Exhibit 10.20
Exhibit A
Confidential Treatment
AMENDED AND RESTATED
AFFILIATION AND LICENSE AGREEMENT
FOR DTH SATELLITE EXHIBITION
OF PROGRAMMING
PLAYBOY TV, TWO ADULT MOVIE CHANNELS AND PLAYBOY TV EN ESPANOL
DIRECTV, INC.
and
PLAYBOY ENTERTAINMENT GROUP, INC. and
SPICE HOT ENTERTAINMENT, INC.
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Confidential Treatment
AMENDED AND RESTATED
AFFILIATION AND LICENSE AGREEMENT
FOR DTH SATELLITE EXHIBITION
OF PROGRAMMING
AMENDED
AND RESTATED AGREEMENT made as of September 16, 2006 (the
"Effective Date"), by and between PLAYBOY ENTERTAINMENT GROUP, INC., and SPICE
HOT ENTERTAINMENT,
INC., each of which is a Delaware corporation having an
office located
at Media Center Drive., Los Angeles, California 90065
(collectively referred
to herein as "Programmer"), and DIRECTV, INC., a
California corporation, having an office located at 2230
East Imperial Hwy., El
Segundo, California 90245 ("Affiliate").
WITNESSETH:
WHEREAS,
Affiliate
has established a direct-to-home
("DTH")
satellite-based television system in North America;
WHEREAS,
Affiliate desires to
continue to distribute
various television
networks owned and
operated by Programmer
that feature
adult films,
related
programming and interstitial material (the "Service," as defined in
Section 1(b)
below) in the United States as restricted by Section 17 herein (the
"Territory");
WHEREAS,
Affiliate and Programmer are parties to the Affiliation
Agreement
for DBS Satellite Exhibition of Cable Programming, dated as of May 17, 2002, as
amended, (the "Current Playboy Agreement"); and
WHEREAS,
this Agreement supersedes all prior understandings and
agreements
relating to the subject matter herein, including without
limitation, the Current
Playboy Agreement and any amendments or extensions thereto;
NOW,
THEREFORE,
FOR GOOD AND
VALUABLE CONSIDERATION, THE RECEIPT AND
ADEQUACY OF WHICH ARE HEREBY ACKNOWLEDGED, IT IS MUTUALLY AGREED AS
FOLLOWS:
1. Grant
of Rights.
(a) Distribution; Certain Definitions.
(i) Programmer
hereby grants to Affiliate, and Affiliate
hereby accepts,
the non-exclusive right to distribute the Service in the
Territory via the
DTH Distribution System (as defined below) to DIRECTV
Subscribers during the Term (as defined in Section 6(a) below), as
follows: (i)
with respect to the
Playboy TV Service
(as defined in Section 1(b) below),
distribution shall include residential subscribers, hotels,
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motels, private
offices, multiple
dwelling facilities
and oil rigs (provided,
however, that
Affiliate shall not have the right to
distribute the Service in
any common areas to
which the public has free access) on a subscription (a la
carte or package) basis (the "Subscription Offerings") and on a pay-per-view,
pay-per-block and pay-per-night basis (collectively, the "PPV Offerings"), in
blocks of at least sixty (60) minutes each (or such period as the
parties shall
agree) for up to twenty four (24) hours; provided, however, that any partial
exhibition of the
Service which
consists only of motion pictures must be no
shorter than sixty (60) minutes (any block of time, a "PPV
Program");
and (ii)
with respect
to each of Movie
Channel 1,
Movie Channel 2 and Playboy TV en
Espanol Services (as
each is defined in Section 1(b) below), distribution may
include Subscription
Offerings and PPV
Offerings to
residential
subscribers,
hotels, motels,
private offices, multiple dwelling facilities and oil rigs
(provided, however,
that Affiliate
shall not have the
right to distribute the
Service in any common
areas to which the
public has free
access). Affiliate
shall determine in its sole discretion whether to sell Subscription
Offerings on
an a la carte or package basis. Affiliate shall have the
non-exclusive right to
use the name of or logo for "Playboy TV," "Spice Wild" "The Hot
Network," and
"Playboy TV en
Espanol" as such names or logos may be
changed, altered and
amended by Programmer,
or the names,
titles or logos of the
Service or any of
its programs,
or the names, voices, photographs, music, likenesses or
biographies of any
individual participant
or performer in, or contributor to,
any program
or any variations thereof, all of which are being licensed
exclusively for use in connection with the distribution, promotion, marketing
and sale of the
Service as provided
herein. Any further use shall require
Affiliate's notification to Programmer and Programmer's written
approval, not to
be unreasonably withheld.
(ii) The term "DTH Distribution System" shall mean the
distribution system
for video and other programming services whereby the
programming satellite
signal or feed is
received from
Programmer's
delivery
source by a DIRECTV
turnaround
earth-station facility
which compresses and
processes the
signal or feed and then uplinks it to a DTH communications
satellite (a "DTH
Satellite") for
transmission
to DIRECTV
Subscribers.
DTH
Distribution System
shall also include any other method of distribution that
Affiliate currently
and/or subsequently
uses to deliver the Service feed(s) to
DIRECTV Subscribers
as part of
Affiliate's
provision of
television
services
consisting of multi-channel linear programming (which may be
combined with other
services),
including,
without
limitation, MMDS
and territorial-based
transmission
infrastructures such as Internet protocol (excluding distribution
via the Internet or the World Wide Web; provided that if at any time
Programmer
offers the right to distribute the Service via the Internet or
World Wide Web to
any other distributor
of the Service,
Programmer will offer the same rights on
the same terms and
conditions to distribute the Service on the Internet or
the
World Wide Web to
Affiliate)), fiber
optic, twisted pairs
and coaxial cable,
provided that in connection with such delivery methods,
Affiliate complies
with
the following: (i) the
end users to whom Affiliate distributes the Service are
DIRECTV Subscribers;
(ii) the branding and
packaging that is
received by such
DIRECTV Subscribers
is substantially the same as the branding and
packaging
received by DIRECTV
Subscribers that receive the Service via Affiliate's direct
to home satellites.
