Dated the 12th day of October 2001 GTM Holdings, Inc. and Sun Television Cybernetworks Holdings Limited Production and Broadcast Purchase Agreement SCHEDULES Schedule 1 - Form of Certificate 12 Schedule 2 - Charge Out Rates For Production Equipment 14...
Dated the 12th day of October 2001
GTM Holdings, Inc.
and
Sun Television Cybernetworks Holdings Limited
Production and Broadcast Purchase Agreement
TABLE OF CONTENTS
| 1. Definitions and Interpretation | 1 |
| 2. Sun TV Deliverables | 2 |
| 3. Production Facilities and Equipment and Services | 2 |
| 4. Grant of Broadcast Airtime | 5 |
| 5. Payment for Sun TV Deliverables and Closing | 5 |
| 6. Royalties | 5 |
| 7. Closing | 6 |
| 8. Provisions relating to Conversion Shares | 6 |
| 9. Representations and Warranties | 7 |
| 10. Confidentiality | 8 |
| 11. Notices | 8 |
| 12. Successors and Assigns | 9 |
| 13. Amendment and Waiver | 9 |
| 14. Signatures; Counterparts | 9 |
| 15. Governing Law/Jurisdiction | 10 |
| 16. Severability | 10 |
| 17. Entire Agreement | 10 |
| 18. Expenses | 10 |
| 19. Publicity | 11 |
| 20. Further Assurances | 11 |
| SCHEDULES | |
| Schedule 1 - Form of Certificate | 12 |
| Schedule 2 - Charge Out Rates For Production Equipment | 14 |
| EXECUTION | 15 |
THIS AGREEMENT is made the day of October 2001
BETWEEN
1. GTM Holdings, Inc., a limited liability company incorporated in Nevada and having its principal offices at Suite 12/F., Xxx Xxxxx Building, Avenida Xxxxxxx Xxxxxxxxx, Macau Special Administrative Region, the People's Republic of China ("GTM"); and
2. Sun Television Cybernetworks Holdings Limited, a limited liability company incorporated in the Bermuda having its registered address at Xxxxx Xxxxx, 00 Xxxxx Xxxxxx, Xxxxxxxx XX00, Xxxxxxx and whose principal office is at Xxxx 0000, Xxx Xxxxxx, 00 Xxxxx'x Xxxx Xxxxxxx, Xxxx Xxxx ("Sun TV").
WHEREAS
A- Sun TV is a company whose securities are listed on the Stock Exchange of Hong Kong and is engaged in, inter alia, the provision of free to air satellite television channels to the Asian region, the leasing of airtime on such channels, production of television programs at its own production facilities and the rental of such production facilities.
B- GTM is a company engaged in the business of television broadcast home shopping and general content provider and wishes to use, or acquire the use of certain facilities, capabilities and resources from Sun TV on the terms and conditions as set out in this agreement.
