Affiliation and License Agreement for DBS Satellite Exhibition of Programming - DirecTV Inc., Playboy Entertainment Group Inc., Spice Entertainment Inc., Spite Hot Entertainment Inc. and Spice Platinum Entertainment Inc.
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AMENDED AND RESTATED
AFFILIATION AND LICENSE AGREEMENT
FOR DBS SATELLITE EXHIBITION
OF PROGRAMMING
"CHANNELS 594, 595, 596, 597 AND 598"
DIRECTV, INC.
and
PLAYBOY ENTERTAINMENT GROUP, INC.
SPICE ENTERTAINMENT, INC.
SPICE HOT ENTERTAINMENT, INC. and
SPICE PLATINUM ENTERTAINMENT, INC.
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AMENDED AND RESTATED
AFFILIATION AND LICENSE AGREEMENT
FOR DBS SATELLITE EXHIBITION
OF PROGRAMMING
AMENDED AND RESTATED AGREEMENT made as of May 17, 2002, by and between
PLAYBOY ENTERTAINMENT GROUP, INC., SPICE ENTERTAINMENT, INC., SPICE HOT
ENTERTAINMENT, INC., SPICE PLATINUM ENTERTAINMENT, INC., each of which is a
Delaware corporation having an office located at 9242 Beverly Blvd., Beverly
Hills, California 90210 (collectively referred to herein as "Programmer"), and
DIRECTV, INC., a California corporation, having an office located at 2230 East
Imperial Hwy., El Segundo, California 90245 ("Affiliate").
WITNESSETH:
WHEREAS, Affiliate has established a direct broadcast service ("DBS")
satellite-based television system in North America;
WHEREAS, Affiliate desires to obtain the rights to distribute various
television networks owned and operated by Programmer that feature adult films,
related programming and interstitial material (the "Service," as defined in
Section 1(b) below) in the United States as restricted by Section 17 herein (the
"Territory");
WHEREAS, Affiliate is party to the following agreements: (1) Affiliation
Agreement for DBS Satellite Exhibition of Cable Programming, by and between
Playboy Entertainment Group, Inc. ("Playboy") and Affiliate, dated as of
November 15, 1993, as amended on April 19, 1994, July 26, 1995, August 26, 1997,
March 15, 1999 and December 12, 2000, relating to the television network
commonly known as the enhanced feed of "Playboy TV," which Affiliate currently
exhibits on channel 595 (the "Playboy Agreement"); (2) Affiliation and License
Agreement for DBS Satellite Exhibition of Programming, by and between V.O.D.,
INC. ("VODI") and Affiliate, dated as of August 11, 2000, as amended on November
24, 2000, relating to the television network commonly known as "Vivid TV," which
Affiliate currently exhibits on channel 596 (the "Vivid Agreement"); and (3)
Affiliation and License Agreement for DBS Satellite Exhibition of Programming,
by and between Califa Entertainment Group, Inc. ("Califa") and Affiliate, dated
as of March 15, 1999, as amended on August 14, 2000 and November 24, 2000,
relating to the television networks commonly known as "The Hot Network" and "The
Hot Zone," which Affiliate currently exhibits on channels 597 and 598,
respectively (the "Califa Agreement" and together with the Playboy Agreement and
the Vivid Agreement, the "Current Adult Agreements");
WHEREAS, Spice Entertainment, Inc. operates the network known as "Taste of
Spice" and whereas Spice Platinum Entertainment, Inc. is the
successor-in-interest to VODI and operates "Vivid TV" and "The Hot Network," and
whereas Spice Hot Entertainment, Inc.
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is the successor-in-interest to Califa and operates "The Hot Zone," each, except
for "Taste of Spice," under the Current Adult Agreements;
WHEREAS, this Agreement supersedes all prior understandings and agreements
relating to the subject matter herein, including without limitation, the Current
Adult Agreements and any amendments thereto; and
WHEREAS, Affiliate is party to that certain DBS Distribution Agreement,
dated April 10, 1992, as amended, with the National Rural Telecommunications
Cooperative ("NRTC") for the distribution to subscribers in certain counties and
zip codes in the United Sates of programming via the DBS Distribution System;
NOW, THEREFORE, FOR GOOD AND VALUABLE CONSIDERATION, THE RECEIPT AND
ADEQUACY OF WHICH ARE HEREBY ACKNOWLEDGED, IT IS MUTUALLY AGREED AS FOLLOWS:
1. Grant of Rights.
(a) Distribution; Certain Definitions.
(i) Programmer hereby grants to Affiliate (which as used for
all purposes in this Agreement shall mean DIRECTV and/or its designees,
including, without limitation, NRTC and/or its members), and Affiliate hereby
accepts the non-exclusive right to distribute the Service in the Territory via
the DBS Distribution System (as defined below) to DIRECTV Subscribers during the
Term (as defined in Section 6(a) below), as follows: (i) Channel 595. With
respect to the Channel 595 Service (as defined in Section 1(b) below),
distribution shall include residential subscribers, hotels, motels, private
offices, multiple dwelling facilities and oil rigs (provided, however, that
Affiliate shall not have the right to distribute such channel in any common
areas to which the public has free access of any multiple dwelling facilities or
oil rigs) on a subscription (a la carte or package) basis (the "Subscription
Offerings") and on a pay-per-view, pay-per-block and pay-per-night basis
(collectively, the "PPV Offerings"), in blocks of at least 60 minutes each (or
such period as the parties shall agree) up to 24 hours; provided, however, that
any partial exhibition of the Service which consists only of motion pictures
must be no shorter than sixty (60) minutes (any block of time, a "PPV Program");
and (ii) Channels 594, 596, 597 and 598. With respect to each of the Channel
594, 596, 597 and 598 Services (as each is defined in Section 1(b) below),
distribution shall include Subscription Offerings and PPV Offerings to
residential subscribers only. Affiliate shall determine in its sole discretion
whether to sell Subscription Offerings on an a la carte or package basis.
Affiliate shall have the non-exclusive right to use the name of or logo for
"Playboy TV," "Taste of Spice (TBD)," "Vivid TV (TBD)" "The Hot Network" and
"The Hot Zone," as such names or logos may be changed, altered and amended, 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, all of which are being licensed exclusively for use in connection with
the
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distribution, promotion, marketing and sale of the Service as provided herein.
Any further use shall require Affiliate's notification to Programmer and
Programmer's written approval, not to be unreasonably withheld.
(ii) The term "DBS Distribution System" shall mean the
distribution system for video and other programming services whereby the
programming satellite signal or feed is received from Programmer's transponder
source by a DIRECTV turnaround earth-station facility which compresses and
processes the signal or feed and then uplinks it at one of the DIRECTV
Frequencies on a DBS communications satellite (a "DBS Satellite") for
transmission to DIRECTV Subscribers. "DIRECTV Frequencies" shall mean the DBS
operating frequencies associated with an orbital location or locations, for
which Affiliate or an Affiliated Company (as defined in Section 8(a) below) is
the Federal Communications Commission ("FCC")-authorized permittee. During the
Term (as defined in Section 6(a)), the Service (as defined below) shall be
distributed via a DBS Satellite at the orbital location which transmits to the
greatest number of DIRECTV Subscribers. "DIRECTV Subscribers" shall mean those
customers (both residential and non-residential) authorized by Affiliate to
receive DBS service via the DBS Distribution System. "Service Subscribers" shall
mean DIRECTV Subscribers authorized by Affiliate to receive the Subscription
Offerings and/or PPV Offerings.
(b) The Service. The "Service" shall, individually and collectively,
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
five (5) programming services described in clauses (i) through (v) below,
presented on a 24-hour per day, 7 days a week schedule, as described below and
in the "Description of the Service," attached hereto as Exhibit A. The Service
shall be delivered to Affiliate in its entirety, meaning that the programming
(including, without limitation, all other information related thereto (e.g.,
data)) on the Service, as received by any Service Subscriber at a given point in
time, shall be the same as the programming received by all other subscribers to
the Service at such point in time.
(i) Channel 594. The programming exhibited on channel 594 (the
"Channel 594 Service") shall consist of uninterrupted movies of the adult genre
(subject to the description and limitations set forth in Exhibit A), together
with interstitials, public service announcements, behind the scenes spots and
spots promoting upcoming programming on the Service; provided, however, the
Channel 594 Service shall not contain any advertising, including but not
limited, to audio text services, merchandise sales, Internet services and other
such products. Notwithstanding the foregoing, during the "breaks" between
movies, the Channel 594 Service may contain the following audio text spots (the
"Audio Text Spots"): (x) if the break is less than or equal to ten (10) minutes
in length, Audio Text Spots not exceeding two (2) minutes in the aggregate
during such break; and (y) if the break is greater than ten (10) minutes in
length, Audio Text Spots not exceeding three (3) minutes in the aggregate during
such break; provided that, in either case, Programmer shall not interrupt any
movies to air the Audio Text Spots. In addition, Programmer shall be permitted
to refer viewers to Programmers' and its Affiliated Companies' websites for
scheduling information
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regarding the Service and may refer generally to the websites (e.g., "Visit our
website at Playboy.com"); provided that, such referrals shall not contain any
advertising, promotions or sales. The Channel 594 Service shall include
promotions for upcoming programming on the Channel 595, 596, 597 and 598
Services. The amount of broadcast time allocated to promoting each of the four
other channels comprising the Service shall be made in the ratio of
approximately three to one (3:1) for the Channels 596, 597 and 598,
collectively, and the Channel 595 Service, respectively; provided that, the
parties acknowledge that in any given month one or more channels may receive a
disproportionate allocation of broadcast time due to special, unique or one-time
events, so long as for the full year, the broadcast time reflects the allocation
set forth above. The Channel 594 Service shall be in the "Cable Version" as set
forth in the Programming Standards on Exhibit A, including without limitation,
the promotions for upcoming programming on the Service. In the Event that any
such promotions include content that is more explicit than the "Cable Version,"
Programmer acknowledges that it shall not use pixilation or black bars to
conceal said content, but shall use a variety of other filtration systems so as
to adhere to the "Cable Version" content standard and maintain the quality of
the Channel 594 Service. The parties agree to mutually consult regarding the
programming on the Channel 594 Service on a regular (i.e., not less than
quarterly) basis during the Term. Affiliate shall refer to the Channel 594
Service as "Taste of Spice," or other name mutually agreed to by the parties,
and may list the Channel 594 Service on the program guide as "TOS."
