Shareholders' Agreement - Playboy TV UK/Benelux Ltd., Continental Shelf 16 Ltd. and Playboy Entertainment Group Inc.
MADE EFFECTIVE 12TH JANUARY 1995
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(1) CONTINENTAL SHELF 16 LIMITED
(2) PLAYBOY ENTERTAINMENT GROUP, INC.
(3) PLAYBOY TV UK/BENELUX LIMITED
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SHAREHOLDERS' AGREEMENT
Relating to the establishment of
PLAYBOY TV UK/BENELUX LIMITED
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[LOGO OF DENTON HALL]
FIVE CHANCERY LANE
CLIFFORD'S INN
LONDON EC4A IBU
TELEPHONE 0171 242 1212 FAX 0171 404 0087
MEMBER OF THE DENTON INTERNATIONAL
GROUP OF LAW FIRMS
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DENTON HALL
INDEX
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CLAUSE PAGE
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1. Definitions 1
2. Business of the Company and Launch of the Channel 12
3. Closing Arrangements 14
4. Provision of Finance 16
5. The Board and Management 20
6. Agreement to Perform 23
7. Information 23
8. Restrictions on the Company's Activities 25
9. Name 33
10. Dividend Policy 33
11. Condition Precedent 33
12. Confidentiality 33
13. Transfers of Shares and Loan Stock 35
14. Deemed Transfers 43
15. Option 45
16. Sell Down 52
17. Compulsory Purchase by Flextech 55
18. Representations and Warranties 56
19. Competition 58
20. No Assignment 58
21. Waivers, Remedies Cumulative, Amendments etc 59
22. Invalidity etc 59
23. No Partnership or Agency 60
24. Announcements 60
25. Costs 60
26. Entire Agreement 60
27. Conflict with Articles etc 61
28. Notices 61
29. Governing Law 62
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DENTON HALL
AGREED FORM DOCUMENTS
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1. Articles of Association
2. Resolutions
3. Loan Stock Deed and Certificate
4. Programme Supply Agreement
5. Trademark Licence
6. Legal Opinions
7. Consent Agreement
8. Initial Business Plan
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DENTON HALL
SCHEDULES
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SCHEDULE I Particulars of the Company
SCHEDULE II Details of Subscriptions by Shareholders at Closing
SCHEDULE III Deed of Adherence
SCHEDULE IV Funding
SCHEDULE V Directors
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DENTON HALL
THIS AGREEMENT is made effective 12th January 1995
BETWEEN
(1) CONTINENTAL SHELF 16 LIMITED registered in England under number 3,005,499
whose registered office is at The Ouadrangle, Imperial Square, Cheltenham,
Gloucester, GL50 lYX ("Flextech");
(2) PLAYBOY ENTERTAINMENT GROUP, INC. a Delaware corporation of 9242 Beverly
Boulevard, Beverly Hills, California 90210 ("Playboy")
(3) PLAYBOY TV UK/BENELUX LIMITED registered in England under number 3,000,033
whose registered office is at Five Chancery Lane, Clifford's Inn, London
EC4A lBU (for itself and, under Clauses 12 and 19, for itself and as
trustee for its Subsidiaries for the time being) ("the Company").
WHEREAS:
(A) The Shareholders wish to incorporate the Company and to procure that the
Company will establish a pay television service to be known as "Playboy TV"
based on the pay television service which is currently operated by Playboy
in the United States of America under the name "Playboy TV" ("the Channel")
in the Territory.
(B) The Shareholders are entering into this Agreement with the Company (whose
corporate details are set out in Schedule I) in order to record the basis
of their relationship as shareholders in the Company and to establish the
manner in which the business and affairs of the Company will be financed
and conducted.
NOW IT IS HEREBY AGREED as follows:
1. Definitions
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1.1 In this Agreement and in the Recitals and Schedules hereto the following
words and expressions shall save as otherwise specifically provided have
the following meanings:
2.
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DENTON HALL
"the Act": the Companies Acts 1985 to 1989 and the Companies Consolidation
(Consequential Provisions) Act 1985 and the Company Directors Disqualification
Act 1986 and all regulations made under any of the foregoing:
"Advertising Material": audio and/or visual and/or audio visual films and/or
sound recordings which in each such case are advertising, promoting or selling
goods, services or facilities or otherwise as permitted in accordance with the
relevant codes published from time to time by the ITC;
"the Articles": the articles of association of the Company in the agreed form or
as they may subsequently be altered from time to time in a manner consistent
with the terms of this Agreement;
"Associate": in relation to any company, another company which controls, is
controlled by or is in common control with that company; and for the purposes of
this definition a company shall be deemed to control any company which is a
subsidiary or a subsidiary undertaking of such company;
"the Board": the board of directors of the Company;
"the Business": the operation of a pay television service and ancillary
businesses (known as Playboy TV) in the Territory and in such other country in
Europe as the Board may approve from time to time and in respect of which the
Company or any Subsidiary has a license to operate such a service under the
"Playboy" name;
"the Business Plan": the initial business plan and budget of the Company in the
agreed form or where the context permits any revision or amendment thereto and
any other business plan and/or budget approved pursuant to Clause 8;
"Chairman": the Chairman from time to time of the Board;
3.
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DENTON HALL
"the Channel": a pay television service to be known as "Playboy TV" based on the
pay television service which is currently operated by Playboy in the United
States of America under the name "Playboy TV" as such service may be developed
from time to time initially to operate as a cable channel and thereafter to be
transmitted by such other means as may be approved from time to time in
accordance with Clause 8;
"Closing": the date of completion of the matters specified in Clause
3.1;
"Consent Agreement": an agreement in the agreed form between Playboy, Playboy
Enterprises, Inc., Flextech and the Company which (inter alia) permits the
pledge of certain assets which would otherwise have been prohibited under the
Transaction Documents;
"control": the meaning ascribed thereto in Section 416 of the Taxes Act;
"Deed of Adherence": a deed of adherence in the form set out in
Schedule III;
"Directors": the directors for the time being of the Company;
"Disqualified Participant": any person all or part of whose Interest or
shareholding or interest in any other company taken alone or together with the
Interest or shareholding or interest in any other company of any other person or
persons, after taking into account any issue of any shares or securities in the
Company or any transfer of any Interest, in either case in respect of which the
relevant person has indicated in writing an intention to acquire any such shares
or securities and, has caused or would cause or be likely to cause (as
determined in accordance with this Agreement), a Licence Event;
4.
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DENTON HALL
"Encumbrance": means any assignment by way of security, charge, hypothecation,
lien (other than a lien arising solely by operation of law in the normal course
of trading, the aggregate amount of which is not material), mortgage, pledge,
title retention (other than arising pursuant to a third party's standard
conditions of supply of goods) right of set off, security interest, trust
arrangement and any other preferential right or agreement to confer security,
including any analogous security interest under local law.
"Europe": all countries which are situated within the geopolitical entity known
as Europe, for the avoidance of doubt, including, but without limitation all the
countries which are members of the European Union or the European Free Trade
Area.
"Fair Value":
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(a) in respect of each Share the same proportion of the fair market value of
the Company as a whole on the date of service of the Transfer Notice (or
deemed date thereof) or in the event that clauses 8.5 and 8.6 apply the
date of the Winding Up Resolution or in the event that clause 15 applies
on the date of the Option Exercise Notice as such Share bears to the whole
of the issued ordinary share capital of the Company stated as a price per
Share; and
(b) in respect of each (Pounds)1 principal amount of Loan Stock the lesser
of:--
(i) the principal amount thereof plus interest thereon which has accrued
in accordance with the terms of issue of the Loan Stock but which
remains unpaid; and
(ii) the same proportion of the fair market value thereof treating each
(Pounds)1 of Loan Stock as if it were a fully paid Share calculated in
accordance with (a) above
5.
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DENTON HALL
as certified (except in relation to (b)(i)) by the Referee on the basis of a
sale thereof as between a willing vendor and a willing purchaser on the
assumption that the Shares and/or Loan Stock the subject of the Transfer Notice
will be purchased in one lot by a purchaser contracting on arm's length terms,
who has no other interest in the Company and (if the Company is then continuing
as a going concern) on the assumption that all the Shares were ordinary shares
of the same class and that the Company will continue in business as a going
concern and having regard to any goodwill attaching to the Company though
taking into account of the fact (if that be the case) that the Programme Supply
Agreement and/or Trademark Licence has been terminated;
"Foreign Licence Event": an event having a legal effect analogous to that of
a Licence Event in any of the Territories (other than the United Kingdom);
"Gross Revenues": all income and other payments receivable in the normal course
of business as shown in the audited accounts of the Company from time to time
less any value added tax or other similar taxes;
"Group": in relation to a Shareholder, that Shareholder and any holding
company or subsidiary of that Shareholder and any subsidiary of such holding
company;
"Indebtedness for Borrowed Money": any loan, debt, bond, note, loan stock,
debenture or other obligation for borrowed moneys, any obligation under any
hire purchase, conditional sale or title retention agreement or lease (other
than for payment of rent and service charges not exceeding a commercial rate
under any lease of real property), any liability in respect of any acceptance
credit or note or bill discounting facility, any amount of consideration
left outstanding by way of loan or otherwise under any agreement for the sale
or purchase of assets and/or the supply of services (other than normal trade
credit) and any guarantee, indemnity or security in respect of any of the
foregoing, the amount thereof in each case
6.
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DENTON HALL
being taken for the purpose of this Agreement to be (a) the maximum amount
capable of being outstanding from companies in the Playboy/Flextech Group
whether or not then due or owing from or advanced to companies in the
Playboy/Flextech Group at the time of calculation but (b) to be calculated
excluding any amounts owing to other companies in the Playboy/Flextech Group;
"Interest": an interest of any person in Shares, Loan Stock or any other
securities of the Company;
"in the Agreed Proportions": where the term is used in relation to all the
Shareholders in such proportions as equal the percentage which the nominal value
of the Shares for the time being in issue and beneficially owned by each
Shareholder respectively bears to the aggregate nominal value of all the Shares
or, where the term is used in relation to some only of the Shareholders in such
proportions as equal the percentage which the nominal value of the Shares for
the time being in issue and beneficially owned by each relevant Shareholder
bears to the aggregate nominal value of all the Shares held by such relevant
Shareholders;
"in writing": includes any communication made by letter, facsimile transmission
or electronic mail;
"ITC Satellite Licence": the non-domestic satellite service licence in respect
of the Channel to be applied for by the Company from ITC in accordance with the
provisions of the Broadcasting Act 1990;
"the ITC": the Independent Television Commission;
"LIBOR": the three month London Interbank Offered Rate for Sterling Deposits,
as published in the Financial Times on the first day of each month or on the
next succeeding day on which the Financial Times is published;
7.
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DENTON HALL
"Licence Event": any of the following events:
(a) the ITC revoking or (in a manner which has or is reasonably likely to
have a material adverse effect on the Company) reducing the period of
the ITC Satellite Licence (and, for the avoidance of doubt, any
reduction which results in the involuntary cessation of business by the
Company shall be deemed to have such an effect); or
(b) the ITC varying the terms of the ITC Satellite Licence which variation
has or is likely to have a material adverse effect on the Company; or
(c) the ITC declining to grant to the Company a renewal licence to provide
a non-domestic satellite service on terms and conditions reasonably
acceptable to the Company upon the expiry of the ITC Satellite
Licence; or
(d) a relevant change (as defined in sub-section 5(7) of the Broadcasting
Act 1990) taking place in relation to the Company; or
(e) the Company becoming a Disqualified Person in relation to the holding
of the ITC Satellite Licence by virtue of Schedule 2 to the
Broadcasting Act l990;
"Loan Stock": unsecured floating rate loan stock of the Company l999 to be
constituted by a Loan Stock Deed, in the agreed form and/or such other loan
stock as the Company may issue to the Shareholders from time to time pursuant
to this Agreement;
"Loan Stock Certificate": a certificate in respect of Loan Stock in
the agreed form;
"the Option": the options granted to Playboy pursuant to Clause 15;
8.
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DENTON HALL
"the Original Shares": the number of ordinary shares of (Pounds)1 each
in the capital of the Company as have been subscribed for by the
Shareholders in accordance with clauses 3.1(b) and 4.1(b);
"person": any individual, firm, company or other incorporated or
unincorporated body;
"Playboy/Flextech Group": the Company and each of its subsidiaries from
time to time;
"plc": Flextech plc;
"Prescribed Price":
(a) in relation to a voluntary Transfer of Shares or Loan Stock in
respect of which a Transfer Notice shall have been served pursuant to
Clauses 13.5 or 13.11, the price per Share or, as the case may be,
for each (Pounds)1 principal amount of Loan Stock, offered by the
Proposed Transferee (as defined in Clause 13.5.1(a)); or
(b) in relation to a Transfer of Shares or Loan Stock in respect of
which a Transfer Notice shall be deemed to have been served pursuant
to Clauses 14 or 16.2, such price as the Shareholders may agree per
Share and, as the case may be, for each (Pounds)1 principal amount
of Loan Stock, or in default of agreement within 30 days after the
date on which the Transfer Notice is deemed to be served, following a
reference by either of the Shareholders, such price per Share and, as
the case may be, for each (Pounds)1 principal amount of Loan Stock,
as the Referee shall determine to be on the date of receipt of the
relevant Transfer Notice:
(i) in the case of Clause 14.1(a) and (b) and Clause 16.2, Fair
Value; and
9.
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DENTON HALL
(ii) in the case of Clause 14.1(c) the Fair Value (for the avoidance of
doubt, taking into account the breach of agreement which has given
rise to the requirement to transfer pursuant to Clause 14.1(c))
less a discount of 10%.
"Programme Service": the supply of television programmes by Playboy pursuant to
the Programme Supply Agreement;
"the Programme Supply Agreement": an agreement in the agreed form between the
Company and Playboy relating to the Programme Service on the Channel;
"Referee": such independent merchant or investment bank with acknowledged
experience of the industry in which the Company operates as the Shareholders may
agree or, in default of agreement within seven business days, as may be
nominated, on the request of either Shareholder, by the President for the time
being of the British Institute of Bankers, who shall be instructed to produce
his certificate within thirty days of this appointment and who shall act as
expert and not as arbitrator and whose certificate shall be final and binding
on the parties hereto, save in the event of manifest error;
"the Satellite": the Intelsat Satellite which is to be used for the
transmission of the Channel or any other satellite which may from time to time
be used for the transmission of the Channel in accordance with this Agreement;
"the Shareholders": Flextech and Playboy and their permitted transferees
pursuant to Clauses 13, 14, 15 and 17;
"Shares": the issued ordinary shares of (Pounds)1 each in the capital of the
Company for the time being;
"subsidiary" and "holding company": have the respective meanings attributed to
them by Section 736 of the Act;
10.
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DENTON HALL
"the Taxes Act": the Income and Corporation Taxes Act 1988;
"the Territories": the UK, the Republic of Ireland, Belgium, Luxembourg,
the Netherlands and such other countries and regions in which the Channel
has been launched or in which the Board subject to Clause 19.1 has
decided to launch the Channel and in respect of which any company in the
Playboy/Flextech Group has a licence pursuant to the Trademark Licence to
operate a pay television service under the "Playboy" name;
"the Trademark Licence": a licence in the agreed form between the Company
and Playboy Enterprises, Inc. granting to the Company the right to use
the name, logo and trade mark "Playboy" in connection with the
Business;
"Transaction Documents": this Agreement, the Articles, the ITC Satellite
Licence, the Trademark Licence, the Programme Supply Agreement, the
Consent Agreement and any Deed of Adherence which has been executed
pursuant to this Agreement, each as it may subsequently be amended or
altered from time to time;
"Transfer": any sale, assignment, transfer, grant of lease or other
disposition of any legal, equitable or other interest or the creation of
an Encumbrance;
"Transponder": the Transponder, as defined in the Transponder Sub Lease;
"the Transponder Sub Lease": a sub-lease of specified capacity on the
Transponder to be entered into between the Company and United Artists
European Holdings Limited;
"UK": the United Kingdom of Great Britain and Northern Ireland which
expression shall for the avoidance of doubt continue to include
Northern Ireland notwithstanding that Northern Ireland may at any time
hereafter cease to be part of the UK, the Channel Islands and the Isle
of Man.
11.
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DENTON HALL
1.2 All references to "the Company" in Clauses 5, 7, 8, 9 and 12 shall
include a reference to each company in the Playboy/Flextech Group so
that each provision of such clauses shall, where the context admits,
also apply to each company in the Playboy/Flextech Group.
1.3 In this Agreement, references to statutes, statutory instruments and
regulations shall include any statute statutory instruments and
regulations modifying, re-enacting, extending or made pursuant to
the same or which is modified re-enacted or extended by the same or
pursuant to which the same is made.
1.4 A document is in "the agreed form" if it is in the form of a draft
agreed between and initialled by or on behalf of the Shareholders on
or before the date hereof.
1.5 References in this Agreement to Clauses, Sub-Clauses, paragraphs and
Schedules are references to those contained in this Agreement.
1.6 The Schedules to this Agreement are an integral part of this
Agreement and references to this Agreement include references to such
Schedules.
1.7 Clause headings are for ease of reference only and shall not be taken
into account in construing this Agreement.
1.8 "day" (except where it is used in the expression "business day")
means any day and "business day" means any day other than a Saturday,
Sunday or public holiday either in England or the United States of
America.
2. Business of the Company and Launch of the Channel
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2.1 The sole object of the Company shall be to carry on the Business and
businesses ancillary or incidental thereto, and to that end the Board
shall seek to secure such means to distribute the Channel as are, in
the Board's opinion, viable in the context of the Business
12.
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DENTON HALL
Plan and the Company's available resources. The Shareholders shall use
their reasonable endeavours to procure that the Business shall be
conducted in accordance with the Business Plan.
2.2 After Closing the Shareholders and the Company shall do all such things
as are reasonably within their respective powers as Shareholders to
ensure that the Channel is launched in the Territories (other than
Republic of Ireland) for broadcast via cable operators on or before 1st
June 1995 and in Republic of Ireland after, but not before, the first
anniversary of the launch of the Channel in the Territory and to this
end the Company shall as soon as practicable after Closing
(a) apply for any licences necessary to launch the Channel in
the Territories, including the ITC Satellite Licence; and
(b) conclude negotiations with United Artists European Holdings
Limited on the terms of, and then enter into, the Transponder Sub
Lease.
2.3 In the event that the Company is refused the ITC Satellite Licence and/or
is not awarded the ITC Satellite Licence and/or the Transponder Sub Lease
is not entered into on or before six months after Closing ("the Licence
Long Stop Date"), then
(i) the liability of the Shareholders pursuant to clause 4 shall
forthwith cease;
(ii) the Shareholders shall (to the extent they are able) procure that
the Company will promptly be wound up;
(iii) funding provided by the Shareholders pursuant to Clauses 3 and 4
shall be used to pay the liabilities of the Company;
(iv) the Loan Stock will, to the extent possible after compliance with
clause (iii), be repaid pro rata to the amounts held by the
Shareholders respectively; and
13.
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DENTON HALL
(v) the Consent Agreement, the Trade Mark Licence and the Programme
Supply Agreement shall terminate.
2.4 The provisions of clause 2.3 shall be without prejudice to any
obligations of the Shareholders to provide funding to the Company which
have accrued due but not been discharged prior to the Licence Long Stop
Date and which the Board determines are required to discharge the
obligation of the Company accrued prior to that date.
2.5 If any product using the brand name Playboy other than the Playboy
Magazine and other Playboy publications ("a Playboy Product") is
advertised on the Channel:
(a) where all the rights to use the brand name in relation to such
Playboy Product vest in any company in the Playboy Group the
Company shall have the right to sell such Playboy Product on the
Channel and shall be entitled to be paid a fee by Playboy (which
shall be negotiated and agreed by Playboy and the Company in
good faith) which will, unless otherwise agreed be calculated by
reference to an agreed percentage of the gross selling price of
sales of such Playboy Product;
(b) where the rights to use the brand name in relation to a Playboy
Product have been licensed other than to a company in the Playboy
Group, Playboy shall use its reasonable endeavours to procure
advertising of such Playboy Product on the Channel on similar terms
to those set out in relation to (a) above.
2.6 The Company shall not launch, or otherwise make available, the Channel
outside the Territory without all parties unanimous approval.
3. Closing Arrangements
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3.1 Closing shall take place on the third business day after the conditions
in Clause 11 have been satisfied or waived when:
14.
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DENTON HALL
(a) the Shareholders shall cause to be passed at a duly convened
Shareholders' meeting of the Company a resolution in the agreed
form to adopt the Articles;
(b) each Shareholder shall subscribe in cash at par for the number of
Shares and principal amount of Loan Stock set opposite its
respective name in Schedule II, provided that Associates of
Flextech and Playboy may make such Loan Stock subscriptions in
substitution for Flextech and Playboy respectively;
(c) at a meeting of the Board, the Company shall allot and issue such
Shares and Loan Stock to the Shareholders (or in respect of Loan
Stock, where the provision in paragraph (b) has been utilised, the
relevant Associates of the Shareholders) as so subscribed by them
respectively and shall enter the names of the Shareholders (or, as
appropriate their Associates in the case of Loan Stock) in the
register of members and Loan Stock holders of the Company as
registered holders of such Shares and Loan Stock, and shall issue
and deliver to the Shareholders (or an Associate of their
Associates in the case of Loan Stock) the requisite Share and Loan
Stock Certificates in the agreed form duly executed under seal by
the Company;
(d) the following officers of the Company shall be appointed:
-- Fred Vierra, Roger Luard and Mark Luiz as Flextech appointed
Directors
-- David I. Chemerow and Anthony J. Lynn as Playboy appointed
Directors;
-- Fred Vierra as first Chairman;
-- Mark Luiz as Company Secretary;
15.
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DENTON HALL
- KPMG Peat Marwick as the Company's auditors;
(e) the following Transaction Documents shall be duly executed:
- the Loan Stock Deed
- the Trademark Licence
- the Programme Supply Agreement
- the Consent Agreement;
(f) the Board shall adopt and approve the Business Plan;
(g) Playboy will deliver to Flextech a legal opinion addressed
to Flextech and the Company by Howard Shapiro (General
Counsel, Playboy Enterprises, Inc.) in the agreed form; and
(h) Flextech will deliver to Playboy a legal opinion addressed
to Playboy and the Company by Denton Hall in the agreed
form;
3.2 Any provision in Clause 3.1 to the effect that a Transaction Document shall
be "entered into and completed in accordance with its terms" shall
constitute several obligations on the parties to sign such agreement, and
duly to perform its respective obligations under the clause therein headed
"Completion" or "Closing". Where any party to such a Transaction Document
is not also a party to this Agreement, the Shareholder (if any) of whom any
such party is an Associate shall to the extent practicable, make reasonable
efforts to procure that such party so signs and performs.
3.3 The payments by the Shareholders under paragraph 3.1(b) shall each be made
for value on the date of Closing by way of bankers' drafts drawn on a London
Town Clearing Bank payable to the Company or by international wire transfer.
16.
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DENTON HALL
3.4 No party shall be obliged to complete this Agreement unless all of the
matters referred to in Clause 3.1 are completed or, as appropriate, dealt
with in accordance with that clause.
4. Provision of Finance
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4.1 The parties agree that the approved budgeted, working capital, capital
expenditure and other budgeted funding requirements of the companies in the
Playboy/Flextech Group as set out in any Business Plan and any other
funding requirements shall be met in the following order of priority:
(a) initially, out of the proceeds of the subscription for Shares and Loan
Stock pursuant to Clause 3.1;
(b) thereafter by the Shareholders (or, in the case of Loan Stock,
Shareholder's Associates) by subscription in the Agreed Proportions at
par for Shares and Loan Stock in the ratio of one Share for every
(Pounds)3 principal amount of Loan Stock (or such other ratio as the
Inland Revenue agrees is suitable for allowing all interest on such Loan
Stock to be tax deductible for UK corporation tax purposes) on such
dates and in such amounts as are set out in Schedule IV or in the event
that the Board considers funding in excess of or earlier than that
specified in Schedule IV is required, on the dates and in such amounts
as may be determined by the Board having given to the Shareholders 14
days prior written notice thereof up to a maximum principal aggregate
amount (including amounts previously advanced whether or not for the
time being outstanding) of (Pounds)11,500,000; or
(c) thereafter (subject to Clause 4.7) by borrowings (secured if necessary
by charges over the assets of any company in the Playboy/Flextech Group)
from a bank or another financial institution on terms approved pursuant
to Clause 8 provided that the Board shall approve any such borrowings
which are available on terms in all respects commercially reasonable
17.
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DENTON HALL
and further provided that any Shareholder (or in the case of Loan Stock
its Associate) may participate in such borrowings on such terms up to
such amount (including all such borrowings) as such Shareholder may
decide and if more than one in the Agreed Proportions;
(d) thereafter (subject to Clause 4.7) by subscription for Shares and/or
Loan Stock by one or more Shareholders (or, in the case of Loan Stock
their Associates) in accordance with Clause 4.5 or any third parties
nominated by a Shareholder.
4.2 If either Shareholder (or its nominated Associate in the case of Loan
Stock) fails to provide funding pursuant to Clause 4.1(b), the other
Shareholder (or its Associate) may forthwith (at its own election and
without prejudice to its other rights under this Agreement or the general
law) provide funding by the methods described in Clause 4.5 or subscribe
for new Shares/Loan Stock at par ("the Subscription Price") to meet the
resulting funding requirement deficit, in a ratio of one Share each for
every (Pounds)2 principal amount of Loan Stock (the "Default Shares/Loan
Stock") PROVIDED THAT if the Inland Revenue agrees a debt: equity ratio for
the purposes of Clause 4.1(b) other than 3:1, this 2:1 ratio shall be
adjusted pro rata.
4.3 Where any Loan Stock has been issued to a Shareholder or its Associate
pursuant to Clause 4.2 ("Clause 4.2 Loans") as a result of
the default by the other Shareholder ("the Defaulter") no outstanding Loan
Stock of the Defaulter (or interest accrued due thereon) subscribed
pursuant to Clauses 3.1 and 4.1 may be repaid or demanded for repayment
without the other Shareholders' consent until all Clauses 4.2 or 4.5 Loans
(and interest accrued thereon) have been fully discharged.
4.4 Save as specifically provided in Clause 3.1(b) and 4.1(b), neither
Shareholder shall be required to make any funding available to the Company.
18.
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DENTON HALL
4.5 Subject always to Clause 4.7 (save where funding is being provided pursuant
to Clause 4.2), if the Board determines that any company in the
Playboy/Flextech Group requires funds in excess of those currently
available to it or them (whether from Shareholders or third parties) either
Shareholder ("a Funding Shareholder") wishing to provide (and who commits
in writing within 7 business days of such determination to provide or
procure the provision of) such additional funds shall be entitled to do so.
The method(s) for such additional funding (whether by way of borrowing, or
the issue of loan capital or securities) shall be determined by the Funding
Shareholder or, in the event that more than one Shareholder so commits
(each a "Funding Shareholder") and proposes different methods of providing
additional funds, the Shareholders shall acting in good faith use their
reasonable endeavours to agree the method of funding and the amount of such
funding; failing which it shall be determined by the Funding Shareholder
who holds the largest number of Shares PROVIDED THAT (i) no such method may
provide for any Shareholder being obliged to incur any expenditure or
financial commitment without its prior agreement; (ii) in the event of
competition, unless otherwise agreed by the Funding Shareholders, the
additional funds shall be provided in the Agreed Proportions. In any event,
any opportunity to participate in any funding proposed pursuant to this
Clause 4.5 shall be offered first to the Shareholders in the Agreed
Proportions.
4.6. Subject always to Clause 4.7, for the purpose of implementing any method
of funding approved by the Board pursuant to Clause 4.5 each of the parties
agrees that any provision in this Agreement, the Loan Stock or the
Articles which requires any particular agreement of the parties or any of
them (including for the avoidance of doubt agreement to convert the Loan
Stock into Shares or to subordinate the Loan Stock to any such funding) or
a voting level or quorum or the vote of any class of Shareholder to
increase the Company's authorised capital, to issue any securities or to
create any Indebtedness for Borrowed Money shall not apply and
(notwithstanding any other provision of this Agreement or of the Articles)
the Shares held by a non-Defaulter (in the case of Clause 4.3) or a
Funding
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Shareholder (in the case of clauses 4.2 and/or 4.5) shall on any vote carry
such number of votes and entitle the holder to fulfil such quorum
requirements as will enable the necessary resolution(s) to be passed as
required by the non-Defaulter or Funding Shareholder as appropriate.
4.7 Flextech undertakes to Playboy that it will exercise all voting rights and
other powers of control available to it in relation to the Company so as to
procure (in so far as it is able by the exercise of such rights) that the
Board shall not approve any annual budget or business plan for the Company
or implement any material amendment to or material departure from any of
the same which would require funding to be provided or procured pursuant
to clause 4.1(c) or (d) ("the Additional Funding") if the Directors
appointed by Playboy pursuant to clause 5.1 do not approve such Additional
Funding and
(a) the proposal and/or the approval of such Additional Funding by the
Directors appointed by Flextech pursuant to clause 5.1 is capricious;
or
(b) the Additional Funding is in excess of what is reasonably required
for the normal commercial operations of the Business for the 12 month
period covered by the then current Business Plan and annual budget
provided that this Clause 4.7 shall not apply and the Board shall be
entitled to approve funding without reference to the restrictions contained
in this clause for the purchase in any Year after the second Year (as
determined in accordance with the Programme Supply Agreement) of Acquired
Premium Movies (as defined in the Programme Supply Agreement).
4.8 In the event of any dispute as to whether Flextech has complied with its
undertaking in Clause 4.7, the matter may be referred by either party
hereto within 28 days of any proposal or approval of Additional Funding to
an independent accountant agreed between the
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DENTON HALL
parties. The independent accountant shall act as expert and not as
arbitrator; and shall be instructed to determine the matter within thirty
days of such referral.
4.9 If the parties are unable to agree as to the appointment of the independent
accountant pursuant to 4.8 above within 15 days of one party serving notice
on the other calling for such appointment then the independent accountant
shall be appointed on the application of either party to the President for
the time being of the Institute of Chartered Accountants of England and
Wales.
4.10 The decision of the independent accountant appointed pursuant to Clauses
4.8 or 4.9 shall be final and binding on the parties hereto, save in the
event of manifest error. The costs of such independent accountant shall
be borne by the party whose position on the proposal for the Additional
Funding least prevails.
5. The Board and Management
------------------------
5.1 The Board shall comprise not more than eleven Directors. Each Shareholder
shall be entitled to appoint up to such number of Directors as is stated
opposite its name in Schedule V and to remove and replace any such
appointees provided that Flextech shall always be entitled to appoint a
majority of the Directors so long as it holds more than 50% of the Shares.
The right to appoint remove and/or replace a director shall be exercisable
by notice to the Company a copy of which notice shall be given to the
Shareholder not exercising or giving such notice. The Board shall act by
majority vote only.
5.2 The Chairman shall be one of the Directors appointed by Flextech and shall
not have a second or casting vote at Board or Shareholders' Meetings.
5.3 The appointment of the Chief Executive Officer, the Chief Financial Officer
and the Marketing Manager (if any) of the Company shall be made by the
Board in accordance with clause 8.1.
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DENTON HALL
5.4 The Chief Financial Officer and the Marketing Manager (if any) shall report
directly to the Chief Executive Officer. Any director of the Board shall
have unrestricted direct access to such executives who shall be obliged, as
a term of their respective service agreements, to respond to any enquiries
from, and provide any information and documentation requested by, any such
director.
5.5 Without prejudice to the rights of any such persons under their respective
terms of employment to claim compensation for breach, any Shareholder
beneficially owning (or Shareholders together beneficially owning) more
than 15% of the Shares may terminate the employment of the Chief Executive
Officer, the Marketing Manager (if any) or the Chief Financial Officer.
5.6 Save as otherwise provided or contemplated in this Agreement, the Company
(so far as it is legally able) shall and the Shareholders shall exercise
their powers in relation to the Company so as to ensure that the Company
shall:
(a) convene and hold a formal meeting of the Board at least once in every
period of 4 months;
(b) procure that (save for emergency meetings) not less than fourteen
business days' prior written notice of any meeting of the Board shall
be given to the Directors, that every such notice shall be accompanied
by a written agenda specifying the business of such meeting. Directors
shall be permitted to attend board meetings by telephone;
(c) carry on and conduct its business and affairs on a commercial basis,
and in accordance with the Business Plan in force from time to time;
(d) comply with the terms and conditions of the ITC Satellite Licence and
any directions made by the ITC in relation to it and comply with the
provisions of the Broadcasting Act 1990 and any other licences;
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DENTON HALL
(e) observe and duly perform its obligations under each Transaction
Document to which it is a party.
5.7 Subject to Clause 3.4 each Shareholder and each Director shall, in its
capacity as Shareholder and/or Director of the Company, be entitled to vote
in connection with the approval by the Company of any agreement,
transaction or arrangement in or to which (as applicable) that Shareholder
(or as appropriate Shareholder appointing such Director), or any of its
Associates, is an interested party and in connection with any revisions or
amendments to, or waiver of any rights under, such agreement, transaction
or arrangement PROVIDED THAT its/his interest therein has been disclosed
beforehand to the Board.
5.8 Upon a Shareholder ceasing to be entitled to appoint a director or
directors of the Company (other than by Transfer of Shares to its Associate
pursuant to Clause 13.2) it shall procure the resignation from the Board
(and from any executive position held with the Company) of some or all the
Directors (as the case may be) it has appointed to the Board without any
claim for damages or compensation for loss of office of any kind
whatsoever.
5.9 No non-executive Director shall be entitled to Directors' fees or to
reimbursement by the Company of travelling or other expenses for attending
meetings of the Board.
5.10 All references to "the Board" in Clause 5 shall include a reference to the
board of directors of each company in the Playboy/Flextech Group, so that
each provision therein shall (where the context admits) also apply to the
board of directors of each company in the Playboy/Flextech Group.
6. Agreement to Perform
--------------------
6.1 Each Shareholder shall at all times exercise its respective powers and
votes as shareholder of the Company to ensure that (to the extent that the
same is within such powers and voting rights) the
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DENTON HALL
Company will comply with all of its obligations under each Transaction
Document and the Transponder Sub-Lease.
6.2 Each Shareholder undertakes with the other generally to use its reasonable
endeavours to promote the Business and the Channel.
7. Information
-----------
7.1 The Company shall:
(a) at all times keep true, accurate and up to date books and records of
all the affairs of the Company;
(b) subject to Clause 12, and subject to having received not less than 2
business days' prior notice, make available to the Shareholders and
their duly authorised representatives during working hours on
reasonable notice access to the books, records, accounts, documents and
premises of the Company; and
(c) subject to Clause 12, supply to each Shareholder such information
relating to the Company as it may reasonably require and without
prejudice to the foregoing shall keep the Shareholders fully and
promptly informed as to all material developments regarding the
Company's financial and business affairs and promptly notify the
Shareholders of any significant event (including without limitation any
litigation or arbitration) the outcome of which will or is likely to
materially affect the Company or its business, finances, assets or
affairs.
7.2 Without detracting from the provisions of Clause 7.1, the Company shall at
its own cost prepare and send to the Shareholders and each Director:
(a) within 10 business days from the end of each calendar month unaudited
management accounts of the Company for that month and cumulative
management accounts for the current
24.
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DENTON HALL
accounting period up to and including that month;
(b) within forty five business days from the end of each of its financial
years audited consolidated accounts of the Company (to be prepared,
save as required by law, in accordance with UK Accounting Standards and
certified by the auditors of the Company) and will convene and hold a
meeting of Shareholders within one month thereafter to approve the
same; and
(c) without detracting from the provisions of clause 8.2(a) it shall be the
responsibility of the Chief Executive Officer and the Chief Financial
Officer, in consultation with Mark Luiz or such other person as may be
nominated by Flextech from time to time and such person as Playboy may
nominate from time to time, to prepare a budget, business plan and
marketing plan for each fiscal year beginning after 31st December
l995 no later than the end of October in the year prior to the year to
which the budget, business plan and marketing plan relates.
7.3 The Company may at any time serve written notice upon any Shareholder
requiring it to provide the Company with any information, supported by a
declaration or by such other evidence (if any) in support as the Company
may reasonably require, for the purpose of:
(a) complying with any EC or UK merger or competition law or regulations
in relation to the issue or transfer of Shares and/or Loan Stock in
accordance with this Agreement; or
(b) deciding whether a Licence Event has occurred or is likely to occur;
or
(c) deciding whether a Shareholder is, or is likely to become, a
Disqualified Participant
and such Shareholder shall promptly comply with any such notice.
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DENTON HALL
7.4 The Company undertakes to each Shareholder to keep it informed of any
matter of which the Company is aware which may lead to a Licence Event or
to any Shareholder becoming a Disqualified Participant.
7.5 Each Shareholder shall use its reasonable endeavours to ensure that all
data and information which is reasonably required by the ITC or any other
regulatory body having jurisdiction or to ensure compliance with EC or UK
merger or competition law or regulations or with the Broadcasting Act 1990
shall be duly and promptly supplied to that body.
8. Restrictions on the Company's Activities
----------------------------------------
8.1 Save as expressly provided for in any Transaction Document, the
Transponder Sub-Lease or in the initial Business Plan and subject to
clause 8.2, so long as a Shareholder (together with its Associates) is the
beneficial owner of not less than 15% of the Shares (and, additionally in
the case of Playboy and its Associates so long as Playboy is an Associate
of Playboy Enterprises, Inc., and the Trademark Licence and the Programme
Supply Agreement have not been terminated or are under notice of
termination, other than by wrongful termination by the Company) the
following matters shall require the prior written approval of such
Shareholder and if the above condition does not apply the following
matters shall require the prior approval of the Board and the Shareholders
shall exercise all voting rights and other powers of control available to
them in relation to the Company so as to ensure (in so far as they are able
by the exercise of such rights) that the Company shall not without such
approval:
(a) increase or reduce the authorised or issued share capital of the
Company (other than to permit an issue of shares conducted in
accordance with clause 4 of this Agreement) or consolidate, sub-divide,
purchase, redeem or cancel any of such share capital or alter any right
pertaining to any share or class of shares in such capital or
otherwise re-organise, restructure or reduce the share capital of the
Company;
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DENTON HALL
(b) issue or allot any share or security or grant or create any option or right
to acquire any share or security in the capital of the Company other than by
way of a rights issue offered in accordance with Clause 4 of this Agreement
and the Articles;
(c) alter the Company's Memorandum of Association or the Articles;
(d) save where Clause 8.2(i) applies, take or permit the taking of any action to
have the Company wound up PROVIDED THAT nothing in this clause shall
prohibit such action, taken upon the recommendation or decision of the Board
(on the advice of the Company's auditors or legal counsel of not less than
six years standing with experience in such matters) that the Company should
cease trading in circumstances where, if the Company continued to trade,
the Directors may, under the Insolvency Act 1986, be or become personally
liable for the debts of the Company or to make a contribution to the
Company's assets;
(e) amend or assign or fail to implement or enforce any Transaction Document or
the Transponder Sub-Lease;
(f) enter into a scheme or arrangement, admit in writing its inability to pay
its debts as they fall due, commence negotiations with creditors or any
class thereof with a view to the readjustment or rescheduling of its
indebtedness, make a general assignment for the benefit of creditors, or
save where Clause 8.l(d) applies take any action for the winding-up,
administration, dissolution, liquidation or reorganisation (other than a
solvent reorganisation) of the Company, or for the adjustment, protection
or relief of the Company or its debts under any law relating to bankruptcy,
insolvency or reorganisation;
27.
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DENTON HALL
(g) enter into, renew, vary, terminate or continue after expiry
any contract which is not on bona fide arm's length terms in
all material respects;
(h) subject to Clauses 5.3 and 5.4, engage or alter the terms of
employment (including salary and benefits) of any person
fulfilling the function of Chief Executive Officer, Chief
Financial Officer, or Marketing Manager (if any);
(i) approve any secure encryption system for the Channel or make any
material change in such system such approval by Playboy not to be
unreasonably withheld or delayed;
(j) make any material change in the character of the Channel from
that set out in this Agreement;
(k) subject to Clause 15, make any determination as to (i) whether a
Licence Event has been caused or is likely to be caused, (ii)
whether a person is or is likely to become a Disqualified
Participant, or (iii) whether a Transfer Notice has been or is
deemed to be given in accordance with Clause 16 provided that:
(aa) the approval of such Shareholder shall not be required
pursuant to (i) and/or (ii) of this clause once 14 days have
elapsed after a direction or ruling in respect of the matter
has been made by the ITC (unless, during such 14 days,
such Shareholder has, at its own expense, applied to court
for a judicial review or reversal of such direction or
ruling and the application has been successful or is still
sub judice the first instance court); and
(bb) in the event that such Shareholder fails to give approval,
either such Shareholder or the Board may by notice in
writing to the other refer the matter to such legal counsel
of not less than six years
28.
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DENTON HALL
standing with experience in such matters as shall
be agreed between such Shareholder and the Board
(or, in the event of failure to agree within 7
business days of such notice, to such legal
counsel as above appointed by the President of the
Bar Counsel) who shall be instructed to determine
the matter as soon as reasonably practical, who
shall act as expert and not as arbitrator and
whose decision shall be final and binding on such
Shareholder and the Board. The costs of such
legal counsel shall be borne by such Shareholder
if their position least prevails. Otherwise such
costs shall be borne by the Company;
(l) Transfer (other than by an Encumbrance) the whole or any material
part of the undertaking, property and/or assets of the Company
(or any interest therein), or contract so to do otherwise than in
the ordinary and proper course of the Business;
(m) consolidate, merge or amalgamate with any other person;
(n) subject to clause 4 create, acquire or dispose of any subsidiary
or otherwise acquire or dispose of any shares, securities or
other interest in any company or business or incorporate or
promote any company or permit any subsidiary to issue or allot
any share or security or grant or create any option or right to
acquire any share or security except to the Company or another
wholly owned subsidiary of the Company;
(o) declare or pay any dividend or other distribution or refrain
from declaring or paying any dividend or other distribution
other than in accordance with Clause 10;
(p) incur, enter into or commit to Indebtedness for Borrowed Money
or vary any terms or conditions of any such Indebtedness other
than in accordance with clause 4;
29.
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DENTON HALL
(q) give any guarantee or indemnity or other similar undertaking or
create any Encumbrance over any of the undertaking, property, assets
or uncalled share capital of the Company except to the extent
necessary to obtain Indebtedness to be incurred pursuant to clause 4
of this agreement;
(r) make any loan or advance other than loans to another company in the
Playboy/Flextech Group and normal trade credit and season ticket
loans to employees not exceeding (Pounds)2,500 for all employees;
(s) approve the transmission of the Channel by means of a satellite
other than the Satellite, including transmission to the UK Direct to
Home Market such approval of Playboy not to be unreasonably withheld
or delayed;
(t) use (other than in emergencies) any transponder, other than the
Transponder such approval of Playboy not to be unreasonably withheld
or delayed.
