Dbs Programming Affiliation Agreement

Exhibit 10.8


Portions of this exhibit have been omitted pursuant to a request for confidential treatment. The omitted portions marked by [**] have been separately filed with the Commission.


DBS PROGRAMMING AFFILIATION AGREEMENT


DBS PROGRAMMING AFFILIATION AGREEMENT (the "Agreement"), made as of this 28th day of Dec , 1995, between EchoStar Satellite Corporation, a
------ ----- Colorado corporation ("EchoStar"), with offices at 90 Inverness Circle East, Englewood, Colorado 80112, and Muzak Limited Partnership, a Delaware limited partnership ("Muzak"), with offices at 2901 Third Avenue, Suite 400, Seattle, Washington 98121.


RECITALS


A. EchoStar and Muzak, contemporaneous with the execution of this Agreement, have entered into a Video Programming Sales Agent Agreement (the "Video Agreement") and an Uplink Facility Agreement (the "Uplink Agreement"), which Video Agreement and Uplink Agreement contemplated the execution of this Agreement contemporaneous therewith; and


B. EchoStar is engaged in the business of, among other things, providing direct broadcast satellite-delivered, multi-channel, digital audio, video and data services to commercial and residential subscribers, itself and through its authorized EchoStar Sales Agents (as hereinafter defined); and


C. Muzak is engaged in the business of, among other things, producing and distributing subscription music, video, data and other services to commercial subscribers, through its owned and independent Muzak Affiliates (as hereinafter defined); and


D. EchoStar desires to deliver via the EchoStar System (as hereinafter defined) Music Channels (as hereinafter defined) for distribution by EchoStar and EchoStar Sales Agents to residential and commercial consumers; and


E. Subject to the terms and conditions set forth below, Muzak agrees to allow EchoStar to deliver Music Channels via the EchoStar System and offer subscriptions thereto.


NOW, THEREFORE, in consideration of the mutual promises and the covenants hereinafter set forth, and for other good and valuable consideration, the receipt of which is hereby acknowledged, Muzak and EchoStar agree as follows:


SECTION 1. DEFINITIONS


In addition to the terms defined above or elsewhere in this Agreement, the following capitalized terms shall have the meanings ascribed to them in this Section 1 (It is the intent of the parties that the definitions used in this Agreement be consistent with the definitions used in the Uplink Agreement and the Video Agreement. To the extent of any conflict between a defined term in this Agreement and a defined term in the Uplink Agreement or the Video Agreement, it is the parties' intent that the two terms be interpreted in the most reasonable manner so as to give the same or as reasonably similar an interpretation to such defined term as is possible.)


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1.1 "Affected Party" shall have the meaning given to such term in Section 9.2 of this Agreement.


1.2 "Affiliate Consent" shall have the meaning given to such term in Section 9.4 of this Agreement.


1.3 "Affiliated Entities" shall mean, with respect to any person or entity, any other person or entity directly or indirectly controlling, controlled by or under common control (i.e., the power to direct affairs by reason of ownership of voting stock, by contract or otherwise) with, such person or entity, any partner of such person or entity, and any member, director, officer or employee of such person or entity.


1.4 "Commercial Music Channels" shall mean the Music Channels programmed by Muzak which are predominantly targeted for Commercial Subscribers.


1.5 "Commercial Subscribers" shall mean those EchoStar Subscribers who are activated by EchoStar to receive Music Channels at retail, business, office or other commercial locations.


1.6 "Commercial Subscriber Fees" shall have the meaning given to such term in Section 2.7(a) of this Agreement.


1.7 "EchoStar Indemnities" shall mean EchoStar, its Affiliated Entities, its EchoStar Sales Agents, its contractors, subcontractors and authorized distributors, agents and programming suppliers, and the partners, directors, officers, employees and agents of EchoStar, its Affiliated Entities, its EchoStar Sales Agents, its subcontractors, distributors, agents and programming suppliers.


1.8 "EchoStar Sales Agents" shall mean those persons or entities authorized by EchoStar to solicit video, audio and data programming services delivered via the EchoStar System, with the exception of Muzak and the Participating Muzak Affiliates.


1.9 "EchoStar Subscriber" shall mean a commercial or residential subscriber activated by EchoStar to receive audio, video and/or data programming services via the EchoStar System.


1.10 "EchoStar System" shall mean the direct broadcast satellite delivery system utilized by EchoStar and located at a 119 degrees orbital slot assignment with 12.2 to 12.7 GHz downlink frequencies, and authorized by the Federal Communications Commission ("FCC") for delivery of multi-channel digital audio, video and data services.


