Affiliation Agreement - Playboy Entertainment Group Inc. and Satellite Services
AFFILIATION AGREEMENT
THIS AGREEMENT made as of the 10th day of February 1993 is by and between
PLAYBOY ENTERTAINMENT GROUP, INC., a Delaware corporation ("Network"), and
SATELLITE SERVICES, INC., a Delaware corporation ("Affiliate").
1. RIGHTS:
(a) Grant of Rights. Network hereby grants to Affiliate, and
Affiliate hereby accepts, the following rights relating to the pay cable
television programming service currently known as "PLAYBOY TELEVISION" (and as
it may be renamed from time to time by Network), whether in its current analog
format or in any other format, whether digitized, compressed, modified, replaced
or otherwise manipulated (the "Service"):
(i) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and authorize the reception of the Service by
cable or other wire transmission service, whether now existing or developed in
the future, ("Cable") in the Distribution Areas (as defined herein) of the
System or Systems.(as defined herein), if any, set forth by Affiliate on
Schedule 1, as such Schedule 1, may be added to or deleted from, from time to
time, pursuant to the terms of this Agreement;
(ii) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and authorize the reception of the Service by
satellite master antenna television systems ("SMATV"); by multipoint
distribution services ("MDS"), and by multichannel multipoint distribution
services ("MMDS"), in (A) Operating Areas (as herein defined) of Systems, (B)
other areas of counties in which Operating Areas of Systems are wholly or
partially located but which areas are not the subject of a cable television
franchise or license or, if a cable television franchise or license exists in
such area, the operator of such franchise or license is not distributing the
Service, and (C) areas of counties (which areas are contiguous to counties where
an Operating Area of a System is wholly or partially located) which are not the
subject of a cable television franchise or license or, if a cable television
franchise or license exists in such area, the operator of such franchise or
license is not distributing the Service (the areas described in (A), (B), and
(C) of this Section 1(a)(ii) shall be referred to herein as a System's
"Distribution Area");
(iii) in the event Network offers or grants to any third party
the right to authorize the service for reception, or the right to otherwise
exhibit, distribute, or authorize the reception of the Service, in the District
of Columbia, the United States, or its territories, possessions or
commonwealths, to anyone by means of equipment capable
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of receiving audio/visual signals and/or programming directly from a satellite
(other than a C-Band satellite), including; but not limited" to, K or Ku-Band
signals, whether now existing or developed in the future ("DBS"); or by any
other means of distribution not otherwise mentioned in this Agreement, whether
now existing or developed in the future, *****.
(iv) the non-exclusive right, but not the obligation, to
exhibit, distribute (pursuant to the terms of this Agreement) and authorize the
reception of the Service, nationwide (including, collectively, in the fifty
United States; the District of Columbia, and the territories, possessions and
commonwealths of the United States) to any person or entity ("Satellite
Subscribers"), by means of equipment capable of receiving audio/visual signals
and/or programming directly from a C-Band satellite, in an analog format or as
digitized, compressed, modified, replaced or otherwise manipulated, including
tier-bit access rights and the right to include tier-bit :messages on the
Service on any three (3_) consecutive days of each calendar month, provided
that, if such three (3) days are not the first consecutive Thursday, Friday and
Saturday of a month, Affiliate, (or an affiliate of Affiliate) will give Network
written notice of the days Affiliate selects no less than seven (7) days prior
to the first day of the month in which the selected days occur. Notwithstanding
the foregoing, if: (i) upon the expiration of two years after the date of
execution of this Agreement, Affiliate's Retail Satellite Sales (as computed
below) does not equal or exceed Network's Retail Satellite Sales (as computed
below), then Affiliate's tier-bit messaging rights hereunder may be terminated
by Network as of the end of such two-year period; or (ii) upon the expiration of
five years after the date of execution of this Agreement, Affiliate's Retail
Satellite Sales does not equal or exceed Network's Retail Satellite Sales, then
Affiliate's tier-bit messaging rights hereunder may be terminated by Network as
of the end of such five-year period. "Affiliate's Retail Satellite Sales" shall
equal the total dollar amount of retail sales (net of discounts and credits)
accrued by Affiliate or an affiliate of Affiliate for sales of the Service to
PPV Satellite Subscribers (as defined herein) and Service Satellite Subscribers
(as defined herein) during the days on which Affiliate or an affiliate of
Affiliate exercised tier-bit messaging rights in the three months immediately
prior to the expiration of the two- or five-year periods (as the case may be)
set forth above. "Network's Retail Satellite Sales" shall equal the total dollar
amount of retail sales (net of discounts and credits), accrued by Network for
sales of the Service to Satellite Subscribers during three-day periods in the
three months immediately prior to the expiration of the two- or five-year
periods (as the case may be) set forth above, which three-day periods are
comparable to the days on which Affiliate exercised tier-bit messaging rights in
such three-month period. Affiliate, or an affiliate of Affiliate, shall utilize
a port for access to Network's tier-bit for the purpose of tier-bit access which
port is assigned to, or is owned or leased by, Affiliate, or an affiliate of
Affiliate, unless Network has consented to the utilization by Affiliate or such
affiliate of Affiliate of another port, with such consent not to be unreasonably
withheld or delayed.
The rights set forth in this Section 1(a), and elsewhere under this
Agreement, are also granted hereby to any affiliate of Affiliate. Any use of the
Service under this Agreement by such an affiliate of Affiliate, or by any
permitted subdistributee, shall be subject to the obligations and limitations of
this Agreement. As used in this
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Agreement, an "affiliate of Affiliate" shall include any entity meeting the
requirements of paragraphs 1.1, II or III of Exhibit A hereto regardless of
whether such entity is a cable television system.
"Operating Area" of a cable television system shall mean that
geographic area where the owner of the system is authorized by appropriate
governmental authority to operate an audio or video distribution facility
through Cable and is operating an audio or video distribution facility through
cable within such area; provided, however, that if a franchise or license is not
required for the distribution of television services by Cable in a particular
geographic area, then the Operating Area of a system shall mean that geographic
area where the system is operating regardless of the presence or absence of a
franchise or license.
(b) Affiliate shall have the right, upon written notice to Network
within thirty (30) days thereof, to elect to launch the Service in, and to
include under this Agreement, any cable television system which meets the System
Qualifications of Exhibit A hereto (individually, a "System" or, collectively,
"Systems"). Upon receipt of such a notice, Schedule 1 hereof shall be deemed to
include such System(s) as of the later of: (i) the launch date of the Service on
such System(s), (ii) the date such System(s) first satisfies the requirements of
Exhibit A hereto, or (iii) the date set forth in such notice if such notice is
properly given pursuant to Section 11 of this Agreement. Any then-existing
agreement with Network applicable to any such System or Systems for carriage of
the Service shall be extinguished and shall cease to be effective with respect
to such System as of the effective date of: the addition or deemed addition of
such System to Schedule 1. Affiliate shall have the right, in Affiliate's sole
and absolute discretion, to discontinue carriage of the Service on any or all
Systems, and to delete any or all Systems from Schedule 1, by providing Network
with no less than sixty (60) days prior written notice of such deletion and
discontinuance; provided, however, if such deletion and discontinuance is due to
political, legal or community pressure, such sixty (60) days' notice shall not
be required prior to such deletion or discontinuance but, instead, Affiliate
shall give notice to Network and Network shall have ten (10) days to propose
and, if agreed to by Affiliate in its sole and absolute discretion, to implement
a plan to cure such pressure. If such plan is not successful, as determined by
Affiliate in its sole and absolute discretion, within ten (10) days after
commencement of implementation of such plan, then Affiliate may immediately
discontinue carriage of the Service from such System(s) and delete such
System(s) from Schedule 1. After such discontinuance and deletion, the System(s)
shall cooperate with Network to the extent reasonably necessary to determine the
feasibility of re-launching the Service in such System (s), which re-launch
shall be in the sole and absolute discretion of Affiliate.
(c) Notwithstanding any provision of this Agreement to the contrary,
Affiliate shall not intentionally authorize any use of the Service in a
commercial establishment including; without limitation, any restaurant, tavern,
bar, club, fraternal organization, hospital, correctional facility or any
communal room in an otherwise residential building (including, without
limitation, any lobby or social room in an apartment house, dormitory, drilling
rig or similar place); provided, however, that affiliate may authorize
Pay-per-view (as defined herein) exhibitions of the Service and
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Subscriptions (as defined herein) to the Service in sorority, fraternity and
dormitory rooms; provided further, that Affiliate may authorize Pay-per-view
exhibitions of the Service, but not Subscriptions to the Service, in individual
rooms of transient occupancy, such as hotel, motel and hospital guest rooms and
jail cells, except that sorority houses, fraternity houses and dormitories shall
not be considered places of transient occupancy for purposes of this Agreement.
Furthermore, Affiliate shall take all reasonable precautions to prevent such
impermissible uses from occurring through the facilities of a cable television
system which is a System.
(d) (d) For the first thirty (30) days following commencement of
carriage of the Service by a System, such System may provide the service, to its
employees, only, free of charge without any obligation to sell or promote the
Service to customers (the "Test Period"). At the end of the Test Period in each
System, such System may determine to terminate carriage of the Service or to
continue carriage pursuant to the terms of this Agreement. Any determination by
a System to terminate carriage of the Service will not result in any charge, fee
or penalty to Affiliate or to such System.
2. TERM:
(a) Unless terminated sooner pursuant to the terms of this
Agreement, the "Term" of this Agreement shall consist, collectively, of the
Initial Term and any number of Renewal Terms. The Initial Term of this Agreement
shall commence upon the date of execution hereof and shall terminate on December
31, 2001, unless terminated sooner pursuant to the terms of this Agreement.
Notwithstanding the foregoing, Network and Affiliate hereby ratify the terms and
conditions (including, but not limited to, the payments made by Affiliate and
affiliates of Affiliate) of carriage of the Service by cable television systems
that met the System Qualifications of Exhibit A hereto, for the period ending on
the date of execution hereof.
(b) This Agreement shall automatically renew for successive five (5)
year periods (each, a "Renewal Term") after the expiration of the initial Term
and each Renewal Term, unless either, (i) this Agreement is terminated earlier
in accordance with the terms hereof, or (ii) Affiliate, in Affiliate's sole and
absolute discretion, elects to terminate this Agreement pursuant to Section 5(h)
hereof.
