License Agreement - Playboy Entertainment Group Inc. and Primestar Partners LP
PLAYBOY TELEVISION
DBS LICENSE AGREEMENT
This Agreement made as of April 1, 1997 between PLAYBOY ENTERTAINMENT
GROUP, INC., ("Playboy"), a Delaware corporation, located at 9242 Beverly
Boulevard, Beverly Hills, California 90210 and PRIMESTAR(R) PARTNERS, L.P., a
Delaware limited partnership ("Affiliate"), located at Three Bala Plaza West,
Suite 700, Bala Cynwyd, Pennsylvania 19004, regarding the carriage of the
twenty-four (24) hour adult-oriented television programming service to be
provided to Affiliate hereunder, whether such service is identified as Playboy
TV or by any other service mark that retains a Playboy Mark, as designated by
Playboy (the "Service").
WHEREAS, Affiliate has established a medium power satellite television
direct broadcast service ("DBS") in North America; and
WHEREAS, Affiliate desires to distribute the Service throughout the
Territory (as hereinbelow defined);
NOW, THEREFORE, it is mutually agreed as follows:
1. RIGHTS:
Playboy 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
Paragraph 5 hereof, and to encode/encrypt the signal so that neither video nor
audio are intelligibly received by a non-authorized viewer, and re-uplink and
transmit the Service twenty-four (24) hours per day (or the maximum hours per
day that Playboy offers the Service; referred to as the "Maximum Hours") to the
PrimeStar(R) Satellite for transmission and distribution to K- or Ku-band
satellite reception dishes for reception the Maximum Hours per day by Satellite
Subscribers in the Territory, (3) authorize Affiliate's Distributors to resell
the Service for reception the Maximum Hours per day to Satellite Subscribers in
the Territory, except that Subdistribution (as defined in Paragraph 6) shall be
prohibited, and (4) authorize the reception of the Service the Maximum Hours per
day in the fifty (50) United States and the territories, possessions, and
commonwealths of the United States, and the District of Columbia (the
"Territory") 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 the PrimeStar(R) Satellite.
2. DEFINITIONS:
a. PrimeStar(R) Satellite: The GE2 satellite or its medium power K-
or Ku-band respective successors.
1
<PAGE>
b. Billing Period: Any calendar month during which the Service is
offered to Affiliate's Satellite Subscribers and/or Demand Purchasers. Only the
initial Billing Period may be a partial month.
c. Demand Purchase: Each individual purchase of the Service from the
Affiliate by a Satellite Subscriber or Office Subscriber for a block of time not
less than one (1) hour and not to exceed one (1) complete program day of the
Service, sometimes herein referred to as "Pay-Per-View." A Satellite Subscriber
who purchases the Service in such manner shall be known as a "Demand Purchaser."
A Demand Purchaser in a Hotel shall be known as a "Hotel Demand Purchaser," and
a Demand Purchaser who is an Office Subscriber shall be known as an "Office
Demand Purchaser."
d. Distributor: Any entity authorized by Affiliate to resell the
Service for reception the Maximum Hours per day to Satellite Subscribers, but
shall not include any entity that retransmits the Service.
e. Marks: The service marks, trademarks, trade names, and logos
owned by Playboy or its parent corporation, Playboy Enterprises, Inc.,
including without limitation "PLAYBOY," "PLAYMATE," "PLAYBOY TELEVISION,"
"PLAYBOY TV," and the RABBIT HEAD DESIGN, all of which are being licensed for
use only in connection with the distribution and the promotion, marketing, and
sale of the Service.
f. Satellite Subscriber: (i) Any single family dwelling (whether a
detached single family dwelling or a multiple dwelling unit) which is receiving
any level of programming services from Affiliate, including, but not limited to,
each such single family dwelling in apartment houses, condominiums, cooperatives
and townhomes; and (ii) each individual sleeping room receiving any level of
programming services from Affiliate in a hotel or motel (a hotel or motel is
referred to as a "Hotel").
g. Guest Room: Each sleeping room in a Hotel (other than a public or
common area) that contains a television set and that is available for nightly
rental by individual members of the public.
h. Office Subscriber: Any private, commercial office space that
receives any level of programming services from Affiliate for private, non-
commercial viewing on a single television monitor in a single office space.
i. Service Subscriber: Any Satellite Subscriber or Office Subscriber
who by an affirmative decision elects to purchase the Service from Affiliate or
Distributor on a monthly or longer period (i.e. quarterly, annually, etc.)
subscription basis (but not on a non-discretionary bulk basis, packaged with
other services). A Service Subscriber in a Hotel shall be known as a "Hotel
Service Subscriber." Service Subscribers who are Office Subscribers shall be
known as "Office Service Subscribers." For Office Subscribers, each television
monitor in a commercial office receiving the Service shall be deemed to be a
separate Office Service Subscriber, and no such television monitor may
2
<PAGE>
be placed in any public or group viewing area, such as a conference or reception
room. Hotel Service Subscribers and Office Service Subscribers may be treated
differently or separately by Playboy from other Service Subscribers, such as for
payment or reporting purposes, as provided in this Agreement.
j. Special Events: Specific programs or blocks of programs intended
for Pay-Per-View distribution at a higher than usual retail rate and designated
by Playboy as such in advance, in its sole discretion. Notwithstanding anything
contained in this Agreement to the contrary, Affiliate shall have the right not
to distribute any such Special Events.
k. Gross Retail Revenue: The full retail sales price of a Demand
Purchase, net of any sales tax. For purposes of the Service Charges, Playboy
will not honor or recognize any reduction by Affiliate in the full retail sales
price of a Demand Purchase through the use of promotional discounts, rebates,
credits, coupons or other reductions that relate to any product, service or
other matter other than the Service, without Playboy's prior written approval,
not to be unreasonably withheld. Thus, for example, in calculating the Service
Charges, Playboy need not take into account any offer by Affiliate of any rebate
or discount from the full retail sales price if the consumer purchases some
other product or service, without such prior written approval of Playboy.
