EXHIBIT 10.13
DirecTv
XXXXX X. XXXX
SENIOR VICE PRESIDENT
July 9, 1993
Mr. B. R. Xxxxxxxx III
National Rural Telecommunications Cooperative
Woodland Park
0000 Xxxxxxxxxxx Xxx, Xxxxx 000
Xxxxxxx, Xxxxxxxx 00000
Reference: DBS Distribution Agreement Dated April 10, 1992 between
Xxxxxx Communications Galaxy, Inc. (HCG) and the
National Rural Telecommunications Cooperative (NRTC),
as amended (the "Agreement")
Dear Xxx:
The following sets forth the changes to the Agreement and the primary terms of
the Joint Marketing Agreement as agreed to during our meeting on July 6, 1993.
A. Extension of Deadlines. The parties agree to extend the deadlines
contained in the Agreement as follows:
(1) Except as described in (2) below, the final deadline for executing or
amending a Member Contract shall be July 31, 1993.
(2) Existing Committed Members as of July 31, 1993 shall have the right to
amend their Member Agreements to include Cabled Eligible Residences
until August 31, 1993.
(3) Payment for any Committed Member Residences (Cabled or Non-Cabled)
shall be paid to HCG on or before August 31, 1993.
(4) The above process shall fulfill HCG's obligations under Section
5.01(b)(ii) of the Agreement (i. e., the "Expansion Opportunity").
(5) If NRTC pays to HCG $60M during the period of June 21, 1993 through
August 31, 1993, then NRTC will be granted an extension until
November 15, 1993 to reach the $250M benchmark. NRTC shall have the
right to pay HCG up to $15M of the additional $60M in the form of
irrevocable commitments payable on November 15, 1993. If the November
extension is granted and NRTC does not reach the full $250M benchmark,
then the NRTC Territory shall be defined as those territories acquired
as of August 31, 1993, including those acquired through the
irrevocable commitments, and HCG shall control all other territories.
B. Cabled Eligible Residences. Until August 31, 1993, NRTC shall have the
right to offer Cabled Eligible Residences at discounted rates as follows:
(1) New and existing Committed Members shall have the option to acquire
Cabled Eligible Residences (defined as all Eligible Residences within
a RSA or MSA Part other than Non-Cabled Eligible Residences) for $5
per residence. This option may be exercised only by those Committed
Members who elect to participate in the NRTC/DirecTv Joint Marketing
Program as described in Section D below. The Cabled Eligible
Residences must be within counties (in the case of RSA's) or zip codes
(in the case of MSA Parts) already or concurrently acquired under the
RSA or MSA Non-Cabled Territory Options.
(2) The Cabled Eligible Residence option may be exercised only with
respect to all of the Cabled Eligible Residences within a particular
---
RSA county or MSA zip code.
(3) Those Member/Affiliates who have acquired residences under the RSA
Territory Option shall be entitled to a refund equal to $26.50 per
Cabled Eligible Residence for each Cabled Eligible Residence within
their acquired counties. HCG agrees that NRTC shall provide such
refund from funds generated by new Committed Member Payments, and that
HCG shall honor the residences acquired with such new Committed Member
Payments as if they were paid directly to HCG.
C. Definition of NRTC/Newco Territories. If the $250M benchmark is reached,
the territories controlled by NRTC/Newco shall be defined as follows:
(1) All Cabled and Non-Cabled RSA residences other than those acquired
prior to September 1, 1993.
(2) All Non-Cabled residences within all MSA Parts (i.e., the entire MSA
---
Parts list) other than those acquired prior to September 1, 1993.
(3) Those residences acquired prior to September 1, 1993 by
Member/Affiliates, who have established a business relationship with
NRTC/Newco.
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D. NRTC/DirecTv Joint Marketing Program. The parties will establish a joint
marketing program incorporating the following key terms:
(1) National Package
(a) DirecTv shall establish and price, after consultation with NRTC,
a set of cable programming packages, which shall include Best of
Cable programming (the "National Package(s)") to be made
available for sale on an agency basis by retailers, TVRO dealers
and sales marketing agents (SMA's).
(b) When a National Package is sold by any DirecTv authorized agent
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to a NRTC/Newco Territory resident, then the package (including
price) shall be honored by NRTC/Newco for a minimum 12 month
period.
(c) When a National Package is sold by a national DSS hardware
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retailer (e.g., Sears, Circuit City) to a Committed Member
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Territory resident, then the package (including price) shall be
honored by the Committed Member for a minimum 12 month period.
