-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Pub3XOUGniAprcrJ4PX7JU6b0XvOtciApw6gWO3LpTfNlubrLqsHaxt/GWv1KNop YsO1vbAabmJcUhKHGPxyew== 0000950131-98-003200.txt : 19980513 0000950131-98-003200.hdr.sgml : 19980513 ACCESSION NUMBER: 0000950131-98-003200 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 19980331 FILED AS OF DATE: 19980512 SROS: NYSE SROS: PCX FILER: COMPANY DATA: COMPANY CONFORMED NAME: PLAYBOY ENTERPRISES INC CENTRAL INDEX KEY: 0000079114 STANDARD INDUSTRIAL CLASSIFICATION: PERIODICALS: PUBLISHING OR PUBLISHING AND PRINTING [2721] IRS NUMBER: 362258830 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 001-06813 FILM NUMBER: 98616597 BUSINESS ADDRESS: STREET 1: 680 N LAKE SHORE DR CITY: CHICAGO STATE: IL ZIP: 60611 BUSINESS PHONE: 3127518000 10-Q 1 FORM 10-Q UNITED STATES SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) [x] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the quarterly period ended March 31, 1998 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 For the transition period from ............. to ............. Commission file number 1-6813 Playboy Enterprises, Inc. (Exact name of registrant as specified in its charter) Delaware 36-2258830 (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification Number) 680 North Lake Shore Drive, Chicago, IL 60611 (Address of principal executive offices) (Zip Code) (312) 751-8000 (Registrant's telephone number, including area code) Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- As of April 30, 1998, there were 4,748,954 shares of Class A Common Stock, par value $0.01 per share, and 15,792,588 shares of Class B Common Stock, par value $0.01 per share, outstanding. PLAYBOY ENTERPRISES, INC. FORM 10-Q TABLE OF CONTENTS PART I FINANCIAL INFORMATION
Page ---- Item 1. Financial Statements Condensed Consolidated Statements of Operations for the Quarters Ended March 31, 1998 and 1997 (Unaudited) 3 Condensed Consolidated Balance Sheets at March 31, 1998 (Unaudited) and December 31, 1997 4 Condensed Consolidated Statements of Cash Flows for the Quarters Ended March 31, 1998 and 1997 (Unaudited) 5 Notes to Condensed Consolidated Financial Statements 6-8 Item 2. Management's Discussion and Analysis of Financial Condition and Results of Operations 9-15 Item 3. Quantitative and Qualitative Disclosures About Market Risk 15 PART II OTHER INFORMATION Item 1. Legal Proceedings 16 Item 6. Exhibits and Reports on Form 8-K 17
2 PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS for the Quarters Ended March 31 (Unaudited) (In thousands, except per share amounts)
1998 1997 -------- -------- Net revenues $ 71,762 $ 73,247 -------- -------- Costs and expenses Cost of sales (61,760) (58,853) Selling and administrative expenses (8,758) (9,727) -------- -------- Total costs and expenses (70,518) (68,580) -------- -------- Operating income 1,244 4,667 -------- -------- Nonoperating income (expense) Investment income 34 17 Interest expense (215) (87) Other, net (419) (193) -------- -------- Total nonoperating expense (600) (263) -------- -------- Income before income taxes 644 4,404 Income tax expense (584) (1,894) -------- -------- Net income $ 60 $ 2,510 ======== ======== Weighted average number of common shares outstanding Basic 20,531 20,330 ======== ======== Diluted 21,035 20,831 ======== ======== Basic and diluted net income per common share $ 0.00 $ 0.12 ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 3 PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (In thousands, except share data)
(Unaudited) March 31, Dec. 31, 1998 1997 ---------- -------- Assets Cash and cash equivalents $ 982 $ 947 Receivables, net of allowance for doubtful accounts of $5,137 and $4,467, respectively 31,425 33,324 Inventories 25,703 25,376 Programming costs 41,708 41,504 Deferred subscription acquisition costs 13,000 12,143 Other current assets 9,941 11,910 -------- -------- Total current assets 122,759 125,204 -------- -------- Property and equipment, at cost 38,051 37,945 Accumulated depreciation (28,356) (27,892) -------- -------- Property and equipment, net 9,695 10,053 -------- -------- Programming costs - noncurrent 9,953 8,329 Trademarks 15,288 14,978 Net deferred tax assets 13,519 13,688 Other noncurrent assets 14,252 13,695 -------- -------- Total assets $185,466 $185,947 ======== ======== Liabilities Short-term borrowings $ 14,500 $ 10,000 Accounts payable 24,911 32,258 Accrued salaries, wages and employee benefits 3,498 4,499 Reserves for losses on disposals of discontinued operations 610 610 Income taxes payable 516 627 Deferred revenues 47,065 43,216 Other liabilities and accrued expenses 6,913 7,706 -------- -------- Total current liabilities 98,013 98,916 Other noncurrent liabilities 8,575 8,348 -------- -------- Total liabilities 106,588 107,264 -------- -------- Shareholders' Equity Common stock, $0.01 par value Class A voting - 7,500,000 shares authorized; 5,042,381 issued 50 50 Class B non-voting - 30,000,000 shares authorized; 17,098,582 and 17,076,518 issued, respectively 171 171 Capital in excess of par value 43,933 43,539 Retained earnings 45,317 45,257 Foreign currency translation adjustment (139) (131) Unearned compensation restricted stock (3,780) (3,511) Less cost of treasury stock (6,674) (6,692) -------- -------- Total shareholders' equity 78,878 78,683 -------- -------- Total liabilities and shareholders' equity $185,466 $185,947 ======== ========
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 4 PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS for the Quarters Ended March 31 (Unaudited) (In thousands)
1998 1997 -------- -------- Cash Flows From Operating Activities Net income $ 60 $ 2,510 Adjustments to reconcile net income to net cash provided by (used for) operating activities: Depreciation of property and equipment 478 576 Amortization of intangible assets 438 483 Amortization of investments in entertainment programming 4,702 4,919 Investments in entertainment programming (6,530) (7,446) Net change in operating assets and liabilities (3,056) 7,416 Net cash used for discontinued operations - (19) Other, net (3) (17) ------- ------- Net cash provided by (used for) operating activities (3,911) 8,422 ------- ------- Cash Flows From Investing Activities Additions to property and equipment (141) (139) Acquisitions and funding of equity interests in international ventures (572) (419) Other, net 23 20 ------- ------- Net cash used for investing activities (690) (538) ------- ------- Cash Flows From Financing Activities Increase (decrease) in short-term borrowings 4,500 (7,000) Proceeds from exercise of stock options 88 12 Proceeds from sales under employee stock purchase plan 48 44 ------- ------- Net cash provided by (used for) financing activities 4,636 (6,944) ------- ------- Net increase in cash and cash equivalents 35 940 Cash and cash equivalents at beginning of period 947 1,061 ------- ------- Cash and cash equivalents at end of period $ 982 $ 2,001 ======= =======
The accompanying Notes to Condensed Consolidated Financial Statements are an integral part of these statements. 5 PLAYBOY ENTERPRISES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (A) BASIS OF PREPARATION The financial information included herein is unaudited, but in the opinion of management, reflects all normal recurring adjustments necessary for a fair presentation of the results for the interim periods. The interim results of operations and cash flows are not necessarily indicative of such results and cash flows for the entire year. These financial statements should be read in conjunction with the financial statements and notes thereto contained in the Transition Report on Form 10-K for the period from July 1, 1997 through December 31, 1997 (the "Transition Report") of Playboy Enterprises, Inc. and its subsidiaries (the "Company"). (B) INCOME TAXES The Company's net deferred tax asset declined to $13.8 million at March 31, 1998 based on taxable income for the current quarter and management's projection of calendar year 1998 taxable income. As reported in the Company's Transition Report, the deferred tax asset includes principally the anticipated benefit of net operating loss carryforwards ("NOLs"). Of the $13.8 million and $14.0 million net deferred tax assets included in the Condensed Consolidated Balance Sheets at March 31, 1998 and December 31, 1997, respectively, $0.3 million is included in "Other current assets" with the remainder segregated as "Net deferred tax assets." Realization of the net deferred tax asset is dependent upon the Company's ability to generate taxable income in future years. The recognition of benefits in the financial statements is based upon projections by management of future operating income and the anticipated reversal of temporary differences that will result in taxable income. Projections of future earnings were based on adjusted historical earnings. In order to fully realize the net deferred tax asset of $14.0 million at December 31, 1997, the Company will need to generate future taxable income of approximately $41.2 million prior to the expiration, beginning in 2004, of the Company's NOLs. Management believes that it is more likely than not that the required amount of such taxable income will be realized. Management will periodically reconsider the assumptions utilized in the projection of future earnings and, if warranted, increase or decrease the amount of deferred tax assets through an adjustment to the valuation allowance. 6 (C) INCOME PER COMMON SHARE The following table sets forth the computation of basic and diluted earnings per share ("EPS") (in thousands, except per share amounts):
(Unaudited) Quarters Ended March 31, --------- 1998 1997 ---------------------------------------------------------------------- Numerator: For basic and diluted EPS--net income available to common shareholders $ 60 $ 2,510 ====================================================================== Denominator: Denominator for basic EPS-- weighted-average shares 20,531 20,330 ---------------------------------------------------------------------- Effect of dilutive potential common shares: Stock options 504 376 Nonvested restricted stock awards - 125 ---------------------------------------------------------------------- Dilutive potential common shares 504 501 ---------------------------------------------------------------------- Denominator for diluted EPS-- adjusted weighted-average shares 21,035 20,831 ====================================================================== Basic and diluted EPS Net income $ 0.00 $ 0.12 ======================================================================
During the quarter ended March 31, 1998, approximately 340,000 weighted- average shares of Class B restricted stock awards outstanding were not included in the computation of diluted EPS as the operating income objectives applicable to these restricted awards were not met during that period. (D) INVENTORIES Inventories, which are stated at the lower of cost (average cost and specific cost) or market, consisted of the following (in thousands):
(Unaudited) March 31, Dec. 31, 1998 1997 ---- ---- Paper $ 9,415 $ 7,573 Editorial and other prepublication costs 5,690 6,002 Merchandise finished goods 10,598 11,801 ------- ------- Total inventories $25,703 $25,376 ======= =======
(E) TREASURY STOCK Treasury stock consisted of 293,427 Class A common shares and 970,716 Class B common shares at March 31, 1998. At December 31, 1997, treasury stock consisted of 293,427 Class A common shares and 974,227 Class B common shares. 7 (F) CONTINGENCIES In January 1993, the Company received a General Notice from the United States Environmental Protection Agency (the "EPA") as a "potentially responsible party" ("PRP") in connection with a site identified as the Southern Lakes Trap & Skeet Club, apparently located at the Resort-Hotel in Lake Geneva, Wisconsin (the "Resort"), formerly owned by a subsidiary of the Company. The Resort was sold by the Company's subsidiary to LG Americana-GKP Joint Venture in 1982. Two other entities were also identified as PRPs in the notice. The notice relates to actions that may be ordered taken by the EPA to sample for and remove contamination in soils and sediments, purportedly caused by skeet shooting activities at the Resort property. During fiscal year 1994, the EPA advised the Company of its position that the area of land requiring remediation is approximately twice the size of the initial site. The Company believes that it has established adequate reserves, which totaled $0.6 million at March 31, 1998, to cover the eventual cost of its anticipated share (based on an agreement with one of the other PRPs) of any agreed upon remediation. (G) SUBSEQUENT EVENT On April 20, 1998, the Company and Spice Entertainment Companies, Inc. ("Spice"), a competitor in the adult movie service industry, announced that they had modified the terms of their February 4, 1998 agreement whereby the Company will acquire all of the outstanding shares of Spice, subject to the satisfactory completion of the items discussed below. For each share of Spice stock, shareholders will receive the sum of $3.60 in cash and approximately 0.1371 shares of the Company's Class B stock. The total transaction value, including the assumption of debt, is expected to be approximately $100 million (subject to a collar designed to provide a minimum value of $2.20 or a maximum value of $2.88 per Spice share). It is expected that the acquisition will be accounted for under the purchase method of accounting. The Company expects to initially finance the cash portion of the purchase price through a new bank credit agreement. Under the terms of the agreement, Spice's shareholders will retain ownership of Spice's digital operations center, its option to acquire the outstanding stock of Emerald Media, Inc., a provider of adult entertainment in the C-Band market, and certain rights to a library of adult films. Spice's domestic networks, Spice and Adam & Eve, reached approximately 22.4 million households at December 31, 1997 and reported revenues of $33.6 million for the 12 months ended December 31, 1997. Consummation of the proposed transaction is subject to definitive documentation, approval by the shareholders of Spice, receipt of a fairness opinion by Spice and other customary closing conditions. The waiting period under the Hart-Scott Rodino Antitrust Improvements Act has expired. Closing of the transaction is expected to occur during the third quarter of calendar year 1998, however, there is no assurance that any definitive agreement regarding the sale of Spice will be reached or that the transaction will be completed. 8 MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS (In millions of dollars, except per share amounts) RESULTS OF OPERATIONS The Company's revenues decreased 2% to $71.8 for the quarter ended March 31, 1998 compared to $73.2 for the quarter ended March 31, 1997 (the "prior year quarter"). The decrease was primarily as a result of lower Publishing Group revenues as well as lower revenues from the Entertainment Group as higher revenues from Playboy TV were more than offset by a guarantee recognized in the prior year quarter related to domestic home video backlist titles. The Company reported operating income of $1.2 for the quarter ended March 31, 1998 compared to $4.7 in the prior year quarter. The decrease was primarily due to lower operating income for the Publishing and Entertainment Groups. Net income for the quarter ended March 31, 1998 was $0.1, or basic and diluted EPS of $0.00, compared to $2.5, or basic and diluted EPS of $0.12, for the prior year quarter. Net income for the quarter ended March 31, 1998, adjusted to eliminate federal income tax expense that will not be paid due to the Company's net operating loss and tax credit carryforwards, was $0.2, or basic and diluted EPS of $0.01, compared to $3.8, or basic EPS of $0.19 and diluted EPS of $0.18, for the prior year quarter. Several of the Company's businesses can experience variations in quarterly performance. As a result, the Company's performance in any quarterly period is not necessarily reflective of full-year or longer-term trends. For example, Playboy magazine newsstand revenues vary from issue to issue, with revenues generally higher for holiday issues and any issues including editorial or pictorial features that generate unusual public interest. Advertising revenues also vary from quarter to quarter, depending on product introductions by advertising customers, changes in advertising buying patterns and economic conditions. In addition, Entertainment Group revenues vary with the timing of sales to international customers, particularly on a tier basis. Publishing Group The revenues and operating income of the Publishing Group were as follows for the periods indicated below:
Quarters Ended March 31, -------------- 1998 1997 ----- ----- Revenues Playboy Magazine................................................ $24.0 $24.3 Other Domestic Publishing....................................... 3.8 5.1 International Publishing........................................ 2.2 2.4 ----- ----- Total Revenues.............................................. $30.0 $31.8 ===== ===== Operating Income................................................ $ 0.1 $ 1.6 ===== =====
Publishing Group revenues decreased $1.8, or 5%, for the quarter ended March 31, 1998 compared to the prior year quarter largely due to lower revenues from newsstand specials. For the quarter ended March 31, 1998, Playboy magazine revenues declined $0.3, or 1%, compared to the prior year quarter. Advertising revenues were $0.8, or 11%, lower primarily due to 12% fewer ad pages in the current year quarter. Advertising sales for the calendar year 1998 second quarter issues of the magazine are closed, and the Company expects to report 5% fewer ad pages and 4% lower ad revenues compared to the quarter ended June 30, 1997. Playboy magazine circulation revenues remained relatively stable for the quarter ended March 31, 1998 as higher subscription revenues were basically offset by lower newsstand revenues. Subscription revenues were $1.2, or 9%, higher largely due to more subscription copies served while newsstand revenues were $1.3, or 30%, lower principally as the result of 26% fewer U.S. and Canadian newsstand copies sold in the current year quarter. The lower newsstand 9 revenues are due in part to the consolidation taking place nationally in the single-copy magazine distribution system which the Company expects will continue to adversely affect newsstand revenues. Licensing revenues of $0.5 favorably impacted the current year quarter. Revenues from other domestic publishing businesses decreased $1.3, or 24%, compared to the prior year quarter primarily due to lower revenues from newsstand specials principally due to fewer copies sold in the current year quarter. International publishing revenues decreased $0.2, or 6%, compared to the prior year quarter primarily due to lower royalties from Russia and Taiwan, partially offset by higher royalties from Brazil. For the quarter ended March 31, 1998, Publishing Group operating income decreased $1.5, or 91%, compared to the prior year quarter primarily due to the net decrease in revenues discussed above. Operating income is expected to be materially adversely impacted later in calendar year 1998 due to a 7% paper price increase effective January 1, 1998. As a result of the timing of production schedules and paper inventory levels, this increase did not impact the group's results for the quarter ended March 31, 1998. Entertainment Group The revenues and operating income of the Entertainment Group were as follows for the periods indicated below:
Quarters Ended March 31, -------------- 1998 1997 ----- ----- Revenues Playboy TV Cable....................................................... $ 5.4 $ 5.7 Satellite Direct-to-Home.................................... 7.9 6.1 Off-Network Productions and Other........................... 0.2 0.2 ----- ----- Total Playboy TV................................................ 13.5 12.0 Domestic Home Video............................................. 1.5 3.2 International TV and Home Video................................. 1.7 2.3 ----- ----- Total Playboy Businesses........................................ 16.7 17.5 AdulTVision..................................................... 1.4 1.1 Movies and Other................................................ 0.2 0.6 ----- ----- Total Revenues.............................................. $18.3 $19.2 ===== ===== Operating Income Profit Contribution Before Playboy Businesses Programming Expense............................................ $ 9.4 $10.7 Playboy Businesses Programming Expense.......................... (4.5) (4.5) ----- ----- Total Operating Income...................................... $ 4.9 $ 6.2 ===== =====
