EXHIBIT 10.39
(Translated from German to English)
Original
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FRAMEWORK DISTRIBUTOR CONTRACT
Between Dorint Aktiengesellschaft
Kaldenkirchener Strasse 2
41063 Monchengladbach
for the Dorint Hotels listed in the appendix to this contract
hereinafter referred to as "Hotel"
and Prodac GmbH
Max-Planck-Str. 38
50858 Cologne
hereinafter referred to as "Prodac"
(S) 1 BASIC ITEMS
This framework contract shall govern the collaboration of the contracting
parties in connection with Prodac's equipping Dorint Hotels with trend-setting
audio-visual information, entertainment and communications technology.
Prodac hereby guarantees the highest quality standard with regard to the
equipment features and the implementation of the outfitting.
Prodac shall install a hotel video communications system for four paid channels
in the Hotel at no charge.
For this purpose, a device shall be installed in each TV set, by means of which
the hotel guests can choose between the free general television programs which
are offered and the pay programs and can also use the in-house information and
communications system.
In addition, Prodac shall provide the Hotel with the following:
* remote controls suitable for hotels, with individual buttons for TV, Pay-
TV, information, radio, check-out/message, etc.
* four central radio channels for radio reception through the televisions
* check-out/message system with personal welcome, View Bill, message, Express
Checkout
* multi-lingual info menus for targeted and rapid access (via the television
remote control) to the function desired by the guest (for example, View
Bill local flight information,
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stock exchange), including software for the generation of hotel infotext
pages
* CD1 player with up to 30 pictures with text and music--excellent pictorial
information for the guests concerning the advantages of Dorint and a sales-
promoting medium for the Hotels (initial creation at no cost to the Hotel
in the case of use of the "Hotel Text" system)
* video text of television programs and a comprehensive information
opportunity for the guests (for example, news, health service, weather,
road conditions)
* long-distance data transmission modem for monitoring the overall system.
The Hotel shall provide a place for the lockable video center, which shall be
capable of being locked, if possible, and shall be dust-free and cool, in order
that long-term disruption-free operation can be guaranteed. In addition, a 220-
volt connection and an antenna connection socket is necessary in this room and
must be provided at the site.
The feeding of paid programs into the existing antenna system shall be performed
by Prodac. A prerequisite to the operation of the Prodac system is an impeccably
functioning community antenna system in accordance with the prevailing postal
provisions and, in particular, an impeccable high-frequency line network in all
rooms. Prodac shall notify the Hotel and Dorint headquarters of any necessary
repairs or modifications to the antenna system following the technical hotel
check which shall be conducted by Prodac at no charge.
The following shall apply with regard to the assumption of "antenna" costs:
a) for existing buildings;
in the case of an otherwise impeccable antenna, Prodac shall bear the costs
of Pay-TV modification of the antenna system;
b) for new construction;
an early/timely coordination shall take place between the erector of the
antenna equipment and Prodac. If documented additional costs arise, they
shall be borne by Prodac upon prior written coordination with the
principal.
In general, any costs which will be incurred by the Hotel as a result of
eliminating antenna defects shall be submitted to the Hotel and Dorint
headquarters for decision by Prodac.
With regard to the assumption of "Radio" costs, the following shall apply: In
the case of new construction, the investor shall assume DM [***].
The Hotel hereby guarantees impeccable reception of all television programs in
the rooms. It is hereby agreed that lodging opportunities, parking places,
service telephones and personnel catering shall, upon consultation with the
Hotel, be made available to the employees of Prodac to the extent necessary for
the duration of the installation and any repair work.
(S) 2 VIDEO PROGRAM
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Prodac shall provide the Hotel with a monthly film program. Selection shall be
made by Prodac. The feature film titles shall be updated constantly and shall,
as a rule, be presented in the Hotel prior to the TV broadcast thereof. The top
titles shall be presented in the Hotels shortly after video license clearance.
In the case of the use of HC erotic films, each Hotel shall have a right of
intervention up to 4 weeks prior to the beginning of installation. Following
intervention by the Hotel, Prodac shall use CV erotic films.
