TRANSPONDER LEASE AGREEMENT
FOR GALAXY III R
BETWEEN
XXXXXX COMMUNICATIONS GALAXY, INC. AND
TVN ENTERTAINMENT CORPORATION
TABLE OF CONTENTS
-----------------
1. The Satellites....................................... 1
1.01 Satellites..................................... 1
1.02 Galaxy Fleet Satellites........................ 1
1.03 C-Band Transponders............................ 1
1.04 Ku-Band Transponders........................... 2
1.05 Specifications and Components.................. 2
1.06 Rights to Reserves or Spares................... 2
2. Lease of Transponders................................ 3
3. Lease Rate........................................... 3
3.01 Base Lease Rate Description.................... 3
3.02 Base Lease Rate Amount......................... 3
3.03 Place of Payment............................... 5
3.04 Prompt Repayment............................... 5
3.05 Term of Lease.................................. 5
3.06 Late Payment................................... 5
4. Delivery and Related Matters......................... 5
4.01 Delivery....................................... 5
4.02 Condition to Lessee's Right to Lease........... 6
4.03 Acceptance..................................... 6
4.04 Delivery Failure Defined....................... 6
4.05 In Orbit Protection From Galaxy Backup......... 6
4.06 [Reserved]..................................... 6
4.07 Galaxy Backup Option........................... 6
4.08 [Reserved]..................................... 7
4.09 Use of Galaxy Backup By Lessee................. 7
4.10 [Reserved]..................................... 7
4.11 Use of Galaxy Backup for Catastrophic Failure.. 8
4.12 Galaxy Backup Protection Without Movement...... 8
4.13 Entitlement to Usage........................... 9
5. Representations and Warranties....................... 9
5.01 Authority, No Breach........................... 9
5.02 Corporate Action............................... 10
5.03 Consents....................................... 10
5.04 Litigation..................................... 11
5.05 No Broker...................................... 11
i
6. Additional Representations, Warranties and
Obligations of HCG................................. 11
6.01 Authorization Description...................... 11
6.02 C-Band Transponder Performance Specifications.. 11
6.03 Right to Lease................................. 11
6.04 Government Regulations......................... 11
6.05 Not a Common Carrier........................... 12
6.06 TT&C........................................... 12
6.07 [Reserved]..................................... 12
6.08 Transfers by HCG............................... 12
7. Additional Representations, Warranties and
Obligations of Lessee.............................. 12
7.01 [Reserved]..................................... 12
7.02 Non-Interference............................... 12
7.03 Laws........................................... 13
7.04 Additional Usage Representations and
Obligations........................................ 13
8. Preemptive Rights and Inspection of Facilities....... 14
9. Transponder Spares, Reserve Transponders and
Retained Transponders.............................. 14
9.01 Use of Transponder Spares...................... 14
9.02 Use of Reserve Transponders.................... 15
9.03 Simultaneous Failure -- Priority with
Respect to Use of C-Band Transponder
Spares....................................... 16
9.04 Simultaneous Failure -- Priority with Respect to
Use of Reserve C-Band Transponders........... 16
9.05 HCG's Ownership of C-Band Transponders......... 16
9.06 Notice of Intent to Substitute a Reserve C-Band
Transponder.................................. 17
10. Termination Rights.................................... 17
10.01 [Reserved]..................................... 17
10.02 Cancellation by HCG............................ 17
10.03 HCG's Right to Transfer for Non-Payment........ 19
10.04 [Reserved]..................................... 19
10.05 Transponder Lease Termination.................. 19
10.06 Right to Deny Access........................... 20
10.07 Return of Transponders......................... 22
11. Force Majeure......................................... 23
11.01 Failure to Deliver............................. 23
11.02 Failure of Performance......................... 23
12. Limitation of Liability/Breach of Warranty............ 23
12.01 Liability of HCG............................... 23
12.02 Confirmed Failure.............................. 23
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12.03 Repayment for Failed Transponder................. 24
12.04 Limitation Of Liability.......................... 24
12.05 Obligations of Lessee to Cooperate............... 25
13. Transfers............................................... 26
13.01 Transfers by Lessee.............................. 26
13.02 Transfers by HCG................................. 27
13.03 Additional Requirements for Transfer............. 27
14. Affiliate............................................... 27
15. Monthly Satellite Reports........................ 27
16. Confidentiality and Press Releases............... 27
16.01 Confidential Information......................... 27
16.02 Press Releases................................... 28
17. Disposition of Satellite................................ 28
17.01 Continued Access to C-Band Transponder Spares and
C-Band Reserve Transponders.................... 28
17.02 Disposition of Satellite......................... 28
18. HCG's Option to Cancel the Lease of Lessee's
Transponders.......................................... 29
18.01 Duration......................................... 29
18.02 Condition to Lessee's Exercise of the Option..... 29
18.03 Method of Option Exercise........................ 29
18.04 Effect of Option Exercise........................ 31
18.05 Obligations of Lessee Upon Option Exercise....... 31
18.06 Obligations of HCG............................... 31
18.07 Resolution of Disputes........................... 31
18.08 Cessation Fees................................... 32
19. Outage Allowance........................................ 32
20. Miscellaneous........................................... 33
20.01 Interest......................................... 33
20.02 Applicable Law; Entire Agreement; Modification... 33
20.03 Notices.......................................... 33
20.04 Severability..................................... 34
20.05 Taxes............................................ 35
20.06 Successors; Assignment........................... 35
20.07 Headings......................................... 35
20.08 Survival of Representations and Warranties....... 35
20.09 No Third-Party Beneficiary....................... 35
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20.10 Non-Waiver of Breach............................. 35
20.11 Counterparts..................................... 36
20.12 Documents........................................ 36
20.13 Risk of Loss..................................... 36
21. Periodic Signal Transmission............................ 36
22. HCG's Use of Eight (8) Transponders..................... 36
23. Additional Transponder(s)............................... 36
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EXHIBITS
A Galaxy Fleet Satellites
B-1 C-Band Transponder Performance Specifications: Galaxy IIIR
B-2 C-Band Transponder Performance Specifications: Galaxy Backup
C-1 [Intentionally Omitted]
C-2 [Intentionally Omitted]
Description of C-Band Transponder Spares
ADDENDUM
I. Defined Terms
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GALAXY IIIR TRANSPONDER LEASE AGREEMENT
---------------------------------------
This Transponder Lease Agreement (the "Agreement") (all such defined terms
herein are so capitalized and referenced in Addendum I) is made and entered into
as of October 21, 1994, (the "Execution Date"), by and between Xxxxxx
Communications Galaxy, Inc. ("HCG"), a California corporation, and TVN
Entertainment Corporation ("Lessee"), a Delaware corporation;
RECITALS
--------
WHEREAS, HCG intends to construct, launch and operate a number of
satellites, each containing C-Band capacity, and desires to lease C-Band
capacity on such satellites; and
WHEREAS, Lessee desires to lease from HCG and HCG desires to lease to
Lessee certain transponders on one of such satellites.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the mutual promises set forth below,
and for other good and valuable consideration, the receipt and adequacy of which
are hereby acknowledged, HCG and Lessee hereby mutually agree as follows:
1. The Satellites
--------------
1.01 Satellites. HCG has launched a satellite referred to hereinafter as
----------
"Galaxy Backup" and shall launch one other Satellite referred to as hereinafter
as "Galaxy IIIR" (or "G-IIIR") (collectively, the "Two Satellites"). HCG plans
to launch certain other satellites to be located at the orbital positions listed
on Exhibit A or at such other positions as to which such satellites, or their
replacements in the event of a failure, may be assigned by the Federal
Communications Commission or any successor agency ("FCC") (with all such
satellites hereinafter referred to as the "Galaxy Fleet"). The term "Satellite"
shall mean any one of the Galaxy Fleet satellites. Galaxy IIIR shall be a hybrid
satellite (i.e., it shall contain both Ku-Band capacity ("Ku-Band Transponders")
---
and C-Band capacity ("C-Band Transponders")). Collectively, Galaxy IIIR's C-Band
and Ku-Band Transponders are referred to as the "Galaxy IIIR Transponders".
1.02 Galaxy Fleet Satellites. The orbital position of the Galaxy Fleet
-----------------------
Satellites are set forth on Exhibit A. HCG currently plans to launch Galaxy IIIR
into the 95th West Longitude orbital location in the fourth quarter of 1995.
1.03 C-Band Transponders. Each of the Two Satellites shall have twenty-
-------------------
four (24) C-Band Transponders (collectively, the "Transponders"). Twenty-two
(22)
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of the C-Band Transponders on Galaxy IIIR shall be designated "Primary." The
remaining two (2) C-Band Transponders on Galaxy IIIR shall be designated as
"Reserve." "Primary C-Band Transponders" shall mean C-Band Transponders on
Galaxy IIIR which are not preemptible and as to which the Owners of C-Band
Transponders on the same Satellite, if a Confirmed Failure occurs, shall have
the right to preempt a Reserve C-Band Transponder in accordance with Section
9.02. "Reserve C-Band Transponders" shall mean C-Band Transponders on Galaxy
IIIR which shall be preemptible, in accordance with Section 9.02, by Owners of
Primary C-Band Transponders located on the same Satellite that have suffered a
Confirmed Failure. Each such Satellite also shall have six (6) "C-Band
Transponder Spares", as defined in Section 9.01. All of Galaxy Backup's twenty-
four (24) C-Band Transponders are preemptible in order to satisfy HCG's backup
obligations set forth in Section 4. As used in this Agreement, "Owner" shall
include the actual owner of a C-Band or Ku-Band Transponder on Galaxy IIIR,
including HCG if there remain any unsold Galaxy IIIR Transponders, or any
permitted assignee of such owner's Galaxy IIIR Transponder, or any lessee or
licensee of HCG's, or any entity to which HCG (or any Affiliate of HCG) provides
services. The term "purchase" shall include the execution of an agreement with
HCG for a lease of Transponder(s).
1.04 Ku-Band Transponders. Galaxy IIIR shall have twenty-four (24) Ku-Band
--------------------
Transponders. Eight (8) of the Ku-Band Transponders on Galaxy IIIR shall have a
frequency bandwidth of 00 XXx (xxx "00 XXx Transponders") and the remaining
sixteen (16) Ku-Band Transponders on Galaxy IIIR shall have a frequency
bandwidth of 00 XXx (xxx "00 XXx Transponders"), all twenty-four (24) of which
shall be designated as "Primary" (collectively, the "Primary Ku-Band
Transponders"). Galaxy IIIR shall have six (6) Ku-Band Transponder Spares.
1.05 Specifications and Components. Exhibit B-1 sets forth the "C-Band
-----------------------------
Transponder Performance Specifications", defined as certain technical
specifications for the C-Band Transponders on Galaxy IIIR, including values for
each C-Band Transponder for polarization isolation, interference between C-Band
Transponders, frequency response, group delay, amplitude non-linearity, spurious
outputs, phase shift, cross talk, stability, transmit EIRP, uplink saturation
flux density, and G/T. Exhibit B-2 lists "C-Band Transponder Performance
Specifications" for Galaxy Backup. HCG shall make copies of the antenna range
gain contour test data available to Lessee. Exhibit C sets forth a list of the
Satellite components which constitute Lessee's Transponders.
1.06 Rights to Reserves or Spares. Ownership or the lease of C-Band
----------------------------
Transponders shall not give an Owner the right to preempt or use any Primary Ku-
Band Transponders or Ku-Band Transponder Spares on Galaxy IIIR. Ownership or the
lease of Ku-Band Transponders shall not give an Owner the right to preempt or
use any Primary or Reserve C-Band Transponders or C-Band Transponder Spares on
Galaxy IIIR.
