Affiliation Agreement for DBS Satellite Exhibition of Cable Programming - Playboy Entertainment Group inc. and DirecTV Inc.
EXECUTION VERSION
AFFILIATION AGREEMENT
FOR DBS SATELLITE EXHIBITION
OF CABLE PROGRAMMING
AGREEMENT, made as of this 15 day of November, 1993, by and between
Playboy Entertainment Group, Inc., a Delaware corporation ("Programmer") with
offices at 9242 Beverly Blvd., Beverly Hills, CA 90210, and DirecTv, Inc., a
California corporation with offices at 2230 East Imperial Highway, El Segundo,
California 90245 ("Affiliate").
WHEREAS:
A. Affiliate is in the process of establishing a direct broadcast
service ("DBS") satellite-based television system in North America; and
B. Affiliate desires to obtain the rights to distribute Playboy TV
(the "Service", as defined in Section l(b) below) via the DBS Distribution
System in the Fifty (50) United States (the "Territory") and for no other
purpose and will provide or cause to be provided all necessary facilities to
receive the signal transmitted by Programmer.
NOW, THEREFORE, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Grant of Rights.
(a) Programmer hereby grants to Affiliate (which as used for all
purposes in this Agreement shall mean DirecTv and/or its designees or
affiliates) or its agents the right to distribute the Service in the Territory,
including, without limitation, to hotels, motels, commercial office buildings
and multiple dwelling facilities (provided, however, that Affiliate shall not
have the right to distribute the Service in any common areas to which the public
has free access of any commercial office buildings or multiple dwelling
facilities), via the DBS Distribution System during the Term (as defined in
Section 6(a) below) hereof. Subject to the terms and conditions of this
Agreement, the terms and conditions upon which Affiliate distributes the Service
to DirecTv Subscribers, including, without limitation, the retail price charged,
shall be determined by Affiliate in its sole discretion. Nothing herein shall
prevent or restrict Programmer from distributing the Service in the Territory or
elsewhere via any medium or technology other than the DBS Distribution System
(including, without limitation,
<PAGE>
EXECUTION VERSION
any Ku-Band satellite distribution system other than the DBS Distribution
System). The term "DBS Distribution System" shall mean the distribution system
for video and other programming services (including, without limitation, cable
programming services) whereby the cable programming satellite signal or feed is
received from Programmer's transponder source by a DirecTv turnaround earth-
station facility which compresses and encrypts the signal or feed and then
uplinks it at one of the DirecTv Frequencies on a DBS communications satellite
located at or about the 101 (degrees) West Longitude orbital location (a "DBS
Satellite") for transmission to DirecTv Subscribers. "DirecTv Subscribers" shall
mean those customers authorized to receive DBS service via the DBS Distribution
System, including, without limitation, each residential unit in a multiple
dwelling unit which is authorized to receive the DBS service via the DBS
Distribution System. "Service Subscriber" shall mean any DirecTv Subscriber who
is authorized to receive the service through the DBS Distribution System.
"DirecTv Frequencies" shall mean the DBS operating frequencies associated with
the 101 (degrees) West Longitude orbital location, for which Hughes
Communications Galaxy, Inc. ("HCG") (an affiliate of DirecTv, Inc.) is the FCC-
authorized permittee.
(b) The "Service" shall mean and consist of the national feed (or, if
Programmer uses multiple feeds for the Service, such other of such multiple
feeds designated by Affiliate) of the programming service commonly known as
"Playboy TV", which shall consist of entertainment programming for adult
audiences, presented on a 10-hour per day schedule from 8 PM (eastern time)
until 6 AM (eastern time) (each such 8 PM - 6 AM exhibition time block being
referred to hereinafter as an "Exhibition Day"), the content of which as
Programmer may determine in its sole discretion, including the substitution or
withdrawal of any scheduled programs, and of commercial, promotional or other
announcements. All rights and title in and to the entire contents of the
Service, including, but not limited to, films and recordings thereof, title or
titles, names, trademarks, concepts, stories, plots, incidents, ideas, formulas,
formats, general content and any other literary, musical, artistic, or other
creative material included therein shall, as between Programmer and Affiliate,
remain vested in Programmer.
(c) Subject to Section 17, Affiliate shall distribute the Service as
transmitted by Programmer, in its entirety, in the order and at the time
transmitted by Programmer without any intentional editing, delays, alterations,
interruptions, deletions or additions. Programmer acknowledges that the DBS
Distribution System requires and applies digital compression and encryption
processes prior to transmission and decryption and decompression processes upon
reception and agrees that such processing does not constitute an alteration
and/or other modification of the Service. Notwithstanding the first sentence of
this Section 1(c), Affiliate shall offer the Service to
2
<PAGE>
EXECUTION VERSION
DirecTv Subscribers on a subscription (al a carte or package) basis
(collectively, the "Subscription Offerings") and on a pay-per-transaction (e.g.,
pay-per-night, pay-per-title, pay-per-hour etc.) basis (collectively, the "PPV
Offerings"). Affiliate shall determine in its sole discretion whether to sell
Subscription Offerings on an al a carte or package basis. Affiliate shall have
the right (but not obligation) in its discretion to exhibit the service through
the PPV Offerings in blocks of time as short as 60 minutes and up to the full
amount of time offered by the Service; provided, however, that any partial
exhibition of the Service which consists only of motion pictures must be no
shorter than 120 minutes.
(d) Except as allowed pursuant to this Agreement, Affiliate shall not
redistribute any portion of the Service except as specifically authorized by
Programmer.
(e) Programmer and Affiliate shall use their respective commercially
reasonable efforts to maintain for the Service a high quality of signal
transmission in accordance with their respective technical standards and
procedures.
(f) Affiliate shall have the right, in its sole discretion and for
Affiliate's sole benefit as between Programmer and Affiliate, to utilize the
channel capacity used to transmit the Service during the hours which the Service
is not exhibited.
2. Reports and Payments.
(a) Compensation. As full and complete compensation for Affiliate's
right to distribute the Service, Affiliate shall pay to Programmer the
applicable percentage of Gross Receipts for such calendar month (as such
percentage is calculated as set forth on Exhibit A based on the Per Capita Gross
Receipts (as defined in Exhibit A)).
