Affiliation Agreement - Playboy Entertainment Group Inc. and Primestar Partners LP
AFFILIATION AGREEMENT BY AND BETWEEN Playboy Entertainment Group, Inc.
AND
PRIMESTAR(R) PARTNERS L.P., DATED February 29, 1996
TABLE OF CONTENTS
1. RIGHTS
2. TERM
3. CONTENT OF THE SERVICE
4. DELIVERY AND DISTRIBUTION OF THE SERVICE
5. FEES
6. REPORTS
7. PROMOTION
8. WARRANTIES AND INDEMNITIES
9. EARLY TERMINATION RIGHTS
10. FORCE MAJEURE
11. NOTICES
12. CONFIDENTIALITY; PRESS RELEASES
13. MISCELLANEOUS
(a) Assignment; Binding Effect
(b) Entire Agreement: Amendments; Waivers
(c) Governing Law
(d) Relationship
(e) Severability
(f) No Inference Against Author
(g) No Third Party Beneficiaries
(h) Headings
(i) Non-Recourse
EXHIBIT A,
License Fees
<PAGE>
AFFILIATION AGREEMENT
---------------------
THIS AGREEMENT made as of the 29th day of February, 1996 is by and between
Playboy Entertainment Group, Inc., a Delaware Corporation, ("Network"), and
PRIMESTAR(R) Partners, L.P., ("Affiliate"), regarding the carriage of the
television programming service known as Playboy TV (the "Service").
1. RIGHTS:
------
(a) Grant of Rights. Network hereby grants to Affiliate, and
Affiliate hereby accepts the non-exclusive right, and the obligation, to (1)
receive the signal of the Service, (2) digitize, compress or modify the signal
of the Service as set forth in Section 4(f) hereof, and to encode, re-uplink and
transmit the Service to any satellite for transmission and distribution to
Satellite Subscribers (3) authorize Affiliate's Distributors (pursuant to terms
and conditions, including fees, determined by Affiliate) to resell and
redistribute the Service to Satellite Subscribers, and (4) authorize the
reception of the Service nationwide (including collectively the fifty (50)
United States, its territories, possessions and commonwealths, and the District
of Columbia) by Satellite Subscribers who receive the signal of the Service by
means of equipment capable of receiving audio/visual/data signals and/or
programming directly from any K- or Ku-band satellite including, but not limited
to, medium power and high power satellites ("Satellites"). As used herein,
"Satellite Subscribers" or a "Satellite Subscriber" shall mean each
location to which Affiliate knowingly provides the Service, including,
without limitation,
Single family residences, whether detached single family
dwellings or multiple dwelling units, including, but not limited
to, apartment houses, condominiums, cooperatives, town homes,
and, subject to Network's prior approval (which shall not be
unreasonably delayed or withheld), the individual lodging rooms
of dormitories, hotels and motels.
"Distributor" shall mean any entity authorized by Affiliate to resell
or redistribute the Service to Satellite Subscribers but shall not
include any entity which retransmits the Service.
(b) In the event Network provides an eastern and western feed of the
signal of the Service, Network shall provide Affiliate with advance notice
thereof, and Affiliate shall have the right to elect, in its sole and absolute
discretion, to exhibit either the eastern or western feed of such signal.
2
<PAGE>
2. TERM:
----
Unless earlier terminated pursuant to the terms of this Agreement, the
initial term of this Agreement shall be for one (1) year commencing on February
29, 1996 and expiring on February 28, 1997.
3. CONTENT OF THE SERVICE:
----------------------
(a) Throughout the Term the Service shall contain at least ten (10)
hours of programming per day, exclusive of Infomercials (as defined below),
which ten (10) hours must consist of adult programming. Notwithstanding the
foregoing, Affiliate may, at Affiliate's option, distribute the Service, in
accordance with the terms and conditions of this Agreement, for more than ten
(10) hours per day upon Affiliate's written notice to Network of its desire to
increase the carriage hours for the Service and identifying the additional hours
during which the Service shall be distributed. Network shall, for each month of
the Term, send one (1) copy of its monthly program schedule as soon as it is
available to Affiliate, ATTENTION: Vice President, Marketing. During (i) the
hours of the day that Network is not transmitting the Service ("Dark Hours"),
(ii) the hours, if any, between 8 a.m. and 10 p.m. Eastern time that Affiliate
is not transmitting the Service (the "Additional Hours") and (iii) the hours of
the day that Network is transmitting sixty (60) minutes or longer program length
commercials ("Infomercials"), Affiliate may carry any programming Affiliate
desires, in Affiliate's sole and absolute discretion, without first notifying
Network. Network and Affiliate acknowledge that Infomercials are not a part of
the Service, and that Affiliate shall not be obligated to distribute such
Infomercials; provided, however that in the event that Affiliate elects, in its
sole and absolute discretion to distribute the Infomercials, Network shall
indemnify Affiliate in connection with such distribution as provided in Section
8(d) hereof. Affiliate acknowledges that the Service includes 900 number spots
of two (2) minutes each in duration, that the Service includes "Playboy Home
Shopping" and that once per week Network transmits an up to sixty (60) minute
block of promotional programming intended for its affiliates. Further, Affiliate
acknowledges that such 900 number spots, the "Playboy Home Shopping" programming
and sixty (60) minute promotional programming spots are not included in and are
separate and apart from Infomercials.
