<PAGE> 1
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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
-------------------------------------
FORM 10-Q
(MARK ONE)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934 FOR THE QUARTERLY PERIOD ENDED MARCH 31, 2000
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the transition period from to .
--------------- ----------------
Commission File Number: 0-26176
ECHOSTAR COMMUNICATIONS CORPORATION
(Exact name of registrant as specified in its charter)
<TABLE>
<S> <C>
NEVADA 88-0336997
(State or other jurisdiction of incorporation or organization) (I.R.S. Employer Identification No.)
5701 S. SANTA FE DRIVE
LITTLETON, COLORADO 80120
(Address of principal executive offices) (Zip code)
</TABLE>
(303) 723-1000
(Registrant's telephone number, including area code)
NOT APPLICABLE
(Former name, former address and former fiscal year, if changed
since last report)
INDICATE BY CHECK MARK WHETHER THE REGISTRANT (1) HAS FILED ALL REPORTS
REQUIRED TO BE FILED BY SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF
1934 DURING THE PRECEDING 12 MONTHS (OR FOR SUCH SHORTER PERIOD THAT THE
REGISTRANT WAS REQUIRED TO FILE SUCH REPORTS), AND (2) HAS BEEN SUBJECT TO SUCH
FILING REQUIREMENTS FOR THE PAST 90 DAYS. YES X NO
--- ---
AS OF APRIL 20, 2000, THE REGISTRANT'S OUTSTANDING COMMON STOCK CONSISTED
OF 231,172,351 SHARES OF CLASS A COMMON STOCK AND 238,435,208 SHARES OF CLASS B
COMMON STOCK.
================================================================================
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Condensed Consolidated Balance Sheets -
December 31, 1999 and March 31, 2000 (Unaudited)................................................. 1
Condensed Consolidated Statements of Operations for the
three months ended March 31, 1999 and 2000 (Unaudited)........................................... 2
Condensed Consolidated Statements of Cash Flows for the
three months ended March 31, 1999 and 2000 (Unaudited)........................................... 3
Notes to Condensed Consolidated Financial Statements (Unaudited)................................... 4
Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations.............. 11
Item 3. Quantitative and Qualitative Disclosures About Market Risk......................................... None
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.................................................................................. 18
Item 2. Changes in Securities and Use of Proceeds.......................................................... None
Item 3. Defaults Upon Senior Securities.................................................................... None
Item 4. Submission of Matters to a Vote of Security Holders................................................ None
Item 5. Other Information.................................................................................. None
Item 6. Exhibits and Reports on Form 8-K................................................................... 20
</TABLE>
<PAGE> 3
ECHOSTAR COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED BALANCE SHEETS
(Dollars in thousands)
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
----------- -----------
ASSETS (Unaudited)
<S> <C> <C>
Current Assets:
Cash and cash equivalents ..................................................................... $ 905,299 $ 679,788
Marketable investment securities .............................................................. 348,876 371,120
Trade accounts receivable, net of allowance for uncollectible accounts of
$13,109 and $16,182, respectively ........................................................... 159,685 173,735
Insurance receivable .......................................................................... 106,000 106,000
Inventories ................................................................................... 123,630 152,493
Other current assets .......................................................................... 40,205 47,351
----------- -----------
Total current assets ............................................................................. 1,683,695 1,530,487
Restricted cash and marketable investment securities ............................................. 3,000 3,000
Property and equipment, net ...................................................................... 1,339,939 1,338,275
FCC authorizations, net .......................................................................... 722,402 723,816
Other noncurrent assets .......................................................................... 149,153 229,296
----------- -----------
Total assets ................................................................................ $ 3,898,189 $ 3,824,874
=========== ===========
LIABILITIES AND STOCKHOLDERS' EQUITY (DEFICIT)
Current Liabilities:
Trade accounts payable ........................................................................ $ 194,046 $ 171,481
Deferred revenue .............................................................................. 181,531 210,709
Accrued expenses .............................................................................. 499,265 545,566
Current portion of long-term debt ............................................................. 22,067 20,982
----------- -----------
Total current liabilities ........................................................................ 896,909 948,738
Long-term obligations, net of current portion:
1994 Notes .................................................................................... 1,503 1,503
1996 Notes .................................................................................... 1,097 1,097
1997 Notes .................................................................................... 15 15
Seven Year Notes .............................................................................. 375,000 375,000
Ten Year Notes ................................................................................ 1,625,000 1,625,000
Convertible Notes ............................................................................. 1,000,000 1,000,000
Mortgages and other notes payable, net of current portion ..................................... 27,990 24,839
Long-term deferred satellite services revenue and other long-term liabilities ................. 19,093 26,541
----------- -----------
Total long-term obligations, net of current portion .............................................. 3,049,698 3,053,995
----------- -----------
Total liabilities ........................................................................... 3,946,607 4,002,733
Commitments and Contingencies (Note 5)
Stockholders' Equity (Deficit):
6 3/4% Series C Cumulative Convertible Preferred Stock, 908,665 and 348,135
shares issued and outstanding, respectively ................................................. 45,434 17,407
Class A Common Stock, $.01 par value, 1,600,000,000 shares authorized,
220,087,230 and 230,803,137 shares issued and outstanding, respectively...................... 2,200 2,308
Class B Common Stock, $.01 par value, 800,000,000 shares authorized,
238,435,208 shares issued and outstanding ................................................... 2,384 2,384
Class C Common Stock, $.01 par value, 800,000,000 shares authorized, none
outstanding ................................................................................. -- --
Additional paid-in capital .................................................................... 1,622,538 1,691,467
Deferred stock-based compensation ............................................................. (117,780) (104,071)
Accumulated other comprehensive income ........................................................ -- 1,463
Accumulated deficit ........................................................................... (1,603,194) (1,788,817)
----------- -----------
Total stockholders' equity (deficit) ............................................................. (48,418) (177,859)
----------- -----------
Total liabilities and stockholders' equity (deficit) ........................................ $ 3,898,189 $ 3,824,874
=========== ===========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
1
<PAGE> 4
ECHOSTAR COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(In thousands, except per share amounts)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 2000
----------- -----------
<S> <C> <C>
REVENUE:
DISH Network:
Subscription television services .......................................... $ 261,016 $ 476,874
Other ..................................................................... 2,263 1,313
--------- ---------
Total DISH Network .......................................................... 263,279 478,187
DTH equipment sales and integration services ................................ 32,669 62,704
Satellite services .......................................................... 7,974 14,250
C-band and other ............................................................ 5,654 10,580
--------- ---------
Total revenue .................................................................. 309,576 565,721
COSTS AND EXPENSES:
DISH Network Operating Expenses:
Subscriber-related expenses ............................................... 110,357 201,574
Customer service center and other ......................................... 24,109 56,049
Satellite and transmission ................................................ 9,446 12,476
--------- ---------
Total DISH Network operating expenses ....................................... 143,912 270,099
Cost of sales - DTH equipment and integration services ...................... 22,916 46,222
Cost of sales - C-band and other ............................................ 4,050 8,116
Marketing:
Subscriber promotion subsidies ............................................ 127,608 250,087
Advertising and other ..................................................... 11,689 23,170
--------- ---------
Total marketing expenses .................................................... 139,297 273,257
General and administrative .................................................. 30,023 55,577
Non-cash, stock-based compensation .......................................... -- 14,009
Depreciation and amortization ............................................... 25,060 40,458
--------- ---------
Total costs and expenses ....................................................... 365,258 707,738
--------- ---------
Operating loss ................................................................. (55,682) (142,017)
Other Income (Expense):
Interest income ............................................................. 4,936 18,998
Interest expense ............................................................ (52,510) (61,513)
Other ....................................................................... (10) (543)
--------- ---------
Total other income (expense) ................................................... (47,584) (43,058)
--------- ---------
Loss before income taxes ....................................................... (103,266) (185,075)
Income tax provision, net ...................................................... (66) (55)
--------- ---------
Net loss before extraordinary charges .......................................... (103,332) (185,130)
Extraordinary charge for early retirement of debt, net of tax .................. (268,999) --
--------- ---------
Net loss ....................................................................... (372,331) (185,130)
8% Series A Cumulative Preferred Stock dividends ............................... (124) --
12 1/8% Series B Senior Redeemable Exchangeable Preferred
Stock dividends payable in-kind ............................................. (241) --
Accretion of 6 3/4% Series C Cumulative Convertible Preferred Stock ............ (1,834) --
6 3/4% Series C Cumulative Convertible Preferred Stock dividends .............. -- (493)
--------- ---------
Numerator for basic and diluted loss per share - loss
attributable to common shareholders ......................................... $(374,530) $(185,623)
========= =========
Denominator for basic and diluted loss per share -
weighted-average common shares outstanding .................................. 361,528 465,768
========= =========
Net loss per common share:
Basic and diluted loss per share before extraordinary charge ................ $ (0.30) $ (0.40)
Extraordinary charge ........................................................ (0.74) --
--------- ---------
Basic and diluted net loss .................................................. $ (1.04) $ (0.40)
========= =========
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
2
<PAGE> 5
ECHOSTAR COMMUNICATIONS CORPORATION
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(In thousands)
(Unaudited)
<TABLE>
<CAPTION>
THREE MONTHS ENDED MARCH 31,
----------------------------
1999 2000
----------- -----------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss ........................................................................ $ (372,331) $ (185,130)
Adjustments to reconcile net loss to net cash flows from operating activities:
Extraordinary charge for early retirement of debt ............................ 268,999 --
Deferred stock-based compensation recognized ................................. -- 13,709
Depreciation and amortization ................................................ 25,060 40,458
Amortization of debt discount and deferred financing costs ................... 11,036 1,534
Employee benefits funded by issuance of Class A Common Stock ................. 3,184 7,280
Change in reserve for excess and obsolete inventory .......................... (298) 303
Change in long-term deferred satellite services revenue and other long-term
liabilities ............................................................... 5,729 7,448
Other, net ................................................................... 70 990
Changes in current assets and current liabilities, net ....................... 63,912 8,831
----------- -----------
Net cash flows from operating activities ........................................ 5,361 (104,577)
CASH FLOWS FROM INVESTING ACTIVITIES:
Purchases of marketable investment securities ................................... (213,594) (218,888)
Sales of marketable investment securities ....................................... 229,018 198,107
Funds released from escrow and restricted cash and marketable investment
securities ...................................................................... 77,657 --
Purchases of property and equipment ............................................. (8,854) (36,900)
Investment in iSKY, Inc. ....................................................... -- (50,000)
Investment in Replay TV ......................................................... -- (10,000)
Other ........................................................................... (490) (694)
----------- -----------
Net cash flows from investing activities ........................................ 83,737 (118,375)
CASH FLOWS FROM FINANCING ACTIVITIES:
Proceeds from issuance of Seven Year Notes ...................................... 375,000 --
Proceeds from issuance of Ten Year Notes ........................................ 1,625,000 --
Debt issuance costs and prepayment premiums ..................................... (273,718) --
Retirement of 1994 Notes ........................................................ (575,674) --
Retirement of 1996 Notes ........................................................ (501,350) --
Retirement of 1997 Notes ........................................................ (378,110) --
Retirement of Senior Exchange Notes ............................................. (228,528) --
Redemption of Series A Preferred Stock .......................................... (90,934) --
Repayments of mortgage indebtedness and notes payable ........................... (4,956) (4,236)
Net proceeds from Class A Common Stock options exercised and Class A Common
Stock issued to Employee Stock Purchase Plan ................................. 1,525 2,170
Other ........................................................................... -- (493)
----------- -----------
Net cash flows from financing activities ........................................ (51,745) (2,559)
----------- -----------
Net increase (decrease) in cash and cash equivalents ............................ 37,353 (225,511)
Cash and cash equivalents, beginning of period .................................. 106,547 905,299
----------- -----------
Cash and cash equivalents, end of period ........................................ $ 143,900 $ 679,788
=========== ===========
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION:
8% Series A Cumulative Preferred Stock dividends ............................. 124 --
12 1/8% Series B Senior Redeemable Exchangeable Preferred Stock dividends
payable in-kind ........................................................... 241 --
Accretion of 6 3/4% Series C Cumulative Convertible Preferred Stock .......... 1,834 --
Class A Common Stock issued related to acquisition of Kelly Broadcasting
Systems, Inc. ............................................................. -- 31,556
</TABLE>
See accompanying Notes to Condensed Consolidated Financial Statements.
3
<PAGE> 6
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. ORGANIZATION AND BUSINESS ACTIVITIES
Principal Business
The operations of EchoStar Communications Corporation ("ECC," and together
with its subsidiaries, or referring to particular subsidiaries in certain
circumstances, "EchoStar" or the "Company") include three interrelated business
units:
o The DISH Network - a direct broadcast satellite ("DBS") subscription
television service in the United States. As of March 31, 2000,
EchoStar had approximately 3.9 million DISH Network subscribers.
o EchoStar Technologies Corporation ("ETC") - engaged in the design,
distribution and sale of DBS set-top boxes, antennae and other digital
equipment for the DISH Network ("EchoStar receiver systems"), and the
design and distribution of similar equipment for direct-to-home
("DTH") projects of others internationally, together with the
provision of uplink center design, construction oversight and other
project integration services for international DTH ventures.
o Satellite Services - engaged in the delivery of video, audio and data
services to business television customers and other satellite users.
These services may include satellite uplink services, satellite
transponder space usage, billing, customer service and other services.
Since 1994, EchoStar has deployed substantial resources to develop the
"EchoStar DBS System." The EchoStar DBS System consists of EchoStar's
FCC-allocated DBS spectrum, DBS satellites ("EchoStar I," "EchoStar II,"
"EchoStar III," "EchoStar IV," and "EchoStar V"), digital satellite receivers,
digital broadcast operations centers, customer service facilities, and other
assets utilized in its operations. EchoStar's principal business strategy is to
continue developing its subscription television service in the United States to
provide consumers with a fully competitive alternative to cable television
service.
Recent Developments
On March 22, 2000, EchoStar completed a two-for-one split of its
outstanding Class A and Class B common stock. An amount equal to the par value
of the common shares issued in the stock split was transferred from additional
paid-in capital to Class A common stock and Class B common stock. All references
to shares included herein retroactively give effect to the stock split competed
in March 2000.
During March 2000, EchoStar acquired Kelly Broadcasting Systems, Inc.
("KBS"), a New Jersey based provider of international and foreign-language
programming in the United States. In connection with the acquisition, EchoStar
issued approximately 510,000 shares of its Class A common stock and paid $3.5
million in cash, for 100% ownership of KBS.
During March 2000, EchoStar completed a $50 million investment in iSKY Inc.
Pursuant to the investment agreement, following the launch of iSKY's service,
currently anticipated during late 2001, EchoStar would distribute the iSKY
satellite Internet service along with DISH Network satellite TV service through
its retailers nationwide. With this investment, EchoStar acquired a 11.03%
interest in iSKY and received warrants which, subject to reaching certain iSKY
customer targets through the DISH Network, could increase its stake up to 19.26%
on an outstanding basis.
4
<PAGE> 7
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Presentation
The accompanying unaudited condensed consolidated financial statements have
been prepared in accordance with generally accepted accounting principles and
with the instructions to Form 10-Q and Article 10 of Regulation S-X for interim
financial information. Accordingly, these statements do not include all of the
information and footnotes required by generally accepted accounting principles
for complete financial statements. In the opinion of management, all adjustments
(consisting of normal recurring adjustments) considered necessary for a fair
presentation have been included. All significant intercompany accounts and
transactions have been eliminated in consolidation. Operating results for the
three months ended March 31, 2000 are not necessarily indicative of the results
that may be expected for the year ending December 31, 2000. For further
information, refer to the consolidated financial statements and footnotes
thereto included in EchoStar's Annual Report on Form 10-K for the year ended
December 31, 1999. Certain prior year amounts have been reclassified to conform
with the current year presentation.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses for each reporting
period. Actual results could differ from those estimates.
Comprehensive Income (Loss)
The components of comprehensive loss, net of tax, are as follows (in
thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED
MARCH 31,
------------------------
1999 2000
--------- ---------
(Unaudited)
<S> <C> <C>
Net loss ............................................................ $(372,331) $(185,130)
Change in unrealized gain (loss) on available-for-sale securities ... -- 1,463
--------- ---------
Comprehensive loss .................................................. $(372,331) $(183,667)
========= =========
</TABLE>
Accumulated other comprehensive income presented on the accompanying
condensed consolidated balance sheets consists of the accumulated net unrealized
gain on available-for-sale securities, net of deferred taxes.
Basic and Diluted Loss Per Share
As of March 31, 2000 and 1999, options to purchase approximately 27,861,000
and 29,448,000 shares of Class A common stock were outstanding, respectively.
Common stock equivalents (employee stock options and warrants) are excluded from
the calculation of diluted loss per share as they are antidilutive. Securities
which are convertible into shares of Class A common stock (6 3/4% Series C
Cumulative Convertible Preferred Stock and 4 7/8% Convertible Subordinated
Notes) also are excluded from the calculation of diluted loss per share as they
are antidilutive. Approximately 37,720,000 and 5,713,000 shares of Class A
common stock were issuable upon conversion of the 6 3/4% Series C Cumulative
Convertible Preferred Stock as of March 31, 1999 and 2000, respectively. As of
March 31, 2000, the 4 7/8% Convertible Subordinated Notes are convertible into
approximately 11 million shares of Class A common stock.
5
<PAGE> 8
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
3. INVENTORIES
Inventories consist of the following (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31, MARCH 31,
1999 2000
--------- ---------
<S> <C> <C>
Finished goods - DBS ........................................................... $ 63,567 $ 55,633
Raw materials .................................................................. 35,751 61,774
Finished goods - reconditioned and other ....................................... 19,509 25,281
Work-in-process ................................................................ 7,666 13,220
Consignment .................................................................... 1,084 835
Reserve for excess and obsolete inventory ...................................... (3,947) (4,250)
--------- ---------
$ 123,630 $ 152,493
========= =========
</TABLE>
4. ECHOSTAR IV IMPAIRMENT
As a result of the failure of EchoStar IV solar arrays to fully deploy and
the failure of 22 transponders to date, a maximum of approximately 16 of the 44
transponders on EchoStar IV are currently available for use at this time. Due to
the normal degradation of the solar arrays, the number of available transponders
may further decrease over time. Based on current data from Lockheed Martin, we
expect that at least 10 high power transponders or 5 extra-high power
transponders will probably be available over the remaining useful life of the
satellite, absent significant additional transponder problems or other failures.
In addition to transponder failures, EchoStar IV experienced anomalies
affecting its heating systems and fuel system during 1999. As a result of the
heating system and fuel system anomalies, the estimated remaining useful life of
EchoStar IV has been reduced to approximately 4 years. This change increased
EchoStar's net loss for the three months ended March 31, 2000 by approximately
$2.4 million.
During September 1998, EchoStar recorded a $106 million provision for loss
in connection with the partial failure of EchoStar IV solar arrays to deploy.
During December 1999, EchoStar recorded an additional $13.7 million provision
for loss. The aggregate loss provision of $119.7 million represented EchoStar's
estimate, at December 31, 1999, of the asset impairment attributable to lost
transmission capacity on EchoStar IV resulting from the solar array anomaly
described above. EchoStar also recorded a $106 million gain, during September
1998, attributable to an anticipated insurance claim receivable that it believes
is probable of receipt. While there can be no assurance as to the amount of the
final insurance settlement, EchoStar believes that it will receive insurance
proceeds at least equal to the $106 million receivable recorded. To the extent
that it appears probable that EchoStar will receive insurance proceeds in excess
of the $106 million currently recorded and that no further provision for loss is
necessary, a gain will be recognized for the incremental amount in the period
that the amount of the final settlement can be reasonably estimated.
In September 1998, EchoStar filed a $219.3 million insurance claim for a
constructive total loss under the launch insurance policy related to EchoStar
IV. However, if the Company receives $219.3 million for a constructive total
loss on the satellite, the insurers would obtain the sole right to the benefits
of salvage from EchoStar IV under the terms of the launch insurance policy.
Although we believe we have suffered a total loss of EchoStar IV under that
definition in the launch insurance policy, we intend to negotiate a settlement
with the insurers to compensate us for the reduced satellite transmission
capacity and allow us to retain title to the asset.
6
<PAGE> 9
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
The satellite insurance policy for EchoStar IV consists of separate
identical policies with different carriers for varying amounts which, in
combination, create a total insured amount of $219.3 million. Two of the
participants in EchoStar's insurance line have notified EchoStar they believe
that its alleged delay in providing required insurance claim information may
reduce their obligation to pay any settlement related to the claim.
During April 2000, the insurance carriers offered EchoStar a total of
approximately $88 million, or 40% of the total policy amount, in settlement of
the EchoStar IV insurance claim. The insurers allege that all other impairment
to the satellite occurred after expiration of the policy period and is not
covered by the policy. EchoStar strongly disagrees with the position of the
insurers. As a result, EchoStar filed for arbitration to resolve its insurance
claim for constructive total loss with respect to the EchoStar IV satellite.
There can be no assurance that EchoStar will receive the amount claimed or, if
it does, that EchoStar will retain title to EchoStar IV with its reduced
capacity.
While there can be no assurance, we do not currently expect a material
adverse impact on short term satellite operations. We will continue to evaluate
the performance of EchoStar IV and may modify our loss assessment as new events
or circumstances develop.
5. COMMITMENTS AND CONTINGENCIES
DirecTV
During February 2000 EchoStar filed suit against DirecTV and Thomson
Consumer Electronics/RCA in the Federal District Court of Colorado. The suit
alleges that DirecTV has utilized improper conduct in order to fend off
competition from the DISH Network. According to the complaint, DirecTV has
demanded that certain retailers stop displaying EchoStar merchandise and has
threatened to cause economic damage to retailers if they continued to offer both
product lines in head-to-head competition. The suit alleges, among other things,
that DirecTV has acted in violation of federal and state anti-trust laws in
order to protect DirecTV's market share. EchoStar is seeking injunctive relief
and monetary damages. It is too early in the litigation to make an assessment of
the probable outcome.
The DirecTV defendants filed a counterclaim against EchoStar. DirecTV
alleges that EchoStar tortuously interfered with a contract that DirecTV
allegedly had with Kelly Broadcasting Systems, Inc. (KBS). DirecTV alleges that
EchoStar "merged" with KBS, in contravention of DirecTV's contract with KBS.
DirecTV also alleges that EchoStar has falsely advertised to consumers about
EchoStar's right to offer network programming. DirecTV further alleges that
EchoStar improperly used certain marks owned by PrimeStar, now owned by DirecTV.
Finally, DirecTV alleges that EchoStar has been marketing National Football
League games in a misleading manner. The amount of damages DirecTV is seeking is
as yet unquantified. EchoStar intends to vigorously defend against these claims.
The case is currently in discovery.
The News Corporation Limited
During February 1997, News Corporation agreed to acquire approximately 50%
of our outstanding capital stock. During late April 1997, substantial
disagreements arose between the parties regarding their obligations under this
agreement. Those substantial disagreements led to litigation which the parties
subsequently settled. In connection with the News Corporation litigation, we
have a contingent fee arrangement with the attorneys who represented us in that
litigation, which provides for the attorneys to be paid a percentage of any net
recovery obtained in the News Corporation litigation. The attorneys have
asserted that they may be entitled to receive payments totaling hundreds of
millions of dollars under this fee arrangement. We are vigorously contesting the
attorneys' interpretation of the fee arrangement, which we believe significantly
overstates the magnitude of our liability. We also believe that the fee
arrangement is void and
7
<PAGE> 10
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
unenforceable because the attorneys who represented us are seeking a fee that we
believe is unreasonable and excessive, among other things. If we are unable to
resolve this fee dispute with the attorneys, it would be resolved through
arbitration or litigation. During mid-1999, we initiated litigation against the
attorneys in the District Court, Arapahoe County, Colorado, arguing that the fee
arrangement is void and unenforceable. In December 1999, the attorneys initiated
an arbitration proceeding before the American Arbitration Association. It is too
early to determine the outcome of negotiations, arbitration or litigation
regarding this fee dispute.
WIC Premium Television Ltd.
During July 1998, a lawsuit was filed by WIC Premium Television Ltd., an
Alberta corporation, in the Federal Court of Canada Trial Division, against
General Instrument Corporation, HBO, Warner Communications, Inc., John Doe,
Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and two
of EchoStar's wholly-owned subsidiaries. The lawsuit seeks, among other things,
an interim and permanent injunction prohibiting the defendants from activating
receivers in Canada and from infringing any copyrights held by WIC. It is too
early to determine whether or when any other lawsuits or claims will be filed.
It is also too early to make an assessment of the probable outcome of the
litigation or to determine the extent of any potential liability or damages.
During September 1998, WIC filed another lawsuit in the Court of Queen's
Bench of Alberta Judicial District of Edmonton against certain defendants,
including EchoStar. WIC is a company authorized to broadcast certain copyrighted
work, such as movies and concerts, to residents of Canada. WIC alleges that the
defendants engaged in, promoted, and/or allowed satellite dish equipment from
the United States to be sold in Canada and to Canadian residents and that some
of the defendants allowed and profited from Canadian residents purchasing and
viewing subscription television programming that is only authorized for viewing
in the United States. The lawsuit seeks, among other things, an interim and
permanent injunction prohibiting the defendants from importing hardware into
Canada and from activating receivers in Canada, together with damages in excess
of $175 million.
We filed motions to dismiss each of the actions for lack of personal
jurisdiction. The Court in the Alberta action recently denied our Motion to
Dismiss. The Alberta Court also granted a motion to add more EchoStar parties to
the lawsuit. EchoStar Satellite Corporation, EchoStar DBS Corporation, EchoStar
Technologies Corporation, and EchoStar Satellite Broadcast Corporation have been
added as defendants in the litigation. The newly added defendants have also
challenged jurisdiction. The Court in the Federal action has stayed that case
before ruling on our motion to dismiss. We intend to vigorously defend the suits
in the event our motions are denied. It is too early to determine whether or
when any other lawsuits or claims will be filed. It is also too early to make an
assessment of the probable outcome of the litigation or to determine the extent
of any potential liability or damages.
Broadcast network programming
Under the Satellite Home Viewer Act, the determination of whether a
household qualifies as "unserved" for the purpose of eligibility to receive a
distant network channel depends, in part, on whether that household can receive
a signal of "Grade B intensity" as defined by the FCC.
During 1998, the national networks and local affiliate stations challenged,
based upon copyright infringement, PrimeTime 24's methods of selling network
programming to consumers. Historically, we obtained distant broadcast network
signals for distribution to our customers through PrimeTime 24. The United
States District Court for the Southern District of Florida entered a nationwide
permanent injunction preventing PrimeTime 24 from selling its programming to
consumers unless the programming was sold in accordance with certain
stipulations in the injunction. The injunction covers distributors as well. The
plaintiffs in the Florida litigation informed us they considered us a
distributor for purposes of that injunction. A federal district court in North
Carolina also issued an injunction against PrimeTime 24 prohibiting certain
distant signal retransmissions in the Raleigh area. The Fourth Circuit Court of
Appeals recently affirmed the North Carolina Court's decision. We have
implemented Satellite Home Viewer Act compliance procedures which materially
restrict the market for the sale of network channels by us.
8
<PAGE> 11
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
In October 1998, we filed a declaratory judgment action in the United
States District Court for the District of Colorado against the four major
networks. We asked the court to enter a judgment declaring that our method of
providing distant network programming does not violate the Satellite Home Viewer
Act and hence does not infringe the networks' copyrights. In November 1998, the
four major broadcast networks and their affiliate groups filed a complaint
against us in federal court in Miami alleging, among other things, copyright
infringement. The court combined the case that we filed in Colorado with the
case in Miami and transferred it to the Miami court.
In February 1999, CBS, NBC, Fox and ABC filed a "Motion for Temporary
Restraining Order, Preliminary Injunction and Contempt Finding" against DirecTV
in Miami related to the delivery of distant network channels to DirecTV
customers by satellite. Under the terms of a settlement between DirecTV and the
networks, some DirecTV customers were scheduled to lose access to their
satellite-provided network channels by July 31, 1999, while other DirecTV
customers were to be disconnected by December 31, 1999. Subsequently, PrimeTime
24 and substantially all providers of satellite-delivered network programming
other than us agreed to this cut-off schedule.
The networks are pursuing a Motion for Preliminary Injunction in the Miami
Court, asking the Court to enjoin us from providing network programming except
under very limited circumstances, and to turn off network programming to many of
our customers.
A preliminary injunction hearing was held during September 1999. The Court
took the issues under advisement to consider the networks' request for an
injunction, whether to hear live testimony before ruling upon the request, and
whether to hear argument on why the Satellite Home Viewer Act may be
unconstitutional, among other things. The Court did not say when a decision will
be made, or whether an additional hearing will be necessary prior to ruling on
the networks' preliminary injunction motion. Additional motions and affidavits
have been filed with the Court over the past several months and a ruling
adverse, or favorable, to us could issue at any time.
If this case is decided against us, or a preliminary injunction is issued,
significant material restrictions on the sale of distant ABC, NBC, CBS and Fox
channels by us could result, including potentially a nationwide permanent
prohibition on our broadcast of ABC, NBC, CBS and Fox network channels by
satellite. The litigation and the new legislation discussed above, among other
things, could also require us to terminate delivery of network signals to a
material portion of our subscriber base, which could cause many of these
subscribers to cancel their subscription to our other services. While the
networks have not sought monetary damages, they have sought to recover attorney
fees if they prevail. We have sent letters to some of our subscribers warning
that their access to distant broadcast network channels might be terminated soon
and have terminated ABC, NBC, CBS and Fox programming to many customers.
In November 1999, Congress passed new legislation regarding the satellite
delivery of network programming and it was signed into law by President Clinton.
This new law has the potential of reducing the number of customers whose network
channels EchoStar may otherwise be required to terminate, as the law
"grandfathers" many subscribers to continue to receive network channels by
satellite.
9
<PAGE> 12
ECHOSTAR COMMUNICATIONS CORPORATION
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
(Unaudited)
6. SEGMENT REPORTING
Financial Data by Business Unit
<TABLE>
<CAPTION>
ECHOSTAR
DISH TECHNOLOGIES SATELLITE ELIMINATIONS CONSOLIDATED
NETWORK CORPORATION SERVICES AND OTHER TOTAL
--------- ----------- --------- ------------ ------------
<S> <C> <C> <C> <C> <C>
THREE MONTHS ENDED MARCH 31, 1999
Revenue .......................... $ 269,189 $ 26,517 $ 9,110 $ 4,760 $ 309,576
Net income (loss) before
extraordinary charges ......... (495,439) (3,776) 4,962 390,921 (103,332)
THREE MONTHS ENDED MARCH 31, 2000
Revenue .......................... $ 484,448 $ 52,469 $ 17,661 $ 11,143 $ 565,721
Net income (loss) ................ (534,017) (4,494) 11,062 342,319 (185,130)
</TABLE>
7. SUBSEQUENT EVENTS
During April 2000, EchoStar announced an investment of $50 million in
Gilat-To-Home Inc. Gilat-To-Home, a joint venture whose partners now include
EchoStar, Gilat Satellite Networks Ltd., and Microsoft, plans to provide
consumer, two-way satellite, broadband Internet service later this year. With
the investment, EchoStar will hold approximately a 17.6% stake in Gilat-To-Home.
EchoStar and Gilat previously announced an agreement to jointly offer
consumers two-way, Ku-band, high-speed satellite Internet access along with DISH
Network satellite television programming via a single small consumer dish. Under
the terms of the agreement, EchoStar will distribute the Gilat-To-Home broadband
satellite Internet service powered by MSN along with DISH Network satellite TV
service through its retailers nationwide. The Gilat-To-Home services are
expected to be available during late 2000.
10
<PAGE> 13
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
All statements contained herein, as well as statements made in press
releases and oral statements that may be made by us or by officers, directors or
employees acting on our behalf, that are not statements of historical fact
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties and other factors that could
cause our actual results to be materially different from historical results or
from any future results expressed or implied by such forward-looking statements.
Among the factors that could cause our actual results to differ materially are
the following: a total or partial loss of a satellite due to operational
failures, space debris or otherwise; an unsuccessful launch or deployment of our
sixth satellite, EchoStar VI; delays in the construction of our seventh, eighth
or ninth satellites; a decrease in sales of digital equipment and related
services to international direct-to-home or DTH service providers; a decrease in
DISH Network subscriber growth; an increase in subscriber turnover; an increase
in subscriber acquisition costs; an inability to obtain certain retransmission
consents; our inability to retain necessary authorizations from the FCC; an
increase in competition from cable, direct broadcast satellite, other satellite
system operators, and other providers of subscription television services; the
introduction of new technologies and competitors into the subscription
television business; a change in the regulations governing the subscription
television service industry; the outcome of any litigation in which we may be
involved; general business and economic conditions; and other risk factors
described from time to time in our reports filed with the Securities and
Exchange Commission. In addition to statements that explicitly describe such
risks and uncertainties, readers are urged to consider statements that include
the terms "believes," "belief," "expects," "plans," "anticipates," "intends" or
the like to be uncertain and forward-looking. All cautionary statements made
herein should be read as being applicable to all forward-looking statements
wherever they appear. In this connection, investors should consider the risks
described herein and should not place undue reliance on any forward-looking
statements.
RESULTS OF OPERATIONS
Three Months Ended March 31, 2000 Compared to the Three Months Ended March 31,
1999.
Revenue. Total revenue for the three months ended March 31, 2000 was $566
million, an increase of $256 million compared to total revenue for the three
months ended March 31, 1999 of $310 million. The increase in total revenue was
primarily attributable to DISH Network subscriber growth. We expect that our
revenues will continue to increase as the number of DISH Network subscribers
increases.
DISH Network subscription television services revenue totaled $477 million
for the three months ended March 31, 2000, an increase of $216 million compared
to the same period in 1998. This increase was directly attributable to the
increase in the number of DISH Network subscribers and higher average revenue
per subscriber. DISH Network subscribers for the three months ended March 31,
2000 increased approximately 71% compared to the same period in 1999. As March
31, 2000, we had approximately 3.9 million DISH Network subscribers compared to
2.3 million at March 31, 1999. The strong subscriber growth reflects the impact
of aggressive marketing promotions, including our free installation program,
together with increased interest in satellite television resulting from the
availability of local network channels by satellite, together with generally
good economic conditions and positive momentum for the DISH Network generally.
Monthly revenue per subscriber was approximately $43.85 during the three months
ended March 31, 2000 and approximately $41.50 during the same period during
1999. DISH Network subscription television services revenue principally consists
of revenue from basic, premium and pay-per-view subscription television
services. DISH Network subscription television services revenue will continue to
increase to the extent we are successful in increasing the number of DISH
Network subscribers and maintaining or increasing revenue per subscriber.
For the three months ended March 31, 2000, DTH equipment sales and
integration services totaled $63 million, an increase of $30 million compared to
the same period during 1999. DTH equipment sales consist of sales of digital
set-top boxes and other digital satellite broadcasting equipment to
international DTH service operators and sales of DBS accessories. This increase
in DTH equipment sales and integration services revenue was primarily
attributable to an increase in international demand for digital set-top boxes as
compared to the same period during 1999.
11
<PAGE> 14
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
Substantially all of our EchoStar Technologies Corporation, or ETC,
revenues have resulted from sales to two international DTH providers. We
currently have agreements to provide equipment to DTH service operators in Spain
and Canada. As a result, our ETC business currently is economically dependent on
these two DTH providers. Our future revenue from the sale of DTH equipment and
integration services in international markets depends largely on the success of
these DTH operators and continued demand for our digital set-top boxes. Although
there can be no assurance, we expect that our DTH equipment and integration
services revenue for the year ended December 31, 2000 will approximate DTH
equipment and integration services revenue during 1999. Although we continue to
actively pursue additional distribution and integration service opportunities
internationally, no assurance can be given that any such efforts will be
successful.
As previously reported, since 1998, Telefonica, one of the two DTH service
providers described above, has had recurrent discussions and negotiations for a
possible merger with Sogecable (Canal Plus Satellite), one of its primary
competitors. While we are not currently aware of any formal negotiations between
Telefonica and Canal Plus Satellite, there are again rumors of a potential
merger in the marketplace. Although we have binding purchase orders from
Telefonica for deliveries of DTH equipment in 2000, we cannot predict the
impact, if any, eventual consummation of this possible merger might have on our
future sales to Telefonica.
Satellite services revenue totaled $14 million during the three months
ended March 31, 2000, an increase of $6 million as compared to the same period
during 1999. These revenues principally include fees charged to content
providers for signal carriage and revenues earned from business television, or
BTV customers. The increase in satellite services revenue was primarily
attributable to increased BTV revenue due to the addition of new full-time BTV
customers. Satellite services revenue for the year ended December 31, 2000 is
expected to increase as compared to the year ended December 31, 1999, to the
extent we are successful in increasing the number of our BTV customers and
developing and implementing new services.
In order, among other things, to prepare for a potential adverse result in
our pending litigation with the four major broadcast networks and their
affiliate groups, we have sent letters to some of our subscribers warning that
their access to CBS, NBC, Fox and ABC distant network channels might be
terminated this year. Such terminations would result in a small reduction in
average monthly revenue per subscriber and possibly increased subscriber
turnover. While there can be no assurance, any such decreases could be offset by
increases in average monthly revenue per subscriber resulting from the delivery
of local network channels by satellite, and increases in other programming
offerings that will follow the launch of EchoStar VI this summer.
DISH Network Operating Expenses. DISH Network operating expenses totaled
$270 million during the three months ended March 31, 2000, an increase of $126
million or 88%, compared to the same period in 1999. The increase in DISH
Network operating expenses was consistent with, and primarily attributable to,
the increase in the number of DISH Network subscribers. DISH Network operating
expenses represented 57% and 55% of subscription television services revenue
during the three months ended March 31, 2000 and 1999, respectively. The
percentage increase is primarily attributable to operating inefficiencies
resulting from our rapid growth including upgrades to our installation and call
center infrastructure. We believe these issues will be resolved shortly and will
provide long term efficiency improvement.
Subscriber-related expenses totaled $202 million during the three months
ended March 31, 2000, an increase of $92 million compared to the same period in
1999. Such expenses, which include programming expenses, copyright royalties,
residuals currently payable to retailers and distributors, and billing, lockbox
and other variable subscriber expenses, represented 42% of subscription
television services revenues during each of the three months ended March 31,
2000 and 1999. Although we do not currently expect subscriber-related expenses
as a percentage of subscription television services revenue to increase
materially in future periods, there can be no assurance this expense to revenue
ratio will not materially increase.
Customer service center and other expenses principally consist of costs
incurred in the operation of our DISH Network customer service centers, such as
personnel and telephone expenses, as well as subscriber equipment installation
and other operating expenses. Customer service center and other expenses totaled
$56 million during the
12
<PAGE> 15
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
three months ended March 31, 2000, an increase of $32 million as compared to the
same period in 1999. The increase in customer service center and other expenses
primarily resulted from increased personnel and telephone expenses to support
the growth of the DISH Network and from installation expenses related to the
expansion of our installation business. Customer service center and other
expenses totaled 12% of subscription television services revenue during the
three months ended March 31, 2000, as compared to 9% during the same period in
1999. These expenses in total, and as a percentage of subscription television
services revenue, may continue to increase in future periods as we continue to
develop and expand our customer service centers and installation business to
provide additional customer support and help us better accommodate anticipated
subscriber growth, resulting in long term efficiency improvements.
Satellite and transmission expenses include expenses associated with the
operation of our digital broadcast center, contracted satellite telemetry,
tracking and control services, and satellite in-orbit insurance. Satellite and
transmission expenses totaled $12 million during the three months ended March
31, 2000, a $3 million increase compared to the same period in 1999. This
increase resulted from higher satellite and other digital broadcast center
operating expenses due to an increase in the number of operational satellites.
We expect satellite and transmission expenses to continue to increase in the
future as additional satellites or digital broadcast centers are placed in
service. Satellite and transmission expenses totaled 3% and 4% of subscription
television services revenue during the three months ended March 31, 2000 and
1999, respectively.
Cost of sales - DTH equipment and Integration Services. Cost of sales - DTH
equipment and integration services totaled $46 million during the three months
ended March 31, 2000, an increase of $23 million compared to the same period in
1999. Cost of sales - DTH equipment and integration services principally
includes costs associated with digital set-top boxes and related components sold
to international DTH operators and DBS accessories. This increase in cost of
sales - DTH equipment and integration services is consistent with the increase
in DTH equipment sales and integration services revenue. Cost of sales - DTH
equipment and integration services represented 74% and 70% of DTH equipment
revenue, during the three months ended March 31, 2000 and 1999, respectively.
The increase reflects price pressure resulting from increased competition from
other providers of DTH equipment.
Marketing Expenses. Marketing expenses totaled $273 million during the
three months ended March 31, 2000, an increase of $134 million compared to the
same period in 1999. The increase in marketing expenses was primarily
attributable to an increase in subscriber promotion subsidies. Subscriber
promotion subsidies include the excess of transaction costs over transaction
proceeds at the time of sale of EchoStar receiver systems, activation allowances
paid to retailers, and other promotional incentives. Advertising and other
expenses totaled $23 million and $12 million during the three months ended March
31, 2000 and 1999, respectively.
We subsidize the purchase and installation of EchoStar receiver systems in
order to attract new DISH Network subscribers. Consequently, our subscriber
acquisition costs are significant. In connection with our plans to encourage as
many new subscribers as possible to be ready for the additional services that
will become available at the 110(Degree) WL orbital location, and as a result of
continuing competition and our plans to attempt to continue to drive rapid
subscriber growth, we expect our subscriber acquisition costs for 2000 may
average as much as $450 or more for the full year.
During the three months ended March 31, 2000, our marketing promotions
included our DISH Network One-Rate Plan, C-band bounty program, Great Rewards
program (PrimeStar bounty), cable bounty and a free installation program. Our
subscriber acquisition costs under these programs are significantly higher than
those under our marketing programs historically.
Under the DISH Network One-Rate Plan, consumers are eligible to receive a
rebate that ranges from $100 up to $299 on the purchase of certain EchoStar
receiver systems. To be eligible for this rebate, a subscriber must make a
one-year commitment to subscribe to our America's Top 100 CD programming package
plus additional channels. The amount of the monthly programming commitment
determines the amount of the rebate. Although subscriber acquisition costs are
materially higher under this plan compared to previous promotions, DISH Network
One-Rate Plan customers generally provide materially greater average revenue per
subscriber than a typical DISH Network subscriber. In addition, we believe that
these customers represent lower credit risk and therefore may be marginally less
likely to
13
<PAGE> 16
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
disconnect their service than other DISH Network subscribers. To the extent that
actual consumer participation levels exceed present expectations, subscriber
acquisition costs may increase. Although there can be no assurance as to the
ultimate duration of the DISH Network One-Rate Plan, it will continue through at
least April 2000.
Under our bounty programs, current cable, C-band and PrimeStar customers
are eligible to receive a free base-level EchoStar receiver system and free
installation. In addition, PrimeStar customers are eligible to receive six
months of our America's Top 40 programming or our DISH Latino programming (both
packages retail for $19.99 per month) without charge. A subscriber must make a
one-year commitment to subscribe to either our America's Top 40, our DISH Latino
programming package or our America's Top 100 CD programming package and prove
that they are a current cable, C-band or PrimeStar customer to be eligible for
these programs.
Under our free installation program all customers who purchase an EchoStar
receiver system through April 30, 2000 are eligible to receive a free
professional installation. The free installation program was responsible, in
part, for the strong subscriber growth during the first quarter of 2000. The
free installation program was also largely responsible for the increase in
subscriber acquisition costs during the first quarter. While there can be no
assurance, we expect that subscriber acquisition costs may be lower during the
remainder of 2000 following expiration of the free installation program and
commencement of other less expensive programs including our new Digital Home
Plan. That plan provides consumers with the use of two receivers plus
installation, in home service and our America's Top 150 programming package for
only $49.99, plus a $99 up front fee.
During the three months ended March 31, 2000, our total subscriber
acquisition costs, inclusive of acquisition marketing expenses, totaled
approximately $273 million, or approximately $467 per new subscriber activation.
Comparatively, our subscriber acquisition costs during the three months ended
March 31, 1999, inclusive of acquisition marketing expenses, totaled $142
million, or approximately $355 per new subscriber activation. The increase in
our subscriber acquisition costs, on a per new subscriber activation basis,
principally resulted from the impact of several aggressive marketing promotions
to acquire new subscribers, including most significantly our free installation
offer which commenced in January and is scheduled to conclude during the second
quarter.
In connection with the launch of EchoStar V and EchoStar VI, we will
utilize the 110(Degree) orbital location to enhance revenue opportunities with
new value added services for our current and future subscribers, and maintain
our primary DBS service at the 119(Degree) orbital location. Our existing
subscribers will need to upgrade their dish and receiver systems in order to
take advantage of all of the services we offer. To encourage existing
subscribers to upgrade their systems and remain subscribers, we are currently
subsidizing upgrades by existing subscribers to our DISH 500 system. The cost of
this program could be significant if utilized by a large number of our existing
subscribers. The anticipated date for the launch of EchoStar VI, previously
scheduled for June 2000, is now expected in July as a result of a delay of an
Atlas launch scheduled prior to EchoStar VI.
Our subscriber acquisition costs, both in the aggregate and on a per new
subscriber activation basis, may materially increase further to the extent that
we continue or expand our bounty programs, our "free system/free installation"
program, or the DISH Network One-Rate Plan, or if we determine that other more
aggressive promotions are necessary to respond to competition, or for other
reasons.
General and Administrative Expenses. General and administrative expenses
totaled $56 million during the three months ended March 31, 2000, an increase of
$26 million as compared to the same period in 1999. The increase in G&A expenses
was principally attributable to increased personnel expenses to support the
growth of the DISH Network. G&A expenses represented 10% of total revenue during
each of the three months ended March 31, 2000 and 1999. Although we expect G&A
expenses as a percentage of total revenue to remain near the current level or
decline modestly in future periods, this expense to revenue ratio could
increase.
Non-cash, Stock-based Compensation. During 1999, we adopted an incentive
plan which provided certain key employees a contingent incentive including stock
options. The payment of these incentives was contingent upon our achievement of
certain financial and other goals. We met certain of these goals during 1999.
Accordingly, we recorded approximately $179 million of deferred compensation
related to post-grant appreciation of stock
14
<PAGE> 17
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
options granted pursuant to the 1999 incentive plan. The related deferred
compensation will be recognized over the five-year vesting period. As a result
of substantial post-grant appreciation of options, during the three months ended
March 31, 2000 we recognized $14 million of the total of $179 million of
deferred stock-based compensation under this performance based plan. The
remainder will be recognized over the remaining vesting period.
EBITDA. EBITDA represents earnings before interest, taxes, depreciation,
amortization, and non-cash, stock-based compensation. EBITDA was negative $88
million during the three months ended March 31, 2000 compared to negative $31
million during the same period in 1999. This decline in EBITDA principally
resulted from an increase in subscriber acquisition costs due to the success of
several aggressive marketing promotions to acquire new subscribers, as well as
other previously described factors. It is important to note that EBITDA does not
represent cash provided or used by operating activities. Further, our
calculation of EBITDA for the three months ended March 31, 2000 does not include
approximately $14 million of non-cash compensation expense resulting from
post-grant appreciation of employee stock options. EBITDA should not be
considered in isolation or as a substitute for measures of performance prepared
in accordance with generally accepted accounting principles.
As previously discussed, to the extent we expand our current marketing
promotions and our subscriber acquisition costs materially increase, our EBITDA
results will be negatively impacted because subscriber acquisition costs are
expensed as incurred.
Depreciation and Amortization. Depreciation and amortization expenses
aggregated $40 million during the three months ended March 31, 2000, a $15
million increase compared to the same period in 1999. The increase in
depreciation and amortization expenses principally resulted from an increase in
depreciation related to the commencement of operation of EchoStar V in November
1999 and other depreciable assets placed in service during 1999.
Other Income and Expense. Other expense, net totaled $43 million during the
three months ended March 31, 2000, a decrease of $5 million compared to the same
period in 1999. This decrease resulted from an increase in interest income
partially offset by an increase in interest expense.
LIQUIDITY AND CAPITAL RESOURCES
Cash Sources
As of March 31, 2000, our unrestricted cash, cash equivalents and
marketable investment securities totaled $1.051 billion compared to $1.254
billion as of December 31, 1999. For the three months ended March 31, 1999 and
2000, we reported net cash flows from operating activities of $5 million and
negative $105 million, respectively. The increase in net cash flows reflects,
among other things, the significant increase in subscriber acquisition costs
associated with our rapid subscriber growth and our "free installation"
promotion.
We expect that our future working capital, capital expenditure and debt
service requirements will be satisfied primarily from existing cash and
investment balances and cash generated from operations. Our ability to generate
positive future operating and net cash flows is dependent upon our ability to
continue to rapidly expand our DISH Network subscriber base, retain existing
DISH Network subscribers, and our ability to grow our ETC and Satellite Services
businesses. There can be no assurance that we will be successful in achieving
our goals. The amount of capital required to fund our 2000 working capital and
capital expenditure needs will vary, depending, among other things, on the rate
at which we acquire new subscribers and the cost of subscriber acquisition. Our
working capital and capital expenditure requirements could increase materially
in the event of increased competition for subscription television customers,
significant satellite failures, or in the event of a general economic downturn,
among other factors. These factors could require that we raised additional
capital in the future.
Subscriber Turnover
Our churn increased during 1999, but did not further increase during the
three months ended March 31, 2000. We believe that our average churn continues
to be lower than satellite industry averages. Our maturing subscriber base,
together with the effects of rapid growth, were responsible for the increase in
churn during 1999. Rapid growth resulted
15
<PAGE> 18
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
in customer installation delays, and the effectiveness of our customer service
has also been impacted. We are rapidly expanding our customer service and
installation capabilities in response to our increased business, but churn may
increase until we have completed the upgrades to our infrastructure. Further,
our litigation with the networks in Miami, and other factors, including our
inability to obtain retransmission consents from local network stations on or
before May 29, 2000, could require us to terminate delivery of network channels
to a material portion of our subscriber base, which could cause many of those
customers to cancel their subscription to our other services. Any such
terminations could result in a small reduction in average monthly revenue per
subscriber and could result in increased churn. While there can be no assurance,
notwithstanding the issues discussed above we expect to be able to continue to
manage churn to a level at or below satellite industry averages during 2000.
Subscriber Acquisition Costs
As previously described, we subsidize the purchase and installation of
EchoStar receiver systems in order to attract new DISH Network subscribers.
Consequently, our subscriber acquisition costs are significant. Our average
subscriber acquisition cost was $467 during the first quarter of 2000. While
there can be no assurance, we expect that our per subscriber acquisition costs
for the remainder of 2000 will be less than during the first quarter, unless
competition, the desire to drive stronger subscriber growth or other factors
require relatively more costly promotions than those presently planned, or
result in the extension of our free installation program beyond the currently
scheduled second quarter expiration.