The following discussion focuses on the profit contribution of each Playboy business before Playboy businesses programming expense ("profit contribution"). Playboy TV For the quarter ended March 31, 1998, revenues of $13.5 from the Company's branded domestic pay television service, Playboy TV, were $1.5, or 12%, higher compared to the prior year quarter. Cable revenues were $0.3, or 7%, lower compared to the prior year quarter largely due to the estimated negative effect of the enforcement of Section 505 of the Telecommunications Act of 1996 (the "Telecommunications Act"), including a decline in the average number of subscribing households due to some system drops, partially offset by higher retail rates. At March 31, 1998, Playboy TV was available to approximately 11.3 million cable addressable households, a 3% increase compared to March 31, 1997. Of the 11.3 million cable addressable households, only an estimated 2.3 million could receive Playboy TV on a 24-hour basis, a 2.6 million, or 53%, decrease compared to March 31, 1997. The drop in households with 24-hour availability began in the fourth quarter of fiscal year 1997 concurrent with enforcement of Section 505 of the Telecommunications Act ("Section 505"). The number of total cable addressable households to which Playboy TV was available at March 31, 1998 decreased 3% from December 31, 1997, while households with 24-hour availability increased 0.3 million, or 15%, over the same period. 10 Management believes that the Company's revenues attributable to its domestic pay television cable services will continue to be materially adversely affected as a result of enforcement of Section 505, which commenced May 18, 1997, due to reduced buy rates from the systems that roll back carriage to a 10:00 p.m. start time, subscriber declines and reduced carriage from cable operators due to aggressive competition for carriage from all program suppliers. The Company has estimated that the Entertainment Group's calendar year 1998 revenues will be reduced by approximately $3.5, and approximately $25 (at present value at 6%) over the next ten years, due to Section 505. These amounts do not take into account the loss of revenues due to the slowing of access to new homes and of upgrading of old homes from ten to 24 hours. The Company is pursuing in the United States District Court in Wilmington, Delaware (the "Delaware District Court") its case challenging on constitutional grounds the validity of Section 505 and is seeking a permanent injunction against the enforcement of Section 505. The Company's full case on the merits was heard by the Delaware District Court in March 1998. A decision is expected by summer 1998. There can be no assurance that the Delaware District Court will grant such an injunction. See "Legal Proceedings." Additionally, management believes that the growth in cable access for the Company's domestic pay television businesses has slowed in recent years due to the effects of cable reregulation by the Federal Communications Commission (the "FCC"), including the "going-forward rules" announced in fiscal year 1995 which provide cable operators with incentives to add basic services. As cable operators have utilized available channel space to comply with "must-carry" provisions, mandated retransmission consent agreements and "leased access" provisions, competition for channel space has increased. Further, the delay of new technology, primarily digital set-top converters, has constrained the expected increase in channel capacity. Management believes that growth will continue to be affected in the near term until digital technology (which is unaffected by Section 505) becomes more available. Ultimately, the Company believes that its pay television networks will be available to the vast majority of cable households on a 24-hour basis. Higher satellite direct-to-home ("DTH") revenues more than offset the cable decline and were $1.8, or 30%, higher for the quarter ended March 31, 1998 primarily due to significant increases in addressable universes for DirecTV and PrimeStar and, beginning in March 1997, the availability of monthly subscriptions through PrimeStar. DTH is unaffected by Section 505. As expected, revenues from TVRO, or the big-dish market, continued to decline. Playboy TV was available to approximately 8.4 million DTH households, including approximately 275,000 monthly subscribers, at March 31, 1998, an increase of 40% and 24% compared to March 31, 1997 and December 31, 1997, respectively. Profit contribution for Playboy TV increased $0.7 for the quarter ended March 31, 1998 primarily due to the net increase in revenues discussed above, partially offset by favorable music licensing settlements in the prior year quarter. Domestic Home Video Domestic home video revenues and profit contribution decreased $1.7 and $1.6, respectively, for the quarter ended March 31, 1998 compared to the prior year quarter. These decreases were primarily due to a guarantee recorded in the prior year quarter related to the final year of a three-year backlist distribution agreement with Universal Music & Video Distribution that was extended through June 1998. The Company is currently in negotiations for a new distribution agreement which it anticipates executing in the second quarter. International TV and Home Video For the quarter ended March 31, 1998, revenues and profit contribution from the international TV and home video business decreased $0.6 and $0.7, respectively, compared to the prior year quarter. These decreases were largely due to lower international home video sales to Taiwan, primarily as a result of poor economic conditions in that country. Variations in quarterly performance are caused by revenues and profit contribution from the recognition of tier sales depending upon the timing of program delivery, license periods and other factors. Playboy Businesses Programming Expense Programming amortization expense associated with the Entertainment Group's Playboy businesses discussed above was flat for the quarter ended March 31, 1998 compared to the prior year quarter. 11 AdulTVision AdulTVision revenues increased $0.3, or 25%, for the quarter ended March 31, 1998 compared to the prior year quarter primarily due to higher revenues from the domestic network principally due to an increase in the addressable universe, despite the estimated negative effect of the enforcement of Section 505 as previously discussed. At March 31, 1998, the network was available domestically to approximately 7.7 million cable addressable and DTH households, a 57% and 31% increase from March 31, 1997 and December 31, 1997, respectively. AdulTVision is also available internationally. For the quarter ended March 31, 1998, operating income increased $0.1 as the higher revenues were largely offset by higher marketing costs. Movies and Other For the quarter ended March 31, 1998, revenues and operating income from movies and other businesses decreased $0.4 and $0.1, respectively, primarily due to lower revenues related to feature films. The Entertainment Group's administrative expenses for the quarter ended March 31, 1998 decreased $0.3 compared to the prior year quarter primarily due to lower performance-related variable compensation expense. Product Marketing Group The revenues and operating income of the Product Marketing Group were as follows for the periods indicated below:
Quarters Ended March 31, -------------- 1998 1997 ----- ----- Revenues........................................................ $ 2.6 $ 2.0 ===== ===== Operating Income................................................ $ 0.7 $ 0.9 ===== =====
Revenues for the quarter ended March 31, 1998 increased $0.6, or 29%, compared to the prior year quarter. The increase was primarily due to higher revenues from Special Editions, Ltd. ("SEL") as a result of a barter agreement related to the sale of prints and posters from the Company's art publishing inventory, partially offset by lower international product licensing royalties, principally from China. Operating income of $0.7 for the quarter ended March 31, 1998 decreased $0.2, or 26%, compared to the prior year quarter primarily due to the lower international royalties. The higher SEL revenues were mostly offset by higher associated costs. Catalog Group The revenues and operating income of the Catalog Group were as follows for the periods indicated below:
Quarters Ended March 31, -------------- 1998 1997 ----- ----- Revenues........................................................ $19.4 $19.5 ===== ===== Operating Income................................................ $ 1.0 $ 1.2 ===== =====
For the quarter ended March 31, 1998, revenues of the Catalog Group were relatively stable compared to the prior year quarter as higher revenues from the Collectors' Choice Music catalog, primarily attributable to higher circulation, were offset by lower revenues from the Critics' Choice Video catalog. Critics' Choice Video was favorably impacted by sales in the current year quarter from the The Big Book of Movies catalog first available in October 1997, however these sales were more than offset by lower circulation and lower response rates. Catalog Group operating income decreased $0.2, or 10%, for the quarter ended March 31, 1998 compared to the prior year quarter primarily due to slightly higher costs. 12 Casino Gaming Group The Company anticipates the opening of the Playboy Casino and Beach Hotel in Rhodes, Greece in calendar year 1998. The Company is also exploring additional casino gaming opportunities. Expenses of $0.2 were incurred in the quarter ended March 31, 1998 principally related to executive staffing. Playboy Online Group Beginning with the quarter ended March 31, 1998, Playboy Online results, which were previously reported in the Publishing and Catalog Groups, are now reported as a separate operating group. The group's results include advertising sales from Playboy.com, the Company's free site on the Internet; subscription sales to Playboy Cyber Club, the Company's pay site on the Internet; and e- commerce sales from all of the Company's online catalog offerings. The revenues and operating loss of the Playboy Online Group were as follows for the periods indicated below:
Quarters Ended March 31, -------------- 1998 1997 ----- ----- Revenues........................................................ $ 1.4 $ 0.8 ===== ===== Operating Loss.................................................. $(0.7) $ - ===== =====
For the quarter ended March 31, 1998, Playboy Online Group revenues increased $0.6, or 84%, compared to the prior year quarter primarily due to subscription revenues in the current year quarter related to Playboy Cyber Club, which launched in the summer of 1997. Additionally, e-commerce revenues increased compared to the prior year quarter primarily due to the launches of CCMusic and CCVideo, online versions of the Collectors' Choice Music and Critics' Choice Video catalogs, in the summer and fall of 1997, respectively. For the quarter ended March 31, 1998, the Playboy Online Group reported an operating loss of $0.7 compared to breakeven results in the prior year quarter. The current year quarter included higher planned investments related to the group's continued growth and development. Corporate Administration and Promotion Corporate administration and promotion expense of $4.6 for the quarter ended March 31, 1998 decreased $0.6, or 11%, compared to the prior year quarter primarily due to performance-related variable compensation expense and higher investment spending on corporate marketing in the prior year quarter. Partially offsetting the above were higher executive compensation expenses in the current year quarter due in part to filling the chief financial officer position in May 1997. LIQUIDITY AND CAPITAL RESOURCES At March 31, 1998, the Company had $1.0 in cash and cash equivalents and $14.5 in short-term borrowings, compared to $0.9 in cash and cash equivalents and $10.0 in short-term borrowings at December 31, 1997. The Company expects to meet its short- and long-term cash requirements through its revolving credit agreement and cash generated from operations. Cash Flows From Operating Activities Net cash used for operating activities was $3.9 for the quarter ended March 31, 1998 compared to net cash provided of $8.4 for the prior year quarter. Cash used for operating assets and liabilities was $3.1 in the current year quarter compared to cash provided of $7.4 in the prior year quarter. Cash used for accounts payable increased $5.7 in the current year quarter primarily due to the timing of payments for the Critics' Choice Video catalog and Entertainment Group profit participation. Additionally, cash used for accrued employee costs was $1.0 in the current year quarter compared to cash provided of $2.4 in the prior year quarter largely due to the Company's change in fiscal year end. The Company invested $6.5 in Company-produced and licensed entertainment programming during the current year quarter compared to $7.4 in the prior year quarter, and expects to invest approximately $24.8 in such programming during the remainder of calendar year 1998. 13 Cash Flows From Investing Activities Net cash used for investing activities was $0.7 for the quarter ended March 31, 1998 compared to $0.5 in the prior year quarter. Cash Flows From Financing Activities Net cash provided by financing activities was $4.6 for the quarter ended March 31, 1998 compared to net cash used of $6.9 for the prior year quarter. This increase was principally due to a $4.5 increase in the level of short-term borrowings under the Company's revolving line of credit in the current year quarter to finance ongoing operations, compared to a $7.0 decrease in the level of short-term borrowings in the prior year quarter. Income Taxes Based on current tax law, the Company will need to generate approximately $41.2 of future taxable income prior to the expiration of the Company's NOLs for full realization of the $14.0 net deferred tax asset recorded at December 31, 1997. At December 31, 1997, the Company had NOLs of $23.2 for tax purposes, with $1.1 expiring in 2004, $2.1 expiring in 2007, $1.1 expiring in 2008, $16.4 expiring in 2009 and $2.5 expiring in 2012. Management believes that it is more likely than not that the required amount of such taxable income will be generated in years subsequent to December 31, 1997 and prior to the expiration of the Company's NOLs to realize the $14.0 net deferred tax asset at December 31, 1997. The Company's net deferred tax asset declined to $13.8 at March 31, 1998 based on taxable income for the current quarter and management's projection of calendar year 1998 taxable income. Following is a summary of the bases for management's belief that a valuation allowance of $16.5 at December 31, 1997 is adequate, and that it is more likely than not that the net deferred tax asset of $14.0 at December 31, 1997 will be realized: . In establishing the net deferred tax asset, management reviewed the components of the Company's NOLs and determined that they primarily resulted from several nonrecurring events, which were not indicative of the Company's ability to generate future earnings. . The Company continues to generate meaningful earnings, particularly from the Entertainment Group, and the Company's substantial investments in this group are anticipated to lead to increased earnings in future years. . The Company has opportunities to accelerate taxable income into the NOL carryforward period. Tax planning strategies would include the capitalization and amortization versus immediate deduction of circulation expenditures, the immediate inclusion versus deferred recognition of prepaid subscription income, the revision of depreciation and amortization methods for tax purposes and the sale-leaseback of certain property that would generate taxable income in future years. Other In January 1993, the Company received a General Notice from the EPA as a PRP in connection with a site identified as the Southern Lakes Trap & Skeet Club, apparently located at the Resort, formerly owned by a subsidiary of the Company. The Resort was sold by the Company's subsidiary to LG Americana-GKP Joint Venture in 1982. Two other entities were also identified as PRPs in the notice. The notice relates to actions that may be ordered taken by the EPA to sample for and remove contamination in soils and sediments, purportedly caused by skeet shooting activities at the Resort property. During fiscal year 1994, the EPA advised the Company of its position that the area of land requiring remediation is approximately twice the size of the initial site. The Company believes that it has established adequate reserves, which totaled $0.6 at March 31, 1998, to cover the eventual cost of its anticipated share (based on an agreement with one of the other PRPs) of any agreed upon remediation. On December 18, 1995, BrandsElite International Corporation, an Ontario, Canada corporation ("BrandsElite"), filed a complaint against the Company in the Circuit Court of Cook County, Illinois (the "Illinois Circuit Court"). In the complaint, BrandsElite, an international distributor of premium merchandise, including liquor, perfume, cosmetics and luxury gifts, principally to duty-free retailers, alleges that the Company breached a product license agreement, shortly after its execution by the Company in October 1995. The agreement provided for the appointment of BrandsElite as the exclusive, worldwide licensee of the Playboy trademark and tradename with respect to the sale of cognac and possibly some deluxe whiskeys. The Company had advised BrandsElite that it had determined not to proceed with the transaction and disputes strongly BrandsElite's allegation that as a result of the 14 Company's breach, BrandsElite has suffered millions of dollars of damages in future lost profits and diminished value of its stock. BrandsElite also seeks to recoup out-of-pocket expenses, fees and costs incurred in bringing the action. The license agreement provides for recovery by a party in any judgment entered in its favor of attorneys' fees and litigation expenses, together with such court costs and damages as are provided by law. The action is in discovery and is likely to go to trial during calendar year 1998. On October 22, 1997, the Company filed a motion for partial summary judgment challenging BrandsElite's claims for future lost profits and stock market valuation damages. On March 4, 1998, the Illinois Circuit Court granted the portion of the Company's motion relating to stock market valuation damages but denied the portion of the motion relating to future lost profits. BrandsElite's expert reports on damages assert future lost profits damages ranging from $3.5 to $12.5. In response to the Year 2000 issue, the Company has begun to identify, evaluate and implement changes to its existing computerized business systems. The Company is addressing the issue through a combination of modifications to existing programs and conversions to Year 2000 compliant software. In addition, the Company is communicating with its vendors and other service providers to ensure that their products and business systems will be Year 2000 compliant. If modifications and conversions by the Company and those it conducts business with were not made in a timely manner, the Year 2000 issue could have a material adverse affect on the Company's business, financial condition, and results of operations. Certain key systems of the Company have already been identified as Year 2000 compliant, including financial applications and Playboy Online operations. Although the Company is still quantifying the impact, the early estimate of the total costs associated with the required modifications and conversions are expected to be approximately $2.0, of which approximately $1.0 is expected to be expensed in calendar year 1998. These costs are being expensed as incurred. Forward-Looking Statements This Form 10-Q Report contains "forward-looking statements," including statements in "Management's Discussion and Analysis of Financial Condition and Results of Operations," as to expectations, beliefs, plans, objectives and future financial performance, and assumptions underlying or concerning the foregoing. Such forward-looking statements involve risks and uncertainties which could cause actual results or outcomes to differ materially from those expressed in the forward-looking statements. The following are some of the important factors that could cause actual results or outcomes to differ materially from those discussed in the forward-looking statements: (1) government actions or initiatives, including (a) attempts to limit or otherwise regulate the sale of adult-oriented materials, including print, video and online materials or businesses such as casino gaming, (b) regulation of the advertisement of tobacco products, or (c) substantive changes in postal regulations or rates, (2) further increases in paper prices, (3) changes in distribution technology and/or unforeseen delays in the implementation of such technology by the cable and satellite industries that might affect the Company's plans and assumptions regarding carriage of its program services, (4) increased competition for advertisers from other publications and media or any significant decrease in spending by advertisers generally or with respect to the adult male market, (5) increased competition for transponders and channel space, and any decline in the Company's access to, and acceptance by, cable and DTH systems, and (6) the effects of the consolidation taking place nationally in the single-copy magazine distribution system. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Not required as the Company's market capitalization was less than $2.5 billion as of January 28, 1997. 