(a)(1) Network shall use commercially reasonable efforts to provide
Affiliate with a "clean" entry point to the Service at 10 p.m. Eastern
time each day, provided, however, that Network's occasional failure to
provide such entry due to live events or other programming shall not
be considered a breach of this Agreement.
(b) Network shall promptly give written notice of any offer made by
Network to any of Network's affiliate distributors for commercial announcement
time on the Service, and the terms and conditions of such offer. Network shall
make available to Affiliate the most favorable number of minutes of commercial
announcement time per hour of the Service given or offered by Network to any of
Network's affiliate distributors, which commercial announcement time may be used
at Affiliate's option and control. In addition, such commercial announcement
time shall be provided to Affiliate under the most favorable terms and
conditions for which commercial announcement time is provided by Network to any
such distributor, including, but not limited to, the distribution of such
commercial announcement time throughout the Service, placement of such
commercial announcement time in the Service programming, and insertion of such
commercial announcement into the Service programming time by Network. Affiliate
shall
3
<PAGE>
have the right to retain for itself all of the proceeds derived from the sale of
the commercial announcement time furnished to it hereunder.
(c) If for any reason, including without limitation causes beyond the
control of Network, Affiliate, in good faith, determines that the Service does
not include programming as required in Section 3(a) hereof, Affiliate may, in
addition to any and all remedies available to Affiliate hereunder, in law or in
equity, discontinue carriage of the Service upon the expiration of thirty (30)
days following Affiliate's notice to Network thereof, unless Network has cured
such default prior to the expiration thereof
(d) During the Term, Network shall provide the Service in its
entirety to Affiliate. When the phrase "in its entirety" is used in this Section
3(d), it means that each subscriber of Affiliate receiving the Service shall be
able to receive, at all points in time between the hours of 10 p.m. and 8 a.m.
Eastern time, or as such carriage hours may be increased pursuant to Paragraph
3(a), programming received at each such point in time by any other subscriber to
the Service, and if any subscriber to the Service is receiving, at any given
point in time, programming that is different than the programming received by
any subscriber of Affiliate receiving the Service at such point in time,
Affiliate shall have the unconditional right to elect which programming it
desires to subdistribute as permitted by this Agreement, and/or which
programming it will authorize for reception by Satellite Subscribers.
4. DELIVERY AND DISTRIBUTION OF THE SERVICE
----------------------------------------
(a) During the Term, Network shall, at its own expense, deliver an
analog signal of the service to Affiliate's uplink facility by transmitting such
signal via a domestic satellite commonly used for transmission of cable
television programming and shall, at its own expense, fully encode the satellite
signal of the Service utilizing scrambling technology commonly used in the
domestic cable television industry. Except as otherwise provided in this Section
4(a), Affiliate shall, at its own expense, furnish an earth station and all
other facilities necessary for the receipt of such satellite transmission and
the uplink of such transmissions to a Satellite, including a back-up receiver
decoder.
(b) Network shall provide to Affiliate a video and audio signal of
the Service of a technical quality equivalent to the technical quality of audio
and video signals delivered by other cable television programming services.
(c) Affiliate may distribute the Service as a part-time service,
between the hours of 10 p.m. and 8 a.m. Eastern time, or as such carriage hours
may be increased pursuant to Paragraph 3(a), (excluding Dark Hours, Additional
Hours and Infomercials) and will distribute the Service over one (1) designated
channel without alteration, editing or delay. Network agrees that Affiliate will
have complete authority to control, to designate and to change the channels on
which the Service is carried, provided, however, that Affiliate shall provide
Network with written notice of such change within thirty (30) days thereof, and
any new channel over which the Service is carried shall provide signal quality
equal to or better than the channel it replaces.
(d) Affiliate retains and reserves any and all rights in and to all
signal distribution capacity contained within the bandwidth of the Service as
received by Affiliate, including, without limitation, the vertical blanking
interval, audio sub-carriers and any other portions of the bandwidth of the
signal of the Service. Affiliate shall have no obligation to digitize, compress,
re-uplink or otherwise transmit any of the signal distribution capacity
contained within the bandwidth of the Service as received by
4
<PAGE>
Affiliate, including, without limitation, the vertical blanking interval, audio
channels and any other portions of the bandwidth that may be created or made
usable as a result of the conversion of the signal of the Service to a
compressed, digital or other non-analog format, except the principal audio
carriage frequency (including closed captioning information) and the principal
video carriage frequency of the Service. Nothing herein shall preclude Affiliate
from exercising and exploiting such rights by any means and in any locations
freely and without restriction; provided, however, that any such use by
Affiliate shall not materially degrade, or otherwise materially interfere with,
the picture quality of the Service or the audio portion of the Service signal
which is the principal audio carriage frequency of the Service (including closed
captioning information).