(ii) Channel 595. The programming service commonly known as
the enhanced feed of "Playboy TV" is currently exhibited on channel 595 (the
"Channel 595 Service"). The Channel 595 Service shall consist of entertainment
programming for adult audiences, and, subject to the description and limitations
in Exhibit A and the other restrictions contained herein, Programmer may
determine the content of such service in its sole discretion, including the
substitution or withdrawal of scheduled programs, and of commercial, promotional
or other announcements. Except as specifically set forth in Section (i)(B) of
Exhibit A, the Channel 595 Service shall be in the "Cable Version," as set forth
in the Programming Standards on Exhibit A. Affiliate shall refer to the Channel
595 Service as "Playboy TV," or other name mutually agreed to by the parties,
and may list the Channel 595 Service on the program guide as "PBTV."
(iii) Channel 596. The programming service commonly known as
"Vivid TV" is currently exhibited on channel 596 (the "Channel 596 Service").
The Channel 596 Service shall consist of uninterrupted movies of the adult genre
(subject to the description and limitations in Exhibit A), together with
interstitials, public service announcements, behind the scenes spots and spots
promoting upcoming programming on the Channel 596, 597 and 598 Services;
provided, however, the Channel 596 Service shall not contain any advertising,
including but not limited to audio text services, merchandise sales, Internet
services and other such products. Notwithstanding the foregoing, during the
"breaks" between movies, the Channel 596 Service may contain the following Audio
Text Spots: (x) if the break is less than or equal to ten (10) minutes in
length, Audio Text Spots not exceeding two (2) minutes in the aggregate during
such break; and (y) if the break is greater than ten (10) minutes in length,
Audio Text Spots not exceeding three (3) minutes in
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the aggregate during such break; provided that, in either case, Programmer shall
not interrupt any movies to air the Audio Text Spots. In addition, Programmer
shall be permitted to refer viewers to Programmers' and its Affiliated
Companies' websites for scheduling information regarding the Service and may
refer generally to the websites (e.g., "Visit our website at Playboy.com");
provided that, such referrals shall not contain any advertising, promotions or
sales. The Channel 596 Service shall be in the "Hotter Version," as set forth in
the Programming Standards on Exhibit A. Programmer shall include different
movies on the Channel 596 Service from those offered on the Channel 597 and 598
Services, and differentiate the programming on the Channel 596 Service
sufficiently such that the Channel 596 Service is a distinct and independent
service, and not a "multiplex" or time-shifted version of the Channel 597 and
598 Services. The Channel 596 Service shall offer premiere movies designed to
compliment the premiere movies provided on the Channel 597 and 598 Services.
Affiliate shall refer to the Channel 596 Service as "VIVID TV," or other name
mutually agreed to by the parties, and may list the Channel 596 Service on the
program guide as "VIVD."
(iv) Channel 597. The programming service commonly known as
"The Hot Network" is currently exhibited on channel 597 (the "Channel 597
Service"). The Channel 597 Service shall consist of uninterrupted movies of the
adult genre (subject to the description and limitations in Exhibit A), together
with interstitials, public service announcements, behind the scenes spots and
spots promoting upcoming programming on the Channel 596, 597 and 598 Services;
provided, however, the Channel 597 Service shall not contain any advertising,
including but not limited to audio text services, merchandise sales, Internet
services and other such products. Notwithstanding the foregoing, during the
"breaks" between movies, the Channel 597 Service may contain the following Audio
Text Spots: (x) if the break is less than or equal to ten (10) minutes in
length, Audio Text Spots not exceeding two (2) minutes in the aggregate during
such break; and (y) if the break is greater than ten (10) minutes in length,
Audio Text Spots not exceeding three (3) minutes in the aggregate during such
break; provided that, in either case, Programmer shall not interrupt any movies
to air the Audio Text Spots. In addition, Programmer shall be permitted to refer
viewers to Programmers' and its Affiliated Companies' websites for scheduling
information regarding the Service and may refer generally to the websites (e.g.,
"Visit our website at Playboy.com"); provided that, such referrals shall not
contain any advertising, promotions or sales. The Channel 597 Service shall be
in the "Hotter Version," as set forth in the Programming Schedule on Exhibit A.
Programmer shall include different movies on the Channel 597 Service from those
offered on the Channel 596 and 598 Services, and differentiate the programming
on the Channel 597 Service sufficiently such that the Channel 597 Service is a
distinct and independent service, and not a "multiplex" or time-shifted version
of the Channel 596 and 598 Services. The Channel 597 Service currently premieres
movies on Thursday through Sunday nights, designed to compliment the premiere
movies provided on the Channel 598 Service, which currently premieres movies on
Monday through Wednesday nights. Programmer shall be permitted to change the
movie premiere schedule upon notice to, and good faith consultation with,
Affiliate. Affiliate shall refer to the Channel 597 Service as "THE HOT
NETWORK," or other name mutually agreed to by the parties, and may list the
Channel 597 Service on the program guide as "THN."
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(v) Channel 598. The programming service commonly known as
"The Hot Zone" is currently exhibited on channel 598 (the "Channel 598
Service"). The Channel 598 Service shall consist of uninterrupted movies of the
adult genre (subject to the description and limitations in Exhibit A), together
with interstitials, public service announcements, behind the scenes spots and
spots promoting upcoming programming on the Channel 596, 597 and 598 Services;
provided, however, the Channel 598 Service shall not contain any advertising,
including but not limited to audio text services, merchandise sales, Internet
services and other such products. Notwithstanding the foregoing, during the
"breaks" between movies, the Channel 598 Service may contain the following Audio
Text Spots: (x) if the break is less than or equal to ten (10) minutes in
length, Audio Text Spots not exceeding two (2) minutes in the aggregate during
such break; and (y) if the break is greater than ten (10) minutes in length,
Audio Text Spots not exceeding three (3) minutes in the aggregate during such
break; provided that, in either case, Programmer shall not interrupt any movies
to air the Audio Text Spots. In addition, Programmer shall be permitted to refer
viewers to Programmers' and its Affiliated Companies' websites for scheduling
information regarding the Service and may refer generally to the websites (e.g.,
"Visit our website at Playboy.com"); provided that, such referrals shall not
contain any advertising, promotions or sales. The Channel 598 Service shall be
in the "Hot Version," as set forth in the Programming Schedule on Exhibit A.
Programmer shall include different movies on the Channel 598 Service from those
offered on the Channel 596 and 597 Services, and differentiate the programming
on the Channel 598 Service sufficiently such that the Channel 598 Service is a
distinct and independent service, and not a "multiplex" or time-shifted version
of the Channel 596 and 597 Services. The Channel 598 Service currently premieres
movies on Monday through Wednesday nights, designed to compliment the premiere
movies provided on the Channel 597 Service, which currently premieres movies
Thursday through Sunday nights. Programmer shall be permitted to change the
movie premiere schedule upon notice to, and good faith consultation with,
Affiliate. Affiliate shall refer to the service as "THE HOT ZONE," or other name
mutually agreed to by the parties, and may list the Channel 597 Service on the
program guide as "THZ."
(vi) Programmer represents and warrants that (A) it reviews
all programming contained in the Service for compliance with the restrictions
and limitations set forth in Exhibit A, and (B) the Service shall reflect adult
content subject to the restrictions and limitations set forth in Exhibit A, and
shall not contain or depict any acts otherwise prohibited by Exhibit A.
Notwithstanding the foregoing, the occasional and inadvertent inclusion of
material in the Service that is not technically in compliance with Exhibit A,
shall not constitute a material breach of this Agreement. Except as permitted in
Sections 1(b)(i) - (v) above, and as specifically limited by Section 3 below,
Programmer represents and warrants that during the Term, the Service shall not
include any direct sales, advertising or infomercials.
(vii) All right, title and interest 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
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any other literary, musical, artistic, or other creative material included
therein shall, as between Programmer and Affiliate, remain vested in Programmer.
(viii) If Programmer does not provide the Service in its
entirety to Affiliate (i.e., the programming received by any subscriber to the
Service at a given point in time is different from the programming received by
any Service Subscriber at such point in time), then, in addition to any other
remedies available to Affiliate, at law or in equity, Affiliate shall have the
right to receive, exhibit, distribute, subdistribute and authorize the reception
of the programming included in the Service as provided to Affiliate and/or such
additional programming provided to any other subscriber to the Service.
(ix) Affiliate shall be permitted to authorize satellite
master antenna television system ("SMATV") operators (including telephone
companies and similar service providers) that serve multiple dwelling unit
buildings or complexes or commercial or business establishments with multiple
television viewing sites to distribute the Service in the Territory via such
SMATV systems directly to end users within such buildings or establishments for
DBS reception only.
(x) Each of the five (5) channels comprising the Service shall
be offered on a simultaneous basis, a minimum of 24 hours per day, seven days
per week, on a separate and distinct channel.
(xi) At any time during the Term and in any portion of the
Territory, Affiliate shall be permitted to offer other "branded" or "unbranded"
adult programming competitive to the Service, it being acknowledged and agreed
by the parties that Affiliate's offering of such other adult programming shall
not constitute a breach of this Agreement.
(xii) Programmer shall not propose or impose upon Affiliate,
nor shall Affiliate be obligated to pay, any surcharge or other cost (other than
the License Fees provided for in Section 2 hereof) for receipt and distribution
of the Service.
(c) Other Distribution Rights and Obligations. In addition, the
parties agree as follows:
(i) Subject to Programmer's obligations hereunder and
Affiliate's rights under 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 and willful editing, delays,
alterations, interruptions, deletions or additions (excepting Affiliate's
commercial or other announcements, only if permitted under Section 3 hereof).
Programmer acknowledges that the DBS 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. Programmer
shall fully encrypt the satellite signal of the Service
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utilizing encryption technology commonly used in the satellite distribution
industry. Programmer shall provide Affiliate with two receivers and decoders per
channel necessary to receive and decode the Service for each of Affiliate's
broadcast facilities in Castle Rock, Colorado and Los Angeles, California.
(ii) Subject to the terms and conditions of this Agreement,
the terms and conditions upon which Affiliate distributes the Service to Service
Subscribers, including, without limitation, the retail price charged, shall be
determined by Affiliate in its sole discretion. Affiliate shall use best efforts
to provide Programmer with sixty (60) days' prior written notice of any retail
price change.
