Exhibit 10.18
ASSET ACQUISITION AGREEMENT
BY AND AMONG
TVN ENTERTAINMENT CORPORATION,
GRTV NETWORK, INC.,
XXXXX-XXXXXX CORPORATION
AND
XXXXX-XXXXXX TELEVISION NETWORK, INC.
JULY 30, 1999
CLOSING EFFECTIVE AS OF JULY 1, 1999
TABLE OF CONTENTS
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ARTICLE I ACQUISITION OF GRTV ASSETS AND ASSUMPTION OF GRTV LIABILITIES................ 2
1.1 Purchase of Assets........................................................... 2
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1.2 Consideration................................................................ 3
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1.3 Closing...................................................................... 3
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1.4 No Further Ownership Rights in GRTV Assets................................... 4
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1.5 Treatment of Certain Liabilities............................................. 4
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1.6 Allocation of Aggregate Consideration........................................ 5
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1.7 Excluded Assets.............................................................. 6
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ARTICLE II REPRESENTATIONS AND WARRANTIES.............................................. 6
2.1 Representations and Warranties of Xxxxx-Xxxxxx and GRTV with respect to GRTV. 6
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2.2 Representations and Warranties of Xxxxx-Xxxxxx............................... 20
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2.3 Investment Representations of Xxxxx-Xxxxxx and GRTV.......................... 22
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2.4 Representations and Warranties of TVN and Newco regarding Newco.............. 23
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2.5 Representations and Warranties of TVN........................................ 25
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ARTICLE III POST-CLOSING COVENANTS..................................................... 28
3.1 Expenses..................................................................... 28
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3.2 Public Announcements......................................................... 28
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3.3 [Intentionally Deleted]...................................................... 29
3.4 Transfer Taxes............................................................... 29
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3.5 GRTV Employees............................................................... 29
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3.6 GRTV Designations............................................................ 29
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3.7 Access to Books, Records and Employees....................................... 30
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3.8 Financial Information and Reports............................................ 30
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3.9 Benefit Plans................................................................ 31
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ARTICLE IV CONDITIONS PRECEDENT........................................................ 31
4.1 Conditions to Each Party's Obligation at Closing............................. 31
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4.2 Conditions of Obligations of TVN and Newco................................... 32
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4.3 Conditions of Obligation of Xxxxx-Xxxxxx and GRTV............................ 33
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ARTICLE V INDEMNIFICATION.............................................................. 33
5.1 Indemnification.............................................................. 33
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5.2 Limitations and Expiration................................................... 34
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5.3 Indemnity Offset Against Promissory Note..................................... 36
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5.4 Representative of Xxxxx-Xxxxxx; Claims By the TVN Indemnified Persons........ 36
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5.5 Representative of TVN and Newco; Claims By the Xxxxx-Xxxxxx Indemnified
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TABLE OF CONTENTS
(continued)
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Persons...................................................................... 37
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5.6 Third Party Claims........................................................... 39
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5.7 Survival of Representations, Warranties and Covenants........................ 40
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ARTICLE VI GENERAL PROVISIONS.......................................................... 40
6.1 Extension; Waiver............................................................ 40
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6.2 Dispute Resolution........................................................... 40
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6.3 Notices...................................................................... 43
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6.4 Interpretation............................................................... 44
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6.5 No Transfer.................................................................. 44
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6.6 Severability................................................................. 44
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6.7 Other Remedies............................................................... 44
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6.8 Further Assurances........................................................... 44
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6.9 Absence of Third Party Beneficiary Rights.................................... 45
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6.10 Mutual Drafting.............................................................. 45
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6.11 Governing Law................................................................ 45
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6.12 Amendment.................................................................... 45
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6.13 Scope of Representations and Warranties...................................... 45
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6.14 Schedules; Materiality....................................................... 45
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6.15 Entire Agreement............................................................. 46
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6.16 Definitions.................................................................. 46
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6.17 Counterparts................................................................. 50
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SCHEDULES AND EXHIBITS
Exhibit A Form of Transition Services Agreement
Exhibit B Form of Promissory Note
Exhibit C Form of Noncompetition Agreement
Exhibit D Form of Security Agreement
Exhibit E-1 Form of Xxxxxx Employment Agreement
Exhibit E-2 Form of Xxxxx Employment Agreement
Exhibit F-1 Xxxx of Sale and Assumption Agreement
Exhibit F-2 Form of Copyright Assignment
Exhibit G Form of TVN Guaranty
Article I Schedules
Schedule 1 GRTV Assets
Schedule 1.5 GRTV Liabilities
Schedule 1.8 Excluded Assets
Disclosure Schedule
Schedule 2.1(b) Subsidiaries
Schedule 2.1(c) GRTV Third-Party Consents, Waivers, and Approvals
Schedule 2.1(f) Material Adverse Changes and Other Events
Schedule 2.1(g) Additional Liabilities
Schedule 2.1(i) Major Contracts
Schedule 2.1(m) Litigation
Schedule 2.1(n) GRTV and Third-Party Intellectual Property
Schedule 2.1(o) Real Property, Leaseholds and Tangible Property
Schedule 2.1(p) Environmental Permits
Schedule 2.1(q) Government Authorizations and Permits
Schedule 2.1(r) Employee Agreements and Plans
Schedule 2.1(s) Transactions with Affiliates
Schedule 2.1(t) Interests of Officers
Schedule 2.1(u) GRTV Customers
Schedule 2.1(w) GRTV Employees
Schedule 2.1(z) Sufficiency of GRTV Assets
Representations and Warranties of Xxxxx-Xxxxxx
Schedule 2.2(b) Xxxxx-Xxxxxx Third-Party Consents, Approvals and
Authorizations
Schedule 2.2(c) Conflicts of Interest of Stockholders
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ASSET ACQUISITION AGREEMENT
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THIS ASSET ACQUISITION AGREEMENT (the "Agreement") is executed on July 30,
1999 (the "Execution Date") and shall be effective as of July 1, 1999 (the
"Effective Closing Date"), by and among TVN Entertainment Corporation, a
Delaware corporation ("TVN"), GRTV Network, Inc., a Delaware corporation
("Newco"), Xxxxx-Xxxxxx Corporation, a Delaware corporation ("Xxxxx-Xxxxxx"),
and Xxxxx-Xxxxxx Television Network, Inc., a Delaware corporation ("GRTV").
RECITALS:
A. Each of Xxxxxxx X. Xxxxxx ("Xxxxxx"), T&T Productions, Inc., a
California corporation controlled by Xxxxxx (collectively with Xxxxxx, the
"Xxxxxx Parties"), Xxxxx-Xxxxxx and GRTV has entered into that certain Sale,
Termination and Release Agreement of even date herewith (the "Xxxxxx Termination
Agreement"), pursuant to which, among other things, (i) Xxxxx-Xxxxxx purchased
from the Xxxxxx Parties 775 shares of the issued and outstanding Common Stock of
GRTV, which shares represent all of the shares of Common Stock of GRTV held by
the Xxxxxx Parties, (ii) the parties thereto terminated that certain Omnibus
Stock Plan Grant Agreement dated as of January 1, 1998 by and between Xxxxxx and
GRTV and in connection therewith, all options granted thereunder or required to
be granted in the future to Xxxxxx, and (iii) the parties thereto terminated
that certain Stockholders Agreement dated as of January 1, 1998 by and between
Xxxxx-Xxxxxx, GRTV and the Xxxxxx Parties. In addition, Xxxxxx, Xxxxx-Xxxxxx,
GRTV and Newco have agreed to amend that certain Employment Agreement dated as
of January 1, 1998, by and among Xxxxx-Xxxxxx, GRTV and Xxxxxx to delete Xxxxx-
Xxxxxx and GRTV as parties to such agreement and to add Newco as a party to such
agreement, among other things.
B. As a result of the consummation of the transactions set forth in the
Xxxxxx Termination Agreement, Xxxxx-Xxxxxx owns 11,916 shares of Common Stock
of GRTV, which shares are all of the issued and outstanding shares of capital
stock of GRTV.
C. Each of Xxxxx-Xxxxx ("Xxxxx") and GRTV have entered into that certain
Termination and Release Agreement (the "Xxxxx Termination Agreement") to
terminate (among other things) that certain Amended and Restated Employment
Agreement dated as of April 15, 1999 and effective as of January 1, 1999 between
Xxxxx and GRTV.
D. GRTV is engaged in the business of acquiring media time in quantities
from cable service providers and television broadcasters and reselling such
media time in packages to direct response infomercial and product sales
fulfillment companies (the "GRTV Business").
X. Xxxxx-Xxxxxx desires to sell and TVN desires to acquire the assets
used in the GRTV Business listed on Schedule 1 hereof (the "GRTV Assets"),
subject to the GRTV Liabilities, on the terms and subject to the conditions set
forth in this Agreement.
NOW, THEREFORE, in consideration of the covenants, promises and
representations set forth herein, the parties agree as follows:
ARTICLE I
ACQUISITION OF GRTV ASSETS AND ASSUMPTION OF GRTV LIABILITIES
1.1 Purchase of Assets. On the terms and subject to the conditions of this
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Agreement, on the Execution Date and for the consideration set forth in Section
1.2:
(a) Newco will purchase the GRTV Assets from GRTV, and GRTV shall
sell, transfer, assign and deliver the GRTV Assets, and Newco will assume the
GRTV Liabilities, pursuant to Section 1.5 hereof;
(b) Xxxxx-Xxxxxx and Newco shall enter into a Transition Services
Agreement in the form attached hereto as Exhibit A (the "Transition Services
Agreement");
(c) TVN and Newco shall execute and deliver to GRTV the Promissory
Note in the form attached hereto as Exhibit B (the "Promissory Note");
(d) TVN, Newco, Xxxxx-Xxxxxx and GRTV shall enter into the
Noncompetition Agreement in the form attached hereto as Exhibit C (the
"Noncompetition Agreement");
(e) TVN, Newco and GRTV shall enter into the Security Agreement in
the form attached hereto as Exhibit D (the "Security Agreement");
(f) TVN shall enter into the Guaranty in the form attached hereto as
Exhibit G (the "Guaranty");
The Transition Services Agreement, Guaranty and Noncompetition Agreement are
referred to herein collectively as the "Supplemental Agreements" and
individually as a "Supplemental Agreement." The Promissory Note and the Security
Agreement are referred to herein collectively as the "Loan Documents" and
individually as a "Loan Document." In addition, Xxxxxx and Newco shall enter
into the Amended and Restated Employment Agreement in the form attached hereto
as Exhibit E-1 (the "Xxxxxx Employment Agreement") and Xxxxx and Newco shall
enter into the Employment Agreement in the form attached hereto as Exhibit E-2
(the "Xxxxx Employment Agreement" and collectively with the Xxxxxx Employment
Agreement, the "Employment Agreements").
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1.2 Consideration.
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(a) TVN and Newco agree to pay to GRTV in consideration for the
purchase of the GRTV Assets an aggregate of cash in the amount of U.S.
$13,302,000, and to assume and timely discharge and perform all of the GRTV
Liabilities (the "Aggregate Consideration") pursuant to the terms and subject to
the conditions set forth in this Agreement and the Exhibits hereto. The parties
agree that the Aggregate Consideration and the other obligations on TVN's and
Newco's part to be performed under the terms of this Agreement, the Supplemental
Agreements and the Loan Documents constitute full and fair equivalent
consideration for the GRTV Assets exchanged therefor and the covenants,
agreements and performances of Xxxxx-Xxxxxx and GRTV under this Agreement and
the Supplemental Agreements.
(b) On the Closing Date, TVN and Newco shall pay cash in the amount
of $302,000 to GRTV (or, alternatively, such payment may be made by wire
transfer of immediately available funds to an account designated by GRTV) and
deliver to GRTV the Promissory Note in the aggregate principal amount of
$13,000,000.
1.3 Closing. The closing of the purchase and sale of the GRTV Assets and
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the entering into of the Supplemental Agreements and the Loan Documents
(collectively, the "Closing") is taking place contemporaneously with the
execution and delivery of this Agreement at the offices of TVN at 0000 Xxxx
Xxxxxxx Xxxxxx, 0/xx/ Xxxxx, Xxxxxxx, Xxxxxxxxxx 00000 and shall be effective as
of the Effective Closing Date, except as otherwise provided in the
Noncompetition Agreement.
(a) At the Closing, Xxxxx-Xxxxxx and GRTV shall deliver to TVN and
Newco copies of the Xxxxxx Termination Agreement executed by Xxxxx-Xxxxxx, GRTV
and each of the Xxxxxx Parties.
(b) [Intentionally Deleted].
(c) At the Closing, Xxxxx-Xxxxxx and GRTV shall deliver to TVN and
Newco all bills of sale and other documents of assignment as reasonably required
by TVN and Newco with respect to the transfer of GRTV's interest in all of the
GRTV Assets, duly endorsed for transfer to Newco including, but not limited to:
(i) the xxxx of sale, assignment and assumption agreement
attached hereto as Exhibit F-1 (the "Xxxx of Sale and Assumption Agreement");
(ii) the copyright assignment attached hereto as Exhibit F-2
(the "Copyright Assignment"); and
(iii) an assignment of GRTV's membership interests in Coast to
Coast Media LLC ("Coast to Coast").
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(d) At the Closing, TVN and Newco shall deliver to GRTV the amount of
$302,000 and the Xxxx of Sale and Assumption Agreement in the manner set forth
at Section 1.2(b) hereof.
(e) At the Closing, TVN and Newco shall deliver to GRTV the
Promissory Note and Security Agreement each duly executed by Newco and TVN.
(f) At the Closing, Xxxxx-Xxxxxx, GRTV, TVN and Newco shall deliver
to each other executed copies of the Transition Services Agreement and the
Non-Competition Agreement.
(g) At the Closing, TVN shall deliver to GRTV the Guaranty duly
executed by TVN.
1.4 No Further Ownership Rights in GRTV Assets. The amounts paid in
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respect of the GRTV Assets in accordance with the terms of this Agreement shall
be deemed to have been delivered in full satisfaction of all rights pertaining
thereto, and following the Execution Date, none of GRTV, Xxxxx-Xxxxxx or any
other stockholder of GRTV shall have any further rights to, or ownership in, the
GRTV Assets, except as set forth in the Loan Documents.
1.5 Treatment of Certain Liabilities.
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(a) GRTV Liabilities.
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(i) At and after the Effective Closing Date, GRTV shall retain
those liabilities of GRTV (collectively, the "Excluded Liabilities") that are:
(1) a trade payable, account payable or other liability
owed to any member of the GRC Group (the "GRC Intercompany Liability") or any
indebtedness to fund working capital of other activities of GRTV from
Xxxxx-Xxxxxx or any member of the GRC Group (the "GRC Lines of Credit");
(2) Taxes of Xxxxx-Xxxxxx, GRTV or any member of the GRC
Group for any taxable period and Taxes relating to the GRTV Assets and
attributable to taxable periods on or before the Effective Closing Date, which
are due and payable by Xxxxx-Xxxxxx or GRTV, except as set forth in Section 3.4;
(3) obligations with respect to optionees or any
stockholders of GRTV;
(4) obligations with respect to any Incentive Plans or
Rights Plans, except for bonuses and accrued vacation payable to the GRTV
Employees listed on Schedule 1.5 in the amounts set forth thereon shall be
included in the GRTV Liabilities and cash in amounts sufficient to offset such
amounts payable has been included in the GRTV Assets;
(5) obligations with respect to the Xxxxxx Termination
Agreement, any accrued indebtedness due from GRTV or Xxxxx-Xxxxxx to the Xxxxxx
Parties or
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any bonuses due from GRTV or Xxxxx-Xxxxxx to the Xxxxxx Parties based on
revenues recognized prior to the Effective Closing Date;
(6) obligations of GRTV and Xxxxx-Xxxxxx with respect to
any litigation, award, settlement or other agreement with Xxxx Xxxxx, the
defense, compromise and settlement of which shall be controlled by Xxxxx-Xxxxxx;
(7) all obligations of GRTV and Xxxxx-Xxxxxx to Wex
including without limitation, pursuant to the Wex Termination Agreement and the
Settlement Agreement and General Release Agreement dated October 7, 1998 between
GRTV and Wex;
(8) all obligations of GRTV and Xxxxx-Xxxxxx to Xxxxxx
Xxxxxx and Xxxxx including without limitation, pursuant to certain Amended and
Restated Employment Agreement dated as of April 15, 1999 and effective as
of January 1, 1999 between Xxxxx and GRTV and the Amended and Restated
Employment Agreement between GRTV and Xxxxxx Xxxxxx;
(9) all liabilities relating to any other litigation,
disputes or claims related to the conduct of the GRTV Business for actions
occurring on or before the Execution Date; and
(10) all liabilities of GRTV other than the GRTV
Liabilities.
(ii) Except for the Excluded Liabilities, Newco shall assume,
timely discharge and perform (as part of the Aggregate Consideration) (A) all of
the liabilities of GRTV set forth on the GRTV unaudited balance sheet as of June
30, 1999, (B) all of the liabilities of GRTV arising in the ordinary course
of the GRTV Business between June 30, 1999 and the Execution Date and (C) all of
the liabilities of GRTV set forth on Schedule 1.5 hereof (collectively the
"GRTV Liabilities").