(e) Affiliate and its Distributors may sell and distribute the Service
on a pay-per-transaction (e.g., pay-per-title, pay-per-hour, etc.) basis
(collectively the "PPV Offerings"). In addition, Affiliate agrees to use
commercially reasonable efforts to make available, no later than June 1, 1996,
for its Distributors to sell and distribute the Service on a monthly subscriber
basis (the "Subscription(s)"). Affiliate shall have the right (but not the
obligation) in its discretion to make the PPV Offerings available in blocks as
short as sixty (60) minutes, and no longer than four (4) hours; provided,
however, that any PPV Offerings which consists of a motion picture shall be no
shorter than one hundred-twenty (120) minutes. A Subscription shall last for a
period of no less than one (1) calendar month and shall entitle the viewer to
receive the Service during all of the hours the Service is broadcast by
Affiliate.
(f) Network hereby grants Affiliate the right to receive the signal of
the Service, to digitize, compress, modify, replace, convert or otherwise
technologically manipulate the signal, and to transmit the signal as so altered
(the "Altered Signal") to a satellite, including, without limitation a Ku-Band
Satellite, and/or to a location designated by Affiliate (in its sole and
absolute discretion), for redistribution to terrestrial or other reception sites
capable of receiving and utilizing the Altered Signal as set forth in Section
1(a) of this Agreement, provided that no such alteration, transmission,
redistribution, reception or other use will cause a material change in a
viewer's perception of the principal video or principal audio presentation of
the Service.
Furthermore, Network shall not change the signal of the Service in
such a way as to technically or technologically defeat, or otherwise interfere
with, Affiliate's rights under this Section 4(f). In the event Network
interferes with or otherwise prevents receipt, digitization, compression,
modification, replacement, conversion, utilization or manipulation of the signal
of the Service by Affiliate pursuant to the terms of this Section 4(f), then
Affiliate shall have the right to discontinue carriage, immediately, of the
Service.
5. FEES
In consideration of the terms and conditions set forth herein, Affiliate
shall, subject to Sections 5(b)(i) - (iv), pay the following fees ("Fees" and
or "Fee"):
(a) For each calendar month during the Term, Affiliate shall pay
Network a Fee for each Satellite Subscriber who receives the Service hereunder,
whether Service is received by Satellite Subscriber on a PPV Offerings or
Subscription basis. The Fee(s) shall be calculated as set forth in Exhibit A.
(b) In calculating Fee(s) due as described under Section 5(a) above,
Satellite Subscriber shall not include (i) up to one hundred (100) full-time
employees of Affiliate or Distributor or any affiliated party who are not
charged for the Service, subject
5
<PAGE>
to Network's consent (which shall not be unreasonably delayed or withheld); or
(ii) subscribers who have not paid their monthly rate to Distributor for a given
month and are subsequently deauthorized; (iii) subscribers of Distributor who
are authorized to receive the Service as a free preview, provided, that such
free preview may be offered only with the Network's consent, or (iv) retail
locations (e.g., dealer showrooms) and other public locations (e.g., shopping
malls and fairs) where Affiliate or a Distributor is demonstrating the Service
for marketinq and promotional purposes.
(b)(1) Affiliate shall provide Network, at Affiliate's sole cost,
with two (2) integrated receiver decoders and the Service, one
(1) at Network's corporate office in Beverly Hills, California,
and one (1) at the Playboy mansion in Los Angeles, California;
such locations shall not be deemed Satellite Subscribers for the
purposes of the payments provisions hereof.
(c) Any undisputed Fees payable by Affiliate to Network hereunder
shall be due and payable forty-five (45) days after the end of the pertinent
calendar month during the Term. In the event of a good faith dispute regarding
any Fees, Affiliate shall notify Network of the basis of the dispute, the
parties shall use their respective good faith efforts to resolve the dispute
within sixty (60) days following Affiliate's notice to Network thereof, and no
such disputed Fees shall be due or payable by Affiliate to Network unless and
until such dispute has been resolved to the satisfaction of Affiliate and
Network.
(d) Any undisputed Fees that are unpaid within forty-five (45) days
after they are due and payable shall accrue interest at one and one-half percent
(1 1/2%) per month or the highest lawful rate, whichever is less, from the due
date until payment is received by Network. Affiliate shall be liable to Network
for all reasonable costs and expenses (including, but not limited to, fines,
forfeitures, attorneys' fees, disbursements and administrative or court costs)
in connection with the collection of any such overdue amounts.
