Exhibit 10.1.1
Portions of this exhibit have been omitted pursuant to a request for
confidential treatment filed with the Securities and Exchange Commission. The
omissions have been indicated by asterisks ("*****"), and the omitted text has
been filed separately with the Securities and Exchange Commission.
AFFILIATION AGREEMENT
THIS AGREEMENT made as of the 1st day of November, 1992 is by and between
SPICE, INC., a New York corporation ("Network"), and Satellite Services, Inc., a
Delaware corporation ("Affiliate").
1. RIGHTS:
(a) Grant of Rights. Network hereby grants to Affiliate, and
Affiliate hereby accepts, the following rights relating to the pay-per-view
television programming service known as "Spice," whether in its current analog
format or in any other digitized, compressed, modified, replaced or otherwise
manipulated format (the "Service"):
(i) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and authorize the reception of the Service
(for the purposes described in Section 4 (e) hereof), by cable or other wire
transmission service, whether now existing or developed in the future, ("Cable")
in the Distribution Areas (as defined herein) of the System or Systems (as
defined herein), if any, set forth by Affiliate on Schedule 1, as such Schedule
1 may be added to or deleted from, from time to time, pursuant to the terms of
this Agreement;
(ii) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and authorize the reception of the Service
(for the purposes described in Section 4(e) hereof) by satellite master antenna
television systems ("SMATV"), by multipoint distribution services ("MDS"), by
multichannel multipoint distribution services ("MMDS"), by Satellite (as defined
below), and by any other means of distribution whether now existing or developed
in the future (all such technologies including SMATV, MDS, MMDS, Satellite and
any other means of distribution whether now existing or developed in the future
(other than cable) shall be referred to hereinafter, collectively, as
"Alternative Technologies") in (A) Operating Areas (as defined herein), (B)
other areas of counties in which Operating Areas are wholly or partially located
but which areas are not the subject of a cable television franchise or license
or, if a cable television franchise or license exists, the operator of such
franchise or license is not distributing the Service, and (C) areas of counties
(which are contiguous to such counties where an Operating Area is wholly or
partially located) which are not the subject of a cable television franchise or
license or, if a cable television franchise or license exists, the operator of
such franchise or license is not distributing the Service (the areas described
in subsections (A), (B), and (C) of this Section 1(a)(ii) shall be referred to
hereinafter, collectively, as a System's "Distribution Area"); and
(iii) the non-exclusive right, but not the obligation, to
exhibit, distribute, subdistribute and authorize the reception of the Service
(for the purposes described in Section 4(e) hereof) nationwide (including the
fifty United States, the District of Columbia and the territories, possessions
and commonwealths of the United States) to any person or entity ("Satellite
Subscribers") by means of equipment capable of receiving audio/visual signals
and/or programming directly from a satellite, including, but not limited to,
C-Band and Ku-Band signals, as digitized, compressed, modified, replaced or
-otherwise manipulated, whether now existing or developed in the future,
including tier-bit access rights ("Satellite"). Without the prior written
authorization of Network, the Service may not be exhibited or otherwise
distributed to Satellite Subscribers in: Tennessee, Mississippi, Alabama,
Oklahoma, North Carolina or Utah.
The rights set forth in this Section 1(a), and elsewhere under this
Agreement, are also granted hereby to any affiliate of Affiliate. As used in
this Agreement, an affiliate of Affiliate shall include any entity meeting the
requirements of paragraphs I.1, II or III of Exhibit A hereto, regardless of
whether such entity is a cable television system.
"Operating Area" of a cable television system shall mean that
geographic area where the owner of the system is authorized by appropriate
governmental authority to operate an audio or video distribution facility
through Cable and is operating an audio or video distribution facility through
Cable within such area; provided, however, that if a franchise or license is not
required for the distribution of television services by Cable in a particular
geographic area, then the operating Area of a system shall mean that geographic
area where the system is operating regardless of the presence or absence of a
franchise or license.
(b) Affiliate shall have the right to elect to include, under
this Agreement, and to demand authorization from Network, if necessary, any
cable television system consisting of Cable which, (i) meets the System
Qualifications of Exhibit A hereto, and (ii) either carries the Service or
commits to carry the Service, by giving Network written notice within thirty
(30) days of the commencement of such carriage (individually, a "System" or,
collectively, "Systems"). Upon receipt of such notice or upon the launch of the
Service by a System, Schedule 1 hereof shall be deemed to include such System(s)
as of the later of: (i) the launch date of the Service on such System(s), or
(ii) the date of acquisition of such System(s) by Affiliate. Any then-existing
agreement with Network applicable to any such System for carriage of the Service
shall terminate and shall cease to be effective with respect to such System as
of the effective date of the addition or deemed addition of such System to
Schedule 1. Affiliate shall have the right, in Affiliate's sole discretion, to
discontinue carriage of the service on any or all Systems, and to delete any or
all Systems from Schedule 1, by providing Network with written notice within
thirty (30) days of such deletion or discontinuance; provided, however, if such
deletion or discontinuance is due to political, legal or community issues, no
such notice by Affiliate will be required to delete or discontinue the Service.
(c) Notwithstanding any provision of this Agreement to the
contrary, Affiliate shall not intentionally authorize any use of the Service:
(i) in a room
2
open to the public in a commercial establishment (including, without limitation,
public areas of any restaurant, tavern, bar, club, fraternal organization,
hospital or correctional facility), or (ii) in any communal room in an otherwise
residential building (including without limitation, any lobby or social room in
an apartment house, dormitory, drilling rig or similar place). Furthermore,
Affiliate shall take all reasonable precautions to prevent such impermissible
uses from occurring through the facilities of a System.
2. TERM:
(a) Unless terminated sooner pursuant to the terms of this
Agreement, the Term of this Agreement shall consist of the Initial Term and any
number of Renewal Terms. The Initial Term of this Agreement shall commence upon
the date of complete execution of this Agreement and shall terminate on November
30, 2002 unless terminated sooner pursuant to the terms of this Agreement.
(b) This Agreement shall automatically renew for successive five (5)
year periods (each a "Renewal Term") after the Initial Term, and each Renewal
Term, unless either, (i) this Agreement is terminated earlier in accordance with
the terms hereof, or (ii) Affiliate provides a minimum of sixty (60) days' prior
written notice to Network of its intent to terminate this Agreement, in
Affiliate's sole discretion, prior to the end of the Initial Term or any Renewal
Term. As used herein, the word "Term" shall mean, collectively, the Initial Term
and any number of Renewal Terms.
3. CONTENT OF THE SERVICE:
(a) Throughout the Term, the Service shall be commercial-free and
shall consist of twenty-four (24) hours per day of high quality, non-rated
cable-version adult programming intended for an adult audience, similar to the
program schedule attached hereto as Exhibit B, but also including special Events
as described in Section 5 below. Notwithstanding the foregoing, the Service
shall not contain any programming depicting rape, necrophilia, sadism, sado
masochism, bestiality, bondage, incest or programming involving or suggesting
sexual activity with, between or among, minors. Network agrees that, during each
calendar month of the Term, Network will send one (1) copy of its monthly
program schedule to Affiliate, in care of: Vice President, Programming.
(b) During the Term, Network shall provide the Service in its
entirety to Affiliate. When the phrase "in its entirety" is used in this
section, it means that each subscriber of Affiliate receiving the Service shall
receive, at all points in time, the same programming received at each such point
in time by any other subscriber to the Service, and if any subscriber to the
Service is receiving, at such point in time, programming that is different than
the programming received by any subscriber of Affiliate receiving the Service at
that point in time, Affiliate shall have the unconditional right to elect which
programming it desires to receive and utilize at any System and which
programming it will authorize for reception.
