Exhibit 10.2.1
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the
Securities and Exchange Commission. The
omissions have been indicated by asterisks
("*****"),
and the omitted text
has
been filed separately with the Securities
and Exchange Commission.
AFFILIATION AGREEMENT
THIS
AGREEMENT made as of
the 10th day of February 1993 is by and between
PLAYBOY ENTERTAINMENT GROUP, INC., a Delaware corporation ("Network"), and
SATELLITE SERVICES, INC., a Delaware
corporation ("Affiliate").
1.
RIGHTS:
(a) Grant of
Rights. Network hereby grants to Affiliate, and
Affiliate hereby accepts, the following rights relating to the pay cable
television programming service currently
known as "PLAYBOY
TELEVISION" (and as
it may be renamed from time to time by
Network), whether in
its current analog
format or in any other format, whether
digitized, compressed, modified, replaced
or otherwise manipulated (the
"Service"):
(i) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and
authorize the reception of the Service by
cable or other wire transmission
service, whether now existing or developed
in
the future, ("Cable") in the Distribution Areas (as defined herein) of the
System or Systems.(as defined herein), if any, set forth by Affiliate on
Schedule 1, as such Schedule 1, may be added to or
deleted from,
from time to
time, pursuant to the terms of this
Agreement;
(ii) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and
authorize the reception of the Service by
satellite master antenna television systems ("SMATV"); by multipoint
distribution services ("MDS"), and by multichannel multipoint distribution
services ("MMDS"), in (A) Operating Areas (as herein
defined) of Systems,
(B)
other areas of counties in which Operating Areas of Systems are wholly or
partially located but which areas are not the subject of a cable television
franchise or license or, if a cable
television
franchise or license
exists in
such area, the operator of such franchise or license is not
distributing
the
Service, and (C) areas of counties (which
areas are contiguous to counties where
an Operating Area of a System is wholly or
partially located)
which are not the
subject of a cable television franchise or license or, if a cable
television
franchise or license exists in such area, the operator of such franchise or
license is not distributing the Service (the areas
described in (A), (B),
and
(C) of this Section 1(a)(ii) shall be referred to herein as a System's
"Distribution Area");
(iii) in the event Network offers or grants to any third party
the right to authorize the service for reception, or the right to otherwise
exhibit, distribute, or authorize the
reception of the Service, in the District
of Columbia, the United States, or its territories, possessions or
commonwealths, to anyone by means of
equipment capable
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of receiving audio/visual signals and/or programming
directly from a satellite
(other than a C-Band satellite), including; but not limited" to, K or
Ku-Band
signals, whether now existing or developed in the future ("DBS"); or by any
other means of distribution not otherwise
mentioned in this
Agreement, whether
now existing or developed in the future,
*****.
(iv) the non-exclusive right, but not the obligation, to
exhibit, distribute (pursuant to the terms
of this Agreement) and authorize the
reception of the Service, nationwide (including, collectively, in the fifty
United States; the District of Columbia,
and the territories,
possessions and
commonwealths of the United States) to any person or entity ("Satellite
Subscribers"), by means of equipment capable of
receiving audio/visual
signals
and/or programming directly from a C-Band satellite,
in an analog format or
as
digitized, compressed, modified, replaced or otherwise
manipulated,
including
tier-bit access rights and the right to include tier-bit :messages on the
Service on any three (3_) consecutive days of each calendar month, provided
that, if such three (3) days are not the
first consecutive Thursday, Friday and
Saturday of a month, Affiliate, (or an
affiliate of Affiliate) will give Network
written notice of the days Affiliate selects no less than seven (7)
days prior
to the first day of the month in which the
selected days occur.
Notwithstanding
the foregoing, if: (i) upon the expiration of two years after the date of
execution of this Agreement, Affiliate's Retail Satellite Sales (as computed
below) does not equal or exceed
Network's Retail Satellite Sales (as computed
below), then Affiliate's tier-bit messaging rights
hereunder may be terminated
by Network as of the end of such two-year
period; or (ii) upon the expiration of
five years after the date of execution
of this Agreement, Affiliate's Retail
Satellite Sales does not equal or exceed
Network's Retail Satellite Sales, then
Affiliate's tier-bit messaging rights
hereunder may be terminated by Network as
of the end of such five-year period.
"Affiliate's Retail
Satellite Sales" shall
equal the total dollar amount of retail sales (net of discounts and credits)
accrued by Affiliate or an affiliate of Affiliate
for sales of the
Service to
PPV Satellite Subscribers (as defined herein)
and Service Satellite Subscribers
(as defined herein) during the days on which
Affiliate or an affiliate of
Affiliate exercised tier-bit messaging rights in the three
months immediately
prior to the expiration of the two- or five-year
periods (as the case
may be)
set forth above. "Network's Retail
Satellite Sales" shall equal the total dollar
amount of retail sales (net of discounts
and credits), accrued by Network for
sales of the Service to Satellite
Subscribers
during three-day
periods in the
three months immediately prior to the expiration of the two- or five-year
periods (as the case may be) set
forth above, which three-day periods are
comparable to the days on which Affiliate
exercised tier-bit messaging rights in
such three-month period. Affiliate, or an
affiliate of Affiliate, shall utilize
a port for access to Network's tier-bit for
the purpose of tier-bit access which
port is assigned to, or is owned or leased by,
Affiliate,
or an affiliate of
Affiliate, unless Network has consented to
the utilization by Affiliate or such
affiliate of Affiliate of another port,
with such consent not to be unreasonably
withheld or delayed.