3. TERM: The initial term of this Agreement shall commence on April 1,
1997 and end on ***; provided, however, that this Agreement shall be deemed
automatically extended for successive one (1)-year periods upon the expiration
of the initial or any succeeding term.*** Either party shall have the right
hereunder to terminate this Agreement, effective at the end of the then-current
term, without liability to the other party, on not less than ninety (90) days
prior written notice prior to the expiration of the initial or any succeeding
term.
4. CONTENT OF THE SERVICE
a. Playboy shall, in its sole discretion, include such programming
in the Service as it deems appropriate from time to time to deliver an adult-
oriented pay television service. Subject to the provisions of Paragraph 5,
Affiliate shall have no right to alter, substitute, delete or otherwise modify
the Service as provided by Playboy. Playboy shall have the exclusive right to
extend, reduce, or otherwise change the hours during which the Service is being
delivered to Affiliate.***
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
3
<PAGE>
During the hours of the day, if any, that Playboy is not transmitting the
Service, Affiliate may carry any other programming that Affiliate desires in its
sole and absolute discretion, provided that Affiliate notifies Playboy of such
carriage of other programming and that Affiliate may not in any way imply that
non-Service programming is a part of or is connected in any way with the
Service. Affiliate shall not exhibit or transmit any Service programming at any
time other than as scheduled by Playboy, without express written permission by
Playboy. Affiliate hereby acknowledges that from time to time Playboy may modify
the specific programs and programming schedule (as opposed to materially
changing the adult nature of the Service) to be supplied as part of the Service
without prior notice, and Playboy shall not be held liable in any way by
Affiliate for such changes.
b. Playboy shall, for each month of the Term, send one (1) copy of
its monthly program schedule as soon as it is available to Affiliate, ATTN:
Director, Pay-Per-View.*** Affiliate acknowledges that the Service includes (or,
in the future, may include) 800, 888 and 900 telephone number spots and "Playboy
Home Shopping"*** Affiliate also acknowledges that once per week Playboy
transmits an up-to-sixty (60)-minute block of promotional programming intended
for its affiliates.***
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
4
<PAGE>
c. Playboy shall use commercially reasonable efforts to provide
Affiliate with a "clean" entry point to the Service at 11:00 p.m. Eastern time
each day, provided, however, that Playboy's occasional failure to provide such
entry due to live events or other programming shall not be considered a breach
of this Agreement.
d. ***
5. DELIVERY AND DISTRIBUTION OF THE SERVICE:
a. During the Term, Playboy shall, at its own expense, transmit an
analog or digital signal of the Service to Affiliate's uplink facility by
transmitting such signal via a North American satellite commonly used for
transmission of cable television programming to receive sites in the Continental
United States, 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. Playboy's obligations to transmit the signal of the
Service and to encode such signal shall be subject to temporary lapses in
connection with service or maintenance, equipment malfunction, or force
majeure or other causes beyond Playboy's sole control. The normal video and
audio signal of the Service shall be of a technical quality substantially
similar to the technical quality of the video and audio signals delivered by
other national cable television programming services in the Territory.
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
5
<PAGE>
b. Affiliate shall, at its own expense, obtain and install such earth
station receivers and other equipment, including a complete set of duplicate,
back-up equipment for use in the event of a malfunction in the primary
equipment, as shall be necessary to enable Affiliate to receive, descramble,
digitize, compress, scramble, transmit and deliver the signals comprising the
Service to Satellite Subscribers via the PrimeStar(R) Satellite. The signals,
including authorization data delivered to Service Subscribers and/or Demand
Purchasers shall be securely scrambled by Affiliate using then state-of-the-art
technology.
c. In the event Playboy provides an eastern and western (or other time
zone) feed, with exactly the same programming, but only time shifted, of the
signal of the Service, Affiliate shall have the right to elect, in its sole and
absolute discretion, to exhibit either the eastern or western (or other time
zone) feed of such signal, but not for purposes of selecting particular items of
programming between feeds.
d. Playboy hereby grants Affiliate the right, and Affiliate agrees, to
receive the signal of the Service, to digitize, compress, modify, or otherwise
technologically manipulate the signal, and to transmit the signal as so altered
(the "Altered Signal") to the PrimeStar(R) Satellite for redistribution to
terrestrial reception sites capable of receiving and utilizing the Altered
Signal as set forth in Paragraph 1 of this Agreement, provided that no such
alteration, transmission, redistribution, reception, or other use will cause an
adverse change in a viewer's perception of the video or audio presentation of
the Service. If Playboy changes the signal of the Service in such a way as to
technically or technologically defeat or otherwise materially interfere with
Affiliate's rights under this subparagraph 5.d., such as materially interfering
with or otherwise preventing reception, digitization, compression, modification,
authorized replacement, conversion, utilization or manipulation of the signal of
the Service by Affiliate pursuant to this subparagraph 5.d., then following
such change in the signal of the service by Playboy, Affiliate shall have the
right immediately to suspend carriage of the Service, provided that Affiliate
notifies Playboy in writing of such suspension and the reasons therefor and
promptly following Playboy's remedy of the changes in the signal giving rise to
such suspension right, if any, Affiliate recommences its carriage of the signal
of the Service in accordance of this Agreement.