IT IS HEREBY AGREED as follows:
1. DEFINITIONS AND INTERPRETATION
1.1 In this Agreement, the following terms shall have the following meanings unless the context requires otherwise:
| "Agreed Form" | means either in the form as set out in a Schedule hereto or in a form to be reasonably agreed between the parties before Closing; |
| "Agreement" | means this agreement as may be amended, modified or supplemented from time to time; |
| "Business Day" | means any day not including Saturday, being a day on which licensed banks in Hong Kong are open for business; |
| "Certificate" | means the certificate to be issued in respect of the Convertible Note in the Agreed Form; |
| "Charge-Out Rates" | means the agreed charge-out rates for the Production Equipment being the rates as set out in Schedule 2 discounted by 33 and 1/3%; |
| "Closing" | shall mean the closing of this Agreement in accordance with sub-clause 7.1; |
| "Consideration" | means the consideration to be paid by GTM to Sun TV as set out in and in accordance with clause 5; |
| "Convertible Note" | means a non-transferrable convertible loan note to be issued by GTM to Sun TV in Agreed Form with the benefit of and subject to the provisions of the conditions as set out therein containing the principal terms set out in Schedule 1; |
| "Conversion Shares" | means the Shares to be issued by GTM to Sun TV upon exercise by Sun TV of its conversion rights under the Convertible Note; |
| "Escrow Instructions" | means the instructions to the escrow agent referred to in sub-clause 8.3 in the Agreed Form; |
| "Macau TV" | means Travel TV (Macau) Co. Ltd, a 51% indirect subsidiary of Sun TV; |
| "Macau TV Channel" | means Macau Satellite TV Travel satellite television channel which is operated by Macau TV and broadcast in Macau and mainland China; |
| "Market Value" | means the average reported sale price on the 10 trading days prior to the relevant valuation date on the composite tape or NASDAQ exchange Shares (as the case may be) on which the Shares are traded. If no such sale of Shares was reported during such period, the market value shall be the average of the reported asked and bid prices for such period; |
| "Production Equipment" | means the production equipment located at the Production Facilities made available to GTM underclause 3, the particulars of which are set out in Schedule 2; |
| "Production Facilities" | means the production facilities of Sun TV located at Sun TV's premises in Hong Kong and Macau; |
| "Registration Rights Agreement" | means the registration rights agreement to be entered into pursuant to sub-clause 8.4 in the Agreed Form; |
| "Shares" | means the shares of common stock having a par value of US$0.01 each of GTM; |
| "Sun TV Channel" | means the Sun satellite television channel which is owned and operated by Sun TV and broadcast in Hong Kong and mainland China ; and |
| "Sun TV Deliverables" | means those items set out in clauses 3 and 4 that Sun TV shall deliver to GTM according to the terms and conditions as set out in this Agreement. |
1.2 References to statutory provisions shall be construed as references to those provisions as amended or re-enacted as their application is modified by other provisions (whether before or after the date hereof) from time to time and shall include any provisions of which they are re-enactments (whether with or without modification).
1.3 References herein to clauses and schedules are to clauses in and schedules to this Agreement unless the context requires otherwise, and the schedules to this Agreement shall be deemed to form part of this Agreement.
1.4 The headings are inserted for convenience only and shall not affect the construction of this Agreement.
1.5 Unless the context requires otherwise, words importing the singular include the plural and vice versa and words importing a gender include every gender.
2. SUN TV DELIVERABLES
Sun TV shall, subject to the terms and conditions set out in this Agreement, deliver or make available, or procure the delivery or availability of the items set out in clauses 3 and 4.
3. PRODUCTION FACILITIES AND EQUIPMENT AND SERVICES
3.1 Sun TV undertakes to GTM for a period of 3 years from Closing (or earlier as may be agreed) (subject to sub-clause 3.2 below) the following:
3.1.1 to provide non-exclusive access to and use of the Production Facilities;
3.1.2 to provide non-exclusive use of the Production Equipment;
3.1.3 to provide non-exclusive use of certain of Sun TV's employees and agents who are suitably qualified to operate the Production Facilities and the Production Equipment as reasonably requested by GTM; and
3.1.4 to meet with GTM's other requirements as agreed to by Sun TV in accordance with the provisions set out in this clause 3.
3.2 Production Equipment
3.2.1 Sun TV undertakes to make available to GTM the Production Equipment at the Production Facilities on a non-exclusive basis and at times reasonably agreed by Sun TV and GTM. Sun TV shall use commercially reasonable endeavors to accommodate the requests of GTM for use of the Production Facilities and Production Equipment, but shall not be liable to GTM for any bona fide unavailability of the same provided that GTM will be treated in equal priority with all other users thereof.
3.2.2 Under this Agreement GTM shall be entitled to use such of the Production Facilities and Production Equipment for such periods of time until the sum of US$1,000,000 has been utilized (the "Total Rental Sum") based on the Charge-Out Rates. After the Total Rental Sum has been utilized GTM shall pay for the use of the Production Equipment and the Production Facilities at the relevant Charge-Out Rates. GTM shall record on a daily basis which of the Production Equipment it has used and for how long and such records will be verified by an employee of Sun TV. If at the end of 3 years from Closing the Total Rental Sum has not been fully utilized, the same shall be forfeited absolutely provided that if GTM has been unable to fully utilize the Total Rental Sum due to unavailability of the Production Facilities then GTM may require that the unutilized amount of the Total Rental Sum is refunded to GTM in cash or the forfeiting of the relevant amount of Conversion Shares issued pursuant to this Agreement.
