Satellite Capacity Lease - Colorado Satellite Broadcasting Inc. and Transponder Encryption Services Corp.
EXECUTION COPY
SATELLITE CAPACITY LEASE
This Satellite Capacity Lease (the "Lease") is made and entered into as of
October 24, 2006 (the "Effective Date") by and between Colorado Satellite
Broadcasting, Inc. ("Network"), having a principal place of business at 7007
Winchester Circle, Suite 200, Boulder, Colorado 80301, and Transponder
Encryption Services Corporation ("TESC"), having a principal place of business
at 90 Inverness Circle East, Englewood, Colorado 80112.
RECITALS
A. Network is in the business of producing and/or distributing certain
programming services (hereinafter referred to as the "Programming Services", as
more particularly described in Section 1.3.1 below and EXHIBIT A attached
hereto, for viewing by end-users located in the Territory (as defined in Section
1.4 below).
B. TESC is in the business of leasing satellite capacity on satellites
using Ku-Band and/or Ka-Band frequencies.
C. TESC and Network are parties to Satellite Capacity Leases dated
September 1, 1998, December 14, 1999, and July 11, 2000, as such leases may have
been modified or extended from time to time (the "Old Leases").
D. Network desires to terminate the Old Leases and lease, in accordance
with the terms of this Lease, certain satellite capacity from TESC for the
purpose of transmitting the Programming Services in a digitally encrypted format
for receipt on a Subscription basis, Demand Purchase basis, SVOD Selection basis
and/or VOD Purchase basis, as such terms are defined in Section 1.1 of this
Lease, as determined by TESC in its sole judgment from time to time, by
end-users in the Territory via one or more Ku-Band and/or Ka-Band satellite(s)
to be selected by TESC from time to time in its sole judgment (collectively, a
"Satellite"), which are directly or indirectly owned and/or operated in whole or
in part by TESC and are located at the 119(degree) west longitude orbital
position and/or the 110(degree) west longitude orbital position.
E. Subject to the terms and conditions set forth below, TESC agrees to
allow Network to lease such capacity on a Satellite for the purpose of
transmitting the Programming Services in a digitally encrypted format for
receipt on a Subscription basis, Demand Purchase basis, SVOD Selection basis
and/or VOD Purchase basis, as determined by TESC in its sole judgment from time
to time, by end-users in the Territory, except as limited in this Lease.
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NOW, THEREFORE, in consideration of the mutual promises and the covenants
hereinafter set forth, and for other good and valuable consideration, the
receipt and sufficiency of which is hereby acknowledged, Network and TESC agree
as follows:
1. LEASE
1.1 Customer Purchases.
1.1.1 Service Subscriber. A "Service Subscriber" is defined to mean any
location in the Territory that is authorized to receive one or more of the
Programming Services in an encrypted format via a monthly or multi-month
subscription that is active and in good standing ("Subscription"). A Service
Subscriber may include, but shall not be limited to, residential locations,
condominium complexes, apartment buildings, town-home complexes, assisted living
facilities, hotel and motel guest rooms, private offices, truck stops, cellular
telephones and other handheld devices (only with respect to parts of the
Programming Services for which Network has the rights for cellular telephone and
handheld devices, except that all of the Programming Services may be delivered
to PocketDish, as such device may be renamed or modified from time to time), and
vehicles (e.g. cars, airplanes, recreational vehicles and commercial hauling
vehicles). For residential Service Subscribers, each single residential dwelling
unit, regardless of the number of televisions, integrated receiver-decoders
("IRDs"), computers or other devices within the unit or establishment that are
authorized by TESC or its Affiliate to receive one or more of the Programming
Services, shall be deemed to be a single Service Subscriber. For hotel/motel
rooms, truck stops and private business offices, each television authorized to
receive one or more of the Programming Services shall be deemed to be a single
Service Subscriber. For bulk-billed Service Subscribers (typically residential
locations, condominium complexes, apartment buildings, town-home complexes and
assisted living facilities), the number of Service Subscribers per account shall
be determined on an equivalent billing unit basis, assuming one hundred percent
(100%) occupation. TESC shall be entitled to determine, in its sole judgment,
whether a particular Service Subscriber is a bulk-billed Service Subscriber.
1.1.2 Demand Purchases. "Demand Purchase" is defined to mean an
individual purchase of a block of a Programming Service delivered via a
Satellite in an encrypted format not to exceed ninety (90) minutes in duration
(or such other period of time that the parties may agree upon from time to time
in writing). A Customer in the Territory who receives a Programming Service on a
Demand Purchase basis shall be referred to hereinafter as a "Demand Purchaser".
For residential Demand Purchasers, each single residential dwelling unit,
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regardless of the number of televisions or, IRDs, computers or other devices
within the unit or establishment that are authorized to receive a particular
Demand Purchase, shall be deemed to be a single Demand Purchaser. For
hotel/motel rooms, truck stops and private business offices, each television
authorized to receive a particular Demand Purchase shall be deemed to be a
single Demand Purchaser. For Demand Purchases originating from facilities which
are deemed bulk billed Service Subscribers (typically residential locations,
condominium complexes, apartment buildings, town-home complexes and assisted
living facilities), the number of Demand Purchases shall be the actual number of
Demand Purchases originating from such facility. TESC shall be entitled to
determine, in its sole judgment, whether a particular Demand Purchaser is a
bulk-billed Demand Purchaser.
1.1.3 SVOD Selections. "SVOD Selection" is defined to mean the
selection by a Customer of a video program on a Programming Service on an "on
demand" basis (either using "push" or "pull" technology) from a Network-selected
group of video programs that are transmitted to Customers who have purchased a
Subscription for that Programming Service. A Customer in the Territory who
receives a program on a Programming Service on a SVOD Selection basis shall be
referred to herein as an "SVOD Purchaser". Such receipt may be at no additional
cost (other than the cost of the Subscription of the underlying Programming
Service) or may be at an additional charge, as determined by TESC in its sole
discretion. For residential SVOD Purchasers, each single residential dwelling
unit, regardless of the number of televisions, IRDs, computers or other devices
within the unit or establishment that are authorized to receive a particular
SVOD Selection, shall be deemed to be a single SVOD Purchaser. For hotel/motel
rooms, truck stops and private business offices, each television authorized to
receive a particular SVOD Purchase shall be deemed to be a single SVOD
Purchaser. For SVOD Selections originating from facilities which are deemed bulk
billed Service Subscribers (typically residential locations, condominium
complexes, apartment buildings, town-home complexes and assisted living
facilities), the number of SVOD Selections shall be the actual number of SVOD
Selections originating from such facility. TESC shall be entitled to determine,
in its sole judgment, whether a particular SVOD Purchaser is a bulk-billed SVOD
Purchaser. Network shall be responsible for the encoding and delivery to TESC of
all SVOD content in accordance with TESC's reasonable technical and other
requirements at no additional cost to TESC.
1.1.4 VOD Purchases. "VOD Purchase" is defined to mean the purchase by
a Customer of the right to view a program on a Programming Service on an "on
demand" basis (either using "push" or "pull" technology), such that the Customer
can select the program, begin watching the program at any time, and have pause,
rewind and fast forward functionality. A Customer in the Territory who receives
a program on a Programming Service on a VOD Purchase basis shall be referred to
herein as a "VOD Purchaser". For residential VOD Purchasers, each single
residential dwelling unit, regardless of the number of televisions, IRDs,
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computers or other devices within the unit or establishment that are authorized
to receive a particular VOD Purchase, shall be deemed to be a single VOD
Purchaser. For hotel/motel rooms, truck stops and private business offices, each
television authorized to receive a particular VOD Purchase shall be deemed to be
a single VOD Purchaser. For VOD Purchases originating from facilities which are
deemed bulk-billed Service Subscribers (typically residential locations,
condominium complexes, apartment buildings, town-home complexes and assisted
living facilities), the number of VOD Purchases shall be the actual number of
VOD Purchases originating from such facility. TESC shall be entitled to
determine, in its sole judgment, whether a particular VOD Purchaser is a
bulk-billed VOD Purchaser. Network shall be responsible for the encoding and
delivery to TESC of all VOD content in accordance with TESC's reasonable
technical and other requirements at no additional cost to TESC.
1.1.5 Exceptions. Notwithstanding the foregoing, the following end
users who are authorized to receive one or more of the Programming Services
shall not be considered Service Subscribers, Demand Purchasers, SVOD Purchasers
or VOD Purchasers under any circumstances: (a) TESC's and/or any of its
Affiliates' test sites; (b) TESC's and/or any of its Affiliates' retailer
showrooms; and (c) employees of TESC and/or any of its Affiliates. Any Service
Subscriber who receives the Programming Service (A) through more than one (1)
distribution technology from TESC or any of its Affiliates, (B) to more than one
type of device, and/or (C) in more than one package of services shall be
included in the Service Subscriber count as only one (1) Service Subscriber. For
purposes of this Lease, "Affiliate" shall mean, with respect to a person or
entity, any other person or entity directly or indirectly controlling,
controlled by or under common control with such person or entity. For the
purposes of this definition, the term "Control" (including the words
"controlling" or "controlled by") shall mean the power to direct or cause the
direction of the management, policies and/or affairs of a person or entity
whether through the ownership of voting securities, by contract or otherwise.
1.1.6 Single Purchases, Customer Purchases and Customers. For
purposes of this Lease, Demand Purchases, SVOD Selections and VOD Purchases may
be collectively referred to in this Lease as "Single Purchases". For purposes of
this Lease, Subscriptions, Demand Purchases, SVOD Selections and VOD Purchases
may be collectively referred to in this Lease as "Customer Purchases". For
purposes of this Lease, Service Subscribers, Demand Purchasers, SVOD Purchasers
and VOD Purchasers may be collectively referred to in this Lease as "Customers."
1.2 Grant of Rights.
1.2.1 By TESC. Subject to the terms and conditions of this Lease, TESC
hereby agrees to lease three (3) video channels of capacity on a Satellite to
Network for the sole purpose of transmitting the Programming Services in a
digitally compressed and encrypted format (or any other transmission method
determined by TESC in its sole discretion) on a twenty-four (24) hour per day,
seven (7) day per week Subscription, Demand Purchase, SVOD Selection, and/or VOD
basis, as determined by TESC in its sole judgment, to end-users in the
Territory.
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1.2.2 By Network. Subject to the terms and conditions of this Lease,
Network grants TESC and/or any of its Affiliates the right (but not the
obligation), along with all intellectual property rights appurtenant thereto
including without limitation, the non-exclusive, non-transferable, limited use
of all copyrights and trademarks, to: (i) offer and sell Customer Purchases, as
determined by TESC in its sole judgment, to residences; SMATVs, hotel/motels,
truck stops and other bulk-billed Customers; cellular telephones and other
handheld devices (only with respect to parts of the Programming Services for
which Network has the rights for cellular telephone and handheld devices, except
that all of the Programming Services may delivered to PocketDish, as such device
may be renamed or modified from time to time); and vehicles (e.g. cars,
airplanes, recreational vehicles and commercial hauling vehicles) and/or to
sub-distribute the Programming Services (to private cable operators, franchised
cable operators, housing cooperatives, municipalities and the like) subject to
the restrictions set forth in Section 1.5. In furtherance of and without
limiting the generality of the foregoing, Network agrees and acknowledges that
TESC shall have the non-exclusive right to (i) bundle the Programming Services
with other programming services either now or in the future offered by TESC or
its Affiliates; (ii) authorize and deauthorize IRDs or other devices to receive
the Programming Services for Customers; and (iii) distribute the Programming
Services using any transport technology either now existing or later developed
including without limitation C-band receive facilities such as SMATV systems and
all forms of wireless and wire-line data distribution technology (including, by
way of example but not limitation, BSS or FSS satellite regardless of frequency
or band; copper wire; fiber optic or coaxial cable; all forms of terrestrial
wireless; and Internet Technologies) as necessary to deliver the Programming
Services to Customers and to exercise the rights granted herein. Except in the
case of transmission via Internet Technologies to a computer (which transmission
is subject to the restrictions contained in Section 1.2.3 below), the
Programming Services shall be transmitted for reception via a Set Top Box. For
purposes of this Lease, "Set-Top Box" means those certain conditional access and
control hardware components (provided by TESC, its Affiliate, or a third party)
that connect to, or are integrated as part of, a television or other video
output display device ("Display Device") (including a computer monitor to the
extent that the computer providing a signal to the monitor has a video card with
a television input with the purpose of the computer being used as a television)
and also connect to TESC's transmission system, the content of which then is
displayed on the Display Device, and which have been commercially adopted for
use with the TESC's transmission system for delivery of television programming
services to viewers at a residential or commercial location. In the case of
transmission of the Programming Services via Internet Technologies to a
computer, another conditional access system may be used.