e. Affiliate retains and reserves any and all rights in and to all
signal distribution capacity (as opposed to the signal of the Service) contained
within the bandwidth of the Service as received by Affiliate, including, without
limitation, the vertical blanking interval, audio subcarriers 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 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
6
<PAGE>
and in any locations freely and without restriction, except if it competes with,
disparages or lessens the value of the Service or Playboy's business; and
provided 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 that comprises the principal audio carriage
frequency of the Service (including closed captioning information).
f. Distribution or exhibition of the Service in a Hotel in any area
other than a Guest Room, whether or not occupied, or other than to a Hotel
Demand Purchaser or Hotel Service Subscriber who by an affirmative decision
elects to purchase the Service, is expressly prohibited. Additionally, any
charge for admission to a Guest Room or any cover charge or minimum other than
the regular nightly charge for the use of such Guest Room, or the specific
charge for the right to turn on the Service as a Demand Purchase or Service
subscription of one (1) month or longer to the same individual Hotel guest for
the duration of the subscription in such Guest Room, is expressly prohibited.
Exhibition of the Service in any Guest Room contained in a Hotel for which
Playboy does not receive the minimum payment pursuant to Paragraph 8 below is
expressly prohibited.
g. It shall be deemed unauthorized exhibition to allow the Service to
be exhibited to the occupants of a multiple unit dwelling, commercial office
space or Hotel on a free-to-the-viewer or otherwise no-charge basis without
charging a distinct monthly or per-viewing fee for exhibition of the Service,
except as expressly preapproved by Playboy in writing as part of an authorized
"free preview" promotion. It also shall be deemed unauthorized exhibition to
distribute the Service on a bulk basis where individual Service Subscribers or
Demand Purchasers are not each required to make an affirmative decision to
receive the Service. In the event Affiliate or a Distributor breaches any
provision of this subparagraph, Playboy may treat such breach as a material
breach of the Agreement. Furthermore, in the event of any such breach, Affiliate
shall be liable to Playboy for Service Charges for each dwelling unit, office
space and Guest Room receiving the Service as though each such dwelling unit,
office space and Guest Room were an authorized Service Subscriber for each
Billing Period during which the Service was exhibited to the occupants of such
multiple unit dwelling, commercial office space or Hotel.
6. SUBDISTRIBUTION PROHIBITED:
a. Except as explicitly provided for in this Paragraph 6,
Subdistribution of the Service is expressly prohibited. It shall be deemed
"Subdistribution" to transmit the signal or Altered Signal of the Service to a
"Cable Television" system operator, a "C-Band satellite operator," or an
operator of "broadcast television," "low-powered television," "a multichannel
multipoint distribution system," or "a telephone company," as such terms are now
or hereafter generally defined in the pay television industry, or any other
entity for the rebroadcasting or retransmission of the Service or its
programming to any customer or end user of any such entity. As used herein,
"Cable Television" shall refer to programming delivered by any form of cable
technology, including, without limitation, coaxial and fiber-optic and any form
of microwave technology. Any such authorization
7
<PAGE>
requests received by Affiliate shall be forwarded to Playboy, or another party
designated by Playboy. As an exception to the prohibition on Subdistribution
provided in this subparagraph 6.a., Affiliate may transmit the signal or Altered
Signal of the Service to "Alternative Distribution Facilities" that have been
authorized by Playboy to receive such signal from Affiliate, on the condition
that each Alternative Distribution Facility that receives such signal from
Affiliate shall have a written agreement with Playboy authorizing such receipt
and utilization of such signal from Affiliate and authorizing the exhibition and
distribution of the Service in accordance with the provisions of such written
agreement with Playboy. For purposes of this subparagraph, the term "Alternative
Distribution Facilities" shall mean satellite master antennae television
systems, multipoint distribution systems, multichannel multipoint distribution
systems, Cable Television systems and other terrestrial distribution modalities
that have been authorized by Affiliate to utilize the signal of the Service as
technically modified or reconfigured by Affiliate for resale and retransmission
to the subscribers of the particular Alternative Distribution Facility and for
which Affiliate may receive a service charge (pursuant to terms and conditions,
including service charges, determined by Affiliate). Affiliate shall not
authorize any Alternative Distribution Facility to utilize or receive the signal
of the Service from Affiliate unless and until such Alternative Distribution
Facility first enters into a written agreement with Playboy governing such
Alternative Distribution Facility's exhibition and distribution of the Service.
Neither any Alternative Distribution Facility so authorized by Affiliate and
Playboy nor any of such Alternative Distribution Facility's respective
subscribers or any revenue derived from them shall be counted as Satellite
Subscribers or taken into account in calculating GRPS under this Agreement for
purposes of the payment provisions of this Agreement. It shall also be deemed
prohibited Subdistribution to enter into an agreement to authorize receipt of
the Service by any commercial establishment (other than by an Office Subscriber
in a private office) including, without limitation, restaurants and bars,
subject to the provisions of Paragraphs 2.h. and 7.