2
2. Lease of Transponders
---------------------
HCG shall lease to Lessee, and Lessee shall lease from HCG, eight (8)
Primary C-Band Transponders on Galaxy IIIR ("Lessee's Primary Transponders") and
two (2) Reserve C-Band Transponders on Galaxy IIIR ("Lessee's Reserve
Transponders") (Lessee's Primary Transponders and Lessee's Reserve Transponders
collectively referred to as "Lessee's G-IIIR Transponders" or "Lessee's
Transponders"). Lessee's Transponders shall be Transponder No. 1 through
Transponder No. 10 on Galaxy IIIR: Lessee's Primary Transponders shall be
Transponders No. 1 through 8 and Lessee's Reserve Transponders shall be
Transponders No. 9 and 10.
3. Lease Rate
----------
3.01 Base Lease Rate Description. The lease rate for each of Lessee's
---------------------------
Transponders shall consist of a "Base Lease Rate" and, if Lessee elects to
purchase the In Orbit Galaxy Backup protection pursuant to which Lessee shall be
entitled to certain rights to utilize C-Band Transponders on Galaxy Backup in
accordance with Sections 4.09 through 4.13, an "In Orbit Satellite Backup Fee".
The Base Lease Rate includes payment of $[*] per month for tracking, telemetry
and control service (the "TT&C Fee"). Pursuant to the TT&C Fee, the services
described in Section 6.06 will be provided. Pursuant to the In Orbit Satellite
Backup Fee, Lessee is entitled to utilize C-Band Transponders on Galaxy Backup
in accordance with Sections 4.09, 4.11, 4.12 and 4.13. The Base Lease Rate and
the In Orbit Satellite Backup Fee set forth below are on a per Transponder
basis.
3.02 Base Lease Rate Amount. The Base Lease Rate and lease terms for
----------------------
Lessee's Transponders shall be as follows:
(a) The Base Lease Rate per month for each of Lessee's Transponders
shall be as described in the following table, and shall be due and payable
in advance on Delivery and the first day of each month thereafter through
the Lease Termination Date. Lessee shall pay to HCG a deposit of $[*]
payable as follows: $[*] as of the Execution Date, $[*] on or before
December 31, 1994, $[*] on or before March 31, 1995, and $[*] as of
Delivery. HCG shall apply the deposit toward the total Base Lease Rate due
for the last month(s) of service. If one of Lessee's Transponders becomes a
Failed Transponder, Lessee's rights and obligations to continue making Base
Lease Rate payments, with respect to such Failed Transponder, shall be
governed by Sections 12.01 and 12.03. Payments for a partial month shall be
pro-rated.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
3
(per Transponder basis)
Year Lessee's Primary Transponder Lessee's Reserve Transponder
---- ---------------------------- ----------------------------
1 $[*] $[*]
2 $[*] $[*]
3 $[*] $[*]
4 $[*] $[*]
5 $[*] $[*]
6 $[*] $[*]
7 $[*] $[*]
8 $[*] $[*]
9 $[*] $[*]
10 $[*] $[*]
(b) Lessee shall have the right to purchase the In Orbit Satellite
protection for all of Lessee's Transponders or for at the minimum of all
eight (8) of Lessee's Primary Transponders by delivering to HCG a written
notice of Lessee's decision to purchase the In Orbit Backup protection at
any time between the Execution Date and thirty (30) days prior to the
scheduled launch date. HCG shall deliver a written notice to Lessee at
least sixty (60) days prior to the scheduled launch date. Lessee and HCG
agree that HCG shall not be obligated to issue more than one (1) such
written notice as a result of any change in the scheduled launch date.
Lessee's decision to purchase such protection shall be irrevocable. If
Lessee elects to purchase the In Orbit Satellite Backup protection, then
the In Orbit Satellite Backup Fee for each of Lessee's Transponders shall
be a per month fee of $[*], payable on Delivery and on the first day of
each month thereafter until the Lease Termination Date. The In Orbit
Satellite Backup Fee shall be payable as to each of Lessee's Transponders
only if (i) Galaxy Backup (or any replacement of Galaxy Backup) is
Available (as defined in Section 3.02(c)) to be used as a backup for such
Transponder and (ii) Lessee is not paying the Monthly Lease Rate (as
defined in Section 4.09(b)) for such Transponder. The In Orbit Satellite
Backup Fee shall cease prior to the Lease Termination Date either when
Galaxy Backup is not Available or when the Monthly Lease Rate is being paid
by Lessee, but shall resume if, and when, prior to the Lease Termination
Date, Galaxy Backup becomes Available or the Monthly Lease Rate is not
being paid by Lessee. Payments for a partial month shall be pro-rated. If
Lessee elects not to purchase the In Orbit Satellite Backup protection for
Lessee's Transponders, then Lessee shall not have any right to utilize
Galaxy Backup Transponders.
(c) Galaxy Backup shall be "Available" if each of the following
conditions is satisfied: (i) Galaxy Backup has been launched successfully
with at least twenty-two (22) C-Band Transponders meeting its C-Band
Transponder Performance Specifications, is in orbit and has not itself
suffered
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
4
a "Catastrophic Failure," and has sufficient C-Band Transponders on it that
meet its C-Band Transponder Performance Specifications to satisfy HCG's
backup commitment to Lessee under this Agreement; (ii) Galaxy Backup is not
already located or required to be located in the orbital position of
another Galaxy Fleet Satellite for use as a replacement for such other
Satellite which has experienced a late delivery, Delivery Failure or
Catastrophic Failure (as defined for all Satellites pursuant to Section
4.11); and (iii) if Galaxy Backup has been moved to the orbital position of
another Satellite, and no transponder owner on the failed Satellite
previously in the orbital position to which Galaxy Backup has been moved
contracted for the In Orbit Satellite Backup Fee or its equivalent.
3.03 Place of Payment. All payments by Lessee shall be made to HCG at its
----------------
principal place of business, as designated in Section 20.03, and shall be deemed
to be made only upon actual receipt by HCG. All refunds by HCG shall be made to
Lessee at its principal place of business as designated in Section 20.03, and
shall be deemed to be made only upon actual receipt by Lessee.
3.04 Prompt Repayment. All refunds provided for in this Agreement to be
----------------
made by HCG shall be due and paid within fifteen (15) business days of
notification to HCG of the occurrence of the event giving rise to such refund
and any late payment by HCG to Lessee shall be with interest calculated at the
rate set forth in Section 20.01, payable with the amount due and calculated from
the date payment was due until the date it is received by Lessee.
3.05 Term of Lease. Subject to Section 4.02, the term of the lease of each
-------------
Lessee's Transponder provided for in this Agreement shall commence on Delivery
and shall terminate, cancel, or expire on the tenth anniversary, unless
terminated earlier pursuant to Section 10, Section 12.01, or Section 17.02 or
extended pursuant to Section 10.05. The parties' rights upon the termination,
cancellation, or expiration of this Agreement are set forth in Sections 10 and
12.
3.06 Late Payment. Any late payments by Lessee of amounts due and payable
------------
hereunder (including, but not limited to, specified payments, damages and
indemnification) to HCG shall be with interest calculated at the rate set forth
in Section 20.01 payable with the amount due and calculated from the date
payment was due until the date it is received by HCG.
4. Delivery and Related Matters
----------------------------
4.01 Delivery. Galaxy IIIR Delivery shall occur upon, and "Delivery,"
--------
"Delivered" and "Deliver" as to Galaxy IIIR shall mean, (i) the placing of
Galaxy IIIR in its assigned orbital position with a minimum of thirteen (13) C-
Band Transponders and thirteen (13) Ku-Band Transponders meeting the requisite
5
transponder performance specifications on such Satellite (which requirement may
be met through the use of Reserve Transponders or Transponder Spares), (ii)
Lessee's acceptance of such Transponders as provided for in Section 4.03, and
(iii) full payment by Lessee of all amounts due on or prior to Delivery pursuant
to Section 3 or other Sections of the Agreement.
4.02 Condition to Lessee's Right to Lease. A condition to HCG's obligation
------------------------------------
to lease Lessee's Transponders to Lessee, and of Lessee's right to so lease
Lessee's Transponders, shall be the timely payment, both before and after
Delivery, by Lessee of all amounts due to HCG pursuant to the provisions of
Section 3 or other Sections of this Agreement.
4.03 Acceptance. HCG shall test each of Lessee's Transponders in
----------
accordance with an acceptance test plan to be prepared by HCG in advance of the
launch of Galaxy IIIR and delivered to Lessee. Acceptance of Lessee's
Transponders by Lessee shall be deemed to have occurred upon completion of the
following: (a) Lessee's Transponders have passed all tests set forth in the
aforementioned acceptance test plan and meet the C-Band Transponder Performance
Specifications; and (b) HCG has notified Lessee in writing that it has
successfully completed testing Lessee's Transponders and that Lessee's
Transponders are available for service.
4.04 Delivery Failure Defined. "Delivery Failure" of Galaxy IIIR shall
------------------------
mean failure, after a launch attempt has occurred, to place such Satellite in
its assigned orbital position with a minimum of thirteen (13) C-Band
Transponders and thirteen (13) Ku-Band Transponders meeting the requisite
transponder performance specifications on such Satellite (which requirement may
be met through the use of Transponder Spares or Reserve Transponders) within
ninety (90) days after the launch date. As used herein, "launch attempt" shall
mean the actual lift off of the launch vehicle.
4.05 In Orbit Protection From Galaxy Backup. Galaxy Backup has been
--------------------------------------
launched in advance of launching Galaxy IIIR in order to provide actual, in
orbit C-Band protection for the Galaxy Fleet.
4.06 [Reserved.]
--------
4.07 Galaxy Backup Option.
---------------------
(a) If Galaxy Backup is not Available at any time prior to the
expiration of ten (10) years from the date of Delivery of Galaxy IIIR, then
HCG may launch a second satellite to function as the Galaxy Backup (the
"Galaxy Backup Replacement").
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(b) HCG shall determine the minimum price and payment terms needed by it to
build and launch the Galaxy Backup Replacement, which satellite shall have at
least equivalent C-Band Transponder Performance Specifications to those of
Galaxy Backup, and shall determine an estimated launch and delivery date. The
Galaxy Backup Replacement shall then be offered by HCG to all entities that have
committed to purchase or lease C-Band Transponders on any Galaxy Fleet Satellite
and have paid a "Launch Backup Fee" or its equivalent on the same basis as it is
offered to Lessee (the "Galaxy Backup Option"). Such entities shall have sixty
(60) days to deliver their response to such offer to HCG. If HCG obtains
commitments for the minimum price needed by it to build and launch the Galaxy
Backup Replacement, then HCG shall be obligated, subject to FCC approval, to
launch the Galaxy Backup Replacement. HCG shall use its reasonable best efforts
to obtain such FCC approval and to cause construction to commence and to obtain
a launch date so that the Galaxy Backup Replacement is ready for delivery to a
launch facility within forty (40) months, and placed in its assigned orbital
position and operational within sixty (60) months, of HCG's receipt of the
requisite commitments. The Galaxy Backup Replacement shall then function as
Galaxy Backup.
4.08 [Reserved.]
--------
4.09 Use of Galaxy Backup By Lessee.
------------------------------
(a) Pursuant to Sections 4.09 through 4.13, Lessee shall have certain
rights to use C-Band Transponders on Galaxy Backup, provided that Lessee has
paid the In Orbit Satellite Backup Fee in accordance with Section 3.02 (b).
(b) If and when a C-Band Transponder on Galaxy Backup is leased by Lessee
in accordance with Sections 4.11 through 4.12, Lessee shall begin paying a
monthly lease payment in the amount of the Base Lease Rate per C-Band
Transponder (the "Monthly Lease Rate") (which payment shall include the TT&C Fee
of $[*]).