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4. DELIVERY AND DISTRIBUTION OF THE SERVICE:
(a) During the Term, Network shall, at its own expense, deliver a
signal of the Service to the earth station of each System, to each Satellite
Subscriber and to any other location in the continental United States designated
by Affiliate by transmitting such signal via a domestic satellite commonly used
for transmission of domestic cable television programming and shall, at its own
expense, fully encode the satellite signal of the Service utilizing scrambling
technology commonly used in the domestic cable television industry. Except as
otherwise provided in this Section 4(a), Affiliate shall, at its own expense,
furnish an earth station and all other facilities necessary for the receipt of
such satellite transmission and the delivery of such signal to the Service Cable
Subscribers and PPV Cable Subscribers (each as defined below). In the event
Network either (i) changes the satellite to which the Service is transmitted, to
a satellite not susceptible to viewing by a System's or Systems' then-existing
earth station equipment, or (ii) changes the technology used by Network to
encrypt the Service, to a technology not compatible with a System's or Systems'
then existing descrambling equipment, then Affiliate shall have the right to
delete from Schedule 1 of this Agreement, immediately, any such System or
Systems, and to discontinue carriage of the Service on any such System or
Systems, provided that this termination right shall not apply to any System or
Systems if, (1) Network agrees, unconditionally, to reimburse such System or
Systems, as the case may be, (A) for the cost of acquiring and installing new
equipment necessary to descramble the signal of the Service, and/or (B) for the
cost of acquiring and installing equipment reasonably necessary for such System
or Systems to receive the Service from such new satellite; (2) physical space
exists at the then-existing headend or earth station site to accommodate the
necessary equipment; and (3) current zoning and other restrictions permit such
additional equipment.
(b) Network shall provide to each System distributing the Service
and to each Satellite Subscriber a video and audio signal of a technical quality
equivalent to the greater of the following: (i) comparable to the technical
quality of audio and video signals delivered by other television programming
services; or (ii) the technical standards set forth in Exhibit C hereof. If, at
any time during the Term, Network converts to a digital format, Network and
Affiliate shall negotiate in good faith to agree upon replacement specifications
for Exhibit C; provided, however, that the technical quality of the video and
audio signal under the replacement specifications shall not be of a lesser
technical quality than the video and audio signal quality of the Service as of
the month immediately preceding the conversion to digital technology. Each
System will deliver a principal video and audio signal of the Service to its
Service Cable Subscribers and PPV Cable Subscribers of a technical quality
comparable to other cable television programming services, but in no event
higher than the technical quality provided by Network.
(c) The Systems, if any, may distribute the Service as a fully
pre-emptible service. Network agrees that Affiliate will have complete authority
to control and to designate the channel(s) over which the Service is to be
carried on each System.
4
(d) Each System retains and reserves any and all rights in and to
all signal distribution capacity contained within the bandwidth of the Service
as received at each System, including, without limitation, the vertical blanking
interval and audio subcarriers (and any other portions of the bandwidth that may
be created as a result of the conversion of the signal of the Service to a
digital format). Network shall not use any portion of the bandwidth other than
as provided herein without the prior written consent of Affiliate. Nothing
herein shall preclude Affiliate from exercising and exploiting such rights by
any means and in any locations freely and without restriction; provided,
however, that any such use by Affiliate or the Systems shall not degrade, or
otherwise interfere with, the picture quality of the Service or the audio
portion of the Service signal which is the principal audio carriage frequency of
the Service.
(e) Each System or other distribution facility or enterprise may
offer the Service, (i) as a Subscription (as defined below) service, and/or (ii)
as a PPV (as defined below) service.
(f) In each of the Systems, Affiliate shall employ reasonable
security measures to prevent pirating, theft or unauthorized exhibition of the
Service, or any portion thereof, or of any advertising or promotional materials.
Except as provided in Section 4(g) below, neither Affiliate, nor any affiliate
of Affiliate, shall authorize others to copy, tape or otherwise reproduce any
part of the Service without Network's prior written authorization and shall take
reasonable and practical security measures to prevent the unauthorized or
otherwise unlawful copying, taping or other reproduction of the Service, by
others, through the facilities of any System. Affiliate shall not be responsible
for home taping by anyone viewing the Service. Network acknowledges that this
Section 4(f) does not restrict Affiliate's practice of (i) connecting its
subscribers' videotape recorders, VCRs or other devices susceptible to use for
home duplication of video programming to the facilities of a System; or (ii)
promoting home taping of the Service by subscribers.
(g) Affiliate and any System shall have the right, at their own
expense, to make taped copies of any transmissions of the Service programming,
which taped programming may be used by such System for one or more of the
purposes described in Section 4(e) above, for exhibition and sale at times other
than at the times of original satellite transmission by Network.
(h) Network hereby grants Affiliate the right to receive the signal
of the Service, to digitize, compress, modify, replace or otherwise manipulate
the signal, and to transmit the signal as so altered (the "Altered Signal") to a
satellite or to a central location for redistribution to terrestrial or other
reception sites capable of receiving and utilizing the Altered Signal. Network
hereby grants Affiliate the right to deliver the Altered Signal for the uses set
forth in Section 1(a) of this Agreement, provided that no such alteration,
transmission, redistribution, reception or other use will cause a change in a
viewer's perception of the principal video or principal audio presentation of
the Service. Furthermore, Network shall not change the signal of the Service in
such a way as to technically or technologically defeat, or otherwise interfere
with, Affiliate's rights under this Section 4(h).
5
5. FEES:
(a) In consideration of the terms and conditions set forth herein,
Affiliate shall pay the Fees set forth below. Each of the four categories of
Fees defined below (PPV Satellite Fees, Service Satellite Fees, PPV Cable Fees
and Service Cable Fees) shall be calculated, stated and reported separately. As
used herein, the following terms will have the following meanings:
(i) "PPV Satellite Subscriber" means someone who is both a
Satellite Subscriber and who utilizes the Service as a PPV service by making a
purchase through Affiliate or an affiliate of Affiliate. "PPV Satellite Fees"
are those Fees payable by Affiliate to Network in connection with sales of the
Service to PPV Satellite Subscribers.
(ii) "Service Satellite Subscriber" means someone who is both
a Satellite Subscriber and a Service Subscriber (as defined below) who utilizes
the Service as a Subscription service. "Service Satellite Fees" are those Fees
payable by Affiliate to Network in connection with sales of the Service to
Service Satellite Subscribers.
(iii) "PPV Cable Subscriber" means someone who is provided the
Service by Affiliate or an affiliate of Affiliate hereunder, who utilizes the
Service as a PPV service and who receives the Service by means other than
Satellite. "PPV Cable Fees" are those Fees payable by Affiliate to Network in
connection with sales of the Service to PPV Cable Subscribers.
(iv) "Service Cable Subscriber" means someone who both
receives the Service by means other than Satellite and is a Service Subscriber
and who utilizes the Service as a Subscription service. "Service Cable Fees" are
those Fees payable by Affiliate to Network in connection with sales of the
Service to Service Cable Subscribers.
(v) "Fees" means PPV Satellite Fees, Service Satellite Fees,
PPV Cable Fees and Service Cable Fees (collectively) payable by Affiliate to
Network during the Initial Term. Fees payable by Affiliate to Network during a
Renewal Term are referred to herein as Renewal Fees.
(vi) "Pay-per-view" or "PPV" means the authorization of a PPV
Satellite Subscriber or PPV Cable Subscriber to receive at least a single motion
picture, event or other program included in the Service for a fee separate and
distinct from fees paid by such PPV Satellite Subscriber or PPV Cable Subscriber
for other television or audio services. Viewing segments may include, but are
not limited to, pay-per-view, pay-per-night, pay-per-weekend, or any other
continuous segment of seventy-two (72) or fewer consecutive hours of the Service
received on a pay-per-view basis.
(vii) "Subscription" means the authorization of a Service
Cable Subscriber or Service Satellite Subscriber to receive the Service as a
monthly
6
subscription service either on an a la carte basis or as part of a package of
other services, or both.
(viii) "Service Subscriber" means each customer to whom
Affiliate or an affiliate of Affiliate knowingly provides the Service directly,
through an affiliate, or, as permitted by this Agreement, through a third party,
as a Subscription service.