(b) Liabilities of Xxxxx-Xxxxxx. At and after the Effective Closing
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Date, Newco and TVN will not assume or perform any liabilities or obligations of
Xxxxx-Xxxxxx (except to the extent such liabilities and obligations are included
in the GRTV Liabilities). Xxxxx-Xxxxxx shall remain solely responsible for
satisfying, discharging or performing all other liabilities, debts, contracts
and obligations of Xxxxx-Xxxxxx on a timely basis in accordance with their
respective terms.
1.6 Allocation of Aggregate Consideration. The parties hereto agree to
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Execution Date (i) use their good faith efforts to agree upon an allocation of
the Aggregate Consideration among the GRTV Assets within 30 days after the
Execution Date (provided, however, that the parties hereby agree that in no
event shall the amount be so allocated to depreciable personal property exceed
the adjusted tax basis of such property as of the Effective Closing Date); (ii)
to report the transactions contemplated hereby in accordance with the allocation
agreed upon by the parties in computing their taxable income and otherwise in
preparing and filing their tax returns for federal, state and local income tax
purposes; and (iii) that, in the event any audit, proceeding, suit, action or
investigation is brought against the other party before the Internal Revenue
Service or any state, local or foreign
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counterpart, the United States Tax Court or any Federal or state court of
competent jurisdiction, each will at all times use its commercially reasonable
efforts to maintain and defend the reporting positions agreed on in this
Agreement, and use its commercially reasonable efforts to obtain a settlement or
resolution consistent with such position in any such proceeding.
1.7 Excluded Assets. The parties hereto agree and acknowledge that the
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GRTV Assets include only the assets listed on Schedule 1 hereto and do not
include any other property or assets of Xxxxx-Xxxxxx and/or any other member of
the GRC Group, including, without limitation, (i) any assets of Xxxxx-Xxxxxx
other than those used in the GRTV Business, (ii) any assets of GRTV which are or
have been used by GRTV only in its conduct of its business other than the GRTV
Business, (iii) the systems, hardware and software, tools and people associated
with corporate accounting, information processing, facilities, purchasing,
Xxxxx-Xxxxxx'x Intellectual Property, shipping, customer support, telephone
support, human resources, legal, business services functions and other similar
functions and (iv) any of the rights, property and assets set forth on Schedule
1.8 hereof (collectively, the "Excluded Assets").
ARTICLE II
REPRESENTATIONS AND WARRANTIES
2.1 Representations and Warranties of Xxxxx-Xxxxxx and GRTV with respect
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to GRTV. Except as disclosed in the Schedules attached hereto and hereby made a
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part hereof, referring specifically to the representations and warranties in
this Agreement which identify the section and subsection to which such
disclosure relates and which are delivered by Xxxxx-Xxxxxx and GRTV to TVN and
Newco prior to the execution of this Agreement (collectively, the "Disclosure
Schedule"), Xxxxx-Xxxxxx and GRTV represent and warrant to TVN and Newco, as of
the Execution Date, as set forth below. As used in this Agreement, (i)
"Subsidiary" means a corporation or other entity 25% or more of whose voting
securities are owned or are otherwise controlled directly or indirectly by a
parent corporation or other intermediary entity in an amount sufficient to elect
at least a majority of the board of directors or other managers of such
corporation or other entity and (ii) the term "Material Adverse Effect" means
any change, event or effect that is materially adverse to the business, assets
(including intangible assets), liabilities, financial condition or results of
operations of the subject company or assets.
(a) Organization, Standing and Power.
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(i) GRTV is a corporation duly incorporated and validly existing
under the laws of the State of Delaware and is in good standing under the laws
of the States of Delaware and California, and has all requisite power and
authority to own, operate and lease its properties and to carry on the GRTV
Business as now being conducted.
(b) Capital Structure and Subsidiaries. Except as set forth on the
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Disclosure Schedule, as of the Execution Date, (i) Xxxxx-Xxxxxx is the sole
stockholder of GRTV and (ii) GRTV will have no Subsidiaries nor any direct or
indirect equity interest in or loans to any partnership, corporation, joint
venture, business association or other entity.
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(c) Authority.
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(i) GRTV has all requisite corporate power and authority to
enter into this Agreement, the Supplemental Agreements and the Loan Documents,
in each case to which it is a party, to perform its obligations hereunder and
thereunder, and to consummate the transactions contemplated hereby and thereby.
The execution and delivery of this Agreement, the Supplemental Agreements, and
the Loan Documents, in each case to which it is a party, the performance by GRTV
of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of GRTV, including the
unanimous approval by the Board of Directors of GRTV and the consent of
Xxxxx-Xxxxxx as its sole stockholder. This Agreement, the Supplemental
Agreements and the Loan Documents, in each case to which it is a party, have
been duly executed and delivered by GRTV and constitute legal, valid and binding
obligations of GRTV enforceable against GRTV in accordance with the terms herein
and therein, except as enforcement may be limited by bankruptcy, insolvency, or
other similar laws affecting the enforcement of creditors' rights generally and
except that the availability of equitable remedies is subject to the discretion
of the court before which any proceeding therefor may be brought.
(ii) Except as set forth in the Disclosure Schedule, the
execution and delivery of this Agreement, the Supplemental Agreements and the
Loan Documents, in each case to which GRTV is a party, do not, and the
consummation of the transactions contemplated hereby and thereby will not
conflict with or result in any violation of any material statute, law, rule,
regulation, judgment, order, decree or ordinance applicable to GRTV or its
properties or assets, or conflict with or result in any breach or default (with
or without notice or lapse of time, or both) under, or give rise to a right of
termination, cancellation or acceleration of any obligation or to loss of a
material benefit under, or result in the creation of a Lien on any of the GRTV
Assets pursuant to (A) any provision of the Certificate of Incorporation or
Bylaws of GRTV or (B) any material agreement, contract, note, mortgage,
indenture, lease, instrument, permit, concession, franchise or license to which
GRTV is a party or by which GRTV or any of its properties or assets may be bound
or affected, except for any conflict, violation, breach, default, right, Lien or
encumbrance which would not have a Material Adverse Effect on Newco's interest
in the GRTV Assets or TVN's ability to operate the GRTV Business as currently
conducted by GRTV. Schedule 2.1(c) lists all consents, waivers and approvals
under any of GRTV's agreements, contracts, licenses or leases required to be
obtained by GRTV in connection with the consummation of the transactions
contemplated hereby, by the Supplemental Agreements and the Loan Documents (the
"Third-Party Consents").
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any court, administrative agency,
commission, regulatory authority or other governmental authority or
instrumentality or the United States government (a "Governmental Entity"), is
required by or with respect to GRTV in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for (A) such consents, approvals, orders, authorizations,
registrations, declarations and filings as may be required under the laws of any
foreign country, which if not obtained or made would not have a Material Adverse
Effect on the GRTV Assets or GRTV Liabilities or TVN's ability to operate the
GRTV
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Business as currently conducted by GRTV and (B) such other consents,
authorizations, filings, approvals and registrations which if not obtained or
made would not have a Material Adverse Effect on the GRTV Assets or GRTV
Liabilities.
(d) Financial Statements. Xxxxx-Xxxxxx has furnished TVN and Newco
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with audited financial statements of GRTV for the fiscal year ended January 3,
1999 (the "Audited Financial Statements") and GRTV's unaudited balance sheet as
of June 30, 1999 (the "Interim Balance Sheet") and GRTV's unaudited statement of
operations for the period ended June 30, 1999 (the "Interim Income Statement";
the foregoing financial statements are referred to collectively as the "GRTV
Financial Statements"). The GRTV Financial Statements have been prepared in
accordance with GAAP consistently applied (except that the Interim Balance Sheet
and Interim Income Statement do not contain notes otherwise required by GAAP and
are subject to normal year-end adjustments) and fairly present, in all material
respects, the financial position of GRTV as at the dates thereof and the results
of its operations and changes in financial position for the periods then ended.
There has been no change in GRTV's accounting policies since January 3, 1999.
(e) Receivables. The accounts receivable that are shown on the
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Interim Balance Sheet arose in the ordinary course of business, and the
allowance for doubtful accounts has been provided in accordance with GAAP and
consistent with the past practice of GRTV.
(f) No Material Adverse Change. Except as set forth on the Disclosure
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Schedule and as contemplated by this Agreement, the Supplemental Agreements and
the Loan Documents, since January 3, 1999, GRTV has conducted its businesses in
the ordinary course and there has not occurred:
(i) Any change in the condition of the GRTV Assets
constituting a Material Adverse Effect on such GRTV Assets (ordinary wear and
tear excepted), either individually or in the aggregate;
(ii) Any damage, destruction or loss, whether covered by
insurance or not, that have had a Material Adverse Effect on the GRTV Assets,
individually or in the aggregate;
(iii) Any increase in or modification of the salary or wages
payable or to become payable by GRTV to any of its officers who are employees or
other employees, except in the ordinary course of business consistent with past
practice;
(iv) Any acquisition or sale of a material amount of property
or assets of GRTV;
(v) Any incurrence, assumption or guarantee by GRTV of any
debt for money borrowed from an affiliate, a bank or a lending institution
("Borrowed Money") other than borrowings reflected in the GRC Intercompany
Liabilities and the GRC Lines of Credit;
(vi) Any creation or assumption by GRTV of any Lien
on any of the GRTV Assets, other than in the ordinary course of business;
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(vii) Any making of any loan, advance or capital contribution
to or investment in any person other than (A) loans or advances for travel or
other business expenses made in the ordinary course of business of GRTV and (B)
other loans and advances in an aggregate amount which does not exceed $10,000
outstanding at any time;
(viii) Any entry into, amendment of, relinquishment, termination
or non-renewal by GRTV of any contract, lease transaction, commitment or other
right or obligation other than in the ordinary course of business;
(ix) Any transfer or grant of a right under the GRTV
Intellectual Property (as defined in Section 2.1(n) hereof) included in the GRTV
Assets by GRTV, other than those transferred or granted in the ordinary course
of business consistent with past practice;
(x) Any labor dispute, other than routine individual
grievances, or any activity or proceeding by a labor union or representative
thereof to organize any employees of GRTV; or
(xi) Any agreement or arrangement made by GRTV to take any
action which, if taken prior to the date hereof, would have made any
representation or warranty set forth in this Section 2.1(f) untrue or incorrect
as of the date when made.
(g) Absence of Undisclosed Liabilities. Except as set forth in the
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Disclosure Schedule, GRTV has no liabilities or obligations (whether absolute,
accrued or contingent, and whether or not determined or determinable) of a
character which, under GAAP, are required to be accrued, shown, disclosed or
indicated in a balance sheet of GRTV that are not reflected on the January 3,
1999 Balance Sheet, the Interim Balance Sheet, as of the respective dates
thereof or Schedule 1.5 hereof, except for liabilities and obligations (A)
arising in the ordinary course of the GRTV Business between June 30, 1999 and
the Execution Date or (B) which would not have a Material Adverse Effect on the
GRTV Assets or TVN's ability to operate the GRTV Business as currently conducted
by GRTV.
(h) Taxes.
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(i) For purposes of this Agreement, the following terms have
the following meanings: "Tax" (and, with correlative meaning, "Taxes" and
"Taxable") means (A) any and all federal, state, local, United States and other
foreign jurisdictions taxes and similar governmental obligations, charges,
imposts and assessments, including without limitation any income (gross or net),
alternative or add-on minimum tax, gross income, gross receipts, value added,
goods and services, sales, use, environmental, ad valorem, corporation capital,
property transfer, transfer, franchise, profits, license, withholding, payroll,
employment, excise, severance, stamp, occupation, premium, property, net worth,
environmental or windfall profit tax, custom, duty or other tax, assessment or
similar governmental charge of any kind whatsoever, together with any interest
or any penalty, addition to tax or additional amount imposed by any governmental
entity (a "Taxing Authority") responsible for the imposition of any such tax
(United States or other foreign jurisdiction), (B) any liability for the payment
of any amounts of the type described in (A) as a result
-9-
of being a member of an affiliated, consolidated, combined or unitary group for
any Taxable period and (C) any liability for the payment of any amounts of the
type described in (A) or (B) as a result of any express or implied obligation to
indemnify or reimburse any other person.
(ii) All Tax returns, statements, reports and forms (including
estimated Tax returns and reports and information returns and reports) required
to be filed with any Taxing Authority with respect to any Taxable period ending
on or before the date hereof, by GRTV (collectively, the "GRTV Returns"), have
been or will be filed when due (including any extensions of such due date),
except where the failure to file such GRTV Return would not have a Material
Adverse Effect on the GRTV Assets, the GRTV Liabilities or TVN's ability to
operate the GRTV Business. Such GRTV Returns are true and correct in all
material respects, and all amounts shown due on such GRTV Returns on or before
the date hereof have been or will be paid on or before such date. The Interim
Balance Sheet accrues all actual and contingent liabilities in accordance with
GAAP for Taxes with respect to all periods through such date.
(iii) No material Tax liability since January 3, 1999 has been
incurred other than in the ordinary course of business. Since January 3, 1999,
GRTV has withheld and paid to the applicable financial institution or Taxing
Authority all amounts required to be withheld. GRTV has not granted any
extension or waiver of the limitation period applicable to any GRTV Returns.
(iv) There is no material claim, audit, action, suit,
proceeding, or investigation now pending or (to the Knowledge of Xxxxx-Xxxxxx or
GRTV) threatened against or with respect to GRTV in respect of any Tax or
assessment. No notice of deficiency or similar document of any Tax Authority has
been received by Xxxxx-Xxxxxx or GRTV with respect to GRTV.
(v) There are no Liens (and immediately following the Closing
Date there will be no Liens) on the GRTV Assets relating to or attributable to
Taxes other than Liens for Taxes not yet due and payable. Neither GRTV or Xxxxx-
Xxxxxx has any Knowledge of any basis for the assertion of any claim relating or
attributable to Taxes which, if adversely determined, would result in any Lien
on the GRTV Assets.
(vi) GRTV has heretofore provided or made available to TVN true
and correct copies of all material GRTV Returns, and, as reasonably requested by
TVN prior to or following the date hereof, information statements, reports, work
papers, Tax opinions and memoranda and other Tax data and documents reasonably
available relating to the GRTV Returns.
(i) Major Contracts. Schedule 2.1(i) lists with respect to GRTV:
---------------
(i) Any union contract, any employment contract or other
arrangement or contract providing for future payments, salary or wages in excess
of $25,000 annually, written or oral, with any officer, consultant, director or
employee which is not terminable by it on 30 days' notice or less without
penalty or obligation to make payments related to such termination, other than
such agreements, arrangements or requirements as may be imposed or implied by
law;
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(ii) Any plan, contract or arrangement, written or oral,
providing for bonuses, pensions, deferred compensation, severance pay or
benefits, retirement payments, profit-sharing, phantom stock, stock appreciation
rights, or the like;
(iii) Any joint venture contract or arrangement or any other
agreement which has involved or is expected to involve a sharing of profits of
GRTV with other persons including employee bonus or variable compensation
arrangements;
(iv) Any existing affiliate agreement, advertiser agreement,
distribution agreement, volume purchase agreement, or other similar agreement or
pursuant to which GRTV has granted or received most favored nation pricing
provisions or exclusive marketing rights related to any product, group
of products or territory;
(v) Any lease for real or personal property (including leases
with options to purchase) in which the amount of payments which GRTV is required
to make on an annual basis exceeds $25,000;
(vi) Any material agreement, contract, mortgage, indenture,
lease, instrument, license, franchise, permit, concession, arrangement,
commitment or authorization which may be, by its terms, terminated or breached
by reason of the execution of this Agreement or the transactions contemplated
hereby which are otherwise listed in Schedule 2.1(c);
(vii) Except for trade indebtedness incurred in the ordinary
course of business and leases for real or personal property (including leases
with options to purchase), any instrument evidencing or related in any way to
indebtedness incurred in the acquisition of companies or other entities or
indebtedness for Borrowed Money by way of direct loan, sale of debt securities,
purchase money obligation, conditional sale, guarantee, or otherwise, except as
reflected in the GRTV Financial Statements;
(viii) Any material license agreement, either as licensor or
licensee (excluding software licenses from third parties relating to software
which is generally available to the public on standard commercial terms and
nonexclusive software licenses granted to affiliates, original equipment
manufacturers ("OEMs"), customers or end-users in the ordinary course of
business);
(ix) Any material Internet Service Provider, web hosting,
Internet transaction processing or similar agreement related to GRTV's Internet
sales activities;
(x) Any contract containing covenants purporting to limit
GRTV's freedom to compete in any line of business in any geographic area;
(xi) Any contract for the lease or sublease as lessee, lessor,
sublessee or sublessor of real or personal property of GRTV, any license of
computer software used by GRTV, any agreement to receive or supply programming
or merchandise, or any agreement to access television broadcast or satellite
services, requiring payments in excess of $25,000 per year; or
-11-
(xii) Any other agreement, contract or commitment where the
amount remaining to be paid is in excess of $25,000.