(c) Nothing shall prevent HCG from using Galaxy Backup for other services
or as a backup for satellites not part of the Galaxy Fleet so long as, if Galaxy
Backup is needed to backup Galaxy IIIR (in accordance with Sections 4.11 and
4.12) or the other Galaxy Fleet Satellites, then such other service or use is
preemptible. HCG shall be entitled to use Galaxy Backup only in orbital
positions assigned to it by the FCC or to which the FCC allows it to be moved.
Galaxy Backup shall not be moved to another orbital position at a rate faster
than 1.5 degrees per day unless backing up a failure of Galaxy IIIR or another
Galaxy Fleet Satellite which has suffered a Catastrophic Failure (as defined in
the equivalent to Section 4.11 in the purchase agreement of any other Owner).
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
7
4.10 [Reserved.]
--------
4.11 Use of Galaxy Backup for Catastrophic Failure. If, after successful
---------------------------------------------
Delivery of Lessee's Transponders on Galaxy IIIR, Galaxy IIIR experiences a
"Catastrophic Failure" (which shall mean twelve (12) or more C-Band Transponders
on such Satellite becoming Failed Transponders), then the following shall occur:
(a) HCG, subject to FCC approval (which HCG shall promptly use its
best efforts to obtain), shall, at HCG's option, either (i) cause Galaxy
Backup, provided it is Available, to be moved to the orbital position of
Galaxy IIIR within seven (7) days of the earlier of notification to HCG or
HCG's knowledge of such Catastrophic Failure or (ii) lease to Lessee an
equivalent number of C-Band Transponders on Galaxy Backup, up to the number
of Lessee's Transponders that have become Failed Transponders at Galaxy
Backup's then-existing orbital location, provided Galaxy Backup is
Available;
(b) Subject to Section 4.13, Lessee shall lease a number of C-Band
Transponders on Galaxy Backup equal to the number of Lessee's Transponders
and shall pay the Monthly Lease Rate for each such C-Band Transponder on
Galaxy Backup that it is leasing. However, if HCG selects the option
specified in this Section 4.11(a)(ii), above, then, subject to Section
4.13, Lessee shall have the right, provided that such C-Band Transponders
are "non-committed" (as defined below), to lease an equivalent number of C-
Band Transponders on Galaxy Backup, up to the number of Lessee's
Transponders that have become Failed Transponders within thirty (30) days
after the occurrence of the event giving rise to the right; and
(c) Lessee shall continue such lease of Galaxy Backup C-Band
Transponders until the earlier to occur of (i) the successful placement
with the requisite number of C-Band Transponders (i.e., thirteen (13))
---
meeting the C-Band Transponder Performance Specifications by HCG of a
replacement Satellite in Galaxy IIIR orbital position, or (ii) the end of
Galaxy Backup's useful life, (iii) in the event HCG has selected the option
as set forth in Section 4.11(a)(ii), above, the movement or use of Galaxy
Backup in the event of a late delivery, Delivery Failure, or Catastrophic
Failure of any other Galaxy Fleet Satellite, or (iv) with respect to
Lessee's Reserve Transponders, HCG's cancellation of the lease of Lessee's
Reserve Transponders pursuant to Section 18.
HCG agrees that the "Delivery Failure" and "Catastrophic Failure" definitions
shall require the same or a greater level of failure for all other Galaxy Fleet
Satellites for the purposes of determining whether HCG is obligated to move
Galaxy Backup to a new orbital location.
8
4.12 Galaxy Backup Protection Without Movement. If any of Lessee's
-----------------------------------------
Transponders become Failed Transponders, then the following shall occur:
(a) Subject to Section 4.13, Lessee shall have the right, provided
that such C-Band Transponders are "non-committed" (as defined below), to
lease an equivalent number of C-Band Transponders on Galaxy Backup, up to
the number of Lessee's Transponders that have become Failed Transponders.
Lessee shall have the right to lease such C-Band Transponders in whatever
location Galaxy Backup may then be, provided that Lessee commits to such a
lease within thirty (30) days following the occurrence of the event giving
rise to the right;
(b) Lessee shall pay the Monthly Lease Rate for each such C-Band
Transponder on Galaxy Backup that it is leasing; and
(c) Lessee shall continue such lease of Galaxy Backup C-Band
Transponders until the earliest to occur of (i) the successful placement
with the requisite number of C-Band Transponders meeting the C-Band
Transponder Performance Specifications by HCG of a replacement Satellite
(excluding Galaxy Backup), in the Galaxy IIIR orbital position, at which
time Lessee, if Galaxy Backup is Available, shall commence or resume, as
appropriate, paying the monthly In Orbit Satellite Backup Fee, (ii) the end
of Galaxy Backup's useful life, or (iii) the movement or use of Galaxy
Backup in the event of a late delivery, Delivery Failure, or Catastrophic
Failure of any other Galaxy Fleet Satellite, or (iv) with respect to
Lessee's Reserve Transponders, HCG's cancellation of the lease of Lessee's
Reserve Transponders pursuant to Section 18.
A C-Band Transponder on Galaxy Backup shall be deemed to be "non-committed"
if such C-Band Transponder is not already being used by an entity having
priority over Lessee pursuant to the exercise of its right to use such C-Band
Transponder as a result of payment to HCG for an "In Orbit Satellite Backup Fee"
or its equivalent, in connection with its purchase or lease of a transponder or
transponders on a Satellite.
4.13 Entitlement to Usage. If Owners of Primary C-Band Transponders on
--------------------
Galaxy IIIR become simultaneously entitled to lease C-Band Transponders on
Galaxy Backup, then the Owner of the Primary C-Band Transponder (or Owner's
predecessor in interest) who first executed a transponder purchase agreement
with HCG for the purchase of a Primary Transponder shall have a priority as to
the Galaxy Backup Transponders. Owners of Primary C-Band Transponders on Galaxy
IIIR shall have priority over Owners of Reserve C-Band Transponders on Galaxy
IIIR, in all instances, as to the use of Galaxy Backup Transponders, and the
Reserve
9
C-Band Transponder Owner's use of Galaxy Backup shall therefore be preemptible
as provided for herein.
5. Representations and Warranties
------------------------------
HCG and Lessee each, except as expressly indicated herein, represent and
warrant to, and agree with, the other that:
5.01 Authority, No Breach. It has the right, power and authority to enter
--------------------
into, and perform its obligations under, this Agreement. The execution, delivery
and performance of this Agreement shall not result in the breach or
nonperformance of any agreements it has with third parties.
5.02 Corporate Action. It has taken all requisite corporate (or
----------------
partnership, as appropriate) 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.
5.03 Consents. The fulfillment of its obligations hereunder will not
--------
constitute a material violation of any existing applicable law, rule, regulation
or order of any governmental authority. All necessary or material appropriate
public or private consents, permissions, agreements, licenses, or authorizations
to which it or any Transponder or any Satellite may be subject have been or
shall be obtained in a timely manner; provided, however, that it shall be HCG's
sole responsibility to obtain any regulatory approvals needed to enable it to
lease Transponders as provided for in this Agreement. Notwithstanding the above,
HCG and Lessee acknowledge that the transactions set forth in this Agreement may
be challenged before the FCC or a court of competent jurisdiction by other
persons or entities not parties hereto. In such event, HCG and Lessee agree that
HCG shall use its best efforts, and Lessee shall use reasonable efforts, before
the FCC, and the courts if an appeal from an FCC order is taken, to support
HCG's right to lease and Lessee's right to lease Lessee's Transponders and shall
fully cooperate with each other in these endeavors. Lessee alone shall have the
right to determine how much and to whom it will incur legal expenses in
connection with any proceeding arising out of its obligations under this Section
5.03. If, however, by written order, the FCC or a court of competent
jurisdiction shall determine that HCG may not lease and Lessee may not lease
Lessee's Transponders under the terms and conditions set forth herein, then HCG
and Lessee shall seek immediate review of such order before the FCC or an
appellate court or shall, if possible, reconstitute the transaction to comply
with such order and to provide Lessee with use of "equivalent capacity" on the
Satellites and to provide HCG with the "price provided for herein." As used
herein, "equivalent capacity" shall mean the same number of Transponders leased
by Lessee pursuant to this Agreement; provided that there is no material adverse
change in the provisions of this Agreement regarding lease rate taking into
account payment
10
terms using a present value analysis, Warranty Period, use of Transponder Spares
and Reserve Transponders, and C-Band Transponder Performance Specifications. As
used herein, "price provided for herein" shall mean the total lease rate payable
to HCG, taking into account payment terms, using a present value analysis. If an
appellate court issues a written order, which is no longer subject to further
judicial rehearing or review, upholding the determination of the FCC or a court
or competent jurisdiction that HCG may not lease and Lessee may not lease
Lessee's Transponders, then HCG and Lessee shall, if possible, reconstitute the
transaction as set out herein.
5.04 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, or is concurrently being, disclosed in
writing by either party to the other.
5.05 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. Additional Representations, Warranties and Obligations of HCG
-------------------------------------------------------------
6.01 Authorization Description. HCG has obtained from the FCC the
-------------------------
authority to launch and operate the Two Satellites and to sell or lease
Transponders on each of the Two Satellites on a private non-common carrier
basis. HCG has obtained from the FCC the authority to place Galaxy IIIR in
geostationary orbit at 95th West Longitude and shall utilize such orbital
location unless prevented by subsequent order of the FCC or any successor
thereto, in which event HCG shall utilize such other orbital position closest to
such position that the FCC or any successor thereto may designate for such
Satellite and, to the extent possible, the orbital position closest to those
positions outlined above. The Two Satellites will be "communications satellites"
(as defined in Section 1.03(3) of the Communications Satellite Act of 1962, 47
U.S.C. 702(3)).
6.02 C-Band Transponder Performance Specifications. Each of Lessee's
---------------------------------------------
Transponders, upon Delivery, shall meet the C-Band Transponder Performance
Specifications.
6.03 Right to Lease. Upon Delivery and subject to Section 4.02, Lessee
--------------
shall be entitled to lease each of Lessee's Transponders free from all liens,
charges, claims or encumbrances (collectively, "Encumbrances"), except: (i)
Encumbrances resulting from (a) Lessee's lease of Lessee's Transponders; (b) any
actions taken by Lessee; and
11
(c) the right and interest of any financing entity purchasing the Transponders
on Galaxy IIIR and leasing them back to HCG pursuant to a sale and leaseback
transaction; and (ii) Encumbrances which do not have an adverse effect on
Lessee's rights hereunder. However, HCG shall have an option to cancel the lease
of Lessee's Reserve Transponders as set forth in Section 18.
6.04 Government Regulations. HCG has or shall use its best efforts until
----------------------
the disposition of Galaxy IIIR pursuant to Section 17 to obtain and maintain, in
all material respects, all applicable federal, state and municipal
authorizations or permissions to construct, launch and operate the Two
Satellites, applicable to HCG; and to comply, in all material respects, with all
such government regulations regarding the construction, launch and operation of
the Two Satellites and Transponders applicable to HCG.
6.05 Not a Common Carrier. Unless required to do so by the FCC, HCG shall
--------------------
not hold itself out, publicly or privately, as a provider of common carrier
communications services on Galaxy IIIR and is not purporting herein to provide
to Lessee or to any other party any such services with respect to Galaxy IIIR.
6.06 TT&C. Tracking, telemetry and control ("TT&C") shall be provided by
----
Xxxxxx Communications Satellite Services, Inc. ("HCSS"), an Affiliate of HCG,
for the life of the Two Satellites, pursuant to a separate "Transponder Service
Agreement" which has been executed by HCSS and Lessee concurrently herewith. The
TT&C Fee for the Two Satellites is included in the Base Lease Rate and the
Monthly Lease Rate, as appropriate.
6.07 [Reserved.]