15 LEGAL PROCEEDINGS In February 1996, Congress passed the Telecommunications Act, and President Clinton signed it into law. Certain provisions of the Telecommunications Act are directed exclusively at cable programming in general and adult cable programming in particular. In some cable systems, audio or momentary bits of video of premium or pay-per-view channels may accidentally become available to nonsubscribing cable customers. This is called "bleeding." The practical effect of Section 505 is to require many existing cable systems to employ additional blocking technology in every household in every cable system that offers adult programming, whether or not customers request it or need it, to prevent any possibility of bleeding, or to restrict the period during which the programming is transmitted from 10:00 p.m. to 6:00 a.m. Penalties for violation of the Telecommunications Act are significant and include fines and imprisonment. Based on the limited information received, the Company believes that most of the cable operators that were not in compliance with Section 505 have complied by restricting the hours of transmission. On February 26, 1996, one of the Company's subsidiaries filed a civil suit in the Delaware District Court challenging Section 505 on constitutional grounds. The suit names as defendants The United States of America, The United States Department of Justice, Attorney General Janet Reno and the FCC. On March 7, 1996, the Company was granted a Temporary Restraining Order ("TRO") staying the implementation and enforcement of Section 505. In granting the TRO, the Delaware District Court found that the Company had demonstrated it was likely to succeed on the merits of its claim that Section 505 is unconstitutional. On November 8, 1996, eight months after the TRO was granted, a three-judge panel in the Delaware District Court denied the Company's request for preliminary injunction against enforcement of Section 505 and, in so denying, found that the Company was not likely to succeed on the merits of its claim. The Company appealed the Delaware District Court's decision to the United States Supreme Court (the "Supreme Court") and enforcement of Section 505 was stayed pending that appeal. On March 24, 1997, without opinion, the Supreme Court summarily affirmed the Delaware District Court's denial of the Company's request for a preliminary injunction. On July 22, 1997, the Company filed a motion for summary judgment on the ground that Section 505 is unconstitutionally vague based on the Supreme Court's decision on June 26, 1997 that certain provisions of the Telecommunications Act regulating speech on the Internet were invalid for numerous reasons, including vagueness. On October 31, 1997, the Delaware District Court denied the motion on the grounds that further discovery in the case was necessary to assist it in resolving the issues posed in the motion. Management believes that the Company's revenues attributable to its domestic pay television cable services will continue to be materially adversely affected as a result of enforcement of Section 505, which commenced May 18, 1997, due to reduced buy rates from the systems that roll back carriage to a 10:00 p.m. start time, subscriber declines and reduced carriage from cable operators due to aggressive competition for carriage from all program suppliers. The Company has estimated that the Entertainment Group's calendar year 1998 revenues will be reduced by approximately $3.5 million, and approximately $25 million (at present value at 6%) over the next ten years, due to Section 505. These amounts do not take into account the loss of revenues due to the slowing of access to new homes and of upgrading of old homes from ten to 24 hours. The Company is pursuing in the Delaware District Court its case challenging on constitutional grounds the validity of Section 505 and is seeking a permanent injunction against the enforcement of Section 505. The Company's full case on the merits was heard by the Delaware District Court in March 1998. A decision is expected by summer 1998. There can be no assurance that the Delaware District Court will grant such an injunction. On December 18, 1995, BrandsElite filed a complaint against the Company in the Illinois Circuit Court. In the complaint, BrandsElite, an international distributor of premium merchandise, including liquor, perfume, cosmetics and luxury gifts, principally to duty-free retailers, alleges that the Company breached a product license agreement, shortly after its execution by the Company in October 1995. The agreement provided for the appointment of BrandsElite as the exclusive, worldwide licensee of the Playboy trademark and tradename with respect to the sale of cognac and possibly some deluxe whiskeys. The Company had advised BrandsElite that it had determined not to proceed with the transaction and disputes strongly BrandsElite's allegation that as a result of the Company's breach, BrandsElite has suffered millions of dollars of damages in future lost profits and diminished value of its stock. BrandsElite also seeks to recoup out- of-pocket expenses, fees and costs incurred in bringing the action. The license agreement provides for recovery by a party in any judgment entered in its favor of attorneys' fees and litigation expenses, together with such court costs and damages as are provided by law. The action is in discovery and is likely to go to trial during calendar year 1998. On October 22, 1997, the Company filed a motion for partial summary judgment challenging BrandsElite's claims for future lost profits and stock market valuation damages. On March 4, 1998, the Illinois Circuit Court granted the portion of the Company's motion relating to stock market valuation damages but denied the portion of the motion relating to future lost profits. BrandsElite's expert reports on damages assert future lost profits damages ranging from $3.5 million to $12.5 million. 16 EXHIBITS AND REPORTS ON FORM 8-K (a) Exhibits Exhibit Number Description - ------ ----------- 3 Composite bylaws of the Company (as amended) #10.1 DBS License Agreement dated April 1, 1997 between Playboy Entertainment Group, Inc. and PrimeStar Partners, L.P. regarding the satellite distribution of Playboy TV or any other service mark that retains a Playboy Mark 10.2 Playboy Mansion West Lease Agreement, as amended, between Playboy Enterprises, Inc. and Hugh M. Hefner a Amendment to June 1, 1979 lease dated January 12, 1998 10.3 Chicago Office Lease Documents a Fifth Amendment to April 7, 1988 lease dated March 19, 1998 27 Financial Data Schedule - ---------- # Certain information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission (b) Reports on Form 8-K During the quarter ended March 31, 1998, the Company filed a Current Report on Form 8-K dated February 4, 1998 under Item 5 of such report. The purpose of this report was for the Company and Spice to announce an agreement whereby the Company will acquire all of the outstanding shares of Spice, subject to the satisfactory completion of various items. 17 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. PLAYBOY ENTERPRISES, INC. ------------------------- (Registrant) Date May 12, 1998 By s/ Linda Havard --------------- ------------------------ Linda Havard Executive Vice President, Finance and Operations, and Chief Financial Officer (Authorized Officer and Principal Financial and Accounting Officer) 18 EX-3 2 COMPOSITE BYLAWS EXHIBIT 3 PLAYBOY ENTERPRISES, INC. -o-O-o- COMPOSITE BYLAWS (as amended) -o-O-o- ARTICLE I OFFICES Section 1. The principal office shall be in the City of Wilmington, County of New Castle, State of Delaware. Section 2. The Corporation may also have offices at such other places both within and without the State of Delaware as the Board of Directors may from time to time determine or the business of the Corporation may require. ARTICLE II MEETINGS OF STOCKHOLDERS Section 1. Meetings of the stockholders for the election of directors shall be held at such place, either within or without the State of Delaware, as may be fixed from time to time, by the Board of Directors, and as shall be stated in the notice of the meeting or in a duly executed waiver of notice thereof. Section 2. Annual meetings of stockholders shall be held on a date and time designated by the Board of Directors consistent with the Delaware General Corporation Law, at which meetings they shall elect a Board of Directors by the vote set forth in Section 8 of this Article II, and transact such other business as may properly be brought before the meeting. Section 3. The officer who has charge of the stock ledger of the Corporation shall prepare and make, at least ten days before every election of directors, a complete list of the stockholders entitled to vote at said election, arranged in alphabetical order, showing the address of and the number of shares registered in the name of each stockholder. Such list shall be open to the examination of any stockholder for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the election, either at a place within the city, town or village where the election is to be held and which place shall be specified in the notice of the meeting, or, if not specified, at the place where said meeting is to be held, and the list shall be produced and kept at the time and place of election during the whole time thereof, and subject to the inspection of any stockholder, for any purpose germane to the meeting, who may be present. Section 4. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by statute or by the Certificate of Incorporation, may be called by the Chief Executive Officer and shall be called by the Chief Executive Officer or Secretary at the request in writing of a majority of the Board of Directors, or at the request in writing of stockholders owning a majority in amount of the entire capital stock of the Corporation issued and outstanding and entitled to vote. Such request shall state the purpose or purposes of the proposed meeting. Section 5. Whenever stockholders are required or permitted to take any action at a meeting, a written notice of the meeting shall be given, which notice shall state the place, date and hour of the meeting, and, in the case of a special meeting, the purpose or purposes for which the meeting is called. The written notice of any meeting shall be given to each stockholder entitled to vote at any such meeting not less than ten nor more than sixty days before the date of the meeting. If mailed, notice is given when deposited in the United States mail, postage prepaid, directed to the stockholder at his address as it appears on the records of the Corporation. 2 Section 6. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Section 7. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business except as otherwise provided by statute or by the Certificate of Incorporation. If, however, such quorum shall not be present or represented at any meeting of the stockholders, the stockholders entitled to vote thereat, present in person or represented by proxy, shall have power to adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present or represented. At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the meeting as originally notified. Section 8. When a quorum is present at any meeting, the vote of the holders of a majority of the stock having voting power present in person or represented by proxy shall decide any question brought before such meeting, except for the election of directors of the Corporation, unless the question is one upon which by express provision of the statutes or of the Certificate of Incorporation, a different vote is required in which case such express provision shall govern and control the decision of such question. Each nominee for director, in order to be elected at a meeting, must receive the vote of the holders of a majority of the stock having power to vote in the election of the Board of Directors and present in person or represented by proxy at such meeting. Section 9. Each stockholder shall at every meeting of the stockholders be entitled to one vote in person or by proxy for each share of capital stock having voting power held by such stockholder, but no proxy shall be valid unless it provides that it may only be voted on at a specific meeting of stockholders or any adjournment or adjournments thereof; except where the transfer 3 books of the Corporation have been closed or a date has been fixed as a record date for the determination of its stockholders entitled to vote, no share of stock shall be voted on at any election for directors which has been transferred on the books of the Corporation within twenty days next preceding such election for directors. Section 10. Unless otherwise provided in the Certificate of Incorporation, any action required to be taken at any annual or special meeting of stockholders of the Corporation, or any action which may be taken at any annual or special meeting of such stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent or consents in writing, setting forth the action so taken, shall be signed by the holders of outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted and shall be delivered to the Corporation by delivery to its registered office in Delaware, its principal place of business, or to an officer or agent of the Corporation having custody of the book in which proceedings of meetings of stockholders are recorded. Delivery made to the Corporation's registered office shall be by hand or by certified or registered mail, return receipt requested. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing. ARTICLE III DIRECTORS Section 1. The number of directors which shall constitute the whole Board shall be such number, not less than five nor more than ten, as may be determined from time to time by resolution duly adopted by the Board of Directors. The directors shall be elected at the annual meeting of the 4 stockholders, except as provided in Section 2. of this Article, and each director elected shall hold office until his successor is elected and qualified. Directors need not be stockholders. Section 2. Vacancies and newly created directorships resulting from any increase in the authorized number of directors may be filled by a majority of the directors then in office, though less than a quorum, and the directors so chosen shall hold office until the next annual election and until their successors are duly elected and shall qualify, unless sooner displaced. Section 3. The business of the Corporation shall be managed by its Board of Directors which may exercise all such powers of the Corporation and do all such lawful acts and things as are not by statute or by the Certificate of Incorporation or by these Bylaws directed or required to be exercised or done by the stockholders. Section 4. Unless otherwise provided by the Certificate of Incorporation or by law, any director or the entire Board of Directors may be removed, with or without cause, by the holders of a majority of shares then entitled to vote at an election of directors. MEETINGS OF THE BOARD OF DIRECTORS Section 5. The Board of Directors of the Corporation may hold meetings, both regular and special, either within or without the State of Delaware. Section 6. The first meeting of each newly elected Board of Directors shall be held without other notice than this Bylaw, immediately after, and at the same place, as the annual meeting of stockholders. Section 7. Regular meetings of the Board of Directors may be held without notice at such time and at such place as shall from time to time be determined by the Board. Section 8. Special meetings of the Board may be called by the Chief Executive Officer on twenty-four hours' notice to each director, either personally, by telegram or by facsimile, or on 5 five days' notice by mail; special meetings shall be called by the Chief Executive Officer or Secretary in like manner and on like notice on the written request of two directors. Section 9. At all meetings of the Board, a majority of the number of directors who have been elected and are then serving in such capacity, but in no event less than one-third of the total number of authorized directors, shall constitute a quorum for the transaction of business and the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by statute or by the Certificate of Incorporation. If a quorum shall not be present at any meeting of the Board of Directors the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. Section 10. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting, if prior to such action a written consent thereto is signed by all members of the Board or of such committee as the case may be, and such written consent is filed with the minutes of proceeding of the Board or committee. Section 11. Unless otherwise restricted by the Certificate of Incorporation or these Bylaws, members of the Board of Directors or of any committee thereof may participate in a meeting by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and such participation in a meeting shall constitute presence in person at such meeting. 6 COMMITTEES OF DIRECTORS Section 12. The Board of Directors may, by resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of two or more of the directors of the Corporation, which, to the extent provided in the resolution and permitted by law, shall have and may exercise the powers of the Board of Directors in the management of the business and affairs of the Corporation and may authorize the seal of the Corporation to be affixed to all papers which may require it. Such committee or committees shall have such name or names as may be determined from time to time by resolution adopted by the Board of Directors. Section 13. Each committee shall keep regular minutes of its meetings and report the same to the Board of Directors when required. COMPENSATION OF DIRECTORS Section 14. The directors may be paid their expenses, if any, of attendance at each meeting of the Board of Directors and may be paid such compensation as the Board may by resolution determine, including without limitation a fixed sum for attendance at each meeting of the Board of Directors and a stated salary as director. No such payment shall preclude any director from serving the corporation in any other capacity and receiving compensation therefor. Members of special or standing committees may be allowed such compensation for attending committee meetings as the Board may by resolution determine. (Amended 02/22/90) ARTICLE IV NOTICES Section 1. Notice to directors and stockholders shall be in writing and delivered personally or mailed to the directors or stockholders at their addresses appearing on the books of the 7 Corporation. Notice by mail shall be deemed to be given at the time when the same shall be mailed. Notice to directors may also be given by telegram or facsimile. Section 2. Whenever any notice is required to be given under the provisions of the statutes or of the Certificate of Incorporation or of these Bylaws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent thereto. ARTICLE V OFFICERS Section 1. The officers of the Corporation shall be chosen by the Board of Directors and shall be the Chairman Emeritus/Editor in Chief, the Chairman of the Board, the Chief Executive Officer, a Vice President, a Secretary and a Treasurer. The Board of Directors may also choose additional Vice Presidents, and one or more Assistant Secretaries and Assistant Treasurers. Two or more offices may be held by the same person. Section 2. The Board of Directors at its first meeting after each annual meeting of stockholders shall choose the Chairman Emeritus/Editor in Chief, the Chairman of the Board, Chief Executive Officer, a Vice President, a Secretary and a Treasurer, and may choose one or more additional Vice Presidents and one or more Assistant Secretaries and Assistant Treasurers. Section 3. The Board of Directors may appoint such other officers and agents as it shall deem necessary who shall hold their offices for such terms and shall exercise such powers and perform such duties as shall be determined from time to time by the Board of Directors. Section 4. The Board of Directors shall be responsible for establishing the compensation and employee benefit policies and programs of the Corporation. 8 Section 5. The officers of the Corporation shall hold office until their successors are chosen and qualified. Any officer elected or appointed by the Board of Directors may be removed at any time by the affirmative vote of a majority of the Board of Directors. Any vacancy occurring in any office of the Corporation shall be filled by the Board of Directors. CHAIRMAN EMERITUS/EDITOR IN CHIEF Section 6. The Chairman Emeritus/Editor in Chief shall direct senior editorial and video production personnel on creative matters and editorial policy. He will consult with senior management of the Corporation and advise regarding major strategic business decisions and direction. He shall be entitled to attend all meetings of the Board whether or not he shall be a director of the Corporation. He shall be actively involved in promoting the Corporation and its products and shall be available for publicity, promotional events and charitable affairs sponsored by the Corporation. THE CHIEF EXECUTIVE OFFICER Section 7. The Chief Executive Officer shall be the Chief Executive Officer of the Corporation, shall have general and active management of the business and officers of the Corporation, shall see that all orders and resolutions of the Board of Directors are carried into effect and shall have the general powers and duties of management usually vested in the chief executive officer of corporations. The Chief Executive Officer shall be a director of the Corporation, shall be Chairman of the Board of Directors and as such shall preside at all meetings of the Board of Directors and stockholders. THE VICE PRESIDENTS Section 8. In the election of officers, the Board of Directors may designate one of the Vice Presidents as the Executive Vice President and one or more of the Vice Presidents as Senior Vice Presidents. In the absence or inability or refusal to act of the Chief Executive Officer, the duties 9 of such office shall be performed by one of the Vice Presidents, acting singly in the following order in the absence or inability or refusal to act of their respective designated predecessors: (a) The Executive Vice President, if any; (b) The Senior Vice Presidents, if any, in the order designated by the Board of Directors or, in the absence of any designation, then in the order of their election; (c) All other Vice Presidents in the order designated by the Board of Directors or, in the absence of any designation, then in the order of their election. Each Vice President when performing the duties of the Chief Executive Officer shall have all the powers of and be subject to all the restrictions upon the Chief Executive Officer. Each Vice President may sign, with the Secretary or an Assistant Secretary, certificates for shares of the Corporation and shall perform such other duties as may be assigned to him from time to time by the Chief Executive Officer or by the Board of Directors. THE SECRETARY AND ASSISTANT SECRETARIES Section 9. The Secretary shall attend all meetings of the Board of Directors and all meetings of the stockholders and record all the proceedings of the meetings of the Corporation and of the Board of Directors in a book to be kept for the purpose and shall perform like duties for the standing committees when required. He shall give, or cause to be given, notice of all meetings of the stockholders and special meetings of the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors or Chief Executive Officer, under whose supervision he shall be. He shall have custody of the corporate seal of the Corporation and he, or an Assistant Secretary, shall have authority to affix the same to any instrument requiring it and when so affixed, it may be attested by his signature or by the signature of such Assistant