Exhibit 99.2
First Amendment to Term Sheet
Reference is made to the Term Sheet (the "Term Sheet") dated as of August 5,
2003, by and among National Rural Telecommunications Cooperative ("NRTC"), North
Central Communications and Iowa Lakes Electric Cooperative, on behalf of the
Class certified in the United States District Court for the Central District of
California, Case No. CV 00-2117 (the "Class"), and Xxxxxx Communications Galaxy,
Inc. and DIRECTV, Inc. (together, "DIRECTV"), a copy of which is attached
hereto. NRTC, DIRECTV, and the Class may hereinafter be referred to collectively
as the "Parties." All defined terms used in the Term Sheet and not otherwise
defined herein have the meanings set forth in the Term Sheet.
The Class is this date executing the Term Sheet and in conjunction
therewith the Parties desire to make certain amendments thereto, as set forth
below.
Accordingly, for good and valuable consideration, the receipt of which is
hereby acknowledged, the Parties hereby agree as follows:
1. The Term Sheet is hereby amended as follows:
(a) In Section I in both the first and second sentences after the words
"dismiss with prejudice" insert ", except as set forth in the following
paragraph", and then add the following to Section I as a new paragraph:
"For purposes of clarity and not in limitation of the foregoing, the
Parties agree that NRTC's and the Class's claims for existing or known
"Advanced Services" (as that term is used in NRTC's and the Class's
complaints in Case Nos. CV-99-8672 and CV-00-2117, respectively), including
Advanced Services identified in the litigation, are dismissed with
prejudice. NRTC's and the Class's claims for future "Advanced Services" (as
that term is used in NRTC's and the Class's complaints in Case Nos.
CV-99-8672 and CV-00-2117, respectively), are dismissed without prejudice.
Notwithstanding the foregoing, NRTC and the Class will receive revenues
from TiVo services and Wink services as provided in Section IV of this Term
Sheet. Moreover, the Parties agree to negotiate in good faith regarding the
marketing, sale or distribution by NRTC and the Class through NRTC of
future Advanced Services that DIRECTV may offer during the term of the New
DBS Distribution Agreement, when such Advanced Services are available for
marketing, sale or distribution."
(b) In Section II (b), change clause (i) to read as follows:
"(i) the remaining fuel on board DBS-1 is less than 6% of the initial fuel
mass prior to launch, including reasonable provision for uncertainty in
estimation of fuel plus a credit for fuel used in the move of DBS-1 to
110(degree) and back to 101(degree), or (ii)"
(c) In Section II (e) insert the following new sentence after the sentence
that begins "If the programming agreement..."
"NRTC agrees that it will pass on to DBS participants, in the same pro rata
manner as set forth above, without deduction or charge for any NRTC margin,
(i) any such unconstrained launch support payments and (ii) any such
constrained launch support payments as may, in accordance with the terms
and conditions thereof, be passed on to such DBS participants, provided
that such DBS participants use such constrained launch support payments in
the manner specified by the providers thereof."
(d) In Section III, in the introductory paragraph in the fifth line, delete
"except as modified by" and replace with "modified to reflect the
provisions of".
(e) In Section III (c) add the following language at the end of the Section
immediately after the words "June 30, 2011": "or December 31, 2009, as
applicable,"
(f) In Section III (d), add the following language at the end of the
section immediately following the words "transfer to DIRECTV,":
"provided, however, that DIRECTV shall have no obligation to pay $150 for
subscribers transferred to DIRECTV for any DBS participant which chooses
Option 2, as defined in Section III (e) below. The $150 per subscriber
payment will be paid by DIRECTV to NRTC, and NRTC will pass such payment on
to each affected DBS participant upon successful transfer by such DBS
participant of its subscribers to DIRECTV and upon final settlement between
NRTC and such DBS participant of any amounts owing by such DBS participant
to NRTC,"
(g) Section III (e) shall be replaced in its entirety with the following
language:
"(e) The New DBS Distribution Agreement will provide that NRTC may (and
NRTC agrees that it shall) offer to each member of the Class, and each
other DBS participant which accepts the settlement, a new Member Agreement
("New Member Agreement") in a form materially consistent with the existing
Member Agreement (except as modified herein). The New Member Agreement must
be approved by DIRECTV, which approval shall not be unreasonably withheld,
and will include one of the following two options (each DBS participant
accepting this settlement must choose Option 1 or Option 2 within thirty
days of Court approval of the settlement at or following a fairness
hearing). The New DBS Distribution Agreement will also provide that NRTC
may itself serve, or offer to other members or affiliates of NRTC New
Member Agreements for, the territories of any non-accepting DBS
participants (or accepting DBS participants who do not execute a New Member
Agreement (with either Option 1 or 2) within 30 days after approval of this
settlement and
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Term Sheet by the Court) for the period comprising the term of the New DBS
Distribution Agreement, on the same terms as the New Member Agreements.