During the Term (as
defined in Section 6(a)), the Service
(as defined below)
shall be distributed via a DTH Satellite at the orbital
location which transmits to the greatest
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number of DIRECTV Subscribers. "DIRECTV Subscribers" shall mean
those customers
(both residential
and non-residential) authorized by Affiliate to receive a
DIRECTV branded
DTH service via the
DTH Distribution
System to a
customer's
Set-Top Box (as defined below), provided that nothing herein shall
prohibit the
transfer of Service
programming by a DIRECTV Subscriber from such
Subscriber's
Set-Top Box to a
portable viewing
device. "Service Subscribers" shall mean
DIRECTV Subscribers
authorized
by Affiliate to receive the Subscription
Offerings and/or
PPV Offerings. "Internet" shall mean the electronic
communications network
that connects computer networks and organizational
computer facilities
around the
world. "World Wide Web" means the hypertext
transfer protocol-based, distributed information system that
facilitates sharing
information and
content via the
Internet. A "Set-Top
Box" means a device that
connects to, or is
integrated as part of,
a television
or other video
output
display device ("Display Device") and also connects to the source
of Affiliate's
audio/visual signal,
the content of which then is
displayed on the Display
Device.
(iii) If Programmer grants or has granted to any other
distributor of
multi-channel (i.e.,
broadcast or cable
television
networks)
video programming
that distributes the Service in the Territory the
right to
receive and distribute any Service via a "New Distribution Method" (as defined
below), then
Programmer
will promptly notify Affiliate thereof and make
available to Affiliate the right to receive and distribute
such Service(s) via
such New Distribution
Method to the extent
that, and under the
same terms and
conditions such rights were made available to such other
distributor directly in
exchange for such rights; provided that if Affiliate cannot
reasonably satisfy
such terms and conditions, Programmer shall offer Affiliate
comparable terms and
conditions. The phrase
"same terms and conditions" shall include the allocation
of costs of
distribution of the applicable Service(s) on the New Distribution
Method between
Programmer,
the other distributor of the Service(s) and any
required third party facilitator needed for the distribution of the
Service(s).
"New Distribution
Method" shall mean,
with respect to any other distributor of
the Service in the Territory, any distribution method, device, distribution
technology or
format (for example, distribution to hand-held devices,
distribution via the
Internet, or distribution to computers in college dorm
rooms) other than has been granted under this Agreement; provided that, in all
events, the current distribution methods of cable television,
telco (i.e., via
traditional fiber
lines), direct to home satellite, SMATV and multipoint
distribution service shall not be considered a New Distribution
Method.
(iv) Affiliate shall
have the right, but
not the obligation,
exercisable in its
absolute sole
discretion,
to distribute
the programming
service commonly
known as "Playboy en
Espanol" upon delivery
to Programmer of
not less than
thirty (30) days prior written notice thereof. References
throughout this
Agreement to Playboy
en Espanol shall be applicable only upon
Affiliate's launch,
if any, of Playboy en Espanol via the DTH Distribution
System.
(v) Affiliate shall be permitted to authorize satellite master
antenna television system ("SMATV") operators (including telephone
companies and
similar service
providers)
that serve
multiple dwelling unit buildings or
complexes, commercial
or business
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establishments
with multiple
television
viewing sites or master planned
communities and the
like to distribute
the Service in the
Territory via such
SMATV systems directly to end users within such buildings or
establishments for
DTH reception only, provided, however, that: (i) such SMATV operator
shall not
have the right to distribute the Service in any common areas to
which the public
has free access and
(ii) Affiliate
shall be responsible for each such SMATV
operator's compliance
with all the
terms and conditions of this Agreement
including but not
limited to, the service charge due for each individual
purchase of the
Service, whether on a
PPV Offering or
Subscription
Offering
basis.
(b) The Service. The "Service" shall, individually and
collectively,
mean and consist of the national feed (or, if Programmer uses
multiple feeds for
the Service for the purpose of serving multiple time zones, such other of such
multiple feeds
designated
by Affiliate) of the three programming services
described in clauses (i) through (iii) below, and Playboy TV en Espanol and
the
VOD Service at such time, if any, that Affiliate elects to launch Playboy TV en
Espanol and/or the VOD Service. Each Service, except the VOD Service,
shall be
presented on a 24-hour per day, 7 days a week schedule,
as described
below and
in the "Descriptions and Limitations of the Service," attached
hereto as Exhibit
A. The Service shall be delivered to Affiliate in its entirety,
meaning that the
programming
(including, without
limitation,
all other information related
thereto (e.g., data))
on the Service as received by any Service Subscriber at a
given point in time shall be the same as the programming received by all other
subscribers to the
Service at such point in time (excluding insertions by
individual video
service providers to
permit the
customization of a feed with
respect to promoting such video service provider not to exceed four
minutes per
hour; provided that
the insertions do not change the content of a Program, and
only preempt
interstitial
programming). In the
event that Programmer
grants
individual service
providers the right to insert customized insertions as
provided hereinabove,
Programmer shall
notify Affiliate and Affiliate shall be
granted the same such rights.
(i) Playboy TV. The
programming
service commonly known as
"Playboy TV" is currently exhibited on channel 595 (
"Playboy TV"). Playboy
TV
shall consist of
entertainment
programming for adult
audiences as more
fully
described in the "Description and Limitation of the Services"
Section attached
hereto as Exhibit A.
Affiliate shall refer
to Playboy TV as
"Playboy TV," or
other name mutually
agreed to by the
parties, and may list Playboy TV on the
program guide as
"PBTV." Affiliate
shall include a
marketing description
of
Playboy TV in Affiliate's programming guide that is viewed by
Subscribers that
is mutually agreed upon by the parties.