Except as set forth on the disclosure schedule, each agreement,
contract, mortgage, indenture, plan, lease, instrument, permit, concession,
franchise, arrangement, license, commitment or authorization listed on Schedule
2.1(i) (each a "Major Contract") is valid and binding on GRTV, and is in full
force and effect (except with respect to oral agreements as to the latter
clause), and neither GRTV nor, to the Knowledge of Xxxxx-Xxxxxx or GRTV, any
other party thereto, has breached any provision of, or is in default under the
terms of, any such Major Contract, in any material respect.
(j) Restrictions on Business Activities. There is no material
-----------------------------------
agreement, judgment, injunction, order or decree binding upon GRTV which has or
could reasonably be expected to have the effect of prohibiting or materially
impairing any business practice of GRTV, any acquisition of property by GRTV or
the conduct of business by GRTV as currently conducted. GRTV has not entered
into any agreement under which GRTV is restricted from selling, licensing or
otherwise distributing any of its technology or products to or providing
services to, customers or potential customers or any class of customers in any
geographic area, during any period of time or in any segment of the market.
(k) Compliance with Law. To Xxxxx-Xxxxxx'x or GRTV's Knowledge, GRTV
-------------------
is in compliance and has conducted its business so as to comply with all laws,
rules and regulations, judgments, decrees or orders of any Governmental Entity
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would, individually or in the aggregate, not have had and is expected not to
have a Material Adverse Effect on the GRTV Assets, the GRTV Liabilities or TVN's
ability to operate the GRTV Business as currently conducted by GRTV. To the
Knowledge of Xxxxx-Xxxxxx or GRTV, there are no material judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration), other than those that are applicable
to the industry as a whole, against Xxxxx-Xxxxxx, GRTV or their affiliates
regarding the GRTV Business or against any of the GRTV Assets.
(l) No Defaults. GRTV is not, nor has it received notice that it
-----------
would be with the passage of time, in default or violation of any material term,
condition or provision of (A) any material judgment, decree, order, injunction
or stipulation applicable to GRTV or (B) any material agreement, note, mortgage,
indenture, contract, lease or instrument, permit, concession, franchise or
license to which GRTV is a party or by which the GRTV Assets may be bound, which
default or violation would have a Material Adverse Effect on the GRTV Assets,
the GRTV Liabilities or TVN's ability to conduct the GRTV Business as currently
conducted by GRTV.
(m) Litigation. Except as set forth on the Disclosure Schedule,
----------
there is no action, suit, proceeding, claim or investigation pending or, to the
Knowledge of Xxxxx-Xxxxxx or GRTV, threatened, against GRTV which could,
individually or in the aggregate, have a Material Adverse Effect on the GRTV
Assets or TVN's ability to conduct the GRTV Business as currently conducted
-12-
by GRTV or which in any manner challenges or seeks to prevent, enjoin, alter or
materially delay any of the transactions contemplated hereby (each a "Material
Litigation"). The Disclosure Schedule sets forth with respect to each Material
Litigation the forum, the parties thereto, a brief description of the subject
matter thereof and the amount of damages claimed.
(n) Technology.
----------
(A) Definitions. As used in this Section 2.1(n) and
-----------
elsewhere in this Agreement, the following terms have these definitions:
"Intellectual Property" shall mean any or all of the following and all rights
in, arising out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof, (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights registrations
and applications therefor, and all other rights corresponding thereto throughout
the world; (iv) all industrial designs and any registrations and applications
therefor throughout the world; (v) all trade names, logos, common law trademarks
and service marks, trademark and service xxxx registrations and applications
therefor throughout the world; (vi) all databases and data collections and all
rights therein throughout the world; and (vii) any similar or equivalent rights
to any of the foregoing anywhere in the world. "Registered Intellectual
Property" means all United States, international and foreign: (i) patents and
patent applications (including provisional applications); (ii) registered
trademarks, applications to register trademarks, intent-to-use applications, or
other registrations or applications related to trademarks; (iii) registered
copyrights and applications for copyright registration; and (iv) any other
Intellectual Property that is the subject of an application, certificate,
filing, registration or other document issued, filed with, or recorded by any
state, government or other public legal authority. "GRTV Intellectual Property"
means any Intellectual Property used by GRTV in connection with the GRTV
Business.
(i) Schedules. Schedule 2.1(n) hereto sets forth a
---------
complete list of the GRTV Intellectual Property including, without limitation,
any Registered Intellectual Property other than (A) all inventions not reduced
to tangible form, invention disclosures, improvements, trade secrets,
proprietary information, know-how, technology, technical data and customer lists
and all documentation related to any of the foregoing, and (B) generally
available shrink-wrapped licensed computer software and computer software that
was embedded in equipment upon its acquisition by GRTV. Schedule 2.1(n)
specifies the jurisdictions in which any patent or trademark included in any
Registered Intellectual Property, which is included in the GRTV Assets, has been
issued or registered or in which an application for issuance or registration has
been filed, including the respective registration numbers in the proper U.S. or
foreign offices, as applicable. Pursuant to this Agreement and subject to the
terms, conditions and restrictions set forth herein and therein, Newco shall, as
of the Effective Closing Date, have the right to use, hold for use or otherwise
exploit all of the GRTV Intellectual Property included in the GRTV Assets in a
manner not materially different than that in which such Intellectual Property is
used, held for use or otherwise exploited by GRTV as of the Effective Closing
Date.
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(ii) Confidentiality. Xxxxx-Xxxxxx and GRTV have used
---------------
commercially reasonable measures to protect the secrecy, confidentiality and
value of the GRTV Intellectual Property included in the GRTV Assets.
(iii) Infringers. To the Knowledge of Xxxxx-Xxxxxx or GRTV,
----------
no person is infringing or misappropriating the GRTV Intellectual Property
included in the GRTV Assets. As of the date hereof, Xxxxx-Xxxxxx or GRTV have
not made any claim in writing of a violation, infringement, misuse or
misappropriation by others of rights of GRTV to or in connection with the GRTV
Intellectual Property included in the GRTV Assets.
(iv) Pending Claims. As of the date hereof, there is no
--------------
pending or, to the Knowledge of Xxxxx-Xxxxxx or GRTV, threatened claim by any
third person of a violation, infringement, misuse or misappropriation by GRTV of
any Intellectual Property owned by any third person, that would, individually or
in the aggregate, have a Material Adverse Effect on the GRTV Assets or the
ability of TVN to operate the GRTV Business. There are no interferences or other
contested inter partes proceedings, either pending or, to the Knowledge of
Xxxxx-Xxxxxx or GRTV, threatened, in any domestic or foreign copyright office,
patent and trademark office or any other Governmental Entity relating to any
pending application with respect to any GRTV Intellectual Property included in
the GRTV Assets.
(A) Clear Title. Each item of GRTV Intellectual
-----------
Property included in the GRTV Assets, including all Registered Intellectual
Property, is free and clear of any Liens of any kind. For purposes of this
subsection (iv), Liens will exclude any end-user licenses granted in the
ordinary course of business and Liens for Taxes not yet due and payable.
(B) Trademarks and Copyrights. GRTV (i) is the
-------------------------
exclusive owner of all trademarks and trade names included in the GRTV Assets
and (ii) owns exclusively, and has good title to, all copyrighted works that are
included in the GRTV Assets.
(C) Transfers.
---------
(1) GRTV has not transferred ownership of, or
granted any license of or right to use or authorized the retention of any rights
to use, any of the GRTV Intellectual Property included in the GRTV Assets to any
other person except for licenses of such GRTV Intellectual Property to
affiliates, OEMs, customers and end-users made in the ordinary course of
business.
(2) Xxxxx-Xxxxxx has not transferred ownership
of, or granted any license of or right to use or authorized the retention of any
GRTV Intellectual Property included in the GRTV Assets to any persons other then
GRTV and members of the GRC Group made in the ordinary course of business.
(D) Transferability. Except as set forth on the
---------------
Disclosure Schedule, all of the GRTV Intellectual Property included in the GRTV
Assets, including any item
-14-
thereof, will be fully transferable, alienable or licensable by or between GRTV
and TVN or Newco without restriction and without payment of any kind to any
third party.
(E) No Loss of Rights. Other than with respect to the
-----------------
Third-Party Consents listed on Schedule 2.1(c) and the consents and approvals
listed on Schedule 2.2(c) and the transfers by Xxxxx-Xxxxxx and GRTV pursuant to
this Agreement, the consummation of the transactions contemplated by this
Agreement will not result in the loss of, or otherwise adversely affect, any
ownership rights of GRTV or Xxxxx-Xxxxxx in the GRTV Intellectual Property
included in the GRTV Assets or result in the breach or termination of any
license, contract or agreement to which GRTV or Xxxxx-Xxxxxx is a party with
respect to such GRTV Intellectual Property included in the GRTV Assets which
loss, breach or termination would have a Material Adverse Effect on the GRTV
Assets or the ability of TVN to operate the GRTV Business as currently conducted
by GRTV.
(F) Non-Infringement. To Xxxxx-Xxxxxx'x Knowledge, the
----------------
conduct of the GRTV Business in the manner currently conducted by GRTV does not
infringe or misappropriate any Intellectual Property right of any third person,
or constitute unfair competition or trade practices under the laws of any
jurisdiction that would, individually or in the aggregate, have a Material
Adverse Effect on the GRTV Assets or TVN's ability to operate the GRTV Business
as currently conducted by GRTV, nor do Xxxxx-Xxxxxx or GRTV have Knowledge of
any basis therefor.
(G) No Claims. There are no contracts, licenses or
---------
agreements between GRTV and any other person with respect to the GRTV
Intellectual Property under which there is any dispute of which Xxxxx-Xxxxxx or
GRTV has Knowledge regarding the scope of such agreement or performance under
such agreement including with respect to any payments to be made or received by
GRTV thereunder.
(H) No Standing Orders. No GRTV Intellectual Property
------------------
included in the GRTV Assets is subject to any proceeding or outstanding decree,
order, judgement, agreement or stipulation that restricts in any manner the use,
transfer or licensing thereof by GRTV or that would have a Material Adverse
Effect on the GRTV Assets or the ability of TVN to operate the GRTV Business as
currently conducted by GRTV.
(v) Indemnification. Neither GRTV nor its affiliates have
---------------
entered into any agreement to indemnify any person against any charge of
infringement by a third party relating to the GRTV Intellectual Property
included in the GRTV Assets.
(0) Title to Properties; Absence of Liens and Encumbrances; Condition
-----------------------------------------------------------------
of Equipment.
------------
(i) Schedule 2.1(o) sets forth a true and complete list of all
real property owned or leased by GRTV and material tangible personal property
owned or leased by GRTV, and true, correct and complete copies of all such
leases have been delivered to TVN.
-15-
(ii) GRTV has good and valid title to, or, in the case of leased
properties and assets, valid leasehold interests in, all of the tangible
properties and assets, real, personal and mixed, included in the GRTV Assets,
free and clear of any Liens, except as reflected in Schedule 2.1(o) hereof and
except for such imperfections of title and encumbrances, if any, which are not
substantial in character, amount or extent, and which do not materially detract
from the value, or interfere with the present use, of the property subject
thereto or affected thereby.
(iii) The GRTV Assets constituting tangible personal property are
in good working condition, ordinary wear and tear excepted, and, to
Xxxxx-Xxxxxx'x Knowledge, conform in all material respects to the requirements
of all laws, ordinances and regulations applicable to their use and ownership or
lease by GRTV; and the buildings and structures containing the premises of GRTV
are suitable in all material respects and properly zoned for the purpose for
which they are currently used, have been properly maintained in all material
respects in accordance with applicable leases to the extent GRTV is required to
do so, and there are no material outstanding work orders with respect to any
maintenance, repair or alterations to be performed by GRTV thereon, except in
any such case, which would not have a Material Adverse Effect on the GRTV Assets
or the ability of TVN to operate the GRTV Business as currently conducted by
GRTV.
(p) Environmental Matters.
---------------------
(i) No substance that is regulated by any Governmental Entity
or that has been designated by any Governmental Entity to be radioactive, toxic,
hazardous or otherwise a danger to health or the environment (a "Hazardous
Material") is present in, on or under any property that GRTV has at any time
owned, operated, occupied or leased as a result of the conduct of the GRTV
Business, except as permitted by the laws or regulations in force as of the date
hereof and except if any such case would not have a Material Adverse Effect on
the GRTV Assets or the ability of TVN to operate the GRTV Business as currently
conducted by GRTV.
(ii) GRTV has not transported, stored, used, manufactured,
released or exposed its employees or any other person to any Hazardous Material
in violation of any applicable statute, rule, regulation, order or law, except
where such violation would not have a Material Adverse Effect on the GRTV Assets
or the ability of TVN to operate the GRTV Business as currently conducted by
GRTV.
(iii) GRTV has obtained all permits, licenses and other
authorizations ("Environmental Permits"), if any, required to be obtained by it
under the laws of any Governmental Entity to which it is subject relating to
pollution or protection of the environment (collectively, "Environmental Laws"),
except where the failure to obtain such permit would not have a Material Adverse
Effect on the GRTV Assets or the ability of TVN to operate the GRTV Business.
The Disclosure Schedule sets forth a true and complete list of all material
Environmental Permits, if any, each of which is in full force and effect. GRTV
is in compliance in all material respects with (A) all terms and conditions of
the Environmental Permits and (B) all other material obligations contained in
the Environmental Laws or contained in any regulation, code, plan, order,
decree, judgment, notice or demand letter issued, entered, promulgated or
approved thereunder except where such
-16-
violation would not have a Material Adverse Effect on the GRTV Assets or the
ability of TVN to operate the GRTV Business as currently conducted by GRTV. GRTV
has not received any notice and is not aware of any past or present condition or
practice of the business conducted by GRTV which forms or could reasonably be
expected to form the basis of any claim, action, suit, proceeding, hearing or
investigation against GRTV arising out of the manufacture, processing,
distribution, use, treatment, storage, spill, disposal, transport, or handling,
or the emission, discharge, release or threatened release into the environment,
of any Hazardous Material except where such violation would not have a Material
Adverse Effect on the GRTV Assets or the ability of TVN to operate the GRTV
Business as currently conducted by GRTV.
(q) Governmental Authorizations and Permits. The Disclosure Schedule
---------------------------------------
accurately lists all licenses, authorizations, permits, concessions,
certificates and other franchises of any Governmental Entity, if any, required
to operate the GRTV Business of which GRTV is the holder, other than the
Environmental Permits, except where the failure to obtain such licenses,
authorizations, permits, concessions, certificates and other franchises would
not have a Material Adverse Effect on the GRTV Assets or TVN's ability to
operate the GRTV Business as currently conducted by GRTV (collectively, the
"GRTV Permits"). The GRTV Permits, if any are included in the GRTV Assets, are
in full force and effect. There is not now pending or, to the Knowledge of
Xxxxx-Xxxxxx or GRTV, is there threatened, any action, suit, investigation or
proceeding against GRTV before any Governmental Entity with respect to the GRTV
Permits, if any are included in the GRTV Assets, nor is there any issued or
outstanding written notice, order or complaint with respect to the violation by
GRTV of the terms of any GRTV Permit included in the GRTV Assets or any rule or
regulation applicable thereto, except where such failure would not have a
Material Adverse Effect on the GRTV Assets or TVN's ability to operate the GRTV
Business as currently conducted by GRTV.
(r) Employee Benefit Plans and Compensation.
---------------------------------------
(i) For purposes of this Section 2.1(r) and elsewhere in this
Agreement, the following terms shall have the meanings set forth below:
(A) "Affiliate" shall mean any other person or entity
---------
under common control with GRTV within the meaning of Section 414(b), (c), (m) or
(o) of the Code and the regulations thereunder.
(B) "Employee Plan" shall refer to any plan, program,
-------------
policy, practice, contract, agreement or other arrangement providing for
bonuses, severance, retention, termination pay, deferred compensation, pensions,
profit sharing, performance awards, phantom stock, stock appreciation rights,
other stock or stock-related awards, fringe benefits or other employee benefits
of any kind, whether formal or informal, written or otherwise, funded or
unfunded and whether or not legally binding.
(C) "Employee" shall mean any current, former or retired
--------
employee, consultant, officer or director of GRTV.
-17-
(D) "Employee Agreement" shall refer to each employment,
------------------
severance, consulting or similar agreement or contract between GRTV and any
Employee.
(ii) Schedule. Schedule 2.1(r) contains an accurate and
--------
complete list of each Employee Plan and each Employee Agreement currently
maintained by GRTV as of the Effective Closing Date and the date hereof (each, a
"GRTV Employee Plan").
(iii) Documents. GRTV has provided or made available to TVN and
---------
Newco, (i) correct and complete copies of all documents embodying each GRTV
Employee Plan and each Employee Agreement including all amendments thereto and
copies of all forms of agreement and enrollment used therewith; (ii) the most
recent annual actuarial valuations, if any, prepared for each GRTV Employee
Plan; (iii) the most recent annual report (Series 5500 and all schedules
thereto), if any, required under the GRTV Employee Retirement Income Security
Act of 1974, as amended ("ERISA") or the Code in connection with each GRTV
Employee Plan or related trust; (iv) the most recent summary plan description
together with the most recent summary of material modifications thereto, if any,
required under ERISA with respect to each GRTV Employee Plan; (v) all Internal
Revenue Service ("IRS") determination letters, if any, relating to GRTV Employee
Plans; (vi) if the GRTV Employee Plan is funded, the most recent annual and
periodic accounting of GRTV Employee Plan assets; and (vii) administrative
service agreements, group annuity contracts and group insurance contracts that
are included in the GRTV Assets.