8.2 Save as expressly provided for in any Transaction Document, the
Transponder Sub-Lease or the Business Plan any decision relating to any
of the following matters and any other matters of a non-routine nature
shall require the prior approval of the Board alone and the Shareholders
shall exercise all voting rights and other powers of control available to
them in relation to the Company so as to procure (in so far as they are
able by the exercise of such rights) that the Company shall not without
such approval:
(a) approve any annual budget or any business plan for the Company or
implement any amendment to or material departure from any of the same;
(b) set, amend or waive any of the charges levied by the Company to
subscribers to and/or advertisers on the Channel other than in the
normal course of business;
30.
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DENTON HALL
(c) approve the Company's audited balance sheet or profit and loss
accounts or change the Company's accounting reference date,
accounting policies or auditors;
(d) vary or terminate (other than by effluxion of time) any long term
contract or contract of material importance to the Company;
(e) except in the case of emergency for the protection of the Company's
business or assets institute or defend any litigation, arbitration
or tribunal proceedings (other than normal debt collection in the
ordinary course of business);
(f) take or agree to take any leasehold interest in or licence over any
land;
(g) approve any payment of capital or interest (including capitalised
interest) in respect of the Loan Stock;
(h) enter into any joint venture, partnership, consortium or joint
purchase arrangement;
(i) take or permit the taking of any action to have the Company wound up
if in the first Year (as defined in accordance with the Programme
Supply Agreement) and the immediately succeeding two Years (the
"Relevant Years") the aggregate of the Gross Revenues of the Company
are less than 70% (seventy per cent) of the aggregate of the projected
Gross Revenues of the Company as shown in the initial Business Plan
for the Relevant Years provided that in the event that the Board does
take any such action the provisions of Clauses 8.5 - 8.6 shall apply.
8.3 Notwithstanding the provisions of Clause 8.2, if the Board shall not have
approved the annual budget for any company in the Playboy/Flextech Group
before the commencement of the financial year to which it relates, the
Company shall continue to carry on the
31.
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DENTON HALL
Business for a period of six months on the basis of the previous year's
approved budget in order to give the Board time in which to agree the
annual budget for the financial year in question.
8.4 The exercise of the Company's rights under the Programme Supply
Agreement (including without limitation its rights in relation to
Programme Scheduling under clause 8 and Termination under clause 10.3)
and the Trademark Agreement shall be exercised by the Company through the
directors of the Company appointed by Flextech pursuant to clause 5.1 and
not otherwise.
8.5 In the event that the Board resolves to take or permit the taking of
any action to have the Company wound up in the circumstances set
out in Clauses 8.1(d) and 8.2(i) ("the Winding Up Resolution"):-
(i) the obligations of the Shareholders pursuant to Clause 4 shall
forthwith cease save for obligations which have accrued due
prior to the date of such Winding Up Resolution;
(ii) any Shareholder may serve a notice on the other Shareholder(s)
and the Company at any time within 30 days after the
Winding Up Resolution has been passed, reguiring the
determination of Fair Value of the Shares and the Loan Stock;
(iii) any Shareholder may, within 30 days after such determination
has been made serve a notice ("the Offer Notice") on the other
Shareholder(s) offering to acquire all the Shares and Loan
Stock of the other Shareholder(s) at the price (which shall be
not less than 90% of Fair Value determined pursuant to
paragraph (ii)) per Share and per (Pounds)1 in nominal value
of Loan Stock specified by the Shareholder in the Offer
Notice;
(iv) any Shareholder may within 2 business days of service of an
Offer Notice serve on the Shareholder(s) a notice ("the
Counter Offer Notice") offering to acquire all the Shares and
Loan Stock of the other Shareholder(s) at the price per
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DENTON HALL
Share and per (Pounds)1 in nominal value of Loan Stock
specified in the Counter Offer Notice (being in each case a
price which is higher than the price specified in the Offer
Notice). If no Counter Offer Notice is served within such
timescale, the Shareholder serving the Offer Notice shall
prevail;
(v) if a Counter Offer Notice is served the procedure set out in
(iii) above shall continue and may be repeated until such time
as no further Counter Offer Notice is served within 2 business
days from the date of service of the immediately preceding
Counter Offer Notice when the Shareholder serving the last
Counter Offer Notice shall prevail.
8.6 The Shareholder who prevails and the other Shareholders shall be bound
within 14 days of service of the successful Offer Notice or Counter
Offer Notice (as the case may be) to complete the sale and purchase of
all the Shares and Loan Stock in the Company (other than the Shares
and the Loan Stock held by the prevailing Shareholder or any member of
such Shareholder's Group) at the price per Share and per (Pounds)1 in
nominal value of Loan Stock specified in the Offer Notice or Counter
Offer Notice which prevails (as the case may be) and in the event that
any of the other Shareholders fails to do so the Company may receive the
purchase money and the Directors appointed by the successful Shareholder
may authorise some person to execute a transfer as appropriate of the
Shares and Loan Stock in favour of such Shareholder and the Company shall
hold the purchase money in trust for the relevant Shareholder(s).
9. Name
----
The Company's right to use, or trade under, any name which includes
the word "Playboy" shall be governed by the Trademark Licence.
10. Dividend Policy
---------------
Subject to Clause 8.1 and except as may otherwise be agreed in
writing by the Shareholders, and subject to the provisions of the Act,
the terms of issue of any Loan Stock or other Company
33.
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DENTON HALL
indebtedness and the Company's working capital and other capital
requirements all of the Company's profits from time to time available for
distribution shall be distributed to the Shareholders by way of dividend
as soon as practicable.
11. Condition Precedent
-------------------
This Agreement (other than Clauses 12 and 23 to 25 (inclusive)) is
conditional upon its approval by:
(a) the board of directors of plc;
(b) the board of directors of Playboy;
on or before 27th January 1995. If such conditions are not satisfied or
waived (in the case of (a) by Flextech and in the case of (b) by Playboy)
on or before that date, this Agreement (other than Clauses 12 or 23 to 25
(inclusive)) shall lapse and cease to be of further effect.
12. Confidentiality
---------------
12.1 Each Shareholder shall at all times keep confidential (and shall procure
that its Associates, officers and employees and agents shall keep
confidential) any information which it may have or acquire in relation to
the customers, business, finances, assets or affairs of the Company or the
other Shareholder and its Associates or which, in consequence of the
negotiation or operation of, or the exercise of rights under, any
Transaction Document it may have or acquire in relation to the customers,
business or affairs of the other Shareholder or its Associates, save for
any information:
(a) which is publicly available or becomes publicly available through no
act of that Shareholder;
(b) which is disclosed to that Shareholder by a third party which did not
acquire the information under an obligation of confidentiality;
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DENTON HALL
(c) which is independently acquired by that shareholder as the result
of work carried out by an employee to whom no disclosure of such
information had been made; or
(d) which is required to be disclosed by any law (including any order
of a court of competent jurisdiction) or the rules of any stock
exchange or governmental, revenue or other regulatory authority,
whether or not having the force of law.
Provided that nothing in this clause shall prevent any Shareholder or
any Associate of such Shareholder from operating their respective
businesses in the ordinary and normal course.
12.2 The Company shall, and the Company shall procure that each other
member of the Playboy/Flextech Group shall observe a similar
obligation of confidence in favour of the Shareholders.
12.3 In recognition of each Shareholder's understanding that the other
Shareholder proposes or may in the future propose to invite third
parties to participate as equity or non equity investors or
other providers of finance in or to plc or Flextech or Playboy or
Playboy Enterprises, Inc. the parties agree that such other
Shareholder may provide to such invitees copies of:
(a) the Transaction Documents:
(b) the Transponder Sub-Lease;
(c) any Business Plan,
(d) accounting and other information provided to the Shareholders
pursuant to this Agreement; and
(e) such other information as it would be reasonable in all the
circumstances for a potential investor to require in relation to
the Company and the Business
35.
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DENTON HALL
PROVIDED THAT neither Shareholder may include in such copies any
information which is commercially sensitive, disclosure of which could
in its reasonable opinion cause harm to any company in the
Playboy/Flextech Group, any Shareholder or any company in its Group
AND PROVIDED FURTHER that before providing such copies the invitee has
signed a confidentiality agreement on terms which follow, at least,
those conventionally followed in the United Kingdom, which agreement
shall be expressed to be for the benefit of all parties to this
Agreement and all the companies in the Playboy/Flextech Group.
Furthermore, in recognition of the fact that Flextech and Playboy are
both subsidiaries of publicly-owned companies, the parties agree that
(subject to the first of the preceding provisos) each Shareholder and
its Associates may provide to institutional investors and analysts
such information concerning the Company as is conventional to assist
such investors in deciding whether to invest or such analysts to
prepare their analyst reports.
12.4 The provisions of this Clause shall survive any termination of this
Agreement.
13. Transfers of Shares and Loan Stock
----------------------------------
13.1 No Shares may be Transferred:
(a) at any time if the Transfer is to a Disqualified Person; or
(b) unless and until the terms of clause 13.4 are complied with.
13.2 Subject to Clause 13.1 a Shareholder may Transfer all, but not part
only, of its Shares to any of its Associates but on terms that
immediately upon such transferee ceasing to be the transferor's
Associate such Shares shall be transferred to the transferor or
another of its Associates.
13.3 Subject to Clause 13.1 and save for a Transfer in accordance with
Clauses 13.2, 14, 15, 16 and 17, each Shareholder undertakes that it
will not at any time Transfer any Shares except in accordance with
Clause 13.5.
36.
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DENTON HALL
13.4 If any Shareholder ("the transferor") proposes to Transfer any Shares to
any person ("the transferee") then it shall be a condition precedent to
such Transfer and the registration thereof that the parties to this
Agreement and the transferee shall execute a Deed of Adherence and
deliver a legal opinion in a form, and from legal counsel, reasonably
acceptable to the other Shareholders concerning the issues warranted
and represented by them in Clause 3 of the Deed of Adherence.
13.5.1 Subject to Clauses 13.1 and 13.2 any Shareholder who wishes to sell any
of its Shares (a "Vendor") shall give notice in writing to the Company
and the other Shareholder(s) of such wish (a "Transfer Notice")
identifying:
(a) the person to whom it proposes to sell any of its Shares (the
"Proposed Transferee");
(b) the name of the Proposed Transferee's ultimate parent company and
controlling shareholders, if any;
(c) the Prescribed Price and other terms of the proposed sale and the
extent to which (if any) such price assumes that the Proposed
Transferee shall be entitled to receive all or any dividends or
other distributions accrued due but not paid in respect of the
Shares.
The Transfer Notice shall not be effective if it does not contain such
information unless it is a deemed Transfer Notice pursuant to Clause 14.
A Transfer Notice, once given, cannot be withdrawn without the consent
of all the Shareholders (other than the Vendor). The Transfer Notice
shall constitute the Company the Vendor's agent for the sale of all, but
not some only, of the Shares the subject of the Transfer Notice ("the
Sale Shares") to the other Shareholder(s) and/or (subject to Clause
13.5.4) any person procured or nominated by the other Shareholder(s) as
it/they may in its/their absolute discretion determine ("a Nominee") at
the Prescribed
37.
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DENTON HALL
Price. The Transfer Notice shall be accompanied by the Vendor's share
certificates and duly executed transfers in blank in respect thereof and
(save as hereinafter provided) may not be withdrawn.
13.5.2 In any case where there is a deemed Transfer Notice and the
determination of the Prescribed Price has been referred to the Referee,
the Company shall as soon as it receives the Referee's certificate serve
a certified copy thereof on the Shareholders. The fees and expenses of
the Referee shall be borne as to one half by the purchaser(s) (if any)
and as to the balance (or the whole if there are no purchasers) by the
Vendor of the Sale Shares.
13.5.3 Within 7 business days of receipt of the Transfer Notice by the Company
or, where a Referee's certificate is required, within 7 business days of
receipt by the Company of the Referee's certificate, the Company shall
give notice in writing to the other Shareholder(s) specifying the
number of Sale Shares and the Prescribed Price therefor and offering the
Sale Shares for sale to the other Shareholder(s) and/or (subject to
Clause 13.5.4) a Nominee at the Prescribed Price. Such notice shall be
accompanied by a copy of the Transfer Notice and, if applicable, the
Referee's certificate and shall require the other Shareholder(s) within
14 days of the receipt of the notice:
(a) give notice that it and/or a Nominee is willing to purchase the
Sale Shares at the Prescribed Price; or
(b) (except in the case of a deemed Transfer Notice pursuant to Clause
14 or 16.2) give notice that it consents to the sale of all the Sale
Shares within 28 days thereof to the Proposed Transferee at the
Prescribed Price;
(c) give notice that it objects to the Transfer to the Proposed
Transferee on the grounds set out in Clause 13.5.9.
In the event that no notice or notices are received within the said
period of 14 days or notice or notices have been given pursuant to
Clause 13.5.3(a) but not in respect of all the Sale Shares then such
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DENTON HALL
other Shareholder(s) shall be deemed to have served a notice or notices
pursuant to Clause 13.5.3(b) at the end of such 14 day period.
13.5.4 In the event that a notice or notices are served pursuant to Clause
13.5.3(a) in respect of all of the Sale Shares, the other Shareholder or
Shareholder(s) or a Nominee of either or both shall within 28 days
thereafter complete the purchase from the Vendor of the Sale Shares at
the Prescribed Price provided that in the event of competition the
Shareholders (and/or their Nominees) shall complete the purchase of the
Sale Shares in the Agreed Proportions save that notwithstanding the
above no purchase pursuant to this clause may be made by a Nominee of
any Shareholder if there remains another Shareholder willing to
purchase those Sale Shares which such Nominee would otherwise have
purchased. The Vendor shall be bound to transfer the Sale Shares
comprised in the notice to the other Shareholder(s) or its/their
Nominees at the Prescribed Price, and if it makes default in so doing
the Company may receive the purchase money and the Directors
appointed to the Board by the other Shareholder(s) may authorise some
person to execute a transfer as appropriate of the Sale Shares in
favour of the other Shareholder(s) and/or their Nominee(s) ("the
Shareholder Purchasers") and the Company shall hold the purchase money
in trust for the Vendor. The receipt by the Company of the purchase
money shall be a good discharge to the Shareholder Purchaser(s) and
after its or their name has been entered in the Company's Register of
Members in exercise of the aforesaid power, the validity of the
proceedings shall not be questioned by any person. If such purchase is
not completed (for any reason other than the Vendor's delay or default)
within such period of 28 days, then the certificate and duly completed
transfer of the Sale Shares shall be returned to the Vendor and consent
shall be deemed to have been given pursuant to Clause 13.5.3(b) and the
provisions of Clause 13.5.5 shall apply.
13.5.5 In the event that a notice is given or deemed to be given by the other
Shareholder pursuant to Clause 13.5.3(b) the Vendor shall, subject to
Clause 13.6, be at liberty to sell all of the Sale Shares
39.
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DENTON HALL
at any time within 28 days after the date of such notice (or, if no
actual notice is given pursuant to Clause 13.5.3, the expiry of the
period of 14 days provided for under Clause 13.5.3) to the Proposed
Transferee at the Prescribed Price and otherwise upon no more favourable
terms than those offered to the other Shareholder(s) and as stated in
the Transfer Notice PROVIDED THAT if prior to completion of the said
sale an event has occurred which, if any Proposed Transferee had been a
member of the Company at the date of the Transfer Notice would have
meant that a deemed Transfer Notice arose under Clause 14 then the
identity of the Proposed Transferee shall need to be re-approved and
failing such re-approval, the Transfer Notice shall be deemed to have
been withdrawn by the Vendor and such sale shall not take place. It
shall be a condition precedent of completion of any such sale that the
Proposed Transferee shall deliver to the Vendor an undertaking that
no such event has occurred.
13.5.6 The Board shall refuse to register any Transfer of any Share other
than a Transfer permitted by or under and made in accordance with
the provisions of Clauses 13, 14, 15, 16 or 17, which Transfers the
Board shall register.
13.5.7 All Shares Transferred pursuant to Clause 13.5 shall be transferred as
beneficial owner and free from all Encumbrances together with all
rights, benefits and advantages attached thereto as at the date of the
Transfer Notice or deemed Transfer Notice except the right to any
dividend declared or interest accrued but not paid prior to the date of
the relevant Transfer Notice except where the benefit to the Proposed
Transferee of such payments after the date of the Transfer Notice has
been taken into account in determining the Prescribed Price.
13.5.8 Immediately upon completion of the Transfer of any Shares by any
Shareholder pursuant to the provisions of this Agreement the Vendor
shall procure the resignation of any Director in accordance with
clause 5.8.
40.
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DENTON HALL
13.5.9 A notice under Clause 13.5.3(c) may only be given where the Proposed
Transferee or its Associate engages in a business which has editorial
control over either:
(a) a men's sophisticate magazine which regularly features nudity;
(b) a film, television or multi-media production company which regularly
produces films or programming that features nudity; or
(c) a television programme service consisting of programming that
regularly features nudity
PROVIDED THAT such notice may not be given where the Shareholder
otherwise entitled to give it consents to the Transfer to the Proposed
Transferee, such consent not to be unreasonably withheld. When deciding
whether or not to give such consent, such Snareholder may take account
of:
(a) the value of its or its Associate's logo, trademark, brands,
image and/or reputation (in the case of Playboy, including
its reputation as a mainstream men's sophisticate publisher
and its unique position as an advertising vehicle for many
reputable businesses);
(b) Playboy's and plc's (and plc's ultimate parent company,
Tele-Communications, Inc's.) position as companies whose
stock is publicly traded.
The parties acknowledge that if the publisher of "Hustler", "Mayfair" or
"Penthouse" magazines or the producer of "Spice", "Adam and Eve" or "The
Adult Channel" television services becomes a Shareholder, the image
and/or reputation of Playboy might be impaired and that it might be
reasonable for Playboy to withhold consent to a Transfer to such an
entity. In the event that a notice is duly given under this Clause the
Vendor shall not be permitted to Transfer its Shares to the Proposed
Transferee.
41.
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DENTON HALL
13.6 No Transfer shall be permitted pursuant to Clause 13.5.5, or Clause
13.11 read with Clause 13.5.5, by any Shareholders ("the Selling
Shareholders") who together with its Associates holds the beneficial
interest in Shares representing more than 35% of the Shares immediately
prior to such Transfer if after the proposed Transfer the Selling
Shareholder and its Associates would cease to hold the beneficial
interest in shares representing at least 15% of the Shares unless the
Selling Shareholder shall procure that the Proposed Transferee shall
irrevocably offer (in writing) to acquire that proportion of Shares and
Loan Stock held by each of the other Shareholders (and/or their
respective Associates) as the proportion of Shares and Loan Stock which
the Selling Shareholder proposes to Transfer bears to the total number of
Shares and Loan Stock held by the Selling Shareholder and/or its
Associates. Such offer shall be capable of acceptance, and shall be
irrevocable, for not less than 14 days after it is given; such offer
shall be at the Prescribed Price and otherwise on substantially no less
favourable terms than those offered to the Selling Shareholder by the
Proposed Transferee. If such offer is accepted, completion of the
purchase thereby arising shall take place simultaneously with the
completion of purchase by the Proposed Transferee from the Selling
Shareholder.
13.7 The Shareholders shall together procure that at all times during the
continuation of this Agreement the Board acts in accordance with the
provisions of Clause 13.
13.8 Each Share and Loan Stock Certificate in respect of Shares and Loan
Stock shall have typed on the face thereof the following legend:
"Transfer is subject to restriction as appears on the back".
and on the back the following legend:
"The Shares/Loan Stock represented by this certificate are held and
may only be Transferred by the registered owner subject to the terms
of a Shareholders' Agreement made effective 12th January 1995"
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DENTON HALL
13.9 The Company undertakes with each Shareholder that it will from time to
time and as necessary undertake, and each Shareholder severally
undertakes with each other Shareholder that it will vote in favour of,
any reorganisation of the Shares or Loan Stock in issue if the Company is
reasonably requested to undertake any such reorganisation by any
Shareholder and, in the Company's reasonable opinion, such a
reorganisation is necessary in order to avoid the occurrence of a Licence
Event or a Shareholder becoming a Disqualified Participant, including,
without limitation, the separation of voting and capital and income
rights, the issue of new shares to any Shareholder or to its Associates
and the sub-division or consolidation of Shares or Loan Stock held by any
Shareholder or its Associates (as the case may be) PROVIDED THAT the
Company shall not be requested to undertake any such reorganisation:
(a) if that reorganisation would or would be likely to, as determined in
accordance with the provisions of clause 16.1, cause a Licence Event
or to make any Shareholder a Disqualified Participant; or
(b) if that reorganisation would or would reasonably be likely, in the
reasonable opinion of the Board (the Board having first consulted the
auditors of the Company and considered any reasonable representation
of any Shareholder), to have a material adverse effect on the
Company or any of the other Shareholders
(c) the Shareholder making the said request bears all the Company's and
the other Shareholders' reasonable legal and other costs and
expenses in relation to the reorganisation.
13.10 Each of the Shareholders hereby irrevocably consents for the purposes of
Article 24 of the Articles to a transfer permitted by or made pursuant to
the provisions of Clauses 13, 14, 15, 16 and 17.
13.11 Clauses 13.1 to 13.5 (excluding Clause 13.5.8) shall apply to Transfers
of Loan Stock, mutatis mutandis.
43.
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DENTON HALL
14. Deemed Transfers of Shares
--------------------------
14.1 (a) If a Shareholder becomes unable to pay its debts within Section 123
of the Insolvency Act 1986 or makes a composition or arrangement with
its creditors or puts a proposal to its creditors for a voluntary
arrangement for a composition of its debts or a scheme of arrangement
or on the presentation of a petition that it be put into liquidation
(which is not withdrawn or defeated within 28 days) or administration
or passes a resolution putting it into voluntary liquidation (other
than for the purposes of amalgamation or reconstruction reasonably
approved by the other Shareholder) or it suffers the appointment of a
provisional liquidator, a receiver, manager or a administrative
receiver or on the occurrence of an event which does result in the
crystallisation of any floating charge over its business,
undertaking, property or assets or any part thereof or is dissolved
or an event occurs which is analogous to any of the above in any
jurisdiction other than the UK in which the relevant Shareholder is
incorporated; or
(b) if Playboy ceases to own on a diluted basis at least 10% of the
Shares, or plc ceases to own on a diluted basis at least 20% of the
Shares; (ownership on a diluted basis shall mean the "see through"
percentage of such shares so that for example where a company
(Company A) owns 50% of the shares in another company (Company B) and
Company B owns 50% of the shares in another company (Company C),
Company A will be deemed to own on a diluted basis 25% of the shares
in Company C provided that in the event that Playboy exercises any of
the Options under Clause 15, whether in whole or in part, the
provisions of this Clause shall on completion of such exercise, cease
to apply either to Playboy or to Flextech); or
44.
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DENTON HALL
(c) if a Shareholder or any of its Associates shall commit a material
breach of any material provision of this Agreement, or any other
agreement with the Company to which it or any of its Associates
is a party and shall have failed to remedy such breach, if
capable of remedy, within 30 days after the date of a notice from
the other Shareholder specifying the nature of the breach and
requiring it to be remedied
(such Shareholder (or, in the case of (b) if the event happens to
Playboy Enterprises, Inc., Playboy or if the event happens to
plc, Flextech) being hereinafter referred to as "the
Defaulter")
then in any such event (without prejudicing or in any way limiting its
other rights) the other Shareholder ("the Non-Defaulter") shall be
entitled (by notice in writing to the other and to the Company given
within 60 days of the later of the date of the event or of the date
on which the Non-Defaulter becomes aware of the event giving rise to
such rights under this Clause) in its entire discretion to treat the
occurrence of any such event as the deemed service by the Defaulter of
a Transfer Notice pursuant to Clauses 13.5 and Clause 13.11 the
provisions of which shall accordingly apply mutatis mutandis.
14.2 Where any notice is given by the Non-Defaulter pursuant to Clause 14.1
the Non-Defaulter may specify (and the parties shall give effect
thereto) that (notwithstanding any provision of the Articles) until
completion of the Transfer in accordance with Clause 13:
(a) any transfer by a Defaulter of its Shares or Loan Stock ("the
relevant Units") (other than to or at the direction of the Non-
Defaulter) shall be void;
(b) no voting rights shall be exercisable by the Defaulter in respect
of its Shares or Loan Stock;
(c) no further Shares or Loan Stock shall be issued or need be
offered to the Defaulter;
45.
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DENTON HALL
(d) in the event that the notice is served pursuant to Clause 14.1(c)
no interest, dividend or other payment shall be made of any sums
due from the Company on the Defaulters' Shares or Loan Stock or
any other loans due from the Company (whether in respect of
capital or otherwise) to the Defaulter but such sums shall be
taken into account in determining the Prescribed Price;
(e) all the Defaulter's rights (but not its obligations) under
Clauses 4, 5, 7 and 8, 13 and 14, shall be suspended during that
period and in the event that the Defaulter is Playboy or any of
its Associates, its rights under Clause 15 of this Agreement
shall lapse.
14.3 The Non-Defaulter may by notice remove or relax such restriction in
whole or in any particular case at any time.
15. The Option
----------
15.1 Flextech hereby grants to Playboy the option:
(i) at any time during the period ending nine months after the date
of Closing to purchase up to such number of the Original Shares
as shall, following the exercise of such option and together with
all other Original Shares held by Playboy and/or its Associates
at that time, result in Playboy and/or its Associates together
holding not more than 49% of the Original Shares ("the First
Option"). The consideration payable for the Original Shares in
respect of which the First Option is exercised ("the First Option
Shares") shall be the aggregate price paid by Flextech for the
First Option Shares plus interest thereon at LIBOR + 3% from the
date of payment by Flextech therefor up to and including the date
of completion of the First Option pursuant to Clause 15.6.
46.
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DENTON HALL
(ii) at any time during the 180 day period commencing on the third
anniversary of Closing to purchase up to such number of Original
Shares as shall represent 15% of the total number of the Original
Shares or such lesser number as shall, following the exercise of
such option and together with all other Original Shares held by
Playboy and/or its Associates at that time including for the
avoidance of doubt any Original Shares acquired pursuant to the
First Option), result in Playboy and/or its Associates together
holding not more than 49% of the Original Shares ("the Second
Option"). The consideration payable for the Original Shares in
respect of which the Second Option is exercised ("the Second
Option Shares") shall be:
(a) the Fair Value; or
(b) the aggregate price paid by Flextech for the Second Option
Shares plus interest thereon at LIBOR + 3% from the date of
payment by Flextech therefor up to and including the date of
Completion of the Second Option pursuant to clause 15.6;
whichever is the greater.
(iii) subject to clause 15.2 below, at any time during the 180 day
period commencing on the fifth anniversary of Closing to purchase
such number of Original Shares as shall, following the exercise
of such option and together with all other Original Shares held
by Playboy and/or its Associates at that time, (including for the
avoidance of doubt any Original Shares acquired pursuant to the
First Option and/or the Second Option), result in Playboy and/or
its Associates together holding not more than 49% of the Original
Shares ("the Third Option"). The consideration payable for the
Original Shares in respect of which the Third Option is exercised
("the Third Option Shares") shall be:
47.
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DENTON HALL
(a) the Fair Value; or
(b) the aggregate price paid by Flextech for the Third Option
Shares plus interest thereon at LIBOR + 3% from the date of
payment by Flextech therefor up to and including the date of
Completion of the Third Option pursuant to clause 15.6;
whichever is the greater.
15.2 In the event that it appears to Playboy and Flextech reasonably likely
that (based on available audited accounts of the Company, management
accounts and any annual budgets and projections for future financial
years) Playboy will be entitled to receive the Bonus Licence Fee (as
defined in the Programme Supply Agreement), Flextech will on written
request from Playboy to be received on or before the day on which the
Third Option would have expired in accordance with clause 15.1(iii) above,
extend the period during which the Third Option may be exercised so that
the Third Option may be exercised at any time during the period commencing
on the date on which the Third Option would have expired in accordance
with clause 15.1(iii) and ending on 30 days after (i) the Return of
Investment Date (as defined in the Programme Supply Agreement); or (ii)
the sixth anniversary of the Launch Date as defined in the Programme
Supply Agreement, whichever is the earlier. If the Third Option is so
exercised, payment of so much of the consideration for the Third Option
Shares as equals the Board's estimate (based as aforesaid) of the Bonus
Licence Fee or any relevant part thereof may be deferred, until 3 business
days after each payment of the Bonus Licence Fee is made to Playboy so
that amounts received by way of Bonus Licence Fee may be used to satisfy
the consideration payable in respect of the Third Option Shares, provided
that:
(i) the difference between the Bonus Licence Fee and the consideration
payable for the Third Option Shares shall be payable within 3
business days after the consideration for the Third Option Shares
shall have been determined:
48.
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DENTON HALL
(ii) all payments of Bonus Licence Fee shall, to the extent necessary, be
used to satisfy any consideration for the Third Option Shares
which may be outstanding;
(iii) interest shall be payable on any consideration deferred pursuant to
this clause at LIBOR plus 3% from the third business day after the
date on which the consideration for the Third Option Shares is
established up to and including the date of payment of any deferred
amount pursuant to this clause;
(iv) for the purposes of Clause 15.7, Playboy shall be deemed on each
payment made in respect of the Third Option Shares to have
completed the Third Option in respect of that percentage of the
Original Shares in respect of which the Third Option has been
exercised as equals the percentage which the relevant payment
being made bears to the total consideration payable for the Third
Option Shares; and
(v) all the consideration payable in respect of the Third Option Shares
deferred pursuant to this clause (if not paid or payable before such
date) shall be paid on the second anniversary of the exercise of the
Third Option.
15.3 In calculating interest for the purposes of the above First, Second or
Third Options respectively (and for the purposes to clause 15.5(iii)),
interest shall accrue from day to day on the basis of a 365 day year and
shall be compounded at six monthly intervals.
15.4 Each of the First Option, the Second Option and the Third Option ("the
Options") may be exercised once only during the relevant periods set out
above (time being of the essence as provided in clause 15.2 save in
respect of the Third Option) by Playboy giving to Flextech not more than
21 days' nor less than 7 business days' notice ("the Option Exercise
Notice") in writing to expire on or before the last day of the relevant
option period.
49.
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DENTON HALL
15.5 The right to exercise each of the Options shall be conditional on:
(i) Playboy and/or its Associates being the beneficial owner and
registered holder of not less than 15% of the Shares (or not less
than 10% provided that Playboy has not disposed of Shares which have
resulted in Playboy's becoming the registered holder of less than
15% of the Shares and Playboy are not in default under any
provisions of Clause 4 of this Agreement) and Playboy being an
Associate of Playboy Enterprises, Inc. on the date on which the
Option is exercised;
(ii) such exercise not resulting in or being reasonably likely to result
in a Licence Event;
(iii) Playboy or its Associate contemporaneously with completion of the
relevant Option subscribing in cash for such principal amount of new
Loan Stock as is equal to that proportion of the Loan Stock then
held by Flextech and its Associates as equals the proportion of
Flextech's Shares to be purchased under the relevant Option; such
new Loan Stock shall be subscribed for in cash for the sum of:
(A) the par value thereof; plus
(B) an amount equal to interest on the said proportion of Loan Stock
which is accrued or due but unpaid, calculated from the date of
Flextech's or its relevant Associates subscription for such Loan
Stock to the date of completion of the relevant Option exercise;
(iv) the entire proceeds of the subscription pursuant to paragraph (iii)
being applied on the date of completion of the relevant Option
exercise to redeem the proportion of Flextech's Loan Stock referred
to in paragraph (iii) and interest due or accrued due thereon, for
which purposes (and
50.
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DENTON HALL
for the purposes of the calculations to be made under paragraph
(iii)(B)) the "first in, first out" principal shall be applied.
(v) no event having occurred which would mean that a Transfer Notice
has or may (whether or not such Transfer Notice is served) be
served in relation to Playboy or any of its Associates under clause
14;
(vi) no notice having been served on Playboy to terminate the
Programme Supply Agreement or the Trademark Licence
and for the avoidance of doubt if either (i), (v) or (vi) above are not
satisfied at any time when one or more Options remain available to be
exercised, that Option and any other subsisting Option shall automatically
terminate and be of no further force and effect.
15.6 Completion of the exercise of any of the Options shall take place within
3 business days after the consideration for the relevant Option Shares
has been determined.
15.7 On completion of each of the Options:
(a) Playboy shall pay or procure the payments to:
(i) Flextech (or as Flextech may direct) of the consideration for
the relevant Option; and
(ii) the Company of the subscription price in respect of the new
Loan Stock to be subscribed pursuant to Clause 15.5(iii)
(b) the Company shall, out of the proceeds of the payment under paragraph
(a)(ii), redeem the relevant proportion of Flextech's Loan Stock
pursuant to Clause 15.5(iv);
51.
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DENTON HALL
(c) Flextech shall deliver to Playboy transfers in respect of the
relevant Option Shares duly signed and completed in favour of Playboy
together with the certificate(s) therefor;
(d) Flextech shall use its reasonable endeavours to procure that the said
transfer shall be registered subject to (where applicable) being duly
stamped and that the certificates be sealed and issued to Playboy in
respect of the relevant Option Shares.
15.8 Any Option Shares shall be sold by Flextech as beneficial owner free from
all encumbrances and together with all rights and benefits attached
thereto on or after the date of the exercise, save that in relation to any
dividend declared and paid in respect of any fiscal year in which the
Option is exercised, Flextech and Playboy shall be entitled to that
proportion of the dividend relating to the relevant Option Shares as
equals the proportion of the fiscal year to which the dividend relates
during which they were the holder of the relevant Option Shares and
Flextech and Playboy hereby instruct the Company to make any such dividend
payments in accordance with the above provision unless an entitlement to
such proportion has been taken into account in calculating the
consideration for the relevant Option Shares.
15.9 The Option shall be personal to Playboy and shall not be assignable,
either separately or through a Deed of Adherence.
15.10 Nothing in this Clause 15 shall prevent Flextech from transferring any of
the Shares the subject of any of the Options in accordance with the
provisions of Clauses 13 or 14 provided that (save where the Transfer is
to any of its Associates pursuant to Clause 13.2):
(a) in the event that Flextech transfers all or any of its Original
Shares, immediately prior to such Transfer, the Options shall
automatically terminate and be of no further force and effect in
relation to those Original Shares and the Original Shares shall be
transferred by Flextech free from the Option; or
52.
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DENTON HALL
(b) in the event that after any such Transfer Flextech retains
Original Shares in excess of the maximum number of shares the
subject of the Options which are still exercisable, the Options
shall continue, subject to the other provisions of this Clause
15; or
(c) to the extent that after any such Transfer the number of Original
Shares held by Flextech is less than the number of Original
Shares the subject of any Options which are still exercisable,
the relevant Option(s) shall be deemed forthwith on such Transfer
to relate to the maximum number of Original Shares then held by
Flextech.
15.11 For the purposes of Clause 15.10 Flextech shall be deemed to dispose
first of its Original Shares and only after it has disposed of shares
equal in number to the number of Original Shares for which it has
subscribed shall it be deemed to dispose of shares which are not
Original Shares.
15.12 Notwithstanding any of the preceding provisions of this Clause 15, the
maximum number of Shares which Playboy has the right to purchase under
the Option shall be such number (when added to the other Shares for
the time being held by Playboy and its Associates) as equals 49% of
all the Shares.
16. Selldown
--------
16.1 Where any provision in this Agreement requires a determination of
whether a Licence Event has been caused or has occurred or is likely
to be caused or to occur or whether a person is, or is likely to
become, a Disqualified Participant, that matter shall be determined:
(a) if the ITC shall have made a direction or ruling in respect of
the matter, by the Board in accordance with that direction or
ruling; and
53.
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DENTON HALL
(b) otherwise, in the reasonable opinion of the Board, provided that:
(i) if, in the reasonable opinion of the Board, it is
appropriate in all the circumstances for the Board to
consult the ITC on the matter, the Board shall first
consult the ITC; and
(ii) the Company shall first have served a written notice of
such duration (if any) as the Board shall in its
reasonable discretion think fit on the Shareholder or
Shareholders directly concerned with or affected by the
matter specifying the grounds on which the Board
believes that:
(A) a Licence Event may have been caused or occurred
or may be likely to be caused or occur; or
(B) that a person may be a Disqualified Participant or
may be likely to become a Disqualified Participant
and shall consider any reasonable representation of the
Shareholder(s) concerned.
16.2 Where the Board (following if the Board in its reasonable opinion
considers it is appropriate so to do, consultation with the ITC) shall
determine, in its reasonable opinion and having regard to all the
relevant circumstances, that a Licence Event has been caused or has
occurred or one or more Shareholder(s) has or have become a
Disqualified Participant or Participants or there is a reasonable
likelihood that a Licence Event will occur or be caused or that one or
more Shareholders will become a Disqualified Participant or
Participants then the Shareholders agree that the Company shall be
entitled to serve notice ("a Licence Notice") upon the affected
Shareholder(s) requiring it/them within 90 days (or such other
54.
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DENTON HALL
period as may be specified by the ITC) of service of a Licence Notice
to reduce its/their proportionate holding of the Shares to such
maximum percentage shareholding (if any) as may be fixed pursuant to
any decision of the ITC or, in the absence of any fixed percentage, to
such percentage as the Board may reasonably consider necessary in the
circumstances ("the Reduced Percentage") the difference between the
number of Shares in the Reduced Percentage and the comparable amount
of Loan Stock and the total number of Shares and the Loan Stock held
by the Shareholder being the "Relevant Number". A Licence Notice shall
be deemed to constitute a Transfer Notice served by the affected
Shareholder(s) offering to sell within the said period the Relevant
Number of its/their holding of Shares and Loan Stock pursuant to the
provisions of Clause 13.5.1 and (as the case may be) 13.11 save that
(a) the Relevant Number of Shares and Loan Stock Units shall
constitute the Sale Shares and Sale Loan Stock and (b) the Prescribed
Price shall be determined pursuant to paragraph (b)(i) of the
definition of Prescribed Price in Clause 1.1.
16.3 In the event that the provisions of Clause 16.1 or 16.2 apply then,
with effect from the date of the Licence Notice, pending transfer of
the Shares and Loan Stock in question, the affected Shareholder(s)
shall to the extent required by the ITC be disenfranchised and lose
any right to vote or receive dividends or other distributions in
respect of the Share and Loan Stock in question. Any such dividends or
distributions shall belong to the transferee of any such Share and
Loan Stock and shall be taken into account in establishing the
Prescribed Price. To the extent operation of this Clause 16.3 would
cause any other Shareholder to be in the position where Clauses 16.1
or 16.2 applied to it then the relevant percentage of the Shares held
by such other Shareholders shall also be so disenfranchised with
effect from the same date, pending the said Transfer.
16.4 If at any time within six months after completion of a Transfer
pursuant to Clause 16.2 the ITC or other relevant regulatory authority
indicates it has changed its mind or its decision is found to be
incorrect then in consideration of the payment by the
55.
<PAGE>
purchaser thereof of the Prescribed Price paid under clause 16.2 plus
interest thereon at LIBOR + 3% from the date of Transfer to the date on
which such Shares are transferred back pursuant to this clause the Share
and Loan Stock in question shall be transferred back to the affected
Shareholder who, together with the purchaser of such Shares shall to the
extent possible be put in the same position as if such Transfer had not
taken place.
16.5 A Shareholder who reasonably believes that any other Shareholder is or
may, or would or might with the passage of time, be likely to cause a
Licence Event or become a Disqualified Participant shall forthwith notify
the Company and the other Shareholders to that effect, provided that it
has simultaneously so notified the relevant Shareholder, and the relevant
Shareholder shall provide such information to the Company and the other
Shareholders as any of them shall reasonably require.
16.6 The provisions of this Clause 1 shall apply so far as may be applicable
to a Foreign Licence Event as if references in this Clause 16 to the
ITC were deleted and reference to the analogous licensing body in the
relevant territory was substituted in its place.
16.7 The Shareholders shall themselves respectively and shall procure that the
Company shall use its reasonable endeavours to mitigate the effects on a
Disqualified Participant of the provisions of this Clause 16 provided
that nothing in this clause shall require the Company or any of the
Shareholders to take any action or omit to take any action which would in
its reasonable opinion be prejudicial to the interest of any company in
the Playboy/Flextech Group or to such Shareholders.
17. Compulsory Purchase by Flextech
-------------------------------
17.1 In the event that:
56.
<PAGE>
DENTON HALL
(a) the Company terminates the Programme Supply Agreement pursuant to
Clause 10.3(a) of that Agreement or terminates the Trade Mark Licence
other than on grounds of breach by Playboy or any of its Associates;
and
(b) Playboy and/or its Associates within 60 days of such termination
serves a notice on the Company pursuant to clause 13.5.1 in respect
of all its Shares and Loan Stock; and
(c) a purchase of all such Shares and Loan Stock is not completed in
accordance with clauses 13.5.4 or 13.5.5
Flextech on demand in writing by Playboy undertakes to purchase or
procure the purchase of all the Shares and Loan Stock held by Playboy
and/or its Associates at the lower of:
(i) the Prescribed Price (as defined in paragraph (a) of the
definition of Prescribed Price) (if any); and
(ii) the Fair Value
("the Compulsory Price")
--------------------
17.2 The Compulsory Price shall be notified to the Company and each of the
Shareholders as soon as practicable after it has been established.
Completion of the purchase shall take place not later than 14 days after
the Compulsory Price has been notified as set out above provided that any
other Shareholder who notifies Flextech in writing at any time within 7
business days after the Compulsory Price has been so notified shall,
subject to payment of the relevant purchase monies on completion, be
entitled to participate in such purchase in the Agreed Proportions.
17.3 The provisions of clause 13.5.8 shall apply to any Transfer pursuant to
this clause 17.
57.
<PAGE>
DENTON HALL
18. Representations and Warranties
------------------------------
Each Shareholder hereunder represents and warrants to the other Shareholder
that:
(a) it, and each of its Associates which is a party to any Transaction
Document, is a company duly incorporated and validly existing in all
respects under the laws of the jurisdiction of its incorporation with
full power and authority to own its assets and to carry on its business
as it is now being conducted and no action has been taken or threatened
(whether by it or any third party) for or with a view to its or their
liquidation, receivership or analogous process;
(b) the execution of any Transaction Document to which it or its relevant
Associate is a party has been validly authorised and the obligations
expressed as being assumed by it (or, as applicable, by its Associate)
under such Transaction Documents constitute its (or, as applicable, its
Associate's) valid, legal and binding obligations enforceable against
it (or, as applicable, its Associate) in accordance with its terms:
(c) neither the execution and delivery by it or its Associate of any
Transaction Document to which it is a party nor the performance or
observance of any of its or its Associate's obligations thereunder
does or will:
(i) conflict with, or result in any breach or violation of, any
judgement, order or decree, indenture, mortgage, trust deed,
agreement or other instrument, arrangement. obligation or duty by
which it or such Associate is bound; or
(ii) cause any limitation on any of its or its Associate's powers
whatsoever, howsoever imposed, or on the right
58.