The rights set forth in this Section 1(a), and elsewhere
under this
Agreement, are also granted hereby to any
affiliate of Affiliate. Any use of the
Service under this Agreement by such an affiliate of Affiliate, or by any
permitted subdistributee, shall be subject
to the obligations and limitations of
this Agreement. As used in this
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Agreement, an "affiliate of Affiliate" shall include any entity
meeting the
requirements of paragraphs 1.1, II or III of Exhibit A hereto
regardless
of
whether such entity is a cable television
system.
"Operating Area"
of a cable
television
system shall mean that
geographic area where the owner of the
system is authorized by appropriate
governmental authority to operate an audio or video distribution facility
through Cable and is operating an audio or
video distribution
facility through
cable within such area; provided, however,
that if a franchise or license is not
required for the distribution of television services by Cable in a
particular
geographic area, then the Operating Area of a
system shall mean that geographic
area where the system is operating regardless of the presence or absence of
a
franchise or license.
(b) Affiliate shall
have the right, upon
written notice to Network
within thirty (30) days thereof, to elect to launch the
Service in, and to
include under this Agreement, any cable
television system which meets the System
Qualifications of Exhibit A hereto
(individually,
a "System" or,
collectively,
"Systems"). Upon receipt of such a notice,
Schedule 1 hereof shall be deemed to
include such System(s) as of the later of:
(i) the launch date of the Service on
such System(s), (ii) the date such
System(s) first satisfies the requirements of
Exhibit A hereto, or (iii) the date set forth in
such notice if such
notice is
properly given pursuant to Section 11 of this Agreement. Any then-existing
agreement with Network applicable to any such System or
Systems for carriage of
the Service shall be extinguished and shall cease to be effective
with respect
to such System as of the effective
date of: the addition
or deemed addition
of
such System to Schedule 1. Affiliate shall
have the right, in
Affiliate's sole
and absolute discretion, to discontinue carriage of the Service on any or
all
Systems, and to delete any or all Systems
from Schedule 1, by providing Network
with no less than sixty (60) days prior written notice of such deletion and
discontinuance; provided, however, if such
deletion and discontinuance is due to
political, legal or community pressure,
such sixty (60) days'
notice shall not
be required prior to such deletion or
discontinuance
but, instead, Affiliate
shall give notice to Network and Network shall have ten (10) days to
propose
and, if agreed to by Affiliate in its sole
and absolute discretion, to implement
a plan to cure such pressure. If such plan is not successful,
as determined by
Affiliate in its sole and absolute discretion, within ten (10) days after
commencement of implementation of such plan, then Affiliate may immediately
discontinue carriage of the Service from such System(s) and delete such
System(s) from Schedule 1. After such
discontinuance and deletion, the System(s)
shall cooperate with Network to the extent
reasonably necessary to determine the
feasibility of re-launching the Service in such System (s),
which re-launch
shall be in the sole and absolute
discretion of Affiliate.
(c) Notwithstanding any provision of this Agreement to the
contrary,
Affiliate shall not intentionally authorize any use of the Service in a
commercial establishment including; without
limitation, any restaurant, tavern,
bar, club, fraternal organization, hospital, correctional facility or any
communal room in an otherwise residential building (including, without
limitation, any lobby or social room in an
apartment house, dormitory, drilling
rig or similar place); provided, however, that affiliate may authorize
Pay-per-view (as defined herein)
exhibitions of the Service and
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Subscriptions (as defined herein) to the Service in
sorority, fraternity
and
dormitory rooms; provided further, that Affiliate may authorize
Pay-per-view
exhibitions of the Service, but not Subscriptions to the
Service, in individual
rooms of transient occupancy, such as hotel, motel and hospital
guest rooms and
jail cells, except that sorority houses,
fraternity houses and dormitories shall
not be considered places of transient
occupancy for purposes
of this Agreement.
Furthermore, Affiliate shall take all reasonable precautions to prevent such
impermissible uses from occurring through the facilities of a cable
television
system which is a System.
(d) (d) For the first
thirty (30) days
following commencement
of
carriage of the Service by a System, such
System may provide the service, to its
employees, only, free of charge without any obligation to sell or
promote the
Service to customers (the "Test Period").
At the end of the Test
Period in each
System, such System may determine to terminate carriage of the Service or to
continue carriage pursuant to the terms of
this Agreement. Any
determination by
a System to terminate carriage of the
Service will not result in any charge, fee
or penalty to Affiliate or to such
System.
2.
TERM:
(a) Unless
terminated
sooner pursuant to the terms of this
Agreement, the "Term" of this Agreement shall consist, collectively, of the
Initial Term and any number of Renewal
Terms. The Initial Term of this Agreement
shall commence upon the date of execution
hereof and shall terminate on December
31, 2001, unless terminated sooner pursuant to the terms of this
Agreement.