(iv) Pension Plans. GRTV does not now, nor, to the Knowledge of
-------------
GRTV or Xxxxx-Xxxxxx has it ever, maintained, established, sponsored,
participated in, or contributed to, any Employee Plan, which is subject to Title
IV of ERISA or Section 412 of the Code.
(v) Multiemployer Plans. To the Knowledge of GRTV or Guthy-
-------------------
Renker, at no time has GRTV contributed to or been obligated to contribute to
any multiemployer plan, as defined in Section 3(37) of ERISA.
(vi) Employment Matters. Except for violations that would not
------------------
have a Material Adverse Effect on the GRTV Assets or TVN's ability to operate
the GRTV Business as currently conducted by GRTV, individually or collectively,
GRTV (i) is in compliance with all applicable laws, rules and regulations
respecting employment, employment practices, terms and conditions of employment
and wages and hours, in each case, with respect to Employees in all material
respects; (ii) has withheld all amounts required by law or by agreement to be
withheld from the wages, salaries and other payments to Employees or other
persons who by virtue of their activities performed on behalf of GRTV may be
deemed employees within the meaning of applicable law; (iii) is not liable for
any arrears of wages or any taxes or any penalty for failure to comply with any
of the foregoing; and (iv) is not liable for any payment to any trust or other
fund or to any governmental or administrative authority, with respect to
unemployment compensation benefits, social security or other benefits or
obligations for Employees or other persons who by virtue of their activities
performed on behalf of GRTV may be deemed employees within the meaning of
applicable law (other than routine payments to be made in the normal course of
business and consistent with past practice).
-18-
(s) Transactions with Affiliates. Except as set forth on the
----------------------------
Disclosure Schedule, as contemplated in this Agreement and for regular salary
payments and fringe benefits under an individual's compensation package with
GRTV and confidentiality, nondisclosure and technology assignment agreements,
none of the officers, employees or directors of GRTV is a party to any
transactions with GRTV. Except as set forth in the Interim Balance Sheet and the
January 3, 1999 Balance Sheet, there have been no assumptions or guarantees by
GRTV of any obligations of such individuals.
(t) Interests of Officers. Except as set forth on the
---------------------
Disclosure Schedule, none of GRTV's officers or directors has any material
interest in any of the GRTV Assets or is a beneficiary of any of the GRTV
Liabilities other than the GRTV Liabilities relating to the Xxxxxx Employment
Agreement.
(u) Brokers. No agent, broker, investment banker or other firm
-------
or person is or will be entitled to any broker's or finder's fee or any other
commission or similar fee ("Broker's or Finder's Fee") by any action of any
member of the GRC Group on behalf of GRTV in connection with any of the
transactions contemplated by this Agreement.
(v) Customers; Backlog; Returns and Complaints.
------------------------------------------
Schedule 2.1(v) sets forth a true, correct and complete list of the current
customers of GRTV as of the Execution Date ("Customers"). To Xxxxx-Xxxxxx'x and
GRTV's Knowledge, (i) as of the date hereof there are no material complaints by
Customers concerning GRTV's services and (ii) there are no former customers of
GRTV that have terminated their agreements with GRTV or failed to renew such
agreements due to unresolved disputes with or complaints to GRTV.
(w) Employees. The Disclosure Schedule identifies all current
---------
GRTV employees and sets forth the job title of each such employee. GRTV has
previously provided to TVN and Newco a schedule setting forth the cash
compensation of the employees listed on the Disclosure Schedule during the
period from January 1, 1998 to June 28, 1999. As of the date hereof, none of the
employees identified as key employees on the Disclosure Schedule has tendered to
Xxxxx-Xxxxxx a written or oral notice ofhis or her intention to resign or
retire.
(x) Questionable Payments. None of Xxxxx-Xxxxxx or GRTV nor,
---------------------
to the Knowledge of Xxxxx-Xxxxxx or GRTV, after reasonable inquiry, any
director, officer or other employee of GRTV has: (i) made any payments or
provided services or other favors in the United States of America or in any
foreign country in order to obtain preferential treatment or consideration by
any Governmental Entity with respect to any aspect of the GRTV Business; or (ii)
made any political contributions which would not be lawful under the laws of the
United States (including the Foreign Corrupt Practices Act) or the foreign
country in which such payments were made with respect to any aspect of the GRTV
Business. None of Xxxxx-Xxxxxx or GRTV, nor, to the Knowledge of Xxxxx-Xxxxxx or
GRTV after reasonable inquiry, any director, officer or other employee of GRTV,
nor, to Xxxxx-Xxxxxx or GRTV's Knowledge after reasonable inquiry, any supplier
of GRTV has been the subject of any inquiry or investigation by any Governmental
Entity in connection with payments or benefits or other favors to or for the
benefit of any governmental or
-19-
armed services official, agent, representative or employee with respect to any
aspect of the GRTV Business or with respect to any political contribution made
by GRTV.
(y) Import/Export. GRTV has not violated any United States
-------------
and foreign import and export control laws and regulations, import and export
licensing laws and regulations and customs regulations applicable to GRTV where
the failure to comply would have a Material Adverse Effect on the GRTV Assets or
TVN's ability to operate the GRTV Business. GRTV has not been cited by the
United States Department of Commerce, the United States Customs Service or any
other relevant Governmental Entity for any material violation of United States
laws or regulations relating to importing or exporting of products, materials or
services. All goods imported into the United States or any other country by GRTV
and included in the GRTV Assets, if any ("Imported Goods"), have with such
exceptions as are not material to the GRTV Assets been properly valued and
classified in accordance with applicable tariff laws, rules and regulations and
all proper duties, tariffs or excise taxes have been paid with respect to the
Imported Goods. No penalties have been assessed, asserted or claimed with
respect to any Imported Goods.
(z) Sufficiency of GRTV Assets. Except as set forth on the
--------------------------
Disclosure Schedule, the GRTV Assets (including the GRTV Intellectual Property
included therein) comprise all of the material assets of GRTV used by it to
operate the GRTV Business in the ordinary course as currently conducted.
(aa) Disclosure. With respect to this Section 2.1, no
----------
representation or warranty made by Xxxxx-Xxxxxx or GRTV, nor the Disclosure
Schedule and other Schedules to this Agreement contains as of the Execution Date
any untrue statement of a material fact, or omits as of the Execution Date to
state a material fact necessary to make the statements or facts contained herein
or therein not misleading in light of the circumstances under which they were
furnished.
2.2 Representations and Warranties of Xxxxx-Xxxxxx. Except as
----------------------------------------------
disclosed in the Disclosure Schedule, Xxxxx-Xxxxxx represents and warrants to
TVN and Newco as of the Execution Date as set forth below.
(a) Organization, Standing and Power. Xxxxx-Xxxxxx is a
--------------------------------
corporation duly incorporated, validly existing and in good standing under the
laws of the State of Delaware and has all requisite power and authority to own,
operate and lease its properties and to carry on its business as now being
conducted or as proposed to be conducted.
(b) Authority.
---------
(i) Xxxxx-Xxxxxx has all requisite corporate power and
authority to enter into this Agreement and the Supplemental Agreements to which
Xxxxx-Xxxxxx is a party, to perform its obligations hereunder and thereunder,
and to consummate the transactions contemplated hereby and pursuant to such
Supplemental Agreements to which Xxxxx-Xxxxxx is a party. The execution and
delivery of this Agreement and the Supplemental Agreements, the performance by
Xxxxx-Xxxxxx of its obligations hereunder and thereunder, and the consummation
of the transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate
-20-
action on the part of Xxxxx-Xxxxxx, including the approval by the Board of
Directors of GuthyRenker. This Agreement has been duly executed and delivered by
Xxxxx-Xxxxxx and constitutes a legal, valid and binding obligation of Xxxxx-
Xxxxxx enforceable against Xxxxx-Xxxxxx in accordance with the terms herein,
except as enforcement may be limited by bankruptcy, insolvency, or other similar
laws affecting the enforcement of creditors' rights generally and except that
the availability of equitable remedies is subject to the discretion of the court
before which any proceeding therefor may be brought.
(ii) Except as set forth in the Disclosure Schedule,
the execution and delivery of this Agreement does not, and the consummation of
the transactions contemplated hereby will not conflict with or result in any
violation of any material statute, law, rule, regulation, judgment, order,
decree, or ordinance applicable to Xxxxx-Xxxxxx or its properties or assets, or
conflict with or result in any breach or default (with or without notice or
lapse of time, or both) under, or give rise to a right of termination,
cancellation or acceleration of any obligation or to loss of a material benefit
under, or result in the creation of a Lien on any of the GRTV Assets pursuant to
any provision of (A) the certificate of incorporation or bylaws of Xxxxx-Xxxxxx
or (B) any material agreement, contract, note, mortgage, indenture, lease,
instrument, permit, concession, franchise or license to which Xxxxx-Xxxxxx is a
party or by which Xxxxx-Xxxxxx or any of its respective properties or assets may
be bound or affected, except for any conflict, violation, breach, right, lien or
encumbrance that would not have a Material Adverse Effect on Xxxxx-Xxxxxx'x
ability to fulfill its obligations under this Agreement or under the Supplement
Agreements and Loan Documents to which Xxxxx-Xxxxxx is a party.
(iii) No consent, approval, order or authorization
of, or registration, declaration or filing with, any Governmental Entity, is
required by or with respect to Xxxxx-Xxxxxx in connection with the execution and
delivery of this Agreement or the consummation of the transactions contemplated
hereby, except for such consents, authorizations, filings, approvals, orders,
declarations and registrations which if not obtained or made would not have a
Material Adverse Effect on Xxxxx-Xxxxxx'x ability to fulfill its obligations
under this Agreement or under the Supplemental Agreements to which Xxxxx-Xxxxxx
is a party. Any consents, approvals or authorizations of third parties required
in connection with the transactions contemplated by this Agreement and the
Supplemental Agreements to which Xxxxx-Xxxxxx is a party are listed on Schedule
2.2(b) hereto.
(iv) Ownership of Capital Stock. Xxxxx-Xxxxxx is the
--------------------------
sole stockholder of GRTV (except as set forth on the Disclosure Schedule) and
has full power and authority to cause GRTV to transfer the GRTV Assets to TVN
and Newco.
(c) Conflicts of Interest of Stockholders. Except as set forth
-------------------------------------
on the Disclosure Schedule, Xxxxx-Xxxxxx has no direct or indirect ownership
interest representing 25% or more of the capital stock of any firm or
corporation listed on Schedule 2.2(c) hereto which competes with GRTV, or in any
other firm or corporation which has a significant business relationship with
GRTV (other than with respect to the GRC Intercompany Liabilities, the GRC Lines
of Credit and Xxxxx-Xxxxxx'x interest, through GRTV, in Coast to Coast).
-21-
(d) Disclosure of Information. Xxxxx-Xxxxxx represents that it, its
-------------------------
advisors and representatives have had an opportunity to review such documents,
instruments, and books and records and to ask questions and receive answers from
TVN regarding the terms and conditions contemplated by this Agreement and the
assets, liabilities and condition (financial or otherwise) of TVN and such other
matters as Xxxxx-Xxxxxx has deemed necessary. The foregoing, however, does not
limit or modify the representations and warranties with respect to TVN and Newco
set forth in this Agreement or the right of Xxxxx-Xxxxxx and GRTV to rely
thereon.
(e) No Violations of Representations. Neither Xxxxx-Xxxxxx nor any of
--------------------------------
its officers, directors or agents has Knowledge that any of the representations
and warranties made by TVN herein are inaccurate or incomplete or that a breach
of any such representation or warranty has occurred or is occurring. Neither
Xxxxx-Xxxxxx nor any of its officers, directors or agents has failed to disclose
to TVN the fact of such inaccurate or incomplete representation or warranty, or
that a breach has occurred, or failed to give TVN the opportunity to correct
such inaccurate or incomplete representation or warranty or to cure such breach.
(f) Disclosure. With respect to this Section 2.2, no representation or
----------
warranty made by Xxxxx-Xxxxxx, nor the Disclosure Schedule and other Schedules
to this Agreement or the Exhibits to this Agreement contains as of the Execution
Date hereof any untrue statement of a material fact or omits as of the Execution
Date to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under
which they were furnished.
2.3 Investment Representations of Xxxxx-Xxxxxx and GRTV. Xxxxx-Xxxxxx
----------------------------------------------------
and GRTV represent and warrant to TVN and Newco as of the Execution Date with
respect to the Promissory Note and the shares of TVN Common Stock issuable upon
conversion thereof.
(a) Purchase Entirely for Own Account. This Agreement is made
---------------------------------
with TVN and Newco in reliance upon Xxxxx-Xxxxxx'x and GRTV's representations to
TVN and Newco, which by Xxxxx-Xxxxxx'x and GRTV's execution of this Agreement,
Xxxxx-Xxxxxx and GRTV hereby confirm, that the Promissory Note and the shares of
TVN Common Stock into which such Promissory Note is convertible will be acquired
for investment for GRTV's own account, not as a nominee or agent, and not with a
view to the resale or distribution of any part thereof and that GRTV has no
present intentions of selling, granting any participation in, or otherwise
distributing the same.
(b) Investment Experience. Xxxxx-Xxxxxx and GRTV understand that the
----------------------
Promissory Note and the shares of TVN Common Stock into which such Promissory
Note is convertible have not been, and prior to an appropriate registration
statement's becoming effective will not be, registered under the Securities Act,
by reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the investment intent and the accuracy of Xxxxx-Xxxxxx'x and GRTV's
representations as expressed herein. Xxxxx-Xxxxxx and GRTV acknowledge that they
are able to fend for themselves, can bear the economic risk of such investment
and have such knowledge and experience in financial and business matters that
they are capable of evaluating the merits and risks of the investment in the
-22-
Promissory Note and the shares of TVN Common Stock into which such Promissory
Note may be converted.
(c) Legends. Xxxxx-Xxxxxx and GRTV understand that the shares
-------
of TVN Common Stock into which the Promissory Note may be converted may bear one
or all of the following legends:
(i) "THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THEY MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED IN THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT
TO THE SECURITIES UNDER SUCH ACT OR AN OPINION OF COUNSEL REASONABLY
SATISFACTORY TO THE COMPANY THAT SUCH REGISTRATION IS NOT REQUIRED."
(ii) Any legend required by the Blue Sky laws of any state to
the extent such laws are applicable to the shares represented by the certificate
so legended.
A certificate shall not bear such legends if in the opinion of
counsel reasonably satisfactory to TVN the securities represented thereby may be
publicly sold without registration under the Securities Act and any applicable
state securities laws.
(d) Restricted Securities. Xxxxx-Xxxxxx and GRTV understand that
---------------------
the Promissory Note may be and the shares of TVN Common Stock into which such
Promissory Note may be converted will be characterized as "restricted
securities" under the federal securities laws inasmuch as they are being
acquired from TVN and Newco in a transaction not involving a public offering and
that under such laws and applicable regulations such Promissory Note and the
shares of TVN Common Stock into which such Promissory Note may be converted may
be resold without registration under the Securities Act only in certain limited
circumstances. Xxxxx-Xxxxxx and GRTV acknowledge that the Promissory Note and
the shares of TVN Common Stock into which such Promissory Note may be converted
must be held indefinitely unless subsequently registered under the Securities
Act or an exemption from such registration is available.
(e) Accredited Investor. GRTV is an accredited investor as defined
-------------------
in Rule 501(a) of Regulation D promulgated under the Securities Act.
2.4 Representations and Warranties of TVN and Newco regarding Newco.
---------------------------------------------------------------
Except as disclosed in the schedules attached hereto and hereby made a part
hereof, referring specifically to the representations and warranties in this
Agreement which identifies the section and subsection to which such disclosure
relates and which has been delivered by TVN and Newco to Xxxxx-Xxxxxx and GRTV
prior to the execution of this Agreement (the "TVN Disclosure Schedule"), TVN
and Newco jointly and severally represent and warrant as of the Execution Date
to Xxxxx-Xxxxxx and GRTV as set forth below.
(a) Organization, Standing and Power. Newco is a corporation
--------------------------------
validly existing and in good standing under the laws of the State of Delaware
and has all requisite corporate power
-23-
and authority to own, lease and operate its properties and to carry on its
business as now being conducted or proposed to be conducted pursuant to this
Agreement, the Supplemental Agreements and the Loan Documents.