(ix) "Special Event" means an occasional, high-profile adult
comedy or sports event or program (other than a motion picture or other typical
adult dramatic or comedy program) produced originally for the Service,
premiering on the Service, and first appearing on the Service no more than one
(1) year from its completion date. Network may not include more than one Special
Event on the Service in any six (6) month period (except that, with the consent
of Affiliate (such consent to be in Affiliate's sole and exclusive discretion),
Network may include a Special Event on the Service more frequently than once in
a six (6) month period), and no adult comedy, sports event or program event may
be treated as a Special Event for more than twelve (12) exhibitions on the
Service. Further, no adult comedy, sports event or program may be treated as a
Special Event unless Network provides Affiliate with at least seventy-five (75)
days prior written notice of the premiere on the Service of such Special Event.
(x) "Addressable Subscriber" means a PPV Cable Subscriber
whose television set is connected on the PPV Cable Subscriber's premises, or by
interdiction, to equipment, issued by Affiliate, that allows the channel on
which the Service is received to be turned on or off (i.e., "authorized" or
"deauthorized") from a central location, controlled by the operator of the
System.
(xi) "Gross Receipts" means the amount billed for the Service
to a PPV Cable Subscriber, PPV Satellite Subscriber, Service Satellite
Subscriber or Service Cable Subscriber (as the case may be) less applicable
taxes, franchise fees or other charges, levies or assessments imposed by
governmental entities or agencies thereof attributable to the purchase or sale
of the Service or any portion thereof.
(xii) "Network Share" means that portion of the Gross Receipts
which is payable by Affiliate as Fees or Renewal Fees to Network pursuant to
this Agreement.
(b) Subscription
(i) For each calendar month during the Term, Affiliate will
pay Network as a Service Cable Fee for each Service Cable Subscriber an amount
equal to the greater of (A) ***** or (B) ***** of the Gross Receipts
attributable to such Service Cable Subscriber. When the Service is sold to a
Service Cable Subscriber in combination with other services for a package charge
(as, for example, in a tier or in a package of a la carte or other services),
the Gross Receipts attributable to a Service Cable Subscriber for the Service
shall be equal to the total charge for the tier or package of services sold in
combination with the Service, multiplied by a fraction, the numerator of
7
which is $1.59 and the denominator of which is the numerator plus the aggregate
of the net effective rates per subscriber charged to Affiliate by each of the
other service providers of the services included in the tier or package of a la
carte or other services; provided, however, that the amounts charged to
Affiliate for each of the services in the package or tier shall not be disclosed
by Affiliate to Network but, at Network's request, in order to assure Network of
compliance with this provision, Affiliate shall make such charges and any
pertinent calculations available to a representative of KPMG Peat Marwick (which
representative is neither Network's nor Affiliate's) on a confidential basis, at
Network's cost. This provision shall survive termination or expiration of this
Agreement. Affiliate shall pay a Service Satellite Fee to Network of $7.00 per
month for each Service Satellite Subscriber regardless of whether such Service
Satellite Subscriber purchases the Service alone, as an a la carte service or as
part of a tier or package of a la carte or other services and regardless of the
Gross Receipts attributable thereto.
(ii) The number of Service Satellite Subscribers or Service
Cable Subscribers (as the case may be) for whom Affiliate shall pay each month
shall be the average of (A) the number of Service Satellite Subscribers or
Service Cable Subscribers (as the case may be) on the first day of the month,
and (B) the number of Service Satellite Subscribers or Service Cable Subscribers
(as the case may be) on the last day of the month. Service Satellite Subscribers
or Service Cable Subscribers (as the case may be) shall include each occupied
dwelling (whether in a single family or multi-unit building), hotel or motel
guest room, drilling rig, nursing home room, dormitory room or other location in
which the Service is received. If Affiliate provides the Service to multiple
dwelling complexes, including, but not limited to, apartments, hotels and
motels, on a bulk-rate basis, the number of Service Satellite Subscribers or
Service Cable Subscribers (as the case may be) attributable to each such
bulk-rate subscriber shall be equal to the total monthly retail rate charged a
complex for the Service divided by the standard monthly retail rate charged a
non-bulk rate Service Satellite Subscriber or Service Cable Subscriber (as the
case may be) for the Service in the applicable System or by the pertinent
Satellite distributor, as the case may be. The monthly number of Service
Satellite Subscribers and the monthly number of Service Cable Subscribers shall
each be calculated, stated and reported separately.
(iii) The Service Cable Fees and Service Satellite Fees
payable by Affiliate to Network hereunder shall be due and payable forty-five
(45) days after the end of the calendar month to which they relate.
(c) PPV
(i) For each customer of Affiliate who receives and pays for
one (1) complete and technically satisfactory viewing of one viewing segment of
the Service as a PPV service as a PPV Cable Subscriber, Affiliate will pay
Network a PPV Cable Fee in an amount equal to the greater of, (A) (i) ***** for
orders taken from the date of full execution hereof through November 30, 1995,
(ii) ***** for orders taken from December 1, 1995 through November 30, 1998
(iii) ***** for orders taken from December 1, 1998 through November 30, 2001 and
(iv) ***** for orders from December 1, 2001 through the end of the Initial Term,
or (B) the Network Share of the Gross
8
Receipts paid by such PPV Cable Subscriber. With respect to PPV Cable
Subscribers, "Network Share" shall equal the following percentage of the Gross
Receipts paid by each PPV Cable Subscriber: ***** percent ***** from the date of
execution of this Agreement by both parties hereof through November 30, 1995 and
***** percent ***** from December 1, 1995 through the end of the Initial Term.
For each customer of Affiliate who receives and pays for one (1) complete and
technically satisfactory viewing of one viewing segment of the Service as a PPV
service as a PPV Satellite Subscriber, Affiliate will pay Network a PPV
Satellite Fee in an amount equal to the greater of (C) (i) ***** for orders
taken from the date of full execution hereof through November 30, 1995, (ii)
***** for orders taken from December 1, 1995 through November 30, 1998, (iii)
***** for orders taken from December 1, 1998 through November 30, 2001, and (iv)
***** for orders taken from December 1, 2001 through the end of the Initial
Term, or (D) the Network Share of the Gross Receipts paid by such PPV Satellite
Subscriber. With respect to PPV Satellite Subscribers, the Network Share of the
Gross Receipts shall be *****. Notwithstanding the foregoing, each System and
each Satellite distributor shall have the right to discount the price of a PPV
viewing of the service during the first thirty (30) days after the launch of the
Service in such System or by such Satellite distributor, respectively, and
during no more than two (2) ten (10) day periods each calendar year. For orders
taken during such first thirty (30) days and during each such ten (10) day
period, Affiliate shall be required to pay to Network minimum PPV Satellite Fees
or PPV Cable Fees (as the case may be) of ***** per each complete and
technically satisfactory viewing of a viewing segment of the Service as a PPV
service, rather than the minimum PPV Satellite Fees or PPV Cable Fees specified
in either (A) or (C) of this Section 5(c)(i). Furthermore, there shall be no PPV
Satellite Fee or PPV Cable Fee (as the case may be) payable by Affiliate to
Network for any PPV viewing of the Service by a subscriber who pays for such
viewing by remitting a coupon provided by Affiliate or by an affiliate of
Affiliate to subscribers that have not ordered a PPV movie or event in the six
(6) months immediately preceding the issuance of such coupon.
(ii) In lieu of the PPV Satellite Fees or PPV Cable Fees
payable as calculated pursuant to Section 5(c)(i) above, for each PPV Satellite
Subscriber or PPV Cable Subscriber (as the case may be) who receives and pays
for one (1) complete and technically satisfactory viewing of a Special Event
included in the Service, Affiliate will pay Network a PPV Satellite Fee or PPV
Cable Fee (as the case may be) equal to the greater of (A) a minimum dollar
amount to be set by Network or (B) ***** of the Gross Receipts paid by such PPV
Satellite Subscriber or PPV Cable Subscriber (as the case may be).