Notwithstanding the foregoing, Network and
Affiliate hereby ratify the terms and
conditions (including, but not limited to, the payments
made by Affiliate
and
affiliates of Affiliate) of carriage of the
Service by cable television systems
that met the System Qualifications of
Exhibit A hereto, for the period ending on
the date of execution hereof.
(b) This Agreement shall automatically renew for successive five
(5)
year periods (each, a "Renewal Term") after the expiration of the
initial Term
and each Renewal Term, unless either,
(i) this Agreement is
terminated earlier
in accordance with the terms hereof, or
(ii) Affiliate, in
Affiliate's sole and
absolute discretion, elects to terminate
this Agreement pursuant to Section 5(h)
hereof.
3.
CONTENT OF
THE SERVICE:
(a) Throughout
the Term, the programming on the Service shall
consist of not less than ten (10) hours per
day (initially,
from 8:00 p.m.
to
6:00 a.m. prevailing Eastern Time) of high-quality
adult programming with a
sexual theme and format, (including, but not limited to, R-rated (or R
equivalent non-rated) and NC-17 rated (or NC-17
equivalent
non-rated)
cable
version motion pictures) substantially similar to the
program schedule attached
hereto as Exhibit B-1. The Service shall
not contain any third party promotional
material, including without limitation, commercials, advertising
or
infomercials, except that the Service may contain program sponsorship
billboards, or acknowledgements. Nothing in this paragraph shall be
deemed to
limit Network's rights set forth in Section
7(e). The content of the Service
shall also, be consistent with
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Network's standards and practices as of this
date, attached
hereto as Exhibit
B-2. Notwithstanding anything in the foregoing which may be inconsistent
herewith, the Service shall not contain any programming depicting rape,
necrophilia; sadism, sadomasochism,
bondage, incest,
bestiality or programming
involving or suggesting sexual activity
with, between, or among minors. Network
shall, during each month of the Term, send one copy of its monthly program
schedule to Affiliate, in care of: Vice
President, Programming.
(b) During
the Term, Network shall provide the Service in its
entirety to Affiliate. When the phrase "in
its entirety" is used in this Section
3(b), it means that each subscriber of
Affiliate receiving
the Service shall be
able to receive, at all points in time, all
programming
received at each
such
point in time by any other subscriber to the Service,
and if any subscriber
to
the service is receiving, at such point in time,
programming that is
different
than the programming received by any Subscriber (as
defined herein)
receiving
the Service at such point in time,
Affiliate shall have
the unconditional right
to elect which of such programming it desires to receive and utilize at any
System, and which of such programming it will authorize for reception by PPV
Satellite Subscribers (as defined herein)
and Service Satellite Subscribers (as
defined herein); provided, however, that the foregoing rights
of Affiliate and
obligations of Network shall not apply to
limited testing by Network in specific
selected systems.
4.
DELIVERY
AND DISTRIBUTION OF THE SERVICE:
(a) During the Term,
Network shall, at its
own expense, deliver
a
signal of the Service to the earth station(s) of each System, to each PPV
Satellite Subscriber and to each Service
Satellite Subscriber
and to any other
location within the continental
United States
designated by
Affiliate (in its
sole and absolute discretion), by transmitting such signal via a domestic
satellite commonly used for transmission of domestic cable television
programming and shall, at its own expense, continue to fully encode the
satellite signal of the Service utilizing
scrambling technology commonly used in
the domestic cable television industry. Except as otherwise provided in this
Section 4(a), Affiliate shall, at its own
expense, furnish an
earth station and
all other facilities necessary for the receipt of such
satellite
transmission
and the delivery of such signal to the PPV Cable
Subscribers
and/or Service
Cable subscribers (each as defined herein). In the event Network either (i)
changes the technology used by Network to encrypt the
Service to a
technology
not compatible with a System's or Systems'
then-existing descrambling equipment,
or (ii) changes the satellite to which the
Service is transmitted to a satellite
not susceptible to viewing by a System's or
Systems' then-existing earth station
equipment, Affiliate shall then have the
right to delete from Schedule 1 of this
Agreement, immediately, such System or Systems, and to
discontinue carriage of
the Service, immediately; from such System or
Systems; provided that this right
of deletion and discontinuance shall not apply to any System or
Systems if, (1)
Network agrees, unconditionally, to
reimburse such system or Systems, either, as
the case may be, (A) for the cost to such
System or Systems to acquire and
install new equipment necessary for such System or Systems to
descramble
the
signal of the Service, and/or (B) for the
cost to purchase and install equipment
reasonably necessary for such System or
Systems to receive the Service from such
new satellite; (2) physical space exists at
the then-existing
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head-end or earth station site to
accommodate the necessary equipment; and (3)
current zoning and other restrictions
permit such additional equipment.