6. REPORTS
-------
(a) Affiliate shall send to Network, as and when available due to
current technical constraints, but when sent, not later than forty-five (45)
days after the end of each calendar month during the Term, a statement on a form
mutually acceptable to Affiliate and Network. Affiliate shall deliver such
statement to Network prior to or along with the amount payable to Network as
provided in this Agreement. Each such accounting statement shall be certified by
an appropriate officer of Affiliate or an independent billing service as to the
accuracy of such statement, and shall include:
(i) the aggregate Fees in connection with the PPV Offerings for the
calendar month;
(ii) the aggregate Fees in connection with Subscriptions for the
calendar month;
(iii) the origin of all Fees for such calendar month, itemized by PPV
Offerings and Subscription length;
(iv) the dollar amount of Network's share of Fees for such calendar
month;
(v) for each type of PPV Offering, the number of Satellite Subscribers
purchasing such PPV Offering and the number of purchases of PPV
Offerings each day during such calendar month; and the total number of
6
<PAGE>
Affiliate's subscribers for both PPV Offerings and Subscriptions
during such calendar month;
(vi) the total number of active Subscriptions, by Subscription term
length at the end of the last day of the applicable month, and at the
end of the last day of the immediately preceding month, and the total
number of authorizations and de-authorizations by Subscription term
length during the applicable month; and
(vii) a list of all hotels and motels to which the Service is provided
by Affiliate during such calendar month.
(b) Affiliate agrees to keep and maintain accurate books and records
of all matters directly relating to this Agreement in accordance with generally
accepted accounting principles. During the Term and for one (1) year after the
termination of this Agreement, Affiliate's books and records shall be available
to Network for inspection and audit, during normal business hours, at Network's
expense, at Affiliate's offices upon reasonable notice to Affiliate. Network's
right to perform such audit shall be limited to once in any twelve (12) month
period during the Term and shall be limited to an audit with respect to amounts
to be paid in the current and prior calendar year only. If Network audits
Affiliate's books hereunder, Network must make any claim against Affiliate
within the earlier of three (3) months after Network's representative leaves
Affiliate's offices, or twenty-four (24) months after the close of the earliest
month which is the subject of such claim. In addition, any such claim, if and
when made, must relate to the then-current calendar year or the immediately
preceding calendar year only. If a claim is not made within any limitation set
forth herein, then the Fees, any Renewal Fees, and all reports required
hereunder shall be deemed final and uncontestable, and Network will be deemed to
have forever and conclusively waived its right, whether known or unknown, to
collect any shortfalls from Affiliate for the period(s) audited. If any such
audit reveals an under-payment to Network of greater than ten percent (10%) of
the sum due to Network hereunder, then Affiliate shall reimburse Network for the
reasonable costs of such audit, and any applicable interest thereon pursuant to
Subparagraph 5 (d) hereof.
7. PROMOTION AND MARKETING SUPPORT
-------------------------------
(a) Network shall establish a marketing fund for Affiliate to utilize
in promoting the Service, the amount of which shall equal the additional Fees
during the first month of this Agreement attributable to the additional two (2)
hours during which Affiliate shall transmit the Service pursuant to this
Agreement (the "Marketing Fund"). The Marketing Fund shall be calculated by
subtracting the license fees payable to Network generated from purchases during
the month of February 1996 from the license fees payable to Network generated
from purchases during the month of March 1996, which calculation shall be
determined and disclosed to Network by Affiliate in writing no later than July
10, 1996. Network will reimburse marketing claims submitted by Affiliate for
pre-approved promotions which encourage Satellite Subscribers to purchase the
PPV Offerings or Subscriptions when offered. Claims towards these funds must be
submitted to Network by February 28, 1997; any unused portion of this fund shall
remain with Network upon the expiration of the Term hereof. Affiliate shall
market and promote the Service in a manner similar to its marketing and
promotion of other similar, adult premium and/or pay-per-view services;
provided, however, that Affiliate may market and promote other such services
differently and/or more frequently, if such service provides Affiliate with
consideration or compensation therefore. In connection therewith, Network shall
provide Affiliate, upon Affiliate's request, with promotional and marketing
advice. Affiliate shall make all marketing and promotion decisions in its sole
discretion; the parties understand and agree that Affiliate currently expects to
use a range of media
7
<PAGE>
(including without limitation, print, advertising and cross channel promotional
spots) to market and promote the Service. Affiliate shall publicize the schedule
of the Service in the Territory in a manner similar to other similar adult
premium and/or pay-per-view services, including without limitation the
publication of the Service programming schedule in the television listinqs and
program guides which Affiliate distributes.
(i) Affiliate shall allow Network reasonable access to Affiliate's and
Distributor's customer service representatives for training by
Network, at Network's sole expense, no more than two (2) times per
calendar year.
(ii) Affiliate shall cooperate with Network in commercially reasonable
marketing tests, surveys, ratings pools and other research, provided,
however, that any proprietary information furnished by Affiliate shall
be kept confidential and Affiliate shall keep confidential all
research funded by network and delivered to Affiliate. Network agrees
to forward to Affiliate any and all information and reports resulting
from such research; provided, however, that Network shall not be
required to forward any information protected under confidentiality
terms with a third party.
(b) Affiliate acknowledges that the names and marks "Playboy" and
"Playmate" (and the names of certain programs which appear in the Service) are
the exclusive property of Network and its suppliers and that Affiliate has not
and will not acquire any proprietary rights therein by reason of this Agreement.