3.2.3 GTM undertakes that it shall not connect any of the Production Equipment with or to any other equipment not supplied by Sun TV. GTM undertakes that neither GTM nor any employee, servant or agent of GTM ("GTM Personnel") shall remove any of the Production Equipment from the Production Facilities, and undertakes that neither GTM nor GTM Personnel shall interfere with or carry out any maintenance on the Production Equipment.
3.2.4 Sun TV shall have the exclusive right to maintain the Production Equipment and shall have the right at any time to replace the Production Equipment with equipment of similar specifications.
3.2.5 Sun TV shall procure the availability to GTM at the expense and cost of Sun TV a suitably qualified engineer who shall be available to attend to any problems arising in connection with the Production Equipment. Sun TV shall repair and/or replace as Sun TV considers appropriate any defective Production Equipment as soon as practicable but shall not be liable to GTM for any malfunction or unavailability of any of the Production Equipment provided that GTM shall not be liable for the Charge-Out Rates for the period of such malfunction or unavailability.
3.2.6 In the event that any film or sound recording or audio or audiovisual material is lost or damaged as a result of any breach by Sun TV of its obligations, Sun TV's sole liability to GTM shall be the replacement of the film or tape on which such material was stored and Sun TV shall have no liability for the loss of any material contained on such film or tape or any consequential loss arising therefrom.
3.2.7 Sun TV shall not be liable to GTM in the event of loss of power to the Production Facilities.
3.2.8 The use of the Production Facilities and Production Equipment shall be subject also to standard terms and conditions in the Agreed Form.
3.2.9 Save normal wear and tear, GTM shall be responsible for maintaining the Production Equipment that it uses in good repair and shall indemnify Sun TV against any loss or damage caused to any Production Equipment used by GTM.
4. GRANT OF BROADCAST AIRTIME
4.1 Sun TV shall grant to GTM broadcast airtime on the Sun TV Channel for a period of 3 years from the date of commencement of broadcasting provided that such commencement shall begin no later than 30th November, 2001. Such broadcast airtime shall be on the following schedule at times to be decided in consultation with GTM at the discretion of Sun TV and notified to GTM in writing well in advance and to be on a regular schedule with consistent times from day-to-day that endeavour to reflect the optimum times for GTM's commercial purposes provided that late evening/early morning broadcast shall not finish after 2:30 a.m. hours and the grant of the broadcast airtime shall be subject to terms and conditions in the Agreed Form:
| Day of Week | Broadcast Airtime (per broadcast day) |
| Mon - Fri | 1 hour |
| Saturday | 1 1/2 hours |
| Sunday | 1 1/2 hours |
4.2 Sun TV shall procure that Macau TV shall grant to GTM 6 hours of broadcast airtime daily on Macau TV Channel at times to be determined at the sole discretion of Sun TV for a period of 3 years from the date of commencement of broadcasting provided that such commencement shall begin no later than 30thNovember, 2001 and subject to terms and conditions in the Agreed Form.
4.3 Upon expiry of the 3-year periods referred to in clauses 3 and 4 the parties shall consult with a view to agreeing to the provision of such services for a further period but shall not be bound to enter any agreement or agree any terms.
5. PAYMENT FOR SUN TV DELIVERABLES
The Consideration for the Sun TV Deliverables shall be US$1,000,000 and shall be satisfied by delivery of the Convertible Note in the principal amount of US$1,000,000 upon closing.
6. ROYALTIES
In addition to the payment payable in accordance with clause 5, in respect of all broadcast airtime utilised pursuant to clause 4, GTM shall pay to Sun TV a royalty of 10% of the volume of home shopping sales relating to such broadcasts less returns and postage. Such royalties shall be paid quarterly in arrears. GTM shall make available to Sun TV as Sun TV may reasonably request such financial or other information as may be required to audit such royalty payments.