(i) "Gross Receipts" are defined as the sum of all monies
received by affiliate during any calendar month derived solely from
Affiliate's distribution of the Service after deduction of taxes (other
than income or franchise taxes); provided, however, that Gross Receipts
shall in no event include any charge specifically made for access to
programming other than the service or any general access charge, hardware
licensing charge or other charge made on a "blanket" basis (which shall
mean that such charge will relate to access to all program services
available from Affiliate by means of the DBS Distribution System). If
Affiliate packages the Service with other programming services, then
Affiliate shall determine the Service's allocable share of revenues from
such package by application of the following formula:
3
<PAGE>
EXECUTION VERSION
S = (A/B) X P
where
S = the Service's allocable share of revenues from such package
A = the Service's DirecTv al a carte price then in effect
B = the sum of the DirecTv al a carte prices of all programming services
included in such package (including, without limitation, the Service)
then in effect
P = the price of such package
To the extent that a DirecTv Subscriber prepays any portion of monies owed
solely in connection with Affiliate's distribution of the Service, then the
amount prepaid shall be included in Gross Receipts for the calendar month
in which such prepayment was received. Affiliate shall deduct the amount of
any Credit Transaction (as defined below in Section 2(a)(ii)), as such
amount is reasonably determined by Affiliate, from the Gross Receipts of
the calendar month; in which such Credit Transaction occurs.
(ii) "Credit Transaction" shall mean any refund (or other payment
or credit) to a DirecTv Subscriber in connection with (A) prepayments for
the Service, (B) Programmer's inability to transmit the Service to
Affiliate for distribution via the DBS Distribution System for any reason
other than Affiliate's non-performance of an obligation hereunder, (C) a
Force Majeure Event or (D) credits (excluding free previews of the Service
not authorized by Programmer) allowed by Affiliate in its commercially
reasonable judgment consistent with Affiliate's policies and procedures
applied consistently to Programmer and Affiliate's other sources of
programming services.
(iii) Affiliate shall be responsible for the collection of all
Gross Receipts and shall account to Programmer with regard to the Gross
Receipts for the Service on a calendar month basis, not later than 30 days
after the last day of the calendar month in which the Gross Receipts are
received by Affiliate. Each such accounting shall be certified by an
appropriate officer of Affiliate or an independent billing service as to
the accuracy of such print-out or statement and shall include:
(A) the aggregate Gross Receipts for such calendar month;
4
<PAGE>
EXECUTION VERSION
(B) the origin of all Gross Receipts for such calendar
month, itemized by PPV Offerings and Subscription Offerings;
(C) the number of DirecTv Subscribers as of the fifteenth
calendar day of such calendar month;
(D) the Per Capita Gross Receipts (as defined on Exhibit A);
(E) the applicable Programmer Share from Exhibit A;
(F) the dollar amount of Programmer's share of Gross
Receipts for such calendar month;
(G) for each type of Subscription Offering made available by
Affiliate during such calendar month, the number of Service
Subscribers as of the 15th day of such calendar month, the number of
Service Subscribers connecting to the Service during such calendar
month and the number of Service Subscribers disconnecting the Service
during such calendar month;
(H) for each type of PPV Offering, the number of Service
Subscribers purchasing such PPV Offering on each calendar day of such
calendar month;
(I) a list, for all hotels and motels to which the Service
is provided via the DBS Distribution System and the number of
Available Hotel/Motel Rooms (as defined on Exhibit B) during such
calendar month; and
(J) the Hotel/Motel License Fee (as defined below in
Section 2(b)).
Programmer shall accord confidential treatment to any information contained
in the aforementioned statement in accordance with Section 15.
(b) The parties understand and agree that the terms of this Section
2(b), and not Section 2(a), shall govern in the case of monies received from the
distribution of the Service to hotels or motels. In no event shall Affiliate pay
any fees or other charges on any Gross Receipts pursuant to both this Section
2(b) and any other section of this Agreement. Affiliate shall pay to Programmer
a license fee (the "Hotel/Motel License Fee") simultaneously with the accounting
rendered to Programmer as set forth in section 2(a)(iii); the Hotel/Motel
License Fee shall be
5
<PAGE>
EXECUTION VERSION
equal to the license fee set forth on Exhibit B attached to this Agreement.
Affiliate, simultaneously with such payment, shall notify Programmer in writing,
in a form reasonably requested by Programmer, of the names, addresses and room
capacities of all hotels and motels to which Affiliate shall have either
commenced or ceased distribution of the Service during the relevant calendar
month.
(c) At Programmer's request, Affiliate shall permit Programmer or its
representatives to review, during the Term (no more than once each calendar
year) and for one (1) year and on a one-time basis only thereafter, such DirecTv
Subscriber records as are reasonably necessary for the purpose of verifying such
statements at reasonable times, upon reasonable advance written notice and
during normal business hours at Affiliate's offices. Such review shall be at
Programmer's sole cost and expense and the information and process shall be
subject to the confidentiality provisions of Section 15. In the event any such
audit reveals an underpayment in excess of ten percent (10%) of the total
payment actually due for the period in question, Affiliate shall pay all of
Programmer's reasonable out-of-pocket costs of the review.
(d) Any amounts not paid by Affiliate by the date payment is due shall
accrue interest at the rate of one percent (1%) per month compounded monthly or
at the highest lawful rate, whichever shall be the lesser, from the date such
amounts were due until they are paid.
(e) Neither Programmer's acceptance of any information or payment nor
Programmer's inspection or audit of Affiliate's records or accounts will prevent
Programmer from later disputing the accuracy or completeness of any payment made
or information supplied by Affiliate or prevent Affiliate from later disputing
the accuracy of, or contesting the obligation to make, any payment hereunder.
(f) Programmer represents and warrants that the compensation level set
forth in Exhibit A and in Section 2(b) comply with all applicable Laws. Such
compensation level is substantially similar to Programmer's corresponding cable
rates. If Programmer at any time after the Service Commencement Date (as defined
in Section 6(a)) allows any distributor of the Service other than Affiliate (an
"Other Distributor") with a number of Service Subscribers at any time equal to
or less than a number equal to the then-existing number of Affiliate's Service
Subscribers (an "Equal Distributor") to distribute the Service and charges a
compensation level or computes penetration discounts or volume discounts, or
provides cooperative marketing funds or other terms or conditions which
effectively provide discounts to such compensation level, on a basis not
substantially similar to such distribution network than as set
6
<PAGE>
EXECUTION VERSION
forth on Exhibit A or in Section 2(b) ("Favored Fees"), then, as of the date
which is six months after the Service Commencement Date and again every six
months thereafter during the Term (individually, a "Review Date"), Programmer
shall so notify Affiliate in writing of such Favored Fees and Affiliate shall be
immediately entitled to incorporate into this Agreement the Favored Fees so
promulgated on substantially similar terms and conditions offered such Equal
Distributor effective as of the Review Date on which Programmer became obligated
to notify Affiliate of the Favored Fees. Nothing in the preceding sentence shall
require Affiliate to incorporate the Favored Fees and such terms and conditions
into this Agreement. As used in this Agreement, "Law" shall mean any FCC and any
other governmental (whether international, federal, state, municipal or
otherwise) statute, law, rule, regulation, ordinance, code, directive and order,
including without limitation, any court order.