(ii) Movie Channel 1. The service known as "Movie Channel 1"
is currently exhibited
on channel 597 ( "Movie Channel 1"). Movie Channel 1
shall consist of
entertainment
programming for adult
audiences as more
fully
described in the "Description and Limitation of the Services"
Section attached
hereto as Exhibit A. Affiliate shall refer to Movie Channel 1 as "The Hot
Network," or
other name approved by Affiliate (such approval not to be
unreasonably withheld
or delayed, it being agreed that "Club Jenna" is an
approved name), and may list Movie Channel 1 on the program guide
as "HOT" or as
otherwise agreed
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to by the Parties.
Affiliate shall
include a marketing
description
of Movie
Channel 1 in the
programming
guide that is viewed by Subscribers that is
mutually agreed upon by the parties.
(iii) Movie Channel 2. The service known as "Movie Channel 2"
is currently exhibited
on channel 598 ( "Movie Channel 2"). Movie Channel 2
shall consist of
entertainment
programming for adult
audiences as more
fully
described in the "Description and Limitation of the Services"
Section attached
hereto as Exhibit A. Affiliate shall refer to Movie Channel 2 as
"Spice Wild" or
other name approved by Affiliate (such approval not to be
unreasonably
withheld
or delayed, it being
agreed that
"Spice:Xcess" is an
approved name), and
may
list Movie Channel 2 on the program guide as "WILD" or as otherwise
agreed to by
the Parties. Affiliate
shall include a marketing description of Movie Channel 2
in the programming
guide that is viewed by Subscribers that is mutually agreed
upon by the parties.
(iv) [This section intentionally left blank.]
(vi) Playboy
TV en Espanol. Playboy TV en Espanol shall
consist of native and
dubbed
Spanish-language
entertainment
programming for
adult audiences as
more fully described in the "Description and Limitation of
the Services" Section attached hereto as Exhibit A. Affiliate shall
refer to the
Service as
"Playboy en Espanol," or other name mutually agreed to by the
parties, and may list
the channel on the program guide as "PBE" Affiliate shall
include a marketing
description
of Playboy
TV en Espanol in the
programming
guide that is mutually agreed upon by the parties
(vii) VOD Service. The
collection of VOD Packages (as defined
herein) offered to
distributors
of the Service
for use in the
distributors'
Video-On-Demand
service, wherein
each Package is
offered in its entirety to a
subscriber's premises
by means of the DTH
Distribution
System for use in an
"On-Demand"
environment
where the subscriber can start and stop video
programming at any
time and the content is delivered to subscribers as part of
the same service
that the subscriber receives his or her linear television
service (specifically excluding delivery via the Internet/World
Wide Web.) A VOD
Package is defined
as those bundles of adult programs consisting of adult
content offered
to multi-channel video distributors of television in the
Territory (for example any cable operator, satellite television provider, or
other facilities-based
provider such as Verizon, Bell South or AT&T, in
connection with such other provider's multi-channel video
distribution business,
but not such other
provider's
cellular phone, World Wide Web, Internet or
wireless businesses
(an "MCVP")) for distribution on a VOD basis to subscribers
with specific distribution requirements including requirements with
respect to
the user interface. Notwithstanding the terms of this paragraph, upon
Affiliate's
election and
written request, Programmer agrees to provide
customized VOD
Packages for use by Affiliate in its VOD service offered to
Subscribers to the
extent that use of
Programmer's VOD
Packages as set
forth
above is commercially
unreasonable given the
technology deployed by
Affiliate
for so long as Affiliate's use of Programmer's VOD Packages remains
commercially
unreasonable.
(viii) [This section intentionally left blank.]
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(ix) Programmer
represents
and warrants that (A)
it reviews
all programming
contained in the Service for compliance with the restrictions
and limitations set
forth in Exhibit A, and (B) the Service shall reflect adult
content subject to the
restrictions and limitations set forth in Exhibit A, and
shall not contain or depict any acts otherwise prohibited by
Exhibit A.
(x) All right, title and interest in and to the entire
contents of the Service, including, but not limited to, films and recordings
thereof, title
or titles, names, trademarks, concepts, stories, plots,
incidents, ideas,
formulas, formats, general content and any other
literary,
musical, artistic, or other creative material included therein
shall, as between
Programmer and Affiliate, remain vested in Programmer.
(xi) Each of the Playboy TV, Movie Channel 1, Movie Channel 2
and Playboy TV en Espanol (if applicable) shall be offered on a simultaneous
basis and distributed
by Affiliate to its Subscribers a minimum of 24 hours per
day, seven days per week, on a separate and distinct channel.
(xii) At any time
during the Term and in
any portion of the
Territory, Affiliate
shall be permitted to offer other "branded" or "unbranded"
adult programming
competitive to the Service, it being acknowledged and
agreed
by the parties that Affiliate's offering of such other adult
programming shall
not constitute a breach of this Agreement.
(xiii) Programmer
shall not propose or impose upon Affiliate,
nor shall Affiliate be obligated to pay, any surcharge or other
cost (other than
the License Fees provided for in Section 2 hereof) for receipt and
distribution
of the Service.
(c) Other Distribution
Rights and
Obligations.
In addition,
the
parties agree as follows:
(i) Subject
to Programmer's obligations hereunder and
Affiliate's rights
under Section 17,
Affiliate shall distribute the Service as
transmitted by
Programmer,
in its entirety, in the order and at the time
transmitted by Programmer without any intentional and
willful editing,
delays,
alterations,
interruptions, deletions or additions ("Alterations"), excepting:
(A) Affiliate's
commercial
or other announcements, only if permitted under
Section 3 hereof, (B) Affiliate's electronic guides (including without
limitation, any mosaic
or similar guides),
(C) news bulletins and other public
announcements as may
be required by emergencies or applicable law; and (D) the
use of digital video recorders at the DIRECTV Subscriber's premises
for playback
either on a
television
display or a mobile device ("DVRs"), videocassette
recorders ("VCRs"), or other similar devices by DIRECTV
Subscribers.
Programmer
acknowledges that the
DTH System requires and applies digital compression and
encryption processes
prior to transmission and decryption and decompression
processes upon reception and agrees that such processing does not constitute
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an Alteration
of the Service.
Programmer
shall fully
encrypt the
satellite
signal of the Service
utilizing encryption technology commonly used in the
satellite distribution industry. Affiliate shall at all times
provide Affiliate
with two operational
receivers and decoders per Service as necessary to receive
and decode the Service.