7. CLOSING
7.1 Closing shall take place on or before 1st November, 2001 (the "Closing Date") at the offices of Xxxxxxx Xxxxx & Xxxxx whereupon:
GTM shall deliver:
the Convertible Note duly signed by GTM;
the Registration Rights Agreement duly signed by GTM; and
Sun TV shall deliver:
an agreement in Agreed Form with respect to the Macau TV airtime duly signed by Macau TV; and
the Registration Rights Agreement duly signed by Sun TV; and
(c) GTM and Sun TV and the escrow agent shall sign the Escrow Instructions.
7.2 Neither party shall be obliged to complete the Closing in accordance with this Agreement unless the other party completes the Closing contemporaneously and any partial completion of the Closing shall not be considered a waiver of any rights of either party under this Agreement or under law.
8. PROVISIONS RELATING TO CONVERSION SHARES
8.1 The Shares
The Conversion Shares will be restricted stock for the purposes of the U.S. Securities Act of 1933. GTM shall grant piggyback and shortform registration rights to Sun TV as described under sub-clause 8.4 below.
8.2 Transfer Restriction
Sun TV will not be permitted to directly or indirectly sell, assign, pledge, hypothecate or otherwise transfer all or any of its legal or beneficial interest in any of the unregistered Shares except in compliance with the U.S. Securities Act of 1933, as amended.
8.3 Escrow Arrangements
In addition to the conditions set out in sub-clause 8.2 above, the Conversion Shares shall be held by an escrow agent agreed by the parties in accordance with the Escrow Instructions and shall be released from escrow in 12 equal quarterly tranches with the first such tranche to be released on the date falling 3 calendar months after the date of Closing, and the last such tranche to be released 3 years after the date of Closing.
In the event that Sun TV or Macau TV is subject to liquidation or similar proceedings, or defaults on its obligations to provide and/or deliver any Sun TV Deliverables and such default is not remedied within 14 days after being notified by GTM then the Conversion Shares held in escrow at the time of such event shall be forfeited to GTM to the extent that any of the Sun TV Deliverables are not delivered.
8.4 Registration Rights
Upon execution of this Agreement, the parties shall enter into the Registration Rights Agreement for piggyback and short form registration which will apply to all Conversion Shares.
9. REPRESENTATIONS AND WARRANTIES
9.1 Representations and warranties by GTM
GTM represents and warrants to Sun TV that the information contained in thissub-clause 9.1 are true, complete and accurate in all material respects and that:
(a) all necessary authorities have been or will within 30 days of execution of this Agreement be obtained to enable the issue of the Convertible Note and the issue and allotment of the Conversion Shares by GTM (if applicable);
(b) GTM has power to enter into this Agreement and this Agreement has been duly authorised and executed by, and constitutes legally binding obligations of GTM;
(c) the issue of the Convertible Note and the Conversion Shares will comply with all statutory requirements;
(d) the issue of the Convertible Note or the allotment and issue of Conversion Shares pursuant to this Agreement and the Convertible Note will not cause any breach of any agreement or by which GTM and/or any of its subsidiaries is a party or by which it is or any of them is bound and will not infringe or exceed any limits on, power of, or restrictions on or the terms of any contract, obligation or commitment whatsoever of, GTM and/or any of its subsidiaries and/or their respective board of directors; and
(e) the Conversion Shares will be allotted and issued pursuant to the Convertible Note free from all claims, charges, liens, encumbrances and equities and will rank pari passu in all respects with the existing Shares.