Option 1: The New Member Agreement will include:(i) a term commencing at
the end of the term of its existing Member Agreement and ending on June 30,
2011, on the terms and other provisions set forth in its Member Agreement,
as amended by the provisions of this section, provided such Class member or
other DBS participant is in good standing with NRTC at the end of the term
of its existing Member Agreement(s); (ii) the releases provided for in
Section VII below, to be effective upon execution of the New Member
Agreement; (iii) such DBS participant's agreement to indemnify and hold
NRTC, its officers and directors, harmless from and against any and all
damages, liabilities, costs and expenses, including attorneys' fees and
expenses, which any of them may incur or be obligated to pay or indemnify
on account of any claim asserted, or suit brought by, such DBS participant
or any of its affiliates, against DIRECTV or any of its affiliates, as to
which DIRECTV seeks indemnification from NRTC under the Existing DBS
Distribution Agreement, as amended hereby, or under the New DBS
Distribution Agreement, which indemnification provision shall be effective
upon the execution of the New Member Agreement; (iv) the DBS participant
will work to assure that subscribers in its territories are transferred to
DIRECTV effective as of June 30, 2011, including (a) cooperating in the
transition process negotiated by NRTC and DIRECTV pursuant to Section
III(d) above, and (b) making information regarding its subscribers
available to DIRECTV; and (v) the DBS participant cannot during the term of
the New Member Agreement and for a period of two years thereafter: (a)
share or sell their list of former and/or current DBS customers (or any
portion thereof) to a multi-channel video provider other than DIRECTV; (b)
(except if allowed under the existing Member Agreement during the term
thereof) market or solicit sales for multi-channel video services or the
related receiving equipment (other than DIRECTV services and associated
equipment); or (c) share or sell their customer list related to non-DBS
businesses to any multi-channel video distributor, unless all former and
current DBS customers are excised from such list (i.e., no then current or
former (within the prior two year period) DBS customer shall be included in
a list sold to a multi-channel video distributor, even if such customer
is/was a customer to a non-DBS business as well). For purposes of this
settlement, Option 1 is the default Option, meaning that for any DBS
participant which signs a New Member Agreement and does not indicate which
Option it chooses, Option 1 shall apply.
Option 2: The New Member Agreement will include:(i) a term commencing at
the end of the term of its existing Member Agreement and ending on December
31, 2009, on the terms and other provisions set forth in its Member
Agreement, as amended by the provisions of this section, provided such
Class member or other DBS participant is in good standing with NRTC at
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the end of the term of its existing Member Agreement(s); (ii) the releases
provided for in Section VII below, to be effective upon execution of the
New Member Agreement; (iii) such DBS participant's agreement to indemnify
and hold NRTC, its officers and directors, harmless from and against any
and all damages, liabilities, costs and expenses, including attorneys' fees
and expenses, which any of them may incur or be obligated to pay or
indemnify on account of any claim asserted, or suit brought by, such DBS
participant or any of its affiliates, against DIRECTV or any of its
affiliates, as to which DIRECTV seeks indemnification from NRTC under the
Existing DBS Distribution Agreement, as amended hereby, or under the New
DBS Distribution Agreement, which indemnification provision shall be
effective upon the execution of the New Member Agreement; (iv) the DBS
participant will work to assure that subscribers in its territories are
transferred to DIRECTV effective as of December 31, 2009, including (a)
cooperating in the transition process negotiated by NRTC and DIRECTV
pursuant to Section III(d) above, and (b) making information regarding its
subscribers available to DIRECTV; (v) the DBS participant cannot during the
term of the New Member Agreement and for a period of two years thereafter:
(a) share or sell their list of former and/or current DBS customers (or any
portion thereof) to a multi-channel video provider other than DIRECTV, or
(b) share or sell their customer list related to non-DBS businesses to any
multi-channel video distributor, unless all former and current DBS
customers are excised from such list (i.e., no then current or former
(within the prior two year period) DBS customer shall be included in a list
sold to a multi-channel video distributor, even if such customer is/was a
customer to a non-DBS business as well); and (vi) the DBS participant
cannot during the term of the New Member Agreement (except if allowed under
the existing Member Agreement) market or solicit sales for multi-channel
video services or the related receiving equipment (other than DIRECTV
services and associated equipment). With respect only to any members of the
Class who choose Option 2 as part of the settlement, the transfer of
subscribers to DIRECTV at December 31, 2009 under this Option 2 shall not
be deemed a Liquidity Event within the meaning of this Term Sheet.