In connection with our plans to encourage as many new subscribers as
possible to be ready for the additional services that will become available at
the 110(Degree) WL orbital location, and as a result of continuing competition
and our plans to attempt to continue to drive rapid subscriber growth, we expect
our subscriber acquisition costs for 2000 may average as much as $450 or more
for the full year. Our subscriber acquisition costs, both in the aggregate and
on a per new subscriber activation basis, may materially increase further to the
extent that we continue or expand our bounty programs, our "free system/free
installation" program, or the DISH Network One-Rate Plan, or if we determine
that more aggressive promotions are necessary to respond to competition, or for
other reasons.
Funds necessary to meet subscriber acquisition costs will be satisfied from
existing cash and investment balances to the extent available. We may, however,
be required to raise additional capital in the future to meet these
requirements. If we were required to raise capital today a variety of debt and
equity funding sources would likely be available to us. However, there can be no
assurance that additional financing will be available on acceptable terms, or at
all, if needed in the future.
Conditional Access System
The access control system is central to the security network that prevents
unauthorized viewing of programming. Theft of cable and satellite programming
has been widely reported and our signal encryption has been pirated and could be
further compromised in the future. If other measures are not successful, it
could be necessary to replace the credit card size card that controls the
security of each consumer set top box at a material cost to us.
Obligations and Future Capital Requirements
As of March 31, 2000, we had approximately $3.0 billion of outstanding
long-term debt (including the current portion), which includes $2.6 million of
outstanding notes that were not tendered during our January 1999 refinancing. We
are required to retire these remaining notes when they mature, and the
indentures governing these notes will remain outstanding (although substantially
all of the restrictive covenants have been eliminated) until each series of
notes has been retired in full.
Semi-annual cash debt service requirements of approximately $94 million
related to our 9 1/4% Senior Notes due 2006 (seven year notes) and our 9 3/8%
Senior Notes due 2009 (ten year notes), is payable in arrears on February 1 and
August 1 each year. Semi-annual cash debt service requirements of approximately
$24 million related to our 4 7/8% Convertible Subordinated Notes due 2007
(convertible notes) is payable
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<PAGE> 19
ITEM 2. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS - CONTINUED
in arrears on January 1 and July 1 of each year, commencing July 1, 2000. There
are no scheduled principal payment or sinking fund requirements prior to
maturity of any of these notes.
We utilized $91 million of satellite vendor financing for our first four
satellites. As of March 31, 2000, approximately $36 million of that satellite
vendor financing remained outstanding. The satellite vendor financing bears
interest at 8 1/4% and is payable in equal monthly installments over five years
following launch of the satellite to which it relates. A portion of the contract
price with respect to EchoStar VII is payable over a period of 13 years
following launch with interest at 8%, and a portion of the contract price with
respect to EchoStar VIII and EchoStar IX is payable following launch with
interest at 8%. Those in orbit payments are contingent on the continued health
of the satellite.
Dividends on our 6 3/4% Series C Cumulative Convertible Preferred Stock
began to accrue on November 2, 1999. Holders of the Series C Preferred Stock are
entitled to receive cumulative dividends at an annual rate of 6 3/4% of the
Liquidation Preference of $50 per share. Dividends are payable quarterly in
arrears, commencing February 1, 2000, when, as, and if declared by our Board of
Directors. All accumulated and unpaid dividends may, at our option, be paid in
cash, Class A common stock, or a combination thereof upon conversion or
redemption. We declared a cash dividend of approximately $290,000 or $0.84375
per share, payable on May 1, 2000 to Series C Preferred Stock shareholders of
record on April 21, 2000.
During the remainder of 2000, we anticipate total capital expenditures of
approximately $300-$425 million. This amount includes approximately $180-$240
million related to the construction and launch of EchoStar VI, EchoStar VII,
EchoStar VIII and EchoStar IX, approximately $50-$100 million related to
EchoStar receiver systems to be provided under our Digital Home program and $40
million for capital expenditures related to the build-out of our digital
broadcast centers.
In addition to our DBS business plan, we have licenses, or applications
pending with the FCC, for a two satellite FSS Ku-band satellite system, a two
satellite FSS Ka-band satellite system, and a proposed modification thereof and
a Low Earth Orbit Mobile-Satellite Service 6-satellite system. We will need to
raise additional capital to fully construct these satellites. We recently
announced agreements for the construction and delivery of three new satellites.
Two of these satellites, EchoStar VII and EchoStar VIII, will be advanced,
high-powered DBS satellites. The third satellite, EchoStar IX, will be a hybrid
Ku/Ka-band satellite.
We expect that our future working capital, capital expenditure and debt
service requirements will be satisfied from existing cash and investment
balances, and cash generated from operations. Our ability to generate positive
future operating and net cash flows is dependent, among other things, upon our
ability to continue to rapidly expand our DISH Network subscriber base, retain
existing DISH Network subscribers, and our ability to grow our ETC and Satellite
Services businesses. During the first quarter of 2000, subscriber growth
exceeded our expectations. To the extent the subscriber growth rate continues to
exceed our expectations, it may be necessary for us to raise additional capital
to fund increased working capital requirements. There may be a number of other
factors, some of which are beyond our control or ability to predict, that could
require us to raise additional capital. These factors include unexpected
increases in operating costs and expenses, a defect in or the loss of any
satellite, or an increase in the cost of acquiring subscribers due to additional
competition, among other things. If cash generated from our operations is not
sufficient to meet our debt service requirements or other obligations, we would
be required to obtain cash from other financing sources. If we were required to
raise capital today a variety of debt and equity funding sources would likely be
available to us. However, there can be no assurance that such financing would be
available on terms acceptable to us, or if available, that the proceeds of such
financing would be sufficient to enable us to meet all of our obligations.
17
<PAGE> 20
PART II - OTHER INFORMATION
ITEM 1. LEGAL PROCEEDINGS
DirecTV
During February 2000 we filed suit against DirecTV and Thomson Consumer
Electronics/RCA in the Federal District Court of Colorado. The suit alleges that
DirecTV has utilized improper conduct in order to fend off competition from the
DISH Network. According to the complaint, DirecTV has demanded that certain
retailers stop displaying our merchandise and has threatened to cause economic
damage to retailers if they continued to offer both product lines in
head-to-head competition. The suit alleges, among other things, that DirecTV has
acted in violation of federal and state anti-trust laws in order to protect
DirecTV's market share. We are seeking injunctive relief and monetary damages.
It is too early in the litigation to make an assessment of the probable outcome.
The DirecTV defendants filed a counterclaim against us. DirecTV alleges
that we tortuously interfered with a contract that DirecTV allegedly had with
Kelly Broadcasting Systems, Inc., or KBS. DirecTV alleges that we "merged" with
KBS, in contravention of DirecTV's contract with KBS. DirecTV also alleges that
we have falsely advertised to consumers about our right to offer network
programming. DirecTV further alleges that we improperly used certain marks owned
by PrimeStar, now owned by DirecTV. Finally, DirecTV alleges that we have been
marketing National Football League games in a misleading manner. The amount of
damages DirecTV is seeking is as yet unquantified. We intend to vigorously
defend against these claims. The case is currently in discovery.
The News Corporation Limited
During February 1997, News Corporation agreed to acquire approximately 50%
of our outstanding capital stock. During late April 1997, substantial
disagreements arose between the parties regarding their obligations under this
agreement. Those substantial disagreements led to litigation which the parties
subsequently settled. In connection with the News Corporation litigation, we
have a contingent fee arrangement with the attorneys who represented us in that
litigation, which provides for the attorneys to be paid a percentage of any net
recovery obtained in the News Corporation litigation. The attorneys have
asserted that they may be entitled to receive payments totaling hundreds of
millions of dollars under this fee arrangement. We are vigorously contesting the
attorneys' interpretation of the fee arrangement, which we believe significantly
overstates the magnitude of our liability. We also believe that the fee
arrangement is void and unenforceable because the attorneys who represented us
are seeking a fee that we believe is unreasonable and excessive, among other
things. If we are unable to resolve this fee dispute with the attorneys, it
would be resolved through arbitration or litigation. During mid-1999, we
initiated litigation against the attorneys in the District Court, Arapahoe
County, Colorado, arguing that the fee arrangement is void and unenforceable. In
December 1999, the attorneys initiated an arbitration proceeding before the
American Arbitration Association. It is too early to determine the outcome of
negotiations, arbitration or litigation regarding this fee dispute.
WIC Premium Television Ltd.
During July 1998, a lawsuit was filed by WIC Premium Television Ltd., an
Alberta corporation, in the Federal Court of Canada Trial Division, against
General Instrument Corporation, HBO, Warner Communications, Inc., John Doe,
Showtime, United States Satellite Broadcasting Company, Inc., EchoStar, and two
of EchoStar's wholly-owned subsidiaries. The lawsuit seeks, among other things,
an interim and permanent injunction prohibiting the defendants from activating
receivers in Canada and from infringing any copyrights held by WIC. It is too
early to determine whether or when any other lawsuits or claims will be filed.
It is also too early to make an assessment of the probable outcome of the
litigation or to determine the extent of any potential liability or damages.
During September 1998, WIC filed another lawsuit in the Court of Queen's
Bench of Alberta Judicial District of Edmonton against certain defendants,
including EchoStar. WIC is a company authorized to broadcast certain copyrighted
work, such as movies and concerts, to residents of Canada. WIC alleges that the
defendants engaged in, promoted, and/or allowed satellite dish equipment from
the United States to be sold in Canada and to Canadian residents and that some
of the defendants allowed and profited from Canadian residents purchasing and
viewing subscription television programming that is only authorized for viewing
in the United States. The lawsuit
18
<PAGE> 21
PART II - OTHER INFORMATION
seeks, among other things, an interim and permanent injunction prohibiting the
defendants from importing hardware into Canada and from activating receivers in
Canada, together with damages in excess of $175 million.
We filed motions to dismiss each of the actions for lack of personal
jurisdiction. The Court in the Alberta action recently denied our Motion to
Dismiss. The Alberta Court also granted a motion to add more EchoStar parties to
the lawsuit. EchoStar Satellite Corporation, EchoStar DBS Corporation, EchoStar
Technologies Corporation, and EchoStar Satellite Broadcast Corporation have been
added as defendants in the litigation. The newly added defendants have also
challenged jurisdiction. The Court in the Federal action has stayed that case
before ruling on our motion to dismiss. We intend to vigorously defend the suits
in the event our motions are denied. It is too early to determine whether or
when any other lawsuits or claims will be filed. It is also too early to make an
assessment of the probable outcome of the litigation or to determine the extent
of any potential liability or damages.
Broadcast network programming
Under the Satellite Home Viewer Act, the determination of whether a
household qualifies as "unserved" for the purpose of eligibility to receive a
distant network channel depends, in part, on whether that household can receive
a signal of "Grade B intensity" as defined by the FCC.
During 1998, the national networks and local affiliate stations challenged,
based upon copyright infringement, PrimeTime 24's methods of selling network
programming to consumers. Historically, we obtained distant broadcast network
signals for distribution to our customers through PrimeTime 24. The United
States District Court for the Southern District of Florida entered a nationwide
permanent injunction preventing PrimeTime 24 from selling its programming to
consumers unless the programming was sold in accordance with certain
stipulations in the injunction. The injunction covers distributors as well. The
plaintiffs in the Florida litigation informed us they considered us a
distributor for purposes of that injunction. A federal district court in North
Carolina also issued an injunction against PrimeTime 24 prohibiting certain
distant signal retransmissions in the Raleigh area. The Fourth Circuit Court of
Appeals recently affirmed the North Carolina Court's decision. We have
implemented Satellite Home Viewer Act compliance procedures which materially
restrict the market for the sale of network channels by us.
In October 1998, we filed a declaratory judgment action in the United
States District Court for the District of Colorado against the four major
networks. We asked the court to enter a judgment declaring that our method of
providing distant network programming does not violate the Satellite Home Viewer
Act and hence does not infringe the networks' copyrights. In November 1998, the
four major broadcast networks and their affiliate groups filed a complaint
against us in federal court in Miami alleging, among other things, copyright
infringement. The court combined the case that we filed in Colorado with the
case in Miami and transferred it to the Miami court.
In February 1999, CBS, NBC, Fox and ABC filed a "Motion for Temporary
Restraining Order, Preliminary Injunction and Contempt Finding" against DirecTV
in Miami related to the delivery of distant network channels to DirecTV
customers by satellite. Under the terms of a settlement between DirecTV and the
networks, some DirecTV customers were scheduled to lose access to their
satellite-provided network channels by July 31, 1999, while other DirecTV
customers were to be disconnected by December 31, 1999. Subsequently, PrimeTime
24 and substantially all providers of satellite-delivered network programming
other than us agreed to this cut-off schedule.
The networks are pursuing a Motion for Preliminary Injunction in the Miami
Court, asking the Court to enjoin us from providing network programming except
under very limited circumstances, and to turn off network programming to many of
our customers.
A preliminary injunction hearing was held during September 1999. The Court
took the issues under advisement to consider the networks' request for an
injunction, whether to hear live testimony before ruling upon the request, and
whether to hear argument on why the Satellite Home Viewer Act may be
unconstitutional, among other things. The Court did not say when a decision will
be made, or whether an additional hearing will be
19
<PAGE> 22
PART II - OTHER INFORMATION
necessary prior to ruling on the networks' preliminary injunction motion.
Additional motions and affidavits have been filed with the Court over the past
several months and a ruling adverse, or favorable to us could be issued at any
time.
If this case is decided against us, or a preliminary injunction is issued,
significant material restrictions on the sale of distant ABC, NBC, CBS and Fox
channels by us could result, including potentially a nationwide permanent
prohibition on our broadcast of ABC, NBC, CBS and Fox network channels by
satellite. The litigation and the new legislation discussed above, among other
things, could also require us to terminate delivery of network signals to a
material portion of our subscriber base, which could cause many of these
subscribers to cancel their subscription to our other services. While the
networks have not sought monetary damages, they have sought to recover attorney
fees if they prevail. We have sent letters to some of our subscribers warning
that their access to distant broadcast network channels might be terminated soon
and have terminated ABC, NBC, CBS and Fox programming to many customers.
In November 1999, Congress passed new legislation regarding the satellite
delivery of network programming and it was signed into law by President Clinton.
This new law has the potential of reducing the number of customers whose network
channels EchoStar may otherwise be required to terminate, as the law
"grandfathers" many subscribers to continue to receive network channels by
satellite.
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
3.1(a)[] Amended Restated Articles of Incorporation of EchoStar.
10.1[] Satellite contract dated as of January 27, 2000, between EchoStar
Orbital Corporation and Lockheed Martin Corporation.
10.2[] Satellite contract dated as of February 4, 2000, between EchoStar
Orbital Corporation and Space Systems/Loral Inc.
10.3[] Satellite contract dated as of February 22,2000, between EchoStar
Orbital Corporation and Space Systems/Loral Inc..
10.4[] Agreement dated February 22, 2000, between EchoStar Orbital
Corporation and Loral Skynet, a division of Loral SpaceCom
Corporation.
27[] Financial Data Schedule.
- --------------------------------
[] Filed herewith.
(b) Reports on Form 8-K.
On February 28, 2000, we filed a Current Report on Form 8-K to report a
2-for-1 split of our common stock. Effective March 22, 2000, stockholders of
record at the close of business on March 10, 2000 received one additional share
of common stock for each share they owned on the record date.
20
<PAGE> 23
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
ECHOSTAR COMMUNICATIONS CORPORATION
By: /s/ David K. Moskowitz
-------------------------------------
David K. Moskowitz
Senior Vice President, General
Counsel, Secretary and Director
(Duly Authorized Officer)
By: /s/ Steven B. Schaver
-------------------------------------
Steven B. Schaver
Chief Financial Officer
(Principal Financial Officer)
Date: April 27, 2000
<PAGE> 24
EXHIBIT INDEX
Exhibit No. Description
----------- -----------
3.1(a)[] Amended Restated Articles of Incorporation of EchoStar.
10.1[] Satellite contract dated as of January 27, 2000, between EchoStar
Orbital Corporation and Lockheed Martin Corporation.
10.2[] Satellite contract dated as of February 4, 2000, between EchoStar
Orbital Corporation and Space Systems/Loral Inc.
10.3[] Satellite contract dated as of February 22,2000, between EchoStar
Orbital Corporation and Space Systems/Loral Inc..
10.4[] Agreement dated February 22, 2000, between EchoStar Orbital
Corporation and Loral Skynet, a division of Loral SpaceCom
Corporation.
27[] Financial Data Schedule.
- --------------------------------
[] Filed herewith.
<PAGE> 1
EXHIBIT 3.1(a)
ARTICLES OF INCORPORATION OF
ECHOSTAR COMMUNICATIONS CORPORATION
(incorporating all amendments and reflecting two separate two-for-one
stock splits in 1999, and one two-for-one stock split in March 2000)
ARTICLE I
NAME
The name of the corporation shall be ECHOSTAR COMMUNICATIONS CORPORATION
(the "Corporation").
ARTICLE II
PERIOD OF DURATION
The Corporation shall exist in perpetuity, from and after the date of
filing of its original Articles of Incorporation with the Secretary of State of
the State of Nevada unless dissolved according to law.
ARTICLE III
PURPOSES
The purpose for which this Corporation is organized is to engage in any
lawful acts and activities for which corporations may be organized under the
laws of the State of Nevada and to exercise any powers permitted to
corporations under the laws of the State of Nevada.
ARTICLE IV
CAPITAL
1. Authorized Capital Stock. The total number of shares of capital stock
which the Corporation is authorized to issue shall be 3,220,000,000 shares,
consisting of 3,200,000,000 shares of common stock, par value $0.01 per share
("Common Stock"), and 20,000,000 shares of preferred stock, par value $0.01 per
share ("Preferred Stock").
2. Common Stock. (a) Of the 3,200,000,000 shares of authorized Common
Stock, 1,600,000,000 shares shall be designated Class A Common Stock ("Class A
Common Stock"), 800,000,000 shares shall be designated Class B Common Stock
("Class B Common Stock"), and 800,000,000 shares shall be designated Class C
Common Stock ("Class C Common Stock").
<PAGE> 2
3. Preferred Stock. The Board of Directors of the Corporation is hereby
authorized to provide, by resolution or resolutions adopted by such Board, for
the issuance of Preferred Stock from time to time in one or more classes and/or
series, to establish the number of shares of each such class or series, and to
fix the powers, designations, preferences and relative, participating, optional
or other rights, if any, and the qualifications, limitations or restrictions
thereof, of any of the shares of each such class or series, all to the full
extent permitted by the Nevada General Corporation Law, or any successor law(s)
of the State of Nevada. Without limiting the generality of the foregoing, the
Board of Directors is authorized to provide that shares of a class or series of
Preferred Stock:
(1) are entitled to cumulative, partially cumulative or noncumulative
dividends or other distributions payable in cash, capital stock or
indebtedness of the Corporation or other property, at such times and in such
amounts as are set forth in the Board resolutions establishing such class or
series or as are determined in a manner specified in such resolutions;
(2) are entitled to a preference with respect to payment of dividends
over one or more other classes and/or series of capital stock of the
Corporation;
(3) are entitled to a preference with respect to any distribution of
assets of the Corporation its liquidation, dissolution or winding up over
one or more other classes and/or series of capital stock of the Corporation
in such amount as is set forth in the Board resolutions establishing such
class or series or as is determined in a manner specified in such
resolutions;
(4) are redeemable or exchangeable at the option of the Corporation
and/or on a mandatory basis for cash, capital stock or indebtedness of the
Corporation or other property, at such times or upon the occurrence of such
events, and at such prices, as are set forth in the Board resolutions
establishing such class or series or as are determined in a manner specified
in such resolutions;
(5) are entitled to the benefits of such sinking fund, if any, as is
required to be established by the Corporation for the redemption and/or
purchase of such shares by the Board resolutions establishing such class or
series;
(6) are convertible at the option of the holders thereof into shares
of any other class or series of capital stock of the Corporation, at such
times or upon the occurrence of such events, and upon such terms, as are set
forth in the Board resolutions establishing such class or series or as are
determined in a manner specified in such resolutions;
(7) are exchangeable at the option of the holders thereof for cash,
capital stock or indebtedness of the Corporation or other property, at such
times or upon the occurrence of such events, and at such prices, as are set
forth in the Board
<PAGE> 3
resolutions establishing such class or series or as are determined in a
manner specified in such resolutions;
(8) are entitled to such voting rights, if any, as are specified in
the Board resolutions establishing such class or series (including, without
limiting the generality of the foregoing, the right to elect one or more
directors voting alone as a single class or series or together with one or
more other classes and/or series of Preferred Stock, if so specified by such
Board resolutions) at all times or upon the occurrence of specified events;
and
(9) are subject to restrictions on the issuance of additional shares
of Preferred Stock of such class or series or of any other class or series,
or on the reissuance of shares of Preferred Stock of such class or series or
of any other class or series, or on increases or decreases in the number of
authorized shares of Preferred Stock of such class or series or of any other
class or series.
Without limiting the generality of the foregoing authorizations, any of the
voting powers, designations, preferences, rights and qualifications,
limitations or restrictions of a class or series of Preferred Stock may be made
dependent upon facts ascertainable outside the Board resolutions establishing
such class or series, all to the full extent permitted by the Nevada General
Corporation Law. Unless otherwise specified in the Board resolutions
establishing a class or series of Preferred Stock, holders of a class or series
of Preferred Stock shall not be entitled to cumulate their votes in any
election of directors in which they are entitled to vote and shall not be
entitled to any preemptive rights to acquire shares of any class or series of
capital stock of the Corporation.
ARTICLE V
VOTING AND CONVERSION RIGHTS
1. Voting Rights.
(a) Except as otherwise required by law or, in any Preferred Stock
Statement and Certificate of Designations, Preferences and Rights ("Certificate
of Designations"), with respect to all matters upon which stockholders are
entitled to vote or to which stockholders are entitled to give consent, the
holders of any outstanding shares of Class A Common Stock, Class B Common
Stock, Class C Common Stock and Preferred Stock shall vote together without
regard to class, and every holder of any outstanding shares of the Class A
Common Stock and Class C Common Stock held by such holder; every holder of any
outstanding shares of Class B Common Stock shall be entitled to cast ten votes
in person or by proxy for each share of Class B Common Stock held by such
holder; and every holder of any outstanding shares of Preferred Stock shall be
entitled to cast, in person or by proxy for each share of Preferred Stock held
by such holder, the number of votes specified in the applicable Certificate of
Designations; provided however, in the event of a "Change in Control" of the
Corporation, the holders
<PAGE> 4
of any outstanding shares of Class C Common Stock shall be entitled to cast ten
votes in person or by proxy for each share of Class C Common Stock held by such
holder. As used herein, a "Change of Control" of the Corporation means: (i) any
transaction or series of transactions, the result of which is that the
Principals and their Related Parties (as such terms are hereinafter defined),
or an entity controlled by the Principals and their Related Parties, cease to
be the "beneficial owners" (as defined in Rule 13(d) (3) under the Securities
Exchange Act of 1934) of at least 30% of the total equity interests of the
Corporation and to have the voting power to elect at least a majority of the
Board of Directors of the Corporation; or (ii) the first day on which a
majority of the members of the Board of Directors of the Corporation are not
continuing directors. "Principals" means Charles W. Ergen, James DeFranco, and
David K. Moskowitz. "Related Parties" means, with respect to any Principal: (y)
the spouse and each immediate family member of such Principal; and (z) each
trust, corporation, partnership or other entity of which such Principal
beneficially holds an 80% or more controlling interest.
(b) A quorum for the purpose of shareholder meeting shall consist of
a majority of the voting power of EchoStar. If a quorum is present, the
effective vote of a majority of the voting power represented at the meeting and
entitled to vote on the subject matter shall be the act of the shareholders,
unless the vote of a greater proportion or number is required by any provisions
contained in the NGCL. Notwithstanding any provisions contained in the NGCL
requiring the vote of shares possessing two-thirds of the voting power of
EchoStar to take action, absent a provision herein to the contrary, in the case
of such provisions the affirmative vote of a majority of the voting power shall
be the act of the shareholders.
(c) Holders of Common Stock shall not be entitled to cumulate their
votes in the election of directors and shall not be entitled to any preemptive
rights to acquire shares of any class or series of capital stock of the
Corporation. Subject to any preferential rights of holders of Preferred Stock,
holders of Common Stock shall be entitled to receive their pro rata shares,
based upon the number of shares of Common Stock held by them, of such dividends
or other distributions as may be declared by the Board of Directors from time
to time and of any distribution of the assets of the Corporation upon its
liquidation, dissolution or winding up, whether voluntary or involuntary.
2. Conversion Rights.
(a) Each share of Class B Common Stock and Class C Common Stock Shall
be convertible at the option of the holder thereof into Class A Common Stock of
the Corporation in accordance with this Article V. In order to exercise the
conversion privilege, a holder of Class B Common Stock or Class C Common Stock
shall surrender the certificate evidencing such Class B Common Stock or Class C
Common Stock to the Corporation at its principal office, duly endorsed to the
Corporation and accompanied by written notice to the Corporation that the
holder thereof elects to convert a specified portion or all of such shares.
Class B Common Stock or Class C Common Stock
<PAGE> 5
converted at the option of the holder shall be deemed to have been converted on
the day of surrender of the certificate representing such shares for conversion
in accordance with the foregoing provisions, and at such time the rights of the
holder of such Class B Common Stock or Class C Common Stock, as such holder,
shall cease and such holder shall be treated for all purposes as the record
holder of Class A Common Stock issuable upon conversion. As promptly as
practicable on or after the conversion date, the Corporation shall issue and
mail or deliver to such holder a certificate or certificates for the number of
Class A Common Stock issuable upon conversion, computed to the nearest one
hundredth of a full share, and a certificate or certificates for the balance of
Class B Common Stock or Class C Common Stock surrendered, if any, not so
converted into Class A Common Stock.
(b) The Class B Common Stock and Class C Common Stock shall be
convertible into one share of Class A Common Stock for each share of Class B
Common Stock or Class C Common Stock so converted (the "Conversion Rate"). In
the event the Corporation shall at any time subdivide or split its outstanding
Class A Common Stock, into a greater number of shares or declare any dividend
payable in Class A Common Stock, the Conversion Rate in effect immediately
prior to such subdivision, split or dividend shall be proportionately
increased, and conversely, in case the outstanding Class A Common Stock of the
Corporation shall be combined into a smaller number of shares, the Conversion
Rate in effect immediately prior to such combination shall be proportionately
decreased.
(c) Upon any adjustment of the Conversion Rate then and in each such
case the Corporation shall give written notice thereof, by first-class mail,
postage prepaid, addressed to the registered holders of Class B Common Stock
and Class C Common Stock at the addresses of such holders as shown on the books
of the Corporation, which notice shall state the Conversion Rate resulting from
such adjustment and the increase or decrease, if any, in the number of shares
receivable at such price upon the conversion of Class B Common Stock or Class C
Common Stock, setting forth in reasonable detail the method of calculation and
the facts upon which such calculation is based.
(d) The holders of Class B Common Stock and Class C Common Stock
shall have the following rights to certain properties received by the holders
of Class A Common Stock:
(i) In case the Corporation shall declare a dividend or
distribution upon Class A Common Stock payable other than in cash out of
earnings or surplus or other than in Class A Common Stock, then thereafter
each holder of Class B Common Stock or Class C Common Stock upon the
conversion thereof will be entitled to receive the number of shares of
Class A Common Stock into which such Class B Common Stock or Class C
Common Stock shall be converted, and, in addition and without payment
therefor, the property which such holder would have received as a dividend
if continuously since the record date for any such dividend or
distribution such holder: (A) had been the record holder of the number of
Class A Common Stock then received; and (B) had retained all dividends or
distributions originating directly or indirectly from such Class A Common
Stock.
<PAGE> 6
(ii) If any capital reorganization or reclassification of
the capital stock of the Corporation, or consolidation or merger of the
Corporation with another corporation, or the sale of all or substantially
all of its assets to another corporation shall be effected in such a way
that holders of Class A Common Stock shall be entitled to receive stock,
securities or assets with respect to or in exchange for a Class A Common,
then, as a condition of such reorganization, reclassification,
consolidation, merger or sale, lawful and adequate provision shall be made
whereby the holders of Class B Common Stock and Class C Common Stock shall
thereafter have the right to receive, in lieu of Class A Common Stock of
the Corporation immediately theretofore receivable upon the conversion of
such Class B Common Stock and Class C Common Stock, such shares of stock,
securities or assets as may be issued or payable with respect to or in
exchange for a number of outstanding Class A Common Stock equal to the
number of Class A Common Stock immediately theretofore receivable upon the
conversion or such Class B Common Stock and Class C Common Stock had such
reorganization, reclassification, consolidation, merger or sale not taken
place, and in any such case appropriate provision shall be made with
respect to the rights and interests of the holders of the Class B Common
Stock and Class C Common Stock to the end that the provisions hereof
(including without limitation provisions for adjustments of the Conversion
Rate and of the number of shares receivable upon the conversion of such
Class B Common Stock and Class C Common Stock) shall thereafter be
applicable, as nearly as may be, in relation to any shares of stock,
securities or assets thereafter receivable upon the conversion of such
Class B Common Stock and Class C Common Stock. The Corporation shall not
effect any such reorganization, reclassification, consolidation, merger or
sale, unless prior to the consummation thereof the surviving corporation
(if other than the Corporation), the corporation resulting from such
consolidation or the corporation purchasing such assets shall assume by
written instrument executed and mailed to the registered holders of the
Class B Common Stock and Class C Common Stock at the last address of such
holders appearing on the books of the Corporation, the obligation to
deliver to such holders such shares of stock, securities or assets as, in
accordance with the foregoing provisions, such holders may be entitled to
receive.
(e) In case at any time:
(iii) the Corporation shall pay any dividend payable in
stock upon Class A Common Stock or make any distribution (other than
regular cash dividends to the holders of Class A Common Stock); or
(iv) the Corporation shall offer for subscription pro rata
to the holders of Class A Common Stock any additional shares of stock of
any class or other rights; or
<PAGE> 7
(v) there shall be any capital reorganization,
reclassification of the capital stock of the Corporation, or consolidation
or merger of the Corporation with, or sale of all or substantially all of
its assets, to another corporation (provided however, that this provision
shall not be applicable to the merger or consolidation of the Corporation
with or into another corporation if, following such merger or
consolidation, the shareholders of the Corporation immediately prior to
such merger or consolidation own at least 80% of the equity of the
combined entity); or
(vi) there shall be a voluntary or involuntary dissolution,
liquidation or winding up of the Corporation;
then, in any one or more of the aforesaid cases, the Corporation shall give
written notice, by first-class mail, postage prepaid, addressed to the holders
of Class B Common Stock and Class C Common Stock at the addresses of such
holders as shown on the books of the Corporation, of the date on which: (A) the
books of the Corporation shall close or a record shall be taken for such
dividend, distribution or subscription rights; or (B) such reorganization,
reclassification, consolidation, merger, sale, dissolution, liquidation or
winding up shall take place, as the case may be. Such notice shall also specify
the date as of which the holders of Class A Common Stock of record shall
participate in such dividend, distribution, or subscription rights, or shall be
entitled to exchange their Class A Common Stock for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation or winding up, as the case may be. Such
written notice shall be given at least 20 days prior to the action in question
and not less than 20 days prior to the record date or the date on which the
Corporation's transfer books are closed in respect thereto.
ARTICLE VI
Board of Directors
The name and addresses of the first board of directors, which shall be
three (3) in number, are as follows:
<TABLE>
<CAPTION>
NAME ADDRESS
---- -------
<S> <C>
Charles W. Ergen 5701 S. Santa Fe Drive
Littleton, CO 80102
James DeFranco 5701 S. Santa Fe Drive
Littleton, CO 80120
R. Scott Zimmer 5701 S. Santa Fe Drive
Littleton, CO 80120
</TABLE>
<PAGE> 8
The number of directors shall be increased or decreased as prescribed by
the Bylaws of the Corporation.
ARTICLE VII
Right of Directors to Contract with Corporation
The following provisions are inserted for the management of the business
and for the conduct of the affairs of the Corporation, and the same are in
furtherance of and not in limitation of the powers conferred by law.
1. No contract or other transaction between this Corporation and one or
more of its directors or any other corporation, firm, association, or entity in
which one or more of its directors are directors or officers or are financially
interested shall be either void or voidable solely because of such relationship
or interest or solely because such directors are present at the meeting of the
Board of Directors or a committee thereof which authorizes, approves or
ratifies such contract or transaction or solely because their votes are counted
for such purpose if:
(a) The material facts as to such relationship or interest
and as to the contract or transaction are disclosed or are
otherwise known to the Board of Directors or committee and the
Board or committee authorizes, approves, or ratifies such
contract or transaction by the affirmative vote of a majority of
the disinterested directors, even though such directors are less
than a quorum; or
(b) The material facts of such relationship or interest and
as to the contract or transaction are disclosed or are otherwise
known to the shareholders entitled to vote thereon and they
authorize, approve or ratify such contract or transaction by
vote or written consent; or
(c) The contract or transaction is fair and reasonable to
the Corporation.
2. Common or interested directors may be counted in determining the
presence of a quorum at a meeting of the Board of Directors or a committee
thereof which authorizes, approves or ratifies such contract or transaction.
ARTICLE VIII
Corporate Opportunity
The officers, directors and other members of management of this
Corporation shall be subject to the doctrine of "corporate opportunities" only
insofar as it applies to business opportunities in which this Corporation has
expressed an interest as determined from time to time by this Corporation's
Board of Directors as evidenced by resolutions appearing in
<PAGE> 9
the Corporation's minutes. Once such areas of interest are delineated, all such
business opportunities within such areas of interest which come to the
attention of the officers, directors and other members of management of this
Corporation shall be offered first to the Corporation. In the event the
Corporation declines to pursue any or all such business opportunities, the
officers, directors and other members of management of this Corporation shall
be free to engage in such areas of interest on their own and this doctrine
shall not limit the right of any officer, director or other member of
management of this Corporation to continue a business existing prior to the
time that such area of interest is designated by the Corporation. This
provision shall not be construed to release any employee of this Corporation
(other than an officer, director or member of management) from any duties which
he may have to this Corporation.
ARTICLE IX
Indemnification of Officers, Directors and Others
1. To the full extent permitted by the NGCL, the Corporation shall
indemnify any person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit in proceeding, whether
civil, criminal, administrative or investigative and whether formal or informal
(other than an action by or in the right of the Corporation) by reason of the
fact that he is or was a director, officer, employee, fiduciary or agent of the
Corporation, or is or was serving at the request of the Corporation as a
director, officer, employee, fiduciary or agent of another corporation,
partnership, joint venture, trust, employee benefit plan or other enterprise,
against expenses (including attorneys' fees), judgements, fines an amounts paid
in settlement actually and reasonably incurred by him in connection with such
action, suit or proceeding, if he conducted himself in good faith and in a
manner he reasonably believed to be in or not opposed to the best interests of
the Corporation, and, with respect to any criminal action or proceeding, had no
reasonable cause to believe his conduct was unlawful, The termination of any
action, suit or proceeding by judgment, order, settlement, or conviction, or
upon a plea of nolo contendere or its equivalent, shall not, of itself, create
a presumption that the person did not act in good faith and in a manner which
he reasonably believed to be in or not opposed to the best interests of the
Corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe that his conduct was unlawful.
2. The Corporation shall indemnify any person who was or is a party or
is threatened to be made a party to any threatened, pending or completed action
or suit by or in the right of the Corporation to procure a judgment in its
favor by reason of the fact that he is or was a director, officer, employee,
fiduciary or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise against expenses (including attorneys fees) actually and reasonably
incurred by him in connection with the defense or settlement of such action or
suit if he acted in good faith and in a manner he reasonably believed to be in
or not opposed to the best interests
<PAGE> 10
of the Corporation and except that no indemnification shall be made in respect
of any claim, issue or matter as to which such person shall have been adjudged
to be liable for negligence or misconduct in the performance of his duty to the
Corporation unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses which
such court shall deem proper.
3. To the extent that a director, officer, employee, fiduciary or agent
of a corporation has been wholly successful on the merits or otherwise in
defense of any action, suit or proceeding referred to in paragraphs 1 and 2 of
this Article, or in defense of any claim, issue or matter therein, he shall be
indemnified against expenses (including attorneys fees) actually and reasonably
incurred by him in connection therewith.
4. Any indemnification under paragraphs 1 and 2 of this Article IX
(unless ordered by a court) shall be made by the Corporation only as authorized
in the specific case upon a determination that indemnification of the director,
officer, employee, fiduciary or agent is proper in the circumstances because he
has met the applicable standard of conduct set forth in paragraphs 1 and 2.
Such determination shall be made: (1) by the Board of Directors by a majority
vote of a quorum consisting of directors who were not parties to such action,
suit or proceeding; or (2) if such quorum is not obtainable, or, even if
obtainable a quorum of disinterested directors so directs, by independent legal
counsel in a written opinion; or (3) by the shareholders.
5. Expenses (including attorneys fees) incurred in defending a civil or
criminal action, suit or proceeding may be paid by the Corporation in advance
of the final disposition of such action, suit or proceeding as authorized in
the manner provided in paragraph 4 of this Article IX upon receipt of an
undertaking by or on behalf of the director, officer, employee, fiduciary or
agent to repay such amount unless it shall ultimately be determined that he is
entitled to be indemnified by the Corporation.
6. The Corporation shall have the power to purchase and maintain
insurance on behalf of any person who is or was a director, officer, employee,
fiduciary or agent of the Corporation, or is or was serving at the request of
the Corporation as a director, officer, employee or agent of another
corporation, partnership, joint venture, trust, employee benefit plan or other
enterprise, against any liability asserted against him and incurred by him in
any such capacity or arising out of his status as such, whether or not the
Corporation would have the power to indemnify him against such liability under
the provisions of this Article IX.
7. In addition to the forgoing, the Corporation shall have the power to
indemnify current or former directors, officer, employees and agents to the
fullest extent provided by law.
<PAGE> 11
ARTICLE X
DIRECTOR LIABILITY
To the fullest extent permitted by the Nevada General Corporation Law, as the
same exists or may hereafter be amended, a director of this Corporation shall
not be liable to the Corporation or its shareholders for monetary damages for
breach of fiduciary duty as a director.
ARTICLE XI
INCORPORATOR
The name and address of the sole incorporator of the Corporation is as follows:
Gregory S. Brown, and his address is 303 East 17th Avenue, Suite 1100, Denver,
Colorado 80203.
ARTICLE XII
REGISTERED OFFICE AND REGISTERED AGENT
The address of the registered office of the Corporation is One East First
Street, Reno, Nevada 89501. The name of the Corporation's resident agent at
that address is The Corporation Trust Company of Nevada. Either the registered
office or the registered agent may be changed in the manner permitted by law.
<PAGE> 1
EXHIBIT 10.1
Certain portions of this document have been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
SATELLITE CONTRACT
(ECHOSTAR VII - 119(DEGREE) WEST LONGITUDE)
BETWEEN
LOCKHEED MARTIN CORPORATION
AND
ECHOSTAR ORBITAL CORPORATION
JANUARY 27, 2000
<PAGE> 2
THIS SATELLITE CONTRACT (the "Contract") dated as of the 27th day of
January 2000, made between Lockheed Martin Corporation (hereinafter referred to
as "Contractor"), a corporation organized under the laws of the State of
Maryland, having its principle place of business at 1272 Borregas Avenue,
Sunnyvale, California, 94089, and EchoStar Orbital Corporation (hereinafter
referred to as "Buyer"), a corporation organized under the laws of the State of
Colorado, having its principle place of business at 5701 South Santa Fe Drive,
Littleton, Colorado, 80120-1838.
WHEREAS, Buyer desires to purchase and Contractor desires to provide a
Direct Broadcast Satellite (the "Satellite" or "Spacecraft") and services as
hereinafter specified, and Buyer and Contractor (hereinafter referred to as
"Parties") desire to define the terms and conditions under which the same shall
be furnished;
NOW THEREFORE, the Parties hereto, in consideration of the mutual covenants
herein expressed, agree as follows:
2
<PAGE> 3
TABLE OF CONTENTS
<TABLE>
<CAPTION>
ARTICLE
- -------
<S> <C>
1 Scope of Work
2 Equipment and Services to be Furnished and Prices Therefor
3 Delivery Schedule
4 Payment
5 (Reserved)
6 In-Orbit Incentive Payments
7 Inspection and Final Acceptance
8 Title and Assumption of Risk
9 Access to Work
10 Progress Meetings, Presentations, and Documentation Deliverables
11 Rights in Data
12 Public Release of Information
13 Indemnification
14 Patent Indemnity
15 Indemnification for Taxes
16 Excusable Delays
17 Termination for Default
18 Termination for Convenience
19 Changes
20 Assignment
21 Warranty
22 Arbitration
23 Applicable Law
24 Entire Agreement
25 Disclosure and Use of Information by the Parties
26 Effective Date
27 Permits and Licenses
28 Limitation of Liability
29 Spacecraft Test and Handling Equipment
30 Liquidated Damages
31 Spacecraft Storage
32 Survival
33 Insurance
34 Interparty Waiver of Liability
35 Cooperation Regarding Spot Beams
36 Dry Mass Penalty
37 Key Personnel
</TABLE>
3
<PAGE> 4
ARTICLE 1. SCOPE OF WORK
A. The Contractor shall provide the necessary personnel, material, services,
and facilities to perform work in accordance with the provisions of this
Contract, including the ATTACHMENTS hereto, which are made a part hereof,
and the EXHIBITS listed below, which are attached hereto and made a part
hereof and to make Delivery to Buyer of the equipment and services set
forth in ARTICLE 2 hereof in accordance with the Delivery schedule
specified in ARTICLE 3 hereof:
EXHIBIT A: EchoStar VII Statement of Work (SOW) 8575922
EXHIBIT B: EchoStar VII Spacecraft Performance Specification 8575921
EXHIBIT C: EchoStar VII Test Plan 8575920
EXHIBIT D: A2100 Program Product Assurance Plan PN-8569826 Rev N/C
In the event of any inconsistency among or between the parts of this
Contract set forth above, such inconsistency shall be resolved by giving
precedence in the order of the parts as set forth below:
1. Terms & Conditions, Spacecraft Contract Dated January 27, 2000,
including ATTACHMENT A hereto
2. EchoStar VII Statement of Work, EXHIBIT A
3. EchoStar VII Spacecraft Performance Specification, EXHIBIT B
4. EchoStar VII Test Plan, EXHIBIT C
5. A2100 Program Product Assurance Plan, EXHIBIT D
B. In the event that, thirty (30) days after EDC, the TBDs in the EchoStar VII
Spacecraft Performance Specification, EXHIBIT B, and the TBDs set forth in
ARTICLE 2 have not been agreed to by both Parties or such Performance
Specification is not otherwise finalized to the mutual satisfaction of the
Parties, then notwithstanding ARTICLE 18. TERMINATION FOR CONVENIENCE, or
any other provision in this Contract, Buyer may immediately terminate this
Contract by providing written notice to Contractor. In full and final
settlement of such termination Contractor shall retain the first milestone
payment amount of DOLLARS ($XXXXXXX) paid to Contractor at fifteen (15)
days after EDC and all other liabilities and obligations of the Parties
shall be released, waived and terminated.
C. Contractor agrees to fly the Spacecraft until the earlier to occur of: (i)
the material anomaly(ies) being resolved; (ii) insurance for the material
anomaly(ies) being paid to Buyer; or (iii) Buyer informing Contractor that
it desires to use the Spacecraft for commercial purposes (provided that, in
such instance, Contractor shall continue to fly the Spacecraft until such
time as the material anomaly(ies) is fully understood and Buyer has been
trained how to fly the Spacecraft in such anomalous condition). Provided,
however Buyer shall use its reasonable commercial efforts to include in the
policy for insurance of the Spacecraft, that, "The Spacecraft
manufacturer's efforts concerning Spacecraft rescue, anomaly resolution and
flying time will be covered by the Underwriters."
4
<PAGE> 5
ARTICLE 2. EQUIPMENT AND SERVICES TO BE FURNISHED AND PRICES THEREFOR
A. Upon the full, satisfactory and timely completion and Delivery, as
required, of each item of work specified below, and acceptance by Buyer
thereof in accordance with the requirements of this Contract, Contractor
shall be entitled to payment by Buyer of the applicable fixed price
specified below in accordance with terms and conditions of this Contract,
as such price may be adjusted in accordance with the provisions of the
Contract. The prices stated below, which are inclusive of the In-Orbit
Incentives and include all transportation and related charges for Delivery
of Spacecraft and associated equipment to destination and all Launch
("Launch" means the launch of the Spacecraft as defined in the launch
services agreement the Buyer enters into with the launch service provider
or in the event of a change from one Launch provider to another, then the
definition will be changed to that Launch provider who actually launches
the Spacecraft, and which definition Buyer will provide to Contractor upon
request) and mission support and services through In-Orbit Test (IOT) which
includes post IOT support as specified in EXHIBIT A. Except as otherwise
provided for herein, the prices stated below include all applicable taxes
and all copyright and patent rights necessary to effectuate this Contract.
<TABLE>
<CAPTION>
Item Quantity Description Total Price
- ---- -------- ----------- -----------
<S> <C> <C> <C>
1. 1 Spacecraft as defined $XXXXXXXX (i)
in EXHIBIT B
2. 1 Lot Launch and mission support services for NSP
Spacecraft on an Atlas IIIB launch vehicle
3. 1 Lot Optional additional CONUS Transmit $XXXXXXX
reflector and Feed System
for Spot Beams for less than or
equal to 10(degree)from 119(degree)W.L.
4. 1 Lot Optional additional CONUS Transmit $XXXXXXX
reflector, Receive reflector and Feed System
for Spot Beams for more than
10(degree)from 119(degree)W.L.
5. 1 Lot Optional Satellite Control $XXXXXXX
Facility ("SCF") Equipment, Software,
Setup and Training
6. 1 Lot Optional incremental costs to
Item 1, in support of a Launch from either an Ariane,
or a Proton or a SeaLaunch, Launch at their
respective locations:
6a. 1 Lot Optional incremental cost for Launch out of $XXXXXXX
Kourou, French Guiana on an Ariane Launch
6b. 1 Lot Optional incremental cost for Launch out of $XXXXXXX
Baikonur, Kazakhstan on a Proton Launch
6c. 1 Lot Optional incremental cost for Launch out of $XXXXXXX
Long Beach, CA on a SeaLaunch (Zenit)
TOTAL PRICE $XXXXXXX (ii)
---------
</TABLE>
5
<PAGE> 6
(i) Total Price for Spacecraft, including without limitation the cost of
Delivery of Spacecraft to Cape Canaveral, Florida.
(ii) Does not include the price of the Optional items.
B. The Spacecraft will include some imported goods. In the event the
Spacecraft and its included imported goods are not exported in a timely
manner due to the actions or inactions of Buyer, any duties and penalties
arising therefrom will be the responsibility of Buyer. Contractor shall pay
such above duties and penalties as may be required by law to be so paid and
Buyer agrees to reimburse the Contractor for payments so made; provided
that Contractor uses reasonable commercial efforts to challenge the
imposition of such duties and penalties and keeps Buyer reasonably apprised
of its activities in that regard.
C. Contractor shall be entitled to an early Delivery incentive payment for
each day the Spacecraft is delivered to the Launch site prior to the
Delivery date set forth in ARTICLE 3. DELIVERY, provided Buyer is given
three (3) months prior notice of the early Delivery date, by an amount of
$XXXXXXX per day for days 1 through 60 and $XXXXXXX for each day
thereafter, up to a maximum of $XXXXXXX. In the event Contractor is
entitled to an early Delivery incentive payment in accordance with this
paragraph, the amount of any such incentive shall be added to the Contract
price, and Buyer shall make payment of same to Contractor, ninety (90) days
after Launch of the Spacecraft, and in the event the Spacecraft is placed
into Storage, Buyer shall make payment of same to Contractor ninety (90)
days after it is placed into Storage. Notwithstanding the above, Contractor
shall not be entitled to an early Delivery incentive payment in the event
Contractor is the cause of a Launch delay.
D. Option for additional CONUS Transmit Reflector and Feed System for Spot
Beams for less than or equal to ten (10) degrees from 119 degrees W. L.
Buyer may exercise this option by providing Contractor authorization to
proceed, at a specific orbital location, no later than thirty (30) days
after EDC. Additionally, Buyer shall have the option, exercisable in its
discretion by providing written notice to Contractor, at any time until ten
(10) months after EDC (or later if Buyer and Contractor mutually agree to
an equitable adjustment, or to the deletion of testing as necessary in
order to maintain schedule), to direct Contractor to commence integration
and test of either the baseline antenna set or this Optional CONUS Transmit
Reflector and Feed System for Spot Beams for installation on the
Spacecraft, without affecting schedule. In the event Buyer desires to
exercise this Option subsequent to the date(s) specified above, but prior
to twenty-three (23) months following EDC, then the price for the Option
and the Delivery schedule shall be subject to equitable adjustments. The
Contractor shall use reasonable care to mitigate any impacts to the price
and/or delivery schedule. [AT LEAST 3 INTERIM MILESTONES TBD]
6
<PAGE> 7
E. Option for additional CONUS Transmit Reflector, Receive reflector and Feed
System for Spot Beams for more than ten (10) degrees from 119 degrees W.L.
Buyer may exercise this option by providing Contractor authorization to
proceed, at a specific orbital location, no later than thirty (30) days
after EDC. Additionally, Buyer shall have the option, exercisable in its
discretion by providing written notice to Contractor, at any time until ten
(10) months after EDC (or later if Buyer and Contractor mutually agree to
an equitable adjustment, or to the deletion of testing as necessary in
order to maintain schedule), to direct Contractor to commence integration
and test of either the baseline antenna set or this Optional CONUS Transmit
Reflector, Receive reflector and Feed System for Spot Beams for
installation on the Spacecraft, without affecting schedule. In the event
Buyer desires to exercise this Option subsequent to the date(s) specified
above, but prior to twenty-three (23) months following EDC, then the price
for the Option and the Delivery schedule shall be subject to equitable
adjustment. The Contractor shall use reasonable care to mitigate any
impacts to the price and/or delivery schedule. [AT LEAST 3 INTERIM
MILESTONES TBD]
F. Optional Satellite Control Facility. Buyer shall have the option,
exercisable at its discretion by providing Contractor authorization to
proceed, no later than nine (9) months after EDC, to purchase the following
SCF equipment, software, setup and training at the price set forth above:
<TABLE>
<CAPTION>
Item Description Qty Redundant
<S> <C> <C> <C>
1 Satellite Control Center n/a n/a
1a - Real Time System/Remote 2 2:1
User Interface
2 Baseband TT&C n/a n/a
2a - CR&T Unit 2 2:1
3 O&M Documentation 2 sets n/a
4 Design Review 1 n/a
5 Installation and Test of n/a n/a
Hardware
6 Training (described below) n/a n/a
Documentation Delivery (no design doc):
1 SOW
2 Performance Spec
3 Test Plan
4 Compliance Matrix
5 Design Review Material
6 Test Procedure(s)
7 Current Version(s) of
Hardware O&M Manual(s)
8 Current Version(s) of
Software O&M Manual(s)
9 Shipping Lists/Export
Paperwork
10 Test Report(s)
11 Closeout Package
</TABLE>
7
<PAGE> 8
<TABLE>
NOT INCLUDED:
<S> <C>
1 ICS (scripts)
2 DSS or STS
3 Monitor & Control system
(p/o Antenna/RF)
4 Mission Analysis Software
5 Antenna/RF System
6 Command Encryption
7 Source Code
8 Design Documentation
9 Consoles (Desk Top)
10 Spares
</TABLE>
TRAINING COURSE DESCRIPTIONS:
SPACECRAFT ANALYST (15 DAYS). This course shall present, in detail, the
design and operation of each of the A2100 satellite bus subsystems. The
design of the payload subsystem shall be presented to the extent that the
payload influences satellite bus design and operations. This course shall
be primarily for satellite engineers.