(iii) Subject to the limitations contained in Section 17
below, with respect to the PPV Offerings, when a PPV Program is purchased on a
specific channel, the viewer shall be permitted to view the programming on one
or more other channels, as described below, but for only the time period for
which the purchase was made, as follows:
(A) Channel 594. If a Subscriber purchases a PPV Program
on the Channel 594 Service, the Subscriber is permitted to view only the Channel
594 Service.
(B) Channel 595. If a Subscriber purchases a PPV Program
on the Channel 595 Service, then the Subscriber is permitted to view the Channel
595 Service and the Channel 594 Service.
(C) Channels 596, 597 and 598. If a Subscriber purchases
a PPV Program on any of the Channel 596, 597 or 598 Services, then the
Subscriber is permitted to view all of the five channels comprising the Service
(as restricted by Section 17 herein).
Notwithstanding Affiliate's current intention, Affiliate
shall not be obligated to offer the Service using the purchasing mechanism set
forth in this Section 1(c)(iii). However, Affiliate shall be required to consult
with Programmer in good faith prior to effectuating any change to the mechanism
described above.
(iv) Programmer shall make the Service available via satellite
signal from a domestic communications satellite commonly used for the delivery
of television programming which must be viewable with existing equipment from
Affiliate's broadcast centers in Castle Rock, Colorado and Los Angeles,
California (together, the "Broadcast Centers"). As of the Effective Date, the
feeds of the Service are or will be available on Telstar 7 ("Programmer's U.S.
Satellite"). Programmer may, from time to time, in its sole discretion, change
the satellite being used for delivery of the Service to Affiliate; provided,
however, that any satellite used by Programmer to transmit the Service shall be
a domestic communications satellite commonly used for the delivery of television
programming which must be viewable with existing equipment from the Broadcast
Centers without Affiliate incurring additional costs or requiring Affiliate to
enter into any third-party
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arrangements (e.g., HITS) for receipt of the signals. In the event Programmer
either (i) changes Programmer's U.S. Satellite to a satellite or other
transmission medium not susceptible to viewing or utilization by Affiliate's
then-existing earth station equipment without affecting the receipt of the
signals of any other programming or other services then received (or committed
to be received) by such Affiliate, (ii) changes the technology used by
Programmer to encrypt the Service to a technology not compatible with
Affiliate's then-existing descrambling equipment, or (iii) compresses, digitizes
or otherwise modifies the signal of the Service in such a manner that it cannot
be received or utilized by Affiliate, then Affiliate shall have the right to
discontinue carriage of the Service, immediately; provided that this right of
discontinuance and deletion shall not apply to Affiliate if Programmer agrees
to: (I) provide Affiliate with the necessary additional equipment required to
receive the Service from the new satellite; and (II) promptly reimburse
Affiliate for the cost to acquire and install equipment necessary for Affiliate
to descramble, receive and/or utilize the signal of the Service from such new
satellite or other transmission medium, and/or the cost to acquire and install
equipment necessary for Affiliate to descramble, receive and/or utilize the
signal of the Service. Programmer agrees to use best efforts to provide
Affiliate with at least one hundred twenty (120) days' prior written notice of
any satellite or technology change. Programmer, or its designee, shall maintain
appropriate back-up satellite protection arrangements in accordance with
customary industry standards. 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.
(v) The parties hereby acknowledge and understand that the
overall terms and conditions of this Agreement, including without limitation,
Sections 2(e), 2(f), 4(g), 6(c)(v), 6(f) and 11 and Exhibit "B" hereof, are
expressly conditioned upon Affiliate's distribution of all five channels
comprising the Service. During the Term, should Affiliate cease distributing one
or more channels comprising the Service for any reason whatsoever, the parties
agree to negotiate in good faith the terms and conditions set forth in this
Agreement.
(d) Rights with Respect to Channel Capacity. 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 any hours which (i) the Service, or any significant portion
thereof, is not being transmitted to Affiliate for any reason; or (ii) the
transmission of the Service, or any significant portion thereof, has been
suspended or terminated by Affiliate pursuant to Section 17. Programmer
acknowledges that it has no ownership rights in, or right to use, any channel or
any amount of capacity on any DBS Satellite.
(e) Video On Demand. Programmer hereby grants to Affiliate, and
Affiliate hereby accepts from Programmer, the non-exclusive right to distribute
the Service in the Territory during the Term via Video On Demand, whereby a
consumer selects the viewing of a program on an unscheduled real time basis (as
opposed to selection of an viewing time by such consumer from a pre-determined
schedule of viewing times) ("VOD"),
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at such time that Affiliate has the capability to distribute programming
services via VOD to DIRECTV Subscribers. Nothing herein shall obligate Affiliate
to distribute the Service via VOD. Any future distribution of the Service by
Affiliate via VOD shall be subject to terms and conditions to be negotiated and
mutually agreed to by the parties.
2. Reports; 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 (as defined below) for each month, as
such percentage is calculated as set forth on Exhibit B.
(i) "Gross Receipts" are defined as the sum of all monies
received by Affiliate during any month after deduction of taxes (other than
income or franchise taxes); provided, however, that Gross Receipts shall in no
event include (i) any charge specifically made for access to programming other
than for 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); or (ii) any charges made for ordering via
telephone, the Service as a PPV Offering, which charges are additional to the
charges for ordering the Service without using the telephone. Affiliate shall
consult in good faith with Programmer prior to packaging the Subscription
Offerings with any other programming services. If, however, Affiliate packages
the Subscription Offerings with other premium programming services, then
Affiliate shall determine the Service's allocable share of revenues from such
package by application of the following formula:
S = (A/B) x P
where
S = the Service's allocable share of revenues from such
package
A = the DIRECTV a la carte price then in effect for the
Subscription Offering
B = the sum of the DIRECTV a la carte prices of all
programming services included in such package (including,
without limitation, the Service) then in effect
P = the price of such package
For the avoidance of doubt, an example of such calculation is as follows:
Affiliate packages the Subscription Offerings with programming service X and
programming service Y and each of the foregoing has an a la carte retail price
of $***, $*** and $***, respectively. The retail price
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for the entire package is $***. Programmer's allocable share of the revenues
from such package would be $*** (*** x ***).
(ii) To the extent that a Subscriber prepays any portion of
monies only solely in connection with Affiliate's distribution of the Service,
then the amount prepaid shall be included in Gross Receipts for the month in
which such payment was received; provided that, Affiliate's billing system has
the capability to account for such prepayments. 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
month in which such Credit Transaction occurs.
(iii) "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 judgement
consistent with Affiliate's policies and procedures applied consistently to
Programmer and Affiliate's other sources of programming services.
(iv) 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 monthly basis, not later than 45 days after the last day of
the month in which the Gross Receipts are received by Affiliate. DIRECTV shall
provide a separate accounting for the Channel 594 Service and the Channel 595
Service and a combined accounting for the Channels 596, 597 and 598 Services
collectively. Each such accounting shall include:
(A) the aggregate Gross Receipts for such month;
(B) the origin (categorized separately by residential
subscribers (which includes multiple dwelling
facilities, private offices and oil rigs) and
hotels/motels, if any) of all Gross Receipts for
Subscription Offerings for such month;
(C) the number of residential DIRECTV Subscribers as of
approximately the fifteenth calendar day of such
calendar month;
(D) the applicable Programmer Share from Exhibit A;
(E) the dollar amount of Programmer's share of Gross
Receipts for such month;
(F) the number of Service Subscribers as of approximately
the 15th day of such calendar month;
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(G) for each PPV Offering, the number of Service Subscribers
purchasing such PPV Offering on each calendar day of
such month; and
(H) Hotel/Motel License Fee (as defined below in Section
2(c)).
(v) Programmer shall reimburse Affiliate for the costs to
develop the detailed reporting set forth above for the Channel 594 Service and
the Channel 596, 597 and 598 Services collectively, which cost are estimated to
be $10,000. Affiliate shall use commercially reasonably efforts to commence
providing such detailed reports to Programmer as soon as reasonably practicable
following the execution of this Agreement, but in no event later than August 30,
2002.
(vi) Programmer and Affiliate shall accord confidential
treatment to any information contained in the aforementioned statement in
accordance with Section 15. At Programmer's request and at reasonable times,
upon reasonable advance written notice and during normal business hours at
Affiliate's offices, Affiliate shall permit Programmer or its representatives to
review, one time per each year of the Term and one time during the year
immediately after the termination or expiration of this Agreement, those books
and records maintained according to Affiliate's standard accounting practices
which are generally in accordance with GAAP required to verify License Fees and
reports made hereunder. Programmer shall audit each calendar year of the Term,
if at all, within one (1) year following the end of such calendar year, with
such review limited to those records for those months of the prior calendar year
which have not been previously reviewed and those past months of the current
calendar year for which records are available. Programmer shall report promptly
(but no later than 30 days following completion) to Affiliate the results of
such audit, including any deficiency in payment of License Fees that Programmer
believes were revealed by such audit, and shall make any claim against Affiliate
with respect to the results of such audit within one (1) year after reporting
such results to Affiliate. From and after Programmer's audit of a particular
period of the Term, such period shall be deemed closed by the parties and,
except as may be demonstrated by such audit, Affiliate shall have no further
liability in respect of License Fees for such period. Any such review shall be
at Programmer's sole cost and expense; provided, however, if such review
discloses an underpayment greater than ten percent (10%) of the actual amount
due, Affiliate shall reimburse Programmer for its reasonable out-of-pocket costs
and expenses incurred to discover such underpayment. The information derived
from and the process of such review shall be subject to the confidentiality
provisions of Section 15, and any third party auditor shall be required to
acknowledge in writing its agreement to such confidentiality provisions.
(b) License Fee. As full and complete compensation for the rights
granted Affiliate hereunder, Affiliate shall pay to Programmer, on a monthly
basis, the "License Fees," calculated pursuant to Programmer's Cable Rate Card
in Exhibit B, subject to reduction and offset for any credits, discounts, and
reimbursements set forth in Exhibit B, annexed hereto, which Programmer
represents and warrants complies with all applicable
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Laws. As used in this Agreement, "Laws" mean and include relevant federal,
state, municipal or local statutes, laws, rules, regulations, ordinances, codes,
directives and orders, including administrative rules or policies and court
orders. As used in this Section 2 and elsewhere in this Agreement (including
Exhibit "B") when referring to the payment of License Fees or the provision or
subscriber reports by Affiliate to Programmer, unless expressly modified by
"calendar," the term "month" shall refer to Affiliate's accounting month, which
is the thirty (30) day period commencing on approximately the fifteenth (15th)
day of each month and ending on approximately the fourteenth (14th) day of the
next succeeding month.