3. CONTENT OF THE SERVICE:
(a) Throughout the Term, the programming on the Service shall
consist of not less than ten (10) hours per day (initially, from 8:00 p.m. to
6:00 a.m. prevailing Eastern Time) of high-quality adult programming with a
sexual theme and format, (including, but not limited to, R-rated (or R
equivalent non-rated) and NC-17 rated (or NC-17 equivalent non-rated) cable
version motion pictures) substantially similar to the program schedule attached
hereto as Exhibit B-1. The Service shall not contain any third party promotional
material, including without limitation, commercials, advertising or
infomercials, except that the Service may contain program sponsorship
billboards, or acknowledgements. Nothing in this paragraph shall be deemed to
limit Network's rights set forth in Section 7(e). The content of the Service
shall also, be consistent with
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Network's standards and practices as of this date, attached hereto as Exhibit
B-2. Notwithstanding anything in the foregoing which may be inconsistent
herewith, the Service shall not contain any programming depicting rape,
necrophilia; sadism, sadomasochism, bondage, incest, bestiality or programming
involving or suggesting sexual activity with, between, or among minors. Network
shall, during each month of the Term, send one copy of its monthly program
schedule to Affiliate, in care of: Vice President, Programming.
(b) 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(b), it means that each subscriber of Affiliate receiving the Service shall be
able to receive, at all points in time, all 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 such point in time, programming that is different
than the programming received by any Subscriber (as defined herein) receiving
the Service at such point in time, Affiliate shall have the unconditional right
to elect which of such programming it desires to receive and utilize at any
System, and which of such programming it will authorize for reception by PPV
Satellite Subscribers (as defined herein) and Service Satellite Subscribers (as
defined herein); provided, however, that the foregoing rights of Affiliate and
obligations of Network shall not apply to limited testing by Network in specific
selected systems.
4. DELIVERY AND DISTRIBUTION OF THE SERVICE:
(a) During the Term, Network shall, at its own expense, deliver a
signal of the Service to the earth station(s) of each System, to each PPV
Satellite Subscriber and to each Service Satellite Subscriber and to any other
location within the continental United States designated by Affiliate (in its
sole and absolute discretion), by transmitting such signal via a domestic
satellite commonly used for transmission of domestic cable television
programming and shall, at its own expense, continue to 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 delivery of such signal to the PPV Cable Subscribers and/or Service
Cable subscribers (each as defined herein). In the event Network either (i)
changes the technology used by Network to encrypt the Service to a technology
not compatible with a System's or Systems' then-existing descrambling equipment,
or (ii) changes the satellite to which the Service is transmitted to a satellite
not susceptible to viewing by a System's or Systems' then-existing earth station
equipment, Affiliate shall then have the right to delete from Schedule 1 of this
Agreement, immediately, such System or Systems, and to discontinue carriage of
the Service, immediately; from such System or Systems; provided that this right
of deletion and discontinuance shall not apply to any System or Systems if, (1)
Network agrees, unconditionally, to reimburse such system or Systems, either, as
the case may be, (A) for the cost to such System or Systems to acquire and
install new equipment necessary for such System or Systems to descramble the
signal of the Service, and/or (B) for the cost to purchase and install equipment
reasonably necessary for such System or Systems to receive the Service from such
new satellite; (2) physical space exists at the then-existing
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head-end or earth station site to accommodate the necessary equipment; and (3)
current zoning and other restrictions permit such additional equipment.
(b) Network shall provide to each System distributing the Service
and to each PPV Satellite Subscriber and to each Service. Satellite Subscriber a
video and audio signal of the Service of a technical quality equivalent to the
greater of the following: (i) comparable to the technical quality of audio and
video signals delivered by other cable television programming services; or (ii)
the technical standards set forth in Exhibit c hereof. If, at any time during
the Term, Network converts to a digital or other non-analog format, Network and
Affiliate shall negotiate in good faith to agree upon replacement specifications
for Exhibit C; provided, however, that the technical quality of the video and
audio signal under the replacement specifications shall not be of a lesser
technical quality than the video and audio signal quality of the service
required hereunder in the month immediately preceding the conversion to a
digital or other non-analog format. Each System will deliver to its Service
Cable Subscribers and PPV cable Subscribers a principal video and audio signal
of the Service of a technical quality at least comparable to other cable
television programming services, but in no event higher than the technical
quality provided by Network hereunder.
(c) The Systems, if any, shall carry the Service no less than ten
(10) hours per day, but may carry the Service any number of hours per day in
excess of ten (10) if the Service is made available for more than ten (10) hours
per day. Other than as specifically permitted in this Agreement, Affiliate will
not insert or remove any material into or from the Service. Notwithstanding the
foregoing, Network hereby grants each System which does not, at the pertinent
time, have another pre-emptible or unused, technically capable channel
available, permission to pre-empt such ten (10) hours of the Service for
exhibition of up to four (4) Pay-per-view, (as defined below) events (which may
not be movies) per month, (including replays of any such events); provided that
Affiliate shall not pre-empt such ten (10) hours of the service for exhibition
of Pay-per-view events or features, the content of which is substantially
similar to the content of the Service Network; agrees that Affiliate will have
complete authority to control, to designate and to change the channel(s) over
which the Service is to be carried on each system.
(d) Each System retains and reserves any and all rights in and to
all signal distribution capacity contained within the bandwidth of the Service
after receipt at each System, including, without limitation, the vertical
blanking interval and audio sub-carriers (and any other portions of the
bandwidth that may be created as a result of the conversion of the signal of the
Service to a compressed, digital or non-analog format), Network shall not use
any of the bandwidth other than as provided herein without the prior written
consent of Affiliate. 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 or the Systems
shall not degrade, or otherwise 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. In the event Affiliate offers to a
third-party provider of cable television programming services (which is not an
affiliate of Affiliate) the right to use portions of
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the signal distribution capacity contained within the bandwidth of the Service
(other than the portion of the bandwidth used by the service and other than
portions of the bandwidth made usable by conversion by Affiliate of the signal
of the Service to a compressed, digital, or non-analog format), Affiliate shall
give Network prior written notice of the financial terms and conditions of such
offer. Upon such notice, Network shall have a right of first refusal to accept
Affiliate's offer to use portions of the signal distribution capacity contained
within the bandwidth of the Service (other than the portion of the bandwidth
used by the service and other than portions of the bandwidth made usable by
conversion by Affiliate of the signal of the Service to a compressed, digital,
or non-analog format) upon the same financial terms and conditions as those
offered by Affiliate to such unaffiliated third-party. Network shall have ten
(10) days after such notice to exercise in writing its right of first refusal
and to accept the grant pursuant to such financial terms and conditions. If
Network does not exercise its right of first refusal within such ten (10) day
period, then Network shall be deemed to have rejected such grant and waived all
rights to such portions of the signal distribution capacity contained within the
bandwidth of the Service signal.
(e) Each System or other distribution facility or enterprise may
offer the Service, (i) as a Subscription (as defined below) service and/or (ii)
as a Pay-per-view service marketed and sold in any of the ways described in
Section 5(a)(vii); provided, however, that if the Service is sold in combination
with other programming services, the Service shall be sold in no less than ten
(10) consecutive hour segments. The Service (in no less than ten (10) hour
segments) may be sold in combination with other services (e. g., in a package of
services or in a tier); provided that the Service, and/or viewing segments of
the Service as described in Section 5(a)(vii), must always also be available for
sale through each television distribution facility selling the Service under
this Agreement on a purely a la carte basis.
(f) Neither Affiliate, nor any affiliate of Affiliate, shall
authorize others to copy, tape or otherwise reproduce any part of the Service
without Network's prior written authorization, and each of the systems shall
take reasonable and practical security measures to prevent the unauthorized or
otherwise unlawful copying, taping or other reproduction of the Service by
others through the facilities of the system. Affiliate shall not be responsible
for home taping by anyone viewing the Service. Network acknowledges that this
Section 4(f) does not restrict Affiliate's or any affiliate of Affiliate's
practice of (i) connecting its subscribers, videotape recorders, video cassette
recorders, or other devices susceptible to use for home duplication of video
programming to the facilities of a System; or (ii) promoting home taping for
personal use by Subscribers (as defined below).
(g) Network hereby grants Affiliate the right to receive the signal
of the Service, to digitize, replace, compress, modify or otherwise
technologically manipulate the signal, and to transmit the signal as so altered
(the "Altered Signal") to a satellite, or to a location within the continental
United States 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. Network hereby grants Affiliate the right to
deliver the Altered Signal (without substitutions, delays or preemptions (except
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as otherwise permitted under Section 4(c) of this Agreement)) for the uses 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(g). In the
event Network interferes with or otherwise prevents receipt, digitization,
compression, modification, manipulation or utilization of the signal of the
Service by Affiliate pursuant to this Section 4(g), and fails to remedy such
interference within fifteen (15) days after written notice of such interference
is given by Affiliate, then Affiliate shall have the right to delete any or all
Systems from Schedule 1 of this Agreement, immediately, and to discontinue
carriage, immediately, of the Service on any or all such Systems.
5. FEES:
(a) In consideration of the terms and conditions set forth herein,
Affiliate shall, subject to the provisions of Section 5(f) and Section 7(b), pay
the Fees (as def fined herein) set forth below. Each of the four categories of
Fees defined below (PPV Satellite Fees, Service Satellite Fees, PPV Cable Fees
and Service Cable Fees) shall be calculated, stated and reported separately from
the others. As used in this Agreement, the following terms have the following
meanings:
(i) "PPV Satellite Subscriber" means someone who, (1) is a
Satellite Subscriber, (2) receives a complete and technically satisfactory
viewing of a viewing segment of the Service as a PPV service, and (3) is
authorized to receive the Service by or through Affiliate or an affiliate of
Affiliate pursuant to the terms of this Agreement. "PPV Satellite Fees" are
those Fees payable by Affiliate to Network in connection with sales! of the
Service to PPV Satellite Subscribers.
(ii) "Service Satellite Subscriber" means someone who, (1) is
a Satellite subscriber, (2) utilizes the Service as a Subscription service, and
(3) is authorized to receive the service by or through Affiliate or an affiliate
of Affiliate pursuant to the terms of this Agreement. "Service Satellite Fees"
are those Fees payable by Affiliate to Network in connection with sales of the
Service to service Satellite Subscribers.
(iii) "PPV Cable Subscriber" means someone who, (.1) is
provided the Service by or through Affiliate or an affiliate of Affiliate
pursuant to the terms of this Agreement, (2) receives a complete and technically
satisfactory viewing of a viewing segment of the Service as a PPV service, and
(3) receives the Service by means other than Satellite. "PPV Cable Fees" are
those Fees payable by Affiliate to Network in connection with sales of the
Service to PPV Cable Subscribers.
(iv) "Service Cable Subscriber" means someone who (1) receives
the Service by means other than Satellite, (2) utilizes the Service as a
Subscription service, and (3) receives the Service by or through Affiliate or an
affiliate of
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Affiliate pursuant to the terms of this Agreement. "Service Cable Fees" are
those Fees payable by Affiliate to Network in connection with sales of the
service to Service Cable Subscribers.
