Venture Agreement re: Playboy TV Service and AdulTVision Service in Germany and Scandinavia - Playboy Entertainment Group Inc. and Bloomfield Mercantile Inc.
Cisneros Television Services, Inc.
426 Jefferson Avenue
Miami Beach, FL. 33139
October 20, 1997
Mr. Anthony J. Lynn
President
Playboy Entertainment Group, Inc.
9242 Beverly Blvd.
Beverly Hills, California 90210
RE: New Venture between Playboy Entertainment Group, Inc. ("PEG") and
Bloomfield Mercantile Inc., ("Bloomfield") for the operation of a
Playboy TV service ("PTV") and AdulTVision service ("ATV") in Germany
and Scandinavia
Dear Tony,
Your signature at the space designated below shall confirm the terms and
conditions under which (i) PEG and Bloomfield will form a new venture for the
operation of PTV and ATV in Germany and Scandinavia, and (ii) White Oak
Enterprises Ltd, an affiliate of Bloomfield, will acquire the right to
participate in the operation of PTV and ATV in certain additional territories.
1. Formation of New Venture
a. PEG and Bloomfield shall form a tax efficient venture that will
comply with applicable local laws, such as a limited liability company entity,
(the "Venture") which will own and operate and be the exclusive distributor of
PTV and ATV in Germany, Austria, German speaking Switzerland, Sweden, Finland,
Denmark and Norway (collectively the "GS Territory"). ("Scandinavia" shall mean
Sweden, Norway, Denmark and Finland.)
b. As soon as possible after the execution of this letter agreement,
PEG and Bloomfield (and, where appropriate, certain of their affiliates) intend
to enter into more formal long-form superseding agreements, including: an
Operating Agreement for the Venture; a Program License Agreement between PEG and
the Venture with respect to the PTV programming; a Program License Agreement
between PEG and the Venture with respect to the ATV programming; a Trademark
License Agreement between Playboy Enterprises, Inc. and the Venture for the use
of the Playboy trademarks, tradenames and associated marks; and a Management
Services Agreement between Cisneros Television Services, Inc. and the Venture
for the provision of certain incremental management and back office services
necessary for the Venture in addition to those already provided for in Latin
America and Iberia.
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c. To the extent not specifically provided in this letter agreement,
the terms and conditions of the formation and operation of the Venture for the
purposes of this letter agreement and for the superseding agreements shall be as
set forth in the Agreement Outline dated March 29, 1996, as amended ("PTV
Agreement Outline"), between PEG and Bloomfield for the formation and operation
of Playboy TV - Latin America, LLC ("PTVLA"). Until the superseding agreements
are executed, or in the event they are never executed, this letter agreement
shall be binding upon the parties and their affiliates. Further, the parties
agree to execute, as soon as possible, formal amendments to the relevant
agreements for PTVLA to reflect the modifications to those agreements set forth
herein.
d. The parties will mutually approve a Budget and 10-year Business
Plan, to be attached hereto and incorporated herein, for the operations of the
Venture in the GS Territory, in the same manner as set forth in the PTV
Agreement Outline.
2. Ownership
a. The interests in the Venture initially will be owned ***
Bloomfield and *** PEG, with PEG to have an option to increase to *** at ***
until *** . After the third anniversary of the PTV Hard Launch Date, PEG will
have the option to increase to *** at ***.
b. ***
3. Playboy Television Programming in Scandinavia
Pursuant to that certain letter agreement dated as of July 31, 1997,
("Scandinavia Agreement") between PEG and Bloomfield, PEG granted to the Venture
certain rights regarding PEG's distribution of its programming in Scandinavia.
Pursuant to the Scandinavia Agreement, PEG agrees that all rights and
obligations under that certain agreement between PEG and
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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Modern Times Group, ("Playboy/MTG Distribution Agreement") including those
providing for *** license fee payments from distribution of Playboy programming
by Modern Times Group in Scandinavia shall be assigned to the Venture, which
assignment shall be effective upon the earlier of (i) the PTV Hard Launch Date
in Germany, (as defined herein) or (ii) *** . Any license fees to be paid to the
Venture from distribution of Playboy programming in Scandinavia (the
"Scandiavian License Fees") under the Playboy/MTG Distribution Agreement shall
be paid to the Venture as set forth below and calculated on a pro-rata monthly
basis, the calculation of which shall commence on the commencement date of the
applicable program license. As follows:
a. If the PTV Hard Launch Date occurs prior to *** , the Scandinavian
License Fees shall be paid to the Venture commencing on the PTV Hard
Launch Date.
