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EXHIBIT 10.3
AFFILIATION AGREEMENT
THIS AGREEMENT, made as of the 1st day of July, 1997 (the "Effective
Date"), is by and between DMX Inc., a Delaware corporation ("Network"), and
Satellite Services, Inc., a Delaware corporation ("Affiliate"), regarding the
cable digital audio programming service currently known as "DMX" (whether in its
current format or in any other format) (the "Service"). The parties hereby
mutually agree as follows:
1. RIGHTS:
(a) Grant of Rights. Network grants to Affiliate, any TCI O&O System (as
defined below), and any Electing Affiliate (as defined below), the
non-exclusive right, but not the obligation, to distribute and subdistribute
the Service by any cable, SMATV, or wireline technolog(ies) or platform(s),
whether now existing or developed in the future. An Electing Affiliate shall
mean any affiliate of Affiliate which owns Systems that are not managed under
the authority of Tele-Communications, Inc. but which affiliate elects to be
governed by this Agreement not later than one hundred twenty (120) days after
the later of (1) the date hereof or (2) the date such affiliate of Affiliate
first met the definition of an affiliate of Affiliate after the date of this
Agreement. An "affiliate of Affiliate" shall include any entity meeting the
requirements of paragraphs I.1, II or III of Exhibit A hereto.
(b) Add and Delete Rights. Affiliate shall have the right, upon written
notice to Network within thirty (30) days thereof, to elect to include under
this Agreement any system or enterprise that meets the system qualifications of
Exhibit A hereto. Any such system or enterprise that Affiliate elects to
include under this Agreement shall be referred to as a "System" or "Systems",
as set forth on Schedule 1 hereto, as such Schedule 1 may added to or deleted
from, from time to time. Upon the addition of a System to this Agreement, any
then-existing agreement between or among Network and any one or more third
parties applicable to such System for distribution of the Service shall
terminate and cease to be effective. Affiliate shall have the right to delete
the Service from any or all Systems, by providing Network with written notice
within thirty (30) days of such deletion.
2. TERM:
(a) Unless earlier terminated pursuant to the terms of this Agreement,
the "Initial Term" of this Agreement shall be for ten (10) years, commencing as
of the Effective Date.
(b) After the expiration of the Initial Term, this Agreement shall
automatically renew for successive five (5) year renewal terms, unless (i) this
Agreement is earlier terminated in accordance with its terms, or (ii) Affiliate
provides notice of termination to Network no later than sixty (60) days before
the end of the Initial Term or any Renewal Term.
3. CONTENT OF THE SERVICE:
(a) Throughout the Term the programming on the Service shall consist
exclusively of
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at least 30 channels of commercial-free, digital-quality audio services
programmed across a broad array of customer preferences and tastes, similar to
the programming on the program schedule attached hereto as Exhibit B.
4. DELIVERY AND DISTRIBUTION OF THE SERVICE:
(a) During the Term, Network, at its expense, shall deliver a signal of
the Service to each system, and, for purposes of Section 4(h) hereof, to other
locations within the continental United States designated by Affiliate, in its
discretion, by transmitting such signal via a domestic satellite commonly used
for transmission of cable television programming or such other delivery
mechanism as shall be agreeable between Network and Affiliate.
(b) Each System or other video distribution system or enterprise may
distribute all or any number of the audio channels which are part of the
Service. Each System or other video distribution system or enterprise may carry
the Service (or any or all channels comprising the Service) on the basic level
of service, on any tier, in a package or packages of other services, a la
carte, or in any combination thereof.
(c) Affiliate shall have the right to digitize, compress and reuplink
any or all channels included within the Service for redistribution to Systems,
and to other affiliated and unaffiliated distributors so long as any such other
distributor is authorized by Network (pursuant to a written agreement or
otherwise) to distribute the Service. Network shall not interfere with
Affiliate's (or its affiliates') ability to digitize and compress the Service.
(d) Affiliate shall have the right to transmit the signal of the Service
as received by any System to unaffiliated distributors so long as any such
distributor is authorized by Network (pursuant to a written agreement or
otherwise) to distribute the Service. Affiliate shall have the right to receive
the signal of the Service from any other distributor of the Service.
5. FEES:
(a) Definitions.
(i) "Commercial Per Sub Fee" shall mean, for any month, the
following amounts:
YEAR AMOUNT
------------------------------------
Contract Year 1 [*]
------------------------------------
Contract Year 2 CPI Adjusted Fee
------------------------------------
Contract Year 3 CPI Adjusted Fee
------------------------------------
Contract Year 4 CPI Adjusted Fee
------------------------------------
Contract Year 5 CPI Adjusted Fee
------------------------------------
Contract Year 6 CPI Adjusted Fee
------------------------------------
Contract Year 7 CPI Adjusted Fee
------------------------------------
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately
with the Commission pursuant to Rule 24b-2.
