SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
____________________________________
Form 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported)
August 4, 1997
CAI WIRELESS SYSTEMS, INC.
(Exact name of registrant as specified in its charter)
Connecticut 0-22888 06-1324691
(State or other (Commission File Number) (IRS Employer
jurisdiction of Identification No.)
incorporation)
18 Corporate Woods Blvd., Albany, NY 12211
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (518) 462-2632
(Former name or former address, if changed since last report)
<PAGE>
Item 5 - OTHER EVENTS
On August 4, 1997, CAI Wireless Systems, Inc. (the "Company")
secured access to digitally-compressed programming for its subscription
television business through an affiliation agreement (the "Affiliation
Agreement") with TelQuest Satellite Services LLC ("Satellite Services").
Pursuant to the terms of the Affiliation Agreement, the Company will receive
digital video programming for any of its markets in which it may elect to
launch a digital subscription television business. The Satellite Services
signal will initially be a C-Band satellite signal transmitted to the Company's
MMDS headends from the TelStar 5 Satellite successfully launched and deployed
by Loral Skynet in July. Satellite Services also plans to offer a direct-to-
home ("DTH") digital video programming service commencing in 1998. Upon launch
of such service, the Company will have an opportunity to market and sell the
Satellite Services DTH product along with the Company's headend service in the
Company's markets. The Company has the right to be the exclusive provider of
Satellite Services programming in each of its markets, subject to the payment
of certain minimum fees in certain circumstances and meeting certain
performance standards. The Company expects to use the Satellite Services
programming in Boston this fall in connection with the launch of the Boston
digital subscription television service.
The Satellite Services headend service will eliminate the need for CAI
to construct and operate a digital compression center in each of the markets in
which it decides to launch a digital subscription television service. As the
Company planned the build-out of its systems in fulfillment of its obligations
to Bell Atlantic Corporation ("Bell Atlantic") and NYNEX Corporation ("NYNEX")
under the Business Relationship Agreement (the "BR Agreement") among the
Company, Bell Atlantic and NYNEX, it did not contemplate the need to secure
digitally-compressed video programming as the Company was only required to
provide the MMDS transport system to Bell Atlantic and NYNEX under the BR
Agreement, and not any programming services. Under the BR Agreement, Bell
Atlantic and NYNEX would provide the programming for transmission over the
Company's facilities. With the decision by Bell Atlantic and NYNEX to abandon
their plans to utilize the Company's digital MMDS facilities to broadcast Bell
Atlantic/NYNEX programming in December 1996, the Company needed an alternative
programming solution for any market in which it decided to launch a digital
subscription television system. The Company believes that the use of Satellite
Service's national headend service is a substantially more cost-efficient means
of obtaining digitally-compressed video programming at this time than the
construction and operation of a digital compression center in each of the
markets in which it elects to launch digital subscription television services.
Satellite Services was formed as a joint venture among the Company, CS
Wireless Systems, Inc. and TelQuest Communications, Inc. ("Communications"), an
entity in which Jared E. Abbruzzese, Chairman and Chief Executive Officer of the
Company, is the majority stockholder. Satellite Services was created to develop
and operate satellite systems utilizing C-band and Ku-band satellite capacity to
provide digitally-compressed video programming to MMDS and hard-wire cable
operators and other users through headend and DTH services. Satellite Services
expects to begin providing headend services this fall via its national uplink
facility being constructed in Hawley, PA. In connection with the formation of
Satellite Services, CAI agreed to contribute $2,500,000 in cash and lease to
Satellite Services $2,500,000 of equipment at a nominal rental amount under a
five-year renewable lease in exchange for a minority interest in Satellite
Services. Upon the achievement of certain benchmarks, Satellite Services is
required to purchase the equipment from the Company at not less than its
then-current fair market value. The cash portion of the contribution is payable
in installments, the first of which was paid on August 4, 1997 in the amount of
$711,744, and included principal and accrued interest from an investment by the
Company in Communications in March 1997. The balance of the cash portion will
be payable in four equal quarterly installments of $447,064 beginning on
September 1, 1997.
<PAGE>
Item 7 - FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS
C. Exhibits
Exhibit No. Exhibit Description Page
99.1 MMDS Affiliation Agreement 5
(Confidential treatment has been
requested with respect to portions
of this Exhibit.)
<PAGE>
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 hereunto duly authorized.
Signature Title Date
/s/ James P. Ashman Executive Vice President, Chief August 26, 1997
James P. Ashman Financial Officer and Director
(Principal Financial Officer)
<PAGE>
Exhibit 99.1
MMDS AFFILIATION AGREEMENT
MMDS AFFILIATION AGREEMENT (this "Agreement") dated as of the
4th day of August, 1997 by and between TelQuest Satellite Services LLC, a
Delaware limited liability company ("TelQuest"), and CAI Wireless Systems,
Inc., a Connecticut corporation ("Affiliate").
RECITALS:
A. TelQuest intends to develop and operate a satellite system
("Satellite System") utilizing transponders initially on C-band and
subsequently on Ku-band frequencies for the purpose of providing digital video
information and data through MMDS operators (i) for MMDS head-end in-the-sky
services ("HITS Services") and (ii) for direct-to-home ("DTH") subscription
services ("DTH Services" and together with HITS Services, the "Satellite
Services").
B. Affiliate currently owns or holds a majority interest in and
operates MMDS wireless cable systems through which Affiliate provides video
programming services to its subscribers and such wireless cable systems are
identified on ScheduleA hereto (the wireless cable systems identified in this
recital, together with any additional or subsequent systems as may be added
from time to time in accordance herewith, hereinafter referred to collectively
as the "Affiliate Systems" and individually as an "Affiliate System").
C. Affiliate desires to utilize TelQuest's Satellite System for
the purpose of enhancing Affiliate's provision of video programming services to
its subscribers.