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1.2.3 Internet Technologies. For purposes of this Lease, "Internet
Technologies" means technologies using one or more computer networks that
utilize TCP/IP, IP or other architecture or that uses computer terminals,
terminal servers, routers, multicasting technology or other data processing or
transmission device (regardless of transmission speed experienced by the end
user) whether via cable, wire, wireless, set-top boxes or other technology,
regardless of the end-user's viewing device. Without limiting the generality of
the foregoing, "Internet Technologies" shall include, without limitation, the
Internet as presently configured and all modifications and additions thereto and
substitutions thereof (including, without limitation, the Internet II) whether
using means, methods, processes media or technology now known or later
developed. It is specifically acknowledged and agreed that Internet Technologies
shall include the right to "download," "stream," "push," "pull" and/or
"pre-cache" (as such terms are used in the Internet industry) programming,
whether at a time determined by TESC, the customer or any third party. For
purposes of this Lease, "Internet" shall mean the series of global,
interconnected, packet-switched networks that utilize transmission control
protocols ("TCP") and internet protocols ("IP") to communicate and otherwise
transmit information to and from connected users' computers and operating
systems. Notwithstanding the provisions of Section 1.2.2 of this Lease, TESC
acknowledges that Network does not have the rights necessary for the
distribution of certain programming contained in the Programming Services via
Internet Technologies. TESC may not distribute such identified programming via
Internet Technologies without the prior written consent of Network. However,
Network shall provide TESC with access to its entire library of programming of
the type contained in the Programming Services for which it has Internet
Technologies distribution rights except to the extent that such rights for
specific content prohibit Network from allowing third parties to distribute the
content. Content for transmission by Internet Technologies shall be hosted by
Network at no cost to TESC.
1.2.4 Packaging. TESC may in its sole discretion, but shall not be
obligated to, offer the Programming Services on a Subscription, Demand Purchase,
SVOD Selection and/or VOD Purchase basis, both in standard definition and in
high definition, if applicable, and may in its sole discretion, but shall not be
obligated to, bundle the Programming Services with other adult programming
services. In the event that Network's Programming Services are bundled with
other adult programming services, Network shall receive fees that are consistent
with the payment calculations described in Section 5.6 for the applicable type
of bundled service.
1.3 Programming Services.
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1.3.1 Elements. The Programming Services are comprised of the
programming elements set forth on the Programming Schedule attached hereto as
EXHIBIT A, which is incorporated herein by this reference. Network acknowledges
and agrees that the Programming Services will not directly or indirectly
advertise, market, promote or otherwise reference any distributor of programming
services which is not owned and/or operated by TESC and/or its Affiliates. In
addition to the limitations set forth in Section 5.5 of this Lease, Network
agrees that no Programming Service (including any advertising contained in the
Programming Service will contain (i) religious programming; (ii) the promotion
or marketing of "800" or "888" telephone services other than in connection with
direct response advertising, or (iii) the promotion or marketing of "900," or
"976" telephone services, or other similar services that bill a caller for
placing or confirming the call (other than for the telephone company's cost of
the call), unless the telephone services are operated by Network and not a third
party.
1.3.2 Compliance. Upon request by TESC, Network shall provide TESC with
sufficient proof, as determined in TESC's reasonable judgment, of Network's
right to distribute any content that airs on the Programming Services. If there
is a material change in the programming content set forth in EXHIBIT A hereto,
as determined in TESC's reasonable judgment, Network must notify TESC in writing
at least thirty (30) days in advance of such programming content change. In the
event that a Programming Service at any time does not comply with the
requirements set out in EXHIBIT A, as determined by TESC in its sole judgment,
TESC shall have the option, exercisable in its sole discretion, to cease
transmission of the applicable Programming Service effective thirty (30) days
after delivery of written notice to Network. In the event that Network does not
provide TESC with sufficient proof of Network's license rights to any content
contained in the Programming Services upon request, TESC shall have the option,
exercisable in its sole discretion, to cease transmission of the applicable
Programming Service effective immediately upon delivery of written notice to
Network. In the event that TESC ceases transmission of a Programming Service
pursuant to this Section 1.3.2, such cessation shall be without prejudice to any
other rights or remedies that TESC might have under this Lease, at law, in
equity or otherwise.
1.3.3 Nesting. TESC agrees that it will not use any of the Programming
Services to nest or incubate another programming service within the Programming
Service (a "Second Service"), nor will it "clone" a Programming Service into a
Second Service by duplicating programming from the Programming Service on to any
such Second Service and/or by removing programming from the Programming Service
and distributing it on such Second Service. TESC shall have no obligation to
transmit a Second Service.
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1.4 Territory. The "Territory" shall mean the geographic boundaries of the
United States and its territories, possessions, and commonwealths. TESC is
hereby authorized to distribute, exhibit or, subject to the restrictions set
forth in Section 1.5, authorize any third party to distribute or exhibit each of
the Programming Services, in whole or in part, to any location in the Territory,
subject to all applicable laws, rules and regulations, including without
limitation the laws, rules and regulations of the U.S. Government, the
government of any foreign country, and their respective agencies. TESC reserves
the right, at its sole option, to blackout distribution of the Programming
Service in certain states and/or communities within the Territory. Network is
expressly prohibited from marketing or promoting, or attempting to market or
promote, Subscriptions and/or Demand Purchases to any of the Programming Service
directly or indirectly to persons or entities which: (i) intend to view the
Programming Service in any location outside the Territory, or in any geographic
area for which TESC has determined, in its sole judgment, a blackout is
necessary, provided that TESC shall give Network written notice (in the form of
either a facsimile or an e-mail) of any such geographic area ("each, a "Blackout
Area"); (ii) are under the age of eighteen (18); (iii) may not legally purchase
the Programming Service or to whom the Programming Service may not legally be
sold; or (iv) intend to resell the Programming Service or provide the
Programming Service to third parties on a free-to-guest basis. In the event that
Network breaches its obligations under this Section 1.4, TESC shall be entitled
to terminate this Lease, in whole or in part, effective immediately upon
delivery of written notice to Network and to immediately cease the transport of
one or more of the Programming Services upon delivery of written notice to
Network. Any such termination shall be without prejudice to any other rights or
remedies that TESC might have under this Lease, at law, in equity or otherwise.
Network and TESC hereby acknowledge that, as of the Effective Date, the
following areas are Blackout Areas: Alabama; Mississippi; North Carolina;
Oklahoma; Tennessee; Utah; Cincinnati, Ohio; Arkansas; Indianapolis, Indiana;
Jacksonville, Florida; Tallahassee, Florida; Pensacola, Florida; Panama City,
Florida; and Polk County, Florida. Notwithstanding anything to the contrary
contained in this Lease, Network understands and agrees that the signals of the
Programming Services, when transmitted, may extend beyond the geographic
boundaries of the Territory and that such "overspill," in and of itself, shall
not be a breach of this Lease.
1.5 Wholesale Rights. TESC shall have the right, but not the obligation, to
offer and sell all or any of the Programming Services on a wholesale
Subscription basis, and/or any of the programming on any of the Programming
Services on a wholesale Single Purchase basis, as determined by TESC in its sole
judgment from time to time, to third parties who, in turn, will resell the
Programming Services or such programming at a retail price to be determined in
the third party's sole judgment. TESC shall determine the wholesale Subscription
and/or wholesale Single Purchase rates to be charged to such third parties for
the Programming Services and/or programming in its sole discretion. Any
agreements between TESC and any third parties contemplated by this Section shall
require that the Programming Services shall be delivered by such third parties
via a Set Top Box. The number of Service Subscribers per wholesale account shall
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be determined on an equivalent billing unit basis based upon wholesale
Subscription revenues actually collected by TESC subject to any adjustments
contained in Section 3.1.6. The number of Demand, SVOD and VOD Purchasers per
wholesale account shall be determined on an equivalent billing unit basis based
upon wholesale Single Purchase revenues, respectively, actually collected by
TESC subject to any adjustments contained in Section 3.1.6. TESC shall determine
in its sole discretion to whom, if anyone, TESC will offer and sell the
Programming Services or such programming on a wholesale basis.
2. TERM This Lease shall commence on the Effective Date and shall continue for
three (3) years thereafter, unless terminated sooner as provided herein (the
"Term"); provided however, that in addition to the termination rights set forth
elsewhere in this Lease, TESC may terminate this Lease, either in total or with
respect to one or more of the Programming Services, for any reason or no reason
in its sole judgment upon thirty (30) days advance written notice to Network.
Network agrees that upon the expiration or earlier termination of this Lease, if
TESC has already sold Subscriptions to any of the Programming Services, then, at
TESC's option, Network shall continue to provide TESC the applicable Programming
Services under the terms and conditions outlined herein for a period of time
("Programming Service Extension") that is the shorter of twelve (12) months or
that number of months necessary for TESC to provide the applicable Programming
Services to Service Subscribers who bought a multi-month Subscription to such
Programming Services prior to the receipt of notice of termination of the Lease.
3. RENT AND RESIDUAL REVENUES; RETAIL PRICE OF PROGRAMMING; PAYMENTS AND DUE
DATES
3.1 Rent and Residual Revenues.
3.1.1 Offset. Network hereby grants TESC and its Affiliates the right,
but TESC and its Affiliates shall have no obligation, to offset any amounts due
to Network hereunder against any amounts due to TESC and/or any of its
Affiliates from Network or any Affiliate thereof.
3.1.2 Rent. As consideration for the lease of satellite capacity by
TESC to Network, and subject to the offset rights granted to TESC pursuant to
Section 3.1.1 above, TESC shall pay Network for each Reporting Period (as such
term is defined in Section 3.1.3 below) the [* * *] of [* * *] percent [* *
*]%[* * *] of:
(a) Subscription Revenues (as such term is defined in Section 3.1.4
below) received during such Reporting Period or: (i) as to the [* * *]
Programming Service, $[* * *] per [* * *] during such Reporting Period or $[* *
*] per [* * *] during such Reporting Period; or (ii) as to the [* * *]
Programming Services, $[* * *] per [* * *] or $[* * *] per [* * *]; and
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(b) Single Purchase Revenues (as such term is defined in Section
3.15 below) received during such Reporting Period or: (1) as to the [* * *]
Programming Service, $[* * *] per [* * *] during such Reporting Period; or (ii)
as to the [* * *] Programming Services, $[* * *] per [* * *].
TESC shall be entitled to retain the remainder of such Subscription Revenues and
Single Purchase Revenues from each Reporting Period as Rent. Subject to Section
12 below, the calculation set forth above shall remain in effect regardless of
whether the Programming Services are transmitted via satellite, Internet
Technologies, wireless technology or any other technology now known or
discovered in the future.
3.1.3 Reporting Period. "Reporting Period" means the period between the
22nd day of one calendar month and the 21st day of the following calendar, as
such Reporting Period may change from time to time in TESC's sole discretion.
3.1.4 Subscription Revenues. "Subscription Revenues" for each
Programming Service in a particular Reporting Period shall be calculated by
multiplying the then current retail price per month for a single-family
Subscription to the Programming Service by the average of the sum of: (a) number
of Service Subscribers to such Programming Service as of the last day of the
Reporting Period in question; and (b) the number of Service Subscribers to such
Programming Service as of the last day of the immediately preceding Reporting
Period, and then rounding the product down to the next full dollar amount. For
example, if: (i) there are 30,000 Service Subscribers to the Extasy Programming
Service as of the last day of the Reporting Period in question; (ii) 20,000
Service Subscribers to the Extasy Programming Service as of the last day of the
immediately preceding Reporting Period; and (iii) the retail price per month for
a single-family Subscription to the Extasy Programming Service is US$24.99, then
there would be US$624,750 in Subscription Revenues for the Extasy Programming
Service for the Reporting Period in question, which is equal to US$24.99 (the
then current retail price per month for a single-family Subscription to the
Extasy Programming Service) times 25,000 (the average of the sum of number of
Service Subscribers to the Extasy Programming Service as of the last day of the
current Reporting Period and the number of Service Subscribers to the Extasy
Programming Service as of the last day of the immediately preceding Reporting
Period or (30,000 + 20,000) divided by 2). Such calculation shall be done on a
like-technology and like-delivery basis, using the current retail price per
month for a single-family Subscription to the Programming Service via the
applicable technology and delivery mechanism. Any Service Subscriber who
receives the Programming Service from TESC or any of its Affiliates: (A) through
more than one (1) distribution technology; (B) to more than one type of device;
and/or (C) in more than one package of services shall be included in the Service
Subscriber count as only one (1) Service Subscriber.
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3.1.5 Single Purchase Revenues. "Single Purchase Revenues" for a
Programming Service for a particular Reporting Period shall be calculated by
adding (a) the product obtained by multiplying the number of Demand Purchases of
the Programming Service actually made during the relevant Reporting Period by
the then current retail price per single-family Demand Purchase for that
Programming Service, (b) the product obtained by multiplying the number of SVOD
Selections of the Programming Service actually made during the relevant
Reporting Period by the then current retail price per single-family SVOD
Selection for the Programming Service, if any, and (c) the product obtained by
multiplying the number of VOD Purchases actually made of the Programming Service
during the relevant Reporting Period by the then current retail price per
single-family VOD Purchase for the Programming Service. Each product in such
calculation shall be rounded down to the next full dollar amount before such
products are added together as set forth in this subsection. Such calculation
shall be done on a like-technology and like-delivery basis, using the current
retail price per month for a Single Purchase via the applicable technology and
delivery mechanism. Any Single Purchase of the same programming from TESC or any
of its Affiliates: (A) through more than one (1) distribution technology; (B) to
more than one type of device; and/or (C) in more than one package of services
shall be counted as only one Single Purchase. In no event shall any "universal
service" charges applicable to common carriers of television programming signals
be deducted from Single Purchase Revenues or any component thereof.