(ii) Subject to the terms and conditions of this Agreement,
the terms and conditions upon which Affiliate distributes the
Service to Service
Subscribers,
including, without
limitation,
the packaging of the
Service and
retail price charged,
shall be determined by Affiliate in its sole discretion.
Affiliate shall use
reasonable efforts to
provide Programmer
with sixty (60)
days' prior written notice of any retail price change.
(iii) Subject to the limitations contained in Section 17
below, and
Exhibit B, as applicable, with respect to the PPV Offerings,
Affiliate may offer a multiple channel offering, such that for a single payment
a purchasing Subscriber is permitted to view Movie Channel 1 and
Movie Channel 2
and/or Playboy TV
together with other adult channels as determined by Affiliate
(as restricted
by Section 17 herein) (the "Cascade"), all for one fee (the
"Cascade Fee").
Notwithstanding Affiliate's current intention, Affiliate
shall not be obligated to offer the Service using the purchasing mechanism set
forth in this Section 1(c)(iii).
(iv) Programmer shall make the Service available via satellite
signal from a domestic
communications
satellite commonly used for the delivery
of television
programming which must
be viewable with existing equipment from
Affiliate's broadcast
center in Los Angeles, California (the "Broadcast
Center"). As of the
Effective Date, the feeds of the Service are or will be
available on Intelsat Americas 13 ("Programmer's U.S. Satellite"). Programmer
may, from time to time, in its sole discretion, change the satellite being
used
for delivery of the Service to Affiliate; provided, however, that any
satellite
used by Programmer to
transmit the Service
shall be a domestic
communications
satellite commonly used for the delivery of television programming
which must be
viewable with existing
equipment from the Broadcast Center without Affiliate
incurring additional
costs or requiring Affiliate to enter into any third-party
arrangements (e.g.,
HITS) for receipt of
the signals. In the
event Programmer
either (i)
changes Programmer's U.S. Satellite to a satellite or other
transmission medium
not susceptible
to viewing or
utilization by
Affiliate's
then-existing earth
station equipment without affecting the receipt of the
signals of any other
programming or other
services then received (or committed
to be received)
by such Affiliate, (ii) changes the technology used by
Programmer to
encrypt the Service to a technology not compatible with
Affiliate's then-existing descrambling equipment, or (iii)
compresses, digitizes
or otherwise modifies
the signal of the Service in such a manner that it cannot
be received or utilized by Affiliate, then Affiliate shall have the right to
discontinue carriage
of the Service,
immediately; provided
that this right of
discontinuance and
deletion shall not
apply to Affiliate if Programmer agrees
to: (I) provide Affiliate with the necessary additional equipment required to
receive the
Service from the new satellite; and (II) promptly reimburse
Affiliate for the
actual out of pocket cost to acquire
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and install equipment
necessary for
Affiliate to
descramble, receive
and/or
utilize the signal of the Service from such new satellite or other
transmission
medium, and/or the
actual out of pocket cost to acquire and install equipment
necessary for Affiliate to descramble, receive and/or utilize the signal
of the
Service. Programmer
agrees to use
commercially
reasonable efforts to
provide
Affiliate with at
least one hundred
twenty (120) days' prior written notice of
any satellite or technology change. Programmer, or its designee, shall
maintain
appropriate back-up
satellite protection arrangements in accordance with
customary industry
standards.
Programmer
and Affiliate shall use their
respective
commercially
reasonable efforts to
maintain for the Service a high
quality of signal
transmission in
accordance with their
respective
technical
standards and procedures.
(v) The parties hereby
acknowledge and
understand that
the overall
terms and conditions of this Agreement, including without
limitation, Sections
2(e), 2(f),
6(c)(v) and 11 and
Exhibits "B," "D" and "E"
hereof, are expressly
conditioned upon Affiliate's distribution of each of the
Playboy TV, Movie
Channel 1 and Movie
Channel 2 Services
to all residential
DIRECTV Subscribers, excluding DIRECTV Subscribers restricted from
receiving the
applicable Services as
set forth in Section 17 and sub-paragraph B of Exhibit
"B" and/or
those Subscribers who have elected not to have the option of
purchasing adult
programming
and/or have been
excluded from the purchase of
transactional programming.
(d) Rights with Respect to Channel Capacity. Affiliate shall have
the right, in its sole
discretion and for
Affiliate's sole
benefit as between
Programmer and Affiliate, to utilize the channel
capacity used to
transmit the
Service during any
hours which (i) the
Service, or any significant portion
thereof, is not being
transmitted
to Affiliate for any reason; or (ii) the
transmission of the
Service, or any significant portion thereof, has been
suspended or
terminated
by Affiliate pursuant to Section 17. Programmer
acknowledges that it has no ownership rights in, or right to use,
any channel or
any amount of capacity on any DTH Satellite.
2.
Compensation; Most Favored Nation; Programming Account.
(a) Compensation. As
full and complete compensation for Affiliate's
right to distribute the Service, Affiliate shall pay to Programmer the
applicable percentage
of Gross Receipts (as defined below) for each month,
as
such percentage is calculated as set forth on Exhibit B.