(b) Newco Capital Structure. The authorized capital stock of Newco
-----------------------
consists of 1,000 shares of Common Stock, par value $0.001 per share ("Newco
Common Stock") and no shares of preferred stock. There are issued and
outstanding 1,000 shares of Newco Common Stock that are owned by TVN and are
free and clear of any Liens. The outstanding Newco Common Stock is validly
issued, fully paid and nonassessable and not subject to preemptive rights
created by statute, or by Newco's Certificate of Incorporation or Bylaws, each
as in effect as of the Closing Date, or by any agreement to which TVN or Newco
is a party or to which TVN or Newco may be bound. The Newco Common Stock was
issued in compliance with federal and state securities laws, except for any
noncompliance that would not have a Material Adverse Effect on Newco or Newco's
ability to acquire GRTV Assets or fulfill its obligations pursuant to this
Agreement, the Supplemental Agreements and the Loan Documents. Other than as set
forth in this Section 2.4(b), there are no outstanding shares of Newco Common
Stock, preferred stock or any other equity securities of Newco, and there are no
options, warrants, calls, conversion rights, commitments or agreements of any
character to which Newco or TVN is a party or by which Newco or TVN may be bound
that require Newco to issue any of the foregoing.
(c) Authority.
---------
(i) Newco has all requisite corporate power and authority to
enter into this Agreement, the Supplemental Agreements and the Loan Documents,
to perform its obligations hereunder and thereunder, and to consummate the
transactions contemplated hereby and thereby. The execution and delivery of this
Agreement, the Supplemental Agreements and the Loan Documents, the performance
by Newco of its obligations hereunder and thereunder and the consummation of the
transactions contemplated hereby and thereby have been duly and validly
authorized by all necessary corporate action on the part of Newco, including the
unanimous approval by the Board of Directors of Newco and the consent of TVN.
This Agreement, the Supplemental Agreements and the Loan Documents have been
duly executed and delivered by Newco and constitute legal, valid and binding
obligations of Newco enforceable against Newco in accordance with the terms
herein and therein, except as enforcement may be limited by bankruptcy,
insolvency, or other similar laws affecting the enforcement of creditors' rights
generally and except that the availability of equitable remedies is subject to
the discretion of the court before which any proceeding therefor may be brought.
(ii) Except as set forth in the Disclosure Schedule,
the execution and delivery of this Agreement, the Supplemental Agreements and
the Loan Documents do not, and the consummation of the transactions contemplated
hereby and thereby will not conflict with or result in any violation of any
material statute, law, rule, regulation, judgment, order, decree or ordinance
applicable to Newco or its properties or assets, or conflict with or result in
any breach or default (with or without notice or lapse of time, or both) under,
or give rise to a right of termination, cancellation or acceleration of any
obligation or to loss of a material benefit under, or result in the
-24-
creation of a Lien on any of the properties or assets of Newco pursuant to (A)
any provision of the Certificate of Incorporation or Bylaws of Newco or (B) any
material agreement, contract, note, mortgage, indenture, lease, instrument,
permit, concession, franchise or license to which Newco is a party or by which
Newco or any of its properties or assets may be bound or affected, except for
any conflict, violation, breach, default, right, Lien or encumbrance which would
not have a Material Adverse Effect on Newco, Newco's interest in the GRTV Assets
or TVN's ability to operate the GRTV Business or Newco's ability to fulfill its
obligations hereunder or thereunder. No consents, waivers and approvals under
any of Newco's agreements, contracts, licenses or leases are required to be
obtained in connection with the consummation of the transactions contemplated
hereby and by the Supplemental Agreements and the Loan Documents.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity, is required
by or with respect to Newco in connection with the execution and delivery of
this Agreement, the Supplemental Agreements and the Loan Documents, or the
consummation of the transactions contemplated hereby or thereby, except for (A)
such consents, approvals, orders, authorizations, registrations, declarations
and filings as may be required under the laws of any foreign country, which if
not obtained or made would not have a Material Adverse Effect on Newco and (B)
such other consents, authorizations, filings, approvals and registrations which
if not obtained or made would not have a Material Adverse Effect on Newco or
Newco's ability to fulfill its obligations hereunder or thereunder.
(d) Absence of Prior Business Activity. Prior to the Execution
----------------------------------
Date, Newco has conducted no business activities and has no assets, liabilities
or obligations (whether absolute, accrued or contingent, and whether or not
determined or determinable) other than those provided by or due to TVN in
connection with the initial capitalization of Newco.
(e) Disclosure. With respect to this Section 2.4, no
----------
representation or warranty made by TVN or Newco regarding Newco, nor the TVN
Disclosure Schedule and other Schedules to this Agreement or the Exhibits to
this Agreement contains as of the Execution Date any untrue statement of a
material fact or omits as of the Execution Date to state a material fact
necessary to make the statements or facts contained herein or therein not
misleading in light of the circumstances under which they were furnished.
2.5 Representations and Warranties of TVN. Except as disclosed in the
-------------------------------------
TVN Disclosure Schedule, TVN represents and warrants as of the Execution Date to
Xxxxx-Xxxxxx and GRTV as set forth below.
(a) Organization; Standing and Power. TVN is a corporation duly
--------------------------------
incorporated, validly existing and in good standing under the laws of the State
of Delaware and has all requisite corporate power and authority to own, lease
and operate its properties and to carry on its businesses as now being
conducted.
-25-
(b) Authority.
---------
(i) TVN has all requisite corporate power and authority to
enter into this Agreement, the Supplemental Agreements and the Loan Documents
and to consummate the transactions contemplated hereby and thereby. The
execution and delivery by TVN of this Agreement, the Supplemental Agreements,
the Loan Documents and the consummation of the transactions contemplated by this
Agreement, Supplemental Agreements and the Loan Documents have been duly
authorized by all necessary corporate action on the part of TVN, including the
approval by the board of directors of TVN. This Agreement has been duly executed
and delivered by TVN and constitutes a valid and binding obligation of TVN
enforceable in accordance with its terms, except as enforcement may be limited
by bankruptcy, insolvency, or other similar laws affecting the enforcement of
creditors' rights generally and except that the availability of equitable
remedies is subject to the discretion of the court before which any proceeding
therefor may be brought.
(ii) Except as set forth in the Disclosure Schedule, the
execution and delivery of this Agreement, the Supplemental Agreements and the
Loan Documents and the consummation of the transactions contemplated hereby and
thereby will not conflict with or result in any violation of any material
statute, law, rule, regulation, judgment, order, decree or ordinance applicable
to TVN or its properties or assets, or conflict with or result in any breach or
default (with or without notice or lapse of time, or both) under, or give rise
to a right of termination, cancellation or acceleration of any obligation or to
loss of a material benefit under, or result in the creation of a Lien on any of
the properties or assets of TVN, under (A) any provision of the charter
documents or bylaws of TVN or (B) any material agreement, contract, note,
mortgage, indenture, lease, instrument, permit, concession, franchise or license
to which TVN is a party or by which TVN or its properties or assets may be bound
or affected.
(iii) No consent, approval, order or authorization of, or
registration, declaration or filing with, any Governmental Entity is required by
or with respect to TVN in connection with the execution and delivery of this
Agreement, the Supplemental Agreements to which it is a party or the Loan
Documents or the consummation by TVN of the transactions contemplated hereby and
thereby except for such consents, approvals, orders, authorizations,
registrations, declarations and filings which if not obtained or made would not
have a Material Adverse Effect on TVN or on TVN's ability to fulfill its
obligations hereunder and under the Supplemental Agreements to which it is a
party or the Loan Documents.
(c) SEC Documents; TVN Financial Statements. TVN has furnished or made
---------------------------------------
available to Xxxxx-Xxxxxx a true and complete copy of its Registration Statement
on Form S-4 and the amendments filed to date to such Registration Statement
(collectively, the "SEC Documents"), which TVN filed under the Securities Act of
1933, as amended (the "Securities Act"), with the Securities and Exchange
Commission (the "SEC"). As of their respective filing dates, the SEC Documents
complied in all material respects with the requirements of the Securities Act,
and none of the SEC Documents contained any untrue statement of a material fact
or omitted to state a material fact required to be stated therein or necessary
in order to make the statements made therein, in light
-26-
of the circumstances under which they were made, not misleading, except to the
extent corrected by a document subsequently filed by or on behalf of TVN with
the SEC and included in the SEC Documents. The consolidated financial statements
of TVN, including the notes thereto, included in the SEC Documents (the "TVN
Financial Statements") are complete and correct, comply as to form in all
material respects with applicable accounting requirements and with the published
rules and regulations of the SEC with respect thereto, have been prepared in
accordance with GAAP applied on a consistent basis throughout the periods
involved (except as may be indicated in the notes thereto or, in the case of
unaudited statements, as permitted by the SEC's rules and regulations), and
fairly present the consolidated financial position of TVN and the results of its
operations and cash flows as of the respective dates and for the periods
indicated thereon (subject, in the case of the unaudited statements, to normal
recurring accounting adjustments). There has been no change in TVN's accounting
policies or estimates except as described in the notes to the TVN Financial
Statements.
(d) No Material Adverse Change. Since March 31, 1999, TVN has
--------------------------
conducted its business in the ordinary and usual course and there has not
occurred: (a) any material adverse change in the financial condition, results of
operations, liabilities, assets (including intangible assets), business of TVN
and its Subsidiaries, taken as a whole; (b) any amendment or change in the
Certificate of Incorporation or Bylaws of TVN; or (c) any damage to, destruction
or loss of any assets of TVN or its Subsidiaries (whether or not covered by
insurance) that materially and adversely affects the financial condition or
business of TVN and its Subsidiaries, taken as a whole.
(e) Litigation. There is no action, suit or proceeding of any nature
----------
pending or to TVN's Knowledge, threatened against TVN or any Subsidiary, nor, to
the Knowledge of TVN, is there any reasonable basis therefor which could
reasonably be expected to result in a Material Adverse Effect on TVN or TVN's
ability to fulfill its obligations hereunder and under the Supplemental
Agreements to which it is a party and the Loan Documents.
(f) Compliance with Law. TVN and each of its Subsidiaries is in
-------------------
compliance and has conducted its business so as to comply with all laws, rules
and regulations, judgments, decrees or orders of any Governmental Entity
applicable to its operations or with respect to which compliance is a condition
of engaging in the business thereof, except to the extent that failure to comply
would, individually or in the aggregate, not have had and is excepted not to
have a Material Adverse Effect on TVN or TVN's ability to fulfill its
obligations hereunder and under the Supplemental Agreements to which it is a
party and the Loan Documents. There are no material judgments or orders,
injunctions, decrees, stipulations or awards (whether rendered by a court or
administrative agency or by arbitration), other than those (to the Knowledge of
TVN) that are applicable to the industry as a whole, against TVN, its
Subsidiaries or other affiliates regarding TVN's or any of its Subsidiaries'
business or against any of TVN's or any of its Subsidiaries' respective
properties or business.
(g) No Defaults. TVN is not, nor has it received notice that it would
-----------
be with the passage of time, (i) in violation of any provision of the
Certificate of Incorporation or Bylaws of TVN or (ii) in default or violation of
any material term, condition or provision of (A) any material judgement, decree,
order, injunction or stipulation applicable to TVN or (B) any material
agreement,
-27-
note, mortgage, indenture, contract, lease or instrument, permit, concession,
franchise or license to which TVN is a party or by which TVN or its properties
or assets may be bound.
(h) Brokers. No agent, broker, investment banker or other firm or
-------
person is or will be entitled to any Broker's or Finder's Fee by reason of any
action for or on behalf of TVN in connection with any of the transactions
contemplated by this Agreement.
(i) No Violations of Representations. Neither TVN nor any of its
--------------------------------
officers, directors or agents has knowledge that any of the representations and
warranties made by Xxxxx-Xxxxxx and GRTV herein are inaccurate or incomplete or
that a breach of any such representation or warranty has occurred or is
occurring. Neither TVN nor any of its 6fficers, directors or agents has failed
to disclose to Xxxxx-Xxxxxx and GRTV the fact of such inaccurate or incomplete
representation or warranty, or that a breach has occurred, or failed to give
Xxxxx-Xxxxxx and GRTV the opportunity to correct such inaccurate or incomplete
representation or warranty or to cure such breach.
(j) Disclosure. With respect to this Section 2.5, no representation or
----------
warranty made by TVN, nor the TVN Disclosure Schedule and other Schedules to
this Agreement or the Exhibits to this Agreement contains as of the Execution
Date hereof any untrue statement of a material fact or omits as of the Execution
Date to state a material fact necessary to make the statements or facts
contained herein or therein not misleading in light of the circumstances under
which they were furnished.
ARTICLE III
POST-CLOSING COVENANTS
3. 1 Expenses. All costs and expenses incurred in connection with this
--------
Agreement and the transactions contemplated hereby shall be paid by the party
incurring such expense other than as set forth in Section 3.4 hereof.
3.2 Public Announcements. TVN, Newco, Xxxxx-Xxxxxx and GRTV agree that
--------------------
none of them shall, nor shall they permit their affiliates to: (i) issue any
press release or make any public announcement with respect to this Agreement or
the transactions contemplated by this Agreement or (ii) publicly file all or any
part of this Agreement or the Exhibits hereto or any description thereof, except
as may be required by any applicable law, governmental rule or regulation
(including for this purposes any rules of any securities exchange on which
shares of stock of TVN are or may be traded), except with the prior consultation
with, review of and consent by Xxxxx-Xxxxxx or TVN, as the case may be. If any
party is subject to any such legal or regulatory requirement, such party shall,
to the extent possible, allow the other party (TVN or Xxxxx-Xxxxxx, as the case
may be), reasonable time to review and comment on such release, announcement or
filing in advance of its issuance or filing and use reasonable efforts in good
faith to accept the reasonable and good faith comments of such other party;
provided, however, that prior to the filing of this Agreement with the
Securities and Exchange Commission, should such filing be necessary, no such
prior review by the other party shall be required. It is the intention of the
parties that the initial announcement of the execution of this Agreement or the
transactions contemplated hereby shall be a joint press release of the parties
and
-28-
that the contents of such press release shall be agreed upon as of the date
hereof by each of the parties.
3.3 [Intentionally Deleted].
3.4 Transfer Taxes. TVN and Newco shall be responsible for and shall pay
--------------
and discharge promptly when due all sales, use, excise, value added or other
similar transfer taxes (the "Transfer Taxes") related to the sale of the GRTV
Assets to Newco. Xxxxx-Xxxxxx, GRTV, TVN and Newco shall cooperate in good faith
to take all reasonable steps to reduce or eliminate any transfer taxes,
including, where available, electronic transmission and delivery of the GRTV
Assets; provided, however, that in no event shall Guthy~Renker or GRTV be
required to pay or incur any out of pocket costs or expenses in connection
therewith.
3.5 GRTV Employees. Effective as of the Execution Date, TVN will offer
--------------
employment to all those persons who are GRTV Employees on such date (including
employees on leave, disability or workers compensation) and such employment will
be on substantially the same terms and conditions (including without
limitation, the same base pay and comparable benefits in the aggregate) as
currently in effect with GRTV; provided, however that such Employees shall be
entitled only to the salary structure and those benefits generally available to
similarly situated employees of TVN and its Subsidiaries; and provided further
that the terms of the offers of employment to Xxxxxx, Xxxxx and Xxxxxx Xxxxxx
shall be governed by employment agreements between Newco and such individuals.
The benefits to be provided to the Employees shall recognize all service
recognized by GRTV for all purposes to the extent permitted by law. The
employment of all Employees with Newco will be deemed to have commenced
immediately after 11:59 p.m., Los Angeles local time, on the Execution Date.
Xxxxx-Xxxxxx and GRTV agree to (i) terminate the employment with GRTV of the
Employees who have agreed to become employees of Newco at Closing and to pay any
and all liabilities relating to such termination, including, without limitation
any payments and benefits due such Employees pursuant to accrued salary and
wages, pension, retirement, savings, health, welfare and other benefits of the
Employees under any Xxxxx-Xxxxxx or GRTV plans, policies or practices,
(provided, however, that Newco shall be responsible for and shall pay any and
all severance payments payable to Employees hired by Newco hereunder and
relating to their employment by Newco (the "Post Closing Severance Obligation"),
and all bonuses and accrued vacation to Employees included in the GRTV
Liabilities); such payment to be made in a manner consistent with GRTV's
policies and procedures applicable to its employees, and (ii) provide to each
Employee any notice (which notice shall be reasonably acceptable to TVN and
Newco) required under any law or regulations in respect of such termination
including, without limitation COBRA. Xxxxx-Xxxxxx and Newco shall be responsible
for providing continuation health coverage, to the extent required under COBRA,
to all Employees and their eligible dependents who have experienced a qualifying
event before or on the Execution Date and who (i) elect continuation coverage
within the time period prescribed by COBRA and (ii) who are otherwise qualified
beneficiaries (as defined in Section 4980B(g)(l) of the Code).
3.6 GRTV Designations. The parties hereto agree that during the period
-----------------
commencing as of the Effective Closing Date and continuing until the one (1)
year anniversary date thereof, Newco
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shall have the right to use the trademarks and tradenames "GRTV" and "GRTV
Network" as identified in Schedule 2.1(n), Item 1 (collectively, the "GRTV
Designations") solely in connection with the operation of the GRTV Business by
Newco consistent with the use of the GRTV Designations by GRTV on the Execution
Date; provided, however, that in no event shall the GRTV Designations be used in
connection with the pay per view business of TVN and/or its affiliates. TVN and
Newco agree to use their best efforts to (i) cause the GRTV Designations used by
Newco hereunder to be changed to exclude the name "Xxxxx-Xxxxxx" and (ii) cause
Newco to oversticker or replace any document, packaging, advertisement or other
reference to the GRTV Designations, in either case including any variation or
stylized version of such GRTV Designations in both cases as soon as practicable
after the Execution Date and in all events on or to the first anniversary of
the Effective Closing Date. However, TVN and Newco shall have no obligation to
make any changes to any document, packaging, advertisement or other reference to
Xxxxx-Xxxxxx or the GRTV Designations that have been delivered to any supplier,
customer or creditor of GRTV by Xxxxx-Xxxxxx or GRTV prior to the Execution
Date.