3.1.6 Adjustments. Notwithstanding Sections 3.1.4 and 3.1.5,
TESC shall adjust Subscription Revenues and Single Purchase Revenues, up or
down, for any given Reporting Period to account for: (i) differences between
Subscription Revenues and Single Purchase Revenues previously calculated and
Subscription Revenues and Single Purchase Revenues actually collected; (ii)
refunds and credits issued by TESC in connection with such Customer Purchases
but only to the extent that such refunds and credits do not exceed three percent
(3%) of the Subscription Revenues and Single Purchase Revenues received during
the same period of time; and/or (iii) sales tax assessed or other fees imposed
by governmental or quasi-governmental entities in any way related to TESC's
transmission or distribution thereof (except for universal service charges
imposed upon common carriers) on Customer Purchases that were included in the
calculation of revenues actually collected from the sale of Customer Purchases
by TESC and that has previously been remitted by TESC; and/or (iv) any
adjustments required as a result of bad debt or non-payment from Service
Subscribers or any separate charge imposed by TESC for Single Purchases
including without limitation charges for automatic number identification, and
order fees. Network acknowledges and agrees that revenues actually collected by
TESC from a particular Customer will first be applied towards the payment of
outstanding balances due for any DISH Network programming services purchased by
that Customer, as the case may be, and then will be applied towards the payment
of any outstanding balance due from that Customer, as the case may be, for the
Programming Services.
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3.2 Retail Price of Programming Services. TESC shall determine the
retail pricing for Customer Purchases in its sole discretion.
3.3 Telephone Charges. Network acknowledges and agrees that in the
event of: (i) the interruption of service or other transmission failure
resulting in non-compliance by Network with TESC's technical requirements; or
(ii) any other failure by Network to meet the technical metrics provided by
TESC, TESC shall be entitled, at its option, to charge Network the sum of [* *
*] (US$[* * *]) per telephone call received by TESC or any of its Affiliates
from a Service Subscriber in connection with such failure to meet the technical
metrics. TESC's invoice for such telephone charges shall include backup
documentation sufficient to allow Network to verify the accuracy of the charges.
3.4 Payments and Due Dates.
3.4.1 Due Date. Subscription Revenues and Single Purchase Revenues
owing to Network hereunder for a given Reporting Period shall be paid by TESC no
later than sixty (60) days after the end of the calendar month in which the
relevant Reporting Period ends.
3.4.2 Payment. All such payments shall be made by ordinary mail made
out to Network at the following address: The Erotic Networks, Attn: Accts
Receivable, PO Box 3018, Albuquerque, NM 87190-3018, or to such other address
designated by Network with at least sixty (60) days advance written notice to
TESC.
4. REPORTS; BOOKS AND RECORDS; AUDIT RIGHTS
4.1 Reports. Within sixty (60) days after the end of the calendar month in
which the relevant Reporting Period ends (or within thirty (30) days if
commercially practical), TESC shall supply to Network (a) the total number of
Service Subscribers for each of the Programming Services as of the last day of
the relevant Reporting Period and the immediately preceding Reporting Period,
(b) the total number of Demand Purchases for each of the Programming Services
made during the relevant Reporting Period, (c) the total number of SVOD
Selections for each of the Programming Services made during the relevant
Reporting Period (if such information is readily available to TESC, and (d) the
total number of VOD Purchases for each of the Programming Services made during
the relevant Reporting Period. Network acknowledges and agrees that all
information provided by TESC to Network under this Section 4.1 is deemed
proprietary to TESC, and Network represents and agrees that it will treat all
such information confidential in the same manner as all Subscriber Information
(as hereinafter defined in Section 13.11.2 below) under Section 13.11 of this
Lease.
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4.2 Books and Records. TESC shall maintain for a period of at least one (1)
year during the Term, and for one (1) year thereafter, materially complete and
accurate records pertaining to its obligations under Section 12 of this Lease.
4.3 Network's Audit Rights. No more than once every twelve (12) months
during the Term and on a one (1) -time basis only for one (1) year thereafter,
and upon at least thirty (30) days advance written notice, Network shall have
the right, through a nationally recognized independent accounting or consulting
firm approved by TESC, to perform an audit at TESC's offices, during normal
business hours, of the books and records of TESC with respect to the Programming
Services that are reasonably necessary for the sole purpose of verifying
Subscription Revenue payments, Single Purchase Revenue payments, any adjustments
made thereto and telephone charges. Network shall not be entitled to audit for
any particular time period more than once. Any audit shall be limited to the
books and records of the preceding and current year only. Such audit shall be
conducted at Network's sole cost, and Network shall provide TESC with a copy of
the results of any such audit within four (4) months of conducting the audit.
The audit firm shall execute a non-disclosure agreement acceptable to TESC, in
its reasonable discretion. Any claim as a result of an audit shall be limited to
the current year and the immediate preceding year. Performance and acceptance of
an audit by Network of TESC's books and records shall be conclusively deemed as
acceptance by Network of full and final payment by TESC with respect to all
accounts covered by such audit; provided that any unpaid or underpaid
Subscription Revenues and Single Purchase Revenues revealed by such audit are
actually paid in full by TESC.
5. MARKETING AND SALES
5.1 Marketing and Press Releases by Network.
5.1.1 Marketing by Network. Network will use reasonable efforts to
market and promote the Programming Services to prospective Customers throughout
the Territory; provided, that Network shall not market the Programming Services
to Customers or prospective Customers outside of the Territory or in Blackout
Areas. In no event will Network or any of its Affiliates directly or indirectly
use any TESC Identifying Information in connection with the marketing and
promotion of any Programming Service without TESC's prior written approval,
which approval TESC may withhold in its sole discretion. For purposes of this
Lease, "TESC Identifying Information" shall mean any logos, trademarks, service
marks, trade names or other information in any form now or hereafter used by
TESC and/or any of its Affiliates to identify itself or themselves or any of its
or their products and/or services. Network shall provide to TESC, at least
thirty (30) days prior to first use, an example of any advertising or
promotional materials to be used by Network and/or any of its Affiliates that
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directly or indirectly use any TESC Identifying Information in connection with
the marketing and promotion of a Programming Service, which use has not, within
the past twelve months, been approved by TESC in exactly the form intended for
use. TESC may reject and prohibit Network and its Affiliates from using any such
materials for any reason or no reason in its sole and absolute discretion. In
the event that TESC does not grant written approval of marketing materials
within five (5) business days after receiving them from Network, the marketing
materials submitted shall be deemed rejected and Network and its Affiliates
shall be prohibited from using such materials. In the event that Network or any
of its Affiliates: (i) directly or indirectly uses any TESC Identifying
Information in connection with the marketing and promotion of a Programming
Service without TESC's prior written approval; or (ii) are required to, but fail
to provide TESC with proposed advertising or promotional materials at least
thirty (30) days prior to first use, TESC shall be entitled to terminate this
Lease with respect to any or all of the Programming Services effective
immediately upon delivery of written notice to Network. Any such termination
shall be without prejudice to any other rights or remedies that TESC might have
under this Lease, at law, in equity or otherwise. Notwithstanding the foregoing,
Network may market and promote the Programming Services as being available on a
"high-powered DBS service" (or words of substantially the same import).
Advertising, marketing and promotional materials utilized by Network in
connection with the Programming Services may not directly or indirectly
advertise, market, promote or otherwise refer to any distributor of programming
services which is not owned and/or operated by TESC and/or it Affiliates.
Network agrees that, if requested by TESC in writing, it shall produce and
deliver to TESC one (1) customized thirty (30) second advertising spot for TESC
or its Affiliate for each calendar year during the Term for each of the
Programming Services, which customized spot shall include multiple languages as
they become available.
5.1.2 Press Releases by Network.In no event will Network or any of its
Affiliates directly or indirectly use any TESC Identifying Information in any
press release issued by Network and/or its Affiliates without TESC's prior
written approval, which approval TESC may withhold in its sole discretion.
Network shall provide to TESC, at least thirty (30) days prior to release and in
exactly the form intended to be publicly released by Network and/or any of its
Affiliates, any and all press releases which directly or indirectly use any TESC
Identifying Information (as defined in Section 5.1.1 above). TESC may reject and
prohibit Network and its Affiliates from publicly releasing such press releases
for any reason or no reason in its sole and absolute discretion. In the event
that TESC does not grant written approval of a press release within five (5)
business days after receiving it from Network, the press release submitted shall
be deemed rejected and Network and its Affiliates shall be prohibited from
publicly releasing it. In the event that Network and/or any of its Affiliates:
(i) directly or indirectly uses any TESC Identifying Information in any press
release issued by Network and/or its Affiliates without TESC's prior written
approval; or (ii) are required to, but fail to provide TESC with a proposed
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press release at least thirty (30) days prior to release, TESC shall be entitled
to immediately terminate this Lease with respect to any or all of the
Programming Services by providing written notice to Network to that effect. Any
such termination shall be without prejudice to any other rights or remedies that
TESC might have under this Lease, at law, in equity or otherwise.
5.2 Marketing by TESC. TESC and its Affiliates shall have the right, but
not the obligation, to market and promote the Programming Services in a
substantially similar manner as it markets and promotes other programming
services transmitted in a digitally compressed and encrypted format via the
Satellite. Network agrees to permit TESC to use Network's trademarks to market
the Programming Service to end users in the Territory. Network shall provide
TESC with any cross channel promotional materials, print and Internet marketing
materials reasonably requested by TESC.
5.3 Electronic Programming Guide. TESC reserves the right to (i) enable
Service Subscribers and/or TESC customer service representatives to remove the
Programming Service from the Service Subscriber's electronic programming guide
("EPG") generally available to DISH Network customers and (ii) to alter,
substitute, delete or otherwise modify the display of individual program titles
on the EPG as TESC determines its sole and absolute discretion.
5.4 Sales.
5.4.1 Orders. TESC shall be responsible for receiving and processing
orders for the Programming Services. At all times during the Term, TESC shall be
responsible for billing and collecting payment from Customers, and the
authorization and deauthorization of IRDs to receive the Programming Services;
provided, however, that TESC shall have absolutely no obligation to authorize,
and hereby expressly retains the right to deauthorize, any IRD or other
comparable device which TESC determines in its sole judgment is: (i) in a
Blackout Area; (ii) being used or is going to be used to view the Programming
Services in a Blackout Area; or (iii) within the control of any person who may
not legally purchase the Programming Services or to whom the Programming
Services may not legally be sold; provided, further, that TESC shall have
absolutely no obligation to authorize an IRD or other device to receive a
Programming Service unless the Customer provides TESC with a street mailing
address (i.e., not a post office box).
5.4.2 Direct Payments. Network acknowledges and agrees that under no
circumstances shall Network collect any payment for Customer Purchases of a
Programming Service directly from any Customer, and that all payments for
Customer Purchases will be made directly to TESC. In the event that,
notwithstanding Network's best efforts to comply with this requirement, any
Customer forwards any payment to Network rather than to TESC directly, Network
shall immediately forward the payment, including any and all sales or similar
tax payments included within the amount forwarded to Network, to TESC without
deduction or offset of any kind, and shall instruct the Customer that all future
payments must be made to TESC directly.
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5.4.3 Fees. TESC may, as a condition of furnishing certain programming
services to Customers including without limitation the Programming Services,
pay-per-view, subscription video on demand, video on demand and a la carte
programming, impose additional access fees if a Customer does not maintain a
minimum level of programming services as determined by TESC or for any other
reason determined by TESC, in its sole judgment, as such additional fees may
change from time to time in TESC's sole discretion. No such fees shall be
included in the definition of Subscription Revenues or Single Purchase Revenues.
5.5 TESC's Announcements. The Programming Services shall not contain more
than four (4) minutes of third party commercial advertising time in each
90-minute block of programming. TESC shall have the right to two (2) minutes of
such four (4) minutes of advertising time whether or not Network sells any such
time for third party commercial advertising. Upon notification by TESC that TESC
or its Affiliates have sold any advertising time, Network shall properly "tone
switch," using industry recognized equipment, via inaudible signals, all such
advertising time to enable TESC to insert its commercial announcements. Network
and TESC agree that no advertising inserted by either of them on the Programming
Services shall contain any promotions or advertisements for any video
programming service (including any programming service affiliated or associated
with Network) unless TESC or its Affiliate transmits the other service, except
that Network can include promotions or advertisements for web sites, short
messaging services ("SMS") and other wireless products and services owned and
controlled by Network to the extent that they do not promote specific content
not included in the Programming Services or encourage end users to use those
services to access content not available on the Programming Services.