Prodac currently offers the following programs:
Channel 1
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A German-language feature film program.
Channel 2
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Erotic films in German/English language.
Channel 3
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An English-language feature film program.
Channel 4
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Erotic films in German/English language.
The program package shall be changed monthly. The films shall be returned
monthly.
The Hotel shall charge the guest the fee of DM [***] per night of lodging (time
period: 12:00 p.m. to 12:00 p.m.) for tuning in to all of the paid channels.
Price adjustments shall be made in consultation with the Hotel.
The programs supplied by Prodac shall be broadcast in all rooms of the Hotel.
The Hotel expressly promises that the programs shall not be broadcast beyond the
Hotel property and shall not be made accessible to any receiver who is not a
guest or user of the Hotel system. Specifically, the Hotel shall ensure that the
Prodac programs cannot be received in areas which are connected to the Hotel
antenna network but are not part of the Hotel.
In addition, the Hotel shall ensure that the videocassettes delivered to the
Hotel cannot be used by third parties for non-contractual purposes. The Hotel
further promises that it shall use its best efforts to protect the
videocassettes against unauthorized use, as well as unauthorized utilization
and/or commercial exploitation.
If Prodac proves that the Hotel has delivered videocassettes from the program
supplied by Prodac to a third party which does not have a contractual
relationship with Prodac or proves that a third party affiliated with the Hotel
has effected such a delivery or that a film is being, or has been, used in the
Hotel following the expiration of the stipulated use period, Prodac shall be
entitled to demand that the Hotel pay a contractual penalty in the amount of
DM [***], payable independent of fault for each ascertained case of contractual
breach, or terminate the contract without notice--to the extent even possible in
light of the passage of time. In the case of contract
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termination for the aforementioned or other reasons, as well as the case of
expiration of the stipulated use period, the Hotel shall be obligated to return
to Prodac within a period of 14 days all cassettes entrusted to the Hotel on the
basis of this agreement. If the Hotel fails to comply with this obligation in a
timely manner, it shall be obligated to pay Prodac a contractual penalty in the
amount of DM 10.00 per cassette for each day by which the deadline is exceeded.
Further compensatory damages shall be barred.
(S) 3 TERM/TERMINATION
This contract is concluded for a period of 7 years. The contracts with the
individual hotels shall begin upon Prodac's delivery (date of the delivery
protocol) of the operationally-ready system. After the contract expires, it
shall be extended by consecutive one-year terms, unless it is terminated upon
notice of 6 months effective on the expiration date. If new TV sets are used,
the contract shall be extended by an additional 7 years starting from the time
at which the new sets are used.
The Hotel may terminate the contract upon notice of 6 months, if Prodac is shown
to have failed to provide the services provided or failed to provide such
services in full.
In addition, the Hotel may terminate the contract upon notice of 6 months if an
appropriate building, which had not yet been intended for installation pursuant
to the framework contract, has later been equipped by Prodac in lieu of the
terminated building.
In all other cases, termination on the basis of the investment and cost
statement shall be possible in consultation with Prodac in the spirit of a
partnership relationship.
In the event that the lease contract for the Hotel ends prior to the term of
this contract, Prodac may demand an installation in another Dorint Hotel for the
residual contract term (complete calendar years) if an appropriate Dorint Hotel
is available.
If Prodac is unable to use up-to-date technology ((S) 8), Prodac hereby grants
Dorint AG a right of extraordinary termination of the framework contract upon
compliance with a notice period of 6 months.
Prodac and the Hotel shall be entitled to transfer their rights arising from
this contract to third parties.
(S) 4 PROCEDURE
Prodac shall provide the Hotel with VHS program cassettes and/or encoded
composite signals from cable or satellite transmission intended solely for
broadcast in connection with the hotel television programs.
