extensions of such authority that are
applicable to HCG before the Satellite Expiration Date and NRTC shall fully
cooperate with, if so required by, HCG in this endeavor; provided, however, that
all reasonable expenses (in excess of relatively minimal costs to NRTC) incurred
by NRTC at HCG's request shall be paid by HCG. Nothing in this Section 6.03(d)
modifies NRTC's right to terminate this Agreement pursuant to Section 11.01 and
obtain a Complete Refund, or a Partial Refund, as appropriate.
(e) Except as provided above with respect to FCC authorizations and
as contemplated by Sections 7.07 and 8.04, each party represents and warrants
that the execution and delivery of this Agreement and the performance by it of
its obligations hereunder and the consummation of the transactions contemplated
hereby will not result in a material violation of, or material default under, or
the occurrence of an event that with notice or lapse of time or both would
constitute a material default under, or material noncompliance with, any
applicable Law, any indenture, mortgage, deed of trust, loan agreement, purchase
agreement, option agreement or other agreement or instrument to which it is a
party or by which it or any material portion of its property is bound, its
articles of incorporation or by-laws, partnership agreement, or other charter
documents, as the case may be. Except as specifically provided elsewhere in this
Agreement, it has obtained or shall use its reasonable best efforts to obtain in
a timely manner all material necessary or appropriate public or private
consents, permissions, agreements, licenses, or authorizations to which it is
subject in connection with the transactions contemplated hereby, or which it
must obtain by virtue of its ownership or use of or operation of any
Transponder, the Transponder Capacity, or the Satellite.
6.04 Litigation. To the best of its knowledge, there is no outstanding or
----------
threatened judgment, threatened or pending litigation or proceeding, involving
or affecting the transactions provided for in, or contemplated by, this
Agreement, except as has been previously disclosed in writing by either party to
the other.
6.05 No Broker. It does not know of any broker, finder or intermediary
---------
involved in connection with the negotiations and discussions incident to the
execution of this Agreement, or of any broker, finder or intermediary who might
be entitled to a fee or commission upon the consummation of the transactions
contemplated by this Agreement.
6.06 Notification of Significant Events. NRTC and HCG shall furnish the
----------------------------------
other as soon as possible and in any event within ten (10) days after the
occurrence of each HCG
36
or NRTC Event of Default (as appropriate) or each event that, after notice or
the lapse of time, or both, would constitute an HCG or NRTC Event of Default (as
appropriate), a written notice setting forth the details of such matter and the
action which is proposed to be taken by such notifying party with respect
thereto.
7. Additional Representations, Warranties and Obligations of HCG
-------------------------------------------------------------
7.01 Minimum Requirements. The DBS Distribution Services, on the Service
--------------------
Commencement Date, shall meet the "Minimum Requirements" as set forth in Exhibit
7.01. HCG's failure to obtain and/or maintain FCC consent to operate the
Satellite to provide CONUS DBS service will not adversely affect NRTC's rights
or HCG's obligations that arise from the failure of the Transponder Capacity to
meet the relevant Minimum Requirements.
7.02 [Intentionally Omitted].
7.03 Government Regulations. Except as provided in Section 6.03, HCG has
----------------------
or shall use its reasonable best efforts until the Satellite Expiration Date to
obtain and maintain, in all material respects, all applicable federal, state and
municipal authorizations or permissions to construct, launch and operate the
Satellite applicable to it; and to comply, in all material respects, with all
such government regulations regarding the construction, launch and operation of
the Satellite and the Transponders applicable to it.
7.04 Laws. HCG shall comply (and will require those persons who perform
----
uplinking on its behalf to comply), in all material respects, with all Laws
applicable to it regarding its operation or use of the Satellite or the
Transponders. Without limiting the generality of the foregoing:
(i) If any use of the Satellite or the Transponders constitutes
"Broadcasting" under the Communications Act of 1934, as amended, or the
rules, regulations, orders, or policies of the FCC (collectively, the "FCC
Rules"), then HCG shall comply with all FCC Rules applicable to it with
respect to broadcasting from a DBS satellite, including, without
limitation, all such FCC Rules related to indecency, obscenity, equal
employment opportunities, political broadcasting, children's television and
public affairs programming.
(ii) HCG shall comply with all FCC Rules applicable to it with
respect to the use of the Transponders for "non-conforming" uses of DBS
frequencies.
(iii) HCG shall comply with all copyright and other intellectual
property Laws applicable to it with respect to all Programming Services
that constitute HCG Controlled Programming and are transmitted on the
Transponder Capacity, shall obtain all necessary copyright licenses and/or
consents with respect thereto, and shall pay all required copyright
royalties and other fees with respect to such Programming Services. "HCG
Controlled Programming" means
37
any and all program services that HCG has the
continued responsibility to provide to NRTC over the Transponder Capacity
and under Section 2.07 of this Agreement, and specifically excludes, any
and all program services for which HCG's obligations to provide have
terminated under Section 4.06(b) or Section 19, for which HCG has assigned
the relevant Programming Agreement to NRTC, and/or for which NRTC has
otherwise assumed the responsibility to provide.
7.05 Indemnification. HCG shall indemnify and hold NRTC and its Members
---------------
and Affiliates, and their respective directors, officers and employees (the
"Indemnified Parties"), harmless from and against any and all damages, costs,
liabilities and expenses incurred by the Indemnified Parties (including, without
limitation, (i) costs of investigation and defense, including without limitation
court costs and reasonable attorney and other third party fees and (ii) to the
extent permitted by Law, any fines, penalties, and forfeitures in connection
with any proceedings against an Indemnified Party) caused by the content of
programming or other material transmitted by HCG on the HCG Frequencies in its
capacity as a programmer for its DBS business excepting only any and all
--------- ----
Programming Services that constitute HCG Controlled Programming and/or any NRTC
Controlled Services. "NRTC Controlled Services" means any and all program
services, Data Services, and other services or material that are transmitted on
the Transponder Capacity and that are not HCG Controlled Programming.
7.06 Assurances of HCG. Upon request by NRTC, HCG will provide NRTC with
-----------------
information concerning HCG's abilities to perform its obligations hereunder.
Prior to the release or payments of any funds by NRTC to HCG hereunder
(excluding any payments into the Escrow Account), HCG shall provide NRTC with
further assurance that HCG has the ability to promptly provide NRTC with a
Complete Refund and/or a Partial Refund pursuant to the provisions of Section
11. Such assurance by HCG shall take the form of either, or a combination of
both, of the following as selected by HCG in its sole discretion: (1) HCG's
provision to NRTC of a certificate by its Chief Financial Officer, under oath or
affirmation, that HCG has obtained and shall maintain insurance sufficient to
provide, and shall use such proceeds to provide, NRTC with such a Complete
Refund; and/or (2) HCG's provision to NRTC of an unconditional parent guarantee
by Xxxxxx Aircraft Company of HCG's obligations to provide NRTC with a Complete
Refund, in a form as reasonably agreed to by the parties.
7.07 Sale and Use of Transponders.
----------------------------
(a) If after the date hereof, and prior to the date on which this
Agreement is canceled, terminated or expires, HCG enters into an agreement to
sell or lease or otherwise conveys the right to use to any person or entity
other than NRTC (a "Restricted Entity") transponder capacity on any 101
degrees Satellite (the "Restricted Capacity"), then HCG shall provide in any
such sale, lease or use agreement (i) a provision in which such purchaser,
lessee or user shall represent that such purchaser, lessee or user shall not use
Restricted Capacity to provide any Restricted Service or Similar Restricted
Service to any of the Committed Member Residences, unless such Restricted
Service or Similar Restricted Service shall be distributed to such Committed
38
Member Residences through NRTC (a "Use Restriction"); and (ii) either (x) a
provision giving NRTC rights to enforce such Use Restriction as a third party
beneficiary, or (y) a provision allowing HCG to deny access to any transponder
capacity that is used in violation of the Use Restriction. HCG shall itself
comply with the Use Restriction. HCG will implement adequate procedures to audit
and monitor compliance with the Use Restriction and will promptly notify NRTC of
any non-compliance it discovers. If NRTC is aware of any use of Restricted
Capacity by a Restricted Entity to provide Restricted Services or Similar
Restricted Services in violation of the Use Restriction, then NRTC will promptly
notify HCG in writing and provide evidence to HCG of such use, and if HCG has
not provided NRTC third party beneficiary rights to enforce the relevant Use
Restriction, then HCG will take such actions as are reasonably necessary to
prevent a continued violation of such Use Restriction; otherwise, it shall be
NRTC's responsibility as a third party beneficiary to enforce such Use
Restriction.
(b) The "Services Revision Date" means the earlier to occur of: (i)
the date on which HCG has obtained the rights to distribute all 20 program
services that constitute the Cable Programming; or (ii) where HCG has been
relieved by NRTC of responsibility for obtaining Programming Services pursuant
to Section 4.06(b), Section 19, or otherwise, the earlier to occur of (x) the
date on which NRTC has obtained the rights to distribute 20 program services, or
(y) the Service Commencement Date. From the Execution Date through the Services
Revision Date, "Restricted Services" means any of the program services listed on
Exhibit 7.07. After the Services Revision Date, "Restricted Services" means
only the program services listed on Exhibit 7.07 for which HCG or NRTC (as
appropriate) has obtained the distribution rights as of such date. "Similar
Restricted Services" means any program services that have the same program
content, but whose program content is presented in a different order or at
different times, as any of the Restricted Services. If NRTC is assigned or takes
control of all or some of the Programming Agreements under Section 4.06(b),
Section 19, or otherwise, then NRTC shall notify HCG of any deletions to the
list of Restricted Services that would result from the cessation of the
transmission of such Restricted Services on the Transponder Capacity within 10
days following the event giving rise to such change.