(v) "Subscribers" mean, collectively, PPV Satellite
Subscribers, Service Satellite Subscribers, PPV Cable Subscribers and Service
Cable Subscribers.
(vi) "Fees" means, collectively, PPV Satellite Fees, Service
Satellite Fees, PPV Cable Fees and Service Cable Fees payable by Affiliate to
Network during the Initial Term. Fees payable by Affiliate to Network during a
Renewal Term are referred to herein as Renewal Fees.
(vii) "Pay-per-view" or "PPV" means the authorization of a
subscriber (such as a PPV Satellite Subscriber or PPV Cable Subscriber) to
receive at least one viewing segment of the Service for a fee separate and
distinct from fees paid by such subscriber for other television or audio
services. Viewing segments may include, but are not limited to, any five (5)
consecutive hour segment, any reasonable portion of a single night's (or days)
performance of the Service, pay-per-night, pay per-weekend, or any other segment
of the Service representing a reasonable viewing period.
(viii) "Subscription" means the authorization of a subscriber
(such as a Service Cable Subscriber or Service Satellite Subscriber) to receive
the Service as a subscription service (on a monthly basis, on an annual basis,
or on some other basis representing a reasonable subscription period) either on
an a la carte basis or as part of a package of other services, or both.
(ix) "Addressable Subscriber" means a cable television system
subscriber whose television set is connected on the subscriber's premises to
equipment operated by Affiliate, or an affiliate of Affiliate, that allows the
channel on which the service is received to be turned on or off (i.e.,
"authorized" or "de-authorized") from a central location, controlled by the
operator of the pertinent System or such operator's agent or designee.
(x) "Gross Receipts" means the amount billed for the Service
to a PPV Cable Subscriber, PPV Satellite Subscriber, Service Satellite
Subscriber or Service Cable Subscriber (as the case may be) less all applicable
taxes, franchise fees or other charges, levies or assessments imposed by
governmental entities or agencies thereof attributable to the purchase or sale
of the Service or any portion thereof.
(xi) "Network Share" means that portion of Gross Receipts
which is payable by Affiliate to Network as Fees or Renewal Fees pursuant to
this Agreement.
(xii) "Gross Receipts Per Addressable Subscriber" mean Gross
Receipts attributable to purchases (including Pay-per-view and subscription
purchases) of the Service in a System in a Reporting Period (as defined below)
divided by the number of Addressable Subscribers in such System as of the last
day of such Reporting Period (as
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determined by Affiliate on the first day of the calendar quarter which includes
said last day of the pertinent Reporting Period, or as adjusted pursuant to
Section 5(d) hereof).
(b) Subscription
(i) For each calendar month during the indicated calendar year
during the Initial Term, Affiliate will pay Network a Service Cable Fee per
Service Cable Subscriber in such month in an amount equal to the following:
Service Cable Fee
For the Calendar Year Per Service Cable Subscriber
--------------------- ----------------------------
1992 *****
1993 *****
1994 *****
1995 *****
For each calendar month during the calendar years of the Initial Term after
1995, Affiliate will pay Network a Service Cable Fee per Service Cable
Subscriber in such month equal to the greater of (A) *****, or (B) ***** of the
Gross Receipts attributable to each such Service Cable Subscriber, except that
such ***** shall be subject to reduction as provided in Section 5(d) below. When
the Service is sold to a Service Cable Subscriber in combination with other
services for a package charge (as, for example, in a tier or in a package of a
la carte or other services), the Gross Receipts deemed to be attributable to a
Service cable subscriber for the Service shall be equal to the total Gross
Receipts for the tier or package of services sold in combination with the
service, multiplied by a fraction, the numerator of which is the a la carte
retail charge for the service otherwise charged by the pertinent System and the
denominator of which is the numerator plus the aggregate of the a la carte
retail charges otherwise charged by the pertinent System for the other services
included in the tier or package of a la carte or other services.
(ii) During the Initial Term, Affiliate shall pay a monthly
Service Satellite Fee to Network-per Service Satellite Subscriber in the
indicated calendar year of the amount indicated (regardless of whether such
Service Satellite Subscribers purchase the Service alone, as an a la carte
service or as part of a tier or package of a la carte or other services and
regardless of the amount of Gross Receipts attributable to such Service
Satellite Subscribers) as follows:
For any and
For the First For the next all
24,999 Service 15,000 Service additional
Satellite Satellite Service
Subscribers Subscribers Subscribers
---------------- ---------------- ----------------
1993 ***** ***** *****
1994 ***** ***** *****
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For any and
For the First For the next all
24,999 Service 15,000 Service additional
Satellite Satellite Service
Subscribers Subscribers Subscribers
---------------- ---------------- ----------------
1995 ***** ***** *****
1996 ***** ***** *****
1997 ***** ***** *****
1998 ***** ***** *****
1999 ***** ***** *****
2000 ***** ***** *****
2001 ***** ***** *****
(iii) The number of service Satellite Subscribers or Service
Cable Subscribers (as the case may be) for whom Affiliate shall pay each month
shall be the average of (A) the number of Service Satellite Subscribers or
Service Cable Subscribers (as the case may be) on the first day of the month,
and (B) the number of Service Satellite Subscribers or Service Cable Subscribers
(as the case may be) on the last day of the month. Service Satellite Subscribers
or Service Cable Subscribers (as the case may be) shall include each occupied
dwelling (whether a single family home or a multiunit building), drilling rig,
nursing home room, dormitory room, fraternity room, sorority room, or other
location in which the Service is received. If Affiliate provides the Service to
multiple dwelling complexes, including, but not limited to, apartment buildings,
on a bulk-rate basis, the number of Service Satellite Subscribers or Service
Cable Subscribers (as the case may be) attributable to each such bulk-rate
subscriber shall be equal to the total monthly retail rate charged a complex for
the Service divided by the standard monthly retail rate charged a non-bulk rate
Service Satellite Subscriber or Service Cable Subscriber (as the case may be)
for the service in the applicable System or by the pertinent satellite
distributor, as the case may be. The monthly number of Service Satellite
Subscribers and the monthly number of Service Cable Subscribers shall each be
calculated, stated and reported separately from the other.
(iv) The Service Cable Fees and Service Satellite Fees payable
by Affiliate to Network hereunder shall be due and payable forty-five (45) days
after the end of the calendar month to which they relate.
(c) PPV
For each PPV Cable Subscriber and each PPV Satellite
Subscriber who receives and pays for one (1) complete and technically
satisfactory viewing of one (1) viewing segment of the Service during the
Initial Term, Affiliate will pay Network a PPV Cable Fee or PPV Satellite Fee
(as the case may be) in an amount equal to the greater of: (A) *****, or (B) the
Network Share of the Gross Receipts paid by such PPV Cable Subscriber or PPV
Satellite Subscriber to Affiliate. "Network Share" shall equal ***** percent
***** of the Gross Receipts paid by each PPV Satellite Subscriber and shall
equal ***** percent ***** of the Gross Receipts paid by each PPV Cable
Subscriber,
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except that such ***** percent ***** paid by each PPV Cable Subscriber shall be
subject to reduction as provided in Section 5(d) below.
(d) During the Initial Term, the Network Share in any System for Any
Reporting Period shall be subject to reduction (from the ***** percent ***** of
Gross Receipts otherwise payable by Affiliate to Network hereunder) based upon
the aggregate number of cents in Gross Receipts attributable to PPV Cable
Subscribers and Service Cable Subscribers in such System in such Reporting
Period as measured against the number of Addressable Subscribers in such System
during such Reporting Period (provided, however, that the number of Addressable
Subscribers in each System shall be determined by Affiliate on the first
calendar day of each calendar quarter and each such number of Addressable
Subscribers so determined shall be applied for each Reporting Period which
concludes during that pertinent calendar quarter; provided, however, that if the
number of Addressable Subscribers in a System increases or decreases more than
***** percent ***** in a calendar quarter, then the number of Addressable
Subscribers attributable to such System for Reporting Periods which conclude
during such calendar quarter shall be equal to the average of the number of
Addressable Subscribers in such System on the first calendar day of such
calendar quarter and the number of Addressable Subscribers in such System on the
first calendar day of the succeeding calendar quarter; provided, further, that
Affiliate shall make appropriate adjustments in its payments to Network to
properly pay under this provision), as follows:
For the calendar years 1993, 1994, and 1995:
If the Gross Receipts Per Then, the Network Share For
Addressable Subscriber In A Such Calendar Month for
System in a Calendar Month purchases by PPV Cable
Is: Subscribers in such System
shall be:
(A) equal to or greater than $.42 but
less than $.62 (A-1) *****
(B) equal to or greater than $.62 (B-1) *****
For the calendar years 1996, 1997 and 1998:
If the Gross Receipts Per Then the Network Share For
Addressable Subscriber In A Such Calendar Month for
System in a Calendar Month purchases by PPV Cable
Is: Subscribers and Service
Cable Subscribers in such
System shall be:
(C) equal to or greater than $.46 but
less than $.68 (C-1) *****
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(D) equal to or greater than $.68 (D-1) *****
For the calendar years 1999, 2000 and 2001:
If the Gross Receipts Per Then the Network Share For
Addressable Subscriber In A Such Calendar Month for
System in a Calendar Month purchases by PPV Cable
Is: Subscribers and Service
Cable Subscribers in such
System shall be:
(E) equal to or greater than $.50 but
less than $.75 (E-1) *****
(F) equal to or greater than $.75 (F-1) *****
(e) The PPV Cable Fees and PPV Satellite Fees payable by Affiliate
to Network hereunder for each PPV Cable Subscriber and each PPV Satellite
Subscriber who receives and pays for one complete and technically satisfactory
Pay-per-view viewing of a segment of the Service pursuant to this Agreement
during a Reporting Period during the Term shall be due and payable forty-five
(45) days after the last day of the calendar month which includes the last day
of the Reporting Period. The term "Reporting Period" shall mean the days from
the end of each System's or Satellite distributor's prior monthly reporting
period (which date may vary in each System or for each Satellite distributor
from the 20th of the calendar month to the last day of the calendar month) to
the end of the System's or Satellite distributor's then current monthly
reporting period. Affiliate shall have the right, however, to make adjustments
to any month's payment in an amount equal to the portion of a previous month's
PPV cable Fees and/or PPV Satellite Fees which represents an overpayment or
underpayment.