Secretary. The Board of 10 Directors may give general authority to any other officer to affix the seal of the Corporation and to attest the affixing by his signature. Section 10. The Assistant Secretary, or if there be more than one, the Assistant Secretaries in the order determined by the Board of Directors, shall, in the absence or disability of the Secretary, perform the duties and exercise the powers of the Secretary and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. THE TREASURER AND ASSISTANT TREASURERS Section 11. The Treasurer shall have the custody of the corporate funds and securities and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all monies and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. Section 12. He shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the Chief Executive Officer and the Board of Directors, at its regular meetings, or when the Board of Directors so requires, an account of all his transactions as Treasurer and of the financial condition of the Corporation. Section 13. If required by the Board of Directors, he shall give the Corporation a bond in such sum and with such surety or sureties as shall be satisfactory to the Board of Directors for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation. Section 14. The Assistant Treasurer, or if there shall be more than one, the Assistant Treasurers in the order determined by the Board of Directors, shall, in the absence or disability of the 11 Treasurer, perform the duties and exercise the powers of the Treasurer and shall perform such other duties and have such other powers as the Board of Directors may from time to time prescribe. ARTICLE VI CERTIFICATES OF STOCK Section 1. Every holder of stock in the Corporation shall be entitled to have a certificate, signed by, or in the name of the Corporation by, the Chairman of the Board of Directors, the Chief Executive Officer or Vice President, and by the Treasurer or an Assistant Treasurer, or the Secretary or an Assistant Secretary of the Corporation, certifying the number of shares represented by such certificate owned by him in the Corporation. Section 2. The signatures on any stock certificate of any such Chairman of the Board of Directors, Chief Executive Officer, Vice President, Treasurer, Assistant Treasurer, Secretary or Assistant Secretary may be facsimile. In case any officer or officers who have signed, or whose facsimile signature or signatures have been used on, any such certificate or certificates shall cease to be such officer or officers of the Corporation, whether because of death, resignation or otherwise, before such certificate or certificates have been delivered by the Corporation, such certificate or certificates may nevertheless be adopted by the Corporation and be issued and delivered as though the person or persons who signed such certificate or certificates or whose facsimile signature or signatures have been used thereon had not ceased to be such officer or officers of the Corporation. LOST, STOLEN OR DESTROYED CERTIFICATES Section 3. The Board of Directors may direct a new certificate or certificates to be issued in place of any certificate or certificates theretofore issued by the Corporation alleged to have been lost, stolen or destroyed, upon the making of an affidavit of that fact by the person claiming the certificate of stock to be lost, stolen or destroyed. When authorizing such issue of a new certificate 12 or certificates, the Board of Directors may, in its discretion and as a condition precedent to the issuance thereof, require the owner of such lost, stolen or destroyed certificate or certificates, or his legal representative, to advertise the same in such manner as it shall require and/or to give the Corporation a bond in such sum as it may direct as indemnity against any claim that may be made against the Corporation with respect to the certificate alleged to have been lost, stolen or destroyed. TRANSFERS OF STOCK Section 4. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate to the person entitled thereto, cancel the old certificate and record the transaction upon its books. RECORD DATES Section 5. In order that the Corporation may determine the stockholders entitled to notice of or to vote at any meeting of the stockholders, or any adjournment thereof, or entitled to express consent to corporate action in writing without a meeting, or entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date which shall be not more than sixty nor less than ten days before the date of any such meeting, which shall be not earlier than, nor more than ten days after, the date of adoption of any resolution fixing a record date with respect to a written consent, and which shall not be more than sixty days prior to any dividend payment or other such action. A determination of stockholders of record entitled to notice of or to vote at a meeting of stockholders shall apply to any adjournment of the meeting; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting. (Amended May 21, 1990) 13 REGISTERED STOCKHOLDERS Section 6. The Corporation shall be entitled to recognize the exclusive right of a person registered on its books as the owner of shares to receive dividends, and to vote as such owner, and to hold liable for calls and assessments a person registered on its books as the owner of shares, and shall not be bound to recognize any equitable or other claim to or interest in such share or shares on the part of any other person, whether or not it shall have express or other notice thereof, except as otherwise provided by the laws of Delaware. ARTICLE VII GENERAL PROVISIONS DIVIDENDS Section 1. Dividends upon the capital stock of the Corporation, subject to the provisions of the Certificate of Incorporation, if any, may be declared by the Board of Directors at any regular or special meeting, pursuant to law. Dividends may be paid in cash, in property, or in shares of capital stock, subject to the provisions of the Certificate of Incorporation. Section 2. Before payment of any dividend, there may be set aside out of any funds of the Corporation available for dividends such sum or sums as the directors from time to time, in their absolute discretion, think proper as a reserve or reserves to meet contingencies, or for equalizing dividends, or for repairing or maintaining any property of the Corporation, or for such other purpose as the directors shall think conducive to the interest of the Corporation, and the directors may modify or abolish any such reserve in the manner in which it was created. 14 CHECKS Section 3. All checks or demands for money and notes of the Corporation shall be signed by such officer or officers or such other person or persons as the Board of Directors may from time to time designate. FISCAL YEAR Section 4. The fiscal year of the Corporation shall be fixed by resolution of the Board of Directors. SEAL Section 5. Amended August 31, 1964 by change of corporate name from HMH CORPORATION to HMH PUBLISHING CO., INC. Further amended February 1, 1971 - The corporate seal shall be circular in form with the name "PLAYBOY ENTERPRISES, INC." at top, "Delaware" at the bottom and the words "Corporate Seal" in the center. Pursuant to the General Corporation Law of Delaware, the Corporation may use such seal by causing it or a facsimile thereof to be impressed or affixed, or reproduced, or otherwise, and which corporate seal may be altered at pleasure. INDEMNIFICATION OF DIRECTORS AND OFFICERS Section 6. (a) Right to Indemnification. Each person who was or is made a party or is threatened to be made a party to or is involved in any action, suit or proceeding, whether civil, criminal, administrative or investigative (hereinafter a "proceeding"), by reason of the fact that he or she, or a person of whom he or she is the legal representative, is or was a director or officer of the Corporation or is or was serving at the request of the Corporation as a director, officer, employee or agent of another corporation or of a partnership, joint 15 venture, trust or other enterprise, including service with respect to employee benefit plans, whether the basis of such proceeding is alleged action in an official capacity as a director, officer, employee or agent or in any other capacity while serving as a director, officer, employee or agent, shall be indemnified and held harmless by the Corporation to the fullest extent authorized by the Delaware General Corporation Law, as the same exists or may hereafter be amended (but, in the case of any such amendment, only to the extent that such amendment permits the Corporation to provide broader indemnification rights than said law permitted the Corporation to provide prior to such amendment) against all expense, liability and loss (including attorneys' fees, judgments, fines, ERISA excise taxes or penalties and amounts paid to be paid in settlement) reasonably incurred or suffered by such person in connection therewith and such indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of his or her heirs, executors and administrators; provided, however, that except as provided in Paragraph (b) hereof, the Corporation shall indemnify any such person seeking indemnification in connection with a proceeding (or part thereof) initiated by such person only if such proceeding (or part thereof) was authorized by the Board of Directors of the Corporation. The right to indemnification conferred in this section shall be a contract right and shall include the right to be paid by the Corporation the expenses incurred in defending any such proceeding in advance of its final disposition; provided, however, that if the Delaware General Corporation Law requires, the payment of such expenses incurred by a director or officer in his or her capacity as a director or officer (and not in any other capacity in which service was or is rendered by such person while a director or officer including, without limitation, service to an employee benefit plan) in advance of the final disposition of a proceeding, shall be 16 made only upon delivery to the Corporation of an undertaking, by or on behalf of such director or officer, to repay all amounts so advanced if it shall ultimately be determined that such director or officer is not entitled to be indemnified under this Section or otherwise. (b) Right of Claimant to Bring Suit. If a claim under Paragraph (a) of this Section is not paid in full by the Corporation within ninety days after a written claim has been received by the Corporation, the claimant may at any time thereafter bring suit against the Corporation to recover the unpaid amount of the claim and, if successful in whole or in part, the claimant shall be entitled to be paid also the expense of prosecuting such claim. It shall be a defense to any such action (other than an action brought to enforce a claim for expenses incurred in defending any proceeding in advance of its final disposition where the required undertaking, if any is required, has been tendered to the Corporation) that the claimant has not met the standards of conduct which make it permissible under the Delaware General Corporation Law for the Corporation to indemnify the claimant for the amount claimed, but the burden of proving such defense shall be on the Corporation. Neither the failure of the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) to have made a determination prior to the commencement of such action that indemnification of the claimant is proper in the circumstances because he or she has met the applicable standard of conduct set forth in the Delaware General Corporation Law, nor an actual determination by the Corporation (including its Board of Directors, independent legal counsel, or its stockholders) that the claimant has not met such applicable standard of conduct, shall be a defense to the action or create a presumption that the claimant has not met the applicable standard of conduct. 17 (c) Non-Exclusivity of Rights. The right to indemnification and payment of expenses incurred in defending a proceeding in advance of its final disposition conferred in this section shall not be exclusive of any other right which any person may have or hereafter acquired under any statute, provision of the Certificate of Incorporation, Bylaw, agreement, vote of stockholders or disinterested directors or otherwise. (d) Insurance. The Corporation may maintain insurance, at its expense, to protect itself and any director, officer, employee or agent of the Corporation or another corporation, partnership, joint venture, trust or other enterprise against any such expense, liability or loss, whether or not the Corporation would have the power to indemnify such person against such expense, liability or loss under the Delaware General Corporation Law. ARTICLE VIII AMENDMENTS Section 1. These Bylaws may be altered or repealed at any regular meeting of the stockholders or of the Board of Directors or at any special meeting of the stockholders or of the Board of Directors if notice of such alteration or repeal be contained in the notice of such special meeting. 18 EX-10.1 3 DBS LICENSE AGREEMENT EXHIBIT 10.1 PLAYBOY TELEVISION DBS LICENSE AGREEMENT This Agreement made as of April 1, 1997 between PLAYBOY ENTERTAINMENT GROUP, INC., ("Playboy"), a Delaware corporation, located at 9242 Beverly Boulevard, Beverly Hills, California 90210 and PRIMESTAR(R) PARTNERS, L.P., a Delaware limited partnership ("Affiliate"), located at Three Bala Plaza West, Suite 700, Bala Cynwyd, Pennsylvania 19004, regarding the carriage of the twenty-four (24) hour adult-oriented television programming service to be provided to Affiliate hereunder, whether such service is identified as Playboy TV or by any other service mark that retains a Playboy Mark, as designated by Playboy (the "Service"). WHEREAS, Affiliate has established a medium power satellite television direct broadcast service ("DBS") in North America; and WHEREAS, Affiliate desires to distribute the Service throughout the Territory (as hereinbelow defined); NOW, THEREFORE, it is mutually agreed as follows: 1. RIGHTS: Playboy hereby grants to Affiliate, and Affiliate hereby accepts the non- exclusive right, and the obligation, to (1) receive the signal of the Service, (2) digitize, compress, or modify the signal of the Service as set forth in Paragraph 5 hereof, and to encode/encrypt the signal so that neither video nor audio are intelligibly received by a non-authorized viewer, and re-uplink and transmit the Service twenty-four (24) hours per day (or the maximum hours per day that Playboy offers the Service; referred to as the "Maximum Hours") to the PrimeStar(R) Satellite for transmission and distribution to K- or Ku-band satellite reception dishes for reception the Maximum Hours per day by Satellite Subscribers in the Territory, (3) authorize Affiliate's Distributors to resell the Service for reception the Maximum Hours per day to Satellite Subscribers in the Territory, except that Subdistribution (as defined in Paragraph 6) shall be prohibited, and (4) authorize the reception of the Service the Maximum Hours per day in the fifty (50) United States and the territories, possessions, and commonwealths of the United States, and the District of Columbia (the "Territory") by Satellite Subscribers who receive the signal of the Service by means of equipment capable of receiving audio/visual/data signals and/or programming directly from the PrimeStar(R) Satellite. 2. DEFINITIONS: a. PrimeStar(R) Satellite: The GE2 satellite or its medium power K- or Ku-band respective successors. 1 b. Billing Period: Any calendar month during which the Service is offered to Affiliate's Satellite Subscribers and/or Demand Purchasers. Only the initial Billing Period may be a partial month. c. Demand Purchase: Each individual purchase of the Service from the Affiliate by a Satellite Subscriber or Office Subscriber for a block of time not less than one (1) hour and not to exceed one (1) complete program day of the Service, sometimes herein referred to as "Pay-Per-View." A Satellite Subscriber who purchases the Service in such manner shall be known as a "Demand Purchaser." A Demand Purchaser in a Hotel shall be known as a "Hotel Demand Purchaser," and a Demand Purchaser who is an Office Subscriber shall be known as an "Office Demand Purchaser." d. Distributor: Any entity authorized by Affiliate to resell the Service for reception the Maximum Hours per day to Satellite Subscribers, but shall not include any entity that retransmits the Service. e. Marks: The service marks, trademarks, trade names, and logos owned by Playboy or its parent corporation, Playboy Enterprises, Inc., including without limitation "PLAYBOY," "PLAYMATE," "PLAYBOY TELEVISION," "PLAYBOY TV," and the RABBIT HEAD DESIGN, all of which are being licensed for use only in connection with the distribution and the promotion, marketing, and sale of the Service. f. Satellite Subscriber: (i) Any single family dwelling (whether a detached single family dwelling or a multiple dwelling unit) which is receiving any level of programming services from Affiliate, including, but not limited to, each such single family dwelling in apartment houses, condominiums, cooperatives and townhomes; and (ii) each individual sleeping room receiving any level of programming services from Affiliate in a hotel or motel (a hotel or motel is referred to as a "Hotel"). g. Guest Room: Each sleeping room in a Hotel (other than a public or common area) that contains a television set and that is available for nightly rental by individual members of the public. h. Office Subscriber: Any private, commercial office space that receives any level of programming services from Affiliate for private, non- commercial viewing on a single television monitor in a single office space. i. Service Subscriber: Any Satellite Subscriber or Office Subscriber who by an affirmative decision elects to purchase the Service from Affiliate or Distributor on a monthly or longer period (i.e. quarterly, annually, etc.) subscription basis (but not on a non-discretionary bulk basis, packaged with other services). A Service Subscriber in a Hotel shall be known as a "Hotel Service Subscriber." Service Subscribers who are Office Subscribers shall be known as "Office Service Subscribers." For Office Subscribers, each television monitor in a commercial office receiving the Service shall be deemed to be a separate Office Service Subscriber, and no such television monitor may 2 be placed in any public or group viewing area, such as a conference or reception room. Hotel Service Subscribers and Office Service Subscribers may be treated differently or separately by Playboy from other Service Subscribers, such as for payment or reporting purposes, as provided in this Agreement. j. Special Events: Specific programs or blocks of programs intended for Pay-Per-View distribution at a higher than usual retail rate and designated by Playboy as such in advance, in its sole discretion. Notwithstanding anything contained in this Agreement to the contrary, Affiliate shall have the right not to distribute any such Special Events. k. Gross Retail Revenue: The full retail sales price of a Demand Purchase, net of any sales tax. For purposes of the Service Charges, Playboy will not honor or recognize any reduction by Affiliate in the full retail sales price of a Demand Purchase through the use of promotional discounts, rebates, credits, coupons or other reductions that relate to any product, service or other matter other than the Service, without Playboy's prior written approval, not to be unreasonably withheld. Thus, for example, in calculating the Service Charges, Playboy need not take into account any offer by Affiliate of any rebate or discount from the full retail sales price if the consumer purchases some other product or service, without such prior written approval of Playboy. 3. TERM: The initial term of this Agreement shall commence on April 1, 1997 and end on ***; provided, however, that this Agreement shall be deemed automatically extended for successive one (1)-year periods upon the expiration of the initial or any succeeding term.*** Either party shall have the right hereunder to terminate this Agreement, effective at the end of the then-current term, without liability to the other party, on not less than ninety (90) days prior written notice prior to the expiration of the initial or any succeeding term. 4. CONTENT OF THE SERVICE a. Playboy shall, in its sole discretion, include such programming in the Service as it deems appropriate from time to time to deliver an adult- oriented pay television service. Subject to the provisions of Paragraph 5, Affiliate shall have no right to alter, substitute, delete or otherwise modify the Service as provided by Playboy. Playboy shall have the exclusive right to extend, reduce, or otherwise change the hours during which the Service is being delivered to Affiliate.*** ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 3 During the hours of the day, if any, that Playboy is not transmitting the Service, Affiliate may carry any other programming that Affiliate desires in its sole and absolute discretion, provided that Affiliate notifies Playboy of such carriage of other programming and that Affiliate may not in any way imply that non-Service programming is a part of or is connected in any way with the Service. Affiliate shall not exhibit or transmit any Service programming at any time other than as scheduled by Playboy, without express written permission by Playboy. Affiliate hereby acknowledges that from time to time Playboy may modify the specific programs and programming schedule (as opposed to materially changing the adult nature of the Service) to be supplied as part of the Service without prior notice, and Playboy shall not be held liable in any way by Affiliate for such changes. b. Playboy shall, for each month of the Term, send one (1) copy of its monthly program schedule as soon as it is available to Affiliate, ATTN: Director, Pay-Per-View.*** Affiliate acknowledges that the Service includes (or, in the future, may include) 800, 888 and 900 telephone number spots and "Playboy Home Shopping"*** Affiliate also acknowledges that once per week Playboy transmits an up-to-sixty (60)-minute block of promotional programming intended for its affiliates.*** ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 4 c. Playboy shall use commercially reasonable efforts to provide Affiliate with a "clean" entry point to the Service at 11:00 p.m. Eastern time each day, provided, however, that Playboy's occasional failure to provide such entry due to live events or other programming shall not be considered a breach of this Agreement. d. *** 5. DELIVERY AND DISTRIBUTION OF THE SERVICE: a. During the Term, Playboy shall, at its own expense, transmit an analog or digital signal of the Service to Affiliate's uplink facility by transmitting such signal via a North American satellite commonly used for transmission of cable television programming to receive sites in the Continental United States, and shall, at its own expense fully encode the satellite signal of the Service utilizing scrambling technology commonly used in the domestic cable television industry. Playboy's obligations to transmit the signal of the Service and to encode such signal shall be subject to temporary lapses in connection with service or maintenance, equipment malfunction, or force majeure or other causes beyond Playboy's sole control. The normal video and audio signal of the Service shall be of a technical quality substantially similar to the technical quality of the video and audio signals delivered by other national cable television programming services in the Territory. *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 5 b. Affiliate shall, at its own expense, obtain and install such earth station receivers and other equipment, including a complete set of duplicate, back-up equipment for use in the event of a malfunction in the primary equipment, as shall be necessary to enable Affiliate to receive, descramble, digitize, compress, scramble, transmit and deliver the signals comprising the Service to Satellite Subscribers via the PrimeStar(R) Satellite. The signals, including authorization data delivered to Service Subscribers and/or Demand Purchasers shall be securely scrambled by Affiliate using then state-of-the-art technology. c. In the event Playboy provides an eastern and western (or other time zone) feed, with exactly the same programming, but only time shifted, of the signal of the Service, Affiliate shall have the right to elect, in its sole and absolute discretion, to exhibit either the eastern or western (or other time zone) feed of such signal, but not for purposes of selecting particular items of programming between feeds. d. Playboy hereby grants Affiliate the right, and Affiliate agrees, to receive the signal of the Service, to digitize, compress, modify, or otherwise technologically manipulate the signal, and to transmit the signal as so altered (the "Altered Signal") to the PrimeStar(R) Satellite for redistribution to terrestrial reception sites capable of receiving and utilizing the Altered Signal as set forth in Paragraph 1 of this Agreement, provided that no such alteration, transmission, redistribution, reception, or other use will cause an adverse change in a viewer's perception of the video or audio presentation of the Service. If Playboy changes the signal of the Service in such a way as to technically or technologically defeat or otherwise materially interfere with Affiliate's rights under this subparagraph 5.d., such as materially interfering with or otherwise preventing reception, digitization, compression, modification, authorized replacement, conversion, utilization or manipulation of the signal of the Service by Affiliate pursuant to this subparagraph 5.d., then following such change in the signal of the service by Playboy, Affiliate shall have the right immediately to suspend carriage of the Service, provided that Affiliate notifies Playboy in writing of such suspension and the reasons therefor and promptly following Playboy's remedy of the changes in the signal giving rise to such suspension right, if any, Affiliate recommences its carriage of the signal of the Service in accordance of this Agreement. e. Affiliate retains and reserves any and all rights in and to all signal distribution capacity (as opposed to the signal of the Service) contained within the bandwidth of the Service as received by Affiliate, including, without limitation, the vertical blanking interval, audio subcarriers and any other portions of the bandwidth of the signal of the Service. Affiliate shall have no obligation to digitize, compress, re-uplink, or otherwise transmit any of the signal distribution capacity contained within the bandwidth of the Service as received by Affiliate, including, without limitation, the vertical blanking interval, audio channels, and any other portions of the bandwidth that may be created or made usable as a result of the conversion of the signal of the Service to a compressed, digital, or other non-analog format, except the principal audio carriage frequency (including closed captioning information) and the principal video carriage frequency of the Service. Nothing herein shall preclude Affiliate from exercising and exploiting such rights by any means 6 and in any locations freely and without restriction, except if it competes with, disparages or lessens the value of the Service or Playboy's business; and provided that any such use by Affiliate shall not materially degrade, or otherwise materially interfere with, the picture quality of the Service or the audio portion of the Service signal that comprises the principal audio carriage frequency of the Service (including closed captioning information). f. Distribution or exhibition of the Service in a Hotel in any area other than a Guest Room, whether or not occupied, or other than to a Hotel Demand Purchaser or Hotel Service Subscriber who by an affirmative decision elects to purchase the Service, is expressly prohibited. Additionally, any charge for admission to a Guest Room or any cover charge or minimum other than the regular nightly charge for the use of such Guest Room, or the specific charge for the right to turn on the Service as a Demand Purchase or Service subscription of one (1) month or longer to the same individual Hotel guest for the duration of the subscription in such Guest Room, is expressly prohibited. Exhibition of the Service in any Guest Room contained in a Hotel for which Playboy does not receive the minimum payment pursuant to Paragraph 8 below is expressly prohibited. g. It shall be deemed unauthorized exhibition to allow the Service to be exhibited to the occupants of a multiple unit dwelling, commercial office space or Hotel on a free-to-the-viewer or otherwise no-charge basis without charging a distinct monthly or per-viewing fee for exhibition of the Service, except as expressly preapproved by Playboy in writing as part of an authorized "free preview" promotion. It also shall be deemed unauthorized exhibition to distribute the Service on a bulk basis where individual Service Subscribers or Demand Purchasers are not each required to make an affirmative decision to receive the Service. In the event Affiliate or a Distributor breaches any provision of this subparagraph, Playboy may treat such breach as a material breach of the Agreement. Furthermore, in the event of any such breach, Affiliate shall be liable to Playboy for Service Charges for each dwelling unit, office space and Guest Room receiving the Service as though each such dwelling unit, office space and Guest Room were an authorized Service Subscriber for each Billing Period during which the Service was exhibited to the occupants of such multiple unit dwelling, commercial office space or Hotel. 6. SUBDISTRIBUTION PROHIBITED: a. Except as explicitly provided for in this Paragraph 6, Subdistribution of the Service is expressly prohibited. It shall be deemed "Subdistribution" to transmit the signal or Altered Signal of the Service to a "Cable Television" system operator, a "C-Band satellite operator," or an operator of "broadcast television," "low-powered television," "a multichannel multipoint distribution system," or "a telephone company," as such terms are now or hereafter generally defined in the pay television industry, or any other entity for the rebroadcasting or retransmission of the Service or its programming to any customer or end user of any such entity. As used herein, "Cable Television" shall refer to programming delivered by any form of cable technology, including, without limitation, coaxial and fiber-optic and any form of microwave technology. Any such authorization 7 requests received by Affiliate shall be forwarded to Playboy, or another party designated by Playboy. As an exception to the prohibition on Subdistribution provided in this subparagraph 6.a., Affiliate may transmit the signal or Altered Signal of the Service to "Alternative Distribution Facilities" that have been authorized by Playboy to receive such signal from Affiliate, on the condition that each Alternative Distribution Facility that receives such signal from Affiliate shall have a written agreement with Playboy authorizing such receipt and utilization of such signal from Affiliate and authorizing the exhibition and distribution of the Service in accordance with the provisions of such written agreement with Playboy. For purposes of this subparagraph, the term "Alternative Distribution Facilities" shall mean satellite master antennae television systems, multipoint distribution systems, multichannel multipoint distribution systems, Cable Television systems and other terrestrial distribution modalities that have been authorized by Affiliate to utilize the signal of the Service as technically modified or reconfigured by Affiliate for resale and retransmission to the subscribers of the particular Alternative Distribution Facility and for which Affiliate may receive a service charge (pursuant to terms and conditions, including service charges, determined by Affiliate). Affiliate shall not authorize any Alternative Distribution Facility to utilize or receive the signal of the Service from Affiliate unless and until such Alternative Distribution Facility first enters into a written agreement with Playboy governing such Alternative Distribution Facility's exhibition and distribution of the Service. Neither any Alternative Distribution Facility so authorized by Affiliate and Playboy nor any of such Alternative Distribution Facility's respective subscribers or any revenue derived from them shall be counted as Satellite Subscribers or taken into account in calculating GRPS under this Agreement for purposes of the payment provisions of this Agreement. It shall also be deemed prohibited Subdistribution to enter into an agreement to authorize receipt of the Service by any commercial establishment (other than by an Office Subscriber in a private office) including, without limitation, restaurants and bars, subject to the provisions of Paragraphs 2.h. and 7. b. It shall not be deemed Subdistribution for Distributor to enter into an arrangement by which it authorizes and deauthorizes Service Subscribers and/or Demand Purchasers pursuant to requests received from either retailers of Affiliate's satellite equipment or other such retailers who are among Distributors of the Service permitted by Playboy from time to time ("Permitted Subdistributors"); provided that Affiliate shall be responsible for Permitted Subdistributors' compliance with all the terms of this Agreement, and provided further that Affiliate shall be wholly responsible for the payment of any Service Charge required hereunder on behalf of any Permitted Subdistributor. The parties agree that if any Permitted Subdistributor commences or engages in any form of prohibited Subdistribution, then promptly after learning of such prohibited Subdistribution, Affiliate must immediately (i) notify Playboy in writing that such prohibited Subdistribution has occurred; (ii) notify the applicable Permitted Subdistributor immediately to cease and desist from the prohibited Subdistribution; and (iii) prevent Service subscription authorizations or deauthorizations by such Permitted Subdistributor. Also in such event, Affiliate shall remain liable for all Service subscriptions and/or Demand Purchases sold by the Permitted Subdistributor. In addition, Playboy has the option to demand that Affiliate, within forty-five 945) days of receipt of a notice from Playboy, pay Playboy all the revenue, if any, due Playboy, calculated in accordance with 8 the Service Charge (Whether due from Affiliate's Subdistributior's Service Subscribers and/or Demand Purchasers and whether such revenue due is from monthly or multi-month subscriptions). 7. USE OF THE SERVICE: Affiliate and its Distributors shall market, transmit, and deliver the Service the Maximum Hours per day on a pay-per- transaction (e.g. pay-per-hour, pay-per-title, pay-per-day, etc.) basis (collectively, the "Pay-Per-View Offerings") and as a monthly or longer subscription service. Affiliate shall not make available all or any part of the Service or the Marks for any sponsorship, advertising, promotional public service, or commercial announcement of any third party, product, or service, or any product or service of Affiliate other than the offering of the Service by Affiliate in accordance with this Agreement. Affiliate shall not permit, and shall take appropriate and reasonable precautions necessary to prevent any use of the Service by (i) any person or entity other than a paying Service Subscriber and/or Demand Purchase customer; (ii) any person or entity who charges an admission fee, cover charge or "minimum"; (iii) any commercial establishment or non-residential building (including without limitation, any restaurant, tavern, bar, club, fraternal organization, hospital, or correctional facility) other than an Office Service Subscriber or an Office Demand Purchaser in a private office, or a Hotel Service Subscriber or Hotel Demand Purchaser in a Hotel Guest Room; or (iv) any communal room in an otherwise residential building or Hotel (including, without limitation, any lobby or social room in an apartment house, Hotel or similar place). Affiliate shall not permit, and shall take appropriate and reasonable precautions necessary to prevent any unauthorized or unlawful use, reproduction, exhibition, or distribution of any part of the Service or the Marks as to entities over which Affiliate has control. 8. PAYMENT TO PLAYBOY a. Affiliate shall pay to Playboy, with respect to each Billing Period, not later than *** calendar days following the expiration of such Billing Period, the "Service Charge(s)" for all purchases during such Billing Period calculated as hereinafter set forth in this Agreement. b. *** the Service Charge for each Demand Purchase (other than "Special Events") made during the applicable Billing Period payable to Playboy shall equal the greater of (i) *** per such Demand Purchase, or (ii) *** of the Gross Retail Revenue "earned" by Affiliate from such Demand Purchase, calculated separately for each Demand Purchase. c. The Service Charge payable for Special Events shall be determined by Playboy in its sole discretion. d. *** *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 9 the Service Charge for Service subscriptions of Service Subscribers shall be calculated separately for each category of Service Subscriber (Hotel, Office, other) for each particular Billing Period, ***. For purposes of this subparagraph, the average number of Service Subscribers for a particular Billing Period (calculated separately for each category of Service Subscriber) shall equal the average of (A) the number of active Service Subscribers as of the last day of the prior Billing Period, and (B) the number of active Service Subscribers as of the last day of the current Billing Period. e. *** *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 10 *** "Gross Revenue Per Subscriber" shall be calculated for each Billing Period and defined as (A) the total combined Gross Retail Revenue for a particular Billing Period for all Demand Purchases, other than by Hotel Demand Purchasers or Office Demand Purchasers, in such Billing Period, and the "Gross Subscription Revenue" from all Service subscriptions from all Service Subscribers, other than Hotel Service Subscribers and Office Service Subscribers, in such Billing Period, divided by (B) the total number of Affiliate's active Satellite Subscribers, other than in Hotels and other than Office Subscribers, on the last day of such Billing Period. The "Gross Subscription Revenue" from all Service subscriptions from all Service Subscribers, other than Hotel Service Subscribers and Office Service Subscribers, shall be calculated by multiplying *** for a particular Billing Period by the average number of Service Subscribers, other than Hotel Service Subscribers and Office Service Subscribers, for which *** is applicable for the Billing Period. The aggregate of all such products for *** and category of Service Subscriber shall equal the Gross Subscription Revenue from all Service subscriptions from all Service Subscribers, other than Hotel Service Subscribers and Office Service Subscribers, for such Billing Period. The average number of Service Subscribers for a particular Billing Period shall equal the average of (1) the number of active Service Subscribers as of the last day of the prior Billing Period, and (2) the number of active Service Subscribers as of the last day of the applicable Billing Period. *** *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 11 f. Revenues shall be considered "earned" regardless of whether Affiliate collects payments due from any Service Subscriber and/or Demand Purchaser. g. In calculating Service Charge(s) due as described under subparagraphs 8.b. and 8.d. above, Service Subscribers shall not include *** subscribers of Affiliate or Distributor who are authorized to receive the Service as a free preview, provided that such free preview may be offered only with Playboy's consent; (iii) commercial business locations where the Service is provided by Affiliate for the purposes of technical testing and comparison and/or consumer marketing research, evaluation and analysis of Affiliate's services and equipment, provided that there is no charge to view the Service at any of such locations; or (iv) retail locations (e.g., dealer showrooms) and other public locations (e.g., shopping malls and fairs) where Affiliate or a Distributor is demonstrating the Service on a "no charge" basis for marketing and promotional purposes; provided that each such demonstration is available for viewing only by requesting adults and does not violate any, and complies with all laws, rules and regulations and the contractual obligations of Affiliate, the applicable Distributor and all other demonstrators and exhibitors. h. Affiliate shall provide and install for Playboy, at Affiliate's sole cost, three (3) satellite antennas integrated receiver decoders with certain basic program services currently called PRIME Value and Service subscriptions for the Term, on a "free," "no charge" basis, one (1) at Playboy's corporate office in Beverly Hills, California, one (1) at the Playboy Mansion in Los Angeles, California, and one (1) at the private residence of the Chief Executive Officer of Playboy or his or her designee; such locations shall not be deemed Service Subscribers for the purposes of the payment provisions hereof. i. Any amounts not paid by Affiliate within *** days of the end of the appropriate Billing Period shall accrue interest at the lesser rate of one and one-half percent (1-1/2%) per month or at the highest lawful rate, compounded monthly from the *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 12 date such amounts were first due until they are paid. j. All payments required under this Paragraph 8 shall be made either by wire transfer of immediately available funds to a bank account specified by Playboy, which, until further notice, shall be LaSalle National Bank, 135 S. LaSalle Street, Department 2657, Chicago, Illinois 60674-2657, ABA #071000505, A/C #5800010356, Credit: Playboy Entertainment Group, Inc. or by payment via a check drawn on a United States bank account and sent to Playboy Entertainment Group, Inc., 9242 Beverly Boulevard, Beverly Hills, CA 90210, Attention: Accounts Receivable. 9. REPORTS a. Affiliate shall send to Playboy, as soon as available, but not later than *** days after the end of each Billing Period during the Term, a statement on a form mutually acceptable to Affiliate and Playboy. Affiliate shall deliver such statement to Playboy prior to or along with the amount payable to Playboy as provided in this Agreement. Each such accounting statement shall be certified by an appropriate officer of Affiliate or an independent billing service as to the accuracy of such statement, and shall include: (i) stated separately for each price level of Demand Purchases and in the aggregate for all Demand Purchases for the applicable Billing Period, the Gross Retail Revenue and Service Charge for Demand Purchases during the Billing Period, including all calculations necessary to arrive at the Service Charge; (ii) the *** Service Charge for each category of Service subscriptions during the Billing Period, including all calculations necessary to arrive at the Service Charge; (iii) the origin of all Service Charges for such Billing Period, itemized by Demand Purchases, subscriptions and ***; (iv) for each type of Demand Purchase, the number of Satellite Subscribers (stated separately for Hotels) and Office Subscribers making such a Demand Purchase and the number of such Demand Purchases during such Billing Period, itemized on a daily basis if and when available on such daily basis; (v) the total number of active Service Subscribers, broken out by Hotel Service Subscribers, Office Service Subscribers and all other Service Subscribers, at the end of the last day of the applicable Billing Period, and at the end of the last day of the immediately preceding Billing Period, and, if and when available, the total number of Service subscription authorizations and de-authorizations during the applicable Billing Period; and (vi) the total number of Affiliate's active Satellite Subscribers (stated separately for Hotels) and Officer Subscribers (also stated separately) at the end of each *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 13 respective Billing Period. b. Affiliate agrees to keep and maintain accurate books and records of all matters directly relating to this Agreement in accordance with generally accepted accounting principles. During the Term and for *** after the termination of this Agreement, Affiliate's books and records shall be available to Playboy for inspection and audit, during normal business hours, at Playboy's expense, at Affiliate's offices upon reasonable notice to Affiliate.