The Committed Member shall have the right to specify the price of
Best of Cable portion of the National Package(s) for sale within
the Committed Member's territory by non-national entities (e.g.,
---------------------
SMA's and/or TVRO dealers).
(d) In all cases where a National Package is sold by a DirecTv
authorized agent to a Committed Member Territory or NRTC/Newco
Territory resident, such resident shall become a subscriber of
the Committed Member or NRTC/Newco, and the Committed Member or
NRTC/Newco shall be responsible for paying the agent's
commission, which shall not exceed 10% of the purchase price, on
the Best of Cable portion of the package.
(e) If the National Package is sold or renewed by a national retailer
to an NRTC Territory Resident at a price which is less than 85%
of the local price set by NRTC/Newco or a Committed Member, then
DirecTv shall pay to NRTC the difference between such national
package price and 85% of the local price during the period in
which such national package price is applicable.
(f) If the National Package is sold or renewed by a local DirecTv
authorized agent to a NRTC/Newco Territory Resident at a price
which is less than 85% of the local price set by NRTC/Newco, then
DirecTv shall pay to NRTC the difference between such national
package price and 85% of the NRTC/Newco price during the period
in which such national package price is applicable.
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(2) Commissions on DirecTv Programming
(a) Definitions
(i) "Dealer Programming" is the set of DirecTv programming that
DirecTv authorizes for sale by dealers.
(ii) "Non-Dealer Programming" is all DirecTv programming other
than Dealer Programming.
(b) For Committed Member Territory residences as of August 31, 1993:
(i) Per the Distribution Agreement, NRTC will be paid 5% of
total DirecTv programming revenues on an annual basis (both
Dealer Programming and Non-Dealer Programming) from each NRTC-
Registered Subscriber and Joint Subscriber within the
territories. (This is paid regardless of whether NRTC/Member is
responsible for DirecTv programming sale).
(ii) NRTC will be paid an additional 5% commission on Dealer
Programming sales made by NRTC and the Committed Members. Such
commission shall be paid to NRTC on the same terms as DirecTv's
other SMAs. This commission is paid only with respect to sales
made by Committed Members participating in the joint marketing
program and is contingent on NRTC and the Committed Member
performing their respective SMA/agent responsibilities.
(iii) If NRTC fails to pay DirecTv an additional $60M by August
31, 1993, then the 5% commission specified in clause (ii) above
shall be reduced to 2%.
(c) For NRTC/Newco Territory Residences:
(i) NRTC/Newco will be designated as the DirecTv SMA for co-ops
and will be paid 10% of revenues from Dealer Programming sold by
NRTC/Newco agents (provided NRTC/Newco performs all required SMA
functions and responsibilities).
(ii) NRTC/Newco will be paid 5% of Non-Dealer Programming
revenues from each NRTC-Registered Subscriber and Joint
Subscriber within NRTC/Newco Territories.
(d) Non-NRTC Territory Residences
(i) DirecTv will authorize co-ops as DirecTv agents on a case-
by-case basis either directly or through third party SMA's or
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through NRTC, at DirecTv's sole discretion. Commissions will be
based on DirecTv / SMA standard policies.
(3) Miscellaneous
(a) The parties agree to negotiate in good faith concerning the
establishment of a joint marketing fund.
(b) NRTC shall ensure a sufficient level of Committed Member
participation in the Joint Marketing Agreement such that no less
than 90% of the aggregate Committed Member Residences in all
acquired territories are represented by participating Members.
If the 90% level is not attained prior to November 15, 1993, HCG
shall have the option to terminate or renegotiate the terms and
conditions of the Joint Marketing Agreement. The termination or
renegotiation of the Joint Marketing Agreement shall not
otherwise effect:
(i) Committed Member rights under the Agreement to serve
Committed Member Residences previously acquired by Committed
Members.
(ii) NRTC/Newco participation in the Joint Marketing Agreement.
(c) The Joint Marketing Agreement shall commence at its execution and
continue until December 31, 1995.
The terms and conditions contained in this letter shall be subsequently
formalized in both an amendment to the Agreement and a fully executed Joint
Marketing Agreement. Per your request, we have attached a draft of our SMA
Agreement and a listing of the territories in which the SMA's will be
authorized.
Regards,
Xxxxx X. Xxxx
HCG
Acknowledged and Agreed To:
B. R. Xxxxxxxx III
NRTC
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