Exhibit 10.4
FORM OF NON-COMPETITION AGREEMENT
NON-COMPETITION AGREEMENT, dated as of ______________, 1998 (this
"Agreement"), between New Playboy, Inc., a Delaware corporation ("Playboy"),
and Directrix, Inc., a Delaware corporation ("Subco").
WHEREAS, Playboy Enterprises, Inc., a Delaware corporation and a
subsidiary of Playboy, and Spice Entertainment Companies, Inc., a Delaware
corporation and the parent of Subco as of the time prior to the Redemption
described below ("Spice"), have entered into an Agreement and Plan of Merger,
dated as of May 29, 1998 (the "Merger Agreement"), wherein, among other things,
they have agreed to merge in accordance with the terms and conditions contained
therein.
WHEREAS, all capitalized terms used but not otherwise defined herein
shall have the meanings ascribed to them in the Merger Agreement.
WHEREAS, in accordance with the terms contained in the Merger
Agreement, the Transfer and Redemption Agreement and the other Related
Agreements, Spice has transferred certain assets and liabilities to Subco and
has distributed the outstanding shares of common stock of Subco (and warrants to
purchase shares of common stock of Subco) to the stockholders of Spice, so that
Spice no longer owns any shares of capital stock of Subco (the "Redemption").
WHEREAS, in order to obtain the intended benefits of the foregoing
transactions, Playboy and Subco wish to provide for the protections contained in
this Agreement, and each of them acknowledges that, but for the protections
provided in this Agreement, the transactions contemplated by the Merger
Agreement would not have been entered into.
WHEREAS, accordingly, it is a condition precedent to the closing of the
transactions contemplated by the Merger Agreement that the parties enter into
this Agreement.
WHEREAS, the Board of Directors of each of the parties hereto have
approved this Agreement.
NOW, THEREFORE, in consideration of the premises, and of the respective
representations, warranties, covenants and agreements set forth in this
Agreement, the parties hereto hereby agree as follows:
1. Non-Competition.
(a) Playboy. Through the Restricted Period, Playboy will not
directly or indirectly, (i) engage in the Explicit C-Band Business for its own
account, (ii) enter the employ of, or render or provide any material goods or
services, to any Person engaged in the Explicit C-Band Business, which
employment, goods or services are directly related to the Explicit C-Band
Business, (iii) interfere in any material respect with the business
relationships between Subco and customers or suppliers of Subco, which
interference shall be known, or should reasonably have been known, by Playboy,
or (iv) (A) acquire more than a 5% financial interest in any Person engaged
primarily in the Explicit C-Band Business, or (B) otherwise become involved in
any material respect with any Person engaged in the Explicit C-Band Business,
directly or indirectly, as an individual entity, partner, shareholder,
principal, agent, trustee, consultant or otherwise, except, in the case of
clause (B) above, to the extent that such involvement relates to a business or
activity other than the Explicit C-Band Business.
(b) Subco. Through the Restricted Period, Subco will not (and
will cause Emerald Media, Inc. ("EM") not to), directly or indirectly, (i)
engage in the Playboy Business for its own account (provided, that this clause
(i) shall not prohibit Subco (including EM) from engaging in the Explicit C-Band
Business, the Explicit Internet Business, the Playback and Uplink Business and
the Additional Permitted Activities), (ii) enter the employ of, or render or
provide any material goods or services, to any Person engaged in the Playboy
Business, which employment, goods or services are directly related to businesses
or activities in which Subco (including EM) is otherwise prohibited from
engaging under the terms of this Agreement, (iii) (A) acquire more than a 5%
financial interest in, or (B) otherwise become involved in any material respect
with, any Person engaged in the Playboy Business, directly or indirectly, as an
individual entity, partner, shareholder, principal, agent, trustee, consultant
or otherwise, except, in the case of clause (B) above, to the extent that such
involvement relates to a business or activity which Subco is not otherwise
prohibited from engaging in under the terms of this Agreement, or (iv) interfere
in any material respect with the business relationships between Playboy and
customers or suppliers of Playboy, which interference shall be known, or should
reasonably have been known, by Subco (or EM).