3.7 Access to Books, Records and Employees. Xxxxx-Xxxxxx and GRTV shall
--------------------------------------
provide to TVN and Newco, and Newco and TVN shall provide to Xxxxx-Xxxxxx and
GRTV, and any of such parties' professional advisors upon prior notice access to
the books and records of Newco and GRTV, as the case may be, and to employees of
Newco and GRTV, as the case may be, as may be reasonably necessary or take any
actions necessary to fulfill their obligations pursuant to this Agreement, the
Supplemental Agreements and the Loan Documents.
3.8 Financial Information and Reports. Until the Promissory Note is paid
---------------------------------
in full, TVN and Newco shall furnish to Xxxxx-Xxxxxx:
(a) as soon as available and in any event within forty-five (45) days
after the end of each interim fiscal quarter of each fiscal year of TVN, a
consolidated and consolidating balance sheet of TVN and its subsidiaries as of
the end of such interim fiscal period, and a consolidated and consolidating
statement of earnings and shareholders' equity of TVN and its subsidiaries for
such fiscal period and for the period beginning on the first day of such fiscal
year and ending on the date of such balance sheet, setting forth in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail and certified by the chief financial
officer of TVN;
(b) as soon as available and in any event within ninety (90) days
after the last day of each fiscal year of TVN, consolidated and consolidating
financial statements which have been examined by TVN's regular independent
public accountants of recognized standing, covering the operations of TVN and
its subsidiaries as of the end of such year, and a consolidated and
consolidating statement of earnings, shareholders' equity and changes in
financial position for TVN and its subsidiaries for the year then ended, each on
a comparative basis with corresponding financial statements for the preceding
fiscal year, which financial statements shall be accompanied by a report of such
independent public accountants stating in substance that such financial
statements have been prepared in accordance with GAAP consistently applied;
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(c) promptly upon any officer of TVN learning of the same, notice of
the occurrence of any material change in the financial status of TVN, and notice
of the initiation of any litigation against TVN which could, if adversely
determined, have a Material Adverse Effect on the GRTV Assets, the financial
condition or operations of TVN or TVN's ability to fulfill its obligations under
this Agreement, the Supplemental Agreements to which TVN is a party and/or the
Loan Documents.
3.9 Benefit Plans. Xxxxx-Xxxxxx and GRTV will retain responsibility for
-------------
any and all retention payments and reporting thereof owed pursuant to any and
all retention plans, programs and arrangements of GRTV existing prior to Closing
(the "Incentive Plans") and any amounts payable or to be paid in connection with
all of GRTV's outstanding stock appreciation rights and phantom stock rights
including, but not limited to, those granted pursuant to the 1996 Incentive Plan
(collectively, the "Rights Plans"), except for (and in connection with) the
bonuses and vacation included in the GRTV Liabilities. To the extent applicable,
Xxxxx-Xxxxxx and GRTV will retain liability for payment and reporting of all
withholding related to any stock appreciation rights payable or due to the
Employees owed pursuant to any and all Rights Plans on or prior to the Execution
Date.
ARTICLE IV
CONDITIONS PRECEDENT
4.1 Conditions to Each Party's Obligation at Closing. The respective
------------------------------------------------
obligation of each party under this Agreement shall be subject to the
satisfaction or waiver prior to the Execution Date of the following conditions:
(a) Approvals. All authorizations, consents, orders or approvals of,
---------
or declarations or filings with any Governmental Entity necessary for the
consummation of the transactions contemplated by this Agreement, the
Supplemental Agreements and the Loan Documents shall have been filed, occurred
or been obtained, other than any state or federal security law filings to be
made after the Execution Date or if failure to make such filing or obtain such
approval would not be materially adverse to TVN or Newco taken as a whole.
(b) Legal Action. No temporary restraining order, preliminary
------------
injunction or permanent injunction or other order preventing the consummation of
the transactions contemplated hereby shall have been issued by any Governmental
Entity and remain in effect, and no litigation seeking the issuance of such an
order or injunction, or seeking the imposition against Xxxxx-Xxxxxx, GRTV, TVN
or Newco of substantial damages if the transactions contemplated hereby are
consummated, shall be pending which, in the good faith judgment of Xxxxx-Xxxxxx
and TVN's respective boards of directors or a senior executive of each of the
foregoing (acting upon the advice of their respective counsel) has a reasonable
probability of resulting in such order, injunction or damages. In the event any
such order or injunction shall have been issued, each party agrees to use its
reasonable efforts to have any such injunction lifted.
(c) Statutes. No action shall have been taken, and no statute, rule,
--------
regulation or order shall have been enacted, promulgated or issued or deemed
applicable to the transactions contemplated by this Agreement, by any
Governmental Entity which would (i) make the
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consummation of the transactions contemplated hereby illegal, (ii) prohibit
TVN's or Newco's ownership or operation of all or a material portion of the GRTV
Business or GRTV Assets, or compel TVN, Newco, GRTV or Xxxxx-Xxxxxx, to dispose
of or hold separate all or a material portion of the GRTV Business or GRTV
Assets or (iii) render TVN, Xxxxx-Xxxxxx or GRTV unable to consummate the
transactions contemplated hereby.
(d) Compliance with Laws. At the Execution Date, the purchase of
--------------------
the GRTV Assets by Newco, the assumption of the GRTV Liabilities by Newco, the
execution, delivery and performance of the obligations of each of the parties
set forth in each of the Supplemental Agreements and the Loan Documents, shall
be legally permitted by all laws and regulations to which TVN, Newco,
Xxxxx-Xxxxxx and/or GRTV are subject. Xxxxx-Xxxxxx, GRTV, TVN and Newco shall
have complied with, and the sale of the GRTV Assets shall be effective under,
all applicable federal and state securities laws.
4.2 Conditions of Obligations of TVN and Newco. The obligations of TVN at
------------------------------------------
the Closing are subject to the satisfaction of the following conditions, unless
waived by TVN and Newco:
(a) Representations and Warranties. The representations and
------------------------------
warranties of Xxxxx-Xxxxxx and GRTV set forth in this Agreement shall be true
and correct in all material respects (except for such representations and
warranties which are qualified by their terms by a reference to materiality,
which representations and warranties as so qualified shall be true as written)
as of the Execution Date except as otherwise contemplated by this Agreement and
the Supplemental Agreements.
(b) Execution of Noncompetition Agreement. Xxxxx-Xxxxxx and GRTV
-------------------------------------
shall have executed and delivered to TVN and Newco a Noncompetition Agreement,
in the form set forth as Exhibit D hereto.
(c) GRTV and Xxxxx-Xxxxxx Stockholder Actions. Xxxxx-Xxxxxx shall
-----------------------------------------
have provided evidence satisfactory to TVN of all necessary stockholder
approvals required in connection with the transactions contemplated hereby.
(d) GRTV Employee Agreements and Employee Benefits.
----------------------------------------------
(i) Savings Plan. Xxxxx-Xxxxxx shall have amended the
------------
Xxxxx-Xxxxxx Retirement Savings Plan (the "Savings Plan") to the extent
permissible under applicable law, if and as necessary (A) to cause the active
participation of the Employees who will be employees of Newco as of the day
after the Execution Date therein to cease as of the Execution Date, and (B) to
permit the Employees who will be employees of Newco as of the day after the
Execution Date to elect to take distributions (subject to applicable law) of
their accounts thereunder and, if such Employees so elect, to roll them over,
directly or otherwise, in accordance with applicable law and regulations and (C)
if possible, to provide for the full vesting of all Employees who will be
employees of Newco as of the day after the Execution Date participating in the
Savings Plan.
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(ii) Confidentiality Agreements. Xxxxx-Xxxxxx and GRTV shall
--------------------------
have assigned to Newco its rights with respect to GRTV and the GRTV Intellectual
Property included in the GRTV Assets to any existing nondisclosure and invention
assignment agreements with each current and former employee and consultant of
GRTV.
(e) Compensation Schedules. TVN shall have received a compensation
----------------------
schedule pursuant to the requirements set forth in Section 2.1(w) hereof and in
substantially the form attached hereto as Schedule 2.1(w).
(f) Other Agreements. Each of Xxxxx-Xxxxxx and the Xxxxxx Parties
----------------
shall have executed the Xxxxxx Termination Agreement. Xxxxxx and Newco shall
have entered into the Xxxxxx Employment Agreement. Xxxxx and Newco shall have
entered into the Xxxxx Employment Agreement. TVN, Newco, Xxxxx-Xxxxxx and GRTV
shall have entered into the Transition Services Agreement and the Noncompetition
Agreement.
4.3 Conditions of Obligation of Xxxxx-Xxxxxx and GRTV. The obligations of
-------------------------------------------------
Xxxxx-Xxxxxx and GRTV at the Closing are subject to the satisfaction of the
following conditions unless waived by Xxxxx-Xxxxxx and GRTV:
(a) Representations and Warranties. The representations and
------------------------------
warranties of TVN and Newco set forth in this Agreement shall be true and
correct in all material respects (except for such representations and warranties
which are qualified by their terms by a reference to materiality, which
representations and warranties as so qualified shall be true as written) as of
the Execution Date except as otherwise contemplated by this Agreement, the
Supplemental Agreements and the Loan Documents.
(b) Loan Documents. TVN and Newco shall have executed and delivered
--------------
the Promissory Note and Security Agreement to Xxxxx-Xxxxxx and GRTV.
(c) Supplemental Agreements. TVN and Newco shall have executed and
-----------------------
delivered to Xxxxx-Xxxxxx and GRTV the Transition Services Agreement and the
Noncompetition Agreement, and TVN shall have executed and delivered the Guaranty
to Xxxxx-Xxxxxx and GRTV.
ARTICLE V
INDEMNIFICATION
5.1 Indemnification.
---------------
(a) From and after the Execution Date, Xxxxx-Xxxxxx and GRTV shall
indemnify, defend and hold harmless TVN, Newco and the officers, directors,
employees, shareholders, assigns and successors and the affiliates of the
foregoing persons and entities (individually, a "TVN Indemnified Person" and
collectively, the "TVN Indemnified Persons"), from and against and in respect of
any and all claims, demands, lawsuits, actions, causes of actions,
administrative proceedings (including informal proceedings), losses,
assessments, costs, damages, punitive damages, judgments, liabilities (including
sums paid in settlement of claims), penalties, fines,
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interest (including interest from the date of such damages), and costs and
expenses including reasonable legal fees and disbursements of every kind, nature
and description (collectively "Damages") that are actually incurred by a TVN
Indemnified Person and that arise or result from or relate to, directly or
indirectly, (i) any breach of any of the representations, warranties, and
covenants given or made by Xxxxx-Xxxxxx or GRTV in this Agreement, the
Disclosure Schedule hereto and other Schedules listed herein and (ii) any
Excluded Liabilities.
(b) From and after the Execution Date, TVN and Newco shall indemnify,
defend and hold harmless Xxxxx-Xxxxxx, GRTV and the respective officers,
directors, employees, shareholders, assigns and successors and the affiliates of
the foregoing persons and entities (individually, a "Xxxxx-Xxxxxx Indemnified
Person" and collectively, "Xxxxx-Xxxxxx Indemnified Persons") from and against
and in respect of any and all Damages that are actually incurred by a
Xxxxx-Xxxxxx Indemnified Person and that arise or result from or relate to,
directly or indirectly, (i) any breach of any of the representations,
warranties, and covenants given or made by TVN or Newco in this Agreement, the
TVN Disclosure Schedule and other Schedules listed herein, (ii) the GRTV
Liabilities, the use of the GRTV Assets, the GRTV Designations and the operation
of the GRTV Business by Newco, TVN or any of their respective affiliates after
the Execution Date (including, without limitation, the Post Closing Severance
Obligation), and (iii) all other actions taken or omitted to be taken by TVN or
Newco after the Execution Date.
(c) The TVN Indemnified Persons and the Xxxxx-Xxxxxx Indemnified
Persons shall be referred to herein as the "Indemnified Persons."
(d) For purposes of this Agreement, Damages shall be net of
insurance, indemnities or other third-party payments recovered by an Indemnified
Person (it being agreed that an Indemnified Person shall use commercially
reasonable efforts to pursue such recoveries), net of out-of-pocket costs of
obtaining any such recovery, and in no event shall Damages include any special,
consequential or similar damages, regardless of the foreseeability of such
damages. In determining the amount of any Damages under this Section 5, there
shall be (i) deducted an amount equal to the present value of any income or
similar Tax benefit (whether federal, state, local or otherwise) that is, or
would reasonably expected to be, realized by the Indemnified Person by reason of
such Damages during the current and future taxable periods; and (ii) added an
amount equal to the amount of Tax, if any, which will be payable by the
Indemnified Person (including any Tax payable by the Indemnified Person by
reason of any additional payments pursuant to this clause (ii)) with respect to
any indemnification payment made pursuant to this Section 5. Present value of
the income or similar Tax benefit shall be calculated using the applicable
federal mid-term interest rate in effect for the month in which the payment of
the Damages is to be made as published by the Internal Revenue Service in the
Internal Revenue Bulletin.
5.2 Limitations and Expiration. Notwithstanding the above:
--------------------------
(a) There shall be no liability for indemnification under this
Section 5 unless and until the aggregate amount of all Damages claimed by the
Xxxxx-Xxxxxx Indemnified Persons or the TVN Indemnified Persons, as the case may
be, exceeds $250,000, and all liability for such
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Indemnified Persons' Damages under this Section 5 shall exclude the first
$250,000 of such Indemnified Persons' Damages once such threshold has been
exceeded. The foregoing limitations shall not apply to Claims or Damages with
respect to Taxes under Section 2.1(h), clause (ii) of 5.1(a) or clauses (ii) and
(iii) of 5.1(b).
(b) The maximum liability for Damages under this Section 5 payable by
Xxxxx-Xxxxxx and GRTV to the TVN Indemnified Persons shall be an aggregate of
the lesser of $4.5 million or the amounts paid by TVN or Newco under the
Promissory Note, except with respect to Claims relating to Taxes in Section
2.1(h) or any of the Excluded Liabilities, and an aggregate of $4.5 million
payable by TVN and Newco to the Xxxxx-Xxxxxx Indemnified Persons, except with
respect to Claims relating to clauses (ii) and (iii) of Section 5.1(b).
Indemnification under this Section 5 shall be the exclusive remedy of the TVN
Indemnified Persons or the Xxxxx-Xxxxxx Indemnified Persons, as the case may be,
and shall be in lieu of any statutory, other contractual, equitable or common
law remedy any party may have for a breach of a representation, warranty or
covenant contained herein, and all such other rights and remedies are hereby
irrevocably waived, other than (i) any non-monetary remedy pursuant to Section
6.2 (except for recission or similar remedies), (ii) any cause of action by any
party to this Agreement with respect to the fraudulent inducement of this
Agreement and (iii) any Claim or cause of action by a Xxxxx-Xxxxxx Indemnified
Person relating to TVN's or Newco's failure to pay the Promissory Note pursuant
to its terms and conditions (other than any right of offset TVN or Newco may
have hereunder) or failure to perform any of their other obligations under the
Loan Documents.
(c) The indemnification obligations under this Section 5 shall
terminate on the later of (i) 18 months after the Execution Date, except in the
case of indemnification obligations of TVN and Newco with respect to the payment
of the Promissory Note (or with respect to any of their obligations under the
other Loan Documents) or the issuance of TVN Common Stock upon conversion or
payment thereof, which shall survive until such time as the Promissory Note is
paid in full, less the amount of any Approved Claim properly offset by TVN or
Newco in accordance with Section 5.3 hereof, or such shares of TVN Common Stock
have been issued (the "Indemnification Deadline Date"), or (ii) with respect to
any and all claims for Damages ("Claims") under this Agreement pending as of the
Indemnification Deadline Date ("Pending Claims"), the final resolution of such
Pending Claims; provided, however, that the indemnification obligations of TVN
and Newco hereunder relating to Claims under clauses (ii) and (iii) of Section
5.1(b) shall survive indefinitely. Notwithstanding anything to the contrary in
this Section 5, the Promissory Note may only be used to pay indemnification
obligations in accordance with Section 5.3 hereof based on Claims made by the
TVN Indemnified Persons on or prior to the date that is 18 months after the
Execution Date (the "Release Date"), and all amounts due at such time shall be
paid and released to Xxxxx-Xxxxxx and GRTV pursuant to the terms of the
Promissory Note. Notwithstanding anything to the contrary in the foregoing, the
indemnification obligations in this Section 5 shall terminate upon the
expiration of the applicable statute of limitations for (i) Xxxxx-Xxxxxx and
GRTV with respect to representations, warranties and covenants with respect to
the Taxes set out in Section 2.1(h) and (ii) TVN and Newco with respect to the
covenants regarding Taxes set out in Section 3.4.