--------
6.08 Transfers by HCG. HCG shall not Transfer, as defined below, other
----------------
than for part time video or for leases with a term of two (2) years or less, any
of the C-Band Transponders on Galaxy IIIR to any third party without requiring,
in all such agreements, clauses substantially identical to, or terms the effect
of which shall be as or more restrictive with respect to such third party than,
the provisions in Sections 1.06, 4.13, 7.02, 7.03, 7.04(a), 7.04(b), 7.04(c), 8,
9.01, 9.02, 9.03, 9.04, 9.05, 10.03, 11.01, 11.02, 12.02, 12.04, 12.05, 17, the
first sentence of 20.02, 20.05 and 20.09. "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. Any Transfer by
HCG for part time video or under a lease for a term of two (2) years or less
without such clauses shall be consistent, in all material respects, with HCG's
obligations to Lessee under this Agreement.
12
7. Additional Representations, Warranties and Obligations of Lessee
----------------------------------------------------------------
7.01 [Reserved.]
--------
7.02 Non-Interference. Lessee's radio transmissions (and those of its
----------------
uplinking agents) to the Two Satellites shall comply, in all material respects,
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
(collectively, "Laws") applicable to it regarding the operation of the Two
Satellites, Lessee's Transponders and any Galaxy Backup C-Band Transponders to
which Lessee is given access pursuant to this Agreement and shall not interfere
with the use of any other Transponder. Lessee shall not utilize (or permit or
allow any of its uplinking agents to utilize) any of Lessee's Transponders or
any Galaxy Backup C-Band Transponders to which Lessee is given access pursuant
to this Agreement in a manner which will or may interfere with the use of any
other Transponder or cause physical harm to any of Lessee's Transponders, any
Galaxy Backup C-Band Transponders to which Lessee is given access pursuant to
this Agreement, any other Transponders, or to either of the Two Satellites.
Further, Lessee will coordinate (and will require its uplinking agents to
coordinate) with HCG, in accordance with procedures reasonably established by
HCG and uniformly applied to all users of Transponders on the Two Satellites,
its transmissions to the Satellites, so as to minimize adjacent channel and
adjacent satellite interference. For purposes of this Section 7.02, interference
shall also mean acts or omissions which cause a Transponder to fail to meet its
Transponder Performance Specifications. Without limiting the generality of the
foregoing, Lessee (and its uplinking agents) shall comply with all FCC rules and
regulations regarding use of automatic transmitter identification systems
(ATIS).
7.03 Laws. Lessee shall comply (and shall require its uplinking agents
----
to comply), in all material respects, with all Laws applicable to it regarding
the operation or use of the Two Satellites, Lessee's Transponders, and any
Galaxy Backup C-Band Transponders to which Lessee is given access pursuant to
this Agreement.
7.04 Additional Usage Representations and Obligations.
-------------------------------------------------
(a) Lessee has not been convicted for the criminal violation of, and
has not been found by the FCC or other federal, state or local governmental
authority with appropriate jurisdiction (collectively, the "Governmental
Authority") to have violated, any federal, state or local law or regulation
as applicable concerning illegal or obscene program material or the
transmission thereof (the "Obscenity Laws"), and Lessee is not aware of any
pending investigation (including, without limitation, a grand jury
investigation)
13
involving Lessee's programming or any pending proceeding against Lessee for
the violation of any Obscenity Laws.
(b) Lessee will notify HCG as soon as it receives notification of, or
becomes aware of, any pending investigation by any Governmental Authority,
or any pending criminal proceeding against Lessee, which investigation or
proceeding concerns transmissions by Lessee potentially in violation of any
law, including without limitation, Obscenity Laws.
(c) Any use of Lessee's Transponders shall comply, in all material
respects, with all applicable laws regarding the operation or use of the
Satellite(s), Lessee's Transponders, and any other satellite and
transponder to which Lessee is given access pursuant to this Agreement
(including, but not limited to, any Obscenity Laws).
(d) Lessee will not use, or allow the use of, Lessee's Transponders
for direct distribution of programming to television viewers unless the
programming is scrambled such that television viewers can receive the
programming only through the use of a decoder authorized by Lessee or
Lessee's authorized agent.
8. Preemptive Rights and Inspection of Facilities
----------------------------------------------
Lessee recognizes that it may be necessary in unusual or abnormal
situations or conditions for HCG deliberately to preempt or interrupt Lessee's
use of each of its Transponders, in order to protect the overall performance of
the Satellites. Such decisions shall be made by HCG in its sole discretion;
provided, however, that, to the extent it is technically feasible, HCG shall
preempt or interrupt the use of either or both of Reserve C-Band Transponders
before preempting or interrupting the use of any Primary C-Band Transponder on
Galaxy IIIR and, with respect to Primary C-Band Transponders on Galaxy IIIR, in
the inverse order in which the Owners (or such Owner's predecessors in interest)
on such Satellite executed transponder purchase agreements for its Transponders
on such Satellite. To the extent technically feasible and, with respect to
Lessee's Reserve Transponders, not inconsistent with HCG's right to cancel the
lease of Lessee's Reserve Transponders pursuant to the provisions of Section
9.02 and 18, HCG shall give Lessee 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 Transponders on such
Satellites. To the extent that such preemption results in a loss to Lessee of
the use of Lessee's Transponders sufficient to constitute a breach of HCG's
obligations as set forth in Section 12, then Lessee shall have all of the rights
and remedies set forth in Sections 4, 9 and 12.
14
9. Transponder Spares, Reserve Transponders and Retained Transponders
------------------------------------------------------------------
9.01 Use of Transponder Spares. HCG shall cause Galaxy IIIR to contain
-------------------------
certain redundant equipment units (collectively, the "Transponder Spares";
individually, a "C-Band Transponder Spare," or a "Ku-Band Transponder Spare", a
C-Band Transponder Spare being as described in Exhibit F) which are designed as
substitutes for such equipment units of the same frequency, the failure of which
could cause a Galaxy IIIR Transponder to fail to meet the requisite transponder
performance specifications. HCG, as soon as possible and to the extent
technically feasible, shall employ a C-Band Transponder Spare in such Satellite
as a substitute for Lessee's Transponder equipment unit which has caused one of
Lessee's Transponders to suffer a Confirmed Failure in order to enable Lessee's
Transponders to meet the C-Band Transponder Performance Specifications. To the
extent technically feasible, a C-Band Transponder Spare will be substituted for
the faulty equipment unit on a first-needed, first-served basis to satisfy HCG's
obligations to Lessee and to other Owners of C-Band Transponders which have
suffered Confirmed Failures; provided, however, that HCG's obligations to
provide such Transponder Spares shall continue until such time as all of the C-
Band Transponder Spares are committed to use as substitutes for C-Band
Transponders which have suffered Confirmed Failures. If HCG furnishes a C-Band
Transponder Spare to Lessee as a substitute for an equipment unit which has
caused a Lessee's Transponder to suffer a Confirmed Failure, then such
Transponder Spare shall become part of the Transponder which is leased to Lessee
hereunder, and Lessee, concurrently, shall no longer have any right to lease or
otherwise use the failed equipment unit. Lessee's Transponder equipment unit
which has been returned shall be made available by HCG, to the extent
technically feasible, to satisfy its obligations to Owners on the same
Satellite. HCG also shall have the right, until the Transponder Spares are
needed, to utilize such Transponder Spares in any manner HCG determines.
9.02 Use of Reserve Transponders. If no C-Band Transponder Spare is
---------------------------
available at the time that Lessee's Primary Transponder suffers a Confirmed
Failure or if the use of such C-Band Transponder Spare would not correct the
failure, then HCG shall employ, as soon as possible and to the extent
technically feasible (unless any delay is requested by Lessee), a Reserve C-Band
Transponder as a substitute for such Transponder which has suffered a Confirmed
Failure; provided, however, that HCG's obligation to provide Reserve C-Band
Transponders to Owners of Primary C-Band Transponders (including Lessee) shall
continue only until such time as all of the Reserve C-Band Transponders are
committed to use as substitutes for Primary C-Band Transponders which have
suffered a Confirmed Failure. HCG shall include in the purchase or lease
agreement of any Owner who has purchased or leased a Reserve C-Band Transponder
(or in any other agreement providing for the Transfer of a Reserve C-Band
Transponder) a requirement that HCG may preempt such Reserve C-Band
Transponder(s) after two (2) hours' notice from HCG. Reserve C-
15
Band Transponders utilized as substitutes for Lessee's Primary Transponders
shall meet the C-Band Transponder Performance Specifications. Reserve C-Band
Transponders, or any one of them, will be substituted and utilized on a first-
needed, first-served basis to satisfy HCG's obligations to Lessee and to other
Owners with respect to the performance of their Primary C-Band Transponders. HCG
shall have the right, in its sole discretion, to utilize first a C-Band
Transponder Spare prior to furnishing a Reserve C-Band Transponder to the Owner
of Primary C-Band Transponders (including Lessee). If HCG furnishes a Reserve C-
Band Transponder to the Owner of Primary C-Band Transponder (including Lessee),
then HCG shall lease such Reserve C-Band Transponder to such Owner as a
substitute, and such Owner, concurrently, shall no longer have any right to
lease or otherwise use the failed equipment unit. Such Owner's Primary C-Band
Transponder which has been returned to HCG shall thereafter be made available by
HCG, to the extent technically feasible, to satisfy its obligations to other
Owners. If HCG preempts Lessee's Reserve Transponders in order to furnish a
Reserve C-Band Transponder to the Owner of a Primary C-Band Transponder
(including Lessee), then Lessee shall no longer have any right to lease or
otherwise use Lessee's Reserve Transponders.
9.03 Simultaneous Failure -- Priority with Respect to Use of C-Band
--------------------------------------------------------------
Transponder Spares. In the event that Primary C-Band Transponders of more than
------------------
one Owner simultaneously suffer a Confirmed Failure, then the Owner of the
Primary C-Band Transponder (or such Owner's predecessor in interest) who first
executed a C-Band transponder purchase agreement with HCG for the purchase of a
Primary C-Band Transponder on Galaxy IIIR shall have priority as to the use of
C-Band Transponder Spares with respect to said Owner's Primary Transponder or
Transponders which have suffered a Confirmed Failure, to the extent technically
feasible. As used in this Section 9, the term "simultaneously" shall be deemed
to mean occurring within a 24-hour period.
9.04 Simultaneous Failure-- Priority with Respect to Use of Reserve C-Band
---------------------------------------------------------------------
Transponders. In the event that Primary C-Band Transponders of more than one
------------
Owner simultaneously suffer a Confirmed Failure, and no C-Band Transponder Spare
of the same frequency is available or if the use of such C-Band Transponder
Spare would not correct the failure, then the Owner of the Primary C-Band
Transponder (or such Owner's predecessor in interest) who first executed a C-
Band transponder purchase agreement with HCG for the purchase of a Primary C-
Band Transponder on Galaxy IIIR shall have priority as to the use of Reserve C-
Band Transponders with respect to said Owner's Primary C-Band Transponder or
Transponders which have suffered a Confirmed Failure.
9.05 HCG's Ownership of C-Band Transponders. If HCG is unable to sell all
--------------------------
of the C-Band Transponders, then HCG may retain ownership of such unsold C-Band
Transponders ("HCG's Transponders"). In such event, HCG shall have the same
rights to use HCG's Transponders as any other Owner would have, including,
16
without limitation, the right to utilize C-Band Transponder Spares and Reserve
C-Band Transponders (if the Transponder is a Primary C-Band Transponder) in the
event HCG's Transponders do not meet the C-Band Transponder Performance
Specifications. HCG also shall have the right, but not the obligation, to
utilize HCG's Transponders to satisfy HCG's obligations to Lessee and to other
Owners of C-Band Transponders. HCG shall be deemed to have been the last entity
to execute a transponder purchase agreement for purposes of determining its
priority under the provisions of this Section 9 and other Sections of this
Agreement; provided, however, that if HCG Long Term Leases any unsold C-Band
Transponder to a third party for a term of eight (8) or more years, such third
party shall, for purposes of determining its priority under the provisions of
this Section 9, or elsewhere in this Agreement, be deemed to have "purchased"
such Transponder and to have executed a transponder purchase agreement on the
date it executed such Long Term Lease.