Notwithstanding anything herein to the contrary, no advertising inserted by TESC
or its Affiliates on the Programming Services shall contain any promotions or
advertisements for any specific adult video programming service or specific
adult VHS/DVD distribution offered by a competitor of Network or for "800,"
"888," "900," or "976" telephone sex chat services, regardless of whether TESC
or its Affiliates transmits such video programming service, except that TESC and
its Affiliates can insert promotions and advertisements regarding its or their
own web services or portals. Neither party shall insert advertising or messages
on the Programming Services which in any way disparage the other, any Affiliate
of the other or TESC's or any of its Affiliate's transmission systems. The
Programming Services, including without limitation commercial announcements
inserted by Network, shall not include any calls to action or similar messages,
or prompts or triggers with respect to information embedded in or around the
signals of the Programming Services, that TESC has not agreed to in advance and
in writing, and, except as set forth above, shall not advertise or otherwise
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direct Customers to any web site where programming included in any of the
Programming Services may be viewed. Network agrees that none of the Programming
Services will air any promotional spot (whether alone or in conjunction with any
other person or entity) indicating that any other method of transmission offers
a service not transmitted by TESC or its Affiliates. Except as specifically
provided herein, Network shall not black out any programming that airs on any of
the Programming Services. Network shall not seek a surcharge or additional fee
of any kind from TESC in connection with any of the programming that airs on any
of the Programming Services. In addition to and without limiting any other
rights and remedies TESC may have, TESC shall have the immediate right to
declare Network in breach of this Lease, with no opportunity for cure, if
Network violates any of the foregoing more than twice in any calendar year.
5.6 Packaging.
5.6.1 TESC Discretion. TESC may offer a la carte Subscriptions to, and
Single Purchases of, the Programming Services or bundle the sale of Customer
Purchases of the Programming Services with any of TESC's new or existing
programming packages or services. The retail price for any bundled services
including the Programming Services shall be determined in TESC's sole
discretion.
5.6.2 Bundled Subscription Service.
(a) In the event that TESC elects to bundle Subscriptions to a
Programming Service with subscriptions to any other Programming Services,
programming package(s) or programming service(s) (collectively, the "Bundled
Subscription Service"), the number of Service Subscribers to that Programming
Service attributable to the Bundled Subscription Service as of the last day of
any given Reporting Period shall be equal to the quotient of the amount of
Bundled Subscription Service Revenues attributable to that Programming Service
under Section 5.6.2(b) below during that particular Reporting Period divided by
the then current retail price per month for a single-family Subscription to that
Programming Service, which quotient shall be rounded down to the next full
number of Service Subscribers. For example, if US$100,000.00 in Bundled
Subscription Service Revenues are attributable to the Extasy Programming Service
under Section 5.6.2(b) below during a given Reporting Period and the then
current retail price per month for a single-family Subscription to the Extasy
Programming Service is US$24.99, there would be 4,001 Extasy Service Subscribers
attributable to the Bundled Subscription Service as of the last day of that
Reporting Period. Such calculation shall be done on a like-technology and
like-delivery basis, using the current retail price per month for a
single-family Subscription to the Bundled Subscription Service via the
applicable technology and delivery mechanism. Any Service Subscriber who
receives the Bundled Subscription Service from TESC or any of its Affiliates:
(A) through more than one (1) distribution technology; (B) to more than one type
of device; and/or (C) in more than one package of services shall be included in
the Service Subscriber count as only one (1) Service Subscriber.
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(b) "Bundled Subscription Service Revenues" for a particular
Reporting Period shall be calculated by multiplying the then current retail
price per month for a single-family Subscription to the Bundled Subscription
Service by the average of the sum of: (a) number of subscribers to such Bundled
Subscription Service as of the last day of the Reporting Period in question; and
(b) the number of subscribers to such Bundled Subscription Service as of the
last day of the immediately preceding Reporting Period, and then rounding the
product down to the next full dollar amount. The percentage of Bundled
Subscription Service Revenues attributable to each particular programming
package or service comprising a Bundled Subscription Service containing one or
more of the Programming Services shall be equal to the quotient of the then
current retail price per month for a single-family subscription to the relevant
programming package or service divided by the sum of the then current retail
prices per month for single-family subscriptions to each of the individual
programming packages or services constituting the relevant Bundled Subscription
Service, which quotient shall be rounded down to the next full percentage point.
For example, if TESC bundles a Subscription to the Extasy Programming Service
(US24.99 per month for a single-family Subscription) with "Channel X" (US$15.99
per month for a single-family subscription) and "Channel Y" (US$9.99 per month
for a single-family subscription), then the percentage of Bundled Subscription
Service Revenues attributable to the Extasy Programming Service would be equal
to the quotient of then current retail price per month for a single-family
Subscription to the Extasy Programming Service (US24.99) divided by the sum of
the current retail price per month for a single-family Subscription to the
Extasy Programming Service and the then current retail prices per month for
single-family subscriptions to Channel X and Channel Y (US$50.97), or forty-nine
percent (49%). Such calculation shall be done on a like-technology and
like-delivery basis, using the current retail price per month for a
single-family Subscription to the Bundled Subscription Service via the
applicable technology and delivery mechanism. Any Service Subscriber who
receives the Bundled Subscription Service from TESC or any of its Affiliates:
(A) through more than one (1) distribution technology; (B) to more than one type
of device; and/or (C) in more than one package of services shall be included in
the Service Subscriber count as only one (1) Service Subscriber.
5.6.3 Bundled Single Purchase Service.
(a) In the event that TESC elects to bundle Single Purchases of a
Programming Service with similar types of purchases of any other Programming
Services, programming package(s) or other programming service(s) (collectively,
the "Bundled Single Purchase Service"), which Bundled Single Purchase Service
must bundle the same types of Single Purchases (i.e., Demand Purchases, SVOD
Selections or VOD Purchases), the Single Purchases Revenues for the Programming
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Service attributable to the Bundled Single Purchase Service during a given
Reporting Period shall be equal to the quotient of the amount of Bundled Single
Purchase Service Revenues attributable to the applicable Programming Service
pursuant to Section 5.3.35.6.3(b) below during that particular Reporting Period
divided by the then current retail price per single-family Single Purchase of
that type (Demand, SVOD or VOD) of the Programming Service, which quotient shall
be rounded down to the next full percentage point. For example, if US$50,000.00
in Bundled Demand Service Revenues are attributable to Demand Purchases of the
Extasy Programming Service under Section 5.6.3(b) below during a given Reporting
Period and the then current retail price per single-family Demand Purchase of
the Extasy Programming Service is US$9.99, there would be 5,005 Demand Purchases
of the Extasy Programming Service attributable to the Bundled Demand Service for
that particular calendar month. Such calculation shall be done on a
like-technology and like-delivery basis, using the current retail price per
month for a single-family Single Purchase of the Bundled Single Purchase Service
via the applicable technology and delivery mechanism.
(b) "Bundled Single Purchase Revenues" for a particular Reporting
Period shall be calculated by multiplying the number of purchases actually made
of the Bundled Single Purchase Service during the relevant Reporting Period by
the then current retail price per single-family purchase of the Bundled Single
Purchase Service. The percentage of Bundled Single Purchase Revenues
attributable to each particular Programming Service, programming package or
other programming service comprising a Bundled Single Purchase Service shall be
equal to the quotient of the then current retail price per single-family
purchase of that type (PPV, SVOD or VOD) of the relevant Programming Service,
programming package or other programming service divided by the sum of the then
current retail prices per single-family purchase of that type (PPV, SVOD or VOD)
of the individual Programming Services, programming packages or other
programming services constituting the relevant Bundled Demand Service, which
quotient shall be rounded down to the next full percentage point. For example,
if TESC bundles a Demand Purchase of the Extasy Programming Service (US$9.99 per
single-family Demand Purchase) with PPV purchases of "Channel X" ($3.99 per
single-family demand purchase) and "Channel Y" ($1.99 per single-family demand
purchase), then the percentage of Bundled Demand Service Revenues attributable
to the Extasy Programming Service would be equal to the quotient of then current
retail price per single-family Demand Purchase of the Extasy Programming Service
(US$9.99) divided by the sum of the current retail price per single-family
Demand Purchase of the Extasy Programming Service and then current retail prices
per single-family PPV purchases of Channel X and Channel Y (US$15.97), or
sixty-two percent (62%). Such calculation shall be done on a like-technology and
like-delivery basis, using the current retail price per month for a
single-family Single Purchase of the Bundled Single Purchase Service via the
applicable technology and delivery mechanism.
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5.6.4 Mixed Bundles. In the event that TESC elects to bundle
Subscriptions to any of the Programming Services with PPV, SVOD or VOD purchases
of any other programming package(s) or service(s) or TESC elects to bundle
Single Purchases of any of the Programming Services with subscriptions to any
other programming package(s) or service(s), or TESC elects to bundle purchases
via one type of technology or delivery mechanism with purchases via another type
of technology or delivery mechanism, the parties shall mutually agree upon the
number of Service Subscribers and Single Purchases attributable to the sale of
such bundled services.
6. RECEPTION AND DISTRIBUTION OF THE PROGRAMMING SERVICE
6.1 Signal Delivery by Network.
6.1.1. Delivery of Signal. Network shall be solely responsible for all
costs of production, programming and delivery of the Programming Services to
TESC's uplink facility in Cheyenne, Wyoming and/or TESC's uplink facility in
Gilbert, Arizona or any other uplink facility designated by TESC (as determined
in TESC's sole judgment from time to time upon reasonable prior written notice
to Network) (the "Uplink Facility") including, without limitation the provision
of any equipment necessary to receive and process the Programming Services at
the Uplink Facility. Network will transmit to TESC a high-quality signal for
each of the Programming Services from a satellite and shall keep TESC apprised
of both the satellite and transponder it is using for such transmission. In the
event that Network desires to change the satellite transmitting any of the
Programming Services to the Uplink Facility from the satellite used on the
Effective Date, Network agrees to give TESC written notice of the satellite and
transponder location by which the Programming Services will be delivered to the
Uplink Facility at least sixty (60) days prior to the date upon which Network
intends to commence delivery of the Programming Services via the new satellite.
In the event that a Programming Service's signal from the satellite indicated by
Network in any such notice cannot be received by TESC using existing antennas at
the Uplink Facility, Network agrees to pay all reasonable costs associated with
the purchase of appropriate downlink antenna equipment for, and the installation
and integration of such equipment at, the Uplink Facility within fifteen (15)
days after delivery of such notice. In the event that Network fails to pay such
costs in a timely manner, then TESC may at its option by notice to Network
delete transport of the Programming Service and terminate this Lease with
respect to any or all of the Programming Services. Any such termination shall be
without prejudice to any other rights or remedies that TESC might have under
this Lease, at law, in equity or otherwise.
6.1.2 Closed Captioning. Network agrees that during the Term it shall,
at its sole expense, include as part of the signals of the Programming Services
closed-captioning and video-descriptioning to the full extent required by any
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current or future federal, state or local law, rule or regulation (collectively,
the "Law"), and to the extent required to ensure that TESC is in compliance with
all such Laws, regardless of whether such Law imposes the obligation to include
closed captioning or video descriptioning, as applicable, on Network or TESC.
Network acknowledges and agrees that neither TESC nor any of its Affiliates,
shall have any liability in connection with Network's failure to prepare, insert
or include closed-captioning or video descriptioning, as applicable, in the
Programming Services as required by this subsection. Network also agrees to
cooperate with TESC on a commercially reasonable basis to the extent necessary
and desirable to establish compliance with any such Laws, and Network shall
provide TESC with all documents reasonably necessary for TESC to demonstrate
compliance with such Laws in a timely manner. Claims arising out of violations
of this subsection are subject to the indemnification provisions set forth in
Section 8.1 of this Lease.
6.1.3 Ratings. During the Term, Network shall, at its sole expense,
include as part of the signals of the Programming Services ratings information
or other such data in compliance with the voluntary-participation FCC parental
ratings guidelines (the "Ratings Guidelines") and any applicable Laws that would
enable customers of TESC or its Affiliates to exercise parental controls over
the programming on the Programming Services, and such ratings information or
other data shall be compatible with the Set Top Boxes or other technology used
by TESC and standard industry interactive technology implementing parental
controls. Network shall provide complete, accurate program rating data to TESC's
designated data provider as requested, or as otherwise required in this Lease.
Network acknowledges and agrees that neither TESC, nor any of its Affiliates,
shall have any liability in connection with Network's failure to prepare, insert
or include or program rating information in the Programming Services as required
by this subsection. Network also agrees to cooperate with TESC on a commercially
reasonable basis to the extent necessary and desirable to establish compliance
with any such guidelines or Laws, and Network shall provide TESC with all
documents reasonably necessary for TESC to demonstrate compliance with such
guidelines and Laws in a timely manner. Claims arising out of violations of this
subsection are subject to the indemnification provisions set forth in Section
8.1 of this Lease.
6.1.4 Other Laws. In the event that any programming on a Service is
regulated by any Law other than those specified above that is applicable to TESC
or its Affiliates, then Network shall comply with the Law, ensure that the
Programming Services comply with the Law and provide TESC with all documents
reasonably necessary for TESC to demonstrate compliance with the Law in a timely
manner.
6.1.5 Same Feed. Taking into account time zone differences, during the
Term each feed of the programming on each of the Programming Services, as
delivered to TESC at a given point in time, shall be the same as that feed of
programming delivered by Network to all Distributors in the Territory at such
point in time.
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6.1.6 Metadata. Network shall provide to an entity designated by TESC
from time to time the metadata information necessary to allow such entity to
provide an accurate description of programming to be included in the Programming
Services; provided, that guide information for the SVOD and VOD offerings may be
provided in the metadata file that is provided with the SVOD and VOD
programming. For clarity, Network shall: (i) ensure that the time blocks
available for sale are correctly mapped to the length of any given movie or
feature, and (ii) provide complete, accurate and timely program schedules and
program rating data to TESC's designated data provider (currently Tribune Media
Systems), as that data provider may be changed from time to time, at least eight
(8) weeks in advance of the air date.