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Contract Year 8 CPI Adjusted Fee
------------------------------------
Contract Year 9 CPI Adjusted Fee
------------------------------------
Contract Year 10 CPI Adjusted Fee
------------------------------------
(ii) A "Commercial Subscriber" shall mean a Service Subscriber
which is either a "Class A Commercial Establishment" or a "Class B
Commercial Establishment." A "Class A Commercial Establishment" shall mean
each of the following: the common areas, open to the public, of hotels and
motels; night clubs; restaurants; bars; grills; taverns; cocktail lounges
and other establishments in which food or beverages are served; stores;
shops, supermarkets; automobile showrooms; gasoline service stations and
other establishments where goods or services are sold or offered to the
public at retail; and each of such premises located in a shopping center.
A "Class B Commercial Establishment" shall mean each of the following: an
office, factory or plant; a bank; an office or professional building; a
doctor's, dentist's or other professional office; the common areas, open
to the public, or a hospital, clinic, nursing or rest home or
rehabilitation center; a funeral home or mortuary; a library, school,
college or university; a church; a private club owned and operated by the
members as a non-commercial venture; the common areas, open to the public,
of an ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇, sorority house or fraternity
house; a government office; a park or recreation area owned and operated
by the government excluding private or commercial concessions or leased
areas, a garage; a security or commodity broker; an insurance or real
estate agency; a finance or loan office; a savings and loan association; a
warehouse; a trucking terminal, access to which is limited to operators of
such trucks and maintenance men and to which other members of the public
are not generally admitted; a research organization or laboratory; a room
in a commercial establishment occupied solely as a rest room (or lounge);
a room occupied solely as a reception or information area or an employee's
cafeteria in such respective premises; and each such premises located in a
shopping center.
(iii) "Contract Year" shall mean any of the consecutive twelve (12)
month periods commencing on the Effective Date and each anniversary of
the Effective Date.
(iv) The "CPI Adjusted Fee" for any twelve (12)-month period shall
be the pertinent fee for the immediately preceding twelve (12)-month
period (the immediately preceding period shall be referred to herein as
the "Base Year") multiplied by a fraction, the numerator of which is the
CPI as of April 1 of the Base Year and the denominator of which is the
CPI as of April 1 of the twelve (12)-month period immediately preceding
the Base Year. "CPI" shall mean the Consumer Price Index, Urban, U.S.
City Average of "All Items", as published by the Bureau of Labor
Statistics of the United States Department of Labor (or any successor
thereto).
(v) "Electing Affiliate Systems" shall mean all cable television
systems that meet the System Qualifications of Exhibit A hereto and are
managed under the authority of any Electing Affiliate.
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(vi) "Multiple" shall mean [*] in Contract Years four (4) and five
(5), [*] in Contract Years six (6) and seven (7), and [*] in Contract
Years eight (8) through ten (10).
(vii) "Original Commercial Subscribers" shall mean the number of all
Commercial Subscribers in TCI O&O Systems on the Effective Date, as adjusted
pursuant to the terms of this Agreement.
(viii) "Original Residential Subscribers" shall mean the number of all
Residential Subscribers in TCI O&O Systems on the Effective Date, as adjusted
pursuant to the terms of this Agreement.
(ix) "Residential Baseline" shall mean 2,000,000, as adjusted
pursuant to the terms of this Agreement.
(x) "Residential Per Subscriber Fee" shall mean, for any month, the
following amounts:
--------------------------------------------------
YEAR AMOUNT
--------------------------------------------------
CONTRACT YEAR 1 [*]
--------------------------------------------------
CONTRACT YEAR 2 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 3 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 4 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 5 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 6 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 7 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 8 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 9 CPI Adjusted Fee
--------------------------------------------------
CONTRACT YEAR 10 CPI Adjusted Fee
--------------------------------------------------
(xi) A "Residential Subscriber" shall mean any Service Subscriber
which is not a Commercial Subscriber.
(xii) "Service Subscriber(s)" shall mean each location which
Affiliate intentionally authorizes the Service by cable reception. Service
Subscribers shall include each occupied residential or commercial location
where the Service is received. If Affiliate provides the Service to multiple
unit complexes on a bulk-rate basis, then the number of Service Subscribers
attributable to each such bulk-rate subscriber shall be equal to the total
monthly retail rate the complex is charged for the Service or for the level or
package of services in which the Service is distributed, divided by the
standard monthly retail rate a non-bulk rate subscriber is charged for the
Service or for such level or package of services; provided, however, in no
event will the number of Service Subscribers calculated for any such complex
exceed the actual number of occupied dwelling units receiving the Service in
such complex. Service Subscriber shall not include
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately
with the Commission pursuant to Rule 24b-2.
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(i) subscribers who do not pay any monies to Affiliate to receive the level of
service on which the Service is carried, (ii) public officials, administrative
personnel or public buildings that are not charged for the Service; (iii)
subscribers who have not paid their monthly rate for a given month; or (iv) any
customer who receives the Service, either commercially or residentially,
through any medium other than through cable television delivery, including
without limitation, OVS, DBS, TVRO, or MMDS. Notwithstanding any other
provision of this Agreement to the contrary, neither Affiliate nor any
affiliate of Affiliate shall owe any Fees or pay any charge for the delivery or
distribution of the Service, or any part thereof, through any medium other than
through cable television delivery.
