Exhibit 10.7c
THIRD AMENDED AND RESTATED
OPERATING AGREEMENT
FOR
PLAYBOY TV - LATIN AMERICA, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
TABLE OF CONTENTS
Page
ARTICLE I DEFINITIONS .................................................................... 2
ARTICLE II ORGANIZATIONAL MATTERS ........................................................ 10
2.1 Formation .................................................................. 10
2.2 Name ....................................................................... 10
2.3 [Intentionally Omitted] .................................................... 11
2.4 Office and Agent ........................................................... 11
2.5 Addresses of the Members, the Managers and the General Manager. ............ 11
2.6 Purpose of Company ......................................................... 11
2.7 Feasibility Study .......................................................... 11
2.8 Option to Develop the Playboy Lifestyle Channel USA in the US Lifestyle
Territory .................................................................. 12
2.9 On-line Internet Rights Good Faith Negotiation ............................. 13
2.10 Playboy Lifestyle Rights of Good Faith Negotiation ......................... 13
ARTICLE III CAPITAL CONTRIBUTIONS ........................................................ 13
3.1 Capital Contribution ....................................................... 13
3.2 Additional Capital Contributions ........................................... 13
3.3 Optional Capital Contributions ............................................. 13
3.4 Capital Accounts ........................................................... 14
3.5 No Interest ................................................................ 15
3.6 Iberia Agreements .......................................................... 15
ARTICLE IV ALLOCATIONS OF NET INCOME AND NET LOSSES AND DISTRIBUTIONS .................... 15
4.1 Allocations of Net Income and Net Loss ..................................... 15
4.2 Distribution of Distributable Cash by the Company .......................... 15
4.3 Form of Distribution ....................................................... 15
4.4 Restriction on Distributions ............................................... 15
4.4.1 Restriction .......................................................... 15
4.4.2 Method of Determination .............................................. 15
4.4.3 Personal Liability ................................................... 16
4.5 Return of Distributions .................................................... 16
4.6 Withholding ................................................................ 16
ARTICLE V MANAGEMENT AND CONTROL OF THE COMPANY .......................................... 16
5.1 The Management Committee ................................................... 16
5.1.1 General Scope of Authority ........................................... 16
5.1.2 Veto Rights .......................................................... 16
5.2 Members of the Management Committee; Appointment and Removal; Voting. ...... 18
5.3 Meetings of the Management Committee ....................................... 18
5.4 Delegation of Authority; General Manager and Other Officers ................ 19
5.4.1 General Power to Delegate Authority .................................. 19
5.4.2 The General Manager .................................................. 19
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5.4.3 Duties of the General Manager ........................................ 20
5.4.4 Additional Officers .................................................. 20
5.4.5 Officers Serve at the Pleasure of the Management Committee ........... 20
5.5 Interested Party Transactions .............................................. 21
5.5.1 Approval ............................................................. 21
5.5.2 Termination and Remedies ............................................. 21
5.5.3 Priority of Payments ................................................. 21
5.6 Performance of Duties; Liability of Managers ............................... 21
5.6.1 Standards ............................................................ 21
5.7 Management Company ......................................................... 21
5.8 Insurance .................................................................. 22
ARTICLE VI BUSINESS PLANS AND ANNUAL BUDGETS ............................................. 22
6.1 The Business Plan .......................................................... 22
6.1.1 The Business Plan .................................................... 22
6.1.2 Additions to Business Plan ........................................... 22
6.2 Annual Budgets ............................................................. 22
6.2.1 Adjustment to Annual Budget .......................................... 22
6.2.2 Required Local Programming Expenditures Allocations .................. 22
6.2.3 Adjustment to Company Produced Programming Budget and Marketing
Budget ............................................................... 23
ARTICLE VII [INTENTIONALLY OMITTED] ...................................................... 23
ARTICLE VIII MEMBERS ..................................................................... 23
8.1 Limited Liability .......................................................... 23
8.2 Admission of Additional Members ............................................ 23
8.3 Withdrawals or Resignations ................................................ 23
8.4 Termination of Membership Interest ......................................... 23
8.5 Remuneration To Members..................................................... 24
8.6 Members Are Not Agents; No Management Authority............................. 24
8.7 Meetings of Members ........................................................ 24
8.7.1 Date, Time and Place of Meetings of Members; Secretary ............... 24
8.7.2 Power to Call Meetings ............................................... 24
8.7.3 Notice of Meeting .................................................... 24
8.7.4 Manner of Giving Notice; Affidavit of Notice ......................... 24
8.7.5 Validity of Action ................................................... 24
8.7.6 Quorum ............................................................... 24
8.7.7 Adjourned Meeting; Notice ............................................ 25
8.7.8 Waiver of Notice or Consent .......................................... 25
8.7.9 Action by Written Consent Without a Meeting .......................... 25
8.7.10 Telephonic Participation by Member at Meetings ...................... 25
8.7.11 Record Date ......................................................... 25
8.7.12 Proxies ............................................................. 26
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Page
ARTICLE IX TRANSFER AND ASSIGNMENT OF INTERESTS .......................................... 26
9.1 Transfer and Assignment of Interests ....................................... 26
9.2 Further Restrictions on Transfer of Interests .............................. 27
9.3 Right of First Offer ....................................................... 27
9.4 Right of First Refusal ..................................................... 28
9.5 Substitution of Members .................................................... 29
9.6 Effective Date of Permitted Transfers ...................................... 29
9.7 Rights of Legal Representatives ............................................ 29
9.8 PEGI Buy-Up Option ......................................................... 30
9.9 Claxson Control Over Membership Interest ................................... 31
9.10 Playboy Television B.V. and PTVLA U.S., LLC ................................ 31
9.11 Venus Operations ........................................................... 33
9.12 Playboy Lifestyle Holding and Newco ........................................ 34
ARTICLE X CONSEQUENCES OF DEATH, DISSOLUTION RETIREMENT OR BANKRUPTCY OF MEMBER .......... 35
10.1 Withdrawal Dissolution Event................................................ 35
10.2 Purchase Price ............................................................. 35
10.3 Notice of Intent to Purchase ............................................... 35
10.4 Election to Purchase Less Than All of the Former Member's Interest ......... 35
10.5 Payment of Purchase Price .................................................. 35
10.6 Closing of Purchase of Former Member's Interest ............................ 36
10.7 Purchase Terms Varied by Agreement ......................................... 36
ARTICLE XI ACCOUNTING, RECORDS, REPORTING BY MEMBERS ..................................... 36
11.1 Books and Records .......................................................... 36
11.2 Delivery to Members and Inspection ......................................... 37
11.2.1 Delivery Upon Request ............................................... 37
11.2.2 Inspection .......................................................... 37
11.2.3 Authorized Persons .................................................. 37
11.2.4 PEI Additional Right of Inspection .................................. 37
11.3 Statements ................................................................. 37
11.3.1 Annual Report ....................................................... 37
11.3.2 Monthly Report ...................................................... 37
11.3.3 Tax Information ..................................................... 38
11.4 Financial and Other Information ............................................ 38
11.5 Filings .................................................................... 38
11.6 Bank Accounts .............................................................. 38
11.7 Accounting Decisions and Reliance on Others ................................ 38
11.8 Tax Matters for the Company Handled by Managers and Tax Matters Member ..... 38
ARTICLE XII DISSOLUTION AND WINDING UP ................................................... 39
12.1 Term ....................................................................... 39
12.2 Dissolution Events ......................................................... 39
12.3 Effect of Dissolution ...................................................... 41
12.4 Dissolution ................................................................ 41
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TABLE OF CONTENTS
(continued)
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12.5 Certificate of Dissolution ................................................. 41
12.6 Winding Up ................................................................. 41
12.7 Distributions in Kind ...................................................... 42
12.8 Order of Payment of Liabilities Upon Dissolution ........................... 42
12.8.1 Distributions to Members ............................................ 42
12.8.2 Payment of Debts .................................................... 42
12.9 Certificate of Cancellation ................................................ 42
12.10 No Action for Dissolution ............................................ 42
ARTICLE XIII INDEMNIFICATION AND INSURANCE ............................................... 43
13.1 Indemnification of Agents .................................................. 43
13.2 Insurance .................................................................. 43
ARTICLE XIV NON-COMPETITION .............................................................. 43
14.1 Adult Oriented Television Business Non-Competition ......................... 43
14.2 Playboy Lifestyle Business Non-Competition in the Territory ................ 44
14.3 US Playboy Lifestyle Business Non-Competition in the US Lifestyle
Territory .................................................................. 44
14.4 Separate Covenants ......................................................... 45
14.5 Intent; Severability ....................................................... 45
14.6 Injunctive Relief .......................................................... 46
ARTICLE XV MEMBER REPRESENTATIONS AND WARRANTIES ......................................... 46
15.1 Representations and Warranties by Each Member .............................. 46
15.1.1 Experience .......................................................... 46
15.1.2 No Advertising ...................................................... 46
15.1.3 Investment Intent ................................................... 46
15.1.4 Purpose of Entity ................................................... 46
15.1.5 Economic Risk ....................................................... 46
15.1.6 No Registration of Membership Interest .............................. 47
15.1.7 Membership Interest in Restricted Security .......................... 47
15.1.8 No Obligation to Register ........................................... 47
15.1.9 No Disposition in Violation of Law .................................. 47
15.1.10 Investment Risk .................................................... 47
15.1.11 Restrictions on Transferability .................................... 48
15.1.12 Information Reviewed ............................................... 48
15.1.13 No Representations By Company ...................................... 48
15.1.14 Consultation with Attorney ......................................... 48
15.1.15 Tax Consequences ................................................... 48
15.1.16 No Assurance of Tax Benefits ....................................... 48
15.2 Indemnity .................................................................. 48
15.3 Procedure .................................................................. 48
ARTICLE XVI DISPUTE RESOLUTION ........................................................... 49
16.1 Alternate Dispute Resolution ............................................... 49
16.2 Notification and Negotiation ............................................... 49
16.3 Arbitration Rules .......................................................... 49
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16.4 Selection of Arbitrators ................................................... 49
16.5 Arbitration Procedures ..................................................... 50
16.6 Effect of Arbitration ...................................................... 50
16.7 Statute of Limitations ..................................................... 50
16.8 Service of Process ......................................................... 50
16.9 Additional Arbitration Provisions .......................................... 51
16.10 Availability of Equitable Relief ........................................... 51
ARTICLE XVII MISCELLANEOUS ............................................................... 51
17.1 Additional Documents and Acts .............................................. 51
17.2 Time is of the Essence ..................................................... 51
17.3 Remedies Cumulative ........................................................ 51
17.4 Currency; Payments ......................................................... 51
17.5 Governing Law .............................................................. 52
17.6 Authority .................................................................. 52
17.7 Assignment; No Third Party Beneficiary ..................................... 52
17.8 Agreement Negotiated ....................................................... 52
17.9 Waivers; Remedies Cumulative, Amendments, etc .............................. 52
17.10 Notices .................................................................... 53
17.11 Public Announcements ....................................................... 54
17.12 Survival ................................................................... 54
17.13 Confidentiality ............................................................ 54
17.13.1 General Confidentiality Requirements ............................... 54
17.13.2 Exceptions to the General Confidentiality Requirements ............. 54
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EXHIBITS
EXHIBIT A CAPITAL CONTRIBUTION AND ADDRESSES OF MEMBERS ................. A-1
EXHIBIT B TAX ALLOCATIONS ............................................... B-1
EXHIBIT C CALCULATION OF FAIR MARKET VALUE .............................. C-1
EXHIBIT D [Intentionally Omitted] ....................................... D-1
EXHIBIT E RESTRICTED TRANSFEREES ........................................ E-1
EXHIBIT F [Intentionally Omitted] ....................................... F-1
EXHIBIT G REGISTRATION RIGHTS ........................................... G-1
EXHIBIT H RELATED DOCUMENTS ............................................. H-1
i
THIRD AMENDED AND RESTATED
OPERATING AGREEMENT
FOR
PLAYBOY TV - LATIN AMERICA, LLC
A CALIFORNIA LIMITED LIABILITY COMPANY
This Third Amended and Restated Operating Agreement (this
"Agreement") of Playboy TV - Latin America, LLC, a limited liability company
organized under the laws of the State of California (the "Company"), is made and
entered into on November 10, 2006, by and between Playboy Entertainment Group,
Inc., a Delaware corporation (together with its permitted successors and assigns
"PEGI") and Lifford International Co. Ltd., an International Business Company
incorporated under the laws of the British Virgin Islands (together with its
permitted successors and assigns "Lifford"), with reference to the following
facts:
A. On June 14, 1996, Articles of Organization for the Company were
filed with the California Secretary of State, and PEGI and Bloomfield
Mercantile, Inc. executed an operating agreement (the "Initial Operating
Agreement").
B. On November 4, 1998, Bloomfield Mercantile, Inc. assigned all of
its rights and obligations under the Initial Operating Agreement to Lifford and
Lifford was admitted as a Member to the Company.
C. On November 10, 1998, PEGI and Lifford amended and restated the
Initial Operating Agreement in its entirety effective as of June 14, 1996 (the
"First Amended and Restated Operating Agreement").
D. On December 23, 2002 and effective as of April 1, 2002, PEGI and
Lifford amended and restated the First Amended and Restated Operating Agreement
in its entirety effective as of April 1, 2002 (the "Second Amended and Restated
Operating Agreement").
E. On June 17, 2004, PEGI and Lifford amended the Second Amended and
Restated Operating Agreement (the "Amendment").
F. The parties desire to amend and restate the Second Amended and
Restated Operating Agreement in order to, among other things, (i) include the
terms of the Amendment; (ii) modify the terms of the PEGI Buy-Up Option and
Additional Buy-Up Option and (iii) provide certain agreements with respect to
the development, launch and operation by the Company, through a newly formed,
wholly owned subsidiary Playboy Lifestyle Holding, LLC, a Delaware limited
liability company ("Playboy Lifestyle Holding"), and its soon to be formed,
wholly owned subsidiary, an Argentine limited liability company ("Newco" and
collectively with Playboy Lifestyle Holding, the "Playboy Lifestyle Companies"),
of the Playboy Lifestyle Business, each as more fully set forth in this
Agreement.
NOW, THEREFORE, for good and valuable consideration, the receipt,
adequacy and legal sufficiency of which are hereby acknowledged, the parties
hereby amend and restate the Second Amended and Restated Operating Agreement in
its entirety under the laws of the State of California upon the terms and
subject to the conditions of this Agreement as follows:
ARTICLE I
DEFINITIONS
When used in this Agreement, the following terms shall have the
meanings set forth below:
"AAA" has the meaning set forth in Section 16.3.
"Act" means the Beverly-Killea Limited Liability Company Act,
codified in the California Corporations Code, Section 17000 et seq., as the same
may be amended from time to time.
"Additional Buy-Up Option" has the meaning set forth in Section 9.8.
"Adult-Oriented" means, with respect to a Channel or program, that
such Channel or program features content that is comparable to or more explicit
than the content that is exhibited on the Channels in the Territory as of the
date of this Agreement; it being understood that content that would be rated no
more restrictively than "R" by the Motion Picture Association of America as such
rating standards are currently in effect is not "Adult-Oriented" content.
"Adult-Oriented Television Business" means the business of owning or
operating an Adult-Oriented television service or distributing, supplying or
producing Adult-Oriented programming in the Media.
"Affiliate" means any Person, directly or indirectly through one or
more intermediaries, controlling, controlled by, or under common control with
the specified Person. The term "control" (and "controlled" and "controlling,"
respectively), as used in the immediately preceding sentence, means the
possession, direct or indirect, of the power to direct or cause the direction of
the management and policies of the specified Person (whether by the holding of
shares or other equity interests, the possession of voting rights or otherwise).
"Agent" has the meaning set forth in Section 13.1.
"Agreement" means this Third Amended and Restated Operating
Agreement, as originally executed and as amended from time to time in accordance
with the terms hereof.
"Amended Affiliation Agreement" means that certain Amended and
Restated Affiliation Agreement, dated the date hereof, by and between the
Company and PTV BV.
"Annual Budget" has the meaning set forth in Section 6.2.
"Articles" means the Articles of Organization for the Company
originally filed with the California Secretary of State and as amended from time
to time.
"Bankruptcy" with respect to a Member means: (a) the filing of an
application by a Member for, or such Member's consent to, the appointment of a
trustee, receiver, or custodian of such Member's other assets; (b) the entry of
an order for relief with respect to a Member in proceedings under the Bankruptcy
Code, as amended or superseded from time to time; (c) the making by a Member of
a general assignment for the benefit of creditors; (d) the entry of an order,
judgment, or decree by any court of competent jurisdiction appointing a trustee,
receiver, or custodian of the assets of a Member unless the proceedings and the
person appointed are dismissed within ninety (90) days; or (e) the failure by a
Member generally to pay such Member's debts as the debts become due within the
meaning of Section 303(h)(l) of the Bankruptcy Code, as determined by the
Bankruptcy Court, or the admission in writing of such Member's inability to pay
its debts as they become due.
"Bankruptcy Code" means the United States Bankruptcy Code, 11 U.S.C.
101 et seq.
2
"Basic Cable" has the meaning currently or hereafter commonly
understood in the television industry, but will also include for all purposes of
this Agreement any broadcast or other transmission (whether by satellite or
otherwise) to television sets or other television devices, now or hereafter
known, of a program service (other than any free television terrestrial
broadcast station) (a) that is included as part of a package of program services
for which members of the public pay a periodic fee for the right to receive such
package of program services, and (b) for which program service a separate fee is
not generally charged for the right to receive the particular service in
question.
"Branded" means a television service or a Program or block of
Programs where PEGI's or any PEGI Affiliate's name or trademarks are used either
in connection or close affiliation with the service or the Program or block of
Programs, or any related advertising.
"Branded Format Programming" has the meaning set forth in the
Program Supply Agreement.
"Business Plan" has the meaning set forth in Section 6.1.
"Capital Account" means with respect to any Member the capital
account that the Company establishes and maintains for such Member pursuant to
Section 3.4 and Article 1 of Exhibit B.
"Capital Call" has the meaning set forth in Section 3.3.
"Capital Call Due Date" has the meaning set forth in Section 3.3.
"Capital Contribution" means the total value of cash and fair market
value of property (including promissory notes or other obligation to contribute
cash or property) contributed and/or services rendered or to be rendered to the
Company by Members, other than the Venus Contribution.
"Caribbean Basin" means the following territories: Anguilla, Antigua
and Barbuda, Aruba, Barbados, Bermuda, The British Virgin Islands, The Cayman
Islands, Cuba, Dominica, Dominican Republic, Grenada, Haiti, Jamaica,
Montserrat, St. Kitts & Nevis, St. Lucia, St. Vincent and the Grenadines,
Trinidad and Tobago, and the Turks and Caicos Islands.
"Channels" means Playboy TV - Latin America, the television program
service based on PEGI's Playboy television network as programmed by PEGI in the
United States from time-to-time, the Spice Networks, Venus, the G-Channel and
the Playboy Lifestyle Channel, and any other television program service added
from time-to-time, in each case, as provided for reception within the Territory
by the Company or any of its Subsidiaries in accordance with this Agreement and
the Program Supply Agreement (each, a "Channel").
"Cisneros Group" means (i) Gustavo A. Cisneros, Ricardo J. Cisneros,
their respective wives and direct descendants or any entity, including trusts,
in which Gustavo A. Cisneros and/or Ricardo J. Cisneros or their respective
wives and direct descendants hold, directly or indirectly, at least 50.1% of the
economic benefit or the total shares, participations or interests in (however
designated) corporate stock, partnership interests, limited liability company
interests, or any equivalents thereof of such entity, and which is controlled,
directly or indirectly, by any of such persons; or (ii) any entity, including
trusts, which is controlled, directly or indirectly, by any of Gustavo A.
Cisneros and/or Ricardo J. Cisneros or their respective wives and direct
descendants.
"Claim" has the meaning set forth in Section 15.2.
"Claxson" means Claxson Interactive Group Inc., an International
Business Company incorporated under the laws of the British Virgin Islands.
"Claxson Guarantee Obligation" has the meaning set forth in Section
12.2.3.
3
"Claxson Offer" has the meaning set forth in Section 2.8.
"Code" means the Internal Revenue Code of 1986, as amended from time
to time, the provisions of succeeding law, and to the extent applicable, the
Treasury Regulations.
"Company" has the meaning set forth in the preamble.
"Company Format Programming" has the meaning set forth in the
Program Supply Agreement.
"Company Produced Programming" shall mean Programs produced by the
Company for exhibition on the Channels.
"Company Produced Programming Budget" has the meaning set forth in
Section 6.2.1.
"Corporations Code" means the California Corporations Code, as
amended from time to time, and the provisions of succeeding law.
"CPI" means the Consumer Price Index for all Urban Consumers as
released by the Bureau of Labor Statistics, U.S. Department of Labor. If the
Bureau of Labor Statistics, U.S. Department of Labor (i) substantially revises
the methodology (in contrast to benchmark adjustments or other corrections of
previously published data), (ii) discontinues publication of any of the data
referred to above or (iii) temporarily discontinues publication of any of the
data referred to above, the parties shall select a substitute for the revised or
discontinued data, in order to provide substitute data to lead to the same
adjustment result, insofar as possible, as would have been achieved by
continuing the use of the original data as it may have fluctuated had it not
been revised or discontinued.
"Dissolution Event" has the meaning set forth in Section 12.2.
"Distributable Cash" means the amount of cash that the Management
Committee deems available for distribution to the Members, taking into account
all debts, liabilities and obligations of the Company then due and amounts that
the Management Committee deems necessary to place into reserves for customary
and usual claims with respect to the Company's business.
"Distribution Agreement" means that certain Second Amended and
Restated Distribution Agreement, dated the date hereof, between the Company and
PEGI.
"DTM" has the meaning set forth in Section 3.6.
"DTM Arrangement" has the meaning set forth in Section 3.6.
"EBITDA" means, for any period, the consolidated earnings from
continuing operations of the Company and its Subsidiaries for such period before
interest expense, income taxes, the cumulative effect of changes in accounting
principle, depreciation of property and equipment, amortization of intangible
assets, amortization of investments in entertainment programming and
amortization of deferred financing fees.
"Economic Interest" means a Member's share of one or more of the
Company's Net Income, Net Losses, and distributions of the Company's assets
pursuant to this Agreement and the Act, but shall not include any other rights
of a Member, including, but not limited to, the right to vote or participate in
the management, or except as provided in Section 17106 of the Corporations Code,
any right to information concerning the business and affairs, of the Company.
"Fair Market Value" with respect to the Company or any asset thereof
means the value determined pursuant to Exhibit C.
"Feasibility Study" has the meaning set forth in Section 2.7.
4
"First Amended and Restated Operating Agreement" has the meaning set
forth in the recitals.
"Fiscal Year" means the Company's fiscal year, which shall be the
calendar year.
"Former Member" has the meaning set forth in Section 10.1.
"Former Member's Interest" has the meaning set forth in Section
10.1.
"Fully-Participating Member" has the meaning set forth in Section
3.3.1.
"GAAP" has the meaning set forth in Section 11.1.
"G-Channel" means that certain pay-per-view, adult content channel,
launched in 2004, and owned and distributed by the Company or any successor
channels.
"General Manager" has the meaning set forth in Section 5.4.2.
"Iberia" means Spain, Portugal and Andorra.
"Iberia Arrangements" has the meaning set forth in Section 3.6.
"Imagen" means Imagen Satelital S.A., an Argentine corporation
"Initial Operating Agreement" has the meaning set forth in the
recitals.
"Initial Option Percentage" has the meaning set forth in Section
9.8.
"Lifestyle Linear Television Business" means the business of owning
or operating a Lifestyle Oriented, advertising supported, 24 hours a day 7 days
a week linear television programming service (which may also be distributed on a
pay per view or video on demand basis offered as a premium on demand or
subscription on demand solely to subscribers of the 24 hours a day, 7 days a
week linear television programming service).
"Lifestyle Media Business" means the business of owning or operating
a Lifestyle Oriented programming service or distributing, supplying or producing
Lifestyle Oriented programming in the Playboy Lifestyle Media.
"Lifestyle Oriented" means, with respect to content, programs or
advertising supported Channels, such content, program, or advertising supported
Channel, that is primarily focused on themes associated with the attitudes and
values of a group of persons or social classification, including without
limitation, habits of consumption, dress, recreation and way of living; it being
understood that Lifestyle Oriented content does not include "Adult-Oriented"
content.
"Lifford" has the meaning set forth in the preamble.
"Lifford Managers" has the meaning set forth in Section 5.2.1.
"Lifford US" has the meaning set forth in Section 9.10(b).
"Major Currency" as used herein shall mean US Dollars, UK Pounds,
Euros or Japanese Yen.
"Majority Interest" means one or more Percentage Interests of
Members that taken together exceed fifty percent (50%) of the aggregate of all
Percentage Interests.
"Management Co." means Claxson USA II, Inc., a Florida corporation
(formerly known as Claxson USA, Inc.)
5
"Management Committee" has the meaning set forth in Section 5.1.1.
"Management Services Agreement" means the Amended and Restated
Management Services Agreement dated the date hereof between the Company and
Management Co. relating to the provision of services by Management Co.
"Manager" has the meaning set forth in Section 5.2.1.
"Marketable Security" shall mean common stock or an American
Depositary Receipt that is listed for trading on the New York Stock Exchange,
the NASDAQ National Market System, or the London Stock Exchange.
"Marketing Budget" has the meaning set forth in Section 6.2.1.
"Media" means all forms of linear and nonlinear television
exhibition, transmission and distribution whether now existing or developed in
the future and whether on a subscription, pay-per-view, video-on-demand or free
basis, including but not limited to the following: (i) conventional VHF or UHF
television broadcast, (ii) Basic Cable and pay cable, (iii) "over the air pay"
subscription television (STV), (iv) direct broadcasting by satellite (DBS), (v)
master antenna television systems (MATV), (vi) multipoint distribution services
(MDS), (vii) multichannel multipoint distribution services (MMDS), (viii)
satellite master antenna television systems (SMATV), (ix) microwave transmission
and (x) IP television encrypted to a set top box. Solely with respect to the
Playboy Lifestyle Business (other than the Playboy Lifestyle Channel), Media
shall include the Playboy Lifestyle Media as defined below. Notwithstanding the
foregoing, except as provided herein, in the Program Supply Agreement or any
Related Documents, Media shall exclude Streaming.
"Mediation Period" has the meaning set forth in Section 2.8.1.
"Member" means each Person who (a) is an initial signatory to this
Agreement or has been admitted to the Company as a Member in accordance with
this Agreement and (b) has not resigned, withdrawn, been expelled or dissolved.
"Member Offerees" has the meaning set forth in Section 9.3.
"Membership Interest" means a Member's entire interest in the
Company including the Member's Economic Interest, the right to vote on or
participate in the management, and the right to receive information concerning
the business and affairs, of the Company.
"Negotiated Purchase Price" has the meaning set forth in Section
9.3.
"Net Income" and "Net Losses" have the meanings set forth in Article
2 of Exhibit B hereto.
"Newco" has the meaning set forth in the recitals.
"Non-Contributing Member" has the meaning set forth in Section
3.3.1.
"Notice" has the meaning set forth in Section 16.2.
"Offer Notification" has the meaning set forth in Section 9.3.
"Offered Membership Interest" has the meaning set forth in Section
9.3.
"Optional Capital Contribution" has the meaning set forth in Section
3.3.
"PEGI" has the meaning set forth in the preamble.
6
"PEGI Buy-Up Option" has the meaning set forth in Section 9.8.
"PEGI Managers" has the meaning set forth in Section 5.2.1.
"PEI" means Playboy Enterprises, Inc., a Delaware corporation.
"PEI Rejection" has the meaning set forth in Section 2.8.1.
"PEI Reply" has the meaning set forth in Section 2.8.1.
"PEI Representatives" has the meaning set forth in Section 11.2.4.
"PEI Second Rejection" has the meaning set forth in Section 2.8.1.
"PEI Stock" has the meaning set forth in Section 9.8(b).
"Percentage Interest" means the percentage of a Member set forth
opposite the name of such Member under the column "Member's Percentage Interest"
in Exhibit A hereto, as such percentage may be adjusted from time to time
pursuant to the terms of this Agreement.
"Person" means an individual, general partnership, limited
partnership, limited liability company, corporation, trust, estate, real estate
investment trust, association or any other entity.
"Playboy Lifestyle Business" means, the business of owning or
operating the Playboy Lifestyle Programming Services or distributing, licensing,
sublicensing, supplying or producing Playboy Lifestyle Programming Services in
the Playboy Lifestyle Media.
"Playboy Lifestyle Capital Contribution" has the meaning set forth
in Section 3.3.2.
"Playboy Lifestyle Channel" has the meaning set forth in the Program
Supply Agreement.
"Playboy Lifestyle Channel USA" has the meaning set forth in the
Program Supply Agreement.
"Playboy Lifestyle Channel USA Non-Competition" has the meaning set
forth in Section 2.8.1.
"Playboy Lifestyle Companies" has the meaning set forth in the
recitals.
"Playboy Lifestyle Holding" has the meaning set forth in the
recitals.
"Playboy Lifestyle Media" means the Media and any and all other
forms of audiovisual distribution, exhibition and transmission now known or
hereafter devised, linear and non linear, including but not limited to wireless
transmission technologies, wireless messaging technologies and other wireless
network technologies primarily intended to transmit voice, video, still images,
or data to mobile devices (including cellular phones, handhelds, and personal
digital assistants), video on demand, near video on demand, or portable media
players. Notwithstanding the foregoing, except as provided herein, in the
Program Supply Agreement or any Related Documents, Playboy Lifestyle Media shall
exclude Streaming, including IP television that is not encrypted to a set top
box.
"Playboy Lifestyle Note" means that certain Senior Secured Credit
Promissory Note dated as of the date hereof executed by Playboy Lifestyle
Holding and payable to the order of Lifford, which, except as provided in the
related Pledge and Security Agreement executed as of the date hereof, shall be
nonrecourse to the Company.
"Playboy Lifestyle Programming Service" means any Branded or
Unbranded programming service or content and the marketing thereof in the
Playboy Lifestyle Media, including
7
through promotional websites, that is Lifestyle Oriented and is not Adult
Oriented, including, without limitation, the Playboy Lifestyle Channel.
"Program" or "Programming" means any program which is, or may be
scheduled to be, broadcast or transmitted on the Channels.
"Program Supply Agreement" means the Amended and Restated Program
Supply Agreement, executed concurrently herewith dated the date hereof, between
PEGI and the Company with respect to the supply of programming for the Channels
and the license of certain trademarks.
"Proposed Purchaser" has the meaning set forth in Section 9.4(a).
"PTV BV" has the meaning set forth in Section 9.10(a).
"PTV Holdings" has the meaning set forth in Section 9.10(a).
"PTV UK" has the meaning set forth in Section 3.6.
"PTV US" has the meaning set forth in Section 9.10(a).
"PTV US Affiliation Agreement" means that certain Amended and
Restated Affiliation Agreement, dated the date hereof, by and between the
Company and PTV US.
"Purchase Notification" has the meaning set forth in Section 9.3.
"Reference Rate" means the reference rate as set forth from time to
time by The Bank of America Corporation.
"Related Documents" means those agreements set forth on Exhibit H
attached hereto.
"Remaining Members" has the meaning set forth in Section 10.1.
"Remediable Breach" has the meaning set forth in Section 12.2.2(b).
"Renewal" has the meaning set forth in Section 5.4.5.
"Required Expenditure Adjustment" has the meaning set forth in
Section 6.2.3.
"Response" has the meaning set forth in Section 16.2.
"Rules" has the meaning set forth in Section 16.3.
"Sales Services Agreement" Amended and Restated Sales Services
Agreement, dated as of the date hereof, by and between Imagen and the Company.
"SEC" means the U.S. Securities and Exchange Commission.
"Second Amended and Restated Operating Agreement" has the meaning
set forth in the recitals.
"Second Option Percentage" has the meaning set forth in Section 9.8.
"Securities Act" has the meaning set forth in Section 15.1.6.
"Securities Exchange Act" means the Securities Exchange Act of 1934,
as amended.
"Selling Member" has the meaning set forth in Section 9.3.
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"Shortfall" has the meaning set forth in Section 6.2.3.
"Spice Networks" means collectively, Spice Digital Networks, Club
Jenna, Spice:Xcess, fresh! and shorteez, and successor networks, if any, as PEGI
may include from time-to-time, as programmed by PEGI.
"Streaming" means the delivery of audio and/or visual programming
whether in real time or by program download (including, but not limited to,
RealVideo, any format that operates on the Windows Media Player or any other
streaming or direct download audio and/or visual software) through the data
delivery protocol known as TCP/Internet Protocol or any successor or replacement
protocol to any recipient for purposes of viewing.
"Subsequent Transfer Offer Period" has the meaning set forth in
Section 9.3.
"Subsequent Third-Party Transfer Offer Period" has the meaning set
forth in Section 9.4(b).
"Subsidiary" means, with respect to any Person at any time, any
corporation, partnership, limited liability company or other entity, a majority
of the equity interests of which shall, at the time as of which any
determination is made, be owned, controlled or held by such Person either
directly or through Subsidiaries of such Person.
"Tax Matters Member" shall be Lifford or such Member's successor as
designated pursuant to Section 11.8.
"Term" has the meaning set forth in Section 12.1.
"Terms" has the meaning set forth in Section 9.3.
"Territory" means (a) Mexico and each country comprising Central and
South America; (b) Spain, Portugal and Andorra (c) the Caribbean Basin and (d)
the territories and possessions of each of the foregoing.
"Third Party" has the meaning set forth in Section 17.14.2(a).
"Third Party Buyer" has the meaning set forth in Section 9.3.
"Third Party Transfer Notice" has the meaning set forth in Section
9.4(a).
"Third-Party Transfer Offer Period" has the meaning set forth in
Section 9.4(b).
"Transfer" has the meaning set forth in Section 9.1.
"Transfer Offer Period" has the meaning set forth in Section 9.3.
"Treasury Regulations" has the meaning set forth in Exhibit B.
"Unbranded" means a television service or a Program or block of
Programs where PEGI's or any PEGI Affiliate's name or trademarks are not used
either in connection or close affiliation with the service or the Program or
block of Programs or any related advertising other than in customary production,
logo credits or end sequences of such Program or block of Programs, for use
solely in the credit block in advertising for such Program, where applicable.
"US Lifestyle Territory" means the United States and Canada, their
territories and possessions.
"US Option Confirmation" has the meaning set forth in Section 2.8.1.
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"US Option Period" has the meaning set forth in Section 2.8.1.
"Venus" means that certain premium and pay-per-view adult content
channel, launched in 1994, and owned and distributed throughout Latin America by
Claxson and its Subsidiaries and Affiliates.
"Venus Argentina" has the meaning set forth in Section 9.11.
"Venus Assets" has the meaning set forth in the Venus Contribution
Agreement.
"Venus Contribution" means Claxson's contribution of Venus to the
Company pursuant to the Venus Contribution Agreement.
"Venus Contribution Agreement" means that certain Venus Contribution
Agreement dated as of December 23, 2002, by and among Claxson, Lifford, the
Company and PEGI.
"Venus Entities" has the meaning set forth in Section 9.11.
"Venus International" has the meaning set forth in Section 9.11.
"Web Site Revenue Share Agreement" means the Amended and Restated
Web Site Revenue Share Agreement, dated the date hereof, by and among
Playboy.com, Inc., a Delaware corporation, Claxson and the Company.
"Wireless Distribution Agreement" means the Wireless Distribution
Agreement, dated September 1, 2005, by and between Playboy.com, Inc. and the
Company which the parties agree will be amended or restated to reflect the
Playboy Lifestyle Business within thirty (30) days of the date hereof.
"Withdrawal Dissolution Event" means, with respect to any Member,
one or more of the following: the expulsion, Bankruptcy, dissolution or
occurrence of any other event that terminates the continued membership of any
Member unless the other Member(s) consent to continue the business of the
Company pursuant to Section 10.1.
"Zagasse" has the meaning set forth in Section 9.10(b).
ARTICLE II
ORGANIZATIONAL MATTERS
2.1 Formation. Pursuant to the Act, the Members formed a limited liability
company under the laws of the State of California by filing the Articles with
the California Secretary of State and entering into the Initial Operating
Agreement. The rights and liabilities of the Members shall be determined
pursuant to the Act and this Agreement. To the extent that the rights or
obligations of any Member are different by reason of any provision of this
Agreement than they would be in the absence of such provision, this Agreement
shall, to the extent permitted by the Act, control.
2.2 Name. The name of the Company shall be "Playboy TV - Latin America,
LLC." The Management Committee shall be permitted to change the name of the
Company to any name approved by the PEGI Managers, such approvals not to be
unreasonably withheld. The business of the Company may be conducted under such
name in compliance with applicable laws. The General Manager shall file any
fictitious name certificates and similar filings, and any amendments thereto,
that the Management Committee considers appropriate or advisable.
Notwithstanding the foregoing, if there is no PEGI Manager on the Management
Committee or PEGI is no longer a Member, at PEGI's request the Articles shall be
amended to change the name of the Company to a name that does not contain or
utilize any Playboy trademarks or any confusingly similar designation or mark.
10
2.3 [Intentionally Omitted].
2.4 Office and Agent. The Company shall continuously maintain an office
and registered agent in the State of California as required by the Act. The
principal office of the Company shall be as the Management Committee may
determine. The Company also may have such offices, anywhere within and without
the State of California, as the Management Committee from time to time may
determine, or the business of the Company may require. The registered agent
shall be as stated in the Articles or as otherwise determined by the Management
Committee.
2.5 Addresses of the Members, the Managers and the General Manager. The
respective addresses of the Members are set forth on Exhibit A, which exhibit
will be modified from time to time to reflect changes therein. The respective
addresses of the Managers and the General Manager shall be maintained in the
books of the Company and made available to any Member on request.
2.6 Purpose of Company. The purpose of the Company is to engage in any
lawful activity for which a limited liability company may be organized under the
Act. Notwithstanding the foregoing, without the majority approval of the
Management Committee and subject to the veto right under Section 5.1.2(a), the
Company shall not engage in any business other than (i) the Adult-Oriented
Television Business in the Territory; (ii) licensing programming to third
parties in the Territory, except for Company Produced Programming, which can be
distributed worldwide to PEGI or one of its Affiliates pursuant to the terms of
the Distribution Agreement; (iii) development and marketing of Adult-Oriented
commercial websites, subject to any restrictions set forth in the Web Site
Revenue Share Agreement, targeted to Spanish and Portuguese language audiences
in the Territory, including the Company websites, Venus commercial website and
Spice websites; (iv) the Playboy Lifestyle Business in the Territory; (v)
licensing Company Produced Programming and Company Format Programming produced
for the Playboy Lifestyle Business (other than Branded Format Programming) or
otherwise to third parties worldwide in any and all media now known or hereafter
devised; (vi) content distribution via wireless media in the Territory,
including pursuant to the Wireless Distribution Agreement; and (vii) such other
activities ancillary and related thereto as may be necessary, advisable or
appropriate, in the reasonable opinion of the Management Committee to further
the businesses set forth in clauses (i) - (vi) above. Notwithstanding any
territorial or other restrictions contained in this Agreement, the parties
hereto acknowledge that the distribution of the Channels in Puerto Rico in the
Spanish language via DirecTV Latin America, LLC, so long as such distribution is
conducted solely in Puerto Rico in Spanish via DTH, shall not be deemed to
violate any such territorial restrictions. Notwithstanding any territorial or
other restrictions contained in this Agreement, Branded Company Produced
Programming and Branded Company Format Programming produced for the Playboy
Lifestyle Business may only be exploited in the US Lifestyle Territory with the
written consent of PEGI, such consent not to be unreasonably withheld.
2.7 Feasibility Study. The Playboy Lifestyle Companies shall conduct and
complete a feasibility study (the "Feasibility Study") within twenty one (21)
months of this Agreement, to determine the feasibility and economic benefit of
creating a Playboy Lifestyle Channel USA in both the English and Spanish
languages in the US Lifestyle Territory. The cost incurred by the Playboy
Lifestyle Companies to complete or cause the Feasibility Study to be completed
shall be financed by the proceeds of the Playboy Lifestyle Note and shall not
exceed Five Hundred Thousand Dollars (U.S.$500,000). If the costs incurred for
the completion of the Feasibility Study are less than U.S.$200,000, PEI shall
have the right to reject the Feasibility Study to serve as the basis for Claxson
to make the Claxson Offer (as defined below). The Playboy Lifestyle Companies
shall actively seek input from and provide updates for each stage of the
Feasibility Study to representatives of each of Claxson and PEI. Upon completion
of the Feasibility Study, the Playboy Lifestyle Companies shall furnish a copy
of the Feasibility Study to Claxson and PEI.
11
2.8 Option to Develop the Playboy Lifestyle Channel USA in the US
Lifestyle Territory.
2.8.1 On or prior to the date that is ninety (90) days after the
completion of the Feasibility Study, Claxson may, in its sole and discretionary
option, offer to PEI a written proposal for the creation, including a suggested
time frame for the launch, of the Playboy Lifestyle Channel USA in the US
Lifestyle Territory which shall not exceed 12 months from the US Option
Confirmation (the "Claxson Offer"). If Claxson fails or refuses to make a timely
Claxson Offer, all of the terms and conditions related to the US Lifestyle
Territory shall be null and void and of no further effect and PEI shall have no
further obligations with respect to the Playboy Lifestyle Channel USA in the US
Lifestyle Territory including PEI's and its Subsidiaries non compete obligations
set forth in Section 14.3.1, provided, however, that Claxson shall be bound by
the non compete obligations regarding the Lifestyle Linear Television Business
in the US Lifestyle Territory set forth in Sections 14.3.2 and 14.3.4. If
Claxson makes a timely Claxson Offer to PEI, PEI shall have ninety (90) days to,
in writing, accept, reject or provide comments and modifications in good faith
to the Claxson Offer (the "PEI Reply"). If PEI accepts the Claxson Offer it will
be deemed as a "US Option Confirmation". If PEI rejects the Claxson Offer or
fails or refuses to make a timely PEI Reply it will be deemed as a rejection
("PEI Rejection") and PEI and its Subsidiaries shall be bound by the non compete
obligations regarding the Lifestyle Linear Television Business in the US
Lifestyle Territory set forth in Sections 14.3.3 and 14.3.4. If PEI provides
Claxson with a timely PEI Reply other than a US Option Confirmation, the parties
shall have an additional thirty (30) days to meet, confer and agree to the terms
and conditions of the Claxson Offer as modified by the PEI Reply and as further
negotiated by the parties in such 30-day period. If Claxson fails or refuses to
meet and confer with PEI during such 30-day period, all of the terms and
conditions related to the US Lifestyle Territory shall be null and void and of
no further effect and PEI shall have no further obligations with respect to the
Playboy Lifestyle Channel USA in the US Lifestyle Territory including PEI's and
its Subsidiaries non compete obligations set forth in Section 14.3.1, provided,
however, that Claxson shall be bound by the non compete obligations regarding
the Lifestyle Linear Television Business in the US Lifestyle Territory set forth
in Sections 14.3.2 and 14.3.4. If the parties can not agree on the terms and
conditions during such thirty (30) day period, the parties shall continue their
discussions in good faith for a period of 180 days (the "Mediation Period") with
the participation of a non-binding mediator appointed by the parties who will
work in mediating and resolving the differences for the launch and development
of the Playboy Lifestyle Channel USA in the US Lifestyle Territory. Unless the
parties otherwise agree, Fred Vierra shall act as the mediator. If Claxson fails
or refuses to participate during the Mediation Period, all of the terms and
conditions related to the US Lifestyle Territory shall be null and void and of
no further effect and PEI shall have no further obligations with respect to the
Playboy Lifestyle Channel USA in the US Lifestyle Territory including PEI's and
its Subsidiaries non compete obligations set forth in Section 14.3.1, provided,
however, that Claxson shall be bound by the non compete obligations regarding
the Lifestyle Linear Television Business in the US Lifestyle Territory set forth
in Sections 14.3.2 and 14.3.4. If during the Mediation Period the parties agree
to the terms and conditions for the creation, including a suggested time frame
for the launch, of the Playboy Lifestyle Channel USA in the US Lifestyle
Territory, it will be deemed a "US Option Confirmation." If after the expiration
of the Mediation Period, the parties have not reached an agreement for the
launch and development of the Playboy Lifestyle Channel USA in the US Lifestyle
Territory it will be deemed a rejection by PEI to launch the Playboy Lifestyle
Channel USA in the US Lifestyle Territory ("PEI Second Rejection"), and PEI and
its Subsidiaries shall be bound by the non-competition provisions related to the
Lifestyle Linear Television Business in the US Lifestyle Territory set forth in
Sections 14.3.3 and 14.3.4 ("Playboy Lifestyle Channel USA Non-Competition"). If
the parties reach an agreement on the terms and conditions for the launch and
development of the Playboy Lifestyle Channel USA in the US Lifestyle Territory,
including an estimated time schedule for the launch of the channel, the parties
shall be bound by the non-competition provisions related to the Lifestyle Linear
Television Business in the US Lifestyle Territory set forth in Section 14.3. The
period from the date of this Agreement until the expiration of the Mediation
Period shall be hereinafter referred to as the "US Option Period".
12
2.8.2 Notwithstanding the above, during the period of discussion of
the Feasibility Study and the negotiation of the Claxson Offer, PEI and Claxson
agree to consult on the potential development and expansion of the Playboy
Lifestyle Channel USA into other forms of media, other than the Playboy
Lifestyle Channel USA, including other forms of non-linear television, on-line
and wireless media distribution.
2.9 On-line Internet Rights Good Faith Negotiation. Except with respect to
the US Lifestyle Territory, PEI and Claxson agree to negotiate in good faith,
for a period of 180 days following the date of this Agreement, to determine
reasonable terms and conditions, for the extension of the distribution of the
Adult Oriented Television Business and the Playboy Lifestyle Business (which for
purposes of the Playboy Lifestyle Business shall include a 6% license fee
calculated based on the gross annual revenues earned and actually collected by
the Playboy Lifestyle Companies for the applicable business), for on-line
Internet rights, including Streaming, in the Territory other than Brazil.
2.10 Playboy Lifestyle Rights of Good Faith Negotiation. If PEI or any of
its Affiliates determines to extend the Playboy Lifestyle Business or a
competing business into any territory outside of the Territory other than the
United States and its territories and possessions which are subject to Section
2.8, PEI agrees to negotiate in good faith with Claxson to determine reasonable
terms and conditions, for the participation of Claxson or its Affiliates in the
extension of the distribution of the Playboy Lifestyle Business into such
territory.
ARTICLE III
CAPITAL CONTRIBUTIONS
3.1 Capital Contribution. Each Member has contributed the amounts set
forth on Exhibit A. Exhibit A shall be revised to reflect any additional
contributions contributed in accordance with Section 3.3. Notwithstanding
anything to the contrary contained herein, the parties agree and acknowledge
that the Venus Contribution shall have no impact on the Capital Accounts of
Lifford and PEGI.
3.2 Additional Capital Contributions. No Member shall be required to make
any additional Capital Contributions.
3.3 Optional Capital Contributions. The Management Committee may
reasonably determine in good faith from time to time, that additional Capital
Contributions from the Members (each, an "Optional Capital Contribution") are
necessary or appropriate for the conduct of the Company's business, including
without limitation, expansion or diversification thereof. Upon the Management
Committee making such a determination, the Company shall provide written notice
of such request for additional Capital Contributions (a "Capital Call") to each
Member not less than thirty (30) days prior to the date such Optional Capital
Contributions are due (the "Capital Call Due Date"). Such notice shall set forth
the aggregate amount of the Capital Call, the purposes for which such Capital
Contributions will be used and the date on which Optional Capital Contributions
are due. No Member shall be obligated to make any such Capital Contributions.
However, each Member shall have the opportunity, but not the obligation, to
participate in a Capital Call on a pro rata basis in accordance with its
Percentage Interest by making an Optional Capital Contribution. In addition, a
Member may elect to make its Optional Capital Contribution conditional (a
"Conditional Capital Contribution") upon the other Members making their
respective Optional Capital Contributions, in which event such Conditional
Capital Contribution shall be deemed made, if at all, only at such time as the
other Members make their respective Optional Capital Contributions. If a Member
elects to make a Conditional Capital Contribution and the other Members decline
or fail to make their respective Optional Capital Contributions, then the
Company shall immediately return the Conditional Capital Contribution to the
Member making such Conditional Capital
13
Contribution and such Conditional Capital Contribution shall be deemed never to
have been made. Immediately following any Optional Capital Contribution by a
Member, the Percentage Interests shall be adjusted to reflect the new relative
proportions of the Capital Accounts of the Members. Each of Lifford and PEGI
will have the right, by written notice to the General Manager and the other
Members at least five (5) business days prior to the Capital Call Due Date, to
fund its Optional Capital Contributions through retention by the Company of the
fees payable under the Related Documents then accrued, to the extent sufficient
to cover such requirements, subject to the timely review and approval of the
other Members of the offset amount.
3.3.1 If a Member (a "Non-Contributing Member") does not make an
Optional Capital Contribution equal to its pro rata share of the Capital Call by
the Capital Call Due Date, the Company shall notify each Member that made an
Optional Capital Contribution equal to its pro rata share of such Capital Call
(each, a "Fully-Participating Member") that such Fully-Participating Member may,
within the fourteen (14) day period from the date of such notice, increase its
Optional Capital Contribution to the Company to cover amounts that the
Non-Contributing Member declined to contribute on a pro rata basis, in which
case the Percentage Interests of the Members shall be adjusted to reflect the
new relative proportions of the Capital Accounts of the Members.
3.3.2 Until the full payment or acceleration of all Obligations (as
defined in the Playboy Lifestyle Note) under the Playboy Lifestyle Note, the
Members of the Company (other than Lifford or its Affiliates who are then
Members of the Company) shall have the option to make an additional Capital
Contribution in an amount equal to the number obtained by multiplying the
aggregate amount of such Members' Percentage Interest by the quotient obtained
by dividing the sum of the outstanding amount of principal and interest then
outstanding under the Playboy Lifestyle Note by Lifford's (or its Affiliates who
are then Members of the Company) Percentage Interest (the "Playboy Lifestyle
Capital Contribution"). This option may only be exercised if all of the Members
of the Company (other than Lifford or its Affiliates who are then Members of the
Company) agree to make the Playboy Lifestyle Capital Contribution. If this
option is exercised (i) the Company shall immediately contribute the amount of
the Playboy Lifestyle Capital Contribution to the Playboy Lifestyle Companies
and (ii) Lifford (or its Affiliates who are then Members of the Company) shall
be deemed to have made a Playboy Lifestyle Capital Contribution in the amount of
principal and interest outstanding under the Playboy Lifestyle Note and the loan
evidenced by the Playboy Lifestyle Note shall be capitalized and converted into
Membership Interests which for the avoidance of doubt shall result in no change
in the respective Member's Percentage Interest. For purposes of illustration
only, if $81.00 in principal and simple interest is owed under the Playboy
Lifestyle Note and Lifford's Percentage Interest is 81% and PEGI's Percentage
Interest is 19% and the Members agree to make the Playboy Lifestyle Capital
Contribution, then PEGI will be required to make a Capital Contribution of
$19.00 to the Company and in exchange for the capitalization of the Playboy
Lifestyle Note, Lifford will be deemed to have made a Capital Contribution of
$81.00 through the surrender and capitalization of the loan under the Playboy
Lifestyle Note for the same amount and as a result, no change in the respective
Member's Percentage interest will occur. ( i.e., .19 x ($81/.81) = $19). For
clarification purposes, pursuant to Section 8 of the Playboy Lifestyle Note,
upon the exercise of the option to make the Playboy Lifestyle Capital
Contribution, the total amount of interest accrued under the Playboy Lifestyle
Note, whether paid or unpaid, shall be recalculated as simple interest, without
compounding.
3.4 Capital Accounts. The Company has established an individual Capital
Account for each Member in accordance with Article 1 of Exhibit B hereto. If a
Member transfers all or a part of its Membership Interest in accordance with
this Agreement, such Member's Capital Account attributable to the transferred
Membership Interest shall carry over to the new owner of such Membership
Interest pursuant to Treasury Regulations Section l.704-l(b)(2)(iv)(l). Each
Member's Capital Account as of the date hereof is set forth in Exhibit A hereto.
14
3.5 No Interest. No Member shall be entitled to receive any interest on
its Capital Contributions.
3.6 Iberia Agreements. The parties acknowledge that Playboy TV UK Limited,
a wholly owned subsidiary of PEGI ("PTV UK") has entered into certain agreements
through Desarrollos Tecnicos Multimedia s.l. ("DTM"), relating to the
distribution of Private Spice and The Adult Channel in Iberia (the "DTM
Arrangement"). The parties agree and acknowledge that, notwithstanding anything
to the contrary contained in the Agreement, PEGI shall have the right to modify
the DTM Arrangement and enter into other arrangements, in its own right or
through its Affiliates or agents, to distribute Private Spice in Iberia, as
determined by PEGI in its sole and absolute discretion from time to time,
including but not limited to via DTH (together with the DTM Arrangement, the
"Iberia Arrangements"). The parties hereby agree that PEGI shall pay over to the
Company fifty percent (50%) of the net revenues that it receives from the Iberia
Arrangements, net of all payments due and payable to its agents relating to the
Iberia Arrangement and any withholding required by applicable law, following the
end of the applicable quarter. It is understood and agreed that the initial
sales agent for distribution of Private Spice in Iberia other than the DTM
Arrangement will be Imagen pursuant to the Sales Services Agreement.
ARTICLE IV
ALLOCATIONS OF NET INCOME AND NET LOSSES AND DISTRIBUTIONS
4.1 Allocations of Net Income and Net Loss. Net Income and Net Loss shall
be allocated to the Members in accordance with Article 1 of Exhibit B.
4.2 Distribution of Distributable Cash by the Company. Subject to
applicable law and any limitations contained elsewhere in this Agreement, the
Management Committee shall cause the Company to distribute Distributable Cash on
a quarterly basis to the Members, which distributions shall be made to the
Members in proportion to their Percentage Interests as of the end of the
relevant quarter.
4.3 Form of Distribution. Except as provided in Section 12.7, a Member,
regardless of the nature of the Member's Capital Contribution, has no right to
demand and receive any distribution from the Company in any form other than
money. No Member may be compelled to accept from the Company a distribution of
any asset in kind in lieu of a proportionate distribution of money being made to
other Members. Except upon a dissolution and the winding up of the Company, no
Member may be compelled to accept a distribution of any asset in kind.
4.4 Restriction on Distributions.
4.4.1 Restriction. No distribution shall be made if, after giving
effect to the distribution:
(a) The Company would not be able to pay its debts as they become
due in the usual course of business.
(b) The Company's total assets would be less than the sum of its
total liabilities.
4.4.2 Method of Determination. The Management Committee may base a
determination that a distribution is not prohibited on any of the following: (i)
financial statements prepared on the basis of accounting practices and
principles that are generally consistent with those used to prepare the
Company's audited financial statements; (ii) a fair valuation; or (iii) any
other method that is reasonable in the circumstances.
15
Except as provided in Section 17254(e) of the Corporations Code, the
effect of a distribution is measured as of the date the distribution is
authorized if the payment occurs within one hundred twenty (120) days after the
date of authorization, or the date payment is made if it occurs more than one
hundred twenty (120) days of the date of authorization.
4.4.3 Personal Liability. A Member or Manager who votes for a
distribution in violation of this Agreement or the Act is personally liable to
the Company for the amount of the distribution that exceeds what could have been
distributed without violating this Agreement or the Act if it is established
that the Member or Manager did not act in compliance with the terms of this
Agreement. Any Member or Manager who is so liable shall be entitled to compel
contribution from (a) each other Member or Manager who also is so liable and (b)
each Member for the amount the Member received with knowledge of facts
indicating that the distribution was made in violation of this Agreement or the
Act.
4.5 Return of Distributions. Except for distributions made in violation of
the Act or this Agreement, no Member shall be obligated to return any
distribution to the Company or pay the amount of any distribution for the
account of the Company or to any creditor of the Company. The amount of any
distribution returned to the Company by a Member or paid by a Member for the
account of the Company or to a creditor of the Company shall be added to the
account or accounts from which it was subtracted when it was distributed to the
Member.
4.6 Withholding. Notwithstanding any other provision of this Agreement,
the Management Committee is authorized to take any action that it determines to
be necessary or appropriate to cause the Company to comply with any federal,
state, local or foreign withholding requirement with respect to any payment,
allocation or distribution by the Company to any Member or other person. Any
amount withheld pursuant to the preceding sentence shall be treated as a
distribution to the Member to which such amount would have been distributed
under this Agreement but for the withholding. If any such withholding
requirement with respect to any Member exceeds the amount distributable to such
Member under this Agreement, or if any such withholding requirement was not
satisfied with respect to any item previously paid, allocated or distributed to
such Member, such Member or any successor or assignee with respect to such
Member's interest hereby indemnifies and agrees to hold harmless the other
Members and the Company for such excess amount or such unsatisfied withholding
requirement, as the case may be, and any penalties assessed on such amounts.
ARTICLE V
MANAGEMENT AND CONTROL OF THE COMPANY
5.1 The Management Committee.
5.1.1 General Scope of Authority. The business and affairs of the
Company shall be managed by a management committee of the Company (the
"Management Committee") appointed and constituted in the manner provided in
Section 5.2 hereof. The Management Committee shall be responsible for all
aspects of the operations and development of the Company and, except as
otherwise expressly provided for in this Agreement, the Management Committee
shall have exclusive authority and full discretion with respect to the
management of the business of the Company and shall have the exclusive right,
power and authority to cause the Company to do, or cause to be done, all acts
and actions which in its sole judgment are necessary, proper, convenient or
desirable in order to operate and conduct the business of the Company and to
carry out and fulfill the purposes of the Company.
5.1.2 Veto Rights. Notwithstanding anything to the contrary
contained in this Agreement: (i) the Lifford Managers may (so long as Lifford or
any of its Affiliates is a Manager) and the PEGI Managers may (so long as PEGI
or any of its Affiliates is a Manager) veto any decision of the
16
Management Committee to perform, or cause the Company to perform, any of the
acts or transactions described in subsections (d) and (h) below; and (ii) the
Lifford Managers may (so long as Lifford and its Affiliates hold, in aggregate,
Percentage Interests equal to at least 10%) and the PEGI Managers may (so long
as PEGI and its Affiliates hold, in aggregate, Percentage Interests equal to at
least 10%) veto any decision of the Management Committee to perform, or cause
the Company to perform, any of the following acts or transactions:
(a) any material change in the basic business of the Company as
defined in Section 2.6;
(b) any material acquisition or sale by the Company of any business
(whether by asset purchase, stock purchase, merger or other business
combination);
(c) any borrowing by the Company or making or guaranteeing loans by
the Company or incurrence or guaranteeing of obligations of others by the
Company in the aggregate at any time exceeding the lesser of (i) one times
EBITDA of the Company for the most recent Fiscal Year or (ii) $5.0 million;
provided, however, that the Company may not pledge, transfer, assign or
otherwise encumber its rights under any agreements with PEI (or its Affiliates),
including without limitation, any of the Related Documents, in connection with
the foregoing;
(d) the sale of all or substantially all of the assets of the
Company or the merger, consolidation or reorganization of the Company with or
into another Person;
(e) the acceptance of any additional capital other than Optional
Capital Contributions or Playboy Lifestyle Capital Contributions from any Member
pursuant to Section 3.3;
(f) the issuance of Membership Interests except in connection with
an Optional Capital Contribution or a Playboy Lifestyle Capital Contribution for
a Member pursuant to Section 3.3;
(g) other than pursuant to the Related Documents, transactions with
any Member or any Affiliate of any Member;
(h) commencement by the Company of a voluntary case under the
Bankruptcy Code or any applicable bankruptcy, insolvency or other similar law
now or hereafter in effect; or consent by the Company to the entry of an order
for relief in an involuntary case, or to the conversion of an involuntary case
to a voluntary case under any such law; or consent by the Company to the
appointment of or taking of possession by a receiver, trustee or other custodian
for all or substantially all of its property; or making by the Company of a
general assignment for the benefit of creditors;
(i) any amendment, modification or waiver relating to a Related
Document;
(j) any distribution by the Company on the Membership Interests
other than distributions of Distributable Cash;
(k) loans by the Company to any Member or any Affiliate of any
Member;
(l) the selection or replacement of the Company's accountants if the
selected or replacement accountants are not one of the following firms:
PricewaterhouseCoopers, LLP, KPMG, LLP, Ernst & Young, LLP or Deloitte & Touche
LLP or
17
(m) (i) filing any tax return or (ii) making any tax election or
taking any position with respect to any examination audit or proceeding by a
taxing authority that could have an adverse impact on any Member or the Company.
The PEGI Managers and the Lifford Managers shall cause the Company to
enforce the veto rights set forth in this Section to apply to the Company's
Subsidiaries.
5.2 Members of the Management Committee; Appointment and Removal; Voting.
5.2.1 For so long as Lifford (or its Affiliates) and PEGI (or its
Affiliates) are the only Members, the Management Committee shall consist of five
members, three representatives selected by Lifford (the "Lifford Managers") and
two representatives selected by PEGI (the "PEGI Managers"). The number of
Managers shall not be amended without the approval of both the Lifford and the
PEGI Managers. No other Member shall have the right to appoint Managers. Each
member of the Management Committee is referred to as a "Manager", and,
collectively, as the "Managers". A Manager need not be a resident of the State
of California or a citizen of the United States. To the fullest extent permitted
by law, no Manager shall be deemed an agent or sub-agent of the Company. Each
Member, by execution of this Agreement, agrees to, consents to, and acknowledges
the delegation of powers and authority to such Managers and the Management
Committee, and to the actions and decisions of such Managers and the Management
Committee within the scope of such Manager's and Management Committee's
authority as provided herein. No Manager shall have the authority in his
capacity as a Manager to enter into any transaction on behalf of the Company.
5.2.2 Each of Lifford and PEGI shall have the absolute and
unconditional right from time to time to designate the Managers appointed by it
by delivery of written notice to the Members. A Manager may be removed with or
without cause at the sole discretion of the Member that appointed that Manager
by delivery of written notice to the other Members. A vacancy on the Management
Committee may only be filled by the Member that originally appointed the Manager
whose death, disability, removal or resignation created such vacancy. Each of
Lifford and PEGI shall also have the right to appoint alternates to each Manager
by designating the name of such alternates in a written notice to the other
Members. In case of the absence of a Manager, any individual designated as an
alternate for that Manager shall have the right and power to exercise all rights
and powers of the absent Manager.
5.2.3 The current Lifford Managers and PEGI Managers will serve on
the Management Committee until their death, disability, removal or resignation.
5.2.4 Except as provided in Section 5.1.2 or as otherwise
specifically provided in this Agreement, the affirmative vote of Managers
holding the Majority Interests shall be required for any decision or approval of
the Management Committee or to cause the Company to engage in any act or
transaction. The Managers shall have voting power in proportion to the ratio of
Percentage Interests held by the Member appointing them. All Managers appointed
by a Member will collectively exercise such voting power and each Member
entitled to designate Managers will designate one Manager to vote on behalf of
all Managers appointed by such Member in the event of a disagreement among the
Managers appointed by such Member.
5.3 Meetings of the Management Committee.
5.3.1 Regular quarterly meetings of the Management Committee shall
be held without call or notice at such time as shall from time to time be fixed
by standing resolution of the Management Committee. Special meetings of the
Management Committee may be held at any time whenever called by any Manager.
Written Notice of a special meeting of the Management Committee shall be given
to the
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other Managers by the Manager calling the meeting at least seventy-two (72)
hours before such special meeting.
5.3.2 All meetings of the Management Committee shall be held at such
location as the Management Committee shall agree by majority vote; provided,
however, at least one (1) meeting per year shall be held in Miami or Los Angeles
as the Management Committee shall agree by majority vote. The presence of at
least one Lifford Manager and at least one PEGI Manager at a duly noticed
meeting of the Management Committee shall constitute a quorum for the
transaction of business; provided, however, that with respect to the taking of
any action for which the vote of any Managers may be excluded or any matter for
which a unanimous vote is required to take action (e.g., pursuant to Section
5.1.2), the presence of at least one Manager appointed by each Member whose
Managers are entitled to vote on such action shall constitute a quorum for
purpose of taking such action. Managers may participate in a meeting through the
use of conference telephone or similar communications equipment, and such
Managers shall be considered present in person as long as all Managers
participating in such meeting can hear one another.
5.3.3 Every act of the Management Committee taken at any meeting of
the Management Committee, however called and noticed or wherever held, shall be
as valid as though made or performed at a meeting duly held after regular call
and notice, if a quorum is present and if, either before or after the meeting,
each of the Managers not present or who, though present, has prior to the
meeting or at its commencement, protested the lack of proper notice to such
Manager, signs a written waiver of notice or a written consent to holding such
meeting or approval of the minutes thereof.
5.3.4 Any action required or permitted to be taken at any meeting of
the Management Committee may be taken without a meeting if one Lifford Manager
and one PEGI Manager consent thereto in writing, and the writing is filed with
the minutes of proceedings of the Management Committee.
5.4 Delegation of Authority; General Manager and Other Officers.
5.4.1 General Power to Delegate Authority. The Management Committee
may delegate the right, power and authority to manage the day-to-day business,
affairs, operations and activities of the Company to any officer of the Company
or Management Co. pursuant to the Management Services Agreement, or to any other
Person with the prior approval of the PEGI Managers, subject to the ultimate
direction, control and supervision of the Management Committee; provided,
however, that no officer or other Person, including without limitation
Management Co., shall be authorized to take any action or engage in any activity
where unanimous approval of the Management Committee is required or where the
approval of a specified Person is required, without first obtaining the required
approvals.
5.4.2 The General Manager. The Members intend that the Management
Committee delegate the management of the day-to-day business, affairs,
operations and activities of the Company to a general manager (the "General
Manager"). Subject to the supervisory powers of the Management Committee, the
General Manager shall have general and active management of the business of the
Company and shall see that all orders and resolutions of the Management
Committee are carried into effect. The General Manager shall have the power to
execute any agreements and instruments on behalf of the Company, except where
the execution thereof shall be expressly reserved by the Management Committee or
delegated by the Management Committee to some other officer or agent of the
Company. The General Manager shall have such other powers and duties as may be
prescribed by the Management Committee or this Agreement.
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5.4.3 Duties of the General Manager. Unless and until any of the
following duties are delegated to another officer by the Management Committee,
the General Manager shall:
(a) attend all meetings of the Management Committee and all meetings
of the Members, unless directed not to do so by the Management Committee, and
record all the proceedings of the meetings in a book to be kept for that
purpose;
(b) give, or cause to be given, notice of all special meetings of
the Management Committee and all meetings of the Members;
(c) keep, or cause to be kept, at the principal executive office, a
register, or a duplicate register, showing the names of all Members and their
addresses, their Percentage Interests, and all documents described in this
Agreement or required under the Act to be maintained at the principal executive
office of the Company;
(d) keep and maintain, or cause to be kept and maintained, adequate
and correct books and records of accounts of the properties and business
transactions of the Company, including accounts of its assets, liabilities,
receipts, disbursements, gains, losses, capital, Membership Interests and
Economic Interests, which books of account shall at all reasonable times be open
to inspection by any Manager or his/her representatives;
(e) have or supervise the custody of the funds and securities of the
Company, keep or cause to be kept full and accurate accounts of receipts and
disbursements in books belonging to the Company, and deposit or cause to be
deposited all monies and other valuable effects in the name and to the credit of
the Company in such depositories as may be designated by the Management
Committee;
(f) disburse or cause to be disbursed the funds of the Company as
may be ordered by the Management Committee, taking proper vouchers for such
disbursements, and render to the Management Committee, at their regular
meetings, or when Members so require, at a meeting of the Members, an account of
the financial condition of the Company; and
(g) prepare or cause to be prepared the various financial statements
and reports required to be delivered to the Members in this Agreement.
5.4.4 Additional Officers. The Company may have such other officers
with such powers and duties as the Management Committee shall determine from
time to time.
5.4.5 Officers Serve at the Pleasure of the Management Committee.
Subject to whatever rights an officer may have under a contract of employment
with the Company, all officers of the Company shall serve at the pleasure of the
Management Committee. Other than the renewal on substantially similar terms of
the employment agreement of an officer, including, but not limited to the
General Manager, of the Company (a "Renewal"), the Company shall not enter into
any new employment agreement or amend any existing employment agreement with an
officer of the Company, including, but not limited to, the General Manager,
without the prior approval of the PEGI Managers during any of the following time
periods: (i) the period of time commencing upon the receipt of an Offer
Notification from Lifford pursuant to Section 9.3 hereof and expiring on the
later of (a) the date that PEGI may no longer exercise its right of first offer
or (b) the date of closing on PEGI's purchase of the additional Membership
Interests pursuant to such right of first offer; (ii) the period of time
commencing upon the receipt of a Third-Party Transfer Notice pursuant to Section
9.4 hereof and expiring on the later of (a) the date that PEGI may no longer
exercise its right of first refusal of (b) the date of closing on PEGI's
purchase of the additional Membership Interests pursuant to such right of first
refusal; and (iii) the period of time
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commencing upon PEGI's notice that it is exercising its buy-up option pursuant
to Section 9.8 hereof and expiring upon the closing of PEGI's purchase of
additional Membership Interests pursuant to such buy-up option; provided,
however, that any Renewal during any such time periods shall not be for a term
extending beyond the end of such time periods and shall not result in the
Company being subject to any liabilities with respect to such officer after the
end of such time periods.
5.5 Interested Party Transactions.
5.5.1 Approval. Except for transactions provided in the Related
Documents, the Company shall only engage in a transaction with a Member or any
Affiliate of a Member if the transaction is on terms and conditions fair and
reasonable to the Company and at least as favorable to the Company as those
generally available in a similar transaction between parties operating at arm's
length and is approved by the Management Committee. A transaction shall
conclusively be deemed to have met the above requirements if, after full
disclosure, the transaction is unanimously approved by the Management Committee.
In addition, any transaction between the Company and any member of the Cisneros
Group, for so long as any such member directly or indirectly holds an interest
in Claxson, shall be subject to the approval of the PEGI Managers. Each Member
agrees to disclose to the Management Committee the nature and extent of the
interest of such Member and its Affiliates in any transaction to be acted on by
the Management Committee pursuant to this Section 5.5.1 prior to such action.
Subject to applicable law, if a Member or an Affiliate thereof engages in a
transaction with the Company, such Member and/or such Affiliate shall have the
same rights and obligations with respect thereto as a Person who is not a
Member.
5.5.2 Termination and Remedies. With respect to any contract between
the Company and a Member or any Affiliate of a Member, including but not limited
to every Related Document, the Managers appointed by the Members independent of
such contract shall have the right, acting by majority vote, to determine what
actions, if any, should be taken upon the other party's default or
non-performance and to cause the Company to exercise any and all remedies it may
have under such contract or applicable law, including without limitation, the
termination of such contract.
5.5.3 Priority of Payments. Except for payments to be made pursuant
to the Playboy Lifestyle Note, to the extent such note has not been capitalized
pursuant to Section 3.3.2, the General Manager and the Management Committee
shall cause any payments made to Lifford and its Affiliates to be made pari
passu with payments to be made to PEGI and its Affiliates.
5.6 Performance of Duties; Liability of Managers.
5.6.1 Standards. A Manager shall not be liable to the Company or to
any Member for any loss or damage sustained by the Company or any Member, unless
the loss or damage shall have been the result of fraud, deceit, gross
negligence, reckless or intentional misconduct, or a knowing violation of law by
the Manager. The Managers shall perform their managerial duties in good faith,
in a manner they reasonably believe to be in the best interests of the Company
and its Members, and with such care, including reasonable inquiry, as an
ordinarily prudent person in a like position would use under similar
circumstances. A Manager who so performs the duties of Manager shall not have
any liability by reason of being or having been a Manager of the Company.
5.7 Management Company. The Members intend that the General Manager
delegate certain of the day-to-day operational and financial responsibilities of
the Company to Management Co., subject to the terms and conditions of the
Management Services Agreement. Such services shall be rendered under the
supervision of the General Manager and, as set forth in the Management Services
Agreement, shall include, without limitation, the following services: financial
management, payroll services and
21
accounting; collections and accounts payable; facilities acquisition and
management; and management of day to day business and legal affairs.
5.8 Insurance. The Members shall cause the Company to secure errors and
omissions and other customary liability insurance for the Company covering
exhibitions of programming by the Company, which insurance policies shall meet
Claxson's customary standards, and liability and other insurance covering the
activities of the Company consistent with good business customs and practices in
the Territory and the other locations in which the Company conducts business.
All insurance policies shall name each Member and their respective Affiliates as
named insureds.
ARTICLE VI
BUSINESS PLANS AND ANNUAL BUDGETS
6.1 The Business Plan.
6.1.1 The Business Plan. The Management Committee and the General
Manager shall conduct the business of the Company in accordance with the three
year Business Plans and the Annual Budgets (each as defined below), as adjusted
from time to time by the Management Committee. The financial model for the
operation of the Company and the Channels, as annually updated pursuant to
Section 6.1.2, is the "Business Plan."
6.1.2 Additions to Business Plan. The Business Plan shall be updated
annually by the Management Committee not later than sixty (60) days prior to the
conclusion of the then current Fiscal Year and each Business Plan so adopted
shall cover the next three (3) consecutive Fiscal Years.
6.2 Annual Budgets. The annual update to the Business Plan shall include a
budget for the coming Fiscal Year (the "Annual Budget"). The General Manager
will prepare the Annual Budget and present it to the Management Committee for
approval at least sixty (60) days prior to commencement of the applicable Fiscal
Year. The approved Annual Budget for a given Fiscal Year will supersede the data
contained in the Business Plan for that Fiscal Year.
6.2.1 Adjustment to Annual Budget. Beginning January 1, 2003 and
ending December 31, 2003, the Company shall spend one million dollars
($1,000,000) to produce Company Produced Programming (the "Company Produced
Programming Budget") and shall spend one million two hundred thousand dollars
($1,200,000) for marketing purposes (the "Marketing Budget") for the Channels in
each case not including any amounts spent on the Playboy Lifestyle Programming
Service. For each subsequent Fiscal Year during the term of the Program Supply
Agreement, the Company shall spend the Company Produced Programming Budget and
the Marketing Budget, each of which shall be adjusted each Fiscal Year by any
change in the CPI. Notwithstanding the foregoing, pursuant to Section 9.2 of the
Program Supply Agreement, in the event PEGI elects not to renew the Program
Supply Agreement, Sections 6.2.1, 6.2.2 and 6.2.3 herein shall terminate on
January 1, 2020. Subject to Section 6.2.3, the Company shall not spend less than
the annual Marketing Budget and Company Produced Programming Budget for that
Fiscal Year without the prior written approval of the PEGI Managers.
6.2.2 Required Local Programming Expenditures Allocations. In each
of Fiscal Years 2004 through 2007, the Company shall spend at least seventy
percent (70%) of the Company Produced Programming Budget to produce Branded
Company Produced Programming and no more than thirty percent (30%) of the
Company Produced Programming Budget to produce Unbranded Company Produced
Programming. In each of Fiscal Years 2008 through 2022, the Company shall spend
at least sixty percent (60%) of the Company Produced Programming Budget to
produce Branded Company
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Produced Programming and no more than forty percent (40%) of the Company
Produced Programming Budget to produce Unbranded Company Produced Programming.
6.2.3 Adjustment to Company Produced Programming Budget and
Marketing Budget. In the event that the Company would be unable to meet its
obligations as they become due if it met its payment obligations to PEGI
pursuant to the Program Supply Agreement (a "Shortfall"), the Management
Committee, in its sole discretion, may reduce the amount of the annual Company
Produced Programming Budget and annual Marketing Budget by an amount equal to
the Shortfall in order to allow the Company to make such payments to PEGI (a
"Required Expenditure Adjustment"); provided, however, except for payments
required to be made pursuant to the Playboy Lifestyle Note, the Management
Committee shall cause any payments made to PEGI or Lifford and their respective
Affiliates or members of the Cisneros Group, thereafter to be reduced pari passu
with such Required Expenditure Adjustment; provided, further, that if the cash
flow provided from operations of the Company after any Required Expenditure
Adjustment is sufficient to enable the Company to make all or any part of the
annual Company Produced Programming Budget or annual Marketing Budget in effect
prior to such Required Expenditure Adjustment, then the Company shall fund the
maximum possible local Company Produced Programming Budget and Marketing Budget
until such initial annual required Company Produced Programming Budget or annual
Marketing Budget has been met. The Management Committee shall make no more than
two (2) such Required Expenditure Adjustments during the Term.
ARTICLE VII
[INTENTIONALLY OMITTED]
ARTICLE VIII
MEMBERS
8.1 Limited Liability. Except as required under the Act or as expressly
set forth in this Agreement, no Member shall be personally liable for any debt,
obligation, or liability of the Company, whether that liability or obligation
arises in contract, tort, or otherwise. In the event any Member becomes
personally liable for any debt, obligation or liability of the Company arising
from any action or approval of the Members or Management Committee taken without
the approval of such Member or the Managers appointed by such Member where such
approval is required under the terms hereof, then, in addition to any other
rights set forth herein, the Members taking or who appointed the Managers taking
such action shall indemnify and hold harmless such Member from and against any
liability, loss, claim or damage, including but not limited to, reasonable
attorneys fees and cost, arising from or relating to such action.
8.2 Admission of Additional Members. Subject to Sections 5.1.2 and 9.2,
the Management Committee may admit to the Company additional Members. Any
additional Members shall obtain Membership Interests and will participate in the
management, Net Income, Net Losses, and distributions of the Company on such
terms as are determined by the Management Committee.
8.3 Withdrawals or Resignations. No Member may withdraw or resign from the
Company.
8.4 Termination of Membership Interest. Upon the transfer of a Member's
Membership Interest in violation of this Agreement or the occurrence of a
Withdrawal Dissolution Event as to such Member that does not result in the
dissolution of the Company, the Membership Interest of a Member shall be
terminated by the Managers designated by the other Members or such Membership
Interest shall be purchased by the Company or remaining Members as provided
herein. Each Member acknowledges and agrees that such termination or purchase of
a Membership Interest upon the occurrence of any of the foregoing events is not
unreasonable under the circumstances existing as of the date hereof.
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8.5 Remuneration To Members. Except as otherwise authorized in, or
pursuant to, this Agreement, no Member is entitled to remuneration for acting in
the Company business, subject to the entitlement of Managers or Members winding
up the affairs of the Company to reasonable compensation.
8.6 Members Are Not Agents; No Management Authority. Pursuant to this
Agreement and the Articles, the management of the Company is vested in the
Management Committee. No Member, acting solely in the capacity of a Member, is
an agent of the Company nor can any Member in such capacity bind nor execute any
instrument on behalf of the Company. The Members shall have no power to
participate in the management of the Company except as expressly authorized by
this Agreement and except as expressly required by the Act.
8.7 Meetings of Members.
8.7.1 Date, Time and Place of Meetings of Members; Secretary.
Meetings of Members may be held at such date, time and place within or without
the State of California as the Management Committee may fix from time to time.
No annual or regular meetings of Members is required. At any Members' meeting,
the General Manager shall preside at the meeting and shall act as secretary of
the meeting.
8.7.2 Power to Call Meetings. Unless otherwise prescribed by the
Act, meetings of the Members may be called by the Management Committee acting by
majority vote or by any Member or group of Members holding more than fifteen
percent (15%) of the Percentage Interests for the purpose of addressing any
matters on which the Members may vote.
8.7.3 Notice of Meeting. Written notice of a meeting of Members
shall be sent or otherwise given to each Member not less than ten (10) nor more
than sixty (60) days before the date of the meeting. The notice shall specify
the place, date and hour of the meeting and the general nature of the business
to be transacted. No other business may be transacted at such meeting without
the consent of all Members. Upon written request to the General Manager by any
Person entitled to call a meeting of Members, the General Manager shall
immediately cause notice to be given to the Members entitled to vote that a
meeting will be held at a time requested by the Person calling the meeting, not
less than ten (10) days nor more than sixty (60) days after the receipt of the
request. If the notice is not given within twenty (20) days after the receipt of
the request, the Person entitled to call the meeting may give the notice.
8.7.4 Manner of Giving Notice; Affidavit of Notice. Notice of any
meeting of Members shall be given either personally or by first-class mail or
telegraphic or other written communication, charges prepaid, addressed to the
Member at the address of that Member appearing on the books of the Company or
given by the Member to the Company for the purpose of notice.
8.7.5 Validity of Action. Any action approved at a meeting other
than by unanimous approval of those entitled to vote, shall be valid only if the
general nature of the proposal so approved was stated in the notice of meeting
or in any written waiver of notice.
8.7.6 Quorum. The presence in person or by proxy of the holders of a
Majority Interest shall constitute a quorum at a meeting of Members. The Members
present at a duly called or held meeting at which a quorum is present may
continue to do business until adjournment, notwithstanding the loss of a quorum,
if any action taken after loss of a quorum (other than adjournment) is approved
by at least Members holding a Majority Interest.
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8.7.7 Adjourned Meeting; Notice. Any Members' meeting, whether or
not a quorum is present, may be adjourned from time to time by the vote of the
majority of the Membership Interests represented at that meeting, either in
person or by proxy, but in the absence of a quorum, no other business may be
transacted at that meeting, except as provided in Section 8.7.6. When any
meeting of Members is adjourned to another time or place, notice need not be
given of the adjourned meeting if the time and place are announced at a meeting
at which the adjournment is taken, unless a new record date for the adjourned
meeting is subsequently fixed, or unless the adjournment is for more than
forty-five (45) days from the date set for the original meeting, in which case
the Managers shall set a new record date. At any adjourned meeting the Company
may transact any business that might have been transacted at the original
meeting.
8.7.8 Waiver of Notice or Consent. The actions taken at any meeting
of Members however called and noticed, and wherever held, have the same validity
as if taken at a meeting duly held after regular call and notice, if a quorum is
present either in person or by proxy, and if, either before or after the
meeting, each of the Members entitled to vote, who was not present in person or
by proxy, signs a written waiver of notice or consents to the holding of the
meeting or approves the minutes of the meeting. All such waivers, consents or
approvals shall be filed with the Company records or made a part of the minutes
of the meeting.
Attendance of a Member or its representative at a meeting shall
constitute a waiver of notice of that meeting, except when the Member or such
representative objects, at the beginning of the meeting, to the transaction of
any business because the meeting is not lawfully called or convened, and except
that attendance at a meeting is not a waiver of any right to object to the
consideration of matters not included in the notice of the meeting if that
objection is expressly made at the meeting. Neither the business to be
transacted nor the purpose of any meeting of Members need be specified in any
written waiver of notice.
8.7.9 Action by Written Consent Without a Meeting. Any action that
may be taken at a meeting of Members may be taken without a meeting, if a
consent in writing setting forth the action so taken, is signed and delivered to
the Company within sixty (60) days of the record date for that action by Members
having not less than the minimum number of votes that would be necessary to
authorize or take that action at a meeting at which all Members entitled to vote
on that action at a meeting were present and voted. All such consents shall be
filed with the General Manager and shall be maintained in the Company records.
Any Member giving a written consent, or the Member's proxy holders, may revoke
the consent by a writing received by the General Manager before written consents
of the number of votes required to authorize the proposed action have been
filed.
Unless the consents of all Members entitled to vote have been
solicited in writing, notice of any Member approval without a meeting by less
than unanimous written consent, shall be given at least ten (10) days before the
consummation of the action authorized by such approval to those Members entitled
to vote who have not consented in writing.
8.7.10 Telephonic Participation by Member at Meetings. Members may
participate in any Members' meeting through the use of any means of conference
telephones or similar communications equipment as long as all Members
participating can hear one another. A Member so participating is deemed to be
present in person at the meeting.
8.7.11 Record Date.
(a) Fixed By Managers or Members. To enable the Company to determine
the Members of record entitled to notices of any meeting or to vote, or entitled
to receive any distribution or
25
to exercise any rights in respect of any distribution or to exercise any rights
in respect of any other lawful action, the Management Committee or Members
representing more than fifteen percent (15%) of the Percentage Interests, may
fix, in advance, a record date, that is not more than sixty (60) days nor less
than ten (10) days prior to the date of the meeting and not more than sixty (60)
days prior to any other action.
(b) If Not Fixed. If no record date is fixed, the record date for
determining Members entitled to notice of or to vote at a meeting of Members
shall be at the close of business on the business day preceding the day on which
notice is given or, if notice is waived, at the close of business on the
business day preceding the day on which the meeting is held. The record date for
determining Members entitled to give consent to Company action in writing
without a meeting shall be the day on which the first written consent is given.
The record date for determining Members for any other purpose shall be at the
close of business on the day on which the Management Committee adopts the
resolution relating thereto, or the sixtieth (60th) day prior to the date of the
other action, whichever is later.
8.7.12 Proxies. Every Member entitled to vote on any matter shall
have the right to do so either in person or by one or more agents authorized by
a written proxy signed by the person and filed with the General Manager. A proxy
shall be deemed signed if the Member's name is placed on the proxy (whether by
manual signature, typewriting, telegraphic transmission, electronic transmission
or otherwise) by the Member or the Member's attorney in fact. A proxy may be
transmitted by an oral telephonic transmission if it is submitted with
information from which it may be determined that the proxy was authorized by the
Member or the Member's attorney in fact. A validly executed proxy that does not
state that it is irrevocable shall continue in full force and effect unless
revoked by the Person executing it, before the vote pursuant to that proxy, by a
writing delivered to the General Manager stating that the proxy is revoked, or
by a subsequent proxy executed by, or attendance at the meeting and voting in
person by, the Person executing the proxy; provided, however, that no proxy
shall be valid after the expiration of eleven (11) months from the date of the
proxy, unless otherwise provided in the proxy. The revocability of a proxy that
states on its face that it is irrevocable shall be governed by the provisions of
Corporations Code Sections 705(e) and 705(f) or any successor provisions.
ARTICLE IX
TRANSFER AND ASSIGNMENT OF INTERESTS
9.1 Transfer and Assignment of Interests. No Member shall be entitled to
transfer, assign, sell, encumber or in any way alienate or dispose of (each, a
"Transfer"), including to an Affiliate, all or any portion of its Membership
Interest if such Transfer: (i) is to a party which is materially less
creditworthy than the transferring Member (taking into account the obligations
of such transferring Member's Affiliates under this Agreement and the Related
Documents); or, (ii) would cause the termination or dissolution of the Company.
Notwithstanding the foregoing, a Member shall be entitled to pledge all of such
Member's Membership Interest as collateral as part of a blanket pledge of all of
such Member's assets to a financial institution. Transfers in violation of this
Article 9 shall be null and void and the transferee shall have no right to vote
or participate in the management of the business, property and affairs of the
Company, to exercise any rights of a Member or to receive the share of one or
more of the Company's Net Income, Net Losses and distributions of the Company's
assets to which the transferor would otherwise be entitled. After the
consummation of any transfer of any part of a Membership Interest, the
Membership Interest so transferred shall continue to be subject to the terms and
provisions of this Agreement and any further transfers shall be required to
comply with all the terms and provisions of this Agreement. If the secured party
receiving a pledge of an Economic Interest of a Member forecloses on such
Economic Interest, such Person shall not be admitted as a Member, shall not be
entitled to further transfer or otherwise dispose of such Economic Interest
without the approval of the Members and shall have no rights of a Member other
than the right to receive the share of one or more of the Company's Net
26
Income, Net Losses and distributions of the Company's assets to which the
pledging Member would otherwise be entitled.
9.2 Further Restrictions on Transfer of Interests. In addition to other
restrictions found in this Agreement, no Member shall Transfer all or any part
of its Membership Interest: (a) without compliance with Section 15.1.9, and (b)
if the Membership Interest to be transferred, assigned, sold or exchanged, when
added to the total of all other Membership Interests sold or exchanged in the
preceding twelve (12) consecutive months prior thereto, would cause the
termination of the Company under the Code, as determined by the Managers.
Notwithstanding anything to the contrary contained in this Agreement, Lifford
(nor any of its respective Affiliates which may hold Membership Interests,
collectively) shall not Transfer any Membership Interest to any of the Persons
set forth on Exhibit E or any of such Persons' Affiliates, successors or
assigns.
9.3 Right of First Offer. In addition to other restrictions found in this
Agreement, in the event any Member (such Member being herein referred to as the
"Selling Member"), desires to Transfer any of its Membership Interest to any
Person which is not an Affiliate of such Selling Member, and, in the case of
Lifford, any member of the Cisneros Group (a "Third Party Buyer"), such Selling
Member must first make a bona fide offer in good faith (including as to price
and terms) to Transfer such Membership Interest to the other Members (such other
Members being referred to as the "Member Offerees") on a pro rata basis and must
Transfer such Membership Interest to any Member Offeree that accepts such offer
as set forth below. In the event any such Selling Member desires to Transfer
such offered Membership Interest, such Selling Member will notify in writing
(the "Offer Notification") the Company and the Member Offerees of such desire
setting forth the amount of the Membership Interest proposed to be Transferred
and the proposed purchase price thereof (the "Offered Membership Interest") and
other terms of the proposed sale (the "Terms"); provided, that the consideration
must be in United States Dollars and must constitute a bona fide, good faith
offer. For a period of thirty (30) days following the receipt of the Offer
Notification, the Selling Member and the Member Offerees shall negotiate in good
faith to agree upon a final purchase price and terms for the Offered Membership
Interest (a "Negotiated Purchase Price"). If the Selling Member and the Member
Offerees agree on a Negotiated Purchase Price, then the Member Offerees shall
purchase the Offered Membership Interest at the Negotiated Purchase Price. If
the Selling Member and the Member Offerees are unable in good faith to agree on
a purchase price and terms, the Member Offerees shall have the right for a
period of fifteen (15) days following the end of the thirty (30) day negotiation
period, to elect to purchase all or any portion of its pro rata share of such
Offered Membership Interest on the Terms originally set forth in the Offer
Notification (the "Transfer Offer Period"). If the Member Offeree elects not to
purchase the Offered Membership Interest prior to the termination of the
forty-five (45) day period, such Member Offeree shall be deemed to have waived
its right to purchase the Offered Membership Interest under this Section 9.3
(but not under any other section of this Agreement). If any Member Offeree
desires to purchase such Offered Membership Interest, it will notify in writing
(the "Purchase Notification") the Selling Member of such desire. In the event
that any Member Offeree does not elect to purchase its full pro rata share of
any such Offered Membership Interest, such unpurchased Offered Membership
Interest will be offered by the Selling Member to the other Member Offerees (if
any) subscribing to purchase the Offered Membership Interest on a pro rata basis
for a period of fifteen (15) days commencing on the expiration of the Transfer
Offer Period (the "Subsequent Transfer Offer Period"); provided, however, that
if there is only one other Member, there shall be no Subsequent Transfer Offer
Period. In the event that, after compliance with the foregoing provisions of
this Section 9.3, the Member Offerees, taken together, fail to purchase all of
the Offered Membership Interest, then (i) the Member Offerees shall have no
right to purchase any of the Offered Membership Interest (other than pursuant to
Section 9.4 or 9.8 below), and (ii) such Selling Member may offer to Transfer
all of the Offered Membership Interest to any Person; provided, however, that
any such Transfer must be made in accordance with the provisions set forth in
Section 9.4 below. The closing of any purchase by the Member Offerees of any of
the Offered Membership Interest as
27
provided in this Section 9.3 will take place at the offices of the Company on
such date as designated by the Member Offerees occurring within fifteen (15)
days after the expiration of the Subsequent Transfer Offer Period, or if there
be none, the Transfer Offer Period. At such closing, the Member Offerees will be
entitled to receive customary representations and warranties from the Selling
Member regarding ownership and title of the Offered Membership Interest and the
Company will evidence such Transfer on the books of the Company.
9.4 Right of First Refusal.
(a) Subject to, and after compliance with, the requirements set
forth in Section 9.3 above, in the event any Selling Member desires to Transfer
any of its Membership Interest to any Third Party Buyer who shall have made a
written bona fide offer to purchase such Membership Interest, which, in the
Selling Member's reasonable judgment, has a substantial likelihood of closing
and is not subject to a financing or other material contingency other than
applicable antitrust or similar clearances, provided, that such offer may be
subject to a financing contingency if such offer is accompanied by financing
commitments from institutions of national standing in the United States or other
international institutions of comparable standing on usual and customary terms,
the Selling Member will promptly furnish to the Company and all Member Offerees
written notification (the "Third Party Transfer Notice") of such desire to
Transfer such Membership Interest and of the bona fide offered price for such
Membership Interest, the method of payment of such offered price (which must be
in either cash in a Major Currency or Marketable Securities, provided that such
Marketable Securities must be freely tradable upon the receipt thereof by the
Selling Member), the identity of the prospective purchaser or purchasers (the
"Proposed Purchaser") and all other pertinent terms and conditions of such bona
fide offer to purchase such Membership Interest.
(b) For a period of thirty (30) days commencing on the date that the
Member Offerees receive the Third-Party Transfer Notice (provided, that, in the
event that the price for the Membership Interest set forth in the Third Party
Transfer Notice is less than 80% of the price set forth in the Offer
Notification delivered by the Selling Member to the other Members pursuant to
Section 9.3, or the consideration is different than, or the terms are more
favorable to the third party than the terms set forth in the Offer Notification,
such period shall be extended for an additional five (5) business days, the
Member Offerees will have the right to elect to purchase on a pro rata basis all
(but not less than all) of the Membership Interest on the same terms and
conditions as described in the Third-Party Transfer Notice and at the bona fide
offer price using cash in a Major Currency if the Proposed Purchaser is using
cash in a Major Currency, or using its own Marketable Securities or cash, if the
Proposed Purchaser intends to use its own Marketable Securities as consideration
(the "Third Party Transfer Offer Period"); provided, that if PEGI is a Member
Offeree and desires to use PEI Stock as its own Marketable Securities, (i) the
PEI Stock so used shall have the registration rights set forth on Exhibit G
hereto; (ii) the closing of PEGI's purchase and the transfer of the PEI Stock
shall occur on the effective date of the registration statement filed by PEI
with respect to such PEI Stock; and (iii) the number of shares of PEI Stock
issued with respect to such payment will be determined at the time the
registration statement filed by PEI with respect to such PEI Stock becomes
effective by dividing (x) the aggregate consideration by (y) the average closing
trading price for PEI Stock for the twenty (20) trading days ending on the
trading day three trading days prior to the effective date of such registration
statement. Any Member Offeree desiring to purchase any Membership Interest must
notify the Selling Member in writing of such desire. In the event that any
Member Offeree does not elect to purchase its full pro rata share of any
Membership Interest proposed to be Transferred, such unpurchased Membership
Interest will be offered by the Selling Member to the other Member Offerees (if
any) subscribing to purchase Membership Interests on a pro rata basis for a
period of 15 days commencing on the expiration of the Third-Party Transfer Offer
Period (the "Subsequent Third Party Transfer Offer Period"); provided, however,
that if there is only one other Member, there shall be no Subsequent Third Party
Transfer Offer Period. No such Membership
28
Interest may be made available for purchase by any Proposed Purchaser pursuant
to the remaining provisions of this Section 9.4 unless and until all Member
Offerees have had an opportunity to purchase all such Membership Interest in
accordance with the provisions of this clause (b).
(c) Except as otherwise provided in Section 9.4(b), the closing of
any purchase by the Member Offerees of any Membership Interest as provided in
this Section 9.4 will take place at the offices of the Company on such date as
designated by the Member Offerees occurring within 15 days after the expiration
of the Subsequent Third-Party Transfer Offer Period, or if there be none, the
Third-Party Transfer Offer Period. At such closing, the Member Offerees will be
entitled to receive customary representations and warranties from the Selling
Member regarding ownership and title of the subject Membership Interest and the
Company will evidence such Transfer on the books of the Company.
(d) In the event that, after compliance with the foregoing
provisions of this Section 9.4, the Member Offerees fail to purchase all of the
Membership Interest proposed to be Transferred by the Selling Member, then for a
period of one-hundred-twenty (120) days commencing on the date that no Member
Offeree remains entitled to exercise its right to purchase any Membership
Interest in accordance with the foregoing provisions of this Section 9.4, the
Selling Member may Transfer to the Proposed Purchaser any of the Membership
Interest described in the Third-Party Transfer Notice which the Member Offerees
are not purchasing; provided, however, that (1) any such Transfer to the
Proposed Purchaser must be made for the consideration and upon the terms and
conditions set forth in the Third-Party Transfer Notice, (2) any such transfer
to the Proposed Purchaser remains subject to those restrictions on transfers
contained in this Agreement, including the restrictions on transfer included in
this Article 9, and (3) at the closing of any such Transfer, the Proposed
Purchaser executes and delivers to the Company a counterpart of, or an agreement
adopting, this Agreement. Such Member Offerees who fail to purchase all of the
Membership Interest proposed to be transferred by the Selling Member shall be
deemed to have consented to the Transfer of the Membership Interest to the
Third-Party Transferee. If the Selling Member shall not consummate the Transfer
of such remaining Membership Interest to the Proposed Purchaser within such
one-hundred-twenty (120) day period, such Membership Interest shall remain
subject to the provisions of this Agreement and the Seller Member shall not
thereafter Transfer any such Membership Interest to any Person without again
first complying with all of the provisions of this Agreement.
9.5 Substitution of Members. A transferee of a Membership Interest shall
have the right to become a substitute Member only if (a) the requirements of
Sections 9.1 and 9.2 relating to securities and tax requirements hereof are met,
(b) the requirements of Sections 9.3 and 9.4 relating to rights of first offer
and rights of first refusal are met, (c) such Person executes an instrument
reasonably satisfactory to the Management Committee accepting and adopting the
terms and provisions of this Agreement, and (c) such Person pays any reasonable
expenses in connection with its admission as a new Member. The admission of a
Member shall not result in the release of the Member who assigned the Membership
Interest from any liability that such Member may have to the Company.
9.6 Effective Date of Permitted Transfers. Any permitted transfer of all
or any portion of a Membership Interest shall be effective as of the first
business day following the date upon which the requirements of Sections 9.1,
9.2, 9.3, 9.4 and 9.5 have been met. The General Manager shall promptly provide
the Members with written notice of such transfer. Any transferee of a Membership
Interest shall take subject to the restrictions on transfer imposed by this
Agreement.
9.7 Rights of Legal Representatives. If a Member who is an individual dies
or is adjudged by a court of competent jurisdiction to be incompetent to manage
the Member's person or property, the Member's executor, administrator, guardian,
conservator, or other legal representative may exercise all of the Member's
rights for the purpose of settling the Member's estate or administering the
Member's
29
property, including any power the Member has under this Agreement to give an
assignee the right to become a Member. If a Member is a corporation or other
entity and is dissolved or terminated, the powers of that Member may be
exercised by its legal representative or successor.
9.8 PEGI Buy-Up Option.
(a) On or before December 23, 2022, PEGI (or its Affiliates who are
then Members of the Company) has the option to acquire up to thirty and
nine-tenths percent (30.9%) of additional Membership Interests in the Company
(the applicable percentage from time to time being the "Initial Option
Percentage") by purchasing such additional Membership Interests from Lifford
(and any of its Affiliates which hold Membership Interests, collectively) (the
"PEGI Buy-Up Option") provided, however; (i) that if PEGI (and its Affiliates,
collectively) Transfers Membership Interests to any Person(s) which is not an
Affiliate of PEGI, the Initial Option Percentage will be adjusted downward, pro
rata, in accordance with the decline in PEGI's and its Affiliates' aggregate
Membership Interests in the Company; (ii) in the event that Lifford receives
additional Membership Interests in the Company, the Initial Option Percentage
shall be increased in accordance with the then outstanding Membership Interests
of the Company such that following the exercise by PEGI of its option to acquire
the Initial Option Percentage pursuant to this Section 9.8, PEGI and any third
Person not affiliated with Lifford shall hold forty-nine and nine-tenths percent
(49.9%) of the Membership Interests of the Company. Starting on December 23,
2012 and continuing through December 23, 2022, PEGI (or its Affiliates who are
then Members of the Company) has the option (the "Additional Buy-Up Option") to
acquire up to the remaining fifty and one-tenth percent (50.1%) of additional
Membership Interest in the Company (the applicable percentage from time to time
being the "Second Option Percentage") by purchasing all of the additional
Membership Interests owned by Lifford (and any of its Affiliates which hold
Membership Interests, collectively); provided, that PEGI (or its Affiliates) has
previously or concurrently exercised its option to acquire the entire Initial
Option Percentage, it being the intent of the Members that PEGI would own one
hundred percent (100%) of the Membership Interests following PEGI's purchase of
the Second Option Percentage, and payment therefor.
(b) PEGI's buy-in price for the Initial Option Percentage and the
Second Option Percentage will be a pro rata portion of the Fair Market Value of
the Company at the time of purchase (as determined in accordance with Exhibit
C). PEGI may pay the purchase price for the Initial Option Percentage or the
Second Option Percentage in cash, shares of PEI's Class B common stock ("PEI
Stock") (if upon the closing of any such transaction such stock is a Marketable
Security) or a combination of cash and PEI Stock, which election will be set
forth in PEGI's notice that it is exercising its buy-up option. If PEGI elects
to pay for some or all of its purchase with cash, it will make such payment
prior to the later of (i) sixty (60) days after the delivery of such notice or
(ii) twenty (20) days after the final determination of Fair Market Value with
respect to such purchase. If PEGI elects to pay for some or all of its purchase
with PEI Stock, such transfer of stock will be made on or prior to the date that
is the later of (i) ninety (90) days after the delivery of such notice, (ii)
twenty (20) days after the final determination of Fair Market Value with respect
to such purchase or (iii) the effective date of the registration statement filed
by PEI with respect to the PEI Stock. The number of shares of PEI Stock issued
with respect to such payment will be determined at the time the registration
statement filed by PEI with respect to such shares becomes effective by dividing
(x) the aggregate consideration elected by PEGI to be paid in PEI Stock by (y)
the average closing trading price for PEI Stock for the twenty (20) trading days
ending on the trading day three trading days prior to the effective date of such
registration statement. The closing of any purchase by PEGI as provided in this
Section 9.8 shall take place at the offices of the Company (i) on such date as
mutually agreed to by PEGI and Lifford, if PEGI elects to pay the purchase price
solely in cash, or (ii) if PEI elects to pay any or all of the purchase price in
shares of PEI Stock, on the date on which the registration statement filed by
PEI with respect to such shares is declared effective. In the event that the
registration statement to be filed with respect to the PEI Stock has not become
effective
30
within one-hundred-eighty (180) days from the date of the delivery of PEGI's
notice of its election to exercise the PEGI Buy-Up Option or Additional Buy-Up
Option, Lifford shall have the option to either: (i) allow an extension of such
one-hundred-eighty (180) day period, or (ii) refuse to allow such extension and
cause the applicable option to expire, unless PEGI pays for the applicable
option in cash within fifteen (15) days from the expiration of such
one-hundred-eighty (180) day period. At such closing, PEGI will be entitled to
receive customary representations and warranties from Lifford (and any of its
Affiliates which hold Membership Interests, collectively) regarding ownership
and title of the purchased Membership Interest and the Company will evidence
such Transfer on the books of the Company. After the date on which the cash
portion of the purchase price is due, PEGI may determine that it wishes to pay
all or any part of the portion of the purchase price previously elected to be
paid in PEI Stock in cash, in which event such additional cash payment will be
due immediately. In the event PEGI fails to timely pay for any additional
Percentage Interests for which it exercised its buy-up option, Lifford may elect
either: (i) to terminate permanently PEGI's right to purchase such Percentage
Interests; or (ii) to cause the Company to withhold any payments otherwise due
to PEGI under this Agreement or the Program Supply Agreement or any other
agreement that requires the Company to make payments to PEGI or its Affiliates
and to pay such amounts to Lifford until Lifford is paid in full (including
interest at the Reference Rate from the date such payment was due) for such
additional interests, and Lifford will then transfer such interests to PEGI.
(c) If PEGI pays for some or all of the Initial Option Percentage or
the Second Option Percentage in PEI Stock, Lifford shall have registration
rights and obligations with respect to the PEI Stock as set forth in Exhibit G.
(d) In the event Lifford sells Membership Interests representing
fifty and one-tenths percent (50.1%) or more of the Company to a third party
after giving PEGI the opportunity to exercise its right of first offer and right
of first refusal pursuant to Sections 9.3 and 9.4 of this Agreement (which
Lifford may do at any time), the Additional PEGI Buy-Up Option will terminate.
9.9 Claxson Control Over Membership Interest. Subject to a Member's right
to transfer and assign its Membership Interest pursuant to the right of first
offer in Section 9.3, right of first refusal in Section 9.4 and PEGI's Buy-Up
Option in Section 9.8, at all times during the term of this Agreement, Claxson
will, directly or indirectly, (i) own 100% of the Membership Interest owned by
Lifford on the date of this Agreement, (ii) retain all voting rights with
respect to such Membership Interest, (iii) retain all rights to participate in
the management of the business, property and affairs of the Company with respect
to such Membership Interest, and (iv) retain all rights to the Economic Interest
with respect to such Membership Interest, subject to Claxson's right to pledge
all of its indirect Membership Interest as collateral as part of a blanket
pledge of all such Member's assets to a financial institution.
9.10 Playboy Television B.V. and PTVLA U.S., LLC
(a) The Members hereby agree and acknowledge that Playboy Television
B.V., a Netherlands limited liability company ("PTV BV") has been created by the
Members and their Affiliates to distribute the Channels in Spain and Mexico,
that Playboy TV Holdings, LLC, a Delaware limited liability company ("PTV
Holdings"), has been created by the Members and their Affiliates to serve as a
holding company for PTV BV, and that PTVLA U.S., LLC, a Delaware limited
liability company ("PTV US") has been created by the Members and their
Affiliates to distribute the Channels in the United States, Canada and Puerto
Rico. At all times during the Term, Claxson and PEI will, directly or
indirectly, (i) own the same percentage ownership interest in PTV Holdings or
PTV US as they may hold in the Company from time to time; (ii) in the event of
transfer of any Membership Interest, transfer a corresponding percentage of such
Equity Interest to the same purchaser so long as such transfer does not have a
material adverse tax effect on any member of PTV Holdings or PTV US; (iii)
retain all voting
31
rights with respect to such Equity Interests, (iv) retain all rights to
participate in the management of the business, property and affairs of PTV
Holdings and PTV US with respect to such Equity Interests. Without the prior
written consent of the PEGI Managers, Claxson and Lifford shall not, and shall
cause their respective Subsidiaries and Affiliates (including without limitation
PTV Holdings, PTV BV and PTV US) not to:
(i) take any action with respect to PTV Holdings, PTV BV or
PTV US that would require the consent of the PEGI
Managers as set forth in Section 5.1.2, determined as if
the definition of "Company" contained therein included,
for the purposes of this Section 9.10(a)(i) only, PTV
Holdings, PTV BV and PTV US;
(ii) authorize the issuance of or issue any additional Equity
Interests in PTV Holdings, PTV BV or PTV US, other than
to the Company in connection with a capital
contribution;
(iii) allow or permit PTV Holdings to conduct any business
other than owning all of the issued and outstanding
Equity Interests of PTV BV;
(iv) allow or permit PTV BV to conduct any business other
than the licensing of rights from PEGI and the
sublicensing of such rights in the territory of Spain
and Mexico in the English, Spanish and Portuguese
languages as contemplated and permitted by the Amended
Affiliation Agreement;
(v) allow or permit PTV US to conduct any business other
than the licensing of rights from the Company and the
sublicensing of such rights to PEGI in the territory of
the United States, Canada and Puerto Rico in the Spanish
language as contemplated and permitted by the PTV US
Affiliation Agreement and the Distribution Agreement;
(vi) amend or modify the certificate of formation, deed of
incorporation, operating agreement, by-laws or any other
constitutive or organizational document of PTV Holdings,
PTV BV or PTV US;
(vii) sell any of the assets of PTV Holdings, PTV BV or PTV
US, except in the ordinary course of business, or merge,
consolidate or reorganize PTV Holdings, PTV BV or PTV US
with or into another Person, other than another wholly
owned Subsidiary of the Company; or
(viii) take any action with respect to PTV Holdings, PTV BV or
PTV US that would have a disproportionate adverse impact
(financial or otherwise) on PEGI or its Subsidiaries or
Affiliates.
(b) In the event that PEGI at any time acquires additional
Membership Interests in the Company, whether pursuant to Section 9.3, 9.4 or 9.8
hereof or otherwise, at the closing of the acquisition by PEGI of such
Membership Interests, PEGI shall have the right, exercisable by written notice
to Lifford not later than two days prior to the date of such closing:
(i) with respect to PTV Holdings and PTV BV, to elect that
either: (i) Lifford or its Affiliates shall contribute
to PEGI a corresponding membership interest in PTV
Holdings, and in the event that PEGI so
32
elects, Claxson shall cause Zagasse Corp., N.V., a
Netherlands Antilles limited liability company
("Zagasse"), or any other Affiliate of Claxson that then
holds an interest in PTV Holdings, to contribute to PEGI
for no additional consideration and at no additional
cost to PEGI a corresponding membership interest in PTV
Holdings simultaneously with the closing of PEGI's
acquisition of additional Membership Interests in the
Company, such that following such closing, PEGI's
membership interest in PTV Holdings shall be equal to
PEGI's Membership Interest in the Company.
Notwithstanding the foregoing, in the event that PEGI
acquires 100% of the Membership Interests in the
Company, PEGI may, in lieu of acquiring all of the
membership interests in PTV Holdings, elect to dissolve
PTV Holdings and PTV BV. In such event, Claxson shall,
and shall cause its Subsidiaries to, take all actions
necessary or desirable to effect such dissolution
simultaneously with, and effective as of, the closing of
PEGI's acquisition of additional Membership Interests in
the Company; and
(ii) with respect to PTV US, to elect that either: (i)
Lifford or its Affiliates shall contribute to PEGI a
corresponding membership interest in PTV US, and in the
event that PEGI so elects, Claxson shall cause Lifford
US, Inc., a Delaware corporation ("Lifford US"), or any
other Affiliate of Claxson that then holds an interest
in PTV US, to contribute to PEGI for no additional
consideration and at no additional cost to PEGI a
corresponding membership interest in PTV US
simultaneously with the closing of PEGI's acquisition of
additional Membership Interests in the Company, such
that following such closing, PEGI's membership interest
in PTV US shall be equal to PEGI's Membership Interest
in the Company. Notwithstanding the foregoing, in the
event that PEGI acquires 100% of the Membership
Interests in the Company, PEGI may, in lieu of acquiring
all of the membership interests in PTV US, elect to
dissolve PTV US. In such event, Claxson shall, and shall
cause its Subsidiaries to, take all actions necessary or
desirable to effect such dissolution simultaneously
with, and effective as of, the closing of PEGI's
acquisition of additional Membership Interests in the
Company.
9.11 Venus Operations. The Members hereby agree and acknowledge that
Contribution S.R.L., an Argentine limited liability company ("Venus Argentina"),
and Venus TV International, Inc., a British Virgin Islands corporation ("Venus
International", and together with Venus Argentina, the "Venus Entities") will be
acquired by the Company to own and operate the Venus Channels in the Territory.
Without the prior written consent of the PEGI Managers, the Company shall not,
and shall cause Venus Argentina and Venus International not to:
(a) Transfer the Venus Assets from the Venus Entities to any other
Person, including without limitation the Company or any of its Subsidiaries or
Affiliates;
(b) allow or permit the Transfer of any assets from any other
Person, including the Company and any of its Subsidiaries or Affiliates, to
either or both of the Venus Entities;
(c) allow or permit the Venus Entities to own any assets other than
the Venus Assets;
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(d) operate the Venus Entities other than as stand-alone entities,
provided, however, that the Company may manage either or both of the Venus
entities;
(e) allow or permit the Venus Channels to be operated other than as
businesses separate and distinct from the other Channels and businesses of the
Company, provided, however, that the Company may manage either or both of the
Venus entities;
(f) commingle any of the assets of a Venus Entity with any other
assets of the Company and its Subsidiaries and Affiliates; or
(g) merge the Venus Entities, merge any other Person into a Venus
Entity or otherwise combine the operations of the Venus Entities with any other
Person.
9.12 Playboy Lifestyle Holding and Newco. The Members hereby acknowledge
and agree that Playboy Lifestyle Holding and Newco have been formed and will
soon to be formed respectively by the Company to develop, launch and operate the
Playboy Lifestyle Business in the Territory, and to fund the Feasibility Study
to develop the Playboy Lifestyle Channel USA in the US Lifestyle Territory
whereby Playboy Lifestyle Holding will borrow up to U.S.$5,000,000 pursuant to
the Playboy Lifestyle Note to fund the operation of the Playboy Lifestyle
Business in the Territory through Newco. Except as may be required in connection
with the Playboy Lifestyle Note or any related documents, without the prior
written consent of the PEGI Managers, the Company shall not, and shall cause
Playboy Lifestyle Holding and Newco not to:
(a) take any action with respect to Playboy Lifestyle Holding and
Newco that would require the consent of the PEGI Managers as set forth in
Section 5.1.2, determined as if the definition of "Company" contained therein
included, for the purposes of this Section 9.12(a)(i) only, Playboy Lifestyle
Holding and Newco;
(b) authorize the issuance of or issue any additional Equity
Interests in Playboy Lifestyle Holding or Newco, other than to the Company in
connection with a capital contribution;
(c) allow or permit Playboy Lifestyle Holding to conduct any
business other than (x) owning all of the issued and outstanding Equity
Interests of Newco, (y) issuing the Playboy Lifestyle Note and (iii) the Playboy
Lifestyle Business as contemplated and permitted by this Agreement;
(d) allow or permit Newco to conduct any business other than the
Playboy Lifestyle Business as contemplated and permitted by this Agreement;
(e) amend or modify the certificate of formation, deed of
incorporation, operating agreement, by-laws or any other constitutive or
organizational document of Playboy Lifestyle Holding or Newco;
(f) sell any of the assets of Playboy Lifestyle Holding or Newco,
except in the ordinary course of business, or merge, consolidate or reorganize
Playboy Lifestyle Holding or Newco with or into another Person, other than
another wholly owned Subsidiary of the Company;
(g) take any action with respect to Playboy Lifestyle Holding or
Newco that would have a disproportionate adverse impact (financial or otherwise)
on PEGI or its Subsidiaries or Affiliates;
(h) operate Playboy Lifestyle Holding and Newco other than as
stand-alone entities, provided, however, that the Company may manage either or
both of these entities;
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(i) allow or permit the Playboy Lifestyle Holding or Newco to be
operated other than as businesses separate and distinct from the other Channels
and businesses of the Company, provided, however, that the Company may manage
either or both of these entities or
(j) commingle any of the assets of Playboy Lifestyle Holding or
Newco with any other assets of the Company and its Subsidiaries and Affiliates.
ARTICLE X
CONSEQUENCES OF DEATH, DISSOLUTION
RETIREMENT OR BANKRUPTCY OF MEMBER
10.1 Withdrawal Dissolution Event. Upon the occurrence of a Withdrawal
Dissolution Event, the Company shall dissolve unless the remaining Members (the
"Remaining Members") holding all of the remaining Membership Interests consent
within ninety (90) days of the Withdrawal Dissolution Event to the continuation
of the business of the Company. If the Remaining Members consent to the
continuation of the business of the Company, the Remaining Members and/or, if
applicable pursuant to Section 10.4, the Company shall purchase, and the Member
whose actions or conduct resulted in the Withdrawal Dissolution Event ("Former
Member") or such Former Member's legal representative shall sell, the Former
Member's Membership Interest ("Former Member's Interest") as provided in this
Article 10 to avoid dissolution of the Company.
10.2 Purchase Price. The purchase price for the Former Member's Interest
shall be the lesser of (i) the positive Capital Account balance of the Former
Member or (ii) the Fair Market Value of the Former Member's Interest.
Notwithstanding the foregoing, if the Withdrawal Dissolution Event results from
a breach of this Agreement by the Former Member, the purchase price paid by the
Remaining Members and/or the Company shall be reduced by an amount equal to the
damages suffered by such purchasing parties as a result of such breach.
10.3 Notice of Intent to Purchase. Within thirty (30) days after the
General Manager has notified the Remaining Members as to the purchase price of
the Former Member's Interest determined in accordance with Section 10.2, each
Remaining Member shall notify the General Manager in writing of its desire to
purchase a portion of the Former Member's Interest. The failure of any Remaining
Member to submit a notice within the applicable period shall constitute an
election on the part of the Member not to purchase any of the Former Member's
Interest. Each Remaining Member so electing to purchase shall be entitled to
purchase a portion of the Former Member's Interest in the same proportion that
the Percentage Interest of the Remaining Member bears to the aggregate of the
Percentage Interests of all of the Remaining Members electing to purchase the
Former Member's Interest.
10.4 Election to Purchase Less Than All of the Former Member's Interest.
If any Remaining Member elects to purchase none or less than all of its pro rata
share of the Former Member's Interest, then the Remaining Members can elect to
purchase more than their pro rata share. If the Remaining Members fail to
purchase the entire interest of the Former Member, the Company shall purchase
any remaining share of the Former Member's Interest.
10.5 Payment of Purchase Price. The purchase price shall be paid by the
Remaining Members and/or the Company, as the case may be, at the closing
one-fifth (1/5) in cash and the balance of the purchase price in four equal
annual principal installments, plus accrued interest, and be payable each year
on the anniversary date of the closing. Any such payment by the Company shall be
made solely out of Distributable Cash allocable to the Remaining Members. The
unpaid principal balance shall accrue interest at the current applicable federal
rate as provided in the Code for the month in which the initial payment is made,
but the Company and the Remaining Members shall have the right to prepay in full
or
35
in part at any time without penalty. The obligation to pay the balance due shall
be evidenced by a promissory note, and if purchased by a Remaining Member,
secured by a pledge of the Membership Interest being purchased.
10.6 Closing of Purchase of Former Member's Interest. The closing for the
sale of a Former Member's Interest pursuant to this Article 10 shall be held on
a business day at the principal office of the Company no later than sixty (60)
days after the determination of the purchase price. At the closing, the Former
Member or such Former Member's legal representative shall deliver to the Company
or the Remaining Members an instrument of transfer (containing warranties of
title and no encumbrances) conveying the Former Member's Interest. The Former
Member or such Former Member's legal representative, the Company and the
Remaining Members shall do all things and execute and deliver all papers as may
be necessary fully to consummate such sale and purchase in accordance with the
terms and provisions of this Agreement.
10.7 Purchase Terms Varied by Agreement. Nothing contained herein is
intended to prohibit Members from agreeing upon other terms and conditions for
the purchase by the Company or any Member of the Membership Interest of any
Member in the Company desiring to retire, withdraw or resign, in whole or in
part, as a Member.
ARTICLE XI
ACCOUNTING, RECORDS, REPORTING BY MEMBERS
11.1 Books and Records. The books and records of the Company shall be
kept, and the financial position and the results of its operations recorded, in
accordance with United States generally accepted accounting principles as in
effect from time to time ("GAAP") and the accounting methods followed for United
States federal income tax purposes. The books and records of the Company shall
reflect all the Company transactions and shall be appropriate and adequate for
the Company's business. The Company shall maintain at its principal office all
of the following:
(a) A current list of the full name and last known business or
residence address of each Member, together with the Capital Contributions,
Capital Account and Percentage Interest of each Member;
(b) A current list of the full name and business or residence
address of each Manager;
(c) A copy of the Articles and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which
amendments thereto have been executed;
(d) Copies of the Company's federal, state, and local income tax or
information returns and reports, if any, for the six (6) most recent taxable
years;
(e) A copy of this Agreement and any and all amendments thereto
together with executed copies of any powers of attorney pursuant to which this
Agreement or any amendments thereto have been executed;
(f) Copies of the financial statements of the Company, if any, for
the six (6) most recent Fiscal Years; and
(g) The Company's books and records as they relate to the internal
affairs of the Company for at least the current and past four (4) Fiscal Years.
36
11.2 Delivery to Members and Inspection.
11.2.1 Delivery Upon Request. Upon the request of any Member for
purposes reasonably related to the interest of that Person as a Member, the
General Manager shall promptly deliver to the requesting Member, at the expense
of the Company, a copy of the information required to be maintained by Sections
11.1(a), (b) and (d), and a copy of this Agreement, as amended. The General
Manager shall promptly furnish to a Member a copy of any amendment to the
Articles or this Agreement executed by a Manager pursuant to a power of attorney
from the Member.
11.2.2 Inspection. Each Member has the right, upon reasonable
request for purposes reasonably related to the interest of the Person as Member
to:
(a) inspect and copy during normal business hours any of the Company
records described in Sections 11.1(a) through (g); and
(b) obtain from the General Manager, promptly after their becoming
available, a copy of the Company's federal, state, and local income tax or
information returns for each Fiscal Year.
11.2.3 Authorized Persons. Any request, inspection or copying by a
Member under this Section 11.2 may be made by that Person or that Person's agent
or attorney.
11.2.4 PEI Additional Right of Inspection. Upon reasonable notice,
the Company shall, and shall cause the Company's independent public accountants
and outside counsel and each of the Company's employees, agents and
representatives to: (i) afford the officers, employees and authorized agents,
independent public accountants, outside counsel, financing sources and
representatives of PEI (the "PEI Representatives") access, during normal
business hours, to the offices, properties, other facilities, books and records
of the Company and to the Company's independent public accountants and outside
counsel and those employees, agents and representatives of the Company who have
any knowledge relating to the business, assets and properties of the Company or
the Channels and (ii) furnish promptly to the PEI Representatives such
additional financial and operating data and other information regarding the
business, assets and properties of the Company or the Channels as PEI may from
time to time reasonably request; provided, however, that PEI shall not be
entitled to exercise such rights of inspection more than once in a twelve (12)
month period, unless Lifford or any of its Affiliates are in breach of this
Agreement, in which case there shall be no limit on the number of such
inspections.
11.3 Statements.
11.3.1 Annual Report. The General Manager shall cause an audited
annual report to be sent to each of the Members not later than thirty (30) days
after the close of each fiscal year or sooner if the reporting obligations of
PEI or Claxson are accelerated due to a change in applicable SEC or other
regulatory requirements. The report shall contain a balance sheet as of the end
of the Fiscal Year and an income statement and statement of changes in financial
position for the Fiscal Year. The report shall be prepared in accordance with
GAAP consistently applied and fairly present the results of operations and
financial condition of the Company and its Subsidiaries for the periods covered
thereby. Such financial statements shall be accompanied by the report thereon,
if any, of the independent accountants engaged by the Company.
11.3.2 Monthly Report. The General Manager shall cause a monthly
report to be sent to each of the Members not later than twenty (20) days after
the end of each month during a Fiscal Year, subject to customary year-end
adjustments. The report shall contain a balance sheet as of the last day of such
month and an income statement and statement of changes in financial position for
the period then
37
ended. The report shall be prepared in accordance with GAAP consistently applied
and fairly present the results of operations and financial condition of the
Company and its Subsidiaries for the periods covered thereby subject to
customary year-end adjustments. Such financial statements will be unaudited but
will prepared on a consistent basis with the Company's audited annual report
described above.
11.3.3 Tax Information. The General Manager shall cause to be
prepared at least annually, at Company expense, information necessary for the
preparation of the Members' federal and state income tax returns. The General
Manager shall send or cause to be sent to each Member within ninety (90) days
after the end of each taxable year such information as is necessary to complete
federal, state, and local income tax or information returns, and a copy of the
Company's federal, state, and local income tax or information returns for that
year.
11.4 Financial and Other Information. The General Manager shall provide
such financial and other information relating to the Company, as a Member may
reasonably request.
11.5 Filings. The General Manager, at Company expense, shall cause the
income tax returns for the Company to be prepared and timely filed with the
appropriate authorities. Within seventy five (75) days after the close of the
taxable year, the General Manager shall deliver to the Managers copies of such
returns for their approval pursuant to Section 5.1.2(m) prior to the filing due
date. The General Manager, at Company expense, shall also cause to be prepared
and timely filed, with appropriate federal and state regulatory and
administrative bodies, amendments to, or restatements of, the Articles and all
reports required to be filed by the Company with those entities under the Act or
other then current applicable laws, rules, and regulations. If a Manager
required by the Act to execute or file any document fails, after demand, to do
so within a reasonable period of time or refuses to do so, any other Manager or
Member may prepare, execute and file that document with the California Secretary
of State.
11.6 Bank Accounts. The General Manager shall maintain the funds of the
Company in one or more separate bank accounts in the United States or the
European Union in the name of the Company and in any other jurisdiction where
the applicable laws of such jurisdiction require the Company to maintain such an
account and shall not permit the funds of the Company to be commingled in any
fashion with the funds of any other Person.
11.7 Accounting Decisions and Reliance on Others. All decisions as to
accounting matters, except as otherwise specifically set forth herein, shall be
made by the Management Committee. A Manager may rely upon the advice of the
Company's accountants as to whether such decisions are in accordance with
accounting methods followed for federal income tax purposes.
11.8 Tax Matters for the Company Handled by Managers and Tax Matters
Member. The Management Committee shall from time to time cause the Company to
make such tax elections as it deems to be in the best interests of the Company;
provided, however, that the Management Committee shall not (i) file any tax
return or (ii) make any tax election or take any position with respect to any
examination audit or proceeding by a taxing authority that could have an adverse
impact on PEGI or the Company without PEGI's prior written consent. Any failure
by the Management Committee to approve unanimously any matter described in
Section 5.1.2(l) will be resolved in accordance with the procedures specified in
Article 16; provided, however, that the sole arbitrator described in Section
16.4 shall appoint one or more impartial experts to testify on the disputed
matters and shall base his or her decision on such expert testimony, taking into
account the interests of both parties. The Tax Matters Member (the equivalent to
the Tax Matters Partner as defined in Code Section 6231) shall represent the
Company (at the Company's expense) in connection with all examinations of the
Company's affairs by tax authorities, including resulting judicial and
administrative proceedings, and shall expend the Company's funds for
professional services and costs associated therewith. The Tax Matters Member
shall oversee the
38
Company's tax affairs in the overall best interests of the Company. If for any
reason the Tax Matters Member can no longer serve in that capacity or ceases to
be a Member or Manager, as the case may be, Members holding a Majority Interest
may designate another to be Tax Matters Member.
ARTICLE XII
DISSOLUTION AND WINDING UP
12.1 Term. The term (the "Term") of the Company shall commence on the date
the Articles are filed with the Secretary of State of California and terminate
on the earlier to occur of the termination of the Company as provided in the
Articles or the earlier dissolution of the Company pursuant to the terms of this
Article 12.
12.2 Dissolution Events. The Company may be dissolved prior to the
termination date set forth in the Articles upon the happening of any of the
following events (each, a "Dissolution Event"):
12.2.1 Either Lifford or PEGI may elect to dissolve the Company if
controlling ownership of the other Member changes (other than a change to an
Affiliate of such Member); provided, however, that the parties acknowledge that
Claxson and PEI are publicly held and that no change in their ownership will
constitute a change of control of Lifford or PEGI, as the case may be, as long
as Lifford or PEGI remain a controlled subsidiary of Claxson or PEI, as the case
may be. Any such dissolution will be effective as of the later of (i) the last
day of the Fiscal Year in which such dissolution event occurs or (ii) the date
six (6) months after such dissolution event occurs.
12.2.2 Any Member may without prejudice to any other remedies it may
have elect to dissolve the Company by notice in writing to the other Members on
or after the occurrence of any of the following:
(a) the commission of one or more material breaches of this
Agreement by the Company or another Member which are not capable of remedy;
(b) the commission of a material breach of this Agreement by the
Company or another Member which is capable of remedy (a "Remediable Breach")
which shall not have been remedied within a period of thirty (30) days after the
party in breach has been given notice in writing specifying that Remediable
Breach and requiring it to be remedied; provided, however, that such thirty (30)
day period shall be extended for such additional period, not to exceed
one-hundred-twenty (120) days, as shall be reasonably necessary if that
Remediable Breach is incapable of remedy within that thirty (30) day period and
during that additional period the party in breach shall diligently endeavor to
remedy that Remediable Breach, but only if such extension would not reasonably
be expected to have a material adverse effect on the party giving notice of such
breach. However, in respect of the breach of any obligation to make payment
hereunder, the cure period shall not be extended as provided in the foregoing
proviso.
(c) the bankruptcy, insolvency, general assignment for the benefit
of creditors or similar event or the appointment of a trustee, receiver or
similar person for any Member holding a Majority Interest or of the Company;
(d) the uncured material breach of one or more of the Program Supply
Agreement or the Distribution Agreement by another Member or their Affiliates or
the Company, unless in the event of a breach by the Company, the party seeking
dissolution hereunder caused such breach; or
39
(e) the institution by such Member of a legal proceeding against
another Member to enforce against the other Member either (i) a final arbitral
award or (ii) a final judgment, in each case arising out of or relating to this
Agreement, the Program Supply Agreement or the Distribution Agreement.
12.2.3 Any failure by the Company to make payments due to PEGI under
the Program Supply Agreement shall be deemed to constitute a material breach
hereunder by Claxson and Lifford. Each of Claxson and Lifford hereby
unconditionally and irrevocably guarantees, as primary obligor and not merely as
a surety, and as a guaranty of payment when due and not of collectibility, to
PEGI and its successors and assigns the prompt payment and satisfaction in full
of any amounts due and owing by the Company to PEGI and its successors and
assigns pursuant to the Program Supply Agreement in an amount equal to the
outstanding obligation multiplied by the Percentage Interest in the Company then
owned by Lifford and its Affiliates (the "Claxson Guarantee Obligation"), and
each of Claxson and Lifford hereby (a) further agrees that if the Company shall
fail to pay, or otherwise satisfy, in full any of such amounts when they become
due, whether at stated maturity, by acceleration, demand or otherwise, it shall
promptly pay the same up to amount of the Claxson Guarantee Obligation, and (b)
waives, for the benefit of PEGI and its successors and assigns, (i) any right to
require PEGI to proceed against the Company or any guarantor, or to proceed
against, exhaust or have resort to any security held from the Company or any
other guarantor, or any balance of any deposit account or credit on the books of
PEGI, (ii) any right to set-offs, recoupments and counterclaims; (iii) notices,
demands, presentments, protests, notices of protest and notices of dishonor and
notices of any action or inaction or default under this Agreement or the Program
Supply Agreement; (iv) any right of subrogation, reimbursement or
indemnification that it may have against the Company and any right of
contribution it may have against any other guarantor and (v) to the fullest
extent permitted by law, any defenses or benefits that may be derived from or
afforded by law which limit the liability of or exonerate it or sureties, or
which may conflict with the terms of this Section 12.2.3. The obligations of
each of Claxson and Lifford pursuant to this Section 12.2.3 shall continue and
remain in full force and effect or be reinstated, as the case may be, in the
event that all or any part of any payment made by the Company to PEGI under the
Program Supply Agreement is rescinded or recovered directly or indirectly from
PEGI as a preference, fraudulent transfer or conveyance or otherwise. PEGI,
Claxson and Lifford acknowledge that any payment obligation of Claxson or
Lifford hereunder shall be limited to Lifford's (or its Affiliate's) Membership
Percentage Interest at the time of such failure to make payment multiplied by
the amount of the payment due and further, that the payment of such payments due
shall constitute a cure of such breach. In the event that PEGI exercises the
PEGI Buy-Up Option, the provisions of this Section 12.2.3 shall terminate in
their entirety.
12.2.4 PEI hereby unconditionally and irrevocably guarantees, as
primary obligor and not merely as a surety, and as a guaranty of payment when
due and not of collectibility, to the Company and its successors and assigns the
prompt payment and satisfaction in full of any amounts due and owing by PEGI to
the Company, its successors and assigns pursuant to the Program Supply
Agreement, and the Distribution Agreement, and PEI hereby (a) further agrees
that if PEGI shall fail to pay, or otherwise satisfy, in full any of such
amounts when they become due, whether at stated maturity, by acceleration,
demand or otherwise, it shall promptly pay, or otherwise satisfy, the same and
(b) waives, for the benefit of the Company and its successors and assigns, (i)
any right to require the Company to proceed against PEGI or any other guarantor,
or to proceed against, exhaust or have resort to any security held from PEGI or
any guarantor or any balance of any deposit account or credit on the books of
the Company; (ii) any right to set-offs, recoupments and counterclaims; (iii)
notices, demands, presentments, protests, notices of protest and notices of
dishonor and notice of any action or inaction or default under the Program
Supply Agreement or the Distribution Agreement; (iv) any right of subrogation,
reimbursement or indemnification that it may have against PEGI and any right of
contribution it may have against any other guarantor and (v) to the fullest
extent permitted by law, any defenses or benefits that may be derived from
40
or afforded by law which limit the liability of or exonerate it or sureties, or
which may conflict with the terms of this Section 12.2.4. The obligations of PEI
pursuant to this Section 12.2.4 shall continue and remain in full force and
effect or be reinstated, as the case may be, in the event that all or any part
of any payment made by PEGI to the Company under the Distribution Agreement is
rescinded or recovered directly or indirectly from the Company as a preference,
fraudulent transfer or conveyance or otherwise, PEGI, Claxson and Lifford
acknowledge that any payment obligation of PEI hereunder shall be limited to
PEGI's (or its Affiliate's) Membership Percentage Interest at the time of such
failure to make payment multiplied by the amount of the payment due and further,
that the payment of such payments due shall constitute a cure of such breach. In
the event that PEGI exercises the PEGI Buy-Up Option, the provisions of this
Section 12.2.4 shall terminate in their entirety.
12.3 Effect of Dissolution. Upon dissolution of the Company, the Related
Documents will automatically terminate and all rights and obligations of the
respective parties thereunder will terminate, except for any provisions that
expressly survive such termination or claims, etc. that have arisen prior to
such termination. Upon dissolution of the Company, each Member shall have the
right to compel the Company to be promptly wound-up and liquidated.
12.4 Dissolution. The Company shall be dissolved, its assets shall be
disposed of, and its affairs wound up on the first to occur of the following:
(a) Upon the election of the applicable Member(s) following the
happening of any Dissolution Event;
(b) Upon the entry of a decree of judicial dissolution pursuant to
Section 17351 of the Corporations Code;
(c) The occurrence of a Withdrawal Dissolution Event and the failure
of the Remaining Members to consent to continue the business of the Company
within ninety (90) days after the occurrence of such event or the failure of the
Company or the Remaining Members to purchase the Former Member's Interest as
provided in Article 10; or
(d) The sale of all or substantially all of the assets of the
Company.
12.5 Certificate of Dissolution. As soon as possible following the
occurrence of any of the events specified in Section 12.4, the Managers
appointed by Members whose breach or Withdrawal Dissolution Event have not
caused the dissolution of the Company or, if none, the Members, shall execute a
Certificate of Dissolution in such form as shall be prescribed by the California
Secretary of State and file the Certificate as required by the Act.
12.6 Winding Up. Upon dissolution, the Company shall continue solely for
the purpose of winding up its affairs in an orderly manner, liquidating its
assets, and satisfying the claims of its creditors. The Managers appointed by
Members whose breach or Withdrawal Dissolution Event have not caused the
dissolution of the Company or, if none, the Members, shall be responsible for
overseeing the winding up and liquidation of Company, shall take full account of
the liabilities of Company and assets, shall (subject to PEGI's right under
Section 12.7) either cause its assets to be sold or distributed, and if sold as
promptly as is consistent with obtaining the Fair Market Value thereof, shall
cause the proceeds therefrom, to the extent sufficient therefor, to be applied
and distributed as provided in Section 12.8. The Persons winding up the affairs
of the Company shall give written notice of the commencement of winding up by
mail to all known creditors and claimants whose addresses appear on the records
of the Company. The Managers or Members winding up the affairs of the Company
shall be entitled to reasonable compensation for such services.
41
12.7 Distributions in Kind. Any non-cash asset distributed to one or more
Members shall first be valued at its Fair Market Value to determine the Net
Income or Net Loss that would have resulted if such asset were sold for such
value, such Net Income or Net Loss shall then be allocated pursuant to Article
4, and the Members' Capital Accounts shall be adjusted to reflect such
allocations. The amount distributed and charged to the Capital Account of each
Member receiving an interest in such distributed asset shall be the Fair Market
Value of such interest (net of any liability secured by such asset that such
Member assumes or takes subject to). The Fair Market Value of such asset shall
be determined by the Managers or by the Members or if any Member objects by an
independent appraiser in accordance with Exhibit C, with a single appraiser
selected by the Manager or liquidating trustee and approved by the Members;
provided, however, that the Fair Market Value of the physical embodiment of any
intellectual property shall be determined based on its value to a third party
(i.e., to a Person other than the owner of such intellectual property).
Notwithstanding the foregoing, PEGI may elect in lieu of or in addition to any
other form of distribution to have distributed to it in kind or destroyed any
assets of the Company that are Playboy-branded, contain Playboy-identified
content or are otherwise identified as a Playboy-related product.
12.8 Order of Payment of Liabilities Upon Dissolution.
12.8.1 Distributions to Members. After determining that all known
debts and liabilities of the Company in the process of winding-up, including,
but not limited to, debts and liabilities to Members that are creditors of the
Company, have been paid or adequately provided for, the remaining assets shall
be distributed to the Members in accordance with their positive Capital Account
balances, after taking into account income and loss allocations for the
Company's taxable year during which liquidation occurs. Such liquidating
distributions shall be made by the end of the Company's taxable year in which
the Company is liquidated, or, if later, within ninety (90) days after the date
of such liquidation.
12.8.2 Payment of Debts. The payment of a debt or liability, whether
the whereabouts of the creditor is known or unknown, has been adequately
provided for if the payment has been provided for by either of the following
means:
(a) Payment thereof has been assumed or guaranteed in good faith by
one or more financially responsible persons or by the United States government
or any agency thereof, and the provision, including the financial responsibility
of the Person, was determined in good faith and with reasonable care by the
Members or Managers to be adequate at the time of any distribution of the assets
pursuant to this Section.
(b) The amount of the debt or liability has been deposited as
provided in Section 2008 of the Corporations Code.
This Section 12.8.2 shall not prescribe the exclusive means of
making adequate provision for debts and liabilities.
12.9 Certificate of Cancellation. The Managers or Members who filed the
Certificate of Dissolution shall cause to be filed in the office of, and on a
form prescribed by, the California Secretary of State, a certificate of
cancellation of the Articles upon the completion of the winding up of the
affairs of the Company.
12.10 No Action for Dissolution. Except as expressly permitted in this
Agreement, a Member shall not take any voluntary action that directly causes a
Dissolution Event. The Members acknowledge that irreparable damage would be done
to the goodwill and reputation of the Company if any Member should bring an
action in court to dissolve the Company under circumstances where dissolution is
not
42
required by Section 12.4. This Agreement has been drawn carefully to provide
fair treatment of all parties. Accordingly, except where the Managers have
failed to liquidate the Company as required by this Article 12, each Member
hereby waives and renounces its right to initiate legal action to seek the
appointment of a receiver or trustee to liquidate the Company or to seek a
decree of judicial dissolution of the Company on the ground that (a) it is not
reasonably practicable to carry on the business of the Company in conformity
with this Agreement, or (b) dissolution is reasonably necessary for the
protection of the rights or interests of the complaining Member. Damages for
breach of this Section 12.10 shall be monetary damages only (and not specific
performance), and the damages may be offset against distributions by the Company
to which such Member would otherwise be entitled.
ARTICLE XIII
INDEMNIFICATION AND INSURANCE
13.1 Indemnification of Agents. The Company shall and hereby agrees to
indemnify any Person who was or is a party or is threatened to be made a party
to any threatened, pending or completed action, suit or proceeding by reason of
the fact that such Person is or was a Member, Manager, officer, employee or
other agent of the Company or that, being or having been such a Member, Manager,
officer, employee or agent, such Person is or was serving at the request of the
Company as a manager, director, officer, employee or other agent of another
limited liability company, corporation, partnership, joint venture, trust or
other enterprise (all such persons being referred to hereinafter as an "Agent"),
to the fullest extent permitted by applicable law in effect on the date hereof
and to such greater extent as applicable law may hereafter from time to time
permit. The Managers shall be authorized, on behalf of the Company, to enter
into indemnity agreements from time to time with any Person entitled to be
indemnified by the Company hereunder, upon such terms and conditions as the
Managers deem appropriate in their business judgment.
13.2 Insurance. The Company shall have the power to purchase and maintain
insurance on behalf of any Person who is or was an Agent of the Company against
any liability asserted against such Person and incurred by such Person in any
such capacity, or arising out of such Person's status as an Agent, whether or
not the Company would have the power to indemnity such Person against such
liability under the provisions of Section 13.1 or under applicable law.
ARTICLE XIV
NON-COMPETITION
14.1 Adult Oriented Television Business Non-Competition.
14.1.1 PEI and its Subsidiaries may not directly or indirectly,
alone or as a partner, joint venturer, member, consultant, agent, independent
contractor or stockholder of or lender to, any company or business, engage,
compete or participate in the Adult-Oriented Television Business in the
Territory (except as provided in Section 3.6), for a period coterminous with the
Term and until two (2) years after the termination of this Agreement.
14.1.2 Claxson and its Subsidiaries may not directly or indirectly,
alone or as a partner, joint venturer, member, consultant, agent, independent
contractor or stockholder of, or lender to, any company or business, engage,
compete or participate in the Adult-Oriented Television Business in all other
territories except for the Territory for a period coterminous with the Term and
until two (2) years after the termination of this Agreement.
14.1.3 Claxson and PEI and their respective Subsidiaries may not own
any interest in a Person engaged in the Adult-Oriented Television Business in
the Territory, except and unless those
43
interests are contributed to the Company, and only with the written permission
of the other Member, and such party shall not receive any consideration for such
contribution.
14.1.4 If this Agreement, the Program Supply Agreement or any
Related Document is terminated due to a breach by PEI, Claxson or any of their
respective Subsidiaries, all non-competition restrictions on the breaching party
will remain in force for an additional two (2) years, while the non-competition
restrictions on the non-breaching party and its Subsidiaries will be terminated.
14.2 Playboy Lifestyle Business Non-Competition in the Territory.
14.2.1 Neither PEI or Claxson nor any of their respective
Subsidiaries may directly or indirectly, alone or as a partner, joint venturer,
member, consultant, agent, independent contractor or stockholder of or lender
to, any company or business, engage, compete or participate in the Lifestyle
Media Business in the Territory for a period coterminous with the Term and until
two (2) years after the termination of this Agreement.
14.2.2 Claxson and PEI and their respective Subsidiaries may not own
any interest in a Person engaged in the Lifestyle Media Business in the
Territory, except and unless those interests are contributed to the Company or
the Playboy Lifestyle Companies, and only with the written permission of the
other Member, and such party shall not receive any consideration for such
contribution.
14.2.3 If this Agreement or the Program Supply Agreement or any
Related Document is terminated due to a breach by PEI, Claxson or any of their
respective Subsidiaries, all non-competition restrictions on the breaching party
will remain in force for an additional two (2) years, while the non-competition
restrictions on the non-breaching party and its Subsidiaries will be terminated.
14.3 US Playboy Lifestyle Business Non-Competition in the US Lifestyle
Territory.
14.3.1 Neither PEI or Claxson nor any of their respective
Subsidiaries may for a period coterminous with the US Option Period: (i)
directly or indirectly, alone or as a partner, joint venturer, member,
consultant, agent, independent contractor or stockholder of or lender to, any
company or business, engage, compete or participate in the Lifestyle Linear
Television Business in the US Lifestyle Territory, or (ii) own any interest in a
Person engaged in the Lifestyle Linear Television Business in the US Lifestyle
Territory, except and unless those interests are contributed to the Company or
the Playboy Lifestyle Companies, and only with the written permission of the
other Member, and such party shall not receive any consideration for such
contribution. If there is a US Option Confirmation, this non competition
obligation will survive during the Term of this Agreement; provided however,
that if (i) there is a PEI Second Rejection or (ii) the Playboy Lifestyle
Channel USA is not launched in the US Lifestyle Territory within the time frame
as mutually determined by the parties pursuant to Section 2.8.1, this
noncompetition obligation will terminate.
14.3.2 If Claxson fails or refuses to make a timely Claxson Offer,
Section 14.3.1 shall no longer be applicable, and Claxson and its Subsidiaries
may not for the one (1) year period immediately following the expiration of the
90-day period to complete a Claxson Offer: (i) directly or indirectly, alone or
as a partner, joint venturer, member, consultant, agent, independent contractor
or stockholder of, or lender to, any company or business, engage, compete or
participate in the Lifestyle Linear Television Business in the US Lifestyle
Territory or (ii) own any interest in a Person engaged in the Lifestyle Linear
Television Business in the US Lifestyle Territory, except and unless those
interests are contributed to the Company or the Playboy Lifestyle Companies, and
only with the written permission of the other Member, and such party shall not
receive any consideration for such contribution. If Claxson fails or refuses to
meet and confer with PEI during the 30-day period after a PEI Reply other than a
US Option
44
Confirmation, Section 14.3.1 shall no longer be applicable, and Claxson and its
Subsidiaries may not for the one (1) year period immediately following the
expiration of such 30-day period: (i) directly or indirectly, alone or as a
partner, joint venturer, member, consultant, agent, independent contractor or
stockholder of, or lender to, any company or business, engage, compete or
participate in the Lifestyle Linear Television Business in the US Lifestyle
Territory or (ii) own any interest in a Person engaged in the Lifestyle Linear
Television Business in the US Lifestyle Territory, except and unless those
interests are contributed to the Company or the Playboy Lifestyle Companies, and
only with the written permission of the other Member, and such party shall not
receive any consideration for such contribution. If Claxson fails or refuses to
participate during the Mediation Period, Section 14.3.1 shall no longer be
applicable, and Claxson and its Subsidiaries may not for the one (1) year period
immediately following the expiration of the 180-day Mediation Period: (i)
directly or indirectly, alone or as a partner, joint venturer, member,
consultant, agent, independent contractor or stockholder of, or lender to, any
company or business, engage, compete or participate in the Lifestyle Linear
Television Business in the US Lifestyle Territory or (ii) own any interest in a
Person engaged in the Lifestyle Linear Television Business in the US Lifestyle
Territory, except and unless those interests are contributed to the Company or
the Playboy Lifestyle Companies, and only with the written permission of the
other Member, and such party shall not receive any consideration for such
contribution.
14.3.3 If there is a PEI Rejection or PEI Second Rejection, Section
14.3.1 shall no longer be applicable, and for the two (2) year period
immediately following a PEI Rejection or the one (1) year period immediately
following a PEI Second Rejection, PEI and its Subsidiaries may not: (i) directly
or indirectly, alone or as a partner, joint venturer, member, consultant, agent,
independent contractor or stockholder of, or lender to, any company or business,
engage, compete or participate in the Lifestyle Linear Television Business in
the US Lifestyle Territory or (ii) own any interest in a Person engaged in the
Lifestyle Linear Television Business in the US Lifestyle Territory, except and
unless those interests are contributed to the Company or the Playboy Lifestyle
Companies, and only with the written permission of the other Member, and such
party shall not receive any consideration for such contribution.
14.3.4 If this Agreement or the Program Supply Agreement or any
Related Document is terminated due to a breach by PEI, Claxson or any of their
respective Subsidiaries, all non-competition restrictions on the breaching party
in this Section 14.3 will remain in force for an additional two (2) years, while
the non-competition restrictions on the non-breaching party and its Subsidiaries
will be terminated
Notwithstanding anything to the contrary in the foregoing, PEI expressly
acknowledges and agrees that neither the ownership or operation by Claxson or
any of its Subsidiaries of any of Claxson's or any of its Subsidiaries' existing
television channels shall be deemed to be a breach of this Section 14.3.
Notwithstanding anything to the contrary in the foregoing, Claxson expressly
acknowledges and agrees that neither the ownership or operation by PEI or any of
its Subsidiaries of any of PEI's or any of its Subsidiaries' existing television
channels shall be deemed to be a breach of this Section 14.3.
14.4 Separate Covenants. The agreements contained in Sections 14.1, 14.2
and 14.3 shall be construed as a series of separate and distinct covenants, one
for each (a) activity of PEI and its Subsidiaries and Claxson and its
Subsidiaries, as the case may be, (b) capacity in which each of PEI and its
Subsidiaries and Claxson and its Subsidiaries, as the case may be, are
prohibited from competing and (c) territory in which PEI and its Subsidiaries
and Claxson and its Subsidiaries, as the case may be, are carrying on or
prohibited from carrying on such activity.
14.5 Intent; Severability. Each of PEI, PEGI and Claxson intends that
Sections 14.1, 14.2 and 14.3 satisfy the terms of, and be enforceable in
accordance with California Business and Professions Code Section 16602.5, which
authorizes any member who sells its interest in a limited liability company to
enter into an agreement with the buyer of such interest to refrain from carrying
on a similar business
45
within the counties or cities in which a limited liability company carries on a
like business therein. Each of PEI, on behalf of itself and its Subsidiaries
(including, without limitation, PEGI), and Claxson, on behalf of itself and its
Subsidiaries, recognizes that the territorial and time restrictions set forth
herein are reasonable, not burdensome and are properly required by law for the
adequate protection of the Company, PEI and its Subsidiaries and Claxson and its
Subsidiaries. If such territorial or time restrictions or any other provision
contained herein shall be deemed to be illegal, unenforceable or unreasonable by
a court of competent jurisdiction, each of PEI and its Subsidiaries and Claxson
and its Subsidiaries agrees and submits to the reduction of such territorial or
time restriction or other provision to such an area or period as such court
shall deem reasonable.
14.6 Injunctive Relief. Each of PEI, PEGI and Claxson acknowledges that
(a) the covenants and the restrictions contained in Sections 14.1, 14.2 and 14.3
are a material factor to such party's execution of this Agreement and are
necessary and required for the protection of the Company, PEI and its
Subsidiaries and Claxson and its Subsidiaries, (b) such covenants relate to
matters that are of a special, unique and extraordinary character that gives
each of such covenants a special, unique and extraordinary value, and (c) a
breach of any of such covenants will result in irreparable harm and damages to
the Company, PEI and its Subsidiaries or Claxson and its Subsidiaries, as the
case may be, in an amount difficult to ascertain and that cannot be adequately
compensated by a monetary award. Accordingly, in addition to any of the relief
to which the Company, PEI and its Subsidiaries or Claxson and its Subsidiaries,
as the case may be, may be entitled at law or in equity, the Company, PEI and
its Subsidiaries and Claxson and its Subsidiaries, as the case may be, shall be
entitled to temporary and/or permanent injunctive relief from any breach or
threatened breach of the provisions of Sections 14.1, 14.2 and 14.3 without
proof of actual damages that have been or may be caused to such Persons by such
breach or threatened breach.
ARTICLE XV
MEMBER REPRESENTATIONS AND WARRANTIES
15.1 Representations and Warranties by Each Member. Each Member hereby
represents and warrants to, and agrees with, the other Members, and the Company,
as follows:
15.1.1 Experience. By reason of such Member's business or financial
experience, such Member is capable of evaluating the risks and merits of an
investment in the Membership Interest and of protecting such Member's own
interests in connection with this investment.
15.1.2 No Advertising. Such Member has not seen, received, been
presented with, or been solicited by any leaflet, public promotional meeting,
newspaper or magazine article or advertisement, radio or television
advertisement, or any other form of advertising or general solicitation with
respect to the sale of the Membership Interest.
15.1.3 Investment Intent. Such Member is acquiring the Membership
Interest for investment purposes for such Member's own account only and not with
a view to or for sale in connection with any distribution of all or any part of
the Membership Interest. No other Person will have any direct or indirect
beneficial interest in or right to the Membership Interest.
15.1.4 Purpose of Entity. Such Member was not organized for the
specific purpose of acquiring the Membership Interest.
15.1.5 Economic Risk. Such Member is financially able to bear the
economic risk of an investment in the Membership Interest, including the total
loss thereof.
46
15.1.6 No Registration of Membership Interest. Such Member
acknowledges that the Membership Interest has not been registered under the
Securities Act of 1933 (as amended, the "Securities Act"), or qualified under
the California Corporate Securities Law of 1968, as amended, or any other
applicable blue sky laws in reliance, in part, on such Member's representations,
warranties, and agreements herein.
15.1.7 Membership Interest in Restricted Security. Such Member
understands that the Membership Interest is a "restricted security" under the
Securities Act in that the Membership Interest will be acquired from the Company
in a transaction not involving a public offering, and that the Membership
Interest may be resold without registration under the Securities Act only in
certain limited circumstances and that otherwise the Membership Interest must be
held indefinitely. In this connection, such Member understands the resale
limitations imposed by the Securities Act and is familiar with SEC Rule 144, as
presently in effect, and the conditions which must be met in order for such SEC
Rule 144 to be available for resale of "restricted securities".
15.1.8 No Obligation to Register. Such Member represents, warrants,
and agrees that the Company is under no obligation to register or qualify the
Membership Interest under the Securities Act or under any state securities law,
or to assist such Member in complying with any exemption from registration and
qualification.
15.1.9 No Disposition in Violation of Law. Without limiting the
representations set forth above, and without limiting the other provisions of
this Agreement relating to the transfer of Membership Interests, such Member
will not make any disposition of all or any part of the Membership Interest
which will result in the violation by such Member or by the Company of the
Securities Act, the California Corporate Securities Law of 1968, or any other
applicable securities laws. Without limiting the foregoing, such Member agrees
not to make any disposition of all or any part of the Membership Interest unless
and until:
(a) There is then in effect a registration statement under the
Securities Act covering such proposed disposition and such disposition is made
in accordance with such registration statement and any applicable requirements
of state securities laws; or
(b) (i) Such Member has notified the Company of the proposed
disposition and has furnished the Company with a detailed statement of the
circumstances surrounding the proposed disposition, and (ii) such Member has
furnished the Company with a written opinion of counsel, reasonably satisfactory
to the Company, that such disposition will not require registration of any
securities under the Securities Act or the consent of or a permit from
appropriate authorities under any applicable state securities law; and
(c) In the case of any disposition of all or any part of the
Membership Interest pursuant to SEC Rule 144, in addition to the requirements
set forth above, such Member shall promptly forward to the Company a copy of any
Form 144 filed with the SEC with respect to such disposition and a letter from
the executing broker satisfactory to the Company evidencing compliance with SEC
Rule 144. If SEC Rule 144 is amended or if the SEC's interpretations thereof in
effect at the time of any such disposition have changed from its present
interpretations thereof, such Member shall provide the Company with such
additional documents as the General Manager may reasonably require.
15.1.10 Investment Risk. Such Member acknowledges that the
Membership Interest is a speculative investment which involves a substantial
degree of risk of loss by such Member of its entire investment in the Company,
that such Member understands and takes full cognizance of the risk factors
related to the purchase of the Membership Interest.
47
15.1.11 Restrictions on Transferability. Such Member acknowledges
that there are substantial restrictions on the transferability of the Membership
Interest pursuant to this Agreement, that there is no public market for the
Membership Interest and none is expected to develop, and that, accordingly, it
may not be possible for such Member to liquidate such Member's investment in the
Company.
15.1.12 Information Reviewed. Such Member has received and reviewed
all information such Member considers necessary or appropriate for deciding
whether to purchase the Membership Interest.
15.1.13 No Representations By Company. No Person has at any time
represented, guaranteed or warranted to such Member that such Member may freely
transfer the Membership Interest, that a percentage of profit and/or amount or
type of consideration will be realized as a result of an investment in the
Membership Interest, that past performance or experience on the part of the
Managers or any other Person in any way indicates the predictable results of the
ownership of the Membership Interest or of the overall Company business, that
any cash distributions from Company operations or otherwise will be made to the
Members by any specific date or will be made at all, or that any specific tax
benefits will accrue as a result of an investment in the Company.
15.1.14 Consultation with Attorney. Such Member has been advised to
consult with such Member's own attorney regarding all legal matters concerning
an investment in the Company and the tax consequences of participating in the
Company, and has done so, to the extent such Member considers necessary.
15.1.15 Tax Consequences. Such Member acknowledges that the tax
consequences to such Member of investing in the Company will depend on such
Member's particular circumstances, and such Member will look solely to, and rely
upon, such Member's own advisers with respect to the tax consequences of this
investment.
15.1.16 No Assurance of Tax Benefits. Such Member acknowledges that
there can be no assurance that the Code or the Treasury Regulations will not be
amended or interpreted in the future in such a manner so as to deprive the
Company and the Members of some or all of the tax benefits they might now
receive, nor that some of the deductions claimed by the Company or the
allocations of items of income, gain, loss, deduction, or credit among the
Members may not be challenged by the Internal Revenue Service.
15.2 Indemnity. Each Member shall indemnify and hold harmless the Company,
each and every Manager, each and every other Member, and any officers,
directors, shareholders, managers, members, employees, partners, agents,
attorneys, accountants, registered representatives, and control persons of any
such entity who was or is a party or is threatened to be made a party to any
threatened, pending, or completed action, suit, or proceeding, whether civil,
criminal, administrative, or investigative (a "Claim"), by reason of or arising
from any misrepresentation or misstatement of facts or omission to represent or
state facts made by such Member including, but not limited to, the information
and representations in this Agreement, against losses, liabilities, and expenses
of the Company, each and every Manager, each and every other Member, and any
officers, directors, shareholders, managers, members, employees, partners,
attorneys, accountants, agents, registered representatives, and control persons
of any such Person (including attorneys' fees, judgments, fines, and amounts
paid in settlement, payable as incurred) incurred by such Person in connection
with such action, suit, proceeding, or the like.
15.3 Procedure. If a claim by a third party is made against an indemnified
party, the indemnified party will promptly notify the indemnifying party of such
claim. Failure to so notify the
48
indemnifying party will not relieve the indemnifying party of any liability
which the indemnifying party might have, except to the extent that such failure
materially prejudices the indemnifying party's legal rights. The indemnifying
party will have the obligation after receipt of such notice to undertake,
conduct and control such claim through counsel of its own choosing and at its
expense. If, within thirty (30) days of such notice, the indemnifying party has
not undertaken, conducted nor controlled such claim through counsel, the
indemnified party shall have the right to undertake, conduct and control such
claim through counsel of its own choosing and the indemnifying party shall be
responsible for paying all such reasonable, documented expenses at the expense
of the indemnifying party.
ARTICLE XVI
DISPUTE RESOLUTION
16.1 Alternate Dispute Resolution. Except as set forth in Section 16.10,
any dispute arising out of or relating to this Agreement shall be resolved in
accordance with the procedures specified in this Article 16, which shall be the
sole and exclusive procedures for the resolution of any such disputes; provided,
however, that this Article shall not apply to any dispute concerning the
validity, ownership or control of the trademarks licensed by PEI to the Company
pursuant to the Program Supply Agreement or the copyrights to any programming
supplied by PEGI pursuant to the Program Supply Agreement, and instead any such
dispute shall be litigated in a court of law. The Company and the Members intend
that these provisions shall be valid, binding, enforceable and irrevocable and
shall survive any termination of this Agreement or any of the other Related
Documents.
16.2 Notification and Negotiation. If the Company or any Member wishes to
assert a dispute with the Company or any other Member arising out of or relating
to this Agreement, such Person shall promptly notify the Company and/or such
other Member in writing of such dispute and shall attempt in good faith to
resolve any dispute arising out of or relating to this Agreement promptly by
negotiation between executives who have authority to settle the controversy.
Within five (5) business days of the receipt by a party of a notice of the
existence of a Dispute ("Notice"), the receiving party shall submit a written
response to the other party ("Response"). Both the Notice and the Response shall
include (i) a statement of each party's position with regard to the Dispute and
a summary of arguments supporting that position; and (ii) the name and title of
the senior executive who will represent that party in attempting to resolve the
Dispute pursuant to this Section. Within five (5) business days of receipt of
the Response, the designated executives shall meet and attempt to resolve the
Dispute. All reasonable requests for information made by one party to the other
will be honored. All negotiations pursuant to this clause shall be confidential
and shall be treated as compromise and settlement negotiations, and no oral or
documentary representations made by the parties during such negotiations shall
be admissible for any purpose in any subsequent proceedings. If any Dispute is
not resolved for any reason within twenty (20) days of receipt of Notice (or
within such longer period as to which the parties have agreed in writing), then,
on the request of any party the Dispute shall be submitted to arbitration in
accordance with Sections 16.3 to 16.9 herein.
16.3 Arbitration Rules. Any Dispute not timely resolved in accordance with
Section 16.2 shall be finally and exclusively settled by arbitration in
accordance with the International Arbitration Rules of the American Arbitration
Association ("AAA") then in effect (the "Rules"), except as modified herein. The
arbitration shall be held in Los Angeles, California. The arbitration
proceedings shall be conducted, and the award shall be rendered, in the English
language.
16.4 Selection of Arbitrators. If the Dispute (including claims and
counterclaims) is for less than $5 million, there shall be one arbitrator. The
parties shall have fifteen (15) days from the receipt by the respondent of the
demand for arbitration to agree on an arbitrator. If the parties fail to timely
agree, on the request of any party such arbitrator shall be appointed by the AAA
in accordance with the Rules
49
and the procedures set forth herein. If the Dispute (including claims and
counterclaims) is for more than $5 million, there shall be three neutral and
impartial arbitrators of whom the claimant and the respondent shall each appoint
one, within fifteen (15) days of the receipt by respondent of a copy of the
demand for arbitration. The two arbitrators so appointed shall select a third
arbitrator to serve as presiding arbitrator, such selection to be made within
twenty (20) days of the selection of the second arbitrator. If any arbitrator is
not appointed within the time limits set forth herein, such arbitrator(s) shall
be appointed by the AAA in accordance with the Rules and the procedures set
forth herein. There shall be no restriction on the nationality of any
arbitrator. Any arbitrator appointed by the AAA shall be either a retired judge
with experience in international commercial cases or a practicing attorney with
at least 15 years experience with large commercial cases and experience as an
international arbitrator. The AAA shall send simultaneously to each party an
identical list of at least nine arbitrator candidates, and each party shall be
permitted to strike two names from the list, rank the remaining arbitrators in
order of preference and return the list to the AAA within ten (10) days of the
transmittal date. If a party does not return the list within the time specified,
all persons named therein shall be considered acceptable. From among the persons
who remain on both lists and in accordance with the designated order of mutual
preference, the AAA shall invite the acceptance of an arbitrator to serve.
16.5 Arbitration Procedures. The hearing on the merits shall be held as
expeditiously as possible, if practicable no later than four (4) months after
the appointment of a single arbitrator or five (5) months after the appointment
of the third arbitrator, as applicable. The hearing shall, if practicable, last
no longer than ten (10) days, which shall be consecutive, if possible. The
award, which shall be in writing and shall briefly and concisely state the
findings of fact and conclusions of law on which it is based, shall be rendered,
if practicable, within twenty (20) days of the close of the hearing. In
rendering an award, the arbitrator(s) shall be required to follow the law of the
State of California. The arbitrator(s) are not empowered to award damages in
excess of compensatory damages and each party hereby irrevocably waives any
right to recover such damages with respect to any dispute resolved by
arbitration. The arbitrator(s) shall have the authority to award the costs of
the arbitration (including attorneys' fees and expenses) to the prevailing
party. The award shall be final and binding upon the parties and shall be the
sole and exclusive remedy between the parties regarding any claims,
counterclaims, issues or accounting presented to the arbitral tribunal. Judgment
upon any award may be entered in any court having jurisdiction thereof. Any
costs or fees (including attorneys' fees and expenses) incident to enforcing the
award shall be charged against the party resisting such enforcement.
16.6 Effect of Arbitration. By agreeing to arbitration, the parties do not
intend to deprive any court of its jurisdiction to issue a pre-arbitral
injunction, pre-arbitral attachment or other order in aid of arbitration
proceedings and the enforcement of any award. Without prejudice to such
provisional remedies as may be available under the jurisdiction of a national
court, the arbitral tribunal shall have full authority to grant provisional
remedies or modify or vacate any temporary or preliminary relief issued by a
court, and to award damages for the failure of any party to respect the arbitral
tribunal's orders to that effect.
16.7 Statute of Limitations. The statute of limitations of the State of
California applicable to the commencement of a lawsuit shall apply to the
commencement of an arbitration hereunder, except that no defenses shall be
available based upon the passage of time during any negotiation or mediation
called for by the preceding paragraphs of this Article 16.
16.8 Service of Process. The Company and each Member agrees that service
by registered or certified mail, return receipt requested, delivered to such
party at the address provided in Section 17.10 (Notices) will be deemed in every
respect effective service of process upon such Person for all purposes of these
provisions relating to mediation and arbitration. The Company and each Member
irrevocably submits to the jurisdiction of the courts of the State of California
and to any federal court located within
50
such state for the purpose of any action or judgment with respect to this
Agreement, regardless of where any alleged breach or other action, omission,
fact or occurrence giving rise thereto occurred. The Company and each Member
hereby irrevocably waives any claim that any action or proceeding brought in
California has been brought in any inconvenient forum.
16.9 Additional Arbitration Provisions. The Company and each Member shall
take all actions necessary for awards and other judgments resulting from the
provisions set forth above to be recognized and enforceable in the respective
jurisdictions of organization of the Company, the Members and the other parties
to the Related Documents and, to the extent necessary, in other jurisdictions in
the Territory.
16.10 Availability of Equitable Relief. Notwithstanding the foregoing
provisions of this Article 16, the Company and the Members acknowledge that a
material breach of this Agreement, the Program Supply Agreement or the
Distribution Agreement by a party thereto may result in irreparable harm to the
Company or a Member for which there is no adequate remedy at law. Accordingly,
if the Company or any Member reasonably believes that the Company or another
Member, as the case may be, (i) has materially breached this Agreement, the
Program Supply Agreement or the Distribution Agreement and (ii) said breach will
create irreparable harm to such Person for which there is not adequate remedy at
law, the allegedly harmed party shall be entitled to preliminary, temporary or
permanent equitable relief in any Federal or State Court of competent
jurisdiction located in the State of California.
ARTICLE XVII
MISCELLANEOUS
17.1 Additional Documents and Acts. Each Member agrees to execute and
deliver such additional documents and instruments and to perform such additional
acts as may be necessary or appropriate to effectuate, carry out and perform all
of the terms, provisions, and conditions of this Agreement and the transactions
contemplated hereby.
17.2 Time is of the Essence. All dates and times in this Agreement are of
the essence.
17.3 Remedies Cumulative. The remedies under this Agreement are cumulative
and shall not exclude any other remedies to which any Person may be lawfully
entitled.
17.4 Currency; Payments.
17.4.1 All amounts due from one Member to another Member, from the
Company to one or more Members or from one or more Members to the Company
pursuant to this Agreement and the other Related Documents shall be paid in U.S.
Dollars. If any portion of such payment is calculated on the basis of revenues
received in other currencies, such revenues shall be calculated using the
exchange rate published in the Wall Street Journal or as quoted by the Central
Bank of any country in the Territory, as of the business day immediately
preceding the date on which the payment initially is due. Such exchange rate
shall also apply to any portion of a payment which is permitted to be deferred,
regardless of whether such deferred payment is represented by a promissory note
or other instrument.
17.4.2 All payments owing pursuant to this Agreement and the other
Related Documents will be made by wire transfer of immediately available funds,
net of any withholding required by applicable law. Each Member and the Company
will from time to time designate one or more accounts into which such payments
will be made and may designate one or more Affiliates to receive such payments.
51
17.4.3 Unless otherwise indicated, any payment hereunder or under
the other Related Documents not made when due will bear interest from the date
due to and including the date of payment in full at a rate equal to the
Reference Rate as in effect on the date payment was due.
17.4.4 Each Member agrees for the benefit of the other Members that
if any payment owing by it under this Agreement is precluded or limited by a
restriction imposed by the jurisdiction of organization or operation of such
Member or the jurisdiction where such Member's funds are deposited, then an
Affiliate of such Member not subject to such restriction shall make the required
payment.
17.5 Governing Law. This Agreement has been negotiated and entered into in
the State of California and all questions with respect to this Agreement and the
relationships of the parties hereunder will be governed by the internal laws of
the State of California, regardless of the choice of law principles of
California or any other jurisdiction.
17.6 Authority. Each Member represents that (i) it has full power and
authority to enter into and perform this Agreement, (ii) this Agreement is the
valid and binding obligation of such Member, enforceable against it in
accordance with its terms, and (iii) the performance by such Member of its
obligations under this Agreement does not violate any law, rule or regulation
binding on such Member or such Member's charter documents.
17.7 Assignment; No Third Party Beneficiary. Neither the Company nor any
Member shall assign its rights or delegate its obligations hereunder without
written consent of all of the Members except to an Affiliate of the Company or
such Member; provided that no such assignment shall relieve the assignor of its
obligations. The provisions of this Agreement are for the benefit only of the
Company and the Members, and no third party may seek to enforce or benefit from
these provisions except that the Persons indemnified by the Company pursuant to
Section 13.1 shall be third party beneficiaries of this Agreement with respect
to such Section only and shall have independent standing to enforce or benefit
from such Section. References to a party by name herein shall also be deemed to
be references to such party's permitted successors and assigns.
17.8 Agreement Negotiated. The Members are sophisticated and have been
represented by lawyers throughout the negotiation and execution of this
Agreement who have carefully negotiated the provisions hereof. As a consequence,
the parties do not believe the presumption of California Civil Code Section 1654
and similar laws or rules relating to the interpretation of contracts against
the drafter of any particular clause should be applied in this case and
therefore waive its effects.
17.9 Waivers; Remedies Cumulative, Amendments, etc.
17.9.1 No failure or delay by the Company or any Member in
exercising any right, power or privilege under this Agreement shall operate as a
waiver thereof nor shall any single or partial exercise by any of them of any
right, power or privilege preclude any further exercise thereof or the exercise
of any other right, power or privilege.
17.9.2 The rights and remedies herein provided are cumulative and
not exclusive of any rights and remedies provided by law.
17.9.3 No provision of this Agreement may be amended, modified,
waived, discharged or terminated, other than by the express written agreement of
all of the Members nor may any breach of any provision of this Agreement be
waived or discharged except with the express written consent of the party(ies)
not in breach.
52
17.10 Notices. All notices, requests, demands and other communications
required to be given under this Agreement shall be in writing and shall
conclusively be deemed to have been duly given to each Member (a) when hand
delivered, (b) the next business day if sent by a generally recognized overnight
courier service that provides written acknowledgement by the addressee of
receipt, or (c) when received, if sent by facsimile (with appropriate answer
back) or other generally accepted means of electronic transmission addressed as
follows:
If to PEGI to:
Playboy Entertainment Group, Inc.
Attention: President
2706 Media Center Drive
Los Angeles, CA 90065
United States of America
Fax Number: (323) 276-4500
with a copy to:
Playboy Enterprises, Inc.
Attention: General Counsel
680 North Lake Shore Drive
Chicago, IL 60611
United States of America
Fax Number: (312) 266-2042
with a copy to:
Playboy Entertainment Group, Inc.
Attention: Business and Legal Affairs
2706 Media Center Drive
Los Angeles, CA 90065
United States of America
Fax Number: (323) 276-4502
if to Lifford to:
Lifford International Co. Ltd.
c/o Claxson Interactive Group, Inc.
Attention: General Counsel
1550 Biscayne Boulevard
Ground Floor
Miami, FL 33132
Fax Number: (305) 894-4803
with a copy to:
Paul Berkowitz, Esq.
Greenberg Traurig, P.A.
1221 Brickell Avenue
Miami, Florida 33131
Fax Number: (305) 961-5685
53
if to the Company to:
Playboy TV - Latin America, LLC
c/o Claxson Interactive Group Inc.
Attention: General Counsel
1550 Biscayne Boulevard
Ground Floor
Miami, FL 33132
Fax Number: (305) 894-4803
with copies to PEGI and Claxson
or to such other address, or facsimile transmission number as the relevant
addressee may hereafter by notice hereunder substitute.
17.11 Public Announcements. Unless otherwise unanimously agreed by the
Management Committee or as required by law or by the stock exchange on which any
Member's stock, or the stock of any direct or indirect parent of a Member, is
traded, no public announcement will be made by any of the Company, any Member,
any Manager, the General Manager or any other officer of the Company or any of
their respective Affiliates with respect to the subject matter of this
Agreement.
17.12 Survival. Notwithstanding the termination of this Agreement, the
dissolution of the Company, or a Member's ceasing to be a Member under this
Agreement, the following sections of this Agreement, as set forth as of the date
hereof or as hereafter amended by agreement in writing signed by both PEGI and
Lifford, shall survive indefinitely and be enforceable by PEGI or Lifford:
Section 12.7, Section 13.1, Article 14, Article 16 and this Section 17.12.
17.13 Confidentiality. Unless otherwise unanimously agreed by the
Management Committee or as required by law or by the stock exchange on which any
Member's stock, or the stock of any direct or indirect parent of a Member, is
traded, no public announcement will be made by any of the Company, any Member,
any Manager, the General Manager or any other officer of the Company or any of
their respective Affiliates with respect to the subject matter of this
Agreement.
17.13.1 General Confidentiality Requirements. Each Member shall and
shall cause its Affiliates to, maintain the confidentiality of all information
of a confidential or proprietary nature, which it may have or acquire regarding
customers, business, finances, assets or affairs of the Company or the other
Members or its Affiliates, except for any information, which is (a) generally
available to the public or becomes generally available to the public other than
through disclosure in violation of this Agreement, (b) required to be disclosed
by applicable law or to enforce the provisions of this Agreement and the Related
Documents, or (c) disclosed to its representatives (which term shall be deemed
to include their banks, private investors, independent accountants and legal
counsel); provided, such Member causes such representatives to comply with the
confidentiality requirements of this Agreement.
17.13.2 Exceptions to the General Confidentiality Requirements.
(a) Notwithstanding anything stated to the contrary in Section
17.12.1 above, to the extent any Member invites a third party to participate as
an equity or non-equity investor or other provider of finance (a "Third Party")
in or to such Member or its respective Affiliates, the Members agree that such
Member may provide to such Third Party and its representatives (which term shall
be deemed to include their banks, private investors, independent accountants and
legal counsel), subject to the execution of an appropriate confidentiality
agreement, copies of (i) this Agreement, (ii) the Related
54
Documents, (iii) any other agreement by and between any of the parties that
relate to the Company and transactions contemplated by this Agreement and the
Related Documents, and (iv) any other financial or other information that would
be reasonable in the circumstances for a potential investor to require.
Notwithstanding the foregoing, no such information will be provided until a
confidentiality agreement to the benefit of the Members, in a form and substance
reasonably acceptable to the Members, has been signed by the Third Party.
(b) Notwithstanding anything stated to the contrary in Section
17.13.1 above, Claxson, PEI and the Members may provide to any institutional
investors and analysts and their representatives (which term shall be deemed to
include their independent accountants and legal counsel), subject to the
execution of an appropriate confidentiality agreement, such information
concerning the Company as is conventional to assist (i) such institutional
investors in deciding whether to invest or (ii) such analysts to prepare their
reports; provided, however, that no information may be disclosed to any entity
pursuant to this Section 17.13.2(b) without the prior written consent of the
Management Committee, with such consent only being withheld upon reasonable
determination by the Management Committee that the disclosure of such
information would reasonably be expected to cause harm, including with respect
to its competitive position, to the Company.
[SIGNATURE PAGE FOLLOWS]
55
IN WITNESS WHEREOF, the parties have caused their duly authorized
officers to execute this Agreement.
PLAYBOY ENTERTAINMENT GROUP, INC.
By: Reid Nathan
-----------------------------------------
Name:Reid Nathan
Title:V.P. Business and Legal Affairs
LIFFORD INTERNATIONAL CO. LTD.
By: Amaya Arizstoy
-----------------------------------------
Name:Amaya Arizstoy
Title:
Solely in connection with Article 14, Sections 2.8, 2.9, 2.10, 9.8 and 12.2.4
and Exhibit G of this Agreement, agreed to and accepted by:
PLAYBOY ENTERPRISES, INC.
By: Alejandro Inglesias
-----------------------------------------
Name:Alejandro Inglesias
Title:
Solely in connection with Article 14, Sections 2.8, 2.9, 2.10, 9.9, 9.10 and
12.2.3 and Exhibit G, agreed to and accepted by:
CLAXSON INTERACTIVE GROUP INC.
By: Roberto Vivo
-----------------------------------------
Name:Roberto Vivo
Title:
56
EXHIBIT A
CAPITAL CONTRIBUTION / CAPITAL ACCOUNT
AND ADDRESSES OF MEMBERS
AS OF APRIL 1, 2002
Playboy TV - Latin America, LLC
Member's Member's Member's Percentage
Member's Name Address Capital Account Capital Contribution Interest
Playboy Entertainment Group, Inc. See Section 17.10 ($ 381,000) $ 5,692,000 19%
Lifford International Co. Ltd. See Section 17.10 ($1,637,000) $24,260,000 81%
Playboy TV Holdings, LLC
Member's Member's Member's Percentage
Member's Name Address Capital Account Capital Contribution Interest
Playboy Entertainment Group, Inc. See Section 17.10 $ 74,470 $ -- 19%
Zagasse Corp, N.V. See Section 17.10 $334,530 $ -- 81%
A-1
EXHIBIT B
TAX ALLOCATIONS
ARTICLE 1
ALLOCATION OF NET INCOME, NET LOSSES
AND OTHER ITEMS AMONG THE MEMBERS
1.1 Capital Accounts.
(a) A separate capital account shall be maintained for each Member
(a "Capital Account"). Such Member's Capital Account shall from time to time be
(i) increased by (A) the amount of money and the Gross Asset Value of any
property contributed by the Member to the Company (net of liabilities secured by
the property or to which the property is subject), and (B) the Net Income and
any other items of income and gain specially allocated to the Member under
Paragraph 1.3, and (ii) decreased by (A) the amount of money and the Gross Asset
Value of any property distributed to the Member by the Company (net of
liabilities secured by the property or to which the property is subject), and
(B) the Net Losses and any other items of deduction and loss specially allocated
to the Member under Paragraph 1.3.
(b) For purposes of this Paragraph 1.1, an assumption of a Member's
unsecured liability by the Company shall be treated as a distribution of money
to that Member. An assumption of the Company's unsecured liability by a Member
shall be treated as a cash contribution to the Company by that Member.
(c) In the event that assets of the Company other than money are
distributed to a Member in liquidation of the Company, or in the event that
assets of the Company other than money are distributed to a Member in kind, in
order to reflect unrealized gain or loss, Capital Accounts for the Members shall
be adjusted for the hypothetical "book" gain or loss that would have been
realized by the Company if the distributed assets had been sold for their Gross
Asset Values in a cash sale. In the event of the liquidation of a Member's
interest in the Company, in order to reflect unrealized gain or loss, Capital
Accounts for the Members shall be adjusted for the hypothetical "book" gain or
loss that would have been realized by the Company if all Company assets had been
sold for their Gross Asset Values in a cash sale.
1.2 Allocation of Net Income and Net Losses. After giving effect to the
special allocations set forth in Paragraph 1.3 below, Net Income and Net Losses
of the Company for each Fiscal Year shall be allocated to the Members in
accordance with their respective Percentage Interests.
1.3 Special Allocations. The following special allocations shall be made
in the following order:
(a) Minimum Gain Chargeback. Subject to the exceptions set forth in
Treasury Regulation Section 1.704-2(f), if there is a net decrease in Company
Minimum Gain during a Company Fiscal Year, each Member shall be specially
allocated items of income and gain for Capital Account purposes for such year
(and, if necessary, for subsequent years) in an amount equal to such Member's
share of the net decrease in Company Minimum Gain during such year (which share
of such net decrease shall be determined under Treasury Regulation Section
1.704-2(g)(2)). It is intended that this Paragraph 1.3(a) shall constitute a
"minimum gain chargeback" as provided by Treasury Regulation Section 1.704-2(f).
(b) Member Nonrecourse Debt Minimum Gain Chargeback. Subject to the
exceptions contained in Treasury Regulation Section 1.704-2(i)(4), if there is a
net decrease in Member Nonrecourse
B-1
Debt Minimum Gain during a Company Fiscal Year, any Member with a share of such
Member Nonrecourse Debt Minimum Gain (determined in accordance with Treasury
Regulation Section 1.704-2(i)(5)) as of the beginning of such year shall be
specially allocated items of income and gain for Capital Account purposes for
such year (and, if necessary, for subsequent years) in an amount equal to such
Member's share of the net decrease in Member Nonrecourse Debt Minimum Gain
(which share of such net decrease shall be determined under Treasury Regulation
Sections 1.704-2(i)(4) and 1.704-2(g)(2)). It is intended that this Paragraph
1.3(b) shall constitute a "partner nonrecourse debt minimum gain chargeback" as
provided by Treasury Regulation Section 1.704-2(i)(4).
(c) Nonrecourse Deductions. Any Nonrecourse Deductions shall be
allocated to the Members in accordance with their Percentage Interests.
(d) Member Nonrecourse Deductions. Any Member Nonrecourse Deductions
shall be allocated to the Member that takes the Economic Risk of Loss for the
Member Nonrecourse Debt to which such deductions relate as provided in Treasury
Regulation Section 1.704-2(i)(1).
(e) Qualified Income Offset. In the event any Member unexpectedly
receives any adjustments, allocations, or distributions described in Treasury
Regulation Sections 1.704-1(b)(2)(ii)(d)(4), 1.704-l(b)(2)(ii)(d)(5), or
1.704-1(b)(2)(ii)(d)(6), items of Company income and gain for Capital Account
purposes for such Fiscal Year shall be specially allocated to the Member in an
amount and manner sufficient to eliminate, to the extent required by the
Treasury Regulations, the Adjusted Capital Account Deficit of the Member as
quickly as possible, provided that an allocation pursuant to this Paragraph
1.3(e) shall be made if and only to the extent that the Member would have an
Adjusted Capital Account Deficit after all other allocations provided for in
this Article 1 have been tentatively made as if this Paragraph 1.3(e) were not
in the Agreement.
(f) Section 754 Adjustment. To the extent any adjustment to the
adjusted tax basis of any Company asset pursuant to Code Section 734(b) or Code
Section 743(b) is required, pursuant to Treasury Regulation Section
l.704-1(b)(2)(iv)(m), to be taken into account in determining Capital Accounts,
the amount of such adjustment to the Capital Accounts shall be treated as an
item of gain (if the adjustment increases the basis of the asset) or loss (if
the adjustment decreases such basis) and such gain or loss shall be specially
allocated to the Members in a manner consistent with the manner in which their
Capital Accounts are required to be adjusted pursuant to such section of the
Treasury Regulations.
(g) No Excess Deficit. To the extent that any Member has or would
have, as a result of an allocation of loss (or an item thereof), an Adjusted
Capital Account Deficit, such amount of loss (or an item thereof) shall be
allocated to the other Members in accordance with this Paragraph 1.3, but in a
manner which will not produce an Adjusted Capital Account Deficit as to any such
Member.
(h) Curative Allocations. The allocations set forth in this
Paragraph 1.3 shall be taken into account for purposes of equitably adjusting
subsequent allocations of Net Income and Net Losses, and items of income, gain,
loss and deduction among the Members so that, to the extent possible, the net
amount of such allocations of Net Income and Net Losses and other items to each
Member shall be equal to the net amount that would have been allocated to each
such Member if such allocations had not occurred.
(i) It is the intent of the allocation provisions of this Exhibit B
that the distributions to the Members pursuant to Article 12 will be equal to
the positive Capital Account balances of the Members (as determined after taking
into account all Capital Account adjustments for the year prior to any
liquidating distributions). If such Capital Account Balances would otherwise not
satisfy the intent described in the preceding sentence, then the Manager shall
reallocate items of gross income or deduction
B-2
for the year of such liquidating distributions (and, if necessary, for prior
taxable years of the Company for which amended tax returns can be and are filed)
such that, to the extent possible, the positive Capital Account balances of the
Members (as determined after taking into account all Capital Account adjustments
for the year of liquidation) will be equal to the distributions to be received
by the Members pursuant to Article 12.
1.4 Allocation of Certain Tax Items.
(a) Except as otherwise provided in this Paragraph 1.4, all items of
income, gain, loss or deduction for federal, state and local income tax purposes
shall be allocated in the same manner as the corresponding "book" items are
allocated under Paragraph 1.2 (as a component of Net Income or Net Losses), or
1.3.
(b) In accordance with Code Section 704(c) and the Treasury
Regulations thereunder, income, gain, loss and deduction with respect to any
property contributed to the capital of the Company shall, solely for tax
purposes, be allocated among the Members so as to take account of any variation
between the adjusted basis of such property to the Company for federal income
tax purposes and the initial Gross Asset Value thereof (computed in accordance
with subparagraph (i) of the definition of the term Gross Asset Value herein).
(c) In the event the Gross Asset Value of any Company asset is
adjusted pursuant to subparagraph (ii) or (iv) of the definition of the term
Gross Asset Value, subsequent allocations of income, gain, loss and deduction
with respect to such asset shall take account of any variation between the
adjusted basis of such asset for federal income tax purposes and its Gross Asset
Value in the same manner as under Code Section 704(c) and the Treasury
Regulations thereunder.
(d) In the event the Company has in effect an election under Section
754 of the Code, allocations of income, gain, loss or deduction to affected
Members for federal, state and local tax purposes shall take into account the
effect of such election pursuant to applicable provisions of the Code.
(e) Any elections or other decisions relating to such allocations
shall be made by the Manager in any manner that reasonably reflects the purpose
and intention of this Agreement. Allocations pursuant to this Paragraph 1.4 are
solely for federal, state and local tax purposes and shall comprise the
information furnished to such Members in their Schedule K-1s each year. Except
to the extent allocations under this Paragraph 1.4 are reflected in the
allocations of the corresponding "book" items pursuant to Paragraph 1.2 (as a
component of Net Income or Net Losses), or 1.3, allocations under this Paragraph
1.4 shall not affect, or in any way be taken into account in computing, any
Member's Capital Account or share of Net Income, Net Losses, other items or
distributions pursuant to any provision of this Agreement.
(f) To the extent possible, any tax credits shall be allocated in
accordance with each Member's Percentage Interest.
1.5 Allocation Between Assignor and Assignee. The portion of the income,
gain, losses, credits, and deductions of the Company for any Fiscal Year of the
Company during which a Membership Interest is assigned by a Member (or by an
assignee or successor in interest to a Member), that is allocable with respect
to such Membership Interest shall be apportioned between the assignor and the
assignee of the Membership Interest on whatever reasonable, consistently applied
basis selected by the Manager and permitted by the applicable Treasury
Regulations under Section 706 of the Code.
B-3
ARTICLE 2
DEFINITIONS
As used in this Exhibit B, the following terms shall have the
following meaning:
"Adjusted Capital Account Deficit" means, with respect to any
Member, the deficit balance, if any, in such Member's Capital Account as of the
end of the relevant Fiscal Year, after giving effect to the following
adjustments: (i) credit to such Capital Account any amounts which such Member is
treated for purposes of the Treasury Regulations as being obligated to restore
to the Company pursuant to Treasury Regulations Section 1.704-1(b)(2)(ii)(c) or
is deemed to be obligated to restore pursuant to the penultimate sentences of
Treasury Regulation Sections 1.704-2(g)(1) and 1.704-2(i)(5); and (ii) debit to
such Capital Account the items described in Treasury Regulation Sections
1.704-1(b)(2)(ii)(d)(4), 1.704-1(b)(2)(ii)(d)(5), and 1.704-1(b)(2)(ii)(d)(6).
The foregoing definition of Adjusted Capital Account Deficit is intended to
comply with the provisions of Treasury Regulation Section 1.704-1(b)(2)(ii)(d)
and shall be interpreted consistently therewith.
"Company Minimum Gain" with respect to any year means the
"partnership minimum gain" computed in accordance with the principles of Section
l.704-2(d)(1) of the Treasury Regulations.
"Depreciation" means, for each Fiscal Year or other period, an
amount equal to the depreciation, amortization, or other cost recovery deduction
allowable for federal income tax purposes with respect to an asset for such year
or other period, except that if the Gross Asset Value of any asset differs from
its adjusted basis for federal income tax purposes at the beginning of such year
or other period, Depreciation shall be an amount which bears the same ratio to
such beginning Gross Asset Value as the federal income tax depreciation,
amortization, or other cost recovery deduction for such year or other period
bears to such beginning adjusted tax basis, provided, however, that if the
federal income tax depreciation, amortization, or other cost recovery deduction
for such year is zero, Depreciation shall be determined with reference to such
beginning Gross Asset Value using any reasonable method selected by the Manager.
"Economic Risk of Loss" shall have the meaning provided by Sections
1.704-2(b)(4) and 1.752-2 of the Treasury Regulations.
"Gross Asset Value" means, with respect to any asset, the asset's
adjusted basis for federal income tax purposes, except as follows:
the initial Gross Asset Value of any asset contributed by a Member to the
Company shall be the gross fair market value of such asset, as determined by the
contributing Member and the Company; and
the Gross Asset Value of all Company assets shall be adjusted to equal their
respective gross fair market values, as determined by the Manager, as of the
following times: (a) the acquisition of an additional interest in the Company by
any new or existing Member in exchange for more than a de minimis capital
contribution; (b) the distribution by the Company to a Member of more than a de
minimis amount of Company property as consideration for an interest in the
Company, (provided, that in the case of either (a) or (b), if the Members
reasonably determine that such adjustment is necessary or appropriate to reflect
the relative Economic Interests of the Members in the Company within the meaning
of Section 1.704-(b)(2)(iv)(g) of the Treasury Regulations); and (c) the
liquidation of a Member's interest in the Company or the Company within the
meaning of Section 1.704-1(b)(2)(ii)(g) of the Treasury Regulations;
the Gross Asset Value of any Company asset distributed to any Member shall be
the gross fair market value of such asset on the date of distribution;
B-4
the Gross Asset Values of Company assets shall be increased (or decreased) to
reflect any adjustments to the adjusted basis of such assets pursuant to Section
734(b) or Section 743(b) of the Code, but only to the extent that such
adjustments are taken into account in determining Capital Accounts pursuant to
Treasury Regulation Section 1.704-1(b)(2)(iv)(m) and Paragraph 1.3(f) hereof,
provided, however, that Gross Asset Values shall not be adjusted pursuant to
this subparagraph (iv) to the extent that the Members determine that an
adjustment pursuant to subparagraph (ii) of this definition is necessary or
appropriate in connection with a transaction that would otherwise result in an
adjustment pursuant to this subparagraph (iv); and
if the Gross Asset Value of any asset has been determined or adjusted pursuant
to subparagraphs (i), (ii) or (iv) hereof, such Gross Asset Value shall
thereafter be adjusted by the Depreciation taken into account with respect to
such asset for purposes of computing gains or losses from the disposition of
such asset.
"Member Nonrecourse Debt" means liabilities of the Company treated
as "partner nonrecourse debt" under Section 1.704-2(b)(4) of the Treasury
Regulations.
"Member Nonrecourse Debt Minimum Gain" means an amount of gain
characterized as "partner nonrecourse debt minimum gain" under Treasury
Regulation Section 1.704-2(i)(2) and 1.704-2(i)(3).
"Member Nonrecourse Deductions" in any year means the Company
deductions that are characterized as "partner nonrecourse deductions" under
Sections 1.704-2(i)(1) and 1.704-2(i)(2) of the Treasury Regulations
"Net Income" and "Net Losses" mean, for each Fiscal Year or other
period, an amount equal to the Company's taxable income or loss, as applicable
for such year or period, determined in accordance with Section 703(a) of the
Code (for this purpose, all items of income, gain, loss and deduction required
to be stated separately pursuant to Section 703(a)(1) of the Code shall be
included in taxable income or loss), with the following adjustments: (i) any
income of the Company that is exempt from federal income tax and not otherwise
taken into account in computing Net Income or Net Losses pursuant to this
paragraph shall be added to such taxable income or loss; (ii) any expenditures
of the Company described in Code Section 705(a)(2)(B) or treated as Code Section
705(a)(2)(B) expenditures pursuant to Treasury Regulation Section
1.704-1(b)(2)(iv)(i), and not otherwise taken into account in computing Net
Income or Net Losses pursuant to this paragraph shall be subtracted from such
taxable income or loss; (iii) in the event the Gross Asset Value of any Company
asset is adjusted pursuant to subparagraph (ii), (iii) and (iv) of the
definition thereof, the amount of such adjustment shall be taken into account as
gain or loss from the disposition of such asset for purposes of computing Net
Income or Net Losses; (iv) gain or loss resulting from the disposition of any
Company asset with respect to which gain or loss is recognized for federal
income tax purposes shall be computed by reference to the Gross Asset Value of
the asset disposed of, notwithstanding that the adjusted tax basis of such asset
differs from its Gross Asset Value; (v) in lieu of the depreciation,
amortization, and other cost recovery deductions taken into account in computing
such taxable income or loss, there shall be taken into account Depreciation for
such Fiscal Year or other period, computed in accordance with the definition
thereof, and (vi) notwithstanding any other provision of this paragraph, any
items which are specially allocated pursuant to Paragraph 1.4 hereof shall not
be taken into account in computing Net Income and Net Losses.
"Nonrecourse Deductions" in any year means the Company deductions
that are characterized as "nonrecourse deductions" under Sections 1.704-2(b)(1)
and 1.704-2(c) of the Treasury Regulations.
B-5
"Nonrecourse Liabilities" means liabilities of the Company treated
as "nonrecourse liabilities" under Section l.704-2(b)(3) and 1.752-1(a)(2) of
the Treasury Regulations.
"Treasury Regulations" means the income tax regulations (including
temporary and proposed) promulgated under the Code.
Other Definitions. All other capitalized terms used in this Exhibit
B shall have the same meaning as in the text of the Agreement.
B-6
EXHIBIT C
CALCULATION OF
FAIR MARKET VALUE
As used in the Agreement, the term "Fair Market Value" shall mean
the price at which a willing seller would sell and a willing buyer would buy the
asset for which the determination of value is being made, having full knowledge
of the facts, in an arm's length transaction without time constraints, and
without being under any compulsion to buy or sell. The determination of the Fair
Market Value of an asset shall, without duplication of deduction, be reduced by
the amount of any liens, claims, encumbrances or liabilities relating to such
asset. The Fair Market Value of a fractional interest in an asset shall be equal
to the appropriate pro rata portion of the Fair Market Value for the entire
asset, without any further reduction on account of the fractional ownership.
As soon as practicable after the receipt of any notice or the
occurrence of any event requiring the determination of the Fair Market Value of
the Company or other asset, the Members shall confer and use their reasonable
best efforts to determine the same. If the Members agree upon the determination
of the Fair Market Value of the Company or other asset, such determination shall
be final and binding upon the parties for all purposes. If any Member shall give
notice to the other Member(s) requesting determination of such amount or value
by appraisal, or the parties have been unable to agree on the Fair Market Value,
then the Members shall consult for the purpose of appointing a
mutually-acceptable qualified independent expert. If the Members are unable to
agree on an expert within a three-day period, each Member shall select its own
expert within a 10 day period, which shall provide its own determination within
thirty (30) days after its appointment. In the event that the two experts'
determination are not identical or differ by ten percent (10%) or less then, the
Fair Market Value shall be the average of those two determinations and the Fair
Market Value as so determined shall be final and binding upon the Members for
all purposes. In the event that the two experts' determination differ by more
than ten percent (10%) and the Members cannot then agree on the Fair Market
Value, then the experts shall choose a third expert within a three day period,
which shall also provide with its own determination. Such third independent
expert shall report its determination with thirty (30) days after its
appointment. The Fair Market Value shall be the average of the two
determinations, which are closest in their determinations of Fair Market Value
(i.e., the outlier will be disregarded). In the event that the third expert's
determination falls exactly halfway between the other two experts'
determination, the third expert's determination shall be the Fair Market Value.
The Fair Market Value as so determined shall be final and binding upon the
Members for all purposes. Any expert selected pursuant to this provision shall
not be affiliated with any Member (and in the case of Lifford, to any member of
the Cisneros Group or any of its Affiliates) nor shall it have provided other
investment banking services to such Member (and in the case of Lifford, to any
member of the Cisneros Group or any of its Affiliates) during the preceding 12
months and shall be an investment banking firm of national standing in the
United States or other qualified firm of comparable standing with prior
experience in appraising assets comparable to the asset(s) at issue. If any
Member fails to appoint an independent expert as required under this provision,
the Member shall forfeit its rights to appoint an independent expert, and the
determination of Fair Market Value by (or on behalf of) the other Member shall
be final and binding for all purposes hereunder. If the Members agree on an
expert, then the Company shall pay the fees and costs of the appraisal;
otherwise, each Member shall pay the fees and costs of the expert it selects and
the fees and costs of the third expert shall be borne by the Member whose expert
provided the disregarded determination, or if there is no disregarded
determination, then the costs of the third expert shall be borne by the Members
equally.
C-1
EXHIBIT D
[Intentionally Omitted]
D-1
EXHIBIT E
RESTRICTED TRANSFEREES
Gold Group International Ltd.
Northern and Shell Plc
Paul Raymond Organisation Ltd. (Club; Mayfair)
Private Media Group Inc.
Pout TV
Sapphire
Sport Newspapers Ltd.
Zone Vision Enterprises Limited
Dennis Publishing, Inc. (Maxim)
General Media International, Inc. (Penthouse)
LFP, Inc. (Hustler)
New Frontier Media, Inc.
Vivid Entertainment Group
Vivid Video, Inc.
Vivid Video International, Inc.
VCA Pictures
Wicked Pictures
E-1
EXHIBIT F
[Intentionally Omitted]
F-1
EXHIBIT G
REGISTRATION RIGHTS
All terms used herein not otherwise defined shall have the meaning
ascribed to them in the Operating Agreement.
In the event that PEGI elects to pay all or part of the PEGI Buy-up Option
and Additional Buy-Up Option with shares of PEI Class B common stock (the
"Issued Stock"), PEI agrees to grant Lifford the following registration rights
in connection with the Issued Stock:
1. Resale Registration. Promptly following the exercise of the PEGI Buy-Up
Option and Additional Buy-Up Option, if Issued Stock is to be used as
consideration, PEI will prepare and file, a shelf registration statement
on Form S-3, or any successor or other appropriate form (the "Registration
Statement") under the Securities Act of 1933, as amended (the "Securities
Act"), covering the Issued Stock and will use commercially reasonable
efforts to cause the Registration Statement to be declared effective as
soon as reasonably practicable. Once the Registration Statement has become
effective, PEI will use commercially reasonable efforts to maintain the
effectiveness of such Registration Statement for a period of time
terminating on the first to occur of (a) the date that is nine (9) months
after the date the Registration Statement is declared effective and (b)
the date on which Lifford has sold or otherwise disposed of all of the
Issued Stock, in each case as such period may be extended pursuant to
Sections 2 and 3.
2. Blackout Periods. Notwithstanding anything to the contrary contained
herein, PEI will be entitled to postpone and/or suspend for a period of
time, not to exceed one hundred twenty (120) days (a "Blackout Period"),
the use of any Registration Statement pursuant to Section 1, if PEI
reasonably determines that the offering of any Issued Stock by Lifford
would impede, delay or interfere with any financing, offer or sale of
securities, acquisition, corporate reorganization or other material
transaction involving PEI or any of its affiliates, or require disclosure
of material information as to which disclosure at that time would not be
in the best interest of PEI and its stockholders; provided, however, that
the Blackout Period will earlier terminate upon public disclosure by PEI
of such material information or completion of such a transaction. Upon
notice by PEI to Lifford of such determination, Lifford agrees to (i) keep
the fact of any such notice strictly confidential, (ii) promptly halt any
offer, sale, trading or transfer by Lifford of any Issued Stock for the
duration of the Blackout Period set forth in such notice (or until earlier
terminated by PEI) and (iii) promptly halt any use, publication,
dissemination or distribution of any registration statement, each
prospectus included therein, and any amendment or supplement thereto for
the duration of the Blackout Period set forth in such notice (or until
earlier terminated by PEI). In the event PEI gives such notice, PEI shall
extend the effectiveness of the Registration Statement pursuant to Section
1 for a period of time equal to the length of the Blackout Period. PEI may
not impose a Blackout Period during the sixty (60) day period immediately
following the date the Registration Statement is declared effective.
3. Suspension of Dispositions. Lifford agrees that upon receipt of any notice
(a "Suspension Notice") from PEI of the happening of any event of the kind
which, in the opinion of PEI, requires the amendment or supplement of any
prospectus, Lifford will forthwith discontinue disposition of Issued Stock
until Lifford's receipt of the copies of the supplemented or amended
prospectus or until it is advised in writing by PEI that the use of the
prospectus may be resumed, and has received copies of any additional or
supplemental filings which are incorporated by reference in the prospectus
(the period from the receipt of any Suspension Notice to the date of
receipt by Lifford of copies of any additional or supplemental filings and
written notice from PEI
G-1
that the use of the prospectus may be resumed being referred to as a
"Suspension Period"), and, if so directed by PEI, Lifford will deliver to
PEI all copies of the prospectus covering such Issued Stock, current at
the time of receipt of the Suspension Notice. PEI will use commercially
reasonable efforts to prepare and cause to become effective any such
amendment or supplement as promptly as practicable. In the event PEI
delivers a Suspension Notice to Lifford, PEI shall extend the
effectiveness of the Registration Statement pursuant to Section 1 for a
period of time equal to the Suspension Period.
4. Information by Lifford. Lifford shall furnish to PEI such information
regarding Lifford and the distribution proposed by Lifford as PEI may
reasonably request in writing and as shall be reasonably required in
connection with any registration, qualification, or compliance referred to
in Section 1.
5. Conduct of Sales by Lifford. Claxson and Lifford hereby covenant and agree
that, during the period commencing upon the receipt by Lifford of notice
from PEGI of its intent to exercise the PEGI Buy-Up Option or Additional
Buy-Up Option and to pay some or all of the purchase price in PEI Stock
and terminating upon the effectiveness of the Registration Statement,
Claxson, Lifford and their Subsidiaries and Affiliates (collectively, the
"Lifford Parties") shall not, directly or indirectly, whether or not then
prohibited by law or regulation, sell, offer to sell, solicit offers to
buy, or dispose of (collectively, a "Disposition") any shares of PEI
Stock, nor will any Lifford Party engage in any hedging transaction which
would result in a Disposition of PEI Stock by such Lifford Party;
including, without limitation, effecting any short sale (whether or not
such short sale is against the box) of PEI Stock or maintaining any short
position in shares of PEI Stock. The Lifford Parties hereby further agree
(i) that all sales of Issued Stock will be conducted in a commercially
reasonable manner, and (ii) to use all commercially reasonable efforts in
their selling activities, whether prior to or after the effectiveness of
the Registration Statement, not to adversely affect the trading value of
PEI Stock.
6. Legends; Securities Laws Compliance. Lifford acknowledges that any Issued
Stock will bear any and all appropriate state and federal securities law
legends. Lifford agrees that it will comply with all state and federal
securities laws relating to the sale and distribution of Issued Stock,
including delivering the prospectus provided by PEI for resales pursuant
to the Registration Statement. In addition, Lifford agrees not to take any
action that would prevent the distribution of Issued Stock included in the
Registration Statement to be made in accordance with the plan of
distribution set forth in the Registration Statement. Lifford agrees to
notify PEI promptly in writing upon the sale by Lifford of any Issued
Stock covered by the Registration Statement.
G-2
EXHIBIT H
RELATED DOCUMENTS
"Related Documents" means the following agreements as amended from time to time
in accordance with their terms:
1. Third Amended and Restated Operating Agreement for Playboy TV - Latin
America, LLC, a California limited liability company ("PTVLA"), dated
November 10, 2006 by and between Playboy Entertainment Group, Inc., a
Delaware corporation ("PEGI"), and Lifford International Co. Ltd. (BVI), a
British Virgin Islands corporation ("Lifford").
2. Amended and Restated Playboy TV - Latin America Program Supply and
Trademark License Agreement, dated November 10, 2006, by and between PEGI
and PTVLA.
3. Second Amended and Restated Distribution Agreement, dated the date hereof,
by and between PEGI, PTVLA U.S., LLC, a Delaware limited liability company
("PTV US") and PTVLA.
4. Transfer Agreement, dated as of December 23, 2002, by and among Playboy
Enterprises, Inc., a Delaware corporation ("PEI"), PEGI, Playboy
Enterprises International, Inc., a Delaware corporation ("PEII"), Claxson
Interactive Group Inc., a British Virgin Islands corporation ("Claxson"),
Carlyle Investments LLC, a Delaware limited liability company ("Carlyle")
(in its own right and as a successor in interest to Victoria Springs
Investments Ltd., a British Virgin Islands corporation ("VSI")), Carlton
Investments LLC, a Delaware limited liability company ("Carlton") (in its
own right and as a successor in interest to VSI), Lifford, and Playboy TV
International, LLC, a Delaware limited liability company ("PTVI").
5. Master Termination and Successor Agreement, dated as of December 23, 2002,
by and among PEI, PEGI, Playboy.com, Inc., a Delaware corporation
("Playboy.com"), PTVI, Lifford, Carlyle, Carlton, and Claxson, in its own
right and as successor in interest to Morehaven Investments, Inc., a
British Virgin Islands corporation.
6. Notice, dated as of December 23, 2002, given by Lifford to Playboy.com.
7. Letter Agreement, dated December 23, 2002, by and among PEI, PEGI, Claxson
and PTVLA.
8. Venus Contribution Agreement, dated as of December 23, 2002, by and among
Claxson, Lifford, PTVLA and PEGI.
9. Amended and Restated Management Services Agreement, dated the date hereof,
by and between Claxson USA II , Inc., a Florida corporation ("Claxson
USA"), and PTVLA.
10. Amended and Restated Sales Services Agreement, dated as of the date hereof
and effective as of December 1, 2004, by and between Imagen and PTVLA.
11. Program Origination Services Agreement, dated the date hereof, by and
between Imagen and PTVLA.
H-1
12. Termination and Release Agreement, dated as of the date hereof and
effective as of June 1, 2005, by and between Claxson Playout, Inc., a
Florida Corporation, formerly know as The Kitchen, Inc. and PTVLA.
13. First Amended and Restated Web Site Revenue Share Agreement, dated the
date hereof, by and among Playboy.com, Claxson and PTVLA.
14. Contribution Agreement, dated as of December 22, 2002 and effective as of
March 31, 2002, by and among PEGI, AdulTVision Communications, Inc., a
Delaware corporation, Carlyle and Carlton.
15. Amended and Restated Affiliation Agreement, dated the date hereof, by and
between PTVLA and Playboy Television B.V., a Netherlands limited liability
company ("PTV BV").
16. Amended and Restated Affiliation Agreement, dated the date hereof, by and
between PTVLA and PTV US.
17. Affiliate Agreement Termination Agreement, dated as of December 23, 2002,
by and between PTVI and Claxson.
18. Master Termination and Release Agreement, dated the date hereof, by and
among Imagen, Contribution S.A., an Argentine corporation ("Venus
Argentina") and Venus TV, Inc., a British Virgin Islands corporation
("Venus International").
19. Termination and Release Agreement, dated the date hereof, by and between
Claxson USA and Venus International.
20. Master Termination, Consent and Release Agreement, dated the date hereof
and effective as of December 1, 2004, by and between Troy, Imagen, PTVLA
and Venus International.
21. Amended and Restated Sales Services Agreement, dated as of the date hereof
and effective as of December 1, 2004, by and between Imagen and Venus
Argentina.
22. Sales Services Agreement, dated as of the date hereof and effective as of
December 1, 2004, by and between Imagen and Venus International.
23. Senior Secured Credit Promissory Note, dated the date hereof, issued by
Playboy Lifestyle Holding.
24. Pledge and Security Agreement, dated the date hereof, by and among Playboy
Lifestyle Holding, PTVLA and Lifford.
25. Sub-Licensing Agreement, dated the date hereof, by and between Playboy
Lifestyle Holding and PTVLA.
26. Operating Agreement of Playboy Lifestyle Holding, LLC, dated as of October
10, 2006, by and between PTVLA and Playboy Lifestyle Holding.
27. Wireless Distribution Agreement, dated September 1, 2005, by and between
Playboy.com and PTVLA.
H-2
28. Satellite Transponder Segment Agreement, dated the date hereof, by and
between Claxson USA and PTVLA.
29. License Agreement dated July 30, 2003 between El Sitio Management, S.A.
and Playboy.com.
30. Amended and Restated Amendment and Assignment Agreement, dated as of the
date hereof and effective as of September 22, 2004, by and among Imagen,
El Sitio, Inc., a British Virgin Islands corporation, Claxson and
Playboy.com.
H-3