DBS PROGRAMMING AFFILIATION AGREEMENT MUZAK/ECHOSTAR PAGE 3


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1.11 "EchoStar's Uplink Facility" shall mean EchoStar's satellite uplink and broadcast center located in Cheyenne, Wyoming that serves the function of uplinking satellite signals to the EchoStar System.


1.12 "Exclusive Muzak Territories" shall have the meaning given to such term in Section 9.4 of this Agreement.


1.13 "Force Majeure" shall mean an event described in Section 10.8 of this Agreement.


1.14 "Indemnified Party" shall mean a party seeking indemnification pursuant to Section 8.3 of this Agreement.


1.15 "Indemnifying Party" shall mean a party from whom indemnification is sought pursuant to Section 8.3 of this Agreement.


1.16 "Music Channels" shall mean Commercial Music Channels and Residential Music Channels, as more fully described in Section 2.1, which in any event shall exclude the Exclusive Muzak Channels (as defined in the Uplink Agreement). The Music Channels may be in mono or stereo sound, as determined by EchoStar in its sole discretion.


1.17 "Music Subscribers" shall mean Residential Subscribers and Commercial Subscribers.


1.18 "Muzak" shall have the meaning given to such term in the introductory paragraph of this Agreement, and shall be deemed to include owned Muzak Affiliates, except where circumstances otherwise require or where it would not be logical to infer such inclusion.


1.19 "Muzak Affiliates" shall mean those existing owned and independent operators at the effective date of this Agreement, their successors, assignees and transferees as permitted by Muzak, that have the exclusive right to use the existing Muzak(R) trademark and certain other existing trademarks of Muzak, and to distribute subscription music services, adjunct services related to the sequencing, changing and switching of music-program communications, and certain adjunct services related to the delivery of advertising, data and video communications, in Exclusive Muzak Territories.


1.20 "Muzak Affiliation Agreement" shall mean collectively the franchise agreement and the Participating Affiliate Agreement between Muzak and an independent Muzak Affiliate.


1.21 "Muzak Indemnities" shall mean Muzak, the Participating Muzak Affiliates, its Affiliated Entities, its contractors, subcontractors and authorized distributors and agents, and


DBS PROGRAMMING AFFILIATION AGREEMENT MUZAK/ECHOSTAR PAGE 4


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the partners, directors, officers, employees and agents of Muzak, the Participating Muzak Affiliates, such Affiliated Entities, subcontractors, distributors and agents.


1.22 "Muzak Services" shall mean the Music Channels and the Exclusive Muzak Channels (as defined in the Uplink Agreement).


1.23 "Other Party" shall have the meaning given to such term in Section 9.2 of this Agreement.


1.24 "Participating Muzak Affiliate" shall mean a Muzak Affiliate that executes a Participating Affiliate Agreement with Muzak, which thereby shall become a part of the Muzak Affiliation Agreement.


1.25 "Participating Affiliate Agreement" shall mean the agreement between Muzak and an independent Muzak Affiliate pursuant to which Muzak obtains Affiliate Consent and which agreement shall require Participating Muzak Affiliates to comply with all terms and conditions in this Agreement, the Video Agreement and the Uplink Agreement, applicable to Participating Muzak Affiliates.


1.26 "Performance Right Fees" shall have the meaning given to such term in Section 2.3(a) of this Agreement.


1.27 "Residential Music Channels" shall mean the Music Channels programmed by Muzak which are predominantly targeted for Residential Subscribers.


1.28 "Residential Subscriber Fee" shall have the meaning given to such term in Section 2.2 of this Agreement.


1.29 "Residential Subscribers" shall mean EchoStar Subscribers who are activated by EchoStar to receive Music Channels at their homes.


1.30 "Second Satellite Launch" shall mean the initial date on which EchoStar commences transmission of the Video Services or Muzak Services on a second EchoStar System satellite, which date shall in no event be later than December 31, 1997.


1.31 "Service Launch" shall mean the initial date on which EchoStar commences transmission of the Music Channels for revenue-generating purposes, which date shall in no event be later than October 31, 1996.


1.32 "Subscriber Fees" shall mean Residential Subscriber Fees and Commercial Subscriber Fees.


DBS PROGRAMMING AFFILIATION AGREEMENT MUZAK/ECHOSTAR PAGE 5


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1.33 "Term" shall mean the duration of this Agreement, as set forth in Section 9.1 hereof.


1.34 "Territory" shall mean the footprint of the EchoStar System, subject to any international, foreign, Federal, state, local or municipal, conventions, treaties, laws, statutes, regulations, rules, ordinances or codes, or prohibitions contained in programming agreements, which otherwise limit or restrict EchoStar's right or ability to deliver any audio, video or data programming services via the EchoStar System for receipt in any given jurisdiction.


1.35 "Third Party Claim" shall mean any claim, assessment, action, suit, audit or proceeding by a third party in respect of which indemnity may be sought pursuant to Section 8 of this Agreement.