(i) "Gross
Receipts" are defined as the sum of all monies
billed to Subscribers by Affiliate during any month (not including
amounts owed
by Affiliate due to
taxes other than income or franchise taxes) for receiving
any part of the Service; provided, however, that Gross Receipts shall in no
event include (i) any charge specifically made for access to programming
other
than for the Service or any general access charge, hardware licensing charge or
other charge made on a
"blanket" basis (which
shall mean that such charge will
relate to access to all program services available from Affiliate by means of
the
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DTH Distribution
System); or (ii) any charges made for ordering the Service via
telephone as a PPV
Offering, which
charges are
additional to the
charges for
ordering the Service without using the telephone. Affiliate shall
have the right
to offer Movie
Channel 1, Movie Channel 2 and/or Playboy TV as part of the
Cascade, as set forth
above, in which case
the Service's
allocable share of
revenues from such
Cascade shall equal Programmer's pro rata share of the
Cascade Fee based on the number of networks in the package. Other than as set
forth above,
Affiliate
shall notify Programmer prior to packaging the
Subscription Offerings
with any other programming services. If, however,
Affiliate packages the
Subscription
Offerings with other non-adult premium
subscription
programming services, then Affiliate shall determine the
Service's
allocable share of
revenues from such package by application of the following
formula:
S = (A/B) x P
where
S = the
Service's allocable share of revenues from such
package
A= the
DIRECTV a la carte
price then in effect for the
Subscription Offering
B =
the sum of
the DIRECTV a la carte prices of all
programming services included in such package
(including, without
limitation,
the Service)
then in
effect
P = the price of
such package
For the avoidance
of doubt, an example of such calculation is as follows:
Affiliate packages the
Subscription Offerings
with programming
service X and
programming service Y
and each of the
foregoing has an a la carte retail price
of $15, $5 and $10,
respectively. The
retail price for the
entire package is
$36. Programmer's allocable share of the revenues from such package
would be $18
(15/30 x 36).
(ii) To the extent
that a Subscriber
prepays any portion
of
monies solely in connection with Affiliate's distribution of the Service,
then
the amount prepaid
shall be included in
Gross Receipts for the
month in which
such payment was received; provided that, Affiliate's billing system has the
capability to account for such prepayments. Affiliate shall deduct
the amount of
any Credit Transaction (as defined below in Section 2(a)(ii)), as
such amount is
reasonably determined
by Affiliate, from the Gross Receipts of the month in
which such Credit Transaction occurs.
(iii) "Credit
Transaction"
shall mean any refund (or other
payment or credit) to a DIRECTV Subscriber in connection
with (A) prepayments
for the Service, (B) Programmer's inability to transmit the Service
to Affiliate
for distribution
via the DTH
Distribution
System for any
reason other than
Affiliate's
non-performance of an
obligation
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Confidential Treatment
hereunder, (C) a Force
Majeure Event or (D) credits (excluding Discounted
Previews of the Service not authorized by Programmer) allowed by Affiliate in
its commercially
reasonable judgment
consistent with Affiliate's policies and
procedures applied
consistently to
Programmer and Affiliate's other sources of
programming services.
(iv) Affiliate shall be responsible for the accounting for all
Gross Receipts and shall account to Programmer with regard to the
Gross Receipts
for the Service on a monthly basis, not later than 45 days after
the last day of
the month in which the Gross Receipts are accrued by Affiliate.
Affiliate shall
provide a separate accounting for the Playboy TV, Movie Channel 1,
Movie Channel
2 and Playboy TV en Espanol (if applicable) Services. Each such
accounting shall
include:
(A) the
aggregate Gross Receipts for such month;
(B) the
origin (categorized separately by residential
subscribers (which includes multiple dwelling
facilities,
private offices
and oil rigs) and
hotels/motels,
if any) of all Gross Receipts for
Subscription Offerings
for such month;
(C) the
number of residential DIRECTV Subscribers as of
approximately
the fifteenth
calendar
day of such
calendar month;
(D)
the applicable
Programmer Share from Exhibit B;
(E) the
dollar amount of Programmer's share of Gross
Receipts for such month;
(F) the number
of Service Subscribers
as of approximately
the 15th day of such calendar month; and
(G) for each PPV
Offering, the number of Service Subscribers
purchasing such PPV
Offering on each
calendar day of
such month; and
(H) Hotel/Motel
License Fee (as defined below in Section
2(c)).
(v) Programmer
and Affiliate shall accord confidential
treatment to any
information
contained in the aforementioned statement in
accordance with
Section 15. At
Programmer's request
and at reasonable
times,
upon reasonable
advance written notice and during normal
business hours at
Affiliate's offices,
Affiliate shall permit
Programmer's
representatives
to
review, one
time per each year of the Term and one time during the year
immediately after the
termination or expiration of this Agreement, those books
and records maintained
according to Affiliate's standard accounting practices
which are generally in
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Confidential Treatment
accordance with GAAP required to verify License Fees and reports
made hereunder.
Programmer shall audit each calendar year of the Term, if at all,
within one (1)
year following the end of such calendar year, with such review limited to
those
records for
those months of the prior calendar year which have not been
previously reviewed and those past months of the current calendar
year for which
records are available.
Programmer shall
report promptly (but
no later than 30
days following completion) to Affiliate the results of such audit,
including any
deficiency in payment of License Fees that Programmer believes were revealed by
such audit,
and shall make any
claim against
Affiliate with respect to the
results of such
audit within one (1) year after reporting such results to
Affiliate. From and after Programmer's audit of a particular period
of the Term,
such period
shall be deemed closed by the parties and, except as may be
demonstrated by such audit, Affiliate shall have no further
liability in respect
of License Fees for such period. Programmer may not commence a new audit
until
all prior audits
have been closed and the results have been presented to
Affiliate. Any such
review shall be at Programmer's sole cost and expense;
provided, however,
if such review
discloses an
underpayment greater
than ten
percent (10%) of the
actual amount due
(which amount is not
subject to a bona
fide dispute
by Affiliate), Affiliate shall reimburse Programmer for its
reasonable
out-of-pocket
costs and expenses incurred to discover such
underpayment. The
information derived from and the process of such review shall
be subject to the
confidentiality
provisions of Section
15. Notwithstanding
anything herein to the contrary, any audit conducted pursuant to this Section
2(a)(v) shall be
conducted by a reputable, industry recognized third party
auditor or another firm approved in advance by Affiliate, which
shall have first
entered into a confidentiality agreement with Affiliate.
(b) License Fee. As
full and complete
compensation for the
rights
granted Affiliate
hereunder,
Affiliate shall pay to
Programmer, on a
monthly
basis, the "License Fees," calculated pursuant to Programmer's
Cable Rate Card
in Exhibit B, subject to reduction and offset for any credits,
discounts,
and
reimbursements set
forth in Exhibit B, annexed hereto, and a five percent (5%)
reduction in the amount to be paid to Programmer to take into
consideration the
approximated rate that DIRECTV Subscribers default on amounts owed for
viewing
of the Service.
