SEI Inc ApS
June 30, 1999
Mr. William Asher
Manager
SEI 1 ApS
c/o Budde Schou A/S
Vestigrade 31
DK - 1456
Copenhagen, DK
Re: Program Supply Agreement
Dear Bill:
This letter will confirm the terms of our agreement (the "Agreement")
regarding the monthly slate of programming to be provided by SEI Inc ApS
("Licensor") to SEI 1 ApS ("Licensee"):
1. Monthly Programming Slate. Subject to paragraph 4, Licensee shall
license certain feature-length movies (the "Pictures") each calendar
month from Licensor during the Term (as defined below) of this
Agreement. The Pictures that shall be the subject of this Agreement
shall be those certain feature-length Pictures that are broadcast by
the United States pay television networks currently identified as
"Spice" and "Spice 2". In no event shall the minimum number of
titles licensed to Licensee each month be less than twenty-nine (29)
premieres for both networks.
2. Output Term. The term of this Agreement (the "Term") shall be March
15, 1999 through March 14, 2009. The Term shall be automatically
renewed for additional three (3) year periods at the expiration of
the initial and any renewal Term unless one party delivers notice of
termination to the other no later than ninety (90) days prior to the
expiration of the initial or any renewal Term.
3. Picture Term. The term for each Picture licensed hereunder (the
`Picture Term") shall be equivalent to the term that was granted to
Licensor, provided that no Picture Term shall extend beyond the Term
of this Agreement.
4. Rights. Licensor grants Licensee the exclusive right to broadcast,
or to license a third party to broadcast, the "hot" or "enhanced"
version of the Pictures, as those terms are currently commonly
understood in the adult movie business, on the pay television
networks currently identified as "The Hot Network" and "The Hot
Zone" (individually "Service", collectively "Services") in the
Territory (as defined below).
5. Territory. Licensee may exploit the Pictures in the fifty (50)
United States, Canada (to the extent such rights are available), and
all of their territories and possessions.
6. Exhibitions. Each Picture may be exhibited only simultaneously with
the exhibition of the same Picture on "Spice", in the case of
Pictures exhibited on "The Hot Network", and on "Spice 2", in the
case of Pictures exhibited on "The Hot Zone", but in no event shall
the number of permissible exhibitions be less than the number of
times per month that a premiere airs on "Spice" or "Spice 2"
respectively.
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7. License Fee. The License Fee for the Pictures, as calculated over
twelve (12) months, shall be the greater of the Combined Monthly
Slate Fee over the twelve (12) month period, or the Minimum License
Fee.
a) The Combined Monthly Slate Fee shall be calculated as follows:
1) For each Service, the monthly license fee shall be the
sum of three (3) separate slate fees: Satellite, Analog
Cable and Digital Cable (see attached pricing grid).
2) *** Year 1 shall be defined as March 15, 1999 to March
14, 2000, and each subsequent year shall run from March
15 to the following March 14.
3) The Combined Monthly Slate Fee is the sum of six (6)
separate slate fees: three (3) for "The Hot Network" and
three (3) for "The Hot Zone".
b) The Minimum License Fee per year shall be as follows:
1) ***
2) ***
3) ***
Licensee shall pay no later than the fifteenth (15th) day of each
month: 1) the slate fee for amounts collected for Analog and Digital
Cable during the preceding month; 2) any slate fee amounts collected
from Satellite as of the tenth (10th) of each month. Such payments
shall be made by wire transfer to:
ABN AMRO Bank N.V.
Midtermolen 7
DK - 2100 Copenhagen O
Denmark
Account: SEI Inc ApS
Account No.: 62059254
In the event that Licensee's collections for Satellite arrive after
the 10th of any given month, Licensee shall remit the slate fee
applicable to Satellite within five (5) days of the receipt of such
payment. At the end of each quarter ending March 31, June 30,
September 30 and December 31, if the Combined Monthly Slate Fees
paid to Licensor that quarter are less than the prorata Minimum
License Fee payable that quarter, then Licensee shall true up the
difference, provided that in no event shall such true up payment be
greater than the amount necessary to achieve the prorata Minimum
License Fee payable for the portion of the twelve (12) month period
that has elapsed thus far.