b. It shall not be deemed Subdistribution for Distributor to enter
into an arrangement by which it authorizes and deauthorizes Service Subscribers
and/or Demand Purchasers pursuant to requests received from either retailers of
Affiliate's satellite equipment or other such retailers who are among
Distributors of the Service permitted by Playboy from time to time ("Permitted
Subdistributors"); provided that Affiliate shall be responsible for Permitted
Subdistributors' compliance with all the terms of this Agreement, and provided
further that Affiliate shall be wholly responsible for the payment of any
Service Charge required hereunder on behalf of any Permitted Subdistributor. The
parties agree that if any Permitted Subdistributor commences or engages in any
form of prohibited Subdistribution, then promptly after learning of such
prohibited Subdistribution, Affiliate must immediately (i) notify Playboy in
writing that such prohibited Subdistribution has occurred; (ii) notify the
applicable Permitted Subdistributor immediately to cease and desist from the
prohibited Subdistribution; and (iii) prevent Service subscription
authorizations or deauthorizations by such Permitted Subdistributor. Also in
such event, Affiliate shall remain liable for all Service subscriptions and/or
Demand Purchases sold by the Permitted Subdistributor. In addition, Playboy has
the option to demand that Affiliate, within forty-five 945) days of receipt of a
notice from Playboy, pay Playboy all the revenue, if any, due Playboy,
calculated in accordance with
8
<PAGE>
the Service Charge (Whether due from Affiliate's Subdistributior's Service
Subscribers and/or Demand Purchasers and whether such revenue due is from
monthly or multi-month subscriptions).
7. USE OF THE SERVICE: Affiliate and its Distributors shall market,
transmit, and deliver the Service the Maximum Hours per day on a pay-per-
transaction (e.g. pay-per-hour, pay-per-title, pay-per-day, etc.) basis
(collectively, the "Pay-Per-View Offerings") and as a monthly or longer
subscription service. Affiliate shall not make available all or any part of the
Service or the Marks for any sponsorship, advertising, promotional public
service, or commercial announcement of any third party, product, or service, or
any product or service of Affiliate other than the offering of the Service by
Affiliate in accordance with this Agreement. Affiliate shall not permit, and
shall take appropriate and reasonable precautions necessary to prevent any use
of the Service by (i) any person or entity other than a paying Service
Subscriber and/or Demand Purchase customer; (ii) any person or entity who
charges an admission fee, cover charge or "minimum"; (iii) any commercial
establishment or non-residential building (including without limitation, any
restaurant, tavern, bar, club, fraternal organization, hospital, or correctional
facility) other than an Office Service Subscriber or an Office Demand Purchaser
in a private office, or a Hotel Service Subscriber or Hotel Demand Purchaser in
a Hotel Guest Room; or (iv) any communal room in an otherwise residential
building or Hotel (including, without limitation, any lobby or social room in an
apartment house, Hotel or similar place). Affiliate shall not permit, and shall
take appropriate and reasonable precautions necessary to prevent any
unauthorized or unlawful use, reproduction, exhibition, or distribution of any
part of the Service or the Marks as to entities over which Affiliate has
control.
8. PAYMENT TO PLAYBOY
a. Affiliate shall pay to Playboy, with respect to each Billing
Period, not later than *** calendar days following the expiration of
such Billing Period, the "Service Charge(s)" for all purchases during such
Billing Period calculated as hereinafter set forth in this Agreement.
b. *** the Service Charge for each Demand Purchase (other than
"Special Events") made during the applicable Billing Period payable to Playboy
shall equal the greater of (i) *** per such Demand Purchase, or (ii) *** of the
Gross Retail Revenue "earned" by Affiliate from such Demand Purchase, calculated
separately for each Demand Purchase.
c. The Service Charge payable for Special Events shall be determined
by Playboy in its sole discretion.
d. ***
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
9
<PAGE>
the Service Charge for Service subscriptions of Service Subscribers shall be
calculated separately for each category of Service Subscriber (Hotel, Office,
other) for each particular Billing Period, ***. For purposes of this
subparagraph, the average number of Service Subscribers for a particular Billing
Period (calculated separately for each category of Service Subscriber) shall
equal the average of (A) the number of active Service Subscribers as of the last
day of the prior Billing Period, and (B) the number of active Service
Subscribers as of the last day of the current Billing Period.
e. ***
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
10
<PAGE>
***
"Gross Revenue Per Subscriber" shall be calculated for each Billing
Period and defined as (A) the total combined Gross Retail Revenue for
a particular Billing Period for all Demand Purchases, other than by
Hotel Demand Purchasers or Office Demand Purchasers, in such Billing
Period, and the "Gross Subscription Revenue" from all Service
subscriptions from all Service Subscribers, other than Hotel Service
Subscribers and Office Service Subscribers, in such Billing Period,
divided by (B) the total number of Affiliate's active Satellite
Subscribers, other than in Hotels and other than Office Subscribers,
on the last day of such Billing Period. The "Gross Subscription
Revenue" from all Service subscriptions from all Service Subscribers,
other than Hotel Service Subscribers and Office Service Subscribers,
shall be calculated by multiplying *** for a particular Billing Period
by the average number of Service Subscribers, other than Hotel Service
Subscribers and Office Service Subscribers, for which *** is
applicable for the Billing Period. The aggregate of all such products
for *** and category of Service Subscriber shall equal the Gross
Subscription Revenue from all Service subscriptions from all Service
Subscribers, other than Hotel Service Subscribers and Office Service
Subscribers, for such Billing Period. The average number of Service
Subscribers for a particular Billing Period shall equal the average of
(1) the number of active Service Subscribers as of the last day of the
prior Billing Period, and (2) the number of active Service Subscribers
as of the last day of the applicable Billing Period.
