-------------------------
PLAYBOY TV INTERNATIONAL
PROGRAM SUPPLY AGREEMENT
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Among
PLAYBOY ENTERTAINMENT GROUP, INC.
as Licensor
and
PLAYBOY TV INTERNATIONAL LLC
and
PTV U.S., LLC
as Licensee
August 31, 1999
TABLE OF CONTENTS
Page
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1. DEFINITIONS................................................................1
2. GRANT OF LICENSE...........................................................7
2.1 To PTVI.............................................................7
2.1(a) Existing Library.........................................7
2.1(b) Licensor Output..........................................8
2.1(c) "Wall-to-Wall"Material...................................8
2.2 To PTV U.S..........................................................8
2.3 All Other Rights Retained by Licensor...............................8
2.4 Approved Uses of Company Programming................................8
2.4(a) Operation of the Channels................................8
2.4(b) Sub-licensing............................................9
2.4(c) Editing..................................................9
2.5 Assignment of Existing Licenses.....................................9
2.6 Residuals and Co-Production Payments................................9
2.7 Alta Loma Programs.................................................10
2.7(a) Option to Acquire Rights................................10
2.7(b) Programs for Playboy TV "Lite"..........................10
2.8 Exclusive Program Supplier.........................................10
3. LICENSE TERM AND MEDIA HOLDBACKS..........................................10
3.1 License Term.......................................................10
3.1(a) Program License Agreement...............................10
3.1(b) Existing Library Programs...............................11
3.1(c) Output Programs.........................................11
3.1(d) Licensor Acquired Programs..............................11
3.2 Holdbacks..........................................................11
3.3 Other Home Video Rights............................................11
4. CENSORSHIP; WITHDRAWAL OF PROGRAMS........................................11
4.1 Censorship.........................................................11
4.2 Withdrawal of Programs.............................................12
4.3 Advertising........................................................12
5. DELIVERY AND RETURN.......................................................13
5.1 Access and Delivery Items..........................................13
5.2 Title to Delivery Materials........................................13
6. PROGRAM LICENSE FEES......................................................13
6.1 Existing Program Library and Wallpaper.............................13
6.2 Output Programs....................................................14
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6.2(a) General Payment Terms...................................14
6.2(b) Production Budget.......................................14
6.2(c) Licensor Production Obligations.........................14
6.2(d) Calculation of License Fee for Output Programs..........15
6.2(e) Fixed Percentage........................................15
6.2(f) The Reset Mechanism.....................................15
6.2(g) Licensee Production Budget Option.......................16
6.2(h) Production Supply Option................................16
6.3 Maintenance of Records and Audit Rights............................17
7. REPRESENTATIONS AND WARRANTIES; INDEMNITIES...............................18
7.1 Representations and Warranties.....................................18
7.1(a) By Licensor.............................................18
7.1(b) By Licensee.............................................19
7.2 Indemnification....................................................19
7.2(a) By Licensor.............................................19
7.2(b) By the Licensee.........................................20
7.3 Musical Compositions...............................................20
7.4 Procedure..........................................................20
7.5 Taxes..............................................................21
8. TERMINATION...............................................................21
8.1 Expiration of Term.................................................21
8.2 Early Termination on Breach........................................21
9. EFFECTS OF TERMINATION....................................................22
9.1 Survival of Obligations............................................22
9.2 Termination of Rights..............................................22
9.3 Further Assurances.................................................23
10. EQUITABLE RELIEF..........................................................23
11. DISPUTE RESOLUTION........................................................23
11.1 General Agreement Regarding Dispute Resolution.....................23
11.2 Notification and Negotiation.......................................23
11.3 Mediation..........................................................23
11.4 Arbitration........................................................24
11.5 Damages............................................................24
11.6 Statute of Limitations.............................................24
11.7 Confidential Negotiations..........................................24
11.8 Service of Process; Forum..........................................24
11.9 Additional Provisions to Enforce Awards............................25
12. MISCELLANEOUS.............................................................25
12.1 Force Majeure......................................................25
12.2 Binding Effect; No Assignment......................................25
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12.3 Invalidity.........................................................25
12.4 Waivers, Remedies Cumulative, Amendments, etc......................26
12.5 Notices............................................................26
12.6 Governing Law......................................................27
12.7 Entire Agreement...................................................27
12.8 Rules of Construction..............................................28
12.8(a) Headings..................................................28
12.8(b) Tense and Case............................................28
12.8(c) Agreement Negotiated......................................28
12.9 Counterparts.......................................................28
12.10 Relationship Between the Parties...................................28
12.11 Time is of the Essence.............................................28
12.12 Effectiveness......................................................28
iii
THIS PROGRAM SUPPLY AGREEMENT (this "Agreement") is made and entered into
on August 31, 1999, among Playboy Entertainment Group, Inc., a Delaware
corporation ("PEGI"), Playboy TV International LLC, a Delaware limited liability
company ("PTVI"), and PTV U.S., LLC, a Delaware limited liability company ("PTV
U.S.").
RECITALS
WHEREAS, PTVI and PTV U.S. have been formed to engage in the business of
owning and operating television channels and of selling television programming
to third parties;
WHEREAS, PEGI and certain of its Affiliates are the owner of certain
rights in and to certain television programs and will acquire certain rights in
and to certain additional television programs, as described herein;
WHEREAS, PEGI has transferred to PTVI the stock of certain Danish
companies which own rights in certain of the television programs which are
subject to this Agreement, and Licensee has agreed to certain restrictions with
respect to the use of such programs as set forth in this Agreement;
WHEREAS, PEGI has transferred to PTVI the stock of certain U.K. companies
which own rights in certain of the television programs which are subject to this
Agreement, and Licensee has agreed to certain restrictions with respect to the
use of such programs as set forth in this Agreement;
WHEREAS, PTVI and PTV U.S. each wish to license from Licensor and Licensor
has agreed to license to PTVI and PTV U.S. certain television programs in their
respective territories, on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
agreements contained herein, and intending to be legally bound, the parties
agree as follows:
1. DEFINITIONS.
In this Agreement (including the Recitals hereto) the following terms will
have the following meanings unless otherwise stated:
"Actual Net Cash Flow" has the meaning set forth in Section 6.2(g).
"Acquired Movie" means a program acquired by Licensor (or any of its
Affiliates) from a third party that is at least 60 minutes in length and
represents an edited version of an adult film (i.e., a film which contains
actual sex acts).
"Affiliate" means any Person, directly or indirectly through one or more
intermediaries, controlling, controlled by, or under common control with the
specified
1
Person. For purposes of the foregoing, "control" (and "controlled" and
"controlling," respectively), as used in the immediately preceding sentence,
means the possession, direct or indirect, of the power to direct or cause the
direction of the management and policies of the specified Person (whether by the
holding of shares or other equity interests, the possession of voting or
contract rights or otherwise). Notwithstanding the foregoing, Licensee will not
be deemed an Affiliate of either Licensor or VSI.
"After Tax Basis" means a basis such that any payment (the "Original
Payment") received or deemed to have been received by a Person (the "recipient")
will be supplemented by a further payment to the recipient so that the sum of
the two payments will equal the Original Payment, after taking into account (x)
all taxes that would result from the receipt or accrual of such payments, if
legally required, and (y) any reduction in taxes that would result from the
deduction of the expense indemnified against, if legally permissible. In the
event that the expense indemnified against is used to reduce taxes by way of
amortization or depreciation, payments made on an After Tax Basis will be
refunded in each taxable year of the recipient in which such expense is
deductible in an amount equal to the sum of (i) the tax savings attributable to
such deduction plus (ii) any reduction in taxes that would result from the
deduction of any amounts described in clause (i) as increased hereby. All
payments hereunder will be calculated on the assumptions that the recipient was
subject to tax at the highest marginal rates of tax applicable to such class of
taxpayer and that it could benefit from the deduction of any expense at such
rate of tax. In the event that a taxing authority will treat any indemnification
payment as not includible in gross income or disallow any deduction taken into
account hereunder, the indemnification will be recomputed and further payments
or refunds made.
"Alta Loma Program" has the meaning set forth in Section 2.7.
"Annual Budget" has the meaning set forth in the Operating Agreement.
"Applicable Percentage" has the meaning set forth in Section 6.2(d).
"Basic Cable" has the meaning currently or hereafter commonly understood
in the television industry, but will also include for all purposes of this
Agreement ***
"Business Plan" has the meaning set forth in the Operating Agreement.