3. Commercial Avails. Programmer hereby warrants and represents that it
does not make available to any distributor of the Service commercial
announcements of any nature in the schedule of the Service. If at any time
during the Term, Programmer shall provide the right to make commercial
announcements to any distributor of the Service, then Programmer shall offer
such right to Affiliate on terms and conditions no less favorable than those
offered to any other distributor of the Service.
4. Marketing, Promotion and Distribution of Programmer Programminq Services
by Affiliate.
(a) Throughout the Term hereof, Affiliate shall assign one single
channel of transmission on which the Service shall be distributed in its
entirety.
(b) Affiliate shall market and promote the Service in a similar manner
as Affiliate markets and promotes other similar premium programming services;
provided, however, that Affiliate may market and promote any other such premium
programming service differently and/or more frequently, if such service provider
provides Affiliate with consideration or compensation therefore. In connection
therewith, Programmer shall provide Affiliate, upon Affiliate's request, with
promotional and marketing advice. Affiliate shall make all marketing and
promotion decisions in its sole discretion, but the parties understand and agree
that Affiliate currently expects to use a range of promotional media (including,
without limitation, print advertising and cross-channel promotional spots on the
DBS Distribution System) to market and promote the Service. Affiliate shall
publicize the schedule of the Service in the Territory in a manner similar to
that which it employs, and based on the same factors it considers, in
publicizing the schedule of other similar premium programming services
distributed via the DBS Distribution System,
7
<PAGE>
EXECUTION VERSION
including, without limitation, the publication of the Service programming
schedule in the television listings and program guides which Affiliate, as
applicable, distributes.
(c) Subject to Section 17, Affiliate shall not at any time during the
Term (i) cease marketing or promoting the Service or (ii) withdraw distribution
of Service in any area of the Territory after the introduction thereof in such
area.
(d) Affiliate will expend the percentages (as set forth on Exhibit A)
of the Gross Receipts it receives from distribution of the Service, up to, as
set forth in the next sentence, an aggregate amount per 12-month period (with
each l2-month period starting on the Service Commencement Date (as defined in
Section 6(a) or the anniversary thereof) (a "l2-Month Period") for marketing,
advertising and promoting the distribution of the Service via the DBS
Distribution System. The aggregate limit on Affiliate's obligations set forth in
the preceding sentence shall be $l00,000 for the first two l2-Month Periods and
$150,000 for each 12-Month Period thereafter. Subject to the terms and
conditions of this Agreement, Affiliate shall make any decisions relating to
such marketing, advertising, promotion and expenditures in its sole discretion,
including, without limitation, the selection of promotional media (such as print
advertising, direct mail pieces, cross-channel promotional spots on the DBS
Distribution System etc.) and the scheduling of such marketing, advertising and
promotion activities. Any expenditure not made with unaffiliated third parties
shall be accounted for at fair market value. Affiliate's use of its on-air
programming guide shall be valued at zero dollars for purposes of this Section
4(d). In cases where Affiliate makes expenditures for more than one programming
service, Affiliate shall make an equitable allocation of such expenditure based
on dividing the amount of the expenditure by the number of services marketed,
promoted or advertised by such expenditure. If Affiliate intends to promote all
programming services then offered on the DBS Distribution System (other than the
Service) in one promotion piece, then Affiliate shall be obligated to include
the Service in such promotion piece, and Affiliate shall promote the Service in
a similar manner as the manner in which Affiliate promotes the other programming
services in such promotion piece. Affiliate shall deliver to Programmer,
within 60 days after the last day of each 12-month Period, documentation
evidencing the amount and nature of any such expenditures certified by an
officer of Affiliate.
(e) Programmer shall place at least one national full-page
advertisement in Playboy Magazine each 12-Month Period promoting solely the
distribution of the Service via the DBS Distribution System. In addition,
Programmer shall use its best endeavors to place three regional full-page
advertisements each 12-Month Period in Playboy Magazine in each of Playboy
Magazine's
8
<PAGE>
EXECUTION VERSION
12 regions in existence as of the date of this Agreement (collectively, the "12
Regions") promoting solely the distribution of the Service via the DBS
Distribution System.
(f) From time to time, Programmer may offer Affiliate an opportunity
to exhibit the Service free to DirecTv Subscribers ("Free Previews"). Free
Previews shall be made only with Programmer's prior written authorization and
shall be offered to Affiliate on a frequency and basis no less favorable than
those offered to any other distributor of the Service.
5. Representations, Warranties and Covenants.
(a) Affiliate Representations, Warranties and Covenants. Affiliate
warrants, represents and covenants to Programmer that it:
(i) has the power and authority to enter into this Agreement and
to fully perform its obligations hereunder;
(ii) has obtained, and shall maintain in full force during the
Term hereof, such federal, state and local authorizations as are necessary
to operate the business it is conducting in connection with its rights and
obligations under this Agreement;
(iii) shall distribute the Service in the Territory in accordance
with the terms set forth in this Agreement;
(iv) shall arrange for reception of the Service from a domestic
communications satellite or other distribution vehicle acceptable to
Affiliate in its sole discretion as such may be designated by Programmer to
Affiliate from time to time. The signal(s) for the Service may be encoded
and scrambled at the sole option and expense of Programmer. Affiliate
agrees to maintain a high quality signal for the Service when transmitted
from the applicable DBS Satellite to the DBS Subscribers via the DBS
Distribution System (provided that any failure to do so due to a Force
Majeure Event (as defined in Section 6(d)) shall not constitute a breach of
this Agreement) and agrees to acquire and maintain, at Affiliate's sole
expense, any equipment, including, without limitation, backup or reserve
descramblers, which may be necessary to decode and unscramble the signal(s)
for the Service;
(v) shall not, without Programmer's consent, knowingly authorize
or cause or knowingly suffer any portion of the Service to be recorded,
duplicated, cablecast, exhibited or otherwise used (except on a
videocassette
9
<PAGE>
EXECUTION VERSION
recorder or other home taping device for private, noncommercial use) for
any purpose other than for distribution by Affiliate at the time the same
is made available. If Affiliate becomes aware that any unauthorized third
party is recording, duplicating, cablecasting, exhibiting or otherwise
using the Service for any other purpose, Affiliate shall immediately so
notify Programmer and Affiliate will take reasonable steps to prevent such
unauthorized use;
(vi) shall not knowingly authorize or knowingly permit the
exhibition of the Service or any portion thereof at any place where
admission for exhibition of such services is charged;
(vii) shall submit to Programmer such reports, logs or