9.06 Notice of Intent to Substitute a Reserve C-Band Transponder. With
-----------------------------------------------------------
respect to Lessee's Primary Transponders, prior to the substitution of a Reserve
C-Band Transponder for Lessee in accordance with this Section 9, HCG shall
notify Lessee in advance of its intention to so substitute the Reserve C-Band
Transponder and the substitution shall be made at such time as the parties
mutually agree.
10. Termination Rights
------------------
10.01 Termination for Cause. In the event that HCG or Lessee materially
---------------------
defaults in the performance of any of its duties or obligations set forth in
this Agreement and such default is not cured within thirty (30) days after
written notice is given to the defaulting party specifying the default, then the
party may, by giving written notice thereof to the defaulting party, terminate
this Agreement as of a date specified in such notice of termination, and the
non-defaulting party shall have no further obligation to the defaulting party.
In no event shall the terms of this Section 10.01 diminish other rights and
remedies of HCG described elsewhere in this Agreement.
10.02 Cancellation by HCG.
--------------------
(a) Upon the occurrence of any Event of Default (as defined below) and
only after any relevant cure period, HCG may, for so long as such 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 Event of Default
under Section 10.02(b)(iv), (v) or (vi)), and at any time thereafter, HCG
may in its sole and absolute discretion declare immediately due and payable
all sums due and to become due hereunder for the full term of this
Agreement, require Lessee to redeliver Lessee's Transponders to HCG as set
forth in
17
Section 10.07 hereof, render Lessee's Transponders unusable without removal,
cancel this Agreement, obtain damages without canceling this Agreement, and
exercise any other right or remedy which is provided for in this Agreement or
which may be available under the California Uniform Commercial Code or other
applicable Law, including without limitation exercising any right or remedy
applicable to default under Section 10523(1) of the California Uniform
Commercial Code for any Event of Default hereunder (the "Default Option"). A
cancellation hereunder shall occur only upon written notice from HCG to Lessee
stating that such cancellation is made and only as to such Transponders as HCG
specifically elects to cancel and this Agreement shall continue in full force
and effect as to the remaining Transponders. No remedy referred to in this
Section 10.02 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 Lessee the full amount due hereunder in the event of an Event of Default by
Lessee as so required under the California Uniform Commercial Code. HCG's
failure in any case to exercise the Default Option shall not constitute a waiver
of any breach or Event of Default or a continuing waiver of similar or other
breaches or Events of Default.
(b) The following events shall constitute "Event(s) of Default" by Lessee
(whether any such event shall arise as the result of the voluntary or
involuntary action or inaction of Lessee or come about or be effected by
operation of, or pursuant to or in compliance with, any Law):
(i) Lessee shall fail to make any payment due hereunder when due and
such failure shall continue for ten (10) days after HCG has given Lessee
written notice of such failure; or
(ii) Lessee shall fail to perform or observe in any material respect
any 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 notice from HCG; provided, however,
-------- -------
nothing in this Section 10.02(b)(ii) shall restrict HCG's rights to deny
Lessee access pursuant to Section 10.06 hereof during such thirty (30) day
period or otherwise; or
(iii) Any representation or warranty made by Lessee in this Agreement
or in any statement furnished by Lessee in connection herewith after
execution of this Agreement shall have been incorrect in any material
respect at the time made but only if such incorrect representation,
warranty or statement shall have a material adverse effect on HCG or its
rights or obligations hereunder and shall continue
18
unremedied for a period of ten (10) days after HCG has given written notice
to Lessee of such incorrect representation, warranty or statement; or
(iv) Lessee shall consent to the appointment of, or taking possession
by, a receiver, trustee, custodian or liquidator of itself or of a
substantial part of its assets, or Lessee shall make a general assignment
for the benefit of creditors; or
(v) Lessee shall file a voluntary petition in bankruptcy or a
voluntary petition or an answer seeking reorganization in a proceeding
under any applicable bankruptcy or insolvency laws (as now or hereafter in
effect) or an answer admitting the material allegations of a petition filed
against such person in any such proceeding, or Lessee shall, by voluntary
petition, answer or consent, seek relief under the provisions of any now
existing or future bankruptcy, insolvency or other similar law providing
for the liquidation, reorganization or dissolution of corporations, or
providing for an agreement, composition, extension or adjustment with its
creditors; or
(vi) A receiver, trustee, liquidator or custodian of Lessee or of a
substantial part of its property shall be appointed by court order and such
order shall remain in effect for more than sixty (60) days; or any
substantial part of the property of Lessee shall be sequestered by court
order and such order shall remain in effect for more than sixty (60) days;
or a petition shall be filed against Lessee under any bankruptcy,
reorganization, arrangement, insolvency, readjustment of debt, dissolution
or liquidation law of any jurisdiction, whether now or hereafter in effect,
and shall not be dismissed within sixty (60) days after such filing.
10.03 HCG's Right to Transfer for Non-Payment.
----------------------------------------
(a) If, for any reason whatsoever, Lessee does not make the payments in the
amounts and on the dates set forth in (and in accordance with) Section 3 and
Lessee fails to cure such default as set forth in section 10.02, then, in
addition to all of its other remedies at law or in equity, HCG shall be entitled
to Transfer (as defined in section 6.08) Lessee's Transponders immediately to
whomever HCG sees fit, Lessee shall not be entitled to any equitable or other
relief as a result thereof, and Lessee's exclusive remedy shall be limited to
recovery, without interest, of any lease payments actually paid by Lessee to HCG
pursuant to Section 3, less any claim HCG has against Lessee by reason of
Lessee's default.
19
(b) If, for any reason whatsoever, Lessee does not make the payments
in the amounts and on the dates set forth in (and in accordance with)
Section 4 with respect to Transponders provided hereunder other than
Lessee's Transponders and Lessee fails to cure such default as set forth in
Section 10.02, then, in addition to all of its other remedies at law or in
equity, HCG shall be entitled to Transfer (as defined in Section 6.08) such
Transponders immediately to whomever HCG sees fit, Lessee shall not be
entitled to any equitable or other relief as a result thereof, and Lessee's
exclusive remedy shall be limited to recovery, without interest, of any
lease payments actually paid by Lessee to HCG pursuant to Section 4, less
any claim HCG has against Lessee by reason of Lessee's default.
10.04 [Reserved.]
--------
10.05 Transponder Lease Termination. Unless this Agreement terminates,
-----------------------------
expires, or is canceled earlier in accordance with any other subsection of this
Section 10 or pursuant to Section 12.01 or Section 17.02, this Agreement shall
expire on the tenth anniversary of Delivery. In the event that Galaxy VII has
not reached its end-of-life prior to the tenth anniversary of Delivery in
accordance with Section 17.02, then Lessee may extend the lease of all of
Lessee's Transponders for the then remaining useful commercial life of Galaxy
VII, on the terms and conditions contained in the Agreement by delivery of
written notice to do so to HCG at least [180 days prior to the expiration of the
lease term, except that the Base Lease Rate shall be the then-prevailing market
rate]. Upon the date of any termination, expiration, or cancellation pursuant to
any subsection of this Section 10 (the "Lease Termination Date"), HCG shall have
no further obligations to Lessee under this Agreement.
10.06 Right to Deny Access.
---------------------
(a) If, in connection with using Lessee's Transponders and/or Galaxy
Backup Transponders,
(i) "User" (as defined below) is indicted or is otherwise charged
as a defendant in a criminal proceeding based upon, or is convicted
under, any Obscenity Law or has been found by any Governmental
Authority to have violated any such law;
(ii) based on any User's use of Lessee's Transponders or Galaxy
Backup Transponders, HCG is indicted or otherwise charged as a
criminal defendant, becomes the subject of a criminal proceeding or a
governmental action seeking a fine, license revocation or other
sanctions, or any Governmental Authority seeks a cease and desist or
other similar order or filing;
20
(iii) the FCC has issued an order initiating a proceeding to
revoke HCG's authorization to operate the Satellite;
(iv) HCG obtains a court order pursuant to Section 10.06(c),
below, or a court or Governmental Authority of competent jurisdiction
orders HCG to deny access to User or orders User to cease
transmission; or
(v) HCG receives notice (the "Illegal Programming Notice"),
written or oral, from a Governmental Authority that such authority
considers Lessee and/or any other User's programming to be in
violation of Obscenity Laws (the "Illegal Programming"), and that if
HCG does not cease transmitting such Illegal Programming, then HCG
and/or its Affiliates and/or any of their executives will be indicted
or otherwise charged as a criminal defendant, will become the subject
of a criminal proceeding or a governmental action seeking a fine,
license revocation or other sanctions, or that such Governmental
Authority will seek a cease and desist or other similar order or
filing (with HCG being obligated, to the extent permitted by law, to
provide Lessee with a copy of such Illegal Programming Notice, if
written, or with other verification, including the details thereof, if
oral);
then, upon notice from HCG to Lessee (the "Denial of Access Notice"), User
shall cease using Lessee's Transponders or Galaxy Backup Transponders,
immediately, in the case of a denial of access pursuant to subparagraphs
(i), (ii), (iii) or (iv) above, or within 24 hours following receipt of
such notice, in the case of a denial of access pursuant to subparagraph
(v), above; and if User does not voluntarily cease using such capacity at
the appropriate time, then HCG shall have the right to take such steps as
HCG deems necessary to prevent User from accessing Lessee's Transponders or
Galaxy Backup Transponders. Provided, however, that if User has more than
one programming service, then the denial of access by HCG shall apply only
to the Transponder used to provide the Illegal Programming service; and
provided further, however, that if, upon receipt of the Denial of Access
Notice from HCG, User does not immediately cease transmission of such
Illegal Programming service, then HCG shall have the right to take such
steps as HCG deems necessary to prevent User from accessing the transponder
used to transmit such Illegal Programming service (and if, thereafter,
Lessee transmits such Illegal Programming service using any of Lessee's
Transponders or Galaxy Backup Transponders, then HCG shall have the
immediate right, without further notification, to take such steps as HCG
deems necessary to prevent Lessee from accessing any of Lessee's
Transponders or Galaxy Backup Transponders). As used herein, "User" shall
21
mean Lessee and any person to whom Lessee Transfers all or part of its
right to use Lessee's Transponders or Galaxy Backup Transponders, including
without limitation, a lessee, licensee or assignee. Lessee agrees to
maintain a properly operating facsimile machine at all times to receive the
Denial of Access Notice from HCG.
(b) If HCG denies, or has given Lessee notice of its intent to deny,
access to Lessee's Transponders or Galaxy Backup Transponders pursuant to
the provisions of this Section 10.06, and if Lessee does not believe the
conditions set forth in this Agreement to HCG's denial of access have been
met, then Lessee shall have the immediate right to seek injunctive relief,
including a temporary restraining order on notice of four (4) hours or more
to HCG, to prevent the denial or continuing denial of such access by HCG.
(c) HCG shall also have the right to seek: (i) injunctive relief,
including a temporary restraining order on notice of four (4) hours or more
to Lessee, to prevent, suspend or otherwise limit User's continued access
to Lessee's Transponders or Galaxy Backup Transponders where HCG believes
such use has resulted or will result in a violation of any Obscenity Law;
or (ii) declaratory relief to establish its right to deny User's access to
Lessee's Transponders or Galaxy Backup Transponders under this Agreement.