(c) Hotel/Motel License Fee. The parties understand and agree that
the terms of this Section 2(c), and not Section 2(a), shall govern the case of
monies received from the distribution of the Channel 595 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(c) 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)(iv). The Hotel/Motel License Fee shall be equal to the
license fee set forth on Exhibit D attached to this Agreement.
(d) Late or Non-Payments. Any amounts not paid hereunder by the date
payment is due, and which are not paid within ten Business Days after receipt of
a notice from the obligee thereof stating that such amounts have not been paid
and are overdue, shall, at Programmer's option, accrue interest at the rate of
one percent (1%) per month or at the highest lawful rate, whichever shall be the
lesser, from the date notice was given that such amounts were overdue until they
are paid. "Business Day" shall mean a day that is not a Saturday, Sunday or day
on which banks are generally closed for business in the State of California.
(e) ***.
(i) If at any time during the Term, *** another person engaged
in distribution, including, without limitation, broadcast, cable, satellite
and/or satellite-based direct broadcast television distribution (hereinafter, an
"Other Distributor") ***, then Programmer shall promptly notify Affiliate in
writing *** and Affiliate shall ***; provided that, in the case of ***,
Affiliate shall ***. If Affiliate chooses to ***, it must ***
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***. If *** are impossible or impractical for Affiliate to perform, the parties
hereto will mutually negotiate in good faith to establish ***. Nothing in the
preceding sentences shall require Affiliate to ***.
(ii) Notwithstanding anything herein to the contrary, ***
shall not include Programmer's Affiliated Companies (as defined in Section 8(a)
hereof) engaged in distribution of the Service (or any portion thereof) via the
Internet; provided that, such Affiliated Companies are, as of the date hereof
and throughout the Term continue to be, controlled by and at least 50% owned by
Playboy Enterprises, Inc. (the parent company of Playboy Entertainment Group,
Inc.) The parties acknowledge that, as of the date hereof, such Affiliated
Companies consist of, but shall not be limited to, Playboy.com and Spicetv.com,
and Programmer represents and warrants that said companies are controlled by and
at least 50% owned by Playboy Enterprises, Inc.
(iii) Notwithstanding anything herein to the contrary, the
provisions of Section 2(e)(i) above shall not apply to distribution of the
Service (or any portion thereof) via VOD (as defined in Section 1(e) hereof)
during the initial Term of the Agreement. If Affiliate renews the Agreement
pursuant to Sections 6(f) or 6(g) hereof, this provision shall not automatically
apply in the subsequent term, but shall be subject to the parties' good faith
negotiations.
(iv) At Affiliate's election, Programmer shall permit
Affiliate or its representatives to ***. Notwithstanding anything herein to the
contrary, ***. In the event that after such good faith discussions for a period
of thirty (30) days (or such extended period as may be mutually agreed to by the
parties), ***, then,
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within thirty (30) days after such good faith discussions, Programmer shall have
the option, in its sole discretion, to either (x) *** or (y) ***. Under no
circumstances, other than the limited circumstance set forth in foregoing
subsection (y), shall ***. In any event, Affiliate shall ***. From and after ***
of a particular period of the Term, such period shall be *** and, except as may
be demonstrated by ***, Programmer shall *** for such period.
(iii) For purposes of this Section 2(e), the parties agree and
understand the following:
(A) *** deemed as *** includes license, royalty or service fee
discounts, revenue shares of splits, volume discounts, penetration discounts or
caps thereon, payment limits, payment deferrals, special marketing arrangements,
or any other terms and conditions which to either *** or Programmer can be
reasonably measured in dollars.
(B) Programmer represents and warrants that *** as of the date
hereof.
(f) ***. Commencing on the Effective Date and continuing
throughout the Term of this Agreement, Programmer shall ***. Affiliate shall ***
under this Agreement. Affiliate and Programmer shall mutually agree as to ***;
provided, however, that there shall be no obligation to *** unless there exists
a genuine need to do so. Each of Affiliate and Programmer agrees to ***;
provided, however, neither party will have the ability or the right to ***.
Affiliate shall periodically provide Programmer with a written accounting
sufficiently detailed to allow Programmer to ascertain ***. At the conclusion of
the Term, *** shall be (x) *** within 45 days following expiration of the
Agreement if it is not renewed, or (y) *** if the Agreement is renewed.
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3. Commercial Announcements and Other Advertising.
(a) Commercial Announcements. Programmer hereby represents and
warrants that it does not make available to any Other Distributor of the Service
commercial announcements of any nature in the schedule of the Service. If at any
time during the Term, Programmer provides to any Other Distributor the right to
make commercial announcements within the Service, then Programmer shall offer
such right to Affiliate on terms and conditions no less favorable than those
offered to such Other Distributor of the Service.
(b) Advertising. If Programmer offers any Other Distributor the
opportunity to advertise, or includes any Other Distributor in any
advertisement(s), whether or not in connection with the Service, in any
publication, recording, service, visual work or audiovisual work, whether or not
Programmer controls it, then Programmer shall provide Affiliate with the
opportunity to elect to be included in such advertisement, if such advertisement
is in connection with advertising the Service, or an opportunity to elect to be
included in a similar advertisement, if such advertisement is not in connection
with advertising the Service, on at least as favorable terms as such Other
Distributor. Programmer shall not include Affiliate, or advertise Affiliate, by
any means without Affiliate's prior written consent, which may be given or
withheld by Affiliate in its sole discretion.
4. Marketing and Promotion of the Service.
(a) 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, including,
without limitation, the publication of the Service programming schedule in the
television listings and program guides which Affiliate, as applicable,
distributes.
(b) Subject to Sections 6 and 17, Affiliate shall not at any time
during the Term (i) cease marketing or promoting the Service or (ii) withdraw
distribution of the Service in any area of the Territory after the introduction
thereof in such area.
(c) Affiliate may expend such amounts as it deems necessary or
desirable, in its sole discretion, during any 12-month period (with each
12-month period starting on the
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Effective Date as defined in Section 6(a) or the anniversary thereof) (a
"12-Month Period") for marketing, advertising and promoting of distribution of
the Channel 595 Service via the DBS Distribution System. Subject to the terms
and conditions of this Agreement, Affiliate shall consult with programmer in
good faith, but 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
promotional activities. If Affiliate intends to promote all programming services
then offered on the DBS Distribution System (other than the Channel 595 Service)
in one promotion piece, then Affiliate shall be obligated to include the Channel
595 Service, subject to Programmer's reasonable approval, in such promotion
piece, and Affiliate shall promote the Channel 595 Service in a similar manner
as the manner in which Affiliate promotes the other programming services in such
promotion piece.
(d) At the written request of Affiliate, 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; provided that such promotion shall not, in any manner, conflict with the
business of Programmer's corporate parent or any Affiliated Company (as defined
in Section 8(a) hereof). Programmer shall provide to Affiliate one free
advertisement (promoting the distribution of the Service via the DBS
Distribution system), in Playboy Magazine, for each advertisement purchased by
Affiliate in Playboy Magazine at the applicable market rate; provided, however,
in no event shall Programmer be required to provide more than two free
advertisements to Affiliate in any one year period commencing on July 1 and
ending on June 30 of a given year. Such free advertisement shall be limited to a
national advertisement campaign.
(e) From time to time, Programmer may offer Affiliate an opportunity
to exhibit the Service discounted to DIRECTV Subscribers ("Discounted
Previews"). Discounted 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 (or
any portion thereof). The retail price for Discounted Previews shall be no less
than ninety-nine cents ($.99) per programming block and shall be paid to
Programmer in a similar manner as provided in Section 2.
(f) Continuation of Efforts. Affiliate shall continue to exercise
reasonably similar levels of commercial efforts to maximize the number of
Service Subscribers and Gross Receipts as Affiliate currently exercises, and
Affiliate shall perform the same type of promotional activities referred to in
clauses (i) through (iv) below throughout the Term; provided, however, Affiliate
shall not be obligated to exhibit in any particular month of the Term any
minimum number of "Cross-Channel Spots" or "Preview Spots" (each, as defined
below):
(i) Affiliate currently exhibits in excess of four hundred
(400) thirty (30)-second cross-channel promotional advertising spots (the
"Cross-Channel Spots") for each month of the Term, and in excess of two thousand
four hundred (2,400) thirty (30)-
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and/or sixty (60)-second promotional advertising spots for each month of the
Term on Affiliate's pay-per-view preview channel (the "Preview Channel Spots"),
all at no charge to Programmer. Affiliate and Programmer shall mutually
determine in their reasonable business judgment the other Affiliate channels
over which to exhibit the Cross-Channel Spots, based on whether such other
channels have a likely target audience for the Service and are not channels
where the Cross-Channel Spots might be objectionable to Affiliate's viewing
audience. Such channel selection for the Cross-Channel Spots also is subject to
third party programmers' limitations on adult-oriented promotional spots.
(ii) Affiliate currently participates in and promotes at least
one (1) of Programmer's national free or discounted preview promotions each
calendar year of the Term.
(iii) Affiliate currently promotes Programmer and the Channel
595 Service in each of Affiliate's monthly printed pay-per-view bill inserts at
no cost to Programmer.
(iv) Affiliate currently lists the program titles and program
descriptions of the Channel 595 Service in printed and electronic program
guides.
(g) ***. Affiliate shall ***. Affiliate and Programmer agree with
respect to the *** as follows:
(i) The *** shall not be *** used for *** under the Agreement,
and instead shall be ***.
(ii) The *** shall be used to *** all as mutually determined
and agreed to later confirmed in writing by Affiliate and Programmer.
(iii) Affiliate shall *** in a manner mutually acceptable to
Affiliate and Programmer, but whatever *** that has been *** at the conclusion
of the Term and has not actually been *** (including *** prior to such date, as
mutually agreed), (i) if the Agreement is not renewed, based on ***
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*** within forty five (45) days of such termination date, in accordance with
each party's ***, or (ii) if the Agreement is renewed, *** in the subsequent
term. The parties acknowledge that as of the date hereof *** in accordance with
the terms and conditions set forth herein.