D. TelQuest agrees to provide Satellite Services to Affiliate
on the Satellite System by providing HITS Services to Affiliate's head-ends and
DTH Services directly to Affiliate DTH Subscribers (as defined below) in
Affiliate's Service Area (as defined below), and Affiliate agrees to purchase
the Satellite Services, on the terms and conditions contained herein.
NOW, THEREFORE, in consideration of the foregoing and of the
mutual covenants and agreements set forth herein, the parties agree as follows:
1. Definitions. As used in this Agreement, the following terms
shall have the meanings assigned to them below:
a. "Agreement" means this MMDS Affiliation Agreement dated as
of August 4, 1997 by and between TelQuest and Affiliate.
b. "Affiliate" has the meaning set forth in the Preamble.
c. "Affiliate Subscribers" shall mean, collectively, all the
Affiliate DTH Subscribers and all of the Affiliate MMDS Subscribers.
d. "Affiliate DTH Subscribers" shall mean all subscribers
receiving TelQuest Programming through the utilization of the DTH Services
hereunder and, for purposes of Section 9, the sum of (a)the average number of
residential (individual dwelling unit) customers who (i) have been receiving
TelQuest Programming during the last thirty (30) days and (ii) are not
currently more than sixty (60) days past due on their account or pending
disconnection for any reason and (b)commercial and multiple dwelling unit
("MDU") accounts, such as hotels, motels, apartment houses and multifamily
homes, provided that the number of "Affiliate DTH Subscribers" serviced by each
commercial and MDU account shall be deemed to be an amount equal to the
quotient of (x) the monthly basic service revenue derived from such commercial
and MDU account (excluding any charges for taxes or other non-recurring items)
divided by (y) the Affiliate's per subscriber charge for DTH Service.
e. "Affiliate MMDS Subscribers" shall mean all residential,
commercial and bulk-billed customers receiving TelQuest Programming through the
utilization of the HITS Services hereunder, via either digital MMDS or a hybrid
MMDS transmission platform, and, for purposes of Section 9, the sum of (a)the
average number of residential (individual dwelling unit) customers who (i) have
been receiving TelQuest Programming during the last thirty (30) days and (ii)
are not currently more than sixty (60) days past due on their account or
pending disconnection for any reason and (b)commercial and MDU accounts, such
as hotels, motels, apartment houses and multifamily homes, provided that the
number of "Affiliate MMDS Subscribers" serviced by each commercial and MDU
account shall be deemed to be an amount equal to the quotient of (x) the
monthly basic service revenue derived from such commercial or MDU account
(excluding any charges for taxes or other non-recurring items) divided by (y)
the Affiliate's per subscriber charge for service.
f. "Affiliate System(s)" has the meaning set forth in the
Recitals.
g. "BTA" shall mean Basic Trading Area.
h. "CPE" has the meaning set forth in Section16.
i. "CPI" shall mean the Consumer Price Index (All items) for
the Urban Consumers/U.S. (New Series) as published by the United States
Department of Labor, Bureau of Labor Statistics, or such other index as
mutually agreed upon between TelQuest and Affiliate.
j. "DTH" has the meaning set forth in the Recitals.
k. "DTH Services" has the meaning set forth in the Recitals.
l. "Force Majeure" has the meaning set forth in Section13.
m. "HITS Services" has the meaning set forth in the Recitals.
n. "Indemnified Party" has the meaning set forth in Section 20.
o. "Indemnifying Party" has the meaning set forth in Section
20.
p. "Initial Term" has the meaning set forth in Section 2.
q. "IRT(s)" has the meaning set forth in Section 3(b).
r. "Launch Dates" has the meaning set forth in Section 3(d).
s. "Monthly Fee" has the meaning set forth in Section 9.
t. "Performance Standards" has the meaning set forth in Section
15(a).
u. "Satellite(s)" shall mean the C-band satellite and/or Ku-
band satellite on which TelQuest leases transponder capacity for the provision
of the Satellite Services.
v. "Satellite Services" has the meaning set forth in the
Recitals.
w. "Satellite System" has the meaning set forth in the
Recitals.
x. "Service Area" is the BTA for a given Affiliate System as
specified on Schedule A.
y. "Successor Satellite(s)" shall mean any replacement or
successor satellite(s) to the initial Satellites on which TelQuest leases
transponder capacity for the provision of the Satellite Services.
z. "Technical Specifications" has the meaning set forth in
Section5.
aa. "TelQuest" has the meaning set forth in the Preamble.
bb. "TelQuest Programming" has the meaning set forth in Section
4(a).
cc. "Term" has the meaning set forth in Section 2.
dd. "Transponder Agreement" has the meaning set forth in
Section18(e).
ee. "Uplink Facilities" has the meaning set forth in Section
6(a).
2. Term. TelQuest shall commence providing Satellite Services under
this Agreement as of September 1, 1997. This Agreement will commence as of the
date hereof and shall continue for a period of ten (10) years (the "Initial
Term") unless sooner terminated in accordance with Section22. Thereafter,
this Agreement shall be automatically renewed for additional five- (5) year
terms unless either party gives written notice of its desire and intention to
terminate at least one (1) year prior to the expiration of the Initial Term or
any five- (5) year renewal term thereafter (the Initial Term together with any
renewal term hereinafter referred to as the "Term").