4.1
The programs are protected by copyright. Any use of the programs other than that
intended is
prohibited. The play permit shall be limited to the contractual broadcast of the
programs in the Hotel. Prodac expressly promises that it holds the rights to the
programs offered for contractual use and that no obligations or costs arising
from potential claims of third parties may be incurred by the Hotel. Prodac
hereby releases the Hotel from copyright claims of third parties. At the request
of the Hotel, Prodac shall document the licensing of the rights by means of
appropriate declarations of the licensor.
4.2
If necessary, Prodac shall obtain the "certificate of non-objection" required
for operation of hotel video television pursuant to the resolution of German
state broadcasting departments. Prodac shall also obtain the postal permit for
the Prodac system.
4.3
Any fees arising in connection with the postal system or GEMA [Association for
Musical Performance and Mechanical Duplication Rights] shall be paid by Prodac.
(Exception: GEMA for CDI).
(S) 5 RETENTION OF TITLE
The Hotel shall acquire no ownership rights in the components provided by
Prodac. The Hotel hereby promises to promptly report to Prodac in writing any
encroachment upon Prodac's ownership right.
(S) 6 EXCLUSIVITY
During the term of this agreement, the Hotel shall offer no other commercial
programs which are in direct competition with the Pay-TV system.
(S) 7 OPERATION
A permanent Pay-TV operation is necessary to finance and maintain the video
communications system. The Pay-TV operation shall be commenced if Prodac's scope
of supply is complete.
The firm of Prodac shall retain the right to finance the video communications
system through third parties (leasing contract, investment credit, etc.). In
such a case, the claims arising from operator revenues shall be assigned
(financing source: see delivery protocol).
Measures which disrupt the operation of the system in whole or in part shall be
reported to Prodac in writing in a timely manner (renovation work in the Hotel,
for example).
The Hotel hereby promises to offer the program supplied by Prodac according to
the Prodac program scheme and as set forth in (S) 2 and promises to switch the
film cassettes according to the program plan. Quality defects which arise with
respect to the videocassettes must be promptly reported to Prodac, in order that
a replacement can be delivered. Moreover, the Hotel shall place in every room
the informational material which Prodac provides with reference to the hotel
television program and shall change said informational material on a monthly
basis.
(S) 8 MAINTENANCE
Prodac hereby guarantees the use of up-to-date technology and promises to keep
the software for the system up-to-date on a regular basis.
Prodac shall be responsible for the maintenance and repair of the Prodac system.
The equipment shall be maintained, cleaned and/or refurbished at periodic
intervals. Various activities in this connection may also be performed in the
Hotel.
In this connection, the Hotel shall make it possible for the service technicians
to switch and clean the equipment and shall, by agreement with the Hotel,
provide the employees of Prodac with lodging opportunities, parking places,
service telephones and catering at no charge for the duration of the work.
When the system is placed in operation, the Hotel shall receive instructions and
an operations manual from Prodac. In the case of disruptions, it shall be
necessary to proceed according thereto. In the event that it is not possible to
remedy the disruption, the Hotel must contact Prodac promptly in order to
eliminate the disruption; Prodac shall then ensure repairs and/or replacement.
Maintenance and repair work shall be without charge to the Hotel.
Prodac shall equip all replacement TV sets in the Hotel with the fee recording
unit--likewise at no charge.
In order to optimize impeccable operation, the Prodac system shall be monitored
by Prodac by means of long-distance data transmission. For this purpose, the
Hotel shall provide a separate telephone line or extension at no charge. Said
line or extension shall be located in the same room as the video rack.
(S) 9 INSURANCE
The devices made available by Prodac and the films which are to be used shall be
insured by Prodac.
(S) 10 BILLING
The Hotel shall bill the guests for tuning in to the paid programming on the
basis of the record printouts from the central computer. Connections to the
program shall be billed by the Hotel only once within a period of 24 hours--from
12:00 p.m. to 12:00 p.m. on the following day.
Settlement with Prodac shall begin when the system is placed in operation. As
noted on the billing coupon, billing is executed in the name of and for the
account of Prodac.
For up to [***] connections per room/per month, the Hotel shall receive [***]%
of the Pay-TV
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revenues (according to the computer printout) as compensation for expenses.