"Channels" means television channels operated by Licensee or its
subsidiaries, now or in the future (each, a "Channel").
"Company Aggregate Revenue" has the meaning set forth in Section
6.2(i)(ii).
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
2
"Company Programming" means, collectively, the Existing Library Programs,
the Output Programs, the Wallpaper and the Supplemental Programs.
"Delivery Materials" has the meaning set forth in Section 5.1.
"End Date" has the meaning set forth in Section 3.1(a).
"Existing Library" means the Existing Playboy Library, the Existing Spice
Library, and the Existing U.K. Library.
"Existing Playboy Library" means the programs listed on Schedule 2.1(a) -
1.
"Existing Spice Library" means the programs listed on Schedule 2.1(a) - 2.
"Existing U.K. Library" means the programs listed on Schedule 2.1(a) - 3
with respect to PTV U.K. and any and all programs in which HVC owns rights in
the Media in the Territory.
"Fiscal Year" has the meaning set forth in the Operating Agreement.
"Fixed Percentage" has the meaning set forth in Section 6.2(e).
"Force Majeure" has the meaning set forth in Section 12.1.
"Funding Date" has the meaning set forth in the Operating Agreement.
"HVC" means Home Video Channel Limited, a company organized under the laws
of England and Wales.
"License Term" has the meaning set forth in Section 3.1.
"Licensee" means collectively (i) PTVI and any of its Affiliates that hold
any of the rights licensed hereunder, including the Spice Rights Subsidiaries
and the U.K. Subsidiaries; (ii) PTV US; and (iii) any such successor or assignee
of either of them as may be permitted herein.
"Licensee Applicable Revenue" has the meaning set forth in Section
6.2(f)(iii).
"Licensee Indemnified Parties" has the meaning set forth in Section
7.2(a).
"Licensor" means PEGI and any of its Affiliates that hold any of the
rights licensed hereunder, or such successor or assignee as may be permitted
herein.
"Licensor-Acquired Programs" has the meaning set forth in Section 3.2.
3
"Licensor Applicable Revenue" has the meaning set forth in Section
6.2(f)(ii).
"Licensor Indemnified Parties" has the meaning set forth in Section
7.2(b).
"Licensor Shortfall" has the meaning set forth in Section 6.2(c).
"Licensor Streaming Revenue" has the meaning set forth in Section
6.2(i)(i).
"Licensor Taxes" has the meaning set forth in Section 7.5.
"Lifford" means Lifford International Co. Ltd., an International Business
Company incorporated under the laws of the British Virgin Islands.
"Losses" has the meaning set forth in Section 7.1(a).
"Measurement Year" has the meaning set forth in Section 6.2(i)(i).
"Media" means ***
"Member" has the meaning set forth in the Operating Agreement.
"Net Channel Revenues" has the meaning set forth in Section 6.2(e)(viii).
"Operating Agreement" means the Operating Agreement for Playboy TV
International, LLC, entered into concurrently herewith, as may be amended from
time to time.
"Option Percentage" has the meaning set forth in Section 6.2(g)(ii).
"Output Programs" has the meaning set forth in Section 2.1(b).
"Out Year Programs" has the meaning set forth in Section 3.1(c).
"Overhead Cap" has the meaning set forth in Section 6.2(b).
"PEGI" means Playboy Entertainment Group, Inc., a Delaware corporation.
"PEI" means Licensor's ultimate parent company, Playboy Enterprises, Inc.,
a Delaware corporation.
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
4
"PEII" means Licensor's direct parent company, Playboy Enterprises
International, Inc., a Delaware corporation.
"Person" means an individual, general partnership, limited partnership,
limited liability company, corporation, trust, estate, association or any other
entity.
"Plan Net Cash Flow" has the meaning set forth in Section 6.2(g).
"Production Budget" has the meaning set forth in Section 6.2(b).
"Production Budget Option" has the meaning set forth in Section 6.2(g).
"Production Supply Option" has the meaning set forth in Section 6.2(h).
"Program" means any television program which is, or is scheduled to be,
broadcast or transmitted in the Service, including, but not limited to, any
Company Programming.
"Program License Fees" has the meaning set forth in Section 6.
"PTVI" means Playboy TV International, LLC, a Delaware limited liability
company.
"PTV U.K." means Playboy TV U.K./Benelux, Limited, a company organized
under the laws of England and Wales.
"PTV U.S." means PTV U.S., LLC, a Delaware limited liability company.
"PTVLA" means Playboy TV - Latin America, LLC, a California limited
liability company.
"PTVLA Program Supply Agreements" means Playboy TV - Latin America Program
Supply Agreement and the AdulTVision - Latin America Program Supply Agreement,
each entered into November 10, 1998 (effective as of June 14, 1996) between PEGI
and XXXXX.
"XXXXX Xxxxxxxxx" is defined in the PTVLA Program Supply Agreements.
"PTVLA/I" means Playboy TV - Latin American/Iberia, LLC, a Delaware
limited liability company and a subsidiary of PTVI, into which PTVLA will be
merged following the contribution of PTVLA to PTVI.
"PTVLA Service" means the Spanish- and Portuguese-language television
channel known as "Playboy TV Latin American" which is produced by PTVLA and
will, following the contribution of PTVLA to PTVI and the merger of PTVLA into
PTVLA/I, be co-produced by PTVLA/I and PTV U.S.
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"Remediable Breach" has the meaning set forth in Section 8.2(b).
"Reset Mechanism" has the meaning set forth in Section 6.2(f).
"Reset Percentage" has the meaning set forth in Section 6.2(f)(iv).
"Spice Closing" means March 15, 1999, the date on which the Spice
Transaction was consummated.
"Spice Rights Licensor" means SEI Inc. ApS, a company formed under the
laws of Denmark and a subsidiary of PEGI.
"Spice Rights Subsidiaries" means SEI 2 ApS and SEI 3 ApS, each a company
formed under the laws of Denmark, being those companies acquired by the Licensee
pursuant to the Spice Rights Subsidiaries Stock Purchase Agreements of even date
herewith.
"Spice Transaction" means the merger between PEI and one or more of its
Affiliates with Spice Entertainment Companies, Inc. and one or more of its
Affiliates (collectively, "Spice"), which was consummated pursuant to that
certain Agreement and Plan of Merger dated May 29, 1998.
"Supplemental Programs" means programming produced or acquired by PTVI
and/or PTV U.S. in accordance with the Operating Agreement, whose primary use is
exhibition on one or more of the Channels.
"Streaming" means ***
"Termination Date" has the meaning set forth in Section 9.2.
"Territory" means the World, except for the United States and Canada and
their territories and possessions worldwide. For certain Existing Library
Programs and Output Programs, the Territory will exclude certain countries in
the Territory, as set forth in Schedules 2.1(a)-1, 2.1(a)-2, and 2.1(a)-3 hereto
or the extent effecting programs in which HVC owns rights.
"Threshold Revenue" has the meaning set forth in Section 6.2(e)(viii).
"Total Applicable Revenue" has the meaning set forth in Section
6.2(f)(iv).
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
6
"Trademark License Agreement" means the Trademark License Agreement
between PEII and PTVI, executed concurrently herewith.
"TV Lite Venture" has the meaning set forth in Section 6.3(b).
"U.K. Subsidiaries" means HVC and its subsidiary, PTV U.K.
"U.S. Hispanic Market" means those cities or regions of the United States
and its territories and possessions with a sufficient number of Spanish-speaking
households such that PTV U.S. elects, now or in the future, to distribute the
PTVLA Service in such city or region.
"VSI" means Victoria Springs Investments Ltd., a British Virgin Islands
corporation and a member of Licensee.
"Wallpaper" has the meaning set forth in Section 2.1(a)(iii).
2. GRANT OF LICENSE.
2.1 To PTVI. Upon and subject to the terms and conditions set forth in
this Agreement and to Licensor's retained rights described in Section 2.3,
Licensor hereby grants to PTVI and PTVI hereby accepts a license of exclusive
rights under copyright during the License Term in the Media throughout the
Territory to the programs and other material described below.