(b) Network shall
provide to each System
distributing the
Service
and to each PPV Satellite Subscriber and to
each Service. Satellite Subscriber a
video and audio signal of the Service of a
technical quality
equivalent to the
greater of the following: (i) comparable to the technical
quality of audio
and
video signals delivered by other cable
television programming
services; or (ii)
the technical standards set forth in Exhibit c hereof.
If, at any time
during
the Term, Network converts to a digital or
other non-analog format, Network and
Affiliate shall negotiate in good faith to
agree upon replacement specifications
for Exhibit C; provided, however, that the technical quality of the video and
audio signal under the replacement specifications shall not be of a lesser
technical quality than the video and audio signal quality of the service
required hereunder in the month immediately preceding the conversion to a
digital or other non-analog format. Each System will deliver to its Service
Cable Subscribers and PPV cable
Subscribers a
principal video and audio signal
of the Service of a technical quality at least comparable to other cable
television programming services, but in no event higher than the technical
quality provided by Network hereunder.
(c) The Systems,
if any, shall carry the Service no less
than ten
(10) hours per day, but may carry the Service any number of hours per day in
excess of ten (10) if the Service is made
available for more than ten (10) hours
per day. Other than as specifically
permitted in this Agreement, Affiliate will
not insert or remove any material into or
from the Service.
Notwithstanding the
foregoing, Network hereby grants each System which does not,
at the pertinent
time, have another pre-emptible or unused, technically capable channel
available, permission to pre-empt such ten (10) hours of the Service for
exhibition of up to four (4) Pay-per-view,
(as defined below)
events (which may
not be movies) per month, (including
replays of any such events); provided that
Affiliate shall not pre-empt such ten (10)
hours of the service for exhibition
of Pay-per-view events or features, the content of which is substantially
similar to the content of the Service
Network; agrees that Affiliate will
have
complete authority to control, to designate and to change the
channel(s) over
which the Service is to be carried on each
system.
(d) Each System
retains and reserves
any and all rights in
and to
all signal distribution capacity contained within the
bandwidth of the Service
after receipt at each System, including, without limitation, the vertical
blanking interval and audio sub-carriers (and any other portions of the
bandwidth that may be created as a result
of the conversion of the signal of the
Service to a compressed, digital or non-analog format), Network shall not use
any of the bandwidth other than as provided
herein without the prior written
consent of Affiliate. Nothing herein shall preclude
Affiliate from
exercising
and exploiting such rights by any means and
in any locations
freely and without
restriction; provided, however, that any such use by Affiliate or
the Systems
shall not degrade, or otherwise interfere with, the picture quality of the
Service or the audio portion of the Service
signal which is the principal audio
carriage frequency of the Service. In the event Affiliate offers to a
third-party provider of cable television
programming services
(which is not an
affiliate of Affiliate) the right to use
portions of
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the signal distribution capacity contained within the
bandwidth of the Service
(other than the portion of the bandwidth used by the service and other than
portions of the bandwidth made usable by conversion by
Affiliate of the signal
of the Service to a compressed,
digital, or non-analog
format), Affiliate shall
give Network prior written notice of the
financial terms and
conditions of such
offer. Upon such notice, Network shall have a right of
first refusal to accept
Affiliate's offer to use portions of the
signal distribution
capacity contained
within the bandwidth of the Service (other than the portion of the
bandwidth
used by the service and other than portions of the bandwidth made usable by
conversion by Affiliate of the signal of
the Service to a
compressed,
digital,
or non-analog format) upon the same financial terms and conditions as those
offered by Affiliate to such unaffiliated third-party. Network shall have ten
(10) days after such notice to exercise in writing its right of first
refusal
and to accept the grant pursuant to such financial terms and conditions. If
Network does not exercise its right of first refusal within such ten (10) day
period, then Network shall be deemed to
have rejected such grant and waived all
rights to such portions of the signal
distribution capacity contained within the
bandwidth of the Service signal.
(e) Each System or other distribution facility or enterprise may
offer the Service, (i) as a Subscription (as defined
below) service and/or (ii)
as a Pay-per-view service marketed and sold in any of the ways
described in
Section 5(a)(vii); provided, however, that
if the Service is sold in combination
with other programming services, the Service shall be sold in no
less than ten
(10) consecutive hour segments. The Service (in no less than ten (10) hour
segments) may be sold in combination with
other services (e. g., in a package of
services or in a tier); provided that the Service,
and/or viewing
segments of
the Service as described in Section
5(a)(vii), must always also be available for
sale through each television distribution facility selling the Service under
this Agreement on a purely a la carte
basis.
(f) Neither
Affiliate,
nor any affiliate of Affiliate, shall
authorize others to copy, tape or otherwise reproduce any part of the
Service
without Network's prior written authorization, and each of the systems shall
take reasonable and practical security measures to prevent the
unauthorized or
otherwise unlawful copying, taping or other reproduction of the Service by
others through the facilities of the
system. Affiliate
shall not be responsible
for home taping by anyone viewing the
Service. Network
acknowledges
that this
Section 4(f) does not restrict
Affiliate's
or any affiliate of Affiliate's
practice of (i) connecting its subscribers,
videotape recorders,
video cassette
recorders, or other devices susceptible to use for home duplication of video
programming to the facilities of a System;
or (ii) promoting home taping for
personal use by Subscribers (as defined
below).