<PAGE>
DENTON HALL
or ability of the directors of it or such Associate to exercise
such powers, to be exceeded.
19. Competition
-----------
19.1 If Playboy wishes to launch (alone or with others) a channel which will be
the same as or substantially similar to the Channel in any country in
Europe other than the Territories ("the New Channel") using any of the
assets of the Company, Playboy will negotiate reasonably and in good faith
with Flextech (on behalf of itself and the Company) with a view to
Flextech and/or the Company participating in the New Channel. To enable
Flextech and the Company to consider such launch, Playboy shall provide
to Flextech and the Company copies of any reports, surveys and other
information which they have obtained or prepared relating to the launch
of such New Channel.
Nothing in this Clause shall permit Playboy to launch or operate a New
Channel (other than through a wholly owned subsidiary of the Company)
using any assets of or facilities of the Company or any Company in the
Playboy/Flextech Group without the consent of Flextech.
19.2 Subject to clauses 12 and 19.1, the Programme Supply Agreement and the
Trademark Licence, no Shareholder or its Associates shall be prohibited or
restricted from participating in other ventures that compete, or do not
compete, with the Business or the businesses of any of the other
parties.
20. No Assignment
-------------
The provisions of this Agreement shall be binding on and enure to the
benefit of the successors of each party hereto provided that save as
otherwise provided in this Agreement no party may agree to assign,
transfer, charge or otherwise dispose of or subcontract any of its
rights or obligations hereunder without the prior written consent of the
other party.
59.
<PAGE>
DENTON HALL
21. Waivers, Remedies Cumulative, Amendments. etc.
----------------------------------------------
21.1 No failure or delay by any of the parties hereto in exercising any right,
power or privilege under this Agreement shall operate as a waiver thereof
nor shall any single or partial exercise by any of the parties hereto of
any right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.
21.2 The rights and remedies herein provided are cumulative and not exclusive
of any rights and remedies provided by law.
21.3 No provision of this Agreement may be amended, modified, waived,
discharged or terminated, otherwise than by the express written agreement
of the parties hereto nor may any breach of any provision of this
Agreement be waived or discharged except with the express written consent
of the parties not in breach.
22. Invalidity etc.
---------------
22.1 Should any provision of this Agreement be or become ineffective for
reasons beyond the control of the parties, the parties shall use
reasonable efforts to agree upon a new provision which shall as nearly as
possible have the same commercial effect as the ineffective provision.
22.2 Any provision contained in this Agreement or in any arrangement of which
this Agreement forms part by virtue of which this Agreement or such
arrangement is subject to registration under the Restrictive Trade
Practices Act 1976 shall not come into effect until the business day
following the date on which particulars of this Agreement and of any such
arrangement have been furnished to the Office of Fair Trading (or on such
later date as may be provided for in relation to any such provision) and
the parties hereto agree to furnish such particulars within three months
of the date of this Agreement.
60.
<PAGE>
DENTON HALL
23. No Partnership or Agency
------------------------
Nothing in this Agreement shall be deemed to constitute a partnership
between the parties hereto nor, save as expressly set out herein,
constitute any party the agent of another party for any purpose. In
addition, unless otherwise agreed in writing between the Shareholders,
neither of them shall enter into contracts with third parties as agent for
any member of the Playboy/Flextech Group or for the other Shareholder or
any member of its Group nor shall either Shareholder describe itself as
agent as aforesaid or in any way hold itself out as being an agent as
aforesaid.
24. Announcements
-------------
Unless specifically otherwise agreed in writing or required by law or by
The Stock Exchange no public announcement shall be made in respect of the
subject matter of any Transaction Document or the Transponder Sub-Lease
until after Closing and in no event shall any announcement in connection
herewith be made by either party without the prior written approval of the
other as to its form and content.
25. Costs
-----
Each of the parties hereto shall pay its own costs, charges and expenses
connected with the preparation and implementation of this Agreement and
the transactions contemplated by it.
26. Entire Agreement
----------------
This Agreement and the Transaction Documents and the Transponder Sub-Lease
constitute the entire agreement and understanding of the parties hereto
with respect to the subject matter hereof and none of the parties hereto
has entered into this Agreement in reliance upon any representation or
warranty other than any such as may be set out herein.
61.
<PAGE>
DENTON HALL
27. Conflict with Articles, etc.
----------------------------
In the event of any conflict between the provisions of this Agreement and
the Articles the provisions of this Agreement shall prevail and the parties
shall exercise all voting and other rights and powers available to them so
as to give effect to the provisions of this Agreement and shall and so far
as they are able further if necessary procure any required amendment to the
Articles as may be necessary.
28. Notices
-------
28.1 Any notice or other communication given or made under this Agreement shall
be in writing and, without prejudice to the validity of any other method of
service, may be delivered personally or by courier or sent by facsimile
transmission by prepaid recorded delivery letter (airmail if overseas),
addressed as follows:
(a) if to Flextech to:
13 Albermarle Street
London W1X 3HX
Facsimile transmission number: (London 71) 499 7533
(b) if to Playboy to:
9242 Beverly Boulevard,
Beverly Hills,
California 90210
Facsimile transmission number: (Beverly Hills 310) 246 4065
(Attention President)
with a copy to
Playboy Enterprises, Inc,
680 North Lake Shore Drive,
Chicago,
Illinois 60611
Facsimile transmission number: (Chicago 312) 266 2042
(Attention General Counsel)
62.
<PAGE>
DENTON HALL
(c) if to the Company to:
Twyman House
16 Bonny Street,
London
NWl NPG
Facsimile transmission number: (London 71) 911 0145
with a copy to the other parties, other than the party giving the
notice
or to such other address, or facsimile transmission number as the relevant
addressee may hereafter by notice hereunder substitute.
28.2 Any such notice or other communication shall be deemed to have been duly
served, given or made (i) in the case of posting, 96 hours after the
envelope containing such notice was posted and proof that any such
envelope was properly addressed, prepaid, registered and posted shall be
sufficient evidence that such notice or other communication has been duly
served, given or made; or (ii) in the case of delivery, when left at the
relevant address; or (iii) in the case of facsimile transmission one
business day after transmission.
29. Governing Law
-------------
This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties agree to submit to the
exclusive jurisdiction of the English Courts as regards any claim or matter
arising in relation to this Agreement.
IN WITNESS whereof this Agreement has been duly executed.
63.
<PAGE>
DENTON HALL
SCHEDULE I
----------
PARTICULARS OF THE COMPANY
--------------------------
Date of Incorporation: 9th December 1994
Place of registration: England and Wales
Company Registration Number: 3,000,033
Authorised Share Capital: (Pounds)11,000,000
Issued Share Capital: (Pounds)2, both held by Flextech
Accounting Reference Date: 31st December
Director: Roger Luard
Name and address of Mark Luiz
Secretary:
Name of Auditors: KPMG Peat Marwick
64.
<PAGE>
DENTON HALL
SCHEDULE II
-----------
DETAILS OF SUBSCRIPTIONS BY SHAREHOLDERS AT CLOSING
---------------------------------------------------
Shareholders Ordinary Shares Loan Stock Total Subscription Price
------------ --------------- ---------- ------------------------
Names (Pounds) (Pounds)
----- -------- --------
Flextech 79 243 322
Playboy 19 57 76
---- ---- ----
98 (Pounds)300 (Pounds)398
65.
<PAGE>
DENTON HALL
SCHEDULE III
------------
DEED OF ADHERENCE
-----------------
THIS DEED is made this day of 199 .
BETWEEN:
(1) [Name of transferee] ("the New Shareholder") registered in
[ ] under number [ ] whose registered
office is at [ ]; and
(2) [INSERT DETAILS OF SHAREHOLDER [X]]; and
(3) [INSERT DETAILS OF SHAREHOLDER [Y]]; and
(4) [ ] ("the Company") registered in England under
number [ ] and having its registered office at
[ ]; and
[Any other person becoming bound by the Shareholders' Agreement];
WHEREAS:
By virtue of the Transfer referred to in the Schedule to this Deed the New
Shareholder became entitled subject, inter alia, to the execution of this
Deed, to the Shares in the capital of the Company set out in the Schedule
hereto.
NOW THIS DEED WITNESSES as follows:
1. In this Deed and the Recitals hereto:
(a) "the Shareholders' Agreement": means the agreement dated
[ ] and made between
66.
<PAGE>
DENTON HALL
(b) terms and expression defined in the Shareholders' Agreement shall have
the same meaning when used herein or in the Recital hereto, unless the
context requires or admits otherwise
2. In consideration of the sum of (Pounds)1 now paid by the Company (on behalf
of itself and each other party hereto) to the New Shareholder, receipt
whereof is hereby acknowledged, the New Shareholder hereby covenants with
and undertakes to each other party to this Deed and to the Company as
trustee for all other parties who hereafter become bound by the
Shareholders' Agreement pursuant to a deed in a similar form to this Deed,
entered into pursuant to the Shareholders' Agreement, to adhere to and be
bound by the provisions of the Shareholders' Agreement as if the New
Shareholder had been an original party to the Shareholders' Agreement.
3. [INSERT WARRANTIES BY ALL PARTIES SIMILAR TO CLAUSE [18] TO THE
SHAREHOLDERS' AGREEMENT]
4. Subject to the provisions of Clause 2 of this Deed, and the Shareholders'
Agreement the Company and the Shareholders hereby release the transferor
from its obligations under the Shareholders' Agreement.
5. The provisions of this document (other than those contained in this
clause) shall not have any effect until this document has been dated.
IN WITNESS whereof this Deed has been duly executed.
SCHEDULE
--------
Transferor Transferee Price
---------- ---------- -----
67.
<PAGE>
DENTON HALL
SCHEDULE IV
-----------
FUNDING
-------
68.
<PAGE>
DENTON HALL
SCHEDULE V
----------
BOARD OF DIRECTORS COMPOSITION
------------------------------
Playboy's Playboy may appoint Flextech's Flextech
--------- ------------------- ---------- --------
Percentage up to the following Percentage May Appoint
---------- ------------------- ---------- -----------
Ownership of Shares number of Directors Ownership of Shares up to the
------------------- ------------------- ------------------- ---------
Following
---------
Number of
---------
Directors
---------
0-9.9 0 90.1-100 11
10-27.9 2 71.1-90 9
28-37.9 3 62.1-72 8
38-48.9 4 51.1-62 7
49 5 51 6
69.
<PAGE>
SIGNED by ROGER LUARD )
for and on behalf of )
CONTINENTAL SHELF 16 LIMITED )
in the presence of: )
SIGNED by Myron DuBow )
for and on behalf of PLAYBOY )
ENTERTAINMENT GROUP, INC. in )
the presence of: Sidra Sparks ) /s/ Myron DuBow
/s/ Sidra Sparks
SIGNED by ROGER LUARD )
for and on behalf of )
PLAYBOY TV UK/BENELUX )
LIMITED in the presence )
of: )
70.
<PAGE>
DENTON HALL
SIGNED by ROGER LUARD )
for and on behalf of )
CONTINENTAL SHELF 16 LIMITED )
in the presence of: ) /s/ Roger Luard
/s/ Fairlie Anderson
Fairlie Anderson
Denton Hall
5 Chancery Lane
Clifford's Inn
London
EC4A IBU
SIGNED by ANTHONY J. LYNN )
for and on behalf of PLAYBOY )
ENTERTAINMENT GROUP, INC. in )
the presence of:
SIGNED by ROGER LUARD )
for and on behalf of )
PLAYBOY TV UK/BENELUX )
LIMITED in the presence )
of: ) /s/ Roger Luard
/s/ Fairlie Anderson
Fairlie Anderson
Denton Hall
5 Chancery Lane
Clifford's Inn
London
EC4A IBU
70.
<PAGE>
DATED 1995
--------------------------------------------
(1) PLAYBOY ENTERTAINMENT GROUP, INC
(2) PLAYBOY TV UK/BENELUX LIMITED
--------------------------------------
PROGRAMME SUPPLY AGREEMENT
--------------------------------------
[LETTERHEAD OF DENTON HALL]
<PAGE>
DENTON HALL
THIS AGREEMENT is made the day of 1995
BETWEEN:
(1) PLAYBOY ENTERTAINMENT GROUP, INC
of 9242 Beverly Boulevard
Beverly Hills
California 90210
United States of America
("the Licensor")
and
(2) PLAYBOY TV/UK/BENELUX LIMITED
of Twyman House
16 Bonny Street
London NW1 9PG
("the Company")
WHEREAS:
The Company wishes to licence from the Licensor and the Licensor has agreed to
licence to the Company certain television programmes upon the terms set out in
this Agreement.
NOW IT IS HEREBY AGREED as follows:
1. Definitions and Interpretation
------------------------------
1.1 In this Agreement the following words and expressions shall have the
following meanings:
"Accumulated Net Losses": means as at the end of any Year commencing after
the Return of Investment Date, the amount by which the aggregate amount of
the Losses of the Company in respect of that Year and all
<PAGE>
DENTON HALL
preceding Years (ignoring, for the avoidance of doubt, the fact that any such
Losses may have been, or may be capable of being, surrendered by way of group
relief) exceeds the aggregate amount of the Net Profits of the Company in
respect of that Year and all preceding Years;
"Acquired Premium Movie": any full-length (i.e. with a running time of not less
than 84 minutes) motion picture (whether made for theatrical release and/or
television exhibition) which falls within the Programme Specification and which
may be acquired by the Licensor or the Company for transmission in the Service
following a notice given by the Company pursuant to Clause 8.9;
"Acquired Programme": means any television programme falling within the
Programme Specification which is not a Playboy Programme or a Third Party
Programme but (a) in or to which the Licensor or any Affiliate of the Licensor
has acquired or does at any time during the Term acquire from a third party
inter alia the Non-Standard Television Rights within the Territory and (b) which
the Licensor delivers to the Company for first transmission in the Service in
any Year and as part of the Minimum Number of Hours in respect of that Year;
"Affiliate": of any person means any other person which is from time to time
either directly or indirectly controlling, controlled by or under common control
with the first person and for this purpose "control" means in relation to a
person (the "Relevant Person") the power of another person ("the Controlling
Person") to secure, whether by the holding of shares or the possession of voting
rights in or in relation to the Relevant Person or any other person or the
provisions of any agreement or otherwise, that the affairs of the Relevant
Person are conducted in accordance with the wishes of the Controlling Person;
"the Availability Date": in respect of any Third Party Programme or Acquired
Programme means the first day of the Licence Period in respect of that Third
Party Programme or Acquired Programme and in respect of any Playboy Programme
means the later of the following:
2.
<PAGE>
(a) the first day of the Licence Period in respect of that Playboy Programme;
and
(b) the expiry of the earlier of:
(i) a period of twelve (12) months commencing upon the date on which the
home video release of that Playboy Programme within the Territory
takes place; and
(ii) a period of twenty-four (24) months commencing upon the date of
completion of production of that Playboy Programme;
"Available Cash Flow": means such amount of the monies received by the Company
from the conduct of its business as is available for the purpose of paying the
Bonus Licence Fee to the Licensor pursuant to this Agreement but after having
made such provision as may be necessary, having regard to the reasonably
projected income and cash flow of the Company, to pay the Company's projected
cash requirements and needs, to pay and discharge the current liabilities and
obligations of the Company and to pay and discharge the known contingent
liabilities and obligations of the Company, which amount shall be determined in
accordance with Clause 7.6;
"Available Net Profits": means as at the end of any Year commencing after the
Return of Investment Date, the amount (if any) by which the Net Profits of the
Company in respect of that Year exceeds the Accumulated Net Losses of the
Company as at the end of the immediately preceding Year;
"the Basic Licence Fee": means in respect of each Year an amount calculated in
accordance with the provisions of Schedule 3;
"Bonus Amount": means the amount (if any) by which in respect of any of the
second, third, fourth and fifth Years the total of the Basic Licence Fee and any
Programming Premium payable by the Company in respect of that Year is less than
US$2,000,000 and which shall, for
3.
<PAGE>
DENTON HALL
the avoidance of doubt, be calculated on an annual basis following the end of
each such Year;
"Bonus Licence Fee": means an amount calculated by aggregating each Bonus Amount
following the end of the fifth Year;
"the Business Plan": means any plan which is from time to time in force and in
accordance with which the business of the Company is to be managed and conducted
pursuant to the Shareholders' Agreement;
"Co-Production": means any television programme falling within the Programme
Specification which was not produced solely by or under commission from the
Licensor and is not an Acquired Programme but which is co-produced by the
Licensor and/or any Affiliate of the Licensor with a third party;
"the CPI": means the US City Average Consumer Prices Index for all urban
consumers or any successor or replacement index. For the purpose of determining
any percentage increase in the CPI over the twelve months immediately preceding
the first day of any Year, reference shall be made to the published figure for
the CPI available for the month immediately preceding the first day of that Year
("the final figure") provided that, if the final figure is not available, the
latest published figure available shall apply;
"Delivery Material": means in relation to any Selected Programme, so-called
"vignette" or promotional material the master of the Selected Programme,
so-called "vignette" or promotional material in the form specified in Schedule 2
together with the other materials therein described and any dubbed or sub-titled
version of the Selected Programme, so-called "vignette" or promotional material
which the Licensor is required to deliver pursuant to Clause 5;
"the Directive": means the Directive of the Council of European Communities of
3rd October 1989 No 89/552 EEC and/or any other Directive of the Council of
European Communities which may modify, replace or supersede any of the
provisions of that Directive (including but not limited to Articles 4, 5 and 6
of that Directive);
4.
<PAGE>
DENTON HALL
"European Work": means a programme which complies with the definition of a
European Work contained in the Directive;
"the First Year": means the period commencing upon the Launch Date and ending
upon 31st December in the calendar year in which the Launch Date falls;
"Flextech": Continental Shelf 16 Limited, a company registered in England and
Wales under no. 3005499;
"Force Majeure": means any event or cause not within the control of the party
affected by it (other than a breach of this Agreement by the other party)
including (but not by way of limitation) accident or breakdown of any satellite
or any other facilities equipment or apparatus (caused otherwise than by the
wrongful act neglect or default of that party), act of God, flood, war, riot,
rebellion, civil commotion, strike, lock-out or other industrial dispute or
action, Act of Parliament, any act, order, direction or regulation of any
government or any public, local or regulatory authority or imposition of
government sanction, embargo or similar action, or of any law, judgment, order,
decree, embargo or blockade;
"the Growth Factor": means, for the purpose only of calculating the Minimum
Production Cost in any Year, the aggregate percentage increase in the CPI over
the twelve months immediately preceding the first day of that Year or three (3)
per cent, whichever is the greater;
"the Launch Date": means the date on which the Company commences the provision
of the Service for reception within the Territory;
"LIBOR": the three month London Interbank Offered Rate for Sterling Deposits, as
published in the Financial Times on the first day of each month or on the next
succeeding day on which the Financial Times is published;
5.
<PAGE>
DENTON HALL
"Licence Period": means in relation to:
(a) each Playboy Programme, the period commencing upon the date of signature of
this Agreement or (in the case of a Playboy Programme production of which
has not prior to such date been completed) the date on which production of
that Playboy Programme or the first episode of that Playboy Programme is
completed and ending upon the later of (i) the final day of the Term and
(ii) the date after the end of the Term on which any Transmission Period
relating to that Playboy Programme ends in accordance with sub-clauses
10.6.2, 10.6.3 and 10.6.4; and
(b) each Acquired Programme or Third Party Programme acquired on behalf of the
Company by the Licensor, the duration of the Playboy Licence Period
relating to that Acquired Programme or Third Party Programme;
"the Licensor's Territory": means the United States of America;
"Losses": means in respect of any Year, the losses shown by the audited profit
and loss account of the Company for that Year (which losses shall be determined
according to the Company's accounting policies but shall always take into
account the amount of any Programming Premium payable in respect of that Year
and shall in respect of the fifth Year take into account the full amount of the
Bonus Licence Fee payable by the Company) but before interest on any loans made
to the Company by its shareholders pursuant to sub-clauses 3.1(b) and 4.1(b) of
the Shareholders' Agreement of even date herewith;
"Minimum Number of Hours": means in respect of each Year the minimum number of
Programme Hours of Programmes which the Licensor is obliged to deliver to the
Company in that Year pursuant to this Agreement for first transmission in the
Service and which shall (A) in the First Year be calculated by multiplying 114
by the number of days during the First Year (including the Launch Date) and
dividing the product of that multiplication by 365 and (B) be one hundred and
fourteen (114) Programme Hours in each subsequent Year unless or until that
number is
6.
<PAGE>
DENTON HALL
reduced or increased
(a) in accordance with Clause 8.6, Clause 8.7, Clause 8.8 or Clause 8.11; or
(b) following any termination of this Agreement pursuant to Clause 10.3;
"Minimum Production Cost": means an amount which shall increase during the Term
as follows:
(a) in the first Year, the sum of US$1,000,000 (one million United States
dollars); and
(b) in any subsequent Year, the sum which, by virtue of this definition,
represented the Minimum Production Cost in the immediately preceding Year
increased by the Growth Factor;
"Net Profits": means in respect of any Year, the audited, after tax profits of
the Company for that Year shown in the accounts of the Company for that Year
prepared by its auditors (which profits shall be determined according to the
Company's accounting policies but shall always take into account the amount of
any Programming Premium payable by the Company in respect of that Year and shall
in respect of the fifth Year take into account the full amount of the Bonus
Licence Fee payable by the Company) but before interest on any loans made to the
Company by its shareholders pursuant to sub-clauses 3.1(b) and 4.1(b) of the
Shareholders' Agreement of even date herewith;
"Net Revenue per Household": means an amount calculated in accordance with the
provisions of Schedule 4;
"Net Revenues": means in respect of any Year, the aggregate of all payments
which are actually received by the Company during that Year, which (after making
adequate provision for refunds, discounts, bad debts and credits) the Company is
entitled to retain and which represent charges made for the reception and/or
re-transmission of the
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Service in its entirety, or of programmes (other than Premium Movies and
Acquired Premium Movies included in the Service on a Pay-Per-View Basis), by any
third party (including but not limited to any cable operator) after deduction
of:
(i) all amounts of Value Added Tax or similar sales taxes which may form part
of such payments; and
(ii) all sales and agency commissions which may be payable to third parties as a
result of the receipt of any such payment(s) by the Company and which have
not been deducted by such third party or parties prior to the receipt of
the relevant payment(s) by the Company;
"Non-Standard Television": means all forms of television exhibition,
transmission and distribution whether now existing or developed in the future
(other than Standard Television) and however transmitted or delivered, including
but not limited to the following:
(a) basic cable and pay cable;
(b) "over the air pay" subscription television (STV), direct broadcasting by
satellite (DES), master antenna television systems (MATV), multipoint
distribution systems (MDS), satellite master antenna television systems
(SMATV), microwave transmission and video-on-demand services;
(c) transmission via Non-Standard Television delivery systems to closed circuit
television systems such as hotel, motel or hospital rooms, educational
institutions and military locations;
whether all of the foregoing (a), (b) and/or (c) are on a subscription,
pay-per-view, licence, free or other basis;
"the Non-Standard Television Rights": means the right to exhibit, or cause the
exhibition of, a Programme or a Third Party Programme by means of Non-Standard
Television;
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DENTON HALL
"Payment Date": means any of the six dates specified in Clause 7.3;
"Pay-Per-View Basis": means the inclusion of a programme in the Service on terms
whereby a payment becomes due from a subscriber in consideration solely for the
right to receive and view (a) that programme or (b) a number of programmes which
are transmitted in the Service on the same day including that programme;
"Playboy Acquired Programme": means any Acquired Programme acquired by the
Licensor or any Affiliate of the Licensor pursuant to a licence:
(a) under which the Licensor or that Affiliate was also granted the Television
Rights in that Acquired Programme within the Licensor's Territory;
(b) under which all of the Television Rights in that Acquired Programme granted
to the Licensor and/or any Affiliate of the Licensor were granted on a sole
and exclusive basis;
(c) which was granted for a period of not less than five (5) years from the date
of its commencement; and
(d) under which the Television Rights in that Acquired Programme were granted
within one of the following territories (in addition to the Licensor's
Territory and the Territory): namely, Australia, Germany, France, Italy,
Mexico or Brazil;
"Playboy Licence Period": means in respect of any Acquired Programme, so-called
"vignette" or (if applicable) Third Party Programme the period for which the
Licensor or any Affiliate of the Licensor has acquired the Non-Standard
Television Rights therein within the Territory;
"Playboy Production Costs": means in respect of any Premium Movie the aggregate
of (a) all fees and other remuneration paid to the Licensor and/or any Affiliate
of the Licensor, and to any employee or officer
9.
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DENTON HALL
of the Licensor and/or any such Affiliate, in connection with the production of
that Premium Movie and (b) any part of the cost of production of that Premium
Movie which represents overhead expenditure of the Licensor and/or any Affiliate
of the Licensor that the Licensor and/or any such Affiliate would have incurred
even if that Premium Movie had never been produced, including but not limited to
expenditure incurred in paying salaries or other remuneration to employees and
in owning, operating, occupying, using and/or leasing premises, office
equipment, facilities and/or services and/or equipment customarily used in the
production of television programmes and/or motion pictures;
"Playboy Programme": means (a) any television programme falling within the
Programme Specification which is or was produced by, or under commission from,
the Licensor or any Affiliate of the Licensor or (b) a Co-Production which in
either case is not a Premium Movie;
"Premium Movie": means a full-length film or motion picture
(a) which contains at least one actor or actress with a generally recognizable
name value in the United States motion picture industry who, in the five
years immediately preceding the date on which production of that film or
motion picture was commenced, has appeared in a starring role in a motion
picture theatrically released in the United States by one or more of the
major Hollywood studios or had a starring role in a regular prime-time U.S.
network television series or movie-of-the-week.
(b) which is photographed in colour, using 35 millimeter film
(c) which has a running time of not less than eighty-four (84) minutes
(d) which is based upon a recognisable dramatic plot and/or storyline
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DENTON HALL
(e) which has a Total Production Cost in excess of the Minimum Production Cost
and
(f) whose Total Production Cost does not include Playboy Production Costs which
in the aggregate exceed an amount equal to ten (10) per cent of the Minimum
Production Cost (and to the extent that Playboy Production Costs in excess
of that amount were included in the Total Production Cost such excess
Playboy Production Costs shall be disregarded for the purposes of
determining whether the relevant film or motion picture is a "Premium Movie"
hereunder);
"Programme": means:
(a) any Playboy Programme; or
(b) any Acquired Programme (including but not limited to any Playboy Acquired
Programme) in or to which the Licensor or any Affiliate of the Licensor
acquires owns or holds or is entitled to exercise, or authorise the exercise
of, any or all of the Non-Standard Television Rights within the Territory;
or
(c) any Premium Movie but only insofar as the same may be licensed to the
Company in accordance with Clause 3.2;
and for the purposes of interpreting this definition, it is agreed and declared
that, where a television programme consists of more than one episode or group of
episodes, each series or serial of that television programme which consists of a
single or discrete group of episodes shall be treated as a separate Programme;
"Programme Duration": means in relation to any Programme or Third Party
Programme or (in the case of a Programme or Third Party Programme consisting of
more than one episode) any episode, the running time of the master of the
Programme or Third Party Programme or episode (excluding, for the avoidance of
doubt, commercial breaks, promotional material and advertisements interpolated
in any Programme
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DENTON HALL
or Third Party Programme or episode and further excluding any so-called
"vignettes") delivered to the Company by the Licensor as part of the Delivery
Material or by the licensor of the Third Party Programme (as the case may be);
"Programme Hour": means in relation to the Programme Duration of any
Programme(s) or Third Party Programme(s), a period of forty-five (45) minutes;
"the Programme Specifications": means the description of the programming which
is to be broadcast by the Company as part of the Service and is attached as
Schedule 1;
"Programming Premium": means, in respect of any Year commencing after the Year
in which the Return of Investment Date falls, the amount (if any) payable to the
Licensor in respect of that Year pursuant to sub-clause 7.1(b);
"Quarter": shall mean any three month period ending on the last day of March,
June, September and December;
"Requisite Percentage": means for the purpose of calculating the amount (if any)
of the Programming Premium payable to the Licensor:
(a) 33% (thirty-three per cent) of Available Net Profits; and
(b) 20% (twenty per cent) of Net Revenues
subject always to reduction of such percentages in accordance with the
provisions of Clause 8.6, sub-clause 8.8(d), Clause 8.11 or sub-clause 10.4.2;
"Return of Investment Date": the day on which each of the Company's shareholders
shall actually have received (by way of the repayment of all loans made, by way
of the return (by sales or repayment of shares or otherwise) of all share
capital subscribed (including share premiums), and by way of the payment of
interest or dividends thereon)
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an amount equal to the aggregate of:
(a) the principal amount of all loans made, and share capital subscribed for in
the capital of the Company, by each such shareholder pursuant to sub-clauses
3.1(b) and 4.1(b) of the Shareholders' Agreement of even date herewith (in
each case the "Initial Cost"); PLUS
(b) interest on the Initial Cost at LIBOR plus 3% (which interest shall accrue
on a daily basis from the date of the relevant loan or subscription and
shall be calculated and compounded on 30th June and 31st December of each
Year) PLUS
(c) the principal amount of all loans made, and share capital subscribed for in
the capital of the Company, by each such shareholder in addition to the
Initial Cost prior to the date on which the Initial Cost plus interest
thereon calculated in accordance with (b) above has been received by each
of the Company's shareholders in accordance with the foregoing provisions
of this definition (in each case the "Additional Cost"); PLUS
(d) interest on the Additional Cost at LIBOR plus 3% or (if higher) at the rate
of interest contractually payable on the relevant loan to the relevant
shareholder (which interest shall accrue on a daily basis from the date of
the relevant loan or subscription and shall be calculated and compounded on
30th June and 31st December of each Year)
PROVIDED THAT:
(i) where any such shares or loans are transferred to any person, including
but not limited to upon exercise of any of the Options (as defined in
Clause 15 of the Shareholders' Agreement of even date herewith), such
person shall on such transfer be deemed to have subscribed for the shares
and made the loans the subject of the transfer and there shall not be taken
into
13.
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DENTON HALL
account for the purposes of determining the Return of Investment Date such
amount of the consideration paid by such person as exceeds the Initial
Cost to the selling shareholder of the shares and loans the subject of the
relevant transfer plus interest thereon, calculated in accordance with (b)
above; and
(ii) if any part of the Initial Cost or the Additional Cost shall be repaid to
any shareholder through the use of monies borrowed by the Company from any
third party (i.e. a person other than a shareholder in the Company or an
Affiliate of such a shareholder), the Return of Investment Date shall not
occur until all of those third party borrowings shall have been repaid by
the Company to that third party together with interest thereon at the rate
of interest contractually payable by the Company to that third party
provided, however that if the Company has the funds to repay such third
party but is not contractually permitted to prepay such third party, the
Company will establish a fund to pay such borrowings with interest and
will be deemed to have repaid such borrowings (with interest) to the
extent of the amount from time to time standing to the credit of such
fund; and
(iii) if the Company is not contractually permitted to prepay any part of the
Initial Cost or the Additional Cost which comprises (a) loan(s) made by a
shareholder, the Company will establish a fund to repay such loan(s) with
interest and will be deemed to have repaid such loan(s) (with interest) to
the extent of the amount from time to time standing to the credit of such
fund;
"the Scheduler": the individual appointed in accordance with Clause 8.1, Clause
8.4, Clause 8.5, Clause 8.11 or Clause 10.4 who is to provide the services set
out in Clause 8.2;
"Selected Programme": means any Programme, Third Party Programme or so-called
"vignette" which is selected by the Scheduler for inclusion in the Transmission
Schedule and licensed to the Company by the Licensor pursuant to or by virtue of
any provision of this Agreement;
14.
<PAGE>
"the Service": means the television programme service consisting solely of:
(a) Programmes, Third Party Programmes and so-called "vignettes"; and
(b) infomercials, advertisements and promotional and publicity material
which is to be provided by the Company for reception within the Territory;
"Service Language": means any of the following languages; English, Flemish,
Dutch or any other language of any country within the Territory;
"the Shareholders' Agreement": means the agreement which is for the time being
in force between the holders of not less than ninety-five per cent (95%) in
nominal value of the issued share capital of the Company and which inter alia
regulates the management and conduct of the business of the Company;
"Standard Television": means exhibition by conventional free VHF or UHF
television broadcast stations, the video and audio portions of which are
intelligibly receivable without charge by means of a conventional home roof-top
or television set built-in antenna;
"the Standard Television Rights": means the right to exhibit, or cause the
exhibition of, a Programme or a Third Party Programme by means of Standard
Television;
"the Term": means the period commencing on the date of signature hereof and
ending on the date on which any termination of this Agreement takes effect
pursuant to Clause 10;
15.
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DENTON HALL
"the Television Rights": means the Non-Standard Television Rights and the
Standard Television Rights;
"the Territory": means the countries of the United Kingdom, the Republic of
Ireland, Belgium, The Netherlands and Luxembourg together with any other
countries in which the Service may from time to time be provided by the Company
in accordance with the Business Plan and Shareholders' Agreement;
"Third Party Programme": means
(a) any television programme which falls within the Programme Specification and
which is not a Playboy Programme; or
(b) any Acquired Premium Movie.
in respect of which the Licensor or any Affiliate of the Licensor acquires upon
instruction from the Scheduler and/or the Company in accordance with Clause 8.6,
Clause 8.9 or 8.11 the Non-Standard Television Rights therein within the
Territory or the Company acquires the same in accordance with Clause 8.8, Clause
8.10, Clause 8.11 or Clause 10.4;
"Total Production Cost": means, in respect of each Premium Movie, the actual
cost of production of that Premium Movie (including without limitation the
aggregate of direct, out-of-pocket costs, charges and expenses paid to third
parties in connection with the acquisition of all underlying literary rights
with respect to the production of the Premium Movie, and in connection with the
preparation, production and completion of the Premium Movie including the costs
of materials, equipment, physical properties, any completion bond fee (net of
any rebate), personnel and services utilized in connection with the production
of the Premium Movie, and cost of customary production insurances and Playboy
Production Costs);
"Trademark Agreement": means the agreement between the Company and Playboy
Enterprises, Inc. of even date herewith relating to the use of the Trade Marks;
16.
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DENTON HALL
"the Trade Marks": shall have the meaning ascribed to it in the Trademark
Agreement;
"Transmission Period": means in respect of any Programme, or any Third
Party Programme acquired on behalf of the Company by the Licensor, the
period commencing upon the Availability Date in respect of that Programme
or Third Party Programme or (as the case may be) upon the date of any
notice given by the Company pursuant to Clause 2.2 in respect of that
Programme or Third Party Programme and ending upon the date on which the
twenty-fourth (24th) transmission of that Programme or Third Party
Programme (or, in the case of a Programme or Third Party Programme (or, in
the case of a Programme or Third Party Programme consisting of more than
one episode, the final episode of that Programme or Third Party Programme)
in the Service during that period takes place or (if earlier) the final day
of the Playboy License Period in respect of an Acquired Programme or Third
Party Programme;
"the Transmission Schedule": means the schedule to be prepared by the
Scheduler in accordance with Clause 8.2 setting out the day, date and time
of transmission of each Selected Programme, each so-called "vignette" and
all interstitial material to be transmitted as part of the Service;
"the United Kingdom": means Great Britain, Northern Ireland (irrespective
of whether Northern Ireland is or remains part of the United Kingdom), the
Channel Islands and Isle of Man;
"Year": means the First Year and thereafter any calendar year.
1.2 In this Agreement references to a "programme" or "Programme" shall include
a reference to any associated sound recording comprising the soundtrack
thereto.
1.3 In this Agreement references to Clauses, sub-clauses, paragraphs and
Schedules shall be references to Clauses, sub-classes and paragraphs of and
Schedules to this Agreement.
17.
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DENTON HALL
1.4 Whenever the Service is licensed or otherwise sold to a third party
(including but not limited to a cable operator) as part of a package of
satellite delivered television channels, then the Company shall negotiate
with that third party and/or with the providers of the other television
channels included in such package on an arm's length basis regarding the
allocation between the television channels (including but not limited to
the Service) included in such package of the revenues derived from the
relevant licence or sale.
1.5 Whenever any of the Non-Standard Television Rights in a Programme (other
than a Playboy Programme) or a Third Party Programme within the Territory
are acquired by the Licensor or any Affiliate of the Licensor pursuant to
Clause 8.6, 8.8, 8.9 or 8.11 and the relevant Television Rights are also
acquired in respect of any country or countries outside the Territory, then
for the purposes of sub-clauses 8.6(c), 8.8(c), 8.9(d) and 8.11.4(b) the
Licensor shall on a fair and equitable arm's length basis allocate the
license fee(s) paid by the Licensor or its Affiliates for those Television
Rights to the licensor of that Programme or Third Party Programme between
the Television Rights so acquired by the Licensor within the Territory and
the Television Rights so acquired by the Licensor in respect of any country
or countries outside the Territory.
1.6 Whenever a Programme (other than a Playboy Programme) or a Third Party
Programme is acquired by the Licensor or any Affiliate of the Licensor
pursuant to Clause 8.6, 8.8, 8.9 or 8.11 and that Programme or Third Party
Programme is acquired as part of a package of television programmes, then
for the purposes of sub-clauses 8.6(c), 8.8(c), 8.9(d) and 8.11.4(b) the
Licensor shall on a fair and equitable arm's length basis allocate the
licence fee(s) paid by the Licensor or its Affiliate to the licensor of
that package of television programmes between that Programme or Third Party
Programme and the other television programmes included in that package.
1.7 If so requested by the Company in writing, the Licensor shall within
fourteen (14) days after the date of such request deliver to the
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DENTON HALL
Company a certificate signed as being true and accurate by the Senior
Financial Officer of the Licensor and stating in respect of each Premium
Movie specified in such request (a) the Total Production Cost of that
Premium Movie and (b) the total amount of Playboy Production Costs included
in that Total Production Cost. At any time after delivery of that
certificate the Company may upon reasonable notice to the Licensor and
during normal business hours inspect the books and records of the Licensor
and or any Affiliate of the Licensor relating to the production of any
Premium Movie specified in that certificate for the purpose of verifying
the accuracy of that certificate. The provisions of this Clause shall not
apply to any Premium Movie in which the Television Rights within the
Territory have been granted to any third party pursuant to any legally
binding agreement entered into by the Licensor prior to the date of this
Agreement.
1.8 Whenever reference is made in this Agreement to a period of less than
fourteen (14) days, a "day" shall for the purposes of calculating the
length of that period be deemed to mean any day other than a Saturday,
Sunday or public holiday in England or the United States of America.
2. Licence
-------
2.1 The Licensor hereby grants to the Company by way of a sole and exclusive
license under copyright during the Licence Period in respect of each
Programme or Third Party Programme (as the case may be) and within the
Territory:
(a) the sole and exclusive right to exercise the Non-Standard Television
Rights in and to each Programme on not more than twenty-four (24)
occasions during any Transmission Period relating to that Programme;
and
(b) all Television Rights and all other right title and interest acquired
by the Licensor in and to each Third Party Programme
PROVIDED ALWAYS THAT the Company shall not make any transmission of any
Programme, or any Third Party Programme acquired on its behalf by
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DENTON HALL
the Licensor, otherwise than during a Transmission Period relating to that
Programme or Third Party Programme.
2.2 At any time after the end of the first Transmission Period in respect of a
Programme the Company may by notice in writing to the Licensor elect to
transmit that Programme during a further Transmission Period, then (subject
always to the proviso to this Cause and unless the Licensor notifies the
Company within seven (7) days after the date of receipt of the Company's
notice that that Programme is an Acquired Programme and that the Licensor
would be unable to perform its obligations under Clause 4.6 in relation to
that Programme during that further Transmission Period) the following
provisions shall apply:
(a) that Programme shall automatically be deemed to be a Selected
Programme during that further Transmission Period for all purposes of
this Agreement SAVE THAT that Programme shall not count towards the
Minimum Number of Hours in respect of any Year and the Company shall
pay a license fee to the Licensor in respect of that Programme in
accordance with the provisions of Clause 7.7; and
(b) (unless the then current Scheduler has been appointed by the Company
under Clause 8.4, proviso (c) to Clause 8.5, Clause 8.11.4 or Clause
10.4) the Licensor shall procure that the Scheduler shall include that
Programme in the Transmission Schedule for transmission in the Service
during the further Transmission Period in respect of that Programme
PROVIDED ALWAYS THAT, if the parties are unable to agree upon the amount of
the licence fee payable to the Licensor in respect of that Programme within
the 30 day period described in sub-clause 7.7(a), the Company may by notice
in writing to the Licensor decline to accept a further Transmission Period
of that Programme at the licence fee specified in paragraph (ii) of sub-
clause 7.7(a) and, if the Company does so decline, the provisions of sub-
clauses (a) and (b) of this Clause shall not apply to that Programme.
20.
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DENTON HALL
2.3 The Licensor further grants to the Company by way of a sole and exclusive
licence under copyright the sole and exclusive right during the Term and
within the Territory to exercise the Non-Standard Television Rights in and
to each so-called "vignette" delivered to the Company hereunder on not more
than (subject to the provisions of Clause 4.8) twenty-four (24) occasions.
2.4 Notwithstanding the definition of the Territory, the licences granted to
the Company under Clauses 2.1 and 2.3 shall not extend to the Republic of
Ireland until the earlier of:
(a) the first anniversary of the Launch Date; and
(b) the date on which the Licensor notifies the Company that those
licences have been extended to the Republic of Ireland.
3. Supply of Programmes
--------------------
3.1 In order to assist the Company in marketing the Service and the Scheduler
in performing his duties under Clause 8, the Licensor shall:
(a) within fourteen (14) days after the date of this Agreement supply to
the Company and to the Scheduler a complete list of all of its
Programmes, which list shall include in respect of each Programme the
title, duration and number of episodes of that Programme, a brief
description of that Programme and the year in which that Programme was
produced and is attached as Schedule 5;
(b) not later than the first day of each Year supply to the Company and to
the Scheduler a list of all Programmes which have completed
production, and of all television programmes which have for any reason
become Programmes (for example, because the Licensor or any Affiliate
of the Licensor has acquired the Non-Standard Television Rights
therein), since the last such list (or the list supplied pursuant to
sub-clause 3.1(a)) was supplied, and the Licensor shall include in
that list in
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DENTON HALL
respect of each such Programme the information specified in sub-clause
(a) of this Clause;
(c) upon the Company's or the Scheduler's request, supply to the Company
and the Schedule details (if available) of audience viewing ratings
achieved by any Programme on the last broadcast of that Programme by
the Licensor or any Affiliate or licensee of the Licensor anywhere in
the world; and
(d) within 21 days after any request by the Company or the Scheduler,
provide on loan a VHS viewing cassette of any Programme which may be
requested by the Company or the Scheduler.