2.1(a) Existing Library. Licensor licenses to PTVI all of the
programs comprising the Existing Playboy Library. To the extent the Existing
Playboy Library includes Acquired Movies, such Movies will be licensed to the
appropriate Spice Rights Subsidiary. Rights in the Existing Spice Library and in
the Existing U.K. Library in the Media throughout the Territory have been
provided to PTVI through its acquisition of the Spice Rights Subsidiaries and
the U.K. Subsidiaries. Licensor represents and warrants that the Existing
Library consists of all programs for which Licensor (and/or its Affiliates) owns
rights in the Media in the Territory as of the date hereof, except for the
series known as "Hot Rocks" (which series or the individual programs thereof may
not be licensed by Licensor or its Affiliates to third parties for exhibition in
the Territory), including (but not limited to) "Playboy"-branded programs,
"Spice"-branded programs, adult films licensed by Licensor, and any other
programming, including the Wallpaper (as described in Section 2.1(c)). For
clarity, the parties acknowledge that the Existing Playboy Library includes all
programs produced or acquired by Licensor and/or its Affiliates pursuant to
Licensor's 1998 production budget, the Existing Spice Library includes all
programs (other than programs which are part of the Existing U.K. Library) that
Licensor (or its Affiliates) acquired in the Spice
7
Transaction, and the Existing U.K. Library includes all programs that Licensor
(or its Affiliates) acquired through the U.K. Subsidiaries. ***
2.1(b) Licensor Output. Each Fiscal Year Licensor will license to
PTVI all of the programs which Licensor and/or its Affiliates produce or for
which Licensor and/or its Affiliates have acquired the rights in the Media in
the Territory during that year (the "Output Programs"). The parties acknowledge
that to the extent the rights to Output Programs are controlled by the Spice
Rights Licensor, Licensor will cause the Spice Rights Licensor to license such
programs to the appropriate Spice Rights Subsidiary. For the avoidance of doubt,
the parties acknowledge that the Output Programs for Fiscal Year 1999 include
those programs produced or acquired by Licensor (or its Affiliates) pursuant to
Licensor's 1999 Production Budget, including those programs produced or acquired
prior to the date of this Agreement. ***
2.1(c) "Wall-to-Wall" Material. Licensor will provide PTVI with
copies of, or laboratory access to, all bumpers, promos, interstitials and other
raw materials produced by Licensor and/or its Affiliates for use in its
television business (collectively, the "Wallpaper"). PTVI may exhibit such
materials in the form provided or may modify, edit or utilize them to create
appropriate interstitial and promotional material for the Channels, subject to
the terms and conditions of the Trademark License Agreement.
2.2 To PTV U.S. Upon and subject to the terms and conditions set forth in
this Agreement and to Licensor's retained rights described in Section 2.3,
Licensor hereby grants to PTV U.S., effective upon the effective date of the
Operating Agreement of PTV U.S., and PTV U.S. will accept as of such date, a
license of exclusive rights under copyright during the License Term in and to
the Existing Playboy Library, Output Programs and Wallpaper for the sole
purposes of exhibiting such material on the PTVLA Service and distributing and
promoting the PTVLA Service in the Media throughout the U.S. Hispanic Market.
***
2.3 All Other Rights Retained by Licensor. All rights not expressly
granted to PTVI and PTV U.S. hereunder are reserved to Licensor for its own use
and benefit.
2.4 Approved Uses of Company Programming. PTVI may exploit the Company
Programming as follows:
2.4(a) Operation of the Channels. Throughout the Territory, PTVI
will have the right to exhibit the Company Programming on the Channels. Licensor
and PTVI acknowledge and agree that the accidental or de minimis "spillover"
into the Territory of transmissions to Licensor customers outside of the
Territory will not be a breach of the grant of rights hereunder and that the
accidental or de minimis "spillover" outside of the Territory
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
8
of transmissions to PTVI customers inside the Territory will not be a breach of
the grant of rights hereunder.
2.4(b) Sub-licensing. PTVI will have the right to license the
Company Programming to third parties for exhibition in the Territory. Except as
otherwise specifically provided herein, such sub-licensing may be conducted in
any manner that PTVI determines. ***
2.4(c) Editing. Subject to and consistent with the Trademark License
Agreement, Licensee may edit, dub or subtitle in any language, or otherwise
alter Company Programming as necessary to comply with local language or custom
or local broadcasting requirements; provided that PTV U.S. may only dub or
subtitle into Spanish or Portuguese.
2.5 Assignment of Existing Licenses. Licensor hereby assigns to PTVI all
of Licensor's rights with respect to periods from and after July 1, 1999 under
its existing licenses with third parties for the distribution or exhibition of
Existing Library Programs and Output Programs in the Territory in the Media
including the right to receive payments thereunder; provided, however, that to
the extent such existing licenses contain a grant of trademark rights, such
rights will be retained by Licensor and its Affiliates, including all rights of
approval and control. To the extent that Licensor has existing licenses with
third parties which grant such third parties rights for both the Media and other
media not included hereunder, such licenses will be assigned to PTVI only with
respect to the Media. Licensee hereby assumes and agrees to perform all
obligations of Licensor under such licenses arising with respect to periods from
and after July 1, 1999, and all of Licensor's benefits under such licenses
arising with respect to periods from and after July 1, 1999, including the right
to receive payments, will inure to the benefit of PTVI. Without limiting the
generality of the foregoing, PTVI agrees to comply with the terms of the PTVLA
Program Supply Agreements and agrees that it will not exploit Company
Programming in the PTVLA Territory in any manner which conflicts with such
agreements. PTVI will be entitled to receive all revenues generated in the
Territory by the Output Programs produced or acquired pursuant to Licensor's
1999 Production Budget, including revenues collected by Licensor prior to the
date of the Agreement, net of any amounts actually paid by Licensor or its
Affiliates that would have been PTVI's obligation had the Output Programs been
acquired by PTVI on January 1, 1999 (such as residuals, music clearance fees,
etc.). Schedule 2.5 contains a complete list of the program license agreements
which Licensor is assigning to PTVI. Upon termination of this Agreement, the
foregoing assignment of the existing licenses will automatically terminate and
all rights in the assigned licenses arising from and after the date of such
termination will revert to Licensor.
2.6 Residuals and Co-Production Payments. ***
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
9
2.7 Alta Loma Programs. The parties acknowledge that Licensor and/or its
Affiliates produce an additional stream of programs that do not carry the
"Playboy" or "Spice" brands and which do not contain nudity. These programs are
intended for "first run" on domestic television networks or channels other than
Playboy TV, Spice or AdulTVision. Licensor produces and sells such programming
under the Alta Loma banner. This programming stream may consist, from time to
time, of movies, series, and/or specials. (Any such non-nude program, whether
produced by Licensor or one of its Affiliates, and whether carrying the "Alta
Loma" or any other brand, will be referred to as an "Alta Loma Program").
2.7(a) Option to Acquire Rights. At any time prior to the start of
principal photography for each Alta Loma Program, Licensor will offer PTVI the
opportunity to pay a license fee equal to *** of the budget for that program. If
Licensee chooses to pay such license fee, it will obtain the same rights as if
that program were an Output Program (except that the budget for that program
will not be included under the Production Budget for Output Programs for that
year). If PTVI does not choose to obtain a license for a given Alta Loma
Program, PTVI will have the right to act as Licensor's exclusive sales agent for
that program throughout the Territory and will receive a *** distribution fee on
such sales, plus reimbursement of reasonable costs; provided, however, that in
the event an Alta Loma Program is produced pursuant to an agreement which gives
a third-party co-producer or commissioning network the right to distribute such
program in a region or regions of the Territory (or otherwise restricts
Licensor's right to grant Licensee the right to act as sales agent for such
program), Licensor will pay to PTVI *** of the total revenue which Licensor (or
its affiliates) receives from the exploitation of such program in the Media in
such region(s).
2.7(b)Programs for Playboy TV "Lite". ***
2.8 Exclusive Program Supplier. ***
3. LICENSE TERM AND MEDIA HOLDBACKS
3.1 License Term. The term of this Agreement and the license periods for
each type of Company Programming will be as follows:
3.1(a) Program License Agreement. The term of this Agreement will
commence on the date hereof and run through the date which is the *** hereof
(the "End Date"); provided, however, that Licensor may sooner terminate this
Agreement and the license periods described in Sections 3.1(b), 3.1(c), 3.1(d)
and 3.1(e) below in the event: (i) Licensee is in material default of its
obligations under this Agreement and such default, if curable, is not cured with
thirty (30) days after Licensee has received written notice thereof
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
10
from Licensor (provided such default is not the result of action or inaction by
Licensor as a Member of PTVI; e.g., Licensor's failing to make a mandatory
capital contribution); (ii) PEII has terminated the Trademark License Agreement;
(iii) VSI is in material default of its obligations under the Operating
Agreement and Licensor elects to dissolve PTVI as the result of such default; or
(iv) PTVI is in material default of its obligations under the Stock Purchase
Agreements (as defined in the Operating Agreement) and such default, if curable,
is not cured within thirty (30) days after PTVI has received written notice
thereof from Licensor (provided such default is not the result of action or
inaction by Licensor as a Member of PTVI).