b. If the PTV Hard Launch Date occurs on or after *** , but on
or prior to *** , the Scandinavian License Fees shall be
paid to the Venture commencing on *** .
c. If the PTV Hard Launch Date occurs after *** , the Scandinavian
License Fees shall be paid to the Venture commencing on *** and
continuing to *** , following which date the payment of the
Scandinavian License Fees to the Venture shall be suspended and
instead the Scandinavian License Fees shall be paid to PEG until the
PTV Hard Launch Date. Then, the Scandinavian License Fees shall be
paid to the Venture from and continuing after the PTV Hard Launch
Date. During said suspension period, the Venture shall execute any
document as may be necessary for PEG to receive the Scandinavian
License Fees under the Playboy/MTG Distribution Agreement during such
suspension period.
It is understood that in under sub-paragraph (b) or (c) above, the Scandinavian
License Fees shall be paid to the Venture commencing on *** .
4. Program Costs
a. PTV:
(1) *** , (paid in accordance with Section 7 below); provided,
however, that after the *** of the PTV Hard Launch Date, *** in any calendar
quarter in which *** .
(2) *** .
(3) *** .
(4) ***
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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b. ATV:
***
5. Media/Windows/Holdbacks
a. For PTV:
(1) PEG shall provide, and the Venture shall license, *** hours
of new PTV programming per year, commencing on the earlier of the PTV Hard
Launch or *** ,subject to the suspension of this paragraph as provided in
Section 7 (c) below. *** . PEG will grant to the Venture an exclusive license to
exploit all PTV programming in the GS Territory in the same media, for the same
number of runs and subject to the same windows and dark periods as set forth in
the PTVLA Outline Agreement and PTVLA Program License Agreement; *** . All PTV
programming will be available to the Venture except for the programming already
under license to a third party for television exhibition in any part of the GS
Territory, with respect to that part of the GS Territory, as of the date of the
execution of this agreement, including applicable holdbacks, (with this
exception to not include such programming under license in Scandinavia pursuant
to the exemption for Scandinavia set forth in Paragraph 3). PEG agrees that
contemporaneously upon execution of this Agreement, it shall provide the Venture
with a list of such programming. From the date of execution of this Agreement,
PEG shall not enter into any programming licenses in the GS Territory, except as
set forth in sub-paragraph 5.a.(3) herein. The parties to the Venture
acknowledge that the PEG programming that may be available for PTV in the GS
Territory may not be the same programming that is available to PEG and
Bloomfield in the Latin American territory under the PTV Agreement Outline.
(2) *** . PEG agrees that license fees for each episode
of any program series shall be allocated equally with any other episodes of the
same program series licensed under the same agreement for the same term and
territory. *** . PEG shall be the distributor for post-Venture exploitation of
the PTV programs in the GS Territory
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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*** . It is understood that PEG, in its capacity as distributor, shall
provide for an equitable and reasonable allocation amongst any program it
distributes hereunder so as to in good faith not contravene the intent of the
parties hereto with respect to this provision. Such sales by PEG shall be
conducted on a non-branded basis.
(3) PEG may holdback from the Venture *** .
b. For ATV:
The Venture will acquire from PEG *** new film titles per year
commencing on the ATV Launch Date consistent with the type and quality currently
exhibited on ATV in the United States. The Venture will own or control any and
all rights that PEG owns or controls for such movies *** .
6. Royalty.
PEG will grant the Venture a license to use the Playboy trademarks, service
marks and trade name in the GS Territory for the life of the Venture in exchange
for a royalty payment *** .
7. PTV Launch Date
The "PTV Hard Launch Date" shall be defined as the date on which the
Venture obtains the requisite governmental license(s) to operate PTV in Germany.
If the PTV Hard Launch Date does not occur by *** , then commencing on *** and
continuing until the earlier of the PTV Hard Launch Date or *** , the Venture
shall nevertheless make PTV available in Germany on a limited test basis, ("PTV
Soft Launch"). Payment of the PTV program costs pursuant to Section 4 above and
the supply of the PTV programming pursuant to Section 5.a. above shall be as
follows:
a. If the PTV Hard Launch Date occurs prior to *** , the PTV
program costs and the supply of the PTV programming shall commence on
the PTV Hard Launch Date.
b. If the PTV Hard Launch Date occurs or after *** , but on or prior to
*** , the PTV program costs and the supply of the PTV programming for
the PTV Soft Launch shall commence on *** .
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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c. If the PTV Hard Launch Date occurs after *** , then the PTV program
costs and the supply of the PTV programming for the PTV Soft Launch
shall commence on *** and continue until *** , following which date
the payment of the PTV programming costs and the supply of the PTV
programming shall be suspended until the PTV Hard Launch Date occurs.