6.2 Signal Transmission by TESC.
6.2.1 Delivery of Signal. Network is responsible for providing to TESC,
at Network's sole cost and expense, all equipment necessary for TESC to receive
the Programming Services. Except as otherwise set forth in the immediately
preceding sentence, TESC shall be responsible for the costs of compression,
encryption and transmission of the Programming Services from the Uplink Facility
to Customers; provided however, that if Network desires to change the technology
used to deliver or encode the signal of any of the Programming Services after
the Effective Date, Network agrees to give TESC written notice of the technology
that will be used to deliver and/or encode the signal at least sixty (60) days
prior to the date upon which Network intends to commence delivery and/or
encoding of the Programming Service using that technology. Network agrees to pay
all reasonable additional costs to be incurred by TESC in order to receive,
decode, compress, digitize, transmit or otherwise manipulate the signal due to
such change in technology within fifteen (15) days after delivery of such
notice. In the event that Network fails to pay such costs in a timely manner,
then TESC may at its option by notice to Network cease transmission of the
Programming Service and terminate this Lease with respect to any or all of the
Programming Services. Any such termination shall be without prejudice to any
other rights or remedies that TESC might have under this Lease, at law, in
equity or otherwise.
6.2.2 Compliance with Law. Notwithstanding anything to the contrary set
forth herein, Network acknowledges and agrees that TESC has no obligation to
transmit any of the Programming Services in any manner which is now, or at any
time hereafter may be, prohibited under any Law.
6.2.3 Equipment. Any and all equipment provided to TESC by Network
pursuant to this Lease will become TESC's sole and exclusive property upon
delivery of the equipment to TESC.
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6.3 Streaming Restrictions. Network agrees that it and its Affiliates
will not, and that it and its Affiliates will not authorize or permit (either
through a grant of rights or through acquiescence) any third party to, exhibit,
distribute or "stream," including, without limitation on a time delayed,
simulcast or other basis, any of the Programming Services using Internet
Technologies or any other technology in any format, including without limitation
in multimedia, interactive, three dimensional or other augmented or enhanced
format (collectively, "Content Streaming") whether for a fee or otherwise within
thirty (30) days before or after the same programming is included in a
Programming Service delivered by Network to TESC. In addition, Network agrees
that it and its Affiliates will not, and that it and its Affiliates will not
authorize or permit (either through a grant of rights or through acquiescence)
any third party to perform any Content Streaming using any of the names of the
Programming Services covered by this Lease. Notwithstanding the foregoing,
Network shall be permitted to distribute or authorize Content Streaming (A) to a
local or wide area computer network serving less than one hundred (100) people;
(B) to a computer network serving one hundred (100) or more people if the
computer network is maintained by or on behalf of Network for the exclusive use
of its employees; or (C) with respect to limited portions of the Service or
segments of programming comprising a portion of the Service for strictly
promotional purposes ("Promotional Excerpts"), subject at all times to the
following restrictions: (i) each Promotional Excerpt shall be no more than ten
(10) minutes in duration; (ii) no more than two (2) Promotional Excerpts in any
twenty-four (24) hour period shall be comprised of content from the same
program; and (iii) Promotional Excerpts shall not exceed an aggregated total
duration of ninety (90) minutes in any twenty-four (24) hour time period.
7. REPRESENTATIONS, WARRANTIES AND COVENANTS
7.1 General Representations, Warranties and Covenants. Network
represents, warrants and covenants to TESC that: (i) it is duly organized,
validly existing and in good standing under the laws of the state or country
under which it is organized and it has and will continue to have full and sole
authority, ability and right to enter into and fully perform this Lease; (ii)
the individual executing this Lease on its behalf has the authority to do so;
(iii) it has not and will not during the Term enter into any agreement or
arrangement which limits the full performance of its obligations hereunder; (iv)
it and the Programming Services presently are, and will remain at all times
during the Term, in full compliance with all applicable Laws, including without
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limitation all Laws enforced, administered, promulgated or pronounced in the
United States and in the country or countries in which the content for the
Programming Services originated; (v) it has all rights necessary to grant TESC
the rights contracted for by TESC under this Lease free and clear of all liens,
restrictions, charges, claims and encumbrances and to use Network's trademarks,
service marks, logos and related trade usages as permitted hereunder; (vi) no
civil, criminal, administrative or other claims have ever been filed against
Network, its Affiliates or any predecessor entity, or any of their directors,
officers, substantial shareholders, principals or employees, of either alleging
a violation of any federal, state, local or other obscenity, indecency and/or
similar laws; (vii) it has obtained and will maintain throughout the Term all
licenses, permits, exemptions, authorizations and consents necessary to fully
perform this Lease; (viii) no third party has or has claimed any rights which
would be inconsistent with the rights granted to TESC in this Lease; (ix)
without limiting the generality of Sections 7.1(iv) and 6.2.2 of this Lease, no
programming on a Programming Service shall knowingly violate 18 USC 2257 or 28
CFR 75 or any successor legislation or code. Network has prepared, maintained
and executed, and at all times during the Term and for a period of seven (7)
years thereafter shall, prepare, maintain and execute any documents or records,
and provide TESC with copies of any documents or records which are required by
Title 18, U.S.C. ss. 2257, as amended, and/or the associated regulations found
at 28 C.F.R. 75.1 et. seq., as amended, and/or any successor statute or
regulation ("Section 2257"). Network warrants and represents that it is in
possession of such documents and records, and maintains them in accordance with
Section 2257. Network agrees to appoint a "record custodian" as required under
Section 2257, and will keep TESC apprised of the physical address where all
required records are compiled and maintained pursuant to Section 2257, along
with the full legal name of the records custodian. Network will display a
conspicuous disclosure statement on all depictions of `actual sexually explicit
conduct' contained in the Programming Services as required by Section 2257,
which statement identifies the records custodian for the content and describes
the physical location where the records relating to the content may be inspected
as required under applicable Law. If required by Law, Network will be identified
as a "primary producer" in any and all disclosure statements associated with the
Services pursuant to Section 2257. Network further agrees to cooperate with TESC
in connection with any inspections or government inquiries initiated pursuant to
Section 2257. Network shall have the right to inspect such documents and records
at any time. No programming on a Programming Service containing "actual sexually
explicit activities" as defined by Section 2257 shall contain material created
prior to July 3, 1995 unless Network has documentation that all performers in
such activities were, at the time the material was created, over the age of
eighteen (18) years; and (x) it will comply with all of its representations,
warranties, obligations, covenants and responsibilities herein contained. All
representations, warranties and covenants made under this Section 7 shall
survive the termination or earlier expiration of this Lease. In the event that
Network's representation and warranty under subsection (vi) above ultimately
proves untrue, TESC shall be entitled to terminate this Lease effective
immediately upon delivery of written notice to Network. Any such termination
shall be without prejudice to any other rights or remedies that TESC might have
under this Lease, at law, in equity or otherwise.
7.2 Representations, Warranties and Covenants as to Content. Network
represents, warrants and covenants that all programming included as part of the
Programming Services (whether or not set forth on EXHIBIT A hereto) will not be
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obscene, libelous, slanderous, or defamatory nor will it contain any material
which violates or infringes any copyright, right of privacy or literary or
dramatic right of any person or entity. Network is responsible for making (and
hereby represents and warrants that it will pay as and when due) all copyright,
royalty or other performance rights payments through to the viewer, including
without limitation "through-to-the-viewer" music performance rights for the
Programming Services and/or any other rights necessary from ASCAP, BMI, SESAC
and any other applicable performing rights organizations or other applicable
entities (collectively referred to as the "Performance Right Fees") with respect
to all programming included as part of the Programming Services (whether or not
set forth on EXHIBIT A hereto and whether or not distributed on a Subscription
or Single Purchase basis). Network further represents warrants and covenants
that all of the content elements and requirements set out in EXHIBIT A will be
and remain followed and observed in every respect.
8. INDEMNIFICATION
8.1 Indemnification by Network and its Affiliates. Network and its
Affiliates hereby agree to indemnify, defend (through counsel of the relevant
TESC Indemnitee's choice) and hold harmless TESC and its Affiliates, and its and
their respective directors, officers, employees, agents and shareholders, and
all of the foregoing's respective assigns, heirs, successors and legal
representatives (collectively, the "TESC Indemnities") from, against and with
respect to any and all claims, damages, liabilities, costs and expenses
(including reasonable attorney fees) incurred in connection with any civil,
criminal, administrative and other claims against any of the TESC Indemnities
arising out of or relating in any way to: (i) Network's breach of any material
provision of this Lease; (ii) the breach of any of Network's representations or
warranties herein; (iii) material or programming supplied by Network and/or any
of its Affiliates (whether or not set forth in EXHIBIT A hereto), including
without limitation any claims alleging that the transmission of any programming
provided by Network and/or any of its Affiliates (whether or not set forth in
EXHIBIT A hereto) is obscene, libelous, slanderous or defamatory or violates or
infringes any copyright, right of privacy or literary or dramatic right of any
person or entity; (iv) Network's and/or any of its Affiliates' advertising and
marketing; (v) the transmission of any programming as part of a Programming
Service (whether or nor set forth on EXHIBIT A hereto) which violates or
requires payment of any Performance Rights Fees; (vi) any other materials,
including advertising or promotional copy, supplied and/or approved by Network;
(vii) the use of any logos, trademarks, service marks, trade names or other TESC
Identifying Information inconsistent with TESC's written instructions or this
Lease; and/or (viii) TESC ceasing to transmit any of the Programming Services
for any reason permitted hereunder, unless as a result of TESC's termination of
this Lease without cause as set forth in Section 2.
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8.2 Indemnification by TESC. TESC shall indemnify, defend and hold
harmless Network and its Affiliates, and its and their respective directors,
officers, employees and agents and shareholders, (collectively, the "Network
Indemnities") from, against and with respect to any and all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' fees) incurred
in connection with any claim against the Network Indemnities arising out of: (i)
TESC's breach of any material provision of this Lease; (ii) the breach by TESC
of any of its representations or warranties herein; and/or (ii) TESC's
advertising and marketing of the Programming Services (unless materials are
provided or approved by Network).
8.3 Notice of Indemnification Claim. Should either party wish to assert
a claim for indemnification, such party shall do so by promptly notifying the
other party in writing of such claim. The indemnifying party shall undertake the
defense of any such claim or action and permit the indemnified party to
participate therein at the indemnified party's expense, provided, however that
if Network fails to diligently pursue any claim or action or adequately
indemnify the TESC for any cost (in the reasonable opinion of such TESC) then
TESC shall be entitled to undertake the defense of such claim at the Networks's
sole cost and expense. The settlement of any such claim or action by an
indemnified party, without the indemnifying party's prior written consent, shall
release the indemnifying party from its obligations hereunder with respect to
such claim or action so settled. The indemnities contained in this Article 8
shall continue throughout the Term and shall survive the termination of this
Lease.
9. LIMITATION OF LIABILITY IN NO EVENT SHALL EITHER PARTY OR ANY OF THEIR
RESPECTIVE AFFILIATES BE LIABLE FOR ANY EXEMPLARY, SPECIAL, INCIDENTAL OR
CONSEQUENTIAL DAMAGES TO THE OTHER PARTY (INCLUDING WITHOUT LIMITATION, ANY
PAYMENT FOR LOST BUSINESS, FUTURE PROFITS, LOSS OF GOODWILL, REIMBURSEMENT FOR
EXPENDITURES OR INVESTMENTS MADE OR COMMITMENTS ENTERED INTO, CREATION OF
CLIENTELE, ADVERTISING COSTS, TERMINATION OF EMPLOYEES OR EMPLOYEES SALARIES,
OVERHEAD OR FACILITIES INCURRED OR ACQUIRED BASED UPON THE BUSINESS DERIVED OR
ANTICIPATED UNDER THIS LEASE), WHETHER FORESEEABLE OR NOT, CLAIMS UNDER DEALER
TERMINATION, PROTECTION, NON-RENEWAL OR SIMILAR LAWS, FOR ANY CAUSE WHATSOEVER
WHETHER OR NOT CAUSED BY A PARTY'S NEGLIGENCE, GROSS NEGLIGENCE OR WILLFUL
MISCONDUCT. IN NO EVENT SHALL ANY PROJECTIONS OR FORECASTS BY EITHER PARTY BE
BINDING AS COMMITMENTS OR PROMISES BY SUCH PARTY.
10. TERMINATION
10.1 Termination by Either Party.
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10.1.1 Termination. Subject to Section 10.1.2 below, upon
thirty (30) days prior written notice (or ten (10) days in the case of a payment
default), either party may terminate this Lease (i) in the event that the other
party is in breach or default of any material representation, warranty,
covenant, obligation or duty hereunder; or (ii) the other party becomes
insolvent or seeks relief under any insolvency statute, is placed in
receivership or liquidation, or makes any assignment for the benefit of
creditors. The right of a party to terminate this Lease in any such instances
shall be in addition to any other rights or remedies it may have under this
Lease, at law, in equity or otherwise.