Notwithstanding the above, however, any and all PPV Satellite Fees or PPV Cable
Fees paid by Affiliate to Network for any Special Event shall be subject in all
respects to Section 13(g) of this Agreement (including the minimum dollar amount
payable by Affiliate hereunder).
(iii) The PPV Cable Fees and/or PPV Satellite Fees (as the
case may be) payable by Affiliate to Network hereunder for exhibition to PPV
Cable Subscribers and PPV Satellite Subscribers (as the case may be) during a
Reporting Period (as defined below) during the Term shall be due and payable
forty-five (45) days after the end of the calendar month which includes the last
day of the Reporting Period. (The term "Reporting Period" shall mean the days
from the end of each System's or Satellite
9
distributor's last monthly reporting period (which date may vary in each System
or for each Satellite distributor from the 20th of the calendar month to the
last day of the calendar month) to the end of the System's or Satellite
distributor's then current monthly reporting period.) Affiliate shall have the
right, however, to make credit adjustments to any month's payment in an amount
equal to the portion of a previous month's PPV Cable Fees and/or PPV Satellite
Fees which represents an overpayment.
(d) Addressable Subscribers Volume Discount
(i) On the first day of each calendar quarter of the Term, for
orders taken during such calendar quarter of the Term, the Network Share with
respect to PPV Cable Subscribers as determined above may be reduced below the
Network Share otherwise stated above based upon the number of Addressable
Subscribers in all of the Systems on the first day of such calendar quarter, as
follows:
If the Number of Addressable Subscribers in Then, the Network Share for each Month of
all Systems on the First Day of a Calendar such Calendar Quarter Hereunder Shall be
Quarter is: Reduced By the Following Percentage of the
Gross Receipts:
2,000,000 - 2,999,999 *****
3,000,000 - 3,999,999 *****
4,000,000 - 4,999,999 *****
5,000,000 - 5,999,999 *****
6,000,000 - 6,999,999 *****
(e) Each System shall have the right to expend funds for a market or
community research survey regarding adult, and other types of, television
programming. Any System which launches the Service after undertaking such a
survey shall be fully reimbursed for the costs of such survey from the Gross
Receipts received by the System from Subscription and Pay-Per-View sales of the
Service, or portions thereof, before any such system incurs an obligation to pay
Fees hereunder. Affiliate shall submit to Network complete documentation of the
costs incurred by each such System for such survey. Network shall have the right
(in accordance with Section 6(b)) to inspect and audit the books and records of
any System which has claimed reimbursement of such survey costs, but only those
books and records relating to such survey.
(f) Any amounts payable by Network to Affiliate pursuant to Section
7 hereof shall be due and payable forty-five (45) days after the end of the
pertinent calendar month during the Term.
(g) Notwithstanding any other provision of this Agreement to the
contrary, no Fees shall be payable for PPV Satellite Subscribers, PPV Cable
Subscribers, Service Satellite Subscribers or Service Cable Subscribers if they
are (i) employees of Affiliate or any affiliated party who are not charged for
the Service; or (ii) public officials, administrative personnel or public
buildings that are not charged for the Service; or (iii) subscribers who have
not paid their cable television xxxx for a given
10
month and are subsequently disconnected; or (iv) subscribers who, in the good
faith exercise of reasonable judgment by an employee either of Affiliate or of
an affiliate of Affiliate, are excused from paying for the Service either
because such subscriber claims that the Service was not properly ordered or
because such subscriber claims that a complete and technically satisfactory
viewing of the Service was not received.
(h) Network shall have the right to renegotiate the PPV Satellite
Fees, PPV Cable Fees, Service Satellite Fees and Service Cable Fees applicable
to any Renewal Term upon written notice to Affiliate at least twelve (12) months
prior to the end of the Initial Term or Renewal Term immediately preceding such
Renewal Term. Any such revised Fees ("Renewal Fees") shall be effective upon the
commencement of such Renewal Term. Said Renewal Fees shall be effective for the
five (5) year Renewal Term.
(i) The PPV Satellite Fees, PPV Cable Fees, Service Satellite Fees
and Service Cable Fees and any Renewal Fees payable by Affiliate to Network
hereunder, and any amounts payable by Network to Affiliate or any System
pursuant to Sections 5 or 7 hereof, that are unpaid after they are due and
payable shall accrue interest at one and one-half percent (1-1/2%) per month or
the highest lawful rate, whichever is less, from the due date until payment is
received by Network, a System or Affiliate, (as the case may be). Each
delinquent party shall be liable to the owed party for all reasonable costs and
expenses (including, without limitation, reasonable counsel fees, disbursements,
and administrative or court costs) in connection with the collection of any
overdue amounts.
6. REPORTS:
(a) Affiliate shall send to Network, along with the payments
described in Section 5 hereof, statements on a form mutually acceptable to
Affiliate and Network. Each statement shall set forth information necessary to
the calculation of the PPV Satellite Fees, PPV Cable Fees, Service Satellite
Fees and Service Cable Fees paid. Each of the four categories of Fees shall be
calculated, stated and reported separately.
(i) The statement accompanying each month's Service Satellite
Fees and Service Cable Fees shall include the number of Service Cable
Subscribers and Service Satellite Subscribers as of the first day of the month
and the number as of the last day of the month and the average thereof, and such
other information as may be necessary for the calculation of the Service
Satellite Fees and Service Cable Fees paid.
(ii) The statement accompanying each month's PPV Satellite
Fees and PPV Cable Fees shall include the number of PPV Satellite Subscribers
and PPV Cable Subscribers; the Gross Receipts paid by such PPV Satellite
Subscribers and PPV Cable Subscribers; the aggregate number of Addressable
Subscribers as of the first day of that calendar quarter in all Systems; and
such other information as may be necessary for the calculation of the PPV
Satellite Fees and PPV Cable Fees paid.
11
(b) Network shall send to Affiliate, not later than forty-five (45)
days after the end of each calendar month for which payment pursuant to Section
7 hereof is due, a statement on a form mutually acceptable to Affiliate and
Network which sets forth all pertinent information to compute the amount due to
Affiliate for such calendar month. Network shall deliver such statement to
Affiliate prior to or along with the amount payable to Affiliate as provided in
this Agreement.
(c) Affiliate and Network each agree to keep and maintain accurate
books and records of all matters directly relating to this Agreement in
accordance with generally accepted accounting principles. During the Term and
for one (1) year after the termination of this Agreement, such books and records
of each party shall be available to the other party for inspection and audit,
during normal business hours, at the inspecting party's expense, at the other
party's offices upon reasonable notice to the other party. Each party's right to
perform such audit shall be limited to once in any twelve (12) month period
during the Term and shall be limited to an audit with respect to amounts to be
paid in the then-current and prior calendar year only. If either party audits
the other party's books hereunder, the inspecting party must make any claim
against the other party within the earlier of, three (3) months after the
inspecting party or the inspecting party's representative leaves the other
party's offices, or twenty-four (24) months after the close of the earliest
month which is the subject of such claim. If a claim is not made within such
time, then the Fees and reports shall be deemed final and uncontestable, and the
inspecting party will be deemed to have waived its right to collect any
shortfalls from the other party for the period(s) audited. Each System which
takes a credit against Gross Receipts for repayment of survey costs pursuant to
Section 5(c) hereof must comply fully with Section 5(c) and this Section 6(c).
7. PROMOTION:
(a) Network agrees to spend marketing monies within the Operating
Areas of the Systems in an amount relative to all marketing monies spent by
Network that is equal to or greater than the ratio of the number of Affiliate's
cable television subscribers in the Systems to the total number of Network's
cable television subscribers, including Affiliate's cable television
subscribers. Specifically, but not in limitation of the foregoing, Network shall
do the following:
(i) No later than fifty (50) days prior to the first day of
each calendar month, Network shall make available to Affiliate its monthly
program schedule for such month and such trailers and other publicity materials
as Network may have available to be used for advertising and publicity for such
month. Affiliate may, at its sole expense, make copies of such materials and
make such copies available solely for use by the Systems.