3. Provision of Satellite Services.
a. TelQuest hereby agrees to provide Satellite Services to
Affiliate by delivering the TelQuest Programming to the Satellite(s), causing
the transmission of the TelQuest Programming by the Satellite(s) to the
Affiliate's head-end(s) and subscribing consumer residences, and authorizing
Affiliate's reception of TelQuest HITS Service at Affiliate's head-end(s) and
authorizing consumer reception of TelQuest's DTH Services at subscribing
consumer residences in the Service Areas. TelQuest shall provide Satellite
Services via uplink facilities and satellites owned, leased or operated by
TelQuest or via service agreements with other suitable satellite, and/or
satellite uplink providers. TelQuest's uplink facilities will initially be
located in Hawley, PA. Affiliate acknowledges that initially, TelQuest shall
provide only HITS Services under this Agreement until such time as TelQuest is
capable of providing both HITS and DTH Services. In the event TelQuest is
unable to provide DTH Services, this Agreement shall remain in full force and
effect with respect to TelQuest's provision of HITS Services in accordance with
the terms of this Agreement.
b. In connection with the HITS Services, TelQuest shall deliver
TelQuest Programming to the Satellite(s), cause the transmission of the
TelQuest Programming by the Satellite(s) to the Affiliate's head-ends and
authorize each Affiliate System head-end Integrated Receiver Transcoder ("IRT")
to receive the signals for TelQuest Programming in accordance with the
Technical Specifications. Affiliate shall, at its own cost and expense, obtain
and install one or more satellite earth stations, a sufficient number of IRTs
to receive TelQuest Programming, and any other equipment and software necessary
to receive, digitally reprocess and distribute the HITS Services signals. Each
such digital head-end shall be operational and maintained by Affiliate in
good working order and in compliance with all applicable laws. It shall be the
responsibility of Affiliate to activate and "turn-on" the Affiliate MMDS
Subscribers.
c. In connection with the DTH Services, TelQuest shall deliver
TelQuest Programming to the Satellite(s), cause the transmission of the
TelQuest Programming by the Satellite(s) to the subscribing consumer residences
and authorize receivers installed by Affiliate or its agent(s) at subscribing
consumer residences to receive the signals of TelQuest Programming.
d. Affiliate shall be responsible for the reception of the
Satellite System transmission of TelQuest Programming for HITS Services and
shall cause TelQuest Programming to be delivered on Affiliate Systems
commencing with the respective launch dates ("Launch Dates") for Affiliate
Systems set forth on Schedule A. Affiliate shall diligently endeavor to
commence delivering TelQuest Programming on the applicable Launch Dates, and in
the event Affiliate begins delivering TelQuest Programming on any date other
than that set forth as the anticipated Launch Date, Affiliate shall promptly
notify TelQuest in writing of such actual Launch Date. In the event
Affiliate does not commence delivering TelQuest Programming within ninety (90)
days following the anticipated Launch Date, TelQuest shall have a right to
(i)terminate satellite services with respect to such Affiliate System or
(ii)revoke exclusivity for the Service Area of such Affiliate System.
Affiliate may add Affiliate Systems in areas not serviced by TelQuest with
applicable Launch Dates as the Affiliate in its discretion desires during the
Term, but shall do so only upon written approval by TelQuest, which shall not
be unreasonably withheld, on no less than thirty (30) days' prior written
notice to TelQuest to which TelQuest agrees to respond in writing within
fifteen (15) days, and upon such approval said Affiliate Systems and Launch
Dates shall be incorporated herein by reference.
e. Affiliate shall deliver that portion of the TelQuest
Programming to Affiliate MMDS Subscribers as it chooses in its sole discretion,
subject to the terms of Affiliate's MMDS carriage agreements and digital
transport amendments. Affiliate will use reasonable commercial efforts to
ensure TelQuest Programming will be received only by Affiliate MMDS Subscribers
who are identified, charged for and pay a special charge for the privilege of
receiving TelQuest Programming, or are otherwise authorized to receive TelQuest
Programming. TelQuest reserves the right to terminate this Agreement should
said Affiliate fail to utilize reasonable commercial efforts in ensuring
sufficient and reasonable security to prohibit, to the extent possible,
unauthorized reception of TelQuest Programming.
f. Affiliate shall not deliver or make available TelQuest
Programming to any Affiliate Subscriber except in accordance with the payments
to TelQuest provided for in Section 8.
g. In the event TelQuest has reason to believe that TelQuest
Programming is being received by an unauthorized person or persons within a
given Service Area, TelQuest shall notify Affiliate. Affiliate shall take such
reasonable steps as are appropriate to investigate such information and take
reasonable actions to ensure that TelQuest Programming is received only by
authorized persons, including the initiation of legal action; provided,
however, Affiliate shall only be required to take such action if such
unauthorized use is the result of an act or omission of Affiliate. TelQuest
also reserves the right to take whatever legal action is necessary in its sole
discretion to prosecute and prevent those who are the unauthorized recipients
of TelQuest Programming from obtaining same within the jurisdiction of the
Service Area of Affiliate. In the event TelQuest determines to commence legal
action, it shall first notify Affiliate at least ten (10) days prior to
commencing such action.
4. TelQuest Programming.
a. TelQuest shall initially deliver the digital video
programming ("TelQuest Programming") listed on Schedule B hereto, which has
been approved in advance by Affiliate. TelQuest shall have the right in its
sole discretion to add or remove programming to and from the TelQuest
Programming line-up from time to time upon notice to Affiliate. TelQuest shall
determine in its sole discretion the TelQuest Programming to be delivered to
Affiliate's DTH Subscribers.
b. In connection with procuring TelQuest Programming for the
provision of HITS Service, TelQuest shall provide Affiliate with execution
copies of digital transport amendments to Affiliate's MMDS carriage agreements
with programmers in order to permit Affiliate to access TelQuest's digital
satellite feed of such programming as part of the HITS Service. TelQuest shall
use reasonable commercial efforts to assist in facilitating such arrangements
with programmers, and Affiliate agrees to cooperate in such effort. Affiliate
shall be solely responsible for any and all programming costs associated with
the TelQuest Programming delivered in connection with the HITS Service.
Affiliate represents to TelQuest that it has, or will have prior to launching
HITS Service in its Service Area(s), for each of its Service Areas, MMDS
carriage agreements with programmers covering all of the initial TelQuest
Programming to be delivered by TelQuest in connection with the HITS Service.