SECTION 2. PROGRAMMING AND TRANSMISSION OF MUSIC CHANNELS


2.1 Music Channels.
--------------


(a) Muzak will provide EchoStar with a multi-channel, digital, music service as described in 2.1(b) for distribution over the EchoStar System (the "Music Channels"). Subject to the terms and conditions of this Agreement (including Affiliate Consent required pursuant to Section 9.4) and the on-going rights of Muzak and Muzak Affiliates to distribute the Music Channels, Muzak hereby grants to EchoStar the exclusive right and license to: (i) receive the Music Channels from Muzak; (ii) transmit the signal of the Music Channels in a digitally compressed, encrypted format, in mono or stereo sound as determined in EchoStar's discretion, via the EchoStar System; (iii) activate and deactivate consumer equipment (IRDs) for exhibition of the Music Channels as transmitted via the EchoStar System to Residential Subscribers and Commercial Subscribers; (iv) brand the Music Channels as EchoStar deems appropriate in its sole discretion; and (v) offer and sell subscriptions to the Music Channels and conduct customer service functions. Muzak represents and warrants (subject to Affiliate Consent required pursuant to Section 9.4 below) that it has all rights necessary to grant EchoStar the right to transmit the Music Channels to Residential Subscribers and Commercial Subscribers.


(b) Effective upon Service Launch, and until the Second Satellite Launch, the Music Channels will consist of thirteen (13) Commercial Music Channels and fourteen (14) Residential Music Channels. Effective upon the Second Satellite Launch, the Music Channels will consist of thirty (30) Music Channels.


(c) The Music Channels shall not include the Environmental (R) or FM-One(R) channels. Subject to Section 2.1(b), Muzak shall, in the exercise of its sole discretion, be solely responsible for the programming and format of the Music Channels; provided, however, that (i) EchoStar will have the right to propose and to approve the format of each new


The information below marked by [**] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.


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Music Channel prior to its inclusion in the Music Channels, and (ii) EchoStar may require Muzak to change the format of any Music Channel, and Muzak shall effect any such change at no charge to EchoStar prior to the Second Satellite Launch and for a fee of [**] per change after the Second Satellite Launch. Notwithstanding the exclusivity of the Exclusive Muzak Channels, the Music Channels may include channels with a similar tone or content as, but not identical to, any of the Exclusive Muzak Channels, with the exception of the Environmental(R) Channel. Such similar channels shall in no event utilize or duplicate Muzak's proprietary Stimulus Progression(R) or Quantum Modulation(R) techniques.


(d) All ownership, right, title and interest of any nature in and to all or any part of the Music Channels and the programming contained therein is vested exclusively in Muzak and neither EchoStar nor any EchoStar Sales Agents shall have any right, title or interest in or to all or any part of the Music Channels or the programming contained therein, except as specifically licensed under this Agreement.


(e) EchoStar shall be entitled to package and brand the Music Channels in any manner it chooses for distribution to Residential Subscribers and Commercial Subscribers.


(f) The parties acknowledge that each Music Channel shall be deemed to have a value of [**]. If for any reason EchoStar prices the Music Channels at a higher rate, resulting in an increase in the Performance Right Fees payable by Muzak hereunder as of the date this Agreement is executed, EchoStar shall pay such increase.


2.2 Subscriber Fees for Residential Subscribers. EchoStar shall pay
------------------------------------------- to Muzak a monthly programming fee of [**] per Music Channel per Residential Subscriber (the "Residential Subscriber Fee"). The Residential Subscriber Fee is only payable after EchoStar collects payment for the Music Channels from the applicable Residential Subscriber for the applicable month.


2.3 Delivery of the Music Channels.
------------------------------


(a) Muzak shall be responsible for all costs of programming, production, playback and transmission of the Music Channels to EchoStar's Uplink Facility. Except as provided herein in Section 2.1(f) above and in Section 2.3 of the Uplink Agreement, Muzak shall be responsible for the cost of copyright, royalty or other performance rights payments through to the viewer, including, without limitation, payments to ASCAP, BMI, SESAC and any other applicable music performance society or other applicable entity (collectively referred to as "Performance Right Fees") with respect to the sale of all Music Channels to any Residential Subscribers; provided, however, that in the event that at any time during the term of this Agreement, Performance Right Fees exceed the Residential Subscriber Fee, EchoStar shall pay such excess. EchoStar and the EchoStar Sales Agents shall be independently responsible for


The information below marked by [**] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.


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collecting and remitting all Performance Right Fees, with respect to the sale of any Music Channels to a Commercial Subscriber by EchoStar or EchoStar Sales Agents, and EchoStar acknowledges that Muzak has no responsibility for such Performance Rights Fees.