3.1(b) Existing Library Programs. The license period for each
Existing Library Program (other than as set forth on Schedules 2.1(a)-1,
2.1(a)-2, and 2.1(a)-3) will begin on the date hereof and end on the End Date,
except with respect to programs in which HVC owns rights which will end on the
dates such rights expire.
3.1(c) Output Programs. The license period for each Output Program
(other than acquired programs) will begin on the date such program is made
available to Licensee pursuant to Section 5.1 and will end on the End Date. ***
3.1(d) Licensor Acquired Programs. The license period for Output
Programs (other than Acquired Movies) which Licensor acquires by license from
third parties will be at least as long as the license period obtained by
Licensor for North America.
3.2 Holdbacks. Several of the Existing Library and Output Programs will
only be available for exhibition via the Media after an "upstream" window in
home video (i.e., an exhibition period prior to any television exhibition by any
party, including Licensee). Licensor warrants that of the Output Programs
produced each year ***
3.3 Other Home Video Rights. Licensor will consult with Licensee prior to
acquiring the rights to a program from a third party for home video distribution
in a region or regions within the Territory where Licensor believes that the
terms for acquiring the television rights for the Territory are not favorable to
Licensee, or the Media rights to such program are not available in some or all
of the Territory. ***
4. CENSORSHIP; WITHDRAWAL OF PROGRAMS.
4.1 Censorship. Licensee is willing to accept and pay for the Existing
Library Programs and Output Programs regardless of censorship regulations or the
potential for same throughout the Territory or in any individual country or
political subdivision within the Territory (or, with respect to PTV U.S., the
U.S. Hispanic Market). *** provided that Licensee will make good faith efforts
to obtain waivers of such restrictions or will permit
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11
Licensor to make such efforts on behalf of Licensee. Without limiting Licensee's
rights under Section 2.4(c), Licensee will only make such cuts or deletions as
are necessary to conform to applicable censorship regulations.
4.2 Withdrawal of Programs.
4.2(a) Notwithstanding any other term of this Agreement to the
contrary, Licensor may, in its sole discretion, withdraw any Program if Licensor
determines that the transmission thereof would or might reasonably be expected
to (i) infringe upon the rights of others; (ii) violate the law, court order,
government regulation or other ruling of any governmental agency; or (iii)
subject Licensor to any liability, other than due to a breach by Licensor of its
covenants and representations in this Agreement.
4.2(b) If Licensor elects to withdraw any Program as set forth in
paragraph 4.2(a) above before any telecast, Licensee will have the right, in its
sole discretion, to require Licensor to deliver another program of comparable
quality (which program will constitute a Program hereunder). If Licensor elects
to withdraw any Program, any transportation, dubbing and assembly costs incurred
and paid by Licensee with respect to the withdrawn Program will be refunded by
Licensor promptly upon Licensee's presentation of reasonable evidence of such
expenditures.
4.2(c) If a withdrawn Program has been delivered, Licensee will, at
Licensor's request, either promptly erase such program or return it to Licensor
at Licensor's expense.
4.3 Advertising.
4.3(a) In all advertising and publicity relating to any Program or
any transmission thereof, Licensee will comply with the advertising and billing
credit requirements furnished by Licensor. Licensee will not make or permit to
be made, in any advertising, publicity or otherwise, any statements which (i)
constitute or may be understood to be an endorsement of any sponsor, product,
article or service by Licensor or any of its Affiliates or by any person or
entity that appears in or otherwise renders any services or provides any
materials for use in any Program or (ii) indicate or may be understood to
indicate the Licensor, any of its Affiliates, or any person that appears in or
otherwise renders any services or provides any materials for use in any Program
is connected or associated with any sponsor, product, article or service.
4.3(b) Licensee will not advertise or promote, in any manner, any
Program withdrawn by Licensor.
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4.3(c) Licensee will not authorize or permit any excerpt or clip
from any Program to be used ***
4.3(d) ***
5. DELIVERY AND RETURN.
5.1 Access and Delivery Items. Licensee will have full and immediate
access to all masters and versions of Existing Library Programs, completed
Output Programs and completed Wallpaper. Schedule 5.1 sets forth the other
delivery materials which Licensor will supply to Licensee. Any and all masters,
versions or copies of the Existing Library Programs, Output Programs, Wallpaper
and the items described in Schedule 5.1 will be referred to collectively as the
"Delivery Materials."
5.2 Title to Delivery Materials. It is expressly agreed that title in and
to any Delivery Material provided to Licensee hereunder will remain in Licensor
at all times and that title, including copyrights therein, will vest in Licensor
upon the creation thereof, subject only to the possession and control thereof by
Licensee from the date of delivery through the end of the related license period
solely for the purposes of exercising its rights hereunder. Licensee will
execute, acknowledge and deliver to Licensor any instruments of transfer,
conveyance or assignment in or to any such Delivery Materials necessary or
desirable to evidence or effectuate Licensor's ownership thereof and in the
event that Licensee fails or refuses to execute, acknowledge or deliver any such
instrument or documents then Licensor will be deemed to be, and Licensee hereby
nominates, constitutes and appoints Licensor, its true and lawful
attorney-in-fact irrevocably to execute and deliver all such instruments in
Licensee's name or otherwise, it being acknowledged that such power is a power
coupled with an interest. Licensee will not have the right to use any Delivery
Materials except in the exercise of the rights granted to Licensee hereunder and
in accordance with all limitations on said rights as are contained in this
Agreement. Notwithstanding the foregoing, if Licensor wishes to exploit any
version of a Program included in the Delivery Materials that Licensee has caused
to be dubbed into another language, Licensor will reimburse Licensee for *** of
the direct costs of creating such dubbed version ***
6. PROGRAM LICENSE FEES. Licensee will pay Licensor program license fees as set
forth below (collectively, the "Program License Fees"), it being agreed that the
full amount of all payments to be made by "Licensee" under this Agreement will
be made by PTVI and that the portion thereof to be paid by PTV US will be paid
by PTV US to PTVI pursuant to arrangements between them:
6.1 Existing Program Library and Wallpaper. The license fee for the rights
granted hereunder with respect to the Existing Library Programs and the
Wallpaper is
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treatment filed separately with the Securities and Exchange Commission.
13
included in the Rights Acquisition Fee described in the Operating Agreement and
is payable as set forth in the Operating Agreement.
6.2 Output Programs.
6.2(a) General Payment Terms. For the rights granted hereunder with
respect to the Output Programs, Licensee will pay to Licensor a license fee
which will be calculated as a specified percentage of the total cost to Licensor
to produce, or acquire the worldwide rights to, such Output Programs each Fiscal
Year. For each Fiscal Year, the Program License Fee for the Output Programs (as
determined in reference to the Fixed Percentage, Reset Mechanism, Production
Budget Option and Licensor Production Supply Option, as hereinafter defined),
will be paid in *** payable within ten (10) business days after Licensor
delivers to Licensee the last Program produced or acquired under the Production
Budget for the applicable Fiscal Year; provided, however, in the event that in a
given Fiscal Year PEGI actually spends less than the amount of the Production
Budget for the production and acquisition of Output Programs, the final payment
due with respect to such year will be reduced accordingly. Licensee will pay the
installments that otherwise would have been due on March 20, 1999, June 20, 1999
and September 20, 1999 on the Funding Date.
6.2(b) Production Budget. Licensor agrees to produce (and/or acquire
the worldwide rights to) Output Programs. For the purposes of calculating the
Program License Fee for the Output Programs, the Output Programs for Fiscal Year
1 will carry an actual total production/acquisition cost (the "Production
Budget") of no more than *** The Production Budget for each Fiscal Year may
increase by no more than *** over the prior Fiscal Year, except by agreement of
Licensor and Licensee. The Production Budget for Fiscal Year 1 will include
overhead of no more than ***, and overhead may increase in subsequent Production
Budgets by no more than *** per year (the "Overhead Cap"); provided, however,
that in any Fiscal Year that Licensor exercises the Production Supply Option (as
described in Section 6.2(h)), the overhead in that year's Production Budget will
be reduced pro rata with respect to the overhead that would have been includible
had Licensor not elected the Production Supply Option (without otherwise
affecting the growth of the Overhead Cap in Fiscal Years in which the Production
Supply Option is not in effect).