statements, certified by an appropriate officer, as required pursuant to
Section 2 hereof;
(viii) shall not knowingly use the rights granted to it hereunder
for any unlawful purpose;
(ix) shall not, without Programmer's prior written approval, use
the name of or logo for "Playboy TV" or the names, titles or logos of the
Service or any of its programs, or the names, voices, photographs,
likenesses or biographies of any individual participant or performer in, or
contributor to, any program or any variations thereof, for any purpose
other than in material intended solely to advise DirecTv Subscribers or
potential DirecTv Subscribers of the availability and scheduling of the
Service or as a channel identifier. Programmer shall promptly provide
Affiliate with any and all promotional materials of the Service which it
provides to cable operators and other distributors of the Service having a
subscriber base similar in size to Affiliate's, at Programmer's sole cost
and expense. If Affiliate shall request additional such materials, then
Programmer shall promptly provide such materials, if available, to
Affiliate and Affiliate shall reimburse Programmer for the actual costs
thereof. Affiliate shall not publish or disseminate any material which
violates restrictions imposed by Programmer or Programmer's suppliers and
disclosed in advance and in writing to Affiliate by Programmer. The
restrictions set forth in this Section 5(a)(ix) shall apply only to the
extent they are applied by Programmer uniformly with respect to all of its
cable providers and shall not apply if Affiliate has received a valid
authorization from a third party for any of the uses described in this
Section 5(a)(ix);
10
<PAGE>
EXECUTION VERSION
(x) shall use its reasonable efforts to make the customer service
representatives at Affiliate's telemarketing center available for training
by Programmer; provided, that such training shall take place at Affiliate's
telemarketing center, shall occur no more than once every six months and
shall not exceed 30 minutes in duration for each customer service
representative; and
(xi) shall cooperate in conducting commercially reasonable
marketing tests and surveys, rating pools and other research, provided
however, that any proprietary information so furnished by Affiliate shall
be kept confidential, and Affiliate shall keep confidential all research
funded by Programmer and delivered to Affiliate pursuant to Section
5(b)(iii) of this Agreement.
(b) Programmer Representations, Warranties and Covenants. Programmer
warrants, represents and covenants to Affiliate that it:
(i) has the power and authority to enter into this Agreement and
to fully perform its obligations hereunder;
(ii) has obtained, and shall maintain in full force during the
Term hereof, such federal, state and local authorizations as are necessary
to operate the business it is conducting in connection with its rights and
obligations under this Agreement;
(iii) shall cooperate in conducting commercially reasonable
marketing tests and surveys, rating pools and other research, provided
however, that any proprietary information so furnished by Affiliate shall
be kept confidential. Programmer shall provide Affiliate with written
copies of such research and shall reimburse Affiliate for any reasonable
out-of-pocket costs incurred by Affiliate in connection with such
cooperation;
(iv) shall cause its uplink authorization center to authorize and
enable Affiliate's descramblers to receive and descramble the Service;
(v) shall not, without Affiliate's prior written approval, use
the name of or logo for "DirecTv" or the names, titles or logos of the DBS
Distribution System or any of its programs, or the names, voices,
photographs, likenesses or biographies of any individual participant or
performer in, or contributor to, any program or any variations thereof, for
any purpose other than as set forth in Section 4(e);
11
<PAGE>
EXECUTION VERSION
(vi) has obtained or will obtain at its sole expense all
necessary trademarks, copyrights, licenses and any other intellectual
property or use rights required in connection with, or for Affiliate's
distribution of, the Service (including, without limitation, the right to
use the name of or logo for "Playboy TV" or the names, titles or logos of
the Service or any of its programs, or the names, voices, photographs,
music, likenesses or biographies of any individual participant or performer
in, or contributor to, any program or any variations thereof and to perform
its obligations hereunder and grant the rights granted pursuant to Section
1;
(vii) is in compliance with and will comply with all applicable
Laws, including without limitation, the Cable Television Consumer
Protection and Competition Act of 1992 and the regulations issued pursuant
thereto;
(viii) has no (and there are no), and Programmer covenants that
it shall not enter into directly or indirectly, allow or otherwise permit
any, affiliation, subdistribution or other agreements, whether written or
oral, granting to cable distributors and/or any other third party, person
or entity any form or type of exclusive or other rights that would limit or
restrict in any way Affiliate's rights to distribute the Service in the
Territory;
(ix) has not been convicted for the criminal violation of, and
has not been found by the FCC or other federal, state or local governmental
authority with appropriate jurisdiction (collectively, the "Governmental
Authority") to have violated, any federal, state or local law or regulation
as applicable concerning illegal or obscene program material or the
transmission thereof (the "Obscenity Laws"), and Programmer is not aware of
any pending investigation (including, without limitation, a grand jury
investigation) involving the Service or any pending proceeding against
Programmer for the violation of any Obscenity Laws; and
(x) will notify Affiliate as soon as it receives notification of,
or becomes aware of, any pending investigation by any Governmental
Authority, or any pending criminal proceeding against Programmer, which
investigation or proceeding concerns distribution of the Service,
including, without limitation, Obscenity Laws. For purposes of this Section
5(b)(xi), Programmer shall be deemed to be aware of any such investigation
or proceeding if any of the directors, officers, agents, representatives or
employees of managerial functions of Programmer or Affiliated Companies
12
<PAGE>
EXECUTION VERSION
(as defined in Section 8(a)) becomes aware of any such investigation or
proceeding.
6. Term; Termination.
-----------------
(a) The initial term of this Agreement shall be for the period
commencing on the date hereof and ending on the third anniversary of Service
Commencement Date (such term, as it may be extended below, the "Term"). This
Agreement shall thereafter be automatically extended for successive one (1) year
periods, unless either party notifies the other, at least three (3) months
before the end of the then-applicable Term, of its intention not to further
extend such Term, in which case this Agreement shall terminate at the end of
such Term. The "Service Commencement Date" means the date on which Affiliate
commences distribution of programming services for revenue-generating purposes
over a fully operational DBS Satellite as selected and determined by Affiliate
in its discretion and, subject to Programmer's provision of the Service pursuant
to the terms of this Agreement, shall commence no later than 30 days after
Affiliate's first DBS Satellite is fully operational and is being used for the
distribution of programming services for revenue-generating purposes. It is the
current intention of Affiliate to launch the distribution of the Service over
its first operational DBS Satellite.