As used in this
Section 2 and elsewhere in this Agreement
(including Exhibit
"B") when referring to the payment of License Fees or
the
provision of subscriber reports by Affiliate to
Programmer,
unless expressly
modified by "calendar," the term "month" shall refer to
Affiliate's
accounting
month, which
is the approximately thirty (30) day period commencing on
approximately the middle of each month and ending on approximately
the middle of
the next succeeding month. Affiliate acknowledges that it is
being extended the
License Fees herein in
exchange for offering
Playboy TV, Movie
Channel 1 and
Movie Channel
2 to all residential DIRECTV Subscribers, excluding DIRECTV
Subscribers restricted
from receiving the
applicable Services as
set forth in
Section 17 and
sub-paragraph B of Exhibit "B" and/or those Subscribers who
have
elected not to have the option of purchasing adult programming
and/or have been
excluded from the purchase of transactional programming.
(c) Hotel/Motel
License Fee. The parties understand and agree that
the terms of this Section 2(c), and not Section 2(a), shall govern the case of
monies received from the distribution of the Service to hotels or
motels. In no
event shall
Affiliate pay any
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Confidential Treatment
fees or other charges on any Gross Receipts pursuant to both this Section
2(c)
and any other section
of this Agreement.
Affiliate shall pay to Programmer a
license fee (the "Hotel/Motel License Fee") simultaneously with the
accounting
rendered to Programmer as set forth in Section 2(a)(iv). The
Hotel/Motel License
Fee shall be equal to the license fee set forth on Exhibit D
attached to this
Agreement.
(d) Late or Non-Payments. Any amounts not paid hereunder by the
date
payment is due, and which are not paid within ten Business Days
after receipt of
a notice from the obligee thereof stating that such amounts have not
been paid
and are overdue,
shall, at Programmer's option, accrue interest at the rate of
one percent (1%) per month or at the highest lawful rate, whichever
shall be the
lesser, from the date notice was given that such amounts were
overdue until they
are paid. "Business Day" shall mean a day that is not a Saturday,
Sunday or day
on which banks are generally closed for business in the State of
California.
(e) Most Favored Nation.
(i) If at any time during the Term, Programmer allows (whether
prospectively or by virtue of assuming any pre-existing agreements
or otherwise)
another person
engaged in distribution of any of the Services within the
Territory (including,
without limitation, by means of the Internet, broadcast,
cable, telco
(i.e., via traditional fiber lines), satellite and/or
satellite-based direct
broadcast television distribution) (hereinafter, an
"Other
Distributor"),
to distribute
such
Service(s)
in exchange for
Consideration (as defined below) which, when taken as a whole on a
net effective
basis per subscriber to such Service(s), is more favorable to such Other
Distributor than to Affiliate with respect to such Service(s)
("Favored Fees"),
then Programmer shall
promptly notify Affiliate in writing of such Favored Fees
and Affiliate shall be immediately entitled, at its sole option, to
incorporate
into this Agreement the Favored Fees effective as of the first day
following the
date on which Programmer first allows such Other
Distributor to
distribute the
Service(s) in exchange
for the Favored
Fees; provided that, in case of the
assumption of any
preexisting
agreement by Programmer, Affiliate shall be
entitled to
incorporate into this
Agreement the Favored
Fees on a prospective
basis only (i.e., from
the date that
Programmer assumed
such agreement).
If
Affiliate chooses to
incorporate such Favored Fees, however, it must do so in
their entirety,
including all corresponding terms and conditions related to the
Service(s). If such
corresponding
terms and conditions are impossible or
impractical for Affiliate to perform, the parties hereto will
mutually negotiate
in good faith to
establish comparable terms and conditions. Nothing in the
preceding sentences shall require Affiliate to incorporate the
Favored Fees into
this Agreement.
(ii) Notwithstanding
anything herein to the contrary, "Other
Distributor" shall not include Programmer's Affiliated Companies (as defined
in
Section 8(a)
hereof) engaged in distribution of the Service (or any portion
thereof) via the Internet; provided that, such Affiliated
Companies are, as
of
the date hereof and
throughout the Term
continue to be,
controlled by and
at
least 50% owned by Playboy Enterprises, Inc. (the parent company of Playboy
Entertainment Group,
Inc.) or a subsidiary
thereof. The parties
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Confidential Treatment
acknowledge that, as of the date hereof, such Affiliated Companies consist of,
but shall not be limited to, Playboy.com, Spicetv.com, ClubJenna.com and
Adult.com, and
Programmer
represents
and warrants
that said companies are
controlled by
and at least 50% owned by Playboy Enterprises, Inc. or a
subsidiary thereof.
Programmer
shall provide
Affiliate with advance
written
notice in the event
that any other
Affiliated
Company intends to commence
distribution of the Service via the Internet during the Term.
(iii) Intentionally Omitted.
(iv) At Affiliate's election, Programmer shall permit
Affiliate's
representatives to review, during the Term (no more than once
each
calendar year) and for
one (1) year and on a one-time basis only thereafter,
such Programmer
records
as required for the sole purpose of verifying
Programmer's
compliance with the
terms of this Section
2(e), at reasonable
times, upon reasonable
advance written notice
and during normal business hours
at Programmer's
offices. Such review shall be at Affiliate's sole cost and
expense; provided, however, if such review discloses an overpayment
by Affiliate
greater than ten
percent (10%) of the
actual amount due
(which amount is
not
subject to a bona fide
dispute by Programmer), Programmer shall reimburse
Affiliate for its
reasonable
out-of-pocket
costs and expenses incurred to
discover such overpayment. The information derived from and
the process of such
review shall be subject to the confidentiality provisions of
Section 15, and any
third party auditor shall be required to acknowledge in writing its
agreement to
such confidentiality
provisions.