3.2 The Licensor shall not at any time during the Term licence any of the
Television Rights in any Premium Movie within the Territory to any third
party without first complying with the procedure set out in this Clause but
the provisions of this Clause (other than sub-clause (d)) shall not apply
to any Premium Movie in which the Television Rights within the Territory
have been granted to any third party pursuant to any legally binding
agreement entered into by the Licensor prior to the date of this Agreement.
Whenever the provisions of this Clause apply to a Premium Movie, the
Licensor shall send to the Company a viewing cassette of such Premium Movie
(if the Premium Movie is already produced at the time of sending the notice
hereunder) and a written notice (which notice shall specify the cost,
budget and storyline of the Premium Movie if the Premium Movie is not
available for viewing at the date of the notice) setting out the principal
terms on which the Licensor is proposing so to grant Television Rights
within the Territory in respect of each such Premium Movie. The following
provisions shall apply to each Premium Movie offered for licence within the
Territory by the Licensor in accordance with this Clause:
(a) the Company shall have twenty-eight (28) days from receipt of such
offer to accept such offer by notice in writing to the Licensor;
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DENTON HALL
(b) if the Company shall fail to accept such offer within that 28 day
period and if the Licensor wishes to authorise a third party exercise
the Television Rights in that Premium Movie within the Territory, the
Licensor shall be free to do so, and shall have no further obligation
to offer that Premium Movie for licence to the Company, subject always
to sub-clauses (c) and (d) of this Clause;
(c) if the Company shall fail to accept such offer within that 28 day
period and if the Licensor wishes to authorise a third party to
exercise any of the Television Rights in that Premium Movie within the
Territory, the Licensor shall not so authorise any third party upon
terms which are more favourable to that third party than the terms
offered by the Licensor to the Company pursuant to this Clause without
first offering by notice in writing to the Company to licence that
Premium Movie to the Company upon such more favourable terms. The
Company shall have fourteen (14) days from receipt of such offer in
which to accept such offer by notice in writing to the Licensor and,
if the Company fails to accept such offer within that 14 day period,
the Licensor shall (subject to sub-clause (d) of this Clause) be free
to authorise such third party to exercise the Television Rights in
that Premium Movie within the Territory;
(d) notwithstanding any failure by the Company to accept any offer made
by the Licensor pursuant to this Clause or the absence of any
obligation on the Licensor to make any offer pursuant to this Clause,
the Licensor shall not authorise or permit any third party to
broadcast, transmit or exhibit within the Territory (whether pursuant
to the Standard Television Rights or the Non-Standard Television
Rights) any Premium Movie, any excerpt from any Premium Movie or any
promotional or advertising material or announcement publicising its
transmission of any Premium Movie in any form (other than in the form
of an on-screen credit and/or the display of the
23.
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DENTON HALL
Licensor's logo or immediately after the closing titles) which allows
or causes any of the Trade Marks, the "Playboy" name or any logo, mark
or symbol which is associated with the "Playboy" name or brand to be
seen or heard by any member of the public at any time during any
broadcast, transmission or exhibition of that Premium Movie, any such
excerpt or any such promotional or advertising material or
announcement;
(e) if the Company shall accept any offer made by the Licensor pursuant to
this Clause, that Premium Movie shall automatically become a Selected
Programme for the purposes of this Agreement and be licensed to the
Company as a Programme but on the terms of the offer accepted by the
Company.
3.3 The Licensor shall not supply any Programme or Third Party Programme
hereunder which would reasonably be designated regarded or treated as what
is popularly known as "XXX Rated" in the United States of America.
Programmes and Third Party Programmes supplied hereunder may include
material rated "NC-17" by the Motion Picture Association of America (CARA)
if the sexual content of such material is substantially similar to
programming produced by the Licensor or any Affiliate of the Licensor
itself unless such Programmes and/or Third Party Programmes will or might
in the opinion of the Company be deemed obscene for the purposes of the
Obscene Publications Act 1959 (or any modification re-enactment or
replacement thereof) or in breach of any regulatory rules guidelines or
codes applicable to the Service. In the event that the Company deems any
Programme or Third Party Programme obscene or in breach of any applicable
rule, guideline or code as aforesaid, the Company shall notify the Licensor
to that effect and give the Licensor, if so requested, an opportunity to
present arguments to the contrary to the board of directors of the Company.
3.4 The Company undertakes that, unless it is permitted to do so by virtue of
any provisions of this Agreement, it shall not any time during the Term
transmit in the Service or otherwise for reception in the Territory any
programme which is not a Programme or a Third Party Programme.
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4. Undertakings by the Licensor
----------------------------
The Licensor hereby agrees and undertakes with the Company that:
4.1 Each and every Playboy Programme will throughout the Term, and each and
every Acquired Programme will throughout the Playboy Licence Period in
respect of that Acquired Programme, be available on a sole and exclusive
basis for delivery to and transmission by the Company within the Territory
pursuant to this Agreement. Accordingly, the Licensor shall not and shall
procure that each of its Affiliates shall not exercise, and shall not and
shall procure that each of its Affiliates shall not directly or indirectly
authorise licence or permit any third party to exercise, the Non-Standard
Television Rights or the Standard Television Rights (or any of them) in or
to any Programme or Third Party Programme in any country within the
Territory at any time during the Term.
4.2 If the Licensor or any Affiliate of the Licensor is at any time during the
Term proposing or negotiating to acquire (whether by way of licence, by
operation of law or otherwise) the Non-Standard Television Rights or the
Standard Television Rights within the Licensor's Territory in any
television programme which is a Co-Production or which would, if the Non-
Standard Television Rights therein were so acquired, be an Acquired
Programme, then the Licensor shall, or shall procure that such Affiliate
shall, use its best endeavours to acquire in addition (whether by way of a
licence, by operation of law or otherwise) the Non-Standard Television
Rights in that television programme within each of the countries of the
Territory.
4.3 In each Year:
(a) the total number of Programme Hours of Programmes delivered to the
Company in that Year for first transmission in the Service shall not
be less than the Minimum Number of Hours in respect of that Year; and
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DENTON HALL
(b) the total number of Programme Hours of Playboy Programmes and of
Playboy Acquired Programmes delivered to the Company in that Year for
first transmission in the Service shall not be less than eighty (80)
per cent of the Minimum Number of Hours in that Year; and
(c) the total number of Programme Hours of Playboy Acquired Programmes
delivered to the Company for first transmission in the Service shall
not exceed sixteen (16) per cent of the Minimum Number of Hours in that
Year.
4.4 In each Year none of the Selected Programmes or so-called "vignettes"
delivered to the Company for first transmission in the Service in that Year
shall have been delivered to the Company pursuant to this Agreement in any
previous Year and neither shall any of such Selected Programmes or so-
called "vignettes" have been broadcast, transmitted or exhibited in any
country within the Territory at any time prior to their delivery hereunder
by means of any form of Standard Television or Non-Standard Television.
4.5 The standard, quality, freshness and commercial appeal of the Selected
Programmes, so-called "vignettes", promotional material and other
programming delivered to the Company pursuant to this Agreement for first
transmission in the Service shall not be inferior to the overall standard,
quality, freshness and commercial appeal of the programming included during
the period of twelve (12) months immediately preceding the Launch Date in
the television service which is known as "Playboy TV" and is provided
within the Licensor's Territory by the Licensor and/or an Affiliate of the
Licensor ("the Playboy Service") or (if higher) to the overall standard,
quality, freshness and commercial appeal of the programming from time to
time included in the Playboy Service during the Term.
4.6 No Acquired Programme, Third Party Programme or so-called "vignette" shall
be delivered to the Company by or on behalf of the Licensor for
transmission in the Service, or scheduled for transmission in the Service
by any Scheduler (other than a Scheduler appointed under
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DENTON HALL
Clause 8.4, proviso (c) or (d) to Clause 8.5, Clause 8.11.4 or Clause
10.4), unless (a) the unexpired portion of the Playboy Licence Period in
respect of that Acquired Programme, Third Party Programme or so-called
"vignette" is at least twenty-four (24) months commencing upon the first
day of the calendar month in which the first transmission by the Company of
that Acquired Programme, Third Party Programme or so-called "vignette" in
the Service takes place and (b) the Licensor has acquired the right, and
the Company is therefore entitled, to transmit that Acquired Programme,
Third Party Programme or so-called "vignette" in the Service on not less
than twenty-four (24) occasions.
4.7 Without prejudice to and in addition to its obligations under Clause 4.3,
the Licensor shall:
(a) deliver to the Company for transmission in the Service on a timely
basis such quantity and duration of "vignettes", promotional material
and other programming as may be necessary to fill each hour of
transmission time on the Service during which a Programme, or a Third
Party Programme acquired by the Licensor, is transmitted; and
(b) ensure that the total running time of the "vignettes" delivered to the
Company for first transmission in the Service in each Year shall not in
any event be less than ten (10) per cent of the Minimum Number of Hours
in respect of that Year.
4.8 In the event that the Company requests the Licensor in writing to increase
the maximum number of transmissions of so-called "vignettes" which it is
entitled to make pursuant to this Agreement above twenty-four (24), the
Licensor shall be deemed to have agreed to such request unless the Licensor
notifies the Company within seven (7) days after the date of such request
that it is unable to do so without committing a breach of any agreement
between the Licensor and any third party (other than an Affiliate of the
Licensor).
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5. Delivery Material
-----------------
5.1 Following completion of the Transmission Schedule by the Scheduler for any
Quarter in any Year, the Licensor shall deliver to the Company, at such
place as the Company may from time to time direct by notice in writing, the
Delivery Material in respect of each Selected Programme included in that
Transmission Schedule (or licensed to the Company by virtue of the
acceptance of any offer made pursuant to Clause 3.2 (as the case may be))
no later than two months before the commencement of that Quarter. In the
event that the Licensor or any Affiliate of the Licensor has in its
custody, control or possession a dubbed or sub-titled version of any
Selected Programme in any of the Service Languages, the Licensor shall
deliver that dubbed or sub-titled version to the Company as part of the
Delivery Material in respect of that Selected Programme. The costs of
delivering Delivery Material to the Company pursuant to this Clause 5.1
shall be borne as follows:
(a) the cost of the blank tapes included in the Delivery Material and the
cost of transporting the Delivery Material shall be borne by the
Company; and
(b) all other such costs (including but not limited to duplication costs
and labour costs) shall be borne by the Licensor.
5.2 It shall be the responsibility of the Company to examine any Delivery
Material made available by the Licensor for technical suitability and to
notify the Licensor in writing within 30 (thirty) days of receipt of the
Delivery Material of any defect that prevents use. The Licensor shall use
all reasonable endeavours at its expense to replace the relevant elements
of the Delivery Material within 21 (twenty-one) days of receipt of such
notice but, if no such replacement is possible within such twenty-one day
period or the Company is able to demonstrate that such replacement is also
defective to such a degree as to prevent use, the Licensor shall make
available to the Company (a) substitute Programme(s) or Third Party
Programmes(s) of comparable nature, quality and duration which shall have
been approved by the Company and upon (so far as is reasonably practicable)
all the same
28.
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DENTON HALL
terms as applied to the Programme or Third Party Programme in respect of
which the Delivery Material is defective. The Delivery Material (which term
includes any such replacement material as is referred to above) shall be
deemed to have been accepted by the Company on the expiry of the said
period of thirty (30) days unless the Licensor is so notified.
5.3 If after the Company has accepted, or is deemed pursuant to Clause 5.2 to
have accepted, any Delivery Material in relation to a Selected Programme
the Company requests further Delivery Material to replace material which
has been erased or for any other reason is not usable for the purposes of
this Agreement, the Licensor shall at the Company's cost arrange for such
further Delivery Material to be delivered to the Company.
5.4 The supply to the Company of Delivery Material shall not imply a change of
ownership in the Delivery Material or the Selected Programmes contained
therein. The Company shall take reasonable precautions consistent with
those taken for the Company's own materials to safeguard the Delivery
Material against loss or damage.
5.5 The technical quality of Delivery Material delivered to the Company
hereunder shall not be inferior to the technical quality of the
transmission tapes or other material used for the transmission of
programming in the Playboy Service (as defined in Clause 4.5) PROVIDED THAT
the Licensor shall use its reasonable efforts to ensure that the technical
quality of such Delivery Material also meets the customary standards of
technical quality from time to time prevailing in the United Kingdom
television industry.
6. Editing, Publicity, Sub-titling and Dubbing
-------------------------------------------
6.1 Subject to the provisions of Clauses 6.2, 6.3 and 6.6, the Company shall
not without the prior written consent of the Licensor edit, abridge or in
any way alter or rearrange any Selected Programme and shall (save in the
event of an unexpected lack of time) broadcast each Selected Programme in
its entirety.
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6.2 The Company may edit Selected Programmes for the purposes of:
6.2.1 meeting programme timing requirements provided that:
(a) in carrying out such editing the Company shall not impair the
technical quality, meaning or integrity of any Selected
Programme; and
(b) the Company shall not delete or fail to transmit any credits,
titles or copyright notices appearing in any Selected Programme
unless such failure is caused by unexpected lack of time;
OR
6.2.2 complying with any legislation or any rules regulations guidelines or
codes of any competent regulatory authority of any country within the
Territory having jurisdiction over the Service.
6.3 Subject to the provisions of Clause 6.8, the Company may at its own expense
interpolate advertisements in the Selected Programmes but shall only do so
during breaks in the Selected Programmes created or designated by the
Licensor provided that such breaks comply with all rules and regulations
relating to advertising which are applicable within the Territory. If the
Licensor fails to create or designate breaks in any Selected Programme
which comply with such rules and regulations, the Company shall be free to
interpolate advertisements in that Selected Programme during breaks created
by it but shall use all reasonable endeavours not to interrupt any Selected
Programme at a place or in a manner which causes its technical quality,
meaning or integrity to be impaired. The Licensor shall not supply to the
Company any Selected Programme (or any Delivery Material in relation
thereto) in which any advertisement or promotional material (other than
promotional material promoting the transmission of Programmes or Third
Party Programmes in the Service) is incorporated and, without
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DENTON HALL
prejudice to any other right or remedy of the Company, the Company shall be
entitled to delete from any Selected Programme any advertisement or
promotional material which is incorporated in that Programme or Third Party
Programme on delivery of the relevant Delivery Material.
6.4 The Company may:
(a) broadcast and authorise third parties to broadcast sequences or
excerpts from any Selected Programme for advertising and publicity
purposes provided that no sequence so broadcast shall exceed two (2)
minutes in running time and no excerpts so broadcast shall exceed
three (3) minutes in running time; and
(b) exhibit excerpts from any Selected Programme to potential investors in
the Company, advertisers and similar bodies. The Licensor shall on a
timely basis following any request by the Company make available
excerpts selected by the Company and supply materials to the Company
for this purpose.
6.5 The Company may, and may authorise third parties to, publicise its
transmission of each Selected Programme in any medium or media (including
but not limited to newspaper, magazine, billboard, direct mail, television
and radio advertising and publicity) and may for that purpose use and
authorise the use of the title of the Selected Programme, the name and
likeness (in the form of photographs which shall be supplied for that
purpose by the Licensor) of each contributor to the Selected Programme (but
not so as to endorse the use of any goods or services) and all other
publicity material comprised in the Delivery Material.
6.6 The Licensor shall incorporate at appropriate intervals (which shall be
determined by the Licensor having due regard to the need to identify and
promote the Service and to the views and requests of the Company) in the
Delivery Material relating to Selected Programmes supplied by the
Licensor under this Agreement the logo used by the Company in connection
with the Service (which logo shall be in the
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DENTON HALL
form approved by the Licensor prior to the Launch Date, such approval not
to be unreasonably withheld) but, if the Licensor shall fail to do so, the
Company shall, without prejudice to any of its other rights and remedies,
be entitled to add such logo to Selected Programmes.
6.7 Unless the Licensor shall have notified the Company prior to or
concurrently with delivery of the Delivery Material in respect of any
Selected Programme that the Licensor does not have the right to dub and/or
sub-title that Selected Programme, the Company shall also be entitled at
its own expense to, and to authorise any third party to, translate, dub
and/or sub-title the soundtrack of any Selected Programme into any or all
of the Service Languages and to produce a version of versions of any
Selected Programme in any of the Service Languages provided that the
Company shall consult in good faith with the Licensor with a view to
ensuring that the meaning or integrity of any Selected Programme is not
impaired by any such dubbing or sub-titling. Ownership of all dubbed and/or
sub-titled versions and foreign language tracks created by or on behalf of
the Company pursuant to this Clause shall remain vested in the Company
during the Term and thereafter shall be transferred to the Licensor without
payment. The Company shall also make available to the Licensor at a price
equal to 50% of the cost of dubbing or sub-titling access to and use of
such versions and tracks during the Term.
6.8 Whenever the Company includes advertisements in the Service, it shall:
(a) use all reasonable endeavours not to accept advertisements for
products and services which in any material way detract from the image
established by the overall editorial content, graphic appeal and
production qualities of the Playboy Programmes included in the Service
("the Playboy Image");
(b) not accept advertisements for:
(i) any of the categories of products and services listed in Schedule
7; or
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DENTON HALL
(ii) magazines which compete with any edition of the "Playboy"
magazine; or
(iii) related publications which are published or distributed in
printed form by any competitor of the Licensor or any Affiliate
of the Licensor (i.e. any person who is engaged in the
publication and distribution of any magazine which competes with
any edition of the "Playboy" magazine); or
(iv) any audio-visual products which compete with those produced,
sold or distributed by the Licensor or any Affiliate of the
Licensor within the Territory;
(c) if the Licensor notifies the Company that any advertisement
transmitted by the Company in the Service and specified by the Licensor
in such notice does detract in a material way from the Playboy Image,
only refuse to cease transmitting that advertisement in the Service on
reasonable grounds (having regard inter alia to its contractual
obligations to third parties in relation to that advertisement provided
that the Company shall, if it would otherwise be obliged to cease
transmitting that advertisement, use reasonable endeavours to obtain a
release from such contractual obligations).
6.9 The Company hereby grants to the Licensor without charge the right
throughout the Term to use Playboy Airtime for the purpose of advertising
"Playboy" publications, and to authorise any Permitted Advertiser to use
Playboy Airtime for the purpose of advertising any of its products and
services which such Permitted Advertiser is concurrently advertising or
committed to advertise in any edition of the "Playboy" magazine PROVIDED
THAT the Licensor shall not itself use or authorise any Affiliate of the
Licensor to use Playboy Airtime for the purpose of advertising any product
(including but not limited to any audio or audio-visual product) or any
service other than editions of the "Playboy" magazine (whether published by
or under licence from the Licensor or any Affiliate of the Licensor) and
related
33.
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DENTON HALL
publications which are published or distributed in printed form. For the
purposes of this Clause:
(a) a "Permitted Advertiser" shall mean any person who has during the
twelve (12) months immediately preceding any use of Playboy Airtime by
that person purchased or agreed to purchase advertising space in any
edition of the "Playboy" magazine for the first time; and
(c) "Playboy Airtime" shall mean in respect of each hour of transmission
time on the Service a period of thirty (30) seconds during that hour
which is reserved for the transmission of advertisements.
All advertisements which are to be transmitted during Playboy Airtime
pursuant to this Clause shall be produced and delivered to the Company at
the sole cost and expense of the Licensor. All such advertisements shall be
subject to the terms and conditions (other than the Company's ratecard and
discount policy) upon which the Company is prepared to accept
advertisements as stated from time to time by the Company within its
printed standard terms and conditions.
7. Payment
-------
7.1 In consideration of the rights granted to the Company under this Agreement
and under the Trademark Agreement, the Company shall pay to the Licensor:
(a) in each Year the Basic Licence Fee;
(b) in respect of each Year commencing after the Year in which the Return
of Investment Date falls, an amount equal to the amount by which the
lesser of:
(i) the Requisite Percentage of Available Net Profits in that Year; and
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DENTON HALL
(ii) the Requisite Percentage of Net Revenues in that Year exceed the
Basic Licence Fee payable in respect of that Year; and
(c) the Bonus Licence Fee (if any) upon the terms and subject to the
conditions detailed in Clause 7.2.
7.2 In the event that the Return of Investment Date falls before the sixth
anniversary of the Launch Date, then the Bonus Licence Fee shall be
payable to the Licensor PROVIDED THAT:
(a) if at any time after the Return of Investment Date and prior to payment
of the Bonus Licence Fee in full any of the Company's shareholders (by
whatever means and for whatever reason) provide(s) additional funding
to the Company, payment of the balance of the Bonus Licence Fee shall
be deferred until after repayment of all such funding (plus interest
thereon) has (in the manner described and calculated in the definition
of "Return of Investment Date" in Clause 1) been received by the
relevant shareholder(s) in the Company; and
(b) the Bonus Licence Fee shall only be payable to the Licensor out of
Available Cash Flow and, to the extent that the Company does not as at
the end of any Quarter have Available Cash Flow out of which to pay the
Bonus Licence Fee, the Company shall have no liability to pay the Bonus
Licence Fee on the final day of that Quarter pursuant to Clause 7.4(b)
but the Bonus Licence Fee (or any unpaid balance thereof) shall be
payable pursuant to Clause 7.4(b) as and when there is Available Cash
Flow at the end of any subsequent Quarter.
7.3 The Basic Licence Fee in respect of each Year shall be payable by the
Company in six (6) equal instalments on or before 28th February, 30th
April, 30th June, 31st August, 31st October and 31st December in that Year
(the first such instalment being payable on the first Payment Date
following the Launch Date) provided that the number of
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DENTON HALL
instalments payable in the First Year shall be equal to the number of the
Payment Dates falling during the First Year.
Not later than 30 days prior to the first day of each Licence Year the
Company shall supply to the Licensor a signed purchase order committing in
that Licence Year to pay to the Licensor the amount of the Basic Licence
Fee applicable to that Licence Year in consideration for and subject to the
Licensor delivering to the Company for that Licence Year the portion of the
Minimum Number of Hours of Programmes which is applicable to that Licence
Year for first transmission in the Service. That purchase order will also
contain a list of the Programmes to be delivered for first transmission in
that Licence Year if the Licensor has previously supplied that list to the
Company. The obligations of the Company under this paragraph of Clause 7.3
and the terms of any purchase order delivered by the Company hereunder
shall be read and construed subject to all of the other provisions of this
Agreement which shall, in the event of any conflict, prevail. For the
purposes of this paragraph a "Licence Year" shall mean any consecutive
period of 12 months during the Term commencing upon the Launch Date or any
anniversary of the Launch Date.
7.4 (a) In the event that a Programming Premium is payable to the Licensor in
respect of any Year commencing after the Year in which the Return of
Investment Date falls, the Company shall pay such Programming Premium
to the Licensor within thirty (30) days after the date on which the
amount of the Available Net Profits and the Net Revenues in that Year
have been determined by the auditors of the Company and included in
accounting statements approved by the directors of the Company.
(b) On the final day of each Quarter in each Year commencing after the
Return of Investment Date but in no event before the end of the fifth
Year, the Company shall, until it has made payment of the Bonus Licence
Fee in full, apply 100% of its Available Cash Flow in payment of the
Bonus Licence Fee to the Licensor.
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DENTON HALL
(c) Only after 100% of the Bonus Licence Fee has been paid by the Company
may the Company begin paying dividends to any shareholder in the
Company.
7.5 The licence fees payable by the Company under this Clause 7 and under
Clause 8 are exclusive of any and all amounts of Value Added Tax payable
thereon, which amounts of Value Added Tax shall be paid by the Company
provided that an appropriate invoice shall have been rendered to the
Company by the Licensor. If the Company is compelled by law or required by
any present or future law, regulation, treaty or official directive to make
any deduction or withholding from any amount of such licence fees, the
Company shall be entitled to do so and shall not be required to pay any
additional amount or amounts to the Licensor as a result of, or in order to
compensate the Licensor for, any such deduction or withholding.
7.6 The Available Cash Flow of the Company as at the end of any Quarter shall
for the purposes of sub-clause 7.2(b) be determined by the directors of the
Company on a timely basis and a copy of such determination shall be
provided to the Licensor. If the Licensor disagrees with any such
determination, the Licensor may within 30 days after receipt of a copy
thereof notify the Company to that effect whereupon the Company shall
promptly refer the matter to its auditors (acting as experts and not as
arbitrators) for their determination which shall be final and binding upon
both parties. The costs of any such referral to the auditors shall be borne
by the Licensor unless the auditors find that the determination made by the
directors of the Company was materially incorrect in which case such costs
shall be borne by the Company.
7.7 If the Company elects to transmit a Programme during a further Transmission
Period pursuant to Clause 2.2 and provided that the Company does not
subsequently decline to accept a further Transmission Period of that
Programme pursuant to the proviso to Clause 2.2:
(a) the licence fee payable by the Company in respect of that further
Transmission Period shall be:
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DENTON HALL
(i) such sum as may be agreed in writing between the parties within a
period of thirty (30) days after the date of the notice given by
the Company pursuant to Clause 2.2 in respect of that Programme;
or
(ii) in the absence of such agreement within that 30 day period, a sum
equal to forty (40) per cent of the Initial Licence Fee and for
this purpose "the Initial Licence Fee" shall be the lower of
US$13,158 per Programme Hour of that Programme and the amount
paid to the third party licensor of that Programme (in the case
of an Acquired Programme) in consideration for the right to
transmit that Programme in the Service within the Territory. Any
licence fee payable pursuant to this Clause shall be paid in six
(6) equal instalments within thirty (30) days after the final day
of every fourth month during the first two (2) years of the
further Transmission Period;
(b) the Basic Licence Fee in respect of each Year shall be increased by the
aggregate of the license fees which the Company is liable to pay and
reimburse to the Licensor in that Year pursuant to this Clause, and the
references to the Basic Licence Fee in sub-clause 7.1(b) and in the
definition of "the Bonus Amount" in Clause 1 shall, for the purpose of
calculating any Programming Premium payable to the Licensor in respect
of any Year and the Bonus Licence Fee (if any), mean the Basic Licence
Fee as increased pursuant to this sub-clause.
7.8 In relation to each payment which is due to the Licensor pursuant to this
Agreement, the Licensor shall deliver to the Company an invoice showing the
amount of such payment and the Company shall make each such payment which
is so invoiced in accordance with the relevant provision(s) of this
Agreement.
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8. The Scheduler and Scheduling
----------------------------
8.1.1 During the first four (4) Years ("the Initial Period") the Licensor
shall, after consulting with the Company in good faith regarding its
proposed choice and taking into account any comments made by the Company
in relation thereto, appoint an individual from the Licensor's staff
based in Los Angeles to be the scheduler of the Service. If the Scheduler
appointed under this Clause 8.1 is an employee of the Licensor, the
Licensor shall be free to terminate the employment of that Scheduler
based upon the Licensor's normal business practices whereupon the
Licensor shall forthwith notify the Company and the provisions of sub-
clause 8.1.2 shall apply to the appointment of a replacement Scheduler.
In addition the Company may by giving one month's notice in writing to
the Licensor expiring at any time after the first anniversary of the
Launch Date and before the final day of the Initial Period require the
Licensor to replace any Scheduler appointed under this Clause 8.1
whereupon the provisions of sub-clause 8.1.2 or Clause 8.4 (as the case
may be) shall apply to the appointment of a replacement Scheduler. The
Company may not however exercise its right under the immediately
preceding sentence of this sub-clause on more than one occasion during
any twelve (12) month period during the Initial Period.
8.1.2 If at any time during the Initial Period the Licensor terminates the
employment of any Scheduler appointed by it under this Clause 8.1 or the
Company exercises its right under sub-clause 8.1.1 to replace any such
Scheduler, the Licensor shall, after consulting with the Company in good
faith regarding its proposed choice and taking into account any comments
made by the Company in relation thereto, on a timely basis appoint one of
its employees to be the scheduler of the Service as a replacement for the
individual whose employment has been terminated by it or who is to be
replaced by virtue of the exercise by the Company of its right under sub-
clause 8.1.1.
8.2 The duties of the Scheduler shall include:
8.2.1 selecting the Programmes and Third Party Programmes for
transmission in the Service and preparing a quarterly
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DENTON HALL
Transmission Schedule for the same in compliance with the
Shareholders Agreement, the Business Plan and this Agreement
(including but not limited to Clause 4 as well as the Minimum
Number of Hours and Programme Specification). The Scheduler will
supply to the Company and to the Licensor a copy of each quarterly
Transmission Schedule not later than 75 days prior to the first day
of the relevant Quarter. The Scheduler will only procure the
acquisition of and schedule Third Party Programmes in accordance
with the terms of this Agreement;
8.2.2 ensuring that the Selected Programmes and all interstitial material
referred to in sub-clause 8.2.5 below are assembled in accordance
with the Transmission Schedule;
8.2.3 ensuring that no Selected Programme is scheduled for transmission
in the Service on more than fifteen (15) occasions during any Year
(which number shall be reduced or increased pro rata if the Minimum
Number of Hours is increased above or reduced below 114 pursuant to
Clause 8.6, 8.7, 8.8, 8.11 or 10.4);
8.2.4 supervising the design of the on-screen appearance of the Service;
8.2.5 at the cost of the Licensor procuring (a) the supply of or
commissioning where necessary all on-screen promotional and
interstitial material which is required in order to promote both
the Selected Programmes and the Service and in a form which is
suitable for transmission within the Territory and (b) the
insertion of the Company's logo in each Selected Programme.
8.3.1 Each Scheduler appointed by the Licensor under Clause 8.1 during the
Initial Period will be based in Los Angeles but the Licensor shall
procure that he or she will be available to the Company at the Company's
offices in the United Kingdom as and when reasonably required by the
Company for the proper discharge of the Scheduler's functions hereunder.
The Licensor shall also procure that each such
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DENTON HALL
Scheduler shall when not in the United Kingdom be generally readily
available for consultation with the Company and its staff.
8.3.2 All costs (including, without limitation, all remuneration, benefits and
bonuses) in connection with the engagement and provision of the services
of the Scheduler and all related support personnel and services and with
the performance of the Licensor's obligations under Clauses 8.1, 8.2 and
8.3 will be borne solely and exclusively by the Licensor (save only in
the circumstances set out in Clause 8.4, in sub-clause 8.5.3 and in
provisos (c) and (d) to Clause 8.5 and provided that all reasonable and
vouchered travelling and accommodation costs incurred by the Scheduler
in travelling to and whilst visiting the United Kingdom or elsewhere
within the Territory at the request of the Company shall be borne by the
Company).
8.3.3 The services of each Scheduler appointed under Clause 8.1, Clause 8.4 or
Clause 8.5 shall (unless the Scheduler is engaged by the Company as an
employee of the Company pursuant to Clause 8.4 or proviso (c) or (d) to
Clause 8.5) be made available by the Licensor to perform inter alia the
duties set out in Clause 8.2 on a first call basis in connection with the
Service. The Licensor shall make available the services of each such
Scheduler, together with all support personnel and office services and
facilities reasonably required by that Scheduler, for such periods, at
such times during the Licensor's normal working hours and in such a
manner as may be necessary in order to enable that Scheduler to discharge
his or her obligations effectively and efficiently hereunder. The
Licensor shall (unless the Scheduler is engaged by the Company as an
employee of the Company pursuant to Clause 8.4 or proviso (c) or (d) to
Clause 8.5) procure that the Scheduler shall at all times perform his
or her duties in accordance with the provisions of this Agreement and the
Shareholders' Agreement.
8.4 If the Company wishes to replace any Scheduler appointed under Clause
8.1 with effect from any date after the final day of the Initial Period,
it may do so upon giving not less than one month's written notice to the
Licensor expiring at any time after the final
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DENTON HALL
day of the Initial Period. If the Company gives such a notice, the Company
shall nominate in writing two or more individuals to act as Scheduler and,
in respect of each individual so nominated by it, the Company shall specify
the parameters of the financial terms on which it is proposing to engage
that individual. Within fourteen (14) days thereafter the Licensor must
choose one of the persons nominated and the Company will then engage at its
own expense in the capacity of Scheduler hereunder either the individual so
chosen by the Licensor or, if within that 14 day period the Licensor fails
to choose any of the individuals nominated, the individual chosen by the
Company. The provisions of Clause 8.5 shall apply to the replacement of any
Scheduler appointed under this Clause 8.4.
8.5 If at any time after the first anniversary of the date upon which the
appointment of the Scheduler appointed under Clause 8.4 took effect either
party wishes to replace the Scheduler appointed under Clause 8.4 or any
successor thereof appointed under this Clause 8.5, it may (subject always
to the provisions of sub-classes 8.11.4 and 10.4.4) do so upon giving three
months' written notice (a "Scheduler Replacement Notice") to the other
party in which event:
8.5.1 each party shall use its best endeavours to reach agreement with the
other party upon the appointment of a replacement Scheduler and, if
within that 3 month notice period such agreement is reached, the
agreed individual shall be appointed as the Scheduler;
8.5.2 if within that 3 month notice period the parties shall have been
unable to reach agreement, each party shall not later than the final
day of that 3 month period nominate in writing two individuals to act
as Scheduler, the name of each individual so nominated shall be
placed in a hat and the Chief Executive Officer of the Company shall
draw one name out of that hat. The individual whose name is drawn out
of the hat shall be appointed as the Scheduler;
42.
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DENTON HALL
8.5.3 if any Scheduler appointed under sub-clause 8.5.2:
(a) was nominated by the Company; and
(b) is not an employee of the Licensor
that Scheduler shall be engaged by the Company at its expense;
8.5.4 if at any time either party wishes to replace an individual appointed
under sub-clause 8.5.1 or 8.5.2, it shall follow the procedure
hereinbefore set out in this Clause 8.5
PROVIDED ALWAYS THAT:
(a) neither party may exercise the right to replace a Scheduler appointed
under this Clause 8.5 at any time prior to the first anniversary of the
date upon which the appointment of that Scheduler took effect;
(b) the Licensor may not exercise the right to replace a Scheduler appointed
under Clause 8.4 or under this Clause 8.5 in the circumstances described
in sub-clause 8.11.4 or 10.4.4 if:
(i) at any time prior to the date of any Scheduler Replacement Notice
given under this Clause 8.5, the Company has given a notice to the
Licensor under Clause 8.6 or Clause 8.11; or
(ii) as at the date of any Scheduler Replacement Notice given under this
Clause 8.5, the Licensor holds less than fifteen (15) per cent in
nominal value of the total issued ordinary shares in the capital of
the Company
and, if either paragraph (i) or (ii) above shall apply, the relevant
Scheduler Replacement Notice given by the Licensor under this Clause 8.5
shall have no force or effect; and
43.
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DENTON HALL
(c) if either paragraph (i) or (ii) of proviso (b) above shall apply as at
the date of any Scheduler Replacement Notice given by the Company under
this Clause 8.5 and if within the three month period specified in that
notice the parties shall have been unable to reach agreement upon a
replacement Scheduler, then the Company may nominate in writing two or
more individuals to act as Scheduler and, in respect of each individual
so nominated by it, the Company shall specify the parameters of the
financial terms on which it is proposing to engage that individual
whereupon the provisions of sub-clauses 8.5.1 to 8.5.3 shall not apply
to the appointment of the replacement Scheduler. Within fourteen (14)
days thereafter the Licensor must choose one of the persons nominated
and the Company will then engage at its own expense in the capacity of
Scheduler hereunder either the individual so chosen by the Licensor or,
if within that 14 day period the Licensor fails to choose any of the
individuals nominated, the individual chosen by the Company; and
(d) if as at the date of any Scheduler Replacement Notice given under this
Clause 8.5, the Licensor holds less than ten (10) per cent in nominal
value of the total issued ordinary shares in the capital of the
Company, the Company shall be freely entitled to replace the Scheduler
and engage at its expense a replacement Scheduler of its choice and
sub-clauses 8.5.1 to 8.5.3 and proviso (c) to this Clause 8.5 shall not
apply to the appointment of any such replacement Scheduler by the
Company.
8.6 If the Net Revenues per Household received by the Company during the fourth
Year is less than One Pound and thirty-seven pence ((Pounds)1.37) then at
any time prior to the first day of the sixth Year the Company may, or if
the Company becomes entitled to (but does not) terminate this Agreement
pursuant to sub-clause 10.2(b), then at any time thereafter the Company
may, give notice to the Licensor (with a copy to the Scheduler) stating
that the Minimum Number of Hours is with effect from a date specified in
such notice which shall not fall less than
44.
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DENTON HALL
ninety (90) days after the date of such notice ("the Applicable Date") to be
reduced and specifying such reduced Minimum Number of Hours in respect of each
subsequent Year. If the Company gives such a notice, then the following
provisions shall apply:
(a) the aggregate Programme Duration of Programmes delivered to the Company
by the Licensor for first transmission in the Service during each Year
commencing after the Applicable Date shall comprise not less than fifty-
one (51) per cent of the aggregate Programme Duration of all Programmes
and all Third Party Programmes transmitted in the Service for the first
time during that Year;
(b) all Third Party Programmes broadcast by the Company for reception within
the Territory following the Applicable Date shall fall within the
Programme Specification;
(c) following the Applicable Date Third Party Programmes shall (subject to
the provisions of sub-clause (i) of this Clause 8.6) be acquired by the
Licensor acting upon instruction from the Scheduler or the Company and
as the agent of the Company on terms which shall first have been approved
by the Company in writing and the Company shall within 21 days of receipt
of the Licensor's invoice with respect thereto reimburse to the Licensor
all licence fees which shall actually have been paid by the Licensor to
the relevant third party with the prior written approval of the Company
in accordance with this sub-clause and in consideration for the right to
transmit the relevant Third Party Programme(s) in the Service within the
Territory;
(d) the Basic Licence Fee payable by the Company in respect of each Year
commencing after the Year in which the Applicable Date falls shall be
reduced pro rata to an amount calculated by:
(i) multiplying the reduced Minimum Number of Hours specified in such
notice by the Basic Licence Fee which
45.
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DENTON HALL
would have been payable by the Company in respect of the relevant Year
if no notice had been given by the Company pursuant to this Clause; and
(ii) dividing the product of that multiplication by the number which would
have represented the Minimum Number of Hours in respect of the Year in
which the Applicable Date falls if no notice had been given by the
Company pursuant to this Clause;
(e) the Basic Licence Fee payable by the Company in respect of the Year in which
the Applicable Date falls shall be the aggregate of the following amounts:
(i) an amount ("the First Amount") calculated by (A) dividing by 365 the
amount of the Basic Licence Fee which would have been payable by the
Company in respect of that Year if no notice had been given by the
Company pursuant to this Clause and (B) multiplying the product of that
division by the total number of days during that Year prior to (but
excluding) the Applicable Date; and
(ii) an amount calculated by (A) subtracting the First Amount from the
amount of the Basic Licence Fee which would have been payable by the
Company in respect of that Year if no notice had been given by the
Company pursuant to this Clause, (B) dividing the figure resulting from
that subtraction by the number which would have represented the Minimum
Number of Hours in respect of that Year if no notice had been given by
the Company pursuant to this Clause and (C) multiplying the product of
that division by the reduced Minimum Number of Hours specified in such
notice in respect of each subsequent Year;
46.
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DENTON HALL
(f) each Requisite Percentage shall with effect from the Applicable Date be
reduced pro rata to a percentage calculated in the manner detailed in
paragraphs (i) and (ii) of sub-clause (d) of this Clause save that for
the purposes of each such calculation the reference in paragraph (i) of
sub-clause (d) to "the Basic Licence Fee which would have been payable by
the Company" shall be read as a reference to the Requisite Percentage of
Available Net Profits or Net Revenues (as the case may be) which applied
for the purpose of calculating the Programming Premium (if any) payable
to the Licensor in respect of the immediately preceding Year;
(g) the Minimum Number of Hours in respect of the Year in which the
Applicable Date falls shall be the aggregate of the following numbers:
(i) a number calculated by (A) dividing by 365 the number which would
have represented the Minimum Number of Hours in respect of that
Year if no notice had been given by the Company pursuant to this
Clause and (B) multiplying the product of that division by the total
number of days during that Year prior to (but excluding) the
Applicable Date; and
(ii) a number calculated by (A) subtracting the total number of days
during that Year following (and including) the Applicable Date from
365, (B) dividing the figure resulting from that subtraction by 365
and (C) multiplying the product of that division by the reduced
Minimum Number of Hours specified in such notice in respect of each
subsequent Year;
(h) the maximum percentage (i.e. 36%) of Programme Hours of Acquired
Programmes and the maximum percentage of Playboy Acquired Programmes
(i.e. 16%) which in any Year commencing after the Applicable Date the
Licensor is entitled by virtue of sub-clauses 4.3(b) and 4.3(c) to
deliver to the Company for
47.
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DENTON HALL
first transmission in the Service shall each be reduced pro rata to a
percentage calculated in the manner detailed in paragraphs (i) and (ii) of
sub-clause (d) of this Clause save that for the purposes of this
calculation the reference in paragraph (i) of sub-clause (d) to "the Basic
Licence Fee which would have been payable by the Company" shall be read as
a reference to the maximum percentage of Programme Hours of Acquired
Programmes or (as the case may be) the maximum percentage of Playboy
Acquired Programmes which the Licensor was entitled to deliver to the
Company in the immediately preceding Year pursuant to sub-clause 4.3(b) or
4.3(c) for first transmission in the Service;
(i) in the event that the Company gives a notice pursuant to this Clause 8.6
after the Company has become entitled (but has elected not) to terminate
this Agreement pursuant to sub-clause 10.2(b), then following the
Applicable Date:
(i) the provisions of sub-clause (c) of this Clause 8.6 shall cease to
apply, the Company shall be freely entitled at the Company's expense
to licence Third Party Programmes from third parties and to schedule
and transmit such Third Party Programmes in the Service and the
Company shall assume sole responsibility for such licensing and
scheduling PROVIDED THAT all Third Party Programmes so transmitted in
the Service shall fall within the Programme Specification and the
Company shall comply with the provisions of sub-clause (a) of this
Clause 8.6 (as amended by paragraph (iii) below);
(ii) the Company shall be freely entitled to replace the Scheduler and to
engage at its expense a replacement Scheduler of its choice and
Clauses 8.1 and 8.5 shall not apply to the appointment of any such
replacement Scheduler.
48.
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DENTON HALL
(iii) the reference to "fifty-one (51) per cent" in sub-clause (a) of
this Clause 8.6 shall be read as a reference to "fifty-one (51)
per cent or such lesser percentage as the Licensor is able to
deliver to the Company for first transmission in the Service in
compliance with the provisions of Clause 4"; and
(iv) if in any Year commencing after the Applicable Date the
aggregate Programme Duration of Programmes transmitted by the
Company in the Service during that Year shall comprise less than
twenty-five (25) per cent of the aggregate Programme Duration of
all Programmes and all Third Party Programmes transmitted in the
Service during that Year, then the Licensor may within ninety
(90) days after the final day of that Year give notice to the
Company requiring the Company to remove the word "Playboy" from
both the name of the Service and the name of the Company and the
Company shall promptly comply with any such notice.