(c) Public Investments. Notwithstanding anything to the
contrary in this Agreement, each of the parties hereto may, directly or
indirectly own, solely as an investment, securities of any Person which are
publicly traded on a national or regional stock exchange or on the
over-the-counter market if such party (i) is not a controlling Person of, or a
member of a group which controls, such Person and (ii) does not, directly or
indirectly, own 2% or more of any class of securities of such Person.
2
(d) Employee and Related Matters.
(i) During the five year period commencing on the
date hereof, neither party hereto (including, in the case of Subco, EM) will,
directly or indirectly, (w) interfere in any material respect with the
relationships of such other party with any of its employees, agents or similar
representatives, (x) interfere in any material respect with the relationship of
such other party with any of its consultants under contract, joint venturers or
other partners, which interference shall be known, or should reasonably have
been known, by such party (including, in the case of Subco, EM), (y) solicit or
encourage any employee of such other party to leave the employment of such other
party, or otherwise hire, retain, employ or engage in any business with any
employee of such other party, or (z) hire any employee who has left the
employment of such other party (other than as a result of the termination of
such employment by such other party, including, without limitation, as a result
of any termination of former Spice employees by Playboy in connection with the
Mergers) within one year after the termination of such employee's employment
with such other party.
(ii) Playboy hereby agrees to consent to an
amendment, which shall be in form and substance reasonably satisfactory to
Playboy, of the non-competition provision contained in any employment agreement
between Spice (or any of its subsidiaries) and any employee of Spice as of the
Closing Date (other than an employee who shall have been hired or otherwise
retained, as a consultant or in any similar capacity, by Playboy unless the
employment or other retention of any such employee by Playboy shall have been
terminated within 60 days after the Closing Date and Subco shall have hired or
otherwise retained such employee as an employee or consultant of Subco after
such termination by Playboy) to the extent necessary to permit such employees to
engage in the businesses and activities in which Subco is permitted to engage
under the terms of this Agreement; provided that any such engagement is
conducted by any such employee in his or her capacity as an employee or
consultant of Subco for the benefit of Subco.
(e) Additional Covenants. Notwithstanding the generality of
the foregoing provisions contained in this Section 1 (including the definitions
of all terms contained therein as set forth in Section 4), the parties further
agree as follows:
(i) Playboy hereby agrees that it will not directly
or indirectly, enter into any agreement or other arrangement to acquire any
licensing, distribution or transmission rights with respect to any Explicit
Programming or Explicit Still Images for transmission during the Restricted
Period via C-Band.
(ii) Subco hereby agrees that it will not (and it
shall cause EM not to), directly or indirectly, enter into any agreement or
other arrangement to
3
acquire any licensing, distribution or transmission rights with respect to any
Explicit Programming or Explicit Still Images for transmission during the
Restricted Period other than via C-Band or via the Internet, or for the purpose
and effect of conducting any Additional Permitted Activities.
(iii) Subco hereby agrees that, in connection with
the Explicit Internet Business, it will not (and it shall cause EM not to) enter
into any contract, agreement or other arrangement with any cable or DTH operator
or provider (including, without limitation, in connection with Direct TV, Echo
TV or similar services) for the distribution or transmission of any Adult
Programming via cable or DTH.
(iv) Subco hereby agrees not to (and to cause EM not
to), directly or indirectly, use any trade names, trademarks or other
proprietary business designations used or owned in connection with the business
of Spice or its subsidiaries (other than the names "SXTV" and "Eurotica") at any
time through the date hereof, including, without limitation, the name "Spice"
and "Adam and Eve" alone, in combination with other words, or in any stylistic
or other variation thereof.
(v) Subco hereby agrees not to (and to cause EM not
to), directly or indirectly, sell, license, distribute, advertise, promote or
market any adult industry related merchandise other than via C-Band, via the
Internet or via magazines, newspapers or other similar printed medium.
(f) Subsidiaries. The parties hereto agree that for purposes
of Sections 1, 2 and 7(c), all references to each of Playboy, Subco, EM or any
party hereto shall also include a reference to all of its Subsidiaries and the
entities of which it is a direct or indirect Subsidiary and the other direct and
indirect Subsidiaries of such entities.