9.2 Representations and warranties by Sun TV
Sun TV represents and warrants to GTM that the information contained in thissub-clause 9.2 are true, complete and accurate in all material respects and that:
(a) Sun TV has the power to enter into and perform this Agreement and this Agreement has been duly authorised and executed by, and constitute legally binding obligations of Sun TV;
(b) the airtime agreement to be entered into by Macau TV pursuant to clause 4 has and shall at the time of entry into such agreement have been duly authorised and executed by Macau TV and shall constitute legally binding obligations of Macau TV;
(c) entry and performance of this Agreement and of the airtime agreement with Macau TV will not cause any breach of any agreement to which Sun TV, Macau TV and/or any of their subsidiaries is a party or by which it is or any of them is bound and will not infringe or exceed any limits on, power of, or restrictions on or the terms of any contract, obligation or commitment whatsoever of, Sun TV, Macau TV and/or any of their subsidiaries and/or their respective board of directors; and
(d) the representations and warranties as set out in the Film Rights License Agreement are deemed to be incorporated into this Agreement.
10. CONFIDENTIALITY
Neither of the parties hereto shall divulge to any person (other than its officers, employees and professional advisors on a need to know basis) or use for any purpose any of the trade secrets or confidential information or any financial or trading information relating to the other party which it acquires as a result of entering into this agreement whether directly or indirectly. Each of the parties shall endeavour to prevent its employees from doing anything which, if done by the party, would be a breach of this clause. This restriction shall continue to apply after the expiration or termination of this Agreement without limit in point of time but shall cease to apply to secrets or information which come into the public domain through no fault of the party concerned. If there is any requirement of any government or regulatory authority for disclosure of information and/or making of any announcement, the relevant party shall notwithstanding the provisions of this clause be entitled to comply with such requirement but shall consult the other party with respect to the contents of the announcement made.
11. NOTICES
All notices, demands and other communications provided for or permitted hereunder shall be made in writing and shall be by registered or certified first-class mail, return receipt requested, telecopier (with receipt confirmed), courier service or personal delivery:
if to the GTM:
Suite 12/F., Xxx Xxxxx Building
Avenida Xxxxxxx Xxxxxxxxx
Macau Special Administrative Region
The People's Republic of China
Facsimile: (853) 711-999
Attention: Xx Xxxxxxx X. Xxxxxx
if to Sun TV:
Xxxx 0000, Xxx Xxxxxx
00 Xxxxx'x Xxxx Xxxxxxx
Xxxx Xxxx
Facsimile: (000) 0000-0000
Attention: Xx Xxxxx Xx
or to such other address or addresses as shall have been furnished in writing to the other parties hereto.
All such notices and communications shall be deemed to have been duly given; when delivered by hand, if personally delivered; when delivered by courier, if delivered by commercial overnight courier service; if mailed, five (5) Business Days after being deposited in the mail, postage prepaid; or if telecopied, on the same day unless received after 5 p.m. Hong Kong time or on a day other than a Business Day, in which event the notice or communication shall be deemed to have been duly given on the next Business Day.
12. SUCCESSORS AND ASSIGNS
This Agreement shall inure to the benefit of and be binding upon the successors and permitted assigns of the parties hereto provided that neither party shall be entitled to assign any of its risk or obligations hereunder without the written consent of the other party.
13. AMENDMENT AND WAIVER
No failure or delay on the part of any of the parties hereto in exercising any right, power or remedy hereunder shall operate as a waiver thereof, nor shall any single or partial exercise of any such right, power or remedy preclude any other or further exercise thereof or the exercise of any other right, power or remedy. The remedies provided for herein are cumulative and are not exclusive of any remedies that may be available to the parties hereto at law, in equity or otherwise. No amendment, supplement or modification of or to any provision of this Agreement or any of the other agreements referred to herein, or any waiver of any such provision or consent to any departure by any party from the terms of any such provision shall be effective unless agreed in writing.
14. SIGNATURES; COUNTERPARTS
Facsimile transmissions of any executed original document and/or retransmission of any executed facsimile transmission shall be deemed to be the same as the delivery of an executed original. At the request of any party hereto, the other parties hereto shall confirm facsimile transmissions by executing duplicate original documents and delivering the same to the requesting party or parties. This Agreement may be executed in any number of counterparts and by the parties hereto in separate counterparts, each of which when so executed shall be deemed to be an original and all of which taken together shall constitute one and the same agreement.