SPACECRAFT CONTROLLER (10 DAYS). This course shall describe in detail
ground console operation and use of the on-station operating instructions
and procedures for the satellite bus and payload subsystems. Operating
instructions for the communications subsystem shall be covered in a summary
fashion.
GROUND SYSTEM OPERATIONS AND MAINTENANCE (5 DAYS). This course shall detail
the operation and maintenance of the A2100 Ground System including
operation and interfaces of the computer, status and control, baseband, and
antenna/RF subsystems. This course shall be primarily for the Ground
Systems O&M engineer.
G. Option to select a Launch other than an Atlas IIIB. Buyer, after entering
into a launch services agreement with the Launch provider, may exercise
this option by providing Contractor authorization to proceed with any one
of the Launch vehicles listed in Item 6, in lieu of an Atlas IIIB Launch,
at the applicable price increase to Item 1. price no later than 12 months
after EDC for the Ariane or Proton, without affecting schedule. In the
event that a SeaLaunch is selected then the latest date by which that
Option may be exercised without affecting schedule is 10 months after EDC.
In either case the coupled loads analysis as well as a mission analysis
plan will not be available until after the Launch provider is contracted
for by Buyer, as delineated in EXHIBIT A.
8
<PAGE> 9
ARTICLE 3. DELIVERY SCHEDULE
A. "Delivery", in the case of the Spacecraft, shall mean delivery of the
Spacecraft, at Contractor's expense, to the applicable Launch site and, in
the case of all other equipment, shall mean delivery of such equipment, at
Contractor's expense, to the applicable delivery destination.
B. Delivery shall be as indicated below:
<TABLE>
<CAPTION>
Item Description Delivery Date
- ---- ----------- -------------
<S> <C> <C>
1. Spacecraft as defined in EXHIBIT B. 12/20/2001
2. Launch and Mission Operation Support Services Commencing on Delivery of
the Spacecraft to the Launch
Site and Continuing Through
On Orbit Check-out and all
mission support costs and
services through IOT together
with post IOT support as
specified in EXHIBIT A
3 1 Lot Optional additional CONUS Transmit
Reflector and Feed System
for Spot Beams for less than or
equal to ten (10) degrees from
119 degrees W.L. As provided in ARTICLE 2,
Paragraph D.
4. 1 Lot Optional additional CONUS Transmit
Reflector, Receive Reflector and Feed System
for Spot Beams for more than 10(degree)
from 119(degree)W.L. As Provided in ARTICLE 2,
Paragraph E.
5. 1 Lot Optional Satellite Control Fourteen (14) months
Facility ("SCF") Equipment, Software, after exercise of option
Setup and Training
6. 1 Lot Optional incremental Delivery days to
be added to Item 1, in support of a Launch from
either an Ariane, or a Proton or a
SeaLaunch, Launch at their
respective locations
6a. 1 Lot Optional incremental Delivery days for Launch plus one (1) day
out of Kourou, French Guiana on an
Ariane Launch
6b. 1 Lot Optional incremental Delivery days for Launch plus two (2) days
out of Baikonur, Kazakhstan on a Proton Launch
6c. 1 Lot Optional incremental Delivery days for Launch No Change
out of Long Beach, CA on a SeaLaunch (Zenit)
</TABLE>
9
<PAGE> 10
ARTICLE 4. PAYMENT
A. The total price stipulated in ARTICLE 2. EQUIPMENT AND SERVICES TO BE
FURNISHED AND PRICES THEREFOR, as such price may be adjusted in
accordance with the provisions of the Contract, shall be paid by Buyer
to Contractor in accordance with the payment arrangements specified for
the construction payments in the Spacecraft Payment Plan set forth in
paragraph B of this ARTICLE (the "Payment Plan"), and the payment
arrangements for the In-Orbit Incentives described in paragraph C of
this ARTICLE and ARTICLE 6. IN-ORBIT INCENTIVE PAYMENTS. Except for the
first two construction payments, which will be paid at the dates set
forth below, the amounts specified in the Payment Plan shall in each
case be paid by Buyer to Contractor on the dates indicated; provided
that: (i) Contractor submits an invoice for each payment no later than
thirty (30) days in advance of the payment due date; and (ii)
Contractor completes the applicable milestone no later than three (3)
business days in advance of the payment due date. Notwithstanding the
foregoing, in the event that Contractor does not deliver an invoice to
Buyer at least thirty (30) days prior to the applicable payment date
and/or does not achieve the relevant milestone, or provide a
work-around that does not affect schedule and is otherwise acceptable
to Buyer, at least three (3) business days prior to the applicable
payment date, Buyer may suspend construction payments until such time
as the relevant invoice is received and milestone is completed. Within
thirty (30) days following Buyer's receipt of the relevant invoice or
three (3) business days following Contractor's completion of the
relevant milestone, whichever occurs later, Buyer shall pay Contractor
for all construction payments that were required to have been made but
were not as a result of the suspension.
All payments required to be made to Contractor under this Contract
shall be made by either cable transfer to Citibank N.Y. ABA# 021000089,
Lockheed Martin, A/C #38469306, or by check payable to Lockheed Martin
Corporation sent by overnight mail carrier (at Contractor's expense) to
the address and attention of the Lockheed Martin representative
designated in ARTICLE 10, PROGRESS MEETING, PRESENTATIONS AND
DOCUMENTATION DELIVERABLES, paragraph C.
10
<PAGE> 11
B. SPACECRAFT PAYMENT PLAN
1. The construction payments applicable to Spacecraft shall be made as
follows:
MILESTONE PAYMENT SCHEDULE FOR ECHOSTAR VII SPACECRAFT
<TABLE>
<CAPTION>
- --------------------------------------------- ------------------- ------------------------- -----------------------
MILESTONE DESCRIPTION* MONTHS AFTER EDC AMOUNT, $ CUMULATIVE
AMOUNT, $
- --------------------------------------------- ------------------- ------------------------- -----------------------
<S> <C> <C> <C>
Initial Payment 15 days after EDC $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Agreement on the TBDs in EXHIBIT B and the 1 $ XXXXXXX $ XXXXXXX
TBDs set forth in ARTICLE 2
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete 1st Monthly report & Program 2 $ XXXXXXX $ XXXXXXX
Kick-Off
- --------------------------------------------- ------------------- ------------------------- -----------------------
Place Subcontractor orders** 3 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver Program Management Plan 4 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Conduct System PDR 5 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
First Quarterly Management Report & 6 $ XXXXXXX $ XXXXXXX
Spacecraft/Launch Vehicle Kick-off
- --------------------------------------------- ------------------- ------------------------- -----------------------
Select Spacecraft Harness Vendor 7 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Payload ICD & Start Panel Design 8 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Conduct System CDR 9 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Start Antenna Integration & Test 10 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Start Electronics Box I&T 11 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Start Propulsion Subsystem I&T 12 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver OMUX's to SV 13 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver CORE to PSS I&T 14 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver Electronic Boxes to B159 15 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver Solar Array and Batteries to B159 16 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver TWTAs to SV 17 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Payload Initial Turn-Ons 18 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Spacecraft Mate 19 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Deliver Mission Ops Plan 20 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Vibration Test *** 21 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Thermal/Vacuum Test *** 22 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
Complete Range Test 23 $ XXXXXXX $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
PSR and Spacecraft Final Acceptance 24 $ XXXXXXX
- --------------------------------------------- ------------------- ------------------------- -----------------------
</TABLE>
* Work arounds that do not affect schedule and are otherwise acceptable to Buyer
will satisfy the milestone event.
Notwithstanding the above milestones, if it becomes reasonably clear that
problems with deliverables are reasonably likely to cause schedule delays, then
the construction payments may
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<PAGE> 12
be suspended, at Buyers option, and the date for payment of each subsequent
construction payment delayed, by an amount of time equal to the difference
between the Delivery date for the Spacecraft set forth in ARTICLE 3 above and
the revised forecast Delivery date. In the event that Contractor subsequently
recovers all or a portion of the originally scheduled Delivery date, the
construction payments will again be revised to reflect that recovery. Further,
if, following completion of a milestone, a problem arises which requires rework
of elements of the milestone, then all construction payments may be suspended,
at Buyer's option, until the milestone is again complete.
** Subcontractor List (see below)
Subcontractor List
<TABLE>
<CAPTION>
- ----------------------------------- -----------
Description Quantity
- ----------------------------------- -----------
<S> <C>
Structure (core & panels) 1
- ----------------------------------- -----------
Arcjets 4
- ----------------------------------- -----------
PCU 1
- ----------------------------------- -----------
Tanks 5
- ----------------------------------- -----------
OMUXes 12
- ----------------------------------- -----------
IMUXes 9
- ----------------------------------- -----------
Command Receivers 3
- ----------------------------------- -----------
Beacon Transmitters 3
- ----------------------------------- -----------
OBC 1
- ----------------------------------- -----------
LAE 1
- ----------------------------------- -----------
REAs 18
- ----------------------------------- -----------
Battery Cells 78
- ----------------------------------- -----------
TWTAs 60
- ----------------------------------- -----------
</TABLE>
*** In the event the Program Managers of Contractor and Buyer jointly agree to
conduct Thermal Testing prior to Vibration Testing, then the order of these
milestones shall be reversed.
2. In the event of earlier Delivery of the Spacecraft, and
provided the proper notice of early Delivery was provided,
then Buyer shall use its reasonable efforts to pay the
remaining construction payments promptly following receipt of
Contractor's invoice therefor as provided in paragraph A of
this ARTICLE.
C. Spacecraft In-Orbit Incentive Payments
1. In addition to the construction payments described above,
Buyer shall pay In-Orbit Incentives in the aggregate amount of
$XXXXXX, plus interest at X% per annum, to Contractor in
accordance with the requirements set forth in ARTICLE 6 below.
2. The Parties are willing to enter into good faith negotiations
to establish an alternative to the payment schedule set out in
ARTICLE 6 for the In-Orbit Incentives including without
limitation, prepayment. Buyer shall have the right to
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<PAGE> 13
prepay, at any time, without penalty, that amount of the
In-Orbit Incentives outstanding. In the event of prepayment of
In-Orbit Incentives, if there is subsequently a reduction in
the amount of In-Orbit Incentives that would have otherwise
been due Contractor, then the Contractor shall pay Buyer for
the reduced performance, calculated from the date of
prepayment by Buyer to the subsequent date of repayment by
Contractor, at a rate of X% per annum
D. Failure to make any payments required hereunder, shall constitute a
default by Buyer subject to the provisions of ARTICLE 17. TERMINATION
FOR DEFAULT, paragraph F.
E. 1. For the Spacecraft delivered by Contractor which, following
Launch, does not achieve Successful Injection, as a result of
a Launch vehicle failure unrelated to the Spacecraft defined
in ARTICLE 6, Contractor shall be entitled to receive
$XXXXXXX, which payment is in lieu of and in full satisfaction
of the In-Orbit Incentives.
For purposes of this paragraph, the Spacecraft shall be deemed
to have been "Successfully Injected" provided that:
(a) at the time of separation from the launch vehicle,
the transfer orbit perigee altitude error, apogee
altitude error, inclination error, argument of
perigee error, Spacecraft attitude, and Spacecraft
spin are within or equal to +/-3 sigma limits of
their specified values; and
(b) the Spacecraft has not suffered damage as a
consequence of a failure or malfunction of the launch
vehicle or other cause that is not the fault or is
beyond the control of Contractor.
Notwithstanding that the transfer orbit does not meet all of
the criteria stated in paragraph E(1)(a) above, the Spacecraft
shall be deemed to have been Successfully Injected if the
Spacecraft has nevertheless been positioned in its orbital
slot as defined in EXHIBIT B, Spacecraft Performance
Specification, and the then remaining calculated operation
time period is equal to or greater than 13 years.
2. In the event Buyer is obligated to make payment to Contractor
in accordance with paragraph 1 above, payment shall be due
within ten (10) days from Buyer's receipt of the insurance
proceeds.
F. Except in the case of a bona fide dispute, in the event that either
Party fails to make any payment required hereunder when due, such
payment shall bear interest at the rate of X% per annum until paid.
13
<PAGE> 14
ARTICLE 5. (RESERVED)
14
<PAGE> 15
ARTICLE 6. IN-ORBIT INCENTIVE PAYMENTS
6.1 In addition to the construction payments described in ARTICLE 4, Buyer
will pay the Contractor in orbit incentives in the aggregate amount of
XXXXXXX Dollars ($XXXXXXX), plus interest at X% per annum accruing from
the completion of the IOT review, for the in-orbit performance of the
Satellite as set forth herein (the "In Orbit Incentives").
6.2 The In Orbit Incentives will be payable in thirteen (13) equal annual
payments, the first such payment becoming due on the last day of the
month during which the one year anniversary of the completion of the
IOT review occurs, provided that no payment shall be due any sooner
than thirty (30) days following receipt of an invoice therefor from
Contractor.
6.3 Except as provided below, the criteria for determining a loss pursuant
to pages 5 through 11 (inclusive) of the commercial insurance policy
that Buyer procured with respect to the launch and operation of the
EchoStar V satellite, copies of which are attached hereto as ATTACHMENT
A (the "Criteria"), shall be utilized by Contractor and Buyer to
determine the extent, if any, to which Contractor's In Orbit Incentives
are reduced, if at all. Buyer and Contractor agree that the Criteria
will be utilized for the duration of this Contract. The formula to
determine losses will, in the sole discretion of Buyer (regardless of
the mode of operation at the time or the number of licensed
frequencies), be based upon, notwithstanding the Criteria: (i) with
respect to full CONUS payload, on either 32 transponders operating at
high power mode with a Stated Spacecraft Life of 13 years, not subject
to the Deductible, or 16 transponders operating at super high power
mode with a Stated Spacecraft Life of 13 years, not subject to the
deductible; and (ii) with respect to the spot beam payload, on 25
transponders with a Stated Spacecraft Life of 13 years, not subject to
the Deductible. The entire amount of the $XXXXXXX of In Orbit
Incentives shall be at risk of being reduced based on failures of the
full CONUS payload. In addition, $XXXXXXX of the In Orbit Incentives
shall be at risk of being reduced based on failures of the spot beam
payload. So, for example, in the event of the failure of a transponder
which results in only 15 full CONUS transponders operating at super
high power being available, in addition to any adjustment to the In
Orbit Incentives pursuant to paragraph 6.6, the In Orbit Incentives
would be reduced by XX x $XXXXXXX x (the number of days of remaining
life at the time of the failure/4,745). If the same transponder failure
resulted in only 13 available spot beam transponders, then the In Orbit
Incentives would be further reduced by 13/25 x $XXXXXXX x (the number
of days of remaining life at the time of the failure/4,745). Each
reduction to the In Orbit Incentives shall be applied on an equal basis
to all annual payments subsequent to the occurrence of the underlying
failure/anomaly.
In the event that Buyer obtains launch/operation insurance for the
Spacecraft ("EchoStar VII Insurance"), if application of the criteria
in the EchoStar VII Insurance Policy would result in a larger reduction
in the In Orbit Incentives than application of the Criteria
15
<PAGE> 16
would, then the reduction in the In Orbit Incentives will be based on
the criteria in the EchoStar VII Insurance Policy.
6.4 If any anomaly with respect to the Satellite would result in a loss
under the Criteria, then Contractor's In Orbit Incentives shall be
reduced by a percentage equal to the percentage loss which would be
payable in accordance with the Criteria. In the case of a conflict or
inconsistency between the terms of this Section 6.4 and Section 6.3
above, the Parties agree that only one Section can apply to any
particular failure/anomaly and that Buyer shall choose, in its sole
judgment, which Section shall apply each particular failure/anomaly.
6.5 If the cumulative losses pursuant to this ARTICLE 6 are equal to or
greater that 50%, then the Satellite shall be considered a total loss,
and Contractor's In Orbit Incentives shall be reduced to zero.
6.6 If an anomaly occurs with respect to the Satellite which would not
result in a loss under the Criteria, or with respect to which Buyer
does not believe the loss amount fairly reflects the consequences of
the anomaly, then the amount of In Orbit Incentives due to Contractor
may nonetheless be further reduced as provided below, if the anomaly:
(1) would cause commercial insurers to demand terms, conditions or
rates for continued insurance which are greater than would be required
for a satellite which does not experience such an anomaly, or (2)
results in a reduction in the fair market value of the Satellite.
Contractor and Buyer shall jointly agree on the amount of any such
reduction of the In Orbit Incentives, taking into account the
anticipated degradation of the Satellite or of its life as a result of
the anomaly, any reduction in its value over such term as a result of
the anomaly, the extent to which Contractor is able to devise ways and
methods to overcome the impacts of such anomaly, and any increased
costs to Buyer as a result of the anomaly.
For example (and not by way of limitation), if tubes on the Spacecraft
experience failures, the exact nature of which, and the timing of
additional numbers of failures which, can not be predicted with
certainty, and/or with respect to which redundancies on the Spacecraft
allow continued operation of all frequencies, then even if commercial
insurers would claim that the number of failures to date, together with
the number of potential future failures, is not sufficiently certain to
result in a loss under the Criteria (or should result in only a small
loss under the Criteria), a further reduction in the In Orbit
Incentives would none-the-less occur based on the guidelines in the
paragraph above.
6.7 If Contractor and Buyer are unable to agree whether an event as
described in Paragraph 6.3, 6.4 or 6.6 above has occurred, or on the
appropriate amount payable, the parties shall submit the matter to
binding arbitration as provided for in ARTICLE 22.
6.8 If at the time an In Orbit Incentive payment is due, a potential
reduction of the In Orbit Incentives is pending, then the payment date
shall be delayed until 30 days following
16
<PAGE> 17
resolution of the potential reduction. Notwithstanding the prior
sentence, Buyer shall timely pay any amounts reasonably likely to be in
excess of the value of the potential reduction.
6.9 If an anomaly which results in a loss is caused by Buyer's operation of
the Satellite outside of the appropriate criteria established by
Contractor or by a Launch Vehicle failure that is not caused by the
Satellite, then no reduction in the In-Orbit Incentive payments shall
be made for such anomaly. Further, if either of these two events occur,
and the Satellite becomes a total loss under this ARTICLE 6, then Buyer
shall pay to Contractor all In Orbit Incentives (less any reductions as
a result of anomalies or amounts previously paid) within thirty (30)
days after Buyer receives payment from its insurance carrier.
6.10 Unless Launch is delayed due to the fault of Contractor, if the
Satellite is not launched within one hundred eighty (180) days after
Delivery and final acceptance pursuant to ARTICLE 7, Buyer shall
commence making In Orbit Incentive payments in accordance with the
above as though the IOT review of the Satellite had been completed
after the one hundred and eightieth (180th) day after Delivery and
final acceptance pursuant to ARTICLE 7.
6.11 Notwithstanding anything to the contrary above, in no event shall the
reduction in In-Orbit Incentives exceed the amount of unearned In-Orbit
Incentives remaining due from Purchaser to Contractor at the relevant
point in time.
17
<PAGE> 18
ARTICLE 7. INSPECTION AND FINAL ACCEPTANCE
A. Inspection
Buyer, or its designated representative, shall have the right to
witness and review the results of the final acceptance testing at the
system level of the deliverable hardware at the facilities of
Contractor. To allow Buyer to most effectively schedule the monitoring
stated above, Contractor shall give Buyer reasonably timely
notification of the acceptance testing of the deliverable hardware.
B. Final Acceptance
Final acceptance of the items to be delivered hereunder shall be in
accordance with the requirements of this Contract, including the
EXHIBITS. Delivery and final acceptance shall be as provided herein.
1. The Spacecraft furnished under this Contract shall be tested
by Contractor in the presence of Buyer or Buyer's
representative, and in the case of Spacecraft to be delivered
to storage, shall be finally accepted by Buyer upon
demonstration at Contractor's facility, prior to Delivery of
Spacecraft to storage, by means of test results obtained
pursuant to the test requirements set forth in EXHIBIT C, that
the Spacecraft meets the performance specifications set forth
in EXHIBIT B for the Spacecraft.
2. In the case of Spacecraft delivered for launch, upon arrival
of Spacecraft at the Launch site, as required by EXHIBIT A for
the Spacecraft, Contractor shall promptly conduct an
inspection and test the Spacecraft, in accordance with the
requirements of EXHIBIT C, in the presence of Buyer or Buyer's
representative.
3. However, in paragraphs 1 and 2 above, Contractor may conduct
the test without the Buyer's presence providing Buyer or
Buyer's representative is notified within a reasonable time
before the test is to be conducted. At the written request of
the Contractor, Buyer or Buyer's representative shall either
finally accept the Spacecraft in writing or notify Contractor
in writing of those particulars in which the Spacecraft to be
delivered does not meet the requirements of this Contract. For
the purposes of paragraph 2 above, this action shall take
place no later than forty-eight hours after Buyer or Buyer's
representative has received the final Launch System
Performance Test (LSPT) Test Data. Upon remedy of such
particulars to meet the requirements of this Contract, the
Spacecraft shall be deemed to have been Delivered and finally
accepted. Notwithstanding the above, if Buyer or Buyer's
representative is not present and Contractor presents the test
results to Buyer and Buyer does not respond within three (3)
business days, the final acceptance will have been deemed to
have taken place.
18
<PAGE> 19
4. Final acceptance of items other than the Spacecraft shall take
place after Delivery by Contractor to the applicable delivery
destination and, if required by Contract, completion of
installation and inspection. Contractor shall promptly conduct
an inspection and, if required, test the items other than the
Spacecraft, in accordance with the requirements of EXHIBIT C,
in the presence of Buyer or Buyer's representative. However,
Contractor may conduct the test without the Buyer's presence
providing Buyer or Buyer's representative is notified within a
reasonable time before the test is to be conducted. At the
written request of the Contractor, Buyer shall either finally
accept the item(s) in writing or notify Contractor in writing
of those particulars in which the items to be delivered do not
meet the requirements of this Contract. Upon remedy of such
particulars to meet the requirements of this Contract, the
item involved shall be deemed to have been Delivered and
finally accepted. Notwithstanding the above, if Buyer or
Buyer's representative is not present and Contractor presents
the test results to Buyer and Buyer does not respond within
three (3) business days, the final acceptance will have been
deemed to have taken place.
19
<PAGE> 20
ARTICLE 8. TITLE AND ASSUMPTION OF RISK
A. Unless otherwise stated herein, the following shall apply:
1. Title and risk of loss or damage to a Spacecraft shall pass to
Buyer at Launch, even in the case of a Spacecraft delivered to
storage.
2. Title and risk of loss or damage to items other than
Spacecraft shall pass to Buyer upon final acceptance.
B. Buyer agrees to cause its insurer(s) to waive all rights of subrogation
against Contractor and its officers, agents, servants, subsidiaries and
employees, subject to terms and conditions as are then customarily
available regarding such waivers.
C. EXCEPT WITH RESPECT TO WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY
CONTRACTOR, UPON AND AFTER LAUNCH OF THE LAUNCH VEHICLE FOR THE
SPACECRAFT, CONTRACTOR'S SOLE FINANCIAL RISK, AND THE SOLE AND
EXCLUSIVE REMEDIES OF BUYER, WITH RESPECT TO THE USE OR PERFORMANCE OF
THE SPACECRAFT, SHALL BE AS SET FORTH IN ARTICLES 6, 13, 14, 15 AND 21.
20
<PAGE> 21
ARTICLE 9. ACCESS TO WORK
A. For the purpose of observing the quality of Contractor's performance of
work, Contractor shall afford a reasonable number of Buyer's personnel
(including without limitation Buyer's consultants) access, with office
facilities as delineated in EXHIBIT A, to all work in process at
Contractor's facilities. Upon Buyer's request, Contractor will request
and attempt to obtain similar access to work related to Buyer's
Spacecraft that is being performed at Contractor's major
subcontractors.
B. The Contractor shall use reasonable commercial efforts to obtain the
U.S. Governments' authorization to allow Telesat Consultants access to
the same extent as delineated in paragraph A above. Additionally,
Contractor shall apply for and, once issued, use reasonable commercial
efforts to maintain all U.S. Government export licenses and approvals
needed for Buyer's personnel, representatives, agents and consultants
who are citizens of a country other than the U.S., to access Contractor
facilities or technical data in connection with the performance of this
Contract as delineated in paragraph A above. Buyer shall cooperate with
Contractor and provide the support necessary for Contractor to apply
for and maintain such export licenses and approvals, and shall promptly
notify Contractor of any occurrence or change in circumstances of which
it becomes aware that is relevant to or affects such export license and
approvals.
C. Information disclosed to Buyer pursuant to this ARTICLE shall be
subject to the limitations set forth in ARTICLE 25. DISCLOSURE AND USE
OF INFORMATION BY THE PARTIES.
21
<PAGE> 22
ARTICLE 10. PROGRESS MEETINGS, PRESENTATIONS AND DOCUMENTATION DELIVERABLES
A. Meetings and Presentations
In addition to any other meetings called for under the provisions of
this Contract and without limitation thereto, Contractor shall provide
the manpower, facilities, materials and support required to conduct the
following periodic meetings and presentations:
1. Informal Program Manager meetings.
2. Technical Review meetings as determined by Contractor's
Program Manager.
3. Quarterly Summary Executive Reviews.
Copies of view graphs or other documents utilized during these meetings
shall be furnished or be made available to Buyer. Buyer's management
personnel, as may be deemed appropriate by Buyer, shall be invited to
the Quarterly Summary Executive Reviews. Contractor shall be
represented by its Program Manager and such other personnel as are
specifically required to support the particular presentation. All
periodic meetings shall be held at Contractor's facilities at either
Sunnyvale, CA or Newtown, PA, or such other locations that the Parties
shall mutually agree to.
B. Distribution of Reports
All materials, reports and documentation furnished pursuant to this
ARTICLE shall be the property of Buyer subject to the limitations set
forth in ARTICLE 25, DISCLOSURE AND USE OF INFORMATION BY THE PARTIES,
except that, Contractor or its subcontractors may retain copies for
their own purposes, including the using of such materials and reports
in the performance of other contracts.
22
<PAGE> 23
C. Correspondence
All correspondence, including notices, reports and documentation
deliverables, to be provided to Buyer or Contractor under this Contract
shall be sent in writing to Buyer or Contractor, signed by the Party
issuing them, and sent by either: (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 address set forth below, or sent by facsimile to the
fax number set forth below, or such other address or fax number as such
party may have substituted by notice given to the others in accordance
with this paragraph C. 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.
EchoStar Orbital Corporation Lockheed Martin Corporation
5701 South Santa Fe Drive 1272 Borregas Avenue
Littleton, Colorado 80120-1838 Sunnyvale C.A, 94089
Attention: Mr. C. Ergen Attention: Ms. S. McMahan
Fax: 303-723-1699 Fax: 408-743-4906
CC: Mr. David Moskowitz
Fax: 303-723-1608
CC: Mr. Rohan Zaveri
Fax: 303-723-1099
D. The only representatives of Buyer and Contractor authorized to sign
contractual documents are:
BUYER: CONTRACTOR:
Mr. C. Ergen Mr. P.L. Kujawski
Mr. D. Moskowitz Mr. C. Stees
Ms. Sandra McMahan
Mr. P.H. Wiggett
Or others authorized by written Or others authorized by
delegation of the Board of written delegation by
Directors of EchoStar Orbital Lockheed Martin Corporation
Corporation
23
<PAGE> 24
ARTICLE 11. RIGHTS IN DATA
A. Except as provided in paragraph B below, Buyer shall have an unlimited
right to use, duplicate, and disclose the information contained in the
Spacecraft Operations Manual (SOM) furnished pursuant to EXHIBIT A for
the Spacecraft, however, if any written material furnished as part of
said document is copyrighted, Buyer shall have an unlimited right to
make copies of such copyrighted material and to use such copies for any
Buyer purpose associated with the operation of the Spacecraft without
payment of additional compensation to Contractor to the extent that
Contractor has the authority to grant such right. In the event
Contractor does not have such right, Contractor will exert its best
efforts to obtain such rights for Buyer.
B. All data that are or may be delivered or disclosed by either party to
the other shall be subject to ARTICLE 25, DISCLOSURE AND USE OF
INFORMATION BY THE PARTIES.
C. Notwithstanding any other provision hereof, the ownership and title to
copyrights and computer programs and their related documentation
delivered to Buyer by Contractor in accordance with this Contract shall
remain in Contractor or its licensor. Contractor shall grant to Buyer a
paid up non-exclusive, non-transferable license to use (including "to
duplicate" and "to adapt") solely for use in connection with this
Contract, the copies of computer programs and their related
documentation specified in the Contract required for the operation of
the Spacecraft delivered under this Contract.
24
<PAGE> 25
ARTICLE 12. PUBLIC RELEASE OF INFORMATION
During the term of this Contract, neither Party, its affiliates,
subcontractors, employees, agents and consultants shall release items of
publicity of any kind, including, without limitation, news releases, articles,
brochures, advertisements, prepared speeches, company reports or other
information releases, related to the work performed hereunder, including the
denial or confirmation thereof, without the other Party's prior written consent
which consent shall not be unreasonably withheld. Notwithstanding the foregoing
either Party may disclose the existence and the purpose of this Contract to the
extent required by any laws, rules, or regulations.
25
<PAGE> 26
ARTICLE 13. INDEMNIFICATION
A. Each party shall defend the other party and its officers, agents,
servants, subsidiaries and employees, and any of them, from and against
all claims, actions, suits and proceedings (collectively "Claims")
alleging damage to any property, private or public, and injuries,
including death, to persons caused by any act or omission of the
indemnifying Party and/or the indemnifying Party's agents or
representatives at any tier or any of them, and, notwithstanding the
provisions of Article 28, shall pay any final judgment or settlement,
provided the indemnifying Party is given prompt written notice of any
such Claim and full authority to resist, defend and settle such Claim.
The indemnified Party shall provide at the indemnifying Party's request
such assistance and information as may be required the indemnifying
Party. The indemnifying Party shall in no event be liable for any costs
or expenses incurred without its written authorization.
B. Other than as provided in ARTICLES 6, 13, 14, 15 and 21, upon and after
Launch of the launch vehicle for the Spacecraft, Contractor shall not
be liable to Buyer, customers of Buyer or their customers for any
damages resulting from: (i) any loss or destruction of the Spacecraft;
or (ii) failure of the Spacecraft or its subsystems to operate
satisfactorily, except any such liabilities, losses and damages that
are caused by the gross negligence or willful misconduct of Contractor.
Buyer also agrees to cause its insurers to waive all right of
subrogation against Contractor and its officers, agents, servants,
subsidiaries and employees, subject to terms and conditions as are then
customarily available regarding such waivers.
26
<PAGE> 27
ARTICLE 14. PATENT INDEMNITY
A. Contractor shall defend Buyer and its officers, agents, servants,
subsidiaries and employees, and any of them from and against all Claims
alleging that the manufacture of any Spacecraft, delivered under this
Contract or the use, lease, sale or other disposition of any such
Spacecraft infringes any U.S. patent, and, notwithstanding ARTICLE 28,
shall pay any final judgment or settlement, provided Contractor is
given prompt written notice of any such Claim and full authority to
resist, defend and settle such Claim. Buyer shall provide at
Contractor's request such assistance and information as may be required
by Contractor.
B. If an injunction or other order is obtained against the manufacture,
use, lease, sale or other disposition of any Spacecraft hereunder,
Contractor agrees to use its best efforts either to procure rights so
that such Spacecraft and the manufacture, use, lease, sale or other
disposition thereof is no longer infringing or to modify or replace
such Spacecraft so that it is no longer subject to such order. In the
event that such injunction or order becomes permanent and that neither
of the foregoing alternatives is suitably accomplished and Contractor
is unable to reasonably perform its obligations hereunder, Buyer may
terminate this Contract and receive a refund of all amounts paid to
Contractor hereunder.
C. Contractor shall in no event be liable for any costs or expenses
incurred without Contractor's written authorization and, except in the
case of gross negligence or willful misconduct, in no event shall
Contractor's total liability to Buyer under, or as a result of
compliance with, the provisions of this ARTICLE exceed the aggregate
Spacecraft price for all Spacecraft under construction or delivered.
The foregoing states the entire warranty by Contractor and the
exclusive remedy of Buyer, with respect to any alleged patent
infringement by such product or part.
27
<PAGE> 28
ARTICLE 15. INDEMNIFICATION FOR TAXES
Contractor shall assume responsibility, and shall defend Buyer, its
officers, agents, employees, servants, subsidiaries and assignees, or any of
them, from and against all Claims arising out of, or relating to, taxes, which
may be required under present federal, state, or local laws and which become due
by reason of the performance of work under this Contract, and, notwithstanding
the provisions of Article 28, shall pay any final judgment or settlement
(including without limitation any interest or penalties), provided Contractor is
given prompt written notice of any such Claim and full authority to resist,
defend and settle such Claim, and Contractor shall execute and deliver such
other and further documents, and comply with such requirements of said laws, as
may be necessary thereunder to confirm and effectuate this Contract, including
making of payment of any interest or penalties related to or arising from such
taxes. Buyer shall provide at Contractor's request such assistance and
information as may be required by Contractor. The indemnifying Party shall in no
event be liable for any costs or expenses incurred without its written
authorization. It is Contractor's belief that no sales, use, income or personal
property taxes will be incurred under this Contract as presently structured. In
the event that Buyer directs changes which result in the assessment of sales,
use, income or personal property taxes which would not be payable absent such
direction, Buyer shall be responsible for such taxes.
28
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ARTICLE 16. EXCUSABLE DELAYS
Without limiting any other provision specifying what constitutes an
excusable delay under this Contract, acts of God or of the public enemy; acts of
the Government in its sovereign or contractual capacity, including Government
priorities, allocations, regulations or orders affecting materials, facilities,
or completed Spacecraft (including changes in the launch specifications); fires;
floods; snowstorms; earthquakes; epidemics; quarantine restrictions; strikes;
wars; freight embargoes; or any similar events which cause failure or delay to
perform hereunder, and in every case are beyond the reasonable control and
without fault or negligence of a Party or its subcontractors hereunder shall
constitute an excusable delay, if notice thereof is given to the other Party as
soon as possible but in no event later than within thirty (30) days after such
event shall have occurred. In the event of a delay resulting from any of the
above causes, the Delivery requirement shall be extended for the period of the
excusable delay.
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ARTICLE 17. TERMINATION FOR DEFAULT
A. Buyer may, by written notice of default sent to Contractor in
accordance with paragraph C of ARTICLE 10, terminate the whole or any
part of this Contract in any one of the following circumstances:
1. If Contractor fails to make Delivery of the supplies or to
perform the services within the time specified herein.
2. If Contractor fails to perform any of the other provisions of
this Contract or so fails to make progress as to endanger
performance of this Contract in accordance with its terms, and
in either of these two circumstances does not act to correct
such failure within a period of thirty (30) days (or such
longer period as Buyer may authorize in writing) after receipt
of notice from Buyer specifying such failure.
B. To the extent the Contract is terminated under this ARTICLE, Buyer
shall use all reasonable efforts to utilize all work in process
hereunder in order to mitigate any costs sustained by Buyer as a result
of Contractor's default. Contractor will pay to Buyer all costs
reasonably incurred by Buyer in obtaining all of the work described in
this Contract, according to the schedule set forth herein, provided
that Buyer enters into a contract for such work within twelve (12)
months of Contractor's default.
C. If this Contract is terminated as provided in this ARTICLE, Contractor
shall promptly refund all payments made by Buyer for the terminated
work, except that Buyer shall remain liable to Contractor for and pay
Contractor: (a) the Contract price for completed items which are
Delivered to Buyer and finally accepted by Buyer pursuant to ARTICLE 7;
and (b) the cost of, and a reasonable profit on, all work in process,
materials in stock and services for which Buyer takes Delivery and
which Buyer finally accepts pursuant to ARTICLE 7.
D. If this Contract is terminated as provided in this ARTICLE, Contractor
shall protect and preserve property in the possession of Contractor in
which Buyer has an interest.
E. Absent gross negligence or willful misconduct, the remedies set forth
in this ARTICLE, and ARTICLES 6, 13, 14, 15, 21 and 30, shall be the
sole recourse to which Buyer is entitled, under paragraph 1or paragraph
2 above, in the event of Contractor's default, and Contractor shall
have no liability for special, indirect, incidental or consequential
damages for lost profits or lost revenues.
F. In the event Buyer fails to perform any obligation which it is required
to perform pursuant to this Contract, Contractor may, if such failure
is not corrected within thirty (30) days after written notice of such
failure is given by Contractor to Buyer in accordance with paragraph C
of ARTICLE 10, halt work on this Contract and consider this entire
Contract to be terminated due to the default of Buyer. In the event
that Contractor terminates this
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<PAGE> 31
Contract pursuant to this paragraph F, Contractor shall be entitled to
compensation as set forth in ARTICLE 18, TERMINATION FOR CONVENIENCE.
Absent gross negligence or willful misconduct, the remedies set forth
in this paragraph F shall be the sole recourse to which Contractor is
entitled, under this ARTICLE, in the event of Buyer's default, and
Buyer shall have no liability for special, indirect, incidental or
consequential damages for lost profits or lost revenues.
G. If, after notice of termination of the Contractor's right to proceed
under the provisions of this ARTICLE, it is determined for any reason
that the Contractor was not in default under the provisions of this
ARTICLE, or that the delay was excusable under the provisions of
ARTICLE 16, EXCUSABLE DELAYS, the rights and obligations of the Parties
shall be the same as if notice of termination had been issued pursuant
to ARTICLE 18, TERMINATION FOR CONVENIENCE.
H. If, after notice of termination of the Buyer's right to proceed under
the provisions of this ARTICLE, it is determined for any reason that
the Buyer was not in default under the provisions of this ARTICLE, or
that the delay was excusable under the provisions of ARTICLE 16,
EXCUSABLE DELAYS, the rights and obligations of the Parties shall be
the same as if Contractor was terminated for default under this
ARTICLE.
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ARTICLE 18. TERMINATION FOR CONVENIENCE
A. Buyer, by written notice to Contractor, may terminate this Contract in
whole, or in part, for any reason or for Buyer's convenience at any
time prior to final acceptance of all the work. In the event of such
termination, Contractor will cease work as directed in the termination
notice. The termination charges shall be limited to the total direct
costs (including applicable overhead charges) reasonably incurred by
Contractor with respect to termination and settlement with all vendors
and subcontractors , plus a profit of fifteen (15) percent on such
direct costs, and reasonable costs incurred by Contractor in connection
with the reassignment of the personnel involved in the Spacecraft
program (provided that Contractor shall use reasonable commercial
efforts to minimize all of the above-listed costs). In the event of
termination by the Buyer of any deliverable item, it is agreed that the
termination charges shall be negotiated but shall not exceed the total
price for deliverable item set forth in ARTICLE 2, EQUIPMENT AND
SERVICES TO BE FURNISHED AND PRICES THEREFORE, hereof. Notwithstanding
the above, in no event shall the Buyer's liability, under this
paragraph A, exceed the percentage of the total price of the
Spacecraft, as such total price is set forth in ARTICLE 2. EQUIPMENT
AND SERVICES TO BE FURNISHED AND PRICES THEREFORE, which corresponds to
the month such termination occurs in the following schedule:
SPACECRAFT TERMINATION LIABILITY SCHEDULE
<TABLE>
<CAPTION>
------------------- ----------------
% OF TOTAL
MONTHS PRICE OF
AFTER EDC SPACECRAFT
------------------- ----------------
<S> <C>
1 XX
------------------- ----------------
2 XX
------------------- ----------------
3 XX
------------------- ----------------
4 XX
------------------- ----------------
5 XX
------------------- ----------------
6 XX
------------------- ----------------
7 XX
------------------- ----------------
8 XX
------------------- ----------------
9 XX
------------------- ----------------
10 XX
------------------- ----------------
11 XX
------------------- ----------------
12 XX
------------------- ----------------
13 XX
------------------- ----------------
14 XX
------------------- ----------------
15 XX
------------------- ----------------
16 XX
------------------- ----------------
17 XX
------------------- ----------------
18 XX
------------------- ----------------
19 XX
------------------- ----------------
20 XX
------------------- ----------------
21 XX
------------------- ----------------
22 XX
------------------- ----------------
23 XX
------------------- ----------------
</TABLE>
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B. Direct costs (including applicable overhead charges) and costs incurred
by Contractor in connection with the reassignment of the personnel
involved in the Spacecraft program shall be determined in accordance
with Contractor's standard accounting practice and may be verified, at
Buyer's option and expense, by an independent certified public
accounting firm to be mutually agreed upon by the Buyer and Contractor.
C. Buyer shall pay Contractor the aforesaid termination charges within
thirty (30) days following the submission of an invoice. Upon payment
of Contractor's invoice, Contractor shall deliver to Buyer all
termination inventory which has not been credited by Contractor against
the termination charges set forth in paragraph D.2 below. In the event
that Contractor's invoice is not paid within thirty (30) days following
submission, Buyer shall be in default pursuant to ARTICLE 17,
TERMINATION FOR DEFAULT, paragraph F.
D. Final payment shall be in the amount of the total termination charges,
less the following:
1. Amounts previously paid by Buyer to Contractor with respect to
previously completed work and any terminated work pursuant to
ARTICLE 4. PAYMENT, hereof; and
2. Amounts representing the total of Contractor's costs with
respect to previously completed work and any terminated work
of segregable items of inventory not desired by Buyer and
which Contractor elects to retain for its use.
In the event the amount set forth in this paragraph D above exceeds the
termination charges defined in paragraph A of this ARTICLE, Contractor
shall promptly refund such excess to Buyer.
E. In no event shall the total amount paid to Contractor pursuant to this
Agreement, including termination charges paid pursuant to this ARTICLE,
exceed the total price stated in ARTICLE 2, EQUIPMENT AND SERVICES TO
BE FURNISHED AND PRICES THEREFORE, hereof.
F. The remedies set forth in this ARTICLE shall be the sole recourse to
which Contractor is entitled, under this ARTICLE, in the event of
Buyer's exercise of termination for convenience.
G. Contractor agrees to use all reasonable efforts to assist Buyer in
disposing/selling of the work in process upon termination pursuant to
this ARTICLE.
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ARTICLE 19. CHANGES
Buyer may, from time to time between the EDC and the completion of this
Contract, by written change order issued by Buyer, make changes within the
general scope of this Contract in drawings, designs, specifications, method of
shipment or packing, quantities of items to be furnished, place of Delivery,
postpone Delivery, require additional work, or direct the omission of work. If
any such change causes an increase or decrease in costs of, or the time required
for, the performance of this Contract, an equitable adjustment shall be made in
the price, or Delivery schedule, or both, and any other affected provision, and
this Contract shall be modified in writing accordingly. Any claim by Contractor
for adjustment under this paragraph shall be deemed waived unless asserted in
writing within thirty (30) days from the date of receipt by Contractor of the
change order. The amount of the claim shall be stated when it is submitted, or
at a later date, not to exceed sixty (60) days from the date for assertion of
the claim, which later date shall be requested at the time of such submission.
Unless Contractor has waived its claim, all changes and equitable adjustments
pursuant to this ARTICLE shall be subject to negotiation between and approval by
both Parties prior to the implementation of any such change. Except for
Excusable Delays pursuant to ARTICLE 16. EXCUSABLE DELAYS, none of the Contract
dates will change unless mutually agreed upon in writing by the Parties.
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ARTICLE 20. ASSIGNMENT
A. Neither party shall assign or delegate this Contract or any of its
rights, duties, or obligations hereunder to any other person without
the prior express written approval of the other party, such approval
shall not be unreasonably denied. Nothing contained in this ARTICLE
shall restrict Contractor from subcontracting work or procuring
parts/materials or services in the ordinary course of performance of
this Contract.
B. Buyer may assign this Contract, provided Buyer can reasonably
demonstrate that any such proposed assignee is in at least as good
financial condition as the Buyer at the EDC.
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<PAGE> 36
ARTICLE 21. WARRANTY
A. Contractor warrants that the goods or services furnished hereunder
shall be free from any defects in material or workmanship and shall be
manufactured in conformity with the performance specifications
applicable to such goods and services.
B. Buyer shall have the right at any time during the period of this
warranty and irrespective of prior inspections or acceptance to reject
any goods or services not conforming to the above warranty and require
that Contractor at its expense, correct or replace as promptly as is
reasonably possible, at Contractor's option, such goods or services
with conforming goods or services.
C. For the Spacecraft, this warranty shall run for a period of one (1)
year from the date of final acceptance by Buyer or until Launch,
whichever is sooner. Notwithstanding the foregoing, Contractor shall
investigate any and all anomalies arising during the life of the
Spacecraft, and use reasonable best efforts to correct any such anomaly
that is correctable by Contractor from Buyer's SCF using the facilities
and equipment available at such site.
D. Except for the Spacecraft, this warranty shall run for a period of one
(1) year from the date of final acceptance by Buyer.
E. Contractor shall pass on or assign to Buyer all warranties on goods or
services given by suppliers or manufacturers other than Contractor to
the extent to which Contractor is permitted by the terms of its
purchase contracts with such suppliers or manufacturers.
F. THIS WARRANTY IS IN LIEU OF ALL OTHER WARRANTIES, WHETHER STATUTORY,
EXPRESS OR IMPLIED, INCLUDING BUT NOT LIMITED TO WARRANTIES OF
MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE.
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<PAGE> 37
ARTICLE 22. ARBITRATION
A. Any dispute or disagreement arising between the Parties in connection
with any interpretation of any provision of this Contract, or the
compliance or noncompliance therewith, or the validity or
enforceability thereof, or any other dispute under any ARTICLE hereof
which is not settled to the mutual satisfaction of the Parties within
thirty (30) days (or such longer period as may be mutually agreed upon)
from the date that either party informs the other, in writing, that
such dispute or disagreement exists, shall be settled by arbitration in
accordance with the Commercial Arbitration Rules of the American
Arbitration Association, in effect on the date that such notice is
given.
B. Either party which demands arbitration of the controversy shall, in
writing, specify the matter to be submitted to arbitration and, at the
same time, choose and nominate a competent person to act as an
arbitrator; thereupon, within fifteen (15) days after receipt of such
written notice, the other party to this agreement shall, in writing,
choose and nominate a competent arbitrator. The two arbitrators so
chosen shall meet and endeavor to resolve the question in dispute, and,
if they agree upon such determination, the determination so made shall
be in writing and signed by both arbitrators. If such two arbitrators
fail to agree, they shall forthwith select a third arbitrator, giving
written notice to both Parties of the choice so made and fixing a time
and place at which both Parties may appear and be heard with respect to
such controversy. In case the two arbitrators shall fail to agree upon
a third arbitrator within a period of seven (7) days, or if for any
other reason there shall be a lapse in the naming of an arbitrator or
arbitrators, or in the filling of a vacancy, or in the event of failure
or refusal of any arbitrator or arbitrators to attend or fulfill his or
their duties, then upon application by either Party to the controversy,
an arbitrator or arbitrators shall be named by the American Arbitration
Association.
C. The arbitration award made shall be final and binding upon the Parties
and judgment may be entered thereon, upon the application of either
Party by any court having jurisdiction. Subject to any other limitation
of damages set forth herein, the relief that may be awarded by the
arbitrators under any arbitration arising from this Contract may not
exceed actual compensatory damages. In no event may the arbitrators
award punitive damages.
D. Each party shall bear the cost of preparing and presenting its case,
and the cost of arbitration, including the fees and expenses of the
arbitrator or arbitrators, will be shared equally by the Parties unless
the award otherwise provides.
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ARTICLE 23. APPLICABLE LAW
A. This Contract shall be interpreted and enforced in accordance with the
substantive laws of the State of New York, exclusive of its conflict
rules.
B. This Contract is subject to all applicable laws and regulations and
each Party agrees to comply with all such applicable laws and
regulations.
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<PAGE> 39
ARTICLE 24. ENTIRE AGREEMENT
This Contract constitutes the entire agreement between the Parties and
supersedes all prior understandings, commitments, and representations with
respect to the subject matter hereof. It may not be amended, modified, or
terminated (other than as specifically provided in the ARTICLES hereof), and
none of its provisions may be waived, except by a writing signed by an
authorized representative of the Party against which the amendment,
modification, termination or waiver is sought to be enforced. The paragraph
headings herein shall not be considered in interpreting the text of this
Contract.
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ARTICLE 25. DISCLOSURE AND USE OF INFORMATION BY THE PARTIES
A. If documents supplied by one party to the other are marked with a
proprietary legend, the receiving party shall take all necessary steps
to ensure that the documents and contents of such documents are not
disclosed to any person other than a person employed or engaged by the
receiving party, whether under subcontract or otherwise, who has a bona
fide need to know the information contained thereon in order to perform
this Contract. Any such document supplied hereunder shall be returned
to the disclosing party together with any copies thereof promptly upon
written request of the disclosing party, except for one copy to be
retained for legal purposes. Whenever the receiving party makes copies
of such proprietary documents for performance of work covered by this
Contract, the receiving party shall mark each such copy as proprietary
to the disclosing party.
B. Any disclosure to any person permitted under paragraph A of this
ARTICLE shall be made under the same conditions that apply to the
initial disclosure and shall extend only so far as may be necessary for
the purposes of this Contract. Any such disclosure to a person other
than an employee of the receiving party shall be made pursuant to a
written confidential disclosure agreement or with prior written
approval of the disclosing party.
C. Except with the written consent of the disclosing party, the receiving
party shall not make use of any document mentioned in paragraph A of
this ARTICLE other than for the purposes of this Contract.
D. The obligations and restrictions imposed by this ARTICLE shall not
apply to the following:
1. information that is or becomes available to the public from a
source other than the receiving party, before or after the
effective date of this Contract;
2. information that is authorized for release in writing by the
disclosing party;
3. information that is lawfully obtained by the receiving party
from a third party;
4. information that is known by the receiving party prior to such
disclosure; and
5. information that is, at any time, developed by the receiving
party completely independently of any disclosure or
disclosures from the disclosing party.
E. Neither party shall be liable for inadvertent or accidental disclosure
of such information marked as proprietary if such disclosure occurs
despite both Parties exercising reasonable efforts to preserve and
safeguard such information.