2. Confidentiality. Each of the parties hereto shall hold, and shall
cause its respective subsidiaries, affiliates (including, in the case of Subco,
EM), employees, agents, consultants and advisors to hold, in strict confidence,
all confidential or proprietary information concerning the business of such
other party in its possession (except to the extent that such information has
been (i) in the public domain or becomes publicly known through no wrongful act
of such party or its employees, agents, consultants or advisors, (ii) received
from a party under no confidentiality or secrecy obligation with respect
thereto, or (iii) disclosed pursuant to governmental, judicial or other legal
requirements; provided, that, in the case of clause (iii) above, such party
shall provide such other party, to the extent practicable, with adequate prior
notice to allow such other party to seek an appropriate protective order and
such party shall cooperate therein).
4
3. (a) Acknowledgments. Each of the parties hereto acknowledges that
(i) it has throughly reviewed the terms of this Agreement; (ii) it has been
represented by and had ample opportunity to consult with legal counsel in
connection with the negotiation and execution of this Agreement; and (iii) it
believes the provisions contained in Sections 1, 2 and 7(c) herein (each, a
"Restrictive Covenant") to be reasonable (in geographical and temporal scope
and in all other respects) and enforceable by all applicable law.
(b) Blue-Pencilling. It is expressly understood and agreed
that if a final judicial determination is made by a court of competent
jurisdiction that the time or territory or any other restriction contained in
this Agreement is an unenforceable restriction against either such party, the
provisions of this Agreement shall not be rendered void but shall be deemed
amended to apply as to such maximum time and territory and to such maximum
extent as such court may judicially determine or indicate to be enforceable.
Alternatively, if any court of competent jurisdiction finds that any restriction
contained in this Agreement is unenforceable, and such restriction cannot be
amended so as to make it enforceable, such finding shall not affect the
enforceability of any of the other restrictions contained herein.
(c) Enforceability in Jurisdictions. The parties hereto intend
to and hereby confer jurisdiction to enforce each Restrictive Covenant upon the
courts of any jurisdiction within the geographical scope of such Restrictive
Covenant for breaches occurring within such jurisdiction. If the courts of any
one or more of such jurisdictions hold any Restrictive Covenant unenforceable by
reason of the breadth of such scope or otherwise, it is the intention of the
parties hereto that such determination not bar or in any way affect the right of
any such party to the relief provided in the courts of any other jurisdiction
within the geographical scope of such Restrictive Covenant, as to breaches of
such Restrictive Covenant in such other respective jurisdictions, each
Restrictive Covenant as it relates to each jurisdiction being, for this purpose,
severable into diverse and independent covenants.
(d) Additional Covenants; Waiver. Notwithstanding anything
contained herein, each of the parties hereto (i) hereby covenants that it will
not argue or otherwise claim in any jurisdiction or under any applicable law
that the terms hereof are not enforceable for any reason and (ii) hereby waives
to the fullest extent permissible by applicable law any right it may have under
such law to void or otherwise modify any of the terms of this Agreement.
(e) Specific Performance. Each party hereto acknowledges and
agrees that such other party's remedies at law for a breach or threatened breach
of any of the provisions of Sections 1, 2 or 7(c) would be inadequate and, in
recognition of this fact, such party agrees that, in the event of such a breach
or threatened breach, in addition to any remedies at law, such other party,
without posting any bond, shall be
5
entitled to obtain equitable relief in the form of specific performance,
temporary restraining order, temporary or permanent injunction or any other
equitable remedy which may then be available.
4. Definitions. For purposes of this Agreement, the following terms
shall have the following meanings:
"Additional Permitted Activities" means the activities of: (i)
creating and/or distributing interactive adult multimedia products, including
CD-ROM products, which products, in each case in this clause (i), feature
Explicit Programming and/or Explicit Still Images (provided that nothing in this
clause (i) shall be read to include any businesses or other activities with
respect to linear videogram rights, including, without limitation, the sale,
distribution, licensing or other exploitation of video cassettes, laser discs,
digital video discs, analog or digital linear playback and storage devices or
any similar devices or products, whether now or hereinafter developed), (ii)
maintaining or otherwise exploiting adult 900-number audio text and other
similar telephone services, (iii) creating and/or marketing adult industry
related merchandise via the Internet or any other media and (iv) publishing
and/or distributing adult magazines, books, calendars and other similar printed
media, which, in each case in this clause (iv), features Explicit Still Images.