10.1.2 Opportunity to Cure. Upon receiving written notice of
termination due to breach or default as specified in Section 10.1.1 above, the
notified party shall use its reasonable commercial efforts to immediately
commence to cure such breach or default (if such breach or default is capable of
cure); provided however, that the notified party shall have: (i) up to a maximum
of thirty (30) days (or ten (10) days in the case of a payment default), if
needed, from the receipt of such notice to cure the breach or default (if such
breach or default is capable of cure): or (ii), except in the case of a payment
default, if such cure is capable of cure but cannot be reasonably completed in
such period, and the notified party has commenced and is diligently pursuing
such cure, then for such longer period necessary to complete such cure, but in
no event to exceed ninety (90) days in total. If such breach or default is
timely cured, the notice of termination shall be null and void.
10.2 Termination by TESC.
10.2.1 Termination by TESC. In addition to any other
termination rights TESC has under this Lease, TESC shall have the right to
terminate this Lease immediately and without liability upon notice to Network:
(i) if the delivery of any of the Services by Network to TESC is discontinued or
interrupted for a continuous period of fifteen (15) days, (ii) if Network or any
of its Affiliates fails to comply with any Law related to adult content,
including, without limitation, the provisions of 18 U.S.C. 2257, (iii) if
Network or any of its Affiliates has falsified, or Network or any of its
Affiliates is criminally charged or indicted for falsifying, any documents,
records or reports required by this Lease or any Law related to adult content,
(iv) if there is evidence of, or Network or any of its Affiliates or any of
their directors, officers, substantial shareholders, principals or employees is
criminally charged or indicted for, fraud, misrepresentation or illegal action,
and/or (v) upon any assignment by Network of all or any part of the Lease. In
addition to and not in limitation of the foregoing, in the event that TESC
determines, in its sole discretion, that the activities contemplated under this
Lease or any other circumstances, including without limitation an increase in
obscenity prosecutions or citizen protests against adult-oriented products or
services, may: (A) adversely impact the business, reputation, or goodwill of
TESC and/or any of its Affiliates; or (B) result in the institution of civil,
criminal, administrative or other proceedings against TESC and/or any of its
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Affiliates, or any of their officers, directors or employees, TESC will have the
right to take such actions as it deems necessary in its sole judgment to protect
the business, reputation, and goodwill of TESC and/or any of its Affiliates and
to prevent the institution of any such proceedings against TESC and/or any of
its Affiliates, including without limitation termination of all or any part of
this Lease and suspension and/or restriction of the transmission of all or any
of the Programming Services in the Territory or any portion of the Territory or
to certain end users within the Territory. TESC shall have no liability or
obligations to Network as a result of such actions, and in the event that TESC
elects to terminate the Lease, TESC shall have no further obligations to Network
whatsoever, except that TESC shall not be relieved of its obligations to pay
moneys due or which become due to Network as of or subsequent to such
termination. Any such termination shall be without prejudice to any other rights
or remedies that TESC might have under this Lease, at law, in equity or
otherwise.
10.2.2 Automatic Termination. Notwithstanding anything to the
contrary contained in this Lease, this Lease shall terminate automatically
should any of the following occur, unless TESC notifies Network to the contrary
in writing: (i) Network becomes insolvent, or voluntary or involuntary
bankruptcy, insolvency or similar proceedings are instituted against Network;
(ii) Network, for more than twenty (20) consecutive days, fails to maintain
operations as a going business; (iii) Network, for more than twenty (20)
consecutive days, ceases to actively market and promote any of the Programming
Services; (iv) Network, any of its affiliates, or any officer, director,
substantial shareholder or principal of the Network or of any of its Affiliates
is convicted in a court of competent jurisdiction of any offenses substantially
related to the business conducted by the Network in connection with this Lease;
(v) Network fails to comply with any applicable local, state and federal laws
and regulations, including without limitation such statutes, laws, rules,
regulations and orders enforced, administered, promulgated or pronounced by the
Federal Communications Commission or any successor agency thereto, as amended
from time to time; (vi) Network falsifies any documents, records or reports
required hereunder; (vii) Network fails to renew or loses, due to suspension,
cancellation or revocation, for a period of fifteen (15) days or more, any
license, permit or similar document or authority required by law or governmental
authority having jurisdiction, that is necessary in carrying out the provisions
of this Lease and to maintain its corporate or other business status, as in
effect as of the effective date of this Lease; (viii) Network makes any
representation or promise on behalf of TESC inconsistent with the
representations or promises that TESC has specifically authorized Network to
make on behalf of TESC in this Lease; or (ix) any actual or alleged fraud,
misrepresentation, or illegal action of any sort by Network in connection with
this Lease. Any such termination under this Section 10.2.2 shall be without
prejudice to any other rights or remedies that TESC might have under this Lease,
at law, in equity or otherwise.
11. TERMINATION OF OLD LEASES
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The parties hereby agree that, effective as of the Effective Date, the
Old Leases and any other written or verbal agreements between the parties are
terminated.
12. MOST FAVORED NATIONS:
12.1 More Favorable Provisions. Subject to the Conditions set forth in
Section 12.2 below, Network agrees that if, as a result of any current or future
license or other agreement "entered into" with Network, any Distributor (as
defined below), regardless of such Distributor's size, number of subscribers to
one or more of the Programming Services or penetration of a Programming Service,
receives (i) a lower NESR (as defined below); (ii) a higher revenue split for
any of the Programming Services with respect to any type of delivery mechanism;
or (ii) any material contract term, provision, covenant or consideration,
whether economic or not, including without limitation any right to interactive
television applications or services or other similar compilations of content;
distribution of a Programming Service or any part of the programming
constituting a Programming Service by any other technology; packaging rights;
limitation on Network's distribution of programming over the Internet; right to
marketing or advertising support or reimbursement; launch incentive; provision
of promotional, marketing and sales and other Programming Service-related
materials; repetition limitation; termination or deletion right; limitation of
liability; content commitment; payment term; pricing capability; advertising
covenant; number, placement or use of advertising insertions; remedy; most
favored nations treatment, sub-distribution or wholesale rights; rate card;
volume discount; transport right; audit right; payment in connection with direct
on-air sales programming; or limitation on or right with respect to direct
on-air sales programming than TESC; (clauses (i), (ii) and/or (iiI) above,
individually and collectively, shall be referred to herein as "More Favorable
Terms(s)") then, subject to the terms of this Section 12 of the Lease, TESC
shall be entitled to the benefit of all such More Favorable Terms. For clarity,
any right to distribute a Programming Service, any of the programming included
in a Programming Service, or any application of a Programming Service or its
programming using a delivery mechanism or technology not granted to TESC in this
Lease including, without limitation, (A) the right to distribute a
three-dimensional or other augmented or enhanced version of a Programming
Service or the programming on a Programming Service, (B) the right to distribute
a multimedia, interactive and/or computer application(s) related to or based on
a Programming Service or the programming on a Programming Service, (C) the right
to copy, tape or reproduce any portion of the programming a Programming Service
and to exhibit, distribute and sell such portions of the programming on a
Programming Service, via a file server or any other technology, at times other
than the time of original transmission by Network or (D) the right to any other
compilation of content that is offered through or originating from a Programming
Service shall be deemed a More Favorable Term. Network promptly and
unconditionally shall notify TESC in writing (an "MFN Notice") of any such More
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Favorable Term and offer the More Favorable Term to TESC for the same amount of
time that the More Favorable Term is or was available to the Distributor on
terms and conditions each one of which is at least as favorable as that granted
to the Distributor. For purposes of clarity, Network agrees that the revenue
share splits to which TESC is entitled under this Lease as of the Effective Date
are, and shall be at all times during the Term, the highest revenue share splits
available to any Distributor for each respective Programming Service. In order
for TESC to evaluate the More Favorable Term, Network will provide TESC with the
exact language expressing the More Favorable Term as it is provided to the
Distributor. Upon receipt of an MFN Notice, TESC shall have the right, but not
the obligation, at TESC's election in its sole discretion, subject only to
Section 12.2 of the Lease, to deem this Lease to have been modified to provide
TESC with the benefit of such More Favorable Term. For purposes of this Section
12 of the Lease, "enter into" shall be deemed to include the entering into,
amendment of, renewal of, or extension of, such license or other agreement,
whether embodied in an agreement or otherwise (e.g., side letters or oral or
written agreements), or whether due to the refraining from the enforcement of a
provision. For purposes of this Lease, a More Favorable Term shall (i) include
any pertinent term, provision, covenant or consideration, regardless of whether
there is a term, provision, covenant, or consideration concerning the subject
matter of the More Favorable Provision in this Lease or whether such term,
provision, covenant or consideration relates to the Distributor's entire
subscriber base or less than the entire base (e.g., a More Favorable Term
relating to a "test" or "sample" group of subscribers) and (ii) apply to any
most favored nations treatment afforded to any Distributor. The determination of
whether a More Favorable Term is more favorable shall focus on the More
Favorable Term independently, for each moment of time during which the More
Favorable Term is effective, rather than on the agreement, understanding or
arrangement as a whole or the More Favorable Term's affect thereon.
Notwithstanding anything herein to the contrary, Network's failure to deliver to
TESC an MFN Notice in accordance with the terms hereof shall not limit or
otherwise effect TESC's right to enjoy the benefits of such More Favorable Term.
Network will not take any action or refrain from taking any action with the
intent of, or having the effect of, frustrating, interfering with or otherwise
circumventing the application of Section 12 of this Lease or TESC's ability to
receive any More Favorable Term. For purposes of this Lease, "Distributor" means
any other person or entity, including Network, which distributes a Programming
Service in the Territory by any means including without limitation DBS
providers, cable system operators, cellular telephone providers and Internet
service providers.
12.2 Conditions. Notwithstanding anything to the contrary contained in
Section 12.1 above, if the grant of any More Favorable Term to a Distributor
requires the performance by such Distributor of any bona fide material
obligation, term or condition (i) with which TESC is reasonably capable of
complying given the technical differences between its platform and that of the
Distributor (for example, it would not be reasonable for TESC to be required to
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comply with a local marketing obligation in specific geographic markets), (ii)
which bears a direct and tangible relationship to and is economically linked to
such More Favorable Term, (iii) which has not been designed or intended to, or
does not operate to, (A) discriminate against TESC or (B) frustrate or
circumvent the application of this Section 12 of the Lease and TESC's ability to
receive any such More Favorable Term under reasonable circumstances; and (iv)
which does not relate to size, number of Customers or penetration of a
Programming Service. (such material obligation, term or condition is referred to
herein as a "Condition"), then TESC shall perform such Condition in order to
receive the More Favorable Term. Network hereby acknowledges and agrees, for
purposes of clarification and not limitation of any of TESC's rights, that TESC
is not "reasonably capable of complying" with any Condition that: (x) requires
TESC or any of its Affiliates to violate any law, governmental rule or
regulations or a right of any person or entity; (y) would require or necessitate
that TESC or any of its Affiliates enter into or amend a contractual arrangement
with any person or entity or agree to acquire, license or distribute any other
product or service; or (z) would require or necessitate that TESC or any of its
Affiliates violate the terms of any contractual arrangement. In order to
determine whether TESC is "reasonably capable of complying" with any particular
obligation, terms or condition, Network will provide TESC with the exact
language expressing such obligation, term or condition as it is imposed on the
Distributor. For clarity, and notwithstanding the limitations imposed by this
"Most Favored Nations" section of the Lease, in no event shall TESC's receipt of
any More Favorable Term be conditioned on acceptance by TESC of any modification
to this "Most Favored Nations" section of the Lease. Notwithstanding anything to
the contrary contained in Article 12, for purposes of determining whether a More
Favorable Term must be offered to TESC, the parties shall only compare such More
Favorable Term granted to a Distributor with such less favorable term provided
to TESC under this Lease on a like-technology and like-delivery basis. For
purposes of clarifying but not limiting the preceding sentence, if the More
Favorable Term granted to a Distributor relates to Programming Services that
terminate at a consumer's personal computer via an Internet Technologies based
delivery mechanism or at the consumer's mobile telephone via wireless
technologies, TESC shall only be entitled to a modification of the corresponding
less favorable term contained in this Lease to the limited extent that such less
favorable term also relates to Programming Services that are terminated at a
consumer's personal computer via a similar Internet Technologies based delivery
mechanism or mobile telephone via similar wireless technologies, as opposed to
terminating at a Set Top Box using Internet Technologies or wireless
technologies.