8.7 The Company shall be entitled at any time and from time to time after the
first anniversary of the Launch Date:
(a) to notify the Licensor that in its reasonable opinion (whether based
upon the results of then current market research, feedback from
advertisers or potential advertisers, a failure to achieve the
objectives of any Business Plan and/or any other valid reason specified
in writing by the Company) the then current Minimum Number of Hours is
not sufficient and needs to be increased; and
(b) pursuant to that notice to require the Licensor to deliver to the
Company with effect from a date specified in that notice which shall
fall not less than ninety (90) days after the date of that notice and
in each subsequent Year commencing after the effective date of that
notice such higher Minimum Number of Hours as may be specified by the
Company in that notice
49.
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DENTON HALL
PROVIDED THAT the higher Minimum Number of Hours so specified by the
Company shall not exceed two hundred and twenty-eight (228).
8.8 If the Company gives such a notice pursuant to Clause 8.7:
(a) the Licensor shall deliver such higher Minimum Number of Hours to
the Company in accordance with that notice provided that, if the
Licensor is unable to deliver such higher Minimum Number of Hours to
the Company without committing a breach of one of its other
obligations hereunder, it shall be entitled to refuse to do so by
giving notice in writing to the Company within 30 days after receipt
of such notice from the Company;
(b) if the Licensor does so refuse to deliver such higher Minimum Number
of Hours to the Company, then the Company shall be free to include
Third Party Programmes in the Service and, solely for the purpose of
calculating (i) any Programming Premium payable to the Licensor in
respect of the Year in which that notice took effect (the "Current
Year") and in respect of any subsequent Year commencing after the
Current Year, and (ii) the Bonus Licence Fee (if any), the Basic
Licence Fee in respect of the Current Year and in respect of each
such subsequent Year shall be deemed to have been increased by the
aggregate of all licence fees paid by the Company during the Current
Year or that subsequent Year (as the case may be) in consideration
for the right to include Third Party Programmes in the Service;
(c) if the Licensor does deliver such higher Minimum Number of Hours to
the Company, then with effect from the date specified in that notice
in accordance with sub-clause 8.7(b):
(i) the Company shall pay to the Licensor an additional licence fee
at the Hourly Rate (as defined in paragraph (iv) below) for
each Programme Hour in respect of those additional Playboy
Programmes which are delivered to the Company for first
transmission in the Service in
50.
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DENTON HALL
any Year (an "additional" Playboy Programme being any Playboy Programme
over and above those Playboy Programmes which are so delivered to the
Company in that Year and whose aggregate Programme Duration is ninety-one
(91) Programme Hours) and that additional licence fee will be added to
and paid as part of the Basic Licence Fee for that Year in accordance
with Clause 7.3;
(ii) the Company shall within 21 days after receipt of the Licensor's invoice
with respect thereto reimburse to the Licensor such licence fees as may
actually have been paid to third parties in consideration for the right
to transmit any Acquired Programme(s) in the Service within the Territory
and with the prior written approval of the Company provided that the
provisions of this paragraph (ii) shall only apply to those Acquired
Programmes which are delivered to the Company for first transmission in
the Service and whose aggregate Programme Duration exceeds twenty-three
(23) Programme Hours in any Year;
(iii) the Basic Licence Fee in respect of each Year shall be increased by the
aggregate of the licence fees which the Company is liable to pay and
reimburse to the Licensor in that Year pursuant to paragraphs (i) and
(ii) of this sub-clause, and in respect to the Current Year (as defined
in sub-clause (b) above) and each subsequent Year commencing after the
Current Year the references to the Basic Licence Fee in sub-clause 7.1(b)
and in the definition off "the Bonus Amount" in Clause 1 shall, for the
purpose of calculating any Programming Premium payable to the Licensor in
respect of the Current Year and any subsequent Year commencing after the
Current Year and the Bonus Licence Fee (if any), mean the Basic Licence
Fee as increased pursuant to this paragraph;
51.
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DENTON HALL
(iv) for the purpose of paragraph (i) of this sub-clause, "the Hourly
Rate" shall mean thirteen thousand one hundred and fifty-eight
United States Dollars (US$13,158);
(d) if the Licensor does deliver such higher Minimum Number of Hours to the
Company, the Company shall be entitled at any time thereafter to give
notice to the Licensor (with a copy to the Scheduler) stating that the
Minimum Number of Hours is with effect from a date specified in such
notice which shall fall not less than ninety (90) days after the date
of such notice ("the Applicable Date") to be reduced and specifying
such reduced Minimum Number of Hours in respect of each subsequent Year
PROVIDED THAT the reduced Minimum Number of Hours so specified
pursuant to this sub-clause shall not be less than one hundred and
fourteen (114). If the Company gives such a notice, the provisions of
sub-clauses 8.6(a) to (h) shall apply as if such notice had been given
under Clause 8.6 SAVE AND EXCEPT THAT sub-clauses 8.6(c) and (h) shall
not apply.
8.9 The Company may at any time by notice in writing to the Licensor require
the Licensor to acquire and schedule for transmission in the Service a
motion picture as an Acquired Premium Movie. Any such notice shall specify
the criteria which any motion picture so acquired by the Licensor would
have to satisfy ("the Criteria") including but not limited to the maximum
amount of the licence fee which the Company is prepared to pay in order to
acquire such a motion picture. The following provisions shall apply to the
acquisition of Acquired Premium Movies:
(a) the maximum number of Acquired Premium Movies which the Licensor can
be required to acquire in any Year and the maximum amount which the
Company may expend on such acquisitions in any Year shall be as
follows:
52.
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DENTON HALL
(i) in the First Year: one Acquired Premium Movie at a cost not
exceeding one hundred thousand pounds ((pounds)100,000);
(ii) in the second Year: such number of Acquired Premium Movies as the
directors of the Company may determine at an aggregate cost not
exceeding four hundred thousand pounds ((pounds)400,000) less
such amount as may have been expended by the Company in the First
Year on the acquisition of an Acquired Premium Movie;
(iii) in the third and each subsequent Year: such number of Acquired
Premium Movies and at such cost and aggregate cost as the
directors of the Company may determine;
(b) if the Company gives such a notice, the Licensor shall within fourteen
(14) days after the date of that notice nominate in writing the titles
of not less than three (3) motion pictures which satisfy the Criteria
and, if the Company selects one of those three (3) motion pictures (a
"Selected Title"), the Licensor shall use all reasonable endeavours to
acquire that Selected Title for transmission in the Service;
(c) the Licensor shall only acquire a Selected Title for transmission in
the Service upon terms which shall first have been approved in writing
by the Company and, after having so acquired a Selected Title, shall
promptly schedule or procure the scheduling of that Selected Title for
transmission in the Service in accordance with the reasonable
requirements of the Company;
(d) if a Selected Title is so acquired by the Licensor and scheduled for
transmission in the Service, the Company shall within 21 days of
receipt of the Licensor's invoice with respect thereto reimburse to the
Licensor all licence fees which shall actually have been paid by the
Licensor with the
53.
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DENTON HALL
prior written approval of the Company in accordance with this sub-
clause and in consideration for the right to transmit the relevant
Selected Title in the Service within the Territory;
(e) if within ninety (90) days after the date of that notice the Licensor
shall have been unable so to acquire a Selected Title for transmission
in the Service or if the Licensor shall have failed to perform its
obligations under this Clause, the provisions of Clause 8.10 shall
apply.
8.10 If at any time when the Company is entitled to include Third Party
Programmes in the Service hereunder and/or the Company requests or
instructs the Licensor to obtain such Third Party Programmes on its behalf
in accordance with the terms hereof and the Licensor refuses, fails or
neglects to obtain the same or does not obtain them in a timely fashion
and/or on terms reasonably acceptable to the Company, then the Company
shall be entitled to license or procure the licensing of the same and to
schedule and transmit such Third Party Programmes in the Service.
8.11 If at any time during the Term the Company is obliged under the laws of
any country within the Territory to transmit in the Service a certain
percentage ("the Quota Percentage") of programmes which are European
Works, then the Company shall notify the Licensor in writing to that
effect specifying the Quota Percentage and the following provisions shall
apply:
8.11.1 within thirty (30) days after the date of any such notice the
Licensor may by notice in writing to the Company elect with effect
from the date which falls sixty (60) days after the date of the
notice given by the Company ("the Applicable Date") to produce, co-
produce or acquire and supply to the Company for first transmission
in the Service in accordance with the provisions of this Agreement
(including but not limited to the provisions of Clause 4) such
number of Programme Hours of Programmes or Third Party Programmes
which are European Works as may be necessary to enable the Company
to transmit in the
54.
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DENTON HALL
Service the Quota Percentage of programmes which are European Works.
8.11.2 if the Licensor elects under sub-clause 8.11.1 to acquire Third Party
Programmes, the Company may give notice to the Licensor stating that the
Minimum Number of Hours is with effect from the Applicable Date to be
reduced and specifying such reduced Minimum Number of Hours in respect of
each subsequent Year whereupon the provisions of sub-clauses 8.6(a) to
(h) shall apply as if such notice had been given under Clause 8.6 SAVE
AND EXCEPT THAT:
(a) the reference in sub-clause 8.6(a) to "fifty-one (51) per cent"
shall be read as a reference to the Quota Percentage for the
purposes of this Clause; and
(b) the references in sub-clause 8.6(c) to "Third Party Programmes"
shall be read as references to "Third Party Programmes which are
European Works".
8.11.3 if the Licensor does not so elect under sub-clause 8.11.1, the provisions
of sub-clause 8.11.2 shall apply SAVE AND EXCEPT THAT sub-clauses 8.6(c)
and 8.11.2(b) shall not apply and the Company shall following the
Applicable Date (subject only to its obligations under sub-clauses 8.6(a)
and (b)) be entitled at the Company's expense to licence Third Party
Programmes which are European Works from third parties and to schedule
and transmit such Third Party Programmes in the Service and shall assume
sole responsibility for such licensing and scheduling.
8.11.4 if the Licensor does not so elect under sub-clause 8.11.1, then the
following provisions shall also apply:
(a) the Company shall be freely entitled to replace the Scheduler and to
engage at its expense a replacement Scheduler of its choice and
Clauses 8.1 and 8.5 shall not apply to the appointment of any such
replacement Scheduler; and
55.
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DENTON HALL
(b) if the Licensor notifies the Company that it is able to license to the
Company any Programme which is a European Work in addition to the
Programmes which the Company is obliged to transmit pursuant to Clause
8.6, then the Company shall not unreasonably refuse to licence that
Programme from the Licensor at a licence fee not exceeding (i)
US$13,158 per Programme Hour (in the case of a Playboy Programme) or
(ii) the actual amount paid to the third party licensor of that
Programme in consideration for the right to transmit that Programme in
the Service within the Territory (in the case of an Acquired
Programme).
9. Warranties
----------
9.1 The Licensor warrants to the Company in relation to each Selected Programme
that:
(a) the Licensor has obtained and paid for, all such rights in the
Selected Programme and has obtained and paid for all such releases
licences and consents in relation to the material incorporated in it
as are necessary to enable the Company to exercise the rights in the
Selected Programme granted to it under this Agreement;
(b) no material contained in the Selected Programme is or will be
libellous or otherwise defamatory of any person or obscene or
constitute an invasion of any rights of privacy;
(c) the exercise by the Company of the rights hereby granted in the
Selected Programme will not infringe the copyright, moral rights or
any other similar right of any person;
(d) the Licensor is not at the date of this Agreement aware of any legal
proceedings or any threat of legal proceedings or any claim by any
third alleging that the Selected Programme
56.
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DENTON HALL
infringes the rights (whether of copyright or otherwise) of any third
party or that the exercise of the rights hereby granted in the
Selected Programme will infringe the rights (whether of copyright or
otherwise) of any third party;
(e) there are not and will not at any time during the Term be any charges,
liens, security interests or other encumbrances over or affecting the
Selected Programme which would preclude the exercise by the Company of
the rights hereby granted in the Selected Programme;
(f) the content of the Selected Programme will comply with all censorship
regulations and all broadcasting standards, regulations, codes and
guidelines as to programme content which may be applicable to
television services such as the Service in each country within the
Territory and may have drawn up and/or imposed on such television
services by any competent regulatory authority or body in any such
country; and
(g) all music synchronisation licence and recording and performance fees
and royalties, and all residuals, use fees and other monies payable in
connection with the Selected Programme or the rights upon which it is
based or the performances incorporated in it have been or will prior
to the delivery of the Delivery Material be paid and that no fees of
any description whatsoever will be payable by the Company in respect
of the exercise in the Territory of the rights hereby granted in the
Selected Programme other than performing rights in respect of music
contained in the Selected Programme.
9.2 Each party warrants to and undertakes with the other that:
(a) it has full right title and authority to enter into this Agreement
and to perform the obligations undertaken by it hereunder and that it
has not entered into any agreement with any third party which does or
will conflict with the terms hereof; and
57.
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DENTON HALL
(b) it will indemnify the other against all actions proceedings claims
costs and expenses (including without limitation legal fees) and any
other damage suffered by the other as a direct or reasonably
foreseeable result of a breach of any of the warranties, undertakings
or agreements on its part contained or made in this Agreement.
10. Term, Termination and Extension
-------------------------------
10.1 This Agreement shall become effective upon the date hereof and shall remain
in effect throughout the Term.
10.2 In addition to and not in substitution for any other right or remedy either
party shall have the right to terminate this Agreement with immediate
effect by written notice to the other party to that effect given at any
time if:
(a) the other party shall commit a material breach of any term or
provision of this Agreement, or (subject to the provisions of Clause
10.7) any warranty made herein by the other party shall be found not
to be true and accurate in all material respects (a "default"), and
such breach or default if remediable shall not have been remedied by
the other party within twenty-eight (28) days after receipt of written
notice specifying such breach or default and requiring the same to be
remedied; or
(b) the other party shall cease to carry on business or shall be unable to
pay its debts as they fall due for payment or if under the laws of any
jurisdiction a liquidator, administrator, receiver, or similar
official is appointed of the other party or in respect of any of its
assets or undertaking or if any liquidation, insolvency, winding-up,
administration or similar proceedings are instituted against the other
party under the laws of any jurisdiction PROVIDED ALWAYS THAT the
Licensor shall not be entitled to terminate this Agreement under this
sub-clause 10.2(b) if Flextech shall notify the Licensor of its
58.
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DENTON HALL
offer to acquire the Licensor's entire shareholding in the Company
pursuant to Clause 8.5 of the Shareholder's Agreement of even date
herewith; or
(c) the other party is prevented by an event of Force Majeure from
performing its obligations, or if the party giving such notice of
termination is prevented by an event of Force Majeure from exercising
its rights, under this Agreement for a period in excess of one hundred
and eighty (180) consecutive days; or
(d) the Trademark Agreement shall be lawfully terminated by either party
thereto.
10.3 The Company shall in addition to the foregoing have the right to terminate
this Agreement by giving notice in writing to the Licensor if:
(a) the Company has given any notice pursuant to Clause 8.6 and if during
the first complete Year following the date of any such notice ("the
Relevant Year") the Net Revenue per Household received by the Company
is less than One Pound and thirty-seven pence ((pounds) 1.37)
PROVIDED THAT any such notice of termination must be given by the
Company within twenty-four (24) months after the final day of the
Relevant Year; or
(b) in any Year after the Licensor has given a notice of election pursuant
to sub-clause 8.11.1 the Licensor has been unable to licence to the
Company pursuant to this Agreement a sufficient Programme Duration of
Programmes or Third Party Programmes which are European Works in order
to enable the Company to comply with the Directive and with the laws
of each country within the Territory PROVIDED THAT any such notice of
termination must be given by the Company within twelve (12) months
after the final day of that Year; or
(c) the Licensor fails to give a notice of election under sub-clause
8.11.1 within the 30 day period referred to in that
59.
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DENTON HALL
sub-clause PROVIDED THAT any such notice of termination must be
given by the Company within twelve (12) months after the final day
of that 30 day period.
Any such termination shall take effect immediately upon the first
anniversary of the date of receipt by the Licensor of any such notice of
termination (such anniversary being hereinafter referred to as "the
Effective Date").
10.4 In the event that the Company terminates this Agreement in accordance with
the provisions of Clause 10.3 then:
10.4.1 the Company shall be entitled to continue to exercise its rights
under the Trademark Agreement until the Effective Date;
10.4.2 for the remaining year of this Agreement ending upon the Effective
Date, the Programme Duration of the Programmes in the Service will
comprise not less than 51% (in the case of a termination pursuant
to sub-clause 10.3(a)) or the Quota Percentage (in the case of a
termination pursuant to sub-clause 10.3(b) or (c)) of the total
Programme Duration of the Programmes and the Third Party
Programmes included in the Service during such year, and the
Programming Premium and the Basic Licence Fee payable by the
Company during or in respect of such year shall each be reduced
pro rata to the proportion which the Programme Duration of
Programmes included in the Service during the said year bears to
the aggregate Programme Duration of Programmes and Third Party
Programmes included in the Service during the said year;
10.4.3 the Company shall be freely entitled at the Company's expense to
licence Third Party Programmes from third parties and to schedule
and transmit such Third Party Programmes in the Service and shall
assume sole responsibility for such licensing and scheduling
PROVIDED THAT all Third Party Programmes so transmitted in the
Service shall fall within the Programme Specification and the
Company shall comply with the provisions of sub-clause 10.4.2;
60.
<PAGE>
DENTON HALL
10.4.4 the Company shall be freely entitled to replace the Scheduler and
to engage at its expense a replacement Scheduler of its choice and
Clauses 8.1 and 8.5 shall not apply to the appointment of any such
replacement Scheduler;
10.4.5 for a period of eighteen (18) months commencing upon the Effective
Date the Licensor:
(a) shall not use or authorise or permit any third party to use
any of the Trade Marks within the Territory; and
(b) shall not authorise or permit any third party to broadcast,
transmit or exhibit (whether pursuant to the Standard
Television Rights or the Non-Standard Television Rights)
within the Territory and Programme, any excerpt from any
Programme or any promotional or advertising material
publicising its transmission of any Programme (i) in any form
which allows or causes the word "Playboy", any of the Trade
Marks or any other logo, mark or symbol which is associated
with the "Playboy" name or brand to be seen at any time during
any broadcast, transmission or exhibition of that Programme by
any person viewing such broadcast, transmission or exhibition
or (ii) which in any way suggests or implies that the
Programme has been produced by, or licensed to that third
party by, the Licensor or any Affiliate of the Licensor.
10.5 In the event that this Agreement is terminated by the Company pursuant to
sub-clause 10.3(a) and in the event that prior to the Effective Date the
Licensor has received or has become entitled to receive licence fees
(other than amounts paid by the Licensor to third party licensors for the
right to transmit Third Party Programmes in the Service and reimbursed to
the Licensor by the Company hereunder) pursuant to any provision of Clause
7, Clause 8 or this Clause 10 (including but not limited to Clauses 7.1 to
7.4 inclusive, Clause 7.7
61.
<PAGE>
DENTON HALL
and Clause 8.8) amounting in the aggregate to less than US$7.5 million ("the
Minimum Amount"), then, for so long as the programming included in the Service
after the Effective Date is of the same genre as the Programmes and Third Party
Programmes delivered to the Company hereunder prior to the Effective Date, the
Company shall following the Effective Date licence from the Licensor on a sole
and exclusive basis within the Territory and the Licensor shall deliver to the
Company for first transmission in the Service such number of Programme Hours of
Playboy Programmes selected by the Company as may be determined in accordance
with the provisions of Schedule 6, upon and subject to the following terms and
conditions:
10.5.1 the Licensor may by notice in writing given to the Company within thirty
(30) days after the date of any notice of termination given by the
Company pursuant to Clause 10.3 decline to licence further Playboy
Programmes to the Company in the event that this Clause should apply
following the Effective Date and, if so, the Company will have no
obligation or liability to the Licensor pursuant to this Clause;
10.5.2 if the Licensor does not give a notice to the Company pursuant to Clause
10.5.1:
(a) the licence fees payable by the Company following the Effective Date
shall be at the rate of US$13,158 per Programme Hour or (in the case
of a Playboy Programme which the Company elects to transmit during a
further Transmission Period pursuant to Clause 2.2) determined in
accordance with Clause 7.7;
(b) the maximum period during which the provisions of this Clause 10.5
shall continue in force following the Effective Date shall be
determined in accordance with the provisions of Schedule 6 but the
provisions of this Clause shall in any event lapse once the Licensor
has received pursuant to Clause 7, Clause 8 and this Clause licence
fees amounting in the aggregate to the Minimum Amount;
62.
<PAGE>
DENTON HALL
(c) subject to the provisions of sub-clauses (a) and (b) of this
Clause and notwithstanding the termination of this Agreement,
all Playboy Programmes licensed to the Company pursuant to
this Clause shall be licensed upon and subject to the same
terms and conditions (mutatis mutandis) as those which
applied to the Programmes licensed under Clause 2 prior to
the Effective Date including under Clause 2 prior to the
Effective Date including but not limited to those terms and
conditions set out in Clause 3.3, 4.1, 4.4, 4.5 and 6.5; and
(d) the Company shall be entitled to transmit the Trade Marks
only in the form and the places in which they appear in
Playboy Programmes licensed to it pursuant to this Clause.
10.6 Following the date on which any termination of this Agreement takes
effect ("the Termination Date"):
10.6.1 subject only to Clause 10.5, the Company shall have no obligation
to licence or accept delivery of further Programmes or Third Party
Programmes from the Licensor, and the Licensor shall have no
obligation to deliver to the Company further Programmes or Third
Party Programmes, for first transmission in the Service;
10.6.2 the licence granted to the Company pursuant to Clause 2 in
relation to each Programme or Third Party Programme whose
Transmission Period has not ended prior to the Termination Date
shall (subject to sub-clauses 10.6.3 and 10.6.4) remain in force
for a period of twenty-four (24) months after the Termination Date
(in the case of a Playboy Programme) and for the full duration of
the Playboy Licence Period (in the case of an Acquired Programme
or Third Party Programme); and
10.6.3 notwithstanding the provisions of sub-clause 10.6.2, if this
Agreement was terminated by the Licensor pursuant to sub-clause
63.
<PAGE>
DENTON HALL
10.2(a), the Licensor may by giving notice in writing to the Company
within 30 days after the Termination Date terminate the licence granted
to the Company pursuant to Clause 2 in relation to each Programme, and
each Third Party Programme acquired on behalf of the Company by the
Licensor, with immediate effect whereupon the Licensor shall within seven
(7) days after the date of such notice pay to the Company an amount equal
to the aggregate of all Excess Payments. For the purposes of this sub-
clause, an "Excess Payment" shall mean in respect of each Programme, or
each Third Party Programme acquired on behalf of the Company by the
Licensor, whose Transmission Period has not ended prior to the
Termination Date an amount equal to:
(A x B) x C where:
-
D
A = US$13,158 or (in the case of a Third Party Programme) the actual
amount paid to the third party licensor of that Third Party Programme
in consideration for the right to transmit the same in the Service
within the Territory
B = the number of Programme Hour(s) of that Programme or Third Party
Programme
C = 24 (twenty-four) less the number of transmissions made by the Company
in the Service of that Programme or Third Party Programme prior to
the Termination Date
D = 24 (twenty-four).
10.6.4 notwithstanding the provisions of sub-clause 10.6.2, the Licensor may by
giving notice in writing to the Company within six (6) months after the
Termination Date terminate the licence granted to the Company pursuant to
Clause 2 in relation to each Playboy Programme with effect from the
expiry of the period of eighteen (18) months commencing upon the
Termination Date ("the Licence Termination Date") whereupon the Licensor
shall within
64.
<PAGE>
DENTON HALL
seven (7) days after the date of such notice pay to the Company an
amount equal to the aggregate of all Excess Payments. For the
purposes of this sub-clause, an "Excess Payment" shall mean in
respect of each Playboy Programme whose Transmission Period has not
ended prior to the Licence Termination Date an amount equal to:
(A x B) x C where:
-
D
A = US$13,158
B = the number of Programme Hour(s) of that Playboy Programme
C = 24 (twenty-four) less the number of transmissions made by the
Company in the Service of that Playboy Programme prior to the
Licence Termination Date
D = 24 (twenty-four).
10.7 In the event that:
(a) any warranty made herein by the Licensor in relation to any Selected
Programme is found not to be true and accurate in all material
aspects (a "default"); and
(b) within twenty-eight (28) days after receipt of written notice from
the Company specifying such default the Licensor has delivered to
the Company for first transmission in the Service a replacement
Playboy Programme or (if the Selected Programme in question was not
a Playboy Programme) an Acquired Programme or Third Party Programme
of comparable quality, duration and commercial appeal,
then without prejudice to any of its other rights and remedies in respect
of such default the Company shall not be entitled to terminate this
Agreement pursuant to sub-clause 10.2(a) as a result of such default.
65.
<PAGE>
DENTON HALL
11. Assignment
----------
Neither party may assign the whole or any part of this Agreement to any
third party without the prior written consent of the other party PROVIDED
THAT either party may assign the benefit of this Agreement to any
Associate (as defined in the Shareholders' Agreement of even date
herewith) without the consent of the other party but shall remain liable
for the performance of its obligations under this Agreement.
12. Notices
-------
12.1 Any notice or other communication given or made under this Agreement shall
be in writing and, without prejudice to the validity of any other method
of service, may be delivered personally or by courier or sent by facsimile
transmission and by prepaid airmail letter, addressed as follows:
(a) if to the Licensor to:
The President of the Licensor
9242 Beverly Boulevard
Beverly Hills
California 90210
United States of America
Facsimile transmission number: (0101 310) 246 4065
with a copy to the Senior Vice President, Legal and Business
Affairs at the same facsimile transmission number
(b) if to the Company, to:
Twyman House
16 Bonny Street
London NW1 9PG
Facsimile transmission number: (0171) 911 0145
with a copy to:
66.
<PAGE>
DENTON HALL
The Chief Executive
Flextech plc
13 Albemarle Street
London W1X 3HA
Facsimile transmission number: (0171) 499 7553
or to such other address, or facsimile transmission number as the relevant
addressee may hereafter by notice hereunder substitute.
12.2 Any such notice or other communication shall be deemed to have been duly
served, given or made (i) in the case of posting, 96 hours after the
envelope containing such notice was posted and proof that any such
envelope was properly addressed, prepaid, registered and posted shall be
sufficient evidence that such notice or other communication has been duly
served, given or made; or (ii) in the case of delivery, when left at the
relevant address; or (iii) in the case of facsimile transmission on the
first business day in the country of the intended recipient after the date
of transmission.
13. Waiver and Set-Off
------------------
13.1 No express or implied waiver by either party of any provision of this
Agreement or of any breach or default of either party shall constitute a
continuing waiver or a waiver of any other provision or (subject to the
other provisions of this Agreement) prevent either party from acting on
the same or any subsequent breach or default.
13.2 In the event that the Company becomes entitled to terminate this Agreement
pursuant to sub-clause 10.2(a) and (subject to Clause 10.7) within thirty
(30) days after becoming aware of such entitlement the Company does so
terminate, then, without prejudice to any other right or remedy of the
Company and notwithstanding any other provision of this Agreement, the
Company shall be entitled without prejudice to any right or remedy of the
Licensor to withhold payment of any or all amounts which may be or may
thereafter become due to the Licensor pursuant to Clause 7 or Clause 8
and, if the Company decides to exercise such right, it shall promptly
notify the Licensor of such decision.
67.
<PAGE>
DENTON HALL
14. Further Assurance
-----------------
The Licensor shall at the request and cost of the Company execute and
deliver all such further documents as the Company shall reasonably request
to confirm and evidence the grant of such Television Rights as are granted
to the Company pursuant to Clause 2.
15. No Partnership
--------------
This Agreement is made between principals and does not constitute a
partnership between the parties and neither of them shall hold itself out
as the agent or partner of the other.
16. Entire Agreement
----------------
This Agreement together with the Trademark Agreement and the
Shareholders' Agreement contains the entire understanding of the parties
with regard to the licensing of Programmes to the Company and may be
changed or modified only in writing signed on behalf of both parties.
17. Force Majeure
-------------
Neither party shall be liable for any failure to perform its obligations
under this Agreement to the extent that such failure is caused by an
event of Force Majeure.
18. Severability, Registration and Notification
-------------------------------------------
18.1 Should any provision of this Agreement be held by any competent court or
authority to be invalid or unenforceable such provision shall (without
prejudice to the remaining provisions) have no effect but the parties
shall use all reasonable endeavours to replace the invalid or
unenforceable provision by a valid provision, the effect of which shall be
the closest possible to the intended effect of the invalid or
unenforceable provision.
68.
<PAGE>
DENTON HALL
18.2 Notwithstanding any other provision of this Agreement or any arrangement
of which this Agreement forms part, any provision which may cause this
Agreement and/or such arrangement to be registrable under the Restrictive
Trade Practices Act 1976 shall be of no effect until the day after such
day as particulars of this Agreement and/or such arrangement shall have
been furnished to the Director General of Fair Trading.
18.3 If either of the parties is advised by its lawyers that this Agreement
should be notified to the European Commission under Council Regulation
17/62, the other party shall on request co-operate in procuring such
notification as soon as practicable.
19. Headings
--------
The headings to the Clauses and sub-clauses in this Agreement are intended
to make reference easier but not to affect its construction.
20. Governing Law
-------------
20.1 This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties agree to submit to the
exclusive jurisdiction of the English Courts as regards any claim or
matter arising in relation to this Agreement.
20.2 The Licensor hereby appoints O'Melveny & Myers of 10 Finsbury Square,
London EC2A 1LA England as its authorised agent for the purpose of
accepting service of process for all purposes in connection with this
Agreement.
AS WITNESS the hands of the duly authorised representatives of the parties the
day and year first above written
69.
<PAGE>
DENTON HALL
SCHEDULE 1
----------
The Programme Specification
---------------------------
The Service is a television program service for adults featuring programming
that is sexually oriented but of a non-pornographic nature.
Programming included in the Service will depict nudity and will allow strong or
explicit language. Playboy will not deliver and the Company will not transmit
programming containing scenes which depict violent behaviour, particularly the
glorification of violence or gratuitous violence. Generally speaking, Playboy
will not deliver and the Company will not transmit programming containing
depictions of rape, non-consensual intercourse or other non-consensual sexual
activity. Generally speaking, Playboy will not deliver and the Company will not
transmit programming containing scenes of bondage, incest, sadism or masochism,
bestiality, extreme sexual explicitness or the graphic close-up of genitals.
Child pornography is never to be shown on the Service, and, even if an actor is
over 18 years of age, if that actor is portrayed as under 18, such showing is
prohibited.
Within the above guidelines, the Programmes and Third Party Programmes delivered
to the Company by Playboy hereunder shall consist of motion pictures (including
those made initially for television exhibition, for home video or for theatrical
release), miscellaneous specials (both in the half-hour and hour length),
dramatic series, game shows, magazine shows (as that term is generally used in
American television), comedy shows, Playmate specials featuring specific
Playmates, music specials, sexual advice specials, Playboy Video Centrefold
specials and Playmate of the Year specials. The vignettes delivered by Playboy
hereunder shall also comply with the above guidelines.
No Programme or Third Party Programme delivered by the Licensor under this
Agreement will have a running time of less than 22 minutes.
70.
<PAGE>
DENTON HALL
SCHEDULE 2
----------
Delivery Material
-----------------
1. (a) The Licensor will supply a Beta SP master videotape for each Selected
Programme, each so-called "vignette" and all promotional and interstitial
material, together with a schedule of the running order in which these
elements are to be broadcast. The Company will at its cost assemble the
nightly programming block from these materials.
(b) Each master videotape supplied by the Licensor shall be of broadcast
quality and in either the NTSC or PAL standard. Where such a videotape is
delivered in the NTSC standard, the Company shall create the necessary
PAL transfer but the Licensor shall reimburse to the Company within 30
days after receipt of an invoice in respect thereof the actual out-of-
pocket cost incurred by the Company in doing so.
(c) If the Licensor supplies NTSC-standard materials and the Company converts
them to PAL, the Licensor shall remain the owner of such PAL-standard
materials, which shall be on loan to the Company for the Term or (if
later) until the end of the Transmission Period in respect of the
relevant Programme or Third Party Programme and shall thereafter be
returned to the Licensor.
(d) Each master videotape supplied by the Licensor shall comply with the
following specification:-
Vision
------
Line up - One minute of Colour Bars 100% luminance, 75% Chroma.
EBU(75/0/100/0)
Ten seconds of Black before Start of each Selected Programme
No pedestal on black
Each Selected Programme should start at Time Code 10:00:00:00
71.
<PAGE>
DENTON HALL
Audio
-----
Time Code should be continuous throughout the line up and programme and
for at least 30 seconds after end of programme Line up with Colour Bars -
Zero Level Tone on linear tracks ('4' PPM)
Maximum peak programme level +8dB above line up.
2. A music cue sheet in customary form and all billings information and credit
requirements.
3. All advertising and promotional material (whether audio, audio-visual or
visual material) which is available for use by the Company including but not
limited to a plot or episodic synopsis, black and white stills, colour
transparencies, a colour trailer and interstitial, "filler" and "behind the
scenes" material.
72.
<PAGE>
DENTON HALL
SCHEDULE 3
----------
Basic Licence Fees
------------------
1. In this Schedule the following expressions shall have the following meanings:
(a) "the Apportionment" means an amount calculated by:
(i) subtracting from 365 the total number of days during the First Year
(including the Launch Date);
(ii) multiplying the figure resulting from that subtraction by
US$1,000,000 (one million United States dollars);
and (iii) dividing the product of that multiplication by 365.
(b) "the Increment": means in respect of the second, third, fourth, fifth and
sixth Years an amount calculated as follows:
A x US$100,000
---
365
where A is the total number of days during the First Year (including the
Launch Date);
(c) "the Initial Amount": means in respect of each Year the amount set out
below opposite that Year:
Year Amount (US$)
---- ------------
First Year US$1,000,000 less the Apportionment
Second Year US$1,000,000)
Third Year US$1,100,000) plus in each case
Fourth Year US$1,200,000) the Increment
Fifth Year US$1,300,000) for that Year
Sixth Year US$1,400,000)
Seventh Year US$1,500,000
and each
subsequent Year
73.
<PAGE>
DENTON HALL
2. In respect of each Year the Basic Licence Fee shall be the Initial Amount
in respect of that Year subject always to:
(a) reduction in accordance with Clause 8.6, sub-clause 8.8(d) or Clause
8.11 or following any notice of termination of this Agreement given
by the Company pursuant to Clause 10.3; and
(b) increase in accordance with sub-clause 7.7(b), sub-clause 8.8(b) or
sub-clause 8.8(c).
74.
<PAGE>
DENTON HALL
SCHEDULE 4
----------
Net Revenue per Household
-------------------------
1. In this Schedule a "Household" means in respect of any Year:
(a) during which (or any part of which) the Service is being transmitted by
means of a medium-powered satellite (such as, by way of example, an Astra
satellite), any person in the United Kingdom who on 1 January or 31
December (as the case may be) in that Year is equipped with a satellite
dish and any other receiving or decoding equipment (other than viewing
cards and other decryption equipment and devices which are only available
to paying subscribers) and/or (if the Service is transmitted by means of
a compressed signal) decompression equipment which is necessary in order
to receive and view a television channel transmitted in an unencrypted
form by means of the same satellite as that by which on 1 January or 31
December (as the case may be) in that Year the Service is being
transmitted or by means of any other satellite which is compatible with
that satellite; and/or
(b) any person in the United Kingdom whose home has by 1 January or 31
December (as the case may be) in that Year been connected to a Relevant
System and for this purpose a "Relevant System" means any cable
television system in the United Kingdom by means of which the Service is
as at 1 January or 31 December in that Year (as the case may be) being
re-transmitted by any means for reception by subscribers to that cable
television system.
2. The "Net Revenue per Household" in respect of any Year shall be calculated by
dividing the Net Revenues of the Company in respect of that Year by the
average number of Households in respect of that Year. The average number of
Households shall be calculated by aggregating the total numbers of Households
on 1 January and on 31 December in that Year and by dividing the resulting
figure by two.
75.
<PAGE>
DENTON HALL
3. The number of Households which on 1 January and 31 December in each Year fall
within paragraph 1(a) of this Schedule shall be determined by reference to
the relevant figure published or provided by Broadcasters' Audience Research
Board Limited (or any replacement or successor body) as at 1 January or 31
December in that Year (as the case may be) or as at the date which is closest
to 1 January or 31 December in that Year and for which such a figure is
available by 31 March in the immediately following Year.
4. The number of Households which on 1 January and 31 December in each Year fall
within paragraph 1(b) of this Schedule shall be determined by reference to
the relevant figure(s) published or provided by the Cable Communications
Association (or any replacement or successor body or by the operators of
Relevant Systems) as at 1 January or 31 December in that Year (as the case
may be) or as at the date which is closest to 1 January or 31 December in
that Year and for which such figure(s) is or are available by 31 March in the
immediately following Year.
76.
<PAGE>
DENTON HALL
SCHEDULE 5
----------
List of existing Programmes
---------------------------
<TABLE>
<CAPTION>
-------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
-------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Series 350 29 30 14.5 1990-1994
America Uncovered 4 30 2 1983-1987
Archival Reel 58 60 58 1970's
The Club 8 30 3 1991
Comedy After Hours 6 30 3 1987
Consenting Adults 3 30 1.5 1984
Do it Now 3 30 1.5 1983
Dueling for Playmates 12 30 6 1983-1984
Eden 26 30 13 1992-1993
Erotic Images 5 60 5 1984-1985
Everything Goes 23 30-60 12 1982-1984
Fantasies 20 30 10 1986-1988
For a Good Time, Call... 4 30 2 1992
Friday Files 6 30-60 3.5 1983
Girls of the Comedy Store 3 80 3 1983-1985
Great American Stripoff 18 80 18 1983-1985
Hot List 3 30 1.5 1987-1988
Hot Rocks 28 30-50 15 1990-1994
Inside Out 26 30 13 1990-1991
Inside Playboy 7 30 3.5 1984
It Happened One Night 5 30-60 3 1994
Late Night I 28 60 26 1989-1990
Late Night II 28 30 13 1991
Late Night III 28 30 13 1992
Late Night IV 26 30 13 1995
Loving 5 30 2.5 1982
Pillow Previews 10 30 5 1984-1985
Playboy After Dark 52 60 52 1968-1970
Playboy Video Magazine 48 60 48 1982-1988
Playboy's Erotic Fantasies 28 30 13 1994
Playboy's Love & Sex Test 28 30 13 1992
Playmate Guide to Physical
Fitness 6 30 3 1982-1983
Prime Cuts 4 30 2 1985
Private Moments 8 30 3 1983-1984
Private Party Jokes 7 30 3.5 1987-1988
Ribald Classics 5 30-60 4.5 1983-1992
Secret Confessions & Fantasies 28 30 1.3 1992-1993
Sexcetera 64 80 64 1983-1988
Shake it, Sexy 6 30 3 1983
Who's on Top 24 30 12 1993
World of Playboy 34 30 17 1991-1995
Women on Sex 46 30 24 1983-1988
-------------------------------------------------------------------------------------------------
Sub Total Series 539.5
-------------------------------------------------------------------------
</TABLE>
* As is television industry practice, a "60-minute" program is typically 44-45
minutes long (to account for commercial breaks), and a "30-minute" program is
typically 22 minutes long. Similarly, throughout this document, a 60-minute
episode length will refer to 45 minutes of actual programming, and a 30-minute
episode length will refer to 22 minutes of actual programming. With respect to
movies, running times are actual.
77.