"Adult Programming" means Explicit Programming, Non-Explicit
Programming, Explicit Still Images and Non-Explicit Still Images.
"C-Band Ancillary Activities" includes, only editing,
reproducing and making dubbed and/or translated variations of Explicit
Programming or Explicit Still Images, as the case may be (provided that any
programming or still image so edited or varied continues to constitute "Explicit
Programming" or an "Explicit Still Image" (as defined herein), as the case may
be), advertising, promoting and marketing the Explicit C-Band Business (provided
that such advertisement does not disparage Playboy), and engaging in such other
incidental activities consistent with the foregoing to the extent reasonably
necessary to exploit the business of providing transmission of Explicit
Programming or Explicit Still Images, as the case may be, via C-Band.
"Explicit C-Band Business" means the business of (i) providing
transmission of Explicit Programming and/or Explicit Still Images via C-Band and
(ii) licensing and distributing Explicit Programming and/or Explicit Still
Images for transmission via C-Band, including, in connection with the foregoing,
all C-Band Ancillary Activities.
"Explicit Internet Business" means the business of (i)
providing transmission worldwide of Explicit Programming and/or Explicit Still
Images via the Internet through the Media, (ii) licensing and distributing
Explicit Programming and/or
6
Explicit Still Images for transmission worldwide via the Internet through the
Media, including, in connection with the foregoing, all Internet Ancillary
Activities.
"Explicit Programming" means any movies and other programming
the content of which would generally be considered in the adult industry to be
that of "explicit" adult movies or programming and more explicit than "hot
cable" or "cable" programming and which are otherwise substantially similar in
content and degree of explicitness to the movies and related programming
currently featured on the C-Band channels maintained by EM.
"Explicit Still Images" means any still images the content of
which would generally be considered in the adult industry to be that of "adult"
still images and equally as explicit as, or more explicit than, "hot cable"
still images and which are otherwise substantially similar in content and degree
of explicitness to the still images currently featured on the Internet sites
maintained by EM.
"Internet Ancillary Activities" includes, only editing,
reproducing and making dubbed and/or translated variations of Explicit
Programming or Explicit Still Images, as the case may be (provided that any
programming or still image so edited or varied continues to constitute "Explicit
Programming" or an "Explicit Still Image" (as defined herein), as the case may
be), advertising, promoting and marketing the Explicit Internet Business
(provided that such advertisement does not disparage Playboy), and engaging in
such other incidental activities consistent with the foregoing to the extent
reasonably necessary to exploit the business of providing transmission of
Explicit Programming or Explicit Still Images, as the case may be, via the
Internet.
"Media" means telephone lines, coaxial cable (including,
without limitation, in connection with the services provided by "Web TV," "At
Home" and similar services), satellite (including, without limitation, DTH),
MDS, MMDS, SMATV, low power TV, pay-per-view services, feature films, video
cassettes, laser discs, digital video discs, the Internet and all other media
(including, without limitation, hybrid systems) now or hereinafter developed.
"Non-Explicit Programming" means any movies and other
programming (other than Explicit Programming) the content of which would
generally be considered in the adult industry to be that of "adult" movies or
programming and which is not Rated Programming, including, without limitation,
movies or programming the content of which would generally be considered in the
adult industry to be equally as explicit as, or less explicit than, "hot cable"
or "cable" programming or which are otherwise substantially similar in content
and degree of explicitness to the movies and related programming currently
featured on the Spice and Spice Hot channels.
7
"Non-Explicit Still Images" means any still images the content
of which would generally be considered in the adult industry to be "adult" still
images (other than Explicit Still Images), including, without limitation, any
still images the content of which would generally be considered in the adult
industry to be less explicit than "hot cable" still images or equally as
explicit as "cable" still images.