NRTC and DIRECTV further agree that any DBS participant that accepts or is
bound by the settlement and does not execute a New Member Agreement shall
remain subject to its existing Member Agreement(s), but NRTC will agree
with such DBS participant that the term of such Member Agreement(s) will
extend until the Termination Date, unless terminated by NRTC pursuant to
section 14 thereof, as a result of a breach by such DBS participant
thereunder.
(h) Rename Section IV "Amendment to Seamless Consumer Agreement; Wink
Services:", make the existing paragraph "(a)" and add the following new
paragraph (b):
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"(b) The Parties acknowledge and agree that the agreement dated September
15, 2000 between NRTC, Pegasus and DIRECTV (the "Wink Agreement") remains
in full force and effect and shall continue, pursuant to its terms, through
the term of the referenced Master Affiliation Agreement between DIRECTV and
Wink Communications, Inc. The Parties further agree to negotiate in good
faith regarding the marketing and sale of the Wink services by NRTC and/or
the Class on substantially equivalent terms to the Wink Agreement, should
DIRECTV renegotiate or otherwise undertake a new agreement for the
distribution of the Wink services on the DIRECTV platform on substantially
similar terms to the Master Affiliation Agreement during the term of the
New DBS Distribution Agreement."
(i) In Section IV (a), change the second and third sentences to read as
follows:
"The Revenue Share from sales of services covered by the Seamless Consumer
Agreement (except Non-Select Sports Programming) shall be adjusted to the
greater of 15% or the rate applicable pursuant to the Service Penetration
Rate calculation described therein. The Seamless Consumer Agreement will
also cover TiVo and Para Todos at a 15% Revenue Share, plus incremental
Revenue Share up to a maximum Revenue Share of 20%, and NRTC and DIRECTV
shall agree upon the appropriate Base Service Penetration Rates for such
incremental Revenue Share calculation, designed to provide incentive to
NRTC to improve from DIRECTV's current penetration rate in NRTC territories
for such services in a manner consistent with the Service Penetration Rate
applicable to the other services covered by the Seamless Consumer
Agreement."
(j) In Section V add the following two sentences after the second sentence
defining a "Liquidity Event." "Notwithstanding the foregoing, the transfer
of subscribers to DIRECTV by any member of the Class selecting Option 2, as
defined in Section III (e) at December 31, 2009, shall not be deemed a
Liquidity Event, and DIRECTV will have no obligation to make the payment
provided in the first sentence of this section for any such subscribers
after December 31, 2009. For clarity, with respect to any Class member
which elects Option 2, if a Liquidity Event occurs before December 31,
2009, then such event will still be a Liquidity Event with respect to the
subscribers of such Option 2 Class members; however, in any such event
DIRECTV will only be obligated to make the payments to NRTC provided for in
the first sentence of this Section V with respect to such subscribers for
the period from the date of such Liquidity Event through December 31, 2009.
The last two sentences of Section V shall be amended to add the following
language after the words "Liquidity Event" each time they appear in the
sentences "or transfer under Option 2".