(f) Notwithstanding any other provision of this Agreement to the
contrary, no Fees shall be payable for PPV Satellite Subscribers, PPV Cable
Subscribers, Service Satellite Subscribers or Service Cable Subscribers if such
Subscribers are (i) employees of Affiliate or of an affiliate of Affiliate who
are not charged for the Service; or (ii) public officials, administrative
personnel or public buildings that are not charged for the Service; or (iii)
subscribers who have not paid their cable television bill for a given month and
are subsequently disconnected; or (iv) subscribers who, in the good faith
exercise of reasonable judgment by an employee either of Affiliate or of an
affiliate of Affiliate, are excused from paying for the Service either because
such subscriber claims that the Service was not properly or intentionally
ordered or because such subscriber claims that a complete and technically
satisfactory viewing of the Service was not received. In addition, except for
the categories of Subscribers described in (i), (ii), (iii) and (iv) of this
paragraph, Affiliate shall not provide the Service or any viewing segment
thereof to persons who are not charged therefor.
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(g) Any undisputed PPV Satellite Fees, PPV Cable Fees, Service
Satellite Fees and Service Cable Fees payable by Affiliate to Network hereunder,
and any undisputed amounts payable by Network to Affiliate or any System
pursuant to Section 7 hereof, that are unpaid 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, a System or Affiliate, (as the case may be); provided,
however, that any dispute which has the effect of suspending the accrual of
interest under this sentence must be a good faith dispute. Each delinquent party
shall be liable to the other party for all reasonable costs and expenses
(including, without limitation, reasonable counsel fees, disbursements, and
administrative or court costs) in connection with the collection of any such
overdue amounts. In the event of a good faith dispute regarding any Fees or
Renewal Fees, no such disputed Fees or Renewal Fees shall be subject to the
terms or conditions of this Section 5(g).
(h) Network shall have the right to renegotiate the PPV Satellite
Fees, PPV Cable Fees, Service Satellite Fees>and Service Cable Fees applicable
to any Renewal Term upon written notice to Affiliate at least twelve (12) months
,prior to the end of the Initial Term or the Renewal Term immediately preceding
such Renewal Term. Any such Renewal Fees shall be effective upon the
commencement of such Renewal Term. Said Renewal Fees shall be effective for such
five (5) year Renewal Term. If no agreement regarding Renewal Fees is reached
upon the expiration of the Initial Term or any Renewal Term, Affiliate may elect
in its sole and absolute discretion either to terminate this Agreement or to
provide the Service under this Agreement to Subscribers at a rate equal to the
Renewal Fee established by Network in connection with such renewal and such
subscribers.
6. REPORTS:
(a) For all Reporting Periods after the Test Period, Affiliate shall
send to Network along with the payments, if any, due under Section 5 hereof,
informational statements on a form mutually acceptable to Affiliate and Network.
Each statement shall set forth information necessary to the calculation of the
Fees or Renewal. Fees paid. Each of the four categories of Fees` shall be
calculated, stated, and reported separately from the others.
(i) The statements accompanying each month's Service Cable
Fees and Service Satellite Fees, respectively, shall include, on a
System-by-System and Satellite distributor-by-Satellite distributor basis, the
number of Service Cable Subscribers and Service Satellite Subscribers and, in
the case of Systems, the number of basic subscribers, as of the first day of the
month and as of the last day of the month, and the average thereof, and
commencing in 1996 in the case of Systems, the Cross Receipts attributable to
Service Cable Subscribers, the number of Addressable Subscribers as of the first
calendar day of the calendar quarter which includes the last day of such
Reporting Period, and the Cross Receipts per Addressable Subscriber for each
System; and such other information as may be necessary for the calculation of
the Service Cable Fees and Service Satellite Fees paid.
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<PAGE>
(ii) The statement accompanying each month's PPV Cable Fees
shall include, on a System-by-System basis, the number of PPV Cable Subscribers
(in the form of the number of Pay-per-view purchases of the Service); the Cross
Receipts paid by such PPV Cable Subscribers at each price level; on a
System-by-System basis., the number of basic subscribers, and the number of
Addressable Subscribers as of the first calendar day of the calendar quarter
which includes the last day of such Reporting Period, and the Gross Receipts per
Addressable Subscriber for each System; and such other information as may be
necessary for the calculation of the PPV Cable Fees paid.
(iii) The statement accompanying each months PPV Satellite
Fees shall include the number, of PPV Satellite Subscribers in the form of the
number of Pay-per-view purchases of the Service; the Gross Receipts paid by such
PPV Satellite Subscribers; and such other information as may be necessary for
the calculation of the PPV Satellite Fees paid.
(iv) In November 1998, Affiliate shall provide Network with
information necessary to allow Network to determine whether its right of
termination provided for in Section 9(a)(v)(B) is operable.
(b) Network shall send to Affiliate, not later than forty-five (45)
days after the end of each calendar month for which payment pursuant to Section
7 hereof is due, a statement on a form mutually acceptable to Affiliate and
Network which sets forth all pertinent information to compute the amount due to
Affiliate for such calendar month. Network shall deliver such statement to
Affiliate prior to or along with the amount payable to Affiliate as provided in
this Agreement.
(c) Affiliate and Network each agree 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 two (2) years after the termination or expiration of this Agreement, such
books and records of each party shall be available to the other party for
inspection and audit, during normal business hours, at the inspecting party's
expense and at the other party's offices, upon reasonable notice to the other
party. Each party's right to perform such audit shall be limited to once in any
nine (9) month period during the Term (and, in the case of Network audits of
Affiliate, Network's rights under this sentence shall consist of one (1) audit
in any nine (9) month period of any System, whether the audit of such System is
conducted at the System or at another office or place of business of Affiliate
or an affiliate of Affiliate) and shall be limited to an audit with respect to
amounts to be paid in the then-current and prior calendar year only, provided,
however, that if Affiliate requires that Network conduct such audits at
individual System locations, Network shall be limited to audits of the
then-current and two prior calendar years only. If either party audits the other
party's books hereunder, the inspecting party must make any claim against the
other party within the earlier of, three (3) months after the inspecting party
or the inspecting party's representative leaves the other party's offices, or
twenty-four (24) months after the close of the earliest month which is the
subject of such audit or inspection (which twenty-four (24) months shall be
extended to thirty-six (36) months for Systems if Affiliate requires that
Network conduct audits at individual system locations). Furthermore, any claim
must
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<PAGE>
relate to the then-current calendar year or the immediately preceding calendar
year only, provided, however, that if Affiliate requires that Network conduct
audits at individual System locations, such claims must relate to the
then-current calendar year or the immediately preceding two calendar years only.
If a claim is not made within such time, then all amounts paid during such time
period shall be deemed final and uncontestable and the inspecting party will be
deemed to have waived its right to collect any shortfalls from the other party
for the period(s) audited.
7. PROMOTION:
(a) Commencing three months after the commencement of the sale of
the Service to the customers of any System, and immediately upon the
commencement of the sale of the Service to Satellite Subscribers under this
Agreement (as the case may be) Network shall contribute $.02 per copy for any
pay-per-view catalogue or pay-per view guide utilized by the Systems or by any
Satellite distributor of the Service under this Agreement which includes
;listings for the Service and at least one (1), one quarter (1/4) page
advertisement for the service, whether or not a subscriber receives such
catalogue or guide without charge once each calendar month throughout the Term
hereof, each System and each Satellite distributor of the Service under this
Agreement shall be entitled to claim the contribution from Network provided for
in this Section 7(a) by providing. Network with appropriate documentation
verifying the quantity and content of the guides or catalogues for which such
contribution is sought. Network shall remit such contributions to the
appropriate Systems and Satellite distributors no later than forty-five (45)
days after receipt of such documentation.
(b) Notwithstanding the provisions of Section 5 of this Agreement to
the contrary, any System which launches the Service ***** after the Test Period,
if any, that the System carries the Service; provided, however, that the Test
Period, if any, in any System shall terminate immediately upon the first sale of
the service in the System to a customer; provided, further, that Affiliate shall
expend an amount of funds, in any System which launches the Service (which
amount is in the aggregate equal to or greater than the amount of Service Cable
Fees or PPV Cable Fees ***** during such ***** period in the absence of this
paragraph), either to, (Y) reimburse Affiliate or an affiliate of Affiliate for
the costs of a market or community research survey regarding programming,
including adult programming, undertaken in connection with, or preparatory to,
the launch of the Service on the pertinent System, (ii) acquire equipment
necessary to descramble the signal of the Service, or (iii) advertise or promote
the Service using methods and expenditures mutually agreeable to Affiliate and
Network. Furthermore, each System shall provide Network with written
documentation (such as receipts or invoices) reflecting such System's
expenditures under this paragraph no later than forty-five (45) days after the
ninetieth day after the expiration of the Fee Waiver Period. If and to the
extent that by ninety (90) days after the expiration of the Fee Waiver Period,
any System has expended an amount of funds under the preceding sentence which is
less than the amount of the Service Cable Fees and PPV Cable Fees so waived
during the Fee Waiver Period, then the difference shall be remitted to Network
promptly. Affiliate shall not be eligible to take advantage of this paragraph
more than once for any System.
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<PAGE>
(c) Network may not, without Affiliate's prior written consent,
undertake marketing tests or surveys, rating polls or any other research in the
systems in connection with the Service. With respect to any test, survey, rating
poll or research which applies to a System or Systems for which Network seeks
Affiliate's consent, Network shall notify Affiliate of the nature and scope of
each such project and, upon Affiliate's prior written consent to such project
(which consent may be withheld in Affiliate's sole and absolute discretion),
Affiliate will, to the extent permitted by applicable lam and company policy,
cooperate in such research by rendering such assistance as Network may
reasonably request and as Affiliate can reasonably provide, the cost of which
assistance shall be borne by Network. Network shall provide Affiliate, without
cost to Affiliate, with the results of such research to the extent it applies to
z System or Systems. Furthermore, Network shall otherwise keep the results of
all research relating to a System or Systems confidential under the provisions
of Section 12 hereof and shall retain the results of such research in an
aggregate form only, which results do not identify any subscriber, cable
television system or cable television operator.
(d) Network shall have the right to review and approve, in advance,
any of Affiliate's publicity, and the publicity of any affiliate of Affiliate or
any subdistributee under this Agreement, about the Service, which approval shall
not be unreasonably withheld or delayed. Affiliate has not and will not acquire
any proprietary rights in any trade names, trademarks, service marks or logos
associated with Network or its parent corporation (the "Marks") 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 Network, and that any additional goodwill in the Marks
which may be created through the use of the Marks by Affiliate shall redound to
the sole benefit of Playboy Enterprises, Inc: and/or Network, as the case may
be. Affiliate may use the Marks only for the promotion of the programs and
program services of Network which Affiliate or any affiliate of Affiliate or any
subdistributee under this Agreement distributes, and such use shall be in
accordance with any further clear, unambiguous, reasonable prior written
instructions that may be issued by Network from time to time. Affiliate shall
submit any initial use of the Marks to Network for Network's prior written
approval at least ten (l0) working days prior to their intended distribution
which approval shall not be unreasonably withheld or delayed. Any use of any
Mark that is not consistent with prior approved uses requires the prior express
written approval of Network; which approval shall not be unreasonably withheld
or delayed. Any such submission or request for approval shall be made
simultaneously to General Manager, Playboy Television, 9242 Beverly Boulevard,
Beverly Hills, California 90210 and to General Counsel, Playboy Enterprises,
Inc., 680 N. Lake Shore Drive, Chicago, Illinois 60611. Network, through either
of such officers, may, pursuant to the terms hereof, disapprove of any use of
any Marks by Affiliate, which use does not meet the requirements hereof.