Starting at [***] connections per room, the Hotel shall receive [***] % of the
Pay-TV revenues (according to the computer printout) as compensation for
expenses.
Starting at [***] connections per room, the Hotel shall receive [***] % of
the Pay-TV revenues (according to the computer printout) as compensation for
expenses.
Starting at [***] connections per room, the Hotel shall receive [***] % of
the Pay-TV revenues (according to the computer printout) as compensation for
expenses.
For licensing reasons (Prodac is the presenter), it shall not be possible to
offset the Hotel commission against the revenues.
Cancellations for which Prodac is clearly responsible may be deducted. If the
Hotel incurs a bad debt on video revenues from the Hotel guest, Prodac shall
acknowledge said cancellation if subsequent demands on the part of the Hotel
have been unsuccessful. At the request of Prodac, the Hotel shall declare its
willingness to document bad debts using records from financial bookkeeping. The
cancellations must be documented for Prodac, i.e., explained in detail. All
cancellations for the preceding month shall be submitted to Prodac by fax for
the purpose of examination and settlement by the 5th of the following month.
Prodac transfers the current 15% VAT to the Cologne Tax Office from the gross
revenues received from the guests. Prodac must receive 100% of the Pay-TV
revenues by deposit-only check by the 10th of the month. A credit in the amount
of the compensation for expenses shall be sent to the Hotel immediately.
It is hereby agreed that the Hotel shall retain no other sums from Pay-TV
revenues or offset any other sums against Pay-TV revenues.
(S) 11 COMPUTER COUPLING
Prodac shall place the interface line on the Hotel computer. Any software and/or
hardware modifications or expansions in the Hotel computer shall be charged to
the Hotel.
The basis for the interface coupling shall be the Prodac interface protocol. In
the event of a time delay resulting from interface coupling, Pay-TV operation
shall remain unaffected.
In the case of Hotels which receive a new installation of Fidelio software, the
Hotel shall bear the Fidelio costs. In already existing Fidelio installations,
Prodac shall assume the costs of the Fidelio interface software and
installation.
(S) 12 FINAL PROVISIONS
Unless otherwise provided under this agreement, the statutory provisions
(particularly (S) 598 ff.
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treatment filed with the Securities and Exchange Commission. Omitted
portions have been filed separately with the Commission.
BGB [German Civil Code] shall have supplemental application. In the event that a
provision of this contract is legally invalid, the entire contract shall not be
void. The provision in question shall be replaced by a provision which at least
comes as close as possible to the desired economic effect in a legally valid
manner.
To the extent permissible by law, it is hereby agreed that Cologne shall be the
place of venue for any disputes arising from this agreement.
Monchengladbach, 4/20/94 Cologne, May 5, 1994
Prodac GmbH
- - Legally valid signature - - Legally valid signature -
/S/ Heinz Wirt
/S/ Burger /S/Bierwirth
BURGER BIERWIRTH HEINZ WIRT
DORINT PRODAC
AKTIENGESELLSCHAFT PROZESSDATENTECHNIC GmbH
Kaldenkirchener Str. 2 - Electronicsysteme -
41063 Monchengladbach Max-Planck-Str. 38 . 50858 Cologne
Company stamp - Company stamp-
Appendix
(to the framework contract) dated 4/20/94
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HOTELS TO BE EQUIPPED BY PRODAC:
EXISTING BUILDINGS
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New construction Planned opening
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Due to additional costs which are necessary as a result of the Prodac system but
which are not approved by Dorint, the number of buildings may change.
For hotels which are run as management operations (for example, Nurburgring,
Gera, etc.), the introduction of a Prodac system may be rejected in individual
cases without citing grounds therefor; this, however, may be done not later than
8 weeks prior to the beginning of installation. Otherwise, the decision in favor
of an installation shall rest with the owners of the management operations.
Notwithstanding the foregoing, a maximum of 2 hotels may be deleted from the
list of hotels to be equipped without citing grounds therefor; however, this may
be done not later than 8 weeks prior to the beginning of installation.