FOURTH AMENDMENT TO AFFILIATION AGREEMENT FOR DBS
SATELLITE EXHIBITION OF CABLE PROGRAMMING BY AND BETWEEN
PLAYBOY ENTERTAINMENT GROUP, INC. AND DIRECTV, INC.
This Fourth Amendment (the "Fourth Amendment") to that certain AFFILIATION
AGREEMENT FOR DBS SATELLITE EXHIBITION OF CABLE PROGRAMMING dated as of November
15, 1993 by and between Playboy Entertainment Group, Inc. ("Programmer") and
DirecTV, Inc. ("Affiliate"), as amended and supplemented, including by that
certain First Amendment dated as of April 19, 1994, that certain Second
Amendment dated July 26, 1995, and that certain Third Amendment dated August 26,
1997 (such Affiliation Agreement, as amended and supplemented, is referred to as
the "Agreement"), is made and entered into as of March 15, 1999, with reference
to the following facts (all defined terms used in this Fourth Amendment but not
defined in this Fourth Amendment are defined in the Agreement):
A. Affiliate currently exercises reasonable commercial efforts to
maximize the number of Service Subscribers and Gross Receipts. Such
efforts currently include exhibiting in excess of four hundred (400)
thirty (30)-second cross-channel promotional advertising spots (the
"Cross-Channel Spots") for each month of the Term, and in excess of
Two Thousand Four Hundred (2,400) thirty (30) and/or sixty (60)
second promotional advertising spots for each month of the Term on
Affiliate's pay-per-view preview channel (the "Preview Channel
Spots"), all at no charge to Programmer. Affiliate and Programmer
mutually determine in their reasonable business judgment the other
Affiliate channels over which to exhibit the Cross-Channel Spots,
based on whether such other channels have a likely target audience
for the Service and are not channels where the Cross-Channel Spots
might be objectionable to the DirecTV viewing audience. Such channel
selection for the Cross-Channel Spots also is subject to third party
programmers' limitations on adult-oriented promotional spots.
B. Affiliate currently participates in and promotes at least one (1) of
Programmer's national free or discounted preview promotions each
calendar year of the Term.
C. Affiliate currently promotes Programmer and the Service in each of
Affiliate's monthly printed pay-per-view bill inserts at no cost to
Programmer.
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D. Affiliate currently lists the program titles and program
descriptions of the Service in printed and electronic program
guides.
E. Pursuant to a Merger Agreement dated as of May 29, 1998, Playboy
Enterprises, Inc. has agreed to merge (the "Merger") with Spice
Entertainment Companies, Inc.
Accordingly, for good and valuable consideration, the receipt and adequacy
of which hereby is acknowledged, Affiliate and Programmer hereby amend,
supplement and ratify the Agreement as follows:
1. Continuation of Efforts. Affiliate shall continue to exercise
reasonably similar levels of commercial efforts to maximize the number of
Service Subscribers and Gross Receipts as Affiliate currently exercises,
and Affiliate agrees to perform the same type of promotional activities
referred to in Paragraphs A through D above throughout the remainder of
the Term; provided, however, that Affiliate shall not be obligated to
exhibit in any particular month of the Term any minimum number of
Cross-Channel Spots or Preview Channel Spots.
2. Term Extension. The current Term of the Agreement hereby is extended to
March 31, 2002.
3. Revised Exhibit A. Conditioned on the consummation of the Merger on or
before March 31, 1999, and further conditioned on the satisfaction of the
following conditions (the "Discount Conditions") at all times during the
applicable calendar month, the Exhibit A of the Agreement, "Programmer's
Rate Card for Non-Hotel/Motel Distribution," hereby is amended and revised
for all PPV Offerings and all Subscription Offerings transacted in a
particular calendar month on or after April 1, 1999, to read as set forth
in the attached Revised Exhibit A, in replacement of any other Exhibit A
to the Agreement for such calendar month:
(a) ***
(b) Affiliate offers the Service for reception on a digital basis to a
minimum of four million (4,000,000) DirecTV Subscribers who are capable of
ordering the Service on both a PPV Offerings and a Subscription
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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Offerings basis (such a DirecTV Subscriber is referred to as an "Eligible
Service Customer").
(c) Affiliate uses commercially reasonable efforts to offer the Service
for reception to one hundred percent (100%) of all DirecTV Subscribers in
residential households via the DBS Distribution System (subject only to,
in the case of PPV Offerings, such households maintaining a land-based
phone line necessary to purchase impulse pay-per-view programming),
twenty-four (24) hours per day, seven (7) days per week, on both a PPV
Offerings and a Subscription Offerings basis, except where not offered
solely on account of obscenity concerns, or where Affiliate's distribution
may be limited (in geographical scope or hours per day) in Affiliate's
reasonable business judgment, based on applicable and binding state or
federal law restricting distribution of "indecent" material, or otherwise
pursuant to Section 17 of the Agreement.