(c) If any provision of this Section 7.07 is determined by any court
of competent jurisdiction to be unenforceable for any reason whatsoever, this
Section 7.07 shall be interpreted to extend only over the maximum period of time
for which it may be enforceable, and/or over the maximum number of Restricted
Services as to which it may be enforceable, and/or over the maximum number of
Restricted Entities as to which it may be enforceable, and/or over the maximum
number of Committed Member Residences as to which it may be enforceable, and/or
over the maximum amount of transponder capacity as to which it may be
enforceable, and/or to the maximum extent in any and all other respects as to
which it may be enforceable, all as determined by such court. If HCG believes
that its compliance with any provision of this Section 7.07 could violate any
Law applicable to HCG or NRTC or the rights of any third party (the "Rights"),
then HCG shall so notify NRTC. HCG shall have the immediate right to cease
complying with this Section 7.07 to the extent, but only to the extent,
necessary and for
39
the time necessary, as reasonably determined by HCG, to prevent such violation
of Law or Rights from continuing. If a bona fide dispute exists between NRTC and
HCG as to whether HCG's compliance could violate any such Law or Rights, HCG
shall continue to comply with this Section 7.07 unless HCG has received either
(i) notice of and delivers a copy (if the action is in written form) to NRTC of,
an indictment, summons, cease and desist order, or other similar order or filing
from any entity with jurisdiction or claiming to have jurisdiction to enforce
the Law (collectively, an "Indictment"), or a complaint or other notification of
the initiation of a legal proceeding brought by a third party (collectively, a
"Complaint") or a threat of any such Indictment or Complaint (with HCG being
obligated to confirm in writing that such threat occurred and specifying the
general details thereof), alleging or stating that HCG is violating or
threatening to violate the Law or the Rights through its compliance with this
Section 7.07, or (ii) an opinion letter to HCG from outside counsel that may be
retained by HCG stating that, in its opinion, HCG's compliance with this Section
7.07 appears to be or could be found to be in violation of any Law or Rights
that are currently being, are threatened to be, or there exists a material
likelihood will be, enforced against or with respect to HCG or NRTC or applied
to HCG or NRTC, or with respect to which relief is currently being, is
threatened to be, or there exists a material likelihood will be, sought in a
legal proceeding. Furthermore, if HCG ceases to comply with this Section 7.07,
and if a bona fide dispute exists as to whether HCG's continued compliance would
violate the Law or the Rights, then NRTC shall have the immediate right to seek
a temporary restraining order (as its sole and exclusive remedy prior to any
final judicial order), on notice of four (4) hours or more to HCG, to prevent
the continued non-compliance by HCG based on the non-existence of any such
violation of the Law or the Rights. HCG shall be entitled to oppose NRTC's
attempts to obtain any such injunctive relief, including any temporary
restraining order, but hereby agrees to the following:
(i) HCG will not contest the jurisdiction of, or the venue of, any action
brought by NRTC in a federal district court sitting in Washington,
D.C., the Central District Court of California, or the Eastern
District Court of Virginia; and
(ii) for a period of five (5) consecutive days after noncompliance by HCG
with this Section 7.07, HCG will make itself available to accept
service by telecopy or personal delivery pursuant to Section 18.03 on
a 24 hour-a-day basis; and
(iii) If NRTC is seeking a temporary restraining order, HCG will not
challenge the sufficiency of notice from NRTC of an impending hearing
if such notice is served at least four (4) hours before the scheduled
court hearing.
If, within five (5) days after HCG notifies NRTC that it intends to cease
complying with this Section 7.07, NRTC notifies HCG that it does not believe
that HCG's compliance with this Section 7.07 ("Section Compliance") violates any
Law applicable to HCG or NRTC or any Rights, then HCG must provide, in any
agreement that it enters into with a Restricted Entity for Restricted Capacity
to provide Restricted Services or Similar
40
Restricted Services to Committed Member Residences (a "Restricted Agreement")
that the Restricted Agreement shall be terminated by HCG and the Restricted
Entity shall not have continuing rights thereunder (the "Termination Clause")
upon the occurrence of any of the following "Terminating Events":
(i) the obtaining of a restraining order or injunction by NRTC preventing
HCG from entering into any Restricted Agreement; with the Termination
Clause continuing in effect unless and until the restraining order or
injunction ceases to be effective; or
(ii) a decision by a court of competent jurisdiction that Section
Compliance does not violate any Law applicable to HCG or NRTC or any
Rights, with the Termination Clause continuing in effect unless and
until such court reverses its decision or a higher court reverses
such decision.
If, after a Terminating Event has occurred, HCG either continues to enter into
Restricted Agreements or fails to terminate an existing Restricted Agreement
pursuant to the provisions of the Termination Clause, then in addition of all
other equitable and other remedies it may have, NRTC shall be entitled to its
actual damages (but not including incidental or consequential damages, whether
foreseeable or not) caused by such actions or inactions of HC.
7.08 Cessation of Program Services.
-----------------------------
(a) If HCG determines that its provision of any HCG Controlled
Programming violates any Law then, following written notice to NRTC, HCG may
cease providing any program service that constitutes HCG Controlled Programming
to the extent, but only to the extent, necessary and for the time necessary, as
reasonably determined by HCG, to prevent such violation of Law from continuing.
However, if a bona fide dispute exists between NRTC and HCG as to whether a
violation of any Law has occurred, HCG shall not cease providing any program
service pursuant to this Section 7.08 unless HCG has received either (i) notice
of and delivers a copy (if the action is in written form) to NRTC of an
Indictment, or a threat of any such Indictment (with HCG being obligated to
confirm in writing that such threat occurred and specifying the general details
thereof), from any entity with jurisdiction or claiming to have jurisdiction to
enforce such Law, alleging or stating that the provision of such program service
is or would be a violation of such Law, or (ii) an opinion letter to HCG from
outside counsel that may be retained by HCG stating that, in its opinion, the
provision of such program service appears to be or could be found to be in
violation of any Law that is currently being, is threatened to be, or there
exists a material likelihood will be, enforced. Furthermore, if HCG ceases to
provide any program service to NRTC pursuant to this Section 7.08, and if a bona
fide dispute exists as to whether a violation of such Law has occurred, then
NRTC shall have the immediate right to seek a temporary restraining order (as
its sole and exclusive remedy prior to any final judicial order), on notice of
four (4) hours or more to HCG, to prevent the cessation of such program service
based on the nonexistence of any such violation of such Law. HCG shall be
entitled to oppose
41
NRTC's attempts to obtain any such injunctive relief, including any temporary
restraining order, but hereby agrees to the following:
(i) HCG will not contest the jurisdiction of, or the venue of, any action
brought by NRTC in a federal district court sitting in Washington,
D.C., the Central District Court of California, or the Eastern
District Court of Virginia;
(ii) for a period of five (5) consecutive days after such cessation of
program service by HCG, HCG will make itself available to accept
service by telecopy or personal delivery pursuant to Section 18.03 on
a 24 hour-a-day basis; and
(iii) If NRTC is seeking a temporary restraining order, HCG will not
challenge the sufficiency of notice from NRTC of an impending hearing
if such notice is served at least four (4) hours before the scheduled
court hearing.
If it is determined by final judicial order that HCG wrongfully ceased providing
any program service under this Section 7.08, then NRTC's sole and exclusive
remedy shall be HCG's payment to NRTC of liquidated damages equal to the
Transponder Capacity Fee, the Ground Capital Fee, the TT&C Fee, the Ground
Services Fee, and the Programming Fee for such program service as to which
service ceased to be provided under this Section 7.08 that was actually paid by
NRTC to HCG and applicable to the period beginning on the cessation of such
program service and ending on the earliest to occur of (w) HCG's provision of an
alternate program service under Section 7.08(b), (x) the retransmission by HCG
of the ceased program service, (y) NRTC's provision of an alternate program
service under Section 7.08(b), or (z) the date of NRTC's termination of such
Program Channel under Section 7.08(b) (with the amount of the Transponder
Capacity Fee and the Ground Capital Fee being prorated over ten (10) years and
with all fees being prorated over twenty (20) Program Channels).
(b) If HCG ceases to provide any program service under this Section
7.08 because the provision of any HCG Controlled Programming violates any Law,
and HCG is able to cure such violation by obtaining any necessary copyright
licenses or consents, or paying any required copyright royalties or other fees,
then HCG shall use its reasonable best efforts to do as soon as reasonably
possible; otherwise, or after HCG has so attempted but has been unable to cure
such violation of Law within thirty (30) days after cessation of the program
service; then HCG, in its sole discretion may provide an alternate program
service from Exhibit 7.07, so long as the combination of program services
required by Section 2.07 (a) is met. If such cessation of program service
continues for a period in excess of sixty (60) days without HCG so providing an
alternate program service, then NRTC will have the option to either (i) directly
obtain such alternate program service and this Agreement shall continue
unmodified, except only that HCG's obligation to provide the terminated program
service shall terminate; or (ii) timely terminate this Agreement with respect to
the Program Channel whose program service HCG has ceased providing, by providing
written notice to HCG within five (5) days
42
following such sixty (60) day period and, upon such timely termination, NRTC
will be entitled to a Partial Refund under Section 11.01(j).
7.09 Patents, Trademarks and Copyrights. HCG represents and warrants that
----------------------------------
(i) it has obtained or will obtain all necessary patents, trademarks and
copyrights required to provide the Transponder Capacity, TT&C Services, Security
Services and Ground Services (the "Intellectual Property") and/or (ii) it has
obtained or will obtain the right to use through purchase, consent, license,
making royalty payments, or otherwise the Intellectual Property. The parties
acknowledge and agree that the sole consequence of (and HCG's sole liability
regarding) HCG's breach of such representation and warranty, shall be HCG's
obligation to provide a Complete Refund or Partial Refund pursuant to and as
applicable under Section 11.01(i). The parties also acknowledge and agree that
HCG may comply with such representation and warranty by, among other things,
utilizing an alternate provider of Security Services. HCG's representation
hereunder expressly does not apply to Subscriber Terminal Equipment, it being
understood that NRTC may seek similar representation and warranty protection
directly from TCE as part of a purchase of Subscriber Terminal Equipment.
7.10 Insurance. If HCG has or obtains one or more insurance policies to
---------
cover third party personal injury and damage claims resulting from a launch
failure or other in-orbit failure of the Satellite, then HCG shall provide
insurance protection to NRTC as either a co-insured or loss payee on such
policy(ies) as determined by HCG in its sole discretion. On or before sixty
(60) days prior to the scheduled launch of the Satellite, HCG shall provide NRTC
with written notice of the amount of such coverage, if any, and other material
terms and conditions of such insurance. HCG is not obligated to obtain or
maintain any such insurance and NRTC may directly obtain such insurance coverage
itself.
8. Additional Representations, Warranties and Obligations of NRTC
--------------------------------------------------------------
8.01 Uplinking. NRTC will not transmit (or directly or indirectly cause
---------
to be transmitted) radio or other signals to the Satellite or the Transponder
Capacity other than through HCG pursuant to this Agreement.
8.02 Laws. NRTC shall comply with all FCC and all other governmental
----
(whether international, federal, state, municipal, or otherwise) statutes, laws,
rules, regulations, ordinances, codes, directives and orders, of any such
governmental agency, body, or court (including, without limitation, the FCC
Rules) (collectively, the "Laws") applicable to it regarding the operation or
use of the Transponder Capacity. Without limiting the generality of the
foregoing:
(i) If any use of the Transponder Capacity constitutes
Broadcasting, then NRTC shall comply with all FCC Rules applicable to it
with respect to broadcasting from a DBS satellite, including, without
limitation, all such FCC Rules related to indecency, obscenity, equal
employment opportunities, political broadcasting, children's television and
public affairs programming.
43
(ii) NRTC shall comply with all FCC Rules applicable to it with
respect to the use of the Transponder Capacity for "non-conforming" uses of
DBS frequencies.
(iii) NRTC shall comply with all copyright and other intellectual
property Laws applicable to it with respect to all NRTC Controlled
Services, shall obtain all necessary copyright licenses and/or consents
with respect thereto, and shall pay all required copyright royalties and
other fees with respect to such NRTC Controlled Services.