*** Affiliate shall pay to Playboy all underpayments revealed by the audit plus interest thereon pursuant to subparagraph 8.i. Additionally, if any such audit reveals an underpayment to Playboy of ten percent (10%) or more of the amount paid to Playboy for any Billing period audited, then Affiliate shall reimburse Playboy for the reasonable costs of such audit. c. In addition to the foregoing, Affiliate will supply to Playboy such additional information relating to the Service as Playboy may reasonably request from time to time and as Affiliate may reasonably obtain *** subject to applicable law *** regarding the dissemination of such information. d. It is expressly understood that Affiliate's obligation to render statements to Playboy in a timely manner in accordance with this Paragraph 9 is a material obligation of Affiliate hereunder, whether or not such statement shall show any sums due to Playboy hereunder. If Affiliate shall fail to timely render any such statement, and shall fail to cure such breach within *** days of Playboy's notice to Affiliate thereof, then without limiting any of its other rights hereunder, Playboy shall have the right immediately to terminate this Agreement. 10. PROMOTION, MARKETING AND SALES AND TRADEMARK APPROVAL: a. Playboy shall provide marketing and promotional advice and information as it deems necessary. Playboy and Affiliate have mutually agreed to the marketing and promotional activities attached hereto as Schedule 1. b. Affiliate, both initially in its expansion of the Service hours and at all times thereafter, will market and promote the Service in order to maximize the number of Service Subscribers and/or Demand Purchasers ***, *** Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 14 c. The parties understand and agree that Affiliate currently expects to use a range of media (including without limitation, print, advertising, and cross-channel promotional spots) to market and promote the Service. Affiliate shall publicize the schedule of the Service in the Territory in a manner similar to other similar premium and/or pay-per-view services, including without limitation the publication of the Service programming schedule in both printed and electronic on-air television listings and program guides that Affiliate distributes. d. Affiliate shall exercise its reasonable commercial efforts to encourage Distributors to allow Playboy reasonable access to each Distributor's customer service representatives for training by Playboy, *** e. Affiliate and Playboy shall cooperate with each other in commercially reasonable marketing tests, surveys, ratings polls and other research ***; provided, however, that any proprietary information furnished by one to the other shall be kept confidential and Affiliate and Playboy shall keep confidential all research delivered to it but funded by the other. Playboy and Affiliate each agree to forward to the other any and all information and reports resulting from such research; provided, however, that neither party shall be required to forward any information protected under confidentiality terms with a third party. f. Playboy shall have the right to review and approve, in advance, any of Affiliate's publicity about the Service, *** Such approval shall not be unreasonably withheld or delayed. g. Affiliate has not and will not acquire any proprietary rights in any of the Marks or any other trade names, trademarks, service marks, or logos associated with Playboy and/or its parent by reason of this Agreement or otherwise. Affiliate further acknowledges the great value of the goodwill associated with the Marks, and the public renown and recognition of the same, and that the Marks have a distinctiveness and a secondary meaning that is firmly associated in the minds of the trade and general public with Playboy Enterprises, Inc. and/or Playboy, and that any additional goodwill in the Marks which may be created through the use of the Marks by Affiliate or a Distributor shall inure to the sole benefit of Playboy and/or its parent, as the case may be. Affiliate may use the Marks only if it is clear that the Marks used are service marks for the programs and program services of Playboy and/or its parent that Affiliate distributes and such use shall be in accordance with any further instructions that may be issued by Playboy and/or its parent from time to time; provided, however, any use of any Mark that is not consistent with prior approved uses requires the prior express written approval of Playboy and/or its parent. Affiliate shall submit any initial use of the Marks to Playboy for Playboy's prior written approval at least ten (10) working days prior to their intended ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 15 distribution. Such submission shall be made simultaneously to Senior Vice President, Playboy Satelite, Playboy Television, 9242 Beverly Boulevard, Beverly Hills, California 90210 and to the General Counsel of Playboy Enterprises, Inc., 680 N. Lake Share Drive, Chicago, Illinois 60611. Playboy, through either of such officers may disapprove of any use. Affiliate will not disseminate any material that has not been approved by Playboy in accordance with the terms hereof.*** Playboy's responses for purposes of this Paragraph may be given telephonically. Notwithstanding the foregoing, it is agreed and understood that standard, periodic, or repetitively issued promotional materials (e.g. Affiliate's monthly program guides), need not be resubmitted for Playboy's prior written approval so long as such materials and the Marks used therein are being used by Affiliate in the same manner, for the same purposes and under the same conditions as previously approved by Playboy. Any promotional materials provided by Playboy to Affiliate shall be deemed automatically approved, but only for the purpose and specific context provided, and Affiliate may not couple or link materials provided by Playboy with other material not provided or previously approved by Playboy. 11. REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION: a. Playboy and Affiliate each represent and warrant to the other that each has the requisite power and authority to enter into this Agreement and to perform fully its respective obligations hereunder, and that this Agreement has been duly executed by it and constitutes a valid obligation enforceable against it in accordance with the terms hereof. b. Playboy represents and warrants to Affiliate that subject to the exclusion for music performing rights provided below in this subparagraph 11.b., the Service as supplied to Affiliate pursuant to this Agreement, if and when presented by Affiliate in the manner and at the times authorized herein, will contain no libelous or slanderous material and will not violate any copyright, right of privacy or literary or dramatic right of any person. Notwithstanding anything in this Agreement to the contrary, Playboy's representations, warranties and indemnify expressly exclude any and all representations, warranties and indemnities of any kind in regard to music performing rights,*** ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 16 c. Affiliate and Playboy shall each indemnify, defend and forever hold harmless the other, its affiliated corporations and other entities, partners, officers, directors, employees and agents (collectively the "Indemnitees") from all liabilities, costs, damages and expenses (including without limitation, reasonable counsel fees of counsel of Playboy's choice) from claims by third parties (collectively, "Claims") arising from the breach of any representation, warranty, or material obligation hereunder, and Affiliate shall indemnify, defend and hold harmless Playboy and other Indemnitees from all Claims, including by any Satellite Subscriber, Office Subscriber, Service Subscriber, or Demand Purchase customer relating to the provision or offering of the Service by Affiliate or a Distributor (except with respect to Claims relating to the specific content of the Service); provided that in each case where such indemnification is sought: (i) the Indemnitee promptly notifies the indemnitor of the Claim to which the indemnification relates; (ii) the indemnitor shall control fully any litigation, compromise, settlement or other resolution or disposition of such Claim; and 17 (iii) the Indemnitee fully cooperates with the *** indemnitor in the Indemnitor's defense of such Claim. d. Notwithstanding the above, Playboy's indemnification of Affiliate will be valid in the event of a prosecution or Claim involving an allegation of violation of the laws insofar as the content of the Service is concerned, only in the event each of the following conditions is met: (i) Immediate telephone contact be made with both the General Counsel's office of Playboy in Chicago at (312) 751-8000 and Playboy's President in Beverly Hills at (310) 246-4000, or other numbers hereafter specified by Playboy. Such telephone notification should be immediately followed with a letter containing copies of all papers that have been served and giving complete information then available regarding the incident. (ii) Playboy shall have the right to approve Affiliate's choice of counsel and to determine in advance the terms of retention. (iii) Playboy will assist in defended actions only and will not be responsible in cases where there is any admission of guilt by any Indemnitee. Settlement or dismissal of any case will not be allowed, except with Playboy's prior written consent. e. Actual or prospective parties involved in such prosecution shall make no voluntary disclosure regarding support or lack thereof by Playboy under this policy. f. *** 12. EARLY TERMINATION RIGHTS: a. In addition to Playboy's other rights at law or in equity or pursuant to other provisions of this Agreement, Playboy may, by so notifying Affiliate, terminate this Agreement: (i) if Affiliate is in material breach of this Agreement; provided, however, that if such breach is of the type that is curable, then Playboy shall not exercise its termination or other rights at law or in equity hereunder unless Playboy has, by so notifying Affiliate in writing, given Affiliate at least *** days from the time such notice is received by Affiliate to fully cure such material breach and to demonstrate to Playboy that such material breach has been cured; or (ii) if Affiliate has filed a petition in bankruptcy, is insolvent, or has sought relief under any law related to Affiliate's financial condition or its ability to meet its payment obligations; or (iii) if any involuntary petition in bankruptcy has ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 18 been filed against Affiliate, or any relief under any such law has been sought by any creditors of Affiliate, unless such involuntary petition is dismissed, or such relief is denied within *** days after it has been filed or sought. b. In addition to Affiliate's other rights at law or in equity or pursuant to other provisions of this Agreement, and in addition to any other right to terminate provided hereunder, Affiliate may, by so notifying Playboy, terminate this Agreement: (i) if Playboy is in material breach of this Agreement; provided, however, if such breach is of the type that is curable, then Affiliate shall not exercise its termination or other rights at law or in equity hereunder unless Affiliate has, by so notifying Playboy, given Playboy at least *** days from the time such notice is received by Playboy, to fully cure such material breach and to demonstrate to Affiliate that such material breach has been cured; or (ii) if Playboy has filed a petition in bankruptcy, is insolvent or has sought relief under any law related to Playboy's financial condition or its ability to meet its payment obligations; or (iii) if any involuntary petition in bankruptcy has been filed against Playboy, or any relief under any such law has been sought by any creditors of Playboy, unless such involuntary petition is dismissed, or such relief is denied within *** days after it has been filed or sought; *** 13. FORCE MAJEURE: Except as herein provided to the contrary, neither Affiliate nor Playboy shall have any rights against the other party hereto for the non-operation, malfunction, or failure of facilities or equipment or the non-furnishing of the Service if such non-operation, malfunction, or failure, or non-furnishing is due to an act of God; inevitable accident; fire; lockout; flood; tornado; hurricane, strike, or other labor dispute; riot or civil commotion; earthquake, war; act of government or governmental instrumentality (whether federal, state or local); failure of performance by a common carrier; failure in whole or in part of technical facilities; or other cause (financial inability excepted) beyond such party's reasonable control. In this regard, the termination or expiration of any of Playboy's arrangements relating to communications satellite facilities and/or the unavailability to ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 19 Playboy of such facilities on terms satisfactory to Playboy shall be deemed excused, and not a breach or default by Playboy under this Agreement, pursuant to this Paragraph. In the event of non-operation or non-furnishing of the Service, Affiliate shall have the right, immediately, to insert programming of its choice on the channel otherwise identified with the Service until such time as the Service resumes full operation, on the condition that Affiliate makes clear to the viewers that such other programming is not the Service and is not related to the Service in any way. *** 14. ASSIGNMENT: Affiliate may not assign this Agreement without the express written consent of Playboy which shall not be unreasonably withheld or delayed; *** Playboy may assign this Agreement or any portion of its rights or obligations hereunder without Affiliate's consent, provided that if, as a result of such assignment, the Service shall no longer be generally identified as a "Playboy" Service, Affiliate may cancel this Agreement on not less than ninety (90) days' prior written notice. 15. NOTICES: All notices, requests, demands, consents, directions and other communications provided for hereunder shall be in writing and be either delivered by courier (e.g., messenger or overnight delivery), delivered by facsimile transmission ("fax"), with confirmed electronic receipt, or sent by means of U.S. certified mail, return receipt requested; if to Playboy to Playboy Entertainment Group, Inc., 9242 Beverly Boulevard, Beverly Hills, California 90210, ATTN: Programming Distribution and Senior Vice President, Satellite, Fax Number 310-246-4050, with a copy by the same method to General Counsel, Playboy Enterprises, Inc., 680 N. Lake Shore Drive, Chicago, Illinois 60611, Fax Number 312-266-2042; and if to Affiliate to Primestar Partners, L.P., Three Bala Plaza West, Suite 700, Bala Cynwyd, Pennsylvania 19004, Attention: Claire Cowart, Fax Number 610-668-2862, or, as to each party, at such other address as shall be designated by such party in a written notice to the other party. All notices shall, if mailed, be deemed effective two (2) business days after the date deposited in the mail, if faxed, on the date receipt of such fax is so confirmed, and, if delivered by courier, on the date delivered. ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 20 16. CONFIDENTIALITY: Neither Playboy nor Affiliate shall disclose to any third party (other than its respective employees, in their capacity as such), any information with respect to the financial terms and provisions of this Agreement except: (i) to the extent necessary to comply with law or the valid order of a court of competent jurisdiction, in which event the party making such disclosure shall so notify the other and shall seek confidential treatment of such information, (ii) as part of its bona fide reporting or review procedure under applicable securities laws or listing or exchange requirements or to its parent company, its partners, its auditors, and its attorneys; or its investors, bankers, investment bankers, or business consultants/advisors; provided, however, that such parent company, partners, auditors, attorneys, investors bankers, investment bankers, and business consultants/advisors agree to be bound by the provisions of this paragraph and (iii) in order to enforce its rights pursuant to this Agreement. 17. MISCELLANEOUS: a. Entire Agreement; Amendments; Waivers. This Agreement contains the entire understanding of the parties and supersedes and abrogates all contemporaneous or prior understandings of the parties, whether written or oral, relating to the subject matter hereof. This Agreement may not be modified except in writing executed by both parties hereto. Any waiver of any provision of, or right included in, this Agreement must be in writing and signed by the party whose rights are being waived. No waiver by either Affiliate or Playboy of any breach of any provision hereof shall be or be deemed to be a waiver of any preceding or subsequent breach of the same or any other provision of this Agreement. The failure of Affiliate or Playboy to enforce or seek enforcement of the terms of this Agreement following any breach shall not be construed as a waiver of such breach. b. Governing Law. The obligations of Affiliate and Playboy under this Agreement are subject to all applicable federal, state and local laws, rules and regulations (including, but not limited to, the Communications Act of 1934, as the same may be amended from time to time, and the rules and regulations of the FCC promulgated thereunder) and this Agreement and all matters or issues collateral thereto shall be governed by *** , without regard to choice of law rules. c. Relationship. Neither Affiliate no Playboy shall be, or hold itself out as, the agent of the other under this Agreement. No subscriber of Affiliate shall be deemed to have any privity of contract of direct contractual or other relationship with Playboy by virtue of this Agreement or Playboy's delivery of the Service to Affiliate hereunder. Likewise, no supplier of advertising or programming or anything else included in the Service by Playboy shall be deemed to have any privity of contract or direct contractual or other relationship with Affiliate by virtue of this Agreement or Affiliate's carriage of the Service hereunder. Nothing contained herein shall be deemed to create, and the parties do not intend to create, any relationship of partners, joint venturers or agents, as between Affiliate and Playboy, and neither party is authorized to or shall act toward third parties or the public in any manner which would indicate any such relationship with the other. ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 21 d. Severability. The invalidity under applicable law of any provision of this Agreement shall not affect the validity of any other provision of this Agreement, and in the event that any provision hereof is determined to be invalid or otherwise illegal, this Agreement shall remain effective and shall be construed in accordance with its terms as if the invalid or illegal provision were not contained herein; provided however, that both parties shall negotiate in good faith with respect to an equitable modification of the provision, or application thereof, held to be invalid and provisions logically related thereto. e. No Inference Against. Playboy and Affiliate each acknowledge that this Agreement was fully negotiated by the parties and, therefore, no provision of this Agreement shall be interpreted against any party because such party or its legal representative drafted such provision. f. No Third Party Beneficiaries. The provisions of this Agreement are for the exclusive benefit of the parties hereto and their permitted assigns, and no third party shall be a beneficiary of, or have any rights by virtue of, this Agreement. g. Headings. The titles and headings of the sections in this Agreement are for convenience only and shall not in any way affect the interpretation of this Agreement. h. Non-Recourse. Notwithstanding anything contained in this Agreement to the contrary, it is expressly understood and agreed by the parties hereto that each and every representation, warranty, covenant, undertaking and agreement made in this Agreement was not made nor intended to be made as a personal representation, undertaking, warranty, covenant, or agreement on the part of any incorporator, stockholder, director, officer, partner, employee or agent, past, present or future, or any of them, and any recourse, whether known or unknown, in common law, in equity, by statute or otherwise, against any of them is hereby forever waived and released. i. Taxes. Affiliate shall pay and forever hold harmless Playboy from all taxes and any other governmental charges now or hereafter imposed or based upon the rental, license, exhibition or possession for, to or by Affiliate of the Service or any part thereof. IN WITNESS WHEREOF, Playboy and Affiliate have executed this Agreement as of April 1, 1997. PRIMESTAR(R) PARTNERS, L.P. PLAYBOY ENTERTAINMENT GROUP, INC. By: /s/ Daniel J. O'Brien By: /s/ Doug Lindquist ----------------------------- ----------------------------- Daniel J. O'Brien, President Doug Lindquist, Senior V.P. - -------------------------------- -------------------------------- Name and Title Name and Title Date: 4-2-98 Date: 4-7-98 --------------------------- --------------------------- 22 SCHEDULE 1 PRIMESTAR(R) PARTNERS, L.P. Playboy and Affiliate have mutually agreed upon the following marketing support: 1. On-Air a. Cross Channel Avails (i) Affilate will schedule *** video spot via cross channel avails to promote the expansion to twenty-four (24) hours,*** The spots will run on channels designated by Affiliate between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. Spots will be distributed roughly evenly between the designated hours and across channels that reach Playboy's target audience. (ii) Affiliate will schedule *** video spot via cross channel avails to promote the introduction of the monthly subscription service,*** The spots will run on channels designated by Affiliate between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. Spots will be distributed roughly evenly between the designated hours and across channels that reach Playboy's target audience. (iii) Affiliate will schedule the Service's product promotion spots via cross channel avails, including special previews and promotions, *** The spots will run on channels designated by Affiliate between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. Spots will be distributed roughly evenly between the designated hours and across channels that reach Playboy's target audience. b. Barker Channel Avails (i) Affiliate will schedule *** video spot on the PRIMEView One and PRIMECinema Today twenty-four (24) hour promotional channels to promote the expansion to twenty-four (24) hours, *** The spots will run between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 23 (ii) Affiliate will schedule *** video spot on the PRIMEView One and PRIMECinema Today twenty-four (24) hour promotional channels to promote the introduction of the monthly subscription service, *** The spots will run between the hours of 1:00 a.m. and 6:00 a.m. Eastern Time or earlier if Affiliate's policy allows. c. Materials (i) Playboy will develop and produce, *** video spots that meet Affiliate's specifications to promote the (1) expansion of the service from ten (10) to twenty-four (24) hours; and (2) introduction of a monthly subscription service. (ii) Playboy will provide, *** customizable video spots, approximately four (4) video spots per month, to promote monthly product premieres. Affiliate, at its expense, will tag the customizable time/space on these spots. 