***
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
11
<PAGE>
f. Revenues shall be considered "earned" regardless of whether
Affiliate collects payments due from any Service Subscriber and/or Demand
Purchaser.
g. In calculating Service Charge(s) due as described under
subparagraphs 8.b. and 8.d. above, Service Subscribers shall not include ***
subscribers of Affiliate or Distributor who are authorized to receive the
Service as a free preview, provided that such free preview may be offered only
with Playboy's consent; (iii) commercial business locations where the Service is
provided by Affiliate for the purposes of technical testing and comparison
and/or consumer marketing research, evaluation and analysis of Affiliate's
services and equipment, provided that there is no charge to view the Service at
any of such locations; 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 on a "no charge" basis for marketing
and promotional purposes; provided that each such demonstration is available for
viewing only by requesting adults and does not violate any, and complies with
all laws, rules and regulations and the contractual obligations of Affiliate,
the applicable Distributor and all other demonstrators and exhibitors.
h. Affiliate shall provide and install for Playboy, at Affiliate's
sole cost, three (3) satellite antennas integrated receiver decoders with
certain basic program services currently called PRIME Value and Service
subscriptions for the Term, on a "free," "no charge" basis, one (1) at Playboy's
corporate office in Beverly Hills, California, one (1) at the Playboy Mansion in
Los Angeles, California, and one (1) at the private residence of the Chief
Executive Officer of Playboy or his or her designee; such locations shall not be
deemed Service Subscribers for the purposes of the payment provisions hereof.
i. Any amounts not paid by Affiliate within *** days of the end of
the appropriate Billing Period shall accrue interest at the lesser rate of one
and one-half percent (1-1/2%) per month or at the highest lawful rate,
compounded monthly from the
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
12
<PAGE>
date such amounts were first due until they are paid.
j. All payments required under this Paragraph 8 shall be made either
by wire transfer of immediately available funds to a bank account specified by
Playboy, which, until further notice, shall be LaSalle National Bank, 135 S.
LaSalle Street, Department 2657, Chicago, Illinois 60674-2657, ABA #071000505,
A/C #5800010356, Credit: Playboy Entertainment Group, Inc. or by payment via a
check drawn on a United States bank account and sent to Playboy Entertainment
Group, Inc., 9242 Beverly Boulevard, Beverly Hills, CA 90210, Attention:
Accounts Receivable.
9. REPORTS
a. Affiliate shall send to Playboy, as soon as available, but not
later than *** days after the end of each Billing Period during the Term, a
statement on a form mutually acceptable to Affiliate and Playboy. Affiliate
shall deliver such statement to Playboy prior to or along with the amount
payable to Playboy 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) stated separately for each price level of Demand Purchases
and in the aggregate for all Demand Purchases for the applicable Billing Period,
the Gross Retail Revenue and Service Charge for Demand Purchases during the
Billing Period, including all calculations necessary to arrive at the Service
Charge;
(ii) the *** Service Charge for each category of Service
subscriptions during the Billing Period, including all calculations necessary to
arrive at the Service Charge;
(iii) the origin of all Service Charges for such Billing Period,
itemized by Demand Purchases, subscriptions and ***;
(iv) for each type of Demand Purchase, the number of Satellite
Subscribers (stated separately for Hotels) and Office Subscribers making such a
Demand Purchase and the number of such Demand Purchases during such Billing
Period, itemized on a daily basis if and when available on such daily basis;
(v) the total number of active Service Subscribers, broken out
by Hotel Service Subscribers, Office Service Subscribers and all other Service
Subscribers, at the end of the last day of the applicable Billing Period, and at
the end of the last day of the immediately preceding Billing Period, and, if and
when available, the total number of Service subscription authorizations and
de-authorizations during the applicable Billing Period; and
(vi) the total number of Affiliate's active Satellite
Subscribers (stated separately for Hotels) and Officer Subscribers (also stated
separately) at the end of each
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
13
<PAGE>
respective Billing Period.
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 *** after the
termination of this Agreement, Affiliate's books and records shall be available
to Playboy for inspection and audit, during normal business hours, at Playboy's
expense, at Affiliate's offices upon reasonable notice to Affiliate.***
Affiliate shall pay to Playboy all underpayments revealed by the audit plus
interest thereon pursuant to subparagraph 8.i. Additionally, if any such audit
reveals an underpayment to Playboy of ten percent (10%) or more of the amount
paid to Playboy for any Billing period audited, then Affiliate shall reimburse
Playboy for the reasonable costs of such audit.
c. In addition to the foregoing, Affiliate will supply to Playboy
such additional information relating to the Service as Playboy may reasonably
request from time to time and as Affiliate may reasonably obtain *** subject to
applicable law *** regarding the dissemination of such information.
d. It is expressly understood that Affiliate's obligation to render
statements to Playboy in a timely manner in accordance with this Paragraph 9 is
a material obligation of Affiliate hereunder, whether or not such statement
shall show any sums due to Playboy hereunder. If Affiliate shall fail to timely
render any such statement, and shall fail to cure such breach within *** days of
Playboy's notice to Affiliate thereof, then without limiting any of its other
rights hereunder, Playboy shall have the right immediately to terminate this
Agreement.