(d) Affiliate establishes and maintains the "Co-Op Marketing Funds"
defined in Paragraph 4 below.
4. Co-Op Marketing Funds. Commencing with Affiliate's monthly reporting
period under the Agreement for the month of April 1999, Affiliate shall
set aside in a separate accounting entry, a sum equal to one percent (1%)
of all Gross Receipts for such monthly reporting period and all subsequent
monthly reporting periods during the Term (the "Co-Op Marketing Funds").
Affiliate and Programmer agree with respect to the Co-Op Marketing Funds
as follows:
(a) The Co-Op Marketing Funds for a particular monthly reporting period
shall not be included in the Gross Receipts used for calculating the
applicable percentage of Gross Receipts retained by Affiliate and payable
to Programmer for such monthly reporting period under the Agreement, and
instead shall be treated as an "off-the-top" deduction for purposes of
such calculations.
(b) The Co-Op Marketing Funds shall be used to pay for certain marketing
activities and expenditures undertaken by Affiliate and Programmer to
promote the sale of the Service, such as print advertisements in program
guides, customized on-air promotional advertisements, customer service
representative incentive contests, sales incentive premiums, retention or
promotional direct mail efforts and specific retail subscription efforts
including such support for the
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promotions in preamble A, all as mutually determined and agreed or later
confirmed in writing by Affiliate and Programmer.
(c) Affiliate shall administer and account for the Co-Op Marketing Funds
in a manner mutually acceptable to Affiliate and Programmer, but whatever
portion of the aggregate Co-Op Marketing Funds that has been accrued
through the monthly reporting period for the month of December (or the
last month of the Term in the event of early termination of the Agreement)
of a particular calendar year of the Term but that has not actually been
expended as of December 31 of such calendar year of the Term (or the last
month of the Term in the event of early termination of the Agreement) on
mutually agreed activities (including reserves for expenses accrued prior
to December 31, as mutually agreed), based on a "first in, first out"
accounting basis for the expenditures, shall be liquidated and paid to
Affiliate and Programmer within thirty (30) days of such December 31 or
earlier termination of the Agreement, in accordance with the applicable
percentage split of Gross Receipts in effect for PPV Offerings and
Subscription Offerings transacted in the calendar month corresponding to
the monthly reporting period for which each particular portion of
unexpended Co-Op Marketing Funds was first accrued.
(d) Thus, commencing with the monthly reporting period for January of the
calendar year 2000 and each calendar year or portion thereof thereafter
during the Term, the Co-Op Marketing Funds shall start new yearly accruals
from a zero balance, other than mutually agreed reserves from the prior
year.
(e) In addition to the Co-Op Marketing Funds, each of Affiliate and
Programmer may elect in its discretion to fund other promotional efforts
in connection with the Service, through Affiliate or otherwise, during the
Term.
5. No Other Amendment or Modification. Except as specifically provided in
this Fourth Amendment, the Agreement is not otherwise modified in any
respect, and as so modified by this Fourth Amendment, all terms and
provisions of the Agreement are ratified and confirmed and shall remain in
full force and effect.
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6. Counterparts. This Fourth Amendment may be executed in counterparts,
each of which shall be deemed an original, and all of such counterparts
taken together shall constitute one and the same instrument.
IN WITNESS WHEREOF, Affiliate and Programmer have executed this Fourth
Amendment through their respective duly authorized representatives as of
March 15, 1999.
ACCEPTED AND AGREED TO:
PLAYBOY ENTERTAINMENT GROUP, INC. DIRECTV, INC.
By: /s/ Douglas H. Lindquist By: /s/ Michael Thornton
-------------------------------- -----------------------------
Douglas H. Lindquist Michael Thornton
Executive Vice President Vice President
Satellite Sales and Program Acquisition
International Network Operations
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FOURTH AMENDMENT - REVISED EXHIBIT A
PROGRAMMER'S RATE CARD FOR NON-HOTEL/MOTEL DISTRIBUTION
Gross Receipts Split, Subject to the Discount Conditions and Co-Op
Marketing Funds Allotment, as Applicable:
Calendar Month of Affiliate's Share of Programmer's Share
PPV Offering or Gross Receipts for of Gross Receipts for
Subscription Offering PPV Offerings and PPV Offerings and
Subscription Offerings Subscription Offerings
April 1, 1999 through *** ***
December 31, 1999.
January 1, 2000 through *** ***
the end of the Term,
unless the 5.5MM Bonus
Split (as defined below)
is applicable.
Beginning January 1, *** ***
2001, for all calendar
months through the
end of the Term in
which the average
number of Eligible
Service Customers for
such calendar month
exceeds 5,500,000
(the Gross Receipts
split for each such
calendar month is
referred to as the
"5.5MM Bonus Split").
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*** Confidential information omitted pursuant to a request for confidential
treatment filed separately with the Securities and Exchange Commission.
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