Network shall have the right to approve any of Affiliate's mentioning or using
of such names or marks in publicity about Network or the products or programming
included in the Service. Uses of such names and marks in routine promotional
materials such as program guides, program listings and bill stuffers, shall be
deemed approved unless Network specifically notifies Affiliate to the contrary
prior to such use by Affiliate.
8. WARRANTIES AND INDEMNITIES
--------------------------
(a) Network represents and warrants to Affiliate that (i) Network is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware; (ii) Network has the power and authority to enter into
this Agreement and to fully perform its obligations hereunder; (iii) Network is
under no contractual or other legal obligation which shall in any way interfere
with its full, prompt and complete performance hereunder; (iv) the individual
executing this Agreement on behalf of Network has the authority to do so; (v)
Network is in compliance with all laws, rules, regulations and court and
administrative decrees to which it is subject including, without limitation, all
applicable rules and regulations of the Federal Communications Commission (the
"FCC"); (vi) Network has, or will have acquired at the pertinent time all or
part of the Service is made available to Affiliate, good title to, and/or each
and every property right (whether relative to tangible or intangible property),
or license, usage or other right necessary or appropriate to effectuate the acts
or performances contemplated by, or satisfy the obligations imposed on it
pursuant to, this Agreement, including, without limitation, all permits, rights,
licenses and approvals necessary, required or appropriate for any and all
performances included through to the premises and to the listeners frequenting
the premises of Satellite Subscribers; (vii) neither the Service, any program
related thereto, or any component thereof is subject to, or the subject of, any
lien, encumbrance, charge, lis pendens, administrative proceeding, governmental
investigation, or litigation pending or threatened; (viii) the use and
exhibition of the Service by Affiliate, as contemplated by this Agreement, will
not cause Affiliate to violate any law, rule, regulation or court or
administrative decree; and (ix) the obligations created
8
<PAGE>
by this Agreement, insofar as they purport to be binding on Network, constitute
legal, valid and binding obligations of Network enforceable in accordance with
their terms.
(b) Affiliate represents and warrants to Network that (i) Affiliate is
a limited partnership duly organized and validly existing under the laws of the
State of Delaware, (ii) Affiliate has the power and authority to enter into this
Agreement and to fully perform its obligations hereunder, (iii) Affiliate is
under no contractual or other legal obligation which shall in any way interfere
with its full, prompt and complete performance hereunder; (iv) the individual
executing this Agreement on behalf of Affiliate has the authority to do so; and
(v) the obligations created by this Agreement, insofar as they purport to be
binding on Affiliate, constitute legal, valid and binding obligations of the
Affiliate enforceable in accordance with their terms.
(c) Affiliate and Network shall each indemnify, defend and forever
hold harmless the other, the other's affiliated companies and each of the
other's (and the other's affiliated companies') respective officers,
shareholders, directors, employees, partners and agents, against and from any
and all losses, liabilities, claims, costs, damages and expenses (including,
without limitation, fines, forfeitures, attorneys' fees, disbursements and court
or administrative costs) arising out of any breach of any term of this Agreement
or any warranty, covenant or representation contained herein.
(d) Without limiting the provisions of Section 8(c) hereof, Network
will indemnify, defend and forever hold Affiliate, its Distributors and their
respective affiliated companies, and each of Affiliate's and its Distributor's
and their respective affiliated companies' respective officers, shareholders,
directors, employees, partners and agents harmless from and against any and all
losses, liabilities, claims, costs, damages and expenses (including, without
limitation, fines, forfeitures, attorneys' fees, disbursements and
administrative or court costs) arising directly or indirectly out of the content
of the Service and/or the Infomercials or the use and delivery of the Service
and/or the Infomercials hereunder (including, but not limited to, sponsorship,
promotional and advertising spots, any background music and anything else
inserted by Network or any party other than Affiliate), including, without
limitation, any losses, liabilities, claims, costs, damages and expenses based
upon any suit, lien, encumbrance, charge, lis pendens, administrative
proceeding, government investigation or litigation relating to the Service, any
program included therein or any component thereof, or based upon alleged or
proven libel, slander, defamation, invasion of the right of privacy or
publicity, or violation or infringement of copyright (including music
performance rights for any and all performances through to subscribers),
literary or music synchronization rights, obscenity, indecency, or any other
form or forms of speech (whether or not protected by the Constitution of the
United States or any State) or otherwise arising out of the content of the
Service as furnished by Network hereunder (provided that Affiliate shall, to
like extent, indemnify Network for any deletion or addition of material by
Affiliate to the Service which deletion from, or addition to, the Service gives
rise to losses, liabilities, claims, costs, damages or expenses (including,
without limitation, fines, forfeitures, attorneys' fees, disbursements and court
or administrative costs)).