(xiii) "System Original Commercial Subscribers" shall mean, with
respect to each TCI O&O System, the number of Commercial Subscribers in such
System as of the later of the Effective Date or the date such System first met
the System Qualifications of Exhibit A.
(xiv) "System Original Residential Subscribers" shall mean, with
respect to each TCI O&O System, the number of Residential Subscribers in such
System as of the later of the Effective Date or the date such System first met
the System Qualifications of Exhibit A.
(xv) A "TCI O&O System" shall mean a System which is managed under
the authority of one of the operating divisions of Tele-Communications, Inc.
(b) Fees for Commercial Subscribers in TCI O&O Systems.
(i) Each month during Contract Years One through Three, Affiliate
shall pay a Fee to Network for the Commercial Subscribers in all TCI O&O
Systems equal to the following amounts:
--------------------------------------------------
CONTRACT YEAR FEE
--------------------------------------------------
1 [*]
--------------------------------------------------
2 CPI Adjusted Fee
--------------------------------------------------
3 CPI Adjusted Fee
--------------------------------------------------
(ii) If during any month in Contract Years One through Three a TCI
O&O System is sold, divested or otherwise fails to meet the definition of a TCI
O&O System, the Fee for Commercial Subscribers in TCI O&O Systems shall be
reduced by an amount equal to such Fee multiplied by a fraction, the numerator
of which is the number of System Original Commercial Subscribers in such
divested system (the "Divested Commercial Subscribers") and the denominator of
which is the number of Original Commercial Subscribers; provided, however, that
the Fees shall be reduced only to the extent that the acquiror of such System
agrees to assume the obligation for paying the amount of such reduction to
Network through the expiration of Contract Year Three and agrees to pay a
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately
with the Commission pursuant to Rule 24b-2.
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proportionate share of the rate set forth in Section 5(b)(iv) hereof for such
System for the time period following the expiration of Contract Year Three
through the end of the Initial Term. If the Fees are so reduced as set forth in
the preceding sentence, the number of Original Commercial Subscribers shall be
reduced by the number of Divested Commercial Subscribers. Any adjustment to the
Fee set forth herein shall be effective as of the effective date of the
divestiture or other disposition, prorated in the month of divestiture or
disposition based on the number of days following such effective date to the end
of such month.
(iii) If during any month in Contract Years One through Three a TCI O&O
System is acquired, the Fee for Commercial Subscribers in TCI O&O Systems for
Contract Years One through Three shall be increased by an amount equal to the
number of Commercial Subscribers in such acquired TCI O&O System as of the
effective date of acquisition (the "Acquisition Subscribers") multiplied by the
Commercial Per Subscriber Fee. The number of Original Commercial Subscribers
shall be increased by the number of Acquisition Subscribers as of the effective
date of acquisition. Any adjustment to the Fee set forth herein shall be
effective as of the effective date of the divestiture or other disposition,
prorated in the month of divestiture or disposition based on the number of days
following such effective date to the end of such month.
(iv) Fees for Contract Years Four through Ten. Each month during
Contract Years Four through Ten, the Fee for TCI O&O Systems shall be
determined in accordance with the following formula:
(A+(BxC))xD
Where:
A = the number of Original Commercial Subscribers.
B = an amount, which may be negative, equal to the number of Commercial
Subscribers in TCI O&O Systems in the month for which Fees are determined minus
the number of Original Commercial Subscribers.
C = the Multiple.
D = the Commercial Per Subscriber Fee.
(v) If during any month in Contract Years Four through Ten a TCI O&O
System is sold, divested or otherwise fails to meet the definition of a TCI O&O
System, Affiliate shall cease to be liable for Fees for such System, and the
number of Original Commercial Subscribers shall be reduced by the number of
System Original Commercial Subscribers in such divested system. Any such
adjustment shall be effective as of the effective date of the divestiture or
other disposition, prorated in the month of divestiture or disposition based on
the number of days following such effective date to the end of
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such month.
(vi) If during any month in Contract Years Four through Ten a TCI O&O
System is acquired, the number of System Original Commercial Subscribers for
such System shall be the number of Commercial Subscribers in such system as of
the effective date of such acquisition, and the number of System Original
Commercial Subscribers shall be added to the number of Original Commercial
Subscribers. Any such adjustment shall be effective as of the effective date of
the acquisition, prorated in the month of divestiture or disposition based on
the number of days following such effective date to the end of such month.
(c) Fees for Residential Subscribers in TCI O&O Systems.