Affiliate shall maintain all such MMDS carriage agreements in full force and
effect during the Term as necessary to comply with the terms of this Agreement.
At the request of Affiliate, TelQuest shall use reasonable efforts to assist
Affiliate in facilitating MMDS carriage agreements with programmers through
the services of Wireless Programming Cooperative, L.L.C.
c. In connection with procuring TelQuest Programming for the
provision of DTH Service, TelQuest shall enter into DTH affiliation agreements
with programmers in order to permit TelQuest to deliver such programming to
Affiliate's DTH Subscribers as part of the DTH Service. TelQuest shall be
solely responsible for any and all programming costs associated with the
TelQuest Programming delivered by TelQuest in connection with the DTH Service.
Affiliate and TelQuest agree to cooperate in addressing and remedying any
double payments to programmers resulting from the provision of HITS Service and
DTH Service to Affiliate Subscribers.
5. Technical Specifications for Satellite Services.
The initial technical specifications with respect to the receipt
of the Satellite Services on TelQuest's Satellite System are set forth on
ScheduleC hereto (the "Initial Technical Specifications"). The parties agree
to cooperate in establishing and coordinating additional technical
specifications for the receipt of Satellite Services (the "Additional Technical
Specifications" together with the Initial Technical Specifications, the
"Technical Specifications").
6. Modifications and Maintenance of the Satellite System.
a. TelQuest shall have the responsibility during the Term, at
TelQuest's sole cost and expense to operate and maintain TelQuest's satellite
uplink facilities (the "Uplink Facilities") for the Satellite System as may be
necessary to provide the Satellite Services to the Affiliate Systems as
provided herein. [**The confidential material contained herein has been
omitted and has been separately filed with the Commission.**].
b. TelQuest will upgrade its Uplink Facilities at its own cost
from time to time as it deems necessary to take advantage of future
improvements in digital encoding and compression and related technologies, in
accordance with the Technical Specifications, in order to increase the
quality and/or quantity of the TelQuest Programming to be provided to the
Affiliate Systems hereunder.
c. TelQuest shall (a) at all times preserve and keep in full
force and effect the rights material to its business and (b) comply at all
times and in all material respects with the provisions of all permits, licenses
or other similar authorizations relating to such business, including without
limitation any obligations or agreements with respect to signal transmission,
certifications and permits and all other agreements, licenses and sublicenses,
and leases and subleases to which it is a party, and will suffer no loss of
forfeiture thereof or thereunder except for immaterial losses or forfeitures
which in the aggregate would not be material to its business or properties or
have a material adverse effect on its ability to perform its obligations
hereunder.
d. TelQuest shall obtain all necessary licenses from the
Federal Communications Commission for the provision of Satellite Services on
the Satellite System.
7. Call Center, Subscriber Management and Billing. In connection
with TelQuest's provision of DTH Services:
a. TelQuest shall make available to Affiliate a 24 hour-per-
day, seven-day-per-week national call center, staffed by qualified live
operators supported with automatic response units, to receive calls from
subscribers on a toll free number maintained by TelQuest. TelQuest shall
provide sufficient training to the operators staffing the call center to enable
them to handle subscriber calls and arrange subscriber installations in a
professional manner. In connection with such call center, TelQuest hereby
offers Affiliate the call center service packages set forth on ScheduleF.
Affiliate has initially selected the call center service package checked on
ScheduleF. Affiliate shall have the right to change its call center service
package from time to time on thirty (30) days' prior written notice to
TelQuest. Affiliate agrees to pay TelQuest the applicable call center service
fee for the selected call center service package as in effect from time to
time. The initial call center service fees are set forth on ScheduleF and are
subject to change in TelQuest's reasonable discretion upon thirty (30) days'
prior written notice to Affiliate.
(i) TelQuest, in cooperation with Affiliate, shall
develop a computer data base covering each of the
Affiliate Systems, in order to expedite the
process of arranging subscriber installations.
(ii) TelQuest shall cause the operators staffing the
call center to:
(1) Record each subscriber's name, telephone
number, credit information and requested
installation time, subject to parameters
supplied by Affiliate related to installation
crew availabilities, estimated work activity
time, and other considerations reasonably
requested by Affiliate.
(2) Electronically transmit each such completed
service order to the applicable
representative and dispatcher designated by
Affiliate.
(iii) TelQuest shall provide for credit check of
prospective subscribers using Affiliate-supplied
credit limit parameters in order to determine
whether prospective subscribers shall be approved
to subscribe for the DTH Services.
(iv) TelQuest shall provide electronic confirmation to
Affiliate of its decision whether or not to
approve prospective subscriber's credit.
b. TelQuest shall provide the subscriber management and billing
system for Affiliate DTH Subscribers, including the billing and collections
services, as well as supplying MIS reports to Affiliate with respect to
Affiliate DTH Subscribers. Affiliate shall pay TelQuest $1.00 per Affiliate
DTH Subscriber for such subscriber management and billing services.
8. DTH Subscriber Installations. In connection with Affiliate's
receipt of DTH Services Affiliate shall:
a. Provide at its sole cost and expense, dispatchers to handle
the final scheduling confirmation and dispatching for customer installations in
each of the Affiliate Systems.
b. Provide sufficient ongoing training to the dispatchers to
enable them to perform their duties in a professional manner.
c. Provide prompt, professional installations and technical
service for subscribers served by the Affiliate Systems.
d. Maintain at all times sufficient installation resources
available to install each new subscriber within three (3) business days of
receipt of service orders.
e. Cause its dispatchers to:
(i) Receive and review service orders electronically
transmitted from TelQuest's call center.
(ii) to confirm subscriber's requested installation
time, or if Affiliate cannot accommodate such
requested installation time after using its
reasonable commercial efforts to do so, arrange an
alternative installation time acceptable to
subscriber.