F. Neither party shall be liable for the disclosure of any proprietary
information of the other party pursuant to any legally enforceable
requirement of the U.S. Government or any
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<PAGE> 41
State or local government, or any agency, or department of any of the
above, or any binding court order.
G. No license, under any patents or any other intellectual property, is
granted or implied by merely conveying data or information under this
Contract.
H. Any proprietary disclosure to either party, if made orally, or
visually, shall be identified as confidential or proprietary at the
time of disclosure, in order for such information to be treated as
proprietary and subject to the restrictions of this ARTICLE 25.
I. The obligations of this ARTICLE shall be effective for a period of
three (3) years from the date of termination or expiration of this
Contract whichever comes first.
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ARTICLE 26. EFFECTIVE DATE
The term Effective Date of the Contract (EDC), as used in this
Contract, shall mean the 27th day of January 2000.
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ARTICLE 27. PERMITS AND LICENSES
A. This Contract is subject to all applicable U.S. laws and regulations
relating to the export of Spacecraft, technical data and other
equipment and services being furnished pursuant to, or to be utilized
in connection with, this Contract (hereinafter in this ARTICLE referred
to as "Licensed Items") and to all applicable laws and regulations of
the country or countries to which Spacecraft, technical data, and other
equipment and services are exported or are sought to be exported.
B. Contractor shall use its best efforts to obtain such U.S. Government
approvals and licenses for export of the "Licensed Items." Buyer shall
not be liable for any additional cost associated with Contractor
processing any export license application for Delivery of any
Spacecraft.
C. If, within a reasonable time, the U.S. Government fails to grant a
required approval or license to Contractor to export the "Licensed
Items" or revokes or suspends such an approval or license subsequent to
its grant, or grants such a license or approval subject to conditions,
this Contract shall, nevertheless, remain in full force and effect. In
the event of such U.S. Government action or inaction, deliveries and
acceptance of all items to be furnished by Contractor shall be made at
locations within the continental U.S. as agreed upon between the
Parties. Such U.S. Government action or inaction shall not otherwise
modify in any way the rights and obligations of the Parties under this
Contract except to relieve Contractor of any obligations which cannot
be performed without such an approval or license and to make the price
and Delivery schedule subject to equitable adjustment in accordance
with ARTICLE 19, CHANGES, to reflect the obligations of which
Contractor is relieved.
D. If, within a reasonable time, any foreign country or countries to which
such "Licensed Items" are sought to be exported fails to grant a
required approval or license or suspends or revokes a required approval
or license subsequent to its grant, or grants a license subject to
conditions, or if any foreign country or countries to which such
"Licensed Items" are exported fails to grant an approval or licenses to
utilize the "Licensed Items" for the purpose for which exported, this
Contract shall, nevertheless, remain in full force and effect. In the
event of such foreign country or countries action or inaction,
deliveries and acceptance of all items to be furnished by Contractor
shall be made at locations within the continental U.S. as agreed upon
between the Parties. Such foreign government action or inaction shall
not otherwise modify in any way the rights and obligations of the
Parties under this Contract except to relieve Contractor of any
obligations which cannot be performed without such an approval or
license and to make the price and Delivery schedule subject to
equitable adjustment in accordance with ARTICLE 19, CHANGES, to reflect
the obligations of which Contractor is relieved.
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ARTICLE 28. LIMITATION OF LIABILITY
ABSENT GROSS NEGLIGENCE OR WILLFUL MISCONDUCT, IN NO EVENT SHALL EITHER
PARTY BE LIABLE, WHETHER IN CONTRACT, TORT OR OTHERWISE, FOR SPECIAL,
INCIDENTAL, INDIRECT OR CONSEQUENTIAL DAMAGES, INCLUDING, WITHOUT LIMITATION,
FOR LOST PROFIT OR REVENUES TO THE OTHER PARTY.
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ARTICLE 29. SPACECRAFT TEST AND HANDLING EOUIPMENT
Contractor shall provide Spacecraft unique test and handling equipment
at the Launch Site, during the period between Delivery of the Spacecraft to the
Launch Site, and final acceptance for use in connection with the inspection and
final acceptance of the Spacecraft pursuant to ARTICLE 7. INSPECTION AND FINAL
ACCEPTANCE. Title to such equipment shall remain with Contractor.
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ARTICLE 30. LIQUIDATED DAMAGES
A. Contractor acknowledges that its failure to Deliver the Spacecraft to
the Launch site on or before the applicable Delivery date set forth in
ARTICLE 3. DELIVERY SCHEDULE, may cause serious damage to Buyer, the
amount of which may be difficult or impossible to prove.
1. The amount of Liquidated Damages applicable to the Spacecraft
shall be $XXXXXXX per day for days 1 though 60 and $XXXXXXX
for each day thereafter, but shall not, absent gross
negligence or willful misconduct, exceed a total of $XXXXXXX.
B. Contractor and Buyer agree that such liquidated damages, without
further proof of same, shall be deemed to represent the damages
actually sustained by reason of such delay.
C. The liquidated damages are intended to be compensatory and do not
constitute a penalty.
D. These amounts are firm, fixed and not subject to adjustment due to
changes in economic conditions. The Contractor's total liability for
late Delivery of the Spacecraft shall not exceed the specified
liquidated damages, absent gross negligence or willful misconduct.
E. Any interval of excusable delays as defined in ARTICLE 16. EXCUSABLE
DELAYS, shall be excluded from the period for which liquidated damages
accrue. However, such time period shall continue at the conclusion of
the excluded interval as if no such interruption had occurred.
F. In the event that liquidated damage are owed by Contractor to Buyer,
Contractor shall make payment of same to Buyer ninety (90) days after
Launch of the Spacecraft, and in the event the Spacecraft is placed
into Storage, Contractor shall make payment of same to Buyer ninety
(90) days after it is placed into Storage.
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ARTICLE 31. SPACECRAFT STORAGE
A. If as a result of a delay or failure to launch, through no fault of
Contractor, Buyer requests Contractor to store the Spacecraft within
sixty (60) days of completion of in-plant acceptance testing, the
Contractor shall store, at a site designated by Buyer and such site
shall be subject to the approval of Contractor, or if no site is
designated by Buyer, at a site designated by Contractor, the Spacecraft
delivered under this Contract. Title and risk of loss to the Spacecraft
to be stored shall remain with Contractor at the storage site.
Contractor shall assume full responsibility for any loss or damage to
the Satellite during ground storage. There shall be no charge for
storage or reverification work if the Contractor's failure to perform
is the reason that the Satellite is stored, or if the Satellite is
stored for less than six (6) months. Should the Satellite be stored for
a reason other than Contractor's failure to perform and the Spacecraft
remains in storage beyond the six (6) month period, Buyer shall be
responsible for all storage costs (in excess of six (6) months) and
shall be responsible for paying directly or reimbursing Contractor for
all direct costs actually incurred by Contractor to re-verify system
flight assurance and reverification testing (in excess of six (6)
months). Contractor shall be responsible, except in the event of
negligence or willful misconduct by the Buyer, for all transportation
cost and insurance to cover the risk and expense of loss or damage of
the Spacecraft in transit, (i) from Contractor's facility to storage,
(ii) from Buyer's facility to the storage site, (iii) from the storage
site to the launch site or (iv) if necessary, from the storage site to
the refurbishment site and then to the launch site.
B. Upon the request of Buyer, the Contractor shall provide periodic
testing, necessary equipment, and environmental maintenance suitable
for prevention of deterioration to the Spacecraft during the period of
storage. Unless the Contractor's failure to perform is the reason that
the Satellite is stored, and except for the first six (6) months that
the Satellite is stored, the cost for such service shall be subject to
ARTICLE 19. CHANGES, and shall be negotiated upon the request of such
services by Buyer. Any deterioration to a Spacecraft while in storage
shall be at Contractor's risk and shall be corrected at Contractor's
expense.
C. If at any time after storage begins, Buyer elects to launch the stored
Spacecraft, the Contractor shall inspect, test and refurbish as
necessary such Spacecraft to a launch-ready condition and arrange for
transit to the launch site as directed by Buyer. The cost for such
services shall be subject to ARTICLE 19. CHANGES, and shall be
negotiated in good faith by the Contractor and Buyer at the time such
services are required.
D. In the event the Spacecraft is placed into storage as a result of a
delay or failure to launch, through no fault of Contractor, Contractor
shall be entitled to commencement of the payment of In-Orbit Incentives
associated with the Spacecraft in accordance with the provisions of
ARTICLE 6, as though the IOT review had been completed on the date that
the Spacecraft was placed into storage. Notwithstanding the foregoing,
in the event that Contractor's late Delivery of the Spacecraft is the
sole cause of the Spacecraft having to be placed into storage, the
In-Orbit Incentives shall commence as set forth in ARTICLE 6.
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ARTICLE 32. SURVIVAL
The following ARTICLES shall survive the completion, expiration or
termination of this Contract: ARTICLE 11. RIGHTS IN DATA; ARTICLE 12. PUBLIC
RELEASE OF INFORMATION; ARTICLE 13. INDEMNIFICATION; ARTICLE 14. PATENT
INDEMNITY; ARTICLE 15. INDEMNIFICATION FOR TAXES; ARTICLE 21. WARRANTY; ARTICLE
22. ARBITRATION; ARTICLE 23. APPLICABLE LAW; ARTICLE 25. DISCLOSURE AND USE OF
INFORMATION BY THE PARTIES; ARTICLE 27. PERMITS AND LICENSES; ARTICLE 28.
LIMITATION OF LIABILITY; ARTICLE 34. INTERPARTY WAIVER OF LIABILITY.
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ARTICLE 33. INSURANCE
A. If the Buyer applies for insurance regarding risks relating to the
Launch of the Spacecraft, the Contractor shall furnish Buyer with such
information regarding the Spacecraft as is requested by the insurers
and will cooperate in any insurance reviews.
B. If Buyer obtains such insurance, Buyer agrees to cause its insurer(s)
to waive all rights of subrogation against Contractor and its officer,
agents, servants, subsidiaries and employees, subject to terms and
conditions as are then customarily available regarding such waivers.
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ARTICLE 34. INTERPARTY WAIVER OF LIABILITY
The Parties hereby agree to be bound by the no-fault, no-subrogation
inter-party waiver of liability and related indemnity provisions provided in the
launch services agreement that Buyer enters into with the Launch provider who
actually launches the Satellite, with respect to the Launch and to cause their
respective contractors and subcontractors at any tier (including suppliers of
any kind) that are involved in the performance of this Contract and any other
person having an interest in the Satellite or any transponder thereon (including
customers of Buyer), as required by the launch services agreement and as
specified by Buyer, to accede to such waiver. The Parties shall execute and
deliver any instrument that may be required by the Launch provider to evidence
their agreement to be bound by such waiver. Buyer and Contractor also shall
obtain, from their insurers, and shall cause their respective contractors and
subcontractors at any tier (including suppliers of any kind) that are involved
in the performance of this Contract and any other person having an interest in
any Satellite or any transponder thereon (including customers of Buyer), as
required by the launch services agreement and as specified by Buyer, to obtain
from their insurers, an express waiver of such insurers' rights of subrogation,
subject to terms and conditions as are then customarily available regarding such
waivers, with respect to any and all claims that have been waived pursuant to
this ARTICLE 34.
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ARTICLE 35. COOPERATION REGARDING SPOT BEAMS
Until thirty (30) days after EDC, Contractor shall use reasonable
commercial efforts to cooperate with Space Systems/Loral, Inc. ("SS/L")
regarding the footprints of the spot beams for the Spacecraft and the EchoStar 8
satellite being manufactured by SS/L. In addition, upon Buyer's request,
Contractor shall use reasonable commercial efforts to cooperate with SS/L as
necessary to change the initial footprints of the spot beams for the Spacecraft
and the EchoStar 8 satellite. Finally, Contractor shall use reasonable
commercial efforts to cooperate with SS/L as necessary to ensure that the spot
beams of the Spacecraft and the EchoStar 8 satellite, as deployed, will operate
in accordance with the final approved beam footprints.
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ARTICLE 36. DRY MASS PENALTY
If, at the time of final acceptance pursuant to ARTICLE 7, the mass of
the Spacecraft without propellant or pressurant (the "Dry Mass") exceeds 1868
Kilograms (Kg), Contractor shall pay to Buyer an amount calculated as XXXXXXX
Dollars ($XXXXXXX) per each Kg by which such Dry Mass exceeds 1868 Kg (the "Dry
Mass Penalty") and, if Buyer elects to launch the Satellite using a launch
vehicle other than an Atlas IIIB launch vehicle, then, in addition to paying the
Dry Mass Penalty, Contractor will perform all necessary integration activities
in connection with the new launch vehicle on an expedited basis, at no
additional cost or expense to Buyer (the "Integration Penalty").
Notwithstanding the prior paragraph, if the Dry Mass exceeds 1868 Kg,
but the orbital life of the Spacecraft is still expected to be at least 14
years, with industry standard margins, after completion of the IOT review,
assuming an Atlas IIIB launch vehicle having a nominal supersynchronous MRS
mission, then Contractor shall not be required to pay a Dry Mass Penalty or be
subject to the Integration Penalty.
Contractor hereby represents and warrants to Buyer that, to the best of
its knowledge and belief on the date hereof, after the exercise of reasonable
diligence, if the Satellite has a Dry Mass of 1868 or less Kilograms (Kg), at
the time of final acceptance pursuant to ARTICLE 7, and is launched using an
Atlas IIIB launch vehicle, with a nominal supersynchronous MRS mission, the
Satellite will have an orbital life of at least 14 years after completion of the
IOT review, with industry standard margins.
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ARTICLE 37. KEY PERSONNEL
The Contractor will assign properly qualified and experienced personnel
to the program contemplated under the Contract. Personnel assigned to the
following positions shall be considered "Key Personnel":
a) the Contractor's Program Manager
b) the Contractor's Contracts Manager
c) the Contractor's PA Manager
d) the Contractor's Vehicle Systems Engineering Manager
e) the Contractor's Vehicle Manager
The Buyer shall have the right to approve the Contractor's Program
Manager which approval shall not be unreasonably withheld or delayed. Key
Personnel shall not be assigned to other duties without the Contractor giving
prior written notice to and consulting with the Buyer. The Contractor shall
provide a chart to the Buyer of the program Key Personnel and shall keep such
chart current.
Additionally:
1) Dave Bair shall continue to be the primary interface with the
Buyer in the capacity of the EchoStar Account Executive and
Technical Expert and have a key decision making role within
the EchoStar VII program when an issue remains unresolved.
2) Surjit Dhillon shall be assigned to the program on a full time
basis, directing the design and implementation of the payload,
have the key decision-making role on payload-related issues,
and shall be the primary interface with the Buyer on all
payload-related technical and performance issues. Mr. Dhillon
must be consulted, and sign off, on the following
payload-related deliverables: (a) all portions of PDRs and
CDRs relating to payload; (b) payload end item data package;
(c) payload performance data; and (d) payload IOT reports.
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<PAGE> 54
IN WITNESS WHEREOF, the parties hereto have executed this Contract.
ECHOSTAR ORBITAL CORPORATION LOCKHEED MARTIN CORPORATION
By: By:
------------------------------- ----------------------------
David K. Moskowitz Peter H. Wiggett
Senior Vice President and Director of Contracts
General Counsel
EchoStar Communications Corporation hereby guarantees all of the obligations and
duties of EchoStar Orbital Corporation under the Contract to which this
guarantee is attached.
ECHOSTAR COMMUNICATIONS
CORPORATION
By:
-------------------------------
David K. Moskowitz
Senior Vice President and
General Counsel
<PAGE> 1
EXHIBIT 10.2
Certain portions of this document have been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
CONTRACT BETWEEN
ECHOSTAR ORBITAL CORPORATION
AND
SPACE SYSTEMS/LORAL, INC.
ECHOSTAR 8 SATELLITE PROGRAM
(110(DEGREE) W.L.)
This document contains data and information proprietary to Space Systems/Loral,
Inc. This data shall not be disclosed, disseminated or reproduced, in whole or
in part, without the express prior written consent of Space Systems/Loral except
as otherwise provided in this Contract.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE.................................................................................................3
RECITALS.................................................................................................4
ARTICLE 1 - DEFINITIONS..................................................................................5
ARTICLE 2 - SCOPE OF WORK................................................................................9
ARTICLE 3 - DELIVERABLE ITEMS AND DELIVERY SCHEDULE.....................................................10
ARTICLE 4 - PRICE.......................................................................................11
ARTICLE 5 - PAYMENTS....................................................................................12
ARTICLE 6 - PURCHASER-FURNISHED ITEMS...................................................................16
ARTICLE 7 - COMPLIANCE WITH U.S. EXPORT LAWS AND DIRECTIVES.............................................18
ARTICLE 8 - ACCESS TO WORK IN PROGRESS..................................................................19
ARTICLE 9 - SATELLITE PRE-SHIPMENT REVIEW (SPSR)........................................................22
ARTICLE 10 - SATELLITE ACCEPTANCE.......................................................................25
ARTICLE 11 - ACCEPTANCE INSPECTION FOR DELIVERABLE ITEMS OTHER THAN SATELLITES..........................26
ARTICLE 12 - DELIVERY, TITLE AND RISK OF LOSS...........................................................29
ARTICLE 13 - XXX........................................................................................29
ARTICLE 14 - INTENTIONALLY DELETED......................................................................29
ARTICLE 15 - WARRANTY ..................................................................................30
ARTICLE 16 - CHANGES ...................................................................................34
ARTICLE 17 - FORCE MAJEURE..............................................................................35
ARTICLE 18 - PURCHASER DELAY OF WORK....................................................................36
ARTICLE 19 - PATENT INDEMNITY...........................................................................37
ARTICLE 20 - INDEMNITY FOR BODILY INJURY AND PROPERTY DAMAGE............................................39
ARTICLE 21 - TERMINATION FOR CONVENIENCE................................................................41
ARTICLE 22 - XXX........................................................................................43
ARTICLE 22A - XXX ......................................................................................43
ARTICLE 23 - DEFAULT ...................................................................................44
</TABLE>
<PAGE> 3
<TABLE>
<S> <C>
ARTICLE 24 - INTENTIONALLY DELETED......................................................................48
ARTICLE 25 - ARBITRATION................................................................................48
ARTICLE 26 - INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH...............................................50
ARTICLE 27 - RESERVED .................................................................................51
ARTICLE 28 - RESERVED .................................................................................51
ARTICLE 29 - XXX........................................................................................51
ARTICLE 30 - RESERVED ..................................................................................51
ARTICLE 31 - RESERVED ..................................................................................51
ARTICLE 32 - RESERVED ..................................................................................51
ARTICLE 33 - GROUND STORAGE.............................................................................52
ARTICLE 34 - LIMITATION OF LIABILITY....................................................................54
ARTICLE 35 - DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION.........................................55
ARTICLE 36 - RIGHTS IN DATA.............................................................................58
ARTICLE 37 - PUBLIC RELEASE OF INFORMATION..............................................................59
ARTICLE 38 - NOTICES ...................................................................................60
ARTICLE 39 - RISK MANAGEMENT............................................................................62
ARTICLE 40 - ORDER OF PRECEDENCE........................................................................63
ARTICLE 41 - GENERAL ...................................................................................64
ARTICLE 42 - ATTACHMENTS................................................................................67
ARTICLE 43 - TERMINATION RIGHT..........................................................................68
ARTICLE 44 - COOPERATION REGARDING SPOT BEAMS...........................................................69
ARTICLE 45 - MASS PENALTY...............................................................................70
ARTICLE 46 - KEY PERSONNEL .............................................................................70
</TABLE>
<PAGE> 4
PREAMBLE
This Contract is entered into as of February 4, 2000 (the "Effective Date of
Contract" or "EDC") between Echostar Orbital Corporation, organized and existing
under the laws of the State of Colorado having an office and place of business
at 5701 South Santa Fe, Littleton, Colorado 80120 (hereinafter referred to as
"Purchaser") and Space Systems/Loral, Inc., a corporation organized and existing
under the laws of the State of Delaware, having an office and place of business
at 3825 Fabian Way, Palo Alto, California 94303 (hereinafter referred to as
"Contractor").
3
<PAGE> 5
RECITALS
WHEREAS, Purchaser desires to procure one (1) communications satellite, known as
EchoStar 8, to be delivered to the Launch Site, all required ground equipment
and support and training services, to the extent and subject to the terms and
conditions set forth herein, and
WHEREAS, Contractor is willing to furnish such Satellite, ground equipment and
support and training services, to the extent and subject to the terms and
conditions set forth herein, in consideration of the price and other valid
consideration.
NOW, THEREFORE, the Parties hereto agree as follows:
4
<PAGE> 6
ARTICLE 1 - DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the following
meanings:
1.1 "ACCEPTANCE" (i) with respect to a Satellite shall be as provided for
in Article 10, and (ii) with respect to any Deliverable Item other than
a Satellite shall be as provided for in Article 11.
1.2 "ADDITIONAL SATELLITE" has the meaning set forth in Article 29.
1.3 "CONTRACT" means the articles of this executed Contract, its Exhibits
and its Attachment(s), as may be amended from time to time in
accordance with the terms hereof.
1.4 "CONTRACTOR" has the meaning set forth in the preamble and any
successor or assignee permitted hereunder.
1.5 "DELIVERABLE DATA" means the data and documentation required to be
delivered to Purchaser as specified in the Statement of Work.
1.6 "DELIVERABLE ITEM" means any of the items listed in Article 3.1, and
any Additional Satellite or other items ordered by Purchaser pursuant
to Article 29, and, collectively, the "DELIVERABLE ITEMS".
1.7 "DELIVERY" (i) with respect to a Satellite shall be as provided for in
Article 12.1, and (ii) with respect to any Deliverable Item other than
a Satellite shall be as provided for in Article 12.2.
1.8 "EFFECTIVE DATE OF CONTRACT" or "EDC" means the effective date of this
Contract as specified in the preamble.
1.9 "FCC" means the Federal Communications Commission or any successor
agency or governmental authority.
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<PAGE> 7
1.10 "FIRM FIXED PRICE" has the meaning set forth in Article 4.1.
1.11 "FORCE MAJEURE" has the meaning set forth in Article 17.
1.12 "GROSS NEGLIGENCE" means reckless disregard for the rights of others
which very closely approaches intentional wrongdoing or other actions
(or failures to act) which very closely approach intentional
wrongdoing.
1.13 "IN-ORBIT TESTING" or "IOT" means the testing of the Satellite on-orbit
in accordance with the Program Test Plan.
1.14 "INTELLECTUAL PROPERTY CLAIM" has the meaning set forth in Article 19.
1.15 "INTENTIONAL IGNITION" means, with respect to the Satellite, the
official time designated by the Launch Agency during the launch
sequence when the initial motors of the Launch Vehicle are ignited for
the purpose of Launch following a planned countdown.
1.16 "LAUNCH" means, with respect to the Satellite, Intentional Ignition
followed by Lift-Off.
1.17 "LAUNCH AGENCY" means the provider responsible for conducting the
Launch Services for the Satellite.
1.18 "LAUNCH SERVICES" means those services provided by the Launch Agency
pursuant to the Launch Services Agreement.
1.19 "LAUNCH SERVICES AGREEMENT" or "LSA" means the contract between
Purchaser and the Launch Agency which provides for Launch Services for
the Satellite, as such contract may be amended from time to time in
accordance with its terms.
1.20 "LAUNCH SITE" means the location that will be used by the Launch Agency
for purposes of launching the Satellite.
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<PAGE> 8
1.21 "LAUNCH SUPPORT" or "LAUNCH SUPPORT SERVICES" means those services
specified in the Statement of Work to be provided by Contractor in
support of Launch.
1.22 "LAUNCH VEHICLE" means the launch vehicle selected by Purchaser and
used for Launch of the Satellite, which is baselined to be an Atlas
launch vehicle, unless changed under Article 29.4.
1.23 "LIBOR" means the rate of interest per annum, at any relevant time, at
which thirty (30) day U.S. dollar deposits are offered at such time in
the London interbank market.
1.24 "LIFT-OFF" means, with respect to the Satellite, physical separation of
the Launch Vehicle from the ground support equipment following
Intentional Ignition due to the Launch Vehicle rising under its own
power for the purpose of launching the Satellite.
1.25 "MISSION OPERATIONS SUPPORT SERVICES" means the orbit-raising, IOT and
related services specified in the Statement of Work to be performed by
Contractor for a Satellite.
1.26 "NSP" means not separately priced.
1.27 "PARTY" or "PARTIES" means Purchaser, Contractor or both, as the
context requires.
1.28 "PAYMENT PLAN" means the payment plan for the applicable Deliverable
Item, attached as Attachment A.
1.29 "PERFORMANCE SPECIFICATION" means the Satellite performance
specification attached as Exhibit B, as such Exhibit may be amended
from time to time in accordance with the terms of this Contract.
1.30 "PMO" means the Purchaser's program management office.
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<PAGE> 9
1.31 "PRODUCT ASSURANCE PROGRAM PLAN" means the product assurance program
plan attached as Exhibit C, as such Exhibit may be amended from time to
time in accordance with the terms of this Contract.
1.32 "PROGRAM TEST PLAN" means the Satellite program test plan attached as
Exhibit D, as such Exhibit may be amended from time to time in
accordance with the terms of this Contract.
1.33 "PROPRIETARY INFORMATION" has the meaning set forth in Article 35.
1.34 "PURCHASER" has the meaning set forth in the preamble and any successor
or assignee permitted hereunder.
1.35 "SATELLITE" means the communications satellite that is to be
manufactured by Contractor pursuant to this Contract.
1.36 "SATELLITE ANOMALY" means, with respect to any Satellite, any
post-Launch occurrence that has or could have an impact on the
Satellite's health or performance of such Satellite.
1.37 "SATELLITE PRE-SHIPMENT REVIEW" OR "SPSR" has the meaning set forth in
Article 9.
1.38 "SCF" means satellite control facility.
1.39 "STATEMENT OF WORK" or "SOW" means the statement of work attached as
Exhibit A, as such Exhibit may be amended from time to time in
accordance with the terms of this Contract.
1.40 "TT&C" means telemetry, tracking and control.
8
<PAGE> 10
ARTICLE 2 - SCOPE OF WORK
2.1 Provision of Services and Materials
Contractor shall provide the necessary personnel, material, services,
and facilities to: design, manufacture, test, and deliver to the
location set forth in Article 3.1 (or another location agreed upon
pursuant to Article 29), one (1) Satellite, together with all other
Deliverable Items referred to in Article 3.1, in accordance with the
following Exhibits, which are attached hereto and made a part hereof:
2.1.1 Exhibit A, Statement of Work, dated [TBD] (Document Reference No.
[TBD]);
2.1.2 Exhibit B, Satellite Performance Specification, dated [TBD] (Document
Reference No. [TBD]);
2.1.3 Exhibit C, Product Assurance Program Plan, dated [TBD] (Document
Reference No. [TBD]);
2.1.4 Exhibit D, Satellite Program Test Plan, dated [TBD] (Doc No. [TBD]).
9
<PAGE> 11
ARTICLE 3 - DELIVERABLE ITEMS AND DELIVERY SCHEDULE
3.1 Deliverable Items
Subject to the other terms and conditions of this Contract, the items
to be delivered under this Contract are specified in the table below
and the corresponding delivery schedules and locations are as follows:
<TABLE>
<CAPTION>
ITEM DESCRIPTION DELIVERY SCHEDULE DELIVERY LOCATION
---- ----------- ----------------- -----------------
<S> <C> <C> <C>
1. Satellite (EchoStar 8) December 20, 2001 To the Launch Site.
2. Deliverable Data Per SOW, Exhibit A PMO
3. Support and Training Per SOW, Exhibit A Contractor's facilities and
Purchaser's SCF
4. Ground Equipment Per SOW, Exhibit A Purchaser's SCF
</TABLE>
Contractor shall, at its cost, use its reasonable best efforts to
obtain all U.S. and foreign Government approvals necessary to export
and import the Satellite, all Deliverables required hereunder, and the
individual components of the Satellite and such Deliverables.
10
<PAGE> 12
ARTICLE 4 - PRICE
4.1 Firm Fixed Price
The price to be paid by Purchaser to Contractor for the Deliverable
Items 1 through 4 set forth in Article 3.1 within the scope of work
detailed in the Statement of Work, shall be a firm fixed price of $XXX
(the "Firm Fixed Price"). The prices for those Deliverable Items
subject to an option under this Contract, if any, are described in the
particular Articles that set forth those options. The itemization of
the Firm Fixed Price is as follows:
<TABLE>
<CAPTION>
Item Description Amount
---------------- ------
<S> <C>
Satellite (EchoStar 8) $XXX
</TABLE>
The item price for the Satellite includes all design, manufacturing,
tests, In Orbit Incentives, Deliverable Data, training, Launch Support
Services, Mission Operations Support Services, ground equipment and
shipment and transportation, all in accordance with the terms and
conditions of this Contract, as specified herein. The item price also
includes, and Contractor shall indemnify, defend and hold Purchaser,
its affiliates, directors, officers, employees, shareholders and agents
harmless from and against, all applicable taxes, duties and similar
liabilities imposed by any federal, state or local United States
governmental entity in connection with this Contract, except any tax on
the sale to Purchaser resulting from Purchaser's election to exercise
the Ground Storage option in Article 33.
11
<PAGE> 13
ARTICLE 5 - PAYMENTS
5.1 Payment Plan
Absent a bona fide dispute, payments by Purchaser to Contractor of the
Firm Fixed Price set forth in Article 4 and of the amounts for options,
if any, exercised by Purchaser pursuant to this Contract, shall be in
accordance with the Payment Plan applicable thereto for the Satellite.
5.2 Payment Conditions
5.2.1 Payments. Absent a bona fide dispute, all payments due from
Purchaser shall be paid no later than the date specified
therefor as set forth in the Payment Plan, provided that: (i)
Contractor submits to Purchaser an invoice with respect to
each such payment no later than thirty (30) days prior to such
due date; and (ii) Contractor completes the applicable
milestone set forth in Attachment A no later than five (5)
business days prior to such due date. Notwithstanding the
foregoing, in the event that Contractor does not deliver an
invoice to Purchaser at least thirty (30) days prior to such
due date and/or does not achieve the relevant milestone, or
provide a work-around that does not affect schedule and is
otherwise acceptable to Purchaser, at least five (5) business
days prior to such due date, Purchaser may suspend all
payments until such time as the relevant invoice is received
and milestone is completed. Within thirty (30) days following
Purchaser's receipt of the relevant invoice or five (5)
business days following Contractor's completion of the
relevant milestone, whichever occurs later, Purchaser shall
pay Contractor for all payments that were required to have
been made but were not as a result of the suspension.
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<PAGE> 14
5.2.2 Milestones. Notwithstanding the milestones set forth in
Attachment A, if it becomes reasonably clear that problems
with deliverables are reasonably likely to cause schedule
delays, then all payments may be suspended, at Purchaser's
option, and the date for payment of each subsequent payment
delayed, by an amount of time equal to the difference between
the originally scheduled delivery date for the Satellite set
forth in Article 3 and the revised forecast delivery date. In
the event that Contractor subsequently recovers all or a
portion of the originally scheduled delivery date for the
Satellite, payments will again be revised to reflect that
recovery. Further, if, following completion of a milestone, a
problem arises which requires rework of elements of the
milestone, then payments may be suspended, at Buyer's option,
until the milestone is again complete.
5.2.3 Non-Warranty Payments. Absent a bona fide dispute, all amounts
payable to Contractor with respect to non-warranty work
performed pursuant to Article 15.3 shall be paid no later than
thirty (30) days after submission of an invoice by Contractor
certifying that such non-warranty work has been completed.
5.2.4 Obligation to Pay. The failure of Contractor to deliver any
invoice required hereunder shall not affect Purchaser's
obligation hereunder to make any payments to Contractor. If
Contractor shall not have delivered any invoice required
hereunder within the time specified therefor, the relevant
payment due from Purchaser shall be payable thirty (30) days
after receipt of such invoice.
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<PAGE> 15
5.3 Late Payment
In the event that any payment to Contractor is not made when due
hereunder, without prejudice to Contractor's other rights and remedies
under this Contract, at law or in equity, Purchaser shall pay
Contractor interest at the rate of LIBOR + XXX until such time as
payment is made. If such payment is not made by the date thirty (30)
days after the date due hereunder, without prejudice to Contractor's
other rights and remedies under this Contract, at law or in equity,
Contractor may elect to cease performance of its obligations under this
Contract, without prejudice or penalty. In such case, if Contractor
subsequently resumes performance in lieu of termination pursuant to
Article 23.6, the schedule, price and other affected provisions of this
Contract shall be modified to compensate Contractor for its added costs
(and otherwise account for the impacts on Contractor) associated with
such work stoppage.
5.4 Invoices
Invoices required to be delivered by Contractor hereunder shall be
submitted to Purchaser (original plus one (1) copy) at the following
address:
EchoStar Orbital Corporation
5701 South Santa Fe
Littleton, CO 80120
ATTN.: Rohan Zaveri
(with copies to David Moskowitz and Charlie Ergen)
or to such other address as Purchaser may specify in writing to
Contractor.
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<PAGE> 16
5.5 Payment Bank
All payments made to Contractor hereunder shall be in U.S. currency and
shall be made by electronic funds transfer to the following account:
BANK OF AMERICA
SPACE SYSTEMS/LORAL, INC.
ACCOUNT NO. 75-69165
CHICAGO, ILLINOIS
ABA #071-000-039
or by check to:
Space Systems/Loral
3825 Fabian Way
Palo Alto, CA 94303
Attn: Ronald Haley
or to such other account or address as Contractor may specify in
writing to Purchaser.
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<PAGE> 17
ARTICLE 6 - PURCHASER-FURNISHED ITEMS
6.1 Purchaser-Furnished Support
To enable Contractor to perform Launch Support and Mission Operations
Support Services, Purchaser shall timely make available to Contractor
the Purchaser-furnished equipment, facilities and services described in
the Statement of Work. Such equipment, facilities and services shall be
in good working condition and adequate for the required purpose and
shall be made available free of charge for Contractor's use (including
Acceptance inspection pursuant to Article 11) during the period
commencing sixty (60) days prior to such Launch and continuing through
completion of the IOT review. Purchaser and Contractor will conduct an
interface meeting approximately one hundred eighty (180) days prior to
such Launch to confirm the availability and adequacy of
Purchaser-furnished equipment, facilities and services.
6.2 Communications Authorizations
Purchaser shall be responsible, at its cost and expense, for preparing,
coordinating and filing all applications for licenses with the FCC, if
required to do so, for the launch and operation of the Satellite.
Contractor shall timely provide Purchaser with all reasonable
assistance, at no additional cost to Purchaser, requested by Purchaser
in connection with Purchaser's performance of the above-specified
tasks, and in connection with the filing of any technical filings
required to be made by Purchaser with the FCC.
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<PAGE> 18
6.3 Radio Frequency Coordination
Purchaser shall be responsible for the timely preparation and
submission of all filings required by the International
Telecommunication Union (or any successor agency thereto) regarding
radio frequency and orbital position coordination. Such filings shall
be made in accordance with the Radio Regulations of the International
Telecommunication Union (or any successor agency). Contractor shall
timely provide Purchaser with all reasonable assistance, at no
additional cost to Purchaser, requested by Purchaser in connection with
Purchaser's performance of the above-specified tasks.
6.4 Satellite Performance Data
In the event of a Satellite Anomaly that occurs during the life of a
Satellite, Purchaser shall timely provide Contractor with or give
Contractor access to any data Contractor may reasonably require to
investigate or correct (if Contractor is able to do so) such Satellite
Anomaly or make or settle any insurance claim relating to such
Satellite Anomaly.
6.5 Late Delivery of Purchaser-Furnished Items or Services
The late delivery of Purchaser-furnished items, individually or
combined, shall be considered an event beyond the reasonable control of
Contractor, and Contractor shall be entitled to a reasonable adjustment
in price, schedule, and other affected terms for such late delivery.
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ARTICLE 7 - COMPLIANCE WITH U.S. EXPORT LAWS AND DIRECTIVES
7.1 Technical Information, Deliverable Data and Technical Services
7.1.1 Any obligation of either Party hereunder to provide technical
information, Deliverable Data or technical services to the
other Party or its representatives shall be subject to
applicable U.S. Government export control and security laws,
regulations, policies and license conditions. The Parties
shall work cooperatively and in good faith to implement this
Contract consistent with such laws, regulations, policies and
license conditions.
7.1.2 If and to the extent required by U.S. law, the Parties and/or
their representatives shall enter into U.S.
Government-approved agreement(s), separate from this Contract,
governing the Party's provision of technical information,
Deliverable Data or technical services in connection with this
Contract.
7.2 No Retransfer
The Parties shall not transfer to any "foreign person", as defined in
the International Traffic in Arms Regulations (22 C.F.R. Section 120.1)
technical information, Deliverable Data or technical services furnished
hereunder, except as expressly authorized by the U.S. Government in
accordance with U.S. export control laws. THE PARTIES UNDERSTAND AND
WARRANT THAT THEY SHALL NOT RE-EXPORT, TRANSFER OR DIVERT ANY ITEM
EXPORTED UNDER OR IN CONNECTION WITH THIS CONTRACT TO ANY "FOREIGN
PERSON" WITH A NATIONALITY OTHER THAN CONTRACTOR'S OR PURCHASER'S,
RESPECTIVELY, WITHOUT THE PRIOR WRITTEN APPROVAL OF THE U.S.
GOVERNMENT.
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ARTICLE 8 - ACCESS TO WORK IN PROGRESS
8.1 Work in Progress at Contractor's Plant
Subject to Article 7 and Article 8.4 and to compliance with
Contractor's safety and security regulations, Purchaser's employees
shall be allowed access to work being performed at Contractor's
facility for the Satellite and other Deliverable Items, for the purpose
of observing the progress of such work and otherwise confirming
Contractor's compliance with this Contract.
8.2 Work in Progress at Subcontractors' Plant
Subject to Article 7 and Article 8.4, to the extent permitted by
Contractor's subcontractors supplying services or goods in connection
with the Satellite and subject to each such subcontractor's safety and
security regulations, Contractor shall allow Purchaser's employees
access to work being performed with respect to the Satellite in each
such subcontractor's plants for the purpose of observing the progress
of such work and otherwise confirming Contractor's compliance with this
Contract, subject to the right of Contractor to accompany Purchaser on
any such visit to a subcontractor's plant. Contractor will use
reasonable efforts to obtain permission for such access to
subcontractor's facilities.
8.3 On-Site Facilities for Purchaser's Personnel
Subject to Article 7 and Article 8.4, for the purpose of monitoring the
progress of the work to be performed by Contractor hereunder and
otherwise confirming Contractor's compliance with this Contract,
Contractor shall provide private office facilities at or proximate to
Contractor's plant (which private office facilities shall in all cases
at least be co-located with Contractor's program management office) for
two (2) resident Purchaser personnel (or Purchaser's duly appointed
consultants and agents, subject to the prior approval of Contractor,
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<PAGE> 21
which approval shall not be unreasonably withheld or delayed) through
Acceptance of the last Satellite ordered hereunder. The office
facilities to be provided shall include a reasonable amount of private
office space, office furniture, local and reasonable long distance
telephone service, access to copy machines and access to facsimile
machines, to the extent necessary to enable Purchaser personnel to
monitor the progress of work and otherwise confirm Contractor's
compliance with this Contract.
8.4 Competition/Foreign Persons as Purchaser Representatives
Purchaser's representatives, consultants and agents shall not be in
direct competition with Contractor, meaning they shall not currently be
employed by companies or entities that are in the business of
manufacturing communication satellites. Purchaser shall notify
Contractor in writing of the name, title or function, business
relationship, employer and such other information as may be reasonably
requested by Contractor, with respect to each of its intended
representatives, consultants and agents, and cause each such
representative, consultant and agent to execute a confidentiality
agreement directly with Contractor in form and substance reasonably
satisfactory to Contractor and containing terms substantially the same
as those set forth in Article 35. Contractor may deny access to
Contractor provided office facilities to any representative, consultant
or agent of Purchaser upon Contractor's reasonable determination that
such consultant or agent is, by reason of its business or affiliations,
in direct competition with Contractor.
Contractor shall apply for and, once issued, maintain all U.S.
Government export licenses and approvals needed for Purchaser's
personnel, representatives, agents and consultants who are citizens of
Purchaser's country (if other than the U.S.), to access Contractor
facilities or technical data in connection with the performance of this
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Contract. Purchaser shall cooperate with Contractor and provide the
support necessary for Contractor to apply for and maintain such export
licenses and approvals, and shall promptly notify Contractor of any
occurrence or change in circumstances of which it becomes aware that is
relevant to or affects such export license and approvals. IN NO EVENT
SHALL CONTRACTOR BE OBLIGATED UNDER THIS CONTRACT TO PROVIDE ACCESS TO
CONTRACTOR FACILITIES, TO TRANSFER ANY TECHNICAL INFORMATION OR
DELIVERABLE DATA OR TO PROVIDE ANY TECHNICAL SERVICES, TO ANY PERSON
EXCEPT IN COMPLIANCE WITH APPLICABLE U.S. EXPORT CONTROL LAWS,
REGULATIONS, POLICIES AND LICENSE CONDITIONS, AS CONSTRUED BY
CONTRACTOR.
8.5 Interference with Operations
Purchaser shall exercise its rights under this Article 8 in a manner
that does not unreasonably interfere with Contractor's or its
subcontractors' normal business operations or Contractor's performance
of its obligations under this Contract or any agreement between
Contractor and its subcontractors.
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ARTICLE 9 - SATELLITE PRE-SHIPMENT REVIEW (SPSR)
9.1 Purchaser to Review
Purchaser shall conduct a review of each Satellite prior to shipment by
Contractor to the Launch Site in accordance with the terms of this
Article 9 and the Statement of Work (each a "Satellite Pre-Shipment
Review" or "SPSR").
9.2 Time, Place and Notice of SPSR; Failure to Conduct
Each SPSR shall take place at Contractor's facility. Contractor shall
notify Purchaser in writing at least thirty (30) days prior to the date
that each Satellite shall be available for SPSR, which shall be the
scheduled date for commencement of such SPSR. If Purchaser cannot
commence such SPSR on such scheduled date, Contractor shall make
reasonable efforts to accommodate Purchaser's scheduling requirements.
9.3 Conduct and Purpose of SPSR
Each SPSR shall be conducted in accordance with Section 2.2.3 of the
Statement of Work. The purpose of each SPSR shall be to review test
data and analyses for the subject Satellite to determine whether such
Satellite meets applicable Performance Specification requirements and
is therefore ready for shipment to the Launch Site.
9.4 Waivers or Pending Waivers
At the earliest possible time, but at least ten (10) days before the
commencement of the SPSR for the Satellite or the Acceptance inspection
for any Deliverable Item pursuant to Article 11, Contractor shall
submit to Purchaser any request for a waiver of, or deviation from,
provisions(s) of the Performance Specification applicable to the
Satellite or Deliverable Item. Each such waiver or deviation approved
by Purchaser shall be deemed an amendment to the Performance
Specification permitting such waiver thereof, or deviation therefrom,
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effective on or after the date of such approval for the Satellite or
Deliverable Item. Purchaser shall, in keeping with customary industry
practice, consider each waiver or deviation request in good faith and
shall not unreasonably withhold or delay its consent to any such
request.
9.5 Purchaser's Inspection Agents
Purchaser may, subject to prior written notice to Contractor, cause any
agent designated by Purchaser to observe the SPSR pursuant to this
Article 9; provided, however, that the provisions of Article 7 and
Article 8.4 shall apply to any such agent.
9.6 SPSR Results
Within a reasonable time after completion of the SPSR for the
Satellite, Purchaser shall notify Contractor in writing of the results
of the SPSR pursuant to this Article 9 with respect to the Satellite.
Provided Purchaser is in compliance with its contractual obligations
hereunder, such Satellite shall thereupon be prepared and shipped to
the Launch Site for Launch. In the event that such SPSR discloses any
non-conformance of the Satellite to the requirements of the Performance
Specification not the subject of any waivers or deviations approved by
Purchaser pursuant to Article 9.4, Purchaser's notice shall state each
such non-conformance (with reference to the applicable requirement of
the Performance Specification deemed not met), and Contractor shall
correct or repair each such non-conformance and resubmit such Satellite
for SPSR in accordance with this Article 9 as to each corrected or
repaired element.
9.7 Inspection Costs Borne by Purchaser
All costs and expenses incurred by Purchaser and its agents in the
performance of this Article 9, including travel and living expenses,
shall be borne solely by Purchaser.
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9.8 Correction of Deficiencies after SPSR
If at any time following the SPSR for a Satellite, and prior to Launch,
such Satellite fails to meet the Performance Specification, as may be
modified as of such time pursuant to Article 9.4, Contractor shall
promptly correct such deficiencies at its own cost and expense.
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ARTICLE 10 - SATELLITE ACCEPTANCE
10.1 Satellite Acceptance
Acceptance of the Satellite by Purchaser shall occur automatically upon
Launch of the Launch Vehicle for the Satellite.
10.2 In-Orbit Test (IOT) Services
Thirty (30) days prior to Launch of the Satellite, Contractor shall
notify Purchaser of the IOT schedule. Purchaser may observe IOT at
Purchaser's or Contractor's location, at Purchaser's election, subject
to applicable U.S. Government or Contractor security or export
restrictions.
When, in the reasonable assessment of Contractor, the IOT review has
been completed for a Satellite, Contractor shall submit the IOT results
to Purchaser.
Within a reasonable time after Contractor provides the IOT results and
certification to Purchaser, Contractor and Purchaser shall hold a
Satellite review as defined in the SOW.
Contractor may elect to conduct the IOT eclipse test set forth in the
Program Test Plan during the eclipse season following completion of
IOT. The results of the later eclipse test will be provided to
Purchaser for Satellite performance characterization and insurance
purposes only.
Contractor agrees to fly the Satellite until the earlier to occur of:
(i) all material anomalies being resolved; (ii) insurance for all
material anomalies being paid to Purchaser; or (iii) Purchaser
informing Contractor that it desires to use the Satellite for
commercial purposes (provided that, in such instance, Contractor shall
continue to fly the Satellite until such time as all material anomalies
are fully understood by both parties and Contractor has properly
trained Purchaser how to fly the Satellite in such anomalous
condition).
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ARTICLE 11 - ACCEPTANCE INSPECTION FOR DELIVERABLE ITEMS
OTHER THAN SATELLITES
11.1 Inspection of Deliverable Items of Hardware Other Than Satellites
With respect to each Deliverable Item of hardware other than
Satellites, Purchaser shall perform Acceptance inspection within ten
(10) business days after Contractor has notified Purchaser that such
Deliverable Item has arrived at the location designated for delivery
thereof in Article 3.1. Such Acceptance inspection shall be conducted
in accordance with the procedures described in the Statement of Work.
The purpose of the Acceptance inspection shall be to determine whether
each such Deliverable Item meets applicable Performance Specification
requirements as of the date of such delivery, as such requirements may
have been modified pursuant to Article 11.3.
11.2 Purchaser's Inspection Agents
Purchaser may, upon giving prior written notice to Contractor, cause
any agent designated by Purchaser to conduct the Acceptance inspection
pursuant to this Article 11 in whole or in part; provided, however,
that the provisions of Article 7 and Article 8.4 shall apply to any
such agent and such agent shall comply with Contractor's safety and
security regulations.
11.3 Pending Waivers
Waivers of or deviations from the Performance Specification applicable
to any Deliverable Item subject to Acceptance inspection pursuant to
this Article 11 shall be addressed as set forth in Article 9.4.
11.4 Acceptance Inspection Results
Within a reasonable time after completion of Acceptance inspection
pursuant to this Article 11 for any Deliverable Item, Purchaser shall
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notify Contractor in writing of the results of such Acceptance
inspection. In the event that such Acceptance inspection demonstrates
conformity of such Deliverable Item to the applicable requirements of
the Performance Specification, such Deliverable Item shall be deemed
accepted by the Purchaser for all purposes hereunder ("Acceptance" with
respect to each such Deliverable Item other than a Satellite), and
Purchaser's notice shall so state. In the event that such Acceptance
inspection discloses any non-conformance of such Deliverable Item to
the applicable requirements of the Performance Specification,
Purchaser's notice shall detail each such non-conformance (with
reference to the applicable requirement of the Performance
Specification deemed not met), and Contractor shall correct or repair
such non-conformance and resubmit such Deliverable Item for Acceptance
inspection in accordance with this Article 11 as to each such corrected
or repaired element.
11.5 Inspection Costs Borne by Purchaser
All costs and expenses incurred by Purchaser or its agents in the
performance of this Article 11, including travel and living expenses,
shall be borne solely by Purchaser.
11.6 Warranty Obligations
In no event shall Contractor be released from any of its warranty
obligations applicable to any Deliverable Item other than the Satellite
as set forth in Article 15 as a result of such Deliverable Item having
been Accepted as set forth in this Article 11.
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11.7 Deliverable Data
Purchaser shall, within ten (10) business days of delivery by
Contractor to the location designated in Article 3.1 of Deliverable
Data requiring Purchaser approval pursuant to the Statement of Work,
notify Contractor in writing that such Deliverable Data has been
accepted in accordance with the Statement of Work ("Acceptance" with
respect to each such item of Deliverable Data), or advise Contractor in
writing that such Deliverable Data does not comply with the applicable
requirements of the Statement of Work, identifying each particular of
such non-compliance. Contractor shall promptly correct any
non-compliant aspect of such Deliverable Data described in such Notice
from Purchaser, and re-submit it to Purchaser for inspection pursuant
to this Article 11.7.
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ARTICLE 12 - DELIVERY, TITLE AND RISK OF LOSS
12.1 Satellites
Delivery of the Satellite shall occur, and risk of loss of, and title
to, the Satellite shall pass from Contractor to Purchaser, upon
Acceptance of such Satellite pursuant to Article 10.1.
EXCEPT WITH RESPECT TO WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY
CONTRACTOR, UPON AND AFTER LAUNCH OF THE LAUNCH VEHICLE FOR A
SATELLITE, CONTRACTOR'S SOLE FINANCIAL RISK, AND THE SOLE AND EXCLUSIVE
REMEDIES OF PURCHASER OR ANY PARTY ASSOCIATED WITH PURCHASER, WITH
RESPECT TO THE USE OR PERFORMANCE OF SUCH SATELLITE (INCLUDING WITH
RESPECT TO ANY ACTUAL OR CLAIMED DEFECT CAUSED OR ALLEGED TO BE CAUSED
AT ANY TIME BY CONTRACTOR OR ANY OF ITS SUBCONTRACTORS), SHALL BE AS
SET FORTH IN ARTICLES 4.1, 13, 15, 19 AND 20. IN ALL CASES CONTRACTOR'S
LIABILITY SHALL BE SUBJECT TO THE LIMITATION OF LIABILITY SET FORTH IN
ARTICLE 34. CONTRACTOR MAKES NO WARRANTY AS TO THE PERFORMANCE OF ANY
LAUNCH VEHICLE.