(d) Either party shall be entitled to oppose the other's attempt to
obtain equitable relief. However, in order to enable either party to obtain
a resolution of any such dispute as expeditiously as possible, both parties
hereby agree that: (i) neither party will contest the jurisdiction of, or
the venue of, any action for equitable relief brought by the other party in
the following courts:
and the U.S. District Court for the Central District of California; (ii)
the party opposing equitable relief (the "Opposing Party") will make itself
available to accept service by telecopy or personal delivery on a 24
hour-a-day basis for five (5) consecutive days following receipt by the
Opposing Party of the other party's notice of its intent to seek such
equitable relief; and (iii) if either party seeks a temporary restraining
order and provides notice to the Opposing Party at least four (4) hours
before the scheduled court hearing, then the Opposing Party will not
challenge the timeliness of such notice.
(e) If it is determined by final judicial order that HCG prevented
Lessee from accessing any or all of Lessee's Transponders or Galaxy Backup
Transponders at a time when it did not have the right to do so, pursuant to
this Section 10.06, then Lessee's sole and exclusive remedy shall be HCG's
payment to Lessee of liquidated damages equal to two (2) times a pro-rated
amount of Lessee's monthly Base Lease Rate or the Monthly Lease Rate, as
22
applicable, for the terminated capacity, such pro-ration to be based on the
period of time of loss of use of such capacity.
(f) All remedies of HCG set forth in this Section 10.06 shall be
cumulative and in addition to, and not in lieu of any other remedies
available to HCG at law, in equity or otherwise, and may be enforced by HCG
concurrently or from time to time.
(g) In addition to any other indemnification obligations found
elsewhere in this Agreement, Lessee shall indemnify and save HCG, its
directors, officers, employees, and its Affiliates from any liability or
expense arising out of or related to User's use of Lessee's Transponders or
Galaxy Backup Transponder under this Section 10.06. Lessee shall pay all
expenses (including reasonable attorneys' fees) incurred by HCG in
connection with all legal or other formal or informal proceedings,
instituted by any private third party or any Governmental Authority, and
arising out of or related to User's use of Lessee's Transponders or Galaxy
Backup Transponders under this Section 10.06, and Lessee shall satisfy all
judgments, fines, penalties, costs, or other awards which may be incurred
by or rendered against HCG as a result thereof, as and to the extent
permitted by law.
10.07 Return of Transponders. Upon the expiration, termination, or
----------------------
cancellation of this Agreement as to any Transponder for any reason whatsoever
(including, without limitation, expiration of this Agreement in accordance with
its terms and cancellation by HCG as a result of an Event of Default by Lessee),
such Transponder shall be deemed, without any further action by any party, to be
redelivered to HCG and HCG shall be entitled to immediate possession thereof.
HCG shall thereafter have the right to utilize such redelivered Transponder in
any manner it determines.
11. Force Majeure
-------------
11.01 Failure to Deliver. Any failure or delay in the performance by HCG
------------------
of its obligations to Deliver or provide any Transponders 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, weather or acts or omissions of Lessee or any third parties
(excluding the Xxxxxx Aircraft Company and all of its direct and indirect
subsidiaries, and any other Affiliates of HCG or the Xxxxxx Aircraft Company
with whom HCG or the Xxxxxx Aircraft Company contracts for any components of the
Two Satellites or any services with respect thereto).
23
11.02 Failure of Performance. Any failure in the performance of the
----------------------
Transponders, once Delivered or provided, shall not be a breach of this
Agreement if such failure results from 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 Lessee or any third parties
(excluding the Xxxxxx Aircraft Company and all of its direct and indirect
subsidiaries, and any other Affiliates of HCG or the Xxxxxx Aircraft Company
with whom HCG or the Xxxxxx Aircraft Company contracts for any components of the
Two Satellites or any services with respect thereto). Nothing in this Section
11.02 shall excuse HCG's obligations to provide Transponder Spares or Reserve
Transponders, to the extent available and technically feasible, to satisfy its
obligations as set forth in Sections 4 and 9.
12. Limitation of Liability/Breach of Warranty
------------------------------------------
12.01 Liability of HCG. If (i) any one or more of Lessee's Transponders
---------- ---
fails to meet the C-Band Transponder Performance Specifications prior to the
Lease Termination Date, (ii) such failure is deemed to be a Confirmed Failure,
and (iii) HCG is unable to furnish the necessary Transponder Spare or Reserve
Transponder as a substitute for the Lessee's Transponder pursuant to Section 9,
then such Transponder shall be deemed to be a "Failed Transponder," and, unless
such failure of the Lessee's Transponder is excused by an event set forth in
Section 11.02, Lessee shall be entitled to cease making the Base Lease Rate
payments, as to such Failed Transponder, as set forth in Section 3.02(a).
12.02 Confirmed Failure. A Lessee's Transponder shall be deemed to have
-----------------
suffered a "Confirmed Failure" if (a) it fails to meet the C-Band Transponder
Performance Specifications for a cumulative period of more than ten (10) hours
during any consecutive thirty (30) day period, (b) twenty (20) or more "outage
units" (as defined below) occur within a consecutive thirty (30) day period, or
(c) it fails to meet the C-Band Transponder Performance Specifications for any
period of time under circumstances that make it clearly ascertainable or
predictable technically that the failure set forth in either (a) or (b) of this
Section 12.02 will occur. An "outage unit" shall mean the failure of a Lessee's
Transponder to meet the C-Band Transponder Performance Specifications for a
fifteen (15) minute period in one day (with each such fifteen (15) minute period
in the same day constituting a separate outage unit). Lessee shall give HCG
immediate notification of any such failure, as soon after commencement of any
such failure as is reasonably possible, and of the relevant facts concerning
such failure. Upon HCG's verification that a Lessee's Transponder has suffered a
Confirmed Failure, such failure shall be deemed to have commenced upon receipt
by HCG of notification from Lessee, or HCG's actual knowledge, whichever first
occurs, of the Confirmed Failure. As used herein, the term "day" shall mean a
24-hour period of time commencing on 12:00 Midnight Eastern Time.
24
12.03 Repayment for Failed Transponder. For each of Lessee's Transponders
---------------------
which has become a Failed Transponder, for which Lessee is entitled to cease
making Base Lease Rate payments, and for which Lessee has ceased making Base
Lease Rate payments, Lessee shall be entitled to a refund equal to the product
of a fraction, the numerator of which is the number of days from the date of
such failure until the end of the calendar month in which such failure occurred
and the denominator of which is the total number of days in the calendar month
in which such failure occurred, multiplied by the Base Lease Rate actually paid
---------- --
by Lessee for such Transponder for the calendar month in which such failure
occurred. HCG may offset against any refund due to Lessee pursuant to this
Section 12.03 any amounts due from Lessee to HCG under this Agreement. In
addition, if the performance of a Lessee's Transponder is such that, while it
fails to meet the C-Band Transponder Performance Specifications, its performance
is nonetheless of some value to Lessee, then prior to accepting repayment
calculated as aforesaid, Lessee shall have the right to negotiate with HCG to
determine if there is a mutually agreeable reduced lease rate upon which Lessee
is willing to continue leasing such Transponder.
12.04 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 SECTION 6.02, ABOVE. IT
EXPRESSLY IS AGREED THAT HCG'S SOLE OBLIGATIONS AND LIABILITIES RESULTING
FROM A BREACH OF THIS AGREEMENT, AND LESSEE'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 4, 9, 10 AND 12, HEREOF, AND ALL OTHER REMEDIES OF ANY KIND ARE
EXPRESSLY EXCLUDED, INCLUDING, WITHOUT LIMITATION, ALL RIGHTS AND REMEDIES
OF LESSEE UNDER DIVISION 10, CHAPTER 5, ARTICLE 2 AND SECTIONS 10209, 10406
AND 10504 OF THE CALIFORNIA UNIFORM COMMERCIAL CODE.
(b) IN NO EVENT SHALL HCG BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, OCCASIONED BY ANY DEFECT
IN THE TRANSPONDERS, DELAY IN DELIVERY OR PROVISION OF THE TRANSPONDERS,
FAILURE OF THE TRANSPONDERS TO PERFORM OR
25
ANY OTHER CAUSE WHATSOEVER. HCG MAKES NO WARRANTY, EXPRESS OR IMPLIED, TO
ANY OTHER PERSON OR ENTITY CONCERNING THE TRANSPONDERS OR THE SATELLITES
AND LESSEE SHALL DEFEND AND INDEMNIFY HCG FROM ANY CLAIMS MADE UNDER ANY
WARRANTY OR REPRESENTATION BY LESSEE TO ANY THIRD PARTY. THE LIMITATIONS OF
LIABILITY SET FORTH HEREIN SHALL ALSO APPLY TO THE XXXXXX AIRCRAFT COMPANY
(THE MANUFACTURER OF THE SATELLITES AND THE TRANSPONDERS) AND ALL
AFFILIATES THEREOF.
(c) Notwithstanding the limitations of the first sentence of Section
12.04(a) above, Lessee and HCG each shall have the right to obtain
injunctive relief, if necessary, in order to prevent the other party from
willfully breaching its obligations under this Agreement or to compel the
other party to perform its obligations under this Agreement.
12.05 Obligations of Lessee to Cooperate. If any of Lessee's Transponders
----------------------------------
fails to meet the C-Band Transponder Performance Specifications, then Lessee
shall use reasonable efforts to cooperate and aid HCG in curing such failure,
provided that such efforts can be done at minimal or no cost to Lessee.
(a) These obligations of Lessee shall include, but not be limited to,
the following:
(i) If there is a problem which can be compensated for by
increasing the power of its transmission to Lessee's Transponder, then
Lessee shall do so, at HCG's cost and expense, to the extent it can
with existing equipment, provided, however, that HCG shall not be able
to require Lessee to increase the power of its transmission if, by
doing so, it would cause interference with other Transponders on such
Satellite which is prohibited by Section 7.02 of this Agreement, or
interference with any other satellite; and
(ii) Permitting HCG, at HCG's cost and expense, to upgrade and
install Lessee's equipment, provided that Lessee shall be entitled to
select and install such equipment and determine its configuration in
accordance with its own existing operating procedures and technical
requirements, and in accordance with applicable Laws.
(b) HCG shall give notice to Lessee if and when it requires the
increase of power of the transmission of any other Owner pursuant to such
Owner's obligation equivalent to this Section 12.05. HCG shall also give
notice to Lessee when it acquires knowledge of any other Transponder Owner
uplinking at power levels which might cause interference with Lessee's
26
Transponders. If, after such increase in power, a Lessee's Transponder(s) no
longer meets its C-Band Transponder Performance Specifications, HCG shall
promptly take steps to reduce interference, if any, prohibited by Section 7.02.
(c) Lessee's priority for the use of Transponder Spares or Reserve
Transponders under Section 9 shall be determined at the time that its
Transponder would otherwise have become a Failed Transponder without
Lessee's cooperation under this Section 12.05. Regardless of Lessee's
cooperation under this Section 12.05, Lessee shall have the right to
exercise its right to the use of a Transponder Spare or Reserve Transponder
to which it would have been entitled at the time that Lessee's Transponder
was initially determined to have failed had Lessee not taken such action.
13. Transfers
---------
13.01 Transfers by Lessee.
-------------------
(a) Except as specifically set forth in this Section 13.01,
Lessee shall not Transfer (defined in Section 6.08) any of its rights
or obligations under this Agreement except with the prior written
consent of HCG, which consent may be given or withheld in HCG's sole
and absolute discretion.
(b) Lessee may Transfer, in whole, its rights and obligations
hereunder to any Lessee's Affiliate, provided that such Lessee's
Affiliate executes any Transfer documents as reasonably requested by
HCG. In the event of any such Transfer by Lessee, (i) Lessee shall
remain fully liable along with its Transferee for all its obligations
under this Agreement and under the Transponder Service Agreement; and
(ii) such Transferee shall not be permitted to Transfer Lessee's
Transponders.