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(k) In Section VII, delete the portion of the second sentence beginning
with "The New Member..." through the parenthesis ending with "New Member
Agreement)" and insert in place thereof the following:
"The New Member Agreements will also include (1) an appropriate release by
NRTC of known claims against such DBS participant (but specifically
excluding claims related to payments due and ongoing operational matters)
and (2) an appropriate release by such DBS participant of NRTC, its
officers and directors (including with regard to (i) the terms of this
settlement, (ii) the dismissal of the Consolidated Cases and (iii) any and
all known claims, whether asserted or unasserted, arising out of or
relating to (x) any dealings between NRTC and such DBS participant under
its Member Agreement(s) through the date such DBS participant executes and
delivers such New Member Agreement, and including, but not limited to, any
such claims arising out of or relating to NRTC's provision of services to
such DBS participant thereunder, the amounts, including margin, charged by
NRTC to such DBS participant thereunder, and/or NRTC's use or distribution
to DBS participants of any launch or marketing support fees collected by
NRTC and/or (y) NRTC's method of calculation and allocation of patronage
and non-patronage sourced income, and NRTC's calculations and distributions
of net savings to its patrons)".
(l) In Section VIII, at the beginning of the third sentence replace
"sentence" with "sentences".
(m) Add a new Section X as follows:
"X. Offer of Future Sales Agency: DIRECTV agrees that, upon the expiration
of any New Member Agreement as of June 30, 2011, DIRECTV shall offer to the
applicable DBS participant thereunder the opportunity to act as a DIRECTV
retailer, on terms at least equivalent to DIRECTV's then standard terms for
its two-step/independent retailers who sell DIRECTV exclusively, provided
that such DBS participant continues to observe the restrictions set forth
in Section III(e) (iv) and (v) (Option 1)."
(n) Add a new Section XI as follows:
"XI. Certain Agreements with Pegasus: If there are any changes or additions
to the Existing DBS Distribution Agreement, as amended hereby, or the New
DBS Distribution Agreement or the Member Agreements with Pegasus Satellite
Television, Inc, and its affiliates ("Pegasus") (which are approved by NRTC
as the other party thereto) or the Seamless Consumer Agreement between
DIRECTV and Pegasus, as a result of a settlement between DIRECTV and
Pegasus of the current litigation (excluding Seamless Marketing and the
Delaware patent claims) between them, other than as set
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forth in this Term Sheet, DIRECTV will advise NRTC and the Class of all the
precise terms thereof and agrees that, if NRTC and the Class elect, DIRECTV
will make such terms, rights and benefits available to NRTC and through
NRTC to the Class and any other DBS participant which accepts this
settlement, provided that the party agrees to undertake any obligations
associated with such terms, rights and benefits. Notwithstanding the
foregoing, it is expressly agreed that the provisions of this Section XI
shall not apply to the terms of any Liquidity Event transaction which may
be entered into between DIRECTV and Pegasus."
2. As amended hereby, the Term Sheet remains in full force and effect and
binding on the Parties. Promptly after execution of this amendment, the
Parties shall prepare and execute an amended and restated version of the
Term Sheet, incorporating in a single document the provisions of the Term
Sheet and the amendments set forth herein, which, when executed, shall
supersede and replace the Term Sheet and this amendment in their entirety;
however, any failure to execute such amended and restated version shall not
affect the binding effect of the Term Sheet, as amended by this amendment.
This Amendment may be executed in one or more counterparts, each or which
shall be deemed an original. All Parties agree that facsimile signatures by
any Party shall be acceptable.
The rest of this page is intentionally left blank. Signatures are on the
following pages.
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This First Amendment to Term Sheet is executed by the parties on August 10,
2003, and is effective for all purposes as of the Effective Date.
NATIONAL RURAL TELECOMMUNICATIONS COOPERATIVE
By: _________________________
Name: _______________________
Title: ________________________
Date: ________________________
NORTH CENTRAL COMMUNICATIONS
By: _________________________
Name: _______________________
Title: ________________________
Date: ________________________
IOWA LAKES ELECTRIC COOPERATIVE
By: _________________________
Name: _______________________
Title: ________________________
Date: ________________________
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DIRECTV, INC.
By: _________________________
Name: _______________________
Title: ________________________
Date: ________________________
XXXXXX COMMUNICATIONS GALAXY, INC.
By: _________________________
Name: _______________________
Title: ________________________
Date: ________________________
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