8.03 Indemnification. NRTC shall indemnify and hold HCG and its
---------------
Affiliates, and their respective directors, officers and employees (the
"Indemnities"), harmless from and against any and all damages, costs,
liabilities and expenses incurred by the Indemnities (including, without
limitation, (i) costs of investigation and defense, including without limitation
court costs and reasonable attorney and other third party fees and (ii) to the
extent permitted by Law, any fines, penalties, and forfeitures in connection
with any proceedings against an Indemnitee) ("Indemnitee Costs") (x) caused by
the content of any NRTC Controlled Services and/or any HCG Controlled
Programming and/or (y) resulting or arising from HCG's ceasing (or not
commencing) the provision of DBS Distribution services to any Committed Member
(or its NRTC Subscribers) pursuant to Section 3.10(b) or damages resulting from
claims asserted by a Committed Member against HCG in connection with or arising
under the Member Contract, other than an Intentional Breach by HCG of this
Agreement.
8.04 Use of Transponder Capacity. If any NRTC Controlled Services are
---------------------------
transmitted on the Transponder Capacity, then:
(a) NRTC shall use, and shall permit other persons and entities to
use, the Transponder Capacity only for Data Services and program services listed
in Exhibit 7.07 (collectively, the "Permitted Services"). The restrictions on
Transponder Capacity use in this Section 8.04 (a) shall bind NRTC and any
successor-in-interest, and any assignee of NRTC's rights hereunder consented to
by HCG pursuant to Section 14.01.
(b) If required by any Rights Holder, HCG shall have the option,
but not the obligation, upon ten (10) business days' notice to NRTC, to Blackout
any Sports Programming that otherwise would be transmitted by a Superstation
carried on the Transponder Capacity if HCG or any other User will carry such
Sports Programming on any of the HCG Frequencies on a premium basis (e.g., pay
----
TV)simultaneously with such Superstation's planned transmission.
Notwithstanding the foregoing sentence, if the provisions of any agreement HCG
has with a Rights Holder would allow NRTC to compensate the Rights Holder, HCG,
and/or any other appropriate person or entity as determined by HCG, and thereby
avoid the need to Blackout certain Sports Programming; then HCG shall advise
NRTC of such provisions, and, to the extent permitted under such agreement(s)
and after NRTC's timely satisfaction of any
44
requirements any Rights Holder or other person or entity may establish to waive
such Blackout requirement with respect to certain Sports Programming, HCG will
not Blackout such Sports Programming on the Transponder Capacity. In addition,
and to the extent permitted by Law, NRTC shall have the right to insert or
substitute other programming during such Blackouts. NRTC shall be responsible
for any additional costs incurred by HCG in receiving and/or transmitting such
substitute programming. NRTC shall provide to HCG on a weekly basis, and no less
than twenty (20) days in advance of any transmission of any Sports Programming
on a Superstation that is carried on the Transponder Capacity, a full
description of the content of such transmission and the planned time and date of
such transmission.
(c) If any provision of Section 8.04 (a) is determined by any court
of competent jurisdiction to be unenforceable for any reason, Section 8.04 (a)
shall be interpreted to extend only over the maximum period of time for which it
may be enforceable, and/or over the maximum number of Permitted Services as to
which it may be enforceable, and/or over the maximum amount of Transponder
Capacity as to which it may be enforceable, and/or to the maximum extent in any
and all other respects as to which it may be enforceable, all as determined by
such court. If NRTC believes that its compliance with any provision of Section
8.04 (a) could violate any Law applicable to NRTC or HCG or any Rights, then
NRTC shall so notify HCG. NRTC shall have the immediate right to cease complying
with Section 8.04(a) to the extent, but only to the extent, necessary and for
the time necessary, as reasonably determined by NRTC, to prevent such violation
of Law or Rights from continuing. If a bona fide dispute exists between NRTC and
HCG as to whether NRTC's compliance could violate any such Law or Rights, NRTC
shall continue to comply with Section 8.04(a) unless NRTC has received either
(i) notice of and delivers a copy (if the action is in written form) to HCG of
an Indictment or a Complaint or a threat of any such Indictment or a Complaint
(with NRTC being obligated to confirm in writing that such threat occurred and
specifying the general details thereof), alleging or stating that NRTC is
violating or threatening to violate the Law or the Rights through its compliance
with Section 8.04(a), or (ii) an opinion letter to NRTC from outside counsel
that may be retained by NRTC stating that, in its opinion, NRTC's compliance
with Section 8.04 (a) appears to be or could be found to be in violation of any
Law or Rights that are currently being, are threatened to be, or there exists a
material likelihood will be, enforced against or with respect to NRTC or HCG or
applied to NRTC or HCG, or with respect to which relief is currently being, is
threatened to be, or there exists a material likelihood will be, sought in a
legal proceeding. Furthermore, if NRTC ceases to comply with Section 8.04(a),
and if a bona fide dispute exists as to whether NRTC's continued compliance
would violate the Law or the Rights, then HCG shall have the immediate right to
seek a temporary restraining order (as its sole and exclusive remedy prior to
any final judicial order), on notice of four (4) hours or more to NRTC, to
prevent the continued non-compliance by NRTC based on the non-existence of any
such violation of the Law or the Rights. NRTC shall be entitled to oppose HCG's
attempts to obtain any such injunctive relief, including any temporary
restraining order, but hereby agrees to the following:
45
(i) NRTC will not contest the jurisdiction of, or the venue of, any
action brought by HCG in a federal district court sitting in Washington,
D.C., the Central District Court of California or the Eastern District
Court of Virginia; and
(ii) for a period of five (5) consecutive days after non-compliance
by NRTC with this Section 8.04, NRTC will make itself available to accept
service by telecopy or personal delivery pursuant to Section 18.03 on a 24
hour-a-day basis; and
(iii) if HCG is seeking a temporary restraining order, NRTC will not
challenge the sufficiency of notice from HCG of an impending hearing if
such notice is served at least four (4) hours before the scheduled court
hearing.
If, within five (5) days after NRTC notifies HCG that it intends to cease
complying with Section 8.04(a), HCG notifies NRTC that it does not believe that
NRTC's compliance with Section 8.04 (a) ("Section 8.04(a) Compliance") violates
any Law applicable to NRTC or HCG or any Rights, then NRTC must provide, in any
agreement with respect to the use of Transponder Capacity or the programming or
services carried thereon (if NRTC has entered into such an agreement) (a
"Transponder Agreement"), a provision allowing such agreement to be terminated
by NRTC, and providing that the other party will not have any continuing rights
thereunder (a "Transponder Agreement Termination Clause") upon the occurrence of
either of the following "Termination Events":
(i) the obtaining of a restraining order or injunction by HCG
preventing NRTC from entering into any Transponder Agreement or otherwise
violating Section 8.04(a); with the Transponder Agreement Termination
Clause continuing in effect unless and until the restraining order or
injunction ceases to be effective; or
(ii) a decision by a court of competent jurisdiction that Section
8.04(a) Compliance does not violate any Law applicable to NRTC or HCG or
any Right, with the Transponder Agreement Termination Clause continuing in
effect unless and until such court reverses its decision or a higher court
reverses such decision.
If, after a Termination Event has occurred, (i) NRTC either continues to enter
into Transponder Agreements or fails to terminate an existing Transponder
Agreement pursuant to the provisions of the Transponder Agreement Termination
Clause, or (ii) if NRTC has not entered into a Transponder Agreement, but is
otherwise violating Section 8.04(a), then, in addition of all other equitable
and other remedies it may have, HCG shall be entitled to its actual damages (but
not including incidental or consequential damages, whether foreseeable or not)
caused by such actions or inactions of NRTC.
8.05 Non-Conforming Uses. NRTC acknowledges that its use of the
-------------------
Transponder Capacity for Data Services is subject to FCC Rules limiting the use
of DBS frequencies for "non-conforming" uses and agrees to abide by such use
limits with
46
respect to "nonconforming uses" as HCG may establish from time to
time to fairly apportion such limits among NRTC and Users of the HCG
Frequencies.
9. Preemptive Rights to Protect Overall Satellite Performance
----------------------------------------------------------
NRTC recognizes that it may be necessary in unusual or abnormal
situations or conditions for HCG deliberately to preempt or interrupt NRTC's use
of all or a portion of the Transponder Capacity, in order to protect the overall
performance of the Satellite. HCG shall use reasonable best efforts to consult
and coordinate with NRTC in advance of any unilateral preemption or interruption
action affecting the Transponder Capacity and to use reasonable best efforts to
attempt to resolve any such problems, including routine maintenance problems,
through the joint efforts of HCG and NRTC's engineering personnel; it being
understood and agreed, however, that in emergency or other necessary situations,
as determined by HCG, it may not be possible or advisable, and HCG is not
hereunder obligated, to so consult or coordinate with NRTC. HCG shall, however,
promptly provide NRTC with a report (written or oral, as appropriate, or as
reasonably requested by NRTC) subsequent to any such unilateral preemption or
interruption. Such preemption or interruption decisions shall be made by HCG in
its sole discretion. To the extent technically feasible, HCG shall give NRTC at
least forty-eight (48) hours' notice of such preemption or interruption and HCG
shall use its reasonable best efforts to schedule and conduct its activities
during periods of such preemption or interruption so as to minimize the
disruption to the use of the Transponder Capacity. To the extent that such
preemption results in a loss to NRTC of the use of the Transponder Capacity,
then the provisions of Section 10 regarding Transmission Outages shall apply.
Consistent with the above, HCG shall not discriminate against NRTC under this
Section 9 to benefit HCG or any User.
10. Service Outages
---------------
10.01 Outage/Outage Period.
--------------------
(a) A "Transmission Outage" means the failure after the Service
Commencement Date of a Program Channel to meet the Transmission Minimum
Requirements (as set forth in Exhibit 7.01) due to a failure of a component of
the Transponder Capacity, TT&C Services, or Transmission Services. Upon the
occurrence of a Transmission Outage (and notice by NRTC to HCG if HCG is not
aware of such Transmission Outage), HCG shall use its reasonable best efforts to
restore the Program Channel such that it meets its Transmission Minimum
Requirements. Notwithstanding anything to the contrary in this Agreement (and
except only as provided pursuant to Section 19), HCG shall have the option, but
not the obligation, to provide replacement Transponder capacity or utilize spare
equipment to restore a Transmission Outage.
(b) An "Access Control Outage" means the failure after the Service
Commencement Date of a component of the Access Control Services to meet the
Access Control Minimum Requirements (as set forth in Exhibit 7.01). Upon the
occurrence of an Access Control Outage (and notice by NRTC to HCG if HCG is not
aware of such
47
Access Control Outage), HCG shall use its reasonable best efforts to restore the
Access Control Services such that they meet the Access Control Minimum
Requirements.
(c) The "Outage Period" associated with a Transmission Outage or
Access Control Outage means the period of time commencing on the earlier of such
time as an operational manager of HCG becomes aware of, or NRTC notifies HCG of,
such Outage and ending at such time as the services are restored such that they
meet the relevant Minimum Requirements.
(d) A Transmission Outage or Access Control Outage shall not be
deemed to have occurred if a failure of a component of the Transponder Capacity,
TT&C Services, Transmission Services or Access Control Services (a "Component")
to meet the applicable Minimum Requirements is (i) caused by any action or
inaction of NRTC or any of NRTC's Members, Affiliates or agents, (ii) related to
any failure or misoperation of Subscriber Terminal Equipment or any component
thereof, (iii) related to any weather event or any other circumstance
(including, without limitation, sun outage effects) occurring in the
transmission path between the Satellite and reception equipment, (iv) related to
any interference generated from any sources other than the HCG Frequencies or
the Users of such frequencies, or (v) related to the quality or availability of
the C-Band downlink or other source signal for the Program Channels.