6.2(c) Licensor Production Obligations. Licensor warrants that the
annual Production Budget for Output Programs will *** Relevant information about
the current mix of Licensor programming is set forth in Schedule 6.2(c). In the
event Licensor fails to produce Output Programs at a level of hours and mix
which is substantially similar to such levels as contemplated herein (the
"Licensor Shortfall"), Licensee will have the right to provide for the
production and acquisition of a sufficient supply of programs to replace the
Licensor Shortfall. (For the avoidance of doubt, the parties acknowledge that in
the event
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treatment filed separately with the Securities and Exchange Commission.
14
of a Licensor Shortfall, the Program License Fee due for such year will be
calculated based on the total cost of the Output Programs actually produced or
acquired during such year.)
6.2(d) Calculation of License Fee for Output Programs. For each
Fiscal Year, the Program License Fee for the Output Programs will be determined
by reference to the Fixed Percentage, Reset Mechanism, Production Budget Option
and Production Supply Option (as defined below). The aggregate amount due with
respect to the percentage of the Production Budget or Licensor Budget Option to
be paid by Licensee as a Program License Fee for the Output Programs pursuant to
this Section (the "Applicable Percentage") is subject to the crediting of
certain amounts pursuant to the Streaming adjustment described in Section
6.2(i), if applicable.
6.2(e) Fixed Percentage. Unless the Reset Mechanism, Production
Budget Option or Production Supply Option otherwise apply, the annual Program
License Fee for Output Programs will be a "Fixed Percentage" of the Production
Budget for the applicable Fiscal Year, as follows:
6.2.(e)(i) For Fiscal Years ***
6.2.(e)(ii) For Fiscal Year ***
6.2.(e)(iii) For Fiscal Year ***
6.2.(e)(iv) For Fiscal Year ***
6.2.(e)(v) For Fiscal Year ***
6.2.(e)(vi) For Fiscal Year ***
6.2.(e)(vii) For Fiscal Year ***
6.2.(e)(viii) For Fiscal Year ***: *** Licensor will refund
the excess Program License Fee actually paid by Licensee for such Fiscal Year
within thirty (30) days after Licensor issues its audited financial statements
for such year. "Net Channel Revenues" will mean all revenues received by the
Channels as reflected in the audited year end statements of Licensee, and
"Threshold Revenues" will mean the Net Channel Revenues for Fiscal Year 10;
provided, that for any Fiscal Year in which Licensee ***
6.2(f) The Reset Mechanism. For each Fiscal Year commencing with
Fiscal Year 6, Licensee and Licensor will recalculate the percentage of the
Production Budget to
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15
be paid by Licensee as the Program License Fee for Output Programs (the "Reset
Mechanism"), using the following method:
6.2.(f)(i) ***
6.2.(f)(ii) ***
6.2.(f)(iii) ***
6.2.(f)(iv) ***
6.2.(f)(v) ***
6.2(g) Licensee Production Budget Option. Starting in Fiscal Year 4,
Licensee may choose to fund a reduced percentage of the Production Budget for a
given Fiscal Year (the "Production Budget Option") if either: (i) earnings
before interest and taxes (i.e., EBIT) of Licensee for the Fiscal Year just
ended (according to the audited financial statements of Licensee) (the "Actual
Net Cash Flow") fell below the EBIT projected in the approved Business Plan for
that Fiscal Year (the "Plan Net Cash Flow") by (a) ***
6.2.(g)(i) On or about March 1, Licensee will notify Licensor
of (i) Licensee's Actual Net Cash Flow for the Fiscal Year just completed and
(ii) the Plan Net Cash Flow for that Fiscal Year. If the Actual Net Cash Flow
fell short of the Plan Net Cash Flow so as to satisfy either of the conditions
of Section 6.2(g), Licensee may notify Licensor that Licensee is exercising the
Production Budget Option by the later of March 10 or ten (10) days after
Licensor has received Licensee's audited financial statements for the previous
year.
6.2.(g)(ii) Upon exercising the Production Budget Option,
Licensee will be obliged to pay a license fee for the Output Programs equal to
the product of *** of the Production Budget for that Fiscal Year. This 40% will
be referred to as the "Option Percentage." By way of example, if Licensee timely
notifies Licensor that the difference between the Actual Net Cash Flow for
Fiscal Year 5 and the Plan Net Cash Flow for Fiscal Year 5 satisfies either of
the conditions of Section 6.2(g) and that Licensee is exercising the Production
Budget Option, the *** Option Percentage will supersede whichever of the Fixed
Percentage or the Reset Percentage would have otherwise been in effect for
Fiscal Year 6.
6.2(h) Production Supply Option. In the event that Licensee notifies
Licensor that it is exercising the Production Budget Option for a given Fiscal
Year, Licensor
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16
may elect to supply Output Programs for that Fiscal Year (the "Production Supply
Option"), as follows:
6.2.(h)(i) Licensor may elect either: (i) to produce a slate
of programming at the Production Budget for that Fiscal Year, in which case the
Program License Fee will be equal to *** of the Production Budget; or (ii) to
produce a slate of programming whose budget (the "Licensor Budget Option") will
be equal to *** of the Production Budget divided by the Fixed Percentage for
that Fiscal Year, in which case the Program License Fee will be equal to the
product of the Fixed Percentage multiplied by the Licensor Budget Option. If
Licensor elects the Licensor Budget Option, the mix of Output Programs supplied
(as described in Section 6.2(c)) must remain substantially unchanged.
6.2.(h)(ii) Licensor will notify Licensee of its election
under the Production Supply Option within ten (10) days of receiving Licensee's
notice it is exercising the Production Budget Option.
Example: ***
6.2(i) ***
6.2.(i)(i) On or about each March 1 (or as soon thereafter as
PEI's audited financial statements are available) Licensor will notify Licensee
of the ***
6.2.(i)(ii) On or about each March 1 (or as soon thereafter as
Licensee's audited financial statements are available) ***
6.2.(i)(iii) ***
6.2.(i)(iv) ***
6.3 Maintenance of Records and Audit Rights.
6.3(a) Licensor and Licensee will keep accurate books of account and
records covering all transactions relating to or arising out of this Agreement,
including all items necessary to calculate the Program License Fees for Output
Programs (i.e., the Production Budget and Licensor Applicable Revenue for
Licensor, and Net Channel Revenues, Plan Net Cash Flow and Actual Net Cash Flow
for Licensee). Either party will have the right, within 24 months after the end
of a given Fiscal Year, to inspect the books and records of the other party in
connection with the Program License Fees paid with respect to such Fiscal Year.
Upon receipt of written notice that a party wishes to commence such an
inspection or examination, the other party will permit such party and its
employees,
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treatment filed separately with the Securities and Exchange Commission.
17
accountants and agents to (i) have reasonable access to and inspect such books
and records during normal business hours upon reasonable notice, and (ii) to
review and copy all such books and records, to the extent relevant to the
calculation of the Program License Fee. Each party will maintain in good order
and condition all such books and records relating to a given Fiscal Year for not
less than three years after the end of such Fiscal Year, or in the event of a
dispute between the parties, until such dispute is resolved, whichever date is
later. Receipt or acceptance by Licensor, or payment by Licensee, of all or a
portion of the Program License Fee for a given Fiscal Year will not preclude
such party from exercising its rights hereunder.
6.3(b) If an inspection or examination conducted pursuant to Section
6.3(a) discloses, or Licensor or Licensee otherwise discover, an underpayment of
Program License Fees, the amount of such underpayment will be paid by Licensee
to Licensor not later than thirty (30) days after the determination thereof,
and, if such underpayment was due to the misstatement by Licensee of Net Channel
Revenues, Actual Net Cash Flow or Plan Net Cash Flow, then such payment will
also include interest from the date the payment should have been made to and
including the date of payment at the Reference Rate in effect on the date
payment should have been made. If such underpayment of Program License Fees by
Licensee is due to Licensee's misstatement of Net Channel Revenues, Actual Net
Cash Flow or Plan Net Cash Flow and such underpayment is in excess of ten
percent (10%) of the aggregate Program License Fees owed for such Fiscal Year,
Licensee will, in addition to paying Licensor the amount of such underpayment
plus interest, reimburse Licensor for all reasonable costs and expenses of
conducting such inspection or examination.