12.3. NESR. For purposes of this Section 12 of the Lease, the
calculation of net effective subscriber rate ("NESR") shall be based on all
direct and indirect economic outlays in connection with or related to the
carriage of a Programming Service (each as a stand alone inquiry) payable to
Network by a Distributor, or to a Distributor by Network, (whether included in
an agreement relating to a Programming Service or otherwise). If Network
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distributes a Programming Service directly to consumers, any fee or
consideration paid by a consumer to Network to receive the Programming Service
will be deemed the NESR of the Programming Service for such distribution. In
determining NESR, actual numbers of Customers shall be used. The determination
of NESR shall be made on a technology-by-technology basis as follows: (i)
aggregate license fees (whether financial or other outlays, excluding contingent
liabilities) shall be reduced by all Rebates and (ii) the difference shall be
divided by the total number of subscriber months in the term of the relevant
agreement. For purposes of this subsection, "Rebate" shall mean any rebate;
allowance; volume or other discount; credit; reimbursement; adjustment;
prepayment of loan; deduction for uncollected accounts; cash payment (whether
conditional or not); sale or lease of equipment; studio facility discount;
payment term or financing term; marketing or advertising support or
reimbursement; launch incentive payment, support or reimbursement; advertising
or media purchase; free or discounted marketing materials or other marketing
support; long form advertising revenues and/or guarantee; channel position fees;
revenue sharing; contribution; incentive; or other economic or financial
consideration paid, payable or entitled to by or from Network, whether given
directly or indirectly to such Distributor or any of its Affiliates. Aggregate
license fees, Rebates, and any assumptions used in the calculation of aggregate
license fees or Rebates shall be calculated on a net present value basis
applying identical discount rates. The total number of subscriber months shall
be determined by (A) aggregating the number of months in the terms of all
agreements between Network and the relevant Distributor and its Affiliates for
carriage of the Programming Service (including agreements for multiple
distribution systems) and (B) multiplying that sum by the actual number of
subscribers. For past periods, the actual number of subscribers (determined
monthly) at the relevant points in time shall be used. For future periods, the
greater of (A) the number of subscribers actually receiving the Programming
Service at the time the calculation is made or (B) any subscriber commitment
shall be used. For purposes of comparing the NESRs of TESC and of a Distributor
that is using a common delivery system through which multiple parties may
distribute services, the calculation of the actual number of subscribers shall
be based on the total number of customers receiving programming services through
the common delivery system, regardless of the number of distributors providing
services through the common delivery system.
12.4 TESC's Audit Rights. Network agrees to keep and maintain accurate
books and records with respect to its performance under this Lease and its
relationships with Distributors for the period of time during which Network is
providing the Programming Service to such Distributors and for a period of one
(1) year thereafter. In order to verify Network's compliance with and/or to
determine whether Network has given full effect to the terms of this Lease
(including without limitation Section 12 of the Lease), during the Term and for
one (1) year thereafter, TESC may, upon sixty (60) days written notice and at
TESC's expense, during Network's regular business hours (such hours to be
determined in Network's sole discretion) at Network's office where records are
regularly maintained, audit all books and records relating to such obligations.
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TESC's right to perform the audit shall be limited to once in any consecutive
twelve (12)-month period. Any audit with respect to this Section 12 of the Lease
(i.e. audits which require the use of third party contracts which are subject to
confidentiality restrictions) shall be conducted by TESC's review of third party
contracts that have been redacted by Network, or by a nationally recognized
public accounting firm or other outside consultant (each, an "Independent
Auditor"). If the audit is conducted by an Independent Auditor and, as a result
of the audit, the Independent Auditor determines that Network has fully complied
with Section 12 of this Lease, then the Independent Auditor shall provide
written notice to the parties stating only that Network has complied. If, as a
result of the audit, the Independent Auditor determines that Network has failed
to comply with Section 12 of this Lease, then Network shall either (A) grant to
TESC, retroactively, the benefit of the provision which has been violated or (B)
if Network has a bona fide dispute as to the findings of the Independent
Auditor, authorize the Independent Auditor to provide to TESC only that limited
information acquired during the course of the audit that is necessary for TESC
to pursue its claim or claims related to Network's non-compliance. Any
nonessential information shall not be disclosed to TESC by the Independent
Auditor and shall remain strictly confidential. Under no circumstances, other
than the limited circumstance set forth in the prior sentence, shall any
information acquired during the course of the audit be disclosed to TESC by the
Independent Auditor. In the event any audit determines that Network has breached
an obligation in Section 12 of the Lease, or materially breached any other
provision of the Lease, then Network shall bear the cost of the audit. For
clarity, the auditor conditions contained in Section 12.4 of this Lease shall
not apply to an audit conducted by TESC to verify compliance with any other
obligation arising from this Lease which does not require the use of third party
confidential information. Any audit shall be subject to Section 13.11 of this
Lease.
12.5 Certification. Upon TESC's request and upon each annual
anniversary date of the Effective Date, Network agrees to provide to TESC a
written certification signed by an executive level employee of Network that
Network (i) is in compliance with Section 12 of this Lease and (ii) has not
taken any action or refrained from taking any action designed with the intent
of, or having the effect of, frustrating, interfering with or otherwise
circumventing the application of Section 12 of this Lease or TESC's ability to
receive any such More Favorable Term. In addition to this certification and
TESC's audit rights set forth in Section 12.4 of this Lease, within six (6)
months following the execution by the parties of this Lease, TESC (acting
through its auditor or otherwise as set forth in Section 12.4 of this Lease may
(A) audit Network's existing agreements with third parties for distribution of
the Programming Services and (B) review documents in TESC's possession that
relate to the distribution of the Programming Services as well as other business
dealings between Network and Distributors. In the event that, as a result of
such audit or review, TESC determines that it is entitled to any More Favorable
Term, TESC shall notify Network in writing of its determination and this Lease
shall be deemed amended to include the More Favorable Term.
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13. MISCELLANEOUS
13.1 Network's Ownership of Programming Service. All rights, title and
interest in and to the Programming Services, all advertising and promotional
materials produced by Network, and all ideas, formats and concepts contained in
any of the foregoing or used in connection therewith (including all copyrights)
shall, as between the parties, at all times be the sole property of Network, and
TESC shall not make any claim to the contrary.
13.2 Counterparts. This Lease may be executed in one or more identical
counterparts, each of which shall be deemed an original, but all of which shall
together constitute one and the same instrument.
13.3 Assignment. Network shall not assign all or any portion of this
Lease (including the assignment or transfer of any rights, duties or obligations
hereunder) without the prior written consent of TESC, which consent may be
withheld in TESC's sole and absolute discretion, except to an Affiliate of
Network; provided, however, that, such Affiliate is: (i) at least as
creditworthy as Network at the time it originally executed this Lease; (ii) is
not a direct or indirect provider of direct to home programming; and (iii) New
Frontier Media, Inc. ("New Frontier") and Network both unconditionally guarantee
the full and timely payment and performance of the Affiliate's obligations and
duties under this Lease. In furtherance and without limitation of the foregoing,
any merger, reorganization or consolidation of Network shall be deemed an
assignment requiring TESC's consent hereunder. In furtherance and without
limitation of the foregoing, in the event that any person or entity who, as of
the date first written above, did not possess, directly or indirectly, the power
to direct or cause the direction of management or policies of Network, whether
by virtue of the ownership of voting stock, by contract or otherwise, later
comes into possession of such power, that will be considered an assignment
requiring TESC's consent hereunder. TESC's sole remedy for a breach of this
Section 13.3 shall be limited to the immediate termination of this Lease. TESC
may assign this Lease in whole or in part at any time without Network's consent.
In the event that Network assigns or attempts to assign all or any part of this
Lease in violation of this Section 11.3, any such assignment shall be null and
void and TESC shall be entitled to terminate all or any portion of this Lease
effective immediately upon delivery of written notice to Network without regard
to the cure periods set forth in Section 10.1.2 above. Any such termination
shall be without prejudice to any other rights or remedies that TESC might have
under this Lease, at law, in equity or otherwise
13.4 Relationship of the Parties. The relationship of the parties
hereto is that of independent contractors. Nothing contained herein shall be
deemed to create, and the parties hereto do not intend to create, any
relationship of employee/employer, partnership, joint venture or agency, nor
shall any similar relationship be deemed to exist between them. Network hereby
represents that it is not dependent upon TESC for a major part of its business.
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13.5 Force Majeure. Notwithstanding anything to the contrary in this
Lease, neither party shall be liable to the other for failure to fulfill its
obligations hereunder if such failure is caused by or arises out of an act of
force majeure including acts of God, war, strike, riot, labor dispute, natural
disaster, technical failure (including the failure of all or part of the
domestic communications satellite utilized to deliver the Programming Services
to the Uplink Center or TESC's Satellite, or transponders on which the
Programming Services are delivered by Network to TESC or by TESC to Customers,
or of the related uplinking or other equipment), governmental order or
regulation or any other reason beyond the reasonable control of the party whose
performance is prevented during the period of such occurrence. The Term of this
Lease shall be suspended during the period when a party is unable to fulfill its
obligations hereunder by reason of such occurrence. In addition, the
Subscription Revenue payable by TESC shall be reduced on a prorated basis if, by
reason of force majeure, a Customer receives the applicable Programming Service
for less than the full period required and the charge to such Customer is
reduced accordingly. If a Force Majeure event is reasonably expected to continue
for more than three (3) months, either party may terminate this Lease by
providing thirty (30) days prior written notice to the other party. TESC shall
have the right to preempt any Programming Service if there is a total or
substantial in-orbit failure of a satellite that prevents TESC and/or its
Affiliates from continuing a significant portion of the DISH Network without
such preemption.
13.6 Waiver. The failure of either party at any time to enforce any
right or remedy available to it under this Lease or otherwise with respect to
any breach, default or failure by the other party shall not be construed to be a
waiver of such right or remedy with respect to any other breach, default or
failure by the other party.
13.7 Notices. Except as otherwise expressly set forth herein, any
notices to be given pursuant to this Lease ("Notice") shall be in writing,
signed by the party issuing them, and sent by: (i) facsimile transmission; (ii)
first class certified mail, postage prepaid; or (iii) overnight courier service,
charges prepaid, to the party to be notified, addressed to such party at the
following address, or sent by facsimile to the following fax number, or such
other address or fax number as such party may have substituted by notice given
to the others in accordance with this Section 13.7. The sending of such notice
with confirmation or receipt thereof (in the case of facsimile transmission) or
receipt of such notice (in the case of delivery by certified mail or by
overnight courier service) shall constitute the giving thereof:
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If to Network: Colorado Satellite Broadcasting, Inc.
7007 Winchester Circle, Suite 200
Boulder, Colorado 80301
Attn: Ken Boenish, President
Fax No.: (303) 938-8388
with a copy to: Colorado Satellite Broadcasting, Inc.
7007 Winchester Circle, Suite 200
Boulder, Colorado 80301
Attn: Vice President of Legal Affairs
Fax No.: (303) 527-2872
If to TESC: Transponder Encryption Services Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attn: Mark Jackson, President
Fax No.:(303 723-1999
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with a copy to: Transponder Encryption Services Corporation
90 Inverness Circle East
Englewood, Colorado 80112
Attn: R. Stanton Dodge, Esq.
Fax No.: (303) 723-1699
13.8 Governing Law and Exclusive Jurisdiction. This Lease shall be
construed by and governed in accordance with the laws of the State of New York,
without regard to its choice of law provisions. The federal and state courts
located in the State of New York shall have exclusive jurisdiction to hear and
determine any claims, disputes, actions or suits which may arise under or out of
this Lease. The parties voluntarily consent to the personal jurisdiction of, and
waive any objection as to venue in such courts for such purposes and agree to
accept service of process outside the State of New York in any matter to be
submitted to any such court pursuant hereto.
13.9 Severability. The parties agree that each provision of this Lease
shall be construed as separable and divisible from every other provision and
that the enforceability of any one provision shall not limit the enforceability,
in whole or in part, of any other provision hereof. The invalidation or
unenforceability of any provision contained in this Lease shall in no way affect
any of the other provisions hereof or the application thereof and the same shall
remain in full force and effect. In the event that a court of competent
jurisdiction determines that any term or provision herein, or the application
thereof to any person, entity, or circumstance, shall to any extent be invalid
or unenforceable, it shall be construed by limiting and reducing it so as to be
enforceable under then applicable law.
13.10 Entire Agreement, Exhibits, Amendment, Captions and Construction.
13.10.1 Entire Agreement; Captions; Conflict. This Lease
(including any Exhibits hereto) contains the entire understanding of the parties
with respect to the subject matter hereof, and supersedes any and all prior or
contemporaneous agreements, representations or undertakings between the parties
with respect to the subject matter hereof. The captions used herein are for
reference purposes only and shall not be used in the interpretation of this
Lease. In the case of a conflict between the provisions of this Lease and any
Exhibit, this Lease shall prevail.
13.10.2 No Weight. This Lease has been fully reviewed and
negotiated by the parties hereto and their respective counsel. Accordingly, in
interpreting this Lease, no weight shall be placed upon which party hereto or
its counsel drafted the provision being interpreted.
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13.10.3 Writing Required. No waiver, modification or amendment
of any of the terms or conditions of this Lease shall be effective unless
memorialized in a writing that has been signed by both parties hereto.
13.11 Confidentiality.
13.11.1 Confidential Information. Each party agrees, and it is
of the essence under this Lease, that they and their employees, representatives
and agents have maintained and will maintain, in confidence, the terms and
provisions and existence of this Lease, as well as all data, summaries, reports
or information of all kinds, whether oral or written, acquired or devised or
developed in any manner from the disclosing party's personnel or files, and that
they have not and will not reveal the same to any persons not employed by the
disclosing party except: (i) at the written direction of such party; (ii) to the
extent necessary to comply with the law, the valid order of a court of competent
jurisdiction, or a requirement of the Securities and Exchange Commission or any
successor agency thereto, in which event the disclosing party shall so notify
the other party as promptly as practicable (and, if possible, prior to making
any disclosure) and shall seek confidential treatment of such information; (iii)
in connection with any arbitration proceeding; (iv) as part of its normal
reporting or review procedure to its partners, parent company, auditors,
attorneys and investment bankers, provided that such partners, parent company,
auditors, attorneys and investment bankers agree to be bound by the provisions
of this Section 13.11; or (v) in order to enforce any of its rights pursuant to
this Lease.
