Binding Letter of Intent - Playboy TV International LLC, Playboy Enterprises Inc., Carlyle Investments LLC and Carlton Investments LLC
PLAYBOY ENTERPRISES, INC.
680 NORTH LAKE SHORE DRIVE
CHICAGO, IL 60611
March 7, 2001
Via Electronic and Regular Mail
William Fisher, President
Playboy TV International LLC
404 West Washington Avenue, 8th Floor
Miami Beach, FL 33139
Re: Binding Letter of Intent
Dear William:
This letter (including the attachment hereto, the "Amendment Letter
Agreement") sets forth the binding agreement by and among Playboy Enterprises,
Inc. (on behalf of itself and Playboy Entertainment Group, Inc.), Carlyle
Investments LLC, Carlton Investments LLC and Playboy TV International LLC
("PTVI") (each, a "Party" and collectively, the "Parties") relating to certain
pre-existing agreements among the Parties, on the following terms and
conditions. It is agreed that this letter constitutes an agreement and is
legally binding on the Parties.
1. Amendment of Pre-existing PTVI Agreements. The Parties agree to amend the
pre-existing agreements by and among the Parties pursuant to the terms set
forth in Attachment 1.
2. Timing. The Parties agree to negotiate in good faith and execute a
definitive version of the amendments incorporating the terms and
conditions set forth in Attachment 1 (the "Definitive Amendments"). The
Parties agree to use their respective best efforts to execute such
Definitive Amendments as soon as possible. Notwithstanding the intention
to execute the Definitive Amendments, the Parties agree that the terms of
Attachment 1 shall be deemed to take effect immediately upon execution of
this Amendment Letter Agreement.
3. Default Agreement. This Amendment Letter Agreement constitutes a legally
binding and enforceable agreement between the Parties hereto with respect
to the provisions hereof. In the event that the Parties fail to execute
the Definitive Amendments, the terms of this Amendment Letter Agreement
shall be deemed the definitive amendments to the pre-existing agreements
among the Parties. Notwithstanding the foregoing, except as indicated in
this Amendment Letter Agreement or as subsequently modified in the
Definitive Amendments, the agreements previously entered into among the
Parties shall remain in full force and effect.
4. Confidentiality. Except as provided herein, the existence and the terms of
this Amendment Letter Agreement and the amendments contemplated herein
shall be maintained in
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confidence by the parties hereto and their respective officers, directors
and employees. Except as compelled to be disclosed by judicial or
administrative process or by other requirements of law, legal process,
rule or regulation (including to the extent required in connection with
any filings made by the parties or their controlling affiliates with the
Securities and Exchange Commission) all public announcements, notices or
other communications regarding such matters to third parties, including
without limitation any disclosure regarding the transactions contemplated
hereby, shall require the prior approval of all parties.
5. General. This Letter Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of Delaware, without
giving effect to principles of conflicts of law. For convenience, this
Letter Agreement may be signed in more than one counterpart and signature
pages may be exchanged by facsimile.
[Remainder of page intentionally left blank.]
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If you determine that the foregoing is acceptable, we would
appreciate acknowledgment of that determination by the execution and delivery to
us of the enclosed copy of this letter.
We look forward to your favorable consideration of this letter.
Very truly yours,
Playboy Enterprises, Inc.
By: /s/ Linda Havard
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Name: Linda Havard
------------------------
Title: Chief Financial Officer
-----------------------
The foregoing is agreed to and accepted.
Carlyle Investments LLC
By: /s/ Steven Bandel
--------------------------------
Name: Steven Bandel
--------------------------------
Title: President
--------------------------------
The foregoing is agreed to and accepted
Carlton Investments LLC
By: /s/ Steven Bandel
--------------------------------
Name: Steven Bandel
--------------------------------
Title: President
--------------------------------
Playboy TV International LLC
By: /s/ William Fisher
--------------------------------
Name: William Fisher
--------------------------------
Title: President
--------------------------------
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ATTACHMENT 1
AMENDMENTS TO PTVI AGREEMENTS
PARTIES (1) Carlyle Investments LLC and Carlton
Investments LLC (as successors to VSI,
"Carlyle/Carlton"), (2) PEGI, (3) PEI and (4)
PTVI.