(e) In connection with any indemnification provided for in this
Section 8, each party shall so indemnify the other only if such other party
claiming indemnity shall give the indemnifying party prompt notice of any claim
or litigation to which its indemnity applies, it being agreed that the
indemnifying party shall have the right to assume the full defense of any or all
negotiations, claims or litigation to which its indemnity applies subject to the
indemnified party's prior consent, which consent shall not be unreasonably
withheld or delayed. The indemnified party will cooperate fully (at the cost of
the
9
<PAGE>
indemnifying party) with the indemnifying party in such defense and in the
settlement of such claim or litigation, and the indemnified party shall make no
compromise or settlement of any such claim without the prior written consent of
the indemnifying party. The settlement of any claim or action by the indemnified
party without the prior written consent of the indemnifying party shall release
the indemnifying party from its obligations hereunder with respect to such claim
or action so settled.
(f) Network represents, warrants and covenants that (i) it has
obtained general liability insurance covering the Service and all elements
thereof from a nationally recognized insurance carrier and in accordance with
industry standards; (ii) such insurance shall remain in full force and effect
throughout the Term; (iii) Affiliate shall be named as an additional insured and
loss payee on the insurance policy and such policy shall provide that the
proceeds thereof shall be payable to Affiliate; (iv) Network shall provide
Affiliate with documentation to such effect upon the execution hereof; (v) at
least thirty (30) days prior to the expiration of such policy Network shall
provide Affiliate with appropriate proof of issuance of a policy continuing in
force and effect the insurance covered by the insurance so expiring; and (v)
Network shall provide Affiliate with thirty (30) days written notice of any
changes in such policy.
(g) The representations, warranties and indemnities contained in this
Section 8 shall continue throughout the Term and the indemnities shall survive
the expiration or termination of this Agreement, regardless of the reason for
such expiration or termination.
9. EARLY TERMINATION RIGHTS:
------------------------
(a) In addition to Network's other rights at law or in equity or
pursuant to other provisions of this Agreement, Network may, by so notifying
Affiliate, terminate this Agreement: (i) if Affiliate is in material breach of
this Agreement, provided, however, that if such breach is of the type that is
curable, then Network shall not exercise its termination or other rights at law
or in equity hereunder unless Network has, by so notifying Affiliate in writing,
given Affiliate at least thirty (30) days from the time such notice is received
by Affiliate to fully cure such material breach and to demonstrate to Network
that such material breach has been cured; or (ii) if Affiliate has filed a
petition in bankruptcy, is insolvent, or has sought relief under any law related
to Affiliate's financial condition or its ability to meet its payment
obligations; or (iii) if any involuntary petition in bankruptcy has been filed
against Affiliate, or any relief under any such law has been sought by any
creditors of Affiliate, unless such involuntary petition is dismissed, or such
relief is denied within thirty (30) days after it has been filed or sought.
(b) In addition to Affiliate's other rights at law or in equity or
pursuant to other provisions of this Agreement, and in addition to any other
right to terminate provided hereunder, Affiliate may, by so notifying Network,
terminate this Agreement: (i) if Network is in material breach of this
Agreement, including, but not limited to Network changing the content or
reducing the volume of hours of the Service as described in Section 3 hereunder;
provided, however, if such breach is of the type that is curable, then Affiliate
shall not exercise its termination or other rights at law or in equity hereunder
unless Affiliate has, by so notifying Network, given Network at least thirty
(30) days from the time such notice is sent, to fully cure such material breach
and to demonstrate to Affiliate that such material breach has been cured, or
(ii) if Network has filed a petition in bankruptcy, is insolvent or has sought
relief under any law related to Network's financial condition or its ability to
meet its payment obligations; or (iii) if any involuntary petition in bankruptcy
has been filed against Network, or any relief under any such law has been
10
<PAGE>
sought by any creditors of Network, unless such involuntary petition is
dismissed, or such relief is denied, within thirty (30) days after it has been
filed or sought; or (iv) on at least fifteen (15) days' notice in the event that
delivery of the Service is discontinued or interrupted for a continuous period
of fifteen (15) days. Notwithstanding anything contained herein to the contrary,
Affiliate shall have the right, in Affiliate's sole and absolute discretion, to
discontinue carriage of the Service by providing Network with written notice
within thirty (30) days of such deletion.
10. FORCE MAJEURE:
--------------
Except as herein provided to the contrary, neither Affiliate nor Network
shall have any rights against the other party hereto for the non-operation of
facilities or the non-furnishing of the Service if such non-operation or non-
furnishing is due to an act of God; inevitable accident; fire; lockout; flood;
tornado; hurricane, strike, or other labor dispute; riot or civil commotion;
earthquake, war; act of government or governmental instrumentality (whether
federal, state or local); failure of performance by a common carrier; failure in
whole or in part of technical facilities; or other cause (financial inability
excepted) beyond such party's reasonable control. In the event of non-operation
or non-furnishing of the Service, Affiliate shall have the right, immediately,
to insert programming of its choice on the channel otherwise identified with the
Service until such time as the Service resumes full operation. Credit will be
given to Affiliate, however, on that portion of the Service which is affected by
any interruption during any month equal to the product of (x) the Fees or any
Renewal Fees which would be due for such month, calculated in accordance with
this Agreement, assuming no interruption of Service during such month,
multiplied by (y) a fraction, the numerator of which is the total number of
hours of interruption of the Service during such month and the denominator of
which is the total number of hours of the Service which would have been provided
and carried by Affiliate during such month absent such interruptions).