Notwithstanding
anything herein to the
contrary, any such
audit shall be conducted by a "Big 5" public accounting firm
or another firm approved in advance by Programmer which shall have
first entered
into a confidentiality agreement with Programmer (an "Independent
Auditor"). If,
as a result of an audit, the Independent Auditor determines that Programmer
has
fully complied with
its obligations
pursuant to this
Section 2(e),
then the
Independent Auditor
shall provide written
notice to the parties
stating only
that Programmer
has complied.
If, as a result of the
audit, the
Independent
Auditor determines
that Programmer may not be in compliance, then the
Independent Auditor
shall commence good faith discussions with Programmer
related thereto.
In the event
that after
such good faith discussions have
continued for a period
of thirty (30) days (or such extended period as may be
mutually agreed to by the parties), the Independent Auditor
continues to believe
that Programmer may not have complied with such obligations, then,
within thirty
(30) days after such good faith discussions, Programmer shall have the
option,
in its sole
discretion, to either
(x) grant to
Affiliate the Favored Fees
disclosed by the audit, or (y) authorize the Independent Auditor to provide to
Affiliate only that limited redacted information acquired during the course of
the audit as is
reasonably necessary
for Affiliate to pursue its claim of
non-compliance against
Programmer (the
"Programmer
MFN Election").
Under no
circumstances, other
than the limited circumstance set forth in foregoing
subsection (y), shall any information acquired during the course of
the audit be
disclosed to Affiliate by the Independent Auditor. In any event,
Affiliate shall
make any claim against
Programmer
with respect to the results of such audit
within one (1) year after its receipt of the Programmer
MFN Election.
From and
after Affiliate's audit of a particular period of the Term, such
period shall be
deemed closed by the parties and, except as may be
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<PAGE>
Confidential Treatment
demonstrated by such
audit, Programmer shall have no further liability in
respect of Favored Fees for such period.
(v) For purposes of this Section 2(e), the parties agree and
understand the following:
(A) "Consideration"
deemed
as Favored Fees (or a
component part of a
Favored Fee)
includes license, royalty or service fee
discounts, revenue shares of splits, volume discounts, penetration discounts or
caps thereon, payment limits, payment deferrals, special marketing
arrangements,
launch support,
revenue guarantees or
any other terms and conditions which to
either the Other Distributor or Programmer can be reasonably
measured in dollars
computed on a net effective amount per subscriber basis; provided,
however, that
local marketing campaigns (e.g., a Programmer sponsored event at a local
venue)
shall not be deemed as Favored Fees (or a component part of a Favored Fee); and
provided further that
Programmer will offer
Affiliate the right to implement a
substantially similar
campaign for substantially the same cost to Programmer as
mutually agreed to by the parties. If applicable, amounts actually paid to any
required Third Party
Facilitator needed for
the distribution of the Service(s)
will be taken into consideration in the calculation of
Consideration paid to the
relevant Other
Distributor.
Third Party Facilitator means a person that is
providing goods or
services to an Other
Distributor in
conjunction
with the
Other Distributor's
distribution of one or more of the Services where the goods
or services of the
person are required
by the Other
Distributor
in order to
permit the
distribution
of the Services over the Other Distributor's
distribution platform.
As an example, should an Other Distributor offer a
wireless service and utilize a Third Party Facilitator to provide
technology for
distribution of the service for a fee, then the Consideration
paid to the Other
Distributor shall be reduced by the Third Party Facilitator
fee.
(B) Programmer
represents
and warrants that the
Consideration provided
by Affiliate to
Programmer, when taken
as a whole on a
net effective
basis per subscriber to the Service (i.e., each Service
individually and the Services collectively), is no less favorable to
Affiliate
than to any Other Distributor as of the date hereof.
(vi) Programmer
hereby grants to Affiliate, and Affiliate
hereby accepts from Programmer, the non-exclusive right to distribute the VOD
Services that Programmer makes available for distribution on a Video On
Demand
basis (whereby a
consumer selects the
viewing of a program
on an unscheduled
real time basis (as opposed to selection of a viewing time by such
consumer from
a pre-determined schedule of viewing times) ("VOD")) at such time
that Affiliate
has the capability
to distribute programming services via VOD to DIRECTV
Subscribers.
Nothing herein
shall obligate Affiliate to distribute such
programming via VOD. Any distribution of Service programming by Affiliate via
VOD shall be subject
to terms and
conditions to be
negotiated
and mutually
agreed to by the parties, provided that Programmer
shall make VOD
available to
Affiliate on
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Confidential Treatment
terms and conditions
that are no less
favorable to Licensee than any Other
Distributor of VOD, it
being understood
that if the agreement
with such Other
Distributor(s)
contains terms and conditions that are not relevant to
Affiliate
or Affiliate
is not reasonably capable of complying with such terms and
conditions taking into consideration Affiliate's business, including, without
limitation, Affiliate's technology and national platform, then the
parties shall
negotiate comparable obligations, terms and conditions in good
faith. Affiliate
will not distribute
the VOD Services until the terms and conditions for
distribution have been agreed to by the Parties.
(f) Titanium
Subscribers.
Notwithstanding any
other provisions of
this Agreement,
Affiliate may offer the Service as part of Affiliate's planned
premium programming
package offering subscribers the right to receive
all or
substantially all of Affiliate's programming (including premium and
pay-per-view
programming) for a single monthly payment, which package is tentatively
branded
as the "Titanium Package" (the subscribers to which package shall
be referred to
as "Titanium Subscribers"), and Affiliate shall not be
obligated to pay any fee
to Programmer for the
distribution of such
package so long as the total number
of Titanium Subscribers does not exceed five thousand (5,000). In
the event that
Affiliate obtains
more than five thousand (5,000) Titanium Subscribers,
Affiliate and
Programmer
will negotiate in good faith a
reasonable
monthly
license fee to be paid to Programmer by Affiliate for those subscribers in
excess of five thousand (5,000). Affiliate will provide
Titanium Subscribers
with the opportunity to opt out of receiving the Service at any
time.
(g) Programming Account/Marketing Fund.