(g) Network hereby grants Affiliate the right to receive the
signal
of the Service, to digitize, replace, compress, modify or otherwise
technologically manipulate the signal, and to
transmit the signal as so altered
(the "Altered Signal") to a satellite,
or to a location
within the continental
United States designated by Affiliate (in
its sole and absolute discretion), for
redistribution to terrestrial or other reception
sites capable of receiving and
utilizing the Altered Signal. Network hereby grants Affiliate the right to
deliver the Altered Signal (without
substitutions, delays or preemptions (except
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as otherwise permitted under Section 4(c) of
this Agreement)) for
the uses set
forth in Section 1(a) of this Agreement, provided that no such alteration,
transmission, redistribution, reception or other use will cause a material
change in a viewer's perception of the principal video or principal audio
presentation of the Service. Furthermore,
Network shall not change the signal of
the Service in such a way as to technically or technologically defeat, or
otherwise interfere with, Affiliate's rights under this Section 4(g). In
the
event Network interferes with or otherwise prevents receipt, digitization,
compression, modification, manipulation or utilization of the signal of the
Service by Affiliate pursuant to this Section
4(g), and fails to remedy such
interference within fifteen (15) days after
written notice of such interference
is given by Affiliate, then Affiliate shall have the
right to delete any or all
Systems from Schedule 1 of this Agreement, immediately, and to discontinue
carriage, immediately, of the Service on
any or all such Systems.
5.
FEES:
(a) In consideration
of the terms and
conditions set forth herein,
Affiliate shall, subject to the provisions
of Section 5(f) and Section 7(b), pay
the Fees (as def fined herein) set forth
below. Each of the
four categories of
Fees defined below (PPV Satellite Fees,
Service Satellite Fees, PPV Cable Fees
and Service Cable Fees) shall be
calculated, stated and reported separately from
the others. As used in this Agreement, the following terms have the
following
meanings:
(i) "PPV Satellite
Subscriber"
means someone who, (1) is a
Satellite Subscriber, (2) receives a complete and technically satisfactory
viewing of a viewing segment of the Service as a PPV service, and (3) is
authorized to receive the Service by or
through Affiliate
or an affiliate of
Affiliate pursuant to the terms of this
Agreement.
"PPV Satellite Fees" are
those Fees payable by Affiliate to Network in
connection
with sales!
of the
Service to PPV Satellite Subscribers.
(ii) "Service Satellite Subscriber" means someone who, (1)
is
a Satellite subscriber, (2) utilizes the Service as a
Subscription service, and
(3) is authorized to receive the service by
or through Affiliate or an affiliate
of Affiliate pursuant to the terms of this
Agreement. "Service
Satellite Fees"
are those Fees payable by Affiliate to
Network in connection
with sales of the
Service to service Satellite
Subscribers.
(iii) "PPV
Cable Subscriber" means someone who, (.1) is
provided the Service by or through Affiliate or an affiliate of Affiliate
pursuant to the terms of this Agreement,
(2) receives a complete and technically
satisfactory viewing of a viewing segment of
the Service as a PPV service, and
(3) receives the Service by means other than
Satellite.
"PPV Cable Fees"
are
those Fees payable by Affiliate to Network in connection with sales of the
Service to PPV Cable Subscribers.
(iv) "Service Cable Subscriber" means someone who (1) receives
the Service by means other than Satellite, (2) utilizes the Service as a
Subscription service, and (3) receives the
Service by or through Affiliate or an
affiliate of
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Affiliate pursuant to the terms of this Agreement. "Service Cable Fees" are
those Fees payable by Affiliate to Network in connection with sales of the
service to Service Cable Subscribers.
(v)
"Subscribers"
mean,
collectively, PPV Satellite
Subscribers, Service Satellite Subscribers, PPV Cable Subscribers and
Service
Cable Subscribers.
(vi) "Fees" means,
collectively, PPV
Satellite Fees, Service
Satellite Fees, PPV Cable Fees and Service
Cable Fees payable by
Affiliate to
Network during the Initial Term.
Fees payable by
Affiliate to Network during a
Renewal Term are referred to herein as
Renewal Fees.
(vii) "Pay-per-view"
or "PPV" means the
authorization
of a
subscriber (such as a PPV Satellite Subscriber or PPV Cable Subscriber) to
receive at least one viewing segment of the Service for a fee separate and
distinct from fees paid by such subscriber for other television or audio
services. Viewing segments may include, but are not limited to, any five
(5)
consecutive hour segment, any reasonable portion of a single night's (or
days)
performance of the Service, pay-per-night,
pay per-weekend, or any other segment
of the Service representing a reasonable
viewing period.
(viii) "Subscription"
means the authorization of a subscriber
(such as a Service Cable Subscriber or
Service Satellite
Subscriber) to receive
the Service as a subscription service (on a monthly basis,
on an annual
basis,
or on some other basis representing a
reasonable
subscription period) either on
an a la carte basis or as part of a package
of other services, or both.