6.3(c) If an inspection or examination referred to in Section 6.4(a)
discloses, or Licensee otherwise discovers, an overpayment of Program License
Fees for a given Fiscal Year, the amount of such overpayment will be credited
against future payments of Program License Fees, unless the period for which
such overpayment was made is the final period covered by this Agreement, in
which case the amount of the overpayment will be paid by Licensor to Licensee
within thirty (30) days after determination thereof. If such overpayment of
Program License Fees is the result of a misstatement by Licensor of the
Production Budget or Licensor Applicable Revenue, and the amount of such
overpayment is in excess of ten percent (10%) of the Program License Fees
actually owed for such Fiscal Year, Licensor will reimburse Licensee for all
reasonable costs and expenses of conducting such inspection or examination.
7. REPRESENTATIONS AND WARRANTIES; INDEMNITIES.
7.1 Representations and Warranties.
7.1(a) By Licensor. Licensor represents and warrants that, except as
set forth in the Schedules hereto: (i) it is duly authorized to enter into the
transactions contemplated by this Agreement; (ii) this Agreement is a valid and
binding obligation of Licensor, enforceable against it in accordance with its
terms; (iii) the performance of Licensor's obligations hereunder does not
violate any agreement, law, rule, or regulation
18
binding on Licensor or Licensor's charter documents; (iv) subject to Section
7.4, it has, and will continue to have, all rights in and to the Existing
Library Programs, Output Programs and Wallpaper necessary to fulfill its
obligations hereunder (except that with respect to the Existing Library, no such
representation is made as to any program not listed on Schedules 2.1(a)-1,
2.1(a)-2 and 2.1(a)-3); (v) except for the license between Licensor and third
parties which Licensor is assigning to Licensee, the Existing Library Programs,
Output Programs and Wallpaper are not subject to licenses which conflict with
the rights granted herein, and the use thereof by Licensee as contemplated
herein will not infringe upon the copyright, literary or dramatic right or right
of privacy of any third party or constitute a libel or slander of any third
party; (vi) the licenses between Licensor and third parties which Licensor is
assigning to Licensee are assignable, valid and enforceable, that the licensees
under such licenses have not pre-paid the license fees, if any, due thereunder
(except in accordance with the terms of such licenses), and, to the best of
Licensor's knowledge and belief, such licensees do not have any claims, offsets
or defenses which are adverse to Licensee's rights hereunder; and (vii) Licensor
has disclosed all material information relating to the rights granted hereunder,
and that all such information is true and correct to the best of Licensor's
knowledge and belief.
7.1(b) By Licensee. Licensee represents and warrants that: (i) it is
duly authorized to enter into the transactions contemplated by this Agreement;
(ii) this Agreement is a valid and binding obligation of Licensee, enforceable
against it in accordance with its terms; (iii) the performance of Licensee's
obligations hereunder does not violate any agreement, law, rule, or regulation
binding on Licensee or Licensee's charter documents; and (iv) it will not use
the Company Programming except as authorized by this Agreement.
7.2 Indemnification.
7.2(a) By Licensor. Licensor will indemnify and hold harmless
Licensee and its and members, managers, directors, officers, shareholders,
employees, agents, representatives and affiliates (collectively, the "Licensee
Indemnified Parties"), on an After Tax Basis, from and against all claims,
losses, damages (including loss of profits and consequential damages awarded to
unrelated third parties, if any, but excluding loss of profits and consequential
damages otherwise suffered by the Licensee Indemnified Parties), expenses,
judgements, costs and liabilities (including reasonable attorneys' fees and
costs) (collectively, "Losses") incurred by the Licensee Indemnified Parties
arising from Licensor's breach of any obligation, representation or warranty
contained in this Agreement. Notwithstanding the foregoing any claims for
indemnification that any Licensee Indemnified Parties may have pursuant to this
Section 7.2(a) will exclude claims based on information known by Lifford (or its
Affiliates, including Bloomfield) as of the Funding Date whether or not such
information formed the basis of the issues raised by Bloomfield during Due
Diligence (as defined in the Operating Agreement) and whether or not asserted
prior to the Walk Away Notice (as defined in the Operating Agreement) or
thereafter. In the event of a dispute regarding a claim for indemnification, the
Licensee Indemnified Party will have the burden of proof in establishing the
validity and amount of the claim, and Licensor will have the burden of proof in
establishing any defense to such claim, including but not limited to,
19
a defense asserted by Licensor that Lifford (or its Affiliates) had knowledge of
the requisite facts. Notwithstanding the foregoing, Licensor will not be
obligated to provide indemnification where there is any admission of guilt by
any Licensee Indemnified Party charged with violation of the law as to the
content of any Company Program.
7.2(b) By the Licensee. Licensee will indemnify and hold harmless
Licensor and its directors, officers, shareholders, employees, agents,
representatives and affiliates (collectively, the "Licensor Indemnified
Parties"), on or After Tax Basis, from and against all Losses incurred by the
Licensor Indemnified Parties arising from Licensee's breach of any obligation,
representation or warranty contained in this Agreement.
7.3 Musical Compositions. Licensor warrants and represents that to the
best of its knowledge, information and belief, the performing rights in all
musical compositions contained in the Programs are (a) controlled by a
performing rights society having jurisdiction, (b) controlled by Licensor, or
(c) in the public domain. Licensor does not represent or warrant that Licensee
may exercise the performing rights to said musical compositions without the
payment of a performing rights royalty or license fee. Licensee will be solely
responsible for the payment of such royalty or fee and will hold Licensor free
and harmless therefrom.
7.4 Procedure. If a claim by a third party is made against an indemnified
party, the indemnified party will promptly notify the indemnifying party of such
claim. Failure to so notify the indemnifying party will not relieve the
indemnifying party of any liability which the indemnifying party might have,
except to the extent that such failure materially prejudices the indemnifying
party's legal rights. The indemnifying party will have thirty (30) days after
receipt of such notice to undertake, conduct and control through counsel of its
own choosing (subject to the approval of the indemnified party, such approval
not to be unreasonably withheld) and at its expense, the settlement or defense
of such claim, and the indemnified party will cooperate with the indemnifying
party in connection therewith; provided, however, that (i) the indemnifying
party will permit the indemnified party to participate in such settlement or
defense through counsel chosen by the indemnified party, provided that the fees
and expenses of such counsel will be borne by the indemnified party and (ii) the
indemnifying party will reimburse the indemnified party for the full amount of
any Loss resulting from such claim and all related expenses incurred by the
indemnified party within the limits of this Section 7 as such are incurred. If
the indemnifying party does not notify the indemnified party within thirty (30)
days after actual receipt of the indemnified party's notice of a claim of
indemnity hereunder that it elects to undertake the defense thereof (which may
be with a reservation of rights by such indemnifying party) or so notifies the
indemnified party but fails to undertake or maintain such defense promptly and
in good faith so that a default is threatened, the indemnified party will
promptly notify the indemnifying party whether it desires to undertake the
defense of such claim. If the indemnifying party does not within ten (10)
business days thereafter elect to undertake the defense thereof, the indemnified
party will have the right to contest, settle or compromise the claim in the
exercise of its reasonable judgment and without prejudice to the rights of the
indemnified party to indemnification hereunder. Notwithstanding anything
contained herein, the
20
indemnified party will not enter into any settlement or compromise that provides
for any remedy other than money damages without the prior written approval of
the indemnifying party, which approval will not be unreasonably withheld.
7.5 Taxes. Licensee will pay, without limitation, any tax, levy or charge
howsoever denominated, imposed or levied (excluding only any applicable net
income or franchise taxes ("Licensor Taxes") imposed or levied against Licensor)
by any statute, law, rule or regulation now in effect or hereinafter enacted
including, without limitation, sales, use, property and excise or other similar
taxes, licenses, import permits, state, county, city or other taxes howsoever
denominated relating to or imposed on license fees, rentals, negatives, tapes or
other material, or the right or privilege to use the same in connection with any
Program hereunder whether or not billed or demanded by Licensor; it being the
intent hereof that the Program License Fees will be a net amount, free and clear
of any tax, levy or charge of whatsoever kind or nature howsoever denominated
except: (i) Licensor Taxes; (ii) any tax imposed on Licensor that would not have
been imposed had it engaged only in the transactions contemplated hereunder; or
(iii) any tax for which Licensor (or any member of its affiliated group) obtains
a foreign tax credit or could have obtained such credit had it sought to. In
regard to Licensor Taxes, if Licensee pays any such tax for Licensor to local
tax authorities, it may do so only if it simultaneously delivers written
evidence of such payment (in the form of a tax payment certificate or other
similar document) to allow Licensor to deduct such tax payment in the United
States. To the extent that any such other taxes, levies, or charges or penalties
and interest thereon are paid by Licensor, Licensee will reimburse Licensor on
demand, and on the failure of Licensee to reimburse Licensor, Licensor will have
available to it all of the remedies provided for herein with respect to unpaid
Program License Fees as well as such other remedies as may be provided by law.