11. NOTICES:
--------
Any notice or report given under this Agreement shall be in writing, shall
be sent postage prepaid by registered or certified mail return receipt requested
or by hand or messenger delivery, or by Federal Express or similar overnight
delivery service, or by facsimile transmission, to the other party, at the
following address (unless either party at any time or times designates another
address for itself by notifying the other party thereof by certified mail, in
which case all notices to such party thereafter shall be given at its most
recently so designated address):
To Network: Playboy Entertainment Group, Inc.
9242 Beverly Boulevard
Beverly Hills, California 90210
ATTN.: Vice President, Satellite
cc: General Counsel
Fax: 310-246-4098
To Affiliate: PRIMESTAR Partners, L.P.
Three Bala Plaza West, Suite 700
Bala Cynwyd, Pennsylvania 19004
ATTN.: Director of Programming & PPV
Fax: 610-617-5312
cc: General Counsel
Fax: 610-668-2862
11
<PAGE>
Notices or reports given by personal delivery shall be deemed given on
delivery. Notices or reports given by mail shall be deemed given on the earlier
to occur of actual receipt thereof or on the fifth day following mailing thereof
in accordance with the notice requirements of this Section 11. Notices or
reports given by Federal Express or similar overnight delivery service shall be
deemed given on the next business day following delivery of the notice or report
to such service with instructions for overnight delivery. Notices or reports
given by facsimile transmission shall be deemed given on the day of transmission
if transmitted prior to 5 P.M. on a business day, or on the next business day
after the day of transmission if transmitted after 5 P.M. on a business day,
holiday, Saturday or Sunday.
12. CONFIDENTIALITY:PRESS RELEASES
------------------------------
Neither Affiliate nor Network shall disclose (whether orally or in writing,
or by press release or otherwise) to any third party (other than each party's
respective officers, directors and employees, in their capacity as such, and
their respective auditors and attorneys; provided, however, that the disclosing
party agrees to be responsible for any breach of the provisions of this Section
12 by such officers, directors, employees, auditors or attorneys), any
information with respect to the terms and provisions of this Agreement and
Network shall not disclose any information obtained in any inspection and/or
audit of Affiliate's books and records, or any information contained in any data
or report required or delivered hereunder or any materials related thereto, and
any information regarding Affiliate's subscribers or Satellite Subscribers
including, but not limited to, the number of such subscribers, including
Satellite Subscribers, except: (i) to the extent necessary (but redacted to the
greatest extent possible) to comply with law or with the valid order of an
administrative agency or a court of competent jurisdiction, in which event the
party making such disclosure shall so notify the other as promptly as
practicable (and, if possible, prior to making such disclosure) and shall seek
confidential treatment of such information, (ii) as part of its normal reporting
or review procedure to its parent company, its auditors or its attorneys;
provided, however, that the disclosing party agrees to be responsible for any
breach of the provisions of this Section 12 by such parent company, its auditors
or attorneys (iii) in order to enforce its rights or perform its obligations
pursuant to this Agreement provided that prior to such disclosure such party
shall seek confidential treatment of such information; and (iv) if mutually
agreed by Affiliate and Network, in advance of such disclosure, in writing.
Network shall comply with all laws, rules, regulations and court and
administrative decrees to which it is subject. In addition, Network shall not
use or disclose information (whether personally identifiable information or not)
to any third party regarding Affiliate's subscribers or Satellite Subscribers
and shall not engage in any direct mailing or telephone solicitation, for any
purpose, to subscribers or Satellite Subscribers of Affiliate. This Section 12
shall survive, indefinitely, the expiration or termination of this Agreement
regardless of the reason for such expiration or termination.
13. MISCELLANEOUS
-------------
(a) Assignment, Binding Effect. This Agreement, including both its
obligations and benefits, shall redound to the benefit of, and be binding on the
respective
12
<PAGE>
transferees and successors of, the parties, except that neither this Agreement
nor either party's rights or obligations hereunder shall be assigned or
transferred by either party without the prior written consent of the other
party; provided, however, no consent shall be necessary in the event of an
assignment to any or each partner or owner of Network or Affiliate as of the
date hereof.
(b) Entire Agreement: Amendments; Waivers. This Agreement contains the
entire understanding of the parties and supersedes and abrogates all
contemporaneous and prior understandings of the parties, whether written or
oral, relating to the subject matter hereof. This Agreement may not be modified
except in writing executed by both parties hereto. Any waiver of any provision
of, or right included in, this Agreement must be in writing and signed by the
party whose rights are being waived. No waiver by either Affiliate or Network of
any breach of any provision hereof shall be or be deemed to be a waiver of any
preceding or subsequent breach of the same or any other provision of this
Agreement. The failure of Affiliate or Network to enforce or seek enforcement of
the terms of this Agreement following any breach shall not be construed as a
waiver of such breach.