13.11.2 Subscriber Information. Network acknowledges and
agrees that all Customers shall be deemed customers of TESC for all purposes
relating to Programming Services (including but not limited to video, audio and
data) and the hardware necessary to receive such Programming Services. Network
acknowledges and agrees that the names, addresses, profiles and other
identifying information of such Customers ("Subscriber Information") are as
between Network and TESC, the sole and exclusive property of TESC. During the
term of this Lease and at all times thereafter, Network agrees that it will
treat all Subscriber Information strictly confidential, and will not directly or
indirectly disclose any Subscriber Information or directly or indirectly use, or
permit any others to use, any Subscriber Information for any purpose. By
example, but not by way of limitation, Network shall not directly or indirectly
use any Subscriber Information for the purpose of soliciting, or to permit any
others to solicit, Customers to make purchases of, any of the Programming
Services or any other programming services.
13.11.3 Injunctive Relief. Each party agrees that a breach of
these obligations of confidentiality will result in the substantial likelihood
of irreparable harm and injury to the other party, for which monetary damages
alone would be an inadequate remedy, and which damages are difficult to
accurately measure. Accordingly, each party agrees that the other party shall
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have the right, in addition to any other remedies available, to obtain immediate
injunctive relief as well as other equitable relief allowed by the federal and
state courts. The foregoing remedy of injunctive relief is agreed to without
prejudice to the other party's right to exercise any other rights and remedies
it may have, including without limitation, the right to terminate all or any
part of this Lease and seek damages or other contractual, legal or equitable
relief. The foregoing confidentiality obligations will survive termination of
this Lease.
13.11.4 Economic Benefit. In the event that Network or any of
its Affiliates, directly or indirectly, derive an economic benefit, in any form,
from a violation of Network's obligations under Section 13.11 it is hereby
agreed that such economic benefit is the property of TESC and that Network and
its Affiliates shall deliver the cash value of the economic benefit to TESC
immediately upon receipt of the economic benefit. It is further agreed that
Network and its Affiliates shall hold such economic benefit in trust for the
benefit of TESC until such time as its cash value is delivered to TESC. The
foregoing is agreed to without prejudice to TESC to exercise any other rights
and remedies it may have, including without limitation, the right to terminate
all or any part of this Lease and seek damages or other contractual, legal or
equitable relief. The confidentiality obligations set forth in this Section
13.11 will survive termination of this Lease indefinitely.
13.12 Compliance with Law. Network acknowledges and agrees that TESC's
ability to perform under this Lease is subject to, all applicable federal, state
and local laws, rules and regulations, including without limitation: (1) all
provisions of the Communications Act of 1934, as amended from time to time
during the term of this Lease; and (2) the rules and regulations of the Federal
Communications Commission or any successor agency thereto, as amended from time
to time.
13.13 Benefits. This Lease shall be binding upon, and shall redound to
the benefit of, both of the parties hereto and their respective successors and
assigns.
13.14 Remedies Cumulative. It is agreed that the rights and remedies
herein provided in case of breach or default by either party of this Lease are
cumulative and shall not affect in any manner any other remedies that the other
party may have by reason of such breach or default. The exercise of any right or
remedy herein provided shall be without prejudice to the right to exercise any
other right or remedy provided herein, at law, or in equity.
13.15 Attorney Fees. In the event of any suit or action to enforce or
interpret this Lease or any provision thereof, the prevailing party shall be
entitled to recover its costs, expenses and reasonable attorney fees, both at
trial and on appeal, in addition to all other sums allowed by law.
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13.16 Corporate Guarantee. Upon execution of this Lease, Network will
provide TESC with: (i) a guarantee (the "Guarantee") in the form set forth in
EXHIBIT B hereto executed by New Frontier (as defined in Section 13.3 above);
and (ii) a resolution of the Board of Directors of New Frontier approving,
adopting, ratifying and confirming the Guarantee, which has been duly certified
by the Secretary of New Frontier. In the event that Network fails to provide
either document to TESC as scheduled in this Section 13.16 TESC shall be
entitled to terminate this Lease effective immediately upon delivery of written
notice to Network. Any such termination shall be without prejudice to any other
rights or remedies that TESC might have under this Lease, at law, in equity or
otherwise.
13.17 Insurance Requirements.
13.17.1 Insurance Coverages.Network shall, at its sole
expense, keep the following insurance coverages in full force and effect
during the term of this Lease:
(a) Commercial General Liability coverage which includes
Premises/Operations, Products/Completed Operations, Contractual Liability,
Independent Contractors, Broad Form Property Damage, and Personal/Advertising
Injury with limits of not less than One Million United States Dollars
($1,000,000.00) per occurrence;
(b) Broadcasters Liability insurance coverage which
includes Personal/Advertising Injury, Bodily Injury and Property Damage with
limits of not less than One Million United States Dollars ($1,000,000) per
occurrence; and
(c) Umbrella Liability insurance coverage following the
form underlying policies with limits of not less than Ten Million United States
Dollars ($10,000,000) per occurrence.
(d) Officer and Director coverage following the form
underlying policies with limits of not less than Ten Million United States
Dollars ($10,000,000) per occurrence.
(e) Errors and Omissions insurance coverage following
the form underlying policies with limits of not less than Ten Million United
States Dollars ($10,000,000) per occurrence.
13.17.2 Additional Insureds. TESC, its Affiliates and the
directors, officers, employees, agents and shareholders of each shall be named
as additional insureds on all of the above coverages. Network for itself and its
insurer hereby waives any rights of subrogation against TESC, its Affiliates and
the directors, officers, employees, agents and shareholders of each.
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13.17.3 Certificate of Insurance. The foregoing coverages
shall be evidenced by a certificate of insurance acceptable to TESC. Such
certificate shall be issued by an insurance carrier with an A.M. Best rating of
"A-" or better and shall be provided, with such endorsements as required
hereunder, to TESC upon execution of this Lease by Network. Such insurance
certificate shall provide: (i) that the coverages thereon shall not be
substantially modified or canceled without thirty (30) days' prior written
notice to TESC; and (ii) that TESC shall be notified in writing of Network's
failure to renew any policy on the certificate by each policy anniversary date
during the term of this Lease. The foregoing insurance shall be provided in the
form of "occurrence" policies. Notwithstanding anything else contained herein to
the contrary, TESC shall not have any duty to provide the transponder space
contemplated by this Lease or perform in any way under this Lease or continue to
carry any Programming Service if Network fails to provide documentation,
satisfactory to Affiliate in its sole discretion to evidence the insurance
coverages contemplated hereby.
13.17.4 No Effect on Indemnification. Network's indemnity
obligations set forth above shall not be negated or reduced by virtue of
Network's insurance carrier's denial of insurance coverage for the occurrence or
event which is the subject matter of the claim or refusal to defend TESC and/or
any of its Affiliates.
13.17.5 Survival. Any provision of this Lease which logically
would be expected to survive termination or expiration of the Lease shall
survive termination or expiration. In addition and not in limitation of the
foregoing, all representations, warranties, covenants, indemnifications,
confidentiality obligations, and limitations of liability shall survive the
termination or expiration of this Lease.
13.18.6 Clean Slate. TESC and Network acknowledge that, with
respect to all amounts due by either party or its Affiliates to the other for
obligations incurred prior to September 21, 2006 ("Clean Slate Claims"), other
than for Clean Slate Claims listed in EXHIBIT C, all payment-related obligations
shall be deemed fully performed, and each party waives and discharges any claim
with respect to any Clean Slate Claims. The amounts listed for the Clean Slate
Claims in EXHIBIT C reflect each party's position as of the Effective Date,
which may or may not be the other party's position. For clarity, the parties
agree that any claims for indemnification under Old Leases shall survive.
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IN WITNESS WHEREOF, the parties hereto have entered into this Lease as
of the date first set forth above.
COLORADO SATELLITE TRANSPONDER ENCRYPTION
BROADCASTING, INC. (NETWORK) SERVICES CORPORATION
/s/ Ken Boenish /s/ Mark Jackson
--------------------- ---------------------
Ken Boenish Mark Jackson
President President
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EXHIBIT A
PROGRAMMING SCHEDULE
The Programming Services consist of three (3) video channels of unedited
adult-oriented programming, which is largely comprised of feature films and
videos. The Programming Services are currently identified as:
1. The "Extasy" Channel which has an XXX rating.
2. The "Erotic Television Clips" (TeN Clips) Channel which has an XX rating.
3. The "TeN" ("The Erotic Network") Channel which has an XX rating.
All such channels shall be deemed to include the same services operated under
these or any other names in the future whether in standard definition or high
definition.
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EXHIBIT B
CORPORATE GUARANTEE
To induce Transponder Encryption Services Corporation ("TESC") to enter
into the Satellite Capacity Lease (the "Lease") dated October 24, 2006 between
TESC and Colorado Satellite Broadcasting, Inc. ("CSB"), the undersigned
("Guarantor") hereby unconditionally guarantees and promises to perform any and
all of CSB's obligations under the Lease.
1. This Guarantee is a continuing guarantee which shall remain
effective until all of CSB's obligations under the Lease have been fully
performed.
2. The obligations hereunder are joint and several, and independent of
the obligations of CSB. A separate action or actions may be brought and
prosecuted against Guarantor whether or not action is brought against CSB or
whether CSB is joined in any such action or actions (provided, however, that
Guarantor may bring CSB into any such action as permitted under applicable law)
and Guarantor waives the benefit of any statute of limitations affecting its
liability under this Guarantee or the enforcement hereof.
3. This Guarantee shall not be impaired by any modification,
supplement, extension or amendment of any contract or agreement to which TESC
and CSB may hereafter agree, nor by any modification, release or other
alteration of any of the indebtedness thereby guaranteed or of any security
therefor, nor by any agreements or arrangements whatever with CSB or anyone
else.
4. Guarantor waives any and all right to assert against TESC any claim
or defense based upon an election of remedies by TESC which, in any manner
impairs, affects, reduces, releases, destroys and/or extinguishes TESC's
subrogation rights and/or Guarantor's right to proceed against CSB for
reimbursement, and/or any other rights of Guarantor against CSB and/or against
any other person or security, including, but not limited to, any defense based
upon an election of remedies by TESC under the terms of the Rules of Civil
Procedure of the any state, or of the United States. Guarantor waives any right
to require TESC to: (a) proceed against CSB; (b) proceed against or exhaust any
security held from CSB; or (c) pursue any other remedy in TESC's power
whatsoever. Any and all present and future debts and obligations of CSB to
Guarantor are hereby waived and postponed in favor of and subordinated to the
full payment and performance to TESC. Guarantor waives all presentments, demands
for performance, notices of non-performance, protests, notices of protest,
notices of dishonor, notices of default, notices of acceptance of this
Guarantee, notice of any and all other notices to which Guarantor might
otherwise be entitled, and the right to a trial in any action hereunder or
arising out of TESC's transactions with CSB.
5. Guarantor agrees to pay all attorney fees and all other costs and
expenses which may be incurred by TESC in the enforcement of this Guarantee or
any claim hereunder or under any other instrument or guarantee, to the maximum
extent permitted by law.
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6. This Guarantee shall be governed by and construed in accordance with
the laws of the State of New York. The federal and state courts in the State of
New York shall have exclusive jurisdiction to hear and determine any claims,
disputes, actions or suits which may arise under or out of this Guarantee. The
parties agree and voluntarily consent to the personal jurisdiction of, and waive
any objection to venue in, such courts for such purposes and agree to accept
service of process outside the State of New York in any matter to be submitted
to any such court pursuant hereto.
7. No modification of this Guarantee shall be effective for any purpose
unless it is in writing and executed by an officer of TESC authorized to do so.
IN WITNESS WHEREOF, the undersigned Guarantor has executed this
Guarantee effective as of October 20, 2006.
Witness: /s/ (illegible) GUARANTOR: NEW FRONTIER MEDIA, INC., A
------------------ COLORADO CORPORATION HAVING A PRINCIPAL
PLACE OF BUSINESS AT 7007 WINCHESTER CIRCLE,
SUITE 200, BOULDER, COLORADO 80301
/s/ Ken Boenish
------------------
Ken Boenish
President
STATE OF COLORADO )
)
COUNTY OF BOULDER )
This Guarantee was acknowledged before me this 20th day of October,
2006, by Ken Boenish as President of New Frontier Media, Inc., a Colorado
corporation having a principal place of business at 7007 Winchester Circle,
Suite 200, Boulder, Colorado 80301. WITNESS my hand and official seal.
SEAL /s/ Anthony Medina
NOTARY PUBLIC ----------------------------
STATE OF COLORADO Name: ANTHONY MEDINA
Notary Public
My Commission Expires:
My commission expires 12/16/09
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EXHIBIT C
CLEAN SLATE CLAIMS
1. TESC claim regarding overpayment for Extasy of $421,681.61
2. Network claim from December, 2004 audit indicating a possible underpayment to
Network of $199,893.
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