10. PROMOTION, MARKETING AND SALES AND TRADEMARK APPROVAL:
a. Playboy shall provide marketing and promotional advice and
information as it deems necessary. Playboy and Affiliate have mutually agreed to
the marketing and promotional activities attached hereto as Schedule 1.
b. Affiliate, both initially in its expansion of the Service hours
and at all times thereafter, will market and promote the Service in order to
maximize the number of Service Subscribers and/or Demand Purchasers ***,
*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
14
<PAGE>
c. The parties understand and agree that Affiliate currently expects
to use a range of media (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 premium and/or pay-per-view services, including without
limitation the publication of the Service programming schedule in both printed
and electronic on-air television listings and program guides that Affiliate
distributes.
d. Affiliate shall exercise its reasonable commercial efforts to
encourage Distributors to allow Playboy reasonable access to each Distributor's
customer service representatives for training by Playboy, ***
e. Affiliate and Playboy shall cooperate with each other in
commercially reasonable marketing tests, surveys, ratings polls and other
research ***; provided, however, that any proprietary information furnished by
one to the other shall be kept confidential and Affiliate and Playboy shall keep
confidential all research delivered to it but funded by the other. Playboy and
Affiliate each agree to forward to the other any and all information and reports
resulting from such research; provided, however, that neither party shall be
required to forward any information protected under confidentiality terms with a
third party.
f. Playboy shall have the right to review and approve, in advance,
any of Affiliate's publicity about the Service, *** Such approval shall not be
unreasonably withheld or delayed.
g. Affiliate has not and will not acquire any proprietary rights in
any of the Marks or any other trade names, trademarks, service marks, or logos
associated with Playboy and/or its parent by reason of this Agreement or
otherwise. Affiliate further acknowledges the great value of the goodwill
associated with the Marks, and the public renown and recognition of the same,
and that the Marks have a distinctiveness and a secondary meaning that is firmly
associated in the minds of the trade and general public with Playboy
Enterprises, Inc. and/or Playboy, and that any additional goodwill in the Marks
which may be created through the use of the Marks by Affiliate or a Distributor
shall inure to the sole benefit of Playboy and/or its parent, as the case may
be. Affiliate may use the Marks only if it is clear that the Marks used are
service marks for the programs and program services of Playboy and/or its parent
that Affiliate distributes and such use shall be in accordance with any further
instructions that may be issued by Playboy and/or its parent from time to time;
provided, however, any use of any Mark that is not consistent with prior
approved uses requires the prior express written approval of Playboy and/or its
parent. Affiliate shall submit any initial use of the Marks to Playboy for
Playboy's prior written approval at least ten (10) working days prior to their
intended
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
15
<PAGE>
distribution. Such submission shall be made simultaneously to Senior Vice
President, Playboy Satelite, Playboy Television, 9242 Beverly Boulevard, Beverly
Hills, California 90210 and to the General Counsel of Playboy Enterprises, Inc.,
680 N. Lake Share Drive, Chicago, Illinois 60611. Playboy, through either of
such officers may disapprove of any use. Affiliate will not disseminate any
material that has not been approved by Playboy in accordance with the terms
hereof.*** Playboy's responses for purposes of this Paragraph may be
given telephonically. Notwithstanding the foregoing, it is agreed and understood
that standard, periodic, or repetitively issued promotional materials (e.g.
Affiliate's monthly program guides), need not be resubmitted for Playboy's prior
written approval so long as such materials and the Marks used therein are being
used by Affiliate in the same manner, for the same purposes and under the same
conditions as previously approved by Playboy. Any promotional materials provided
by Playboy to Affiliate shall be deemed automatically approved, but only for the
purpose and specific context provided, and Affiliate may not couple or link
materials provided by Playboy with other material not provided or previously
approved by Playboy.
11. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION:
a. Playboy and Affiliate each represent and warrant to the other
that each has the requisite power and authority to enter into this Agreement and
to perform fully its respective obligations hereunder, and that this Agreement
has been duly executed by it and constitutes a valid obligation enforceable
against it in accordance with the terms hereof.
b. Playboy represents and warrants to Affiliate that subject to the
exclusion for music performing rights provided below in this subparagraph 11.b.,
the Service as supplied to Affiliate pursuant to this Agreement, if and when
presented by Affiliate in the manner and at the times authorized herein, will
contain no libelous or slanderous material and will not violate any copyright,
right of privacy or literary or dramatic right of any person. Notwithstanding
anything in this Agreement to the contrary, Playboy's representations,
warranties and indemnify expressly exclude any and all representations,
warranties and indemnities of any kind in regard to music performing rights,***
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
16
<PAGE>
c. Affiliate and Playboy shall each indemnify, defend and forever
hold harmless the other, its affiliated corporations and other entities,
partners, officers, directors, employees and agents (collectively the
"Indemnitees") from all liabilities, costs, damages and expenses (including
without limitation, reasonable counsel fees of counsel of Playboy's choice) from
claims by third parties (collectively, "Claims") arising from the breach of any
representation, warranty, or material obligation hereunder, and Affiliate shall
indemnify, defend and hold harmless Playboy and other Indemnitees from all
Claims, including by any Satellite Subscriber, Office Subscriber, Service
Subscriber, or Demand Purchase customer relating to the provision or offering of
the Service by Affiliate or a Distributor (except with respect to Claims
relating to the specific content of the Service); provided that in each case
where such indemnification is sought:
(i) the Indemnitee promptly notifies the indemnitor of the
Claim to which the indemnification relates;
(ii) the indemnitor shall control fully any litigation,
compromise, settlement or other resolution or disposition of such Claim; and
17
<PAGE>
(iii) the Indemnitee fully cooperates with the *** indemnitor
in the Indemnitor's defense of such Claim.
d. Notwithstanding the above, Playboy's indemnification of Affiliate
will be valid in the event of a prosecution or Claim involving an allegation of
violation of the laws insofar as the content of the Service is concerned, only
in the event each of the following conditions is met:
(i) Immediate telephone contact be made with both the General
Counsel's office of Playboy in Chicago at (312) 751-8000 and Playboy's President
in Beverly Hills at (310) 246-4000, or other numbers hereafter specified by
Playboy. Such telephone notification should be immediately followed with a
letter containing copies of all papers that have been served and giving complete
information then available regarding the incident.