15. GOVERNING LAW/JURISDICTION
This Agreement and the rights and obligations of the parties hereunder shall be governed by, and construed and interpreted in accordance with, the laws of Hong Kong, Special Administrative Region, People's Republic of China, without giving effect to the choice of law provisions thereof, and each party to this Agreement hereby irrevocably agrees that any legal action or proceeding arising out of or relating to this Agreement, the Convertible Note, or any agreements or transactions contemplated hereby may be brought in the courts of Hong Kong, Special Administrative Region, People's Republic of China, and hereby expressly submits to the non-exclusive jurisdiction of such courts for the purposes thereof and expressly waives any claim of improper venue and any claim that such courts are an inconvenient forum. Each party hereby irrevocably consents to the service of process of any of the aforementioned courts in any such suit, action or proceeding by the mailing of copies thereof by registered or certified mail, postage prepaid, to its address set forth in clause 11, such service to become effective 15 days after such mailing.
16. SEVERABILITY
If any one or more of the provisions contained in this Agreement, or the application thereof in any circumstance, is held invalid, illegal or unenforceable in any respect for any reason, the validity, legality and enforceability of any such provision in every other respect and of the remaining provisions hereof shall not be in any way impaired, unless the provisions held invalid, illegal or unenforceable shall substantially impair the benefits of the remaining provisions of this Agreement. The parties hereto further agree to replace such invalid, illegal or unenforceable provision of this Agreement with a valid, legal and enforceable provision that will achieve, to the extent possible, the economic, business and other purposes of such invalid, illegal or unenforceable provision.
17. ENTIRE AGREEMENT
This Agreement, together with the exhibits and schedules hereto is intended by the parties as a final expression of their agreement and is intended to be a complete and exclusive statement of the agreement and understanding of the parties hereto in respect of the subject matter contained herein and therein. There are no restrictions, promises, warranties or undertakings, other than those set forth or referred to herein or therein. This Agreement, together with the exhibits and schedules hereto supersede all prior agreements and understandings between the parties with respect to such subject matter.
18. EXPENSES
Each party shall pay its own costs and disbursements of and incidental to this Agreement and the transactions contemplated hereunder.
19. PUBLICITY
Except as may be required by applicable law, none of the parties hereto shall issue a publicity release or announcement or otherwise make any public disclosure concerning this Agreement or the transactions contemplated hereby, without consulting the other party. If any announcement is required by law to be made by any party hereto, prior to making such announcement such party will deliver a draft of such announcement to the other party and shall give the other party an opportunity to comment thereon and the other party shall respond with its comments promptly and within the time provided for comments. Upon signing of this Agreement the parties shall hold a joint press conference to announce the entry into this Agreement.
20. FURTHER ASSURANCES
Each of the parties shall execute such documents and perform such further acts (including without limitation, obtaining any consents, exemptions, authorizations, or other actions by, or giving any notices to, or making any filings with, any governmental entity or authority or any other Person or entity) as may be reasonably required or desirable to carry out or to perform the provisions of this Agreement.
SCHEDULE 1
Form of Certificate
The Convertible Note (the "Note") shall be in Agreed Form including the following terms:
Principal Amount: US$1,000,000
Interest: N/A
Tranferability: N/A
Conversion: Within 10 Trading Days of receipt of a demand for repayment or a conversion notice from, GTM shall issue the Conversion Shares in the name of Sun TV or its nominee. Conversion shall be by one single conversion of the entire Note.
Conversion Shares: Upon conversion GTM shall issue and allot to Sun TV 50,000 Shares (being the 1,000,000 Shares agreed between the parties as adjusted to reflect the 20-to-1 Share consolidation of GTM (the "Reorganization") taking place on or about 12 September 2001) representing approximately 5.88% of the issued and outstanding share capital of GTM immediately after the Reorganization.