(i) Each month during Contract Years One through Three, Affiliate shall
pay a Fee to Network for Residential Subscribers in TCI O&O Systems as follows:
CONTRACT YEAR FEE
----------------------------------------------------
1 [*]
----------------------------------------------------
2 CPI Adjusted Fee
----------------------------------------------------
3 CPI Adjusted Fee
----------------------------------------------------
(ii) If during any month in Contract Years One through Three a TCI O&O
Systems is sold, divested or otherwise fails to meet the definition of a TCI
O&O System, the Fee for Residential Subscribers in TCI O&O Systems shall be
reduced by an amount equal to such Fee multiplied by a fraction, the numerator
of which is the number of System Original Residential Subscribers in such
divested System (the ""Divested Residential Subscribers") and the denominator
of which is the number of Original Residential Subscribers (the "Reduction
Percentage"); provided, however, that the Fees shall be reduced only to the
extent that the acquiror of such System agrees to assume the obligation for
paying the amount of such reduction to Network through the expiration of
Contract Year Three and agrees to pay a proportionate share of the rate set
forth in Section 5(c)(iv) for such System for the time period following the
expiration of Contract Year Three through the end of the Initial Term. If the
Fees are so reduced as set forth in the preceding sentence, the number of
Original Residential Subscribers shall be reduced by the number of Divested
Residential Subscribers, and the Residential Baseline shall be reduced by an
amount equal to the Reduction Percentage multiplied by 2,000,000. Any
adjustment to the Fee set forth herein shall be effective as of the effective
date of the divestiture or other disposition, prorated in the month of
divestiture or disposition based on the number of days following such effective
date to the end of such month.
(iii) If during any month in Contract Years One through Three a TCI O&O
System is acquired, the Fee for Residential Subscribers in TCI O&O Systems for
Contract Years One through Three shall be increased by an amount equal to the
number of Residential Subscribers in such acquired TCI O&O System as of the
effective date of such
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately
with the Commission pursuant to Rule 24b-2.
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acquisition multiplied by the Residential Per Subscriber Fee. The number of
Original Residential Subscribers and the Residential Baseline shall be
increased by the number of Residential Subscribers in such acquired system
as of the effective date of such acquisition. Any adjustment to the Fee set
forth herein shall be effective as of the effective date of the
acquisition, prorated in the month of acquisition based on the number of
days following such effective date to the end of such month.
(iv) Fees for Contract Years Four through Ten. Each month during
Contract Years Four through Ten, the Fee for Residential Subscribers shall
be determined on a System by System basis for TCI O&O Systems in accordance
with the following formula:
(A + (B x C)) x D
Where:
A = Residential Baseline.
B = an amount, which may be negative, equal to the number of Residential
Subscribers in TCI O&O Systems in the month for which Fees are determined
minus the Residential Baseline.
C = the Multiple.
D = the Residential Per Subscriber Fee.
(v) If during any month in Contract Years Four through Ten a TCI O&O
System is sold, divested or otherwise fails to meet the definition of a TCI
O&O System, Affiliate shall cease to be liable for Fees for such divested
Systems, the number of Original Residential Subscribers shall be reduced by
an amount equal to the number of System Original Residential Subscribers in
such divested System, and the Residential Baseline shall be reduced by an
amount equal to Residential Baseline multiplied by a fraction, the
numerator of which is the number of System Original Residential Subscribers
and the denominator of which is the number of Original Residential
Subscribers, as adjusted. Any such adjustment shall be effective as of the
effective date of the divestiture or other disposition, prorated in the
month of divestiture or disposition based on the number of days following
such effective date to the end of such month.
(vi) If during any month in Contract Years Four through Ten a TCI O&O
System is acquired, the number of Original Residential Subscribers and the
Residential Baseline shall be increased by the number of Residential
Subscribers in such system as of the effective date of such acquisition. In
addition, the number of Residential Subscribers in such system as of the
effective date of such acquisition shall be the number of System Original
Residential Subscribers for such system. Any such adjustment shall be
effective as of the effective date of the acquisition, prorated in the
month of divestiture or disposition based on the number of days following
such effective date to the end of such month.
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(d) Minimum License Fee Payment. Notwithstanding Sections 5(a) through
5(c) hereof, the sum total of all license fee payments for commercial and
residential subscribers paid by Affiliate hereunder with respect to TCI O&O
Systems, or by any third party with respect to TCI O&O Systems which are
divested, sold or otherwise fail to meet the definition of a TCI O&O System
during the Initial Term hereof, shall equal or exceed in any month during
Contract Years Four through Ten an amount determined in accordance with the
following formula:
(A x B x C) + (D x E x C), where
A = the number of Original Commercial Subscribers as June 30, 2000
B = the Commercial Per Sub Fee
C = a factor determined in accordance with the following schedule:
------------------------------
CONTRACT YEAR FACTOR
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4 [*]
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5 [*]
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6 [*]
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7 [*]
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8 [*]
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9 [*]
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10 [*]
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D = The Residential Baseline as of June 30, 2000.
E = The Residential Per Subscriber Fee.
(e) Electing Affiliate Systems. Each month, Affiliate shall pay Fees to
Network for Electing Affiliate Systems as follows:
------------------------------------------------------------------------------
ACCOUNT TYPE MONTHLY FEE
------------------------------------------------------------------------------
Commercial Subscribers Commercial Per Subscriber Fee
------------------------------------------------------------------------------
Residential Subscribers who [*]
receive the Service solely
on an a la carte basis
------------------------------------------------------------------------------
Residential Subscribers who Residential Per Subscriber Fee
receive the Service on a basis
other than a la carte basis
------------------------------------------------------------------------------
(f) Lump Sum Adjustment for Programming Cost Changes. If in any month
licensing fees payable by Network to ASCAP, BMI and SESAC, in the aggregate
(the "License Fees") for distribution of the Service in Systems increase or
decrease after the Effective Date as a percentage of Fees, the Fees payable by
Affiliate for Systems shall likewise be increased or decreased by an amount
equal to such percentage increase or decrease. For example, if License Fees
increase
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* Indicates that material has been omitted and confidential treatment has been
requested therefor. All such omitted material has been filed separately
with the Commission pursuant to Rule 24b-2.