12.2 Deliverable Items Other Than Satellites
Delivery and risk of loss of, and title to, each Deliverable Item of
hardware other than Satellites shall pass from Contractor to Purchaser
upon Acceptance of such Deliverable Item pursuant to Article 11.4.
Purchaser's rights in Deliverable Data are as set forth in Article 36.
ARTICLE 13 - XXX
XXX
ARTICLE 14 - INTENTIONALLY DELETED
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ARTICLE 15 - WARRANTY
15.1 Terms and Period of Warranty
15.1.1 Satellites. Contractor warrants that the Satellite delivered
under this Contract shall be manufactured in conformity with
the Performance Specification (as may be waived pursuant to
Article 9.4) applicable to the Satellite. Contractor's sole
obligation in fulfillment of this warranty after Launch is to
comply with Article 15.2.1. Contractor makes no warranty
regarding the performance of the Satellite from and after the
Launch of the Satellite.
15.1.2 Deliverable Items of Hardware Other Than Satellites.
Contractor warrants that each Deliverable Item of hardware
other than the Satellite delivered under this Contract shall
be manufactured in conformity with the Performance
Specification (as may be waived pursuant to Article 11.3)
applicable to such Deliverable Item and will be free from
defects in materials and workmanship during the period
commencing on the date of Acceptance of such Deliverable Item
pursuant to Article 11 and ending on the first anniversary
thereof.
15.1.3 Disclaimer. EXCEPT AND TO THE EXTENT PROVIDED IN ARTICLE 15.1
AND ARTICLE 15.4, CONTRACTOR HAS NOT MADE NOR DOES IT HEREBY
MAKE ANY REPRESENTATION OR WARRANTY, WHETHER WRITTEN OR ORAL,
EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY
OF DESIGN, OPERATION, CONDITION, QUALITY, SUITABILITY OR
MERCHANTABILITY OR FITNESS FOR USE OR FOR A PARTICULAR
PURPOSE, ABSENCE OF LATENT OR
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OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, WITH REGARD TO ANY
SATELLITE OR ANY OTHER DELIVERABLE ITEM.
15.2 Repair or Replacement
15.2.1 Satellite Anomalies.
Contractor shall investigate any Satellite Anomaly in any
Satellite arising during the life of the Satellite, and use
reasonable best efforts to correct any such Satellite Anomaly
that is correctable by Contractor from Purchaser's SCF using
the facilities and equipment available at such site.
CONTRACTOR SHALL HAVE NO LIABILITY TO PURCHASER OR TO THIRD
PARTIES ARISING FROM ANY ADVICE OR ASSISTANCE THAT CONTRACTOR
OR ANY SUBCONTRACTOR OR AGENT OF CONTRACTOR MAY PROVIDE IN
RESPECT OF THE SATELLITE AFTER LAUNCH, REGARDLESS OF CAUSE OR
LEGAL THEORY, INCLUDING NEGLIGENCE, EXCEPT WITH RESPECT TO
WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY CONTRACTOR. IN ALL
CASES CONTRACTOR'S LIABILITY SHALL BE SUBJECT TO THE
LIMITATION OF LIABILITY SET FORTH IN ARTICLE 34.
15.2.2 Deliverable Items of Hardware Other Than Satellites.
During the period specified in Article 15.1.2 for any
Deliverable Item of hardware other than a Satellite, as
Purchaser's sole and exclusive remedy, any defect in such
Deliverable Item discovered by Purchaser shall be remedied by
Contractor at Contractor's expense by repair or replacement of
the defective component (at Contractor's
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election). For any such Deliverable Item, Contractor shall
determine if repair or replacement is required to be performed
at Contractor's plant. If required, Purchaser shall ship to
Contractor's designated facility any such Deliverable Item.
Contractor shall be responsible for the cost of shipment to
such facility in accordance with its standard commercial
practice (including any taxes and/or duties) of any such
Deliverable Item, and the cost of return shipment, in
accordance with its standard commercial practice, of any such
Deliverable Item once repaired or replaced to Purchaser at the
location designated therefor in Article 3.1. Risk of loss for
such Deliverable Item shall transfer to Contractor upon
delivery of such Deliverable Item to the shipping carrier by
Purchaser, and risk of loss shall transfer to Purchaser for
any such Deliverable Item once repaired or replaced pursuant
to this Article 15.2.2 upon receipt thereof by Purchaser at
the location designated therefor in Article 3.1. When
necessary, Contractor shall provide free of charge temporary
equipment to be used while a repair is being performed.
15.3 Use Conditions Not Covered by Warranty
With respect to Deliverable Items of hardware other than Satellites,
the warranty under this Article 15 shall not apply if adjustment,
repair, or parts replacement is required as a result, directly or
indirectly, of accident, unusual physical or electrical stress beyond
the unit's designed tolerances, negligence, misuse, failure of
environmental control prescribed in operations and maintenance manuals,
repair or alterations by any party other than Contractor or its agents,
or by causes other than normal and ordinary use. The warranty provided
pursuant to this Article 15 is conditioned upon Contractor being given
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access, if required, to Deliverable Items delivered at Purchaser's
facility in order to effect any repair or replacement thereof. If the
defect repaired or remedied by Contractor is not covered by the
warranty provided pursuant to this Article 15, Purchaser shall pay
Contractor the reasonable cost of such repair or replacement,
transportation charges, and a reasonable profit as determined by
Contractor. Such repair costs shall be invoiced to Purchaser pursuant
to the provisions of Article 5.
15.4 Warranty for Training and Services
Contractor warrants that the training and other services it provides to
Purchaser pursuant to this Contract will conform to reasonable industry
standards at the time such training or other services are provided. In
the event Contractor breaches this warranty, as Purchaser's sole
remedy, Contractor shall apply reasonable efforts to correct the
deficiencies in the provision of such training and other services where
it is practicable to do so.
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ARTICLE 16 - CHANGES
Purchaser may, in writing, request a change within the general scope of this
Contract to:
a) Order work in addition to the work provided for herein; or
b) Modify the whole or any part of the work provided for herein.
If such change request causes an increase or decrease in the cost, or the time
required for completion, of the work to be provided herein, or otherwise affects
any other provision of this Contract, Contractor shall provide Purchaser with a
non-binding preliminary estimate of the impact of the change request on the
Contract price (including costs associated with processing of the change
request), Delivery schedules and other provisions of this Contract. If Purchaser
desires to proceed with the change after receipt of Contractor's preliminary
estimate, Purchaser and Contractor shall negotiate and agree in a timely manner
to equitable adjustments in Contract price, Delivery schedules and other
affected provisions of this Contract, and this Contract shall be amended in
writing accordingly. Contractor shall have no obligation to proceed pursuant to
a change request prior to execution of such amendment.
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ARTICLE 17 - FORCE MAJEURE
Contractor and Purchaser shall not be responsible for late Delivery, delay of
the final completion date or nonperformance of its contractual obligations due
to Force Majeure. Force Majeure shall be any event beyond the reasonable control
of a Party or its suppliers and subcontractors and shall include, but not be
limited to: (1) acts of God; (2) acts of a public enemy; (3) acts of a
government in its sovereign capacity (including any action or inaction affecting
the import or export of items); (4) war and warlike events; (5) catastrophic
weather conditions such as hurricanes, tornadoes and typhoons; (6) fire,
earthquakes, floods, epidemics, quarantine restrictions, strikes, lockouts and
other industrial disputes, sabotage, riot and embargoes; (7) non-availability of
a Launch Vehicle or Launch Site for any reason beyond a Party's reasonable
control; and (8) other unforeseen and extraordinary events, which in every case
are beyond the reasonable control and without fault or negligence of a Party or
its suppliers and subcontractors ("Force Majeure"). Upon the occurrence of Force
Majeure, an equitable adjustment shall be negotiated in the schedule and other
portions of this Contract affected by Force Majeure. The Party affected by a
Force Majeure event shall provide reasonable notice to the other Party of a
Force Majeure event.
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ARTICLE 18 - PURCHASER DELAY OF WORK
Except in the case of a Force Majeure event, if the performance of all or any
part of the work required of Contractor under this Contract is delayed or
interrupted by Purchaser's failure to perform its contractual obligations within
the time specified in this Contract or within a reasonable time if no time is
specified, or an act by Purchaser that unreasonably interferes with Contractor's
performance of its obligations under this Contract, this Contract shall be
equitably adjusted in the price, performance requirements, Delivery schedule,
and any other terms of this Contract affected by such act or failure to act of
Purchaser.
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ARTICLE 19 - PATENT INDEMNITY
19.1 Indemnification
Purchaser agrees that Contractor has the right to defend and, at
Contractor's sole option to settle, and Contractor, at its own expense,
hereby agrees to defend or, at Contractor's sole option to settle, and
to indemnify and hold harmless Purchaser, and its affiliates, officers,
directors, employees, shareholders and agents, from and against any and
all claims, actions, suits or proceedings based on an allegation that
the manufacture of any Deliverable Item or the normal intended use,
lease, sale or other disposition of any Deliverable Item infringes U.S.
letters patent ("Intellectual Property Claim"), and shall pay any
royalties and other liabilities adjudicated to be owing to the claimant
(or, in Contractor's sole discretion, provided in settlement of the
matter) as well as costs incurred in defending (including court costs
and reasonable attorneys' fees) such Intellectual Property Claim;
provided that Purchaser promptly notifies Contractor in writing of any
such Intellectual Property Claim and gives Contractor the authority and
all such assistance and information as may be requested from time to
time by Contractor for the defense of such Intellectual Property Claim.
19.2 Infringing Equipment
If the manufacture of any Deliverable Item or the normal intended use,
lease, sale or other disposition of any Deliverable Item under this
Contract is enjoined as a result of an Intellectual Property Claim or
is otherwise prohibited, Contractor shall (i) resolve the matter so
that the injunction or prohibition no longer pertains, (ii) procure for
Purchaser the right to use the infringing item or (iii) modify the
infringing item so that it becomes non-infringing while remaining in
compliance with the Performance Specification (as may be waived
pursuant to Article 9.4). If Contractor is unable to accomplish (i),
(ii) or (iii) as stated above, Purchaser shall have right to terminate
this Contract with respect to
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such Deliverable Item, return such Deliverable Item to Contractor (in
space, with respect to an in-orbit Satellite), and receive a refund of
the price paid for such Deliverable Item (less amounts unpaid for such
item plus a reasonable allowance for depreciation).
19.3 Combinations and Modifications
Contractor shall have no liability under this Article 19 for any
Intellectual Property Claim arising solely from (i) use of any
Deliverable Item in combination with other items, unless Contractor
sold them as a combination intended to be so used or (ii) modifications
of Deliverable Items after Delivery, unless Contractor made such
modifications.
19.4 Sole Remedies
Except in the case of willful misconduct or Gross Negligence by
Contractor, the remedies set forth in this Article 19 are Purchaser's
sole and exclusive remedies for or related to any Intellectual Property
Claim, and Contractor's liability under this Article 19 for any
Intellectual Property Claim with respect to a Deliverable Item shall in
no event exceed the Firm Fixed Price paid by Purchaser hereunder for
such Deliverable Item. In all cases Contractor's liability shall be
subject to the limitation of liability set forth in Article 34.
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ARTICLE 20 - INDEMNITY FOR BODILY INJURY AND PROPERTY DAMAGE
20.1 Contractor's Indemnification of Purchaser
Contractor shall defend, indemnify and hold harmless Purchaser, and its
affiliates, directors, officers, employees, shareholders and agents,
from and against all losses, damages, liabilities, suits and expenses
(including, but not limited to, reasonable attorneys' fees)
(collectively "Losses") attributable to third party claims for bodily
injury or property damage, but only if such Losses were caused by, or
resulted from, negligent acts or omissions, Gross Misconduct or willful
misconduct by Contractor or its employees or representatives. For the
avoidance of doubt, and except for Losses resulting from the Gross
Negligence or willful misconduct of Contractor, Contractor shall have
no indemnity obligation under this Article 20.1 for any Losses with
respect to the operation or use of a Satellite after Launch, even if
such Losses are attributable to an act or omission of Contractor or its
employees prior to Launch. In all cases Contractor's liability shall be
subject to the limitation of liability set forth in Article 34.
20.2 Purchaser's Indemnification of Contractor
Purchaser shall defend, indemnify and hold harmless Contractor, and its
affiliates, directors, officers, employees, shareholders and agents,
from and against all Losses attributable to third party claims for
bodily injury or property damage, but only if such Losses were caused
by, or resulted from, negligent acts or omissions, Gross Negligence or
willful misconduct by Purchaser or its employees or representatives.
20.3 Conditions to Indemnification
The right to any indemnity specified in Article 20.1 or 20.2 shall be
subject to the following conditions:
a. The Party seeking indemnification shall promptly advise the
other Party in writing of the filing of any suit or of any
written or oral
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claim for indemnification upon receipt thereof and shall
provide the other Party, at its request, with copies of all
documentation relevant to such suit or claim.
b. The Party seeking indemnification shall not make any admission
nor shall it reach a compromise or settlement without the
prior written approval of the other Party, which approval
shall not be unreasonably withheld or delayed.
c. The indemnifying Party shall assist and shall have the right
to assume, when not contrary to the governing rules of
procedure, the defense of any claim or suit in settlement
thereof and shall satisfy any judgments rendered by a court of
competent jurisdiction in such suits and shall make all
settlement payments. The Party seeking indemnification may
participate in any defense at its own expense, using counsel
reasonably acceptable to the indemnifying Party, provided
there is no conflict of interest and that such participation
would not adversely affect the conduct of the proceedings.
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ARTICLE 21 - TERMINATION FOR CONVENIENCE
21.1 Reimbursement of Contractor
Purchaser may terminate this Contract without cause, in whole or in
part, by giving Contractor written notice thirty (30) days prior to the
date of such termination. In the event of such termination, Contractor
will cease work as directed in the termination notice. Contractor shall
submit its claim for the work performed in connection with the
terminated Contract, and for its termination costs plus a reasonable
profit as provided in items (a) through (f) of this Article 21.1. If
Purchaser terminates this Contract in whole or in part pursuant to this
Article 21.1, Contractor shall be entitled to be paid:
a. The price set forth in Article 4 for Deliverable Items
completed prior to such termination for which payment had not
been made by Purchaser, whether or not Delivery has occurred
with respect to such Deliverable Item and whether or not this
Contract has been terminated pursuant to this Article 21.1
with respect to such Deliverable Item.
b. Actual out-of-pocket costs incurred by Contractor in
performance of work on Deliverable Items for which this
Contract has been terminated pursuant to this Article 21.1,
that have not been completed prior to such termination.
c. Actual out-of-pocket costs incurred by Contractor in
completing the termination process.
d. Actual out-of-pocket costs incurred by Contractor in settling
claims of subcontractors and other suppliers and vendors in
connection with such termination; provided that Contractor
shall use reasonable efforts to minimize such costs.
e. A XXX profit on items (b), (c) and (d) above. Less, any
amounts previously paid with respect to completed Deliverable
Items and terminated Deliverable Items.
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f. In no event will the aggregate of the amounts previously paid
by Purchaser under this Contract and the amounts to be paid by
Purchaser under this Article 21.1 exceed the Firm Fixed Price.
21.2 Partial Termination
If the termination by Purchaser is partial, the price for the
non-terminated portion of this Contract shall be increased by an amount
equal to the additional costs, if any, which must be borne by such
portion because of the partial termination, plus XXX profit on such
additional costs; however, in no event will the aggregate of the
amounts previously paid by Purchaser under this Contract and the
amounts to be paid by Purchaser for the non-terminated portion of this
Contract, as increased under this Article 21.2, exceed the Firm Fixed
Price.
21.3 Title Transfer
In the event of a termination pursuant to this Article 21, a
termination settlement meeting shall be held at a mutually agreed time
and place no later than sixty (60) days after submission of a claim by
Contractor pursuant to Article 21.1. At or prior to the date of such
termination settlement meeting, Contractor shall provide Purchaser with
such documentation of the costs set forth in Articles 21.1 and 21.2 as
Purchaser may reasonably request. Upon completion of the termination
settlement meeting, Contractor may submit an invoice to Purchaser for
payment in accordance with the terms of Article 5.2. Upon payment by
Purchaser to Contractor of the sums invoiced, subject to applicable
U.S. Government export laws, Contractor shall, at Contractor's or
subcontractor's plant, transfer title and risk of loss to Purchaser of
all Deliverable Items referred to in Article 21.1(a), and all other
partially completed or incomplete Deliverable Items for which
Contractor is paid under this Article 21. Purchaser may direct
Contractor to undertake to reallocate to other uses, and/or to
otherwise assist Purchaser in disposing/selling, items subject to
termination under this Article 21 for the purpose of receiving a price
refund or
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offset against Contractor's termination claim. Upon receipt of such
direction, Contractor shall, on a reasonable efforts basis, attempt to
reallocate, and/or to otherwise assist Purchaser in disposing/selling,
the items and provide a refund (in cases where the amounts generated
are greater than Contractor's termination claim) to Purchaser or an
offset (in cases where the amounts generated are less than or equal to
Contractor's termination claim) against Contractor's termination claim,
less any reasonable selling expenses.
ARTICLE 22 - XXX
XXX
ARTICLE 22A -- XXX
XXX
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ARTICLE 23 - DEFAULT
23.1 Failure to Perform by Contractor
Subject to Article 23.4 below, if Contractor (i) fails to deliver a
Satellite within the time specified therefor plus the maximum number of
days for late delivery liquidated damages specified in Article 22 or
any other Deliverable Item within the time specified therefor in this
Contract (or, in either case, such longer time as may be agreed to in
writing by Purchaser), or (ii) fails to perform any other material
provision of this Contract, and in each case does not cure such
failure, with respect to a Satellite on or before the last day
specified for late delivery liquidated damages in Article 22 (or such
longer time as may be agreed to in writing by Purchaser), or with
respect to any other Deliverable Item within XXX days (or such longer
period as may be agreed to in writing by Purchaser) after receipt from
Purchaser of written notice of such failure, Purchaser may terminate
this Contract in whole or in part by written notice to Contractor.
23.2 Termination Liability
In the event of a termination for default pursuant to Article 23.1,
Contractor shall refund all payments made by Purchaser for the
terminated work except with respect to items referred to in Article
23.3. Such refund shall be made no later than XXX days after
Contractor's receipt of Purchaser's written notice requesting such
refund. In addition, Contractor shall pay to Purchaser all excess costs
above the prices set forth herein reasonably incurred by Purchaser in
reprocuring the work and Deliverables described herein, according to
the delivery schedules set forth herein. Such refund and excess
reprocurement costs shall be Purchaser's sole remedy in case of a
termination pursuant to Article 23.1, except in the case of willful
misconduct or Gross Negligence by Contractor. In all cases Contractor's
liability shall be subject to the limitation of liability set forth in
Article 34.
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23.3 Partially Completed Items and Work In Process; Contractor's
Reimbursement for Terminated Work
In the event of termination pursuant to Article 23.1, upon Purchaser's
request, Contractor shall deliver to Purchaser all partially completed
items or services and work-in-process.
In the event of termination pursuant to Article 23.1, Contractor shall
not be required to refund any amounts, and Purchaser shall remain
liable for payment of all amounts, with respect to Deliverable Items
for which Acceptance has occurred pursuant to the terms of Article 10
or Article 11, or that are retained by Purchaser whether or not
completed, as follows: (i) at the price set forth in this Contract for
such items for which an itemized price is set forth herein and (ii) at
the cost incurred by Contractor for (a) such items for which no
itemized price is set forth herein and (b) partially completed items or
services and work-in-progress.
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23.4 Invalid Default Termination
If, after termination pursuant to Article 23.1, it is finally
determined by arbitration, legal proceeding or mutual agreement that
Contractor was not in default, or that the default was excusable, the
rights and obligations of the Parties shall be the same as if the
termination had occurred under Article 21; except that, Contractor
shall also be entitled to recover its additional direct costs that
would not have been incurred but for such invalid default termination.
23.5 Contractor Termination
Contractor may terminate this Contract upon Purchaser's failure to
comply with any material provision of this Contract by giving written
notice to Purchaser of its intention to so terminate. Such notice shall
set forth the provision or provisions with which Purchaser has failed
to comply and a reasonably detailed description of such failure. Such
termination shall become effective upon Purchaser's failure to correct
such nonperformance within XXX (or such longer period as may be agreed
to in writing by Contractor) after receipt of such notice from
Contractor.
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In the event of termination pursuant to this Article 23.6, Contractor
shall be paid as if the termination were for convenience pursuant to
Article 21. Further, and without limiting Contractor's other rights or
remedies, Contractor may immediately take over all or part of the
Deliverable Items and Contract work-in-process and use them in any
manner Contractor may elect. In such case, the fair market value of any
Deliverable Items or Contract work-in-progress retained by Contractor
shall be off-set against Purchaser's termination liability. If, after
termination pursuant to this Article 23.6, it is finally determined by
arbitration pursuant to Article 25 that Purchaser did not fail in the
performance of its obligations under this Contract, Contractor shall be
liable to Purchaser for direct damages resulting from such termination
of this Contract (in no event exceeding amounts payable to Purchaser
pursuant to Articles 23.2 and 23.3, and subject to the limitation of
liability set forth in Article 34).
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ARTICLE 24 - INTENTIONALLY DELETED
ARTICLE 25 - ARBITRATION
25.1 Arbitration
Any dispute (except as set forth in Article 25.2) arising between the
Parties with respect to the performance of obligations or
interpretation of this Contract that cannot be settled by negotiation
between the Parties within thirty (30) days of written notice from one
Party to the other stating such first Party's intent to resort to
arbitration ("Notice of Arbitration"), shall be submitted for
settlement by arbitration in accordance with the rules of conciliation
and arbitration of the American Arbitration Association. Any such
arbitration shall be conducted in Denver, Colorado by a panel of three
arbitrators who shall be selected within sixty (60) days of such Notice
of Arbitration: one selected by each Party and the third selected by
the arbitrators chosen by the Parties. Should no agreement be reached
on the third arbitrator within the time specified, the third arbitrator
shall be appointed by American Arbitration Association. In resolving
any dispute, the arbitrators shall apply the laws of the State of New
York (without regard to its conflict of law rules) and shall take into
account usages, customs and practices in the performance of contracts
for the purchase and sale of commercial communications satellites.
Proceedings and documents provided and generated in connection with any
arbitration hereunder shall be in the English language. Each Party
shall bear its own costs and expenses (including the costs and expenses
of the arbitrator it selected) and one-half of the costs and expenses
of the third arbitrator, unless otherwise determined in the arbitral
award. The arbitrators' decision shall be final and binding on the
Parties and enforceable in any court of competent jurisdiction. Any
monetary award made by the arbitrators in favor of Purchaser shall be
subject to the limitation of liability set forth in Article 34.
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25.2 Gross Negligence or Willful Misconduct
If a dispute arises as to whether or not a Party has committed or acted
with Gross Negligence or willful misconduct, such dispute shall be
resolved by a federal or state court in New York without a jury, and
the court shall resolve such dispute by applying the laws of the State
of New York without regard to its conflict of law rules. THE PARTIES
EXPRESSLY WAIVE THEIR RIGHT TO A JURY IN CONNECTION WITH SUCH DISPUTE.
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ARTICLE 26 - INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH
26.1 Launch Services Agreement Inter-Party Waiver of Liability
The Parties hereby agree to be bound by the no-fault, no-subrogation
inter-party waiver of liability and related indemnity provisions
provided in the Launch Services Agreement with respect to the Launch of
the Satellite and to cause their respective contractors and
subcontractors at any tier (including suppliers of any kind) that are
involved in the performance of this Contract and any other person
having an interest in the Satellite or any Transponder thereon
(including customers of Purchaser), as required by the Launch Services
Agreement and as specified by Buyer, to accede to such waiver. The
Parties shall execute and deliver any instrument that may be required
by the Launch Agency to evidence their agreement to be bound by such
waiver. Purchaser and Contractor also shall obtain, from their
insurers, and shall cause their respective contractors and
subcontractors at any tier (including suppliers of any kind) that are
involved in the performance of this Contract and any other person
having an interest in any Satellite or any Transponder thereon
(including customers of Purchaser), as required by the Launches
Services Agreement and as specified by Buyer, to obtain from their
insurers, an express waiver of such insurers' rights of subrogation,
subject to terms and conditions as are then customarily available
regarding such waivers, with respect to any and all claims that have
been waived pursuant to this Article 26.
26.2 Indemnity Related to the Inter-Party Waiver of Liability
Each Party shall indemnify against and hold the other Party harmless
from any claim against the other Party, its contractors and
subcontractors at any tier (including suppliers of any kind) that are
involved in the performance of this Contract, made by the Launch Agency
or any of its contractors and subcontractors (including
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suppliers of any kind) that are involved in the performance of the
Launch Services Agreement, resulting from the failure of the first
Party to waive any liability against, or to cause any other person such
Party is obligated to cause to waive any liability against, the Launch
Agency or its contractors and subcontractors at any tier (including
suppliers of any kind).
26.3 Survival of Obligations
The indemnification and hold harmless obligations provided in this
Article 26 shall survive and remain in full force and effect,
notwithstanding the expiration or termination of this Contract.
26.4 XXX
ARTICLE 27 - RESERVED
ARTICLE 28 - RESERVED
ARTICLE 29 XXX
XXX
ARTICLE 30 - RESERVED
ARTICLE 31 - RESERVED
ARTICLE 32 - RESERVED
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ARTICLE 33 - GROUND STORAGE
33.1 Notification
Purchaser may direct Contractor to store the Satellite after completion
of SPSR.
33.2 Storage Location
Ground Storage shall be performed at a Contractor controlled facility
and shall be conducted in accordance with the satellite storage plan
section(s) of the Statement of Work.
33.3 Storage Prices
There shall be no charge for storage and reverification work if the
Contractor's failure to perform is the reason the Satellite is stored,
or if the Satellite is stored for less than six months.
The firm fixed price for Ground Storage of the Satellite in all other
circumstances shall be $XXX per month storage cost while the Satellite
is in Ground Storage. In addition, Purchaser shall also pay directly or
reimburse Contractor for all costs related to re-verification of system
flight assurance and re-verification testing (plus XXX) and for all
additional costs which Contractor would not have incurred had Purchaser
not elected Ground Storage of the Satellite (including taxes, tariffs,
duties, transportation, insurance, and Launch preparation
service-related expenses).
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33.4 Payments
Payments shall be made on the thirtieth day of each month for the prior
month's storage, provided an invoice is received at least thirty days
prior to the payment date.
33.5 Title and Risk of Loss
Title and risk of loss to a Satellite delivered for Ground Storage
shall remain with Contractor at the storage site. Contractor shall
assume full responsibility for any loss or damage to the Satellite
during Ground Storage.
33.6 Notification of Intention to Launch a Previously Stored Satellite
Purchaser shall notify Contractor in writing that a Satellite in Ground
Storage should be removed from Ground Storage and delivered to the
Launch Site. This notification must be received by Contractor not less
than three (3) months prior to the scheduled date for Delivery to the
Launch Site of the Satellite. Failure to notify Contractor in a timely
manner will result in an adjustment to the Delivery schedule for such
Satellite.
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ARTICLE 34 - LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE DIRECTLY OR INDIRECTLY TO THE OTHER, OR
ITS OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS OR SUBCONTRACTORS AT
ANY TIER (INCLUDING SUPPLIERS OF ANY KIND), AGENTS OR CUSTOMERS, TO ITS
PERMITTED ASSIGNEES OR SUCCESSOR OWNERS OF ANY SATELLITE OR OTHER
DELIVERABLE ITEM OR TO ANY OTHER PERSON CLAIMING BY OR THROUGH SUCH
PARTY FOR ANY AMOUNTS REPRESENTING LOSS OF PROFITS, LOSS OF BUSINESS,
OR INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY, CONSEQUENTIAL OR PUNITIVE
DAMAGES, INCLUDING WITHOUT LIMITATION LOST PROFITS, LOST REVENUES OR
COSTS OF RECOVERING A SATELLITE (EXCEPT WITH RESPECT TO A THIRD PARTY'S
DAMAGES FOR WHICH A PARTY HAS AN INDEMNIFICATION OBLIGATION UNDER
ARTICLE 19 OR 20), ARISING FROM OR RELATING TO THE PERFORMANCE OR
NONPERFORMANCE OF THIS CONTRACT OR ANY ACTS OR OMISSIONS ASSOCIATED
THEREWITH OR RELATED TO THE USE OF ANY ITEMS DELIVERED OR SERVICES
FURNISHED HEREUNDER, WHETHER THE BASIS OF SUCH LIABILITY IS BREACH OF
CONTRACT, TORT, STATUTE OR OTHER LEGAL OR EQUITABLE THEORY, EXCEPT THAT
IN THE EVENT OF WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY CONTRACTOR OR
PURCHASER SUCH PARTY MAY BE LIABLE AND RESPONSIBLE FOR AMOUNTS
REPRESENTING LOSS OF PROFITS, LOSS OF BUSINESS AND THE OTHER
ABOVE-DESCRIBED DAMAGES IN AN AMOUNT NOT TO EXCEED $XXX.
IN NO EVENT SHALL EITHER PARTY'S TOTAL LIABILITY UNDER OR IN CONNECTION
WITH THIS CONTRACT EXCEED THE FIRM FIXED PRICE (PROVIDED REFUNDS UNDER
ARTICLE 23.2 WILL NOT COUNT AGAINST THIS FIGURE), EXCEPT FOR LIABILITY
ARISING FROM WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY A PARTY, IN
WHICH CASE THE TOTAL LIABILITY OF A PARTY MAY NOT EXCEED THE FIRM FIXED
PRICE PLUS $XXX.
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ARTICLE 35 - DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION
35.1 Definition of Proprietary Information
For the purpose of this Contract, "Proprietary Information" means all
information (other than Deliverable Data, which is subject to the
provisions of Article 36), in whatever form transmitted, that is
disclosed by such Party (hereinafter referred to as the "disclosing
party") to the other Party hereto (hereinafter referred to as the
"receiving party") relating to the performance by the disclosing party
of this Contract and: (i) is identified as proprietary by means of a
written legend thereon, or (ii) if disclosed orally, is identified as
proprietary at the time of initial disclosure. Proprietary Information
shall not include any information disclosed by a Party that (i) is
already known to the receiving party at the time of its disclosure, as
evidenced by written records of the receiving party, without an
obligation of confidentiality at the time of disclosure; (ii) is or
becomes publicly known through no wrongful act of the receiving party;
(iii) is independently developed by the receiving party as evidenced by
written records of the receiving party; (iv) such Party is legally
compelled to disclose; or (v) is obtained from a third party without
restriction and without breach of this Contract.
35.2 Terms for Handling and Use of Proprietary Information
For a period of five (5) years after receipt of any Proprietary
Information (or until such time as such Proprietary Information becomes
publicly known as provided in Article 35.1), the receiving party shall
not disclose Proprietary Information that it obtains from the
disclosing party to any person or entity except its employees and
agents who have a need to know in order to perform under this Contract
and who have been informed of and have agreed to abide by the receiving
party's obligations under this Article 35. The receiving party shall
use not less than the same degree of care to avoid
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disclosure of such Proprietary Information as it uses for its own
Proprietary Information of like importance; but in no event less than a
reasonable degree of care. Proprietary Information shall be used only
for the purpose of performing the obligations under this Contract, or
as the disclosing party otherwise authorizes in writing.
IN NO EVENT SHALL EITHER PARTY DISCLOSE OR TRANSFER TECHNICAL
INFORMATION OR PROVIDE TECHNICAL SERVICES TO INSURANCE BROKERS,
UNDERWRITERS OR OTHER THIRD PERSONS OR ENTITIES WITHOUT THE OTHER
PARTY'S PRIOR WRITTEN APPROVAL (WHICH SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED) AND, WHERE REQUIRED, PRIOR APPROVAL OF THE U.S.
DEPARTMENT OF STATE.
35.3 Legally Required Disclosures
Notwithstanding the foregoing, in the event that the receiving party
becomes legally compelled to disclose Proprietary Information of the
disclosing party, including this Contract or other supporting
document(s), the receiving party shall, to the extent practicable under
the circumstances, provide the disclosing party with written notice
thereof so that the disclosing party may seek a protective order or
other appropriate remedy, or to allow the disclosing party to redact
such portions of the Proprietary Information as the disclosing party
deems appropriate. In any such event, the receiving party will disclose
only such information as is legally required, and will cooperate with
the disclosing party (at the disclosing party's expense) to obtain
proprietary treatment for any Proprietary Information being disclosed.
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35.4 Disclosure of Contract Terms
Notwithstanding anything to the contrary in this Article 35, and
subject to applicable export restrictions, the terms and conditions of
this Contract may not be disclosed by either Party to any person except
with the prior written consent of the other Party, provided, in each
case, that the recipient of such information agrees to treat such
information as confidential and executes and delivers a confidentiality
agreement reasonably acceptable to both Parties or is otherwise subject
to confidentiality obligations reasonably satisfactory to both Parties;
provided, further, that either Party shall have the right to disclose
such information as is required under applicable law or the binding
order of a court or government agency.
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ARTICLE 36 - RIGHTS IN DATA
36.1 Rights
Contractor shall retain title to all Deliverable Data utilized or
developed by Contractor during the performance of this Contract.
Subject to U.S. export regulations and applicable export restrictions,
Purchaser's officers, directors, employees, consultants and
representatives shall have the non-exclusive right to obtain and use
the Deliverable Data for any and all purposes related to the testing,
operation, use and maintenance of the Satellite. Purchaser's officers,
directors, employees, consultants and representatives shall not
disclose Deliverable Data to other companies, organizations or persons
without the express prior written consent of Contractor, which consent
shall not be unreasonably withheld or delayed. Purchaser shall have no
rights in Deliverable Data other than as expressly stated in this
Contract, and title to Deliverable Data shall not pass to Purchaser or
any other entity pursuant to the terms hereof.
36.2 No Additional Obligation
Nothing contained in this Article shall require Contractor to provide
any data other than as set forth in the Statement of Work.
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ARTICLE 37 - PUBLIC RELEASE OF INFORMATION
Either Party intending to disclose publicly whether through the issuance of news
releases, articles, brochures, advertisements, prepared speeches or other
information releases concerning this Contract or the transactions contemplated
herein shall obtain the prior written approval of the other Party with respect
to the content and timing of such issuance. A Party's approval under this
Article 37 shall not be unreasonably delayed or denied. Notwithstanding the
above, either Party may release information described herein as required by
securities laws or other applicable laws.
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ARTICLE 38 - NOTICES
38.1 Written Notification
Each notice or correspondence required or permitted to be given or made
hereunder shall be in writing (except where oral notice is specifically
authorized) to the respective addresses, facsimile and telephone
numbers and to the attention of the individuals set forth below, and
any such notice shall be deemed given on the earlier to occur of (i)
actual receipt, irrespective of whether sent by post, facsimile
transmission (followed by mailing of the original copy), overnight
courier or other method, and (ii) seven (7) days after mailing by
registered or certified mail, return receipt requested, postage
prepaid.
In the case of Purchaser:
Echostar Orbital Corporation
5701 South Santa Fe
Littleton, CO 80120
Attn: David Moskowitz, Esq.
Telephone No.: (303) 723-1040
Facsimile No.: (303) 723-1608
With a separately delivered copy to:
Charlie Ergen and Rohan Zaveri
(at the same address)
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In the case of Contractor:
Space Systems/Loral, Inc.
3825 Fabian Way, Mailstop G-82
Palo Alto, CA 94303-4697
Attn.: John Dietzel
Telephone No.: (650) 852-7370
Facsimile No.: (650) 852-4087
38.2 Change of Address
Either Party may from time to time change its notice address or the
persons to be notified by giving the other Party written notice (as
provided above) of such new information and the date upon which such
change shall become effective.
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ARTICLE 39 - RISK MANAGEMENT
Purchaser shall be responsible to obtain risk insurance, if any, for the Launch
of the Satellite.
If Purchaser applies for insurance regarding risks relating to the Launch of the
Satellite, Contractor shall furnish Purchaser with such information regarding
the Satellite as is reasonably requested by the insurers and will cooperate in
any insurance reviews.
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ARTICLE 40 - ORDER OF PRECEDENCE
In the event of conflict among the terms of the Preamble and Articles 1 to 42 of
this Contract and the Exhibits, the following order of decreasing precedence
shall apply:
o This Contract (Preamble and Articles 1 through 45 and Attachments A
and B)
o Exhibit A Statement of Work
o Exhibit B Performance Specification
o Exhibit C Product Assurance Program Plan
o Exhibit D Test Plan
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ARTICLE 41 - GENERAL
41.1 Binding Effect; Assignment
This Contract shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. This
Contract may not be assigned, either in whole or in part, by either
Party without the express written approval of the other Party. Such
approval shall not be unreasonably withheld or delayed. Contractor may
require, as a condition of approving an assignment by Purchaser, that
the proposed assignee establish irrevocable letters of credit,
guarantees or other comparable assurances satisfactory to Contractor
prior to such assignment becoming effective and that Purchaser remain
primarily or secondarily liable hereunder. Either Party, upon prior
written notice to the other Party, may grant security interests in its
rights hereunder to lenders that provide financing for the performance
by such Party of its obligations under this Contract or for the subject
matter hereof. In the event that either Party is sold to or merged into
another entity, its responsibilities under this Contract shall not be
altered and the successor organization shall be liable for performance
of such Party's obligations under this Contract.
41.2 Severability
If any provision of this Contract is declared or found to be illegal,
unenforceable or void, the Parties shall negotiate in good faith to
agree upon a substitute provision that is legal and enforceable and is
as nearly as possible consistent with the intentions underlying the
original provision. If the remainder of this Contract is not materially
affected by such declaration or finding and is capable of substantial
performance, then the remainder shall be enforced to the extent
permitted by law.
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41.3 Captions
The captions contained herein are for purposes of convenience only and
shall not affect the construction of this Contract.
41.4 Relationships of the Parties
It is expressly understood that Contractor and Purchaser intend by this
Contract to establish the relationship of independent contractors only,
and do not intend to undertake the relationship of principal and agent
or to create a joint venture or partnership or any other relationship,
other than that of independent contractors, between them or their
respective successors in interests. Neither Contractor nor Purchaser
shall have any authority to create or assume, in the name or on behalf
of the other Party, any obligation, expressed or implied, or to act or
purport to act as the agent or the legally empowered representative of
the other Party, for any purpose whatsoever.
41.5 Entire Agreement
This Contract, including all Exhibits and the Attachments hereto,
represents the entire understanding and agreement between the Parties
hereto with respect to the subject matter hereof, and supersedes all
prior negotiations and agreements with respect to the subject matter
hereof. This Contract may not be modified or amended, and the Parties'
rights and obligations may not be waived, except by the written
agreement of both Parties.
41.6 Standard of Conduct
Both Parties agree that all their actions in carrying out the
provisions of this Contract shall be in compliance with applicable laws
and regulations and neither Party will pay or accept bribes, kickbacks
or other illegal payments, or engage in unlawful conduct.
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41.7 Construction
This Contract, the Exhibits and the Attachment hereto have been drafted
jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of or
against either Party.
41.8 Counterparts
This Contract may be signed in any number of counterparts with the same
effect as if the signature(s) on each counterpart were upon the same
instrument.
41.9 Applicable Law
This Contract shall be interpreted, construed and governed, and the
rights of the Parties shall be determined, in all respects, according
to the laws of the State of New York without regard to its conflict of
law rules.
41.10 Survival
Termination or expiration of this Contract for any reason shall not
release either Party from any liabilities or obligations set forth in
this Contract that (i) the Parties have expressly agreed shall survive
any such termination or expiration or (ii) remain to be performed or by
their nature would be intended to be applicable following any such
termination or expiration.
41.11 U.N. Convention on the International Sales of Goods
The U.N. Convention on the International Sales of Goods shall not apply
or otherwise have any legal effect with respect to this Contract.
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ARTICLE 42 - ATTACHMENTS
The following Attachments are incorporated in this Contract:
Attachment A Payment Plan
Attachment B Pages 5 through 11 of the EchoStar 5 Insurance Policy
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ARTICLE 43 - TERMINATION RIGHT
Notwithstanding anything to the contrary herein, if by the TBD Deadline the
Parties are unable to reach final agreement upon (1) the pricing and schedule
for the options described in Article 29.5, or (2) the TBD terms of this
Contract, the Statement of Work, Satellite Performance Specification, Product
Assurance Program Plan, Satellite Program Test Plan and Payment Plan, then
Purchaser may immediately terminate this Contract by providing written notice to
Contractor. If such termination occurs, then Purchaser shall pay Contractor $XXX
within thirty (30) days of receipt of an invoice. All other liabilities and
obligations of the Parties shall be released, waived and terminated, except for
those set forth in Articles 20, 35 and 37.
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ARTICLE 44 - COOPERATION REGARDING SPOT BEAMS
Until the TBD Deadline, Contractor shall use reasonable commercial efforts to
cooperate with Lockheed Martin Corporation ("LMC") regarding the coordination
and development of the requirements and footprints for the spot beams for the
Satellite and the EchoStar 7 satellite being manufactured by LMC. In addition,
upon Purchaser's request, Contractor shall use reasonable commercial efforts to
cooperate with LMC as necessary to change the initial requirements and/or
footprints of the spot beams for the Satellite and the EchoStar 7 satellite.
Finally, Contractor shall use reasonable commercial efforts to cooperate with
LMC as necessary to ensure that the spot beams of the Satellite and the EchoStar
7 satellite, as deployed, will operate in accordance with the final approved
requirements and footprints. In performing the above obligations, Contractor
shall not be required to disclose any of its proprietary information to LMC.
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ARTICLE 45 - XXX
XXX
ARTICLE 46 - KEY PERSONNEL
The Contractor will assign properly qualified and experienced personnel to the
program contemplated under the Contract. Personnel assigned to the following
positions shall be considered "Key Personnel":
a) the Contractor's Program Manager
b) the Contractor's Contracts Manager
c) the Contractor's Product Assurance Manager
d) the Contractor's Systems Engineering Manager
e) the Contractor's Vehicle Manager
The Purchaser shall have the right to approve the Contractor's Program Manager
which approval shall not be unreasonably withheld or delayed. Key Personnel
shall not be assigned to other duties without the Contractor giving prior
written notice to and consulting with the Purchaser. The Contractor shall
provide a chart to the Purchaser of the program Key Personnel and shall keep
such chart current.
Additionally, for so long as Randy Tyner is associated with Contractor as an
employee or consultant, Purchaser shall have unrestricted access to Mr. Tyner
for purposes of designing the payload and its specifications. Mr. Tyner shall
have a key decision-making role on payload-related issues, and shall be a
primary interface with the Purchaser on all payload-related technical and
performance issues.
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IN WITNESS THEREOF, the Parties have executed this Contract by their duly
authorized officers as of the date set forth in the Preamble.
ECHOSTAR ORBITAL
SPACE SYSTEMS/LORAL, INC. CORPORATION
By: By:
------------------------- -------------------------
Name: Name:
------------------------- -------------------------
Title: Title:
------------------------ ------------------------
<PAGE> 1
EXHIBIT 10.3
Certain portions of this document have been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
CONTRACT BETWEEN
ECHOSTAR ORBITAL CORPORATION
AND
SPACE SYSTEMS/LORAL, INC.
ECHOSTAR 9 SATELLITE PROGRAM
(121(DEGREES) W.L.)
This document contains data and information proprietary to Space Systems/Loral,
Inc. and EchoStar Orbital Corporation. This data shall not be disclosed,
disseminated or reproduced, in whole or in part, without the express prior
written consent of Space Systems/Loral, Inc. and EchoStar Orbital Corporation
except as otherwise provided in this Contract.
<PAGE> 2
TABLE OF CONTENTS
<TABLE>
<S> <C>
PREAMBLE ...................................................................................4
RECITALS ...................................................................................5
ARTICLE 1 DEFINITIONS........................................................................6
ARTICLE 2 SCOPE OF WORK.....................................................................13
ARTICLE 3 DELIVERABLE ITEMS AND DELIVERY SCHEDULE...........................................14
ARTICLE 4 PRICE.............................................................................15
ARTICLE 5 PAYMENTS..........................................................................17
ARTICLE 6 PURCHASER-FURNISHED ITEMS.........................................................21
ARTICLE 7 COMPLIANCE WITH U.S. EXPORT LAWS AND DIRECTIVES...................................24
ARTICLE 8 ACCESS TO WORK IN PROGRESS........................................................25
ARTICLE 9 SATELLITE PRE-SHIPMENT REVIEW (SPSR)..............................................29
ARTICLE 10 SATELLITE ACCEPTANCE - PARTIAL AND TOTAL LOSS.....................................32
ARTICLE 11 ACCEPTANCE INSPECTION FOR DELIVERABLE ITEMS OTHER THAN SATELLITES.................39
ARTICLE 12 DELIVERY, TITLE AND RISK OF LOSS..................................................42
ARTICLE 13 XXX...............................................................................43
ARTICLE 14 INTENTIONALLY DELETED.............................................................43
ARTICLE 15 WARRANTY..........................................................................44
ARTICLE 16 CHANGES...........................................................................48
ARTICLE 17 FORCE MAJEURE.....................................................................50
ARTICLE 18 PURCHASER DELAY OF WORK...........................................................53
ARTICLE 19 PATENT INDEMNITY..................................................................54
ARTICLE 20 INDEMNITY FOR BODILY INJURY AND PROPERTY DAMAGE...................................57
</TABLE>
<PAGE> 3
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
ARTICLE 21 TERMINATION FOR CONVENIENCE.......................................................60
ARTICLE 22 XXX...............................................................................63
ARTICLE 23 DEFAULT...........................................................................64
ARTICLE 24 PARTIAL LOSS AMOUNT...............................................................67
ARTICLE 25 ARBITRATION.......................................................................68
ARTICLE 26 INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH......................................70
ARTICLE 27 CORRECTIVE MEASURES...............................................................72
ARTICLE 28 RESERVED..........................................................................73
ARTICLE 29 XXX...............................................................................74
ARTICLE 30 XXX...............................................................................75
ARTICLE 31 RESERVED..........................................................................76
ARTICLE 32 RESERVED..........................................................................77
ARTICLE 33 GROUND STORAGE....................................................................78
ARTICLE 34 LIMITATION OF LIABILITY...........................................................80
ARTICLE 35 DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION................................82
ARTICLE 36 INTELLECTUAL PROPERTY RIGHTS - RIGHTS IN DATA.....................................86
ARTICLE 37 PUBLIC RELEASE OF INFORMATION.....................................................88
ARTICLE 38 NOTICES...........................................................................89
ARTICLE 39 RISK MANAGEMENT...................................................................91
ARTICLE 40 ORDER OF PRECEDENCE...............................................................99
ARTICLE 41 GENERAL..........................................................................100
ARTICLE 42 ATTACHMENTS......................................................................104
</TABLE>
<PAGE> 4
TABLE OF CONTENTS (CONTINUED)
<TABLE>
<S> <C>
ARTICLE 43 TERMINATION RIGHT................................................................105
ARTICLE 44 RESERVED.........................................................................106
ARTICLE 45 ANTICIPATED LIFE OF SATELLITE....................................................107
ARTICLE 46 KEY PERSONNEL ...................................................................108
</TABLE>
<PAGE> 5
PREAMBLE
This Contract is entered into as of February 22, 2000 (the "Effective Date of
Contract" or "EDC") between EchoStar Orbital Corporation, organized and existing
under the laws of the State of Colorado having an office and place of business
at 5701 South Santa Fe, Littleton, Colorado 80120 (hereinafter referred to as
"Purchaser") and Space Systems/Loral, Inc., a corporation organized and existing
under the laws of the State of Delaware, having an office and place of business
at 3825 Fabian Way, Palo Alto, California 94303 (hereinafter referred to as
"Contractor").
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RECITALS
WHEREAS, Purchaser desires to procure one (1) communications satellite, known as
EchoStar 9, to be delivered on-orbit, risk management therefor, all required
ground equipment and support and training services, to the extent and subject to
the terms and conditions set forth herein, and
WHEREAS, Contractor is willing to furnish such Satellite, Launch Services, risk
management, ground equipment and support and training services, to the extent
and subject to the terms and conditions set forth herein, in consideration of
the Firm Fixed Price and other valid consideration.
NOW, THEREFORE, the Parties hereto agree as follows:
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ARTICLE 1 - DEFINITIONS
Capitalized terms used and not otherwise defined herein shall have the following
meanings:
1.1 "ACCEPTANCE" (i) with respect to a Satellite shall be as provided for
in Article 10, and (ii) with respect to any Deliverable Item other than
a Satellite shall be as provided for in Article 11.
1.2 "AFFILIATE" means, with respect to a Party, any person or entity
directly or indirectly controlling, controlled by or under common
control with such Party.
1.3 "AVAILABLE COMMUNICATIONS CAPACITY" means the cumulative sum of the
Expected Transponder Life of all Ku-band and Ka-band Transponders on a
Satellite.
1.4 "CONTRACT" means the articles of this executed Contract, its Exhibits
and its Attachment(s), as may be amended from time to time in
accordance with the terms hereof.
1.5 "CONTRACTOR" has the meaning set forth in the preamble and any
successor or assignee permitted hereunder.
1.6 "DELIVERABLE DATA" means the data and documentation required to be
delivered to Purchaser as specified in the Statement of Work.
1.7 "DELIVERABLE ITEM" means any of the items listed in Article 3.1, and
any other items ordered by Purchaser pursuant to Article 29, and,
collectively, the "DELIVERABLE ITEMS".
1.8 "DELIVERY" (i) with respect to a Satellite shall be as provided for in
Article 12.1, and (ii) with respect to any Deliverable Item other than
a Satellite shall be as provided for in Article 12.2.
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1.9 "EFFECTIVE DATE OF CONTRACT" or "EDC" means the effective date of this
Contract as specified in the preamble.
1.10 "EXPECTED TRANSPONDER LIFE" means, with respect to a particular
Transponder, the span of time measured in years (and any portion
thereof), calculated from the earlier to occur of: (i) 30 days after
Lift-Off or (ii) Purchaser's Acceptance or rejection of the applicable
Satellite pursuant to Article 10, until the earlier to occur of: (i)
the end of the Satellite Stated Life for such Satellite or (ii) the
time when the relevant Transponder experiences or is expected to
experience a Transponder Failure.
1.11 "FCC" means the Federal Communications Commission or any successor
agency or governmental authority.
1.12 "FIRM FIXED PRICE" has the meaning set forth in Article 4.1.
1.13 "FORCE MAJEURE" has the meaning set forth in Article 17.
1.14 "GROSS NEGLIGENCE" means reckless disregard for the rights of others
which very closely approaches intentional wrongdoing or other actions
(or failures to act) which very closely approach intentional
wrongdoing.
1.15 "IN-ORBIT TESTING" or "IOT" means the testing of a Satellite on-orbit
in accordance with the Program Test Plan.
1.16 "INTELLECTUAL PROPERTY CLAIM" has the meaning set forth in Article 19.
1.17 "INTENTIONAL IGNITION" means, with respect to a Satellite, the official
time designated by the Launch Agency during the launch sequence when
the initial motors of the Launch Vehicle are ignited for the purpose of
Launch following a planned countdown.