Affiliate will not disseminate any material that has not been approved or deemed
approved by Network in accordance with the terms hereof. Network shall use its
best efforts to either approve or disapprove any such use within one (1)
business day of Network's receipt of material for approval. Notwithstanding the
foregoing, any such approval must be granted or withheld within five (5)
business days of
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<PAGE>
Network's receipt of materials for approval. Failure by Network to respond
within five (5) business days of Network's receipt of materials for approval
will not be deemed approval. However, if Affiliate or any affiliate of Affiliate
or any subdistributee under this Agreement resubmits such materials after the
end of said five (5) business day period, then Network shall have two (2)
additional business days to respond, after which, in the absence of response
from Network, the use of such materials shall be deemed approved. For purposes
of this Section 7, Network's disapprovals must be given in writing but approvals
may be given telephonically. Unless otherwise specified by Network, all
materials, involving the Marks shall include the following notice: "PLAYBOY AND
RABBIT HEAD DESIGN ARE MARKS OF AND USED UNDER LICENSE WITH PLAYBOY ENTERPRISES,
INC."
(e) Network shall not, as a part of the Service, include any direct
on-air marketing or sales of products or services, including, but not limited
to, sales through "800", "900" or "976" telephone services (or other telephone
services which impose a charge in addition to the telephone service provider's
charge for placing the call); provided, however, that the Service may contain
commercials for the Network or merchandise or services offered by Playboy
Enterprises, Inc. or a subsidiary thereof ("Network commercials") if such
Network Commercials do not exceed an average (measured monthly) of two (2)
minutes per hour of the service. Network agrees that in the event Network
includes any Network Commercials on the Service in excess of such average of two
(2) minutes per hour, Network shall pay to Affiliate ten percent (l0%) of Net
Sales receipts on all revenues, merchandise, or services sold to respondents in
the Systems' zip code areas by such Network Commercials in excess of such two
(2) minutes per hour on the Service. For purposes of this paragraph, "Net Sales"
shall mean gross sales less taxes, fees, returns and allowances, freight out and
cash discounts. Furthermore, Network agrees that in the event Network does any
direct on-air marketing and sale of goods, merchandise or products offered by
Playboy Enterprises, Inc. or a subsidiary thereof, Network shall provide
Affiliate with lists of the names of respondents from within the zip code areas
of the Systems who respond to such direct on-air marketing and sales, for use by
Affiliate or any System or Systems. Any amounts payable by Network to Affiliate
hereunder shall be due and payable forty-five (45) days after the end of the
calendar month during the Term to which such amounts relate.
(f) Network and Affiliate hereby acknowledge that (i) their
interests are often in direct conflict, (ii) their relationship is often
adversarial, and (iii) Network could cause Affiliate significant harm by the
nature of Network's communications to Affiliate's subscribers or to the
governmental entities or franchise or licensing authorities whose opinions and
actions could adversely affect cable television systems affiliated with
Affiliate. Therefore, Network shall not engage in any communications with any
cable television subscribers or franchise or licensing authority or governmental
entity in the operating Area of any cable television system which satisfies the
requirements of Exhibit A hereto which would, or could, adversely interfere with
the relationship between Affiliate or any affiliate of Affiliate and
subscribers, or the relationship between Affiliate or any affiliate of
Affiliate, and any governmental entities or community in any such operating
Area. This provision shall not apply to any proceeding before any judicial body,
to communications with Congress or any other branch or agency of the Federal
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<PAGE>
government, or to the contents of Playboy Magazine. This Section i(g) shall
survive the expiration or termination of this Agreement for a period of two (2)
years regardless of the reason for such expiration or termination.
(g) Network shall not promote on the Service any other cable
programming service which is affiliated with Network without the prior written
consent of Affiliate.
(h) Network shall make available to Affiliate, each System, and each
distributor to Satellite Subscribers, such promotional materials, at no charge
to Affiliate or to any System, to be used by Affiliate, such Systems and each
distributor to Satellite Subscribers to advertise and promote the Service
programming, provided, however., that Network shall have no obligation to
provide any such materials to Affiliate if Network is not providing such
materials to any other cable television system operator or satellite television
programming distributor. Network shall exercise reasonable efforts to provide
such materials, if available, to Affiliate no later than fifty (50) days prior
to the first day of the calendar month to which they relate.
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"), the non-compliance with which might adversely affect Affiliate; (vi)
Network has, or will have acquired at the 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 whatsoever to effectuate the acts or
performances contemplated by, or satisfy the obligations imposed on it pursuant
to, this Agreement, including all permits, rights, licenses and approvals
necessary, required or appropriate for any and all performances through to the
premises and to the listeners frequenting the premises of Service Cable
subscribers, service Satellite Subscribers, PPV Cable Subscribers and PPV
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 which in each case is constitutional; and (ix) the
obligations created 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.
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(b) Affiliate represents and warrants to Network that (i) Affiliate
is a corporation duly organized, validly existing and in good standing 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 Network enforceable in accordance with their terms.
(c) Network represents and warrants to Affiliate that neither the
service nor any material provided to Affiliate by Network in connection
therewith including., without limitation, any advertising or promotional
materials, will contain any material which will libel, slander or defame any
person, and the Service and such additional materials provided to Affiliate will
not, when exhibited, transmitted or otherwise exploited in accordance herewith,
violate, infringe upon or give rise to any finally sustained adverse claim with
respect to any contract right, common law right or any other right of any party
(including, without limitation, any copyright, trademark, literary or dramatic
right, music synchronization right, right of privacy or publicity or violate any
law, or (when exhibited by Affiliate as contemplated hereby) cause Affiliate or
any affiliate of Affiliate to violate any law.
(d) Network represents, covenants, and warrants that the Service
complies, and will continue to comply, in all respects with the commercial
matter limitations of the Children's Television Act of 1990, Public Law 101-937
(October 18, 1990) and the regulations of the FCC promulgated thereunder as the
same may apply to cable television systems and cable operators, including 47
C.F.R. ss. 76.225, 76.305, and as the same may from time-to-time be amended
("Children's Television Regulations"); provided further, that Network
represents, covenants and warrants that it will provide to Affiliate all records
demonstrating such compliance under the Children's Television Regulations as are
necessary for Affiliate to timely demonstrate its compliance as a cable operator
with the commercial matter limitations and record keeping requirements of the
Children's Television Regulations, it being acknowledged by Affiliate that as of
the date of this Agreement, the providing of a letter to Affiliate pursuant
hereto substantially in the form attached hereto as Exhibit D shall constitute
full compliance with the record-keeping information requirements under the
Children's Television Act regulations existing as of the date hereof; provided
further that the Service contains neither commercial matter nor children's
programming as those terms are defined in such regulations; provided further
that Network represents, covenants and warrants that the Service complies, and
will continue to comply, with all origination cablecasting regulations of the
FCC, including but not limited to 47 C.F.R. ss. ss. 76.205 - 76.221 (political
equal time, personal attack, lotteries and sponsorship identification), as the
same may from time to time be amended ("Origination Cablecasting Requirements"),
and that Network shall provide Affiliate all necessary documentation required
thereunder for Affiliate to timely meet its documentation and public file
requirements under the Origination Cablecasting Requirements. In the event that
any other programming offered by the Service shall be among the kind of
programming which is regulated by federal,
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state or local law, as the same may apply to pay television systems and
operators, then Network shall provide to Affiliate all statements, records or
other documents reasonably necessary for Affiliate to demonstrate timely
compliance as an operator or distributor with such laws and regulations.
(e) 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, directors,
employees, partners and agents, against and from any and all losses,
liabilities, claims, costs, damages and expenses (including, without limitation,
fines, forfeitures, attorney's fees, disbursements and administrative or court
costs) arising out of any breach by it of any term of this Agreement or any
warranty, covenant or representation contained herein.
(f) Without limiting the provisions of Section 8(e) or Section 8 (g)
hereof, Network will indemnify, defend and forever hold Affiliate ,and
Affiliate's affiliated companies', and each of Affiliate's and Affiliate's
affiliated companies' respective officers, directors, employees, partners and
agents harmless from and against any and all losses, liabilities, claims, costs,
damages and expenses (including, without limitation, fines, forfeitures,
attorney's fees, disbursements and administrative or court costs) arising out of
the content of the Service or the use and delivery of the Service (including,
but not limited to, sponsorship, promotional and advertising spots, any
background music and anything else inserted by Network or any party acting under
authority of Network), including, without limitation, any losses, liabilities,
claims, costs, damages and expenses based upon any lien, encumbrance, charge,
lis pendens, administrative proceeding, government investigation or litigation
relating to the Service, any program included in the Service 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 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 without any interruption, delay,
editing or alteration except as required or otherwise caused by Network. In no
event shall the foregoing indemnification include any compensation or
reimbursement for loss of prospective profits or anticipated sales arising from
any breach or alleged breach of Network's representations and warranties.
(g) Without limiting the provisions of Section 8(e) or Section 8(f)
hereof, Network shall indemnify, defend and forever hold harmless Affiliate and
Affiliate's affiliated companies, and each of Affiliate's and Affiliate's
affiliated companies respective officers, directors, employees, partners and
agents from and against any and all losses, liabilities, claims, costs, damages
and expenses (including, without limitation, fines, forfeitures, attorneys'
fees, disbursements, court or administrative costs) or any other losses or
liabilities of whatever nature, arising from any violation by Network of the
Origination Cablecasting Requirements, including required documentation and
public file requirements, or of the Children's Television. Regulations, either
with respect to the
21
<PAGE>
service or with respect to any of the compliance demonstration or record keeping
requirements of the Children's Television Regulations.
(h) 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. The
indemnified party will cooperate fully (at the cost of the 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 respects to such claim or action so settled.
In addition, with regard to any indemnification relating to any prosecution or
claim arising from an alleged violation of statutory law concerning the content
of the service, Network shall so indemnify, defend and hold harmless Affiliate
as provided for in Section 8(f) hereof, only if each of the following conditions
is met:
(i) As soon as practicable after actual receipt by Affiliate's Vice
President, Programming, of actual notice of commencement of a
prosecution or claim involving the content of the Service, Affiliate
or a representative of Affiliate shall notify both the General
Counsel's office of Network in Chicago at (312) 751-8000 and
Network's President in Beverly Hills at (310) 246-4000, or at other
numbers hereafter specified by Network by giving Affiliate prior
written notice of such other numbers. Such telephone notification
shall be followed, within a reasonable period of time, by a letter
to Network containing copies of all papers in the possession of the
Vice President, Programming of Affiliate, served in connection with
such alleged violation of law and giving whatever information is
then in actual possession of Affiliate's Vice President, Programming
regarding the incident. After said initial notifications, Network
shall be solely responsible for further investigation and
information gathering about the incident.