(b) This Agreement may be terminated by either party (the "Affected
Party"), in its discretion, at any time after any of the following occurrences,
except as provided in this Agreement, with respect to the other party (the
"Other Party"):
(i) the failure by the Other Party, its successors or assigns to
perform any material obligation hereunder which is not cured or as to which
reasonable steps to cure have not been commenced (or are not thereafter
diligently pursued) within thirty (30) days after receipt of written notice
thereof from the Affected Party; or
(ii) the filing of a petition in bankruptcy or for reorganization
by or against the Other Party under any bankruptcy act; the assignment by
the Other Party for the benefit of its creditors, or the appointment of a
receiver, trustee, liquidator or custodian for all or a substantial part of
the Other Party's property, and the order of appointment is not vacated
within thirty (30) days; or the assignment or encumbrance by the Other
Party of this Agreement contrary to the terms hereof.
(c) Either party may terminate this Agreement if:
(i) the Service Commencement Date has not occurred on or
before December 31, 1995; or
13
<PAGE>
EXECUTION VERSION
(ii) a Force Majeure Event (as defined below in Section 6(d))
occurs, continues for 270 consecutive days and is continuing as of the
proposed effective date of termination.
(d) Notwithstanding any other provision in this Agreement, neither
Programmer nor Affiliate shall have any liability to the other or any other
person or entity with respect to any failure of Programmer or Affiliate, as the
case may be, to transmit or distribute the Service or perform its obligations
hereunder if such failure is due to any failure or degradation in performance of
the satellite providing Programmer's signal or feed or the DBS Satellite(s) or
transponders on such satellites (as applicable) or of the DBS Distribution
System (in which case, Affiliate shall be excused from its distribution
obligations under this Agreement), or of any scrambling/descrambling equipment
or any other equipment owned or maintained by others (including, without
limitation, Affiliate's automated billing and authorization system), any failure
at the origination and uplinking center used by Programmer or Affiliate, any
labor dispute, fire, flood, riot, legal enactment, government regulation, Act of
God, or any cause beyond the reasonable control of Programmer or Affiliate, as
the case may be (a "Force Majeure Event"), and such non-performance shall be
excused for the period of time such failure(s) causes such non-performance;
provided, however, that if Affiliate reasonably determines that it is
commercially or technically unfeasible to cure a Force Majeure Event with
respect to the DBS Distribution System or DBS Satellite and so notifies
Programmer, then either party may terminate this Agreement effective upon
written notice to the other party.
(e) Termination of this Agreement pursuant to this Section 6 shall not
relieve either party of any of its liabilities or obligations under this
Agreement which shall have accrued on or prior to the date of such termination.
(f) Affiliate may terminate this Agreement in the event the Service
shall no longer consist primarily of programming of the type or genre described
in Section l(b), as reasonably determined by Affiliate.
7. Separate Entities. No officer, employee, agent, servant or independent
contractor of either party hereto or their respective subsidiaries or affiliates
shall at any time be deemed to be an employee, servant or agent of the other
party for any purpose whatsoever, and the parties shall use commercially
reasonable efforts to prevent any such misrepresentation. Nothing in this
Agreement shall be deemed to create any joint-venture, partnership or principal-
agent relationship between Programmer and Affiliate, and neither shall hold
itself out in
14
<PAGE>
EXECUTION VERSION
its advertising or in any other manner which would indicate any such
relationship with the other.
8. Indemnification; Limitation of Liability.
----------------------------------------
(a) Programmer shall indemnify and hold harmless each of Affiliate,
its Affiliated Companies (as defined below), Affiliate's contractors,
subcontractors and authorized distributors and the directors, officers,
employees and agents of Affiliate, such Affiliated Companies and such
contractors, subcontractors and distributors (collectively, the "Affiliate
Indemnitees") from, against and with respect to any and all claims, damages,
liabilities, costs and expenses (including reasonable attorneys' and experts'
fees) incurred in connection with any claim against any of the Affiliate
Indemnitees arising out of (i) Programmer's breach of any provision of this
Agreement, (ii) material or programming supplied by Programmer pursuant to this
Agreement, (iii) the distribution or cablecast of any programming of the Service
which violates or requires payment for use or performance of any copyright,
right of privacy or literary, music performance or dramatic right, (iv)
Programmer's advertising and marketing of the Service, and/or (v) any other
materials, including advertising or promotional copy, supplied or permitted by
Programmer. In addition, Programmer shall pay and hold the Affiliate Indemnitees
harmless from any federal, state, or local taxes or fees which are based upon
revenues derived by, or the operations of, Programmer. As used in this Section
8, "Affiliated Companies" 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 and any
member, director, officer or employee of such person or entity.
(b) Affiliate shall indemnify and hold harmless each of Programmer,
its Affiliated Companies, Programmer's contractors, subcontractors and
authorized distributors, each supplier to Programmer of any portion of the
Service hereunder and each participant therein and the directors, officers,
employees and agents of Programmer, such Affiliated Companies, such contractors,
subcontractors and distributors and such suppliers and participants therein
(collectively, the "Programmer Indemnitees") from, against and with respect to
any and all claims, damages, liabilities, costs and expenses (including
reasonable attorneys' and experts' fees) incurred in connection with any claim
against the Programmer Indemnitees arising out of (i) Affiliate's breach of any
provision of this Agreement, (ii) the distribution by Affiliate of the Service
(except with respect to claims relating to the specific content of the Service
for which Programmer is solely responsible pursuant to Section 8(a)(ii)), (iii)
Affiliate's advertising and marketing of the
15
<PAGE>
EXECUTION VERSION
Service, and (iv) any other materials, including advertising or promotional
copy, supplied or permitted by Affiliate. In addition, Affiliate shall pay and
hold Programmer harmless from any federal, state, or local taxes or fees,
including any fees payable to local franchising authorities, which are based
upon revenues derived by, or the operations of, Affiliate.
(c) Termination of this Agreement shall not affect the continuing
obligations of each of the parties hereto as indemnitors hereunder. The party
wishing to assert its rights set forth in this Section 8 shall promptly notify
the other of any claim or legal proceeding with respect to which such party is
asserting such right. If the indemnifying party shall acknowledge in writing to
the indemnified party that the indemnifying party shall be obligated under the
terms of its indemnity hereunder in connection with any claim or suit involving
only the payment of money (a "Money Claim"), then the indemnifying party shall
have the option to settle or to undertake and conduct the defense of any such
Money Claim. The indemnified party may, through counsel of its own choice and at
its own expense, participate in any such defense of the Money Claim, but in such
event the indemnifying party shall have sole and exclusive control over such
defense and the indemnifying party's decision shall govern and control. The
indemnified party expressly covenants that no compromise or settlement of any
such Money Claim, or any preliminary negotiations with respect to any compromise
or settlement, shall be made or entered into without the prior written approval
of the indemnifying party.