If Licensee denies liability for any tax, levy or charge which Licensor must pay
or collect, Licensee will indemnify Licensor for any liability, penalty or
interest which may result and Licensor will have the immediately aforementioned
remedies against Licensee for the collection of same. Licensor will have no
obligation to contest or to dispute any tax assessed or levied. Licensee will
have the right to do so at its sole cost and expense, and Licensor will provide
Licensee with reasonable cooperation relating to any such contest or dispute.
8. TERMINATION.
8.1 Expiration of Term. The License Term is fifty (50) years commencing on
the date of formation of PTVI unless sooner terminated pursuant to the other
provisions of this Section 8.
8.2 Early Termination on Breach. Licensor may without prejudice to its
other remedies terminate this Agreement by notice in writing to Licensee on or
after the occurrence of any of the following:
8.2(a) PEII has terminated the Trademark License Agreement;
21
8.2(b) Licensor elects to dissolve Licensee as the result of VSI's
(or its Affiliates that are members of Licensee) being in default of its
obligations under the Operating Agreement; or
8.2(c) PTVI is in material default of its obligations under the
Stock Purchase Agreements (as defined in the Operating Agreement) and such
default, if curable, is not cured within thirty (30) days after PTVI has
received written notice thereof from Licensor (provided such default is not the
result of action or inaction by Licensor as a Member of PTVI).
A party may without prejudice to its other remedies terminate this
Agreement by notice in writing to the other on or after either of the following:
8.2(d) the commission of one or more material breaches of this
Agreement by the other party which are not capable of remedy; provided that in
the case of a breach by the Licensee, such breach is not caused by Licensor as a
Member of PTVI; or
8.2(e) the commission of a material breach of this Agreement by the
other party which is capable of remedy (a "Remediable Breach") which will not
have been remedied within a period of thirty (30) days after the party in breach
has been given notice in writing specifying that Remediable Breach and requiring
it to be remedied; provided, however, that such thirty (30)-day period will be
extended for such additional period as will be reasonably necessary if that
Remediable Breach is incapable of remedy within that thirty (30) day period and
during that thirty (30)-day period the party in breach will diligently endeavor
to remedy that Remediable Breach, but only if such extension would not
reasonably be expected to have a material adverse effect on the party giving
notice of such breach; and further provided that such breach is not caused by
Licensor as a Member of PTVI. The parties agree that any inadvertent breach
relating to Licensor's obligations with respect to any individual program will
constitute a Remediable Breach and will not constitute grounds for termination
hereof if Licensor provides comparable substitute programming for the applicable
program.
9. EFFECTS OF TERMINATION.
9.1 Survival of Obligations. The termination of this Agreement for
whatever reason will not affect any provision of this Agreement which is
expressed to survive or operate in the event of its termination and will not
prejudice or affect the rights of either party against the other in respect of
any breach of this Agreement or in respect of any moneys payable by one party to
the other in relation to any period prior to termination.
9.2 Termination of Rights. Upon the date on which any termination of this
Agreement for whatever reason takes effect (the "Termination Date") all rights
of Licensee hereunder will immediately terminate and automatically revert to
Licensor and Licensee will cease to make any use of the Programs and other
materials provided by Licensor hereunder.
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9.3 Further Assurances. Upon termination of this Agreement, the parties
will perform all other acts which may be necessary or useful to render effective
the termination of Licensee's interests in the Programs and other materials
furnished by Licensor hereunder and Licensee will execute any assignment,
conveyance, acknowledgment or other document that Licensor may reasonably
request relinquishing such interests.
10. EQUITABLE RELIEF.
Each of Licensor and Licensee acknowledges that any material breach of
this Agreement by such party, including, by way of example, Licensee's failure
to cease using the any programming supplied hereunder upon the expiration or
termination of this Agreement, will result in irreparable harm to the other
party for which there is no adequate remedy at law. Accordingly, in such event,
Licensor or Licensee, as the case may be, will be entitled to preliminary or
temporary equitable relief in any Federal or State Court of competent
jurisdiction located in Los Angeles County, California pending a final
determination in accordance with Section 11, without the necessity of posting
bond unless otherwise required by applicable law by way of any or all of the
temporary and permanent injunctions and such other relief as any court of
competent jurisdiction may deem just and proper.
11. DISPUTE RESOLUTION.
11.1 General Agreement Regarding Dispute Resolution. Any dispute arising
out of or relating to this Agreement will be resolved in accordance with the
procedures specified in this Section 11, which will be the sole and exclusive
procedures for the resolution of any such disputes. The parties intend that
these provisions will be valid, binding, enforceable and irrevocable and will
survive any termination of this Agreement; provided, however, that this Article
will not apply to any dispute concerning the validity, ownership or control of
the trademarks licensed by PEII to the Company pursuant to the Trademark License
Agreement or the copyrights to any programming supplied by Licensor to the
Program Supply Agreement, and instead any such dispute will be litigated in a
court of law.
11.2 Notification and Negotiation. The parties will promptly notify each
other in writing of any dispute arising out of or relating to this Agreement.
The parties will attempt in good faith to resolve any dispute arising out of or
relating to this Agreement promptly by negotiation between executives who have
authority to settle the controversy. All reasonable requests for information
made by one party to the other will be honored. All negotiations pursuant to
this clause are confidential and will be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence.
11.3 Mediation. If any such dispute remains unresolved within thirty (30)
days of original notice thereof, the parties will endeavor to resolve any
dispute arising out of or relating to this Agreement by mediation under the CPR
Mediation Procedure for Business Disputes. Unless the parties agree otherwise,
the mediator will be selected from the CPR Panel of Neutrals with notification
to CPR.
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11.4 Arbitration. Any controversy or claim arising out of or relating to
this Agreement or the breach, termination or validity thereof, which remains
unresolved forty-five (45) days after appointment of a mediator, will be settled
by arbitration by a sole arbitrator in accordance with the CPR Non-Administered
Arbitration Rules; provided, however, that if either party will not participate
in a non-binding procedure described above in Sections 11.2 and 11.3, the other
may initiate binding arbitration before expiration of the above period for
negotiation and mediation. The arbitration will be governed by the United States
Arbitration Act, 9 U.S.C. ' 1-16, and judgment upon the award rendered by the
arbitrator may be entered by any court having jurisdiction thereof. The place of
arbitration will be Los Angeles, California.
11.5 Damages. Except as expressly provided below, the arbitrator is not
empowered to award damages in excess of compensatory damages and each party
hereby irrevocably waives any right to recover such damages with respect to any
dispute resolved by arbitration. The arbitrator will have the authority to
include, as an item of damages, the costs of arbitration, including reasonable
legal fees and expenses, incurred by the prevailing party and to apportion such
costs among the parties on a claim by claim basis as such party prevails
thereon. For purposes of the foregoing, the "prevailing party" will mean the
party whose final settlement offer (or other position or monetary claim) prior
to the start of arbitration is closest to the judgement awarded by the
arbitrator, regardless of whether such judgement is entered into in favor of or
against such party.
11.6 Statute of Limitations. The statute of limitations of the State of
California applicable to the commencement of a lawsuit will apply to the
commencement of an arbitration hereunder, except that no defenses will be
available based upon the passage of time during any negotiation or mediation
called for by the preceding paragraphs of this Section 11.
11.7 Confidential Negotiations. All negotiations pursuant to Sections 11.2
and 11.3 are confidential and will be treated as compromise and settlement
negotiations for purposes of applicable rules of evidence.
11.8 Service of Process; Forum. Each party agrees that service by
registered or certified mail, return receipt requested, delivered to such party
at the address provided in Section 12.6 (Notices) below, will be deemed in every
respect effective service of process upon such person for all purposes of these
provisions relating to mediation and arbitration. Each party irrevocably submits
to the jurisdiction of the courts of the State of California and to any federal
court located within such state for the purpose of any action or judgement with
respect to this Agreement, regardless of where any alleged breach or other
action, omission, fact or occurrence giving rise thereto occurred. Each party
hereby irrevocably waives any claim that any action or proceeding brought in
California has been brought in any inconvenient forum.