(iii) Dispatch installer in a manner consistent with
customary industry practices.
9. Fees for Satellite Services.
Satellite Services provided hereunder are in consideration of a
monthly fee, payable by Affiliate in accordance with Section 10. The monthly
fee ("Monthly Fee") for the Satellite Services hereunder shall be calculated
and paid as set forth on Schedule D.
10. Payments and Reports.
a. With respect to the HITS Service Monthly Fee:
(i) Within fifteen (15) business days following the
end of each calendar month of the Term, Affiliate
shall deliver to TelQuest a statement from
Affiliate's Chief Financial Officer showing the
computation of the HITS Service Monthly Fees
payable to TelQuest for such calendar month
together with payment of such fees. The form of
such statement shall be as provided by TelQuest,
TelQuest having the right to modify such form from
time to time; provided such form is reasonably
acceptable to Affiliate.
(ii) Within one hundred and twenty (120) days following
the end of Affiliate's fiscal year during any
portion of which this Agreement is in effect,
Affiliate shall supply to TelQuest a letter
addressed to TelQuest from Affiliate's Chief
Financial Officer to the effect that Affiliate
has completed an audit conducted by an independent
certified accounting firm of the results of
Affiliate's operations for such fiscal year and
based on that audit the information supplied to
TelQuest by Affiliate with respect to such fiscal
year is accurate and complete in all respects.
Affiliate's obligation to supply such a letter
shall continue after any termination of this
Agreement until TelQuest receives the required
letter with respect to the last fiscal year
during any portion of which this Agreement is in
effect. In addition, TelQuest shall have the
right to have a TelQuest appointed
representative, once a year, at TelQuest's
timing, upon reasonable notice to Affiliate,
inspect Affiliate's subscriber billing records
and any other subscriber records kept by
Affiliate.
(iii) Affiliate shall keep accurate and complete records
and accounts of billings, subscribers, and all
other matters which pertain to Affiliate MMDS
Subscribers.
(iv) Any amounts not paid by Affiliate to TelQuest when
due shall accrue interest at the rate of one and
one-half percent (1 1/2%) per month or at the
highest lawful rate, whichever shall be lesser,
compounded monthly from the date such amounts were
due until they are paid.
b. With respect to the DTH Service Monthly Fee and other fees
associated with DTH Service:
(i) Within fifteen (15) business days following the
end of each calendar month of the Term, TelQuest
shall deliver to Affiliate a statement from
TelQuest's Chief Financial Officer showing the DTH
subscription revenue received for Affiliate DTH
Subscribers for such calendar month and the
computation of the DTH Service Monthly Fees
payable to TelQuest for such calendar month
together with payment equal to (i)the DTH
subscription revenue received for Affiliate DTH
Subscribers for such calendar month, less (ii)the
DTH Service Monthly Fees payable to TelQuest for
such calendar month, less (iii)the applicable
subscriber management fee, less (iv)the applicable
call center service fee, less (v) any and all
programming costs associated with the TelQuest
Programming delivered by TelQuest in connection
with DTH Service. The form of such statement
shall be as provided by TelQuest, TelQuest having
the right to modify such form from time to time;
provided such form is reasonably acceptable to
Affiliate.
(ii) Within one hundred and twenty (120) days following
the end of TelQuest's fiscal year during any
portion of which this Agreement is in effect,
TelQuest shall supply to Affiliate a letter
addressed to Affiliate from TelQuest's Chief
Financial Officer to the effect that TelQuest has
completed an audit conducted by an independent
certified accounting firm of the results of
TelQuest's operations for such fiscal year and
based on that audit the information supplied to
Affiliate by TelQuest with respect to such fiscal
year is accurate and complete in all respects.
TelQuest's obligation to supply such a letter
shall continue after any termination of this
Agreement until Affiliate receives the required
letter with respect to the last fiscal year during
any portion of which this Agreement is in effect.
In addition, Affiliate shall have the right to
have an Affiliate appointed representative, once a
year, at Affiliate's timing, upon reasonable
notice to TelQuest, inspect TelQuest's DTH
subscriber billing records for Affiliate DTH
Subscribers and any other Affiliate DTH Subscriber
records kept by TelQuest.
(iii) TelQuest shall keep accurate and complete records
and accounts of billings, subscribers, and all
other matters which pertain to Affiliate DTH
Subscribers.
(iv) Any amounts not paid by TelQuest to Affiliate when
due shall accrue interest at the rate of one and
one-half percent (1 1/2%) per month or at the
highest lawful rate, whichever shall be lesser,
compounded monthly from the date such amounts were
due until they are paid.
[
**The confidential material contained herein has
been omitted and has been separately filed with
the Commission.**
]
11. Promotion, Marketing and Sales; Intellectual Property.
a. Affiliate shall use its reasonable commercial efforts to
promote the TelQuest Programming to its subscribers and maximize the sale of
the TelQuest Programming to its subscribers at the earliest possible date. If
the Affiliate offers any services other than the TelQuest Programming,
Affiliate shall not promote any other service in a manner that is detrimental
to the sale of the TelQuest Programming. In aid of such purpose, TelQuest
shall provide promotional and marketing advice, and sales training, and shall
make available to said Affiliate, when and as reasonably requested by
Affiliate, such marketing and promotional materials as TelQuest may deem
appropriate.
b. Affiliate acknowledges that the name and mark "TelQuest,"
and the name of TelQuest's programming package, are the exclusive property of
TelQuest and will not use such names or marks, or any logos or other items
registered in association with that name or mark, or in any way advertise the
programming of TelQuest except as advised and approved by TelQuest. Affiliate
has not and shall not acquire any proprietary or other rights in such name or
marks by reason of this Agreement. Affiliate may distribute materials using
such names or marks only if it is clear that such names and marks are marks for
the TelQuest Programming and Satellite Services of TelQuest that Affiliate
utilizes, and such use shall be in accordance with any instructions that may
be issued by TelQuest from time to time.