(d) If Programmer engages the services of any collection agency or
independent legal counsel to collect past due fees owed to Programmer by
Affiliate under this Agreement, Programmer shall be entitled to full
reimbursement from Affiliate for all costs and expenses incurred in such
collection efforts.
(e) NOTWITHSTANDING ANYTHING TO THE CONTRARY IN THIS AGREEMENT:
(1) IN NO EVENT SHALL ANY PARTY BE LIABLE FOR ANY INCIDENTAL OR
CONSEQUENTIAL DAMAGES, WHETHER FORESEEABLE OR NOT, OCCASIONED BY ANY
FAILURE TO PERFORM OR THE BREACH OF ANY OBLIGATION UNDER THIS AGREEMENT FOR
ANY CAUSE WHATSOEVER.
(2) IN NO EVENT SHALL ANY PROJECTIONS, FORECASTS, ESTIMATIONS OF
SALES AND/OR MARKET SHARE OR EXPECTED PROFITS, OR OTHER ESTIMATIONS OR
PROJECTIONS BY AFFILIATE OR ANY OF ITS DIRECTORS, OFFICERS, EMPLOYEES,
AGENTS OR AFFILIATES, REGARDING OR RELATED TO AFFILIATE'S DBS BUSINESS BE
BINDING AS COMMITMENTS OR, IN ANY WAY, PROMISES BY AFFILIATE.
16
<PAGE>
EXECUTION VERSION
9. Notices. Except as set forth below, all notices hereunder shall be in
writing and delivered by hand or sent by certified mail, return receipt
requested, facsimile machine, an overnight delivery service to the receiving
party at its address set forth above or as otherwise designated by written
notice. Notice to Programmer shall be provided as follows:
If by mail, facsimile Playboy Entertainment Group, Inc.
or overnight or 9242 Beverly Blvd.
personal delivery: Beverly Hills, CA 90210
Attention: Senior Vice President
Business and Legal Affairs
Fax: (310) 246-4077
Notice to Affiliate shall be provided as follows:
If by mail DirecTv, Inc.
or facsimile: P.O. Box 92424
Los Angeles, California 90009
Attention: Vice President, Programming
cc: Corporate Counsel
cc: Business Affairs
Fax: (310) 535-5222
If by overnight or DirecTv, Inc.
personal delivery: 2230 East Imperial Highway
El Segundo, California 90245
Attention: Vice President, Programming
cc: Corporate Counsel
cc: Business Affairs
Notice given by mail shall be considered to have been given five (5) days after
the date of mailing, postage prepaid certified or registered mail. Notice given
by telegram shall be considered to have been given on delivery of such telegram
to a telegraph office with charges therefor paid by or to be billed to the
sender. Notice given by facsimile machine shall be considered to have been given
on the date receipt thereof is electronically acknowledged. Notice given by an
overnight delivery service shall be considered to have been given on the next
business day.
10. Waiver. The failure of any party to insist upon strict performance of
any provision of this Agreement shall not be construed as a waiver of any
subsequent breach of the same or similar nature. All rights and remedies
reserved to either party shall be cumulative and shall not be in limitation of
any other right or remedy which such party may have at law or in equity.
11. Binding Agreement: Assignment. This Agreement shall be binding upon the
parties hereto and their respective successors and assigns, except that it may
not be assigned by Affiliate
17
<PAGE>
EXECUTION VERSION
without the prior written consent of Programmer, which consent shall not be
unreasonably withheld; provided, however, that Affiliate may assign its rights
and obligations under this Agreement, in whole or in part (including without
limitation, Affiliate's right to distribute the Service) (i) to a successor
entity to Affiliate's DBS business or (ii) to a third party, provided Affiliate
remains primarily liable for the performance of such third party's obligations
hereunder.
12. Laws of California. This Agreement shall be governed by and construed
in accordance with the laws of the State of California applicable to contracts
made and fully performed therein, except to the extent that the parties'
respective rights and obligations are subject to mandatory local, State and
Federal laws or regulations.
13. Entire Agreement and Section Headings. This Agreement sets forth the
entire agreement and understanding of the parties relating to the subject matter
hereof, and supersedes all prior agreements, arrangements, or understandings
relating to the subject matter hereof. This Agreement shall not be modified
other than in a writing, signed by each of the parties hereto. The section
headings hereof are for the convenience of the parties only and shall not be
given any legal effect or otherwise affect the interpretation of this Agreement.
14. Severability. The parties agree that each provision of this Agreement
shall be construed as separable and divisible from every other provision and
that the enforceability of any one provision shall not limit the enforceability,
in whole or in part, of any other provision hereof. In the event that a court of
competent jurisdiction determines that a restriction contained in this Agreement
shall be unenforceable because of the extent of time or geography, such
restriction shall be deemed amended to conform to such extent of time and/or
geography as such court shall deem reasonable.
15. Confidentiality. The parties agree that they and their employees have
maintained and will maintain, in confidence, the terms and provisions of this
Agreement, as well as all data, summaries, reports or information of all kinds,
whether oral or written, acquired or devised or developed in any manner from the
other party's personnel or files, and that they have not and will not reveal the
same to any persons not employed by the other party except (i) at the written
direction of such party; (ii) to the extent necessary to comply with the law or
the valid order of a court of competent jurisdiction, in which event the
disclosing party shall so notify the other party as promptly as practicable
(and, if possible, prior to making any disclosure) and shall seek confidential
treatment of such information, or in connection with any arbitration proceeding;
(iii) as part of its normal reporting or review procedure to its parent company,
its auditors and its
18
<PAGE>
EXECUTION VERSION
attorneys, and such parent company, auditors and attorneys agree to be bound by
the provisions of this Section 15; (iv) in order to enforce any of its rights
pursuant to this Agreement; and (v) to potential investors, insurers, financing
entities and, in the case of Affiliate, to any entity engaged in its DBS
business; provided, however, that such person agrees to be bound by the
provisions of this Section 15. Promptly after the Execution Date, the parties
shall use their best reasonable efforts to agree upon a mutually acceptable
press release with respect to the parties' general business relationship under
this Agreement and to jointly issue and release such press release at a date
mutually agreed upon. During the Term, neither party shall issue an independent
press release with respect to this Agreement or the transactions contemplated
hereby without the prior written consent of the other party.
16. Inadequacy of Money Damages.
Programmer and Affiliate hereby acknowledge and agree that Affiliate's
distribution and marketing of the Service pursuant to the terms and conditions
contained herein are of the essence of this Agreement. Affiliate further
acknowledges and agrees that such carriage and marketing requirements are
special and unique, and that Programmer would not be adequately compensated by
the payment of money damages in the event that Affiliate failed to comply with
any of such requirements. Programmer further acknowledges and agrees that the
grant of rights to Affiliate hereunder are special and unique, and that
Affiliate would not be adequately compensated by the payment of money damages in
the event that Programmer failed to comply with any of its obligations under
this Agreement, including without limitation, providing access to any Service
programming to Affiliate, as required hereunder.