10.02 Outage Credit.
-------------
(a) If a Transmission Outage occurs and the corresponding Outage
Period exceeds thirty (30) consecutive minutes, then NRTC shall be entitled to
receive a credit for each Program Channel experiencing a Transmission Outage in
an amount equal to the product of (x) the sum of the then-current monthly Ground
Services Fee and TT&C Fee for one Program Channel (in dollars) multiplied by (y)
-------------
the Outage Period (in minutes) and divided by (z) 43,200 (i.e., the number of
---------- ----
minutes in a thirty-day month). In the case where the Ground Services Fees and
TT&C Fees are paid on a per Authorized Subscriber basis, the fees associated
with a single Program Channel shall be calculated by HCG by dividing the fee
amounts by the number of Program Channels provided immediately prior to the
outage. Such outage credit shall be applied against the Ground Services Fee and
the TT&C Fee due for the month(s) immediately following the month in which the
Transmission Outage occurs.
(b) If an Access Control Outage occurs and the corresponding Outage
Period exceeds forty-eight (48) consecutive hours, then NRTC shall be entitled
to receive a credit in an amount equal to the product of (x) the aggregate of
the then-current monthly Ground Services Fee for three Program Channels (in
dollars) multiplied by (y) the Outage Period (in minutes) and divided by (z)
------------- ----------
43,200 (i.e., the number of minutes in a thirty-day month). In the case where
----
the Ground Services Fees are paid on a per Authorized Subscriber basis, the fees
associated with a single Program Channel shall be calculated by HCG by dividing
the then-current fee amounts by the number of Program Channels provided
immediately prior to the outage. Such outage credit shall be applied
48
against Ground Services Fee due for the month(s) immediately following the month
in which the Access Control Outage occurs.
(c) In no event shall any outage credits under Section 10.02(a)
and/or (b) exceed the amount of the Ground Services Fee (and/or TT&C Fee, as
appropriate) actually paid for the corresponding Outage Period.
10.03 Outage Termination Rights.
-------------------------
(a) If the Outage Period associated with a Transmission Outage
exceeds ten (10) consecutive days or, in the case of a Transmission Outage
caused by a failure of the Transponder Capacity, if twenty (20) or more Outage
Units are experienced in any consecutive thirty (30) day period, then NRTC shall
have the right to terminate this Agreement with respect to any Program Channels
experiencing such Transmission Outage by providing written notice to HCG within
fifteen (15) business days following the end of such ten or thirty consecutive
day period or such right will expire. An "Outage Unit" means a failure to meet
the Transmission Minimum Requirements due to a Transponder Capacity failure for
fifteen (15) or more minutes in any one day. Notwithstanding anything to the
contrary contained in this Agreement, NRTC shall not have the right to terminate
this Agreement with respect to any Program Channel due to any Transmission
Outage caused by a failure of the Transmission Services or TT&C Services if such
failure results from a Force Majeure Event.
(b) If the Outage Period associated with an Access Control Outage
exceeds sixty (60) consecutive days, then NRTC shall have the right to
terminate this Agreement with respect to any Program Channels directly and
adversely affected by such Access Control Outage by providing written notice to
HCG within fifteen (15) business days following the end of such sixty (60)
consecutive day period, or such right will expire. Notwithstanding anything to
the contrary contained in this Agreement, NRTC shall not have the right to
terminate this Agreement with respect to any Program Channel due to any Access
Control Outage caused by a Force Majeure Event.
(c) NRTC's failure to timely exercise its termination right(s) as to
any Program Channel under this Section 10.03 shall not preclude NRTC's exercise
of any subsequent termination right(s) that may arise due to (i) a further,
additional degradation of the Component that failed to meet the applicable
Minimum Requirements for an additional Outage Period; (ii) the failure of such
Component (after it is restored or repaired) to meet the applicable Minimum
Requirements for an additional Outage Period; or (iii) the failure of any other
Component to meet the applicable Minimum Requirements for an Outage Period.
49
11. Termination Rights
------------------
11.01 Termination by NRTC.
-------------------
(a) If, on December 1, 1992, (i) both of the December Conditions have
not occurred, (ii) HCG has obtained the Core Cable Rights but has not provided
NRTC with the HCG Certification, or (iii) HCG has provided the HCG Certification
but has not obtained the Core Cable Rights, then NRTC may terminate this
Agreement in whole under Section 1.04(b).
(b) If on or after the Scheduled Service Commencement Date the
Transponder Capacity is Available and any other component of the DBS
Distribution Services, (i.e., the Ground Services, the TT&C Services, the
----
Security Services, Subscriber Terminal Equipment Availability, and/or the
Programming Services) has not completed Acceptance, then HCG shall so notify
NRTC. NRTC may then terminate this Agreement in whole by providing written
notice to HCG within thirty (30) days following receipt of HCG's notice or such
right will expire. Upon such a timely termination by NRTC, HCG shall provide
NRTC with a Complete Refund. Notwithstanding the foregoing, if a Partial
Delivery of the Program Channels occurs, then NRTC's right to terminate shall be
governed by Section 11.01(c). Nothing in this Section 11.01(b) shall provide
NRTC with a termination right if HCG is unable to make the representation
regarding Subscriber Terminal Equipment production capability as set forth in
Section 4.04.
(c) If Partial Delivery of the Program Channels occurs, then NRTC
shall have the right to partially terminate this Agreement as to certain Program
Channels pursuant to and as provided in Section 4.01(b). Such Section 4.01(b)
also provides that, if NRTC timely notifies HCG that it does not accept Partial
Delivery, then the Service Commencement Date shall not be deemed to occur unless
and until HCG is able to provide all twenty (20) Program Channels; and, if HCG
is not able to do so before the Rescission Date, then NRTC and HCG shall have
the termination rights set forth in Sections 11.01 and 11.02, respectively.
Upon such partial termination, NRTC shall be entitled to a Partial Refund (as
defined in Section 11.01(h)) for each such terminated Program Channel and the
refund period used in calculating such Partial Refund shall be 3,650 days.
(d) If an Outage Period associated with a Transmission Outage exceeds
ten (10) consecutive days or twenty (20) Outage Units occur in any consecutive
thirty (30) day period, or if the Outage Period associated with an Access
Control Outage exceeds sixty (60) consecutive days, then NRTC shall have the
right to partially terminate this Agreement pursuant to and as provided in
Section 10.03. If such termination occurs on or before the tenth anniversary of
the Service Commencement Date, NRTC shall be entitled to a Partial Refund for
each terminated Program Channel and the refund period used in calculating such
Partial Refund shall equal the number of days from the first day of the Outage
Period or the first Outage Unit (that has given rise to the termination right)
until the tenth anniversary of the Service Commencement Date. In no event shall
more
50
than a Partial Refund, in the aggregate, be due for a Program Channel that
is terminated for more than one reason under Section 10.03. Upon such partial
termination, NRTC's obligations to pay the TT&C Fee, Ground Services Fee and
Programming Fee for each terminated Program Channel shall terminate; provided,
however, that such termination shall not relieve NRTC of its obligations to pay
to HCG the amounts of any such fees due and payable to HCG for any services
provided prior to commencement of the Outage Period or first Outage Unit that
has given rise to the termination right.
(e) If the Service Commencement Date does not occur on or before
December 31, 1997 (the "Rescission Date"), then NRTC may terminate this
Agreement in whole by providing written notice to HCG within thirty (30) days
following the Rescission Date or such right will expire. Upon such timely
termination by NRTC, HCG shall provide NRTC with a Complete Refund.
Notwithstanding the foregoing, NRTC shall not have the right to exercise this
termination option if the failure of the Service Commencement Date to occur by
December 31, 1997 is attributable to any failure of performance under this
Agreement by NRTC.
(f) If after the Scheduled Service Commencement Date, the Service
Commencement Date has not occurred and HCG has determined, based on demonstrable
facts, that events have occurred that make it impossible for HCG to cause the
Service Commencement Date to occur by the Rescission Date (the "Determination")
then HCG shall notify NRTC. If HCG makes the Determination or HCG has made the
Required Delivery Attempt (as defined below), then HCG may, at its option,
provide notice to NRTC of NRTC's rescission option under this Section 11.01(f)
(the "Rescission Option"). "Required Delivery Attempt" shall mean the Launch
Attempt of the Satellite. "Launch Attempt" means the actual lift off of the
launch vehicle. NRTC shall notify HCG of its termination of its obligations
within ninety (90) days following HCG's notice, or such Rescission Option shall
expire. If NRTC timely notifies HCG of its termination under this Section
11.01(f), then HCG shall provide NRTC with a Complete Refund.
(g) "Complete Refund" means HCG's refund to NRTC of all Committed
Member Payments actually paid to HCG, and not previously refunded to NRTC, with
no right to set-off except only to deduct any payments owing to HCG under other
provisions of this Agreement specifically creating such payment obligations and
as provided in Section 3.10(d). Any Complete Refund owed by HCG to NRTC shall
be paid within fifteen (15) business days following the date on which the right
to a Complete Refund arises. Upon HCG's provision of a Complete Refund, any and
all Committed Member obligations to make Second Payments automatically shall be
extinguished.
(h) "Partial Refund" means HCG's refund to NRTC of an amount equal to
the product of (x) a fraction whose numerator is the refund period (as provided
in Section 11.01(c), (d), (i), or (j), as applicable) and whose denominator is
3,650 days, multiplied by (y) a fraction whose numerator is the aggregate of the
-------------
Committed Member Payments actually paid to HCG and whose denominator is 20,
multiplied by (z) the number of Program Channels for which a Partial Refund is
-------------
due. HCG shall have no right to set-off such Partial Refund except only to
deduct any payments owing to HCG under
51
other provisions of this Agreement specifically creating such payment
obligations and as provided in Section 3.10(d). Any Partial Refund owed by HCG
to NRTC shall be paid within fifteen (15) business days following the date on
which the right to a Partial Refund arises.