(ix) "Addressable
Subscriber" means a cable television system
subscriber whose television set is connected on the
subscriber's
premises to
equipment operated by Affiliate,
or an affiliate of
Affiliate, that allows
the
channel on which the service is received to be turned on or off (i.e.,
"authorized" or "de-authorized") from a central location, controlled by the
operator of the pertinent System or such
operator's agent or designee.
(x) "Gross Receipts"
means the amount
billed for the Service
to a PPV Cable Subscriber, PPV Satellite Subscriber, Service Satellite
Subscriber or Service Cable Subscriber (as the case may be)
less all applicable
taxes, franchise fees or other charges, levies or assessments imposed by
governmental entities or agencies thereof
attributable to the
purchase or sale
of the Service or any portion thereof.
(xi) "Network
Share" means that portion of Gross Receipts
which is payable by Affiliate to Network as Fees or Renewal
Fees pursuant to
this Agreement.
(xii) "Gross Receipts Per Addressable Subscriber" mean Gross
Receipts attributable to purchases
(including
Pay-per-view
and subscription
purchases) of the Service in a System in a
Reporting Period (as
defined below)
divided by the number of Addressable Subscribers in such System as of
the last
day of such Reporting Period (as
9
<PAGE>
determined by Affiliate on the first day of
the calendar quarter
which includes
said last day of the pertinent Reporting Period, or as adjusted pursuant to
Section 5(d) hereof).
(b) Subscription
(i) For each calendar month during the indicated calendar year
during the Initial Term, Affiliate will pay Network a Service Cable Fee per
Service Cable Subscriber in such month in
an amount equal to the following:
Service Cable Fee
For the Calendar Year
Per Service Cable Subscriber
---------------------
----------------------------
1992
*****
1993
*****
1994
*****
1995
*****
For each calendar month during the calendar years of the Initial Term
after
1995, Affiliate will pay Network a Service Cable Fee per Service Cable
Subscriber in such month equal to the
greater of (A) *****,
or (B) ***** of the
Gross Receipts attributable to each such Service
Cable Subscriber,
except that
such ***** shall be subject to reduction as
provided in Section 5(d) below. When
the Service is sold to a Service
Cable Subscriber in combination with other
services for a package charge (as, for example,
in a tier or in a
package of a
la carte or other services), the Gross Receipts deemed to be
attributable to a
Service cable subscriber for the Service shall be equal to the total
Gross
Receipts for the tier or package of services sold in combination with the
service, multiplied by a fraction, the numerator of which is the a la carte
retail charge for the service otherwise charged by the pertinent
System and the
denominator of which is the numerator plus the aggregate of the a la carte
retail charges otherwise charged by the pertinent
System for the other services
included in the tier or package of a la
carte or other services.
(ii) During the Initial Term, Affiliate shall pay a monthly
Service Satellite Fee to Network-per Service Satellite Subscriber in the
indicated calendar year of the amount indicated (regardless of whether such
Service Satellite Subscribers purchase the Service alone, as an a la carte
service or as part of a tier or
package of a la carte or other
services and
regardless of the amount of Gross Receipts attributable to such Service
Satellite Subscribers) as follows:
For any and
For the First
For the next
all
24,999 Service
15,000 Service
additional
Satellite
Satellite
Service
Subscribers
Subscribers
Subscribers
---------------- ----------------
----------------
1993
*****
*****
*****
1994
*****
*****
*****
10
<PAGE>
For any and
For the First
For the next
all
24,999 Service
15,000 Service
additional
Satellite
Satellite
Service
Subscribers
Subscribers
Subscribers
---------------- ----------------
----------------
1995
*****
*****
*****
1996
*****
*****
*****
1997
*****
*****
*****
1998
*****
*****
*****
1999
*****
*****
*****
2000
*****
*****
*****
2001
*****
*****
*****
(iii) The number of service Satellite Subscribers or Service
Cable Subscribers (as the case may be) for whom
Affiliate shall pay each month
shall be the average of (A) the number of Service Satellite Subscribers or
Service Cable Subscribers (as the case may be) on the first
day of the month,
and (B) the number of Service Satellite
Subscribers or Service Cable Subscribers
(as the case may be) on the last day of the
month. Service Satellite Subscribers
or Service Cable Subscribers (as the case may be) shall include
each occupied
dwelling (whether a single family home or a
multiunit building),
drilling rig,
nursing home room, dormitory room, fraternity room, sorority room, or other
location in which the Service is received.
If Affiliate provides
the Service to
multiple dwelling complexes, including, but
not limited to, apartment buildings,
on a bulk-rate basis, the number of Service Satellite Subscribers or Service
Cable Subscribers (as the case may be) attributable to each such bulk-rate
subscriber shall be equal to the total
monthly retail rate charged a complex for
the Service divided by the standard
monthly retail rate
charged a non-bulk rate
Service Satellite Subscriber or Service Cable
Subscriber (as the
case may be)
for the service in the applicable System or by the pertinent satellite
distributor, as the case may be. The monthly number of Service Satellite
Subscribers and the monthly number of Service
Cable Subscribers
shall each be
calculated, stated and reported separately
from the other.