"Playback and Uplink Business" means the business of
providing playback and uplink services (as such terms are generally
understood in the cable television business) to any cable program service in
any medium used by such cable program service; provided that Subco cannot
(and it shall cause EM not to), directly or indirectly, provide any playback
and uplink services for any Adult Programming unless the arrangements with
the cable program service providing such Adult Programming (i) were
negotiated on an arm's length basis, (ii) provide for the payment for such
playback and uplink services in cash and (iii) provide for service rates no
more favorable than the payment terms offered by Subco to Playboy for similar
services; provided further, that Subco cannot (and it shall cause EM not to),
directly or indirectly provide any playback and uplink services for any Adult
Programming other than in connection with the distribution of such Adult
Programming (a) through satellite delivery systems or (b) if, and only if,
the content of such distribution consists solely of Playboy Adult Programming
or Newco Adult Programming, through file servers linked to cable systems or
multi-channel video programming providers.
"Playboy Business" means the business of (i) producing,
licensing, distributing, marketing and otherwise acquiring any rights or
conducting any other activity with respect to any kind of Adult Programming for
transmission via the Media, (ii) providing transmission of Adult Programming via
the Media to all destinations, including personal and other computers,
television, and all other media now or hereinafter developed; (iii) creating
and/or distributing and otherwise exploiting multimedia products, including
CD-ROM products, which products, in each case in this clause (iii), feature
Non-Explicit Programming and/or Non-Explicit Still Images; and (iv) publishing
and/or distributing and otherwise exploiting adult magazines, books, calendars
and other similar printed media now or hereinafter developed, which in each case
in this clause (iv), feature Non-Explicit Still Images.
"Rated Programming" means any movies or other programming
which (a) is included in an advertiser supported basic cable service, (b) is
rated by a generally recognized and accepted ratings authority and bears an "R"
rating or any rating less restrictive, (c) is rated "NC-17," so long as such
rating is not based primarily on sexual content, nudity or similarly explicit
content, or (d) is substantially similar in content and degree of explicitness
to programming which is covered by clause (a), (b) or (c) above.
"Restricted Period" means the period of time commencing
immediately following the Closing and continuing through __________, 2005.
"Subsidiary" means, as to any Person, a corporation,
partnership or other entity of which shares of stock or other ownership
interests having ordinary voting power (other than stock or such other ownership
interests having such power only by reason of the happening of a contingency) to
elect a majority of the board of
8
directors or other managers of such corporation, partnership or other entity are
at the time owned, or the management of which is otherwise controlled, directly
or indirectly through one or more intermediaries, or both, by such Person.
"Territory" means the United States and Canada (including all
territories and possessions of the foregoing) and the islands of the Caribbean.
"via C-Band" means via C-Band satellite, in either the analog
or digital format, intended and otherwise authorized solely for reception by
C-Band subscribers, located solely within the Territory.
5. Representations and Warranties of Subco. Subco represents and
warrants to Playboy as follows:
(a) Corporate Existence; Power. Subco is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Delaware, and it has the requisite corporate power and authority to
execute, deliver and perform its obligations under this Agreement and each
other Related Agreement to which it is a party. Subco was organized on July
20, 1998, and since such date has engaged in no business other than
activities relating to its organization and the transactions contemplated by
this Agreement and the other Related Agreements.
(b) Authorization; Binding Effect. The execution, delivery and
performance by Subco of this Agreement, the other Related Agreements to which it
is a party and the transactions contemplated hereby and thereby have been duly
authorized by all necessary corporate action of Subco. Each of this Agreement
and the other Related Agreements to which Subco is a party has been duly
executed and delivered by Subco, and constitutes the legal, valid and binding
obligation of Subco enforceable against Subco in accordance with its terms.
6. Representations and Warranties of Playboy. Playboy represents and
warrants to Subco as follows:
(a) Corporate Existence; Power. Playboy is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware, and it has the requisite corporate power and authority to execute,
deliver and perform its obligations under this Agreement and each other Related
Agreement to which it is a party.
(b) Authorization; Binding Effect. The execution, delivery and
performance by Playboy of this Agreement, the other Related Agreements to which
it is a party and the transactions contemplated hereby and thereby have been
duly authorized by all necessary corporate action of Playboy. Each of this
Agreement and the
9
other Related Agreements to which Playboy is a party has been duly executed and
delivered by Playboy, and constitutes the legal, valid and binding obligation of
Playboy enforceable against Playboy in accordance with its terms.