(c) Lessee shall have the right to sublease its rights to use
Lessee's Transponders hereunder to a third party (the "Third-Party
Sublessee"); provided, however, that the Third-Party Sublessee will be
able to meet HCG's legal, technical and operational requirements as
set forth in this Agreement. HCG shall have the right to withhold its
approval of the sublease to the Third-Party Sublessee based on such
Third-Party Sublessee's proposed program content which HCG deems
objectionable, consistent with HCG's practice and policy concerning
the use of the Transponder to transmit programming that violates or
potentially violates the Obscenity Laws. A condition precedent to the
effectiveness of any such sublease shall be the prior execution by the
Third-Party Sublessee of a document, in form and substance as
27
reasonably required by HCG, by which the Third-Party Sublessee agrees
to abide by all of the provisions regarding the operation of the
Satellite and the use of the Transponder, including without
limitation, Sections 7, 8, 10.06 and 13 of the Agreement, as though
the Third-Party Sublessee were the Lessee (the "Sublease"). In the
event of the Sublease, Lessee shall remain fully liable for, and shall
not be relieved of, its obligations to HCG hereunder. In the event the
Third-Party Sublessee breaches any of its obligations described in the
Sublease, then HCG may, at its option and in addition to the exercise
of its other rights against Lessee, require the Third-Party Sublessee
to cease transmissions to the Satellite and, after providing a written
notice to Lessee of the Third-Party Sublessee's breach, take actions
necessary to enforce HCG's rights against the Third-Party Sublessee.
Lessee will pay to HCG all expenses (including attorney's fees)
incurred in connection with HCG's enforcement against the Third-Party
Sublessee and/or Lessee arising out of the Third-Party Sublessee's use
of the Transponder under the Sublease. Lessee's Transponders or Galaxy
Backup Transponders shall not be used for occasional video services to
third parties as of the time from which and for so long as the
provisions of Section 22 cease to be in full force and effect pursuant
to the terms of Section 22.
13.02 Transfers by HCG. HCG may Transfer its rights and/or obligations
------------ ---
hereunder, in whole or in part, to any corporation or other entity wholly-owned,
directly or indirectly, by HCG or to the Xxxxxx Aircraft Company or any
corporation or other entity wholly-owned, directly or indirectly by Xxxxxx
Aircraft Company, including, without limitation, Xxxxxx Communications, Inc.,
HCG's immediate parent corporation, or any corporation or other entity wholly-
owned, directly or indirectly, by Xxxxxx Communications, Inc. Any Transfer by
HCG set forth herein shall not interfere with or impact the use of Lessee's
Transponders hereunder.
13.03 Additional Requirements for Transfer. Notwithstanding anything else
------------------------------------
contained in this Agreement, Lessee shall not be permitted to Transfer Lessee's
Reserve Transponders unless the transferee executes an agreement in favor of HCG
expressly agreeing that HCG shall have the right to preempt the use of and
Transfer such Reserve C-Band Transponder after two (2) hours notice from HCG as
set forth in Section 9.02 and Section 18.
14. Affiliate
---------
Unless otherwise specifically defined elsewhere in the Agreement,
"Affiliate" means any corporation or other entity controlling, controlled by, or
under common control with, Lessee, HCG, or the Xxxxxx Aircraft Company, as the
case may be.
28
15. Monthly Satellite Reports
-------------------------
After Delivery of Lessee's Transponders, Lessee shall receive monthly
reports
on the overall performance of Galaxy IIIR and Galaxy Backup in the form of the
Galaxy Satellite status reports similar to the Galaxy I Satellite Services
Monthly report, plus information furnished to insurers. Anomalous operations
shall be reported to Lessee as soon as possible.
16. Confidentiality and Press Releases
----------------------------------
16.01 Confidential Information. HCG and Lessee shall hold in confidence
------------------------
this Agreement and all Exhibits hereto, including the financial terms and
provisions hereof, and all information provided to Lessee hereby, and HCG and
Lessee hereby acknowledge and agree that all information received in connection
with or related to this Agreement, not otherwise known to the public, is
confidential and proprietary and is not to be disclosed to third persons (other
than to Affiliates, or to the officers, directors, employees and agents of HCG
or Lessee, each of whom is bound by this Section 16.01) without the prior
written consent of both HCG and Lessee, except as follows:
(a) to the extent necessary to comply with applicable Law, provided,
that the party making such disclosure shall seek confidential treatment of
such information;
(b) as part of its normal reporting or review procedure to regulatory
agencies, its parent company, its auditors and its attorneys, provided,
that the party making such disclosure to any such regulatory agency shall
seek confidential treatment of such information, and, provided, that any
other third party to whom disclosure is made agrees to the confidential
treatment of such information;
(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; and
(e) to the extent necessary to satisfy its obligations to other
Owners
of Galaxy IIIR Transponders or to negotiate clauses that will be common to
all Galaxy IIIR Transponder purchase or lease agreements.
29
16.02 Press Releases. The parties agree that no press release relating to
--------------
this Agreement shall be issued without the approval of both parties.
17. Disposition of Satellite
------------------------
17.01 Continued Access to C-Band Transponder Spares and C-Band Reserve
----------------------------------------------------------------
Transponders. Until Galaxy IIIR is disposed of pursuant to Section 17.02, HCG
------------
shall continue to make available to Lessee, on the terms and conditions
contained in this Agreement, C-Band Transponder Spares and C-Band Reserve
Transponders.
17.02 Disposition of Satellite. At the earlier of the time that (i) the
------------------------
remaining fuel on board Galaxy IIIR is less than 6% of the initial mass prior to
launch, including uncertainty in estimate of fuel, (ii) there are fewer than
thirteen (13) Galaxy IIIR C-Band Transponders capable of meeting the requisite
transponder performance specifications, or (iii) 145 months after the Delivery
of Galaxy IIIR, HCG, in its sole discretion, may remove Galaxy IIIR from its
assigned orbital location and have no further obligations to Lessee under this
Section 17 or this Agreement (other than those pursuant to Sections 4.11, 4.12,
and 12); provided, however, that until HCG so removes Galaxy IIIR, HCG shall
continue to make available to Lessee its Transponder or Transponders,
Transponder Spares and Reserve Transponders as provided for in this Agreement.
HCG will, to the extent possible, provide Lessee with ninety (90) days' notice
prior to the disposition of Galaxy IIIR pursuant to this Section 17.02.
18. HCG's Option to Cancel the Lease of Lessee's Reserve Transponders.
-----------------------------------------------------------------
18.01 Duration. HCG may, at its option, cancel the lease of Lessee's
--------
Reserve Transponder(s) (the "Option"). The Option may be exercised by HCG at any
time, or, if Lessee is leasing more than one Reserve C-Band Transponder, from
time to time, up to and including the date on which Galaxy IIIR has been
disposed of pursuant to Section 17.
18.02 Condition to Exercise of the Option. HCG may exercise the Option
-----------------------------------
at any time after it has determined, in its sole discretion, that such exercise
is necessary in order to enable HCG to satisfy its obligations to furnish
Reserve C-Band Transponders to the Owners of Primary C-Band Transponders on
Galaxy IIIR, as set forth in various sections of this Agreement and in other
transponder purchase agreements.
18.03 Method of Option Exercise.
--------------------------
(a) HCG may give Lessee notice of its exercise of the Option at
any time after the condition to exercise set forth in Section 18.02,
above, has been met and such notice shall be effective as of the times
set forth below.
30
(b) Notice shall be given by HCG through one of its authorized
agents ("HCG's Agents") to one of Lessee's authorized agents
("Lessee's Agents") or to Lessee's Authorized Address or Facsimile
Number. Lessee agrees to have one or more of Lessee's Agents available
to receive such notice at all times, seven days per week, 24 hours per
day, during the duration of the Option.
(c) Notice shall be effective immediately if personally delivered
in writing or orally, or if conveyed by telephone by one of HCG's
Agents to one of Lessee's Agents. Notice shall also be effective
immediately if one of HCG's Agents attempts to give notice by
telephone to each of the three Lessee's Agents, listed below, in the
order shown below, and no such Lessee's Agent is available to receive
such notice. Notice shall be effective upon actual delivery to
Lessee's Authorized Address or Authorized Facsimile Number if by
telegram or facsimile or by U.S. mail or by Federal Express or any
other established delivery service. Any oral notice shall be confirmed
in writing and delivered by HCG's Agent within 24 hours of giving such
notice, but the effectiveness of such oral notice shall not be
dependent upon such written confirmation.
(d) Lessee's Agents and their telephone and facsimile numbers
are as follows:
Name Telephone Number
---- ----------------
Xxxxxx Xxxxx Office Telephone: (000) 000-0000
---------------------- After Hours: (___) ___-____
Home Telephone: (___) ___-____
Facsimile: (000) 000-0000
Xxxxxxx Xxxxxxx Office Telephone: (000) 000-0000
---------------------- After Hours: (000) 000-0000
Home Telephone: (000) 000-0000
Facsimile: (000) 000-0000
(e) Lessee's Authorized Address and Facsimile Number are as
follows:
0000 X. Xxxxxxx Xxx.
0xx Xxxxx
Xxxxxxx, XX 00000
Telephone: (000) 000-0000
Facsimile: (000) 000-0000
31
(f) HCG's Agents and their telephone and facsimile numbers are as
follows:
Name or Position Number
---------------- ------
Controller on Duty Office Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxxx Xxxxxx Office Telephone: (000) 000-0000
Supervisor Home Telephone: (000) 000-0000
Facsimile: (000) 000-0000
Xxxxxxx Xxxxxxx Office Telephone: (000) 000-0000
Manager Pager Telephone: (800) SKY-PAGE
Pin No.: 8624364
Facsimile: (000) 000-0000
(g) Either Lessee or HCG may change its agents and Lessee may
change its Authorized Address and Facsimile Number by giving the other
party notice in the manner set forth in this Section 18.03.
18.04 Effect of Option Exercise. Immediately upon HCG's notice to
-------------------------
Lessee of HCG' s exercise of the Option, as set forth in Section 18.03, above,
Lessee's right to use Lessee's Reserve Transponder(s) shall automatically and
without further action on Lessee's or HCG's part cease.
18.05 Obligations of Lessee Upon Option Exercise. Upon HCG's exercise
------------------------------------------
of the Option, Lessee shall immediately discontinue all use of the canceled
Lessee's Reserve Transponder(s), and Lessee shall immediately cause its
sublessees, successors, assigns, transferees and all their sublessees,
successors, assigns, and transferees (collectively referred to as "Assignees")
to discontinue use of the canceled Lessee's Reserve Transponder(s) immediately
upon exercise of the Option. Lessee shall also execute such additional documents
as HCG shall reasonably request in order to confirm or implement the
cancellation of Lessee's Reserve Transponder(s) provided for herein; provided,
however, that the execution of such additional documents by Lessee shall not be
a condition precedent to the actual effectiveness of the cancellation, since
such cancellation shall, as set forth in Section 18.03, above, be deemed to have
occurred, for all purposes, immediately upon HCG's notice to Lessee of the
exercise of the Option, as set forth in Sections 18.03 and 18.04, above. Lessee
further agrees that if any Assignee does not immediately cease the use of and
relinquish all rights to the use of Lessee's Reserve Transponder(s) canceled by
HCG upon its exercise of the Option, then Lessee shall immediately thereafter
pursue all legal and equitable remedies against said Assignee as are necessary
to effectuate such cessation of use and relinquishment of all rights to use such
Lessee's
32
Reserve Transponder(s). HCG shall also have the right to preempt any and all use
of Lessee's Reserve Transponder(s) by Lessee or Assignee after two (2) hours'
notice to Lessee of exercise of the Option.
18.06 Obligations of HCG. HCG agrees that it will not exercise the
------------------
Option unless it believes that such exercise is necessary in order to enable HCG
to satisfy its obligations to the Owners of Primary C-Band Transponders
(including Lessee) as set forth in this Agreement and in other transponder
purchase agreements with said Owners.