(iv) The Service Cable Fees and Service Satellite Fees payable
by Affiliate to Network hereunder shall be
due and payable
forty-five (45) days
after the end of the calendar month to
which they relate.
(c) PPV
For each PPV Cable Subscriber and each PPV Satellite
Subscriber who receives and pays for one (1) complete and technically
satisfactory viewing of one (1) viewing segment of the Service during the
Initial Term, Affiliate will pay Network a PPV Cable Fee
or PPV Satellite Fee
(as the case may be) in an amount equal to
the greater of: (A) *****, or (B) the
Network Share of the Gross Receipts paid by such PPV Cable
Subscriber or PPV
Satellite Subscriber to Affiliate. "Network Share" shall equal *****
percent
***** of the Gross Receipts paid by each PPV Satellite Subscriber and shall
equal ***** percent ***** of the Gross Receipts paid by each PPV Cable
Subscriber,
11
<PAGE>
except that such ***** percent ***** paid
by each PPV Cable
Subscriber shall be
subject to reduction as provided in Section
5(d) below.
(d) During the Initial Term, the Network Share in any System for
Any
Reporting Period shall be subject to
reduction (from the ***** percent ***** of
Gross Receipts otherwise payable by Affiliate to
Network hereunder)
based upon
the aggregate number of cents in Gross Receipts attributable to PPV Cable
Subscribers and Service Cable Subscribers in such System in such Reporting
Period as measured against the number of
Addressable
Subscribers in such System
during such Reporting Period (provided,
however, that the
number of Addressable
Subscribers in each System shall be determined by Affiliate on the first
calendar day of each calendar quarter and each such number of Addressable
Subscribers so determined shall be applied for each
Reporting Period which
concludes during that pertinent calendar
quarter; provided, however, that if the
number of Addressable Subscribers in a System
increases or decreases
more than
***** percent ***** in a calendar quarter, then the number of Addressable
Subscribers attributable to such System for Reporting
Periods which
conclude
during such calendar quarter shall be equal to the average of the number of
Addressable Subscribers in such System on the first calendar day of such
calendar quarter and the number of
Addressable Subscribers in such System on the
first calendar day of the succeeding
calendar quarter;
provided, further,
that
Affiliate shall make appropriate adjustments in its payments to Network to
properly pay under this provision), as
follows:
For the calendar years 1993, 1994, and
1995:
If the Gross Receipts Per
Then, the Network Share For
Addressable Subscriber In A
Such Calendar Month for
System in a Calendar Month
purchases by PPV Cable
Is:
Subscribers in such System
shall be:
(A) equal to or greater than
$.42 but
less than
$.62
(A-1)
*****
(B) equal to or greater than
$.62
(B-1)
*****
For the calendar years 1996, 1997 and
1998:
If the Gross Receipts Per
Then the Network Share For
Addressable Subscriber In A
Such Calendar Month for
System in a Calendar Month
purchases by PPV Cable
Is:
Subscribers and Service
Cable
Subscribers in such
System shall be:
(C) equal to or greater than
$.46 but
less than
$.68
(C-1)
*****
12
<PAGE>
(D) equal to or greater than
$.68
(D-1)
*****
For the calendar years 1999, 2000 and
2001:
If the Gross Receipts Per
Then the Network Share For
Addressable Subscriber In A
Such Calendar Month for
System in a Calendar Month
purchases by PPV Cable
Is:
Subscribers and Service
Cable Subscribers in such
System shall be:
(E) equal to or greater than
$.50 but
less than
$.75
(E-1)
*****
(F) equal to or greater than
$.75
(F-1)
*****
(e) The PPV Cable Fees and PPV Satellite Fees payable by Affiliate
to Network hereunder for each PPV Cable Subscriber and each PPV Satellite
Subscriber who receives and pays for one
complete and
technically
satisfactory
Pay-per-view viewing of a segment of the
Service pursuant to this Agreement
during a Reporting Period during the Term shall be due and
payable forty-five
(45) days after the last day of the
calendar month which
includes the last
day
of the Reporting Period. The term "Reporting Period" shall mean the days
from
the end of each System's or Satellite distributor's prior monthly reporting
period (which date may vary in each System or
for each Satellite
distributor
from the 20th of the calendar month to the last day of the
calendar month) to
the end of the System's or Satellite distributor's then current monthly
reporting period. Affiliate shall have the right,
however, to make
adjustments
to any month's payment in an amount equal to the
portion of a previous
month's
PPV cable Fees and/or PPV Satellite Fees which represents an overpayment or
underpayment.
(f) Notwithstanding
any other provision of this Agreement to the
contrary, no Fees shall be payable
for PPV Satellite Subscribers, PPV Cable
Subscribers, Service Satellite Subscribers or
Service Cable Subscribers if such
Subscribers are (i) employees of Affiliate or of an
affiliate of Affiliate who
are not charged for the Service; or (ii) public officials, administrative
personnel or public buildings that are not charged for the
Service; or (iii)
subscribers who have not paid their cable
television bill for a
given month and
are subsequently disconnected; or (iv) subscribers who, in the good faith
exercise of reasonable judgment by an employee
either of Affiliate or of an
affiliate of Affiliate, are excused from paying for the
Service either
because
such subscriber claims that the Service was not properly or intentionally
ordered or because such subscriber claims that a complete and technically
satisfactory viewing of the Service was not
received. In addition,
except for
the categories of Subscribers
described in (i),
(ii), (iii) and (iv) of this
paragraph, Affiliate shall not provide the Service or any viewing segment
thereof to persons who are not charged
therefor.