Twice per year, approximately September 15 and March 15, Licensor
and Licensee shall review market conditions to determine whether the
PVP Slate Fees need to be revised to account for changing market
conditions. If so, Licensor and Licensee shall mutually agree upon
such revised PVP Slate Fees.
Subject to the immediately preceding paragraph, Licensor and
Licensee have agreed upon the first four (4) years of PVP Slate
Fees. At the end of such four (4) years, Licensor and Licensee shall
agree upon new PVP Slate Fees for a period going forward, provided
that the first year of such new PVP Slate Fees cannot be less than
the PVP Slate Fees for the immediately preceding period (as revised
per the above paragraph, if applicable).
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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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Licensor or its designated representative shall have the right to
audit Licensee once every six (6) months during normal business
hours. In the event that such audit reveals errors prejudicial to
Licensor, all sums which may be due to Licensor as a result of such
errors, plus interest at the prime rate in effect through the
applicable period, shall be paid immediately, and in the event such
audit reveals errors prejudicial to Licensor of an amount greater
than five percent (5%), the cost of each such audit shall be
entirely charged to Licensee.
8. Access to Masters. Licensee shall access the masters it needs
directly from the producer of the Picture or storage facility for
such producer (the "Producer"). In the event there is any charge for
such dubs from the Producer, Licensee shall pay those charges
directly to such Producer. After Licensee has created its "enhanced"
or "hot" version, Licensee shall deliver such masters to Licensor's
address and bill Licensor quarterly for such dubbing and delivery
costs (at cost).
9. Materials. In the event that Licensee requires access to any
materials other than the master for any Picture, Licensor shall
facilitate such access, and the materials shall be provided to
Licensee at no cost.
10. Child Protection Act Records. Licensor acknowledges that records are
being kept in accordance with the Child Protection Restoration and
Penalties Enhancement Act of 1990, where applicable. Licensor will
furnish copies of the records for any Picture licensed hereunder
upon Licensee's reasonable request.
11. Default. In the event Licensee is in default of any payment
hereunder, Licensor shall notify Licensee in writing of such
default. If such default is not cured within fifteen (15) business
days of such notice, Licensor shall have the right to terminate this
Agreement, and all Minimum License Fee amounts payable during the
balance of the initial Term shall become immediately payable, and
Licensor may seek equitable relief to obtain such payments. In the
event this Agreement is terminated, all rights granted pursuant to
this Agreement shall revert to Licensor.
12. Arbitration. If either party to this Agreement has any claim, right
or cause of action against the other arising out of this Agreement
which the parties shall be unable to settle by agreement between
themselves, such claim, right or cause of action shall be determined
by arbitration in accordance with the UNCITRAL Arbitration Rules.
The American Arbitration Association shall serve as the appointing
authority. Arbitration shall take place in the State of California,
the United States of America and shall be conducted in the English
language.
13. Miscellaneous.
a) Licensor and Licensee each represent that it has acquired all
rights necessary to enter into and perform this Agreement.
b) Neither Licensor nor Licensee shall disclose information
regarding this Agreement to any third party (affiliated
companies shall not be deemed third parties hereunder) except
to the extent necessary to comply with law or the valid order
of a court of competent jurisdiction; as part of its normal
reporting requirements including to auditors and attorneys, in
which case such persons shall agree to be bound by the
provisions of this subparagraph; and in order to enforce its
rights pursuant to this Agreement.
c) This Agreement shall be construed in accordance with the laws
of California and any action arising out of this Agreement
shall be tried in a court residing in Los Angeles, California.
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d) This Agreement shall not constitute any relationship of
partnership, joint venture or agency between the parties.
If the above accurately represents our agreement, please sign where
indicated below. Upon your execution of this document, I will direct our
counsel to begin preparing a long-form document. Until such time as that
long-form is executed, however, this letter agreement shall be binding.
Very truly yours,
SEI INC ApS
AGREED AND ACCEPTED:
/s/ Alexandra Shepard
-------------------------------
Alexandra Shepard, Manager
SEI 1 ApS
/s/ William Asher
-----------------------------
William Asher, Manager
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Exhibit A
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SEI Inc ApS
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Per Viewer Programming Slate Fees:
Year 1 Year 2 Year 3 Year 4
Cable Analog *** *** *** ***
Cable Digital *** *** *** ***
Satellite *** *** *** ***
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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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