(ii) Unless otherwise specified in this Section 8 (h) , Network
shall be required to select and pay for counsel to represent
Affiliate in any action relating to the content of the Service, and
to which Affiliate is a party defendant, cross-claimant, third-party
plaintiff, or counterclaimant. If Affiliate elects to engage its own
counsel (in addition to any counsel selected and paid for by Network
and acting as Affiliate's counsel) in connection with any such
prosecution or claim described herein, it shall do so at its own
cost and expense. Nothing herein shall abrogate Network's obligation
to indemnify, defend and hold harmless Affiliate.
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<PAGE>
(i) Network represents, warrants and covenants that (i) it has
obtained errors and omissions 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 on such policy; and (iv) Network will provide Affiliate with
documentation to such effect upon the execution hereof.
(j) 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 to fully cure such material breach and
to demonstrate to Network that such material breach has been cured, and provided
further, that if such breach is confined to a System or to a limited number of
Systems, Network shall have the right to terminate this Agreement only as to
such System or Systems; 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 creditor (s) of Affiliate,
unless such involuntary petition is dismissed, or such relief is denied, within
thirty (30) days after it has been filed or sought; or (iv) upon 120 days prior
written notice, if Network terminates delivery of the Service to all
distribution technologies; provided that if Network commences distribution of a
new service that contains any programming which is substantially similar to any
programming included in the Service within twelve (12) months of such
termination., Affiliate may, in its sole and absolute discretion, elect to carry
such new service pursuant to the terms and conditions of this Agreement; or (v)
if by December 31, 1998, Affiliate is not then making the Service available in
Systems representing the lesser of (A) four million cable television
subscribers; or (B) Systems representing forty percent (40%) of the cable
television subscribers in systems which are then both managed and directly or
indirectly owned at least ten percent (10%) by Tele-Communications, Inc. ("TCI")
or a subsidiary of TCI, then, at any time during January, 1999, Network may
terminate this Agreement as of the later of 120 days after the giving of such
notice or the minimum time necessary for Affiliate to terminate its carriage of
the Service in compliance with applicable law.
(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, provided, however, if such breach is
23
<PAGE>
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 sought by any
creditor(s) 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.
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; strike, or other labor dispute; riot or civil commotion; flood;
hurricane; tornado; 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.
Notwithstanding the foregoing, 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 is fully operational again. In addition, with
respect to Service Cable Subscribers and Service Satellite Subscribers, 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 which would be due for such month 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 during such month absent such interruption(s), provided,
however, that such credit shall be given to Affiliate only if Affiliate shall
pass on proportionate credit to its Service Cable Subscribers and Service
Satellite Subscribers, as the case may be.
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):
24
<PAGE>
To Network:
3242 Beverly Boulevard
Beverly Hills, California 90210
Facsimile Number: (310) 246-4065
Attention: Programming Distribution
cc: Associate General Counsel
Playboy Enterprises, Inc.
680 North Lake Shore Drive
Chicago, Illinois 60611
To Affiliate:
Terrace Tower II
5619 DTC Parkway.
Englewood, Colorado 80111
Facsimile Number: (303)488-3219
Attention: President
cc: Vice President, Programming
cc: Corporate Counsel -
Business Affairs
cc: Vice President, Pay-Per-View
Notice or report given by personal delivery shall be deemed given on
delivery. Notice or report 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. Notice or report
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. Notice or report given by
facsimile transmission, if receipt is electronically confirmed, shall be deemed
given on the day of transmission if a business day, or on the next business day
after the day of transmission if not transmitted on a business day.
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 or 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 or employees, auditors or
attorneys), any information with respect to the terms and provisions of this
Agreement, any information contained in any report delivered under the terms of
this Agreement, any information regarding Affiliate's (or a System's)
subscribers (including but not limited to, the number of such subscribers or the
number of Addressable Subscribers) and neither party hereto shall disclose any
information obtained in any inspection and/or audit of the other party's books
and records, except: (i) to the extent necessary (but redacted to the greatest
extent possible) to comply with law or with the
25
<PAGE>
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; and (iv) if mutually agreed by
Affiliate and Network, in advance of such disclosure, in writing. In addition,
Network shall not use or disclose information (whether personally identifiable
information or not) to any third party regarding Affiliate's or any affiliate of
Affiliate's Subscribers and shall not engage in any direct mailing or telephone
solicitation, for any purpose, to Subscribers of Affiliate or any affiliate of
Affiliate, unless such Subscriber has previously initiated a communication with
Network; provided, however, that the foregoing sentence shall not apply to
information obtained by Network or an affiliate of Network in connection with
sales of products or services other than the Service. This Section 12 shall
survive the expiration or termination of this Agreement regardless of the reason
for such expiration or termination.
13. MISCELLANEOUS:
(a) Assignment: Binding Effect; Reorganization. This Agreement,
including both its obligations and benefits, shall redound to the benefit of the
respective 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 a successor entity resulting from a merger, acquisition or
consolidation by either party or assignment to an entity under common control,
controlled by or in control of either party. Notwithstanding the foregoing,
Network shall give Affiliate written notice of a change in the control or
ownership of the Service or Network not later than the five (5) days after such
change in control or ownership occurs provided, however, that Network shall use
reasonable efforts to give Affiliate thirty (30) days notice in advance of any
such change in control or ownership. In the event of any such change in the
ownership or control of Network or the Service, this Agreement may, in the sole
and absolute discretion of Affiliate, be terminated. For purposes of this
paragraph, the term "control" means the power to direct the management and
policies of an entity, directly or indirectly, whether through the ownership of
voting securities, by contract or otherwise; provided, however, that no transfer
of ownership or management of Network or the Service to any direct descendent of
Hugh Hefner, either from Hugh Hefner or from another direct descendent of Hugh
Hefner, shall be deemed to be a change o(euro) control hereunder. In addition to
the foregoing, upon one hundred twenty (120) days' prior written notice to
Affiliate, Network may assign this Agreement or any portion of its rights or
obligations hereunder without Affiliate's consent, provided that, as a result of
such assignment, the Service shall no longer generally be identified as a
"Playboy" Service by or through the use of the Marks therein and the Service
shall no longer include any "Playboy-identified" programming. Upon receipt of
such notice, Affiliate may elect to terminate this Agreement, at any time
thereafter, upon, ninety (90)
26
<PAGE>
days' prior written notice to Network (or its assignee), to be effective on the
date contained in Affiliate's notice.
(b) Service Combinations. In the event that the Service is merged
with; or Network acquires control of, or Network is acquired by or merges with,
or control of Network is acquired by, or the Service is acquired by, any other
programming service or the owner thereof, if Affiliate has (at the time of such
merger or acquisition) an affiliation agreement with any such other service or
entity, Affiliate shall have the option to choose to continue carriage of the
Service and of such other service, as the case may be, under either this
Agreement or under such other affiliation agreement. If Affiliate does not have
an affiliation agreement with such other service or entity, Affiliate shall have
the option to elect to have this Agreement continue to apply to the service
after such merger or acquisition, or to any surviving service after such merger
or acquisition.
(c) 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 and 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.
(d) 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 (except with respect to issues regarding perpetuity, which shall be
governed by the laws of the State of Colorado), without regard to choice of law
rules.
(e) 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. Network disclaims any
present or future right, interest or estate in or to the transmission facilities
of Affiliate and any affiliate of the Affiliate and the parents, subsidiaries,
partnerships or joint venturers controlling the Systems on which
27
<PAGE>
the Service is transmitted, such disclaimer being to acknowledge that neither
Affiliate nor the transmission facilities of the Systems (nor the owners
thereof) are common carriers.
(f) *****.
(g) 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. Notwithstanding the foregoing, if any legislation is enacted, or
administrative ruling, or court decree or order or stipulated settlement is
issued which materially deprives Affiliate of the overall net economic benefits
of this Agreement with respect to the cable exhibition of the service, and if
the parties fail to reach an agreement after good faith negotiation, Affiliate
shall have the right to terminate this Agreement upon thirty (30) days' prior
written notice to Network.
(h) No Inference Against Author. 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.
(i) 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.
(j) 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.
(k) 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 on the part of any of the parties to this
Agreement was not made nor intended to be made as a personal representation,
warranty, covenant, undertaking, 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 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.
28
<PAGE>
AFFILIATE: NETWORK:
SATELLITE SERVICES, INC. PLAYBOY ENTERTAINMENT GROUP,
a Delaware corporation INC., a Delaware corporation
By: /s/ Jedd Palmer By: /s/ Michael K. Fleming
JEDD PALMER MICHAEL K. FLEMING
Title: Vice President, Programming Title: S.R. V.P. - General Mgr.