(iv) Thus, commencing with the *** as of the Effective Date
and each calendar year or portion thereof thereafter during the Term, ***.
(v) In addition to the ***, each of Affiliate and Programmer
may elect in its discretion to *** in connection with the Service, through
Affiliate or otherwise, during the Term.
(h) Research Project. At Affiliate's request, Programmer shall
conduct a research project, not more than once per calendar year. Said research
project shall be executed according to a statistically valid research plan
mutually agreed upon in advance by Programmer and Affiliate. Promptly following
the completion of such research project, Programmer and Affiliate shall provide
to the other any reports or conclusions issued in connection therewith. The ***
shall be used to fund such research projects. To the extent that Programmer
expends any of its own monies to fund research projects, Programmer shall be
reimbursed for said costs out of the ***.
(i) Program Guide. During the Term, Programmer shall provide
the daily programming schedule for the Service to Tribune Media Service in order
that Affiliate may access the program schedule for purposes of the on-screen
program guide. The fees charged by Tribune Media Service for editing the daily
programming schedule to accommodate the marketing of the Service on the System
(***) will be paid for using the ***.
5. Representations. Warranties and Covenants.
(a) By Affiliate. Affiliate warrants, represents and covenants to
Programmer that it:
(i) to its best knowledge after diligent review and receipt of
advice of legal counsel with experience in such matters, is in compliance with
and will comply with all material Laws with respect to its rights and
obligations under this Agreement, including without limitation, all relevant
provisions of the Cable Television Consumer Protection and Competition Act of
1992 which are applicable to Affiliate, the Communications Act of 1934, the
Communications Decency Act of 1996 (as any or all may be amended and any
successor, replacement or similar Laws or statutes), and any and all regulations
issued pursuant to any of the foregoing;
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(ii) has the power and authority to enter into this Agreement
and to fully perform its obligations hereunder;
(iii) shall distribute the Service in the Territory in
accordance with and subject to the terms and conditions set forth in this
Agreement;
(iv) shall arrange and pay for reception of the Service,
except as provided in Sections 5(b)(iii) and 5(b)(ix), from Programmer's U.S.
Satellite to the Broadcast Centers;
(v) shall not, without Programmer's prior written approval,
use the name of or logo for "Playboy TV," "Taste of Spice," "Vivid TV," "The Hot
Network," or "The Hot Zone" or the names, titles or logos of the Service (or any
successors thereto) 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 to advise Service Subscribers or potential Service
Subscribers of the availability and scheduling of the Service or as a channel
identifier. Affiliate shall not publish or disseminate any material that
violates restrictions imposed by Programmer or Programmer's suppliers and
disclosed upon reasonable advance written notice to Affiliate by Programmer. The
restrictions set forth in this Section 5(a) (v) shall apply only to the extent
they are applied by Programmer uniformly with respect to all of its distributors
of the Service, and shall not apply if Affiliate has received a valid written
authorization from a third party for any of the uses described in this Section
5(a)(v);
(vi) has obtained, and shall maintain in full force during the
Term hereof, such federal, state and local authorizations as are material and
necessary to operate the business it is conducting in connection with its rights
and obligations under this Agreement; and
(vii) has no knowledge of any misrepresentation, breach of
warranty or covenant made by Programmer hereunder.
(b) By Programmer. Programmer warrants, represents and covenants to
Affiliate that:
(i) to its best knowledge after diligent review and receipt of
advice of legal counsel with experience in such matters, it is in compliance
with and will throughout the Term continue to comply with all material Laws
applicable to, or with respect to, the Service and the provision of the Service
to Affiliate, and Programmer's rights and obligations under this Agreement with
respect to the Service and Programmer's obligations hereunder, including without
limitation, FCC rules and regulations governing the Service, if any, all
relevant provisions of the Cable Television Consumer Protection and Competition
Act of 1992, and the Communications Act of 1934, the effective portions of the
Communications Decency Act of 1996 (as any or all may be amended and any
successor, replacement or
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similar Laws) and any regulations promulgated under any applicable law or any of
the foregoing;
(ii) it has the power and authority to enter into this
Agreement and to fully perform its obligations hereunder;
(iii) it shall provide the Service for the Territory, at its
sole cost and expense (together with any necessary equipment, including without
limitation, backup or reserve equipment), in accordance with and subject to the
terms and conditions set forth in this Agreement, including, without limitation,
that it shall (A) arrange and pay for the transmission of the Service from
Programmer's U.S. Satellite to the Broadcast Centers, (B) encode and scramble
the Service at its sole expense, (C) cause its uplink authorization center to
authorize and enable Affiliate's descramblers to receive and descramble the
Service, and (D) provide to Affiliate two (2) receivers and two (2) decoders per
channel to receive and unscramble the Service at each of the two (2) Broadcast
Centers;
(iv) it shall promptly provide Affiliate with any and all
promotional materials of the Service which it generally provides to any other
distributor of the Service, at Programmer's sole cost and expense; and if
Affiliate shall request additional such materials, then Programmer shall
promptly provide such materials to Affiliate and Affiliate shall reimburse
Programmer for the reasonable actual costs thereof;
(v) it has obtained, and shall maintain in full force during
the Term hereof, such federal, state and local authorizations as are necessary
to comply with Laws or which are material and necessary to operate the business
it is conducting in connection with its rights and obligations under this
Agreement;
(vi) it has obtained or will obtain at its sole expense all
rights necessary for Affiliate to use and enjoy its rights in connection with
its distribution of the Service, including, without limitation, obtaining all
necessary trademarks, copyrights, licenses and any and all other proprietary,
intellectual, property and other use rights necessary in connection with, or for
Affiliate's distribution of the Service, and at all times during the Term
"PLAYBOY TV," "TASTE OF SPICE," "VIVID TV," "THE HOT NETWORK," "THE HOT ZONE" or
the names, titles or logos of the Service (or any successors thereto) or any of
their 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) there are no (and it covenants that it shall not enter
into directly or indirectly, allow or otherwise permit any) affiliation,
distribution or any other agreements, whether written or oral, granting to
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;
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(viii) it 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 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;
(ix) there is no actual and, to Programmer's knowledge, there
is no pending investigation (including, without limitation, a grand jury
investigation) involving the Service (or any content included in the Service) or
any pending proceeding against Programmer (or any of its principals or
Affiliated Companies) for the violation of any federal, state or local law or
regulation, as applicable, concerning illegal, indecent or obscene material or
the transmission thereof (the "Obscenity Laws");
(x) it will notify Affiliate as soon as reasonably practical,
but in no event more than two Business Days, after receiving notification of, or
becoming aware of, any pending investigation by any Governmental Authority, or
any pending criminal proceeding against Programmer (or any of its principals or
Affiliated Companies (as defined in Section 8(a)), which investigation or
proceeding concerns distribution of the Service or programming in the Service,
including without limitation, investigations any/or proceedings concerning
potential violations of 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 an Affiliated Company has received any
communication about or otherwise becomes aware of any such investigation or
proceeding;
(xi) the programming Service, and all programming provided as
part thereof, Programmer provides Affiliate hereunder (A) is intended to be in
compliance with Obscenity Laws and, to the best of Programmer's knowledge after
diligent review and advice of counsel with experience in such matters, is not
intended to be violative of Obscenity Laws in any jurisdiction in the Territory;
(xii) it solely and exclusively possesses, and will at all
times during the Term so possess, any and all rights necessary to grant
Affiliate the right to distribute the Service and all programming provided as
part thereof, as a whole or in parts, as Subscription Offering(s) and PPV
Offering(s), as the case may be, in the Territory (it being understood and
agreed that Programmer has granted and may grant similar rights to other third
parties);
(xiii) nothing contained in the Service or in any other
material supplied by Programmer to Affiliate violates, infringes, or conflicts
with any rights of any person or entity (including, without limitation,
copyright, trademark, music performance and all other proprietary and/or
intellectual rights);
(xiv) there are no outstanding (or, to the best of
Programmer's knowledge, threatened) judgments or pending claims, liens, charges,
restrictions, or
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encumbrances on or related to the Service or any programming provided as part
thereof that may materially interfere with the rights of Affiliate under this
Agreement; and
(xv) Programmer is the sole entity that has entered into and
shall enter into agreements and obligations with other distributors with respect
to the Service and to any and all programming provided as part of the Service.
6. Term; Effective Date; Termination.
(a) Term; Effective Date. Subject to certain rights of termination,
extension or renewal set forth in this Agreement, the initial term of the
Agreement shall be for the period commencing on May 22, 2002 (the "Effective
Date") and ending on the date that is twenty-four (24) months thereafter (the
"Term"). Until the Effective Date, the Current Adult Agreements shall continue
to govern the Service and on the Effective Date the Current Adult Agreements
shall automatically terminate, and this Agreement shall govern distribution of
the Service for all purposes.
(b) Termination for Breach or Bankruptcy. This Agreement may be
terminated by either party (the "Affected Party"), in its discretion, at any
time after any of the following occurrences with respect to the other party (the
"Other Party"):
(i) the breach of any representation, warranty or covenant of
the Other Party or failure by the Other Party, its successors or assigns to
perform any material obligation hereunder which is not cured within thirty (30)
days after receipt of written notice thereof from the Affected Party or as to
which reasonable steps to cure have not been commenced within such period (or
are not thereafter diligently pursued and completed within an additional thirty
(30) days); 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) Termination by Affiliate. Affiliate may terminate this
Agreement:
(i) immediately upon prior written notice, if the Service, or
any programming provided as part thereof (including, without limitation,
advertising, if any), fails to comply in any material way with Exhibit A hereto
and the definition of "Service" in Section 1(b) hereof, as reasonably determined
by Affiliate;
(ii) if Affiliate discontinues operation of the DBS System,
immediately upon such discontinuance;
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(iii) according to the provisions of Section 6(d) or Section
17 hereof;
(iv) immediately following written notice to Programmer of
Programmer's failure to comply with any material Laws, if Programmer is unable
to cure or eliminate the failure to comply with such material Laws in any
material respect immediately upon notice thereof; or
(v) ***.