BACKGROUND o PTVI and PEI, together with Playboy.com,
Inc. and Morehaven Investments, Inc., have
entered into a binding letter of intent of
even date herewith, including the exhibits
attached thereto (the "Letter Agreement")
that, among other things, relates to
PTVI's participation in Playboy.com's
local internet businesses and PTVI's
creation and operation of web pages
promoting the local PTVI channels (the "TV
Web Pages" or "Interim TV Web Sites,"
where applicable, collectively the "TV
Sites")
o The Letter Agreement contains various terms
relating to the creation and operation of
the TV Sites, including content control
matters.
o The Parties have agreed to amend the PTVI
Operating Agreement, the PTVI Program
Supply Agreement and the PTVI Trademark
License Agreement as described in this term
sheet to provide for the funding and
operation of the TV Sites and to reflect
various other agreements of the parties.
o The Parties acknowledge that they have
been negotiating, and continue to
negotiate, certain other amendments to the
PTVI Operating Agreement, the PTVI Program
Supply Agreement and the PTVI Trademark
License Agreement. Notwithstanding the
amendments contained herein, and the
expectation that they will immediately
take effect, the Parties acknowledge that
such negotiations will continue, on a
timely basis and in good faith.
DEFINITIONS Certain terms are defined in the body of this
term sheet. Capitalized terms used but not
defined in this term sheet will have the
meaning given to them in the PTVI Operating
Agreement, the PTVI Program Supply Agreement or
the PTVI Trademark License Agreement, as
applicable.
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AMENDMENTS TO
OPERATING AGREEMENT
FUNDING OBLIGATION; o To initially fund the creation and launch
INCREASE TO MAXIMUM of the TV Sites, Carlyle/Carlton and PEGI
FUNDING CAP will make Capital Contributions to PTVI,
pro rata in accordance with their
respective membership interests, subject to
an aggregate maximum of $5 million (the
"Contribution"). The Contribution will be
funded pursuant to the Web Channel Annual
Budget (defined below) until fully funded.
o The Parties agree that no Member will be
entitled to special or priority
distributions with respect to the
Contribution.
o The Contribution will be in addition to
each Member's obligation to make Mandatory
Additional Cash Contributions, effectively
increasing the maximum aggregate amount of
Mandatory Additional Cash Contributions to
$105 million. The Members will continue to
fund PTVI's deficits with respect of its
other business activities through
Mandatory Additional Cash Contributions as
contemplated by the Operating Agreement.
INDEPENDENT BUDGET o The Contribution will be specifically
allocated to the creation and launch of
the TV Sites in an independent budget that
is determined and approved in a manner
consistent with, but not made part of,
PTVI's Annual Budgets (each, a "Web
Channel Annual Budget"). The first Web
Channel Annual Budget will be presented to
PTVI's Management Committee as soon as
reasonably practicable, but not later than
June 15, 2001.
o No funds of PTVI other than the
Contribution will be allocated to fund the
creation and operation of the TV Sites.
ADJUSTMENT TO BUY-UP OPTION o For purposes of determining Founders' Price
in connection with an exercise by PEGI of
the Buy-Up Option in Year 2, Year 3 or
Year 4, the Capital Contributions included
in the calculation of Founders' Price will
include the actual amount of the
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Contribution made as of the measuring date,
less amounts distributed, if any, to the
Members from costs recouped by PTVI.
o In all other respects, the Buy-Up Option
will remain in full force and effect.
AMENDMENTS TO PROGRAM
SUPPLY AGREEMENT
AMENDMENTS TO o ***
CALCULATION OF PROGRAM
LICENSE FEE
AMENDED SCOPE OF RIGHTS UNDER o The scope of the grant of rights under the
PROGRAM SUPPLY AGREEMENT Program Supply Agreement will be amended
to include the activities expressly
contemplated by the Letter Agreement
(including with respect to the TV Sites)
and to acknowledge that such activities are
subject to the other requirements of such
agreement.
o The duration of such increase in scope will
be co-terminus with the transaction
contemplated by the Letter Agreement,
unless sooner terminated in accordance with
the terms of the Program Supply Agreement.
AMENDMENTS TO
TRADEMARK LICENSE
AGREEMENT
AMENDED SCOPE OF RIGHTS UNDER o The scope of the grant of rights under the
TRADEMARK LICENSE Trademark License Agreement will be
AGREEMENT amended to include the activities
expressly contemplated by the Letter
Agreement (including with respect to the TV
Sites) and to acknowledge that such
activities are subject to the other
requirements of such agreement.
o The duration of such increase in scope will
be co-terminus with the transaction
contemplated by the Letter Agreement,
unless sooner terminated in accordance with
the terms of the Trademark License
Agreement.
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