2. Print a. Advertising Space (i) Affiliate will dedicate the full "Adults Only" page in *** Affiliate's Program Guide, in the pay-per-view insert section currently known as PRIMECinema. *** (ii) Affiliate will reserve *** tune-in ad space *** for placement at Affiliate's discretion in the designated editions of Affiliate's Program Guide *** Affiliate recognizes that these ads are tied to programs on specific days of the month; however, Affiliate shall use commercially reasonable efforts to comply with Playboy's requested dates and times for placement. (iii) *** ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 24 (iv) Affiliate will add *** copy in the three (3) daily program guide grids, directly below the Playboy listings, to advertise the monthly subscription option in the designated editions of Affiliate's Program Guide *** b. Materials (i) Playboy will design and produce, *** pages that meet Affiliate's specifications, to be placed in the "Adult Only" section in the designated editions of Affiliate's Program Guide *** (ii) Playboy will design and produce, *** ads that meet Affiliate's specifications, for placement in the designated editions of Affiliate's Program Guide*** (iii) Playboy will design and produce, *** ads that meet Affiliate's specifications, to promote the monthly subscription service, for placement in the Playboy product description section in the designated editions of Affiliate's Program Guide *** (iv) If requested by Affiliate, Playboy will design bill inserts and/or direct mail pieces, ***that meet Affiliate's specifications, to promote the twenty-four (24) hour service expansion and the monthly subscription option. *** 3. Other a. *** b. Upgrade Campaign: Playboy, in conjunction with Affiliate, will implement one (1) monthly subscription upgrade campaign, in a mutually agreed upon month, which includes the set-up of a unique toll-free telephone number to process potential orders. Affiliate and Playboy agree to share in the direct costs *** c. Training ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 25 (i) Playboy will conduct Customer Contact Personnel training, *** , based on Affiliate Partner MSO requests, provided that sufficient notice is given to enable Playboy to reasonably comply with requested dates. (ii) Playboy will design Customer Contact Personnel training materials, *** , which Affiliate will purchase based on Affiliate's Partner MSO requests. d. Incentive Program: Playboy will conduct, *** Customer Contact Personnel sales incentive program during the 1997 calendar year. # # # ***Confidential information omitted pursuant to a request for confidential treatment filed separately with the Securities and Exchange Commission. 26 EX-10.2(A) 4 PLAYBOY MANSION WEST LEASE AGMT. EXHIBIT 10.2(a) PLAYBOY ENTERPRISES, INC. January 12, 1998 Hugh M. Hefner 10236 Charing Cross Road Los Angeles, CA 90024 Dear Mr. Hefner: By your countersignature of this letter, you will evidence your agreement to amend that certain Agreement of Lease made as of June 1, 1979, as amended, (the "Lease") by and between you and Playboy Enterprises, Inc. ("Playboy"). All capitalized terms used herein shall have the meaning ascribed to them in the Lease unless otherwise specified. To coincide with the change in Playboy's fiscal year, the current term of the Lease shall be extended through December 31, 1998 and shall continue for 12 month periods thereafter unless terminated as provided under the Lease. The next consumer price index adjustment to your rent and food and beverage units will be made on the basis of the 18 month period from July 1, 1997 through December 31, 1998. A rent update covering the 18 month period will be prepared within 120 days of December 31, 1998 and you will be billed or credited for actual benefits received. The next formal appraisal of your accommodations at Mansion West will be made in calendar 2001. All other terms of the Lease shall remain in full force and effect. Playboy Enterprises, Inc. By /s/ Howard Shapiro /s/ Hugh M. Hefner ------------------------ ------------------------------ Executive Vice President Hugh M. Hefner 680 NORTH LAKE SHORE DRIVE/CHICAGO, ILLINOIS 60611/312 751-8000 EX-10.3(A) 5 CHICAGO OFFICE LEASE AGREEMENTS EXHIBIT 10.3(a) FIFTH AMENDMENT TO LEASE THIS FIFTH AMENDMENT TO LEASE (this "Amendment") entered into in Chicago, Illinois, as of the 19th day of March, 1998, by and between AMERICAN NATIONAL BANK AND TRUST COMPANY OF CHICAGO, not personally, but solely as Trustee under a Trust Agreement dated May 2, 1989, and known as Trust No. 108237-06 ("Lessor"), and PLAYBOY ENTERPRISES, INC., a Delaware corporation ("Lessee"). WITNESSETH: A. LaSalle National Bank, not personally, but solely as Trustee under a Trust Agreement dated December 21, 1987, and known as Trust No. 112912 ("LaSalle"), and Lessee have heretofore entered into that certain Office Lease dated as of April 7, 1988 (the "Original Lease"), whereby LaSalle leased to Lessee certain premises (the "Original Premises") known as Suites 1500 and 1600, consisting of 95,523.05 rentable square feet and comprising the entire 15th and 16th floors of the "Office Area" (as defined in the Original Lease) of that certain building (the "Building") located at 680 North Lake Shore Drive, Chicago, Illinois, for a lease term expiring on August 31, 2004. B. LaSalle has heretofore assigned its interest under the Lease to Lessor. C. Lessor and Lessee have heretofore entered into that certain Amendment to Lease dated as of October 26, 1989 (the "First Amendment"), which amended certain provisions of the Original Lease, including the leasing to Lessee of certain additional space in the basement of the Building comprising 1,792 square feet (the "Additional Premises"; the Original Premises and the Additional Premises are collectively referred to herein as the "Existing Premises"). D. Lessor and Lessee have heretofore entered into that certain Second Amendment to Lease dated as of June 1, 1992 (the "Second Amendment"), which clarified certain provisions of the Lease relating to Taxes (as defined in the Lease) and Expenses (as defined in the Lease) payable by Lessee. E. Lessor and Lessee have heretofore entered into that certain Third Amendment to Lease ("Third Amendment") dated as of August 30, 1993, which granted to Lessee certain additional expansion rights in the Building and amended certain other provisions contained in the Original Lease. F. Lessor and Lessee have heretofore entered into that certain Fourth Amendment to Lease ("Fourth Amendment") dated as of August 6, 1996, which extended the Term (as defined in the Lease), granted certain expansion rights in the Building and amended certain other provisions contained in the Original Lease and in the First and Third Amendments. The Original Lease, the First Amendment, the Second Amendment, Third Amendment and the Fourth Amendment are collectively referred to herein as the "Lease". G. Lessor and Lessee now desire to amend the Lease to expand the Premises and amend certain other provisions contained in the Lease, all upon the terms and provisions hereinafter set forth. NOW, THEREFORE, for good and valuable consideration, the receipt and legal sufficiency of which are hereby acknowledged, Lessor and Lessee hereby agree as follows: 1. Definitions. Each capitalized term used in this Amendment shall have the same meaning as is ascribed to such capitalized term in the Lease, unless otherwise provided for herein. 2. Expansion of Premises. Commencing on July 1, 1998 (the "Effective Date") and expiring on the Expiration Date (as defined in Section 2 of the Fourth Amendment) the Premises shall consist of the Existing Premises and an additional Thirty-Two Thousand One Hundred Forty (32,140) rentable square feet on the fourteenth (14th) floor (Suite 1400) of the Building as shown on Exhibit A attached hereto and incorporated herein (such additional space being referred to herein as the "Second Additional Premises"). 3. Second Additional Premises Base Rent. Commencing on the Effective Date, Lessee shall pay monthly Base Rent for the Second Additional Premises on the first day of each calendar month during the Term hereof in accordance with Section 1 of the Lease in accordance with the following schedule:
=============================================================================== PERIOD ANNUAL MONTHLY ------ ------ ------- BASE RENT BASE RENT --------- --------- - ------------------------------------------------------------------------------- 7/1/98 - 8/31/98 $357,718.20 $29,809.85 - ------------------------------------------------------------------------------- 9/1/98 - 8/31/99 $364,788.96 $30,399.08 - ------------------------------------------------------------------------------- 9/1/99 - 8/31/00 $409,785.00 $34,148.75 - ------------------------------------------------------------------------------- 9/1/00 - 8/31/01 $418,141.44 $34,845.12 - ------------------------------------------------------------------------------- 9/1/01 - 8/31/02 $426,497.76 $35,541.48 - ------------------------------------------------------------------------------- 9/1/02 - 8/31/03 $434,854.20 $36,237.85 - ------------------------------------------------------------------------------- 9/1/03 - 8/31/04 $443,532.00 $36,961.00 - ------------------------------------------------------------------------------- 9/1/04 - 8/31/05 $452,531.16 $37,710.93 - ------------------------------------------------------------------------------- 9/1/05 - 8/31/06 $461,530.44 $38,460.87 ===============================================================================
2 - ------------------------------------------------------------------------------- 9/1/06 - 8/31/07 $470,529.60 $39,210.80 ===============================================================================
The foregoing base rent for the Second Additional Premises shall be deemed "Base Rent" payable by Lessee under the Lease for all purposes under the Lease. 4. Second Additional Premises Rent Adjustments. From and after the Effective Date, Lessee shall pay to Lessor Rent Adjustment for the Second Additional Premises in accordance with Section 2 of the Lease, subject to the following modifications: (a) Rent Adjustment for the Second Additional Premises shall be calculated and determined separate from Rent Adjustment for the Existing Premises. Lessee's Proportionate Share with respect to the Second Additional Premises shall be 7.69%. (b) Rent Adjustment for the Existing Premises shall continue to be determined in accordance with the Lease without regard to the terms of this Section 4. Solely for the purposes of determining Rent Adjustment for the Second Additional Premises, the definition of Expenses and Taxes set forth in Sections 2.A(iv) and 2.A(v), respectively, of the Lease are hereby amended and restated in their entirety as follows: "(iv) "Expenses" shall mean and include (a) those expenses paid or incurred by or on behalf of the Lessor for operating, maintaining, and repairing the Office Area and the personal property used in conjunction therewith (said Office Area and personalty being herein collectively called the "Office Facility" and (b) those expenses incurred for the benefit of the Office Area and other portions of the Building to the extent the burden of such Expenses is allocated to the Office Area by Lessor, in its reasonable discretion, after excluding all expenses allocable to the residential and private garage condominium associations pursuant to the 680 North Lake Shore Drive Operating Agreement and Supplemental Declaration of Easement dated as of January 1, 1993, as amended or replaced from time to time. Such Expenses include, without limitation, the cost of operating, maintaining and repairing systems providing heating and air conditioning, electricity, steam, water, fuel, gas, lighting, window cleaning, janitorial service and security, and operating, maintaining and repairing the "common areas" of the first floor and basement of the Building, as designated on Exhibit B attached to the Fifth Amendment, elevators designated on Exhibit B attached to the Fifth Amendment, exterior of the Building, sidewalks contiguous to the Building and landscaping of the Building, fire protection life safety system servicing the Building, insurance (including, but not limited to, fire, extended coverage, liability, worker's compensation, elevator, or any other insurance carried by the Lessor and applicable to the Office Facility), painting, uniforms, customary management fees applicable to the Office Area, supplies, sundries, sales or use taxes on supplies or services, cost of wages and salaries of all 3 persons engaged in the operation, maintenance and repair of the Office Facility, and so-called fringe benefits (including social security taxes, unemployment insurance taxes, cost for providing coverage for disability benefits, cost of any pensions, hospitalization, welfare or retirement plans, or any other similar or like expenses incurred under the provisions of any collective bargaining agreement, or any other cost or expenses which Lessor pays or incurs to provide benefits for employees so engaged in the operation, maintenance, and repair of the Office Facility), costs of capital improvements, amortized over the useful life of such improvements, provided such capital improvements are required by any government authority with jurisdiction over the Premises, or which capital improvements are made for the purpose of decreasing the Expenses of the Office Area, the charges of any independent contractor who, under contract with the Lessor or its representatives, does any of the work of operating, maintaining, or repairing the Office Facility, reasonable legal and accounting expenses limited to those incurred in connection with seeking or obtaining reduction in or refunds of real estate taxes, maintenance and operation of the Office Area, and preparation of annual audited financial statements for the Building, or any other expense or charge, whether or not hereinbefore mentioned, which in accordance with generally accepted accounting and management principles would be considered an expenses of operating, maintaining, or repairing the Office Facility. Any language in this Lease to the contrary notwithstanding, Expenses shall not include costs or other items included within the meaning of the term "Taxes" (as hereinafter defined); costs of alterations of the premises of tenants of the Office Area; costs of capital improvements to the Office Area not described in subparagraph (A)(iv) of this Section 2; depreciation charges; interest and principal payments on mortgages; ground rental payments; real estate brokerage and leasing commissions; expenses incident to ownership of the Building, such as land trustee fees, corporate franchise tax, or legal and accounting fees related solely to the management of any ownership entity, including key employee and disability insurance premiums, any expense for which Lessor has been reimbursed from the proceeds of insurance maintained in an amount and type which a reasonably prudent owner of a comparable building located in Cook County would maintain; any cost of repair or replacement necessitated by the exercise of eminent domain for which Lessor has been reimbursed from the award in such eminent domain proceeding; advertising and promotional expenditures; legal and accounting fees; except as set forth in subparagraph A(iv) herein of this Section 2; the cost of special services rendered to any other tenant, if such services are not generally available to tenants of the Building; fines and penalties, unless caused by Lessee; cost of any repair necessitated by the negligence of Lessor, its agents, servants or employees; management fees in excess of a reasonable market management fee for commercial space comparable to the Office Area; cost of payments pursuant to any contract between Lessor and an entity which controls, is controlled by or 4 is under common control with Lessor in excess of payments under such a contract in the absence of such relationship, provided that Lessee agrees that the cost of electricity paid to Streeterville Utility Company, its successor, or Lessor for the Office Area shall be included in Expenses; any expenditures for which Lessor has been reimbursed (other than pursuant to rent adjustment provisions in leases); or any expenses not incurred in the ordinary course of business by Lessor. If the Office Area is not a least 90% occupied for all or any portion of an Adjustment Year, Lessor may elect to adjust the Expenses for such Adjustment Year, using sound accounting practices, to estimate the amount of Expenses which would have been incurred had the Office Area been 90% occupied, provided that only those Expenses which vary by occupancy shall be so adjusted. At the date hereof, the Expenses which vary by occupancy of the Office Area are contract cleaning expenses, heating and ventilation expenses, chilled water and air conditioning expenses, elevator contract expenses, scavenger trash removal expenses, water and gas expenses (for hot water heaters in Office Area restrooms). The amount as so adjusted shall be deemed the actual amount of Expenses for such Adjustment Year. Regardless of the formulae, Lessor shall not collect from Lessee the cost of any Expense which has been fully reimbursed to Lessor by one or more other tenants of the Building. If any Office Area expense, though paid in one year, relates to more than one calendar year, at the reasonably exercised discretion of Lessor, such expenses may be proportionately allocated among such related calendar years, provided such allocations must be made if required by generally accepted accounting principles and, if applicable, based on the reasonably estimated useful life of each improvement. (v) "Taxes" shall mean real estate taxes, assessments, sewer rents, rates, and charges, transit taxes, taxes based upon the receipt of rent, and any other federal, state or local government charge, general, special, ordinary or extraordinary (but not including income or franchise taxes or any other taxes imposed upon or measured by the Lessor's income or profits, unless the same shall be imposed in lieu of real estate taxes and other ad valorem taxes, provided that such substituted taxes are based in whole or in part upon the Building or the rents or other income therefrom, but only to the extent such taxes would be payable if the Building were the only property of Lessor and the income from the Building were the only income of Lessor) which may now or thereafter be levied or assessed against: (a) the Office Facility (to the extent of 100% of such taxes, charges, and expenses); (b) Lot 1 ("Lot 1") of the aforementioned Paul's Subdivision (but only to the extent of the percentage of such taxes, charges, and expenses allocated to the Office Facility by Lessor in its reasonable discretion); and (c) such other portions of the Building as serve or benefit the Office Area which have been or will be assigned a tax parcel number and upon which taxes could be levied and assessed (e.g., elevator shafts or air shafts) to such an extent as Lessor, in its reasonably exercised discretion, deems to be equitable and fair 5 in view of the relative levels of benefit to each of the portions of the Building, provided that Lessor is obligated to pay such taxes. In the event any Taxes shall not be separate assessed or charged against the foregoing, such Taxes shall be allocated based upon the records of the assessor or other governmental agency imposing such charges, or in the event such records shall not exist, such allocation shall be made on a pro rata square footage basis. In case of special taxes or assessments which may be payable in installments, only the amount of each installment paid during a calendar year shall be included in Taxes for that year. Taxes shall be allocated for purposes of this provision on a year-of-payment basis. Taxes shall also include any personal property taxes (attributable to the calendar year in which paid) imposed upon the furniture, fixtures, machinery, equipment, apparatus, systems, and appurtenances used in connection with the Office Facility or the operation thereof." 