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(d) Force Majeure. 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 Programmer's U.S. Satellite or Affiliate's DBS Satellite(s) or
transponders on any such satellites (as applicable) or of the DBS 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 systems), 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"), and such non-performance shall be excused for
the period of time such failure(s) causes such non-performance; provided,
however, that if Affiliate determines in its sole discretion that it is
commercially or technically unfeasible to cure a Force Majeure with respect to
the DBS System or one or more DBS Satellites and so notifies Programmer, then
either party may terminate this Agreement effective upon written notice to the
other party. The parties acknowledge and agree that although the Service may at
any given time be uplinked to only one of several DBS Satellites, failure or
degradation in any of such DBS Satellites may require Affiliate to reduce the
number of programming services (in particular the number of PPV and/or adult
services) available for allocation among all of the DBS Satellites, with such
reduction including, without limitation, curtailment or termination of the
distribution of the Service by Affiliate, at Affiliate's sole discretion.
Accordingly, Programmer further acknowledges and agrees that the provisions set
forth in the first sentence of this Section 6(d) shall apply and shall exculpate
Affiliate and excuse the performance of Affiliate hereunder in the event of such
a failure or degradation of any of the DBS Satellites or the transponders on any
such satellite, regardless of whether the satellite to which the Service is
uplinked at the time of such failure or degradation is itself the subject of
such failure or degradation. In the event Affiliate determines in its sole
discretion that it is unable to cure, or it is commercially impracticable to
cure, such Force Majeure during the remaining Term of this Agreement, then
Affiliate may terminate this Agreement immediately upon notice to Programmer.
(e) Survival. Termination of this Agreement pursuant to this Section
6 shall not relieve either party of any of its liabilities or obligations under
this Agreement, including without limitation those set forth below in Section 8,
which shall have accrued on or prior to the date of such termination.
(f) Automatic Renewal of Agreement. Affiliate shall automatically
renew this Agreement for one additional two (2) year period under the same terms
and conditions set forth in this Agreement (except as set forth in Section
2(e)(iii) hereof) in the event that the Service meets certain criteria for
growth to be mutually agreed by the parties. Following the execution of this
Agreement, the parties shall commence negotiating in good faith such
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criteria, and shall set forth such criteria in writing in an amendment to this
Agreement no later than June 15, 2002.
(g) Affiliate Renewal Option. In the event this Agreement is not
automatically renewed pursuant to Section 6(f), Affiliate shall have the option
in its sole discretion to renew the Agreement for two (2) additional twenty-four
(24) month terms under the same terms and conditions set forth in this Agreement
(except as set forth in Section 2(e)(iii) hereof) by providing written notice of
its election to renew the Agreement to Programmer at least sixty (60) days in
advance of each prior term end.
(h) License Fee Reduction. In addition to its remedies set forth in
this Agreement, Affiliate may receive credit against the License Fees in the
proportion that the hours of programming each day materially deviates from the
programming required in Section 1(b), as determined by Affiliate in its sole
discretion, bears to the total hours the Service is transmitted each day, such
credit to be applied against the License Fees in any month.
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 its advertising or in any other manner which would indicate
any such relationship with the other.
8. Indemnification; Limitation of Liability.
(a) By Programmer. Programmer shall indemnify, defend and hold
harmless each of Affiliate, its Affiliated Companies (as defined below) and the
directors, officers, employees, and agents of Affiliate and its Affiliated
Companies (collectively, the "Affiliate Indemnitees") from, against and with
respect to any and all claims, criminal and civil liabilities, costs and
expenses (including reasonable attorneys' and experts' fees) ("Claims") incurred
to third parties (including without limitation, any Governmental Authorities) in
connection with any claim against any of the Affiliate Indemnitees arising out
of (i) Programmer's breach of its representations, warranties and covenants set
forth in this Agreement, (ii) the Service or 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, (v)
any acts or omissions by audio text suppliers (including, without limitation,
the content of any of the audio text service) and all employees and contractors
thereof, (vi) any other materials, including advertising or promotional copy,
supplied or permitted by Programmer, and/or (vii) any claim for payment by a
third party as a result of Affiliate's distribution of the Service. As used in
this Agreement, "Affiliated Company(ies)"
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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) By Affiliate. Affiliate shall indemnify, defend and hold
harmless each of Programmer, Programmer's Affiliated Companies and the
directors, officers, employees and agents of Programmer and Programmer's
Affiliated Companies (collectively, the "Programmer Indemnitees") from, against
and with respect to any and all claims, liabilities, costs and expenses
(including reasonable attorneys' and experts' fees) incurred to third parties
arising out of (i) Affiliate's breach of its representations, warranties and
covenants set forth in this Agreement, (ii) Affiliate's distribution of the
Service by means of the DBS Distribution System (except with respect to claims
relating to the content of the Service, including advertising or promotional
copy supplied or permitted by Programmer), (iii) Affiliate's advertising and
marketing of the Service and the DBS System, and (iii) any other materials used
by Affiliate, including advertising or promotional copy, not supplied or
permitted by Programmer.
(c) Procedure for Indemnification Claims. The respective
indemnification obligations of each of the parties pursuant to Sections 8(a) and
8(b), above, shall be conditioned upon strict compliance with the following
procedures for indemnification claims based upon or arising out of any claim,
action or proceeding by any person not a party to this Agreement. If at any time
a claim shall be made, or an action or proceeding shall be commenced, against a
party to this Agreement (the "Aggrieved Party") which could result in liability
of the other party (the "Indemnifying Party") under its indemnification
obligations under this Agreement, the Aggrieved Party shall give to the
Indemnifying Party notice of that claim, action or proceeding within five (5)
Business Days following receipt of service of any claim, action or proceeding by
the Party (except that failure to give that notice shall not excuse the
Indemnifying Party except to the extent that it is materially prejudiced by that
failure). The notice shall state the basis for the claim, action or proceeding
and the amounts claimed, (to the extent that amount is determined at the time
when the notice is given) and shall permit the Indemnifying Party to assume the
defense of any such claim, action or proceeding (including any action or
proceeding resulting from any such claim) with counsel which is reasonably
acceptable to the Aggrieved Party. Failure by the Indemnifying Party to notify
the Aggrieved Party of its election to defend the claim, action or proceeding
within a reasonable time, but in no event more than fifteen (15) days after the
notice shall have been given to the Indemnifying Party, shall be deemed a waiver
by the Indemnifying Party of its right to defend the claim, action or
proceeding; provided, however, that the Indemnifying Party shall not be deemed
to have waived the right to contest and defend against any claim of the
Aggrieved Party for indemnification under this Agreement based upon or arising
out of that claim, action or proceeding.
(i) Right of Set-Off. Notwithstanding the foregoing and
without limiting Affiliate's other rights and remedies, pending the resolution
of any claim in respect of which Affiliate is entitled to be indemnified,
Affiliate may withhold License Fees which
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would otherwise be payable to Programmer under this Agreement in an amount
consistent with Affiliate Indemnitees' anticipated legal fees and costs
associated with Affiliate's receipt of Service of any such claim. Without
limiting Affiliate's other rights and remedies, Affiliate may offset and retain
from such withheld monies (i) the amount of legal fees and costs the Affiliate
Indemnitees expend in connection with such claims during the pendency thereof,
and (ii) the actual amount(s) to settle such claims and/or to pay any judgments
in connection therewith (subject to the last sentence of this Section 8(c)(i)).
Affiliate shall provide Programmer with a written accounting sufficiently
detailed to allow Programmer to ascertain such expenditures. If no action or
other proceeding for recovery on such a claim has been commenced within twelve
(12) months after its assertion, Affiliate shall not in connection with that
particular claim under this paragraph continue to withhold such monies (that
were not so offset) and shall remit to Programmer all such withheld monies
otherwise due Programmer unless Affiliate believes, in its reasonable judgment,
that such a proceeding is likely to be instituted notwithstanding the passage of
that time. Under no circumstances shall Programmer have the right to settle or
dispose of any claim under this paragraph without Affiliate's prior written
consent.
(d) 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 INCLUDING NEGLIGENCE. EACH OF THE PARTIES HAVE READ AND UNDERSTANDS
AND EXPRESSLY WAIVES AND RELEASES ANY AND ALL RIGHTS AND BENEFITS WHICH THE
RESPECTIVE PARTIES MAY HAVE HAD UNDER SECTION 1542 OF THE CIVIL CODE OF THE
STATE OF CALIFORNIA (THE "CIVIL CODE"), AND ANY SIMILAR PRINCIPLES OF LAW OR
EQUITY, TO THE FULL EXTENT THAT THEY MAY HAVE SUCH RIGHTS AND BENEFITS
PERTAINING TO SUCH DAMAGES THE PARTIES ARE HEREBY WAIVING. SECTION 1542 OF THE
CIVIL CODE PROVIDES AS FOLLOWS:
"A GENERAL RELEASE DOES NOT EXTEND TO CLAIMS WHICH
THE CREDITOR DOES NOT KNOW OR SUSPECT TO EXIST IN HIS
FAVOR AT THE TIME OF EXECUTING THE RELEASE, WHICH IS
KNOWN BY HIM MUST HAVE MATERIALLY AFFECTED HIS
SETTLEMENT WITH THE DEBTOR."
(2) ANY AND ALL EXPRESS AND IMPLIED WARRANTIES, INCLUDING, BUT
NOT LIMITED TO, WARRANTIES OF MERCHANTABILITY OR FITNESS FOR ANY PURPOSE OR USE,
ARE EXPRESSLY EXCLUDED AND DISCLAIMED BY AFFILIATE. IT IS EXPRESSLY AGREED THAT
AFFILIATE'S SOLE OBLIGATIONS AND LIABILITIES AND PROGRAMMER'S EXCLUSIVE
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REMEDIES FOR ANY CAUSE WHATSOEVER (INCLUDING, WITHOUT LIMITATION,
INDEMNIFICATION OBLIGATIONS AND LIABILITY ARISING FROM NEGLIGENCE) ARISING OUT
OF OR RELATING TO THIS AGREEMENT AND/OR THE TRANSACTIONS CONTEMPLATED HEREBY ARE
LIMITED TO THOSE SET FORTH IN SECTIONS 8(b) AND 16 HEREOF, AND ALL OTHER
REMEDIES OF ANY KIND AGAINST AFFILIATE ARE EXPRESSLY EXCLUDED, INCLUDING,
WITHOUT LIMITATION, ALL RIGHTS AND REMEDIES UNDER DIVISION 2, CHAPTER 7,
SECTIONS 2711 THROUGH AND INCLUDING 2717 OF THE CALIFORNIA UNIFORM COMMERCIAL
CODE.