13
<PAGE>
(g) Any undisputed
PPV Satellite Fees, PPV Cable Fees, Service
Satellite Fees and Service Cable Fees
payable by Affiliate to Network hereunder,
and any undisputed amounts payable by Network to Affiliate or any System
pursuant to Section 7 hereof, that are unpaid after they are due and
payable,
shall accrue interest at one and one-half percent (1-1/2%) per month or the
highest lawful rate, whichever is less, from the due date until
payment is
received by Network, a System or Affiliate, (as the case may be); provided,
however, that any dispute which has the effect of
suspending
the accrual of
interest under this sentence must be a good
faith dispute. Each delinquent party
shall be liable to the other party for all reasonable costs and expenses
(including, without limitation, reasonable counsel fees,
disbursements,
and
administrative or court costs) in connection with the collection of any such
overdue amounts. In the event of a good faith
dispute regarding any Fees or
Renewal Fees, no such disputed Fees or Renewal Fees shall be subject to the
terms or conditions of this Section
5(g).
(h) Network shall have
the right to
renegotiate the PPV
Satellite
Fees, PPV Cable Fees, Service Satellite Fees>and Service Cable Fees
applicable
to any Renewal Term upon written notice to
Affiliate at least twelve (12) months
,prior to the end of the Initial Term or
the Renewal Term immediately preceding
such Renewal Term. Any such Renewal Fees shall be effective upon the
commencement of such Renewal Term. Said
Renewal Fees shall be effective for such
five (5) year Renewal Term. If no agreement regarding Renewal Fees is reached
upon the expiration of the Initial Term or
any Renewal Term, Affiliate may elect
in its sole and absolute discretion either to terminate this Agreement or to
provide the Service under this Agreement to Subscribers at a rate equal to
the
Renewal Fee established by Network in connection with such renewal and such
subscribers.
6.
REPORTS:
(a) For all Reporting Periods after the Test Period, Affiliate
shall
send to Network along with the payments, if any, due under Section 5 hereof,
informational statements on a form mutually
acceptable to Affiliate and Network.
Each statement shall set forth information necessary to the calculation of
the
Fees or Renewal. Fees paid. Each of the four categories of Fees` shall be
calculated, stated, and reported separately
from the others.
(i) The statements
accompanying
each month's
Service Cable
Fees and Service Satellite Fees, respectively, shall include, on a
System-by-System and Satellite distributor-by-Satellite
distributor basis,
the
number of Service Cable Subscribers and Service
Satellite Subscribers and, in
the case of Systems, the number of basic
subscribers, as of the first day of the
month and as of the last day of the month, and the average thereof, and
commencing in 1996 in the case of Systems,
the Cross Receipts
attributable
to
Service Cable Subscribers, the number of
Addressable Subscribers as of the first
calendar day of the calendar quarter which includes the last day of such
Reporting Period, and the Cross Receipts per
Addressable
Subscriber for
each
System; and such other information as may be necessary
for the calculation
of
the Service Cable Fees and Service
Satellite Fees paid.
14
<PAGE>
(ii) The statement
accompanying
each month's PPV Cable
Fees
shall include, on a System-by-System
basis, the number of
PPV Cable Subscribers
(in the form of the number of Pay-per-view
purchases of the
Service); the Cross
Receipts paid by such PPV Cable Subscribers at each price level; on a
System-by-System basis., the number of basic subscribers, and the number of
Addressable Subscribers as of the first calendar day of the calendar
quarter
which includes the last day of such
Reporting Period, and the Gross Receipts per
Addressable Subscriber for each System; and such other information as may be
necessary for the calculation of the PPV
Cable Fees paid.
(iii) The statement
accompanying
each months PPV
Satellite
Fees shall include the number, of PPV Satellite Subscribers in the form of the
number of Pay-per-view purchases of the
Service; the Gross Receipts paid by such
PPV Satellite Subscribers; and such other information as may be necessary
for
the calculation of the PPV Satellite Fees
paid.
(iv) In November 1998,
Affiliate shall
provide Network
with
information necessary to allow Network to determine whether its right of
termination provided for in Section
9(a)(v)(B) is operable.
(b) Network
shall send to Affiliate, not later than forty-five (45)
days after the end of each calendar month
for which payment
pursuant to Section
7 hereof is due, a statement on a form
mutually acceptable to Affiliate and
Network which sets forth all pertinent
information to compute
the amount due to
Affiliate for such calendar month. Network shall deliver such statement to
Affiliate prior to or along with the amount
payable to Affiliate as provided in
this Agreement.
(c) Affiliate and
Network each agree to keep and maintain accurate
books and records of all matters directly relating to