(i) Upon the occurrence of any HCG Event of Default (as defined
below), and only after written notice from NRTC to HCG followed by the
expiration of any relevant cure period, NRTC may, for so long as such HCG Event
of Default shall continue, declare this Agreement to be in default (provided,
however, that this Agreement shall be deemed to be in default immediately upon
the occurrence and during the continuation of any HCG Event of Default under
Section 11.01(i)(z)), and at any time thereafter, NRTC may, in its sole and
absolute discretion, cancel this Agreement and exercise any other right or
remedy that is provided for in this Agreement. A cancellation hereunder shall
occur only upon written notice from NRTC to HCG within thirty (30) days
following the HCG Event of Default stating that such cancellation is made. No
remedy referred to in this Section 11.01(i) is intended to be exclusive, but
each remedy shall be cumulative and in addition to any other remedy referred to
above. NRTC shall mitigate its damages in the event of an HCG Event of Default
as so required under the California Uniform Commercial Code. NRTC's failure in
any case to exercise its rights under this Section 11.01(i) shall not constitute
a waiver of any breach or HCG Event of Default or a continuing waiver of similar
or other breaches or HCG Events of Default. Each of the following events shall
constitute an "HCG Event of Default" (whether any such event shall arise as the
result of the voluntary or involuntary action or inaction of HCG or come about
or be effected by operation of, or pursuant to or in compliance with, any Law):
(x) HCG shall fail to perform or observe in any material respect any
material covenant, condition or agreement to be performed or observed by it
under this Agreement and such failure shall continue unremedied for a period of
thirty (30) days following written notice from NRTC (except, however, where this
Agreement specifically provides additional time and/or other options or remedies
for any such failure; or, with respect to an obligation that is susceptible of
cure within a reasonable time period (other than one for payment) so long as HCG
is using its best efforts to promptly cure); or
(y) Any representation or warranty made by HCG in this Agreement or in
any statement furnished by HCG in connection herewith shall have been incorrect
in any material respect at the time made but only if such incorrect
representation or warranty shall have a material adverse effect on NRTC or its
rights or obligations hereunder and shall continue unremedied for a period of
thirty (30) days after NRTC has given written notice to HCG of such incorrect
representation or warranty (except, however, where this Agreement specifically
provides additional time and/or other options or remedies for any such failure;
or, with respect to an obligation that is susceptible of cure within a
reasonable time period (other than one for payment) so long as HCG is using its
best efforts to promptly cure); or
52
(z) HCG shall consent to the appointment of, or taking possession by,
a receiver, trustee, custodian or liquidator or a substantial part of its
assets, file a bankruptcy petition in any bankruptcy proceeding or answer,
consent or seek relief under any bankruptcy or similar Law or fail to obtain a
dismissal of an involuntary petition with sixty (60) days of filing.
If an HCG Event of Default occurs prior to the Service Commencement Date and
NRTC timely exercises its cancellation right under this Section 11.01(i), then
NRTC shall be entitled to a Complete Refund. If an HCG Event of Default occurs
on or after the Service Commencement Date and NRTC timely exercises its
cancellation right under this Section 11.01(i), then NRTC shall be entitled to a
Partial Refund and the refund period used in calculating such Partial Refund
shall equal the number of days from HCG's receipt of notice of such HCG Event of
Default until the tenth anniversary of the Service Commencement Date.
Notwithstanding anything to the contrary in this Agreement, (1) the only
consequence of the existence of any Security Breach or the failure of HCG to
provide Security Services after the Service Commencement Date shall be as
provided in Section 3.04(b) and no such existence or failure shall constitute an
HCG Event of Default, and (2) the only HCG Events of Default that may arise from
any matter whatsoever with respect to the Subscriber Terminal Equipment are a
breach of HCG's representation in Section 2.04, and the failure of HCG to
provide by the Rescission Date (or the breach of) the HCG representation
regarding the Subscriber Terminal Equipment as set forth in Section 4.04.
(j) If HCG ceases to provide any program service that is HCG
Controlled Programming under Section 7.08 and NRTC terminates this Agreement as
to the Program Channel on which such program service was transmitted pursuant to
and as provided in Section 7.08(b), then NRTC shall be entitled to a Partial
Refund, and the refund period used in calculating such Partial Refund shall
equal the number of days from the date of such termination until the tenth
anniversary of the Service Commencement Date. After such termination, NRTC shall
have no further obligations with respect to such Program Channels other than for
any fees due and payable to HCG for the period prior to such termination and HCG
shall have no further obligation to deliver or provide such Program Channels.
11.02 Termination by HCG.
------------------
(a) [Intentionally Omitted]
(b) If, on December 1, 1992, both of the December Conditions have not
occurred, or HCG has not provided NRTC with the HCG Certification, then HCG may
terminate this Agreement in whole under Section 1.04(b).
(c) If the Service Commencement Date does not occur on or before the
Rescission Date, then, on or after the Rescission Date, HCG may terminate this
Agreement in whole by providing written notice to NRTC and providing NRTC with a
Complete Refund.
53
(d) If NRTC does not timely exercise its Rescission Option under
Section 11.01(f), then HCG shall have the right to terminate this Agreement by
providing NRTC with ten (10) days' written notice and a Complete Refund. Upon
payment to NRTC of a Complete Refund as provided under this Agreement, complete
performance of all of HCG's obligations under this Agreement shall be deemed to
have occurred, except for any unfulfilled obligations of HCG to make any Late
Commencement Fee payments to NRTC under Section 4.02.
(e) Upon the occurrence of any NRTC Event of Default (as defined
below) and only after written notice from HCG to NRTC followed by the expiration
of any relevant cure period, HCG may, for so long as such NRTC Event of Default
shall continue, declare this Agreement to be in default (provided, however, that
this Agreement shall be deemed to be in default immediately upon the occurrence
and during the continuation of any NRTC Event of Default under Section
11.02(e)(iv)). At any time thereafter, HCG may, in its sole and absolute
discretion, declare immediately due and payable all Committed Member Payments
(whether in the Escrow Account, committed as Second Payments, or otherwise) the
TT&C Fee and the Ground Services Fee for the expected life of the Satellite,
based on the actual number of NRTC Subscribers as of such Event of Default (but
in no event fewer than 100,000 NRTC Subscribers), cancel this Agreement as to
NRTC, obtain damages without canceling this Agreement, and exercise any other
right or remedy that is provided for in this Agreement or that may be available
under the California Uniform Commercial Code or other applicable Law. A
cancellation hereunder shall occur only upon written notice from HCG to NRTC
within thirty (30) days following the NRTC Event of Default stating that such
cancellation is made. In the event of such cancellation, HCG shall continue to
provide DBS Distribution Services to Committed Members, at HCG's sole option,
either (i) pursuant to the Member Contracts (which shall have a provision
allowing HCG to assume such contracts upon NRTC's breach of this Agreement and
HCG's cancellation as to NRTC) or (ii) on substantially the same terms or on
terms no less favorable than those provided under this Agreement. In either
case, the Committed Member obligations shall be directly to HCG and not to NRTC
and the Member Contracts shall contain provisions to this effect. No remedy
referred to in this Section 11.02(e) is intended to be exclusive, but each
remedy shall be cumulative and in addition to any other remedy referred to above
or otherwise available to HCG at law or in equity. HCG shall mitigate its
damages should it elect to seek from NRTC the Committed Member Payments, the
TT&C Fee, and the Ground Service Fee due hereunder (as specified above) in the
event of an NRTC Event of Default as so required under the California Uniform
Commercial Code. HCG's failure in any case to exercise its rights under this
Section 11.02(e) shall not constitute a waiver of any breach or NRTC Event of
Default or a continuing waiver of similar or other breaches or NRTC Events of
Default. Each of the following events shall constitute an "NRTC Event of
Default" (whether any such event shall arise as the result of the voluntary or
involuntary
54
action or inaction of NRTC or come about or be effected by operation of, or
pursuant to or in compliance with, any Law):
(i) NRTC shall fail to make any payment due hereunder when due and
shall fail to identify to HCG the delinquent Member responsible to NRTC for
such unmade payment (if any) under Section 3.10, and each of such failures
(where appropriate) shall continue unremedied for a period of thirty (30)
days after HCG has given NRTC written notice thereof;
(ii) NRTC shall fail to perform or observe in any material respect
any material covenant, condition or agreement to be performed or observed
by it under this Agreement (other than as specified in clause (i) above)
and such failure shall continue unremedied for a period of thirty (30) days
following written notice from HCG; provided; however, nothing in this
Section 11.02(e) (ii) shall restrict HCG's right to deny NRTC access
pursuant to Section 11.04 hereof (except, however, where this Agreement
specifically provides additional time and/or other options or remedies for
any such failure; or, with respect to an obligation that is susceptible of
cure within a reasonable time period (other than one for payment) so long
as NRTC is using its best efforts to promptly cure); or
(iii) Any representation or warranty made by NRTC in this Agreement
or in any statement furnished by NRTC in connection herewith shall have
been incorrect in any material respect at the time made but only if such
incorrect representation or warranty shall have a material adverse effect
on HCG or its rights or obligations hereunder and shall continue unremedied
for a period of thirty (30) days after HCG has given written notice to NRTC
of such incorrect representation or warranty (except, however, where this
Agreement specifically provides additional time and/or other options or
remedies for any such failure; or, with respect to an obligation that is
susceptible of cure within a reasonable time period (other than one for
payment) so long as NRTC is using its best efforts to promptly cure); or
(iv) NRTC shall consent to the appointment of, or taking possession
by, a receiver, trustee, custodian or liquidator or a substantial part of
its assets, file a bankruptcy petition in any bankruptcy proceeding or
answer, consent or seek relief under any bankruptcy or similar Law or fail
to obtain a dismissal of an involuntary petition with sixty (60) days of
filing.
(f) If a Committed Member does not pay NRTC (or HCG, if applicable)
all delinquent payments as required under Section 3 and/or under the Member
Contract (a "Delinquent Member"), such failure is not cured as provided in
Section 3.10, and HCG suspends service to such Committed Member for sixty (60)
or more days as provided in Section 3.10, then HCG may immediately require NRTC
to (and NRTC shall) terminate such Delinquent Member's Member Contract, bring an
action for sums due and Expenses associated with such failure to make payment,
and HCG shall no longer be responsible or liable to provide any DBS Distribution
Services to such
55
Delinquent Member and its NRTC Subscribers, and HCG shall not be required to
provide such Delinquent Member or NRTC with any refund of monies paid by such
Delinquent Member, except as specifically provided in Section 3.10 in the case
of a Partial or Complete Refund.
11.03 Automatic Termination.
---------------------
(a) If, on December 11, 1992 the December Conditions have occurred
but the aggregate Escrowed Committed Member Payments are less than $100 million,
then this Agreement shall automatically terminate ten (10) days later pursuant
to Section 1.04(a) unless HCG, in its sole discretion, grants to NRTC the July
Extension by such date.
(b) If HCG has provided the HCG Certification, but has not obtained
the Core Cable Rights, NRTC has not exercised its termination right under
Section 1.04(b)(ii), and NRTC does not deliver to HCG the Relief Notice by March
1, 1993, then this Agreement automatically shall terminate as of March 1, 1993
pursuant to Section 1.04(b)(ii).