(3) 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.
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, fax, 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, California 90210
Attention: Senior Vice President,
Business and Legal Affairs
Fax: (310) 246-4078
With a courtesy copy to: Playboy Enterprises, Inc.
680 N. Lake Shore Drive
Chicago, Illinois 60611
Attn: General Counsel
Fax: (312) 266-2042
Notice to Affiliate shall be provided as follows:
If by mail DIRECTV, Inc.
or facsimile: P.O. Box 92424
Los Angeles, California 90009
Attention: Senior Vice President, Programming
Fax: (310) 535-5416
cc: General Counsel
Fax: (310) 964-4991
cc: Legal & Business Affairs
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Fax: (310) 964-4883
If by overnight or DIRECTV, Inc.
personal delivery: 2230 East Imperial Highway
El Segundo, California 90245
Attention: Senior Vice President, Programming
cc: General Counsel
cc: Legal & 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 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. Subject to Section 8(d) above,
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 transfer, by operation of law or otherwise, without the
prior written consent of the non-transferring party, which shall not be
unreasonably withheld; provided, however, that (i) 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) (A) to a
successor entity to Affiliate's DBS business; (B) to a third party as part of
preparing to go or going public; or (C) to a third party, provided Affiliate
remains primarily liable for the performance of such third party's obligations
hereunder and (ii) Programmer may assign its rights and obligations under this
Agreement, in whole or in part, (A) to a successor entity to Programmer's
business; provided, however, that such assignment shall be subject to the
limitations relating to Change in Control set forth in Section 6(c)(v) hereof);
or (B) to a third party as part of preparing to go or going public, so long as
the controlling stockholder(s) of Programmer and substantially all of the
members of management of the Programmer remain the same following the initial
public offering and for the duration of the Term.
12. Laws of California; Consent to California Jurisdiction. 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. All actions relating to
this Agreement shall be brought, and the parties hereto consent to exclusive
jurisdiction (in personam and in rem) and venue for all actions relating to this
Agreement, in the courts located in Los Angeles County, California; provided,
however, that any judgments or court orders obtained may be enforced in any
other
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jurisdiction. Programmer represents that CT Corporation System is its authorized
agent for service of process in Los Angeles, California.
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 (whether written, oral or implied),
including, without limitation, the Current Adult Agreements and any amendments
thereto. 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.
(a) Generally. 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, proprietary information,
trade secrets and information of all kinds, whether oral or written, acquired or
devised or developed in any manner from the other party's personnel or files or
any proprietary or subscriber information provided by one party to the other
party (the "Confidential Information"), and that they have not and will not
reveal the same to any persons not employed by the other party except: (i) (A)
at the written direction of such party; (B) 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; (C) as part of its normal reporting or review procedure
to its parent company, its financial advisors, auditors and its attorneys, and
such parent company, financial advisors, auditors and attorneys agree to be
bound by the provisions of this Section 15; (D) to independent contractors hired
by either party in the ordinary course of business, bona fide potential
investors, insurers and financing entities; provided, however, that such persons
described above agree to be bound by the provisions of this Section 15; (E) in
order to enforce any of its rights pursuant to this Agreement; or (F) in the
case of Affiliate, to the NRTC or any entity engaged in Affiliate's DBS
business; provided, however, that such person described above agrees to be bound
by the provisions of this Section 15; or (ii)(A) at the time of disclosure to
the recipient the Confidential Information is in the public domain; or (B) after
disclosure to the recipient the Confidential Information becomes part of the
public domain by written publication through no fault of the recipient. During
the Term, neither
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party shall issue an independent press release, or discuss with a member of the
press, this Agreement or the transactions contemplated hereby without the prior
written consent of the other party.
(b) Programmer's Further Obligations. Notwithstanding Section 15(a),
Programmer specifically acknowledges and agrees that any lists of Affiliate's
customers or users, and all information related to such customers and users, is
confidential and proprietary information of Affiliate and cannot be disclosed by
Programmer or used by Programmer for any purpose or use whatsoever, other than
for its review at Affiliate's offices as part of Programmer's audit rights
hereunder to determine if Programmer has been paid the License Fees due to it by
Affiliate. Also notwithstanding Section 15(a), Programmer further acknowledges
and agrees that under no circumstances will it in any way: disclose information
(whether personally identifiable or not) to any third party regarding
Affiliate's customers or users or engage in any direct mailing or telephone
solicitation which Affiliate's customers or users do not previously and
expressly approve (whether orally or in writing) or previously and expressly
request (whether orally or in writing), or which Affiliate does not previously
and expressly approve in writing in Affiliate's sole discretion.
16. Arbitration; Injunctive Relief.
(a) Any dispute or disagreement between Programmer and Affiliate
arising out of this Agreement shall be resolved according to the following
dispute resolution procedure: First, such dispute shall be addressed to, in the
case of Affiliate, the Senior Vice President, Programming Acquisitions, and in
the case of Programmer, its Senior Vice President, Business and Legal Affairs
for discussion and attempted resolution. If any such dispute cannot be resolved
by such representatives within five (5) Business Days from the date that either
party gives notice that such dispute or disagreement exists, then such dispute
shall be immediately referred to the Senior Vice President, Programming, in the
case of Affiliate, and the President in the case of Programmer for discussion
and attempted resolution.
(b) If a dispute cannot be resolved to the mutual satisfaction of
both parties within five (5) Business Days (or such longer period as may be
mutually agreed upon) after the second-tier referral described in Section 16(a)
above, such dispute shall be referred to arbitration in Los Angeles, California,
before three arbitrators in accordance with the Commercial Arbitration Rules
(the "Arbitration Rules") of the American Arbitration Association, in effect on
the date that notice of such dispute was originally given. The three arbitrators
shall be appointed as follows: Each party may select one arbitrator and,
thereafter these two shall select the third and final arbitrator. If the two
selected arbitrators cannot agree upon the third arbitrator within five (5) days
of their selection, then the third and final arbitrator shall be selected by and
according to the Arbitration Rules. Once appointed, the arbitrators shall
appoint a time and place for a pre-hearing status conference not more than
fourteen (14) days from the date of their appointment, and shall appoint a time
and place for a final hearing not more than forty-five (45) days from the date
of the status conference. The final hearing shall conclude no later than thirty
(30) days after its commencement. The party
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that demands arbitration of the unresolved dispute or disagreement shall specify
in writing the matter to be submitted to arbitration. The arbitrators shall
render a single written decision setting forth an award and stating with
reasonable detail the reasons for the decision reached. Any cash component of
the award shall be payable in United States dollars through a bank in the United
States. Each party shall bear its own cost of preparing for and presenting its
case; and the cost of arbitration, including the fees, the expenses of the
arbitrators will be shared equally by the parties.
(c) Notwithstanding anything in this Agreement to the contrary,
Programmer and Affiliate each shall have the right to obtain injunctive relief,
if necessary, in order to prevent the other party from willfully breaching its
obligations under this Agreement.
17. Cessation of Program Distribution. If Affiliate in good faith
reasonably believes that Affiliate's provision of any of the programming on the
Service either violates any material Law or could be found by a court or
administrative agency to violate any material Law (a "Law Violation" or
"Potential Law Violation") or reasonably believes in good faith at any time that
any of the programming on the Service is adversely affecting the corporate image
that Affiliate desires to maintain at such time (an "Image Problem") then,
notwithstanding anything to the contrary in this Agreement, (a) immediately
following written notice to Programmer in the case of a Law Violation or
Potential Law Violation, or (b) no sooner than 30 days following written notice
to Programmer in the case of an Image Problem and only after consultation with
Programmer and providing Programmer the opportunity to propose a plan to resolve
the Image Problem (if Affiliate elects to terminate this Agreement as provided
in this Section 17): Affiliate may terminate this Agreement, or Affiliate may
cease distributing the offending programming or the Service (in any portion of
the Territory, or the entire Territory, as Affiliate shall determine in its sole
discretion based on the genesis of the Law Violation; Potential Law Violation or
Image Problem) until Affiliate determines in Affiliate's sole discretion that
there will be no Image Problem because the Service programming at that
subsequent time is consistent with the corporate image that Affiliate then
desires to maintain or Affiliate reasonably determines that a Law Violation or
Potential Law Violation will not again occur. If Affiliate, pursuant to this
Section 17 and due to an Image Problem, desires to cease distributing the
Service, Affiliate shall provide Programmer with notice thereof setting forth in
reasonable detail the nature of Affiliate's concerns and provide Programmer with
the opportunity to propose changes in the Service to address Affiliate's
concerns. If Programmer is unable to sufficiently change the Service to
accommodate Affiliate's concerns and Affiliate ceases distribution of the
Service due to an Image Problem and has not reinstated distribution, or
terminates this Agreement, then Affiliate shall not offer adult programming (as
defined in Exhibit B), other than adult programming already offered by Affiliate
at the time of such cessation or termination prior to May 22, 2004 or the Term
of this Agreement if it is actually extended or renewed, without: (x) in the
case of cessation, first reinstating distribution of the Service; or (y) in the
case of termination, first offering Programmer the opportunity to reinstate this
Agreement on the same terms and conditions. Consistent with the foregoing, the
parties understand and acknowledge that (i) due to the explicit nature of the
programming on the Channel 596
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Service and the Channel 597 Service (i.e., more explicit than the "Hot
Version"), as of the date hereof, Affiliate blacks out such channels in the
following states: Alabama, Mississippi, Oklahoma, Utah, North Carolina,
Tennessee, and in Hamilton County, Ohio, because such programming may constitute
a Law Violation therein; and (ii) Affiliate expressly reserves the right at any
time during the Term to further blackout any such programming constituting a Law
Violation.
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 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.
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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, INC.
By: /s/ Michael Thornton
------------------------------------------------
Michael Thornton
Senior Vice President, Programming Acquisitions
PLAYBOY ENTERTAINMENT GROUP, INC.
By: /s/ James L. English
--------------------------------------------
James L. English
President
SPICE ENTERTAINMENT, INC.
By: /s/ James L. English
---------------------------------------------
James L. English
President
SPICE HOT ENTERTAINMENT, INC.