On the PTV Hard Launch Date, the PTV program costs and the supply of
the PTV programming shall recommence. The Venture shall have no
obligation to pay for any programming after *** in the event the PTV
Hard Launch Date does not occur.
8. Distribution
The Venture shall handle the sale of the PTV and ATV services to the two
primary distribution platforms in the GS Territory, Deutsche Telekom and
Premier, or their respective affiliates which provide for television
distribution systems. Subject to PEG's approval, which shall not be unreasonably
withheld, Bloomfield, or one of its affiliates, will be responsible for
affiliate sales to other distribution platforms in the GS Territory, *** . This
right of Bloomfield, or its affiliate, will include the distribution to local
operators and agents who operate their platform and distribution systems from
the Deutsche Telekom platform.
9. Governance
The terms for the governance of the Venture (e.g., the role of Management
Committee, matters requiring unanimous consent, etc.) shall be substantially
similar to those terms set forth in the PTV Agreement Outline.
10. ***
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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***
11. White Oak's Right to Participate in Other Territories
a. In the event PEG (or any of its affiliates) decides to operate PTV,
ATV or similar services in all or any territory of France, Italy, Poland,
Hungary, the Czech Republic, Iceland, Slovakia, Bulgaria and Romania via a
venture(s) with a non-PEG affiliate, White Oak Enterprises Limited ("White
Oak"), an affiliate of Bloomfield's, *** .
b. In the event PEG (or any of its affiliates) decides to operate PTV,
ATV or similar services in all or any portion of the People's Republic of China,
via a venture(s) with a non-PEG affiliate, White Oak shall *** .
c. *** .
12. White Oak's Programming License from PEG:
White Oak agrees to license from PEG *** program hours of PEG
produced, co-produced or acquired programming for exhibition up to *** broadcast
days on *** television in the GS territory during the period of *** . Such
programming shall consist of any combination of movies, specials and series to
be determined in PEG discretion in good faith. PEG shall deliver the programming
to White Oak, or its designee, on or before *** . White Oak shall pay to PEG the
sum of *** for each program hour (pro-rata for fractional hours), for a total
aggregate payment of *** . Such total aggregate sum shall be payable on *** .
Bloomfield shall guarantee all payments by White Oak to PEG under the terms in
this paragraph. White Oak may exhibit such programming over PTV (without a
reduction to the Venture's obligation to license PTV programming under paragraph
5.a.(1) herein), or over any other single, encrypted, Non-standard television
service in the GS Territory. All other provisions shall be in accordance with
PEG's standard International Pay Television License Agreement, subject to such
changes, if any, negotiated in good faith by PEG and White Oak.
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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13. Pre-Launch Expenses
All pre-launch Venture expenses (including governmental permits and license
fees, legal and consulting expenses, and the like) shall be paid *** .
14. Playboy TV - Latin America, LLC (including Iberia)
PEG and Bloomfield will amend the PTV Agreement Outline and other relevant PTVLA
agreements as follows.
a. Commencing upon execution of this agreement, *** . PEG agrees that
license fees for each episode of any program series shall be allocated equally
with any other episodes of the same program series licensed under the same
agreement for the same term and territory. *** . It is understood that PEG, in
its capacity as distributor, shall provide for an equitable and reasonable
allocation amongst any program it distributes hereunder so as to in good faith
not contravene the intent of the parties hereto with respect to this provision.
Such sales by PEG shall be conducted on a non-branded basis.
b. Commencing upon execution of this agreement, PTVLA will own and
control any and all rights that PEG owns or controls for all of the programming
provided under the ATV Program Supply Agreement *** .
c. Effective as of the date of execution of this letter agreement, the
license fee for ATV movies for Latin America *** .
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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15. Counterpart Execution
This Agreement may be executed in several counterparts, each of which shall be
deemed an original, and all such counterparts together shall constitute but one
and the same instrument.
Please indicate your approval of the foregoing by signing at the space
designated below.
Very truly yours,
/s/ Marc Zand
Marc Zand
AGREED AND ACCEPTED AGREED AND ACCEPTED
AS TO SECTION 11 and 12
PLAYBOY ENTERTAINMENT WHITE OAK ENTERPRISES, LTD
GROUP, INC.
By /s/ Anthony Lynn By /s/ Mark Zand
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Anthony Lynn, President Its Attorney-in-Fact
--------------------------------
BLOOMFIELD MERCANTILE, INC.
By /s/ Mark Zand
-----------------------------------
Its Attorney-in-Fact
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