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from ten percent (10%) to eleven percent (11%) as a percentage of the Fees,
the Fees shall be increased by one percent (1%).
(g) Network shall have the right to negotiate the Fee(s) applicable to
any Renewal Term ("Renewal Fees"). The Fees in effect for the last year of the
Initial Term, or any Renewal Term for which Renewal Fees were agreed to by the
parties, shall remain in effect until the parties agree on the new Renewal Fees.
In the event that at least ninety (90) days prior to the expiration of the
Initial Term or any Renewal Term, Affiliate and Network have failed to agree on
the Renewal Fees and either party notifies the other party that it chooses to
cease negotiations of the Renewal Fees, then Network shall give Affiliate
notice of the rates to be paid per Residential Subscriber and per Commercial
Subscriber and such rate shall be deemed the Renewal Fee per Service Subscriber
to be paid during the succeeding Renewal Term. Affiliate shall then have the
right, but not the obligation, to terminate this Agreement as provided in
Section 2(b) hereof or to continue to provide the Service pursuant to this
Agreement, except that Affiliate shall have unlimited packaging flexibility
notwithstanding the restrictions, if any, contained in Section 4(e) hereof.
6. REPORTS:
(a) No later than forty-five (45) days after the end of each calendar
month for which Fees or Renewal Fees are payable, Affiliate shall send Network
a mutually acceptable statement (together with Fees owed hereunder) setting
forth the total number of Residential Subscribers and Commercial Subscribers
and any other information that is necessary to compute the amount due to
Network for such calendar month. Notwithstanding the foregoing, each Electing
Affiliate may elect to report and pay separately from Affiliate's reports and
payments hereunder.
(b) In order to verify the compliance with or determine whether full
effect has been given to the provisions of this Agreement (including without
limitation paragraphs 5(e) and 13(f)), each party, at its expense, shall have
the right, during the Term and for one (1) year thereafter, to inspect and
audit at the offices of the audited party during normal business hours all
relevant books and records, upon reasonable notice to the audited party. Each
party's right to perform such audit shall be limited to once in any consecutive
twelve (12)-month period. Any audit shall be limited to an audit with respect
to amounts to be paid in the current and prior calendar years only and any
claim, which must relate to the then-current calendar year or the immediately
preceding calendar year, must be made within the earlier of three (3) months
after the auditing party leaves the audited party's offices, or twenty-four
(24) months after the close of the earliest month that is the subject of a
claim or the auditing party will be deemed to have waived its right, whether
known or unknown, to collect any shortfalls from the audited party for the
period(s) audited.
7. PROMOTION:
(a) Affiliate acknowledges that the names and marks Digital Music Express
and DMX are the exclusive property of Network and its suppliers and that
Affiliate has not and will not acquire any proprietary rights therein by reason
of this Agreement. Network shall have the right
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to approve any use of such names or marks by Affiliate in publicity about
Network or the Service or the products or programming included in the Service.
Use of such names and marks in routine promotional materials such as program
guides, program listings and ▇▇▇▇ stuffers shall be deemed approved unless
Network specifically notifies Affiliate to the contrary prior to such use by
Affiliate.
(b) Network and Affiliate hereby acknowledge that Network could cause
Affiliate significant harm by the nature of Network's communications to
Affiliate's subscribers, governmental entities or franchise or licensing
authorities whose opinions and actions could adversely affect Affiliate.
Therefore, Network shall not engage in any communications with subscribers,
governmental entities or franchise or licensing authorities in the areas served
by Affiliate and it affiliate without Affiliate's prior written approval, if
such communications could reasonably be expected to adversely interfere with
Affiliate's relations with the subscribers, governmental entities or franchise
or licensing authorities in such areas. This provision shall not apply (i) to
any national advertising by Network in connection with the Service, (ii) to any
proceeding before any judicial body, or (iii) to communications with Congress
or with any other branch or agency of the Federal government. This Section 7(f)
shall survive termination of this Agreement for two (2) years.
8. WARRANTIES AND INDEMNITIES:
(a) Each party represents and warrants to the other that (i) it is duly
organized, validly existing and in good standing under the laws of the state
under which it is organized, (ii) it has the power and authority to enter into
this Agreement and to perform fully its obligations hereunder; (iii) it is
under no contractual or other legal obligation that shall in any way interfere
with its full, prompt and complete performance hereunder; (iv) the individual
executing this Agreement on its behalf has the authority to do so; and (v) the
obligations created by this Agreement, insofar as they purport to be binding on
it, constitute legal, valid and binding obligations enforceable in accordance
with their terms.