c. TelQuest acknowledges that the name and mark "CAI Wireless
Systems, Inc.," and the names of Affiliate's programming packages, are the
exclusive property of Affiliate and will not use such names or marks, or any
logos or other items registered in association with that name or mark, except
as advised and approved by TelQuest. TelQuest has not and shall not acquire
any proprietary or other rights in such name or marks by reason of this
Agreement. TelQuest may distribute materials using such names or marks only if
it is clear that such names and marks are marks for the Satellite Services of
TelQuest that Affiliate utilizes, and such use shall be in accordance with any
instructions that may be issued by Affiliate from time to time.
d. Affiliate agrees to publicize, promote and prominently
display and exhibit, wherever appropriate, the logos and trademarks of
TelQuest, including the name of TelQuest's programming package, in accordance
with TelQuest's policies and standards.
e. TelQuest agrees to publicize, promote and prominently
display and exhibit, where appropriate, the logos and trademarks of Affiliate,
including the names of Affiliate's programming packages, in accordance with
Affiliate's policies and standards.
f. Affiliate will not advertise, package or market TelQuest
Programming under any other name other than "TelQuest," and the name of
TelQuest's programming package, or such other name agreed to by TelQuest for
the TelQuest Programming, and should Affiliate determine to market such
TelQuest Programming together with other programming, it will obtain TelQuest's
prior written approval as to the manner of such combination.
g. With respect to Affiliate Subscribers:
(i) TelQuest may, from time to time, undertake
consumer marketing tests and surveys, polls and
other research in connection with the TelQuest
Programming. Subject to the limitations of
applicable laws, Affiliate shall cooperate with
TelQuest in such research by making its subscriber
lists and sales information available to TelQuest
and by rendering any other assistance which
TelQuest may reasonably request and which
Affiliate can reasonably provide. Any
such information provided by Affiliate shall be
used by TelQuest only for marketing and billing
purposes. TelQuest shall treat as confidential
the subscriber names, addresses and sales
information received from Affiliate in connection
with such research and shall use any such names
and addresses only in connection with such
research. All subscriber information obtained by
TelQuest hereunder shall be maintained in
confidence by TelQuest and used solely for the
delivery of Satellite Services hereunder or as
otherwise permitted in this Agreement or as
otherwise agreed to in writing by Affiliate.
(ii) TelQuest will provide marketing strategy and
programs for marketing TelQuest Programming for
DTH Services in the markets served by Affiliate
Systems and will work with Affiliate to "co-brand"
the TelQuest Programming package for use in such
advertising. Affiliate shall establish a
marketing budget per Affiliate System for
marketing TelQuest Programming reasonably expected
to permit Affiliate to meet the Performance
Standards for DTH Services hereunder. TelQuest
shall also control the establishment of
licensing/comarketing arrangements and the
development of a consumer retail distribution
plan for the DTH Services.
12. Transmission Security.
Affiliate recognizes that in order to preserve the integrity and
marketability of TelQuest Programming, it is necessary for TelQuest to cause
such programming to be transmitted via satellite in an encoded mode. It shall
be and remain the obligation of Affiliate to obtain at its own expense, but
subject to the approval of TelQuest, such decoding device(s) (IRTs) as may be
necessary to properly receive such TelQuest Programming. PROVIDED, HOWEVER,
that TelQuest shall give said Affiliate no less than ninety (90) days' notice
of implementation of any modifications to such security measures and to the
extent reasonable and possible, cooperate, and coordinate the availability of
said equipment, with Affiliate to assist in the orderly deployment by
Affiliate of acceptable decoding or descrambling device(s).
13. Pre-Emptions and Changes; Force Majeure.
a. Affiliate understands that from time to time, due to the
nature of TelQuest Programming, it may be necessary to change, with little or
no notice, the schedule or lineup of TelQuest Programming as may be or have
been previously provided or contained in any advance program notices or guides,
and such changes or pre-emptions beyond the reasonable control of TelQuest,
shall not affect the responsibility of Affiliate to carry or to pay for the
TelQuest Programming alternatively provided.
b. In addition, neither TelQuest nor Affiliate shall incur any
liability under this Agreement with respect to any failure of the Satellite
Services to be delivered to Affiliate or Affiliate Subscribers if such failure
is due to any of the following events ("Force Majeure"): (i)any satellite or
transponder failure; (ii)the failure of any other equipment owned or
maintained by others other than equipment leased by TelQuest; (iii)any labor
dispute, fire, flood, riot, legal enactment, government regulation, act of God;
or (iv)any cause beyond the reasonable control of TelQuest or Affiliate, as
the case may be. In any such case, the parties' time for performance under
this Agreement, to the extent affected by any of the foregoing, shall be
correspondingly extended. Each party shall exercise its reasonable efforts to
cure any such failures or delays and the cause thereof.
14. Regulations.
The obligations of the parties hereto are and at all times shall remain
subject to all applicable Federal, State and local laws, rules and regulations.
Both TelQuest and Affiliate each represent and warrant as to itself that at the
present time it does not know and has no reason to know of any restrictions
placed on its activities by any applicable jurisdictions which would adversely
affect its performance hereunder.
15. Performance Standards and Exclusivity.
a. TelQuest agrees to provide TelQuest Programming pursuant to
the terms of this Agreement to Affiliate on an exclusive basis within each
Service Area for the Affiliate Systems, and provided that Affiliate is in full
compliance with the mutually acceptable performance standards (the "Performance
Standards") set forth on Schedule E attached hereto. Each month of the Term,
TelQuest will review whether Affiliate is in compliance with the Performance
Standards on a Service Area by Service Area basis. In the event TelQuest
determines that Affiliate is not in compliance with the Performance Standards
in a particular Service Area, then TelQuest shall provide Affiliate with
written notice of such non-compliance. [**The confidential material
contained herein has been omitted and has been filed separately with the
Commission.**]
b. Subject to subsection (a) above, TelQuest may provide
Satellite Services for customers in addition to the Affiliate Systems. When
providing such services to additional customers, TelQuest may use any or all of
its facilities used to provide similar services to the Service Areas of
Affiliate Systems, provided such use does not impair TelQuest's ability to
fulfill, and fully perform in each respect, its obligations to the Affiliate
hereunder.