18.07 Resolution and Disputes. If Lessee does not believe HCG was
-----------------------
justified in its belief that the exercise of the Option was necessary, as set
forth in Section 18.02, above, then Lessee shall have the right to seek a
judicial determination of whether HCG acted in bad faith in exercising the
Option. If a court of competent jurisdiction makes a final determination that
HCG did, in fact, act in bad faith in exercising the Option, then Lessee's sole
right shall be to obtain liquidated damages as set forth in this Section 18.07.
The liquidated damages to which Lessee shall be entitled shall be the higher of
either: (a) $1,000 per day for each day that Lessee was wrongfully deprived of
the use of Lessee's Reserve Transponders; or (b) the amount received by HCG from
all third parties for such third parties' use of the wrongfully canceled
Lessee's Reserve Transponder(s) for each day that Lessee was wrongfully deprived
of the use of the wrongfully canceled Lessee's Reserve Transponder(s). Except
for the remedies and damages specifically provided for in this Section 18.07,
the limitations of liability set forth in Section 12.04 shall apply. Lessee
shall not be entitled to a court order requiring HCG to return Lessee the right
to lease the Transponder or Transponders that were taken in bad faith by HCG.
18.08 Cessation of Fees. Upon cancellation, Lessee shall cease paying
-----------------
the Base Lease Rate and In Orbit Satellite Backup Fee for such Lessee's Reserve
Transponder.
19. Outage Allowance
----------------
HCG shall grant Lessee an Outage Allowance as follows:
If an "Outage Allowance Failure Period" (as defined below) occurs,
then for each hour of such Outage Allowance Failure Period HCG shall grant
Lessee a pro rata Outage Allowance based upon the monthly charge for the
Lessee's Transponder experiencing the Transponder capacity failure, the length
of the Outage Allowance Failure Period, and a standard of 720 hours per month,
calculated pursuant to the equation below. Any such Outage Allowance shall be
applied to the next succeeding monthly billing to Lessee and shall not in any
case exceed one month's standard billing. "Outage Allowance Failure Period"
shall mean the aggregate period--only where such aggregation exceeds one (1)
hour during any consecutive thirty (30) day period on such Transponder--during
which a Transponder capacity failure(s) occurs.
33
A Transponder capacity failure shall be measured from the time HCG receives
notice from Lessee of a claimed Transponder capacity failure until the time the
Transponder has been restored to operation, but shall not begin in any event
until Lessee ceases to use Lessee's Transponder. HCG shall accept or reject such
outage claim within 24 hours of notice from Lessee, or else such claim will be
deemed accepted.
Outage Allowance = Outage Allowance Failure Period (in Hours) x Monthly Base Lease Rate
--------------------------------------------------------------------
720
In no case shall an Outage Allowance be made for any Transponder capacity
failure caused primarily by: (i) any failure on the part of Lessee to perform
its transmission or other material or operational obligations pursuant to this
Agreement, (ii) failure of facilities provided by Lessee, (iii) reasonable
periodic maintenance, provided, however, that HCG will inform Lessee of any
-------- -------
proposed periodic maintenance in advance and will use best reasonable efforts to
agree upon the times at which such periodic maintenance will be performed on
Lessee's Transponder, (iv) interference from sun outage or from third party
transmissions or usage, (v) cooperative testing, except where trouble or fault
is found in the Lessee's Transponder or (vi) any other act or failure to act by
Lessee.
20. Miscellaneous
-------------
20.01 Interest. 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 monthly basis.
The term "prorated" shall mean an allocation on a straight line basis based on a
number of days. All present value analyses shall use a 12% annual discount rate,
compounded monthly.
20.02 Applicable Law; Entire Agreement; Modification. The existence,
----------------------------------------------
validity, construction, operation and effect of this Agreement, and the Exhibits
hereto, shall be determined in accordance with and be governed by the laws of
the State of California. This Agreement and the Exhibits hereto, consisting of
Exhibits A, X-x, B-2, C-1 and C-2 which are hereby incorporated by reference and
which constitute a part of this Agreement, along with the Transponder Service
Agreement, constitute the entire agreement between the parties concerning the
subject matter hereof, and supersede all previous understandings, commitments or
representations concerning the subject matter hereof. The parties each
acknowledge that the other party has not made any representations other than
those which 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.
34
20.03 Notices. All notices and other communications from either party
-------
to the other hereunder shall be in writing and shall be deemed received when
actually received if personally delivered, upon acknowledgement 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,
addressed to the other party as follows'
TO HCG:
If by mail: Xxxxxx Communications Galaxy, Inc.
Post Office Box 00000
Xxxxxxxx Xxxxxx Xxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000
Attention: Senior Vice President
cc: Vice President & Legal Counsel
If by FAX: Xxxxxx Communications Galaxy, Inc.
Attention: Senior Vice President
(000) 000-0000
cc: Vice President & Legal Counsel
(000) 000-0000
If by personal
delivery to its
principal place
of business at: Xxxxxx Communications Galaxy, Inc.
0000 Xxxxx Xxxxxx
X0 Xxxxxxx, Xxxxxxxxxx 00000
Attention: Senior Vice President
cc: Vice President & Legal Counsel
TO LESSEE:
If by mail: TVN Entertainment Corporation
0000 X. xxxxxxx Xxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Attention: Xxxxxx Xxxxx
cc: Xxxxxx Xxxxxx
If by FAX:
Attention: 000-000-0000
Attn: Xxxxxx Xxxxx
cc: Xxxxxx Xxxxxx
35
If by personal
delivery to its
principal place
of business at: --------------------------------
--------------------------------
--------------------------------
--------------------------------
Attention:
---------------------
All payments to be made under this Agreement, if made by mail, shall be deemed
to have been made on the date of actual receipt thereof. The parties hereto may
change their addresses by giving notice thereof in conformity with this Section
20.03.
20.04 Severability. Nothing contained in this Agreement shall be
------------
construed so as to require the commission of any act contrary to any of the
Laws, 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.
20.05 Taxes. If any property or sales taxes are asserted against HCG
-----
after, or as a result of, Delivery, by any local, state, national or
international, public or quasi-public governmental entity, in respect of
Lessee's Transponders or the lease thereof to Lessee, or are asserted in respect
of the provision of any other Transponders provided hereunder, Lessee shall be
solely responsible for such taxes. If any taxes, charges or other levies are
asserted by reason of the use of the point in space or the frequency spectrum at
that point in space in which the Satellite containing Lessee's Transponders is
located, or the use or ownership of such Satellite (excluding any FCC license
fee imposed on the Satellite itself, as compared to the Transponders, which
license fee shall be paid by HCG), and such taxes are not specifically allocated
among the various components of such Satellite, then HCG, Lessee and the other
Owners of such Galaxy IIIR Transponders shall each pay a proportionate amount of
such taxes based on the number of Galaxy IIIR Transponders each of them owns or
leases.
20.06 Successors, Assignment. Subject to the limitations on Transfer
----------------------
set forth in Section 13, 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 Transfer of this Agreement shall relieve either party hereto of its
obligations to the other party. Any purported Transfer by either party not in
compliance with the provisions of this Agreement shall be null and void and of
no force and effect.
20.07 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.
36
20.08 Survival of Representations and Warranties. All representations
------------------------------------------
and warranties contained herein or made by HCG or Lessee in connection herewith
shall survive any independent investigation made by HCG or Lessee.
20.09 No Third-Party Beneficiary. The provisions of this Agreement are
--------------------------
for the benefit only of the parties hereto and HCA, and no third party other
than HCA may seek to enforce, or benefit from, these provisions, except that
both parties acknowledge and agree that the provisions of Sections 7.02, 8,
9.01, 9.02, 9.03 and 9.04, are intended for the benefit of both HCG and all
other Owners. Both parties agree that any other such Owner shall have the right
to enforce, as a third-party beneficiary, the provisions of Sections 7.02, 8,
9.01, 9.02, 9.03 and 9.04, against Lessee directly, in an action brought solely
by such other Owner, or may join with HCG or any other Owner, in bringing an
action against Lessee for violation of such Sections.
20.10 Non-Waiver of Breach. Either party hereto may specifically waive
--------------------
any breach of this Agreement (including an Event of Default) 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.
20.11 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.
20.12 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 and to notify the other party of any such filing.
20.13 Risk of Loss. The provisions regarding risk of loss in this
------------
Agreement supersede Sections 10219 through 10221 of the California Uniform
Commercial Code.
21. Periodic Signal Transmission
----------------------------
HCG shall have the right to periodically transmit essential
stationkeeping signals to a single Lessee's Transponder selected by Lessee on
Galaxy IIIR; such transmissions will not degrade the performance of the
receiving Transponder. Prior to Delivery of Lessee's Transponders, Lessee shall
designate in writing to HCG which of Lessee's Transponders may be used for such
stationkeeping signal transmissions, and HCG shall use only such designated
Transponder for such purposes unless and until such
37
designated Transponder becomes a Failed Transponder, immediately after which
Lessee designate in writing to HCG which other Lessee's Transponder may be so
used.
22. HCG's Use of Eight (8) Transponders
-----------------------------------
Notwithstanding anything to the contrary stated elsewhere in this Agreement,
during the term of this Agreement, HCG shall have the right to lease from Lessee
(8) of Lessees Primary Transponders to transmit [*] for [*] per [*] or extended
for [*] (however, not to exceed [*] during [*] in order to satisfy HCG's
obligations to [*], to provide such transponder capacity. HCG shall pay Lessee
$[*] per hour per the use of each of Lessee's Primary Transponders and the
payment shall be in the form of a credit against the monthly Base Lease Rate due
to HCG by Lessee for the next succeeding months of service. If and when HCG's
agreement with [*] to provide [*] with the transponder capacity as stated in
this Section 22 is terminated (i.e., as [*] no longer has any obligations to
provide the transponder capacity to [*]), then the terms of this Section 22
shall cease to be of any force and effect, except for the payment obligations
that have accrued prior to the effective date of the termination of HCG's
agreement with [*].
23. Additional Transponder(s)
-------------------------
Provided that Lessee is in compliance with all material terms of this
Agreement (including but not limited to being current on all payments owed to
HCG hereunder), Lessee may lease additional Primary C-Band Transponders on
Galaxy IIIR if such Primary C-Band Transponders on Galaxy IIIR are available to
be determined by HCG in HCG's sole discretion. If HCG determines in its sole
discretion that such requested additional Primary C-Band Transponders are
available, then Lessee shall lease additional Primary C-Band Transponders at the
same monthly Base Lease Rate as other Lessee's Primary C-Band Transponders
through the end of the full term of this Agreement. After lease of such
additional Primary C-Band Transponders pursuant to this Section 23 commences,
such additional Transponders shall be treated as an additional Lessee's Primary
Transponders and as an additional Lessee's Transponders. Lessee shall be
obligated to pay the In Orbit Satellite Backup Fee as set forth in Section 3.02
(b) for each of the Primary C-Band Transponders that have been added pursuant to
this Section 23, if Lessee has elected to purchase the In Orbit Satellite Backup
protection.
[*] = CERTAIN INFORMATION ON THIS PAGE HAS BEEN OMITTED AND FILED SEPARATELY
WITH THE COMMISSION. CONFIDENTIAL TREATMENT HAS BEEN REQUESTED WITH
RESPECT TO THE OMITTED PORTIONS.
38
IN WITNESS WHEREOF, each of the parties hereto has duly executed and
delivered this Agreement as of the day and year first written above.
XXXXXX COMMUNICATIONS TVN ENTERTAINMENT
GALAXY, INC. CORPORATION
By: /s/ Xxxx X. Xxxxx By: /s/ Xxxxxx Xxxxx
--------------------------- ---------------------------
Xxxx X. Xxxxx Xxxxxx Xxxxx
Senior Vice President President and Chief Executive
Officer
39