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5.3 Indemnity Offset Against Promissory Note. TVN and Newco shall have the
----------------------------------------
right to offset, on a dollar for dollar basis, any "Approved Claim" (as defined
herein) for indemnification under this Section 5 (subject to the limitations
set forth in this Section 5) against any amounts payable to GRTV under the
Promissory Note; provided that such right of offset shall terminate on the
Release Date. Any offset made in accordance with the provisions of this
Section 5.3 shall be made by written notice from TVN to Xxxxx-Xxxxxx included in
the TVN Officer's Certificate in accordance with Section 5.4(b) hereof. For
purposes hereof, the term "Approved Claim" includes only (i) a Claim with
respect to which (and only to the extent) Xxxxx-Xxxxxx fails to timely object
pursuant to Section 5.4(c) hereof, and (ii) any other Claim which is finally
resolved, pursuant to Sections 5.4(d) and 6.2 hereof, in a manner requiring GRTV
and/or Xxxxx-Xxxxxx to pay Damages pursuant to this Section 5.
5.4 Representative of Xxxxx-Xxxxxx; Claims By the TVN Indemnified Persons.
---------------------------------------------------------------------
(a) Xxxxx-Xxxxxx'x Chief Financial Officer (or such other
representative designated by Xxxxx-Xxxxxx) shall be appointed by Xxxxx-Xxxxxx as
its agent for and on its behalf to give and receive notices and communications,
to authorize delivery to any TVN Indemnified Person of the amounts due in
satisfaction of Claims, to object to such deliveries, to agree to, negotiate,
enter into settlements and compromises of, and demand arbitration and comply
with orders of courts and awards or arbitrators with respect to such Claims, and
to take all actions necessary or appropriate in the judgement of such Xxxxx-
Xxxxxx officer for the accomplishment of the foregoing.
(b) Subject to Section 5.6 hereof, upon receipt by Xxxxx-Xxxxxx'x
Chief Financial Officer (or such other representative designated by Xxxxx-
Xxxxxx) (with a copy to Xxxxx-Xxxxxx'x General Counsel) at any time prior to the
Indemnification Termination Date of a certificate signed by an officer of TVN (a
"TVN Officer's Certificate") providing notice of any Claim and specifying in
reasonable detail the date such Damages were paid, incurred or otherwise arose,
the nature of the misrepresentation or breach to which such Damages are related,
the dollar amount of such Damages and the delivery instructions, if any, to be
followed by Xxxxx-Xxxxxx in paying out such Claim (and, prior to the Release
Date, stating whether all or any portion of such Damages will be offset against
any amounts payable to GRTV under the Promissory Note pursuant to Section 5.3
hereof), Xxxxx-Xxxxxx shall deliver to the TVN Indemnified Person an amount
equal to such Damages (less the amount of any such Damages properly offset in
accordance with Section 5.3 hereof by TVN or Newco against amounts payable under
the Promissory Note), as promptly as practicable, but no later than 30 days
after receipt of the TVN Officer's Certificate provided that no such payment or
delivery shall be made if Xxxxx-Xxxxxx delivers written notice to TVN prior to
the expiration of such 30 day period that Xxxxx-Xxxxxx disputes in good faith
the Claim set forth in the TVN Officer's Certificate, with the basis for such
dispute set forth in reasonable detail except as otherwise provided in Section
5.4(c) below. Xxxxx-Xxxxxx and GRTV shall be entitled to conclusively rely on
such TVN Officer's Certificate and shall make distributions only in accordance
with the terms thereof.
(c) Objections to Claims. For a period of 30 days after receipt of
--------------------
the TVN Officers' Certificate delivered in accordance with the terms hereof,
neither Xxxxx-Xxxxxx nor GRTV
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shall make delivery of the amounts requested in the Claim. After the expiration
of such 30 day period, Xxxxx-Xxxxxx shall without further notice or
authorization of any kind, make delivery of the amount of Damages in accordance
with Section 5.4(b).
(d) Resolution of Conflicts: Arbitration. In case Xxxxx-Xxxxxx
------------------------------------
objects in writing to any Claim made in any TVN Officer's Certificate as
described in Section 5.4(b).
(i) TVN shall have 30 days to respond in a written statement
to the objection of Xxxxx-Xxxxxx. If after such 30 day period there remains a
dispute as to any Claims, TVN and Xxxxx-Xxxxxx shall attempt in good faith for
60 days to agree upon the rights of the respective parties with respect to each
of such Claims. If Xxxxx-Xxxxxx and TVN should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties.
(ii) If no such agreement can be reached after good faith
negotiation, either TVN or Xxxxx-Xxxxxx may, by written notice to the other,
demand resolution of the matter in accordance with Section 6.2 hereof, unless
the amount of the Damage is at issue in pending litigation with a third party
(subject to Section 5.6 hereof), in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration.
(e) Xxxxx-Xxxxxx and GRTV shall have reasonable access to
information retained by TVN and Newco after the Execution Date about the GRTV
Assets and the GRTV Business and the reasonable assistance of TVN's and Newco's
officers and employees for purposes of performing its duties and exercising its
rights hereunder, provided that Xxxxx-Xxxxxx shall treat confidentially and not
disclose any non-public information from or about TVN or Newco to anyone other
than Xxxxx-Xxxxxx, GRTV and their officers, directors, employees,
representatives and agents or the arbitrators appointed pursuant to Section
6.2(b), except (i) on a need to know basis to individuals who agree to treat
such information confidentially, (ii) as may be required by law or order of any
Governmental Entity or (iii) as may be necessary or desirable in connection with
any third party claim pursuant to Section 5.6 hereof.
(f) Actions of Agent. A decision, act, consent or instruction of
----------------
TVN, taken with respect to this Section 5.4 shall constitute a decision of all
the TVN Indemnified Persons and shall be final, binding and conclusive upon each
of the TVN Indemnified Persons, and Xxxxx-Xxxxxx and GRTV may rely upon any
decision, act, consent or instruction of TVN taken in such manner as being the
decision, act, consent or instruction of each and every such TVN Indemnified
Person. Xxxxx-Xxxxxx are hereby relieved from any liability to any person for
any acts done by them in accordance with such decision, act, consent or
instruction of TVN taken in such manner.
5.5 Representative of TVN and Newco; Claims By the Xxxxx-Xxxxxx
-----------------------------------------------------------
Indemnified Persons.
-------------------
(a) TVN's Chief Financial Officer (or other representative
designated by TVN) shall be appointed by TVN and Newco as their agent for and on
their behalf to give and receive notices and communications, to authorize
delivery to any Xxxxx-Xxxxxx Indemnified Person of the amounts due in
satisfaction of claims, to object to such deliveries, to agree to, negotiate,
enter into
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settlements and compromises of, and demand arbitration and comply with orders of
courts and awards or arbitrators with respect to such claims, and to take all
actions necessary or appropriate in the judgement of such TVN officer for the
accomplishment of the foregoing.
(b) Subject to Section 5.6 hereof, upon receipt by the Chief
Financial Officer (or other representative designated by TVN and Newco) at any
time prior to the Indemnification Termination Date of a certificate signed by an
officer of Xxxxx-Xxxxxx (a "Xxxxx-Xxxxxx Officer's Certificate") providing
notice of any Claim and specifying in reasonable detail the date such Damages
were paid, incurred or otherwise arose, the nature of the misrepresentation or
breach to which such Damages are related, the dollar amount of such Damages and
the delivery instructions to be followed by TVN in paying out such Claim, TVN
shall deliver to Xxxxx-Xxxxxx an amount equal to such Damages, as promptly as
practicable, but no later than 30 days after receipt of the Xxxxx-Xxxxxx
Officer's Certificate, provided that no such payment or delivery shall be made
if TVN delivers written notice to Xxxxx-Xxxxxx prior to the expiration of such
30 day period that TVN disputes in good faith the Claim set forth in the
Xxxxx-Xxxxxx Officer's Certificate, with the basis for such dispute set forth in
reasonable detail.
(c) Objections to Claims. For a period of 30 days after receipt of
--------------------
the Xxxxx-Xxxxxx Officer's Certificate delivered in accordance with the terms
hereof, TVN shall make no delivery of the amounts requested in the Claim. After
the expiration of such 30 day period, TVN shall, without further notice or
authorization of any kind, make delivery of the amount of Damages in accordance
with Section 5.5(b).
(d) Resolution of Conflicts; Arbitration. In case TVN objects in
------------------------------------
writing to any Claim made in any Xxxxx-Xxxxxx Officer's Certificate as described
in Section 5.5(b).
(i) Xxxxx-Xxxxxx shall have 30 days to respond in a written
statement to the objection of TVN. If after such 30 day period there remains a
dispute as to any Claims, Xxxxx-Xxxxxx and TVN shall attempt in good faith for
60 days to agree upon the rights of the respective parties with respect to each
of such Claims. If Xxxxx-Xxxxxx and TVN should so agree, a memorandum setting
forth such agreement shall be prepared and signed by both parties.
(ii) If no such agreement can be reached after good faith
negotiation, either TVN or Xxxxx-Xxxxxx may, by written notice to the other,
demand resolution of the matter in accordance with Section 6.2 hereof, unless
the amount of the Damage is at issue in pending litigation with a third party
(subject to Section 5.6 hereof), in which event arbitration shall not be
commenced until such amount is ascertained or both parties agree to arbitration.
(e) TVN and Newco shall have reasonable access to information
retained by Xxxxx-Xxxxxx and GRTV after the Closing Date about GRTV, the GRTV
Assets and the GRTV Business and the reasonable assistance of Xxxxx-Xxxxxx'x and
GRTV's officers and employees for purposes of performing its duties and
exercising its rights as agent for TVN and Newco, provided that TVN or GRTV
shall treat confidentially and not disclose any non-public confidential
information from or about Xxxxx-Xxxxxx to anyone other than TVN, Newco and their
officers, directors, employees, representatives and agents or the arbitrators
appointed pursuant to
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Section 6.2(b), except (i) on a need to know basis to individuals who agree to
treat such information confidentially, (ii) as may be required by law or order
of any Governmental Entity, or (iii) as may be necessary or desirable in
connection with any third party claim pursuant to Section 5.6 hereof.
(f) Actions of Agent. A decision, act, consent or instruction of
----------------
Xxxxx-Xxxxxx, taken with respect to this Section 5.5 shall constitute a decision
of all the Xxxxx-Xxxxxx Indemnified Persons and shall be final, binding and
conclusive upon each of the Xxxxx-Xxxxxx Indemnified Persons, and TVN and Newco
may rely upon any decision, act, consent or instruction of Xxxxx-Xxxxxx taken in
such manner as being the decision, act, consent or instruction of each and every
such Xxxxx-Xxxxxx Indemnified Person. TVN and Newco are hereby relieved from any
liability to any person for any acts done by them in accordance with such
decision, act, consent or instruction of Xxxxx-Xxxxxx taken in such manner.
5.6 Third Party Claims. If any action, suit, investigation or other legal
------------------
proceeding shall be commenced, or any claim or demand shall be asserted, by a
third party (each, a "Third Party Claim") against a Xxxxx-Xxxxxx Indemnified
Person or TVN Indemnified Person, as the case may be, the Indemnified Person
shall give written notice (the "Third Party Claim Notice"), within ten (10) days
following receipt of such Third Party Claim, to the parties obligated to provide
indemnification hereunder (the "Indemnifying Person"). Such Third Party Claim
Notice shall state the nature and the basis of such Third Party Claim, and a
reasonable estimate of the amount thereof, and shall include a copy of any
written claim, process or legal proceeding. If the failure to give such Third
Party Claim Notice materially and adversely affects the Indemnifying Person's
ability to assume and successfully defend such Third Party Claim, such notice
shall be a condition precedent to any liability of the Indemnifying Person under
this Section 5.
(a) The Indemnifying Person shall have the right to assume (by notice
to the Indemnified Person within (15) days after receipt of the Third Party
Claim Notice), at its sole cost and expense, entire control of the defense,
compromise and settlement of such Third Party Claim, subject to the right of the
Indemnified Person to participate (at its own cost and expense and with counsel
of its choice) in the defense thereof. If the Indemnifying Person assumes
control of the Third Party Claim, the Indemnified Person shall cooperate fully
in all respects with the Indemnifying Person in any such defense, compromise or
settlement, including, without limitation, by making available to the
Indemnifying Person all pertinent information and all books and records under
the control of the Indemnified Person. The Indemnifying Person shall keep the
Indemnified Person fully informed of the status of such Third Party Claim until
its resolution or settlement. The Indemnifying Person shall not compromise or
settle any such Third Party Claim without the prior written approval of the
Indemnified Person; provided, however, that if such prior written approval is
withheld by the Indemnified Person, the liability of the Indemnifying Person
with respect to such Claim shall be limited to the amount of the settlement
recommended by the Indemnifying Person and not approved by the Indemnified
Person in defending such Third Party Claim.
(b) If the Indemnifying Person elects not to assume the defense of a
Third Party Claim within the fifteen (15) day period set forth above, the
Indemnified Person shall control the
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defense, compromise and settlement of such Third Party Claim, and the
Indemnifying Person will be entitled to participate (at its sole cost and
expense and with counsel of its choice) in such defense.
(c) In all events, (a) the Indemnified Person shall not admit any
liability with respect to, or settle, compromise or discharge, any Third Party
Claim without the Indemnifying Person's prior written consent, and (b) neither
party shall, without the written consent of the other parties, settle or
compromise or consent to the entry of any judgment with respect to any Third
Party Claim if the effect thereof is to admit any criminal liability by, or to
permit any injunctive relief or other order providing non-monetary relief to be
entered against, the other parties.
5.7 Survival of Representations, Warranties and Covenants. For the
-----------------------------------------------------
purposes of asserting Claims under this Section 5;
(a) all representations, warranties and covenants made by Xxxxx-Xxxxxx
and GRTV in or pursuant to this Agreement will survive the Closing and will
remain in effect until the later of (i) the Indemnification Deadline Date,
(ii) the final resolution of any and all Pending Claims, provided that from and
after the Indemnification Deadline Date, such indemnification obligations shall
survive only to the extent of such Pending Claims and (iii) with respect to the
representations, warranties and covenants with respect to the Taxes set out in
Section 2.1(h), until expiration of the applicable statute of limitations; and
(b) all representations, warranties and covenants made by TVN and
Newco and covenants made by TVN or Newco to be performed after the Closing will
survive the Closing and will remain in effect until the later of (i) the
Indemnification Deadline Date, (ii) the final resolution of any and all Pending
Claims, provided that from and after the Indemnification Deadline Date, such
indemnification obligations shall survive only to the extent of such Pending
Claims, (iii) with respect to the covenants with respect to Taxes set out in
Section 3.4, until expiration of the applicable statute of limitations and
(iv) with respect to Claims under clauses (ii) and (iii) of Section 5.1(b),
indefinitely.
ARTICLE VI
GENERAL PROVISIONS
6.1 Extension; Waiver. At any time, each of Xxxxx-Xxxxxx, GRTV, TVN and
-----------------
Newco by action taken by its board of directors or duly authorized officer, may,
to the extent legally allowed, (i) extend the time for the performance of any of
the obligations or other acts of the other, (ii) waive any inaccuracies in the
representations and warranties made to it contained herein or in any document
delivered pursuant hereto and (iii) waive compliance with any of the agreements
or conditions for the benefit of it contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if set
forth in an instrument in writing signed on behalf of such party.
6.2 Dispute Resolution.
------------------
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(a) If any claim, demand, issue or dispute arises between TVN or
Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as the case may be,
regarding this Agreement or the transactions contemplated hereby (each, a
"Dispute"), the persons named in the notice provisions of Section 6.3 for each
interested party shall attempt in good faith to resolve the Dispute. If those
individuals have not agreed to a resolution within fifteen (15) days from the
date on which the Dispute was first presented to them, any party, by written
notice to the other parties, may require that the Dispute be submitted for
resolution to the Chief Financial Officer of each of Xxxxx-Xxxxxx and TVN. The
Chief Financial Officers shall meet, in person or by other means satisfactory to
them, to attempt to resolve the Dispute within fifteen days after the reference
of the matter to them. If the Chief Financial Officers reach a decision within
such fifteen day period their decision shall be final and binding on the parties
hereto. If the Chief Financial Officers fail to resolve the Dispute within such
period, either of the Chief Financial Officers may refer the matter, on notice
to the other, to the Chief Executive Officers of Xxxxx-Xxxxxx and TVN (the
"Chief Executive Officers"). The Chief Executive Officers shall meet, in person
or by other means satisfactory to them, to attempt to resolve the Dispute within
fifteen days after the reference of the matter to them. If the Chief Executive
Officers reach a decision within such fifteen day period their decision shall be
final and binding on the parties hereto. If the Chief Executive Officers fail to
resolve the Dispute within such period, the matter may be referred by either
party for arbitration as provided in Section 6.2(b).
(b) Arbitration.