(c) Governing Law. The obligations of Affiliate and Network under this
Agreement are subject to all applicable federal, state and local laws, rules and
regulations (including, but not limited to, the Communications Act of 1934, as
the same may be amended from time to time, and the rules and regulations of the
FCC promulgated thereunder) and this Agreement and all matters or issues
collateral thereto shall be governed by the laws of the State of New York,
without regard to choice of law rules.
(d) Relationship. Neither Affiliate nor Network shall be, or hold
itself out as, the agent of the other under this Agreement. No subscriber of
Affiliate shall be deemed to have any privity of contract or direct contractual
or other relationship with Network by virtue of this Agreement or Network's
delivery of the Service to Affiliate hereunder. Likewise, no supplier of
advertising or programming or anything else included in the Service by Network
shall be deemed to have any privity of contract or direct contractual or other
relationship with Affiliate by virtue of this Agreement or Affiliate's carriage
of the Service hereunder. Nothing contained herein shall be deemed to create,
and the parties do not intend to create, any relationship of partners, joint
venturers or agents, as between Affiliate and Network, and neither party is
authorized to or shall act toward third parties or the public in any manner
which would indicate any such relationship with the other.
(e) Severability. The invalidity under applicable law of any provision
of this Agreement shall not affect the validity of any other provision of this
Agreement, and in the event that any provision hereof is determined to be
invalid or otherwise illegal, this Agreement shall remain effective and shall be
construed in accordance with its terms as if the invalid or illegal provision
were not contained herein; provided however, that both parties shall negotiate
in good faith with respect to an equitable modification of the provision, or
application thereof, held to be invalid and provisions logically related
thereto.
(f) No Inference Against. Network and Affiliate each acknowledge that
this Agreement was fully negotiated by the parties and, therefore, no provision
of this Agreement shall be interpreted against any party because such party or
its legal representative drafted such provision.
13
<PAGE>
(g) No Third Party Beneficiaries. The provisions of this Agreement are
for the exclusive benefit of the parties hereto and their permitted assigns, and
no third party shall be a beneficiary of, or have any rights by virtue of, this
Agreement.
(h) Headings. The titles and headings of the sections in this
Agreement are for convenience only and shall not in any way affect the
interpretation of this Agreement.
(i) Non-Recourse. Notwithstanding anything contained in this Agreement
to the contrary, it is expressly understood and agreed by the parties hereto
that each and every representation, warranty, covenant, undertaking and
agreement made in this Agreement was not made nor intended to be made as a
personal representation, undertaking, warranty, covenant, or agreement on the
part of any incorporator, stockholder, director, officer, partner, employee or
agent, past, present or future, or any of them, and any recourse, whether known
or unknown, in common law, in equity, by statute or otherwise, against any of
them is hereby forever waived and released.
The parties hereto have executed this Agreement as of the date
first above written.
AFFILIATE: NETWORK:
PRIMESTAR Partners, L.P. Playboy Entertainment Group, Inc.
By: /s/ Dennis Wilkenson By: /s/ Douglas H. Lindquist
--------------------------- ------------------------------------
Title: S.V.P. Title: Vice President, Playboy Satellite
------------------------ ---------------------------------
14
<PAGE>
EXHIBIT A
To Affiliation Agreement By and Between Playboy Entertainment Group, Inc. and
PRIMESTAR(R) Partners, L.P., Dated February 29, 1996.
License Fees
With regard to the PPV Offerings, for each month during the Term, Affiliate
shall pay to Network a Fee equal to the greater of (i) Forty percent (40%) of
Gross Receipts, as defined below, and (ii) either (a) One Dollar and Ninety-
Eight Cents ($1.98) per two (2) hour PPV Offerings or (b) Two Dollars and
Thirty-Eight Cents ($2.38) per four (4) hour PPV Offerings (excluding Special
Events as defined below) during such month.
With regard to Subscriptions, for each month during the Term, Affiliate shall
pay to Network a Fee equal to Forty Percent (40%) of Gross Receipts; provided,
however, that the minimum Fee(s) for Subscriptions shall not be less than Three
Dollars and Ninety-Eight Cents ($3.98) per month for each Subscription.
"Gross Receipts" shall mean the gross monthly PPV Offerings and Subscription
revenue received from Satellite Subscribers for the Service (excluding revenues
from Special Events); provided, however that revenue received from the sale of
Subscriptions shall be calculated each month during the Term, by employing the
number of Subscription Satellite Subscribers equal to the average of the actual
number of Subscription Satellite Subscribers as of the first day of the month
and the actual number of Subscription Satellite Subscribers as of the last day
of the month.
"Special Events" shall mean specific programs or blocks of programs intended for
pay-per-view distribution at a higher than usual retail rate and designated by
Network as such in advance, in its sole discretion. The License Fee payable for
Special Event shall be determined by Network, in its sole discretion; provided,
however, that not withstanding anything contained in the Agreement to the
contrary, Affiliate shall have the right not to distribute any such Special
Event.