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
-----------------------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
-----------------------------------------------------------------------------------------------------------------------------------
<C> <C> <C> <C> <C> <C>
Specials 101 Ways to Excite Your Lover 1 60 1 1991
20th Century Beauty 1 60 1 1991
Anna Goes Australian 1 30 0.5 1987
Around the World with Donna Wanna 1 30 0.5 1993
Arousal, Foreplay, and Orgasm with Dr. Ruth Westheimer 1 60 1 1994
Art of Sensual Massage 1 60 1 1986
Bedtime Stories 1 60 1 1987
Best of Playboy 2 60 2 1988
Best of Sexy Lingerie 1 60 1 1992
Best of Video Calendar 1 60 1 1992
Best of Wet & Wild 1 60 1 1992
Best of the Playboy Channel 1 90 1.5 1988
Big Ed Show 1 60 1 1990
Blonde, Brunette, and Redhead 1 30 0.5 1989
Blonde Bombshells 1 30 0.5 1989
Body Flash 1 30 0.5 1985
Bunny Memories 1 60 1 1986
Bunny of the Year 1974 1 60 1 1974
Bunny of the Year 1976 1 90 4.5 1976
Cheech and Chong Interview 1 60 1 1984
College Girls 1 60 1 1993
Comedy on Campus 1 90 1.5 1988
Comedy Roast: Don Adams 1 60 1 1985
Comedy Roast: Tommy Chong 1 60 1 1986
Comedy Theatre: The Great Lounge Commedians 1 60 1 1985
Comedy Theatre: Henny Youngman 1 60 1 1985
Comedy Theatre: Mort Sahl 1 60 1 1985
Comedy Theatre: Phyllis Diller 1 60 1 1985
Comedy Theatre: Shecky Green 1 60 1 1985
Celebrity Video Centerfold: Patti Davis 1 60 1 1995
Celebrity Video Centerfold: Jessica Hahn 1 60 1 1993
Celebrity Video Centerfold: LaToya Jackson 1 60 1 1994
Celebrity Video Centerfold: Dian Parkinson 1 60 1 1994
Dear Homes 1 30 0.5 1983
Dorothy Strattan: The Untold Story 1 60 1 1985
Eden 1 1 120 2 1992
Eden 2 1 120 2 1992
Eden 3 1 120 2 1992
Eden 4 1 120 2 1993
Eden 5 1 120 2 1993
Eden 6 1 120 2 1993
Erotic Escapades 1 30 0.5 1994
Erotic Fantasies I 1 60 1 1992
Erotic Fantasies II 1 60 1 1993
Erotic Fantasies III 1 60 1 1993
Erotic Weekend Getaways 1 60 1 1992
Fabulous Forties 1 60 1 1994
Fantasies I 1 90 1.5 1987
Fantasies II 1 60 1 1990
Farmer's Daughters 1 60 1 1987
Girls of the Cabaret Royale 1 60 1 1991
Girls of Europe I 1 30 0.5 1987
Girls of Europe II 1 30 0.5 1987
Girls of Hawaiian Tropic 1 60 1 1994
Girls of Hooters 1 60 1 1994
Girls of Jamaica 1 30 0.5 1992
-----------------------------------------------------------------------------------------------------------------------------------
* see note
</TABLE>
78
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Specials, Girls of Rock 'n Roll 1 60 1 1985
continued Girls of Spring Break 1 60 1 1991
Girls of the Big West 1 30 0.5 1990
Girls of the Moulin Rouge 1 30 0.5 1985
Great American Stripoff 1994 1 60 1 1994
History of Striptease 1 60 1 1994
Hollywood Hookers 1 60 1 1983
Hot, Sexy & Safer with Suzi Landelphi 1 60 1 1993
Hot Rock in Reno 1 120 2 1983
How to Reawaken Your Sexual Powers 1 60 1 1992
Hugh M. Hefner: Birthday Footage 1 330 5.5 1979-1986
Hugh M. Hefner: Miscellaneous Footage 1 90 1.5 1974-1995
Hugh M. Hefner: Once Upon a Time 1 90 1.5 1992
Inside Out I 1 90 1.5 1992
Inside Out II 1 90 1.5 1993
Inside Out III 1 90 1.5 1993
Inside Out IV 1 90 1.5 1994
International Playmates 1 60 1 1993
Intimate Workout for Lovers 1 60 1 1991
International Beauty Pageant Promo Reel 1 30 0.5 1992
Japanese Erotica 1 30 0.5 1989
Jerry Lee Lewis in Concert 1 60 1 1985
Les Filles Fatales 1 30 0.5 1983
Lisa Lyons Lifestyles 1 30 0.5 1990
Love, Sex, and Religion 1 30 0.5 1984
Love, Sex, & Intimacy for New Relationships 1 60 1 1993
Madcap Marathon 1 60 1 1980
Making of... Girls of Cabaret Royale 1 60 1 1991
Making of... Girls of Spring Break 1 30 0.5 1991
Making of... Playmate Challenge Cup 1 30 0.5 1984
Making of... Sexy Lingerie III 1 60 1 1992
Maui Playmate Challenge 1 60 1 1994
Miss Playboy International Beauty Pageant 1987 1 60 1 1987
Nancy Friday's Interviews 1 30 0.5 1982
Nancy Friday's Private Lives 1 120 2 1983
New Year's Eve at the Mansion 1982 1 30 0.5 1982
New Year's Eve at the Mansion 1983 1 30 0.5 1983
New Year's Eve at the Mansion 1984 1 30 0.5 1984
New Year's Eve at the Mansion 1985 1 30 0.5 1985
New Year's Eve at the Mansion 1986 1 30 0.5 1986
Pat Mc Cormick Unleashed I 1 60 1 1980
Pat Mc Cormick Unleashed II 1 60 1 1980
Playboy Club's 24th Anniversary Show 1 60 1 1984
Playboy Follies I 1 60 1 1983
Playboy Follies II 1 60 1 1985
Playboy Jazz Festival 1982 1 180 3 1982
Playboy Video Centerfold: Sherry Arnett 1 60 1 1985
Playboy Video Centerfold: Teri Weigel 1 60 1 1985
Playboy Video Centerfold: Rebekka Armstrong 1 60 1 1986
Playboy Video Centerfold: Luann Lee 1 60 1 1986
Playboy Video Centerfold: Lynne Austen 1 60 1 1987
Playboy Video Centerfold: Fawna MacLaren/35th Anniv. 1 60 1 1988
Playboy Video Centerfold: Dutch Twins 1 60 1 1989
Playboy Video Centerfold: Peggy McIntaggart 1 60 1 1989
Playboy Video Centerfold: Karen Foster/Deborah Driggs 1 60 1 1990
Playboy Video Centerfold: Kerry Kendall 1 60 1 1990
Playboy Video Centerfold: Tawni Cable 1 60 1 1990
Playboy Video Centerfold: Julie Clark 1 60 1 1990
Playboy Video Centerfold: Morgan Fox 1 60 1 1991
---------------------------------------------------------------------------------------------------------------------
* see note
</TABLE>
79.
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Specials Playboy Video Centerfold: Pamala Anderson 1 60 1 1991
continued Playboy Video Centerfold: Tiffany Sloan 1 60 1 1992
Playboy Video Centerfold: Anna Marie Golldard/
40th Anniv. 1 60 1 1994
Playboy's 20th Anniversary Show 1 60 1 1974
Playboy's 25th Anniversary Show 1 60 1 1979
Playboy's 35th Anniversary Special 1 30 0.5 1989
Playboy's 35th Anniv.: World of Hugh M. Hefner 1 90 1.5 1988
Playboy's 35th Anniv.: Hugh M. Hefner's Birthday 1 90 1.5 1988
Playboy's 35th Anniv.: Midsummer Night's Dream
Parties 1 60 1 1985-1993
Playboy's 40th Anniversary Playmate Search 1 60 1 1993
Playboy's Guide to Amsterdam 1 60 1 1983
Playboy's Guide to the Land of G'Day 1 60 1 1989
Playboy's Hidden Camera 1 60 1 1994
Playboy Photographers 1 30 0.5 1989
Playmate Bloopers 1 30 0.5 1992
Playmate Party 1 60 1 1977
Playmate Playoffs 1 60 1 1986
Playmate Challenge Cup 1 60 1 1984
Playmate Guide to Physical Fitness 1 60 1 1983
Playmate Music Videos I 1 30 0.5 1989
Playmate Music Videos II 1 30 0.5 1992
Playmate of the Year 1984: Barbara Edwards 1 60 1 1984
Playmate of the Year 1987: Donna Edmondson 1 60 1 1987
Playmate of the Year 1988: India Allen 1 60 1 1988
Playmate of the Year 1989: Kimberley Conrad 1 60 1 1989
Playmate of the Year 1990: Renee Tenison 1 60 1 1990
Playmate of the Year 1991: Lisa Matthews 1 60 1 1991
Playmate of the Year 1992: Corrina Hamey 1 60 1 1992
Playmate of the Year 1993: Anna Nicole Smith 1 60 1 1993
Playmate of the Year 1994: Jenny McCarthy 1 60 1 1994
Playmate of the Year 1990 Special 1 90 1.5 1990
Playmate Profiles: You Ought to Be In Pictures 1 30 0.5 1988
Playmate Rafting Adventure 1 30 0.5 1984
Playmate Review Hotline I 1 60 1 1992
Playmate Review Hotline II 1 60 1 1993
Playmate Review Hotline III 1 60 1 1994
Playmate Review 1 60 1 1983
Playmate Review II 1 60 1 1984
Playmate Review III 1 60 1 1985
Playmate Review 1992 1 60 1 1992
Playmate Review 1993 1 60 1 1993
Playmate Six Pack 1 60 1 1992
Playmate Sneak Preview 1 30 0.5 1990
Playmate Spectacular I 1 30 0.5 1989
Playmate Spectacular II 1 30 0.5 1990
Playmate Sports Spectacular 1 60 1 1992
Playmate Video Calendar 1988 1 60 1 1987
Playmate Video Calendar 1989 1 60 1 1988
Playmate Video Calendar 1990 1 60 1 1989
Playmate Video Calendar 1991 1 60 1 1990
Playmate Video Calendar 1992 1 60 1 1991
Playmate Video Calendar 1993 1 60 1 1992
Playmate Video Calendar 1994 1 60 1 1993
Playmate Video Calendar 1995 1 60 1 1994
Playmate Video Calendar Preview Show 1 30 1 1988
Playmate Video Calendar Preview Show 1 30 1 1989
Playmate Video Calendar Preview Show 1 30 1 1990
Playmate Video Calendar Preview Show 1 30 1 1991
Playmate Video Calendar Preview Show 1 30 1 1992
Playmate Video Calendar Preview Show 1 30 1 1993
---------------------------------------------------------------------------------------------------------------------
* see note
</TABLE>
80.
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Specials Playmate Video Calendar Preview Show 1 30 1 1994
continued Playmates at Play 1 60 1 1989
Playmates Home Video Party 1 30 0.5 1990
Playmates in the Movies 1 30 0.5 1989
Playmates in Paradise 1 60 1 1992
Playmates of the Year: the '80's 1 60 1 1989
Playmates: the Early Years 1 60 1 1991
Playmates: Where are they Now I 1 30 0.5 1988
Playmates: Where are they Now II 1 30 0.5 1988
Private Diaries 1 60 1 1994
Private Pleasures 1 30 0.5 1993
Roller Disco and Pajama Party 1 60 1 1981
Romantic Visions I 1 30 0.5 1985
Romantic Visions I 1 30 0.5 1985
Secret Confessions I 1 60 1 1993
Secret Confessions II 1 60 1 1994
Secret Confessions III 1 60 1 1994
Secret Moment 1 30 0.5 1984
Secrets of EuroMassage 1 60 1 1989
Secrets of Making Love to the Same Person Forever I 1 60 1 1990
Secrets of Making Love to the Same Person Forever II 1 60 1 1992
Sensual Fantasy for Lovers 1 60 1 1993
Sensual Pleasures of Oriental Massage 1 60 1 1991
Sex Under Hot Lights 1 60 1 1994
Sex & Sensuality Test 1 60 1 1982
Sexy Lingerie I 1 60 1 1983
Sexy Lingerie II 1 60 1 1990
Sexy Lingerie III 1 60 1 1991
Sexy Lingerie IV 1 60 1 1991
Sexy Lingerie V 1 60 1 1992
Sexy Lingerie VI: Night Dreams 1 60 1 1993
Sexy Lingerie VII: Dreams & Desires 1 60 1 1994
Spring Break Madness 1 30 0.5 1989
Spring Fling 1 60 1 1983
Sunday's Child I 1 30 0.5 1983
Sunday's Child II 1 30 0.5 1983
Sunday's Child III 1 30 0.5 1983
Sunday's Child IV 1 30 0.5 1983
Sunday's Child V 1 30 0.5 1983
Sunday's Child VI 1 30 0.5 1983
Sunshine Girls 1 30 0.5 1988
Taking it Off 1 30 0.5 1989
Taste of Playboy 1 90 1.5 1983
Twenty-Nine Minutes 1 60 1 1990
Ultimate Sensual Massage 1 60 1 1991
Valentine Day's Footage 1990 1 60 1 1990
Valentine Day's Footage 1991 1 90 1.5 1991
The Wedding (Hugh M. Hefner/Kimberley Conrad) 1 60 1 1989
Wet & Wild I 1 60 1 1989
Wet & Wild II 1 60 1 1990
Wet & Wild III 1 60 1 1991
Wet & Wild IV 1 60 1 1992
Wet & Wild V 1 60 1 1993
Wet & Wild VI: The Locker Room 1 60 1 1994
Wet & Wild VII: On Vacation 1 60 1 1995
Windy City Comedy Blowout 1 60 1 1987
Women of Color 1 60 1 1993
Women of Radio 1 60 1 1995
---------------------------------------------------------------------------------------------------------------------
Sub Total Specials 233
--------------------------------------------------------------------------------------------------
* see note
</TABLE>
81.
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Movies Affairs of the Heart 1 90 1.5 1994
After Dark I (Title TBD) 1 90 1.5 1995
After Dark II (Title TBD) 1 90 1.5 1995
After Dark III (Title TBD) 1 90 1.5 1995
After Dark IV (Title TBD) 1 90 1.5 1995
After Dark V (Title TBD) 1 90 1.5 1995
After Dark VI (Title TBD) 1 90 1.5 1995
After Dark VII (Title TBD) 1 90 1.5 1995
After Dark VIII (Title TBD) 1 90 1.5 1995
After Dark IX (Title TBD) 1 90 1.5 1995
After Dark X (Title TBD) 1 90 1.5 1995
American Blonde 1 90 1.5 1994
Animal Instinct 1 60 1 1993
Accused 1 90 1.5 1995
Birds in Paradise I 1 90 1.5 1986
Birds in Paradise II 1 90 1.5 1985
Blind Spot 1 60 1 1993
Blonde Justice III 1 90 1.5 1993
Bonnie III 1 60 1 1994
Bonnie IV 1 90 1.5 1994
Candy the Stripper 1 90 1.5 1987
Carnival in Rio 1 60 1 1987
Cheating 1 90 1.5 1995
Companion 1 90 1.5 1995
Coven I 1 90 1.5 1994
Coven II 1 90 1.5 1994
Dominoes 1 60 1 1993
Dr. Yes: The Hyannis Affair 1 120 2 1985
Erotic Showcase I 1 90 1.5 1993
Erotic Showcase II 1 90 1.5 1993
Erotic Showcase III 1 90 1.5 1993
Forever Young 1 90 1.5 1994
Hardcore 1 90 1.5 1995
Icewoman I 1 90 1.5 1993
Icewoman II 1 90 1.5 1994
I Like to Play Games 1 90 1.5 1994
Immortal Desire 1 60 1 1993
Intimate Journey 1 60 1 1995
Letting Go 1 90 1.5 1995
Love & Desire 1 60 1 1991
Lover's Leap 1 90 1.5 1994
Lusty Liaisons I 1 90 1.5 1983-1992
Lusty Liaisons II 1 90 1.5 1983-1992
Man & Women 1 90 1.5 1994
Mask 1 60 1 1993
Masseuse II 1 90 1.5 1994
Matter of Cunning 1 90 1.5 1986
Naked Reunion 1 60 1 1994
New Lovers 1 60 1 1993
Night Train 1 90 1.5 1994
On the Edge 1 90 1.5 1994
Oral Obsession 1 90 1.5 1994
Parlor Games 1 60 1 1993
Passionate Interludes I 1 90 1.5 1986-1988
Passionate Interludes II 1 90 1.5 1986-1988
Playtime 1 90 1.5 1994
Prostitutes of Paris 1 60 1 1983
Romancing of Sarah 1 90 1.5 1995
Sexual Healing 1 90 1.5 1994
Scoring 1 90 1.5 1995
---------------------------------------------------------------------------------------------------------------------
* see note
</TABLE>
82.
<PAGE>
DENTON HALL
PLAYBOY TV UK/BENELUX
PROGRAM LIBRARY
<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------------------------
Program Number of Length per Total Program Completion
Type Title Episodes Episode (min.)* Hours Date
---------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Movies, Sex II 1 90 1.5 1994
continued Silent Strangers 1 90 1.5 1995
Starlet 1 60 1 1993
Steamy Windows 1 60 1 1994
Suite 18 1 90 1.5 1994
Supermodel I 1 90 1.5 1994
Supermodel II 1 60 1 1994
Swap II 1 120 2 1994
Tales of Erotica 1 120 2 1993
Tempted 1 90 1.5 1995
Undress to Thrill 1 90 1.5 1994
Vagablonde 1 90 1.5 1994
Watch Me 1 90 1.5 1995
Young Lady Chatterly II 1 90 1.5 1985
---------------------------------------------------------------------------------------------------------------------
Sub Total Movies 104.5
--------------------------------------------------------------------------------------------------
TOTAL ALL PROGRAMMING 877.0
--------------------------------------------------------------------------------------------------
</TABLE>
83.
<PAGE>
DENTON HALL
SCHEDULE 6
----------
Clause 10.5
-----------
1. In this Schedule the following expressions shall have the following
meanings:
(a) "the Annual Quota": the maximum number of Programme Hours of
Playboy Programmes which the Company shall be obliged to licence
from the Licensor in each year following the Effective Date and
which shall be fifty (50) Programme Hours per year;
(b) "the Shortfall": the amount by which the aggregate amount of the
licence fees (other than amounts paid by the Licensor to third
party licensors for the right to transmit Third Party Programmes
in the Service and reimbursed to the Licensor by the Company
hereunder) received by the Licensor prior to the Effective Date
pursuant to Clauses 7, 8 and 10 is less than the Minimum Amount.
2. The total number of Programme Hours of Playboy Programmes which is to be
licensed by the Company pursuant to Clause 10.5 ("the Total Number")
shall be calculated by dividing the Shortfall by 13,158 (thirteen
thousand one hundred and fifty-eight).
3. The maximum period during which the provisions of Clause 10.5 shall
continue in force following the Effective Date shall be determined by
dividing the Total Number by the Annual Quota.
84.
<PAGE>
DENTON HALL
SCHEDULE 7
----------
Clause 6.8
----------
Categories that are not acceptable for advertising are firearms (or
ads from any gun lobby organisation) and other weapons, explosives
or fireworks, massage parlours, telephone sex lines, sex clubs,
sexually explicit (e.g. adult bookstore, X or NC-17 or similarly
rated hardcore) audio-visual products, sex toys, materials depicting
graphic sexual conduct, violence, sadism, sadomasochism, bondage,
incest, bestiality or child pornography, classified advertising,
psychics or similar, religious organisations and cults.
85.
<PAGE>
SIGNED by )
)
for and on behalf of )
THE LICENSOR )
SIGNED by Roger Luard ) /s/ Roger Luard
)
for and on behalf of )
THE COMPANY )
79.
<PAGE>
FROM: PLAYBOY ENTERTAINMENT GROUP, INC.
of 9242 Beverly Boulevard
Beverly Hills
California 90210
United States of America
("the Licensor")
TO: PLAYBOY TV UK/BENELUX LIMITED
of Twyman House
16 Bonny Street
London NW1 9PG
("the Company")
Dated January 1995
Dear Sirs,
We refer to the Programme Supply Agreement which you are proposing to enter into
with us today ("the Agreement"). Words and expressions used in this letter
agreement and defined in the Agreement shall have the respective meanings
ascribed to them in the Agreement.
In consideration of the Company agreeing to pay to us upon signature hereof the
sum of (Pounds)1 (receipt of which is hereby acknowledged) and of the Company
hereby agreeing to enter into the Agreement today, the Licensor hereby agrees
and undertakes with the Company that the Licensor shall notwithstanding the
provisions of the Agreement:
(a) licence and deliver to the Company in the First Year and in the second Year
such number (which shall be in excess of the Minimum Number of Hours in
respect of the First Year and in respect of the second Year) of Programme
Hours of Programmes as may from time to time be required by the Scheduler
for first transmission in the Service ("the Additional Programme Hours");
and
(b) perform its obligations under paragraph (a) above at no additional cost,
charge or expense to the Company over and above (i) the Basic Licence Fee
payable under the Agreement in respect of the First Year and the second
Year and (ii) any costs and expenses of the kind payable by the Company
under Clauses 5 and 6 of the Agreement which shall during the First Year
and the second Year also be payable in relation to the Additional Programme
Hours, but otherwise it is hereby agreed by the parties that all of the
terms and conditions of the Agreement (including without limitation the
provisions of Clauses 2 and 4 of the Agreement) shall apply to the
licensing, supply and delivery by the Licensor of the Additional Programme
Hours under this letter agreement.
In the event of any conflict between the terms of this letter agreement and the
terms of the Agreement, the terms of this letter agreement shall prevail.
1
<PAGE>
This letter agreement shall be governed by and construed in all respects in
accordance with English law and the parties agree to submit to the exclusive
jurisdiction of the English Courts as regards any claim or matter arising in
relation to this letter agreement. The Licensor hereby appoints O'Melveny &
Myers of 10 Finsbury Square, London EC2A 1LA as its authorised agent for the
purpose of accepting service of process for all purposes in connection with this
letter agreement.
Please signify your agreement to and acceptance of the foregoing by signing and
returning to us the enclosed duplicate of this letter.
Yours faithfully,
.......................
for and on behalf of
PLAYBOY ENTERTAINMENT GROUP, INC
Agreed and Accepted:
.......................
for and on behalf of
PLAYBOY TV UK/BENELUX LIMITED
2
<PAGE>
DENTON HALL
Certificate No: 1 Amount (pound) 243
PLAYBOY TV UK/BENELUX LIMITED
-----------------------------
Incorporated in England No.3,000,033
Registered Office:
5 Chancery Lane, London EC4A 1BU
LOAN STOCK CERTIFICATE
----------------------
Issue of Variable Loan Stock due the 31st day of December 1999 representing a
Principal Sum of (pound) 20,000,000 under the authority of the Memorandum of
Association of the Company and pursuant to a resolution of the Board of
Directors of the Company made on 26th January 1995.
THIS IS TO CERTIFY that Flextech 1992 Plc is the registered holder of
(pound) 243 Loan Stock which is issued with the benefit of and subject to the
Conditions annexed hereto.
Interest at 3% above LIBOR, compounded semi-annually, is payable on the Loan
Stock annually on the 31st December in each year, all as more particularly
described in and subject to the said Conditions.
The Loan Stock and the Conditions annexed hereto shall be construed and take
effect in all respects in accordance with the laws of England.
IN WITNESS WHEREOF this Deed has been duly executed;
EXECUTED as a DEED )
by Playboy TV UK/Benelux Limited )
in the presence of: )
Director /s/ Mark Lewis
/s/ Fairlie Anderson
Fairlie Anderson
Denton Hall
5 Chancery Lane
Clifford's Inn Director/Secretary /s/ Roger Luard
London EC4A 1BU
Note: (1) This certificate must be surrendered at the Company's principal place
of business before any transfer of this Loan Stock will be registered
or a new Certificate issued in exchange.
1
<PAGE>
DENTON HALL
(2) Transfer of this Loan Stock is subject to restrictions.
2
<PAGE>
DENTON HALL
CONDITIONS
----------
1. Definitions
1.1 The following words and expressions shall have the following meanings:
"Company": Playboy TV UK/Benelux Limited;
"LIBOR": the three month London Interbank Offered Rate for Sterling
deposits, as published in the Financial Times on the relevant Quarter Day
on the first business day of each period in respect of which interest is to
be calculated pursuant to Condition 3.1;
"Principal Sum": the principal sum referred to on the face of the Loan
Stock Certificate to which these Conditions are attached together with the
amount of any interest which is not paid when due pursuant to condition
3.2;
"Shareholders Agreement": an agreement made effective 12th January 1995
between Continental Shelf 16 Limited, Playboy Enterprises Group, Inc. and
the Company relating to the Management and funding of the Company;
"Stockholder": the registered holder for the time being of the Loan Stock;
"Transfer": the meaning ascribed thereto in the Shareholders Agreement;
1.2 References to provisions of the Companies Act 1985 are to be construed as
references to those provisions as from time to time amended and re-enacted.
Headings are for ease of reference only and shall not affect the
construction hereof.
2. Covenant to Repay
2.1 The Company shall pay to the Stockholder the Principal Sum together with
accrued unpaid interest to that date on the earlier of:-
(i) as soon as possible after issue of this Loan Stock as the cash flow
position of the Company shall permit (as determined by the Board of
the Company in accordance with clause 8.2 of the Shareholders
Agreement); or
(ii) on the 31st December 1999 ("the Repayment Date") which date shall,
if the Board of the Company resolves in accordance with clause 8.2
of the Shareholders Agreement that the cashflow position of the
Company does not permit payment of all or any of the Principal Sum
on such date, shall in relation to any such unpaid sum, be
automatically extended to 31st December 2000 (and if another such
resolution is past, 31 December 2001) and thereafter be
3
<PAGE>
DENTON HALL
repayable on receipt by the Company of 30 days written notice from the
Stockholder; or
(iii) on such earlier date as the Principal Sum hereby covenanted to be paid
shall become payable in accordance with these Conditions.
2.2 The Company may at any time, repay any or all of the Principal Sum.
3. Interest
3.1 Subject to clause 8.2 of the Shareholders Agreement and Clause 3.2 of these
Conditions until payment in full of the Principal Sum the Company shall pay
the Stockholder interest calculated and compounded semi-annually on each
30th June and 31st December in respect of the immediately following six
calendar month period on the principal amount of the Loan Stock outstanding
from day to day at 3% (three percent) above LIBOR. Subject as hereinafter
provided interest shall be paid annually in arrears on 31st December in
each year the first such payment calculated from the date of issue of the
Loan Stock to be made on 31st December 1996.
3.2 The Company may at its discretion decide to roll up interest otherwise
payable pursuant to this clause in which case the provisions of condition
3.3 shall apply. Such non-payment shall not constitute an Event of Default.
3.3 Any interest which is rolled up in accordance with Clause 3.2 shall with
effect from the date on which such interest became due be added to and form
part of the Principal Sum and interest shall accrue thereon accordingly.
3.4 The Company hereby covenants with the Stockholders that it will pay no
dividends and make no distribution of any kind whatsoever unless and until
the entire Principal Sum together with all accrued interest thereon
(including, for the avoidance of doubt, any interest which has been
capitalised pursuant to clause 3.3) shall have been repaid to the
Stockholders.
3.5 Payment of interest and repayment of any amount of the Principal Sum shall
be made after deduction of United Kingdom taxation (where appropriate).
4. Events of Default
The Principal Sum shall immediately become repayable in full together with
all unpaid interest thereon to the date of payment on the happening of any
of the following events or any event which the lapse of time or the giving
of notice or the fulfilment of any condition might become or give rise to
such event:
(a) the Principal Sum or any interest thereon not being paid by the
Company as and when the same has become due and payable pursuant to
clause 3 provided that
4
<PAGE>
DENTON HALL
the Board of the Company shall have approved the payment of interest
pursuant to clause 8.2 of the Shareholders' Agreement and such payment
would not result in a breach of clause 3.4 of these Conditions; or
(b) any meeting of creditors of the Company being held or any
arrangement, compromise or composition with or for the benefit of its
creditors (including any voluntary arrangement as defined in the
Insolvency Act 1986) being proposed or entered into by or in relation
to the Company; or
(c) a supervisor, receiver, administrator, administrative receiver or
other encumbrancer taking possession of or being appointed over or in
relation to any distress, execution or other process being levied or
enforced (and not being discharged within seven days) upon the whole
or any substantial part of the assets of the Company;
(d) the Company ceasing to carry on business; or
(e) a meeting being convened for the purpose of considering a resolution,
for the making of an administration order, the winding-up, bankruptcy,
or dissolution of the Company;
5. Register of Loan Stock
The Company shall keep a register of Stockholders and enter therein the
issue and all transfers and changes of ownership of this Loan Stock. The
said register may be closed at such times and for such periods as the
Company may from time to time determine provided that it shall not be
closed for more than 7 days in any year.
6. Transfers
6.1 No Stockholder may Transfer any of their Loan Stock unless the Transfer
is permitted by or made in accordance with the provisions of the
Shareholders Agreement.
6.2 A Transfer of this Loan Stock shall be in writing under the hand of the
transferor. The transfer instrument shall be lodged with the Company
together with such evidence of the title of the transferor (including
production of this Loan Stock Certificate) as the Company may reasonably
require and thereupon and transferee shall be registered as the holder
hereof. The Company shall be entitled to retain the transfer instrument.
6.3 "The Loan Stock represented by this Certificate is held and may only be
transferred by the registered owner subject to the terms of the
Shareholders Agreement.
5
<PAGE>
DENTON HALL
7. Sole Holder
-----------
The Company shall recognise and treat the Stockholder as the sole absolute
owner hereof and as alone entitled to give and receive effectual discharges
for the moneys hereby covenanted to be paid. The Company shall not be bound
by or be compelled in any way to recognise (even when having notice hereof)
any equitable, contingent, future or partial interest in this Loan Stock or
any interest in any fractional part hereof or any other rights in respect
of the entirety thereof other than in the registered Stockholder.
8. Set off, etc.
-------------
Subject always to clause 6 the moneys hereby covenanted to be paid shall be
paid and this Loan Stock shall be transferable without regard to any set-
off cross-claim or equities between the Company and the original or any
intermediate Stockholder and the receipt of the Stockholder shall be a good
discharge to the Company.
9. Payment
-------
The Principal Sum and interest due and payable on this Loan Stock will be
paid at the principal place of business of the Company. Payment of such
moneys may be made, at the election of the receiving Stockholders either by
international wire transfer or by cheque to the Stockholder at its
registered address or to such other person or address as the Stockholder
may request in writing and if posted shall be sent by pre-paid letter at
the risk of the Stockholder. Payment of any such cheque shall for all
purposes be deemed to be payment and satisfaction of the Principal Sum or
interest represented thereby.
10. Replacement
-----------
If this Loan Stock Certificate is worn out, defected, lost or destroyed it
may be replaced on such terms as to evidence, identity, indemnity and
expense incurred by the Company in investigating or verifying title as the
Directors of the Company shall think fit provided that in the case of
defacement of this Loan Stock Certificate it must be surrendered before the
new Certificate is issued. Any stamp duty payable on such renewal shall be
borne by the Stockholder.
11. Notices
-------
11.1 Any notice or other communication given or made hereunder shall be in
writing and, without prejudice to the validity of any other method or
service, may be delivered personally or by courier or sent by facsimile
transmission or by prepaid recorded delivery letter (airmail if overseas),
address as follows:
(a) if to Company, at its registered office for the time being;
6
<PAGE>
DENTON HALL
(b) if to a Stockholder at its address as entered for the time being on
the register of Loan Stock.
11.2 Any such notice or other communication shall be deemed to have been duly
served, given or made (i) in the case of posting, 96 hours after the
envelope containing such notice was posted and proof that any such envelope
was properly addressed, prepared, registered and posted shall be sufficient
evidence that such notice or other communication has been duly served,
given or made; or (ii) in the case of delivery, when left at the relevant
address; or (iii) in the case of facsimile transmission one business day
after transmission.
7
<PAGE>
DENTON HALL
Certificate No. 2 Amount (Pounds)57
PLAYBOY TV UK/BENELUX LIMITED
-----------------------------
Incorporated in England No. 3,000,033
Registered Office:
5 Chancery Lane, London EC4A 1BU
LOAN STOCK CERTIFICATE
----------------------
Issue of Variable Loan Stock due the 31st day of December 1999 representing a
Principal Sum of (pound)20,000,000 under the authority of the Memorandum of
Association of the Company and pursuant to a resolution of the Board of
Directors of the Company made on 26th January 1995.
THIS IS TO CERTIFY that Playboy Entertainment Group Inc is the registered holder
of (pound)57 Loan Stock which is issued with the benefit of and subject to the
Conditions annexed hereto.
Interest at 3% above LIBOR, compounded semi-annually, is payable on the Loan
Stock annually on the 31st December in each year, all as more particularly
described in and subject to the said Conditions.
The Loan Stock and the Conditions annexed hereto shall be construed and take
effect in all respects in accordance with the laws of England.
IN WITNESS WHEREOF this Deed has been duly executed;
EXECUTED as a DEED )
by Playboy TV UK/Benelux Limited )
in the presence of: )
/s/ Fairlie Anderson
Fairlie Anderson Director /s/ Mark Lewis
Denton Hall
5 Chancery Lane Director/Secretary /s/ Roger Luard
Clifford's Inn
London
EC4A 1BU
1
<PAGE>
DENTON HALL
Note: (1) This certificate must be surrendered at the Company's principal
place of business before any transfer of this Loan Stock will be
registered or a new Certificate issued in exchange.
(2) Transfer of this Loan Stock is subject to restrictions.
2
<PAGE>
DENTON HALL
CONDITIONS
----------
1. Definitions
-----------
1.1 The following words and expressions shall have the following meanings:
"Company": Playboy TV UK/Benelux Limited;
"LIBOR": the three month London Interbank Offered Rate for Sterling
deposits, as published in the Financial Times on the relevant Quarter Day
on the first business day of each period in respect of which interest is to
be calculated pursuant to Condition 3.1;
"Principal Sum": the principal sum referred to on the face of the Loan
Stock Certificate to which these Conditions are attached together with the
amount of any interest which is not paid when due pursuant to condition
3.2;
"Shareholders Agreement": an agreement made effective 12th January 1995
between Continental Shelf 16 Limited, Playboy Enterprises Group, Inc. and
the Company relating to the management and funding of the Company;
"Stockholder": the registered holder for the time being of the Loan Stock;
"Transfer": the meaning ascribed thereto in the Shareholders Agreement;
1.2 References to provisions of the Companies Act 1985 are to be construed as
references to those provisions as from time to time amended and re-enacted.
Headings are for ease of reference only and shall not affect the
construction hereof.
2. Covenant to Repay
-----------------
2.1 The Company shall pay to the Stockholder the Principal Sum together with
accrued unpaid interest to that date on the earlier of:
(i) as soon as possible after issue of this Loan Stock as the cash
flow position of the Company shall permit (as determined by the
Board of the Company in accordance with clause 8.2 of the
Shareholders Agreement), or
(ii) on the 31st December 1999 ("the Repayment Date") which date
shall, if the Board of the Company resolves in accordance with
clause 8.2 of the Shareholders Agreement that the cashflow
position of the Company does not permit payment of all or any
of the Principal Sum on such date, shall in relation to any
such unpaid sum, be automatically extended to 31st December
2000 (and if another such resolution is passed, 31 December
2001) and thereafter be
3
<PAGE>
DENTON HALL
repayable on receipt by the Company of 30 days written notice from
the Stockholder; or
(iii) on such earlier date as the Principal Sum hereby covenanted to be
paid shall become payable in accordance with these Conditions.
2.2 The Company may at any time, repay any or all of the Principal Sum.
3. Interest
3.1 Subject to clause 8.2 of the Shareholders Agreement and Clause 3.2 of these
Conditions until payment in full of the Principal Sum the Company shall pay
the Stockholder interest calculated and compounded semi-annually on each
30th June and 31st December in respect of the immediately following six
calendar month period on the principal amount of the Loan Stock outstanding
from day to day at 3% (three per cent) above LIBOR. Subject as hereinafter
provided interest shall be paid annually in arrears on 31st December in
each year the first such payment calculated from the date of issue of the
Loan Stock to be made on 31st December 1996.
3.2 The Company may at its discretion decide to roll up interest otherwise
payable pursuant to this clause in which case the provisions of condition
3.3 shall apply. Such non-payment shall not constitute an Event of Default.
3.3 Any interest which is rolled up in accordance with Clause 3.2 shall with
effect from the date on which such interest became due be added to and form
part of the Principal Sum and interest shall accrue thereon accordingly.
3.4 The Company hereby covenants with the Stockholders that it will pay no
dividends and make no distribution of any kind whatsoever unless and until
the entire Principal Sum together with all accrued interest thereon
(including, for the avoidance of doubt, any interest which has been
capitalised pursuant to clause 3.3) shall have been repaid to the
Stockholders.
3.5 Payment of interest and repayment of any amount of the Principal Sum shall
be made after deduction of United Kingdom taxation (where appropriate).
4. Events of Default
The Principal Sum shall immediately become repayable in full together with
all unpaid interest thereon to the date of payment on the happening of any
of the following events or any event which will with the lapse of time or
the giving of notice or the fulfilment of any condition might become or
give rise to such an event.
(a) the Principal Sum or any interest thereon not being paid by the
Company as and when the same has become due and payable pursuant to
clause 2 or 3 provided
4
<PAGE>
DENTON HALL
that the Board of the Company shall have approved the payment of
interest pursuant to clause 8.2 of the Shareholders' Agreement and such
payment would not result in a breach of clause 3.4 of these Conditions;
or
(b) any meeting of creditors of the Company being held or any arrangement,
compromise or composition with or for the benefit of its creditors
(including any voluntary arrangement as defined in the Insolvency Act
1986) being proposed or entered into by or in relation to the Company;
or
(c) a supervisor, receiver, administrator, administrative receiver or other
encumbrancer taking possession of or being appointed over or in
relation to any distress, execution or other process being levied or
enforced (and not being discharged within seven days) upon the whole or
any substantial part of the assets of the Company;
(d) the Company ceasing to carry on business; or
(e) a meeting being convened for the purpose of considering a resolution,
for the making of an administration order, the winding-up, bankruptcy,
or dissolution of the Company;
5. Register of Loan Stock
The Company shall keep a register of Stockholders and enter therein the
issue and all transfers and changes of ownership of this Loan Stock. The
said register may be closed at such times and for such periods as the
Company may from time to time determine provided that it shall not be closed
for more than 7 days in any year.
6. Transfers
6.1 No Stockholder may Transfer any of their Loan Stock unless the Transfer is
permitted by or made in accordance with the provisions of the Shareholders
Agreement.
6.2 A Transfer of this Loan Stock shall be in writing under the hand of the
transferor. The transfer instrument shall be lodged with the Company
together with such evidence of the title of the transferor (including
production of this Loan Stock Certificate) as the Company may reasonably
require and thereupon and transferee shall be registered as the holder
hereof. The Company shall be entitled to retain the transfer instrument.
6.3 "The Loan Stock represented by this Certificate is held and may only be
transferred by the registered owner subject to the terms of the
Shareholders Agreement.
5
<PAGE>
DENTON HALL
7. Sole Holder
-----------
The Company shall recognise and treat the Stockholder as the sole absolute
owner hereof and as alone entitled to give and receive effectual
discharges for the moneys hereby convenanted to be paid. The Company shall
not be bound by or be compelled in any way to recognise (even when having
notice hereof) any equitable, contingent, future or partial interest in
this Loan Stock or any interest in any fractional part hereof or any other
rights in respect of the entirety thereof other than in the registered
Stockholder.
8. Set off, etc.
-------------
Subject always to clause 6 the moneys hereby covenanted to be paid shall
be paid and this Loan Stock shall be transferable without regard to any
set-off cross-claim or equities between the Company and the original or
any intermediate Stockholder and the receipt of the Stockholder shall be a
good discharge to the Company.
9. Payment
-------
The Principal Sum and interest due and payable on this Loan Stock will be
paid at the principal place of business of the Company. Payment of such
moneys may be made, at the election of the receiving Stockholders either
by international wire transfer or by cheque to the Stockholder at its
registered address or to such other person or address as the Stockholder
may request in writing and if posted shall be sent by pre-paid letter at
the risk of the Stockholder. Payment of any such cheque shall for all
purposes be deemed to be payment and satisfaction of the Principal Sum or
interest represented thereby.
10. Replacement
-----------
If this Loan Stock Certificate is worn out, defected, lost or destroyed it
may be replaced on such terms as to evidence, identity, indemnity and
expense incurred by the Company in investigating or verifying title as the
Directors of the Company shall think fit provided that in the case of
defacement of this Loan Stock Certificate it must be surrendered before
the new Certificate is issued. Any stamp duty payable on such renewal
shall be borne by the Stockholder.
11. Notices
-------
11.1 Any notice or other communication given or made hereunder shall be in
writing and, without prejudice to the validity of any other method or
service, may be delivered personally or by courier or sent by facsimile
transmission or by prepaid recorded delivery letter (airmail if overseas),
address as follows:
(a) if to Company, at its registered office for the time being;
6
<PAGE>
DENTON HALL
(b) if to a Stockholder at its address as entered for the time being on
the register of Loan Stock.
11.2 Any such notice or other communication shall be deemed to have been duly
served, given or made (i) in the case of posting, 96 hours after the
envelope containing such notice was posted and proof that any such
envelope was properly addressed, prepared, registered and posted shall be
sufficient evidence that such notice or other communication has been duly
served, given or made; or (ii) in the case of delivery, when left at the
relevant address; or (iii) in the case of facsimile transmission one
business day after transmission.
7
<PAGE>
DENTON HALL
THIS DEED is made the 26th day of January 1995 by PLAYBOY TV UK/BENELUX LIMITED
("the Company") registered in England with number 3000033 whose registered
office is at 5 Chancery Lane, Clifford's Inn, London EC4A 1BU
WHEREAS:
By a Resolution of its Board of Directors (being duly empowered in that behalf
by the Company's Memorandum and Articles of Association) passed on 26th January
1995 the Company has created (pound)20,000,000 nominal of Variable Rate Loan
Stock 1999 to be constituted in manner hereinafter appearing.
NOW THIS DEED WITNESSES as follows:
1. Interpretation
--------------
1.1 In this Deed the following words and expressions shall have the following
meanings:
"Register": the register of Stock to be kept by the Company;
"Stock": the (pound)20,000,000 nominal of Variable Rate Loan Stock 1999 of
the Company hereby constituted or as the context may require the nominal
amount thereof for the time being issued and outstanding or a specific
portion thereof;
"this Deed": this Deed and the Schedules hereto (as from time to time
modified in accordance with the provisions herein contained) and shall
include all Deeds and Instruments supplemental to this Deed;
1.2 Words denoting the singular number include the plural and vice versa.
Words denoting natural persons include corporations.
1.3 Unless the context otherwise requires, any words and expressions defined in
the Companies Act 1985 (as amended) shall bear the same meanings in this
Deed.
1.4 Headings are for ease of reference only and shall not affect the
construction of this Deed.
2. The Stock
---------
The principal amount of the Stock is limited to (pound)20,000,000 and shall
be known as "Variable Rate Loan Stock 1999". All of the Stock shall rank
pari passu equally and rateably without discrimination or preference as an
insecured obligation of the Company.
1
<PAGE>
DENTON HALL
3. Terms of Issue
--------------
The Stock may be issued solely in accordance with the provisions of the
Agreement and of this Deed and the proceeds of issue thereof shall be
receivable by the Company and shall be applied as the Company in its
absolute discretion shall determine.
4. Certificates for Stock
----------------------
4.1 Every Stockholder from time to time shall be entitled to a Certificate
stating the number and amount of stock held by him but so that joint
holders shall be entitled to only one Certificate in respect of the Stock
held jointly by them which Certificate shall be delivered to the joint
holder whose name stands first in the Register.
4.2 The Certificates shall be in or substantially in the form set out in
Schedule 1 hereto and shall have attached thereto Conditions in or
substantially in the form also set out in that Schedule. Every such
Certificate shall be executed as a deed. The Company shall comply with the
terms of the Certificates and shall perform and observe the said Conditions
attached thereto and the Stock shall be held subject to and with the
benefit of such Conditions which Conditions shall be deemed to be
incorporated in this Instrument and shall be binding on the Company and the
holders of the Stock and all persons claiming through or under them
respectively.
5. Governing Law
-------------
This Deed shall be governed by and construed in all respects in accordance
with English law and the parties agree to submit to the non-exclusive
jurisdiction of the English Courts as regards any claim or matter arising
in relation to this Deed.
IN WITNESS whereof this Deed has been duly executed the day and year first above
written.
EXECUTED AS A DEED ) /s/ Roger Luard
by PLAYBOY TV )
UK/BENELUX LIMITED )
in the presence of: ) /s/ Mark Lewis
/s/ Fairlie Anderson
Fairlie Anderson
Denton Hall
5 Chancery Lane
Clifford's Inn
London
EC4A IBU
2
<PAGE>
DENTON HALL
INDEX
-----
<TABLE>
<CAPTION>
Page No.
--------
<C> <S> <C>
1. Interpretation 1
2. Licence 3
3. Quality Control 6
4. Use of the Trade Marks 7
5. Ownership of the Trade Marks 8
6. Infringements 10
7. Indemnity by Licensee 11
8. Termination 12
9. Post Termination 13
10. No Assignment 13
11. Force Majeure 14
12. Invalidity etc 14
13. Waivers, Remedies Cumulative, Amendments. etc. 14
14. Costs 15
15. Notices etc 15
16. Governing Law 16
</TABLE>
Schedule - Part 1 - Registered Trade Marks
Part 2 - Unregistered Trade Marks
<PAGE>
DENTON HALL
THIS DEED is made the day of 1995
(but with effect from 12th January 1995)
BETWEEN:
(1) PLAYBOY ENTERPRISES, INC of 680 North Lake Shore Drive Chicago Illinois
60611 United States of America ("the Licensor"); and
(2) PLAYBOY TV UK/BENELUX LIMITED ("the Licensee") registered in England with
number 3000033 whose address is Twyman House, 16 Bonny Street, London NW1
9PG.