11.04 HCG's Right to Deny Access. If NRTC violates the provisions of
--------------------------
Sections 8.01 or 8.02 (which includes, without limiting the generality of
Section 8.02, NRTC's obligation not to use any of the Transponder Capacity to
transmit any programming or other material that violates any Law) and, following
notice from HCG, continues to violate any such provision, then HCG shall have,
in addition to all other rights hereunder, the immediate right to prevent NRTC
from accessing the Transponder Capacity to the extent, but only to the extent,
necessary and for the time necessary, as reasonably determined by HCG, to
prevent such breach from continuing. HCG shall not enforce such provisions
against Users of the Satellite who execute definitive agreements with HCG on or
after the Execution Date less stringently than it enforces such provisions
against NRTC; nor shall HCG enforce these provisions against NRTC more
stringently than it enforces such provisions against such Users. In addition,
however, if a bona fide dispute exists between NRTC and HCG as to whether a
violation of any Law has occurred, HCG shall not deny access pursuant to this
Section 11.04 unless HCG has received either (i) notice of and delivers a copy
(if the action is in written form) to NRTC of an Indictment, or a threat of any
such Indictment (with HCG being obligated to confirm in writing that such threat
occurred and specifying the general details thereof), from any entity with
jurisdiction or claiming to have jurisdiction to enforce such Law, alleging or
stating that NRTC is violating or threatening to violate such Law, or (ii) an
opinion letter to HCG from outside counsel that may be retained by HCG stating
that, in its opinion, certain conduct or threatened conduct of NRTC (to be
specified in such letter) appears to be or could be found to be in violation of
any Law that is currently being, is threatened to be, or there exists a material
likelihood will be, enforced. Furthermore, if HCG denies access to NRTC
pursuant to the provisions of this Section 11.04 and/or the provisions of
Sections 8.01 or 8.02, and if a bona fide dispute exists as to whether a
violation of such Law has occurred, then NRTC shall have the immediate right to
seek a temporary restraining order (as its sole and exclusive remedy prior to
any final judicial
56
order), on notice of four (4) hours or more to HCG, to prevent the continued
denial of such access by HCG based on the non-existence of any such violation of
such Law. HCG shall be entitled to oppose NRTC's attempts to obtain any such
injunctive relief, including any temporary restraining order, but hereby agrees
to the following:
(i) HCG will not contest the jurisdiction of, or the venue of, any
action brought by NRTC in a federal district court sitting in Washington,
D.C., the Central District Court of California or the Eastern District
Court of Virginia;
(ii) for a period of five (5) consecutive days after such access
denial by HCG, HCG will make itself available to accept service by telecopy
or personal delivery pursuant to Section 18.03 on a 24 hour-a-day basis;
and
(iii) If NRTC is seeking a temporary restraining order, HCG will not
challenge the sufficiency of notice from NRTC of an impending hearing if
such notice is served at least four (4) hours before the scheduled court
hearing.
If it is determined by final judicial order that HCG wrongfully prevented NRTC
from accessing all or part of the Transponder Capacity under this Section 11.04,
then NRTC's sole and exclusive remedy shall be HCG's payment to NRTC of
liquidated damages equal to the Transponder Capacity Fee, the TT&C Fee, the
Ground Capital Fee, the Ground Services Fee, and the Programming Fee for such
Programming Service(s) as to which access is being denied actually paid by NRTC
to HCG and applicable to the period of loss of use of such Transponder Capacity
(with the amount of the Transponder Capacity Fee and the Ground Capital Fee
being prorated over ten (10) years and with all fees being prorated over twenty
(20) Program Channels).
11.05 Right to Use Service Equipment. Upon the expiration, termination or
------------------------------
cancellation of this Agreement for any reason whatsoever, NRTC shall have no
further rights whatsoever with respect to the Service Equipment (except for any
Subscriber Terminal Equipment, and any other Service Equipment not contemplated
by this Agreement that NRTC or Committed Members have independently purchased
from third parties) and HCG may utilize such Service Equipment in any manner HCG
desires.
12. Force Majeure
-------------
12.01 Failure to Deliver. Any failure or delay in the performance by HCG
------------------
of its obligations to commence providing the DBS Distribution Services shall not
be a breach of this Agreement if such failure or delay results from any acts of
God, governmental action or Law (whether in its sovereign or contractual
capacity) or any other circumstances reasonably beyond the control of HCG,
including, but not limited to, earth station sun outage, weather or acts or
omissions of NRTC (or its Affiliates, Members or agents) or any third parties
(excluding Xxxxxx Aircraft Company ("HAC") and all of its direct and indirect
subsidiaries and any other Affiliates of HCG, HAC or any other person or entity
with whom HCG or HAC contracts for any components of the DBS Distribution
Services) (a "Force Majeure Event"). Nothing in this Section 12.01,
57
however, shall be deemed to alter NRTC's absolute rights to terminate this
Agreement as set forth in Section 11.01 and obtain, if applicable, a Complete
Refund thereunder, or to receive Late Commencement Fees under Section 4.02 in
certain circumstances.
12.02 Failure of Performance. Any failure in the performance of the DBS
----------------------
Distribution Services after the Service Commencement Date shall not be a breach
of this Agreement if such failure results from a Force Majeure Event. Nothing
in this Section 12.02, however, shall alter NRTC's rights to receive an Outage
Credit as set forth in Section 10.02 or to terminate this Agreement as provided
in Section 10.03.
13. Limitation of Liability
-----------------------
(a) ANY AND ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING, BUT NOT
LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE, ARE
EXPRESSLY EXCLUDED AND DISCLAIMED EXCEPT TO THE EXTENT SPECIFICALLY AND
EXPRESSLY PROVIDED FOR IN SECTIONS 6 AND 7, ABOVE. IT EXPRESSLY IS AGREED THAT
HCG'S SOLE OBLIGATIONS AND LIABILITIES RESULTING FROM A BREACH OF THIS AGREEMENT
AND NRTC'S EXCLUSIVE REMEDIES FOR ANY CAUSE WHATSOEVER (INCLUDING, WITHOUT
LIMITATION, LIABILITY ARISING FROM NEGLIGENCE) ARISING OUT OF OR RELATING TO
THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY ARE LIMITED TO THOSE
SET FORTH IN SECTIONS 7.05, 7.07, 7.08, 10, 11, AND 13(b) HEREOF, AND ALL OTHER
REMEDIES OF ANY KIND ARE EXPRESSLY EXCLUDED.
(b) IN NO EVENT SHALL HCG BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, OCCASIONED BY ANY DEFECT IN
THE DBS DISTRIBUTION SERVICES, DELAY IN PROVISION OF THE DBS DISTRIBUTION
SERVICES, FAILURE OF THE DBS DISTRIBUTION SERVICES (OR ANY COMPONENT THEREOF),
THE TRANSPONDERS OR THE SUBSCRIBER TERMINAL EQUIPMENT TO PERFORM OR ANY OTHER
CAUSE WHATSOEVER. IN NO EVENT SHALL NRTC BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, IN CONNECTION WITH ANY
DAMAGES CAUSED BY NRTC, EXCEPT THAT NOTHING SHALL RELIEVE NRTC OF ITS OBLIGATION
TO PAY HCG (1) THE AGGREGATE AMOUNT OF ALL COMMITTED MEMBER PAYMENTS (WHETHER IN
THE ESCROW ACCOUNT, COMMITTED AS SECOND PAYMENTS, OR OTHERWISE) PLUS (2) THE
TT&C FEE AND THE GROUND SERVICES FEE FOR THE EXPECTED LIFE OF THE SATELLITE,
BASED ON THE ACTUAL NUMBER OF NRTC SUBSCRIBERS AS OF NRTC'S BREACH, BUT IN NO
EVENT ON FEWER THAN 100,000 NRTC SUBSCRIBERS, LESS ANY AMOUNTS REASONABLY
MITIGATED BY HCG AS REQUIRED UNDER THE CALIFORNIA UNIFORM COMMERCIAL CODE, IF
NRTC BREACHES ITS OBLIGATIONS UNDER THIS AGREEMENT. HCG MAKES NO WARRANTY,
EXPRESS OR IMPLIED, TO ANY OTHER PERSON OR ENTITY
58
CONCERNING THE DBS DISTRIBUTION SERVICES AND NRTC SHALL DEFEND license, lease,
sublease or otherwise convey, directly or indirectly, in whole or in part.
14. Limitations on Transfer
-----------------------
14.01 Transfers. EXCEPT AS SPECIFICALLY PROVIDED ELSEWHERE IN THIS
---------
AGREEMENT, NEITHER PARTY SHALL TRANSFER (DEFINED BELOW) ANY OF ITS RIGHTS OR
OBLIGATIONS UNDER THIS AGREEMENT WITHOUT THE PRIOR WRITTEN CONSENT OF THE OTHER
PARTY, WHICH CONSENT MAY BE GIVEN OR WITHHELD IN ITS SOLE AND ABSOLUTE
DISCRETION; EXCEPT ONLY THAT (1) EITHER PARTY MAY TRANSFER THIS AGREEMENT IN
WHOLE TO A SUCCESSOR OF ALL OR SUBSTANTIALLY ALL OF ITS ASSETS UPON WRITTEN
NOTICE TO THE OTHER PARTY, AND (2) HCG MAY TRANSFER SOME OR ALL OF ITS RIGHTS
AND OBLIGATIONS UNDER THIS AGREEMENT TO AN AFFILIATE. IN THE EVENT OF ANY SUCH
TRANSFER, SUCH TRANSFERRING PARTY SHALL REMAIN FULLY LIABLE ALONG WITH ITS
TRANSFEREE FOR ALL ITS OBLIGATIONS UNDER THIS AGREEMENT. "Transfer" shall mean
to grant, sell, assign, encumber, permit the utilization of, license, lease,
sublease or otherwise convey, directly or indirectly, in whole or in part.
14.02 Financing Transaction. If (a) HCG uses the Satellite or any portion
---------------------
thereof and/or (b) NRTC uses its Transponder Capacity (if it has title to such
Transponders pursuant to Exhibit 19 at paragraph (9), if applicable) for, as
part of, or in connection with, any financing transaction, including but not
limited to a "sale-leaseback" financing or a financing using, in the case of
HCG, the Satellite or any HCG-owned Transponders (or, in the case of NRTC, the
Transponders providing its Transponder Capacity) as collateral (a "Financing
Transaction"), then the non-financing party shall use its reasonable best
efforts (so long as any associated costs are $1,000 or less or so long as the
financing party agrees to reimburse the non-financing party for such costs in
excess of such amount) to cooperate with the financing party in connection with
such Financing Transaction. In neither case shall a financing transaction
adversely affect the rights of the other party under this Agreement.
14.03 Affiliate(s). As used in this Agreement, "Affiliate(s)" means any
------------
person, corporation or other entity controlling or controlled by or under common
control with NRTC or HCG, or another person, corporation or other entity, as the
case may be.
15. NRTC's Right of First Refusal: Successor Satellites.
---------------------------------------------------
15.01 Right of First Refusal. HCG has advised NRTC that it may launch
----------------------
"Successor Satellite(s)" to the Satellite(s). If (1) HCG enters into an
agreement to construct and launch a Successor Satellite to the Satellite; and
(2) NRTC is in compliance with all material terms hereunder; then NRTC shall
have a right of first refusal (the "Successor ROFR") to have HCG provide DBS
Distribution Services (excluding Programming Services) in substantially the same
form as they are provided hereunder.
59
HCG shall not be obligated to launch any such Successor Satellite(s); and if HCG
decides to do so, HCG shall determine in its sole discretion when and under what
conditions a Successor Satellite will be launched.