(i) The parties hereby acknowledge that pursuant to all
predecessor agreements (including, without limitation, Sections
2(f) and 4(g) of
the Current Playboy
Agreement), and
notwithstanding any previous accounting of
the amounts in question, all amounts set aside by Affiliate
for marketing and
promotion of channels
provided to Affiliate by Programmer are being maintained
by Affiliate in a programming account containing the stipulated
amount of One
Million One Hundred Thousand Dollars $1,100,000 (the "Programming
Account") and
that the following shall constitute full satisfaction of the
parties' respective
obligations with
respect to such Programming Account: Affiliate may spend the
Programming Account
funds on any marketing
campaigns or initiatives related to
the Services or Programmer as determined by Affiliate in its sole
discretion
after consultation with Programmer; provided, however, that the parties agree
that if any
Programming Account
funds are not utilized by the end of the Term,
then such amounts will be paid to Programmer.
(ii) Commencing
as of November 16, 2006 and continuing
throughout the Term of this Agreement, Programmer shall contribute
$75,000 per
quarter to a specific special purpose marketing support account (the
"Marketing
Account"). Affiliate shall deduct such payments on a monthly basis
in the amount
of $25,000
from the License Fees due to Programmer under this Agreement.
Affiliate may spend
the Marketing Account
funds on any marketing
campaigns or
initiatives related to
the Services or Programmer as determined by Affiliate in
its sole discretion after consultation with Programmer;
provided
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Confidential Treatment
that Affiliate agrees
to perform at least one marketing initiative per year of
the Term, designed to
drive DIRECTV Subscribers to the "Playboy TV" Service. In
addition, in exchange
for agreeing to the reduced Marketing Account above (as
compared to the Current Playboy Agreement), Programmer agrees to host four
(4)
(two (2) per year of the Term) first class parties for Affiliate's employees,
guests and/or clients
at the Playboy Mansion
in Los Angeles
(evenings and/or
weekends upon
Affiliate's
request as
provided in the
immediately
following
sentence) and two (2)
(one (1) per year of the Term) first class parties for
Affiliate's employees,
guests and/or clients
at the Palms Casino in Las Vegas,
Nevada, each with full food and beverage (alcoholic and
non-alcoholic)
service,
entertainment (as
requested by Affiliate), hotel rooms (for Palms parties)
and
all related services (including, without limitation, convenient parking and/or
shuttle service for
all guests) to be
supplied by
Programmer
at fair market
rates charged to all other parties (with no mark-ups, administrative charges,
etc.) at a total cost
not to exceed $250,000
per party, which cost shall be
funded from the
Programming Account
(until that account is exhausted, and
thereafter out of the
Marketing Account) and paid directly by Affiliate;
provided that
Programmer
shall provide an invoice that will reflect the per
person cost of each party and any costs that are not determined on a per person
basis, such cost to be no greater than the fair market rate charged
to all other
parties for similar parties. Affiliate agrees (i) to provide
Programmer with at
least sixty (60) days advance written notice of any request for any
party, (ii)
that for the purpose
of scheduling
any party, the term weekend shall mean
Friday, Saturday and
Sunday, and (iii) with
respect to the Playboy
Mansion in
Los Angeles, no more
than one (1) party per year during the Term shall occur on
a weekend.
Notwithstanding the foregoing, Programmer agrees that it shall
make
reasonable good faith
efforts to accommodate
any party request made
with less
than sixty (60) days
advance notice
and/or any
request to stage
Affiliate's
allocated number of
parties other than as
stated above
(e.g., a request for
three (3) Mansion
parties during a given
year or a request for two (2) weekend
parties at the Mansion during a given year); provided that there are
sufficient
funds in the Programming Account and/or the Marketing
Account to cover the cost
of the proposed party;
and provided
further that
Affiliate may, in its sole
discretion, elect to
pay the balance
of any costs in the event that funds
remaining in
the Programming Account and/or the Marketing Account are
insufficient to cover
the total cost of any proposed party. In the event that
Affiliate does not use any of the money contributed under this sub-section by
the end of the Term of this Agreement, Affiliate will pay to Programmer the
un-used portion of the funds.
(iii) Affiliate
shall provide a quarterly accounting of
amounts spent pursuant to the above Sections 2(g)(i) and (ii).
3.
Commercial Announcements and Other Advertising.
(a) Commercial
Announcements.
Programmer
hereby represents and
warrants that it does not make available to any Other Distributor
of any Service
commercial announcements of any nature in the schedule of such
Service(s). If at
any time during the Term, Programmer provides to any Other
Distributor the right
to make commercial announcements within any Service, then
Programmer shall offer
such right to Affiliate on terms and conditions no less favorable than those
offered to such Other
Distributor of the
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Confidential Treatment
Service(s). In any
event, the rights with
respect to commercial or promotional
announcements provided by Programmer to Affiliate shall be no less
favorable, in
terms of the nature, use, scheduling, availability, length of the
announcements
and so forth (including, without limitation, the right to cover Programmer's
commercial or
promotional
announcements),
than those
provided to any Other
Distributor.
(b) Advertising.
If Programmer
offers any Other
Distributor
the
opportunity to
advertise,
or includes any Other Distributor in any
advertisement(s),
whether or
not in connection with the Service, in any
publication, recording, service, visual work or audiovisual work,
whether or not
Programmer controls
it, then Programmer shall provide Affiliate with the
opportunity to elect to be included in such advertisement, if such
advertisement
is in connection with advertising the Service, or an opportunity to elect to
be
included in a similar advertisement, if such advertisement is not in
connection
with advertising
the Service, on at least as favorable terms as such Other
Distributor.
Programmer shall not include Affiliate, or advertise Affiliate,
by
any means without
Affiliate's
prior written consent, which may be given or
withheld by Affiliate in its sole discretion.
4.
Marketing and Promotion of the Service.
(a) Affiliate
shall market and promote the Service in a similar
manner as Affiliate
markets and promotes
other similar premium programming
services; provided,
however, that Affiliate may market and promote
any other
such premium
programming service
differently and/or
more frequently, if
such
service provider provides Affiliate with material consideration or compensation
therefore. In
connection
therewith,