16. Equipment.
a. TelQuest shall coordinate with vendors on the general
specifications and design of the consumer premise equipment ("CPE") and related
conditional access facilities to be used by Affiliate Subscribers to receive
the Satellite Services.
b. Affiliate shall be responsible for purchasing and installing
all CPE at Affiliate's sole cost and risk.
c. Affiliate shall have the responsibility during the Term, at
Affiliate's sole cost and expense to maintain, modify and repair all equipment
at Affiliate's head-ends and at Affiliate DTH Subscribers' premises for the
Affiliate Systems as may be necessary to use the Satellite Services provided
herein.
17. Insurance.
a. TelQuest shall maintain with financially sound and reputable
insurers, insurance with respect to the Uplink Facilities as required by the
Master Building Space License Agreement for TelQuest Equipment with Loral
Skynet relating to the Uplink Facilities.
b. Affiliate shall maintain with financially sound and
reputable insurers, insurance with respect to Affiliate's head-ends for the
Affiliate Systems against such casualties and contingencies, of such types, on
such terms and in such amounts (including deductibles, self-insurance and co-
insurance, if applicable) as is customary for entities in business similar to
that of Affiliate in the same geographic areas as Affiliate operates the
Affiliate Systems.
c. Either party may, at its option and at its own cost, secure
business interruption insurance.
18.Representation and Warranties of TelQuest.
a. TelQuest represents and warrants that it is a limited
liability company duly organized, validly existing and in good standing under
the laws of the State of Delaware and is empowered to grant the rights and
privileges provided for hereunder, and this Agreement has been duly executed by
it and constitutes its valid and enforceable obligation.
b. TelQuest represents and warrants that it has or will have
the right to furnish the TelQuest Programming to Affiliate DTH Subscribers.
c. TelQuest represents and warrants that TelQuest's provision
of the Satellite Services complies with all applicable laws, ordinances, codes,
permits, certifications, licensing requirements, rules and regulations, and
TelQuest has not received any notice to the contrary.
d. TelQuest represents and warrants that there is no action,
proceeding at law or in equity, arbitration or administrative or other
proceeding by or before, or, to the best knowledge, information and belief of
TelQuest, any investigation by, any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of
TelQuest, threatened against TelQuest, affecting the ability of TelQuest to
provide the Satellite Services to Affiliate in accordance with this Agreement.
e. TelQuest represents and warrants that it has entered into
that certain Telstar Satellite Transponder Capacity Agreement with Loral Skynet
(the "Transponder Agreement") for the lease of C-band and Ku-band transponders,
a copy of which has previously been provided to Affiliate.
f. Each of the foregoing representations and warranties set
forth in this Section shall be true and correct in all material respects on and
as at each and every date during and throughout the terms of this Agreement as
though made on such date(s).
19.Representations and Warranties of Affiliate.
a. Affiliate represents and warrants that Affiliate is a
corporation duly incorporated or otherwise validly existing and in good
standing in the state referred to in the opening paragraph of this Agreement
and has all the requisite power and authority, corporate or otherwise, to own
and operate the Affiliate Systems set forth on Schedule A attached hereto
including without limitation all necessary franchises and licenses to operate
the same; that all such Affiliate Systems fall within the PSA as set forth on
Schedule A attached hereto; and that this Agreement has been duly executed
by Affiliate and constitutes its valid and enforceable obligation.
b. Affiliate represents and warrants that Affiliate will not
provide TelQuest Programming in any fashion to any person without making
payment to TelQuest provided for in this Agreement, except upon the express
written permission of TelQuest.
c. Affiliate represents and warrants that Affiliate's receipt
of the Satellite Services complies with all applicable laws, ordinances, codes,
permits, certification, licensing requirements, rules and regulations, and
Affiliate has not received any notice to the contrary.
d. Affiliate represents and warrants that there is no action,
proceeding at law or in equity, arbitration or administrative or other
proceeding by or before, or, to the best knowledge, information and belief of
Affiliate, any investigation by, any governmental or other instrumentality
or agency, pending, or, to the best knowledge, information and belief of
Affiliate, threatened against Affiliate, affecting the ability of Affiliate to
perform its obligations in accordance with this Agreement.
e. Affiliate represents and warrants that it has the right to
furnish the TelQuest Programming to Affiliate MMDS Subscribers.
f. Each of the foregoing representations and warranties set
forth in this Section shall be true and correct in all material respects on and
as at each and every date during the terms of this Agreement as though made on
such date(s).
20. Indemnification.
TelQuest and the Affiliate shall each indemnify and forever hold
harmless the other, the other's shareholders, partners, members, and their
respective officers, directors, managers, employees and agents in their
capacity as such from all liabilities, claims, costs, damages and expenses
incurred by a third party for which a claim has been made or action begun by
said third party, (including, without limitation, reasonable attorney's fees)
arising out of any breach of any representation, warranty or any of its
obligations pursuant to this Agreement. In any case in which indemnification
is sought, the party seeking indemnification (the "Indemnified Party") shall
(i) promptly notify the party from which such indemnification is sought (the
"Indemnifying Party") and (ii) afford the Indemnifying Party the opportunity of
defending such claim and controlling the litigation, settlement and other
disposition of such claim and (iii) the Indemnified party shall fully
cooperate in connection with such defense, litigation, settlement or
disposition and shall have the right, but not the obligation, to join in and be
represented by its own counsel, at its own cost and expense. In addition,
TelQuest and the Affiliate shall each indemnify and forever hold harmless the
other, the other's shareholders, partners, members, and their respective
officers, directors, managers, employees and agents in their capacity as such
from all liabilities, claims, costs, damages and expenses incurred (including,
without limitation, reasonable attorneys' fees) arising out of any breach of
any representation, warranty or any of its obligations pursuant to this
Agreement or out of its wrongful or grossly negligent actions or willful
misconduct in connection with this Agreement.