PLAYBOY TELEVISION
PLAYBOY ENTERTAINMENT GROUP
29
<PAGE>
SCHEDULE 1
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
SYSTEMS
TCI OWNED AND MANAGED
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Maricopa Maricopa (Rio Verde) Maricopa Arizona
Scottsdale Scottsdale Maricopa Arizona
North Scottsdale Maricopa Arizona
Shadow Mountain Maricopa Arizona
Maricopa Maricopa Arizona
Alameda Alameda Alameda California
Alameda Nas Alameda California
Brentwood Contra Costa East Contra Costa East California
Brentwood Contra Costa East California
Chino Pomona Los Angeles California
Chino San Bernardino
South California
Carbon Canyon San Bernardino
South California
Chino Hills San Bernardino
South California
Cupertino Cupertino Santa Clara West California
Los Altos Santa Clara West California
Santa Clara Santa Clara West California
Davis Davis Yolo California
Yolo Yolo California
Foster City Foster City San Mateo California
Hillsborough San Mateo California
Hacienda Heights La Puente Los Angeles California
Pico River Los Angeles California
Baldwin Park Los Angeles California
Hayward Hayward Alameda California
Alameda Alameda California
San Leandro Alameda California
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
San Lorenzo Alameda California
Lakeview/Nuevo Perris Riverside West California
Lakeview/Nuevo Riverside West California
Los Angeles Los Angeles Los Angeles California
Martinez Contra Costa North Contra Costa East California
Contra Costa South Contra Costa East California
Lafayette North Contra Costa East California
Lafayette South Contra Costa East California
Martinez Contra Costa East California
North Orinda Contra Costa East California
Pleasant Hill Contra Costa East California
Walnut Creek Contra Costa East California
Moraga Contra Costa East California
South Orinda Contra Costa East California
Danville Contra Costa East California
Clyde Contra Costa East California
Concord Naval Contra Costa East California
Weapons Station
Moreno Valley Moreno Valley Riverside West California
Palo Alto Palo Alto Santa Clara West California
Atherton San Mateo California
East Palo Alto San Mateo California
Menlo Park San Mateo California
Stanford Santa Clara West California
Perris Perris Riverside West California
San Jose San Jose Santa Clara West California
Campbell Santa Clara West California
Santa Clara County Santa Clara West California
Cupertino Santa Clara West California
Los Gatos Santa Clara West California
Scotts Valley Santa Cruz Santa Cruz California
Santa Cruz County Santa Cruz California
Scotts Valley Santa Cruz California
South Whittier South Whittier Los Angeles California
Sunnyvale Sunnyvale Santa Clara West California
Tracy Tracy San Joaquin California
San Joaquin San Joaquin California
Vacaville Vacaville Solano West California
Solano Solano West California
Walnut Creek Walnut Creek Contra Costa East California
Contra Costa Contra Costa East California
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Woodcrest Woodcrest Riverside West California
Castle Rock Castle Rock Douglas Colorado
Acres Green Douglas Colorado
The Pinery Douglas Colorado
Franktown Douglas Colorado
Parker Douglas Colorado
Perry Park Douglas Colorado
Sedalia Douglas Colorado
Louviers Douglas Colorado
Roxborough Village Douglas Colorado
Denver Metroplex Arvada Jefferson/Adams Colorado
Jefferson North Jefferson Colorado
Westminster Jefferson/Adams Colorado
Aurora Adams Colorado
Fitzsimmons Army Med Adams Colorado
Aurora Arapahoe Colorado
Commerce City Adams Colorado
Englewood Arapahoe Colorado
Broadway Estates Arapahoe Colorado
Arapahoe Arapahoe Colorado
Greenwood Village Arapahoe Colorado
Sheridan Arapahoe Colorado
Cherry Hills Village Arapahoe Colorado
Federal Heights Adams Colorado
Adams Adams Colorado
Buckley AFB Denver Colorado
Holly Hills Arapahoe Colorado
Lakewood Jefferson Colorado
Golden Jefferson Colorado
Jefferson South (Lakewood) Jefferson Colorado
Douglas Douglas Colorado
Adams County SMATVS Adams Colorado
Chapparal Subdivision Arapahoe Colorado
Hollywood Hollywood Broward Florida
Miami Opa Locka Dade Florida
Miami Dade Florida
Carpentersville Algonquin Kane/McHenry Illinois
Crystal Lake McHenry Illinois
West Dundee Kane Illinois
Lake in the Hills McHenry Illinois
East Dundee Kane Illinois
Cary McHenry Illinois
Fox River Grove McHenry Illinois
Carpentersville Kane Illinois
Lakewood McHenry Illinois
Oakwood Hills McHenry Illinois
McHenry McHenry Illinois
Sleepy Hollow Kane Illinois
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Huntley McHenry Illinois
Kane Kane Illinois
Lakemoor McHenry Illinois
Wauconda Lake Illinois
Galesburg Galesburg Knox Illinois
East Galesburg Knox Illinois
Knoxville Knox Illinois
Knox Knox Illinois
Mendota Mendota La Salle Illinois
Monmouth Monmouth Warren Illinois
Warren Warren Illinois
Hammond Hammond Lake Indiana
East Chicago Lake Indiana
Bossier City Bossier City Bossier Louisiana
Bossier Bossier Louisiana
Barksdale AFB Bossier Louisiana
Haughton Bossier Louisiana
Fillmore Bossier Louisiana
Princeton Bossier Louisiana
Baltimore Baltimore Baltimore Maryland
Berlin Berlin Worcester Maryland
Worcester Worcester Maryland
Ocean City Ocean City Worcester Maryland
Sussex Sussex Maryland
Fenwick Island Sussex Maryland
Grand Rapids Grand Rapids Kent Michigan
East Grand Rapids Kent Michigan
Grand Rapids Township Kent Michigan
Ada Kent Michigan
Cascade Kent Michigan
Lowell Kent Michigan
Grandville Grandville Kent Michigan
Georgetown Ottawa Michigan
Byron Kent Michigan
Dorr Allegan Michigan
Jamestown Ottawa Michigan
Lake Orion Independence Oakland Michigan
Clarkston Oakland Michigan
Lake Orion Oakland Michigan
Orion Oakland Michigan
Rochester Auburn Hills Oakland Michigan
Rochester Hills Oakland Michigan
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Oakland Oakland Michigan
Rochester Oakland Michigan
Troy Oakland Michigan
Royal Oak Royal Oak Oakland Michigan
Berkley Oakland Michigan
Clawson Oakland Michigan
Ferndale Oakland Michigan
Huntington Woods Oakland Michigan
Pleasant Ridge Oakland Michigan
Troy Oakland Michigan
Walker Walker Kent Michigan
Alpine Kent Michigan
Plainfield Kent Michigan
Cannon Kent Michigan
Sparta Kent Michigan
Wright Ottawa Michigan
Talmadge Ottawa Michigan
Grand Rapids Kent Michigan
Grand Rapids Township Kent Michigan
Wyoming Wyoming Kent Michigan
Kentwood Kent Michigan
Gaines Kent Michigan
Bellevue Bellevue Sarpy Nebraska
Offutt AFB Sarpy Nebraska
Sarpy Sarpy Nebraska
La Vista La Vista Sarpy Nebraska
Ralston Douglas Nebraska
Papillon Sarpy Nebraska
Douglas Douglas Nebraska
Omaha Douglas Nebraska
Gallup Gallup McKinley New Mexico
Gamerco McKinley New Mexico
Brookhaven Brookhaven Suffolk New York
Patchogue Suffolk New York
Bellport Suffolk New York
Lake Grove Suffolk New York
Poquott Suffolk New York
Mamaroneck Mamaroneck (Town) Westchester New York
Mamaroneck (Village) Westchester New York
Larchmont Westchester New York
Bristow Bristow Creek Oklahoma
Claremore Claremore Rogers Oklahoma
Drumright Drumright Creek Oklahoma
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Tulsa Sand Springs Tulsa Oklahoma
Tulsa Tulsa Oklahoma
Broken Arrow Tulsa Oklahoma
Owasso Tulsa Oklahoma
Glenpool Tulsa Oklahoma
Sapulpa Creek Oklahoma
Jenks Tulsa Oklahoma
Creek Creek Oklahoma
Kiefer Creek Oklahoma
Catoosa Rogers Oklahoma
Tulsa Tulsa Oklahoma
Rogers Rogers Oklahoma
Wagoner Wagoner Oklahoma
Osage Osage Oklahoma
Rolling Hills Wagoner Oklahoma
Abilene Abilene Taylor Texas
Tye Taylor Texas
Dyess AFB Taylor Texas
Taylor Taylor Texas
Jacksonville Jacksonville Cherokee Texas
Cherokee Cherokee Texas
Tyler Tyler Smith Texas
Smith Smith Texas
Whitehouse Smith Texas
CAGUAS CABLE SYSTEMS
Caguas Caguas n/a Puerto Rico
Cayey Cayey-Cidra n/a Puerto Rico
Barranquitas Barranquitas n/a Puerto Rico
Humacao Humacao n/a Puerto Rico
LENFEST COMMUNICATIONS
Sellersville Bedminster Bucks Pennsylvania
Blooming Glen Bucks Pennsylvania
Chalfont Bucks Pennsylvania
Colmar Montgomery Pennsylvania
Dublin Bucks Pennsylvania
Earlington Montgomery Pennsylvania
East Greenville Montgomery Pennsylvania
Elroy Montgomery Pennsylvania
Fountainville Bucks Pennsylvania
Franconia Montgomery Pennsylvania
Green Lane Montgomery Pennsylvania
Hatfield Montgomery Pennsylvania
Harleysville Montgomery Pennsylvania
Hilltown Bucks Pennsylvania
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
Lansdale Montgomery Pennsylvania
Line Lexington Montgomery Pennsylvania
Lederach Montgomery Pennsylvania
Mainland Montgomery Pennsylvania
Milford Square Bucks Pennsylvania
Penasburg Montgomery Pennsylvania
Perkasie Bucks Pennsylvania
Perkiomenville Montgomery Pennsylvania
Pipersville Bucks Pennsylvania
Plumsteadville Bucks Pennsylvania
Quakertown Bucks Pennsylvania
Richlandtown Bucks Pennsylvania
Salford Montgomery Pennsylvania
Salfordville Montgomery Pennsylvania
Sellersville Bucks Pennsylvania
Schwensksville Montgomery Pennsylvania
Silverdale Bucks Pennsylvania
Skippack Montgomery Pennsylvania
Souderton Montgomery Pennsylvania
Spinnerstown Bucks Pennsylvania
Spring Mount Montgomery Pennsylvania
Sumneytown Montgomery Pennsylvania
Telford Bucks Pennsylvania
Telford Montgomery Pennsylvania
Trumbauersville Bucks Pennsylvania
Tylersport Montgomery Pennsylvania
Woxall Montgomery Pennsylvania
Zieglersville Montgomery Pennsylvania
Perkaskie Borough Bucks Pennsylvania
Sellersville Borough Bucks Pennsylvania
West Rockhill Township Bucks Pennsylvania
East Rockbill Township Bucks Pennsylvania
Telford Borough Montgomery Pennsylvania
Souderton Borough Montgomery Pennsylvania
Hatfield Borough Montgomery Pennsylvania
Hatfield Township Montgomery Pennsylvania
Franconia Township Montgomery Pennsylvania
Quakertown Borough Bucks Pennsylvania
Richland Township Bucks Pennsylvania
Milford Township Bucks Pennsylvania
Richlandtown Borough Bucks Pennsylvania
Trumbauersville Borough Bucks Pennsylvania
Silverdale Borough Bucks Pennsylvania
Lower Salford Township Montgomery Pennsylvania
Salford Township Montgomery Pennsylvania
Upper Salford Township Montgomery Pennsylvania
Lower Frederick Township Montgomery Pennsylvania
Green Lane Borough Montgomery Pennsylvania
Marlborough Township Montgomery Pennsylvania
Bedminster Township Bucks Pennsylvania
Dublin Borough Bucks Pennsylvania
Upper Frederick Township Montgomery Pennsylvania
<PAGE>
HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
US CABLE OF NORTHERN INDIANA
Griffith Cedar Lake Lake Indiana
Crook Co. Uninc. Cook Illinois
Crown Point Lake Indiana
Dyer Lake Indiana
Ford Heights Cook Illinois
Glenwood Cook Illinois
Griffith Lake Indiana
Highland Lake Indiana
Hobart Lake Indiana
Lake Co. Uninc. Lake Indiana
Lake Station Lake Indiana
Lowell Lake Indiana
Lynwood Cook Illinois
Merrillville Lake Indiana
Munster Lake Indiana
New Chicago Lake Indiana
Porter Co. Uninc. Porter Indiana
St. John Lake Indiana
Schererville Lake Indiana
Whiting Lake Indiana
Will Co. Uninc. Will Illinois
US CABLE OF LAKE COUNTY
North Chicago North Chicago Lake Illinois
Antioch Lake Illinois
Fox Lake Lake Illinois
Green Oaks Lake Illinois
Gurnee Lake Illinois
Knollwood & Shields Lake Illinois
Lake Bluff Lake Illinois