(ii) Commencing upon launch of the Service on any System
and/or the commencement of the sale of the Service to PPV Subscribers or Service
Subscribers (as the case may be), and throughout the Term, Network shall
contribute ***** per copy for any catalogue or guide utilized by the Systems or
by any Satellite distributor which includes listings for the Service and at
least one (1), 1/4 page promotion
12
for the Service, whether or not a subscriber receives such catalogue or guide
without charge. Each System or distributor of the Service to Satellite
Subscribers shall be entitled to claim the contribution provided for in this
Section 7(a)(ii) by providing Network with appropriate documentation verifying
the content and quantity of guides or catalogues for which such contribution is
sought, no more often than once per month. Network shall remit such
contributions to the appropriate Systems or Satellite distributor later than
forty-five (45) days after receipt of such appropriate documentation.
(b) Network may not, without Affiliate's prior written consent,
undertake marketing tests or surveys, rating polls or any other research in the
Systems in connection with the Service. With respect to any test, surveys or
research which apply to a System or Systems for which Network seeks Affiliate's
consent, Network shall notify Affiliate of the nature and scope of each such
project and, upon Affiliate's written consent to such project (which consent may
be withheld in Affiliate's sole and absolute discretion), Affiliate and/or the
pertinent affiliate of Affiliate shall, to the extent permitted by applicable
law and company policy, cooperate in such research by rendering such assistance
as Network may reasonably request and which Affiliate or such affiliate of
Affiliate can reasonably provide, the cost of which assistance shall be borne by
Network. Network shall keep the results of all research relating to a System or
Systems confidential under the provisions of Section 12 hereof and shall retain
the results of such research in an aggregate form only, which does not identify
any subscriber, cable television system or cable television system operator.
(c) Affiliate acknowledges that the names and marks "SPICE" (and the
names of certain programs which appear in the Service) are the exclusive
property of Network and its suppliers and that Affiliate has not and will not
acquire any proprietary rights therein by reason of this Agreement. Network
shall have the right to approve any of Affiliate's mentioning or using of such
names or marks and publicity about Network or the products or programming
included in the Service. Uses of such names and marks in routine promotional
materials or presentations such as program guides, program listings, xxxx
stuffers and video promotions, including, but not limited to, xxxxxx channels
and cross-channel promotions, shall be deemed approved unless Network
specifically notifies Affiliate to the contrary prior to such use by Affiliate.
Affiliate shall, however, comply with all of Network's clear, unambiguous and
reasonable advance written instructions regarding the content or use of
advertising or promotional materials provided to Affiliate by Network prior to
Affiliate's use of such materials; provided, however, that, Affiliate reserves
the right in its sole and absolute discretion to use or decline to use any
advertising or promotional material provided by Network.
(d) Network agrees that in the event Network does any direct on-air
marketing and sale of products or services, including, but not limited to, sales
through "800", "900" or "976" telephone services, Network will:
(i) provide Affiliate with lists of the names of respondents
from within the zip code areas of the Systems who respond to such direct on-air
marketing and sales, for use by Affiliate or the Systems, and
13
(ii) Network shall *****.
(e) Network and Affiliate hereby acknowledge that (i) their
interests are often in direct conflict, (ii) their relationship is often
adversarial, and (iii) Network could cause Affiliate significant harm by the
nature of Network's communications to Affiliate's subscribers or to the
governmental entities or to franchise or licensing authorities whose opinions
and actions could adversely affect cable television systems affiliated with
Affiliate. Therefore, Network shall not initiate communications with any
subscribers or franchise or licensing authorities or governmental entities in
the Operating Area of any cable television system which meets the System
Qualifications of Exhibit A without Affiliate's prior written approval, and
under no circumstances shall Network engage in any communications with any
subscribers or franchise or licensing authority or governmental entity in the
Operating Area of any of such systems which would, or could, adversely interfere
with the relationship between Affiliate or any affiliate of Affiliate, and
subscribers, or the relationship between Affiliate or any affiliate of Affiliate
and any governmental entity or community in any such Operating Area. This
provision shall not apply, (x) to any national advertising, (y) to any
proceeding before any judicial body, or (z) to any communications with Congress
or with any other branch or agency of the federal government. This Section 7(e)
shall survive the expiration or termination of this Agreement (regardless of the
reason for such expiration or termination) for a period of two (2) years.
(f) Network may not promote any other cable programming service
which is affiliated with Network on the Service without the prior written
consent of Affiliate.
(g) Network shall not provide to any third party any telephone
number of, or any information about (whether personally identifiable or
otherwise), any subscriber to any cable television system which meets the System
Qualifications of Exhibit A.
8. WARRANTIES AND INDEMNITIES:
(a) Network represents and warrants to Affiliate that (i) Network is
a corporation duly organized and validly existing under the laws of the State of
New York; (ii) Network has the power and authority to enter into this Agreement
and to fully perform its obligations hereunder; (iii) Network is under no
contractual or other legal obligation which shall in any way interfere with its
full, prompt and complete performance hereunder; (iv) the individual executing
this Agreement on behalf of Network has the authority to do so; (v) Network is
in compliance with all laws, rules, regulations, and court and administrative
decrees to which it is subject including, without limitation, all applicable
rules and regulations of the Federal Communications Commission (the "FCC"); (vi)
Network has, or will have acquired at the pertinent time all or part of the
Service is made available to Affiliate, good title to, and/or each and every
property right (whether relative to tangible or intangible property), or
license, usage or other right necessary or appropriate whatsoever to effectuate
the acts or performances
14
contemplated by, or satisfy the obligations imposed on it pursuant to, this
Agreement, including all permits, rights, licenses and approvals necessary,
required or appropriate for any and all performances through to the premises and
to the listeners frequenting the premises of Service Cable Subscribers, Service
Satellite Subscribers, PPV Cable Subscribers and PPV Satellite Subscribers;
(vii) neither the Service, any program related thereto, or any component thereof
is subject to, or the subject of, any lien, encumbrance, charge, lis pendens,
administrative proceeding, governmental investigation, or litigation pending or
threatened; and (viii) the obligations created by this Agreement, insofar as
they purport to be binding on Network, constitute legal, valid and binding
obligations of Network enforceable in accordance with their terms.
(b) Affiliate represents and warrants to Network that (i) Affiliate
is a corporation duly organized and validly existing under the laws of the State
of Delaware; (ii) Affiliate has the power and authority to enter into this
Agreement and to fully perform its obligations hereunder; (iii) Affiliate is
under no contractual or other legal obligation which shall in any way interfere
with its full, prompt and complete performance hereunder; and (iv) the
individual executing this Agreement on behalf of Affiliate has the authority to
do so.
(c) Network represents and warrants to Affiliate that neither the
Service nor any material provided to Affiliate by Network in connection
therewith including, without limitation, any advertising or promotional
materials, will contain any material which will libel, slander or defame any
person, and the Service and such additional materials provided to Affiliate will
not, when exhibited, transmitted or otherwise exploited in accordance herewith,
violate, infringe upon or give rise to any adverse claim with respect to any
contract right, common law right or any other right of any party (including,
without limitation, any copyright, trademark, literary or dramatic right, music
synchronization right, right of privacy or publicity or music performance right)
or violate any law, or (when exhibited by Affiliate as contemplated hereby)
cause Affiliate or any affiliate of Affiliate to violate any law.