WHEREAS:
Pursuant to the Shareholders' Agreement and the Programme Supply Agreement, the
Licensor, who is the proprietor of the Playboy trade marks, wishes to permit the
Licensee to use the Playboy trade marks in relation to a satellite delivered
television service and programmes transmitted in such service on the terms of
this Deed
NOW IT IS HEREBY AGREED as follows:
1. Interpretation
--------------
1.1 In this Deed (including the Recital hereto) the following words and
expressions shall have the following meanings:
"Flextech": Continental Shelf 16 Limited, a company registered in England
and Wales under no. 3005499;
"Permitted Licensee": any person who may be appointed by the Licensee to
market, promote, sell, distribute or manage subscribers to the Service in
any country within the Territory;
<PAGE>
DENTON HALL
"Programme": any television programme which is, or is scheduled to be, broadcast
or transmitted in the Service;
"the Programme Supply Agreement": the programme supply agreement of even date
herewith which is to be entered into between Playboy Entertainment Group, Inc.
and the Licensee;
"Promotional Material": any audio-visual, visual and/or audio material which is
intended to promote the Service or the transmission of particular Programmes in
the Service including but not limited to channel generic promotions, programme
strand generic promotions and programme specific promotions;
"the Service": the television programme service which is to be provided for
reception within the Territory by the Licensee in accordance with the
Shareholders' Agreement:
"the Shareholders' Agreement": an agreement of even date herewith between
Flextech, Playboy Entertainment Group, Inc. and the Licensee relating to the
Licensee;
"Television Service": any television service or channel (other than the
Service) which is broadcast, distributed or transmitted by any means (including
but not limited to all forms of terrestrial, satellite and cable television
transmission, broadcast and delivery) whether now known or hereafter invented
and is capable of being received in any country within the Territory (whether or
not that service or channel is primarily intended for reception outside the
Territory);
"the Territory": the United Kingdom of Great Britain and Northern Ireland
(irrespective of whether Northern Ireland remains part of the United Kingdom),
the Republic of Ireland, Belgium, Luxembourg, The Netherlands and any other
country or countries in Europe to which the scope of this Deed is extended in
accordance with Clause 2.2;
2.
<PAGE>
DENTON HALL
"the Trade Marks": the registered trade marks and any service marks listed
in Part 1 of the Schedule, the unregistered trade marks and service marks
listed in Part 2 of the Schedule together with any registered or
unregistered trade marks of the Licensor substantially similar to those
listed in the Schedule in any country to which the scope of the licence
granted under Clause 2.1 is extended pursuant to Clause 2.2;
"Transmission Period": shall have the meaning ascribed to it in the
Programme Supply Agreement.
1.2 In this Deed all words defined in the Shareholders Agreement shall when
used herein, save where otherwise expressly provided, bear the same
meaning as in the Shareholders Agreement.
1.3 References in this Deed to statutes, bye-laws, regulations and delegated
legislation shall include any statute, bye-law, regulation or delegated
legislation in force at the date hereof whether before or after the date
hereof modifying, re-enacting, extending or made pursuant to the same or
which is modified, re-enacted or extended by the same or pursuant to
which the same is made.
1.4 Clause headings in this Deed are for ease of reference only and shall not
be taken into account in construing this Deed.
1.5 References in this Deed to Clauses, sub-clauses, paragraphs and Schedules
are references to those contained in this Deed.
1.6 The Schedules to this Deed are an integral part of this Deed and reference
to this Deed includes reference thereto.
2. Licence
-------
2.1 In consideration of the Licensee hereby agreeing to pay to the Licensor
the sum of One Pound ((Pounds)1) upon signature hereof (receipt of which
is hereby acknowledged) and to enter into the Programme Supply Agreement
immediately following the signature of this Deed, the
3.
<PAGE>
DENTON HALL
Licensor grants to the Licensee, on the terms set out in this Deed, an
exclusive licence to use the Trade Marks in the Territory in relation to
the broadcast, transmission and distribution of Programmes and Promotional
Material in or as part of the Service and in relation to the promotion and
marketing of the Service and of the Programmes in any medium or media
whatsoever.
2.2 If at any time during the term of this Deed and in accordance with Clause
2.6 of the Shareholders Agreement the Licensee or any subsidiary (within
the meaning of Section 736 of the Companies Act 1985) of the Licensee
launches its television programme service in any country in Europe which
prior to such launch is not within the Territory, then with the prior
written consent of the Licensor:
(a) the licence granted under sub-clause 2.1 shall automatically be
extended to that country;
(b) all references to the Territory in this Deed shall thereafter be
deemed to include that country; and
(c) the list of trade marks set out in the Schedule shall thereafter be
deemed to include all registered or unregistered trade marks in that
country substantially similar to those listed in the Schedule.
2.3 The Licensee shall be entitled to grant sub-licences to any Permitted
Licensee of such of the rights granted under sub-clause 2.1 in respect of
any country in the Territory as may be necessary for the marketing,
promotion, sale or distribution of or management of subscribers to the
Service in that country provided that:
(a) any sub-licence contains obligations on the Permitted Licensee
relating to the use and protection of the trade marks at least
equivalent to the obligations of the Licensee under this Deed;
4.
<PAGE>
DENTON HALE
(b) the Licensee informs the Licensor within one month of the
execution of each sub-licence that it has been signed;
(c) the Licensee remains responsible for all acts and omissions of each
Permitted Licensee as though they were by the Licensee;
(d) on termination of this Deed for whatever reason any sub-licence shall,
at the option of the Licensor, either be assigned to the Licensor or
terminated by the Licensee.
2.4 The licence granted under sub-clause 2.1 shall continue in force until any
termination of this Deed in accordance with the provisions of Clause 8.
2.5 The Licensee undertakes that during the term of this Deed it will not be
involved in providing a television programme service using the Trade Marks
which is intended for general reception outside the Territory.
2.6 The Licensor undertakes that during the term of this Deed it will not
itself use or permit any other person to use the Trade Marks or any
confusingly similar designation within the Territory in relation to any
Television Service or any programmes or other items of any description
included in any Television Service provided that use of the Trade Marks or
any confusingly similar designation in relation to any Television Service,
or any programmes or other items of any description included in any
Television Service, which is intended solely for reception in any country
or countries outside the Territory but which is also received in a country
or countries within the Territory shall not constitute a breach of this
clause so long as that Television Service was transmitted in encrypted
form and decoders designed to receive and decode such encrypted
transmissions are not made available to the general public within the
Territory by or with the authority of the Licensor or any other licensee
of any of the Trade Marks.
5.
<PAGE>
DENTON HALL
2.7 During the term of this Deed, any or all of the following shall not be used
on or in connection with the Service without the Licensor's prior written
consent:
(a) permutations of any or all of the Trade Marks;
(b) secondary marks derived from any of the Trade Marks; or
(c) new words, devices, designs, slogans or symbols derived from any of the
Trade Marks.
Upon such authorisation by the Licensor and use by the Licensee, each
such permutation, secondary mark, word, device, design, slogan and symbol
derived from any of the Trade Marks shall be the property of the Licensor
and shall be included as one of the Trade Marks subject to this Deed.
2.8 In the event that at any time during the term of this Deed the Licensee
creates or develops any advertising, promotion, packaging or trade dress
which is unique to the Service (collectively "Service Packaging"), it
shall be and remain the property of the Licensee. Accordingly, the Licensee
shall be free to use such Service Packaging throughout the world
(excluding the United States of America) but the Licensee shall within
thirty (30) days after the date of this Deed enter into a royalty-free
licence with Flextech and with the Licensor entitling each of them to use
such Service Packaging in perpetuity and throughout the world excluding
the Territory and further excluding (in the case of the licence granted to
Flextech) the United States of America.
3. Quality Control
---------------
All Programmes transmitted in the Service by the Licensee under or by
reference to the Trade Marks shall comply with the Programme Specification
(as defined in the Programme Supply Agreement).
6.
<PAGE>
DENTON HALL
4. Use of the Trade Marks
----------------------
4.1 The Licensee shall use the Trade Marks in the form stipulated by the
Licensor and shall include such trademark and copyright notices as the
Licensor may request and as are necessary for the protection of the
Licensor's ownership of the Trade Marks. The Licensee shall also observe
any reasonable directions given by the Licensor as to colours and size of
the representations of the Trade Marks and their manner and disposition in
connection with the Programmes, the Promotional Material and the Service.
Any additional goodwill which may attach to the Trade Marks and which
arises out of the Licensee's use of the Trade Marks under this Deed will
inure solely to the benefit of the Licensor. Save as expressly set out in
sub-clauses 2.1 and 2.2, the Licensee has not acquired and will not acquire
any proprietary rights in the Trade Marks by reason of this Deed.
4.2 The use of the Trade Marks by the Licensee shall at all times be in keeping
with and seek to maintain their distinctiveness and reputation as
determined by the Licensor.
4.3 Licensee hereby acknowledges that the trade names "Playboy" and "Playmate"
and the Trade Marks are the sole and exclusive property of the Licensor.
Licensee shall have the right to develop and distribute advertising,
publicity and promotional materials relating to the Programmes, provided,
however, that any such materials (other than material obtained directly
from Licensor) shall:
(a) clearly identify the Trade Marks with a legible credit line with the
wording "Playboy" (or the "Rabbit Head Design" or "The Playboy
Channel" or "Playboy at Night" or "Playboy Television" or "Playmate",
as the case may be) is the mark of and used with the permission of
Playboy Enterprises Inc." or such other words as Licensor may designate
not later than 60 days prior to the first transmission of the relevant
Programme(s) in the Service; and
7.
<PAGE>
DENTON HALL
(b) in no event may any advertising, publicity or promotional material
using the names of Licensor or any person appearing in a Playboy
Programme (as defined in the Programme Supply Agreement) be used to
constitute an endorsement, express or implied of any party, sponsor,
product or service (other than the Service).
Other than as expressly set forth in this Deed, Licensee shall make no use
of the Trade Marks or any confusingly similar designation without the
prior express written consent of Licensor in each instance. Licensee shall
also make no use whatsoever of any other trademark, trade name or service
mark that is the property of Licensor without the prior express written
consent of Licensor in each instance. Licensee similarly agrees that
it will not authorise or purport to authorise any third party to make any
such use except as set out in Clause 2.3, and it will expressly provide in
any applicable third party agreements that such third parties will only be
entitled to use such names and marks on material supplied to them by
Licensee in accordance with Licensee's rights hereunder.
4.4 Licensee may publicise and advertise telecasts of the Programmes or
(unless it is notified to the contrary prior to delivery of the relevant
Programme(s)) any person appearing therein in the Territory.
5. Ownership of the Trade Marks
----------------------------
5.1 The Licensor warrants that it is the proprietor of the Trade Marks and
that it is not aware that any of the Trade Marks or the use of any of them
on or in relation to Programmes or Promotional Material in the Territory
infringes or will infringe the rights of any third party.
5.2 The Licensor shall pay all renewal fees necessary to maintain the
registrations of the registered Trade Marks on the Register of Trade Marks
("the Register") during the term of this Deed.
8.
<PAGE>
DENTON HALL
5.3 The Licensee will on request give to the Licensor or its authorised
representative any information as to its use of the Trade Marks which the
Licensor may require and will during the term of this Deed render any
assistance reasonably required by the Licensor in maintaining the
registrations of the registered Trade Marks.
5.4 The Licensee will not make any representation or do any act which may be
taken to indicate that it has any right title or interest in or to the
ownership or use of any of the Trade Marks except under the terms of this
Deed, and acknowledges that nothing contained in this Deed shall give the
Licensee any right, title or interest in or to the Trade Marks save as
granted hereby.
5.5 Each party shall at its own expense, if required by the other, do all such
acts and execute all such documents as may be necessary to confirm the
licence granted hereunder in respect of any of the Trade Marks and to
record the Licensee as a registered user of the registered Trade Marks on
the trade marks register in any country within the Territory (including
such of the applications as mature into registrations during the term of
this Deed). The Licensee hereby agrees that any such entry on any trade
mark register may be cancelled by the Licensor on termination of this
Deed, for whatever reason, and that it will assist the Licensor so far as
may be necessary to achieve such cancellation including by executing any
necessary documents.
5.6 The Licensor shall indemnify the Licensee against all costs, damages,
liabilities, fees and expenses which it may suffer or incur and all claims,
actions and proceedings which may be made or brought against it, by any
person claiming that use of the Trade Marks by the Licensee in accordance
with this Deed infringes the rights of such person. The Licensee will
notify the Licensor of any such claims promptly and allow the Licensor to
control the defence thereof PROVIDED THAT, where the Licensee reasonably
considers that it may be adversely or materially prejudiced thereby, the
Licensee may elect to continue to be separately represented in the defence
thereof and (if the Licensee shall so elect) no such claim, action
9.
<PAGE>
DENTON HALL
or proceedings may be settled by the Licensor without the prior written
consent of the Licensee. The Licensee will also provide any assistance
reasonably requested by the Licensor at the Licensor's expense.
6. Infringements
-------------
6.1 Each party shall as soon as it becomes aware thereof give the other written
particulars of any use or proposed use by any other person, firm or company
of a trade name, trade mark or get-up or mode of promotion or advertising
which amounts or might amount either to infringement in the Territory of
the Licensor's registered rights in relation to the Trade Marks or to
passing-off.
6.2 Each party shall, as soon as it becomes aware that any other person, firm
or company alleges that the Trade Marks are invalid within the Territory or
that use of the Trade Marks infringes any rights of another party or that
the Trade Marks are otherwise attacked or open to attack within the
Territory, give the other written particulars.
6.3 The Licensee will at the request of the Licensor give full co-operation to
the Licensor in any action, claim or proceedings brought or threatened in
respect of the Trade Marks within the Territory and the Licensor shall
meet any reasonable expenses incurred by the Licensee in giving such
assistance.
6.4 The Licensor shall in the first instance have the conduct of all
proceedings relating to the Trade Marks and shall in its sole discretion
decide what action (if any) to take in respect of any infringement or
alleged infringement of the Trade Marks within the Territory or passing-off
or any other claim or counter-claim brought or threatened in respect of
the use or registration of the Trade Marks within the Territory.
6.5 If the Licensor does not take any action to protect the Trade Marks under
the provisions of Clause 6.4 within two months of the circumstances giving
rise to the need for such action coming to the
10.
<PAGE>
DENTON HALL
attention of the Licensor (or earlier if the Licensor indicates that it
does not intend to take such action) and if the Licensee receives advice
from experienced trade mark counsel that proceedings could stand a
reasonable chance of success, the Licensee shall, provided it has
consulted with the Licensor as to the bringing of proceedings, have the
option to commence proceedings at its own cost relating to the Trade Marks
to which the Licensor shall lend its name and reasonable assistance
subject to the Licensee reimbursing the Licensor for all costs and
expenses that the Licensor may reasonably incur and any award of costs
against it. All sums recovered by any such action representing damages
suffered by the Licensee or unreimbursed costs of the Licensee shall
belong to the Licensee.
6.6 The provisions of sub-clauses 6.1-6.5 inclusive shall also apply in
relation to any registered or unregistered trade mark of the Licensor
within the Territory which are substantially similar to the Trade Marks.
7. Indemnity by Licensee
----------------------
The Licensee shall indemnify the Licensor against all costs, damages,
liabilities, fees and expenses which it may suffer or incur and all claims,
actions and proceedings which may be made or brought against it as a
result of any breach by the Licensee of the provisions of this Deed. The
Licensor will notify the Licensee of any such claims promptly and allow
the Licensee to control the defence thereof PROVIDED THAT, where the
Licensor reasonably considers that it may be adversely or materially
prejudiced thereby, the Licensor may elect to continue to be separately
represented in the defence thereof and (if the Licensor shall so elect) no
such claim, action or proceedings may be settled by the Licensee without
the prior written consent of the Licensor.
11.
<PAGE>
DENTON HALL
8. Termination
-----------
8.l Either party may without prejudice to its other remedies terminate this
Deed forthwith by notice in writing to the other on or after the occurrence
of any of the following:
(a) the persistent commission of material breaches of this Deed by the
other party which are not capable of remedy; or
(b) the commission of a material breach of this Deed by the other party
which is capable of remedy (a "remediable breach") which shall not have
remedied within a period of one month after the party in breach has
been given notice in writing specifying that remediable breach and
requiring it to be remedied PROVIDED ALWAYS THAT the notice of
termination may not be given if that remediable breach is incapable of
remedy within that one month period and during that one month period
the party in breach shall diligently endeavour to remedy that
remediable breach; or
(c) a supervisor, receiver, administrator, administrative receiver or other
encumbrancer taking possession of or being appointed over or any
distress, execution or other process being levied or enforced (and not
being discharged within thirty days) upon the whole or any substantial
part of the assets of the other party PROVIDED ALWAYS THAT the
Licensor shall not be entitled to terminate this Deed under this sub-
clause 8.l(c) if Flextech shall notify the Licensor of its offer to
acquire the entire shareholding of Playboy Entertainment Group, Inc.,
or any Associate of Playboy Entertainment Group, Inc. in the Licensee
pursuant to Clause 8.5 of the Shareholders' Agreement; or
(d) any event analogous to any of the foregoing occurring in any
jurisdiction in relation to the other party.
12.
<PAGE>
DENTON HALL
8.2 Subject only to clause 9.2, this Deed shall automatically terminate
on:
(a) the date on which any termination of the Programme Supply Agreement by
the Licensee pursuant to Clause 10.2 or 10.3 of the Programme Supply
Agreement takes effect; or
(b) the date on which any termination of the Programme Supply Agreement by
the Licensor pursuant to Clause 10.2 of the Programme Supply Agreement
takes effect.
9. Post Termination
----------------
9.1 The termination of this Deed for whatever reason shall not affect any
provision of this Deed which is expressed to survive or operate in the
event of its termination and shall not prejudice or affect the rights of
either party against the other in respect of any breach of this Deed or in
respect of any moneys payable by one party to the other in relation to any
period prior to termination.
9.2 Upon the date on which any termination of this Deed for whatever reason
takes effect ("the Termination Date") the Licensee shall cease to make
any use of the Trade Marks save that in relation to Programmes whose
Transmission Period has not ended prior to the Termination Date the
Licensee shall continue to be entitled to make use of the Trade Marks for
so long as the Licensee continues to be entitled to transmit those
Programmes by virtue of Clause 10.6 of the Programme Supply Agreement.
10. No Assignment
-------------
The provisions of this Deed shall be binding on and enure to the benefit
of the successors of each party hereto provided that no party may agree to
assign, transfer, charge or otherwise dispose of or subcontract any of its
rights or obligations hereunder without the prior written consent of the
other party.
13.
<PAGE>
DENTON HALL
11. Force Majeure
-------------
Either party shall be excused from performance of its obligations under
this Deed if and to the extent that such performance is hindered or
prevented (directly or indirectly) by reason of any strike, lockout,
labour disturbance, government action, riot, armed conflict, accident,
unavailability or breakdown of normal means of transport, act of God or
any other matter whatsoever beyond the reasonable control of that party
(other than a breach of the provisions of this Deed by the other party).
12. Invalidity etc.
---------------
12.1 Should any provision of this Deed be or become ineffective for reasons
beyond the control of the parties, the parties shall use reasonable
efforts to agree upon a new provision which shall as nearly as possible
have the same commercial effect as the ineffective provision.
12.2 Any provision contained in this Deed or in any arrangement of which this
Deed forms part by virtue of which this Deed or such arrangement is subject
to registration under the Restrictive Trade Practices Act 1976 shall not
come into effect until the day following the date on which particulars of
this Deed and of any such arrangement have been furnished to the Office of
Fair Trading (or on such later date as may be provided for in relation to
any such provision) and the parties hereto agree to furnish such
particulars within three months of the date of this Deed.
13. Waivers, Remedies Cumulative, Amendments, etc.
----------------------------------------------
13.1 No failure or delay by any of the parties hereto in exercising any right,
power or privilege under this Deed shall operate as a waiver thereof nor
shall any single or partial exercise by any of the parties hereto of any
right, power or privilege preclude any further exercise thereof or the
exercise of any other right, power or privilege.
14.
<PAGE>
DENTON HALL
13.2 The rights and remedies herein provided are cumulative and not
exclusive of any rights and remedies provided by law.
13.3 No provision of this Deed may be amended, modified, waived, discharged or
terminated, otherwise than by the express written agreement of the parties
hereto nor may any breach of any provision of this Deed be waived or
discharged except with the express written consent of the party not in
breach.
14. Costs
-----
Each of the parties hereto shall pay its own costs, charges and expenses
connected with the preparation and implementation of this Deed and the
transactions contemplated by it.
15. Notices
-------
15.1 Any notice or other communication given or made under this Deed shall be
in writing and, without prejudice to the validity of any other method of
service, may be delivered personally or by courier or sent by facsimile
transmission and by prepaid airmail letter, addressed as follows:
(a) if to the Licensor to:
The General Counsel of the Licensor
680 North Lake Shore Drive
Chicago IL 60611
United States of America
Facsimile transmission number: (O101 312) 266 2042
with a copy to:
The President of Playboy Entertainment, Inc.
9242 Beverly Boulevard
Beverly Hills
California 90210
United States of America
Facsimile transmission number: (0101 310) 246 4065
15.
<PAGE>
DENTON HALL
(b) if to the Licensee to:
Twyman House
16 Bonny Street
London NW1 9PG
Facsimile transmission number: (0171) 911 0145
with a copy to:
The Chief Executive
Flextech plc
13 Albemarle Street
London
W1X 3HA
Facsimile transmission number: (0171) 499 7553
or to such other address, or facsimile transmission number as the
relevant addressee may hereafter by notice hereunder substitute.
15.2 Any such notice or other communication shall be deemed to have been duly
served, given or made (i) in the case of posting, 96 hours after the
envelope containing such notice was posted and proof that any such
envelope was properly addressed, prepaid, registered and posted shall be
sufficient evidence that such notice or other communication has been duly
served, given or made; or (ii) in the case of delivery, when left at the
relevant address; or (iii) in the case of facsimile transmission on the
first business day in the country of the intended recipient after the
date of transmission.
16. Governing Law
-------------
16.1 This Deed shall be governed by and construed in all respects in accordance
with English law and the parties agree to submit to the exclusive
jurisdiction of the English Courts as regards any claim or matter arising
in relation to this Deed.
16.
<PAGE>
DENTON HALL
16.2 The Licensor hereby appoints O'Melveny & Myers of 10 Finsbury Square,
London EC2A 1LA, as its authorised agent for the purpose of accepting
service of process for all purposes in connection with this Deed.
IN WITNESS whereof this Deed has been duly executed.
17.
<PAGE>
DENTON HALL
SCHEDULE
--------
Part 1
------
Registered Trade Marks
----------------------
<TABLE>
<CAPTION>
Mark Country Reg. No Class Reg. Date Relevant
---- ------- ------- ----- --------- --------
Goods/Services
--------------
<S> <C> <C> <C> <C> <C>
PLAYBOY United 1286798 41 10/14/93 radio,
Kingdom television and
stage
entertainments;
all included in
this class
RABBIT United 1324768 41 10/22/87 radio,
HEAD Kingdom television and
DESIGN stage
entertainments
PLAYBOY Benelux 424544 41 1/6/87 entertainment
and amusements;
and the
production of
radio and
television
programmes
RABBIT Benelux 427684 41 1/6/87 entertainment
HEAD and
DESIGN amusements; and
the production
of radio and
television
programmes
</TABLE>
18.
<PAGE>
DENTON HALL
Part 2
------
Unregistered Trademarks
-----------------------
Country Mark or Representation or Goods/Services
------- ------------------------- --------------
Description of Get-up
---------------------
Republic of PLAYBOY Entertainment
Ireland services, namely,
pay television
services and pay per
view television
services
Republic of RABBIT HEAD DESIGN Entertainment
Ireland services, namely,
pay television
services and pay per
view television
services
19.
<PAGE>
EXECUTED AS A DEED by David ) /s/ David I. Chemerow
I. Chemerow and Howard )
Shapiro acting under ) Exec. Vice President
the express authority of )
PLAYBOY ENTERPRISES, INC. ) /s/ Howard Shapiro
in accordance with the laws )
of the State of Delaware ) Exec. Vice President
EXECUTED AS A DEED by )
PLAYBOY TV UK/BENELUX LIMITED )
in the presence of: )
Director
Director/Secretary
20.
<PAGE>
EXECUTED AS A DEED by )
and )
acting under )
the express authority of )
PLAYBOY ENTERPRISES, INC. )
in accordance with the laws )
of the State of Delaware )
EXECUTED AS A DEED by )
PLAYBOY TV UK/BENELUX LIMITED )
in the presence of: )
/s/ Fairlie Anderson
Fairlie Anderson Director /s/ Roger Luard
Denton Hall
5 Chancery Lane
Clifford's Inn Director/Secretary /s/ Mark Lewis
London EC4A IBU
20.
<PAGE>
THE COMPANIES ACTS 1985 TO 1989
_____________________________
COMPANY LIMITED BY SHARES
_____________________________
ARTICLES OF ASSOCIATION
of
PLAYBOY UK/BENELUX LIMITED
________________________
(Adopted by Special Resolution passed on the
26th day of January 1995)
___________________________________________
PRELIMINARY
1.1 In these Articles "the Act" means the Companies Acts 1985 to 1989 (as
amended or re-enacted at the date hereof) and "Table A" means Table A as
prescribed in the Companies (Tables A to F) Regulations 1985 (as amended at
the date hereof).
1.2 The regulations contained in Table A shall not apply to the Company.
INTERPRETATION
2. In these Articles the following words and expressions shall have the
following meanings:
"the Board": the Board of Directors of the Company present at a duly
convened meeting of the Directors at which a quorum is present;
"Associate": means in relation to any member which is a company, another
company which controls, is controlled by or is under common control with
that company and for this purpose a company shall be deemed to control any
company which is a subsidiary or a subsidiary undertaking of such company;
"the Auditors": the auditors for the time being of the Company.
SHARE CAPITAL AND SHARES
3. The authorised share capital of the Company at the date of adoption of
these Articles is (Pounds) 11,000,000 divided into 11,000,000 ordinary
shares of (Pounds)1 each ("the Ordinary Shares").
<PAGE>
4. Subject to the provisions of the Act, shares may be issued which are to be
redeemed or are to be liable to be redeemed at the option of the company or
the holder on such terms and in such manner as may be provided by the
articles.
5. The company may exercise the powers of paying commissions conferred by the
Act. Subject to the provisions of the Act, any such commission may be
satisfied by the payment of cash or by the allotment of fully or partly
paid shares or partly in one way and partly in the other.
6. Except as required by law, no person shall be recognised by the company as
holding any share upon any trust and (except as otherwise provided by the
articles or by law) the company shall not be bound by or recognise any
interest in any share except an absolute right to the entirety thereof in
the holder.
SHARE CERTIFICATES
7. Every member, upon becoming the holder of any shares, shall be entitled
without payment to one certificate for all the shares of each class held by
him (and, upon transferring a part of his holding of shares of any class,
to a certificate for the balance of such holding) or several certificates
each for one or more of his shares. Every certificate shall be sealed with
the seal and shall specify the number, class of the shares to which it
relates and the amount or respective amounts paid up thereon. The company
shall not be bound to issue more than one certificate for shares held
jointly by several persons and delivery of a certificate to one joint
holder shall be a sufficient delivery to all of them.
8. If a share certificate is defaced, worn-out, lost or destroyed, it may be
renewed on such terms (if any) as to evidence and indemnity and payment of
the expenses reasonably incurred by the company in investigating evidence
as the directors may determine but otherwise free of charge, and (in the
case of defacement or wearing-out) on delivery up of the old certificate.
LIEN
9. The company shall have a first and paramount lien on every share (not being
a fully paid share) for all moneys (whether presently payable or not)
payable at a fixed time or called in respect of that share. The directors
may at any time declare any share to be wholly or in part exempt from the
provisions of this regulation. The company's lien on a share shall extend
to any amount payable in respect of it.
10. The company may sell in such manner as the directors determine any shares
on which the company has a lien if a sum in respect of which the lien
exists is presently payable and is not paid within fourteen clear days
after notice has been given to the holder of the share or to the person
entitled to it in consequence of the death or bankruptcy of the holder,
demanding payment and stating that if the notice is not complied with the
shares may be sold.
2.
<PAGE>
11. To give effect to a sale the directors may authorise some person to execute
an instrument of transfer of the shares sold to, or in accordance with the
directions of, the purchaser. The title of the transferee to the shares
shall not be affected by any irregularity in or invalidity of the
proceedings in reference to the sale.
12. The net proceeds of the sale, after payment of the costs, shall be applied
in payment of so much of the sum for which the lien exists as is presently
payable, and any residue shall (upon surrender to the company for
cancellation of the certificate for the shares sold and subject to a like
lien for any moneys not presently payable as existed upon the shares before
the sale) be paid to the person entitled to the shares at the date of the
sale.
CALLS ON SHARES AND FORFEITURE
13. Subject to the terms of allotment, the directors may make calls upon the
members in respect of any moneys unpaid on their shares (whether in respect
of nominal value or premium) and each member shall (subject to receiving at
least fourteen clear days' notice specifying when and where payment is to
be made) pay to the company as required by the notice the amount called on
his shares. A call may be required to be paid by instalments. A call may,
before receipt by the company of any sum due thereunder, be revoked in
whole or part and payment of a call may be postponed in whole or part. A
person upon whom a call is made shall remain liable for calls made upon him
notwithstanding the subsequent transfer of the shares in respect whereof
the call was made.
14. A call shall be deemed to have been made at the time when the resolution of
the directors authorizing the call was passed.
15. The joint holders of a share shall be jointly and severally liable to pay
all calls in respect thereof.
15. If a call remains unpaid after it has become due and payable the person
from whom it is due and payable shall pay interest on the amount unpaid
from the day it became due and payable until it is paid at the rate fixed
by the terms of allotment of the share or in the notice of the call or, if
no rate is fixed, at the appropriate rate (as defined by the Act) but the
directors may waive payment of the interest wholly or in part.
16. An amount payable in respect of a share on allotment or at any fixed date,
whether in respect of nominal value or premium or as an instalment of a
call, shall be deemed to be a call and if it is not paid the provisions of
the articles shall apply as if that amount had become due and payable by
virtue of a call.
17. Subject to the terms of allotment, the directors may make arrangements on
the issue of shares for a difference between the holders in the amounts
and times of payment of calls on their shares.
18. If a call remains unpaid after it has become due and payable the directors
may give to the person from whom it is due not less than fourteen clear
days' notice requiring payment of the amount unpaid
3.
<PAGE>
together with any interest which may have accrued. The notice shall name
the place where payment is to be made and shall state that if the notice is
not complied with the shares in respect of which the call was made will be
liable to be forfeited.
19. If the notice is not complied with any share in respect of which it was
given may, before the payment required by the notice has been made, be
forfeited by a resolution of the directors and the forfeiture shall include
all dividends or other moneys payable in respect of the forfeited shares
and not paid before the forfeiture.
20. Subject to the provisions of the Act, a forfeited share may be sold, re-
allotted or otherwise disposed of on such terms and in such manner as the
directors determine either to the person who was before the forfeiture the
holder or to any other person and at any time before sale, re-allotment
or other disposition, the forfeiture may be cancelled on such terms as the
directors think fit. Where for the purposes of its disposal a forfeited
share is to be transferred to any person the directors may authorise some
person to execute an instrument of transfer of the share to that person.
21. A person any of whose shares have been forfeited shall cease to be a member
in respect of them and shall surrender to the company for cancellation
the certificate for the shares forfeited but shall remain liable to the
company for all moneys which at the date of forfeiture were presently
payable by him to the company in respect of those shares with interest at
the rate at which interest was payable on those moneys before the
forfeiture or, if no interest was so payable, at the appropriate rate (as
defined in the Act) from the date of forfeiture until payment but the
directors may waive payment wholly or in part or enforce payment without
any allowance for the value of the shares at the time of forfeiture or for
any consideration received on their disposal.
22. A statutory declaration by a director or the secretary that a share has
been forfeited on a specified date shall be conclusive evidence of the
facts stated in it as against all persons claiming to be entitled to the
share and the declaration shall (subject to the execution of an instrument
of transfer if necessary) constitute a good title to the share and the
person to whom the share is disposed of shall not be bound to see to the
application of the consideration, if any, nor shall his title to the share
be affected by any irregularity in or invalidity of the proceedings in
reference to the forfeiture or disposal of the share.
TRANSFER OF SHARES
23. The instrument of transfer of a share may be in any usual form or in any
other form which the directors may approve and shall be executed by or on
behalf of the transferor and, unless the share is fully paid, by or on
behalf of the transferee.
24. Save as set out in Article 25 below no share shall be transferred by any
Member or other person entitled thereto without the prior consent of all
the other members.
4.
<PAGE>
25.1 If a member ("the Defaulter") becomes unable to pay its debts within
Section 123 of the Insolvency Act 1986 or makes a composition or
arrangement with its creditors or puts a proposal to its creditors for a
voluntary arrangement for a composition of its debts or a scheme of
arrangement or on the presentation of a petition that it be put into
liquidation (which is not withdrawn or defeated within 28 days) or
administration or passes a resolution putting it into voluntary liquidation
(other than for the purposes of amalgamation or reconstruction reasonably
approved by the other members) or suffers the appointment of a provisional
liquidator, a receiver, manager or an administrative receiver or on the
occurrence of an event which does result in the crystallisation of any
floating charge over its business, undertaking, property or assets of any
part therof or is dissolved or on the occurrence of an event which is
analogous to any of the above in any jurisdiction other than the United
Kingdom in which the relevant member is incorporated, then any other member
may within 60 days of the later of the date of such event or of the date on
which such member becomes aware of that event require the Defaulter, by
notice in writing to the Defaulter and the Company to sell all its shares
in the Company ("the Transfer Notice").
25.2 The Transfer Notice shall constitute the Company the Defaulter's agent for
the sale of all, but not some only, of the shares the subject of the
Transfer Notice ("the Sale Shares") to the other members and/or any person
procured or nominated by the other members as it/they may in its/their
absolute discretion determine ("a Nominee") at the Prescribed Price (as
defined in Article 25.5). The Defaulter shall within 7 business days of
receipt of the Transfer Notice deliver to the Company the Defaulter's share
certificates and duly executed transfers in blank in respect thereof
which may not be withdrawn.
25.3 Within 7 business days of agreement or determination of the Prescribed
Price, the Company shall give notice in writing to the other members
specifying the number of Sale Shares and the Prescribed Price therefor
and offering the Sale Shares for sale to the other members and/or their
Nominees at the Prescribed Price. Such notice shall be accompanied by a
copy of the Transfer Notice and (if applicable) the Referee's certificate
of the Prescribed Price and shall require the other members to state in
waiting within 14 days of the receipt of the notice whether it and/or a
Nominee is willing to purchase the Sale Shares at the Prescribed Price.
25.4 In the event that a notice or notices are served in respect of all of the
Sale Shares, the other members or a Nominee thereof shall within 28 days
thereafter complete the purchase of the Sale Shares from the Defaulter at
the Prescribed Price provided that (i) in the event of competition the
members (and/or their Nominees) shall complete the purchase of the Sale
Shares pro rata to the number of shares held by the other members save that
notwithstanding the above no purchase pursuant to this clause shall be
made by a Nominee of any member if there remains a member or members
willing to purchase the Sale Shares to which any member who has proposed a
Nominee to purchase his/her pro rata entitlement would otherwise be
entitled to purchase. The Defaulter shall be bound to transfer the Sale
Shares
5.
<PAGE>
comprised in the notice to the other member(s) or its/their Nominees at the
Prescribed Price, and if it makes default in so doing the Company may
receive the purchase money and the Directors may authorise some person to
execute a transfer as appropriate of the Sale Shares in favour of the other
members and/or their Nominee(s) ("the Shareholder Purchasers") and the
Company shall hold the purchase money in trust for the Defaulter. The
receipt by the Company of the purchase money shall be a good discharge to
the Shareholder Purchaser(s) and after its or their name has been entered
in the Company's Register of Members in exercise of the aforesaid power,
the validity of the proceedings shall not be questioned by any person. If
such purchase is not completed (for any reason other than the Defaulter's
delay or default) within such period of 28 days, then the certificates and
duly completed transfer of the Sale Shares shall be returned to the
Defaulter.
25.5 The Prescribed Price shall be such price as the members may agree per share
or in default of agreement within 30 days after the date on which the
Transfer Notice is served following a reference by any member to a
Referee such price per share as the Referee shall determine to be on the
date of receipt of the Transfer Notice the Fair Value as defined in
Article 25.6.
25.6 Fair Value shall be in respect of each Sale Share the same proportion of
the fair market value of the Company as a whole on the date of service of
the Transfer Notice as such Sale Share bears to the whole of the issued
share capital in the Company stated as a price per share as certified by
the Referee on the basis of a sale thereof as between a willing vendor and
a willing purchaser on the assumption that the Sale Shares will be
purchased in one lot by a purchaser contracting on arm's length terms, who
has no other interest in the Company and (if the Company is then continuing
as a going concern) on the assumption that all the Shares were ordinary
shares of the same class and that the Company will continue in business as
a going concern and having regard to any goodwill attaching to the Company
though taking into account (if that be the case) the fact that any material
contract or licence of the Company has been terminated. For this purpose,
the Referee shall be such independent merchant or investment bank with
acknowledged experience of the industry in which the Company operates as
the members may agree or, in default of agreement within seven days, as may
be nominated, on the request of any member, by the President for the time
being of the British Institute of Bankers, who shall be instructed to
produce his certificate within thirty days of his appointment and who shall
act as expert and not as arbitrator and whose certificate shall be final
and binding on the members, save in the event of manifest error. The fees
and expenses of the Referee shall be borne as to the other half by the
purchaser(s) of the Defaulter's Shares (if any) and as to the balance (or
the whole if there are no purchasers) by the Defaulter.
25.7 In the event that no notice or notices are received in accordance with
clause 25.3 above the Defaulter shall, be at liberty to sell all of the
Sale Shares at any time within 28 days after the expiry of the period of 14
days provided for under Article 25.2 to a third party at the Prescribed
Price and otherwise upon no more favourable terms than those offered to the
members.
6.
<PAGE>
25.8 Where any Transfer Notice is given by a member pursuant to this Article 25
such member may specify that until completion of any transfer pursuant to
this clause:
(a) any transfer by a Defaulter of its Shares (other than to or in
accordance with this Article 25) shall be void;
(b) no voting rights shall be exercisable by the Defaulter in
respect of its Shares; and
(c) no further Shares shall be issued or need be offered to the
Defaulter.
TRANSMISSION OF SHARES
26. If a member dies the survivor or survivors where he was a joint holder,
and his personal representatives where he was a sole holder or the only
survivor of joint holders, shall be the only persons recognised by the
company as having any title to his interest; but nothing herein contained
shall release the estate of a deceased member from any liability in
respect of any share which had been jointly held by him.
25. A person becoming entitled to a share in consequence of the death or
bankruptcy of a member may, upon such evidence being produced as the
directors may properly require, elect either to become the holder of the
share or to have some person nominated by him registered as the
transferee. If he elects to become the holder he shall give notice to the
company to that effect. If he elects to have another person registered he
shall execute an instrument of transfer of the share to that person. All
the articles relating to the transfer of shares shall apply to the notice
or instrument of transfer as if it were an instrument of transfer executed
by the member and the death or bankruptcy of the member had not occurred.
26. A person becoming entitled to a share in consequence of the death or
bankruptcy of a member shall have the rights to which he would be
entitled if he were the holder of the share, except that he shall not,
before being registered as the holder of the share, be entitled in respect
of it to attend or vote at any meeting of the company or at any separate
meeting of the holders of any class of shares in the company.
ALTERATION OF SHARE CAPITAL
27. The company may by ordinary resolution -
(a) increase its share capital by new shares of such amount as the
resolution prescribes;
(b) consolidate and divide all or any of its share capital into shares of
larger amount than its existing shares;
(c) subject to the provisions of the Act, sub-divide its shares, or any of
them, into shares of smaller amount and the resolution may determine
that, as between the shares resulting
7.
<PAGE>
from the sub-division, any of them may have any preference or
advantage as compared with the others; and
(d) cancel shares which, at the date of the passing of the resolution,
have not been taken or agreed to be taken by any person and diminish
the amount of its share capital by the amount of the shares so
cancelled
28. Whenever as a result of a consolidation of shares any members would become
entitled to fractions of a share, the directors may, on behalf of those
members, sell the shares representing the fractions for the best price
reasonably obtainable to any person (including, subject to the provisions
of the Act, the company) and distribute the net proceeds of sale in due
proportion among those members, and the directors may authorise some person
to execute an instrument of transfer of the shares to, or in accordance
with the directions of, the purchaser. The transferee shall not be bound
to see to the application of the purchase money nor shall his title to the
shares be affected by any irregularity in or invalidity of the proceedings
in reference to the sale.
29. Subject to the provisions of the Act, the company may by special resolution
reduce its share capital, any capital redemption reserve and any share
premium account in any way.
PURCHASE OF OWN SERIES
30. Subject to the provisions of the Act, the company may purchase its own
shares (including any redeemable shares) and, if it is a private company,
make a payment in respect of the redemption or purchase of its own shares
otherwise than out of distributable profits of the company or the proceeds
of a fresh issue of shares.
GENERAL MEETINGS
31. All general meetings other than annual general meetings shall be called
extraordinary general meetings.
32. The directors may call general meetings and, on the requisition of members
pursuant to the provisions of the Act, shall forthwith proceed to convene
an extraordinary general meeting for a date not later than eight weeks
after receipt of the requisition. If there are not within the United
Kingdom sufficient directors to call a general meeting, any director or
any member of the company may call a general meeting.
NOTICE OF GENERAL MEETINGS
33. An annual general meeting and an extraordinary general meeting called for
the passing of a special resolution or a resolution appointing a person as
a director shall be called by at least twenty-one clear days' notice. All
other extraordinary general meetings shall be called by at least fourteen
days' notice but a general meeting may be called by shorter notice if it is
so agreed -
(a) in the case of an annual general meeting, by all the members entitled
to attend and vote thereat; and
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(b) in the case of any other meeting by a majority in number of the members
having a right to attend and vote being a majority together holding not
less than ninety-five per cent in nominal value of the shares giving
that right.
The notice shall specify the time and place of the meeting and the general
nature of the business to be transacted and, in the case of an annual
general meeting, shall specify the meeting as such.