15.02 Terms of Successor ROFR. If the conditions in Section 15.01 above
-----------------------
are met, then HCG shall notify NRTC in writing, no less than eighteen (18)
months prior to the scheduled launch of such Successor Satellite(s) or at such
time as HCG contractually commits to a launch of such Successor Satellite(s), if
earlier, of the Successor ROFR (the "Successor Notice"). The Successor Notice
shall provide NRTC the right to have HCG provide all of the DBS Distribution
Services (excluding Programming Services) upon the same basic terms of price and
payment pursuant to which HCG markets such equivalent DBS Distribution Services
to third parties. The parties acknowledge that HCG is and/or may be providing
different products or services to third parties (e.g., HCG may be providing only
----
satellite or transponder capacity and ground services) and, therefore, that such
equivalency of price and terms may take into account such differences. Within
sixty (60) days of NRTC's request, HCG will also provide either a proposed
definitive purchase or lease agreement to NRTC, as determined by HCG, which
agreement shall contain HCG's then-standard terms and conditions for the
purchase or lease of transponder capacity, and such other terms and conditions
with respect to such DBS Distribution Services as HCG in its sole discretion
deems desirable or appropriate (the "Definitive Agreement"). If NRTC does not
execute a Definitive Agreement with HCG within one-hundred twenty (120) days
after HCG's delivery to NRTC of such proposed Definitive Agreement, the
Successor Notice and NRTC's Successor ROFR shall expire; provided, however, that
NRTC shall not be required to execute such Definitive Agreement earlier than one
year prior to the scheduled launch date of the first of any such Successor
Satellite(s). The price and terms shall be determined by HCG in its sole
discretion but any provision for an NRTC Revenue Fee shall not exceed the price
provided in Section 3.06.
15.03 Successor Satellite Defined. The term "Successor Satellite(s)"
---------------------------
shall mean any replacement satellite(s) for the Satellite that HCG proposes to
operate in the presently assigned position of the Satellite (after the end of
life of such Satellite(s)) or such other orbital position to which the FCC may
order the Satellite moved or the Successor Satellite(s) positioned if HCG
proposes to launch such a replacement.
16. Progress Reports, Inspections and Access to Work in Progress
------------------------------------------------------------
16.01 Progress Reports. Within forty-five (45) days after the Execution
----------------
Date, HCG shall meet with NRTC's designated technical consultants to discuss and
review the various components of the DBS Distribution Services (excluding the
Programming Services). NRTC shall provide a written summary of NRTC's technical
concerns and requirements (including requests for documentation and additional
details on equipment and system specifications) within thirty (30) days after
such initial review, and HCG shall monitor the development of the DBS
Distribution Services with respect to such concerns and requirements and provide
status information and documentation reasonably requested by NRTC (which
documentation has been or will be developed by HCG or its sub-
60
contractors as part of the on-going development of the DBS Distribution
Services) in each subsequent quarterly progress report. Commencing ninety (90)
days after the Execution Date and continuing until the Service Commencement
Date, HCG shall furnish to the NRTC on a quarterly basis a written progress
report on the status of the construction of the Satellite, HCG's preparations to
provide the other components of the DBS Distribution Service to NRTC, and a
statement containing an explanation of material details, including HCG's
projected Scheduled Launch Date and projected Service Commencement Date,
variances from performance specifications and any remedial actions taken. In any
case, HCG shall notify NRTC promptly in writing of any event of which HCG is
aware and which in HCG's reasonable opinion adversely and materially threatens
HCG's ability to make the Scheduled Service Commencement Date. HCG and NRTC each
shall take reasonable steps to keep the other informed periodically of
communications to or from the FCC or any other governmental authority that
materially affect NRTC, HCG, the Satellite, the Transponder Capacity or its use,
and shall promptly deliver copies to the other of any such written
communications.
16.02 Inspection Rights of NRTC. NRTC's independent satellite consultants
-------------------------
and personnel will have the right, on a non-interference basis and upon
reasonable notice to HCG, to review the performance and launch specifications of
the Satellite and to review the design, preparation and implementation of the
other elements of the DBS Distribution System, subject to the confidentiality
provisions governing such information. Such inspection rights shall also
include NRTC's review of antenna EIRP contour measurements obtained during
ground testing for the purpose of establishing expected Satellite performance.
16.03 After Delivery Reports. After the Service Commencement Date, NRTC
----------------------
shall receive monthly operational reports on the overall performance of the DBS
Distribution Services.
17. Confidentiality and Press Releases.
----------------------------------
17.01 Confidentiality. HCG and NRTC shall hold in confidence this
---------------
Agreement, including the financial terms and provisions hereof, and all
information provided by either party to the other, and NRTC and HCG each hereby
acknowledge and agree that all information received in connection with or
otherwise related to this Agreement, not otherwise known to the public, is
confidential and proprietary (the "Confidential Information") and is not to be
disclosed to third persons (other than to Affiliates, officers, directors,
employees and agents of HCG and NRTC, each of whom is bound by this Section 17)
without the prior written consent of both HCG and NRTC, except as follows and
except as explicitly provided in Section 2.07:
(a) to the extent necessary to comply with applicable Law and/or to
the extent necessary or appropriate to respond to any governmental inquiry,
provided, that the party making such disclosure shall request confidential
treatment of such information;
61
(b) as part of its normal reporting or review procedure to regulatory
agencies, its parent company, its auditors and its attorneys, provided, the
party making such disclosure shall seek confidential treatment of such
information with any such regulatory agencies and provided that any other third
party to whom disclosure is made agrees to the confidential treatment of such
information, provided, that HCG shall be permitted to make disclosures as a part
of and regarding FCC filings without any requirement to seek confidential
treatment (except as to information about the fee and payment terms specified in
Sections 1 and 3, as to which confidentiality shall be sought);
(c) in order to enforce its rights and/or perform its obligations
pursuant to this Agreement;
(d) to the extent necessary to obtain appropriate insurance, to its
insurance agent, provided, that such agent agrees to the confidential treatment
of such information;
(e) to the extent necessary to satisfy its obligations to Users of
the Transponders on the Satellite or to negotiate clauses that will be common to
other satellite and/or transponder sale or lease agreements;
(f) to the extent necessary to obtain financing, provided, that any
person or entity providing such financing shall agree in advance, in writing
reasonably acceptable to the other party, to the confidential treatment of such
information; or
(g) to the extent necessary to obtain Programming Services or to
provide other services to be provided by HCG under this Agreement; or
(h) to the extent necessary to obtain and/or promote execution by
potential Committed Members of Member Contracts or other involvement with the
DBS Distribution Services as anticipated under this Agreement, either party may
provide such Member (and its officers, full-time employees and attorneys) with a
"Contract Summary," or other marketing-related materials, which shall initially
be drafted by NRTC before May 1, 1992 and agreed to by the parties in their sole
discretion.
17.02 Subscriber Information. NRTC (and/or the respective Committed
----------------------
Member) and HCG (and/or DirecTv) shall each own the lists and information
(including compilations thereof) regarding respectively, the NRTC Subscribers
and the HCG Subscribers, including the rights to (a) information about such
subscribers' names and addresses, (b) any benefits related to the possession of
such subscriber information or to the provision of services to such subscriber,
and (c) any related commercial or other directories. Both parties shall have
such rights with respect to a Joint Subscriber. Each party agrees that all
information concerning the other's subscribers is proprietary to the other
party, except to the extent that such information is jointly owned, mutually
developed, or otherwise known to the public. Each party acknowledges that the
other party has substantial proprietary interests and rights to all such
subscriber information whether obtained from the other party or any other source
and agrees to maintain all such
62
subscriber information on a strictly confidential basis. Each party further
covenants that under no circumstances will it use or allow others to use the
other party's subscriber information for any reason other than to verify amounts
due to such party under the terms of this Agreement and for such purposes as are
approved in advance and in writing by such other party.
17.03 Press Releases. NRTC and HCG shall commence immediately after the
--------------
Execution Date to agree upon a mutually acceptable press release with respect to
the general business relationship under this Agreement, and such press release
will be jointly issued and released by the parties on such date as to which the
parties may mutually agree.
17.04 Confidentiality Survival. Notwithstanding anything to the contrary
------------------------
contained herein, this Section 17 shall survive the termination or expiration of
this Agreement for a period of five (5) years in the event of a termination
under Section 11.01(a), Section 11.02(a) or Section 11.02(b), or if the
condition precedent to the effectiveness of this Agreement as specified in
Section 1.05 is not timely met.
18. Miscellaneous
-------------
18.01 Interest. Except as otherwise specifically set forth in this
--------
Agreement or in any Exhibit or Attachment hereto, the rate of interest referred
to herein shall be 12% per annum, or the highest legally permissible rate of
interest, whichever is lower, and all interest or discounting shall be
compounded on a yearly basis. Except as otherwise expressly indicated herein,
"pro-rata" and "prorated" means an allocation on a straight line basis based on
number of days. All present value analyses shall use a 12% annual discount
rate. The parties each acknowledge and agree that liquidated damages provision
specifically set forth in this Agreement addresses a circumstance where the
damaged party would suffer direct and substantial damages, that such damages
cannot be determined within reasonable certainty, and that such liquidated
damages amounts represent, the parties' reasonable estimate of actual damages
and do not constitute penalties.
18.02 Applicable Law; Entire Agreement; Modification. The existence,
----------------------------------------------
validity, construction, operation and effect of this Agreement and the Exhibits
and Attachments hereto, shall be determined in accordance with and be governed
by the laws of the State of California. This Agreement and the Exhibits and
Attachments hereto, constitute the entire agreement between the parties, and
supersede all previous understandings, commitments and representations
concerning the subject matter. Each party acknowledges that the other party has
not made any representations other than those that are contained herein. This
Agreement may not be amended or modified in any way, and none of its provisions
may be waived, except by a writing signed by an authorized officer of the party
against whom the amendment, modification or waiver is sought to be enforced.
63
18.03 Notices.
-------
(a) Except as provided in Section 18.03(b), all notices and other
communications from either party to the other hereunder shall be in writing and
shall be deemed received upon actual receipt when personally delivered, upon
acknowledgment of receipt if sent by facsimile, or upon the expiration of the
third business day after being deposited in the United States mails, postage
prepaid, certified or registered mail, addressed to the other party as follows:
TO HCG:
If by mail: Xxxxxx Communications Galaxy, Inc.
X.X. Xxx 00000
Xxx Xxxxxxx, XX 00000
Attention: Xxxxx X. Xxxx
cc: Vice President & Legal Counsel
If by Telephone: (000) 000-0000
Attention: Xxxxx X. Xxxx
If by FAX: (000) 000-0000
Attention: Xxxxx X. Xxxx
cc: Vice President & Legal Counsel
(000) 000-0000
If by personal delivery Xxxxxx Communications Galaxy, Inc.
to its principal 0000 Xxxx Xxxxxxxx Xxxxxxx
place of business at: Building R8, Mail Station 0000
Xx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Xxxxx X. Xxxx
cc: Vice President & Legal Counsel
Xxxxxx Communications Galaxy, Inc.