2.4 Additional Equipment. Muzak shall be responsible for any
-------------------- equipment (including the Mpeg Audio Encoder Boards) necessary for EchoStar to receive and uplink the Music Channels at the point the Music Channels exit the Mpeg Audio Encoder Boards, other than equipment which EchoStar currently utilizes for receiving and uplinking signals to the EchoStar System.


2.5 Cost of Transmission. Except as provided to the contrary in
-------------------- Section 2.4 above, EchoStar shall be responsible for all costs of transmission of the Music Channels from EchoStar's Uplink Facility to the EchoStar System and to EchoStar Subscribers.


2.6 Rate Cards. EchoStar shall be responsible for setting rate cards
---------- for the sale of the Music Channels to EchoStar Subscribers by EchoStar Sales Agents, and EchoStar shall be responsible for enforcing rate cards applicable to sales of the Music Channels to EchoStar Subscribers by EchoStar Sales Agents. The packaging and pricing of the Music Channels by EchoStar and EchoStar Sales Agents to EchoStar Subscribers will be decided by EchoStar, in its sole discretion.


2.7 Distribution of the Music Channels by EchoStar or EchoStar Sales
---------------------------------------------------------------- Agents to Commercial Subscribers. - --------------------------------


(a) EchoStar will pay to Muzak and Participating Muzak Affiliates, as applicable, each month a fee per each Commercial Subscriber in an amount equal to [**] of Commercial EchoStar Collections (the "Commercial Subscriber Fee") for any sales of the Music Channels to Commercial Subscribers by EchoStar or EchoStar Sales Agents in such entity's Exclusive Muzak Territory.


(b) "Commercial EchoStar Collections" means the recurring monthly charges collected from a Commercial Subscriber for the provision of the Music Channels on the EchoStar System by EchoStar or EchoStar Agents. "Commercial EchoStar Collections" shall not include any amounts collected from Commercial Subscribers: (i) for sound system or video equipment lease, purchase, installation or maintenance; (ii) for Performance Right Fees with respect to the Music Channels; and (iii) any applicable sales, use or excise taxes with respect to the Music Channels.


2.8 Discontinuation of Music Channels. EchoStar may, at any time, by
--------------------------------- giving sixty (60) days' prior written notice to Muzak, discontinue the uplink and distribution of the Music Channels. Upon such discontinuation, EchoStar shall purchase the equipment referred


The information below marked by [**] has been omitted pursuant to a request for confidential treatment. The omitted portion has been separately filed with the Commission.


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to in Section 2.4 above by payment to Muzak of the depreciated book value of such equipment (which the parties agree to have a deemed value of [**], allocating depreciation on a straight-line basis over five years.


2.9 Control Over System. Notwithstanding anything to the contrary in
------------------- this Agreement, EchoStar shall always be entitled to exercise control over all aspects of the EchoStar System, including any programming or other material provided by Muzak, but only to the minimum extent EchoStar is required to do so by Federal Communications Commission or similar law, rule or regulation.


SECTION 3. VIDEO AGREEMENT AND UPLINK AGREEMENT


3.1 Video Agreement. Contemporaneous with the execution of this
--------------- Agreement, the parties have executed the Video Agreement, which permits Muzak and Participating Muzak Affiliates to solicit orders for, as an agent of EchoStar, certain video programming packages at prices determined by EchoStar and delivered via the EchoStar System.


3.2 Uplink Agreement. Contemporaneous with the execution of this
----------------- Agreement, the parties have executed the Uplink Agreement, pursuant to which EchoStar shall uplink and deliver the Muzak Services.


SECTION 4. PAYMENT TERMS, REPORTS AND AUDITS


4.1 Payment Schedule. All monthly Subscriber Fee payments required to
---------------- be made by EchoStar pursuant to Sections 2.2 and 2.7 shall be paid within forty five (45) days of the end of each month during the term of this Agreement.


4.2 Reports. Together with the monthly Subscriber Fee payments
------- required under Section 4.1 above, EchoStar shall submit to Muzak a report, which reasonably details the amounts payable to Muzak and the Participating Muzak Affiliates pursuant to this Agreement. Such reports shall include for each applicable month: (i) the total number of Music Subscribers; (ii) the total number of Residential Subscribers and Commercial Subscribers; (iii) the total number of EchoStar Subscribers; (iv) the total number of Residential Subscribers and Commercial Subscribers receiving free trial subscriptions to the Music Channels; (v) the Music Channels ordered by such subscribers; and (vi) the Commercial EchoStar Collections (including itemization) for each Commercial Subscriber. The report shall reflect all Commercial EchoStar Collections during the periods to which such payments pertain. In any event such report shall contain such information as is required by the applicable performance rights societies and other a ...