(ii) Playboy shall have the right to approve Affiliate's
choice of counsel and to determine in advance the terms of retention.
(iii) Playboy will assist in defended actions only and will not
be responsible in cases where there is any admission of guilt by any Indemnitee.
Settlement or dismissal of any case will not be allowed, except with Playboy's
prior written consent.
e. Actual or prospective parties involved in such prosecution shall
make no voluntary disclosure regarding support or lack thereof by Playboy under
this policy.
f. ***
12. EARLY TERMINATION RIGHTS:
a. In addition to Playboy's other rights at law or in equity or
pursuant to other provisions of this Agreement, Playboy 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 Playboy shall not exercise its termination or other rights at
law or in equity hereunder unless Playboy has, by so notifying Affiliate in
writing, given Affiliate at least *** days from the time such notice is
received by Affiliate to fully cure such material breach and to demonstrate to
Playboy 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
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
18
<PAGE>
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 *** 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 Playboy,
terminate this Agreement: (i) if Playboy is in material breach of this
Agreement; 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 Playboy, given Playboy at
least *** days from the time such notice is received by Playboy, to fully cure
such material breach and to demonstrate to Affiliate that such material breach
has been cured; or (ii) if Playboy has filed a petition in bankruptcy, is
insolvent or has sought relief under any law related to Playboy's financial
condition or its ability to meet its payment obligations; or (iii) if any
involuntary petition in bankruptcy has been filed against Playboy, or any relief
under any such law has been sought by any creditors of Playboy, unless such
involuntary petition is dismissed, or such relief is denied within *** days
after it has been filed or sought; ***
13. FORCE MAJEURE: Except as herein provided to the contrary, neither
Affiliate nor Playboy shall have any rights against the other party hereto for
the non-operation, malfunction, or failure of facilities or equipment or the
non-furnishing of the Service if such non-operation, malfunction, or failure, 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 this regard, the
termination or expiration of any of Playboy's arrangements relating to
communications satellite facilities and/or the unavailability to
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
19
<PAGE>
Playboy of such facilities on terms satisfactory to Playboy shall be deemed
excused, and not a breach or default by Playboy under this Agreement, pursuant
to this Paragraph. 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, on the condition that Affiliate makes
clear to the viewers that such other programming is not the Service and is not
related to the Service in any way. ***
14. ASSIGNMENT: Affiliate may not assign this Agreement without the
express written consent of Playboy which shall not be unreasonably withheld or
delayed; *** Playboy may assign this Agreement or any portion of its rights or
obligations hereunder without Affiliate's consent, provided that if, as a result
of such assignment, the Service shall no longer be generally identified as a
"Playboy" Service, Affiliate may cancel this Agreement on not less than ninety
(90) days' prior written notice.
15. NOTICES: All notices, requests, demands, consents, directions and
other communications provided for hereunder shall be in writing and be either
delivered by courier (e.g., messenger or overnight delivery), delivered by
facsimile transmission ("fax"), with confirmed electronic receipt, or sent by
means of U.S. certified mail, return receipt requested; if to Playboy to Playboy
Entertainment Group, Inc., 9242 Beverly Boulevard, Beverly Hills, California
90210, ATTN: Programming Distribution and Senior Vice President, Satellite, Fax
Number 310-246-4050, with a copy by the same method to General Counsel, Playboy
Enterprises, Inc., 680 N. Lake Shore Drive, Chicago, Illinois 60611, Fax Number
312-266-2042; and if to Affiliate to Primestar Partners, L.P., Three Bala Plaza
West, Suite 700, Bala Cynwyd, Pennsylvania 19004, Attention: Claire Cowart, Fax
Number 610-668-2862, or, as to each party, at such other address as shall be
designated by such party in a written notice to the other party. All notices
shall, if mailed, be deemed effective two (2) business days after the date
deposited in the mail, if faxed, on the date receipt of such fax is so
confirmed, and, if delivered by courier, on the date delivered.
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
20
<PAGE>
16. CONFIDENTIALITY: Neither Playboy nor Affiliate shall disclose to any
third party (other than its respective employees, in their capacity as such),
any information with respect to the financial terms and provisions of this
Agreement except: (i) to the extent necessary to comply with law or the valid
order of a court of competent jurisdiction, in which event the party making such
disclosure shall so notify the other and shall seek confidential treatment of
such information, (ii) as part of its bona fide reporting or review procedure
under applicable securities laws or listing or exchange requirements or to its
parent company, its partners, its auditors, and its attorneys; or its investors,
bankers, investment bankers, or business consultants/advisors; provided,
however, that such parent company, partners, auditors, attorneys, investors
bankers, investment bankers, and business consultants/advisors agree to be bound
by the provisions of this paragraph and (iii) in order to enforce its rights
pursuant to this Agreement.
17. MISCELLANEOUS:
a. Entire Agreement; Amendments; Waivers. This Agreement contains
the entire understanding of the parties and supersedes and abrogates all
contemporaneous or 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 Playboy 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 Playboy to enforce or seek enforcement of
the terms of this Agreement following any breach shall not be construed as a
waiver of such breach.
b. Governing Law. The obligations of Affiliate and Playboy 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 *** , without regard
to choice of law rules.
c. Relationship. Neither Affiliate no Playboy 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 of direct contractual
or other relationship with Playboy by virtue of this Agreement or Playboy's
delivery of the Service to Affiliate hereunder. Likewise, no supplier of
advertising or programming or anything else included in the Service by Playboy
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 Playboy, 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.