0000 Xxxxx Xxxxxx
Xx Xxxxxxx, Xxxxxxxxxx 00000
TO NRTC:
If by mail: National Rural Telecommunications
Cooperative
Woodland Park
0000 Xxxxxxxxxxx Xxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: B.R. Xxxxxxxx III
64
cc: Xxxxxxx X. Xxxxxx
If by Telephone: (000) 000-0000
Attention: B.R. Xxxxxxxx III
If by FAX: (000) 000-0000
Attention: B.R. Xxxxxxxx III
cc: Xxxxxxx X. Xxxxxx
If by personal delivery National Rural Telecommunications
to its principal place Cooperative
of business at: Woodland Park
0000 Xxxxxxxxxxx Xxx, Xxxxx 000
Xxxxxxx, XX 00000
Attention: B.R. Xxxxxxxx III
cc: Xxxxxxx X. Xxxxxx
Each party hereto may change its addresses or payment instructions by giving the
other party notice thereof in conformity with this Section 18.03(a).
(b) All payments made to HCG shall be transferred electronically or
by mail as follows:
--------------------------------------------------------------------------------
By electronic funds transfer Bank of America NT&SA
Corporate Services
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxx, Xxxxxxxxxx
ABA #000000000
Attention: Xx. Xxxxx Xxxxxx
Senior Account Administrator
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
Account Name: Xxxxxx Communications
Galaxy, Inc.
Account #: 06008-00840
--------------------------------------------------------------------------------
--------------------------------------------------------------------------------
By mail: Xxxxxx Communications Galaxy, Inc.
X.X. Xxx 00000
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Accounts Receivable
--------------------------------------------------------------------------------
65
18.04 Severability. Nothing contained in this Agreement shall be construed
------------
so as to require the commission of any act contrary to Law, and wherever there
is any conflict between any provision of this Agreement and any Law, such Law
shall prevail; provided, however, that in such event the provisions of this
Agreement so affected shall be curtailed and limited only to the extent
necessary to permit compliance with the minimum legal requirement, and no other
provisions of this Agreement shall be affected thereby and all such other
provisions shall continue in full force and effect.
18.05 Taxes. NRTC shall not be responsible for, and HCG shall pay, all
-----
applicable property, sales, use or similar taxes imposed by any local, state,
national or international, public or quasi-public governmental entity (a
"Governmental Body") and incurred by HCG prior to the Service Commencement Date
in respect of the DBS Distribution Services and/or the Transponder Capacity. If
any such property, sales, use or similar taxes are incurred by HCG after, or as
a result of, the commencement of DBS Distribution Services in respect of the DBS
Distribution Services, the Transponder Capacity, or the provision thereof to
NRTC, NRTC shall be solely responsible for such taxes. If any taxes, fees,
charges, user fees, spectrum fees or other levies are asserted, either before or
after the Service Commencement Date, by reason of HCG's use of the point in
space or the frequency spectrum at that point in space in which the Satellite is
located, or the use or ownership of such Satellite (excluding only any FCC
filing fee imposed on HCG's application(s) to construct, launch and operate the
Satellite, which filing fee shall be paid by HCG), then HCG, NRTC and the Users
of such Transponders shall each pay a proportionate amount of such taxes, fees,
charges, user fees, spectrum fees and other levies based on the number of
Transponders (or amount of Transponder capacity) each of them owns, leases or
uses. Each of NRTC, HCG and Users shall have the right, as between each of them
and any licensee or assignee hereunder, to consent to allocate responsibilities
for such tax, fee, charge and/or levy payments hereunder. No such arrangement
between them shall affect NRTC's or HCG's obligations hereunder or a User's
obligations under a similar provision.
18.06 Successors, Assignment. Subject to the limitations and exceptions on
----------------------
Transfer set forth in Section 14, this Agreement shall be binding on and shall
inure to the benefit of any and all successors and assigns of the parties;
provided that no assignment of this Agreement shall relieve either party hereto
of its obligations to the other party. Any purported assignment by either party
not in compliance with the provisions of this Agreement shall be null and void
and of no force and effect.
18.07 Headings. The descriptive headings of the several sections and
--------
paragraphs of this Agreement are inserted for convenience only and do not
constitute a part of this Agreement.
18.08 Survival of Representations and Warranties. All representations and
------------------------------------------
warranties contained herein or made by HCG or NRTC in connection herewith shall
survive any independent investigation made by HCG or NRTC.
66
18.09 No Third-Party Beneficiary. The provisions of this Agreement are
--------------------------
for the benefit only of the parties hereto, and no third party may seek to
enforce, or benefit from, these Provisions, except that both parties acknowledge
and agree that the provisions of Sections 8.01, 8.02 and 9 are also intended for
the benefit of both HCG and all Users. Both parties agree that any such User
shall have the right to enforce, as a third-party beneficiary, the provisions of
such Sections, against NRTC directly, in an action brought solely by such User,
or may join with HCG or any User, in bringing an action against NRTC for
violation thereof.
18.10 Non-Waiver of Breach. Either party hereto may specifically waive
--------------------
any breach of this Agreement by the other party, provided that no such waiver
shall be binding or effective unless in writing and no such waiver shall
constitute a continuing waiver of similar or other breaches. A waiving party,
at any time, and upon notice given in writing to the breaching party, may direct
future compliance with the waived term or terms of this Agreement, in which
event the breaching party shall comply as directed from such time forward.
18.11 Counterparts. This Agreement may be executed in several
------------
counterparts, each of which shall be deemed an original, and all such
counterparts together shall constitute but one and the same instrument.
18.12 Documents. Each party hereto agrees to execute and, if necessary,
---------
to file with the appropriate governmental entities, such documents as the other
party hereto shall reasonably request in order to carry out the purposes of this
Agreement.
18.13 Arbitration. Prior to submitting to arbitration any matter that
-----------
Section 5.02(b) or Section 20.04 (if Exhibit 19 applies) of this Agreement
requires be arbitrated, the parties (at a Vice-President or similar or higher
level) shall meet to discuss and resolve such matter. If such matter cannot be
resolved within thirty (30) days following the initiation or attempted
initiation of such discussions by either party, then such matter shall be
arbitrated using three arbitrators (the "Arbitrators") under the rules of the
American Arbitration Association ("AAA"). The AAA shall be instructed to
appoint the Arbitrators within thirty (30) days of receiving notice from either
HCG or NRTC that HCG and NRTC would like to submit this dispute to arbitration.
Each of HCG and NRTC shall submit to the Arbitrators its proposed resolution of
each issue to be arbitrated, and the Arbitrators shall select either NRTC's or
HCG's proposal for each issue to resolve the dispute, using the standard (if
any) for their decisions specifically set forth elsewhere in this Agreement. If
no standard is set forth, the Arbitrators may apply their own judgment in making
such decisions. The Arbitrators shall be instructed to use their best efforts
to conclude the arbitration within thirty (30) days of their appointment. The
arbitration shall take place in Washington, D.C. The award of the Arbitrators
shall not be appealable to any court or other entity and shall be final, non-
appealable and binding on each party. The "non-prevailing party"/1/ in any
arbitration conducted under this Section 18.13 (as determined by the
Arbitrators) shall pay all the costs and expenses incurred by the "prevailing
party" in preparing for and conducting the arbitration. The
67
parties acknowledge that this Agreement may allow for dual proceedings to occur
both in the courts and pursuant to arbitration and agree that neither shall
attempt to consolidate into a matter before any court any matter that this
Agreement requires be arbitrated.
18.14 DBS Transponder Capacity. HCG shall be solely responsible for
------------------------
fulfilling any obligations imposed by Law and applicable to HCG as the FCC
licensee of the Satellite regarding the provision to third parties of DBS
transponder capacity for the delivery of non-commercial, public, or educational
programming.
18.15 Rescission Option. Either party may rescind this Agreement by
-----------------
providing the other party with written notice thereof received before 5:00 p.m.
Eastern Time, April 15, 1992; otherwise, this Agreement shall continue in full
force and effect.
19. Modifications of Agreement in Certain Circumstances
---------------------------------------------------
(a) If NRTC pays to HCG (and/or Committed Members commit to pay HCG
as Second Payments), in the aggregate, the sum of $250,000,000 in Committed
Member Payments by December 11, 1992 (or by May 1, 1993 and/or July 31, 1993, if
the May Extension and/or the July Extension apply) (the "Agreement Modification
Date"), then the provisions set forth on Exhibit 19 shall apply automatically
and, as indicated therein, modify this Agreement and shall take precedence over
and supersede any conflicting provisions contained in this Agreement.
Notwithstanding the foregoing, if the provisions of Exhibit 19 so apply, but HCG
has actually not received $250 million in aggregate Committed Member Payments at
the time of Acceptance because one or more Second Payments has not been paid to
HCG, and such non-payment is not cured within the time period provided in
Section 3.10, then this Agreement automatically shall be revised as if Exhibit
19 did not apply and the "Committed Member Residences" shall be reestablished as
of the date of delivery to HCG of the Member Contract that allowed NRTC
initially to meet the $250 million Committed Member Payment target.
(b) Within thirty (30) days following the Agreement Modification
Date, NRTC may deliver to HCG a notice in substantially the identical form
attached as Exhibit 19-A (the "Relief Notice") and thereby relieve HCG of any
and all responsibilities under Section 2.07 and elsewhere in this Agreement to
provide Programming Services. Within thirty (30) days following the Relief
Notice, HCG shall assign to NRTC all of HCG's rights under, and NRTC shall
assume all of HCG's obligations under, any and all Programming Agreements. Upon
such assignment by HCG (the "Relief Notice Assignment"), Sections 2.07(a), (c)
and (d) automatically shall be deleted in their entirety, all HCG's obligations
to provide Programming Services and all of NRTC's obligations to pay HCG for
such Programming Services, shall cease, and all references in this Agreement to
such obligations automatically shall be deleted.
(c) If NRTC does not deliver the Relief Notice, then HCG shall
continue to fulfill its obligations under Sections 2.07(a), (c) and (d).
Promptly after obtaining the rights to distribute Cable Programming to Eligible
Residences as provided in Section 2.07 (subject to any limitations or
restrictions contained in the Programming
68
Agreements), HCG shall assign to NRTC all HCG's rights under, and NRTC shall
assume all of HCG's obligations under, all the Programming Agreements. Upon such
assignment by HCG (the "Fulfillment Assignment"), Sections 2.07(a), (c) and (d)
automatically shall be deleted in their entirety, all HCG's obligations to
provide Programming Services shall cease, and all references in this Agreement
to such obligations automatically shall be deleted.
(d) The Relief Notice Assignment or the Fulfillment Assignment shall
be evidenced by an agreement in substantially the identical form attached as
Exhibit 19-B. After either such assignment, NRTC shall have sole responsibility
for acquiring and maintaining the rights to provide program services to Eligible
Residences. Upon either such assignment, HCG shall have no further obligations
for the assigned Programming Agreements or the consequences of such assignment.
Neither the Relief Notice Assignment nor the Fulfillment Assignment shall
transfer any rights HCG may have to distribute Cable Programming and/or any
other program service to non-NRTC Territories.
WHEREOF, each of the parties hereto has duly executed and delivered
this Agreement as of the day and year first written above.
XXXXXX COMMUNICATIONS GALAXY, INC. NATIONAL RURAL TELECOMMUNICATIONS
COOPERATIVE
By: /s/ By:
--------------------------------- -------------------------------------
Attest: /s/ Attest:
----------------------------- ---------------------------------
69