Lake Forest Lake Illinois
Lake Villa Lake Illinois
Libertyville Township Lake Illinois
Lindenhurst Lake Illinois
Park City Lake Illinois
Third Lake Lake Illinois
Venetian Village Lake Illinois
Wadsworth Lake Illinois
Waukegan Lake Illinois
Winthrop Harbor Lake Illinois
Zion Lake Illinois
COLUMBIA ASSOCIATES
Beaverton Beaverton Washington Oregon
Tigard Washington Oregon
Lake Osweg Clackamas Oregon
Hillsboro Washington Oregon
Washington Co. Uninc. Washington Oregon
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HEADEND NAME FRANCHISE NAME COUNTY STATE
------------ -------------- ------ -----
King City Washington Oregon
Cornelius Washington Oregon
Tualatin Washington Oregon
Sherwood Washington Oregon
Rivergrove Clackamas Oregon
North Plains Washington Oregon
Banks Washington Oregon
Durham Washington Oregon
Wilsonville Washington Oregon
Aloha Washington Oregon
Wash Co-La Washington Oregon
Gaston Washington Oregon
Clackamas Co. Uninc. Clackamas Oregon
<PAGE>
EXHIBIT A
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
System Qualifications
I. Affiliate represents and warrants the following regarding each System listed
on Schedule I hereof:
1. that (a) either Tele-Communications, Inc. or Liberty Media
Corporation (Tele-Communications, Inc. and Liberty Media Corporation shall be
hereinafter referred to as "TCI"; any reference to TCI herein shall be deemed to
be a reference to either Tele-Communications, Inc. or Liberty Media Corporation,
or both, as is necessary to qualify the greatest number of television
distribution facilities hereunder) or its nominee owns, directly or indirectly,
at least a twenty-five percent (25%) interest in the general manager of the
System pursuant to a valid written agreement in full force and effect; or (b)
TCI or its nominee owns, directly or indirectly, a ten percent (10%) interest in
such System or owns an interest or obligation by which TCI, directly or
indirectly, owns a right (whether conditional or not) to convert into or
acquire, directly or indirectly, an interest equal to at least the required
interest. An "indirect" ownership is an interest resulting from ownership
through any series of ownership interests, including corporations, partnerships,
joint ventures or other forms of business organizations; an indirect interest
shall be quantified in amount by a series of percentage multiplications
commencing with TCI's direct interest and multiplying that by the next most
proximate percentage interest and, then, multiplying in turn each succeeding
ownership interest in the order of their progression away from TCI by the result
of the immediately preceding multiplication until the most distant percentage
interest is multiplied;
2. that Affiliate or an agent has been authorized, pursuant to a
valid written agreement in full force and effect, to make and execute decisions
on behalf of each such System with respect to the Service, including but not
limited to billing and collection of fees, selection of programming and
Affiliate continues throughout the Term to exercise such authority with respect
to matters affecting the distribution of the Service by such System;
3. That either a franchise or license is not required or a valid
franchise or license is in effect through the Term of this Agreement or the
franchisee or licensee has held a valid cable television franchise or license
and continues to operate in the franchise or license area under a claim of right
or is otherwise lawfully operating or franchisee or licensee has held a valid
cable franchise or license and is continuing to operate while diligently
pursuing, in good faith, its available judicial remedies. For the
<PAGE>
above purposes, in the event a franchise or license expires before the end of
the Term, such franchise or license shall be deemed valid for so long as
franchisee or licensee is negotiating in good faith with the franchising or
licensing authority for a franchise or license renewal;
4. that, except as permitted under this Agreement, Affiliate is not
subdistributing and will not in the future subdistribute, nor does it claim to
be authorized to subdistribute, the Service through any cable television system
which does not satisfy the requirements set forth above.
II. In the event TCI's direct or indirect equity interest in a System or in the
entity managing such System decreases, and provided TCI's interest does not
decrease to zero, such System shall continue to qualify under Paragraph I
hereof, provided however, (i) at the time of diminution of TCI's interest in the
System, TCI reasonably expects that its interest will return to the necessary
level, and (ii) TCI's interest in such System does in fact increase to the level
required under Paragraph I hereof within eighteen (18) months of the decrease.
III. In the event Affiliate, or any of the entities which owns or manages
Systems which qualify hereunder, effects a corporate separation, reorganization
or restructuring (including, but not limited to, by a distribution of stock, or
other assets or rights, to its shareholders, partners or joint venturers), the
Systems of the entity resulting from such transaction (including all interim and
supporting entities) and/or all of such resulting entities, in the aggregate,
will continue to qualify under Paragraph I hereof, so as to continue to qualify
to distribute the Service under the terms and conditions hereof, as if such
separation, reorganization or other restructuring had not occurred.
<PAGE>
EXHIBIT B-1
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
PROGRAM SCHEDULE
See Attached.
<PAGE>
EXHIBIT B-1
[FEBRUARY PLAYBOY AT NIGHT PROGRAM SCHEDULE]
<PAGE>
EXHIBIT B-2
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
STANDARDS AND PRACTICES
Playboy Television is a targeted, differentiated pay-per-view television
network featuring stylized eroticism and a variety of entertainment programs for
men and women.
The service's programming ranges from sensuous imagery to unusual candid
interviews; lifestyle information; news, music and dance with a sensual flair;
and fast-paced, off-beat comedy.
Original programming, both produced and acquired, is the mainstay of
Playboy Television. The remainder of the line-up consists of acquired motion
pictures. As a rule, Playboy Television does not accept motion pictures shot on
videotape.
Playboy Television does not produce programming with scenes depicting
violent behavior. As a matter of policy, Playboy Television limits the
acquisition of programs and films that contain violent scenes our policy is to
limit such elements and to avoid completely any scenes which link sexuality and
eroticism with violence, directly or indirectly. As a result of these
guidelines, Playboy Television is less violent than programming that can be seen
on HBO, Cinemax, Showtime, The Movie Channel, Viewer's Choice and Request
Television.
Nudity is not restricted on Playboy Television and includes both male and
female full-frontal nude scenes. The extreme sexual explicitness associated with
the majority of adult films is forbidden or strictly edited. Graphic close-ups
of genitals are forbidden. There is no rape, sadism, sadomasochism, bondage,
incest, bestiality or child pornography.
Playboy Television licenses both non-rated and MPAA films. Some explicit
(non-rated) adult films are aired with strict editing to the standards stated
herein. Because of the nature of our service, strong or explicit language is
included in Playboy Television programming.
Playboy Television's broadcast standards and practices code is designed to
present programming consistent with the level of taste and quality established
by Playboy over its more than 35 years as an internationally recognized media
and entertainment company.
<PAGE>
EXHIBIT C
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
TECHNICAL SPECIFICATIONS
GENERAL
1.1 All specifications are to be adhered to anywhere in the contiguous 48 United
States. This specification uses a 5 meter reference antenna which is peaked at
the center of the orbital box. It is the responsibility of the Network to
provide center of the box times on a monthly basis.
1.2 The specification is divided into space segment and total system. Total
system is defined as the additional noise contribution by the originating studio
and transport facility to the input to the uplink.
1.3 System availability based on total system 99.998% per year calculated on a
monthly basis excluding sun outage. The system shall be declared unavailable
under the following:
A. Loss of video
B. Loss of audio
C. Video signal to noise <45db
D. Audio signal to noise <45db
1.4 This specification is for analog service. A specification for digital system
will be added at a later date when equipment is developed.
VIDEO SPECIFICATIONS
Parameter Space Segment Total System
2.1 Frequency response: .25db box .5db box
2.2 Signal to Noise Ratio:
Definition: 1v p/p vid to RMS
noise, 4.2 Mhz weighted. 52db 50.3db
2.3 Chrominance/luminance delay: <20 ns <50ns
<PAGE>
Parameter Space Segment Total System
2.4 2T K Factor: <2% <3%
2.5 Differential Gain: <.2db <.45db
2.6 Differential Phase: +/-1(degree) <+/-2(degree)
2.7 Insertion gain/loss: <2 IRE <4 IRE
2.8 Video formats, waveforms,
timing shall adhere to latest
FCC requirements. All other
parameters not specified shall
conform to NTSC Engineering
Report #7.
AUDIO SPECIFICATIONS
Parameter Space Segment Total System
3.1 Frequency Response: <.5db box <1db box
3.2 Video/Audio Sync: <10 m/sec <20 m/sec
3.3 Signal to Noise Ratio:
Definition: RMS test tone to RMS
noise with 15Khz weighting. This
parameter to be measured with
program video or full field color
bar test pattern. >56db >55db
3.4 Distortion: At l0db above TT
distortion shall not exceed 3%.
Distortion shall be measured at 1004Hz. <.5% at TT <.7% at TT
3.5 Wow and Flutter: <.1%rms
3.6 Crosstalk: >65db >65db
3.7 Insertion gain/loss: <.5db <1d
<PAGE>
EXHIBIT D
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
[DATE]
Satellite Services Inc.
5619 DTC Parkway, Suite 915
Englewood, CO 80111
RE: CHILDREN'S TELEVISION REGULATION CERTIFICATION
Dear ______________:
Please be advised that Playboy Entertainment Group, Inc. produces neither
"commercial matter" nor "children's programming" as those terms are used in 47
U.S.C. Section 303a and C.F.R. Section 76.225; neither does it produce
programming designed to service children's educational and informational needs
as contemplated by 47 U.S.C. Section 303b and applied regulations.
Please let me know if Satellite Services Inc. or its affiliates needs additional
information from Playboy Entertainment Group, Inc. to satisfy compliance with
the Act.
Sincerely,
Playboy Entertainment Group, Inc.
By: _________________________
Name: _________________________
Title: _________________________
<PAGE>
EXHIBIT E
To Affiliation Agreement By and Between
Playboy Entertainment Group, Inc. and
Satellite Services, Inc.
Dated February 10, 1993
LIST OF AGREEMENTS EXCLUDED
FROM THE OPERATION OF SECTION 13 (f)
1. *****
2. *****
3. *****
4. *****
5. *****
6. *****