By: /s/ James L. English
---------------------------------------------
James L. English
President
SPICE PLATINUM ENTERTAINMENT, INC.
By: /s/ James L. English
---------------------------------------------
James L. English
President
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EXHIBIT A
DESCRIPTION OF THE SERVICE
From and after the Effective Date and at all times during the Term, the
Service shall be provided by Programmer to Affiliate on a full-time turnaround
basis (i.e., 24 hours per day, seven days a week). The programming content of
the Service shall comply with the following:
(i) (A) Channel 594 Service. The programming blocks on the Channel 594
Service shall be approximately sixty (60) minutes in length, with attention
given to creating appealing three (3) hour blocks (initially 10:00 P.M. to 1:00
A.M. EST and 1:00 A.M. to 4:00 A.M. EST).
(B) Channel 595 Service. Notwithstanding the content description set
forth in Section 1(b)(ii), the Channel 595 Service also may include the
following content, provided that, in no event shall such content be more
explicit than the "Hot Version," as set forth in the Programming Standards on
Exhibit A: (a) one (1) Director's Cut movie per day, seven days per week.
Programmer may premiere at least seven (7) Director's Cut titles per month and
each title shall be approximately ninety (90) minutes in length. The premiere of
the Director's Cut movies shall be repeated to accommodate the Pacific-time
zone. Director's Cut features shall be of a production quality and content, at
least comparable to, if not better than, the Director's Cut movies that are
currently provided by Playboy to Affiliate; (b) "Naughty Amateur Home Videos,"
which may be exhibited up to two (2) times per day, up to ten (10) days per
month, and shall be approximately sixty (60) minutes in length. Programmer may
premiere a new version of Naughty Home Videos once per month; and (c) "Inside
Adult," which currently premieres on Wednesday nights, with a replay on Saturday
night, and may contain Director's Cut movie "clips" not exceeding two (2)
minutes in length. Programmer shall be required to obtain Affiliate's consent
prior to including on the Channel 595 Service any programming more explicit than
the "Cable Version" other than as set forth in clauses (a) through (c) above.
Programmer acknowledges that any failure by Programmer to strictly comply with
the provisions set forth in this paragraph (i)(B) shall constitute a material
breach of this Agreement.
(C) Channel 596 Service. Each month, the Channel 596 Service shall
consist of a minimum of fifty (50) different movies, including at least ten (10)
new never-before featured movies per month, of a production quality at least
comparable to, if not better than, the production quality of the Channel 596
Service as of January 1, 2002. The movies broadcast on the Channel 596 Service
shall range between 70 to 85 minutes in length. Movies shall be scheduled to
start every 90 minutes, and on a staggered basis with the movies on the Channel
597 and 598 Services, with attention given to creating appealing double feature,
three-hour blocks. The Channel 596 Service shall use reasonable efforts to not
duplicate any movies between the Channel 596 Service and the Channel 597 and 598
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Services at any time. Notwithstanding the foregoing, the Channel 596 Service
will not, without written prior approval from Affiliate, broadcast any movie in
a month in which the same movie has aired on the Channel 597 Service or the
Channel 598 Service or in the month prior to or subsequent to said month. The
Channel 596 Service will use reasonable efforts to license and broadcast movies
that offer the greatest appeal when conformed to the Hotter standard. The
quality of all interstitial, promos, station I.D.s, public service
announcements, etc., shall be of a production quality equal to, if not greater
than, those currently aired on the Channel 596, 597 and 598 Services.
(D) Channel 597 Service. Each month, the Channel 597 Service shall
consist of a minimum of 50 different movies including at least fifteen (15) new
never-before featured movies per month, of a production quality at least
comparable to, if not better than, the production quality of the Channel 597
Service as of January 1, 2002. The movies broadcast on the Channel 597 Service
shall range between 70 to 85 minutes in length. Movies shall be scheduled to
start every 90 minutes, and on a staggered basis with the movies on the Channel
596 and 598 Services, with attention given to creating appealing double feature,
three-hour blocks. The Channel 597 Service shall use reasonable efforts to not
duplicate any movies between the Channel 597 Service and the Channel 596 and 598
Services at any time. Notwithstanding the foregoing, the Channel 597 Service
will not, without written prior approval from Affiliate, broadcast any movie in
a month in which the same movie has aired on the Channel 596 Service or the
Channel 598 Service or in the month prior to or subsequent to said month. The
Channel 597 Service will use reasonable efforts to license and broadcast movies
that offer the greatest appeal when conformed to the Hotter standard. The
quality of all interstitial, promos, station I.D.s, public service
announcements, etc., shall be of a production quality equal to, if not greater
than, those currently aired on the Channel 596, 597 and 598 Services.
(E) Channel 598 Service. Each month, the Channel 598 Service shall
consist of a minimum of 50 different movies including at least fifteen (15) new
never-before featured movies per month, of a production quality at least
comparable to, if not better than, the production quality of the Channel 598
Service as of January 1, 2002. The movies broadcast on the Channel 598 Service
shall range between 70 to 85 minutes in length. Movies shall be scheduled to
start every 90 minutes, with attention given to creating appealing double
feature, three-hour blocks (initially 6:00, 9:00, 12:00 and 3:00 A.M and P.M.
E.S.T.). The Channel 598 Service shall use reasonable efforts to not duplicate
any movies between the Channel 598 Service and the Channel 596 and 597 Services
at any time. Notwithstanding the foregoing, the Channel 598 Service will not,
without written prior approval from Affiliate, broadcast any movie in a month in
which the same movie has aired on the Channel 596 Service or the Channel 597
Service or in the month prior to or subsequent to said month. The Channel 598
Service will use reasonable efforts to license and broadcast movies that offer
the greatest appeal when conformed to the Hot standard. The quality of all
interstitial, promos, station I.D.s, public service announcements, etc., shall
be of a production quality equal to, if not greater than, those currently aired
on the Channel 596, 597 and 598 Services.
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(ii) Each month, approximately seventy five percent (75%) of all prime
time titles shown on the Channel 596 Service, Channel 597 Service and Channel
598 Service shall have been produced within the last eighteen (18) months;
provided, however, the remaining ten percent (10%) of all titles shown shall
have been produced within the last five (5) years from the date most recently
shown on the such service, unless otherwise approved by Affiliate.
(iii) Every sixty (60) days, each of the Channel 596 Service, Channel 597
Service and Channel 598 Service shall introduce a minimum of twenty-four (24)
films, which have never been exhibited on television via satellite or cable
distribution.
(iv) The Service shall adhere to the industry's standards and practices
(the "Industry's Standards and Practices") for adult programming, which will not
be circumvented, and shall comply with the following standards and practices
(the "Standards and Practices") which shall control if they conflict with the
Industry's Standards and Practices. Any act or portrayal that is prohibited to
be presented on the Service as provided below or which the Industry's Standards
and Practices prohibit to be presented in audiovisual material, hereinafter a
"Prohibited Act."
(A) With the exception of "Night Calls," "Night Calls 411," a
program currently entitled "Playboy's Nightly News" and any live programming
mutually agreed to by the parties in writing, each of which shall be monitored
and approved by Programmer's legal counsel, the Service shall offer tasteful
taped (no "live") adult programming (feature films and interstitials), it being
understood and acknowledged that the Service under no circumstances shall
contain content otherwise prohibited by this Exhibit A and shall not include any
act that is listed on the Video Store Version and not permitted in the Hotter
Version.
(B) Any violence, any activity that equates sexuality with violent
behavior, any scenes of non-consenting sexual activity, incest, sadism,
sadomasochism or forced bondage, as presented in the programming and promotional
materials of the Service during the Term, shall not be more explicit or graphic
than the corresponding genre of programming presented on the Service as of
January 1, 2002. Additionally, under no circumstances shall any programming on
the Service contain any scenes of bestiality, any scenes of sexual activity with
children (including "play-acting"), or any acts depicting male homosexuality.
(C) Nudity and sexual situations may be presented on the Service as
a matter of course; however, there shall be no depiction of any sexual acts
prohibited by this Exhibit A.
(D) The Service may include explicit and graphic language, however
the Service and promotional materials of the Service shall not include during
the Term descriptive dialogue that is more sexist, racist, violent, threatening
or patently offensive than such language that has been presented on the Service
as of January 1, 2002.
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EXHIBIT A (continued)
PROGRAMMING STANDARDS
<TABLE>
<CAPTION>
-------------------------------------- ----------------- ----------------- ----------------- ----------------
CABLE HOT HOTTER VIDEO
VERSION CABLE VERSION STORE
VERSION VERSION
-------------------------------------- ----------------- ----------------- ----------------- ----------------
<S> <C> <C> <C> <C>
Condoms * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Explicit language * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Female masturbation/external * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Girl/girl sex * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Medium shot penis/flaccid * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Medium shot vagina * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Oral sex/cunnilingus * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Wide shot penis/flaccid * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Wide shot vagina * * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Close-up penis/erect * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Close-up penis/flaccid * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Close-up vagina * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Female masturbation with penetration * * *
(fingers, objects)
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Male masturbation (no ejaculation) * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Medium shot penis/erect * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Oral sex/fellatio * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Vaginal penetration/objects * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Vaginal penetration/penis * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Vaginal penetration/tongue * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Wide shot penis/erect * * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Ejaculation * *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Anal penetration/objects *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Anal penetration /penis *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
Anal penetration/tongue *
-------------------------------------- ----------------- ----------------- ----------------- ----------------
</TABLE>
An * indicates that the described activity appears in the particular version.
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EXHIBIT B
PROGRAMMER'S CABLE RATE CARD FOR NON-HOTEL/MOTEL DISTRIBUTION
Affiliate's Share of Programmer's Share of
Gross Receipts Gross Receipts
-------------- --------------
Channel 594 Service *** ***
Channel 595 Service** *** ***
Channel 596 Service *** ***
Channel 597 Service *** ***
Channel 598 Service *** ***
** Programmer's Share of Gross Receipts shall *** during the Term, pursuant to
the following: ***.
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EXHIBIT C
MONTHLY PROGRAM SCHEDULES FOR THE SERVICE
(see attached)
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EXHIBIT D
PROGRAMMER'S RATE CARD FOR HOTEL/MOTEL DISTRIBUTION
Affiliate's Share of Programmer's Share of
Gross Receipts Gross Receipts
-------------- --------------
Channel 595 Service *** ***
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