17. Cessation of Program Distribution.
(a) If, in connection with Affiliate's distribution of the
Service via the DBS Distribution System,
(i) Programmer is indicted or is otherwise similarly charged as a
defendant in a criminal proceeding, or is convicted under any Obscenity Law
or has been found by any Governmental Authority to have violated any such
law;
(ii) based on Affiliate's distribution of the Service via the DBS
Distribution System, Affiliate is indicted or otherwise similarly charged
as a criminal defendant, becomes the subject of a criminal proceeding or a
governmental action seeking a fine, license revocation or other sanctions,
or any Governmental Authority seeks a cease and desist or other similar
order or filing;
19
<PAGE>
EXECUTION VERSION
(iii) the FCC has issued an order initiating a proceeding to
revoke Affiliate's authorization to operate the Satellite or the DBS
Distribution System;
(iv) Affiliate obtains a court order pursuant to Section 17.(c),
below, or a court or Governmental Authority of competent jurisdiction
orders Affiliate to cease distribution of the Service; or
(v) if Affiliate receives notice (the "Illegal Programming
Notice"), written or oral, from a Governmental Authority that such
authority considers the Service to be in violation of Obscenity Laws (the
"Illegal Programming"), and that if Affiliate does not cease transmitting
such Illegal Programming, then Affiliate and/or its affiliates and/or any
of their executives will be indicted or otherwise charged as a criminal
defendant, will become the subject of a criminal proceeding or a
governmental action seeking a fine, license revocation or other sanctions,
or that such Governmental Authority will seek a cease and desist or other
similar order or filling (with Affiliate being obligated, to the extent
permitted by law, to provide Programmer with a copy of such Illegal
Programming Notice, if written, or with other verification, including the
details thereof, if oral);
then upon notice from Affiliate to Programmer (the "Cessation of Program
Distribution Notice"), which may be oral, Affiliate may cease distributing
immediately, in the case of a cessation of program distribution pursuant to
subparagraphs (i), (ii), (iii) or (iv) above, or within 24 hours following
receipt of such notice, in the case of a cessation of program distribution
pursuant to subparagraph (v) above, the programming service which was the
subject of the violation or alleged violation of the Obscenity Laws or otherwise
gave rise to the denial of access (the "Illegal Programming Service").
(b) If Affiliate ceases, or has given Programmer notice of its
intent to cease, distribution of the Service pursuant to the provisions of
this Section 17, and if, in the case of a cessation of program distribution
pursuant to subparagraphs (i), (ii), (iii) or (iv) above, Programmer does
not believe the conditions set forth therein to Affiliate's cessation of
program distribution have been met; or in the case of subparagraph (v), if
Programmer does not believe the conditions set forth in subparagraph (v) to
Affiliate's cessation of program distribution have been met or if
Programmer believes that the Illegal Programming Notice does not require
cessation of all segments of the Service, then Programmer shall have the
immediate right to seek injunctive relief, including a temporary
restraining order on notice of four (4) hours or more to Affiliate, to
prevent the cessation or continuing cessation of such
20
<PAGE>
EXECUTION VERSION
program distribution by Affiliate AND SUCH RIGHT SHALL BE PROGRAMMER'S SOLE AND
EXCLUSIVE REMEDY HEREUNDER OR OTHERWISE AT LAW OR IN EQUITY FOR ANY CESSATION OF
PROGRAM DISTRIBUTION PURSUANT TO THIS SECTION 17.
(c) Affiliate shall also have the right to seek: (i) injunctive
relief, including a temporary restraining order on notice of four (4) hours
or more to Programmer, to prevent, suspend or otherwise limit the
distribution of the Service where Affiliate believes such distribution has
resulted or will result in a violation of any Obscenity Law; or (ii)
declaratory relief to establish its right to cease distribution of the
Service under this Agreement.
(d) Either party shall be entitled to oppose the other's attempt
to obtain equitable relief. However, in order to enable either party to
obtain a resolution of any such dispute as expeditiously as possible, both
parties hereby agree that: (i) neither party will contest the jurisdiction
of, or the venue of, any action for equitable relief brought by the other
party in the following courts: U.S. District Court for the Southern
District of New York, and the U.S. District Court for the Central District
of California; (ii) the party opposing equitable relief (the "Opposing
Party") will make itself available to accept service by telecopy or
personal delivery on a 24 hour-a-day basis for five (5) consecutive days
following receipt by the Opposing Party of the other party's notice of its
intent to seek such equitable relief; and (iii) if either party seeks a
temporary restraining order and provides notice to the Opposing Party at
least four (4) hours before the scheduled court hearing, then the Opposing
Party will not challenge the timeliness of such notice.
(e) All remedies of Affiliate set forth in this Agreement shall
be cumulative and in addition to, and not in lieu of any other remedies
available to Affiliate at law, in equity or otherwise, and may be enforced
by Affiliate concurrently or from time to time.
(f) In addition to any other indemnification obligations found
elsewhere in this Agreement, Programmer shall indemnify, defend and save
Affiliate, its directors, officers, employees, and its affiliates from any
liability or expense arising out of or related to matters set forth in
Sections 17(a) (i), (ii), (iv) or (v) of this Agreement. Programmer shall
pay all expenses (including attorneys' fees) incurred by Affiliate in
connection with all legal or other formal or informal proceedings,
instituted by any private third party or any Governmental Authority, and
arising out of or related to matters set forth in Sections 17(a) (i), (ii),
(iv) or (v) of this Agreement, and
21
<PAGE>
EXECUTION VERSION
Programmer shall satisfy all judgments, fines, penalties, costs, or other
awards which may be incurred by or rendered against Affiliate as a result
thereof, as and to the extent permitted by law. Affiliate will cooperate
with Programmer in the defense of any such proceedings with counsel
reasonably satisfactory to Affiliate, and Affiliate will not compromise or
settle any such proceeding without the prior written consent of Programmer,
which consent shall not be unreasonably withheld.