5. Conditions of Second Additional Premises. Simultaneously with the execution and delivery of this Amendment by both Lessor and Lessee, Lessor shall deliver possession of the Second Additional Premises to Lessee in broom clean condition. Lessee shall accept the Second Additional Premises on such date in their "as is", "where is" physical condition, and Lessee acknowledges that no promise of Lessor to alter, remodel, improve, repair or decorate the Second Additional Premises or any part thereof or any portion of the Building has been made, except, however Lessor shall provide to Lessee Lessor's Contribution as provided in Exhibit C attached hereto (the "Workletter") and Lessor acknowledges that Lessee will be constructing certain improvements in the Second Additional Premises in accordance with said Workletter. 6. Return of Premises. As more fully provided in the Workletter, Lessee intends on installing a stairway between the 14th floor and the 15th floor of the Premises. Notwithstanding anything contained in Section 9 or elsewhere in the Lease to the contrary and without limiting the Lessee's other obligations set forth in the Lease, prior to the expiration or earlier termination of the Lease, Lessee shall be responsible for demolishing said stairway and restoring the floor slab between the 14th and 15 floor of the Building in a manner satisfactory to Lessor, all at Lessee's sole cost and expense. 7. 14th Floor Expansion Rights. Sections 4 and 7 of the Fourth Amendment are hereby deleted in their entirety. Notwithstanding such deletion, Section 2 of the Third Amendment, which was deleted by Section 4 of the Fourth Amendment, remains deleted in its entirety from the Lease. With respect to the right of first refusal granted to Tenant under Section 5 of the Fourth Amendment, Lessee acknowledges that the Second Additional Premises incorporates a portion of the Primary ROFR Space (as defined and depicted in the Fourth Amendment). Accordingly, that portion of the Primary ROFR Space which is included within the Second Additional Premises is hereby deleted from the definition of Primarily ROFR Space and no longer subject to the rights of Lessee under Section 5 of the Fourth Amendment. With respect to the right of first refusal granted to Lessee under Sections 5 and 6 of the Fourth 6 Amendment (which pertain to the Primary ROFR Space and Secondary ROFR Space, respectively), Lessee acknowledges that such rights are subject and subordinate to any renewals, extensions or expansions of or into such space by (a) the existing tenant of a portion of such space identified on Exhibit A attached hereto as Columbus-Cuneo-Cabrini Medical Center pursuant to written agreements in affect as of the date hereof of (b) the existing tenants of portions of such space identified on Exhibit A attached hereto as Elias R. Sabbagha, M.D. and Souma Diagnostics, regardless of whether those two existing tenants have written agreements or not for such renewals, extensions or expansions. Except as modified above, Lessee retains its expansion rights with respect to the Primary ROFR Space and Secondary ROFR Space as provided under Section 5 and 6 of the Fourth Amendment. 8. After Hours Heating, Ventilating and Air Conditioning Services for the Second Additional Premises. Lessee desires additional heating, ventilating and air conditioning ("HVAC") services for the Second Additional Premises. Lessor agrees to provide such services in accordance with Section 6.A. of the Lease 8:00 a.m. to 8:00 p.m. Monday through Fridays and 8:00 a.m. to 6:00 p.m. Saturdays, in either case holidays excepted ("Normal Second Additional Premises HVAC Hours"). In order to provide such additional HVAC services to the Second Additional Premises, it will be necessary to operate the air handlers serving the 14th floor of the Building. Such air handler serving the 14th floor of the Building are separately metered. In consideration of such extended hours, Lessee agrees to pay Lessor, within ten (10) days after receipt of invoice for same from Lessor, an amount equal to 18.3% of the cost of the operating such air handlers for the 14th Floor, as determined by such separate meters. In addition to the foregoing, Lessee shall pay to Lessor on the first day of each month a charge of $51.00 per month for the additional maintenance incurred by Lessor in connection with such additional HVAC services plus, during the cooling season (i.e., April 1 through October 31 of each calendar year), a charge of $263.60 per month for the additional condenser water consumed in connection with such additional HVAC services (the foregoing charges are hereinafter collectively referred to as the "Second Additional Premises HVAC Charges"). The Second Additional Premises HVAC Charges are subject to an adjustment as provided in Section 9 below. Lessee may request additional HVAC services for the Second Additional Premises (that is in addition to the Normal Second Additional Premises HVAC Hours) upon at least 24 hours notice. Lessee shall pay for such additional after hours HVAC services at Landlord's Building standard rates. Currently, the Building standard rate is $35.00 per hour. Lessee understands that such rate is subject to periodic change by Lessor. Lessee may elect, by prior written notice given to Landlord, to discontinue such additional HVAC services for the Second Additional Premises (i.e., services during the Normal Second Additional Premises HVAC Hours), in which event, Lessor shall only be required to provide HVAC services for the Second Additional Premises during the normal business hours set forth in Section 6.A. of the Original Lease. Lessee shall pay any accrued charges under this Section 8 for the additional HVAC services to the Second Additional Premises up to the effective date of any such termination, but thereafter shall not be required to pay the charges described in this Section 8. 7 9. Second Additional Premises HVAC Charges CPI Adjustment. A. Definitions. As used herein: (i) "Base Month" shall mean January, 1998. (ii) "Base Second Additional Premises HVAC Charges" shall mean $51.00 per month for the additional maintenance and $263.60 per month for the additional condenser water. (iii) "CPI" shall mean the Consumer Price Index for All Urban Consumers (CPI-U) published by the Bureau of Labor Statistics of the United States Department of Labor for Chicago-Gary-Lake County, IL-IN- WI, All Items, (1982-84=100). If the manner in which the CPI is determined by the Bureau of Labor Statistics shall be substantially revised, including, without limitation, a change in the base index year, an adjustment shall be made by Lessor in such revised index which would produce results equivalent, as nearly as possible, to those which would have been obtained if the CPI had not been so revised. If the CPI shall become unavailable to the public because publication is discontinued, or otherwise, or if equivalent data is not readily available then Lessor will substitute a comparable index based upon changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall be available, then a comparable index published by a major bank, financial institution, university or a recognized financial publication. B. Adjustment. Effective as of each January 1 falling within the term hereof, the Second Additional Premises HVAC Charges shall be increased to an amount equal to the Base Second Additional Premises HVAC Charges multiplied by a fraction, the numerator of which is the CPI for the month of January of such calendar year and the denominator of which is the CPI for the Base Month. In no event shall such CPI adjustment result in a decrease in the Second Additional Premises HVAC Charges. Lessor may furnish to Lessee a notice (the "CPI Notice") showing the CPI and the amount of the CPI adjustment for any calendar year after Lessor ascertains the CPI to be used in determining the CPI adjustment for such calendar year. Until Lessor furnishes the CPI Notice, Lessee shall continue to pay to Lessor monthly installments of Second Additional Premises HVAC Charges in an amount equal to the latest monthly installment of Second Additional Premises HVAC Charges. On or before the first day of the month immediately following the service of a CPI Notice and on or before the first day of each following month until Lessee receives a further CPI Notice, Lessee shall pay to Lessor the monthly installment of Second Additional Premises HVAC Charges shown in such CPI Notice. Within fifteen (15) days following service 8 of each CPI Notice, Lessee shall also pay to Lessor a lump sum payment equal to the Second Additional Premises HVAC Charges owing by Lessee to Lessor (as shown in such CPI Notice) for the period commencing on the first day of the calendar year during which such CPI Notice is served and expiring on the last day of the month during which such CPI Notice is served, less all monthly installments of Second Additional Premises HVAC Charges previously paid by Lessee to Lessor for such calendar year. 10. Broker. Lessee represents to Lessor that Lessee has not dealt with any real estate broker, salesperson or finder in connection with this Amendment other than Golub & Company (the "Broker"), and no other such person initiated or participated in the negotiation of this Amendment or is entitled to any commission in connection herewith. Lessee hereby agrees to indemnify, defend and hold Lessor, its property manager and their respective employees harmless from and against any and all liabilities, claims, demands, actions, damages, costs and expenses (including attorneys' fees) arising from a claim for a fee or commission made by any broker (other than the Broker), claiming to have acted by or on behalf of Lessee in connection with this Amendment. 11. Submission. Submission of this Amendment by Lessor or Lessor's agent, or their respective agents or representatives, to Lessee for examination and/or execution shall not in any manner bind Lessor and no obligations on Lessor shall arise under this Amendment unless and until this Amendment is fully signed and delivered by Lessor and Lessee; provided, however, the execution and delivery by Lessee of this Amendment to Lessor or Lessor's agent, or their respective agents or representatives, shall constitute an irrevocable offer by Lessee on the terms and conditions herein contained, which offer may not be revoked for fifteen (15) days after such delivery. 12. Effect of Amendment. As amended by this Amendment, the Lease shall remain in full force and effect. 13. Exculpatory Provisions. It is expressly understood and agreed by and between the parties hereto, anything herein to the contrary notwithstanding, that each and all of the representations, warranties, covenants, undertakings and agreements herein made on the part of Lessor while in form purporting to be the representations, warranties, covenants, undertakings and agreements of Lessor are nevertheless each and every one of them made and intended, not as personal representations, warranties, covenants, undertakings and agreements by Lessor or for the purpose of or with the intention of binding Lessor personally, but are made and intended for the purpose only of subjecting Lessor's interest in the Office Area and the Premises to the terms of this Amendment and for no other purposes whatsoever, and in case of default hereunder by Lessor (or default through, under or by any of its beneficiaries, or agents or representatives of said beneficiaries), Lessee shall look solely to the interest of Lessor in said Office Area, and this Amendment is executed and delivered by Lessor not in its own right, but solely in the exercise of the powers conferred upon it as such Trustee; that the Lessor shall have no personal 9 liability to pay any indebtedness accruing hereunder or to perform any covenant, either express or implied, herein contained and no liability or duty shall rest upon Lessor to sequester the trust estate or the rent, issues and profits arising therefrom, or the proceeds arising from any sale or other responsibility of any sort is assumed by, nor shall at any time be asserted or enforceable against, said Lessor, American National Bank and Trust Company of Chicago, a national banking association, individually or personally, but only as Trustee under the provisions of a Trust Agreement dated May 2, 1989 and known as Trust No. 108237-06, on account of this Amendment or on account of any representation, warranty, covenant, undertaking or agreement of Lessor in this Amendment contained, either express or implied, all such personal liability, if any, being expressly waived and released by Lessee and by all persons claiming by, through or under Lessee. IN WITNESS WHEREOF, this Amendment is executed as of the day and year aforesaid. LESSEE: LESSOR: - ------ ------ PLAYBOY ENTERPRISES, INC., AMERICAN NATIONAL BANK AND a Delaware corporation TRUST COMPANY OF CHICAGO, not personally, but solely as Trustee under as aforesaid By: /s/ Howard Shapiro By: /s/ Greg Kasprzyk -------------------------------- --------------------------- Title: Ex. VP Title: VP -------------------------- -------------------------- 10 EXHIBIT A --------- FLOOR PLAN OF SECOND ADDITIONAL PREMISES ---------------------------------------- [BLUE PRINT APPEARS HERE] A-1 EXHIBIT B --------- PLAN OF PORTIONS OF THE COMMON AREAS ------------------------------------ [BLUE PRINT APPEARS HERE] Page 1 of 2 EXHIBIT B --------- [BLUE PRINT APPEARS HERE] Page 2 of 2 EXHIBIT C WORKLETTER The terms used herein shall have the meanings ascribed to them in that certain Fifth Amendment to Lease dated March 19, 1998, by and between LaSalle National Bank, as Trustee under that certain Trust Agreement dated May 2, 1989 and known as Trust No. 108237-06 ("Lessor") and Playboy Enterprises, Inc. a Delaware corporation ("Lessee"), unless otherwise stated herein. I. Construction of the Premises. Lessor and Lessee agree that their respective rights and obligations in reference to the construction of the Second Amendment Premises shall be as follows: A. Lessee's Plans and Specifications. (1) Lessee, at Lessee's sole cost and expense, except as provided herein, shall cause a licensed architect satisfactory to Lessor to prepare complete, finished, detailed architectural, mechanical, structural, electrical and telephone plans and specifications including all dimensions and specifications for all work to be performed in the Second Additional Premises as tenant improvements ("Lessee's Plans"). (2) Lessee's Plans shall also include all information as shall be required by Lessor's engineers in connection with mechanical plans, which information shall include, but not be limited to, the following: (i) Any special floor loading conditions which may exceed the structural weight limits of any floor; (ii) Specifications of any heat emanating equipment to be installed by Lessee which may require special air conditioning; (iii) Electrical specifications of any equipment that requires additional electrical power or outlets; (iv) Complete specifications of any dataline wiring required, including cable routing, conduit size, cable type, and similar items; and (v) Complete plans and specifications for construction of the contemplated stairway between the 14th and 15th floors of the Premises. C-1 (3) Lessee's Plans are expressly subject to Lessor's prior written approval, which shall not be unreasonably withheld or delayed, and in any event Lessor shall provide its approval or disapproval within ten (10) business days after submission of proposed Lessee's Plans by Lessee. Upon such approval, Lessee shall cause Lessee's Plans, at Lessee's sole cost and expense, to be filed with the governmental agencies having jurisdiction thereof, in order to obtain all governmental permits and authorizations which may be required in connection with the work to be done. Lessee may not commence any of Lessee's Work until Lessee's Plans are approved by Lessor. (4) Without the prior written consent of Lessor, which consent shall not be unreasonably withheld or delayed, Lessee shall make no changes in Lessee's Plans after approval thereof by Lessor. II. Construction of Lessee's Work. A. Lessee shall designate in Lessee's Plans all work and materials necessary for construction of the Second Additional Premises, and Lessee shall construct and install or cause to be constructed or installed in the Second Additional Premises all of the work designated in Lessee's Plans ("Lessee's Work"). Prior to solicitation of any bids for the construction of Lessee's Work, Lessor shall approve, in writing, each of the contractors to be solicited by Lessee, which approval shall not be unreasonably withheld or delayed. B. Lessee shall contribute a maximum of $1,301,991.40 ("Lessor's Contribution") toward the Cost of Lessee's Work. Lessee is solely responsible for the Cost of Lessee's Work over $1,301,991.40. Lessee shall not be entitled to any payment or credit for any unused portion of Lessor's Contribution. Lessee agrees to cause a portion of the Lessee's Work which costs no less than $964,200.00 to be completed by no later than December 31, 1998 and to complete the balance of Lessee's Work by no later than July 31, 1999. C. For the purpose hereof, "Cost of Lessee's Work" shall mean costs of all labor and materials for construction of the Second Additional Premises in accordance with Lessee's Plans, general contractor's fees, architectural fees and costs, fees and costs relating to engineering, structural, lighting, communications, electrical and construction consultants, costs of the purchase and installation of permanent lines or cable for security purposes, computer operations, telephone service and other forms of communication, costs of built-in furniture, costs of separately metering electricity to the Second Additional Premises, costs for the purchase, delivery and installation of any other item which, when installed in the Second Additional Premises, shall be deemed a fixture or a permanent improvement to the Second Amendment Premises and a supervisory fee payable to Lessor in the amount of $25,000.00. C-2 D. Lessee's right to receive payment of Lessor's Contribution shall be contingent upon (a) Lessee not being in default or breach under the Lease, as amended, at the time Lessee so requests payment and (b) Lessee, at such time, having completed the work for which Lessor's Contribution is being so requested in accordance with the terms of this Workletter and having submitted to Lessor contractor's affidavits and full and final waivers of lien and receipted bills for labor and materials expended and used for such work. In the event that Lessee has satisfied all conditions and requirements as set forth herein and in the Lease, as amended, for the payment of Lessor's Contribution and Lessor fails to pay in full Lessor's Contribution to Lessee within ninety (90) days after Lessee's request therefor as aforesaid and provided that Lessee is not then in breach or default under the Lease, as amended, Lessee shall, upon the expiration of said ninety (90) day period, be entitled to offset the unpaid amount of Lessor's Contribution from the then next due installments of Base Rent thereafter payable by Lessee under the Lease, as amended, until the full amount of Lessor's Contribution has been paid or offset as provided herein. E. In reviewing Lessee's Plans, Lessor may take into consideration whether, in Lessor's reasonable judgement, Lessee's Work will be practicable and consistent with existing physical conditions in the Building and the Office Area and with the Building Plans and any other plans for the Building which have been filed with the appropriate municipality or other governmental authorities having jurisdiction thereof, or may impair Lessor's ability to perform any of Lessor's obligations under the Lease or any other lease of space in the Building. Lessee's Work shall not affect any portion of the Building other than the Second Additional Premises. F. Lessee's Work shall be performed in strict conformity with Lessee's Plans and shall be performed at Lessee's sole cost and expense, except for Lessor's Contribution. G. Prior to soliciting bids for construction of Lessee's Work, Lessee shall submit to Lessor for Lessor's approval, the names and addresses of all contractors to be solicited. Lessee's Work shall be done only by contractors or mechanics approved by Lessor. Lessee shall not permit Lessee's contractors and labor to interfere with Lessor or with any other tenant or its labor. Upon completion of Lessee's Work, Lessee shall furnish or shall cause to be furnished to Lessor through the construction escrow, contractor's affidavits, full and final waivers of lien, final architect's certificates and receipted bills covering all labor and materials expended and Lessee's Work shall comply with all insurance requirements, all laws, ordinances, rules and regulations of all governmental authorities, and all collective bargaining agreements applicable to the Building, and shall be done in a good and workmanlike manner with the use of high grades of materials. C-3 III. Insurance and Indemnity. A. Before commencing Lessee's Work, Lessee shall deliver to Lessor certificates of insurance or copies of insurance policies from all contractors performing labor or supplying materials for the construction of Lessee's Work, insuring Lessor, its agents, representatives, successors and assigns against any and all liability for bodily injury or property damage arising out of or connected in any way with Lessee's Work. B. Lessee hereby indemnifies and holds harmless Lessor, its agents, representatives, successors and assigns, from and against any and all losses, costs, claims and expenses of every kind and description arising out or relating to Lessee's Work, except as such may be required under insurance policies maintained pursuant to Paragraph III.A. above. C-4 EX-27 6 FINANCIAL DATA SCHEDULE
5 1,000 3-MOS DEC-31-1998 JAN-01-1998 MAR-31-1998 982 0 36,562 5,137 25,703 122,759 38,051 28,356 185,466 98,013 0 0 0 221 78,657 185,466 71,762 71,762 61,760 70,518 0 0 215 644 584 60 0 0 0 60 0.00 0.00
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