1.18 "LAUNCH" means, with respect to a Satellite, Intentional Ignition
followed by Lift-Off.
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1.19 "LAUNCH AGENCY" means the provider responsible for conducting the
Launch Services for a Satellite.
1.20 "LAUNCH SERVICES" means those services provided by the Launch Agency
pursuant to the Launch Services Agreement.
1.21 "LAUNCH SERVICES AGREEMENT" or "LSA" means the contract between
Contractor and the Launch Agency which provides for Launch Services for
a Satellite, as such contract may be amended from time to time in
accordance with its terms.
1.22 "LAUNCH SITE" means the location that will be used by the Launch Agency
for purposes of launching a Satellite.
1.23 "LAUNCH SUPPORT" or "LAUNCH SUPPORT SERVICES" means those services
specified in the Statement of Work to be provided by Contractor in
support of Launch.
1.24 "LAUNCH VEHICLE" means the launch vehicle selected by Purchaser and
used for Launch of a Satellite.
1.25 "LIBOR" means the rate of interest per annum, at any relevant time, at
which thirty (30) day U.S. dollar deposits are offered at such time in
the London interbank market.
1.26 "LIFT-OFF" means, with respect to a Satellite, physical separation of
the Launch Vehicle from the ground support equipment following
Intentional Ignition due to the Launch Vehicle rising under its own
power for the purpose of launching a Satellite.
1.27 "MISSION OPERATIONS SUPPORT SERVICES" means the orbit-raising, IOT and
related services specified in the Statement of Work to be performed by
Contractor for a Satellite.
1.28 "NSP" means not separately priced.
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1.29 "PARTIAL LOSS" means, with respect to any Satellite, that the Available
Communications Capacity is less than the Stated Communications Capacity
as a result of one or more Ku-Band or Ka-Band Transponder Failures
where such reduction does not constitute a Total Loss, and where the
event giving rise to such loss has manifested itself at or after
Intentional Ignition.
1.30 "PARTIAL LOSS AMOUNT" means an amount payable to Purchaser pursuant to
Article 10, and calculated pursuant to Article 24, for the purpose of
indemnifying Purchaser in the event of a Partial Loss.
1.31 "PARTY" or "PARTIES" means Purchaser, Contractor or both, as the
context requires.
1.32 "PAYMENT PLAN" means the payment plan for the applicable Deliverable
Item, attached as Attachment A.
1.33 "PERFORMANCE SPECIFICATION" means the Satellite performance
specification attached as Exhibit B, as such Exhibit may be amended
from time to time in accordance with the terms of this Contract.
1.34 "PMO" means the Purchaser's program management office.
1.35 "PRODUCT ASSURANCE PROGRAM PLAN" means the product assurance program
plan attached as Exhibit C, as such Exhibit may be amended from time to
time in accordance with the terms of this Contract.
1.36 "PROGRAM TEST PLAN" means the Satellite program test plan attached as
Exhibit D, as such Exhibit may be amended from time to time in
accordance with the terms of this Contract.
1.37 "PROPRIETARY INFORMATION" has the meaning set forth in Article 35.
1.38 "PURCHASER" has the meaning set forth in the preamble and any successor
or assignee permitted hereunder.
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1.39 "SATELLITE" means a communications satellite that is to be manufactured
by Contractor pursuant to this Contract.
1.40 "SATELLITE ACCEPTANCE REVIEW" has the meaning set forth in Article
10.1.
1.41 "SATELLITE ANOMALY" means, with respect to any Satellite, any
occurrence that occurs at or after Intentional Ignition and has or
could have an impact on a Satellite's health or performance of such
Satellite.
1.42 "SATELLITE PRE-SHIPMENT REVIEW" OR "SPSR" has the meaning set forth in
Article 9.
1.43 "SATELLITE STATED LIFE" means fifteen (15) years after the earlier to
occur of: (i) thirty (30) days after Lift-Off or (ii) Purchaser's
Acceptance or rejection of a Satellite pursuant to Article 10.
1.44 "SCF" means satellite control facility.
1.45 "SKYNET" means and refers to Loral SpaceCom Corporation, a corporation
organized and existing under the laws of the State of Delaware, doing
business as Loral Skynet(R), and having a place of business at 500
Hills Drive, Bedminster, New Jersey 07921.
1.46 "STATEMENT OF WORK" or "SOW" means the statement of work attached as
Exhibit A, as such Exhibit may be amended from time to time in
accordance with the terms of this Contract.
1.47 "STATED COMMUNICATIONS CAPACITY" means, with respect to a Satellite,
the product of the Satellite Stated Life multiplied by the number of
Ku-Band and Ka-Band Transponders on such Satellite (excluding the
C-band Transponders on a Satellite).
1.48 "TT&C" means telemetry, tracking and control.
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1.49 "TOTAL LOSS" means, with respect to any Satellite (i) the complete
loss, destruction or failure of such Satellite, (ii) a loss or failure
such that the Available Communications Capacity is equal to less than
fifty percent (50%) of the Stated Communications Capacity, or (iii)
prior to IOT, but in any event no later than one hundred twenty (120)
days after Launch, the failure to place such Satellite into its
assigned orbital location.
1.50 "TRANSPONDER" means individually those sets of equipment within the
communications subsystem of a Satellite that provide a discrete path to
receive communications signals from earth, translate and amplify such
signals and transmit them to earth.
1.51 "TRANSPONDER FAILURE" means, at any time at or after Intentional
Ignition the physical loss of, or damage to, or permanent failure
(including permanently intermittent failures) of a Ku-Band or Ka-Band
Transponder to meet the requirements of the Performance Specification,
provided that, after all reasonable technical alternatives for
correcting such failure are examined: (i) the relevant Transponder
cannot be used for its intended commercial communications purposes; or
(ii) consistent with telemetry data, IOT or other evidence that
manifests itself at or after Intentional Ignition, it is expected that
the relevant Transponder will cease to be able to be used for its
intended commercial communications purposes before the end of Satellite
Stated Life. All available redundant and/or spare components on the
Satellite applicable to the Transponder must be used or cease to be
available before a Transponder is considered to have experienced a
Transponder Failure. For clarification purposes, a Transponder shall be
deemed a Transponder Failure if: (i) it cannot be used for its intended
commercial communications purposes, or (ii) consistent with telemetry
data, IOT or other evidence that manifests itself at or after
Intentional Ignition, it is expected that the relevant Transponder will
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cease to be able to be used for its intended commercial communications
purposes before the end of Satellite Stated Life, in either case due to
the failure of the Satellite to meet the requirements of the
Performance Specification, including without limitation loss of power
or on-board propellant, even if the relevant Transponder itself meets
the requirements of the Performance Specification.
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ARTICLE 2 - SCOPE OF WORK
2.1 Provision of Services and Materials
Contractor shall provide the necessary personnel, material, services,
and facilities to: design, manufacture, test, Launch and deliver on
orbit to Purchaser, one (1) Satellite, together with all other
Deliverable Items referred to in Article 3.1, in accordance with the
following Exhibits, which are attached hereto and made a part hereof:
2.1.1 Exhibit A, Statement of Work, dated [TBD] (Document Reference No.
[TBD]);
2.1.2 Exhibit B, Satellite Performance Specification, dated [TBD] (Document
Reference No. [TBD]);
2.1.3 Exhibit C, Product Assurance Program Plan, dated [TBD] (Document
Reference No. [TBD]);
2.1.4 Exhibit D, Satellite Program Test Plan, dated [TBD] (Doc No. [TBD]).
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ARTICLE 3 - DELIVERABLE ITEMS AND DELIVERY SCHEDULE
3.1 Deliverable Items
Subject to the other terms and conditions of this Contract, the items
to be delivered under this Contract are specified in the table below
and the corresponding delivery schedules and locations are as follows:
<TABLE>
<CAPTION>
ITEM DESCRIPTION DELIVERY SCHEDULE DELIVERY LOCATION
---- ----------- ----------------- -----------------
<S> <C> <C> <C>
1. Satellite (EchoStar 9) 29 months after To 121 W.L. geostationary orbital
EDC location.
2. Deliverable Data Per SOW, Exhibit A PMO
3. Support and Training Per SOW, Exhibit A Contractor's facilities and
Purchaser's SCF
4. Ground Equipment Per SOW, Exhibit A Purchaser's SCF
</TABLE>
Contractor shall, at its cost, use its reasonable best efforts to
obtain all U.S. and foreign Government approvals necessary to export
and import the applicable Satellite, all Deliverable Items and
Deliverable Data required hereunder, the Launch Vehicle and the
individual components of the applicable Satellite, such Deliverable
Items and Deliverable Data and the Launch Vehicle.
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ARTICLE 4 - PRICE
4.1 Firm Fixed Price
The total price to be paid by Purchaser and Skynet to Contractor for
the Deliverable Items 1 through 4 set forth in Article 3.1 within the
scope of work detailed in the Statement of Work, shall be a firm fixed
price of $XXX (the "Firm Fixed Price"). The prices for those
Deliverable Items subject to an option under this Contract, if any, are
described in the particular Articles that set forth those options. The
itemization of the Firm Fixed Price is as follows:
<TABLE>
<CAPTION>
Item Description Amount
---------------- ------
<S> <C>
Satellite (EchoStar 9) $XXX
</TABLE>
The item price for such Satellite includes in-orbit delivery and all
design, manufacturing, tests, In Orbit Incentives, Deliverable Data,
training, Launch and placement into the assigned orbital location,
Launch Vehicle, Launch Services, Launch Support Services, Mission
Operations Support Services, risk management insurance, ground
equipment and shipment and transportation, all in accordance with the
terms and conditions of this Contract, as specified herein. The item
price also includes, and Contractor shall indemnify, defend and hold
Purchaser, its Affiliates, directors, officers, employees, shareholders
and agents harmless from and against, all applicable taxes, duties and
similar liabilities whatsoever imposed by any governmental entity in
connection with this Contract, except any tax on the sale to Purchaser
resulting from Purchaser's election to exercise the Ground Storage
option in Article 33.
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Purchaser's share of the Firm Fixed Price is One Hundred Twenty Nine
Million Dollars ($129,000,000). The remaining Ninety Three Million
Dollars ($93,000,000) shall be paid by Skynet directly to Contractor
(the "Skynet Portion"). Purchaser does not guarantee payment of the
Skynet Portion, and Contractor agrees to look solely and exclusively to
Skynet for payment of the Skynet Portion. Failure of Skynet to make
payment of the Skynet Potion, when due, shall not be considered a
breach or default of this Contract and Contractor shall nonetheless
still be obligated to fully perform its obligations and duties under
this Contract. Contractor acknowledges and agrees that Purchaser shall
have no liability to Contractor whatsoever in the event that Skynet
fails to make timely payment of the Skynet Portion, and that Contractor
shall have no recourse whatsoever against Purchaser in such case.
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ARTICLE 5 - PAYMENTS
5.1 Payment Plan
Absent a bona fide dispute, payments by Purchaser to Contractor of its
portion of the Firm Fixed Price set forth in Article 4 and of the
amounts for options, if any, exercised by Purchaser pursuant to this
Contract, shall be in accordance with the Payment Plan applicable
thereto.
5.2 Payment Conditions
5.2.1 Payments. Absent a bona fide dispute, all payments due from
Purchaser shall be paid no later than the date specified
therefor as set forth in the Payment Plan, provided that: (i)
Contractor submits to Purchaser an invoice with respect to
each such payment no later than thirty (30) days prior to such
due date; and (ii) Contractor completes the applicable
milestone set forth in Attachment A no later than five (5)
business days prior to such due date. Notwithstanding the
foregoing, in the event that Contractor does not deliver an
invoice to Purchaser at least thirty (30) days prior to such
due date and/or does not achieve the relevant milestone, or
provide a work-around that does not affect schedule and is
otherwise acceptable to Purchaser, at least five (5) business
days prior to such due date, Purchaser may suspend all
payments until such time as the relevant invoice is received
and milestone is completed. Within thirty (30) days following
Purchaser's receipt of the relevant invoice or five (5)
business days following Contractor's completion of the
relevant milestone, whichever occurs later, Purchaser shall
pay Contractor for all payments that were required to have
been made but were not as a result of the suspension.
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5.2.2 Milestones. Notwithstanding the milestones set forth in
Attachment A, if it becomes reasonably clear that problems
with deliverables are reasonably likely to cause schedule
delays, then all payments may be suspended, at Purchaser's
option, and the date for payment of each subsequent payment
delayed, by an amount of time equal to the difference between
the originally scheduled delivery date for the Satellite set
forth in Article 3 and the revised forecast delivery date. In
the event that Contractor subsequently recovers all or a
portion of the originally scheduled delivery date for the
Satellite, payments will again be revised to reflect that
recovery. Further, if, following completion of a milestone, a
problem arises which requires rework of elements of the
milestone, then payments may be suspended, at Buyer's option,
until the milestone is again complete.
5.2.3 Non-Warranty Payments. Absent a bona fide dispute, all amounts
payable to Contractor with respect to non-warranty work
performed pursuant to Article 15.3 shall be paid no later than
thirty (30) days after submission of an invoice by Contractor
certifying that such non-warranty work has been completed.
5.2.4 Obligation to Pay. The failure of Contractor to deliver any
invoice required hereunder shall not affect Purchaser's
obligation hereunder to make any payments to Contractor. If
Contractor shall not have delivered any invoice required
hereunder within the time specified therefor, subject to the
terms and conditions of this Article 5, the relevant payment
due from Purchaser shall be payable thirty (30) days after
receipt of such invoice.
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5.3 Late Payment
Except in the case of a bona fide dispute, in the event that any
payment owed by one party to the other party is not made when due
hereunder, without prejudice to the second party's other rights and
remedies under this Contract, at law or in equity, the first party
shall pay the other party interest at the rate of LIBOR + XXX until
such time as payment is made. If a payment due to Contractor from
Purchaser is not made by the date thirty (30) days after the date due
hereunder, without prejudice to Contractor's other rights and remedies
under this Contract, at law or in equity, Contractor may elect to cease
performance of its obligations under this Contract, without prejudice
or penalty. In such case, if Contractor subsequently resumes
performance in lieu of termination pursuant to Article 23.5, the
schedule, price and other affected provisions of this Contract shall be
modified to compensate Contractor for its added reasonable, actual
out-of-pocket costs plus a profit of twelve percent (12%) (and
otherwise account for the non-economic impacts on Contractor)
associated with such work stoppage. Notwithstanding the foregoing, in
the event of a bona fide dispute between the Parties regarding a
payment due hereunder, such dispute shall be resolved pursuant to
Article 25 hereof, and Contractor shall have no right during the
penance of such dispute to stop work under this Contract because of
such dispute.
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5.4 Invoices
Invoices required to be delivered by Contractor hereunder shall be
submitted to Purchaser (original plus one (1) copy) at the following
address:
EchoStar Orbital Corporation
5701 South Santa Fe
Littleton, CO 80120
ATTN.: Rohan Zaveri
(with copies to David Moskowitz and Charlie Ergen)
or to such other address as Purchaser may specify in writing to
Contractor.
5.5 Payment Bank
All payments made to Contractor hereunder shall be in U.S. currency and
shall be made by electronic funds transfer to the following account:
BANK OF AMERICA
SPACE SYSTEMS/LORAL, INC.
ACCOUNT NO. 75-69165
CHICAGO, ILLINOIS
ABA #071-000-039
or by check to:
Space Systems/Loral
3825 Fabian Way
Palo Alto, CA 94303
Attn: Ronald Haley
or to such other account or address as Contractor may specify in
writing to Purchaser.
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ARTICLE 6 - PURCHASER-FURNISHED ITEMS
6.1 Purchaser-Furnished Support
To enable Contractor to perform Launch Support and Mission Operations
Support Services, Purchaser shall timely make available to Contractor
the Purchaser-furnished equipment, facilities and services described in
the Statement of Work. Such equipment, facilities and services shall be
in good working condition and adequate for the required purpose and
shall be made available free of charge for Contractor's use (including
Acceptance inspection pursuant to Article 11) during the period
commencing sixty (60) days prior to such Launch and continuing through
completion of the Satellite Acceptance Review. Purchaser and Contractor
will conduct an interface meeting approximately one hundred eighty
(180) days prior to such Launch to confirm the availability and
adequacy of Purchaser-furnished equipment, facilities and services.
6.2 Communications Authorizations
Purchaser shall be responsible, at its cost and expense, for preparing,
coordinating and filing all applications for licenses with the FCC, if
required to do so, for the Launch and operation of the Ku-Band and
Ka-Band payloads on a Satellite. Contractor shall timely provide
Purchaser with all reasonable assistance, at no additional cost to
Purchaser, requested by Purchaser in connection with Purchaser's
performance of the above-specified tasks, and in connection with the
filing of any technical filings required to be made by Purchaser with
the FCC.
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6.3 Radio Frequency Coordination
Purchaser shall be responsible for the timely preparation and
submission of all filings required by the International
Telecommunication Union (or any successor agency thereto) regarding
radio frequency and orbital position coordination for the Ku-Band and
Ka-Band payloads. Such filings shall be made in accordance with the
Radio Regulations of the International Telecommunication Union (or any
successor agency). Contractor shall timely provide Purchaser with all
reasonable assistance, at no additional cost to Purchaser, requested by
Purchaser in connection with Purchaser's performance of the
above-specified tasks.
6.4 Licenses and Permits
Except as set forth in Articles 6.2 and 6.3 above, Contractor shall be
responsible, at its sole cost and expense, for securing any and all
permits and licenses for the construction, transportation and Launch of
a Satellite (other than FCC construction permits for the Ku-Band and
Ka-Band payloads).
6.5 Satellite Performance Data
In the event of a Satellite Anomaly that occurs during the life of a
Satellite, Purchaser shall timely provide Contractor with or give
Contractor access to any data Contractor may reasonably require to
investigate or correct (if Contractor is able to do so) such Satellite
Anomaly or make or settle any insurance claim relating to such
Satellite Anomaly.
6.6 Late Delivery of Purchaser-Furnished Items or Services
The late delivery of Purchaser-furnished items, individually or
combined, shall be considered an event beyond the reasonable control
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of Contractor, and Contractor shall be entitled to a reasonable
adjustment in price, schedule, and other affected terms for such late
delivery.
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ARTICLE 7 - COMPLIANCE WITH U.S. EXPORT LAWS AND DIRECTIVES
7.1 Technical Information, Deliverable Data and Technical Services
7.1.1 Any obligation of either Party hereunder to provide technical
information, Deliverable Data or technical services to the
other Party or its representatives shall be subject to
applicable U.S. Government export control and security laws,
regulations, policies and license conditions. The Parties
shall work cooperatively and in good faith to implement this
Contract consistent with such laws, regulations, policies and
license conditions.
7.1.2 If and to the extent required by U.S. law, the Parties and/or
their representatives shall enter into U.S.
Government-approved agreement(s), separate from this Contract,
governing the Party's provision of technical information,
Deliverable Data or technical services in connection with this
Contract.
7.2 No Retransfer
The Parties shall not transfer to any "foreign person", as defined in
the International Traffic in Arms Regulations (22 C.F.R. Section 120.1)
technical information, Deliverable Data or technical services furnished
hereunder, except as expressly authorized by the U.S. Government in
accordance with U.S. export control laws. THE PARTIES UNDERSTAND AND
WARRANT THAT THEY SHALL NOT RE-EXPORT, TRANSFER OR DIVERT ANY ITEM
EXPORTED UNDER OR IN CONNECTION WITH THIS CONTRACT TO ANY "FOREIGN
PERSON" WITH A NATIONALITY OTHER THAN CONTRACTOR'S OR PURCHASER'S,
RESPECTIVELY, WITHOUT THE PRIOR WRITTEN APPROVAL OF THE U.S.
GOVERNMENT.
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ARTICLE 8 - ACCESS TO WORK IN PROGRESS
8.1 Work in Progress at Contractor's Plant
Subject to Article 7 and Article 8.5 and to compliance with
Contractor's safety and security regulations, Purchaser's and Skynet's
employees (and representatives, consultants or agents, subject to the
prior approval of Contractor, which approval shall not be unreasonably
withheld or delayed) shall be allowed access to work being performed at
Contractor's facility for the Satellite and other Deliverable Items,
for the purpose of observing the progress of such work and otherwise
confirming Contractor's compliance with this Contract. Notwithstanding
anything to the contrary set forth herein, the fact that Purchaser
and/or Skynet have observed work performed hereunder shall not be
deemed Purchaser's Acceptance or approval of such work.
8.2 Work in Progress at Subcontractors' Plant
Subject to Article 7 and Article 8.5, to the extent permitted by
Contractor's subcontractors supplying services or goods in connection
with the Satellite and subject to each such subcontractor's safety and
security regulations, Contractor shall allow Purchaser's and Skynet's
employees (and representatives, consultants or agents, subject to the
prior approval of Contractor, which approval shall not be unreasonably
withheld or delayed) access to work being performed with respect to the
Satellite in each such subcontractor's plants for the purpose of
observing the progress of such work and otherwise confirming
Contractor's compliance with this Contract, subject to the right of
Contractor to accompany Purchaser and/or Skynet on any such visit to a
subcontractor's plant; provided, however, that Purchaser and/or Skynet
may conduct an unaccompanied observation in the event that Contractor
fails to furnish a representative after reasonable written
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notice of Purchaser's or Skynet's observation request. Contractor will
use reasonable efforts to obtain permission for such access to
subcontractor's facilities.
8.3 Remedy for Non-Compliance
Purchaser may inform Contractor in writing of any particulars in which
Purchaser observes that work being performed under this Contract is
non-compliant, and Contractor shall remedy such non-compliance at
Contractor's expense, promptly upon receipt of notice thereof.
8.4 On-Site Facilities for Purchaser's Personnel
Subject to Article 7 and Article 8.5, for the purpose of monitoring the
progress of the work to be performed by Contractor hereunder and
otherwise confirming Contractor's compliance with this Contract,
Contractor shall provide private office facilities at or proximate to
Contractor's plant (which private office facilities shall in all cases
at least be co-located with Contractor's program management office) for
two (2) resident employees of Purchaser (or Purchaser's duly appointed
representatives, consultants and agents, subject to the prior approval
of Contractor, which approval shall not be unreasonably withheld or
delayed) through Acceptance of the last Satellite ordered hereunder (or
for a reasonable period of time after the completion of the Satellite
Acceptance Review, in the event that Purchaser exercises its option
under Article 29.2 to direct Contractor not to provide insurance for a
Satellite). The office facilities to be provided shall include a
reasonable amount of private office space, office furniture, local and
reasonable long distance telephone service, access to copy machines and
access to facsimile machines, to the extent necessary to enable such
personnel to monitor the progress of work and otherwise confirm
Contractor's compliance with this Contract.
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8.5 Competition/Foreign Persons as Purchaser Representatives
Purchaser's representatives, consultants and agents shall not be in
direct competition with Contractor, meaning they shall not currently be
employed by companies or entities that are in the business of
manufacturing communication satellites. Purchaser shall notify
Contractor in writing of the name, title or function, business
relationship, employer and such other information as may be reasonably
requested by Contractor, with respect to each of its intended
representatives, consultants and agents, and cause each such
representative, consultant and agent to execute a confidentiality
agreement directly with Contractor in form and substance reasonably
satisfactory to Contractor and containing terms substantially the same
as those set forth in Article 35. Contractor may deny access to
Contractor provided office facilities to any representative, consultant
or agent of Purchaser upon Contractor's reasonable determination that
such consultant or agent is, by reason of its business or affiliations,
in direct competition with Contractor.
Contractor shall apply for and, once issued, maintain all U.S.
Government export licenses and approvals needed for Purchaser's
employees and representatives, agents and consultants who are citizens
of a country other than the U.S., to access Contractor's and its
subcontractors' facilities or technical data in connection with the
performance of this Contract. Purchaser shall cooperate with Contractor
and provide the support necessary for Contractor to apply for and
maintain such export licenses and approvals, and shall promptly notify
Contractor of any occurrence or change in circumstances of which it
becomes aware that is relevant to or affects such export license and
approvals. IN NO EVENT SHALL CONTRACTOR BE OBLIGATED UNDER THIS
CONTRACT TO PROVIDE ACCESS TO CONTRACTOR FACILITIES, TO TRANSFER
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ANY TECHNICAL INFORMATION OR DELIVERABLE DATA OR TO PROVIDE ANY
TECHNICAL SERVICES, TO ANY PERSON EXCEPT IN COMPLIANCE WITH APPLICABLE
U.S. EXPORT CONTROL LAWS, REGULATIONS, POLICIES AND LICENSE CONDITIONS,
AS REASONABLY CONSTRUED BY CONTRACTOR.
8.6 Interference with Operations
Purchaser shall exercise its rights under this Article 8 in a manner
that does not unreasonably interfere with Contractor's or its
subcontractors' normal business operations or Contractor's performance
of its obligations under this Contract or any agreement between
Contractor and its subcontractors.
8.7 Notification
Notwithstanding any other provision of this Contract, Contractor shall
advise Purchaser immediately by telephone and confirm in writing any
event, circumstance or development which materially threatens the
quality of, or the delivery schedule for, any Satellite or component
part thereof, as well as any other Deliverable Items to be provided
hereunder.
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ARTICLE 9 - SATELLITE PRE-SHIPMENT REVIEW (SPSR)
9.1 Purchaser to Review
Purchaser shall conduct a review of each Satellite prior to shipment by
Contractor to the Launch Site in accordance with the terms of this
Article 9 and the Statement of Work (each a "Satellite Pre-Shipment
Review" or "SPSR").
9.2 Time, Place and Notice of SPSR; Failure to Conduct
Each SPSR shall take place at Contractor's facility. Contractor shall
notify Purchaser in writing at least thirty (30) days prior to the date
that each Satellite shall be available for SPSR, which shall be the
scheduled date for commencement of such SPSR. If Purchaser cannot
commence such SPSR on such scheduled date, Contractor shall make
reasonable efforts to accommodate Purchaser's scheduling requirements.
9.3 Conduct and Purpose of SPSR
Each SPSR shall be conducted in accordance with the pertinent Sections
of the Statement of Work. The purpose of each SPSR shall be to review
test data and analyses for the subject Satellite to determine whether
such Satellite meets applicable Performance Specification requirements
and is therefore ready for shipment to the Launch Site.
9.4 Waivers or Pending Waivers
At the earliest possible time, but at least ten (10) days before the
commencement of the SPSR for the Satellite or the Acceptance inspection
for any Deliverable Item pursuant to Article 11, Contractor shall
submit to Purchaser any request for a waiver of, or deviation from,
provisions(s) of the Performance Specification applicable to the
Satellite or Deliverable Item. Each such waiver or deviation approved
by Purchaser shall be deemed an amendment to the Performance
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Specification permitting such waiver thereof, or deviation therefrom,
effective on or after the date of such approval for the Satellite or
Deliverable Item. Purchaser shall, in keeping with customary industry
practice, consider each waiver or deviation request in good faith and
shall not unreasonably withhold or delay its consent to any such
request.
9.5 Purchaser's Inspection Agents
Purchaser may, subject to prior written notice to Contractor, cause any
representative, consultant or agent designated by Purchaser to observe
the SPSR pursuant to this Article 9; provided, however, that the
provisions of Article 7 and Article 8.5 shall apply to any such
representative, consultant or agent.
9.6 SPSR Results
Within a reasonable time after completion of the SPSR for the
Satellite, Purchaser shall notify Contractor in writing of the results
of the SPSR pursuant to this Article 9 with respect to the Satellite.
Provided Purchaser is in compliance with its contractual obligations
hereunder, such Satellite shall be prepared and shipped to the Launch
Site for Launch upon successful completion of the SPSR. In the event
that such SPSR discloses any non-conformance of the Satellite to the
requirements of the Performance Specification not the subject of any
waivers or deviations approved by Purchaser pursuant to Article 9.4,
Purchaser's notice shall state each such non-conformance (with
reference to the applicable requirement of the Performance
Specification deemed not met), and Contractor shall correct or repair
each such non-conformance and resubmit such Satellite for SPSR in
accordance with this Article 9 as to each corrected or repaired
element.
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9.7 Inspection Equipment and Facilities
Contractor shall make available to Purchaser such equipment and
facilities as Purchaser may require to conduct any preshipment
inspections. All costs and expenses incurred by Purchaser and its
agents to dispatch its personnel for pre-shipment inspections,
including travel and living expenses, shall be borne solely by
Purchaser.
9.8 Correction of Deficiencies after SPSR
If at any time following the SPSR for a Satellite, but prior to Launch,
Contractor becomes aware that such Satellite fails to meet the
Performance Specification, as may be modified as of such time pursuant
to Article 9.4, Contractor shall promptly correct such deficiencies at
its own cost and expense.
9.9 Warranty Obligations
In no event shall Contractor be released from any of its warranty
obligations as set forth in Article 15 hereof as a result of any
Satellite having successfully passed the pre-shipment inspection set
forth in this Article 9.
9.10 Repaired or Replaced Satellites
The provisions of this Article 9 shall apply to corrected, repaired or
replaced Satellites.
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ARTICLE 10 - SATELLITE ACCEPTANCE - PARTIAL AND TOTAL LOSS
10.1 Satellite Acceptance Procedure
Following the successful completion of the SPSR for the relevant
Satellite pursuant to Article 9, including without limitation the
correction of any non-conforming items pursuant to Article 9.6,
Contractor shall transport such Satellite, in accordance with
Contractor's standard commercial practices, to the Launch Site and
proceed with the Launch of such Satellite. During the period between
the successful completion of SPSR and Launch, Purchaser shall have the
continuing right to monitor, observe, evaluate and inspect the
Satellite. Thirty (30) days prior to the then-scheduled Launch of the
Satellite, Contractor shall notify Purchaser of the IOT schedule with
respect to the Satellite. Purchaser may observe and participate in such
IOT at Purchaser's, Skynet's and/or Contractor's location, at
Purchaser's election, subject to applicable U.S. Government and
Contractor security and export restrictions.
When, in the reasonable assessment of Contractor, IOT has been
completed for a Satellite, Contractor shall submit the IOT results to
Purchaser and shall either (i) certify to Purchaser by delivery of a
Satellite Acceptance Certificate pursuant to the SOW that such
Satellite meets the applicable criteria for Acceptance set forth in
Article 10.2 or (ii) certify to Purchaser by means of a written notice
that the Satellite is a Total Loss.
Within seventy-two (72) hours after Contractor provides the certified
IOT results to Purchaser with respect to the Satellite, Contractor and
Purchaser shall hold a Satellite Acceptance Review as defined in the
SOW. Within a reasonable period of time after completion of such
review, Purchaser shall either accept such Satellite in writing in
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accordance with Article 10.2 ("Acceptance" with respect to such
Satellite), or reject such Satellite in writing as a Total Loss, in
which event the provisions of Article 10.4 shall apply.
If Purchaser shall reject the Satellite as a Total Loss hereunder, and
Contractor disputes such rejection, rejection shall be deemed to have
occurred with respect to such Satellite pending resolution of such
dispute pursuant to Article 25. Should Purchaser's rejection be
sustained pursuant to Article 25, the provisions of Article 10.4 shall
apply to such Satellite. If such rejection is not sustained, Purchaser
shall promptly pay to Contractor all amounts that should have been paid
to Contractor if the Satellite was Accepted, plus interest in
accordance with Article 5.3 at the rate of LIBOR + 2% per annum.
Contractor may elect to conduct the IOT eclipse test set forth in the
Program Test Plan with respect to a Satellite during the first eclipse
season after IOT is otherwise completed. In such case, Satellite
Acceptance or rejection for such Satellite shall occur on the basis of
IOT results excluding the IOT eclipse test. For a Satellite that is
accepted pursuant to Article 10.1 on the basis of IOT results excluding
the IOT eclipse test, the results of the later IOT eclipse test will be
provided to Purchaser for Satellite performance characterization and
insurance purposes only and shall in no way affect Acceptance of such
Satellite.
10.2 Satellite Acceptance Criteria
Purchaser shall be obligated to accept a Satellite as set forth in
Article 10.1 if, as of the completion of the Satellite Acceptance
Review with respect to the Satellite, there has not been both: (i) a
Total Loss, as determined on the basis of the Ku-Band and Ka-Band
Transponders, and (ii) a total loss of the C-Band payload, as
determined using the criteria for determining a Total Loss, except that
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such determination shall be based solely upon the C-Band Transponders,
as opposed to the Ku-Band and Ka-Band Transponders.
10.3 Partial Loss Payment
If a Satellite (focusing solely on Ku-Band and Ka-Band payloads)
experiences a Partial Loss at any time during the period starting at
Intentional Ignition and ending one (1) year after Launch, Purchaser
shall be entitled to payment of a Partial Loss Amount calculated
pursuant to Article 24. Such Partial Loss Amount shall be paid by
Contractor to Purchaser upon the earlier to occur of: (i) 180 days
after the Partial Loss occurs and is known to Contractor, or (ii) ten
(10) days after Contractor receives proceeds for the Partial Loss from
the carrier that issued the risk management insurance policy described
in Article 39 or 29.3, as applicable.
10.4 Total Loss of a Satellite
10.4.1 If, with respect to a Satellite or a Replacement Satellite (as
defined below), at any time during the period starting at
Intentional Ignition and ending one (1) year after Launch,
there shall occur a Total Loss (such Satellite a "Total Loss
Satellite"), Contractor shall pay to Purchaser the greater of:
(i) total amount paid by Purchaser to Contractor for the Total
Loss Satellite, or (ii) the amount of the insurance procured
for the Ku-Band and Ka-Band payloads on such Total Loss
Satellite by Contractor pursuant to Article 39.1 or 29.3, as
applicable, below (less any portion of the Firm Fixed Price
due and owing to Contractor from Purchaser hereunder), in
either case Purchaser shall have no further obligation to
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make any further payments of the Firm Fixed Price to
Contractor hereunder.
Any amounts owed by Contractor under the immediately preceding
paragraph shall be made by Contractor to Purchaser upon the
earlier to occur of: (i) 180 days after the Total Loss occurs
and is known by Contractor, or (ii) ten (10) days after
Contractor receives proceeds for the Total Loss from the
carrier that issued the risk management insurance policy
described in Article 39 or 29.3, as applicable.
Notwithstanding anything to the contrary herein, if a bona
fide dispute exists as to whether or not the Satellite or
Replacement Satellite is a Total Loss, Contractor shall not be
obligated to refund any amounts paid until after the dispute
is resolved.
10.4.2 In lieu of Purchaser receiving payment of the appropriate
amount set forth in Article 10.4.1, if, with respect to a
Satellite (but not a Replacement Satellite), at any time
during the period starting at Intentional Ignition and ending
one (1) year after Launch, there has been both (i) a Total
Loss, as determined on the basis of the Ku-Band and Ka-Band
Transponders, and (ii) a total loss of the C-Band payload, as
determined using the criteria for determining a Total Loss,
except that such determination shall be based solely upon the
C-Band Transponders, as opposed to the Ku-Band and Ka-Band
Transponders, and both Purchaser and Skynet direct Contractor
in writing to construct and Launch a Replacement Satellite (as
defined below), then Contractor shall provide a new Satellite
(a "Replacement Satellite") substantially identical to the
Total Loss Satellite, which complies in all respects with the
Performance
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Specification, in accordance with the terms and conditions of
this Contract, to be delivered on orbit (provided that
Contractor shall not use a Launch Vehicle, the failure of
which resulted in the loss of the previous Satellite, without
Purchaser's prior written consent, which consent may be
withheld in Purchaser's reasonable judgment) to the location
specified in Article 3 within 27 months after the later to
occur of (i) Purchaser exercising this option or (ii) the
parties resolving any dispute as to whether or not a Total
Loss has occurred; or
If the option set forth in this Article 10.4.2 is selected by
Purchaser, Purchaser shall remain obligated to pay the
remaining unpaid portion of the Firm Fixed Price in accordance
with the terms of this Contract, except that the timing of
such remaining Payments shall be equitably adjusted to
accommodate the construction schedule for the Replacement
Satellite.
10.4.3 Upon the occurrence of a Total Loss with respect to a
Satellite or a Replacement Satellite, and as a condition to
Contractor performing as required under this Article 10.4,
Purchaser shall:
(i) Promptly refund to Contractor any Partial Loss Amount
previously paid by Contractor to Purchaser with respect to
such Total Loss Satellite; and
(ii) Cease to operate or use the Ku-Band and Ka-Band payloads
on such Satellite or Replacement Satellite that results in a
Total Loss promptly upon the occurrence of such Total Loss,
and, in the event that Acceptance of such Satellite or
Replacement Satellite shall have previously
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occurred, Purchaser shall release any right, title and
interest it may have in the Ku-Band and Ka-Band payloads and
Purchaser's ownership interest in the Common Elements (as
defined in the Agreement between Purchaser and Skynet of even
date herewith) of such Satellite or Replacement Satellite to
Contractor and shall promptly discharge or cause to be
discharged, at its expense, any lien, security interest,
charge or other claim on the Ku-Band and Ka-Band payloads and
Purchaser's ownership interest in the Common Elements of such
Satellite or Replacement Satellite or on any part thereof.
10.5 TT&C
If the Satellite experiences a material Anomaly at or prior to handover
of the Satellite, Contractor agrees to fly the Satellite until the
earlier to occur of: (i) all material anomalies being resolved; (ii)
insurance for all material anomalies being paid to Purchaser; or (iii)
Purchaser informing Contractor that it desires to use the Satellite for
commercial purposes (provided that, in such instance, Contractor shall
continue to fly the Satellite until such time as all material anomalies
are fully understood by both parties and Contractor has properly
trained Purchaser how to fly the Satellite in such anomalous
condition).
10.6 Scope of Coverage. For clarification purposes, the Parties acknowledge
and agree that Contractor's obligation to make payments for a Total
Loss or Partial Loss under this Contract only apply with respect to
Ku-Band and Ka-Band transponders. The Parties further acknowledge and
Agree that, except as otherwise set forth in Article 10.4.2,
Contractor's obligations to Skynet with respect to total loss or
partial loss of the C-Band Transponders and/or Skynet's ownership
interest in the Common Elements will be dealt with under a separate
arrangement between Contractor and Skynet.
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Notwithstanding anything to the contrary herein, in the event that the
insurance policy procured by Contractor pursuant to Article 39.1 or
29.3 below, if any, provides broader coverage than the Total Loss and
Partial Loss coverage provided hereunder, then Purchaser shall be
entitled to receive the benefit of such broader coverage.
In addition, if the overall Satellite experiences an Anomaly which will
affect the use of one or more Transponders, and a decision must be made
as to which Transponder(s) shall be affected, then such decision shall
be made in accordance with the terms and conditions of the Agreement
between Purchaser and Skynet of even date herewith. If this situation
arises, Contractor shall have no obligations under this Article 10
until such decision is communicated to Contractor.
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ARTICLE 11 - ACCEPTANCE INSPECTION FOR DELIVERABLE ITEMS OTHER THAN SATELLITES
11.1 Inspection of Deliverable Items of Hardware Other Than Satellites
With respect to each Deliverable Item of hardware other than
Satellites, Purchaser shall perform Acceptance inspection within ten
(10) business days after Contractor has notified Purchaser that such
Deliverable Item has arrived at the location designated for delivery
thereof in Article 3.1. Such Acceptance inspection shall be conducted
in accordance with the procedures described in the Statement of Work.
The purpose of the Acceptance inspection shall be to determine whether
each such Deliverable Item meets applicable Performance Specification
requirements as of the date of such delivery, as such requirements may
have been modified pursuant to Article 11.3.
11.2 Purchaser's Inspection Agents
Purchaser may, upon giving prior written notice to Contractor, cause
any representative, consultant or agent designated by Purchaser to
conduct the Acceptance inspection pursuant to this Article 11 in whole
or in part; provided, however, that the provisions of Article 7 and
Article 8.5 shall apply to any such representative, consultant or agent
and representative, consultant or such agent shall comply with
Contractor's safety and security regulations.
11.3 Pending Waivers
Waivers of or deviations from the Performance Specification applicable
to any Deliverable Item subject to Acceptance inspection pursuant to
this Article 11 shall be addressed in the same manner as set forth in
Article 9.4.
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11.4 Acceptance Inspection Results
Within a reasonable time after completion of Acceptance inspection
pursuant to this Article 11 for any Deliverable Item, Purchaser shall
notify Contractor in writing of the results of such Acceptance
inspection. In the event that such Acceptance inspection demonstrates
conformity of such Deliverable Item to the applicable requirements of
the Performance Specification, such Deliverable Item shall be deemed
accepted by the Purchaser for all purposes hereunder ("Acceptance" with
respect to each such Deliverable Item other than a Satellite), and
Purchaser's notice shall so state. In the event that such Acceptance
inspection discloses any non-conformance of such Deliverable Item to
the applicable requirements of the Performance Specification,
Purchaser's notice shall detail each such non-conformance (with
reference to the applicable requirement of the Performance
Specification deemed not met), and Contractor shall correct or repair
such non-conformance and resubmit such Deliverable Item for Acceptance
inspection in accordance with this Article 11 as to each such corrected
or repaired element.
11.5 Acceptance Inspection; Equipment and Facilities
Contractor shall make available to Purchaser such equipment and
facilities as Purchaser may require to conduct any preshipment
inspections. All costs and expenses incurred by Purchaser or its agents
to dispatch its personnel for acceptance inspections, including travel
and living expenses, shall be borne solely by Purchaser.
11.6 Warranty Obligations
In no event shall Contractor be released from any of its warranty
obligations applicable to any Deliverable Item as a result of such
Deliverable Item having been Accepted as set forth in this Article 11.
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11.7 Repair or Replace Deliverable Items.
The provisions of this Article 11 shall apply to corrected, repaired or
replaced Deliverable Items other than Satellites.
11.8 Deliverable Data
Purchaser shall, within ten (10) business days of delivery by
Contractor to the location designated in Article 3.1 of Deliverable
Data requiring Purchaser approval pursuant to the Statement of Work,
notify Contractor in writing that such Deliverable Data has been
accepted in accordance with the Statement of Work ("Acceptance" with
respect to each such item of Deliverable Data), or advise Contractor in
writing that such Deliverable Data does not comply with the applicable
requirements of the Statement of Work, identifying each particular of
such non-compliance. Contractor shall promptly correct any
non-compliant aspect of such Deliverable Data described in such Notice
from Purchaser, and re-submit it to Purchaser for inspection pursuant
to this Article 11.7.
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ARTICLE 12 - DELIVERY, TITLE AND RISK OF LOSS
12.1 Satellites
Delivery of the Satellite shall occur, and risk of loss of, and title
to, the Satellite shall pass from Contractor to Purchaser, upon
Acceptance of such Satellite pursuant to Article 10.1.
EXCEPT WITH RESPECT TO WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY
CONTRACTOR, UPON AND AFTER LAUNCH OF THE LAUNCH VEHICLE FOR A
SATELLITE, CONTRACTOR'S SOLE FINANCIAL RISK, AND THE SOLE AND EXCLUSIVE
REMEDIES OF PURCHASER OR ANY PARTY ASSOCIATED WITH PURCHASER, WITH
RESPECT TO THE USE OR PERFORMANCE OF SUCH SATELLITE (INCLUDING WITH
RESPECT TO ANY ACTUAL OR CLAIMED DEFECT CAUSED OR ALLEGED TO BE CAUSED
AT ANY TIME BY CONTRACTOR OR ANY OF ITS SUBCONTRACTORS), SHALL BE AS
SET FORTH IN ARTICLES 4.1, 10, 13, 15, 19, 20, AND 24. IN ALL CASES
CONTRACTOR'S LIABILITY SHALL BE SUBJECT TO THE LIMITATION OF LIABILITY
SET FORTH IN ARTICLE 34. WITHOUT PREJUDICE TO PURCHASER'S RIGHTS UNDER
ARTICLES 10 AND 24, CONTRACTOR MAKES NO WARRANTY AS TO THE PERFORMANCE
OF ANY LAUNCH VEHICLE.
12.2 Deliverable Items Other Than Satellites
Delivery and risk of loss of, and title to, each Deliverable Item of
hardware other than Satellites shall pass from Contractor to Purchaser
upon Acceptance of such Deliverable Item pursuant to Article 11.4.
Purchaser's rights in Deliverable Data are as set forth in Article 36.
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ARTICLE 13 - XXX
XXX
ARTICLE 14 - INTENTIONALLY DELETED
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ARTICLE 15 - WARRANTY
15.1 Terms and Period of Warranty
15.1.1 Satellites. Contractor warrants that each Satellite delivered
under this Contract shall be free from any defects in design,
material or workmanship and shall be manufactured and perform
in conformity with the Performance Specification (as may be
waived pursuant to Article 9.4) applicable to the Satellite in
every respect. Prior to Launch, Contractor shall, at its sole
cost and expense, correct any defects in design, material and
workmanship in compliance with Article 9. After Launch,
Contractor's sole obligation and liability in breach of this
warranty is to comply with Articles 4.1, 10, 15.2.1 and 24.
Contractor makes no warranty regarding the performance of the
Satellite from and after the Launch of the Satellite. Nothing
in this Article 15.1.1 shall be construed to limit or
otherwise affect Contractor's obligations under Articles 19
and 20.
15.1.2 Deliverable Items of Hardware Other Than Satellites.
Contractor warrants that each Deliverable Item of hardware
other than the Satellite delivered under this Contract shall
be manufactured and will perform in conformity with the
Performance Specification (as may be waived pursuant to
Article 11.3) applicable to such Deliverable Item in every
respect and will be free from defects in design, materials and
workmanship during the period commencing on the date of
Acceptance of such Deliverable Item pursuant to Article 11 and
ending on the first anniversary thereof.
15.1.3 Disclaimer. EXCEPT AND TO THE EXTENT PROVIDED IN ARTICLE 15.1
AND ARTICLE 15.4, CONTRACTOR HAS
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NOT MADE NOR DOES IT HEREBY MAKE ANY REPRESENTATION OR
WARRANTY, WHETHER WRITTEN OR ORAL, EXPRESS OR IMPLIED,
INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF DESIGN,
OPERATION, CONDITION, QUALITY, SUITABILITY OR MERCHANTABILITY
OR FITNESS FOR USE OR FOR A PARTICULAR PURPOSE, ABSENCE OF
LATENT OR OTHER DEFECTS, WHETHER OR NOT DISCOVERABLE, WITH
REGARD TO ANY SATELLITE OR ANY OTHER DELIVERABLE ITEM.
15.2 Repair or Replacement
15.2.1 Satellite Anomalies.
Contractor shall investigate any Satellite Anomaly in any
Satellite arising during the life of the Satellite, and use
reasonable best efforts to correct any such Satellite Anomaly
that is correctable by Contractor from Purchaser's SCF using
the facilities and equipment available at such site.
WITHOUT PREJUDICE TO PURCHASER'S RIGHTS UNDER ARTICLES 19 AND
20, CONTRACTOR SHALL HAVE NO LIABILITY TO PURCHASER OR TO
THIRD PARTIES ARISING FROM ANY ADVICE OR ASSISTANCE THAT
CONTRACTOR OR ANY SUBCONTRACTOR OR AGENT OF CONTRACTOR MAY
PROVIDE IN RESPECT OF A SATELLITE AFTER LAUNCH, REGARDLESS OF
CAUSE OR LEGAL THEORY, INCLUDING NEGLIGENCE, EXCEPT WITH
RESPECT TO: (1) WILLFUL MISCONDUCT OR GROSS NEGLIGENCE BY
CONTRACTOR, AND (2) PURCHASER'S RIGHTS AND CONTRACTOR'S DUTIES
AND OBLIGATIONS UNDER ARTICLES 4.1, 10, 13, 15.2.1
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AND 24. IN ALL CASES CONTRACTOR'S LIABILITY SHALL BE SUBJECT
TO THE LIMITATION OF LIABILITY SET FORTH IN ARTICLE 34.
15.2.2 Deliverable Items of Hardware Other Than Satellites.
Without prejudice to Purchaser's right and Contractor's duties
and obligations under Articles 4.1, 19 and 20, during the
period specified in Article 15.1.2 for any Deliverable Item of
hardware other than a Satellite, as Purchaser's sole and
exclusive remedy, any defect in such Deliverable Item
discovered by Purchaser shall be remedied by Contractor at
Contractor's expense by repair or replacement of the defective
component (at Contractor's election). For any such Deliverable
Item, Contractor shall determine if repair or replacement is
required to be performed at Contractor's plant. If required,
Purchaser shall ship to Contractor's designated facility any
such Deliverable Item. Contractor shall be responsible for the
cost of shipment to such facility in accordance with its
standard commercial practice (including any taxes and/or
duties) of any such Deliverable Item, and the cost of return
shipment, in accordance with its standard commercial practice,
of any such Deliverable Item once repaired or replaced to
Purchaser at the location designated therefor in Article 3.1.
Risk of loss for such Deliverable Item shall transfer to
Contractor upon delivery of such Deliverable Item to the
shipping carrier by Purchaser, and risk of loss shall transfer
to Purchaser for any such Deliverable Item once repaired or
replaced pursuant to this Article 15.2.2 upon receipt thereof
by Purchaser at the location designated therefor in Article
3.1. When necessary,
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Contractor shall provide free of charge temporary equipment to
be used while a repair is being performed.
15.3 Use Conditions Not Covered by Warranty
With respect to Deliverable Items of hardware other than Satellites,
the warranty under this Article 15 shall not apply if adjustment,
repair, or parts replacement is required as a result, directly or
indirectly, of accident, unusual physical or electrical stress beyond
the unit's designed tolerances, negligence, misuse, failure of
environmental control prescribed in operations and maintenance manuals,
repair or alterations by any party other than Contractor or its agents,
or by causes other than normal and ordinary use. The warranty provided
pursuant to this Article 15 is conditioned upon Contractor being given
access, if required, to Deliverable Items delivered at Purchaser's
facility in order to effect any repair or replacement thereof. If the
defect repaired or remedied by Contractor is not covered by the
warranty provided pursuant to this Article 15, Purchaser shall pay
Contractor the reasonable cost of such repair or replacement,
transportation charges, and a twelve percent (12%) profit. Such repair
costs shall be invoiced to Purchaser pursuant to the provisions of
Article 5.
15.4 Warranty for Training and Services
Contractor warrants that the training and other services it provides to
Purchaser pursuant to this Contract will conform to reasonable industry
standards at the time such training or other services are provided. In
the event Contractor breaches this warranty, as Purchaser's sole
remedy, Contractor shall apply reasonable efforts to correct the
deficiencies in the provision of such training and other services where
it is practicable to do so.
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ARTICLE 16 - CHANGES
16.1 Right to Adjustment
Purchaser may from time to time, in writing, request a change within
the general scope of this Contract to:
a) Order work in addition to the work provided for
herein; or
b) Modify the whole or any part of the work provided for
herein.