(b) Affiliate and Network shall each indemnify, defend and forever hold
harmless the other, the other's affiliated companies and each of the other's
(and the other's affiliated companies') respective present and former officers,
shareholders, directors, employees, partners and agents ("Network Indemnities"
and "Affiliate Indemnities," respectively), against and from any and all
losses, liabilities, claims, costs, damages and expenses, including, without
limitation, fines, forfeitures, reasonable attorneys' fees, disbursements and
court or administrative costs (collectively, "Costs"), arising out of any
breach of any term of this Agreement or any warranty, covenant or
representation contained herein.
(c) Without limiting Section 8(c) hereof, Network shall indemnify, defend
and forever hold harmless the Affiliate Indemnities against and from any and all
Costs, arising directly or indirectly out of (i) the content of the Service or
the use and delivery of the Service hereunder, including, without limitation,
any Cost based upon any suit, lien, encumbrance, charge, lis pendens,
administrative proceeding, governmental investigation, or litigation pending or
threatened (provided that Affiliate shall, to like extent, indemnify the
Network Indemnities for
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Costs arising from any deletion or addition of material by Affiliate to the
Service; (ii) Network's failure to comply with all laws, rules, regulations and
court and administrative decrees to which it is subject or any other failure on
Network's part that causes Affiliate to violate any law, rule, regulation or
court or administrative decree; and (iii) Network's failure to have acquired at
the pertinent time when all or part of the Service is made available to
Affiliate, good title to, and/or each and every property right or other right
necessary for it to satisfy the obligations imposed on it pursuant to this
Agreement.
(d) A party claiming indemnity under this Section 8 must give the
indemnifying party prompt notice of any claim, and the indemnifying party shall
have the right to assume the full defense of any claims to which its indemnity
applies. The indemnified party, at the indemnifying party's cost, will
cooperate fully with the indemnifying party in such defense of any such claim.
If the indemnified party compromises or settles any such claim without the
prior written consent of the indemnifying party, then the indemnifying party
shall be released from its indemnity obligations with respect to the claim so
settled.
(e) The representations, warranties and indemnities contained in this
Section 8 shall continue throughout the Term and the indemnities shall survive
the termination of this Agreement, regardless of the reason for such
termination.
9. EARLY TERMINATION RIGHTS:
(a) In addition to Network's other rights to terminate this Agreement,
Network may, by notifying Affiliate, terminate this Agreement: (i) if Affiliate
is in material breach of this Agreement and Affiliate has not cured such breach
within thirty (30) days of Network's written notice of such breach, unless a
shorter cure period is specified elsewhere in this Agreement for a specific
breach, in which case such shorter cure period will apply; provided, however,
if such breach is confined to a System or to a limited number of Systems,
Network shall have the right to terminate this Agreement only as to such System
or Systems; (ii) if Affiliate has filed a petition in bankruptcy, is insolvent,
or has sought relief under any law related to Affiliate's financial condition
or its ability to meet its payment obligations; or (iii) if any involuntary
petition in bankruptcy has been filed against Affiliate, or any relief under
any such law has been sought by any creditor(s) of Affiliate, unless such
involuntary petition is dismissed, or such relief is denied, within thirty (30)
days after it has been filed or sought.
(b) In addition to Affiliate's other rights to terminate this
Agreement, Affiliate may, by notifying Network, terminate this Agreement: (i)
if Network is in material breach of this Agreement and Network has not cured
such breach within thirty (30) days of Affiliate's written notice of such
breach, unless a shorter cure period is specified elsewhere in this Agreement
for a specific breach, in which case such shorter cure period will apply;
provided, however, if such breach is confined to a System or to a limited
number of Systems, Network shall have the right to terminate this Agreement
only as to such System or Systems; (ii) if Network has filed a petition in
bankruptcy, is insolvent or has sought relief under any law related to
Network's financial condition or its ability to meet its payment obligations;
(iii) if any involuntary petition in bankruptcy has been filed against Network,
or any relief under any such law has been sought by
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any creditor(s) of Network, unless such involuntary petition is dismissed, or
such relief is denied, within thirty (30) days after it has been filed or
sought; or (iv) on at least fifteen (15) days' notice in the event that
delivery of the Service is discontinued or interrupted for a continuous period
of fifteen (15) days.
10. FORCE MAJEURE:
Neither Affiliate nor Network shall have any rights against the other
party hereto for the non-operation of facilities or the non-furnishing of the
Service if such non-operation or non-furnishing is due to an act of God or
other cause (financial inability excepted) beyond such party's reasonable
control (a "Force Majeure Event"). If the Service is interrupted or
discontinued as a result of a Force Majeure Event, Affiliate shall have the
right, immediately, to insert programming of its choice on the channel
otherwise identified with the Service until the Service is fully operational
again. Credit will be given to Affiliate on that portion of the Service that is
affected by any interruption during any month equal to the product of (x) the
Fees or any Renewal Fees that would be due for such month, assuming no
interruption of Service during such month, multiplied by (y) a fraction, the
numerator of which is the total number of hours that the Service is interrupted
during such month and the denominator of which is the total number of hours of
that the Service would have been distributed absent such interruption(s).