(d) Network represents, covenants, and warrants that the Service
complies, and will continue to comply, in all respects with the commercial
matter limitations of the Children's Television Act of 1990, Public Law 101-437
(October 18, 1990) and the regulations of the FCC promulgated thereunder as the
same may apply to cable television systems and cable operators, including 47
C.F.R. ss. 76.225, 76.305, and as the same may from time-to-time be amended
("Children's Television Regulations"); provided further, that Network
represents, covenants and warrants that it will provide to Affiliate all records
demonstrating such compliance under the Children's Television Regulations as are
necessary for Affiliate to timely demonstrate its compliance as a cable operator
with the commercial matter limitations and record keeping requirements of the
Children's Television Regulations. Network further represents, covenants and
warrants that the Service complies and will continue to comply, with all
origination cablecasting regulations of the FCC, including but not limited to 47
C.F.R. xx.xx. 76.205 - 76.221 (political equal time, personal attack, lotteries
and sponsorship identification), as the same may from time to time be amended
("Origination Cablecasting Requirements"), and that Network shall provide
Affiliate all necessary documentation required thereunder for
15
Affiliate to timely meet its documentation and public file requirements under
the Origination Cablecasting Requirements. In the event that any other
programming offered by the Service shall be among the kind of programming which
is regulated by federal, state or local law, as the same may apply to pay or
cable television systems and operators, then Network shall provide to Affiliate
all statements, records or other documents reasonably necessary for Affiliate to
demonstrate timely compliance as an operator or distributor with such laws and
regulations.
(e) Affiliate and Network shall each indemnify, defend and forever
hold harmless the other, the other's affiliated companies and each of the
other's and the other's affiliated companies' respective officers, directors,
employees, partners and agents against and from any and all losses, liabilities,
claims, costs, damages and expenses (including, without limitation, fines,
forfeitures, attorneys' fees, disbursements and administrative or court costs)
arising out of any breach by it of any term of this Agreement or any warranty,
covenant or representation.
(f) Without limiting the provisions of Section 8(e) or Section 8(g)
hereof, Network will indemnify, defend and forever hold Affiliate and
Affiliate's affiliated companies, and each of Affiliate's and Affiliate's
affiliated companies' respective officers, directors, employees, partners and
agents, harmless from and against any and all losses, liabilities, claims,
costs, damages and expenses (including, without limitation, fines, forfeitures,
attorneys' fees, disbursements and administrative or court costs) arising out of
the content of the Service or the use and delivery of the Service under this
Agreement (including, but not limited to, sponsorship, promotional and
advertising spots, any background music and anything else inserted by any party
other than Affiliate), including, without limitation, any losses, liabilities,
claims, costs, damages and expenses based upon any lien, encumbrance, charge,
lis pendens, administrative proceeding, government investigation or litigation
relating to the Service, any program included therein or any component thereof,
or based upon alleged or proven libel, slander, defamation, invasion of the
right of privacy or the right of publicity, or violation or infringement of
copyright (including music performance rights for any and all performances
through to subscribers), literary or music synchronization rights, obscenity or
any other form or forms of speech (whether or not protected by the Constitution
of the United States or any State) or otherwise arising out of the content of
the Service.
(g) Without limiting the provisions of Section 8(e) or Section 8(f)
hereof, Network shall indemnify and hold harmless Affiliate, and Affiliate's
affiliated companies, and each of Affiliate' and Affiliate's affiliated
companies' respective officers, directors, employees, partners and agents, from
and against any and all losses, liabilities, claims, costs, damages and expenses
(including, without limitation, fines, forfeitures, attorneys' fees,
disbursements, court or administrative costs) or any other losses or liabilities
of whatever nature, arising from any violation by Network of the Origination
Cablecasting Requirements, including required documentation and public file
requirements, or of the Children's Television Regulations, either with respect
to the Service or to any of the compliance demonstration or record keeping
requirements of the Children's Television Regulations.
16
(h) In connection with any indemnification provided for in this
Section 8, each party shall so indemnify the other only if such other party
claiming indemnity shall give the indemnifying party prompt notice of any claim
or litigation to which its indemnity applies; it being agreed that the
indemnifying party shall have the right to assume the full defense of any or all
negotiations, claims or litigation to which its indemnity applies. The
indemnified party will cooperate fully (at the cost of the indemnifying party)
with the indemnifying party in such defense and in the settlement of such claim
or litigation, and the indemnified party shall make no compromise or settlement
of any such claim without the prior written consent of the indemnifying party.
The settlement of any claim or action by the indemnified party without the prior
written consent of the indemnifying party shall release the indemnifying party
from its obligations hereunder with respect to such claim or action so settled.
(i) Network represents, warrants and covenants that it has obtained
general liability insurance covering the Service and all elements thereof from a
nationally recognized insurance carrier and in accordance with industry
standards; that such insurance shall remain in full force and effect throughout
the Term; that Affiliate shall be named as an additional insured on such policy;
and Network that will provide Affiliate with documentation to such effect upon
the execution hereof.
(j) The representations, warranties and indemnities contained in
this Section 8 shall continue throughout the Term and the indemnities shall
survive the expiration or termination of this Agreement regardless of the reason
for such expiration or termination.
9. EARLY TERMINATION RIGHTS:
(a) In addition to Network's other rights at law or in equity or
pursuant to other provisions of this Agreement, Network may, by so notifying
Affiliate, terminate this Agreement: (i) if Affiliate is in material breach of
this Agreement, provided, however, that if such breach is of the type that is
curable, then Network shall not exercise its termination or other rights at law
or in equity hereunder unless Network has, by so notifying Affiliate, given
Affiliate at least thirty (30) days to fully cure such material breach and to
demonstrate to Network that such material breach has been cured, and provided
further, that if such breach is confined to a System or to a limited number of
Systems, Network shall have the right to terminate this Agreement only as to
such System or Systems; or (ii) if Affiliate has filed a petition in bankruptcy,
is insolvent, or has sought relief under any law related to Affiliate's
financial condition or its ability to meet its payment obligations; or (iii) if
any involuntary petition in bankruptcy has been filed against Affiliate, or any
relief under any such law has been sought by any creditor(s) of Affiliate,
unless such involuntary petition is dismissed, or such relief is denied, within
thirty (30) days after it has been filed or sought.
(b) In addition to Affiliate's other rights at law or in equity or
pursuant to other provisions of this Agreement, and in addition to any other
right to terminate provided hereunder, Affiliate may, by so notifying Network,
terminate this Agreement: (i) if Network is in material breach of this
Agreement, provided, however, if
17
such breach is of the type that is curable, then Affiliate shall not exercise
its termination or other rights at law or in equity hereunder unless Affiliate
has, by so notifying Network, given Network at least thirty (30) days from the
time such notice is sent, to fully cure such material breach and to demonstrate
to Affiliate that such material breach has been cured; or (ii) if Network has
filed a petition in bankruptcy, is insolvent or has sought relief under any law
related to Network's financial condition or its ability to meet its payment
obligations; or (iii) if any involuntary petition in bankruptcy has been filed
against Network, or any relief under any such law has been sought by any
creditor(s) of Network, unless such involuntary petition is dismissed, or such
relief is denied, within thirty (30) days after it has been filed or sought; or
(iv) on at least fifteen (15) days' notice in the event of any Force Majeure
provided for in Section 10 of this Agreement which continues for a continuous
period of thirty (30) days.
10. FORCE MAJEURE:
Except as herein provided to the contrary, neither Affiliate nor Network
shall have any rights against the other party hereto for the non-operation of
facilities or the non-furnishing of the Service if such non-operation or
non-furnishing is due to an act of God; inevitable accident; fire; lockout;
strike, or other labor dispute; riot or civil commotion; flood; hurricane;
tornado; earthquake; war; act of government or governmental instrumentality
(whether federal, state or local); failure of performance by a common carrier;
failure in whole or in part of technical facilities; or other cause (financial
inability excepted) beyond such party's reasonable control. With respect to
monthly subscriptions to the Service, credit will be given to Affiliate,
however, on that portion of the Service which is affected by any interruption
during any month equal to the product of (x) the Fees which would be due for
such month, assuming no interruption of Service during such month, multiplied by
(y) a fraction, the numerator of which is the total number of hours of
interruption of the Service during such month and the denominator of which is
the total number of hours of the Service which would have been provided during
such month absent such interruption (s), provided, however, that such credit
shall be given to Affiliate only if Affiliate shall pass on such credit to its
Service Subscribers.