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
21
<PAGE>
d. 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.
e. No Inference Against. Playboy 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.
f. 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.
g. 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.
h. 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.
i. Taxes. Affiliate shall pay and forever hold harmless Playboy from
all taxes and any other governmental charges now or hereafter imposed or based
upon the rental, license, exhibition or possession for, to or by Affiliate of
the Service or any part thereof.
IN WITNESS WHEREOF, Playboy and Affiliate have executed this Agreement as of
April 1, 1997.
PRIMESTAR(R) PARTNERS, L.P. PLAYBOY ENTERTAINMENT GROUP, INC.
By: /s/ Daniel J. O'Brien By: /s/ Doug Lindquist
----------------------------- -----------------------------
Daniel J. O'Brien, President Doug Lindquist, Senior V.P.
-------------------------------- --------------------------------
Name and Title Name and Title
Date: 4-2-98 Date: 4-7-98
--------------------------- ---------------------------
22
<PAGE>
SCHEDULE 1
PRIMESTAR(R) PARTNERS, L.P.
Playboy and Affiliate have mutually agreed upon the following marketing support:
1. On-Air
a. Cross Channel Avails
(i) Affilate will schedule *** video spot via cross channel
avails to promote the expansion to twenty-four (24) hours,*** The spots will run
on channels designated by Affiliate between the hours of 1:00 a.m. and 6:00 a.m.
Eastern Time or earlier if Affiliate's policy allows. Spots will be distributed
roughly evenly between the designated hours and across channels that reach
Playboy's target audience.
(ii) Affiliate will schedule *** video spot via cross channel
avails to promote the introduction of the monthly subscription service,*** The
spots will run on channels designated by Affiliate between the hours of 1:00
a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. Spots
will be distributed roughly evenly between the designated hours and across
channels that reach Playboy's target audience.
(iii) Affiliate will schedule the Service's product promotion
spots via cross channel avails, including special previews and promotions, ***
The spots will run on channels designated by Affiliate between the hours of 1:00
a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. Spots
will be distributed roughly evenly between the designated hours and across
channels that reach Playboy's target audience.
b. Barker Channel Avails
(i) Affiliate will schedule *** video spot on the PRIMEView One
and PRIMECinema Today twenty-four (24) hour promotional channels to promote the
expansion to twenty-four (24) hours, *** The spots will run between the hours of
1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows.
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
23
<PAGE>
(ii) Affiliate will schedule *** video spot on the PRIMEView
One and PRIMECinema Today twenty-four (24) hour promotional channels to promote
the introduction of the monthly subscription service, *** The spots will run
between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if
Affiliate's policy allows.
c. Materials
(i) Playboy will develop and produce, *** video spots that
meet Affiliate's specifications to promote the
(1) expansion of the service from ten (10) to
twenty-four (24) hours; and
(2) introduction of a monthly subscription service.
(ii) Playboy will provide, *** customizable video spots,
approximately four (4) video spots per month, to promote monthly product
premieres. Affiliate, at its expense, will tag the customizable time/space on
these spots.
2. Print
a. Advertising Space
(i) Affiliate will dedicate the full "Adults Only" page in
*** Affiliate's Program Guide, in the pay-per-view insert section currently
known as PRIMECinema. ***
(ii) Affiliate will reserve *** tune-in ad space *** for
placement at Affiliate's discretion in the designated editions of Affiliate's
Program Guide *** Affiliate recognizes that these ads are tied to programs on
specific days of the month; however, Affiliate shall use commercially reasonable
efforts to comply with Playboy's requested dates and times for placement.
(iii) ***
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
24
<PAGE>
(iv) Affiliate will add *** copy in the three (3) daily program
guide grids, directly below the Playboy listings, to advertise the monthly
subscription option in the designated editions of Affiliate's Program Guide ***
b. Materials
(i) Playboy will design and produce, *** pages that meet
Affiliate's specifications, to be placed in the "Adult Only" section in the
designated editions of Affiliate's Program Guide ***
(ii) Playboy will design and produce, *** ads that meet
Affiliate's specifications, for placement in the designated editions of
Affiliate's Program Guide***
(iii) Playboy will design and produce, *** ads that meet
Affiliate's specifications, to promote the monthly subscription service, for
placement in the Playboy product description section in the designated editions
of Affiliate's Program Guide ***
(iv) If requested by Affiliate, Playboy will design bill
inserts and/or direct mail pieces, ***that meet Affiliate's specifications, to
promote the twenty-four (24) hour service expansion and the monthly subscription
option. ***
3. Other
a. ***
b. Upgrade Campaign: Playboy, in conjunction with Affiliate, will
implement one (1) monthly subscription upgrade campaign, in a mutually agreed
upon month, which includes the set-up of a unique toll-free telephone number to
process potential orders. Affiliate and Playboy agree to share in the direct
costs ***
c. Training
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
25
<PAGE>
(i) Playboy will conduct Customer Contact Personnel training,
*** , based on Affiliate Partner MSO requests, provided that sufficient notice
is given to enable Playboy to reasonably comply with requested dates.
(ii) Playboy will design Customer Contact Personnel training
materials, *** , which Affiliate will purchase based on Affiliate's Partner MSO
requests.
d. Incentive Program: Playboy will conduct, *** Customer Contact
Personnel sales incentive program during the 1997 calendar year.
# # #
***Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
26