11. NOTICES:
Any notice or report to be given under this Agreement shall be in
writing, shall be sent postage prepaid by certified mail, return receipt
requested, or by hand delivery, or by Federal Express or similar overnight
delivery service, or by facsimile transmission, to the other party, at the
following address (unless either party at any time or times designates another
address for itself by notifying the other party by certified mail, in which
case all notices to such party thereafter shall be given at its most recently
so designated address):
To Network: DMX, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ 90064.1506
Facsimile:
Attention: President
cc: ▇▇▇▇▇ ▇▇▇▇▇, Esq.
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ & ▇▇▇▇▇, ▇.▇.
▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Facsimile: (▇▇▇) ▇▇▇-▇▇▇▇
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To Affiliate: Terrace Tower II
▇▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Facsimile Number: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: President
cc: Legal Department
Notice or report given by hand delivery shall be deemed given on delivery.
Notice or report given by mail shall be deemed given on the earlier to occur of
actual receipt or on the fifth day following mailing if sent in accordance with
the notice requirements of this Section 11. Notice or report given by Federal
Express or similar overnight delivery service shall be deemed given on the next
business day following delivery of the notice or report to such service with
instructions or overnight delivery. Notice or report given by facsimile
transmission shall be deemed given on the day of transmission if a business
day, or on the next business day after the day of transmission if not
transmitted on a business day, provided that the delivery of such facsimile is
confirmed either telephonically or be electronic confirmation.
12. CONFIDENTIALITY:
The terms and conditions, including the existence and duration, of this
Agreement shall be kept confidential, except for disclosure as may be required
by law, regulation, court or government agency of competent jurisdiction
(redacted to the greatest extent possible). This confidentiality provision
shall survive the termination of this Agreement.
13. MISCELLANEOUS:
(a) Assignment; Binding Effect; Reorganization. This Agreement shall be
binding on the respective transferees and successors of the parties hereto,
except that neither this Agreement nor either party's rights or obligations
hereunder shall be assigned or transferred by either party without the prior
written consent of the other party; provided, however, no consent is necessary
in the event of an assignment to a successor entity resulting from a merger,
acquisition or consolidation by either party or assignment to an entity under
common control, controlled by or in control of either party. For purposes of
this Section 13(a), the term "control" means the power to direct the management
and policies of an entity, directly or indirectly, whether through the
ownership of voting securities, by contract or otherwise.
(b) Service Combinations. In the event that the Service is acquired by
or merged or combined with, or Network acquires control of, any other
programming service(s), if Affiliate has (at the time of such merger,
combination or acquisition) an affiliation agreement regarding distribution of
such other service(s), Affiliate has the option to choose to continue
distribution of the Service and of such other service, and/or of any surviving
service after such merger, combination or acquisition, under either this
Agreement or under such other affiliation agreement. If Affiliate does not have
an affiliation agreement regarding distribution of such other service,
Affiliate shall have the option to elect to have this Agreement continue to
apply to the Service
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15
after such merger, combination or acquisition, and/or to any surviving service
after such merger, combination or acquisition.
(c) Entire Agreement; Amendments; Waivers; Cumulative Remedies.
This Agreement, including the Schedule and Exhibits attached hereto, contains
the entire understanding of the parties hereto and supersedes all
contemporaneous and prior understandings of the parties, whether written or
oral, relating to the subject matter hereof. This Agreement may not be modified
except in a writing executed by both parties hereto. Any waiver of any
provision of this Agreement must be in writing and signed by the party whose
rights are being waived. No waiver of any breach of any provision hereof shall
be or be deemed to be a waiver of any preceding or subsequent breach of the
same or any other provision of this Agreement. The failure of Affiliate or
Network to enforce or seek enforcement of the terms of this Agreement following
any breach shall not be construed as a waiver of such breach. All remedies,
whether at law, in equity or pursuant to this Agreement shall be cumulative.
Notwithstanding any provision of this Agreement to the contrary, in the event
of a conflict between this Agreement and the Term Sheet dated as of September
15, 1997 between TCI Music, Inc., DMX, Inc., and Tele-Communications, Inc. (the
"Term Sheet"), the Term Sheet shall control.
(d) Governing Law. The obligations of Affiliate and Network under
this Agreement are subject to all applicable federal, state and local laws,
rules and regulations, and this Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York, without regard
to choice of law rules.
(e) Relationship. Neither party shall be, or hold itself out as,
the agent of the other or as joint venturers under this Agreement. No
subscriber of Affiliate shall be deemed to have any privity of contract or
direct contractual or other relationship with Network and no supplier of
advertising or programming or anything else included in the Service by Network
shall be deemed to have any privity of contract or direct contractual or other
relationship with Affiliate by virtue of this Agreement. Network disclaims any
present or future right, interest or estate in or to the transmission
facilities of Affiliate and its affiliates, such disclaimer being to
acknowledge that neither Affiliate nor the transmission facilities of the
Systems (nor the owners thereof) are common carriers.
(f) Favorable Terms.