Sun TV acknowledges that certain Shares or interests in Shares have been issued or granted to agents and employees of GTM after the Reorganization and before the date of this agreement in consideration of services rendered to GTM and no adjustment will be made to the number of Conversion Shares issued under the Note except to the extent that the percentage that the Conversion Shares represent in the issued and outstanding share capital of GTM on the date of this agreement is reduced below 5.88% by an amount greater than 1.25% (ie., is less than 4.63%).
Agreed Price: US$20 per Conversion Share.
Shares: The Conversion Shares and Adjustment Shares will be restricted stock for the purposes of the U.S. Securities Act of 1933.
Registration Rights: The parties shall enter into the Registration Rights Agreement for piggyback and short form registration which will apply to all Conversion Shares and Adjustment Shares.
Transfer Restriction: Sun TV will not be permitted to directly or indirectly sell, assign, pledge, hypothecate or otherwise transfer all or any of its legal or beneficial interest in any of the unregistered Shares until the expiry of such time as required to be in compliance with the U.S. Securities Act of 1933, as amended.
Trading Day: Any day on which the exchange or over-the-counter market on which GTM is quoted is open for trading of securities.
Compliance: If the Note does not comply with any applicable corporate or securities laws then the parties will act in good faith and as soon as possible to agree upon an alternative arrangement such that the terms of the Note are given full commercial effect and that in any such arrangement the benefit to Sun TV shall be not less than as set out in the Note.
Issue of Adjustment Shares:
(a) If any of the Conversion Shares have a Market Value upon completion of any sale by Sun TV to a bona fides third party of less than the Agreed Price per Conversion Share (with the appropriate adjustments to be made if there has been any sub-division, consolidation or reclassification of the Shares) then GTM shall issue such number of additional Shares (the "Additional Shares") equal to Z based on the following formula:
(A - B) / Y = Z
| A | = | the total number of Conversion Shares sold multiplied by the Agreed Price |
| B | = | the total number of Conversion Shares sold multiplied by the Market Value on the day of completion of the sale |
| Y | = | Market Value per Share on the day completion of the sale |
| Z | = | Number of Additional Shares issued |
(b) If A - B is less than 0 then Z shall be deemed to be 0.
(c) No fractional Additional Shares shall be issued and in the event that Z includes a fraction then it shall be rounded to closest whole number.
(d) If at the time when any Additional Shares fall to be issued the aggregate of all Additional Shares issued and all Conversion Shares sold multiplied in each case by the Market Value at the time of the relevant sale of Conversion Shares plusthe aggregate current Market Value of all remaining Conversion Shares is equal or greater than US$1 million then any Additional Shares issuable shall be held in escrow and shall only be released to Sun TV if and to the extent that the aggregate sale price of all Conversion Shares and Additional Shares sold is less than US$1 million and to the extent not so released shall be cancelled.
(e) As of any date falling not less than 5 years after the date on which Closing occurs GTM may by notice in writing to Sun TV treat all Conversion Shares as sold and issue the appropriate Additional Shares and, upon issue of any Additional Shares required to be issued in accordance with the terms of the Note, its obligations under the Note shall cease.
SCHEDULE 2
Charge Out Rates for Production Equipment
EXECUTION
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the date first above written.
| SIGNED by | ) | |
| duly authorized for and on behalf of | ) | |
| GTM Holdings, Inc. | ) | |
| in the presence of: | ) | |
| ) | ||
| ) | ||
| ) | ||
| Signature of Witness | ) | By executing this Agreement the signatory |
| ) | warrants that the signatory is duly authorized to | |
| ) | execute this Agreement on behalf of | |
| ) | GTM Holdings, Inc. | |
| Name of Witness (Block Letters) | ) |
| SIGNED by | ) | |
| duly authorized for and on behalf of | ) | |
| Sun Television Cybernetworks | ) | |
| Holdings Limited | ) | |
| in the presence of: | ) | |
| ) | ||
| ) | ||
| ) | ||
| Signature of Witness | ) | By executing this Agreement the signatory |
| ) | warrants that the signatory is duly authorized to | |
| ) | execute this Agreement on behalf of | |
| ) | Sun Television Cybernetworks | |
| Name of Witness (Block Letters) | ) | Holdings Limited |