Subject to the provisions of the articles and to any restrictions imposed
on any shares, the notice shall be given to all the members, to all persons
entitled to a share in consequence of the death or bankruptcy of a member
and to the directors and auditors.
34. The accidental omission to give notice of a meeting to, or the non-receipt
of notice of a meeting by, any person entitled to receive notice shall not
invalidate the proceedings at that meeting.
PROCEEDINGS AT GENERAL MEETINGS
35. No business shall be transacted at any meeting unless a quorum of members
is present at the time when the meeting proceeds to business. The quorum
for any general meeting shall be not less than two or more members
(including each member entitled to appoint a director pursuant to Article
67) entitled to vote upon the business to be transacted or by a duly
authorised representative present in person.
36. If such a quorum is not present within half an hour from the time appointed
for the meeting, or if during a meeting such a quorum ceases to be
present, the meeting shall stand adjourned to the same day in the next week
at the same time and place or to such time and place as the directors may
determine and such meeting will be quorate provided a member or members
holding more than 50% of the shares for the one time being in issue and
carry the rights to attend and vote at the meeting are present.
37. The chairman of the board of directors or in his absence some other
director nominated by the directors shall preside as chairman of the
meeting, but if neither the chairman nor such other director (if any) be
present within fifteen minutes after the time appointed for holding the
meeting and willing to act, the directors present shall elect one of their
number to be chairman and, if there is only one director present and
willing to act, he shall be chairman.
38. If no director is willing to act as chairman or if no director is present
within fifteen minutes after the time appointed for holding the meeting,
the members present and entitled to vote shall choose one of their number
to be chairman.
39. A director shall, notwithstanding that he is not a member, be entitled to
attend and speak at any general meeting and at any separate meeting of the
holders of any class of shares in the company.
9.
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40. The chairman may, with the consent of a meeting at which a quorum is
present (and shall if so directed by the meeting), adjourn the meeting from
time to time and from place to place, but no business shall be transacted
at an adjourned meeting other than business which might properly have been
transacted at the meeting had the adjournment not taken place. When a
meeting is adjourned for fourteen days or more, at least seven clear days'
notice shall be given specifying the time and place of the adjourned
meeting and the general nature of the business to be transacted. Otherwise
it shall not be necessary to give any such notice.
41. A resolution put to the vote of a meeting shall be decided on a show of
hands unless before, or on the declaration of the result of, the show of
hands a poll is duly demanded. Subject to the provisions of the Act, a poll
may be demanded -
(a) by the chairman; or
(b) by at least two members having the right to vote at the meeting; or
(c) by a member or members representing not less than one-tenth of the
total voting rights of all the members having the right to vote at
the meeting; or
(d) by a member or members holding shares conferring a right to vote at
the meeting being shares on which an aggregate sum has been paid up
equal to not less than one-tenth of the total sum paid up on all the
shares conferring that right;
and a demand by a person as proxy for a member shall be the same as a
demand by the member.
42. Unless a poll is duly demanded a declaration by the chairman that a
resolution has been carried or carried unanimously, or by a particular
majority, or lost, or not carried by a particular majority and an entry to
that effect in the minutes of the meeting shall be conclusive evidence of
the fact without proof of the number or proportion of the votes recorded in
favour of or against the resolution.
43. The demand for a poll may, before the poll is taken, be withdrawn but only
with the consent of the chairman and a demand so withdrawn shall not be
taken to have invalidated the result of a show of hands declared before the
demand was made.
44. A poll shall be taken as the chairman directs and he may appoint
scrutineers (who need not be members) and fix a time and place for
declaring the result of the poll. The result of the poll shall be deemed to
be the resolution of the meeting at which the poll was demanded.
45. A poll demanded on the election of a chairman or on a question of
adjournment shall be taken forthwith. A poll demanded on any other question
shall be taken either forthwith or at such time and place as the chairman
directs not being more than thirty days after the
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poll is demanded. The demand for a poll shall not prevent the continuance
of a meeting for the transaction of any business other than the question on
which the poll was demanded. If a poll is demanded before the declaration
of the result of a show of hands and the demand is duly withdrawn,the
meeting shall continue as if the demand had not been made.
46. No notice need be given of a poll not taken forthwith if the time and
place at which it is to be taken are announced at the meeting at which it
is demanded. In any other case at least seven clear days' notice shall be
given specifying the time and place at which the poll is to be taken.
47. A resolution in writing executed by or on behalf of each member who would
have been entitled to vote upon it if it had been proposed at a general
meeting at which he was present shall be as effectual as if it had been
passed at a general meeting duly convened and held and may consist of
several instruments in the like form each executed by or on behalf of one
or more members.
VOTES OF MEMBERS
48. Subject to any rights or restrictions attached to any shares, on a show of
hands every member who (being an individual) is present in person or
(being a corporation) is present by a duly authorised representative, not
being himself a member entitled to vote, shall have one vote and on a poll
every member shall have one vote for every share of which he is the holder.
49. In the case of joint holders the vote of the senior who tenders a vote,
whether in person or by proxy, shall be accepted to the exclusion of the
votes of the other joint holders; and seniority shall be determined by the
order in which the names of the holders stand in the register of members.
50. A member in respect of whom an order has been made by any court having
jurisdiction (whether in the United Kingdom or elsewhere) in matters
concerning mental disorder may vote, whether on a show of hands or on a
poll, by his receiver, curator bonis or other person authorised in that
behalf appointed by that court, and any such receiver, curator bonis or
other person may, on a poll, vote by proxy. Evidence to the satisfaction of
the directors of the authority of the person claiming to exercise the right
to vote shall be deposited at the office, or at such other place as is
specified in accordance with the articles for the deposit of instruments of
proxy, not less than 48 hours before the time appointed for holding the
meeting or adjourned meeting at which the right to vote is to be exercised
and in default the right to vote shall not be exercisable.
51. No member shall vote at any general meeting or at any separate meeting of
the holders of any class of shares in the company, either in person or by
proxy, in respect of any share held by him unless all moneys presently
payable by him in respect of that share have been paid.
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52. No objection shall be raised to the qualification of any voter except
at the meeting or adjourned meeting at which the vote objected to is
tendered, and every vote not disallowed at the meeting shall be valid.
Any Objection made in due time shall be referred to the chairman whose
decision shall be final and conclusive.
53. On a poll votes may be given either personally or by proxy. A member
may appoint more than one proxy to attend on the same occasion.
54. An instrument appointing a proxy shall be in writing, executed by or on
behalf of the appointor and shall be in the following form (or in a
form as near thereto as circumstances allow or in any other form which
is usual or which the directors may approve) -
" PLC/Limited
I/We, , of
, being
a member/members of the above-named company, hereby appoint
of
, or failing
him, of , as my/our proxy to vote in my/our
names[s] and on my/our behalf at the annual/extraordinary general
meeting of the company to be held on
19 , and at any adjournment thereof.
Signed on 19 ."
55. Where it is desired to afford members an opportunity of instructing
the proxy how he shall act the instrument appointing a proxy shall be
in the following form (or in a form as near thereto as circumstances
allow or in any other form which is usual or which the directors may
approve) -
" PLC/Limited
I/We, , of
,being a
member/members of the above-named company, hereby appoint
of
or failing him, of , as my/our proxy
to vote in my/our name[s] and on my/our behalf at the
annual/extraordinary general meeting of the company, to be held on
19 , and at any adjournment thereof.
This form is to be used in respect of the resolutions mentioned
below as follows:
Resolution No. 1 *for *against
Resolution No. 2 *for *against.
*Strike out whichever is not desired.
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Unless otherwise instructed, the proxy may vote as he thinks fit or
abstain from voting.
Signed this day of 19 ."
56. The instrument appointing a proxy and any authority under which it is
executed or a copy of such authority certified notarially or in some
other way approved by the directors may -
(a) be deposited at the office or at such other place within the
United Kingdom as is specified in the notice convening the
meeting or in any instrument of proxy sent out by the company in
relation to the meeting not less than 48 hours before the time
for holding the meeting or adjourned meeting at which the person
named in the instrument proposes to vote;
or
(b) in the case of a poll taken more than 48 hours after it is
demanded, be deposited as aforesaid after the poll has been
demanded and not less than 24 hours before the time appointed
for the taking of the poll; or
(c) where the poll is not taken forthwith but is taken not more than
48 hours after it was demanded, be delivered at the meeting at
which the poll was demanded to the chairman or to the secretary
or to any director;
and an instrument of proxy which is not deposited or delivered in a manner so
permitted shall be invalid.
57. A vote given or poll demanded by proxy or by the duly authorised
representative of a corporation shall be valid notwithstanding the
previous determination of the authority of the person voting or
demanding a poll unless notice of the determination was received by
the company at the office or at such other place at which the
instrument of proxy was duly deposited before the commencement of the
meetings or adjourned meeting at which the vote is given or the poll
demanded or (in the case of a poll taken otherwise than on the same
day as the meeting or adjourned meeting) the time appointed for taking
the poll.
NUMBER OF DIRECTORS
58. Unless otherwise approved by special resolution, the number of
directors (other than alternate directors) shall not be less than
two nor more than eleven directors.
ALTERNATE DIRECTORS
59. Any director (other than an alternate director) may appoint any person
willing to act, to be an alternate director and may remove from office
an alternate director so appointed by him.
60. An alternate director shall be entitled to receive notice of all
meetings of directors and of all meetings of committees of directors of
which his appointor is a member, to attend and vote at any such
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meeting at which the director appointing him is not personally present, and
generally to perform all the functions of his appointor as a director in
his absence but shall not be entitled to receive any remuneration from the
company for his services as an alternate director. But it shall not be
necessary to give notice of such a meeting to an alternate director who is
absent from the United Kingdom.
61. An alternate director shall cease to be an alternate director if his
appointor ceases to be a director; but, if a director retires but is
reappointed or deemed to have been reappointed at the meeting at which he
retires, any appointment of an alternate director made by him which was in
force immediately prior to his retirement shall continue after his
reappointment.
62. Any appointment or removal of an alternate director shall be by notice to
the company signed by the director making or revoking the appointment or in
any other manner approved by the directors.
63. Save as otherwise provided in the articles, an alternate director shall be
deemed for all purposes to be a director and shall alone be responsible for
his own acts and defaults and he shall not be deemed to be the agent of the
director appointing him.
POWERS OF DIRECTORS
64. Subject to the provisions of the Act, the memorandum and the articles and
to any directions given by ordinary resolution, the business of the company
shall be managed by the directors who may exercise all the powers of the
company. No alteration of the memorandum or articles and no such direction
shall invalidate any prior act of the directors which would have been valid
if that alteration had not been made or that direction had not been given.
The powers given by this regulation shall not be limited by any special
power given to the directors by the articles and a meeting of directors at
which a quorum is present may exercise all powers exercisable by the
directors.
65. The directors may, by power of attorney or otherwise, appoint any person to
be the agent of the company for such purposes and on such conditions as
they determine, including authority for the agent to delegate all or any of
his powers.
DELEGATION OF DIRECTORS' POWERS
66. The directors may delegate any of their powers to any committee consisting
of one or more directors including at least one director appointed by each
member entitled to appoint a director pursuant to Article 67. They may also
delegate to any managing director or any director holding any other
executive office such of their powers as they consider desirable to be
exercised by him. Any such delegation may be made subject to any conditions
the directors may impose, and either collaterally with or to the exclusion
of their own powers and may be revoked or altered. Subject to any such
conditions, the proceedings of a committee with two or more members shall
be governed by the articles regulating the proceedings of directors so far
as they are capable of applying.
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APPOINTMENT OF DIRECTORS
67. Each member shall be entitled to appoint up to such number of directors as
is stated in the table below. Any member who holds more than 50% of the
issued Ordinary Shares from time to time shall be entitled to appoint a
majority of the directors and remove and replace any such directors from
time to time. The right to appoint, remove or replace a director shall be
exercisable by notice to the company a copy of which notice shall be given
to any shareholder not exercising or giving such notice.
Members's Member may appoint
Percentage Holding up to the following
of Ordinary Shares number of Directors
------------------ -------------------
0-9.9 0
10-27.9 2
28-37-9 3
38-46.9 4
49-50 5
In excess of 50% The remaining Members
of the Board
For the purpose of this table, a member shall be deemed to hold not only
Ordinary Shares in its name but also those held in the name of its
Associates.
DISQUALIFICATION AND REMOVAL OF DIRECTORS
68. The office of a director shall be vacated if -
(a) he ceases to be a director by virtue of any provision of the Act or he
becomes prohibited by law from being a director; or
(b) he becomes bankrupt or makes any arrangement or composition with his
creditors generally; or
(c) he is, or may be, suffering from mental disorder and either -
(i) he is admitted to hospital in pursuance of an application
for admission for treatment under the Mental Health Act
1983 or, in Scotland, an application for admission under
the Mental Health (Scotland) Act 1960, or
(ii) an order is made by a court having jurisdiction (whether in
the United Kingdom or elsewhere) in matters concerning
mental disorder for his detention or for the appointment of
a receiver, curator bonis or other person to exercise
powers with respect to his property or affairs;
or
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(d) he resigns his office by notice to the company; or
(e) he shall for more than six consecutive months have been absent
without permission of the directors from meetings of directors held
during that period and the directors resolve that his office be
vacated.
REMUNERATION OF DIRECTORS
69. The directors shall be entitled to such remuneration as the company may by
ordinary resolution determine and, unless the resolution provides
otherwise, the remuneration shall be deemed to accrue from day to day.
DIRECTORS' EXPENSES
70. The directors shall not be entitled to any expenses incurred by them in
connection with their attendance at meetings of directors or committees of
directors or several meetings or separate meetings of the holders of any
class of shares or of debentures of the company or otherwise in connection
with the discharge of their duties.
DIRECTORS' APPOINTMENTS AND INTERESTS
71. Subject to the provisions of the Act, the directors may appoint one or more
of their number to the office of Managing Director to any other executive
office in the company and may enter into an agreement or arrangement with
any director for his employment by the company or for the provision by him
of any services outside the scope of the ordinary duties of a director.
Any such appointment, agreement or arrangement may be made upon such terms
as the directors determine and they may remunerate any such director for
his services as they think fit. Any appointment of a director to an
executive office shall terminate if he ceases to be a director but without
prejudice to any claim to damages for breach of the contract of service
between the director and the company.
72. Without prejudice to the obligation of any director to disclose his
interest in accordance with Section 317 of the Act, a director
notwithstanding his office -
(a) may be a party to, or otherwise interested in, any transaction or
arrangement with the company or in which the company is otherwise
interested:
(b) may be a director or other officer of, or employed by, or a party to
any transaction or arrangement with, or otherwise interested in, any
body corporate promoted by the company or in which the company is
otherwise interested: and
(c) shall not, by reason of his office, be accountable to the company for
any benefit which he derives from any such office or employment or
from any such transaction or arrangement or from any interest in any
such body corporate and no such transaction or arrangement shall be
liable to be avoided on the ground of any such interest or benefit.
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DIRECTORS' GRATUITIES AND PENSIONS
73. The directors may provide benefits, whether by the payment of gratuities or
pensions or by insurance or otherwise, for any director who has held but no
longer holds any executive office or employment with the company or with
any body corporate which is or has been a subsidiary of the company or a
predecessor in business of the company or of any such subsidiary, and for
any member of his family (including a spouse and a former spouse) or any
person who is or was dependent on him, and may (as well before as after he
ceases to hold such office or employment) contribute to any fund and pay
premiums for the purchase or provision of any such benefit.
PROCEEDINGS OF DIRECTORS
74. Subject to the provisions of the articles, the directors may regulate their
proceedings as they think fit. A director may, and the secretary at the
request of a director shall, call a meeting of the directors. Questions
arising at a meeting shall be decided by a majority of votes. In the case
of an equality of votes, the chairman shall not have a second or casting
vote. A director who is also an alternate director shall be entitled in
the absence of his appointor to a separate vote on behalf of his appointor
in addition to his own vote.
75. The quorum for the transaction of the business of the directors and unless
so fixed at any other number shall be not less than two and must include
one director appointed by each Major Shareholder. A person who holds
office only as an alternate director shall, if his appointor is not
present, be counted in the quorum. If such quorum is not present within
half an hour from the time appointed for the meeting, the meeting shall
stand adjourned to the same day in the next week at the same time and place
and such meeting shall be quorate if any two directors are present.
76. A meeting of the directors may be validly held notwithstanding that all of
the directors are not present at the same place and at the same time
provided that:
(a) a quorum of the directors at the time of the meeting are in direct
communication with each other whether by way of telephone, audio-
visual link or other form of telecommunication: and
(b) a quorum of the directors entitled to attend a meeting of the
directors agree to the holding of the meeting in the manner described
herein.
77. The continuing directors or a sole continuing director may act
notwithstanding any vacancies in their number, but, if the number of
directors is less than the number fixed as the quorum, the continuing
directors or director may act only for the purpose of filling vacancies or
of calling a general meeting.
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78. The directors may appoint one of their number to be the chairman of the
board of directors and may at any time remove him from that office. Unless
he is unwilling to do so; the director so appointed shall preside at every
meeting of directors at which he is present. But if there is no director
holding that office, or if the director holding it is unwilling to preside
or is not present within fifteen minutes after the time appointed for the
meeting, the directors present may appoint one of their number to be
chairman of the meeting.
79. All acts done by a meeting of directors, or of a committee of directors, or
by a person acting as a director shall, notwithstanding that it be
afterwards discovered that there was a defect in the appointment of any
director or that any of them were disqualified from holding office, or had
vacated office, or were not entitled to vote, be as valid as if every such
person had been duly appointed and was qualified and had continued to be a
director and had been entitled to vote.
80. A resolution in writing signed by all the directors entitled to receive
notice of a meeting of directors or of a committee of directors shall be as
valid and effectual as if it had been passed at a meeting of directors or
(as the case may be) a committee of directors duly convened and held and
may consist of several documents in the like form each signed by one or
more directors, but a resolution signed by an alternate director need not
also be signed by his appointor and, if it is signed by a director who has
appointed an alternate director, it need not be signed by the alternate
director in that capacity.
DIRECTORS' INTERESTS
81. Without prejudice to the obligation of any Director to disclose his
interest in accordance with Section 317 of the Act, a Director may vote in
regard to any contract or arrangement in which he is interested or upon any
matter arising thereat and if he shall so vote his vote shall be counted
and he shall be reckoned in ascertaining whether there is present a quorum
at any meeting at which any such contract or arrangement is considered. A
Director may act by himself or his firm in any professional capacity for
the Company and he or his firm may be entitled to remuneration for
professional services as if he were not a Director; provided that nothing
herein contained shall authorise a Director or his firm to act as auditor
to the Company.
SECRETARY
82. Subject to the provisions of the Act, the secretary shall be appointed by
the directors for such term, at such remuneration and upon such conditions
as they may think fit, and any secretary so appointed may be removed by
them.
MINUTES
83. The directors shall cause minutes to be made in books kept for the
purpose -
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(a) of all appointments of officers made by the directors; and
(b) of all proceedings at meetings of the company, of the holders of any
class of shares in the company, and of the directors, and of committees
of directors, including the names of the directors present at each such
meeting.
THE SEAL
84. The seal shall only be used by the authority of the directors or of a
committee of directors authorised by the directors. The directors may
determine who shall sign any instrument to which the seal is affixed and
unless otherwise so determined it shall be signed by a director and by the
secretary or by a second director.
DIVIDENDS
85. Subject to the provisions of the Act, the company may by ordinary
resolution declare dividends in accordance with the respective rights of
the members, but no dividend shall exceed the amount recommended by the
directors.
86. Subject to the provisions of the Act, the directors may pay interim
dividends if it appears to them that they are justified by the profits of
the company available for distribution. If the share capital is divided
into different classes, the directors may pay interim dividends on shares
which confer deferred or non-preferred rights with regard to dividend as
well as on shares which confer preferential rights with regard to dividend,
but no interim dividend shall be paid on shares carrying deferred or non-
preferred rights if, at the time of payment, any preferential dividend is
in arrear. The directors may also pay at intervals settled by them any
dividend payable at a fixed rate if it appears to them that the profits
available for distribution justify the payment. Provided the directors act
in good faith they shall not incur any liability to the holders of shares
conferring preferred rights for any loss they may suffer by the lawful
payment of an interim dividend on any shares having deferred or non-
preferred rights.
87. Except as otherwise provided by the rights attached to shares, all
dividends shall be declared and paid according to the amounts paid up on
the shares on which the dividend is paid. All dividends shall be
apportioned and paid proportionately to the amounts paid up on the shares
during any portion or portions of the period in respect of which the
dividend is paid; but, if any share is issued on terms providing that it
shall rank for dividend as from a particular date, that share shall rank
for dividend accordingly.
88. A general meeting declaring a dividend may, upon the recommendation of the
directors, direct that it shall be satisfied wholly or partly by the
distribution of assets and, where any difficulty arises in regard to the
distribution, the directors may settle the same and in particular may issue
fractional certificates and fix the value for distribution of any assets
and may determine that cash shall be paid to any member upon the footing of
the value so fixed in order to adjust the rights of members and may vest
any assets in trustees.
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89. Any dividend or other moneys payable in respect of a share may be paid by
cheque sent by post to the registered address of the person entitled or, if
two or more persons are the holders of the share or are jointly entitled to
it by reason of the death or bankruptcy of the holder, to the registered
address of that one of those persons who is first named in the register of
members or to such person and to such address as the person or persons
entitled may in writing direct. Every cheque shall be made payable to the
order of the person or persons entitled or to such other person as the
person or persons entitled may in writing direct and payment of the cheque
shall be a good discharge to the company. Any joint holder or other person
jointly entitled to a share as aforesaid may give receipts for any dividend
or other moneys payable in respect of the share.
90. No dividend or other moneys payable in respect of a share shall bear
interest against the company unless otherwise provided by the rights
attached to the share.
91. Any dividend which has remained unclaimed for twelve years from the date
when it became due for payment shall, if the directors so resolve, be
forfeited and cease to remain owing by the company.
ACCOUNTS
92. No member shall (as such) have any right of inspecting any accounting
records or other book or document of the company except as conferred by
statute or authorised by the directors or by ordinary resolution of the
company.
CAPITALISATION OF PROFITS
93. The directors may with the authority of an ordinary resolution of the
company -
(a) subject as hereinafter provided, resolve to capitalise any undivided
profits of the company not required for paying any preferential
dividend (whether or not they are available for distribution) or any
sum standing to the credit of the company's share premium account or
capital redemption reserve;
(b) appropriate the sum resolved to be capitalised to the members who would
have been entitled to it if it were distributed by way of dividend and
in the same proportions and apply such sum on their behalf either in or
towards paying up the amounts, if any, for the time being unpaid on any
shares held by them respectively, or in paying up in full unissued
shares or debentures of the company of a nominal amount equal to that
sum, and allot the shares or debentures credited as fully paid to those
members, or as they may direct, in those proportions, or partly in one
way and partly in the other; but the share premium account, the capital
redemption reserve, and any profits which are not available for
distribution may, for the purposes of this regulation, only be applied
in paying up unissued shares to be allotted to members credited as
fully paid;
20.
<PAGE>
(c) make such provision by the issue of fractional certificates or by
payment in cash or otherwise as they determine in the case of shares or
debentures becoming distributable under this regulation in fractions;
and
(d) authorise any person to enter on behalf of all the members concerned
into an agreement with the company providing for the allotment to them
respectively, credited as fully paid, of any shares or debentures to
which they are entitled upon such capitalisation, any agreement made
under such authority being binding on all such members.
NOTICES
94. Any notice to be given to or by any person pursuant to the articles shall
be in writing except that a notice calling a meeting of the directors need
not be in writing.
95. The company may give any notice to a member either personally or by
sending it by post in a prepaid envelope (airmail if overseas)
addressed to the member at his registered address or by leaving it at that
address. In the case of joint holders of a share, all notices shall be
given to the joint holding and notice so given shall be sufficient notice
to all the joint holders. Notice of every general meeting of the Company
shall be given to every member of the Company who has provided the Company
with an address for such purposes, whether within or outside the United
Kingdom.
96. A member present, either in person or by proxy, at any meeting of the
company or of the holders of any class of shares in the company shall be
deemed to have received notice of the meeting and, where requisite, of
the purposes for which it was called.
97. Every person who becomes entitled to a share shall be bound by any notice
in respect of that share which, before his name is entered in the register
of members, has been duly given to a person from whom he derives his title.
98. Proof that an envelope containing a notice was properly addressed, prepaid
and posted shall be conclusive evidence that the notice was given. A notice
shall be deemed to be given at the expiration of 96 hours after the
envelope containing it was posted.
99. A notice may be given by the company to the persons entitled to a share in
consequence of the death or bankruptcy of a member by sending or delivering
it, in any manner authorised by the articles for the giving of notice to a
member, addressed to them by name, or by the title of representatives of
the deceased, or trustee of the bankrupt or by any like description at the
address, if any, whether within or outside the United Kingdom supplied for
that purpose by the persons claiming to be so entitled. Until such an
address has been supplied, a notice may be given in any manner in which it
might have been given if the death or bankruptcy had not occurred.
21.
<PAGE>
WINDING UP
100. If the company is wound up, the liquidator may, with the sanction of an
extraordinary resolution of the company and any other sanction required by
the Act, divide among the members in specie the whole or any part of the
assets of the company and may, for that purpose, value any assets and
determine how the division shall be carried out as between the members or
different classes of members. The liquidator may, with the like sanction,
vest the whole or any part of the assets in trustees upon such trusts for
the benefit of the members as he with the like sanction determines, but no
member shall be compelled to accept any assets upon which there is a
liability.
INDEMNITY
101. Subject to the provisions of the Act but without prejudice to any
indemnity to which a director may otherwise be entitled, every director or
other officer or auditor of the company shall be indemnified out of the
assets of the company against any liability incurred by him in defending
any proceedings, whether civil or criminal, in which judgment is given in
his favour or in which he is acquitted or in connection with any
application in which relief is granted to him by the court from liability
for negligence, default, breach of duty or breach of trust in relation to
the affairs of the company.
22.
<PAGE>
DENTON HALL
This Agreement is entered into this day of 1995,
by and between:
(1) Harris Trust and Savings Bank of 111 West Monroe Street, Chicago, Illinois
60603, United States of America ("Harris");
(2) LaSalle National Bank of 120 La Salle Street, Chicago, Illinois 60603,
United States of America ("LaSalle");
(3) Continental Shelf 16 Limited a company registered in England under no.
3005499 whose address is Twyman House, 16 Bonny Street, London NW1 9PG
("Flextech");
(4) Playboy TV UK/Benelux Limited of Twyman House, 16 Bonny Street, London
NW1 9PG ("the Joint Venture")
WHEREAS the parties are entering into this Agreement pursuant to an agreement
dated 1995 between Playboy Entertainment Group, Inc. ("Playboy"),
Playboy Enterprises, Inc. ("Playboy Enterprises"), Flextech and the Joint
Venture ("the Head Agreement").
NOW IT IS HEREBY AGREED as follows:
1. For the purposes of this Agreement:
(a) all capitalised words and expressions used but not defined in this
Agreement shall be defined as in the Head Agreement;
(b) the expression "the Lenders" shall mean each of Harris and LaSalle and
their respective assigns and successors in title under the Loan
Documents;
1.
<PAGE>
DENTON HALL
(c) the expression a "Default" shall mean any default by Playboy
Enterprises in or in respect of any of its obligations under the Loan
Documents or any other occurrence which in either case results in
action by or on behalf of either or both of the Lenders to foreclose
upon, assert control over, take possession of, sell or otherwise
enforce its or their security over the Collateral or any Part thereof;
(d) the expression "Programming Collateral" shall mean the entire right
title and interest of Playboy and each Affiliate of Playboy (including
but not limited to Playboy Enterprises), and of their successors in
title and assigns, in and to the Programmes, Third Party Programmes,
any Future Programmes, the Trade Marks and any Delivery Material in
respect of any of the Programmes, Third Party Programmes or Future
Programmes;
(e) the expression "Collateral" shall mean the Programming Collateral and
the respective Interests (as defined in the Shareholders' Agreement) of
Playboy and Playboy Enterprises in the Joint Venture;
(f) the expression "Affiliate of Playboy" shall mean any person which is
from time to time either directly or indirectly controlling, controlled
by or under common control with Playboy and for this purpose "control"
means in relation to a person the power of another person ("the
Controlling Person") to secure, whether by the holding of shares or the
possession of voting rights in or in relation to that person or any
other person or the provisions of any agreement or otherwise, that the
affairs of that person are conducted in accordance with the wishes of
the Controlling Person;
(g) the expression a "Future Programme" shall mean any Programme or Third
Party Programme which (notwithstanding the absence of an obligation on
the Lenders to fund the creation or distribution of new Programmes or
Third Party Programmes) comes into existence at any time after any
Default.
2.
<PAGE>
DENTON HALL
2. In consideration of Flextech and the Joint Venture each agreeing to observe
and comply with the provisions of the Shareholders' Agreement, The
Trademark Agreement, the Programme Agreement and/or the Head Agreement
which it is bound to observe and comply with, and for other good and
valuable consideration the receipt and sufficiency of which are hereby
acknowledged, each of the Lenders hereby undertakes and covenants with
Flextech and the Joint Venture that the Lenders shall:
(a) promptly notify Flextech and the Joint Venture of the occurrence of any
Default;
(b) in the event of any Default forebear from exercising (other than in
compliance with the provisions of Clause 3) any of their rights
against, in or to the Programmes and Third Party Programmes then in
existence, any Future Programmes or the Trade Marks, or any of them,
or any Delivery Material in relation to any of the Programmes or Third
Party Programmes, or any Future Programmes;
(c) not, at any time whilst the Collateral is pledged to it, take any
action (other than in compliance with the provisions of Clause 3) which
would interfere with the performance by Playboy or Playboy Enterprises
of their respective obligations under the Programme Agreement or under
the Trademark Agreement or the exercise by the Joint Venture of any of
its rights under the Programme Agreement or under the Trademark
Agreement with respect to the Programmes and Third Party Programmes
then in existence or any Future Programmes or with respect to the Trade
Marks
provided that neither Flextech nor the Joint Venture is in default of and
shall comply with all of their respective payment obligations under the
Shareholders' Agreement and the Programme Agreement in accordance with
their terms, and subject always to the provisions of Clause 3.
3.
<PAGE>
DENTON HALL
3. Notwithstanding anything in this Agreement to the contrary:
(a) action may be taken by or on behalf of any one or more of the Lenders
to foreclose upon, assert control over, take possession of, sell or
otherwise enforce its liens or security interests on the Collateral or
any part thereof PROVIDED HOWEVER THAT (subject to the provisions of
Clause 4):
(i) any such action shall be taken subject to the terms of the sole
and exclusive license granted to the Joint Venture under the
Programme Agreement in and to each Programme and Third Party
Programme within the territory ("the Territory") of the United
Kingdom, the Republic of Ireland, Belgium, the Netherlands and
Luxembourg (and each other country to which the Lenders have
agreed with Playboy in writing) and subject also to the terms of
the exclusive license granted to the Joint Venture to use the
Trade Marks within the Territory under the Trademark Agreement;
(ii) following the taking of any such action the Lenders shall either
(A) permit and make available to the Joint Venture (or such person
as the Joint Venture may direct the Lenders in writing) access
(in each case to the extent that it is within the rights of
the Lenders to do so) to the Delivery Material required to be
furnished by Playboy to the Joint Venture under the Programme
Agreement; or
(B) (in the case of any sale or disposition of the Programming
Collateral (or any part thereof) to any person under or by
virtue of such action) require that person to permit and make
available to the Joint Venture (or such person as the Joint
Venture may direct the Lenders in writing) access to the
Delivery Material
4.
<PAGE>
DENTON HALL
required to be furnished by Playboy to the Joint Venture under
the Programme Agreement;
(b) neither the Lenders, nor any person who acquires any rights in any
Programming Collateral under or by virtue of any disposition or other
enforcement of the Lenders' rights therein, assumes liability for any
positive obligations of Playboy under the Programme Agreement including
without limitation the obligations of Playboy to provide a Scheduler,
to create or physically deliver Delivery Material to the Joint Venture,
to create or fund the creation of Programmes or Delivery Material or to
acquire or fund the acquisition of Third Party Programmes (it being
understood and agreed that in the event of a Default the Lenders have
no obligation to consent to, and shall be entitled to take steps to
prevent, the creation by Playboy (or any other person acting on behalf
of Playboy) of any Future Programmes or any Delivery Material in
relation to any Future Programmes).
4. Provisos (i) and (ii) to sub-clause 3(a) above shall continue to apply if
and so long as:
(a) all payments due and to become due (if any) to Playboy under the
Programme Agreement after the Joint Venture has been notified of any
Default by the Lenders shall (subject to laws which provide third party
priorities or otherwise provide to the contrary, to the order of any
court of competent jurisdiction, to the provisions of Clause 5 below
and to Playboy Enterprises continuing to perform its obligations under
the Trademark Agreement in accordance with its terms and to the extent
to which Playboy is continuing to perform its obligations under the
Programme Agreement in accordance with its terms) have been made
directly to the Lenders or their designee (to the extent so requested
by the Lenders in writing to the Joint Venture); and
(b) in the event that any payments made by the Joint Venture to the Lenders
or their designee pursuant to sub-clause 4(a) above are not in an
amount sufficient to reimburse the Lenders for their reasonable out-of-
pocket costs and expenses
5.
<PAGE>
DENTON HALL
(if any) of permitting access to the Delivery Material in accordance
with proviso (ii) to sub-clause 3(a) above, the Lenders shall have
received within twenty-one (21) days after having notified the Joint
Venture to that effect such additional amount as will so reimburse
them.
5. In the event that the Joint Venture pays any additional amount to the
Lenders pursuant to sub-clause 4(b) above, the Lenders agree that the Joint
Venture shall be entitled to deduct such additional amount from any
payment(s) which subsequently become(s) due to Playboy under the Programme
Agreement.
6. Except where any governmental department, agency or regulatory body
requires a Lender to assign to a governmental department, agency or
regulatory body the promissory notes evidencing that Lender's credit to
Playboy so as to maintain that Lender's liquidity, each of the Lenders
undertakes that it shall not assign any of its rights under any of the Loan
Documents to any person unless that person shall first have entered into an
agreement with Flextech and the Joint Venture which is substantially
similar in form and substance to this Agreement.
7. This Agreement shall be construed and the rights and obligations of the
parties hereunder determined in accordance with the law of the State of
Illinois, United States of America. The parties hereby consent to the non-
exclusive jurisdiction of the federal courts of the federal districts
having jurisdiction over the State of Illinois located in Cook County.
IN WITNESS WHEREOF, the parties herein have caused this Agreement to be
entered into as of the date set forth above.
HARRIS TRUST AND SAVINGS BANK
By: R.L. Dell'Artino
--------------------------
Its: VICE PRESIDENT
6.
<PAGE>
DENTON HALL
LASALLE NATIONAL BANK
By: Robert Kastenholz
-----------------------------
Its: Senior Vice President
CONTINENTAL SHELF 16 LIMITED
By:
-----------------------------
Its:
PLAYBOY TV UK/BENELUX LIMITED
By:
------------------------------
Its:
7.
<PAGE>
DENTON HALL
AGREEMENT
This Agreement is entered into this day of 1995, by and between
Playboy Entertainment Group, Inc. ("Playboy"), Playboy Enterprises, Inc.
("Playboy Enterprises"), Continental Shelf 16 Limited ("Flextech") and Playboy
TV UK/Benelux Limited (the "Joint Venture").
WHEREAS, Playboy, Playboy Enterprises, Flextech and the Joint Venture intend to
enter into today that certain Programme Supply Agreement (the "Programme
Agreement"), that certain Shareholders' Agreement (the "Shareholders'
Agreement") and that certain Trademark Agreement (the "Trademark Agreement");
and
WHEREAS, Playboy Enterprises intends to enter into, among other things, a loan
and security agreement and related agreements (the "Loan Documents") with the
Harris Trust and Savings Bank and the LaSalle National Bank (collectively, the
"Lenders" which expression shall include their successors in title and assigns)
pursuant to which the Lenders will cause to make a loan or a series of loans and
other financial accommodations to Playboy Enterprises; and
WHEREAS, to secure Playboy Enterprises' obligations under the Loan Documents,
Playboy Enterprises intends to pledge certain assets to the Lenders as
collateral for the aforementioned loans (the "Bank Collateral"); and
WHEREAS, included among the Bank Collateral to be pledged to the Lenders in
accordance with the Loan Documents are or may be those certain "Programmes" and
"Third Party Programmes" as those terms are defined in Section 1.1 of the
Programme Agreement and the "Trade Marks" as that term is defined in Section
1.1 of the Trademark Agreement; and
WHEREAS, Flextech has sought assurances from Playboy and Playboy Enterprises as
to its rights in and to the Programmes and the Third Party Programmes as set
forth in the Programme Agreement and in and to the Trade Marks as set forth in
the Trademark
1.
<PAGE>
DENTON HALL
Agreement in the event of any default by Playboy Enterprises under the Loan
Documents or any other occurrence which results in any action by or on behalf of
the Lenders to foreclose upon or assert control over the Bank Collateral; and
WHEREAS, the parties herein deem it necessary to enter into this Agreement
immediately prior to executing the Shareholders' Agreement, the Programme
Agreement and the Trademark Agreement;
NOW, THEREFORE, for and in consideration of the mutual covenants and agreements
set forth below and other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Notwithstanding the provisions of the Shareholders' Agreement, the
Programme Agreement and the Trademark Agreement but subject to the
performance by Playboy and Playboy Enterprises of their obligations under
paragraph 2 and sub-paragraph 3(a) hereof:
(a) Flextech hereby consents to the pledging to the Lenders of any or all
of the shares in the capital of, and the other Interests (as defined in
the Shareholders' Agreement) in, the Joint Venture held by Playboy
and/or Playboy Enterprises.
(b) Flextech hereby waives any rights which it might have pursuant to the
Shareholders' Agreement to treat the pledging of any such shares to the
Lenders as the deemed service by Playboy of a Transfer Notice (as
defined in the Shareholders' Agreement) provided that nothing contained
in this Agreement shall preclude Flextech from exercising any rights
which it may have, whether under the Shareholders' Agreement or
otherwise, in the event that any of the Lenders propose(s) to Transfer
(as defined in the Shareholders' Agreement) any shares in the capital
of the Joint Venture to any person.
(c) Flextech hereby undertakes that it shall not Transfer any of its shares
in the capital of the Joint Venture to any person other than Playboy or
Playboy Enterprises unless Flextech shall have obtained from any such
person (a copy
2.
<PAGE>
DENTON HALL
of which shall be delivered promptly to Playboy and Playboy Enterprises)
a consent, waiver and undertaking substantially similar in form and
substance to the consent, waiver and undertaking hereinabove given in
sub-paragraphs 1(a), (b) and (c).
(d) The Joint Venture hereby consents to the pledging to the Lenders as part
of the Bank Collateral of the following:
(i) the Programmes, the Third Party Programmes and the Trade Marks; and
(ii) the benefit of the Programme Agreement and the Trade Mark
Agreement.
2. In consideration of Flextech and the Joint Venture each agreeing today to
enter into the Shareholders' Agreement, the Trademark Agreement and/or the
Programme Agreement and of the consents and waiver given by Flextech and the
Joint Venture under paragraph 1 hereof, Playboy shall not later than 28
February 1995 obtain from each of the Lenders and deliver to Flextech and
the Joint Venture a forbearance agreement duly executed by each of the
Lenders in the form attached to this Agreement (the "Forbearance
Agreement").
3. The obligations of Playboy and Playboy Enterprises under this Agreement
shall be continuing in nature such that:
(a) in the event that Playboy Enterprises enters into any such other or
further secured lending agreements with institutions other than the
Lenders; or
(b) in the event that any of the Lenders assigns any of its rights under any
of the Loan Documents to any person (other than any governmental
department, agency or regulatory body as described in the exception to
paragraph 6 of the Forbearance Agreement)
3.
<PAGE>
DENTON HALL
Playboy and Playboy Enterprises shall promptly obtain from any such
lender(s) or assignee(s) and deliver to Flextech and the Joint Venture an
agreement substantially similar in form and substance to the Forbearance
Agreement.
4. Playboy and Playboy Enterprises hereby jointly and severally warrant and
represent to Flextech and the Joint Venture that the entry into the Loan
Documents and the pledging of the Bank Collateral to the Lenders will not
(unless any or the Lenders default in the performance of their obligations
to Flextech and the joint Venture under the Forbearance Agreement) interfere
in any material respect with the performance by Playboy or Playboy
Enterprises of their respective obligations (if any) under the Programme
Agreement or under the Trademark Agreement or the exercise by the Joint
Venture of any of its rights under the Programme Agreement or under the
Trademark Agreement with respect to the Programmes and Third Party
Programmes or with respect to the Trade Marks.
5. The obligations and liability of Playboy and Playboy Enterprises under this
Agreement shall be joint and several.
6. This Agreement shall be governed by and construed in all respects in
accordance with English law and the parties agree to submit to the exclusive
jurisdiction of the English Courts as regards any claim or matter arising in
relation to this Agreement. Playboy hereby appoints O'Melveny & Myers of
10 Finsbury Square London EC2A 1LA, England as its authorised agent for the
purpose of accepting service of process for all purposes in connection with
this Agreement.
7. In the event of any inconsistency between the provisions of this Agreement
on the one hand and the provisions of the Shareholders' Agreement, the
Programme Agreement and the Trademark Agreement on the other hand, the
provisions of this Agreement shall prevail.
IN WITNESS WHEREOF, the parties herein have caused this Agreement to be
entered into as of the date set forth above.
4.
<PAGE>
PLAYBOY ENTERTAINMENT PLAYBOY ENTERPRISES, INC.
GROUP, INC.
By: /s/ Myron DuBow By:
------------------------- -------------------------
Its: Its:
PLAYBOY TV UK/BENELUX LIMITED CONTINENTAL SHELF 16 LIMITED
By: By:
------------------------- -------------------------
Its: Its:
5.
<PAGE>
PLAYBOY ENTERTAINMENT PLAYBOY ENTERPRISES, INC.
GROUP, INC.
By: By: /s/ David I. Chemerow
------------------------- -------------------------
Its: Its: Exec. Vice President
PLAYBOY TV UK/BENELUX LIMITED CONTINENTAL SHELF 16 LIMITED
By: By:
------------------------- -------------------------
Its: Its:
6.
<PAGE>
PLAYBOY ENTERTAINMENT PLAYBOY ENTERPRISES, INC.
GROUP, INC.
By: By:
------------------------- -------------------------
Its: Its:
PLAYBOY TV UK/BENELUX LIMITED CONTINENTAL SHELF 16 LIMITED
By: /s/ Roger Luard By: /s/ Roger Luard
------------------------- -------------------------
Its: Its:
5.