If such change request causes an increase or decrease in the cost, or
the time required for completion, of the work to be provided herein, or
otherwise affects any other provision of this Contract, an equitable
adjustment shall be made in the price, or delivery schedule, or both,
and this Contract shall be modified in writing accordingly. Any claim
by Contractor for adjustment under this Article 16 shall be deemed
waived unless asserted in writing within sixty (60) days from the
receipt by Contractor of the relevant change order. If the cost of
supplies or materials made obsolete or excess as a result of a change
is included in Contractor's claim for adjustment, Purchaser shall have
the right to prescribe the manner of disposition of such supplies or
materials. Nothing in this Article 16 shall excuse Contractor from
promptly proceeding with the Contract as changed.
16.2 Cost Adjustments
If Contractor or Purchaser claims a right to adjustment pursuant to
Article 16.1 above, Contractor shall prepare and furnish to Purchaser
the evidence reasonably necessary to establish the amount of any
increase or decrease in the cost of, or the time required for, the
performance of this Contract caused by the relevant change order.
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Subject to Article 16.3 below, the amount of any such cost increase or
decrease will be calculated in accordance with Contractor's regularly
established accounting practices and include a profit margin of twelve
percent (12%). If requested by Purchaser, the amount of a particular
claim shall be verified, at Contractor's and Purchaser's expense to be
shared equally, by the independent certified public accounting firm
normally used by Contractor.
16.3 Equitable Adjustment
The Parties shall attempt to reach agreement as to any equitable
adjustment that is appropriate pursuant to Article 16.1 above. Without
relieving Contractor of the obligation to proceed promptly with the
Contract as changed, in the event that the Parties are unable to reach
agreement as to an equitable adjustment, the matter shall be determined
in accordance with Article 25. During the pendency of such proceedings,
Contractor shall proceed with the work required under this Contract as
changed and Purchaser shall pay Contractor all amounts not in dispute.
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ARTICLE 17 - FORCE MAJEURE
17.1 Contractor and Purchaser shall not be responsible for late Delivery,
delay of the final completion date or nonperformance of its contractual
obligations due to Force Majeure. Force Majeure shall be any event
beyond the reasonable control of a Party or its suppliers and
subcontractors and shall include, but not be limited to: (1) acts of
God; (2) acts of a public enemy; (3) acts of a government in its
sovereign capacity (including any action or inaction affecting the
import or export of items); (4) war and warlike events; (5)
catastrophic weather conditions such as hurricanes, tornadoes and
typhoons; (6) fire, earthquakes, floods, epidemics, quarantine
restrictions, strikes, lockouts and other industrial disputes,
sabotage, riot and embargoes; (7) non-availability of a Launch Vehicle
or Launch Site for any reason beyond a Party's reasonable control; and
(8) other unforeseen and extraordinary events, which in every case are
beyond the reasonable control and without fault or negligence of a
Party or its suppliers and subcontractors ("Force Majeure"). Upon the
occurrence of Force Majeure, an equitable adjustment shall be
negotiated in the schedule and other portions of this Contract affected
by Force Majeure. The Party affected by a Force Majeure event shall
provide reasonable notice to the other Party of a Force Majeure event.
In the event that a Force Majeure event (other than the
non-availability of a Launch Vehicle or Launch Site) occurs that
extends for two-hundred and seventy (270) or more days or that the
Parties reasonably believe will extend for two-hundred and seventy
(270) or more days, either Party shall have the right to terminate this
Contract upon delivery of written notice to the other party. In the
event of a termination pursuant to the immediately preceding sentence,
Contractor shall refund all payments made by Purchaser for Deliverable
Items not previously Accepted by Purchaser and Purchaser shall have no
further obligation to make any further payments of the Firm Fixed Price
to Contractor hereunder.
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17.2 Special Provision For Launch Vehicle Unavailability.
As of EDC, Contractor intends to Launch each Satellite using a Zenit
3SL Launch Vehicle provided by the Sea Launch Limited Partnership (a
"Sea Launch"). In the event that: (i) during the twelve (12) month
period of time prior to the scheduled Launch of a Satellite a Zenit 3SL
launch is unsuccessful due to a launch vehicle failure; (ii) at any
time prior to the scheduled Launch of a Satellite, a Zenit 3SL launch
is unsuccessful due to a launch vehicle failure and such unsuccessful
launch is reasonably expected to cause a delay of more than [TBD] days
in the Launch of the Satellite; (iii) a Satellite is scheduled to be
Launched immediately following an unsuccessful Zenit 3SL launch due to
a launch vehicle failure; (iv) or other reasons [TBD], then Purchaser
shall have the right to direct Contractor to instead use the launch
vehicle listed below that is expected to have the ability to launch the
Satellite in the shortest period of time (plus or minus one month)
after occurrence of the relevant event described in Subsections (i)
through (iv) above, taking into consideration all relevant factors
including without limitation integration and the procurement of any and
all additional licenses necessary in connection therewith: (a) an
Ariane 44L, (b) Delta IV, (c) Atlas V or (d) Proton Breeze M (assuming
that the Proton Breeze M can accommodate the Satellite) (such direction
a "Launch Vehicle Switch Direction"). Contractor shall be responsible
for all additional costs to switch from a Sea Launch to an Atlas V,
Delta IV or Proton Breeze M Launch Vehicle. In the event of switch to
an Ariane 44L, Purchaser shall be responsible for the increased cost of
the launch vehicle only, and Contractor shall be responsible for any
and all additional costs to switch from a Sea Launch to an Ariane 44L,
including without limitation integration and the procurement of any and
all
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additional licenses necessary in connection therewith. Upon receiving a
Launch Vehicle Switch Direction, Contractor shall procure a new Launch
Vehicle in accordance with the procedures set forth in this Article
17.2 and Contractor shall use its reasonable best efforts to ensure
that such new Launch Vehicle is available for Launch with the least
delay possible. Purchaser understands and acknowledges that in all
likelihood Contractor will not be able to Launch the Satellite on the
new Launch Vehicle until at least twelve (12) months after Contractor
receives a Launch Vehicle Switch Direction. Contractor understands and
acknowledges that in all likelihood the launch campaigns for the launch
vehicles listed in Subsections (a) through (d) above will be at least
one (1) month shorter than the launch campaign for a Zenit 3SL.
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ARTICLE 18 - PURCHASER DELAY OF WORK
Except in the case of a Force Majeure event, if the performance of all or any
part of the work required of Contractor under this Contract is delayed or
interrupted by Purchaser's failure to perform its contractual obligations within
the time specified in this Contract or within a reasonable time if no time is
specified, or an act by Purchaser that unreasonably interferes with Contractor's
performance of its obligations under this Contract, Contractor shall give notice
to Purchaser of the failure or act causing such delay or interruption. If
Purchaser does not promptly cease such act or correct such failure, this
Contract shall be equitably adjusted in the price, performance requirements,
Delivery schedule, and any other terms of this Contract affected by such act or
failure to act of Purchaser.
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ARTICLE 19 - PATENT INDEMNITY
19.1 Indemnification
Purchaser agrees that Contractor has the right to defend and, at
Contractor's sole option to settle, and Contractor, at its own expense,
hereby agrees to defend or, at Contractor's sole option to settle, and
to indemnify and hold harmless Purchaser, and its Affiliates, and their
respective officers, directors, employees, shareholders, agents and
representatives from and against any and all claims, actions, suits or
proceedings based on an allegation that the design or manufacture of
any Deliverable Item or part thereof or the normal intended use, lease,
sale or other disposition of any Deliverable Item or part thereof
infringes any patent or other intellectual property right
("Intellectual Property Claim"), and shall pay any royalties and other
liabilities adjudicated to be owing to the claimant (or, in
Contractor's sole discretion, provided in settlement of the matter) as
well as costs incurred in defending (including court costs and
reasonable attorneys' fees) such Intellectual Property Claim; provided
that Purchaser promptly notifies Contractor in writing of any such
Intellectual Property Claim and gives Contractor the authority and all
such assistance and information as may be requested from time to time
by Contractor for the defense of such Intellectual Property Claim. Any
such assistance or information which is furnished by Purchaser at the
request of Contractor shall be at Contractor's expense.
In any proceeding relating to an Intellectual Property Claim, any
person or entity entitled to indemnification hereunder (an "Indemnified
Party") shall have the right to retain its own counsel at its own
expense. Notwithstanding the foregoing, Contractor shall pay the fees
and expenses of counsel retained by an Indemnified Party in the event
that: (i) Contractor and such Indemnified Party shall have mutually
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agreed to retention of such other counsel; or (ii) the named parties to
any proceeding (including without limitation any impleaded parties)
include both Contractor and such Indemnified Party and representation
of both Contractor and such Indemnified Party by the same counsel would
be inappropriate due to actual or potential conflict of interest
between them.
19.2 Infringing Equipment
If the design or manufacture of any Deliverable Item or the normal
intended use, lease, sale or other disposition of any Deliverable Item
under this Contract is enjoined as a result of an Intellectual Property
Claim or is otherwise prohibited, Contractor shall (i) resolve the
matter so that the injunction or prohibition no longer pertains, (ii)
procure for Purchaser the right to use the infringing item or (iii)
modify the infringing item so that it becomes non-infringing while
remaining in compliance with the Performance Specification (as may be
waived pursuant to Article 9.4) in all respects. If Contractor is
unable to accomplish (i), (ii) or (iii) as stated above, Purchaser
shall have right to terminate this Contract with respect to such
Deliverable Item, return such Deliverable Item to Contractor (in space,
with respect to an in-orbit Satellite), and receive a refund of the
price paid for such Deliverable Item (less amounts unpaid for such item
plus a reasonable allowance for depreciation).
19.3 Combinations and Modifications
Contractor shall have no liability under this Article 19 for any
Intellectual Property Claim arising solely from (i) use of any
Deliverable Item in combination with other items, unless Contractor
sold them as a combination intended to be so used or (ii) modifications
of Deliverable Items after Acceptance, unless Contractor or one of its
subcontractors (with the knowledge and consent of Contractor) made or
specifically recommended such modifications.
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19.4 Sole Remedies
Except in the case of willful misconduct or Gross Negligence by
Contractor, the remedies set forth in this Article 19 are
Purchaser's sole and exclusive remedies for or related to any
Intellectual Property Claim, and Contractor's liability under this
Article 19 for any Intellectual Property Claim with respect to a
Deliverable Item shall in no event exceed the Firm Fixed Price
paid by Purchaser hereunder for such Deliverable Item. In all
cases Contractor's liability shall be subject to the limitation of
liability set forth in Article 34.
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ARTICLE 20 - INDEMNITY FOR BODILY INJURY AND PROPERTY DAMAGE
20.1 Contractor's Indemnification of Purchaser
Contractor shall defend, indemnify and hold harmless Purchaser, and its
Affiliates, and their respective directors, officers, employees,
shareholders, agents and representatives from and against all losses,
damages, liabilities, suits and expenses (including, but not limited
to, reasonable attorneys' fees) (collectively "Losses") attributable to
third party claims for bodily injury or property damage, but only if
such Losses were caused by, or resulted from, negligent acts or
omissions, Gross Misconduct or willful misconduct by Contractor or its
employees, agents, consultants or representatives. For the avoidance of
doubt, and except for Losses resulting from the Gross Negligence or
willful misconduct of Contractor, Contractor shall have no indemnity
obligation under this Article 20.1 for any Losses with respect to the
operation or use of a Satellite after Launch, even if such Losses are
attributable to an act or omission of Contractor or its employees prior
to Launch. In all cases Contractor's liability shall be subject to the
limitation of liability set forth in Article 34.
20.2 Purchaser's Indemnification of Contractor
Purchaser shall defend, indemnify and hold harmless Contractor, and its
Affiliates, and their respective directors, officers, employees,
shareholders, agents and representatives from and against all Losses
attributable to third party claims for bodily injury or property
damage, but only if such Losses were caused by, or resulted from,
negligent acts or omissions, Gross Negligence or willful misconduct by
Purchaser or its employees, agents, consultants or representatives.
20.3 Conditions to Indemnification
The right to any indemnity specified in Article 20.1 or 20.2 shall be
subject to the following conditions:
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a. The Party seeking indemnification shall promptly advise the
other Party in writing of the filing of any suit or of any
written or oral claim for indemnification upon receipt thereof
and shall provide the other Party, at its request, with such
assistance and information available to the indemnified party
as is relevant to the defense such suit or claim. Any such
assistance or information which is furnished by the
indemnified Party at the request of the indemnifying Party
shall be at the indemnifying Party's expense.
b. The Party seeking indemnification shall not make any admission
nor shall it reach a compromise or settlement without the
prior written approval of the other Party, which approval
shall not be unreasonably withheld or delayed.
c. The indemnifying Party shall assist and shall have the right
to assume, when not contrary to the governing rules of
procedure, the defense of any claim or suit in settlement
thereof and shall satisfy any judgments rendered by a court of
competent jurisdiction in such suits and shall make all
settlement payments.
d. The Party seeking indemnification may participate in any
defense at its own expense, using counsel reasonably
acceptable to the indemnifying Party, provided there is no
conflict of interest and that such participation would not
adversely affect the conduct of the proceedings.
e. Notwithstanding the foregoing, the indemnifying party shall
pay the fees and expenses of counsel retained by an
indemnified party in the event that: (i) the indemnifying
party and such indemnified party shall have mutually agreed to
retention of such other counsel; or (ii) the named parties to
any proceeding (including without limitation any impleaded
parties) include both the indemnifying party and such
indemnified party and representation of both the indemnifying
party and such
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indemnified party by the same counsel would be inappropriate
due to actual or potential conflicts of interest between them.
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ARTICLE 21 - TERMINATION FOR CONVENIENCE
21.1 Reimbursement of Contractor
Purchaser may terminate this Contract without cause, in whole or in
part, by giving Contractor written notice thirty (30) days prior to the
date of such termination. In the event of such termination, Contractor
will immediately cease work as directed in the termination notice and
it is agreed that the termination charges shall be negotiated. In no
event shall the termination charges pursuant to this Article 21.1
exceed the lesser of: (i) the Firm Fixed Price, as the same may be
modified in accordance with the terms of this Contract, less the price
of work not terminated if a price has been established for such work;
or (ii) the sum of: (x) the amount provided in paragraph (a) below and
(y) 112% of the amounts provided in paragraphs (b) through (d) below
(less (A) amounts previously paid and (B) amounts representing
Contractor's costs of segregable items of inventory for the work
terminated hereunder not desired by Purchaser and which Contractor
elects to retain for its own use).
a. The price set forth in Article 4 for Deliverable Items
completed prior to such termination and accepted by Purchaser
before or after termination for which payment had not been
made by Purchaser.
b. Actual out-of-pocket costs incurred by Contractor in
performance of work on Deliverable Items for which this
Contract has been terminated pursuant to this Article 21.1,
that have not been accepted by Purchaser or for which a price
has not been established.
c. Actual out-of-pocket costs incurred by Contractor in
completing the termination process.
d. Actual out-of-pocket costs incurred by Contractor in settling
claims of subcontractors and other suppliers and vendors in
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connection with such termination; provided that Contractor
shall use reasonable efforts to minimize such costs.
In no event will the aggregate of the amounts previously paid by
Purchaser under this Contract and the amounts to be paid by Purchaser
under this Article 21.1 exceed the Firm Fixed Price, as the same may be
modified in accordance with the terms of this Contract.
21.2 Partial Termination
If the termination by Purchaser is partial, the price for the
non-terminated portion of this Contract shall be increased by an amount
equal to the reasonable additional actual, out-of-pocket costs, if any,
which must be borne by such portion because of the partial termination,
plus a XXX profit on such additional costs; however, in no event will
the aggregate of the amounts previously paid by Purchaser under this
Contract and the amounts to be paid by Purchaser for the non-terminated
portion of this Contract, as increased under this Article 21.2, exceed
the Firm Fixed Price, as the same may be modified in accordance with
the terms of this Contract.
21.3 Title Transfer
In the event of a termination pursuant to this Article 21, a
termination settlement meeting shall be held at a mutually agreed time
and place no later than sixty (60) days after submission of a claim by
Contractor pursuant to Article 21.1. At or prior to the date of such
termination settlement meeting, Contractor shall provide Purchaser with
such documentation of the costs set forth in Articles 21.1 and 21.2 as
Purchaser may reasonably request. Upon mutual agreement of the
termination settlement, Contractor may submit an invoice to Purchaser
for payment in accordance with the terms of Article 5.2. Upon mutual
agreement of the termination settlement, subject to applicable U.S.
Government export laws, Contractor shall, at Contractor's or
subcontractor's plant, transfer title and risk of loss to Purchaser of
all Deliverable Items referred to in Article 21.1(a), and all other
partially
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completed or incomplete Deliverable Items for which Contractor is
entitled to payment under this Article 21 at the time of the
termination settlement. Purchaser may direct Contractor to undertake to
reallocate to other uses, and/or to otherwise assist Purchaser in
disposing/selling, items subject to termination under this Article 21
for the purpose of receiving a price refund or offset against
Contractor's termination claim. Upon receipt of such direction,
Contractor shall, on a reasonable efforts basis, attempt to reallocate,
and/or to otherwise assist Purchaser in disposing/selling, the items
and provide a refund (in cases where the amounts generated are greater
than Contractor's termination claim) to Purchaser or an offset (in
cases where the amounts generated are less than or equal to
Contractor's termination claim) against Contractor's termination claim,
less any reasonable selling expenses.
21.4 Minimize Termination Costs
In the event of termination pursuant to this Article 21, Contractor
shall take all actions necessary to reduce the termination costs due
from Purchaser, including but not limited to, the immediate
discontinuance of the terminated work under this Contract and the
placing of no further orders for labor, materials or services required
under the terminated portion of the Contract. Contractor agrees to take
such action as may be necessary or as Purchaser may direct for
protection of property in Contractor's possession in which Purchaser
may have acquired an interest.
21.5 Continued Efforts
Contractor shall continue performance of the portion of this Contract
not terminated. Purchaser shall have no obligations to Contractor with
respect to the terminated portion of this Contract except as set forth
in this Article 21.
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21.6 Settlements
Contractor agrees to advise Purchaser in writing of all proposed
settlements with vendors in excess of five hundred thousand dollars
($500,000.00) in the event of termination under this Article 21, and
Contractor further agrees not to enter into any binding settlements
until Purchaser has approved the proposed settlement or thirty (30)
days have elapsed from the date Purchaser was first notified of such
proposed settlement.
21.7 Measurement of Costs
Costs shall be determined in accordance with generally accepted
accounting principals and verified by an independent certified
accounting firm of national reputation mutually acceptable to Purchaser
and Contractor with costs therefor shared equally by both parties.
ARTICLE 22 - XXX
XXX
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ARTICLE 23 - DEFAULT
23.1 Failure to Perform by Contractor
Subject to Article 23.4 below, if: (i) Acceptance of a Satellite does
not occur within the time specified for delivery thereof plus the
maximum number of days for late delivery liquidated damages specified
in Article 22; (ii) Acceptance of any other Deliverable Item does not
occur within the time specified for delivery thereof in this Contract
(or, in either case, such longer time as may be agreed to in writing by
Purchaser), or (iii) Contractor fails to prosecute the work hereunder
or to perform any other material provision of this Contract, thereby
endangering performance of this Contract within the time period set
forth in Subsection (i) above, and in each case Contractor does not
cure such failure within sixty (60) days (or such longer period as may
be agreed to in writing by Purchaser) after receipt from Purchaser of
written notice of such failure, Purchaser may terminate this Contract
in whole or in part by written notice to Contractor.
23.2 Termination Liability
In the event of a termination for default pursuant to Article 23.1,
Contractor shall refund all payments made by Purchaser for the
terminated work except with respect to items referred to in Article
23.3, plus the maximum amount of liquidated damages payable pursuant to
Article 22. Such refund shall be made no later than XXX days after
Contractor's receipt of Purchaser's written notice requesting such
refund. In addition, Contractor shall pay to Purchaser all excess costs
above the prices set forth herein reasonably incurred by Purchaser in
reprocuring the work and Deliverables described herein, according to
the delivery schedules set forth herein. Such refund, liquidated
damages and excess reprocurement costs shall be Purchaser's sole remedy
in case of a termination pursuant to Article 23.1, except in the case
of willful misconduct or Gross Negligence by Contractor. In all
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cases Contractor's liability shall be subject to the limitation of
liability set forth in Article 34.
23.3 Partially Completed Items and Work In Process; Contractor's
Reimbursement for Terminated Work
In the event of termination pursuant to Article 23.1, upon Purchaser's
request, Contractor shall deliver to Purchaser all partially completed
items or services and work-in-process.
In the event of termination pursuant to Article 23.1, Contractor shall
not be required to refund any amounts, and Purchaser shall remain
liable for payment of all amounts, with respect to Deliverable Items
for which Acceptance has occurred pursuant to the terms of Article 10
or Article 11, or that are retained by Purchaser whether or not
completed, as follows: (i) at the price set forth in this Contract for
such items for which an itemized price is set forth herein and (ii) at
the reasonable out-of-pocket cost incurred by Contractor for (a) such
items for which no itemized price is set forth herein and (b) partially
completed items or services and work-in-progress.
23.4 Invalid Default Termination
If, after termination pursuant to Article 23.1, it is finally
determined by arbitration, legal proceeding or mutual agreement that
Contractor was not in default, or that the default was excusable, the
rights and obligations of the Parties shall be the same as if the
termination had occurred under Article 21; except that, Contractor
shall also be entitled to recover its additional reasonable
out-of-pocket costs that would not have been incurred but for such
invalid default termination.
23.5 Contractor Termination
Contractor may terminate this Contract upon Purchaser's failure to
comply with any material provision of this Contract by giving written
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notice to Purchaser of its intention to so terminate. Such notice shall
set forth the provision or provisions with which Purchaser has failed
to comply and a reasonably detailed description of such failure. Such
termination shall become effective upon Purchaser's failure to correct
such nonperformance within XXX days (or such longer period as may be
agreed to in writing by Contractor) after receipt of such notice from
Contractor.
In the event of termination pursuant to this Article 23.5, Contractor
shall be paid as if the termination were for convenience pursuant to
Article 21. Further, and without limiting Contractor's other rights or
remedies, Contractor may immediately take over all or part of the
Deliverable Items and Contract work-in-process and use them in any
manner Contractor may elect. In such case, the fair market value of any
Deliverable Items or Contract work-in-progress retained by Contractor
shall be off-set against Purchaser's termination liability. If, after
termination pursuant to this Article 23.5, it is finally determined by
arbitration pursuant to Article 25 that Purchaser did not fail in the
performance of its obligations under this Contract, Contractor shall be
liable to Purchaser for its reasonable direct damages resulting from
such termination of this Contract (in no event exceeding amounts
payable to Purchaser pursuant to Articles 23.2 and 23.3, except in the
case of Gross Negligence or willful misconduct, and in all cases
subject to the limitation of liability set forth in Article 34).
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ARTICLE 24 - PARTIAL LOSS AMOUNT
24.1 Partial Loss Amount
In the event any Satellite meets the criteria for Partial Loss pursuant
to Article 10.2, Contractor shall pay Purchaser a Partial Loss Amount
in accordance with this Article 24. In no event shall the aggregate of
Partial Loss Amounts for Partial Loss with respect to a Satellite
exceed the maximum sum insured for the Ku-Band and Ka-Band payloads on
such Satellite. In the event Purchaser has previously been indemnified
for a loss on a Satellite under the insurance policy therefor, the
amount of indemnity of Purchaser for a subsequent loss on such
Satellite shall be adjusted to eliminate any duplicative recovery for
loss. Except as otherwise provided in Articles 4.1, 10, 13 and 15, the
foregoing states Purchaser's sole remedy for a Partial Loss of any
Satellite, except in the case of Gross Negligence or willful
misconduct. In all cases Contractor's liability shall be subject to the
limitation of liability set forth in Article 34.
24.2 Calculation of Partial Loss Amount
Calculation of the Partial Loss Amount with respect to any Satellite
shall be made pursuant to the following formula:
Available Communications Capacity
Partial Loss Amount = A * (1 - ---------------------------------)
Stated Communications Capacity
"A" equals the amount for which the Ku-Band and Ka-Band payloads on a
Satellite are insured by Contractor pursuant to Article 39.1 or 29.3,
as applicable (less any portion of the Firm Fixed Price due and owing
to Contractor from Purchaser hereunder).
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ARTICLE 25 - ARBITRATION
25.1 Arbitration
Any dispute (except as set forth in Article 25.2) arising between the
Parties with respect to the performance of obligations under, or
interpretation of, this Contract that cannot be settled by negotiation
between the Parties within thirty (30) days of written notice from one
Party to the other stating such first Party's intent to resort to
arbitration ("Notice of Arbitration"), shall be determined by
submission to binding arbitration in accordance with the provisions of
the "Uniform Arbitration Act of 1975", part 2 of article 22 of title
13, Colorado Revised Statutes, as amended from time to time, and not by
a lawsuit or resort to court process except as Colorado law provides
for judicial review of arbitration proceedings. Any such arbitration
shall be conducted in the City and County of Denver, Colorado by a
panel of three arbitrators who shall be selected within sixty (60) days
of such Notice of Arbitration, as follows: (i) one arbitrator shall
selected by each Party; and (ii) the third arbitrator shall be selected
by the arbitrators chosen by the Parties. In resolving any dispute, the
arbitrators shall apply the substantive laws of the State of New York
(without regard to its conflict of law rules), but shall apply the
Colorado Rules of Civil Procedure and the Colorado Rules of Evidence,
and shall take into account usages, customs and practices in the
performance of contracts for the purchase and sale of commercial
communications satellites. Proceedings and documents provided and
generated in connection with any arbitration hereunder shall be in the
English language. Each Party shall bear its own costs and expenses
(including the costs and expenses of the arbitrator it selected) and
one-half of the costs and expenses of the third arbitrator, unless
otherwise determined in the arbitral award. The parties agree that, in
no event, shall the arbitrators' decision include a recovery under any
theory of liability, or award in any amount, not expressly allowed
under this Contract. In furtherance and without
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limitation of the foregoing, any award made by the arbitrators shall be
within the limitations set forth in Article 34.
25.2 Gross Negligence or Willful Misconduct
If a dispute arises as to whether or not a Party has committed or acted
with Gross Negligence or willful misconduct, that issue alone shall be
resolved by a federal or state court in New York without a jury, and
the court shall resolve such issue by applying the laws of the State of
New York without regard to its conflict of law rules. THE PARTIES
EXPRESSLY WAIVE THEIR RIGHT TO A JURY IN CONNECTION WITH SUCH DISPUTE.
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ARTICLE 26 - INTER-PARTY WAIVER OF LIABILITY FOR A LAUNCH
26.1 Launch Services Agreement Inter-Party Waiver of Liability
The Parties hereby agree to be bound by the no-fault, no-subrogation
inter-party waiver of liability and related indemnity provisions
provided in the Launch Services Agreement with respect to the Launch of
the Satellite and to use reasonable commercial efforts to cause their
respective contractors and subcontractors at any tier (including
suppliers of any kind) that are involved in the performance of this
Contract and any other person having an interest in the Satellite or
any Transponder thereon (including customers of Purchaser), as required
by the Launch Services Agreement and as specified by Buyer, to accede
to such waiver. The Parties shall execute and deliver any instrument
that may be required by the Launch Agency to evidence their agreement
to be bound by such waiver. Purchaser and Contractor also shall use
reasonable commercial efforts to obtain, from their insurers, and shall
use reasonable commercial efforts to cause their respective contractors
and subcontractors at any tier (including suppliers of any kind) that
are involved in the performance of this Contract and any other person
having an interest in any Satellite or any Transponder thereon
(including customers of Purchaser) to obtain from their insurers, as
required by the Launches Services Agreement and as specified by Buyer,
an express waiver of such insurers' rights of subrogation, subject to
terms and conditions as are then customarily available regarding such
waivers, with respect to any and all claims that have been waived
pursuant to this Article 26.
26.2 Indemnity Related to the Inter-Party Waiver of Liability
Each Party shall indemnify against and hold the other Party harmless
from any claim against the other Party, its contractors and
subcontractors at any tier (including suppliers of any kind) that are
involved in the performance of this Contract, made by the Launch
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Agency or any of its contractors and subcontractors (including
suppliers of any kind) that are involved in the performance of the
Launch Services Agreement, resulting from the failure of the first
Party to waive any liability against, or to use reasonable commercial
efforts to cause any other person such Party is obligated to use
reasonable commercial efforts to cause to waive any liability against,
the Launch Agency or its contractors and subcontractors at any tier
(including suppliers of any kind).
26.3 Survival of Obligations
The indemnification and hold harmless obligations provided in this
Article 26 shall survive and remain in full force and effect,
notwithstanding the expiration or termination of this Contract.
26.4 XXX
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ARTICLE 27 - CORRECTIVE MEASURES
27.1 Unlaunched Satellites
If the performance data from any launched satellite manufactured by
Contractor shows that such launched satellite will not or may not meet
the performance specifications for such launched satellite at any time
during its mission, then Contractor shall, at its sole cost and
expense, if applicable, take appropriate corrective measures in the
Satellite before it is Launched so as to eliminate therefrom the
deficiencies noted in the launched satellite.
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ARTICLE 28 - RESERVED
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ARTICLE 29 - XXX
XXX
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ARTICLE 30 - XXX
XXX
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ARTICLE 31 - RESERVED
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ARTICLE 32 - RESERVED
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ARTICLE 33 - GROUND STORAGE
33.1 Notification
Purchaser may direct Contractor to store the Satellite after completion
of SPSR.
33.2 Storage Location
Ground Storage shall be performed at a Contractor controlled facility
and shall be conducted in accordance with the satellite storage plan
section(s) of the Statement of Work.
33.3 Storage Prices
There shall be no charge for storage and reverification work if the
Contractor's failure to perform is the reason the Satellite is stored,
or if the Satellite is stored for less than six months.
The firm fixed price for Ground Storage of the Satellite in all other
circumstances shall be $XXX per month storage cost while the Satellite
is in Ground Storage. In addition, Purchaser shall also pay directly or
reimburse Contractor for all reasonable costs related to
re-verification of system flight assurance and re-verification testing
(plus XXX) and for all reasonable additional costs which Contractor
would not have incurred had Purchaser not elected Ground Storage of the
Satellite (including taxes, tariffs, duties, transportation, insurance,
and Launch preparation service-related expenses).
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33.4 Payments
Payments shall be made on the thirtieth day of each month for the prior
month's storage, provided an invoice is received at least thirty days
prior to the payment date.
33.5 Title and Risk of Loss
Title and risk of loss to a Satellite delivered for Ground Storage
shall remain with Contractor at the storage site. Contractor shall
assume full responsibility for any loss or damage to the Satellite
during Ground Storage.
33.6 Notification of Intention to Launch a Previously Stored Satellite
Purchaser shall notify Contractor in writing that a Satellite in Ground
Storage should be removed from Ground Storage and delivered to the
Launch Site. This notification must be received by Contractor not less
than three (3) months prior to the scheduled date for Delivery to the
Launch Site of the Satellite. Failure to notify Contractor in a timely
manner will result in an adjustment to the Delivery schedule for such
Satellite. Contractor shall use its reasonable best efforts to obtain
the next available Launch slot, subject to completion of all necessary
verification tests.
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ARTICLE 34 - LIMITATION OF LIABILITY
NEITHER PARTY SHALL BE LIABLE DIRECTLY OR INDIRECTLY TO THE OTHER PARTY
OR ITS AFFILIATES, OR THEIR OFFICERS, DIRECTORS, EMPLOYEES, CONTRACTORS
OR SUBCONTRACTORS AT ANY TIER (INCLUDING SUPPLIERS OF ANY KIND), AGENTS
OR CUSTOMERS, TO ITS PERMITTED ASSIGNEES OR SUCCESSOR OWNERS OF ANY
SATELLITE OR OTHER DELIVERABLE ITEM OR TO ANY OTHER PERSON CLAIMING BY
OR THROUGH SUCH PARTY FOR ANY AMOUNTS REPRESENTING LOSS OF PROFITS,
LOSS OF BUSINESS, OR INDIRECT, SPECIAL, INCIDENTAL, EXEMPLARY,
CONSEQUENTIAL OR PUNITIVE DAMAGES, INCLUDING WITHOUT LIMITATION LOST
PROFITS, LOST REVENUES OR COSTS OF RECOVERING A SATELLITE (EXCEPT WITH
RESPECT TO A THIRD PARTY'S DAMAGES FOR WHICH A PARTY HAS AN
INDEMNIFICATION OBLIGATION UNDER ARTICLE 19 OR 20), ARISING FROM OR
RELATING TO THE PERFORMANCE OR NONPERFORMANCE OF THIS CONTRACT OR ANY
ACTS OR OMISSIONS ASSOCIATED THEREWITH OR RELATED TO THE USE OF ANY
ITEMS DELIVERED OR SERVICES FURNISHED HEREUNDER, WHETHER THE BASIS OF
SUCH LIABILITY IS BREACH OF CONTRACT, TORT, STATUTE OR OTHER LEGAL OR
EQUITABLE THEORY, EXCEPT THAT IN THE EVENT OF WILLFUL MISCONDUCT OR
GROSS NEGLIGENCE BY CONTRACTOR OR PURCHASER SUCH PARTY MAY BE LIABLE
AND RESPONSIBLE FOR AMOUNTS REPRESENTING LOSS OF PROFITS, LOSS OF
BUSINESS AND THE OTHER ABOVE-DESCRIBED DAMAGES IN AN AMOUNT NOT TO
EXCEED $XXX.
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IN NO EVENT SHALL EITHER PARTY'S TOTAL LIABILITY UNDER OR IN CONNECTION
WITH THIS CONTRACT EXCEED $XXX (PROVIDED REFUNDS UNDER ARTICLE 23.2 AND
PAYMENTS FOR PARTIAL AND TOTAL LOSSES UNDER ARTICLES 10 AND 24 WILL NOT
COUNT AGAINST THIS FIGURE), EXCEPT FOR LIABILITY ARISING FROM WILLFUL
MISCONDUCT OR GROSS NEGLIGENCE BY A PARTY, IN WHICH CASE THE TOTAL
LIABILITY OF A PARTY MAY NOT EXCEED $XXX.
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ARTICLE 35 - DISCLOSURE AND HANDLING OF PROPRIETARY INFORMATION
35.1 Definition of Proprietary Information
For the purpose of this Contract, "Proprietary Information" means all
information (other than Deliverable Data, which is subject to the
provisions of Article 36), in whatever form transmitted, that is
disclosed by such Party (hereinafter referred to as the "disclosing
party") to the other Party hereto (hereinafter referred to as the
"receiving party") relating to the performance by the disclosing party
of this Contract and: (i) is identified as proprietary by means of a
written legend thereon, or (ii) if disclosed orally, is identified as
proprietary at the time of initial disclosure. Proprietary Information
shall not include any information disclosed by a Party that (i) is
already known to the receiving party at the time of its disclosure, as
evidenced by written records of the receiving party, without an
obligation of confidentiality at the time of disclosure; (ii) is or
becomes publicly known through no wrongful act of the receiving party;
(iii) is independently developed by the receiving party as evidenced by
written records of the receiving party; (iv) such Party is legally
compelled to disclose; or (v) is obtained from a third party without
restriction and without breach of this Contract.
35.2 Terms for Handling and Use of Proprietary Information
For a period of five (5) years after receipt of any Proprietary
Information (or until such time as such Proprietary Information becomes
publicly known as provided in Article 35.1), the receiving party shall
not disclose Proprietary Information that it obtains from the
disclosing party to any person or entity except its and Skynet's
employees and agents who have a need to know in order to perform under
this Contract and who have been informed of and have agreed to abide by
the receiving party's obligations under this Article 35. The receiving
party shall use not less than the same degree of care to
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avoid disclosure of such Proprietary Information as it uses for its own
Proprietary Information of like importance; but in no event less than a
reasonable degree of care. Proprietary Information shall be used only
for the purpose of performing the obligations under this Contract, or
as the disclosing party otherwise authorizes in writing.
IN NO EVENT SHALL EITHER PARTY DISCLOSE OR TRANSFER TECHNICAL
INFORMATION OR PROVIDE TECHNICAL SERVICES TO INSURANCE BROKERS,
UNDERWRITERS OR OTHER THIRD PERSONS OR ENTITIES WITHOUT THE OTHER
PARTY'S PRIOR WRITTEN APPROVAL (WHICH SHALL NOT BE UNREASONABLY
WITHHELD OR DELAYED) AND, WHERE REQUIRED, PRIOR APPROVAL OF THE U.S.
DEPARTMENT OF STATE.
35.3 Legally Required Disclosures
Notwithstanding the foregoing, in the event that the receiving party
becomes legally compelled to disclose Proprietary Information of the
disclosing party, including this Contract or other supporting
document(s), the receiving party shall, to the extent practicable under
the circumstances, provide the disclosing party with written notice
thereof so that the disclosing party may seek a protective order or
other appropriate remedy, or to allow the disclosing party to redact
such portions of the Proprietary Information as the disclosing party
deems appropriate. In any such event, the receiving party will disclose
only such information as is legally required, and will cooperate with
the disclosing party (at the disclosing party's expense) to obtain
confidential and proprietary treatment for any Proprietary Information
being disclosed.
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35.4 Title; Return
All Proprietary Information disclosed under this Contract in tangible
form (including without limitation information incorporated in computer
software or held in electronic storage means) shall be and remain the
property of the disclosing party. All notes, memoranda or other
materials created or fabricated by the receiving party, including
without limitation evaluations, based upon Proprietary information or
prepared by the receiving party which include Proprietary Information
shall be considered Proprietary Information for all purposes under this
Contract. Upon request of the disclosing party, all such Proprietary
Information shall be returned to the disclosing party or shall be
destroyed by the receiving party and shall not thereafter be retained
in any form by the receiving party. Upon request of the disclosing
party, the receiving party shall certify in writing that such party has
either returned or destroyed all Proprietary Information previously
received from the disclosing party. The rights and obligations of the
parties under this Article 35 shall survive any such return or
destruction of Proprietary Information.
35.5 Specific Performance
The parties acknowledge and agree that the unauthorized use or
disclosure by the receiving party of any Proprietary Information
disclosed by the disclosing party would result in irreparable injury to
the disclosing party. The parties agree that that the disclosing party
shall, in addition to and not in lieu of any other available legal or
equitable remedies or damages, be entitled to a temporary injunction
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to restrain threatened or actual breaches of the terms of this Article
35 by the receiving party, its agents, employees, representatives and
all other persons acting for any of the above-mentioned persons or
entities.
35.6 Disclosure of Contract Terms
Notwithstanding anything to the contrary in this Article 35, and
subject to applicable export restrictions, the terms and conditions of
this Contract may not be disclosed by either Party to any person except
with the prior written consent of the other Party, provided, in each
case, that the recipient of such information agrees to treat such
information as confidential and executes and delivers a confidentiality
agreement reasonably acceptable to both Parties or is otherwise subject
to confidentiality obligations reasonably satisfactory to both Parties;
provided, further, that either Party shall have the right to disclose
such information as is required under applicable law or the binding
order of a court or government agency; and provided further that
Purchaser shall have the right to disclose any or all of the terms and
conditions of this Contract to Skynet and to its and Skynet's insurance
brokers and underwriters as Purchaser deems necessary in its sole
judgment.
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ARTICLE 36 - INTELLECTUAL PROPERTY RIGHTS - RIGHTS IN DATA
36.1 Intellectual Property Rights
(a) Contractor hereby grants to Purchaser a fully-paid up, royalty
free, irrevocable, and non-exclusive license to practice and have
practiced throughout the world exclusively for the purpose of (i)
operating, maintaining or using the Deliverable Items, or (ii)
developing, operating, maintaining or using ground equipment with such
Deliverable Items any inventions (including without limitation
software), whether patented or unpatented or otherwise subject to
intellectual property protections, now or hereafter owned by
Contractor, or to which Contractor has or may acquire rights, which
inventions are incorporated in any Deliverable Item or required in
order to practice or have practiced any invention incorporated in any
Deliverable Item.
36.2 Rights in Data
Contractor shall retain title to all Deliverable Data utilized or
developed by Contractor during the performance of this Contract.
Subject to U.S. export regulations and applicable export restrictions,
Purchaser's officers, directors, employees, consultants and
representatives shall have the non-exclusive right to obtain and use
the Deliverable Data for any and all purposes related to the testing,
operation, use and maintenance of the Satellite. With the sole
exception of Skynet, Purchaser's officers, directors, employees,
consultants and representatives shall not disclose Deliverable Data to
other companies, organizations or persons without the express prior
written consent of Contractor, which consent shall not be unreasonably
withheld or delayed. Purchaser shall have no rights in Deliverable Data
other than as expressly stated in this Contract, and title to
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Deliverable Data shall not pass to Purchaser or any other entity
pursuant to the terms hereof.
36.3 No Additional Obligation
Nothing contained in this Article shall require Contractor to provide
any data other than as set forth in the Statement of Work.
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ARTICLE 37 - PUBLIC RELEASE OF INFORMATION
Either Party intending to disclose publicly whether through the issuance of news
releases, articles, brochures, advertisements, prepared speeches or other
information releases concerning this Contract or the transactions contemplated
herein shall obtain the prior written approval of the other Party with respect
to the content and timing of such issuance. A Party's approval under this
Article 37 shall not be unreasonably delayed or denied. Notwithstanding the
above, either Party may release information described herein as required by
securities laws or other applicable laws.
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ARTICLE 38 - NOTICES
38.1 Written Notification
Each notice or correspondence required or permitted to be given
hereunder shall be given in writing (except where oral notice is
specifically authorized) to the respective addresses or facsimile
numbers and to the attention of the individuals set forth below by
post, facsimile transmission, overnight courier or first class
registered or certified mail, return receipt requested, postage
prepaid. The sending of such notice with confirmation of successful
receipt of the complete transmission (in the case of facsimile
transmissions) or receipt of such notice (in the case of delivery by
first class registered or certified mail or by overnight courier
service) shall constitute the giving thereof.
In the case of Purchaser:
Echostar Orbital Corporation
5701 South Santa Fe
Littleton, CO 80120
Attn: David Moskowitz, Esq.
Telephone No.: (303) 723-1040
Facsimile No.: (303) 723-1608
With a separately delivered copy to:
Charlie Ergen and Rohan Zaveri
(at the same address)
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In the case of Contractor:
Space Systems/Loral, Inc.
3825 Fabian Way, Mailstop G-82
Palo Alto, CA 94303-4697
Attn.: John Dietzel
Telephone No.: (650) 852-7370
Facsimile No.: (650) 852-4087
38.2 Change of Address
Either Party may from time to time change its notice address or the
persons to be notified by giving the other Party written notice (as
provided above) of such new information and the date upon which such
change shall become effective.
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ARTICLE 39 - RISK MANAGEMENT
39.1 Risk Insurance Obligations of Contractor
Unless Purchaser exercises the option in Section 29.2 or 29.3,
Contractor shall obtain risk insurance coverage for each Satellite
commencing at Intentional Ignition until one (1) year after Launch for
the purpose of satisfying its obligations in respect of a Total Loss
under Article 10.4, any Partial Loss Amount payable pursuant to Article
10.3 and Article 24 and the procurement of a Replacement Satellite
pursuant to Article 10.4.2 (the "Policy"). The sum insured under the
Policy is currently expected to be equal to the Firm Fixed Price
($XXX), allocated $XXX to the Ku-Band and Ka-Band payloads and $XXX to
the C-Band payload.
At any time during the period starting at EDC and ending six (6) months
thereafter but prior to Contractor purchasing the Policy, Purchaser has
the option to direct Contractor to increase the sum insured under such
Policy. If Purchaser exercises this option, Purchaser shall be charged
a firm fixed rate of XXX% of the increased sum insured amount up to
$XXX. If the sum insured under the Policy exceeds $XXX, then Purchaser
shall pay to Contractor (i) the actual amount charged by the
underwriters (on a pass-through basis) with no mark-up for the
additional coverage above $XXX, plus (ii) the additional actual amount
(on a pass-through basis) with no mark-up, if any, that the
underwriters charge for the initial $XXX of coverage as a result of the
sum insured exceeding $XXX.
At any time after Contractor purchases the Policy or procures insurance
pursuant to Article 29.3, Purchaser has the option to direct Contractor
to increase the sum insured under such Policy. If
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Purchaser exercises this option, Purchaser shall pay to Contractor the
actual amount charged by the underwriters (on a pass-through basis)
with no mark-up for the additional coverage. Contractor makes no
guarantee as to the amount to be charged by the underwriters for such
additional coverage.
Contractor shall give Purchaser the full opportunity to participate in
the solicitation of proposals for, and the negotiations regarding the
placement of, such Policy.
39.2 Limitation of Liability for Insured Claims
Notwithstanding anything to the contrary in this Contract, Contractor
shall have no obligation to make payments to Purchaser for a Total Loss
or Partial Loss arising from occurrences or circumstances that are
excluded from or denied coverage under such insurance policy as set
forth in Article 39.9.
39.3 Conditions of Purchaser Rights
The right of Purchaser to a Partial Loss Amount, the amount payable
pursuant to Article 10.4 in the event of the Total Loss or correction
of any Satellite Anomaly as provided in Article 15.2.1 shall terminate
if Purchaser knowingly and intentionally conceals or misrepresents, in
writing or otherwise, any material fact or circumstance concerning the
operation or use of a Satellite or Transponder thereon which, if not
concealed or if correctly represented, would not entitle Purchaser to
any such right.
39.4 Waiver of Subrogation and Salvage Value Remedies
Each Party shall use reasonable commercial efforts to obtain a waiver
of subrogation and release, subject to terms and conditions as are then
customarily available, of any right of recovery against the other
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Party and its contractors and subcontractors at any tier (including
suppliers of any kind) that are involved in the performance of this
Contract, from any insurer providing coverage for risk of loss or
noncompliant performance of or damage to a Satellite or any
Transponder. Both Parties agree to perform their obligations pursuant
to any salvage value remedies included in applicable risk management
insurance policies for the Ku-Band and Ka-Band Transponders and
Purchaser's ownership interest in the Common Elements.
39.5 Mitigation of Loss; Satellite Information
Purchaser will at all times act with due diligence and will do all
things practicable and reasonable to avoid or diminish any loss or
degradation of the lifetime or operational capability of a Satellite.
Purchaser will provide to Contractor all information regarding
operation and control of a Satellite reasonably requested by
Contractor. In the event Contractor determines, in its reasonable
judgment, that changes to the Performance Specification requested by
Purchaser in accordance with the terms of this Contract could adversely
affect the risk of loss to a Satellite, Contractor shall have the right
to renegotiate the terms of the risk insurance coverage provided for
such Satellite hereunder.
39.6 Notice of Loss
In the event Purchaser believes a Total Loss or Partial Loss has
occurred, Purchaser shall give written notice of the occurrence to
Contractor as soon as possible, but in no event later than thirty (30)
days after an officer or director of Purchaser becomes aware of such
occurrence. If Purchaser believes such occurrence entitles it to claim
payment of any amount for a Total Loss or Partial Loss pursuant to this
Contract, Purchaser shall deliver to Contractor a sworn and
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notarized proof of loss in such form and including such information as
Contractor may reasonably require and request as soon as practicable,
but in no event later than ninety (90) days after the delivery of the
notice of such occurrence.
39.7 Return of Payment
In the event of payment to Purchaser of any amount for a Total Loss or
Partial Loss pursuant to this Contract with respect to a Satellite and
it is later determined that the Available Communications Capacity of
such Satellite has not been reduced to the extent claimed as the basis
for such payment, Purchaser shall return to Contractor, within thirty
(30) days after receipt of Contractor's invoice, which shall be issued
no earlier than the date of such determination, an amount such that the
payment retained by Customer equals the amount that would have been
paid had the Available Communications Capacity been calculated as
subsequently determined.
39.8 Salvage Value
Subject to Article 39.10 below, In the event that a Total Loss or
Partial Loss shall occur that entitles Purchaser to payment of any
amount pursuant to this Contract, Contractor shall be entitled to any
salvage value of the Ku-Band and Ka-Band Transponders and Purchaser's
ownership interest in the Common Elements that are the subject of a
Total Loss or any Transponders thereon that are the subject of a
Partial Loss.
39.9 Exclusions
Notwithstanding anything in this Contract to the contrary, Contractor
shall have no obligation to pay any amount to Purchaser for a Total
Loss or a Partial Loss caused by or resulting from any of the following
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(provided that the same are reasonably consistent with industry
standards and are actually excluded from or denied coverage under the
actual insurance policy procured by Contractor):
(i) war, hostile or warlike action in time of peace or war,
including action in hindering, combating or defending against
an actual, impending or expected attack by any government or
sovereign power (de jure or de facto); any authority
maintaining or using a military, naval or air force; a
military, naval or air force; or any agent of any such
government, power, authority or force;
(ii) any anti-satellite device or device employing atomic or
nuclear fission and/or fusion, or device employing laser or
directed energy beams;
(iii) insurrection, strikes, riots, civil commotion,
rebellion, revolution, civil war, usurpation or action taken
by a government or governmental authority in hindering,
combating or defending against such an occurrence whether
there be a declaration of war or not;
(iv) confiscation by order of any government or governmental
authority or agency (whether secret or otherwise), or public
authority;
(v) nuclear reaction, nuclear radiation or radioactive
contamination of any nature, whether such loss or damage be
direct or indirect, except for radiation naturally occurring
in the space environment;
(vi) electromagnetic or radio frequency interference, except
for physical damage to a Satellite directly resulting from
such interference;
(vii) willful or intentional acts of Purchaser or its
contractors or subcontractors (other than Contractor) designed
to cause loss or failure of a Satellite; or
(viii) any exclusions in addition to the foregoing or any
modifications thereto as are reasonably consistent with
industry standards in first-party launch insurance contracts.
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39.10 Right of First Offer/Refusal
Any insurance policy procured pursuant to Article 39.1 or 29.3 above
shall contain a provision to the effect that in the event of a Total
Loss, Purchaser shall have the right for a period of up to thirty (30)
days following the Total Loss to make an offer to the underwriters of
such insurance policy to take or retain unencumbered title to Ku-Band
and Ka-Band Transponders and Purchaser's ownership interest in the
Common Elements that are subject to the Total Loss, In the event that
such underwriters are unwilling to accept such offer of Purchaser, the
underwriters shall have the right to solicit bona fide offers from
third parties to acquire title to such assets. Purchaser shall have the
right to meet all such bona fide third-party offers, if any, and in the
event that Purchaser makes such matching offer, the underwriters shall
be obligated to accept Purchaser's offer promptly.
39.11 Third Party Indemnity Insurance
Contractor shall cause Purchaser to be named as an additional insured
under any and all insurance policies procured by the Launch Agency with
respect to the Launch of any Satellite.
39.12 Pre-Launch Risk Insurance
Contractor shall obtain and at all times maintain insurance coverage
against all risks of loss and damage to a Satellite and its components
during the period from EDC until Launch in an amount not less than the
Firm Fixed Price of the applicable Satellite and sufficient to provide
the Replacement Satellite pursuant to Article 10.4.2.