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11.9 Additional Provisions to Enforce Awards. The parties will negotiate
in good faith and agree on such further or modified arbitration provisions as
are reasonably necessary for awards and other judgements resulting from the
provisions set forth above to be recognized and enforceable in other
jurisdictions in the Territory.
12. MISCELLANEOUS.
12.1 Force Majeure. Subject to the right to terminate set forth in Section
8.2(e), neither party will be liable to the other for any failure or delay in
delivery of Delivery Materials, or the inability to telecast any of the
Programs, due to accident involving breakdown of any satellite or of
transmission facilities or equipment, labor disputes, acts of God, failure of
carriers, failure or delay of laboratories, of or any other cause beyond the
control of such party (each, an event of "Force Majeure") and such performances
will be excused to the extent that it is prevented by reason of any of the
foregoing conditions. Notwithstanding the foregoing, an event of "Force Majeure"
will not include censorship restrictions or any restriction by any jurisdiction
on a party's right to transfer funds. If at the end of the term the Licensor in
good faith determines that any event of Force Majeure materially decreased the
value of this license, Licensor, in Licensor's sole discretion to be exercised
in good faith, may make an adjustment of said license payments.
12.2 Binding Effect; No Assignment. The provisions of this Agreement will
be binding on and enure to the benefit of the successors of each party hereto;
provided, however, that no party may assign, transfer, pledge, hypothecate,
charge or otherwise dispose of or subcontract any of its rights or obligations
hereunder without the prior written consent of the other party. Notwithstanding
the foregoing: (i) either party may assign its rights and obligations hereunder
to an Affiliate of such party, but the original party will remain responsible
and liable for such Affiliate's compliance with all of such original party's
obligations hereunder, and in the case of an assignment by Licensor, such
Affiliate must be the owner of the rights in the programming and materials
necessary to perform Licensor's obligations hereunder; and (ii) in the event
Lifford (or an Affiliate of Lifford which is then a member of Licensee)
dissolves Licensee due to a breach by Licensor (or an Affiliate of Licensor
which is then a member of Licensee) of the Operating Agreement, Lifford (or such
Affiliate) may cause Licensee's rights hereunder to be assigned to Lifford (or
to an Affiliate of Lifford), provided that Licensee's rights under the Trademark
License Agreement are assigned to the same assignee. Nothing in this Agreement,
expressed or implied, is intended to confer on any person other than the parties
hereto or their respective permitted successors and assigns, any rights,
remedies, obligations or liabilities under or by reason of this Agreement.
12.3 Invalidity. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction will, as to such jurisdiction, be ineffective
to the extent of such prohibition or unenforceability without invalidating the
remaining provisions hereof or affecting the validity or enforceability of such
provisions in any other jurisdictions.
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12.4 Waivers, Remedies Cumulative, Amendments, etc.
12.4(a) No failure or delay by any of the parties hereto in
exercising any right, power or privilege under this Agreement will operate as a
waiver thereof nor will any single or partial exercise by any of the parties
hereto of any right, power or privilege preclude any further exercise thereof or
the exercise of any other right, power or privilege.
12.4(b) Except as otherwise provided in this Agreement, the rights
and remedies herein provided are cumulative and not exclusive of any rights and
remedies provided by law.
12.4(c) No provision of this Agreement may be amended, modified,
waived, discharged or terminated, other than by the express written agreement of
the parties hereto nor may any breach of any provision of this Agreement be
waived or discharged except with the express written consent of the party not in
breach.
12.5 Notices.
12.5(a) All notices, requests, demands and other communications
required to be given under this Agreement will conclusively be deemed to have
been duly given (a) when hand delivered, (b) the next business day if sent by a
generally recognized overnight courier service that provides written
acknowledgment by the addressee of receipt, or (c) when received (with
appropriate answerback), if sent by facsimile transmission or other generally
accepted means of electronic transmission addressed as follows:
If to Licensor to:
Playboy Entertainment Group, Inc.
Attention: President
0000 Xxxxxxx Xxxxxxxxx
Xxxxxxx Xxxxx, XX 00000
Xxxxxx Xxxxxx of America
Fax Number: (000) 000-0000
With a copy to:
Playboy Enterprises, Inc.
Attention: General Counsel
000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxxx of America
Fax Number: (000) 000-0000
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If to PTVI or PTV U.S.:
Playboy TV International LLC
c/x Xxxxxxxx Television Group
Attention: Director Legal and Business Affairs
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxx Xxxxx, XX 00000
United States of America
Fax Number: (000) 000-0000
With copies to:
Playboy Enterprises, Inc.
Attention: General Counsel
000 Xxxxx Xxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
Xxxxxx Xxxxxx of America
Fax Number: (000) 000-0000
and
Xxxxx Xxxxxxx, Esq.
Greenberg, Glusker, Fields, Claman & Machtinger LLP
1900 Avenue of the Stars, Xxxxx 0000
Xxx Xxxxxxx, XX 00000
Xxxxxx Xxxxxx xx Xxxxxxx
Fax Number: (000) 000-0000
or to such other address, or facsimile transmission number as the relevant
addressee may hereafter by notice hereunder substitute.
12.5(b) All notices will be deemed given when received at the
address(es) as provided in paragraph (a) above.
12.6 Governing Law. ALL QUESTIONS WITH RESPECT TO THIS AGREEMENT AND THE
RIGHTS AND LIABILITIES OF THE PARTIES WILL BE GOVERNED BY THE LAWS OF THE STATE
OF DELAWARE, IRRESPECTIVE OF THE CHOICE OF LAWS PROVISIONS OF DELAWARE OR OF ANY
OTHER JURISDICTION.
12.7 Entire Agreement. This Agreement, together with its attachments,
constitutes the entire agreement between the parties hereto with respect to the
subject matter hereof and supersedes all prior agreements and understandings,
oral and written, between the parties hereto with respect to the subject matter
hereof.
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12.8 Rules of Construction.
12.8(a) Headings. The section headings in this Agreement are
inserted only as a matter of convenience, and in no way define, limit, or extend
or interpret the scope of this Agreement or of any particular section.
12.8(b) Tense and Case. Throughout this Agreement, as the context
may require, references to any word used in one tense or case will include all
other appropriate tenses or cases.
12.8(c) Agreement Negotiated. The parties hereto are sophisticated
and have been represented by lawyers throughout the negotiation and execution of
this Agreement who have carefully negotiated the provisions hereof. As a
consequence, the parties do not believe the presumption of California Civil Code
Section 1654 and similar laws or rules relating to the interpretation of
contracts against the drafter of any particular clause should be applied in this
case and therefore waive its effects.
12.9 Counterparts. This Agreement may be executed in two or more
counterparts, each of which will be deemed an original, but all of which
together will constitute one and the same instrument.
12.10 Relationship Between the Parties. This Agreement will not be
construed to place the parties in the relationship of partners or joint
venturers.
12.11 Time is of the Essence. Time will be of the essence with respect to
each and every obligation of Licensee and Licensor hereunder.
12.12 Effectiveness. This Agreement will be binding on, and effective with
respect to PTVI, as of the date hereof. This Agreement will be binding on, and
effective with respect to PTV U.S., as of the date of it executes this
Agreement.
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IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed by their respective authorized officers as of the date first above
written.
LICENSOR:
Date: 8/31/99 PLAYBOY ENTERTAINMENT GROUP, INC.
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
-----------------------------------
Title: President
-----------------------------------
Date: 8/31/99 LICENSEE:
PLAYBOY TV INTERNATIONAL LLC
By: /s/ Xxxxxxx X. Xxxx
--------------------------------------
Name: Xxxxxxx X. Xxxx
-----------------------------------
Title: Director
-----------------------------------
By: /s/ Xxx Xxxxxxx
--------------------------------------
Name: Xxx Xxxxxxx
-----------------------------------
Title: Director
-----------------------------------
Date:____________ PTV U.S., LLC
By:
--------------------------------------
Name:
-----------------------------------
Title:
-----------------------------------
ACKNOWLEDGED, ACCEPTED AND AGREED
ON BEHALF OF ALL LICENSOR AFFILIATES:
PLAYBOY ENTERPRISES, INC.
By: /s/ Xxxxxxx X. Xxxx
---------------------------------
Name: Xxxxxxx X. Xxxx
------------------------------
Title: Executive Vice President
------------------------------
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