11. NOTICES:
Any notice or report given under this Agreement shall be in writing, shall
be sent postage prepaid by registered or certified mail return receipt requested
or by hand or messenger delivery, or by Federal Express or similar overnight
delivery service, or by facsimile transmission, to the other party, at the
following address (unless either party at any time or times designates another
address for itself by notifying the other party thereof by certified mail, in
which case all notices to such party thereafter shall be given at its most
recently so designated address):
To Network: 000 Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: President
18
To Affiliate: Terrace Tower II
0000 XXX Xxxxxxx
Xxxxxxxxx, Xxxxxxxx 00000
Attention: President
With copies to: - Vice President, Programming
- Vice President, Pay Per View
- Corporate Counsel, Business Affairs
Notice or report given by personal delivery shall be deemed given on
delivery. Notice or report given by mail shall be deemed given on the earlier to
occur of actual receipt thereof or on the fifth day following mailing thereof in
accordance with the notice requirements of this Section 11. Notice or report
given by Federal Express or similar overnight delivery service shall be deemed
given on the next business day following delivery of the notice or report to
such service with instructions for overnight delivery. Notice or report given by
facsimile transmission shall be deemed given on the day of transmission if a
business day, or on the next business day after the day of transmission if not
transmitted on a business day.
12. CONFIDENTIALITY: PRESS RELEASES:
Neither Affiliate nor Network shall disclose (whether orally or in
writing, or by press release or otherwise) to any third party (other than each
party's respective officers, directors and employees, in their capacity as such,
and their respective auditors or attorneys, provided, however, that the
disclosing party agrees to be responsible for any breach of the provisions of
this Section 12 by such officers, directors or employees, auditors or
attorneys), any information with respect to the terms and provisions of this
Agreement and neither party hereto shall disclose any information obtained in
any inspection and/or audit of the other party's books and records, except: (i)
to the extent necessary (but redacted to the greatest extent possible) to comply
with law or the valid order of an administrative agency or a court of competent
jurisdiction, in which event the party making such disclosure shall so notify
the other as promptly as practicable (and, if possible, prior to making such
disclosure) and shall seek confidential treatment of such information; (ii) as
part of its normal reporting or review procedure to its parent company, its
auditors or its attorneys, provided, however, that the disclosing party agrees
to be responsible for any breach of the provisions of this Section 12 by such
parent company, its auditors or attorneys; (iii) in order to enforce its rights
or perform its obligations pursuant to this Agreement; and (iv) if mutually
agreed by Affiliate and Network, in advance of such disclosure, in writing. In
addition, Network shall not use or disclose information (whether personally
identifiable information or not) to any third party regarding Affiliate's or any
affiliate of Affiliate's cable television subscribers or Satellite subscribers
and shall not engage in any direct mailing or telephone solicitation, for any
purpose, to cable television subscribers or Satellite subscribers of Affiliate
or any affiliate of Affiliate. This Section 12 shall survive the expiration or
termination of this Agreement regardless of the reason for such expiration or
termination.
19
13. MISCELLANEOUS:
(a) Assignment; Binding Effect; Reorganization. This Agreement,
including both its obligations and benefits, shall redound to the benefit of,
and be binding on the respective transferees and successors of, the parties,
except that neither this Agreement nor either party's rights or obligations
hereunder shall be assigned or transferred by either party without the prior
written consent of the other party; provided, however, no consent shall be
necessary in the event of an assignment to a successor entity resulting from a
merger, acquisition or consolidation by either party or assignment to an entity
under common control, controlled by or in control of either party.
Notwithstanding the foregoing, Network shall give Affiliate thirty (30) days'
prior written notice of a change in the control or ownership of the Service or
Network. In such event, this Agreement may, in the sole discretion of Affiliate,
be terminated. For purposes of this paragraph, the term "control" means the
power to direct the management and policies of an entity, directly or
indirectly, whether through the ownership of voting securities, by contract or
otherwise.
(b) Service Combinations. In the event that the Service is merged
with, or Network acquires control of, or Network is acquired by or merges with,
or control of the Network is acquired by, or the Service is acquired by, any
other programming service, if Affiliate has (at the time of such merger or
acquisition) an affiliation agreement with any such other service or entity,
Affiliate shall have the option to choose to continue carriage of the Service
and of such other service, as the case may be, under either this Agreement or
under such other affiliation agreement. If Affiliate does not have an
affiliation agreement with such other service or entity, Affiliate shall have
the option to elect to have this Agreement continue to apply to the Service
after such merger or acquisition, or to any surviving service after such merger
or acquisition.
(c) Taxes. Affiliate shall be responsible to pay all income, sales,
use and other taxes arising out of Affiliate's exhibition of the Service by the
Systems, Affiliate's storage, possession or use of any advertising or
promotional materials and/or any personal property or other taxes imposed,
assessed or levied against Affiliate by any governmental authority. Network
shall be responsible to pay all income, sales, use and other taxes arising out
of its provision of the Service to Affiliate and the Systems, Network's storage,
possession or use of its advertising or promotional materials and/or any
personal property or other taxes imposed, assessed or levied by any governmental
authority.
(d) Entire Agreement; Amendments; Waivers. This Agreement contains
the entire understanding of the parties and supersedes and abrogates all
contemporaneous and prior understandings of the parties, whether written or
oral, relating to the subject matter hereof. This Agreement may not be modified
except in writing executed by both parties hereto. Any waiver of any provision
of, or right included in, this Agreement must be in writing and signed by the
party whose rights are being waived and no waiver by either Affiliate or Network
of any breach of any provision hereof shall be or be deemed to be a waiver of
any preceding or subsequent breach of the same or any other provision of this
Agreement.
20
(e) Governing Law. The obligations of Affiliate and Network under
this Agreement are subject to all applicable federal, state and local laws,
rules and regulations (including but not limited to the Communications Act of
1934, as amended from time to time, and the rules and regulations of the FCC
promulgated thereunder) and this Agreement and all matters or issues collateral
thereto shall be governed by the laws of the State of New York (except with
respect to issues regarding perpetuity, which shall be governed by the laws of
the State of Colorado), without regard to choice of law rules.
(f) Relationship. Neither Affiliate nor Network shall be, or hold
itself out as, the agent of the other under this Agreement. No subscriber of
Affiliate shall be deemed to have any privity of contract or direct contractual
or other relationship with Network by virtue of this Agreement or Network's
delivery of the Service to Affiliate hereunder. Likewise, no supplier of
advertising or programming or anything else included in the Service by Network
shall be deemed to have any privity of contract or direct contractual or other
relationship with Affiliate by virtue of this Agreement or Affiliate's carriage
of the Service hereunder. Nothing contained herein shall be deemed to create,
and the parties do not intend to create, any relationship of partners, joint
venturers or agents, as between Affiliate and Network, and neither party is
authorized to or shall act toward third parties or the public in any manner
which would indicate any such relationship with the other. Network disclaims any
present or future right, interest or estate in or to the transmission facilities
of Affiliate or the parent, subsidiaries, partnerships or joint venturers
controlling the Systems on which the Service is transmitted, such disclaimer
being to acknowledge that neither Affiliate nor the transmission facilities of
the Systems (nor the owners thereof) are common carriers.
(g) *****. Network agrees that ***** of this Agreement, signed by a
duly authorized officer of Network, stating that Network has satisfied its
obligations under this section.