7. Miscellaneous.
(a) Waiver and Amendments; Remedies; No Third Party
Beneficiaries. This Agreement may be amended, superseded, canceled, renewed or
extended, and the terms hereof may be waived, only by a written instrument
signed by the parties, or in the case of a waiver, by the party waiving
compliance. No delay on the part of any party in exercising any right, power or
privilege hereunder shall operate as a waiver thereof, nor shall any waiver on
the part of any party of any such right, power or privilege, nor any single or
partial exercise of any such right, power or privilege, preclude any further
exercise thereof or the exercise of any other such right, power or privilege.
The rights and remedies herein provided are cumulative and are not exclusive of
any rights or remedies that any party may otherwise have at law or in equity.
Nothing expressed or mentioned in this Agreement is intended or shall be
construed to give any Person other than the parties hereto and their respective
successors and assigns any legal or equitable right, remedy or claim under or in
or in respect of this Agreement or any provision herein contained.
(b) GOVERNING LAW. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK APPLICABLE TO
AGREEMENTS MADE AND TO BE PERFORMED ENTIRELY WITHIN SUCH STATE WITHOUT REGARD TO
CONFLICTS OF LAW PRINCIPLES THEREOF.
(c) Binding Effect; No Assignment. This Agreement shall be
binding upon and shall inure to the benefit of the parties and their respective
successors, assigns and legal representatives. Neither party hereto may assign
this Agreement without the prior written consent of the other party, except that
either party may assign this Agreement to any successor to all or substantially
all of its assets or business. No party hereto may, directly or indirectly,
transfer any substantial asset or business relating to the Explicit C-Band
Business or the Explicit Internet Business to another Person, unless such Person
agrees in writing to be bound by the terms of this Agreement to the same extent
that such party is so bound.
(d) Entire Agreement. This Agreement, the Merger Agreement,
the other Related Agreements (including the exhibits and schedules hereto and
thereto) and any collateral documents executed in connection with the
transactions contemplated thereby contain the entire agreement among the parties
with respect to the transactions contemplated hereby and thereby and supersede
all prior agreements, written or oral, with respect thereto.
10
(e) Severability. If any provision of this Agreement shall be
declared to be invalid, illegal or unenforceable, such provision shall survive
to the extent it is not so declared, and the validity, legality and
enforceability of the other provisions hereof shall not in any way be affected
or impaired thereby, unless such action would substantially impair the benefits
to either party of the remaining provisions of this Agreement.
(f) Table of Contents; Headings. The table of contents and
headings in this Agreement are solely for convenience of reference and shall not
affect the interpretation or construction of any of the provisions hereof.
(g) Notices. All notices, requests, demands and other
communications required or permitted hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand or mailed, certified or
registered mail, with postage prepaid as follows:
If to Playboy: Playboy Enterprises, Inc.
680 North Lake Shore Drive
Chicago, IL 60611
Attention: Howard Shapiro, Esq.
General Counsel
Facsimile: (312) 266-2042
with a copy to: Paul, Weiss, Rifkind, Wharton & Garrison
1285 Avenue of the Americas
New York, New York 10019-6064
Attention: James M. Dubin, Esq.
Facsimile: (212) 757-3990
or to such other Person or address as Playboy shall furnish to Subco in writing.
If to Subco to: Directrix, Inc.
536 Broadway, 10th Floor
New York, New York 10012
Attention: J. Roger Faherty
Facsimile: [ ]
with a copy to: Kramer, Levin, Naftalis & Frankel
919 Third Avenue
New York, New York 10022
Attention: Paul S. Pearlman, Esq.
Facsimile: (212) 715-8000
11
or to such other Person or address as Subco shall furnish to Playboy in writing.
(h) Counterparts. This Agreement may be executed in two
counterparts, each of which shall be deemed an original, but both of which
together shall constitute one and the same original.
12
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
NEW PLAYBOY, INC.
By:
-----------------------------------
Name:
Title:
DIRECTRIX, INC.
By:
-----------------------------------
Name:
Title: