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Playboy TV International LLC Agreement 03-07-2001

PLAYBOY ENTERPRISES, INC.

680 NORTH LAKE SHORE DRIVE

CHICAGO, IL 60611

 

March 7, 2001

 

Via Electronic and Regular Mail

 

William Fisher, President

Playboy TV International LLC

404 West Washington Avenue, 8th Floor

Miami Beach, FL 33139

 

Re: Binding Letter of Intent

 

Dear William:

 

This letter (including the attachment hereto, the "Amendment Letter

Agreement") sets forth the binding agreement by and among Playboy Enterprises,

Inc. (on behalf of itself and Playboy Entertainment Group, Inc.), Carlyle

Investments LLC, Carlton Investments LLC and Playboy TV International LLC

("PTVI") (each, a "Party" and collectively, the "Parties") relating to certain

pre-existing agreements among the Parties, on the following terms and

conditions. It is agreed that this letter constitutes an agreement and is

legally binding on the Parties.

 

1. Amendment of Pre-existing PTVI Agreements. The Parties agree to amend the

pre-existing agreements by and among the Parties pursuant to the terms set

forth in Attachment 1.

 

2. Timing. The Parties agree to negotiate in good faith and execute a

definitive version of the amendments incorporating the terms and

conditions set forth in Attachment 1 (the "Definitive Amendments"). The

Parties agree to use their respective best efforts to execute such

Definitive Amendments as soon as possible. Notwithstanding the intention

to execute the Definitive Amendments, the Parties agree that the terms of

Attachment 1 shall be deemed to take effect immediately upon execution of

this Amendment Letter Agreement.

 

3. Default Agreement. This Amendment Letter Agreement constitutes a legally

binding and enforceable agreement between the Parties hereto with respect

to the provisions hereof. In the event that the Parties fail to execute

the Definitive Amendments, the terms of this Amendment Letter Agreement

shall be deemed the definitive amendments to the pre-existing agreements

among the Parties. Notwithstanding the foregoing, except as indicated in

this Amendment Letter Agreement or as subsequently modified in the

Definitive Amendments, the agreements previously entered into among the

Parties shall remain in full force and effect.

 

4. Confidentiality. Except as provided herein, the existence and the terms of

this Amendment Letter Agreement and the amendments contemplated herein

shall be maintained in

 

<PAGE>

 

confidence by the parties hereto and their respective officers, directors

and employees. Except as compelled to be disclosed by judicial or

administrative process or by other requirements of law, legal process,

rule or regulation (including to the extent required in connection with

any filings made by the parties or their controlling affiliates with the

Securities and Exchange Commission) all public announcements, notices or

other communications regarding such matters to third parties, including

without limitation any disclosure regarding the transactions contemplated

hereby, shall require the prior approval of all parties.

 

5. General. This Letter Agreement shall be governed by, and construed and

enforced in accordance with, the laws of the State of Delaware, without

giving effect to principles of conflicts of law. For convenience, this

Letter Agreement may be signed in more than one counterpart and signature

pages may be exchanged by facsimile.

 

[Remainder of page intentionally left blank.]

 

 

<PAGE>

 

If you determine that the foregoing is acceptable, we would

appreciate acknowledgment of that determination by the execution and delivery to

us of the enclosed copy of this letter.

 

We look forward to your favorable consideration of this letter.

 

Very truly yours,

 

Playboy Enterprises, Inc.

 

 

By: /s/ Linda Havard

--------------------------

 

Name: Linda Havard

------------------------

 

Title: Chief Financial Officer

-----------------------

 

The foregoing is agreed to and accepted.

 

Carlyle Investments LLC

 

 

By: /s/ Steven Bandel

--------------------------------

 

Name: Steven Bandel

--------------------------------

 

Title: President

--------------------------------

 

The foregoing is agreed to and accepted

 

Carlton Investments LLC

 

 

By: /s/ Steven Bandel

--------------------------------

 

Name: Steven Bandel

--------------------------------

 

Title: President

--------------------------------

 

Playboy TV International LLC

 

 

By: /s/ William Fisher

--------------------------------

 

Name: William Fisher

--------------------------------

 

Title: President

--------------------------------

 

 

.<PAGE>

 

ATTACHMENT 1

 

AMENDMENTS TO PTVI AGREEMENTS

 

PARTIES (1) Carlyle Investments LLC and Carlton

Investments LLC (as successors to VSI,

"Carlyle/Carlton"), (2) PEGI, (3) PEI and (4)

PTVI.

 

BACKGROUND o PTVI and PEI, together with Playboy.com,

Inc. and Morehaven Investments, Inc., have

entered into a binding letter of intent of

even date herewith, including the exhibits

attached thereto (the "Letter Agreement")

that, among other things, relates to

PTVI's participation in Playboy.com's

local internet businesses and PTVI's

creation and operation of web pages

promoting the local PTVI channels (the "TV

Web Pages" or "Interim TV Web Sites,"

where applicable, collectively the "TV

Sites")

 

o The Letter Agreement contains various terms

relating to the creation and operation of

the TV Sites, including content control

matters.

 

o The Parties have agreed to amend the PTVI

Operating Agreement, the PTVI Program

Supply Agreement and the PTVI Trademark

License Agreement as described in this term

sheet to provide for the funding and

operation of the TV Sites and to reflect

various other agreements of the parties.

 

o The Parties acknowledge that they have

been negotiating, and continue to

negotiate, certain other amendments to the

PTVI Operating Agreement, the PTVI Program

Supply Agreement and the PTVI Trademark

License Agreement. Notwithstanding the

amendments contained herein, and the

expectation that they will immediately

take effect, the Parties acknowledge that

such negotiations will continue, on a

timely basis and in good faith.

 

DEFINITIONS Certain terms are defined in the body of this

term sheet. Capitalized terms used but not

defined in this term sheet will have the

meaning given to them in the PTVI Operating

Agreement, the PTVI Program Supply Agreement or

the PTVI Trademark License Agreement, as

applicable.

 

 

<PAGE>

 

AMENDMENTS TO

OPERATING AGREEMENT

 

FUNDING OBLIGATION; o To initially fund the creation and launch

INCREASE TO MAXIMUM of the TV Sites, Carlyle/Carlton and PEGI

FUNDING CAP will make Capital Contributions to PTVI,

pro rata in accordance with their

respective membership interests, subject to

an aggregate maximum of $5 million (the

"Contribution"). The Contribution will be

funded pursuant to the Web Channel Annual

Budget (defined below) until fully funded.

 

o The Parties agree that no Member will be

entitled to special or priority

distributions with respect to the

Contribution.

 

o The Contribution will be in addition to

each Member's obligation to make Mandatory

Additional Cash Contributions, effectively

increasing the maximum aggregate amount of

Mandatory Additional Cash Contributions to

$105 million. The Members will continue to

fund PTVI's deficits with respect of its

other business activities through

Mandatory Additional Cash Contributions as

contemplated by the Operating Agreement.

 

INDEPENDENT BUDGET o The Contribution will be specifically

allocated to the creation and launch of

the TV Sites in an independent budget that

is determined and approved in a manner

consistent with, but not made part of,

PTVI's Annual Budgets (each, a "Web

Channel Annual Budget"). The first Web

Channel Annual Budget will be presented to

PTVI's Management Committee as soon as

reasonably practicable, but not later than

June 15, 2001.

 

o No funds of PTVI other than the

Contribution will be allocated to fund the

creation and operation of the TV Sites.

 

ADJUSTMENT TO BUY-UP OPTION o For purposes of determining Founders' Price

in connection with an exercise by PEGI of

the Buy-Up Option in Year 2, Year 3 or

Year 4, the Capital Contributions included

in the calculation of Founders' Price will

include the actual amount of the

 

 

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<PAGE>

 

Contribution made as of the measuring date,

less amounts distributed, if any, to the

Members from costs recouped by PTVI.

 

o In all other respects, the Buy-Up Option

will remain in full force and effect.

 

AMENDMENTS TO PROGRAM

SUPPLY AGREEMENT

 

AMENDMENTS TO o ***

CALCULATION OF PROGRAM

LICENSE FEE

 

AMENDED SCOPE OF RIGHTS UNDER o The scope of the grant of rights under the

PROGRAM SUPPLY AGREEMENT Program Supply Agreement will be amended

to include the activities expressly

contemplated by the Letter Agreement

(including with respect to the TV Sites)

and to acknowledge that such activities are

subject to the other requirements of such

agreement.

 

o The duration of such increase in scope will

be co-terminus with the transaction

contemplated by the Letter Agreement,

unless sooner terminated in accordance with

the terms of the Program Supply Agreement.

AMENDMENTS TO

TRADEMARK LICENSE

AGREEMENT

 

AMENDED SCOPE OF RIGHTS UNDER o The scope of the grant of rights under the

TRADEMARK LICENSE Trademark License Agreement will be

AGREEMENT amended to include the activities

expressly contemplated by the Letter

Agreement (including with respect to the TV

Sites) and to acknowledge that such

activities are subject to the other

requirements of such agreement.

 

o The duration of such increase in scope will

be co-terminus with the transaction

contemplated by the Letter Agreement,

unless sooner terminated in accordance with

the terms of the Trademark License

Agreement.

 

 

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