(h) Severability. The invalidity under applicable law of any
provision of this Agreement shall not affect the validity of any other provision
of this Agreement, and in the event that any provision hereof is determined to
be invalid or otherwise illegal, this Agreement shall remain effective and shall
be construed in accordance with its terms as if the invalid or illegal provision
were not contained herein; provided however, that both parties shall negotiate
in good faith with respect to an equitable modification of the provision, or
application thereof, held to be invalid and all provisions logically related
thereto. Notwithstanding the foregoing, in the event volume discounts are
declared null and void, or otherwise curtailed or restricted by legislative
enactment, administrative ruling or court order or decree, and Affiliate is
required by Network to pay a higher net effective rate as a result, or if any
other legislation is enacted, or administrative ruling, or court decree or
order, issued which materially deprives Affiliate of the overall net economic
benefits of this Agreement with respect to the cable exhibition of the Service,
and if the parties fail to reach an agreement after good faith negotiation,
Affiliate shall have the right to terminate this Agreement upon thirty (30)
days' prior written notice to Network.
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(i) No Inference Against Author. Network and Affiliate each
acknowledge that this Agreement was fully negotiated by the parties and,
therefore, no provision of this Agreement shall be interpreted against any party
because such party or its legal representative drafted such provision.
(j) No Third Party Beneficiaries. The provisions of this Agreement
are for the exclusive benefit of the parties hereto and their permitted assigns,
and no third party shall be a beneficiary of, or have any rights by virtue of,
this Agreement.
(k) Headings. The titles and headings of the sections in this
Agreement are for convenience only and shall not in any way affect the
interpretation of this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of
the date first above written.
AFFILIATE: NETWORK:
SATELLITE SERVICES, INC. SPICE, INC.,
a Delaware corporation a New York corporation
By: /s/ Xxxx Xxxxxx By: [SIGNATURE ILLEGIBLE]
Xxxx Xxxxxx, Name: _______________________
Vice President, Title: _______________________
Programming
22
SCHEDULE 1
To Affiliation Agreement By and Between
Spice, Inc. and
Satellite Services, Inc.
Dated November 1, 1992
SYSTEMS
[TO BE PROVIDED]
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EXHIBIT A
To Affiliation Agreement By and Between
Spice, Inc. and
Satellite Services, Inc.
Dated November 1, 1992
System Qualifications
I. Affiliate represents and warrants the following regarding each System listed
on Schedule I hereof:
1. that (a) either Tele-Communications, Inc. or Liberty Media Corporation
(Tele-Communications, Inc. and Liberty Media Corporation shall be hereinafter
referred to as "TCI"; any reference to TCI herein shall be deemed to be a
reference to either Tele-Communications, Inc. or Liberty Media Corporation, or
both, as is necessary to qualify the greatest number of television distribution
facilities hereunder) or its agent owns, directly or indirectly, at least a
***** interest in the general manager of the System pursuant to a valid written
agreement in full force and effect; or (b) TCI or its agent owns, directly or
indirectly, a ***** interest in such System or owns an interest or obligation by
which TCI, directly or indirectly, owns a right (whether conditional or not) to
convert into or acquire, directly or indirectly, an interest equal to at least
the required interest. An "indirect" ownership is an interest resulting from
ownership through any series of ownership interests, including corporations,
partnerships, joint ventures or other forms of business organizations; an
indirect interest shall be quantified in amount by a series of percentage
multiplications commencing with TCI's direct interest and multiplying that by
the next most proximate percentage interest and, then, multiplying in turn each
succeeding ownership interest in the order of their progression away from TCI by
the result of the immediately preceding multiplication until the most distant
percentage interest is multiplied;
2. that Affiliate or an agent has been authorized, pursuant to a valid
written agreement in full force and effect, to make and execute decisions on
behalf of each such System with respect to the Service, including but not
limited to billing and collection of fees, and Affiliate continues throughout
the Term to exercise such authority with respect to matters affecting the
distribution of the Service by such System;
3. that either a franchise or license is not required or a valid franchise
or license is in effect through the Term of this Agreement or the franchisee or
licensee has held a valid cable television franchise or license and continues to
operate in the franchise or license area under a claim of right or is otherwise
lawfully operating or franchisee or licensee has held a valid cable franchise or
license and is continuing to operate while diligently pursuing, in good faith,
its available judicial remedies. For the above purposes, in the event a
franchise or license expires before the end of the Term, such franchise or
license shall be deemed valid for so long as franchisee or
24
licensee is negotiating in good faith with the franchising or licensing
authority for a franchise or license renewal;
4. that, except as permitted under this Agreement, Affiliate is not
subdistributing and will not in the future subdistribute, nor does it claim to
be authorized to subdistribute, the Service through any cable television system
which does not satisfy the requirements set forth above.
II. In the event TCI's direct or indirect equity interest in a System or in the
entity managing such System decreases because of a refinancing of the entity
(other than as described in Paragraph III below) which owns or manages such
System, and provided TCI's interest does not decrease to zero, such System shall
continue to qualify under Paragraph I hereof, provided however, TCI's interest
in such System shall increase to the level required under Paragraph I hereof
within eighteen (18) months of the decrease.
III. In the event Affiliate, or any of the entities which owns or manages
Systems which qualify hereunder, effects a corporate separation, reorganization
or restructuring (including, but not limited to, by a distribution of stock, or
other assets or rights, to its shareholders, partners or joint venturers), the
Systems of the entity resulting from such transaction (including all interim and
supporting entities) and/or all of such resulting entities, in the aggregate,
will continue to qualify under Paragraph I hereof, so as to continue to qualify
to distribute the Service under the terms and conditions hereof, as if such
separation, reorganization or other restructuring had not occurred.
25
EXHIBIT B
To Affiliation Agreement By and Between
Spice, Inc. and
Satellite Services, Inc.
Dated November 1, 1992
PROGRAM SCHEDULE
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EXHIBIT C
To Affiliation Agreement By and Between
Spice, Inc. and
Satellite Services, Inc.
Dated November 1,1992
TECHNICAL SPECIFICATIONS
GENERAL
1.1 All specifications are to be adhered to anywhere in the contiguous 00 Xxxxxx
Xxxxxx. This specification uses a 5 meter reference antenna which is peaked at
the center of the orbital box. It is the responsibility of the Network to
provide center of the box times on a monthly basis.
1.2 The specification is divided into space segment and total system. Total
system is defined as the additional noise contribution by the originating studio
and transport facility to the input to the uplink.
1.3 System availability based on total system 99.998% per year calculated on a
monthly basis excluding sun outage. The system shall be declared unavailable
under the following:
A. Loss of video
B. Loss of audio
C. Video signal to noise <45db
D. Audio signal to noise <.45db
1.4 This specification is for analog service. A specification for digital system
will be added at a later date when equipment is developed.
VIDEO SPECIFICATIONS
Parameter Space Segment Total System
2.1 Frequency response: .25db box .5db box
2.2 Signal to Noise Ratio: 52db 50.3db
Definition: lv p/p vid to RMS
noise, 4.2 Mhz weighted.
2.3 Chrominance/luminance delay: <20ns <50ns
2.4 2T K Factor: <2% <3%
2.5 Differential Gain: <.2db <.45db
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VIDEO SPECIFICATIONS
Parameter Space Segment Total System
2.6 Differential Phase: +/-1(degree) <+/-2(degree)
2.7 Insertion gain/loss: <2 IRE <4 IRE
2.8 Video formats, waveforms, timing shall
adhere to latest FCC requirements. All
other parameters not specified shall
conform to NTSC Engineering Report #7.
AUDIO SPECIFICATIONS
Parameter Space Segment Total System
3.1 Frequency response: <.5db box <1db box
3.2 Video/Audio Sync: <10 m/sec <20 m/sec
3.3 Signal to Noise Ratio: >56db >55db
Definition: RMS test tone to RMS noise
with 15Khz weighting. This parameter to
be measured with program video or full
field color bar test pattern.
3.4 Distortion: <.5% at TT <.7% at TT
At 10db above TT distortion shall not
exceed 3%. Distortion shall be measured
at 1004Hz.
3.5 Wow and Flutter: <.1%rms
3.6 Crosstalk: >65db >65db
3.7 Insertion gain/loss: <.5db <1db
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