(g) If cessation of program distribution has occurred pursuant to
Section 17(a), and, within the term of this Aqreement,
(i) if access was denied under Section 17(a) (i), the
indictment or other charge against Programmer is dismissed or the
conviction or finding is reversed;
(ii) if access was denied under Section 17(a) (ii), the
indictment or other charge against Affiliate is dismissed, or
Affiliate is notified that it is no longer the subject of a criminal
proceeding or governmental action or that the Governmental Authority
is dismissing or will not longer seek a cease and desist order;
(iii) if access was denied under Section 17(a) (iii), the
FCC withdraws, revokes, or cancels its order or dismisses its
proceeding;
(iv) if access was denied under Section 17(a) (iv), the
court order expires or is revoked or reversed; or
(v) if access was denied under Section 17(a) (v), the
Illegal Programming Notice is withdrawn by such Governmental
Authority;
then, upon notice from Programmer to Affiliate (the "Resumption of Program
Distribution Notice"), which notice shall be in writing, Affiliate shall
resume distribution of the Service pursuant to the terms of this Agreement.
18. Survival of Representations and Warranties. All representations
and warranties contained herein or made by the parties, and each of them, in
connection herewith shall survive any independent investigation made by either
party.
19. Counterparts. This Agreement may be executed in several counterparts,
each of which shall be deemed an original
22
<PAGE>
EXECUTION VERSION
and all such counterparts together shall constitute but one and the same
instrument. The parties also agree that this Agreement shall be binding upon the
faxing by each party of a signed signature page thereof to the other party. If
such a faxing occurs, the parties agree that they will each also immediately
post, by Federal Express, a fully executed original counterpart of the Agreement
to the other party.
20. Home Shoppinq Service. Programmer has informed Affiliate that
Programmer might at some future time undertake distribution of a home shopping
service (the "Home Shopping Service"). The parties understand and agree that the
Home Shopping Service is not a part of this Agreement. The parties agree, when
and if Programmer decides in its sole discretion to undertake distribution of
the Home Shopping Service, to discuss the distribution of the Home Shopping
Service on the DBS Distribution System; it being further understood, however,
that neither Programmer nor Affiliate shall be bound to the other (i) in any way
whatsoever to offer the Home Shopping Service for distribution, to distribute
the Home Shopping Service, to negotiate for distribution rights of the Home
Shopping Service or to refrain from discussing similar concepts with other
parties or (ii) in any way whatsoever in connection with the Home Shopping
Service or similar concepts.
IN WITNESS WHEREOF, the undersigned parties have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
above written.
DIRECTV
11-16-93 /s/ Larry N. Chapman
---------------------------------- By: -------------------------------------
Date Name: LARRY CHAPMAN
Title: VICE PRESIDENT, BUSINESS
AFFAIRS AND NEW BUSINESS
DEVELOPMENT
Playboy Entertainment Group, INC.
November 16, 1993 /s/ MK Fleming
----------------------------------- By: ------------------------------------
Date Name: Michael K. Fleming
Title: Sr. Vice President, General
Manager
23
<PAGE>
EXECUTION VERSION
EXHIBIT A
---------
PROGRAMMER'S RATE CARD FOR NON-HOTEL/MOTEL DISTRIBUTION
-------------------------------------------------------
<TABLE>
<CAPTION>
Required
Marketing,
Advertising,
Promotion
Affiliate Expenditure Programmer
Per Capita Gross Receipts Share by Affiliate Share
------------------------- ----- ------------ -----
<S> <C> <C> <C>
$0.00-$1.099 53% 3% 47%
$1.10-$1.599 55% 1.5% 45%
$1.60--above 58% 0% 42%
</TABLE>
The "Per Capita Gross Receipts" for any month shall be determined by taking
the amount of Gross Receipts for any such month and dividing that amount by the
number of DirectTv Subscribers as of the fifteenth calendar day of such month.
24
<PAGE>
EXECUTION VERSION
EXHIBIT B
---------
PROGRAMMER'S RATE CARD FOR HOTEL/MOTEL DISTRIBUTION
---------------------------------------------------
Affiliate shall pay to Programmer the Hotel/Motel License Fee. The
"Hotel/Motel License Fee" shall be equal to $1 per calendar month for each
Available Hotel/Motel Room. "Available Hotel/Motel Rooms" shall mean all private
residence rooms in all hotels and motels to which Affiliate distributes the
service pursuant to this Agreement which are (i) normally held out to the
general public for rental, (ii) operational during the majority of the relevant
calendar month and (iii) available to Affiliate for revenue-producing purposes
during the majority of the relevant calendar month.
25
<PAGE>
PLAYBOY ENTERTAINMENT GROUP, INC.
November 15, 1993
Ed Huguez
Senior Manager
DirecTv, Inc.
P.O. Box 92424
Los Anqeles, California 90009
Dear Ed:
This letter will serve as a side agreement to the contract dated November 15,
1993 entered into between Playboy Entertainment Group, Inc. ("PROGRAMMER") and
DirecTv, Inc. ("AFFILIATE") (the "CONTRACT"). Because of the requirements of a
pre-existing contract between Programmer and an unnamed third party (the
"UNNAMED PARTY"), Programmer and Affiliate agree that, notwithstanding Section
15 of the Contract, Programmer may make the following statement to the Unnamed
Party:
Playboy Entertainment Group, Inc. has entered into an agreement pursuant to
which it has granted DBS distribution rights for the programming service
commonly known as "Playboy TV". The terms of such agreement are less
favorable to the new distributor than those previously granted to you in
connection with our agreement with you to distribute Playboy TV.
Programmer agrees that it will not disclose to the Unnamed Party or any other
person or entity the specific terms in the Contract or any other information
covered by Section 15 of the Contract. Programmer further agrees that it will
not disclose Affiliate's identity to the Unnamed Party.
Programmer represents to Affiliate that (i) Programmer's pre-existing
contractual obligation is a current, legal, valid and binding obligation of the
Programmer and (ii) Programmer's pre-existing contractual obligation requires
the disclosure outlined above and prevents Programmer from disclosing to
Affiliate the identity of the Unnamed Party. Programmer further represents that
it will provide the above statement to the Unnamed Party only upon the Unnamed
Party's agreement that it will keep all such information confidential, and will
disclose such information only to its officers, directors, employees, auditors
or attorneys.
Nothing in this side letter or in Section 15 of the Contract shall prevent
Programmer from
9242 Beverly Boulevard, Beverly Hills, CA 90210/(310) 246-4000
FAX (310) 246-4077
<PAGE>
making a representation to any third party that the terms of any contract
offered by Programmer to such third party are as favorable as, or more favorable
than, those offered to all other distributors.
Sincerely,
PLAYBOY ENTERTAINMENT GROUP, INC.
AGREED AND ACCEPTED: /s/ MK Fleming
-----------------------------------------
Michael Fleming
DIRECTV, INC. Senior Vice President
By: /s/ Larry N. Chapman
------------------------------
Title: VICE PRESIDENT, BUSINESS AFFAIRS
--------------------------------
AND NEW BUSINESS DEVELOPMENT