21. Limitation of Liability. NOTWITHSTANDING ANY OTHER PROVISION
OF THIS AGREEMENT, NO PARTY SHALL BE LIABLE TO ANY OTHER IN THE EVENT
OF A BREACH OF THIS AGREEMENT OR ANY INTERRUPTION IN SERVICE FOR ANY
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES (INCLUDING, BUT NOT LIMITED TO,
LOSS OF PROFITS OR REVENUES).
22. Termination
a. This Agreement may be terminated as follows:
(i) Either party may terminate this Agreement by
written notice to the other party if a party
materially breaches any of the terms and
conditions of this Agreement and does not cure
such breach within thirty (30) days after
receiving from the other party a written
notice with a description of the breach and a
demand for its cure. A material breach shall be
defined as including but not limited to the
failure of the Affiliate to make any payment due
under this Agreement, or the material failure on
the part of TelQuest to provide TelQuest
Programming to the Affiliate substantially in
accordance with and subject to the terms of this
Agreement.
(ii) Either party may terminate this Agreement if any
Force Majeure event continues uninterrupted for a
period of thirty (30) or more.
[
**The confidential material contained herein
has been omitted and has been filed separately
with the Commission.**
]
b. Upon any such termination, or in the event of the expiration
of the Term, TelQuest shall be entitled to receive all amounts due for
Satellite Services through the date of termination. Nothing herein, however,
shall limit the rights of either party to assert a claim for damages against
the other party for breach or wrongful termination of the Agreement.
23. Miscellaneous.
a. Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of Delaware.
b. Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
c. Successors and Assigns. This Agreement shall inure to the
benefit of and be binding upon the parties hereto and their respective
successors and assigns. Except as otherwise set forth herein, neither this
Agreement nor any of the rights, interests or obligations hereunder shall be
assigned by any party hereto without the prior written consent of the other
party hereto; provided, however, Affiliate shall be permitted to assign its
rights, interests and obligations hereunder provided Affiliate guarantees
performance and all payments due to TelQuest hereunder, without the prior
written consent of TelQuest.
d. Arbitration. Any controversy or claim arising out of or
relating to this Agreement or the breach hereof shall be settled by final and
binding arbitration in accordance with the then prevailing rules of the
American Arbitration Association, and judgment upon the award rendered may be
entered in any court having jurisdiction thereof. The arbitration proceedings
shall be held in Philadelphia, PA before a single arbitrator.
e. Headings. The headings in this Agreement are intended solely
for convenience of reference and shall be given no effect in the construction
or interpretation of this Agreement.
f. Severability. The invalidity or unenforceability of any
provision of this Agreement shall not impair the validity or enforceability of
any other provision.
g. Notices. Any notices or other communications hereunder or
with respect to this Agreement shall be in writing and shall be given to the
parties
(i) By hand,
(ii) By facsimile,
(iii) By nationally recognized overnight courier or by
Express, registered or certified mail, postage
prepaid, return receipt requested, addressed as
follows:
If to Affiliate:
CAI WIRELESS SYSTEMS, INC.
101 Ponds Edge Drive, Suite 300
Chadds Ford, PA 19317
Attention: John J. Prisco
Fax No.: (610) 388-3031
With a copy to:
Akin, Gump, Strauss, Hauer & Feld, L.L.P.
1333 New Hampshire Avenue, NW
Suite 400
Washington, DC 20036
Attention: Kay Tatum, Esq.
Fax No.: (202) 887-4288
If to TelQuest:
TELQUEST COMMUNICATIONS, INC.
65 West Street Road A-100
Warminster, Pennsylvania 18974
Attention: Martin C. Lafferty
Fax No.: (215) 956-2456
With a copy to:
Day, Berry & Howard
One Canterbury Green
Stamford, Connecticut 06901
Attention: Counsel to TelQuest
Fax No.: (203) 977-7301
Notices by facsimile transmission shall be deemed to have been received when
confirmed in writing, whether by manual or electronic re-transmission of
receipt, by the party for whom the transmission is intended and notices by
courier shall be deemed received the following business day after delivery
to the courier. This provision shall not be construed as authorization for
service of process or similar papers by facsimile. Any party hereto may, by
giving written notice to the other parties hereto, change the address to which
notices are to be sent.
h. Entire Agreement. This Agreement and the annexed Schedules,
constitutes the entire agreement between the parties relating to the subject
matter hereof and supersedes all prior oral and written understandings between
the parties relating thereto.
i. Amendments. This Agreement may be changed, modified or
amended from time to time only in writing signed by the parties.
j. Waiver. No waiver of any provision in the Agreement or any
breach hereunder shall be deemed a waiver of any other provision or subsequent
breach, nor shall any such attempted waiver constitute a waiver. Delay or
failure of any party to insist on strict performance or observance of any
provision of the Agreement or to exercise any rights or remedies hereunder
shall not be deemed a waiver. Any waiver shall be effective only if in writing
and signed by the waiving party.
[balance of page intentionally left blank]
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first written above.
TELQUEST SATELLITE SERVICES LLC
By: /s/ Martin C. Lafferty
Name: Martin C. Lafferty
Title: President
CAI WIRELESS SYSTEMS, INC.
By: /s/ John J. Prisco
Name: John J. Prisco
Title: President