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39.13 Other Insurance Terms
Contractor shall have Purchaser and/or its designees named as an
additional insured on the insurance policies referenced in Articles
39.1, 29.3 and 39.12 above. Contractor agrees to furnish to Purchaser
certificates of insurance and the underlying policies evidencing that
all insurance required pursuant to Articles 39.1, 29.3 and 39.12 is in
full force and effect. Contractor covenants and agrees not to change
any of the material terms and conditions of said policies of insurance
which are relevant to this Contract without first obtaining the written
consent of Purchaser (which consent shall not be unreasonable
withheld). The certificates of insurance and underlying policies shall
contain an endorsement setting forth that the insurer cannot terminate
or materially amend the provisions of the insurance without prior
written notification to Purchaser at least thirty (30) days before such
termination or amendment. Contractor shall use reasonable commercial
efforts to cause such insurance policies to contain a waiver of
subrogation rights by the insurer against Purchaser, its Affiliates and
their owners, officers, directors, employees, agents, subcontractors,
and customers.
39.14 Contractor shall, at its own cost and expense, timely provide Purchaser
and Skynet with all reasonable assistance requested by Purchaser and/or
Skynet in connection with the procurement of insurance for a Satellite,
including without limitation providing Purchaser and Skynet with such
information regarding a Satellite as is reasonably requested by
Purchaser's and Skynet's brokers and underwriters and performing
technical presentations to brokers and underwriters. In addition,
Contractor shall provide Purchaser and Skynet with such information
regarding a Satellite as is reasonably
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requested by the insurer(s) of a Satellite and will cooperate in any
insurance reviews.
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ARTICLE 40 - ORDER OF PRECEDENCE
In the event of conflict among the terms of the Preamble and Articles 1 to 46 of
this Contract and the Exhibits, the following order of decreasing precedence
shall apply:
o This Contract (Preamble and Articles 1 through 46 and
Attachment A)
o Exhibit A Statement of Work
o Exhibit B Performance Specification
o Exhibit C Product Assurance Program Plan
o Exhibit D Test Plan
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ARTICLE 41 - GENERAL
41.1 Binding Effect; Assignment
This Contract shall be binding upon and inure to the benefit of the
Parties and their respective successors and permitted assigns. Except
as otherwise expressly set forth to the contrary herein, this Contract
may not be assigned, either in whole or in part, by either Party
without the express written approval of the other Party. Such approval
shall not be unreasonably withheld or delayed. Contractor may require,
as a condition of approving an assignment by Purchaser, that the
proposed assignee establish irrevocable letters of credit, guarantees
or other comparable assurances satisfactory to Contractor prior to such
assignment becoming effective and that Purchaser remain primarily or
secondarily liable hereunder. Either Party, upon prior written notice
to the other Party, may grant security interests in its rights
hereunder to lenders that provide financing for the performance by such
Party of its obligations under this Contract or for the subject matter
hereof. In the event that either Party is sold to or merged into
another entity that shall be deemed an assignment requiring the other
party's approval hereunder. Notwithstanding anything to the contrary
herein, Purchaser may assign this Contract, in whole or in part without
Contractor's approval and without regard to the conditions set forth in
the fourth sentence of this Article 41.1, to a person or entity that
directly or indirectly controls, is controlled by or is under common
control with Purchaser.
41.2 Severability
If any provision of this Contract is declared or found to be illegal,
unenforceable or void, the Parties shall negotiate in good faith to
agree upon a substitute provision that is legal and enforceable and is
as nearly as possible consistent with the intentions underlying the
original
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provision. If the remainder of this Contract is not materially affected
by such declaration or finding and is capable of substantial
performance, then the remainder shall be enforced to the extent
permitted by law.
41.3 Captions
The captions contained herein are for purposes of convenience only and
shall not affect the construction of this Contract.
41.4 Relationships of the Parties
It is expressly understood that Contractor and Purchaser intend by this
Contract to establish the relationship of independent contractors only,
and do not intend to undertake the relationship of principal and agent
or to create a joint venture or partnership or any other relationship,
other than that of independent contractors, between them or their
respective successors in interests. Neither Contractor nor Purchaser
shall have any authority to create or assume, in the name or on behalf
of the other Party, any obligation, expressed or implied, or to act or
purport to act as the agent or the legally empowered representative of
the other Party, for any purpose whatsoever.
41.5 Entire Agreement
This Contract, including all Exhibits and the Attachments hereto,
represents the entire understanding and agreement between the Parties
hereto with respect to the subject matter hereof, and supersedes all
prior negotiations and agreements with respect to the subject matter
hereof. This Contract may not be modified or amended, and the Parties'
rights and obligations may not be waived, except by the written
agreement of both Parties.
41.6 Standard of Conduct
Both Parties agree that all their actions in carrying out the
provisions of this Contract shall be in compliance with applicable laws
and
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regulations and neither Party will pay or accept bribes, kickbacks or
other illegal payments, or engage in unlawful conduct.
41.7 Construction
This Contract, the Exhibits and the Attachment hereto have been drafted
jointly by the Parties and in the event of any ambiguities in the
language hereof, there shall be no inference drawn in favor of or
against either Party.
41.8 Counterparts
This Contract may be signed in any number of counterparts with the same
effect as if the signature(s) on each counterpart were upon the same
instrument.
41.9 Applicable Law
This Contract shall be interpreted, construed and governed, and the
rights of the Parties shall be determined, in all respects, according
to the laws of the State of New York without regard to its conflict of
law rules.
41.10 Survival
Termination or expiration of this Contract for any reason shall not
release either Party from any liabilities or obligations set forth in
this Contract that (i) the Parties have expressly agreed shall survive
any such termination or expiration or (ii) remain to be performed or by
their nature would be intended to be applicable following any such
termination or expiration.
41.11 U.N. Convention on the International Sales of Goods
The U.N. Convention on the International Sales of Goods shall not apply
or otherwise have any legal effect with respect to this Contract.
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41.12 Waiver
No delay or omission by either party to exercise any right or power
shall impair any such right or power or be construed to be a waiver
thereof. No payment of money by any person or entity shall be construed
as a waiver of any right or power under this Contract. A waiver by any
party of any of the covenants, conditions or contracts to be performed
by the other party or any breach thereof shall not be construed to be a
waiver of any succeeding breach thereof or of any other covenant,
condition or contract herein contained. No change, waiver or discharge
hereof shall be valid unless in writing and signed by a duly authorized
representative of the party against which such change, waiver or
discharge is sought to be enforced.
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ARTICLE 42 - ATTACHMENTS
The following Attachments are incorporated in this Contract:
Attachment A Payment Plan
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ARTICLE 43 - TERMINATION RIGHT
Notwithstanding anything to the contrary herein, if by the TBD Deadline the
Parties are unable to reach final agreement upon: (1) the pricing and schedule
for the options described in Article 29.1; or (2) the TBD terms of this
Contract, the Statement of Work, Satellite Performance Specification, Product
Assurance Program Plan, Satellite Program Test Plan and the milestones in the
Payment Plan, then Purchaser may immediately terminate this Contract by
providing written notice to Contractor. If such termination occurs, then
Purchaser shall pay Contractor $XXX within thirty (30) days of receipt of an
invoice. All other liabilities and obligations of the Parties shall be released,
waived and terminated, except for those set forth in Articles 20, 35 and 37.
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ARTICLE 44 - RESERVED
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ARTICLE 45 - ANTICIPATED LIFE OF SATELLITE
Contractor hereby represents and warrants to Purchaser that each Satellite will
have an orbital maneuver life of at least 15 years after Purchaser's Acceptance
or rejection of the applicable Satellite pursuant to Article 10 above, with
industry standard margins, assuming that the Satellite is successfully Launched
and operates in accordance with the Performance Specification.
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ARTICLE 46 - KEY PERSONNEL
The Contractor will assign properly qualified and experienced personnel to the
program contemplated under the Contract. Personnel assigned to the following
positions shall be considered "Key Personnel":
a) the Contractor's Program Manager
b) the Contractor's Contracts Manager
c) the Contractor's Product Assurance Manager
d) the Contractor's Systems Engineering Manager
e) the Contractor's Vehicle Manager
The Purchaser shall have the right to approve the Contractor's Program Manager
which approval shall not be unreasonably withheld or delayed. Key Personnel
shall not be assigned to other duties without the Contractor giving prior
written notice to and consulting with the Purchaser. The Contractor shall
provide a chart to the Purchaser of the program Key Personnel and shall keep
such chart current.
Additionally, for so long as Randy Tyner is associated with Contractor as an
employee or consultant, Purchaser shall have unrestricted access to Mr. Tyner
for purposes of designing the payload and its specifications. Mr. Tyner shall
have a key decision-making role on payload-related issues, and shall be a
primary interface with the Purchaser on all payload-related technical and
performance issues.
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IN WITNESS THEREOF, the Parties have executed this Contract by their duly
authorized officers as of the date set forth in the Preamble.
ECHOSTAR ORBITAL
SPACE SYSTEMS/LORAL, INC. CORPORATION
By: By:
--------------------------------- ---------------------------------
Name: Name:
------------------------------- -------------------------------
Title: Title:
------------------------------ ------------------------------
<PAGE> 1
EXHIBIT 10.4
Certain portions of this document have been omitted and filed separately with
the Securities and Exchange Commission pursuant to Rule 24b-2 of the Securities
Exchange Act of 1934.
AGREEMENT
This Agreement (the "Agreement"), is made and effective as of this 22nd day of
February, 2000, by and between EchoStar Orbital Corporation, with a place of
business at 5701 South Santa Fe Drive, Littleton, Colorado 80120 ("EchoStar")
and Loral Skynet, a division of Loral SpaceCom Corporation, with a place of
business at 500 Hills Drive, Bedminister, New Jersey 07921 ("Skynet"). EchoStar
and Skynet are hereinafter referred to collectively as the "Parties" and
individually as a "Party".
WHEREAS, EchoStar is in the business of providing commercial satellite-based
broadcast services and is interested in operating such a service in the Ku-Band
and Ka-Band frequencies from the 121(Degree) W.L. orbital location;
WHEREAS, Skynet is in the business of providing commercial satellite services
and is interested in operating such a service in the C-Band frequencies from the
121(Degree) W.L. orbital location; and
WHEREAS, EchoStar and Skynet are interested in the construction, purchase and
operation of a hybrid C/Ku/Ka-Band satellite to be placed in the 121(Degree)
W.L. orbital location, with EchoStar owning and operating the Ka-Band and
Ku-Band payloads, Skynet owning and operating the C-Band payload, and EchoStar
and Skynet jointly owning and operating the elements that are common to and/or
shared by the Ka-Band, Ku-Band and C-Band payloads;
NOW THEREFORE, the Parties agree as follows:
1. Purchase of the Satellite. Contemporaneously with the execution of this
Agreement, EchoStar shall enter into the contract attached as Exhibit A hereto
(the "Satellite Contract") with Space Systems/Loral, Inc. ("SS/L") for the
construction and purchase of a hybrid C/Ku/Ka-Band satellite to be delivered
in-orbit to the 121(Degree) W.L. orbital location (hereinafter referred to as
"EchoStar 9"). Capitalized terms used and not otherwise defined herein shall
have the meanings as defined in the Satellite Contract.
2. Ownership, Title, and Operation. EchoStar shall exclusively own and operate
the Ka-Band and Ku-Band payloads on the EchoStar 9 satellite. Skynet shall
exclusively own and operate the C-Band payload on the EchoStar 9 satellite.
EchoStar and Skynet shall jointly own, as tenants in common on a 58.11/41.89
percent basis in favor of EchoStar (the "Ownership Ratio"), the elements of the
EchoStar 9 satellite that are common to and/or shared by the Ka-Band, Ku-Band
and C-Band payloads (the "Common Elements"). Title to the C-Band payload and to
Skynet's ownership interest in the Common Elements shall automatically and
immediately pass from EchoStar to Skynet upon transfer of title to the EchoStar
9 satellite from SS/L to EchoStar pursuant to the Satellite
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Contract; provided, however, that following such passage of title to Skynet, in
the event of a partial or total loss of the C-Band payload and/or Skynet's
ownership interest in the Common Elements, Skynet's title shall be subject to
release obligations as described in Article 10.4.3 of the Satellite Contract and
to any salvage value remedies included in the applicable risk management
insurance policies for the EchoStar satellite procured by SS/L pursuant to
Article 39 of the Satellite Contract. EchoStar and Skynet shall mutually agree
upon all operational decisions affecting the Common Elements. Each Party may
grant security interests in and otherwise encumber its payload(s) and its
ownership interest in the Common Elements, provided that in the event of
foreclosure upon any security interest in or other encumbrance upon a Party's
ownership interest in the Common Elements, the foreclosing entity shall take
such interest subject to the terms and conditions of this Agreement, and
provided further that following such foreclosure the Party whose interest was
not foreclosed upon shall have the right to make all operational decisions
regarding the Common Elements. In the event that a payload design change made by
either Party pursuant to Section 5 of this Agreement results in an adjustment to
the Firm Fixed Price, then the Ownership Ratio shall be adjusted accordingly.
3. Payment of the Purchase Price. EchoStar shall be responsible for paying XXX
for the EchoStar 9 satellite subject to and upon the terms and conditions set
forth in the Satellite Contract. Skynet shall be responsible for paying XXX
subject to and upon the terms and conditions of this Agreement and of a separate
agreement(s) to be mutually agreed upon between Skynet and SS/L. Design changes
made pursuant to Section 5 of this Agreement shall result in an adjustment to
the Firm Fixed Price and the Ownership Ratio as and to the extent set forth in
Section 5. Notwithstanding the foregoing, the failure of either Party to pay its
respective portion of the Firm Fixed Price shall not be deemed to constitute a
breach of this Agreement.
4. Insurance.
4.1 Within six (6) months after the date first set forth above or within five
(5) days after EchoStar receives notice from SS/L pursuant to Article 29.2 of
the Satellite Contract that SS/L intends to purchase the risk insurance
described in Article 39.1 of the Satellite Contract following the occurrence of
an event (or events) which is reasonably likely to cause the cost of the
insurance described in Article 39.1 of the Satellite Contract to increase by
more than 3% of the sum insured, whichever occurs earlier, the Parties shall
mutually agree upon whether EchoStar should exercise its option pursuant to
Article 29.2 of the Satellite Contract to direct SS/L not to procure risk
insurance for the EchoStar 9 satellite (the "Insurance Option"). In the event
that the Parties mutually agree that EchoStar should exercise the Insurance
Option, any Firm Fixed Price reductions received by it as a result of such
election shall be shared by the Parties in accordance with the Ownership Ratio.
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4.2 In the event that the Parties mutually agree that EchoStar should exercise
the Insurance Option, then:
(i) if both Parties desire to insure their payloads, either EchoStar or Skynet,
as agreed upon by the Parties, shall solicit bona fide proposals from a
reasonable number of market leaders in the space insurance marketplace regarding
a single policy for the entire satellite (including both Parties' payloads),
(ii) if both Parties desire to insure their payloads and a policy proposal
satisfactory to both Parties, as determined in each Party's sole judgment, has
not been procured pursuant to Subsection (i) above within thirty (30) days after
completion of all technical presentations made by SS/L in connection with the
solicitation of such proposals, the Parties will coordinate to ensure that they
proceed to market simultaneously and each Party shall have the right to procure
its own insurance for its respective payload(s); or
(iii) if one Party does not desire to insure its payload(s), the other Party
shall have the right to procure its own insurance for its Payload(s).
If the Parties procure insurance pursuant to Subsection (i) above or otherwise
elect to procure insurance coverage for the entire EchoStar 9 satellite in a
single policy, then: (a) the Party procuring the insurance policy shall cause
the other Party to be named as an additional insured on such policy, (b) such
policy shall provide that the policy may not be changed without written
agreement from both Parties or cancelled unless both Parties are given at least
thirty (30) days advance notice, (c) such policy will individually insure the
respective payload(s) of each Party in amounts to be determined by each Party in
its sole judgment, and (d) each party shall bear its proportionate share of the
premium.
4.3 In the event that the Parties mutually agree that EchoStar should not
exercise the Insurance Option, then in the event of any loss of Skynet's payload
or any Common Elements (whether a partial or total loss) during the time period
starting at Intentional Ignition and ending one (1) year after Launch, Skynet
shall look solely and exclusively to SS/L for the payment of any claims arising
out of or relating to any such loss.
4.4 Each Party shall, at its own cost and expense, timely provide the other
Party with all reasonable assistance requested by the other Party in connection
with the procurement of insurance as contemplated under this Section 4.
5. Payload Design Changes.
5.1 Either Party may at any time and from time to time make changes in the
design of its payload(s), provided that such change does not negatively impact:
(i) the scheduled launch date for the EchoStar 9 satellite, (ii) the performance
of the other Party's payload(s), or (iii) the designed operational life of the
other
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Party's payload or the designed orbital maneuver life of the Echostar 9
satellite, unless the other Party has otherwise agreed in writing (which
agreement may be withheld in the other Party's sole judgment).
5.2 All design changes to the Party's respective payloads that are not permitted
under Section 5.1 above and all changes to the Common Elements necessitated by
any design change made to either Party's payload(s), shall be mutually agreed
upon by the Parties.
5.3 The Party making a design change to its payload(s) shall be solely
responsible for paying any increases to the Firm Fixed Price that result from
such change (including changes to the Common Elements necessitated by the design
change made to such Party's payload). Similarly, the Party making a design
change to its payload(s) shall receive the full benefit of any reductions in the
Firm Fixed Price resulting from such change to its payload. In either case, the
Ownership Ratio shall be adjusted accordingly.
6. Satellite Management. Skynet shall, XXX, provide EchoStar with support from
its staff of Loral Skynet Spacecraft and Launch Engineers for oversight of
satellite design, fabrication, testing and integration and for oversight of
launch integration, including without limitation supporting EchoStar at the
launch site during the launch campaign and providing technical consultation
during transfer orbit operations and in orbit testing of the satellite, that is
reasonably acceptable to EchoStar and designed to ensure that SS/L manufactures,
launches and delivers the EchoStar 9 satellite and any Replacement Satellite (as
defined in the Satellite Contract) in accordance with the terms and conditions
of the Satellite Contract (the "Satellite Management Services"). In performing
the Satellite Management Services, Skynet shall assign at least one person to be
dedicated to the EchoStar 9 program and any Replacement Satellite on a full-time
basis, who will be stationed on-site at SS/L's facility in Palo Alto,
California. Such on-site person shall report solely and exclusively to EchoStar
for matters dealing with the Ka-Band and Ku-Band payloads, solely and
exclusively to Skynet for matters dealing with the C-Band payload, and jointly
to both EchoStar and Skynet for matters dealing with the Common Elements. The
Satellite Management Services shall be performed by Skynet under the same terms
and conditions XXX as set forth in that certain Agreement between EchoStar
Satellite Corporation and AT&T Corp. Concerning Technical Support, dated March
25, 1996, and the Statement of Work attached as Exhibit A thereto, as such
Exhibit A was amended on February 12, 1999 (the "Technical Support Agreement");
provided that the license granted to EchoStar with respect to certain Delivered
Information pursuant to Section 17.A of the Technical Support Agreement shall be
expanded to include defined business purposes of designing, constructing and
delivering FSS, DBS and Ka-Band Satellites. EchoStar acknowledges that as of the
date of this Agreement SS/L and Skynet are affiliated companies and that, based
on its prior experience with Skynet's performance of Satellite Management
Services pursuant to the
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Technical Support Agreement, EchoStar again desires to engage Skynet to perform
Satellite Management Services despite the fact that Skynet's relationship with
SS/L might appear to present a conflict of interest.
7. TT&C Services. Skynet shall, XXX, provide telemetry, tracking, and control
("TT&C") services for the EchoStar 9 satellite and for any Replacement Satellite
(as defined in the Satellite Contract), but not any replacements thereof,
beginning at Acceptance of each satellite and continuing for the actual orbital
maneuver life of the EchoStar 9 satellite or until Skynet begins providing TT&C
services for a Replacement Satellite (in the case of the EchoStar 9 satellite)
and for the actual orbital maneuver life of the Replacement Satellite (in the
case of a Replacement Satellite), under the same terms and conditions XXX as set
forth in that certain Amended and Restated Tracking, Telemetry and Control
Services Agreement between EchoStar Satellite Corporation and AT&T Corp.,
effective as of March 26, 1996, as amended and assigned to Skynet (the "TT&C
Agreement"); provided that the license granted to EchoStar with respect to
certain Delivered Information pursuant to Sections 8.A and 8.D of the TT&C
Agreement shall be expanded to include the defined business purpose of providing
services to Customer's FSS, DBS and Ka-Band satellite(s)). Provided, however:
(i) if EchoStar elects to launch a Substitute Satellite as provided in Section
12 of this Agreement, Skynet shall have no obligation to provide TT&C services
for the EchoStar 9 satellite or Replacement Satellite after the acceptance by
Skynet of the Substitute Satellite, and (ii) if Skynet elects to launch a
Substitute Satellite, it shall only be obligated to provide TT&C services for
such Substitute Satellite for the remainder of the expected operational life of
the EchoStar 9 satellite or Replacement Satellite, whichever is then in service,
as measured on the first day following acceptance by EchoStar of the Substitute
Satellite. Upon the expiration of Skynet's obligations to provide TT&C services
with respect to a particular satellite under this Section 7, if EchoStar desires
Skynet to continue providing TT&C services for such satellite, Skynet agrees to
do so pursuant to the terms and conditions of the TT&C Agreement XXX. XXX The
Parties agree that (a) in-orbit testing ("IOT") for the Ka-Band and Ku-Band
payloads will be conducted at EchoStar's uplink facility in Cheyenne, Wyoming or
Gilbert, Arizona, at EchoStar's option, with support from Skynet facilities as
reasonably needed, (b) IOT for the C-Band payload shall be performed at Skynet's
uplink facility in Hawley, Pennsylvania, (c) IOT for the Common Elements shall
be performed at a facility to be mutually agreed upon by the Parties after
consultation with SS/L, (d) the Satellite Acceptance Review shall be held at a
single location to be mutually agreed upon by the Parties after consultation
with SS/L, and (e) each Party shall be entitled to have representatives present
at each of the events described in Subsections (a) through (d) above.
8. Decision-Making Authority. Each Party shall have final decision-making
authority with respect to all matters regarding the construction and operation
of the EchoStar 9 satellite that solely and exclusively impact its
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respective payload(s). The Parties shall mutually agree upon all matters
regarding the launch of the EchoStar 9 satellite and all matters regarding the
construction and operation of the EchoStar 9 satellite that involve the Common
Elements or otherwise impact the payloads of both Parties. Skynet, as provider
of the Satellite Management Services, shall be the sole point of contact with
SS/L for technical and design issues; provided, however, that: (i) EchoStar
shall have identical rights to information and to attend meetings regarding the
EchoStar 9 satellite, and (ii) Skynet shall not make any communications or
otherwise convey to SS/L decisions impacting the EchoStar 9 satellite unless
such communication or decision was reached in compliance with the
decision-making requirements of this Agreement. For the avoidance of doubt,
EchoStar shall remain the sole point of contact with SS/L for contractual
issues. Neither Party shall be liable to the other as a result of delays in the
construction of its respective payload(s) or the Common Elements. Within thirty
(30) days after the EchoStar 9 satellite becomes a Total Loss (determined on the
basis of all Ku-Band, Ka-Band and C-Band Transponders, as opposed to just the
Ku-Band and Ka-Band Transponders), the Parties shall mutually agree upon whether
EchoStar should exercise its option for a Replacement Satellite pursuant to
Article 10.4 of the Satellite Contract. In the event that the Parties mutually
agree that EchoStar should exercise that option, then the terms and conditions
of this agreement shall apply mutatis mutandis to the Replacement Satellite.
9. Power Sharing. The following procedure shall be adhered to in the event of a
loss of primary power that impacts the payloads of both Parties:
(i) First, components of the EchoStar 9 satellite will be powered down as
necessary to protect the overall health of the EchoStar 9 satellite;
(ii) Second, bus components of the EchoStar 9 satellite will be powered down to
the extent possible without affecting either Party's payload(s) ;
(iii) Third, the Parties will enter into good faith discussions to determine the
next components to be powered down; and
(iv) In the event that the Parties are unable to mutually agree upon the next
components to be powered down within forty-eight (48) hours after the relevant
loss of primary power, then the residual amount of primary power required to be
shed will be allocated between the payloads of EchoStar and Skynet based on the
ratio of the nominal full-power operation of the Parties' respective payloads.
Such allocation will initially be computed based on the final design
specification for each Parties' respective payload(s), and shall be subject to
adjustment when actual saturated power and efficiency data is determined during
IOT. Each Party will determine in its sole judgment the appropriate actions to
be taken with respect to its payload(s) to shed the power allocated to it
pursuant to this Subsection (iv).
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10. Cooperation.
10.1 Each Party shall, at its own cost and expense, timely provide the other
Party with all reasonable assistance requested by the other Party in connection
with: (i) the preparation, coordination and filing of any and all applications
required to be filed by the other Party for licenses with the Federal
Communications Commission, or any successor agency thereto (the "FCC") and any
other governmental agencies in connection with the construction, launch and
operation of the EchoStar 9 satellite, the Replacement Satellite, and/or the
Substitute Satellite; (ii) the filing of any technical filings required to be
made by the other Party with the FCC or any other governmental agency; and (iii)
all filings required to be made by the other Party with the International
Telecommunication Union (or any successor agency thereto) regarding radio
frequency and orbital position coordination.
10.2 Skynet shall give all reasonable assistance requested by EchoStar, at
Skynet's cost and expense, necessary for EchoStar to perform under the Satellite
Contract with respect to the C-Band payload and Skynet's interest in the Common
Elements, including without limitation the timely provision of all
purchaser-furnished equipment, facilities and services applicable to the C-Band
payload described in the Statement of Work in good working condition and
adequate for the required purpose.
11. Taxes. EchoStar shall be responsible for the payment of any and all sales,
use, gross receipts, excise and other taxes (collectively "Taxes") assessed
solely and exclusively on the construction, use and operation or addition of
value to the Ka-Band or Ku-Band payloads on the EchoStar 9 satellite, and
EchoStar shall indemnify Skynet from any such Taxes in accordance with the
provisions of Section 17 below. Skynet shall be responsible for the payment of
any and all Taxes assessed solely and exclusively on the construction, use and
operation or addition of value to the C-Band payload on the EchoStar 9
satellite, and Skynet shall indemnify EchoStar from any such Taxes in accordance
with the provisions of Section 17 below. The Parties shall share responsibility,
in direct proportion to the Ownership Ratio, for any and all Taxes assessed on
the construction, use and operation or addition of value to any and all Common
Elements, and each Party shall indemnify the other Party from its respective
portion of such Taxes in accordance with the provisions of Section 17 below.
12. Sale, Abandonment and Substitute Satellite.
12.1 In the event that either Party (i) is for any reason unable to operate its
EchoStar 9 payload(s) as contemplated by this Agreement, (ii) for any reason
desires to separate its operations on the EchoStar 9 satellite from those of the
other Party, or (iii) desires for any reason to move the EchoStar 9 satellite to
any orbital location other than the 121(degree) W.L. orbital location, then such
Party may, at its sole discretion:
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(a) sell its entire ownership interest in its payload(s) and in the Common
Elements to a third party, subject to the limitations set forth in Section 19.3
of this Agreement and the other Party's right of first offer and first refusal
described in Section 12.2 below,
(b) turn off its payload and abandon its usage thereof, provided that the other
Party shall have the right to continue to operate any and all portions of the
first Party's payload(s) and the Common Elements as may be necessary for the
other Party to continue to use its payload(s) during any such period of
abandonment, or
(c) in cooperation and consultation with the other Party contract with SS/L or
any other spacecraft manufacturer reasonably acceptable to the other Party for
the construction and delivery on orbit to the 121(Degree) W.L. orbital location
of another satellite having payload capabilities and a designed operational life
which are the same or better than the payload(s) of the other Party on and the
designed operational life of the EchoStar 9 satellite (a "Substitute
Satellite").
Upon acceptance of such Substitute Satellite by the other Party and successful
completion of the transfer of the other Party's traffic from EchoStar 9 to the
Substitute Satellite: (i) the Party providing the Substitute Satellite shall
cause the EchoStar 9 satellite to vacate the 121(Degree) W.L. orbital location;
(ii) title to the entire EchoStar 9 satellite shall automatically vest in the
Party providing the Substitute Satellite; (iii) title to the entire Substitute
Satellite shall automatically vest in the other Party; and (iv) this Agreement
shall automatically terminate. Each Party agrees to provide, at the cost and
expense of the Party providing the Substitute Satellite, all assistance
reasonably necessary to ensure that title is transferred pursuant to Subsections
(ii) and (iii) above free and clear of any and all liens and encumbrances that
do not arise from or relate to the actions of the Party receiving title to the
relevant satellite. It is the intention of the Parties that the guiding
principle governing any Party's provision to the other Party of a Substitute
Satellite shall be that the Party receiving the Substitute Satellite shall be
made whole and shall continue the operation of its business uninterrupted and
with the minimum possible inconvenience.
12.2 In the event that a Party elects to sell its entire ownership interest in
its payload(s) and in the Common Elements to a third party pursuant to Section
12.1 (a) above, then the other Party shall have the right for a period of up to
thirty (30) days after such Party receives written notice from the first Party
of such election, to make an offer to the first Party to purchase the first
Party's entire interest in its payload(s) and in the Common Elements. In the
event that the first Party is unwilling to accept the other Party's offer, then
the first Party may solicit bona fide offers from third parties to purchase the
first Party's entire interest in its payload(s) and in the Common Elements.
Thereafter, the other Party shall have a period of fifteen (15) days to meet
such bona fide third-party offer, and in the
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event that the other Party makes a matching offer, then the first Party shall be
obligated to promptly accept such matching offer.
13. Termination
13.1 Unless terminated sooner pursuant to Section 13.2 below, this Agreement
shall continue in full force and effect until the later to occur of: (i) the end
of the actual orbital maneuver life of the EchoStar 9 satellite; or (ii) the end
of the actual orbital maneuver life of the Replacement Satellite, if any.
13.2 Notwithstanding anything to the contrary herein, if the Parties are unable
to reach final agreement with SS/L upon: (1) the pricing and schedule for the
options described in Article 29.1 of the Satellite Contract, (2) the TBD terms
of the Satellite Contract, or (3) Exhibit A (Statement of Work), Exhibit B
(Satellite Performance Specification), Exhibit C (Product Assurance Program
Plan), Exhibit D (Satellite Program Test Plan) or the milestones set forth in
Attachment A (Payment Plan) to the Satellite Contract, within thirty (30) days
after the date first set forth above, then either Party may immediately
terminate this Agreement by providing written notice to the other Party, and all
liabilities and obligations of the Parties shall be released, waived and
terminated, except for those set forth in Section 19.11 hereof, which remain in
full force and effect as provided therein.
14. Confidentiality.
14.1 Confidential Information. Each Party will treat as confidential the terms
of this Agreement, together with all information whether of a technical nature
or otherwise relating in any manner to the business, technical, operational,
legal or other affairs of the other Party as may be communicated to it hereunder
or otherwise in connection with this Agreement, both prior and subsequent to its
execution (the "Confidential Information"). Each Party undertakes that except as
authorized in writing by the other Party, it will neither disclose any
Confidential Information to any person, including the media, nor use the
Confidential Information other than for purposes permitted under this Agreement.
Each Party shall use all reasonable efforts and shall take every reasonable
precaution to protect and maintain the confidentiality of the Confidential
Information, which precautions shall be at least equivalent in scope and effect
to the measures taken by that Party to protect its own most confidential
proprietary information. Each Party hereby agrees to limit disclosure of
Confidential Information to those of its employees who need to know such
information in the performance of their duties in relation to the EchoStar 9
satellite and to consultants who (i) require access to the information in the
performance of their duties in relation to the EchoStar 9 satellite and (ii)
have executed a written non-disclosure agreement, the provisions of which are
sufficiently wide to protect the confidentiality of the information being
disclosed. Each Party shall be liable to the other Party for the acts and
omissions of its employees and consultants in breach of the provisions of this
Section 14.
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Notwithstanding the foregoing, the terms of this Agreement and any amendments
thereof may be disclosed to SS/L and to the Parties' respective insurance
brokers and underwriters in connection with any and all bona fide attempts to
place insurance as contemplated by Section 4 above.
14.2 Exclusions. The provisions of this Section 14 shall not apply to any
information that (i) is in the public domain, or which becomes generally known
to the public, other than by default of the recipient Party; (ii) was in the
lawful possession of the recipient Party prior to the disclosure, and was not
obtained either directly or indirectly from the disclosing Party; (iii) is, or
had already been, verifiably independently generated by the recipient Party,
without reference to the disclosing Party's Confidential Information; (iv) is
required to be disclosed by law or the valid order of a court of competent
jurisdiction or the request of any governmental or other regulatory authority or
agency in which event the Party required to disclose such Confidential
Information shall so notify the other Party as promptly as practicable (and if
possible prior to making any disclosure) and shall use reasonable commercial
efforts to seek confidential treatment of such information.
14.3 Injunctive Relief. The Parties agree that any breach of this Section 14 by
the recipient Party will result in the substantial likelihood of irreparable
harm and injury to the disclosing Party and that in the event of such a breach,
monetary damages alone would not be an adequate remedy and which damages are
difficult to accurately measure. Accordingly, in the event of such a breach or
threatened breach by the recipient Party, the disclosing Party shall be entitled
to injunctive relief in any court of competent jurisdiction, without prejudice
to the other remedies available to the disclosing Party at law, in equity or
otherwise for such breach or threatened breach.
14.4 No Implied License. Except as expressly set forth to the contrary herein,
this Agreement shall not be construed as granting or conferring any interests or
rights, by license or otherwise, in any of the Confidential Information,
including, without limitation, any patent or patent application or any copyright
in which the disclosing Party now has or subsequently may obtain any right,
title or interest or any other intellectual property rights. Except as otherwise
expressly contemplated herein or agreed by the Parties, all materials created or
fabricated by the recipient Party, including without limitation evaluations,
based upon the Confidential Information are deemed to be Confidential
Information and are owned by and are the exclusive property of the disclosing
Party, and shall be returned by the recipient Party to the disclosing Party
immediately upon request by the disclosing Party or termination or expiration of
this Agreement.
14.5 Prior Agreements. The confidentiality obligations set forth in this
Agreement are in addition to, and not in lieu of, any agreements between the
Parties and/or any of their Affiliates (as defined in Section 19.3
below) respecting confidentiality that were executed on or before the date first
set forth above.
10
<PAGE> 11
15. Publicity. Neither Party shall issue a press release regarding this
Agreement or the transactions contemplated hereby, without the express written
consent of the other Party, which consent shall not be unreasonably withheld or
delayed; provided that nothing in this Section 15 shall be construed as limiting
a Party's right to disclose certain information in accordance with Section
14.2(iv) above.
16. Dispute Resolution.
16.1 Internal Resolution. The following procedure shall be adhered to: (i) in
all disputes that arise under this Agreement that the Parties cannot resolve
informally; and (ii) in all instances where the Director of Space Programs for
EchoStar and the Director of Program Management for Skynet are unable to agree
upon the resolution of an issue, which by the express terms of this Agreement is
to be determined by the mutual agreement of the Parties, within (5) business
days after the issue has been referred to both of them, with the sole exception
of the items to be mutually agreed upon in Sections 9(iii) and 4.1 (each, a
"Dispute"). Either Party to this Agreement may notify the other Party in writing
of the existence of a Dispute. The General Counsel of EchoStar and the General
Counsel of Skynet shall meet in person or by telephone within five (5) business
days after the other Party receives such written notification. If those
individuals are unable to resolve the dispute or agree upon a written plan of
corrective action within five (5) business days after such meeting, then the
matter shall automatically be referred to the President of EchoStar and the
President of Skynet, who shall meet in person or by telephone within five (5)
business days after the date of such referral. If mutual agreement still has not
been reached within five (5) business days after the initial meeting of the
respective Presidents of EchoStar and Skynet, either Party may request
arbitration pursuant to Section 16.2 below by delivery of written notice to the
other Party ("Notice of Arbitration"). Neither Party shall initiate arbitration
unless and until the dispute resolution procedure set forth in this Section 16.1
has been employed or waived by both Parties in writing.
16.2 Arbitration. Any dispute arising between the Parties with respect to the
performance of obligations under, or interpretation of, this Contract and all
Disputes that cannot be settled by the Parties pursuant to Section 16.1 above,
shall be determined by submission to binding arbitration in accordance with the
provisions of the "Uniform Arbitration Act of 1975", part 2 of article 22 of
title 13, Colorado Revised Statutes, as amended from time to time, and not by a
lawsuit or resort to court process except as Colorado law provides for judicial
review of arbitration proceedings. Any such arbitration shall be conducted in
the City and County of Denver, Colorado by a panel of three arbitrators who
shall be selected within thirty (30) days of such Notice of Arbitration, as
follows: (i) one arbitrator shall selected by each Party; and (ii) the third
arbitrator shall be selected by the arbitrators chosen by the Parties. In
resolving any dispute, the arbitrators shall apply the substantive laws of the
State of New York (without regard to its conflict
11
<PAGE> 12
of law rules), but shall apply the Colorado Rules of Civil Procedure and the
Colorado Rules of Evidence, and shall take into account usages, customs and
practices in the performance of contracts for the purchase and operation of
commercial communications satellites. Notwithstanding anything to the contrary
herein, the Arbitrators shall make their decision based on the overriding
principle that, unless expressly set forth to the contrary herein: (a) economic
disputes impacting the payloads of both Parties shall be resolved such that
gains and losses are shared between the Parties in direct proportion to the
Ownership Ratio, and (b) non-economic disputes affecting the payloads of both
Parties shall be resolved such that impact of gains and losses is shared on a
50/50 percent basis between the Parties. Proceedings and documents provided and
generated in connection with any arbitration hereunder shall be in the English
language. Each Party shall bear its own costs and expenses (including the costs
and expenses of the arbitrator it selected) and one-half of the costs and
expenses of the third arbitrator. The parties agree that, in no event, shall the
arbitrators' decision include a recovery under any theory of liability, or award
in any amount, not expressly allowed under this Contract. In furtherance and
without limitation of the foregoing, any award made by the arbitrators shall be
within the limitations set forth in Section 18 below.
17. Indemnification.
17.1 Each Party shall defend, indemnify and hold harmless the other Party, and
its Affiliates, and their respective directors, officers, employees,
shareholders, agents and representatives from and against all losses, damages,
liabilities, suits and expenses (including, but not limited to, reasonable
attorneys' fees) (collectively "Losses") attributable to third party claims for
bodily injury or property damage, but only to the extent that such Losses were
caused by, or resulted from, negligent acts or omissions, gross misconduct or
willful misconduct by the first Party or its employees, agents, consultants or
representatives.
17.2 The right to any indemnity specified in this Section 17 shall be subject to
the following conditions:
(i) The Party seeking indemnification shall promptly advise the other Party in
writing of the filing of any suit or of any written or oral claim for
indemnification upon receipt thereof and shall provide the other Party, at its
request, with such assistance and information available to the indemnified party
as is relevant to the defense such suit or claim. Any such assistance or
information that is furnished by the indemnified Party at the request of the
indemnifying Party XXX
(ii) The Party seeking indemnification shall not make any admission nor shall it
reach a compromise or settlement without the prior written approval of the other
Party, which approval shall not be unreasonably withheld or delayed.
12
<PAGE> 13
(iii) The indemnifying Party shall assist and shall have the right to assume,
when not contrary to the governing rules of procedure, the defense of any claim
or suit in XXX
(iv) The Party seeking indemnification may participate XXX, using counsel
reasonably acceptable to the indemnifying Party, provided there is no conflict
of interest and that such participation would not and does not adversely affect
the conduct of the proceedings.
(v) XXX: (i) the indemnifying Party and such indemnified Party shall have
mutually agreed to retention of such other counsel; or (ii) the named parties to
any proceeding (including without limitation any impleaded parties) include both
the indemnifying Party and such indemnified Party and representation of both the
indemnifying Party and such indemnified Party by the same counsel would be
inappropriate due to actual or potential conflicts of interest between them.
18. LIMITATION OF LIABILITY. THE LIMITATION OF LIABILITY PROVISION OF THE TT&C
AGREEMENT SHALL EXCLUSIVELY CONTROL LIABILITIES ARISING OUT OF THE PROVISION OF
TT&C SERVICES. THE LIMITATION OF LIABILITY PROVISION OF THE TECHNICAL SUPPORT
AGREEMENT SHALL EXCLUSIVELY CONTROL LIABILITIES ARISING OUT OF THE PROVISION OF
SATELLITE MANAGEMENT SERVICES. EXCEPT WITH RESPECT TO BREACHES OF SECTION 14 OR
15 OF THIS AGREEMENT, IN NO EVENT SHALL EITHER PARTY BE LIABLE DIRECTLY OR
INDIRECTLY TO THE OTHER PARTY, ITS AFFILIATES, OR THEIR RESPECTIVE OFFICERS,
DIRECTORS, EMPLOYEES, SHAREHOLDERS, AGENTS, CUSTOMERS, CONTRACTORS OR
SUBCONTRACTORS AT ANY TIER (INCLUDING WITHOUT LIMITATION SUPPLIERS OF ANY KIND),
OR TO ANY OTHER PERSON OR ENTITY CLAIMING BY OR THROUGH SUCH PARTY FOR ANY
AMOUNTS REPRESENTING LOSS OF PROFITS, LOSS OF BUSINESS, OR ANY INDIRECT,
INCIDENTAL, SPECIAL, EXEMPLARY, CONSEQUENTIAL, OR PUNITIVE DAMAGES ARISING FROM
OR RELATING TO THE PERFORMANCE OR NONPERFORMANCE OF THIS AGREEMENT OR ANY ACTS
OR OMISSIONS ASSOCIATED THEREWITH, WHETHER THE BASIS OF THE LIABILITY IS BREACH
OF CONTRACT, TORT, STATUTES OR ANY OTHER LEGAL THEORY. THIS LIMITATION OF
LIABILITY SHALL NOT BE CONSTRUED TO LIMIT A PARTY'S INDEMNIFICATION OBLIGATIONS
PURSUANT TO SECTIONS 11 AND 17.
19. Miscellaneous.
19.1 Relationship of the Parties. This Agreement defines the cooperative
activities of the Parties in the acquisition, manufacture and operation of a
C/Ku/Ka-Band hybrid satellite under the terms contained herein. Except for the
covenants contained herein, no legal entity or relationship of any kind,
including but not limited to a joint venture, pooling arrangement, agency,
partnership or
13
<PAGE> 14
other form of business relationship shall be deemed to arise herefrom between
the Parties or between any other individuals, organizations or corporation. Each
Party shall act as an independent contractor and not as an agent for the other
and no Party shall have any authority to bind the other Party except to the
extent specifically provided herein.
19.2 Applicable Law and Construction. This Agreement shall be construed, and the
relations between the Parties determined, in accordance with the laws of the
state of New York, except for its choice of laws provisions. The descriptive
headings contained in this Agreement are included for convenience and reference
only and shall not be held to expand, modify, amplify or aid in the
interpretation, construction or meaning of this Agreement. Skynet and EchoStar
acknowledge and agree that they and their counsel have reviewed, or have been
given a reasonable opportunity to review, this Agreement and that the normal
rule of construction to the effect that any ambiguities are to be resolved
against the drafting party shall not be employed in the interpretation of this
Agreement or any amendments or attachments hereto.
19.3 Assignment. This Agreement shall be binding upon and inure to the benefit
of the Parties and their respective heirs, legal representatives, successors and
permitted assigns. Neither this Agreement nor any rights, duties or obligations
hereunder may be assigned, delegated or otherwise transferred, in whole or in
part, by either Party, nor shall either Party sell its entire ownership interest
in its payload(s) and in the Common Elements to a third party pursuant to
Section 12.1(a) above, without the prior written consent of the other Party,
which consent shall not be unreasonably withheld; provided, however, that,
without securing such prior consent, a Party shall have the right to assign this
Agreement or sell its entire ownership interest in its payload(s) and in the
Common Elements to any person or entity directly or indirectly controlling,
controlled by or under common control with such Party (an "Affiliate"), or to
any successor of such Party by way of merger or consolidation or the acquisition
of substantially all of the assets of such Party relating to the subject matter
of this Agreement, provided, however, that such Affiliate or successor, as the
case may be, shall expressly assume all of the obligations of such Party under
this Agreement. Any attempted assignment, delegation, sale or other transfer in
contravention of the above provisions shall be void ab initio.
19.4 Notices. All notices and other communications that may be or are required
to be given hereunder shall be in writing and shall be sent via first-class
registered or certified mail, return receipt requested and postage prepaid, or
via overnight courier service, charges prepaid, to the party to be notified at
the following address(es), or sent by facsimile transmission to the party to be
notified at the following fax number(s), or to such other persons, address(es)
or fax number(s) as such party may have substituted by written notice to the
other parties in accordance with the provisions of this Section 19.4:
14
<PAGE> 15
In the case of EchoStar:
Echostar Orbital Corporation
5701 S. Santa Fe Drive
Littleton, Colorado 80120
Attn: Rohan Zaveri, Director of Space Programs
Fax: (303) 723-1099
With a copy to:
Echostar Orbital Corporation
5701 S. Santa Fe Drive
Littleton, Colorado 80120
Attn: David K. Moskowitz, Senior Vice President and General Counsel
Fax: (303) 723-1699
In the case of Skynet:
Loral Skynet
500 Hills Drive
P.O. Box 7018
Bedminster, NJ 07921
Attn: Robert DeMartini, Director, Supplier Relations
Facsimile Number: (908) 470-2453
With a copy to:
Loral Skynet
500 Hills Drive
P.O. Box 7018
Bedminster, NJ 07921
Attn: Charles Davidson, Director, Program Management
Fax: (908) 470-2467
The sending of such notice with confirmation of successful receipt of the
complete transmission (in the case of facsimile transmissions) or receipt of
such notice (in the case of delivery by first class registered or certified mail
or by overnight courier service) shall constitute the giving thereof.
19.5 Unrestricted Activities. Nothing contained herein shall be deemed to
restrict a Party from quoting, offering to sell, selling to, receiving quotes,
offering XXX
19.6 Entire Agreement. This Agreement constitutes the entire understanding and
agreement between the Parties with respect to the subject matter hereof, and
supersedes all such prior representations and agreements, oral or written.
15
<PAGE> 16
This Agreement shall not be modified or altered, except in a writing executed by
a duly authorized representative of each Party.
19.7 Compliance with Export Control and Other Laws and Regulations. The Parties
shall comply with all United States Export Control Regulations and all other
laws and regulations which apply to this Agreement; and further will not
directly or indirectly perform or fail to perform any act which will constitute
a violation of such laws or regulations in the performance of the Agreement.
19.8 Waiver. The failure or delay of either Party at any time to exercise or
enforce any right or remedy available to it under this Agreement with respect to
any breach or default by the other Party shall not be construed to be a waiver
of such right or remedy with respect to any other breach or default by the other
Party. The delay or failure of either Party to give notice of breach or default
shall not be deemed to be a waiver of the right to do so for that or any
subsequent breach or default or for the persistence in a breach or default of a
continuing nature.
19.9 Counterparts. This Agreement may be signed in counterparts, each of which
shall constitute an original and all of which together shall constitute one and
the same agreement.
19.10 Severability. The Parties agree that each provision of this Agreement
shall be construed as separable and divisible from every other provisions and
that the enforceability of any one provision shall not limit the enforceability,
in whole or in part, of any other provision hereof. In the event that a court of
competent jurisdiction or a panel of arbitrators selected pursuant to Section
16.2 above 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, then such term or provision shall be enforced to the maximum
extent deemed by such court or panel of arbitrators to be permissible, and the
remaining provisions of this Agreement shall be unaffected thereby and shall
remain in full force and effect.
19.11 Survival of Obligation. The obligations of the Parties under this
Agreement, which by their nature logically would be expected to survive
termination, cancellation, or expiration of this Agreement, including without
limitation those set forth in Sections 7 (regarding Skynet's obligation to
provide TT&C services on a Substitute Satellite), 14, 15, 16, 17, 18, 19.2 and
19.4, shall survive termination, cancellation or expiration of this Agreement
for the applicable time period specified in such section or, if no time period
is specified, for a reasonable period of time under the circumstances.
19.12 Remedies Cumulative. Except as otherwise expressly set forth herein, it is
agreed that the rights and remedies herein provided in case of default or breach
of this Agreement are cumulative and shall not affect in any manner any other
remedies that any Party may have by reason of such default or breach,
16
<PAGE> 17
except as expressly limited in this Agreement. Except as otherwise expressly set
forth herein, 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.
19.13 Order of Precedence. Any conflict between the terms of this Agreement and
those of any document attached hereto as an Exhibit shall be resolved by
precedence to the provisions of this Agreement.
19.14 Marketing Name. Each Party shall have the right to market and promote its
payload under any name to which it has intellectual property rights, without the
consent or prior approval of the other Party, provided that such marketing and
promotion does not create a likelihood of confusion as to which Party owns the
payload at issue. For the avoidance of doubt, the provisions of this Section
19.14 are without any prejudice to any rights that a Party may have to a
particular name at law, in equity or otherwise.
17
<PAGE> 18
IN WITNESS WHEREOF, the Parties have caused their duly authorized
representatives to execute this Agreement as of the date first set forth above.
LORAL SPACECOM CORPORATION
By:
--------------------------------------
Name:
Title:
ECHOSTAR ORBITAL CORPORATION
By:
---------------------------------------
Name:
Title:
18
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
FINANCIAL STATEMENTS OF ECHOSTAR COMMUNICATIONS CORPORATION AS OF AND FOR THE
THREE MONTHS ENDED MARCH 31, 2000 AND IS QUALIFIED IN ITS ENTIRETY BY REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 3-MOS
<FISCAL-YEAR-END> DEC-31-2000
<PERIOD-START> JAN-01-2000
<PERIOD-END> MAR-31-2000
<CASH> 679,788
<SECURITIES> 371,120
<RECEIVABLES> 173,735
<ALLOWANCES> 16,182
<INVENTORY> 152,493
<CURRENT-ASSETS> 1,530,487
<PP&E> 1,338,275
<DEPRECIATION> 300,222
<TOTAL-ASSETS> 3,824,874
<CURRENT-LIABILITIES> 948,738
<BONDS> 3,048,436
0
17,407
<COMMON> 4,692
<OTHER-SE> (199,958)
<TOTAL-LIABILITY-AND-EQUITY> 3,824,874
<SALES> 551,471<F1>
<TOTAL-REVENUES> 565,721
<CGS> 324,437<F2>
<TOTAL-COSTS> 707,738
<OTHER-EXPENSES> 43,058
<LOSS-PROVISION> 11,819
<INTEREST-EXPENSE> 61,513
<INCOME-PRETAX> (185,075)
<INCOME-TAX> (55)
<INCOME-CONTINUING> (185,130)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (185,130)
<EPS-BASIC> (0.40)
<EPS-DILUTED> (0.40)
<FN>
<F1>INCLUDES PROGRAMMING REVENUE
<F2>INCLUDES COSTS OF PROGRAMMING
</FN>
</TABLE>