(i) Network agrees that if it gives or offers to, has given
or offered to or accepts or has accepted from any third party
(regardless of whether such third party is affiliated with Network or
Affiliate) at any time with respect to Electing Affiliates and after the
expiration of the Initial Term with respect to TCI O&O Systems (A) a
lower net effective rate per subscriber for the Service than Affiliate
is paying per Subscriber hereunder, (B) any marketing or advertising
support or reimbursements, launch support or reimbursements, free or
discounted marketing materials or any other support, credits,
reimbursements, rebates, contributions, adjustments or incentives
related to the marketing of the Service, whether given directly or
indirectly to such third party, or (C) any other economic or
non-economic term, provision, covenant or consideration, which are or is
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more favorable to such third party than Affiliate is receiving
hereunder ((A), (B) and (C) above, individually and collectively, shall
be referred to herein as "More Favorable Provision"). Network will
promptly offer such More Favorable Provision to Affiliate for the same
amount of time that such More Favorable Provision is or was available to
such third party. A More Favorable Provision shall include any
pertinent term, provision, covenant or consideration, regardless of
whether there is a term, provision, covenant or consideration
concerning the subject matter of such More Favorable Provision in this
Agreement or whether such term, provision, covenant or consideration
relates to such third party's entire subscriber base or less than the
entire base (e.g., a More Favorable Provision relating to a "test" or
"sample" group of subscribers).
(ii) Network agrees to provide to Affiliate a written
certification on each annual anniversary date of this Agreement, signed
by a duly authorized officer of Network, stating that Network has
satisfied its obligations under this Section 13(f).
(g) Severability. The invalidity under applicable law of any
provision of this Agreement shall not affect the validity of any other
provision of this Agreement, and in the event that any provision hereof is
determined to be invalid or otherwise illegal, this Agreement shall remain
effective and shall be construed in accordance with its terms as if the invalid
or illegal provision were not contained herein.
(h) No Inference Against Author. Network and Affiliate each
acknowledge that this Agreement was fully negotiated by the parties and,
therefore, no provision of this Agreement shall be interpreted against any
party because such party or its legal representative drafted such provision.
(i) No Third Party Beneficiaries. The provisions of this Agreement
are for the exclusive benefit of the parties hereto and their permitted
assigns, and no third party shall be a beneficiary of, or have any rights by
virtue of, this Agreement.
(j) Headings. The titles and headings of the sections in this
Agreement are for convenience only and shall not in any way affect the
interpretation of this Agreement.
(k) Non-Recourse. Notwithstanding anything contained in this
Agreement to the contrary, it is expressly understood and agreed by the parties
hereto that each and every representation, warranty, covenant, undertaking and
agreement made in this Agreement was not made or intended to be made as a
personal representation, undertaking, warranty, covenant, or agreement on the
part of any individual, and any recourse, whether in common law, in equity, by
statute or otherwise, against any individual is hereby forever waived and
released.
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17
(l) Taxes. To the extent required by applicable law, Affiliate shall have
the right to withhold any portion of any amounts payable by Affiliate to
Network and to pay any such amounts over to any appropriate governmental
authority. Network shall provide such assistance as is necessary to enable
Affiliate to discharge its obligation to withhold and/or pay taxes on Network's
behalf and shall indemnify Affiliate as provided in Section 8 hereof from and
against any and all Costs arising directly or indirectly out of any tax or
other amount withheld, paid or otherwise collected by Affiliate on Network's
behalf, or owed or paid by Network to any governmental entity.
The parties hereto have executed this Agreement as of the date first above
written.
AFFILIATE: NETWORK:
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
---------------------------- ----------------------------
▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇▇ ▇▇▇▇▇ ▇▇▇
Title: Chief Executive Officer and Title: Executive Vice President and
Chairman of the Board Chief Financial Officer
---------------------------- ----------------------------
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18
[SATELLITE SERVICES INC. LOGO]
January 27, 1998
DMX, Inc.
▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
RE: Affiliation Agreement between DMX, Inc. and Satellite Services, Inc.
("SSI") dated July 1, 1997
To Whom It May Concern:
This letter will confirm our agreement regarding the timing of elections into
the Affiliation Agreement by affiliates of Affiliate. Notwithstanding the
terms of the Affiliation Agreement, any affiliate of Affiliate may elect into
the Affiliation Agreement by the later of (1) May 31, 1998 or (2) 120 days
after the date such affiliate of Affiliate first met the definition of an
affiliate of Affiliate.
Except as expressly stated in this letter, the terms and conditions of the
Affiliation Agreement shall remain in effect. In the event of a conflict
between this letter agreement and the Affiliation Agreement, this letter
agreement shall control.
Please indicate your agreement with the terms and conditions provided herein
by executing this letter agreement where provided below.
Sincerely,
SATELLITE SERVICES, INC.
By: /s/ ▇▇▇▇ ▇▇▇▇
-------------------------------------------------
AGREED TO AND ACCEPTED THIS 3 DAY OF FEBRUARY, 1998:
DMX, INC.
By: /s/ ▇▇▇ ▇▇▇▇▇▇
------------------------------------------------