-----------
(i) Except as otherwise provided in Section 6.2(a) hereof, in
the event of any Dispute, such Dispute shall be submitted to and resolved by
final and binding arbitration as provided for by the Commercial Arbitration
Rules of the American Arbitration Association ("AAA"). Arbitration shall be the
sole and exclusive method for resolving any Dispute, and each of TVN or Newco,
as the case may be, and Xxxxx-Xxxxxx, GRTV, as the case may be, are giving up
any right that each might otherwise have for a judge or jury to decide the
Dispute subject to Section 6.2(e) hereof.
(ii) If a written request for arbitration is not made within the
limitations periods applicable to a claim under applicable federal or state law,
that Dispute shall be waived. TVN or Newco, as the case may be, and Xxxxx-Xxxxxx
or GRTV, as the case may be, will select an arbitrator by mutual agreement. If
TVN or Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as the case may be,
are unable to agree on a neutral arbitrator, the parties will obtain a list of
seven (7) arbitrators from the AAA. TVN or Newco, as the case may be, and
Xxxxx-Xxxxxx or GRTV, as the case may be, will alternately strike names from the
list, with Xxxxx-Xxxxxx or GRTV, as the case may be, striking first, until only
one name remains. The remaining person shall be the arbitrator. Both TVN and
Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as the case may be, will
have the opportunity to conduct all discovery as provided for in the Federal
Rules of Civil Procedure, and the arbitrator shall have the power to decide any
discovery disputes between the parties. The arbitrator may also hear and decide
motions for summary disposition of any dispute as provided by applicable state
law and other motions.
-41-
(iii) The arbitrator shall conduct a hearing in accordance with
the commercial arbitration rules of the AAA, except as expressly provided herein
or as otherwise agreed by the parties to such Dispute. Within thirty (30) days
following the hearing and the submission of the matter to the arbitrator, the
arbitrator shall issue a written opinion and award, which shall be signed and
dated. The arbitrator's award shall decide all Disputes and issues submitted by
Xxxxx-Xxxxxx or GRTV, as the case may be, and TVN or Newco, as the case may be,
and the arbitrator may not decide any Dispute or issue not submitted. The
arbitrator shall be permitted to award only those remedies in law or equity
which are requested by either TVN or Newco, as the case may be, or Xxxxx-Xxxxxx
or GRTV, as the case may be, and allowed by law, but in no event may any
punitive or exemplary damages be sought or awarded. The cost of the arbitrator
and other incidental costs of arbitration, including the cost of a court
reporter, shall be shared equally by both Xxxxx-Xxxxxx or GRTV, as the case may
be, and TVN or Newco, as the case may be. Each of Xxxxx-Xxxxxx, GRTV, TVN and
Newco shall bear their own costs for legal representation in any arbitration
proceeding, provided, however, that the arbitrator shall have the authority to
require either party to pay the reasonable attorney's fees for the prevailing
party's representation during the arbitration (as determined by the arbitrator),
and the costs of the arbitrator as part of any remedy that may be ordered.
(iv) Arbitration hearings hereunder shall commence within 120
days of the selection of the neutral arbitrator, and such hearings shall take
place in Los Angeles, California. Arbitration proceedings will be conducted
confidentially and all documents, testimony and records shall be received, heard
and maintained by the arbitrator in confidence, available for the inspection
only by the arbitrator, Xxxxx-Xxxxxx, GRTV, TVN and Newco and their respective
attorneys and their respective experts who shall agree in advance and in writing
to receive all such information confidentially and to maintain such information
in confidence. The decree or award rendered by the arbitrator may be entered as
a final and binding judgment in any court having jurisdiction thereof.
(c) All negotiations and proceedings pursuant to Sections 6.2(a) and
(b) shall be confidential and shall be treated as compromise and settlement
negotiations for purposes of the United States Federal Rules of Evidence and any
applicable state rules of evidence provided that any party may specifically
waive these rights of privileges and confidentiality with respect to any
communications it makes pursuant to those sections. No such confidentiality or
privilege shall apply to communications made to any independent accounting firm.
(d) The resolution of any dispute submitted pursuant to
Sections 6.2(a) or (b) shall be final and binding upon the parties to this
Agreement. No party to this Agreement shall initiate, and each party to this
Agreement shall cause its affiliates not to initiate, any legal proceeding,
except as provided in Section 6.2(e), and except to enforce the decisions of the
arbitrator hereunder.
(e) Nothing in this Section 6.2 shall preclude (i) any party from
seeking prearbitral interim or permanent injunctive relief, specific performance
or other equitable remedies in relation to any Disputes (prior to the
appointment of an arbitrator as provided herein) where such party reasonably
believes that such relief is necessary to prevent irreparable harm that cannot
be calculated or fully or adequately compensated by recovery of damages or
(ii) Xxxxx-Xxxxxx and/or
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XXXX from exercising any and all available remedies, in law or equity, pursuant
to or in connection with the Loan Documents.
6.3 Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given when received if delivered personally or
mailed by registered or certified mail (return receipt requested), sent by
telecopy with a copy via earliest overnight delivery and confirmation of
facsimile received, or sent by recognized overnight delivery service, return
receipt requested, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to TVN or Newco, to:
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
(b) if to GRTV or Xxxxx-Xxxxxx to:
Xxxxx-Xxxxxx Corporation
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Knee
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
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with copies to:
Xxxxx-Xxxxxx Corporation
Legal Department
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Bennet Van xx Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxx & Xxxxxxxxx LLP
0000 Xxx Xxxx Xxxxxx XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
6.4 Interpretation. When a reference is made in this Agreement to
--------------
Sections, Schedules or Exhibits, such reference shall be to a Section, Schedules
or Exhibit to this Agreement unless otherwise indicated. The words "include,"
"includes" and "including" when used herein shall be deemed in each case to be
followed by the words "without limitation." The table of contents and headings
contained in this Agreement are for reference purposes only and shall not affect
in any way the meaning or interpretation of this Agreement.
6.5 No Transfer. This Agreement and the rights and obligations set forth
-----------
herein may not be transferred or assigned by operation of law or otherwise
without the consent of each party hereto. This Agreement is binding upon and
will inure to the benefit of the parties hereto and their respective successors
and permitted assigns.
6.6 Severability. If any provision of this Agreement, or the application
------------
thereof, will for any reason and to any extent be invalid or unenforceable, the
remainder of this Agreement and application of such provision to other persons
or circumstances will be interpreted so as reasonably to effect the intent of
the parties hereto. The parties further agree to replace such void or
unenforceable provision of this Agreement with a valid and enforceable provision
that will achieve, to the extent possible, the economic, business and other
purposes of the void or unenforceable provision.
6.7 Other Remedies. Except as otherwise provided herein, any and all
--------------
remedies herein expressly conferred upon a party will be deemed cumulative with
and not exclusive of any other remedy conferred hereby or by law or equity on
such party, and the exercise of any one remedy will not preclude the exercise of
any other.
6.8 Further Assurances. Each party agrees to cooperate fully with the
------------------
other parties and to execute such further instruments, documents and agreements
and to give such further written
-44-
assurances as may be reasonably requested by any other party to evidence and
reflect the transactions described herein and contemplated hereby and to carry
into effect the intents and purposes of this Agreement.
6.9 Absence of Third Party Beneficiary Rights. No provision of this
-----------------------------------------
Agreement is intended, nor will be interpreted, to provide to create any third
party beneficiary rights or any other rights of any kind in any client,
customer, affiliate, stockholder, employee, partner or any party hereto or any
other person or entity unless specifically provided otherwise herein, and,
except as so provided, all provisions hereof will be personal solely between the
parties to this Agreement.
6.10 Mutual Drafting. This Agreement is the joint product of TVN, Newco,
---------------
Xxxxx-Xxxxxx and GRTV, and each provision hereof has been subject to the mutual
consultation, negotiation and agreement of TVN, Newco, Xxxxx-Xxxxxx, and GRTV
and shall not be construed for or against any party hereto.
6.11 Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of
California (without giving effect to its choice of law principles).
6.12 Amendment. This Agreement may not be amended except by an instrument
---------
in writing signed on behalf of each of the parties hereto.
6.13 Scope of Representations and Warranties. Notwithstanding anything
---------------------------------------
herein to the contrary, it is the explicit intent of each party hereto that
neither Xxxxx-Xxxxxx, GRTV, Newco nor TVN is making any representation or
warranty whatsoever, express or implied, beyond those expressly given in this
Agreement, including, but not limited to, in the case of Xxxxx-Xxxxxx and GRTV,
any implied warranty or representation as to condition, merchantability,
suitability or fitness for a particular purpose as to any of the businesses,
properties or assets of GRTV, and it is understood that TVN and Newco take such
business, properties and assets on an "as is" and "where is" basis. It is
understood that any cost estimates, projections or other predictions contained
or referred to in the Schedules hereto and any cost estimates, projections or
predictions or any other information concerning GRTV contained or referred to in
other materials that have been provided to TVN, Newco or any of their
affiliates, agents or representatives are not and shall not be deemed to be
representations or warranties of Xxxxx-Xxxxxx, GRTV or any of their affiliates.
6.14 Schedules; Materiality. An item disclosed in a Schedule hereto in
----------------------
response to one subsection of this Agreement shall be deemed disclosed in
response to any other subsection in which it is required to be disclosed,
provided such disclosure for one subsection would be sufficient for the purpose
of disclosure for such other subsection. It is understood and agreed that
neither the specification of any dollar amount in the representations and
warranties contained in this Agreement nor the inclusion of any specific item in
the Schedules is intended to imply that such amounts or higher or lower amounts,
or the items so included or other items, are or are not material, and neither
party shall use the fact of the setting of such amounts or the fact of the
inclusion of any such item in the Schedules in any dispute or controversy
between the parties as to whether any obligation, item or matter is or is not
material for purposes of this Agreement.
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6.15 Entire Agreement. This Agreement, the Disclosure Schedule and
----------------
other Schedules listed herein and the Exhibits hereto constitute the entire
agreement among the parties with respect to the subject matter hereof and
supersede all prior agreements and understandings, both written and oral, among
the parties with respect to the subject matter hereof (including, without
limitation, (A) that certain letter of intent dated March 5, 1999 and amended as
of April 22, 1999, by and among TVN, Newco, GRTV and Xxxxx-Xxxxxx and (B) that
certain Closing Agreement dated as of July 1, 1999 by and among the parties
hereto) and are not intended to confer upon any other person any rights or
remedies hereunder except as otherwise expressly provided herein.
6.16 Definitions. As used herein, the definitions set forth below shall
-----------
apply:
(a) "AAA" has the meaning set forth in Section 6.2(b).
(b) "Affiliate" has the meaning set forth in Section 2.1(r).
(c) "Aggregate Consideration" has the meaning set forth in
Section 1.2
(d) "Approved Claims" has the meaning set forth in Section 5.3.
(e) "Audited Financial Statements" has the meaning set forth in
Section 2.1(d).
(f) "Xxxx of Sale and Assumption Agreement" has the meaning set forth
in Section 1.3.
(g) "Borrowed Money" has the meaning set forth in Section 2.1(f).
(h) "Broker's or Finder's Fee" has the meaning set forth in
Section 2.1(u).
(i) "Chief Executive Officers" has the meaning set forth in
Section 6.2(a).
(j) "Claims" has the meaning set forth in Section 5.2(c).
(k) "Closing" has the meaning set forth in Section 1.3.
(1) "Code" means the Internal Revenue Code of 1986, as amended.
(m) "Copyright Assignment" has the meaning set forth in Section 1.3.
(n) "Damages" has the meaning set forth in Section 5.1.
(0) "Dispute" has the meaning set forth in Section 6.2.
(p) "Disclosure Schedule" has the meaning set forth in the preamble
to Section 2.1.
(q) "Effective Closing Date" means July 1, 1999.
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(r) "Employee" has the meaning set forth in Section 2.1(r).
(s) "Employee Agreement" has the meaning set forth in Section 2.1(r).
(t) "Employee Plan" has the meaning set forth in Section 2.1(r).
(u) "Environmental Laws" has the meaning set forth in Section 2.1(p).
(v) "Environmental Permits" has the meaning set forth in
Section 2.1(p).
(w) "ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
(x) "Exchange Act" means the Securities Exchange Act of 1934, as
amended.
(y) "Excluded Liabilities" has the meaning set forth in Section 1.5.
(z) "Execution Date" has the meaning set forth in the preamble to
this Agreement.
(aa) "GAAP" means generally accepted accounting principles.
(bb) "Governmental Entity" has the meaning set forth in
Section 2.1(c)(iii).
(cc) "GRC Group" means Xxxxx-Xxxxxx and any other entity controlled
by, controlling or under common control with Xxxxx-Xxxxxx, including GRTV.
(dd) "GRC Intercompany Accounts" has the meaning set forth in
Section 1.5.
(ee) "GRC Lines of Credit" has the meaning set forth in Section 1.5
hereof.
(ff) "GRTV" means Xxxxx-Xxxxxx Television Network, Inc., a Delaware
corporation.
(gg) "GRTV Assets" has the meaning set forth in the Recitals to this
Agreement.
(hh) "GRTV Business" has the meaning set forth in the Recitals to this
Agreement.
(ii) "GRTV Designations" has the meaning set forth in Section 3.6.
(jj) "GRTV Financial Statements" has the meaning set forth in
Section 2.1(d).
(kk) "GRTV Intellectual Property" has the meaning set forth in
Section 2.1(n).
(ll) "GRTV Liabilities" has the meaning set forth in Section 1.5.
(mm) "GRTV Permits" has the meaning set forth in Section 2.1(q).
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(nn) "GRTV Returns" has the meaning set forth in Section 2.1(h).
(oo) "Xxxxx-Xxxxxx" means Xxxxx-Xxxxxx Corporation, a Delaware
corporation.
(pp) "Xxxxx-Xxxxxx Indemnified Person" has the meaning set forth in
Section 5.1(b).
(qq) "Xxxxx-Xxxxxx Officer's Certificate" has the meaning set forth
in Section 5.5(b).
(rr) "Hazardous Material" has the meaning set forth in
Section 2.1(p).
(ss) "Imported Goods" has the meaning set forth in Section 2.1(y).
(tt) "Incentive Plans" shall have the meaning set forth in
Section 3.9 hereof.
(uu) "Indemnification Deadline Date" has the meaning set forth in
Section 5.2(c) hereof.
(vv) "Indemnifying Person" has the meaning set forth in Section 5.6.
(ww) "Intellectual Property" has the meaning set forth in
Section 2.1(n).
(xx) "Interim Balance Sheet" has the meaning set forth in
Section 2.1(d).
(yy) "IRS" means Internal Revenue Service.
(zz) "Knowledge" means, when used with respect to Xxxxx-Xxxxxx or
GRTV, the actual knowledge of Xxxx Xxxxx, Xxxx Xxxxxx, Xxxxxxx van xx Xxxx,
Xxxxx Knee or Xxxxxx, and means, when used with respect to TVN, the knowledge of
Xxxxxx X. Xxxxx, Xxxxx X. Xxxx or Xxxxxx X. Xxxxxx.
(aaa) "Liens" shall mean any liens, pledges, charges, claims, options,
restrictions on transfer, mortgages, security interests or other encumbrances of
any sort.
(bbb) "Loan Documents" has the meaning set forth in Section 1.1.
(ccc) "Major Contracts" has the meaning set forth in Section 2.1(i).
(ddd) "Material Adverse Effect" has the meaning set forth in the
preamble to Section 2.1.
(eee) "Material Litigation" has the meaning set forth in Section
2.1(m).
(fff) "Newco" means GRTV Network, Inc., a Delaware corporation and
wholly-owned subsidiary of TVN.
-48-
(ggg) "Newco Common Stock" has the meaning set forth in
Section 2.4(b).
(hhh) "Noncompetition Agreement" means the noncompetition agreement,
substantially in the form attached hereto as Exhibit C, to be executed by TVN
and Xxxxx-Xxxxxx.
(iii) "OEM" means original equipment manufacturer.
(jjj) "Pending Claims" has the meaning set forth in Section 5.2(c).
(kkk) Post Closing Severance Obligation has the meaning set forth in
Section 3.5.
(lll) "Promissory Note" means the agreement substantially in the form
attached hereto as Exhibit B to be executed by each of TVN and Newco.
(mmm) "Registered Intellectual Property" has the meaning set forth in
Section 2.1(n).
(nnn) "Release Date" has the meaning set forth in Section 5.2(c).
(ooo) "Restricted Securities" has the meaning set forth in
Section 2.3(d).
(ppp) "Rights Plan" has the meaning set forth in Section 3.9.
(qqq) "Xxxxx" means Xxxxx Xxxxx.
(rrr) "Xxxxx Employment Agreement" has the meaning set forth in the
Recitals to this Agreement.
(sss) "Savings Plan" has the meaning set forth in Section 4.2(d).
(ttt) "SEC" means Securities and Exchange Commission.
(uuu) "SEC Documents" has the meaning set forth in Section 2.5(c).
(vvv) "Securities Act" means the Securities Act of 1933, as amended.
(www) "Security Agreement" has the meaning set forth in Section 1.1.
(xxx) "Significant Customers" has the meaning set forth in
Section 2.1(v).
(yyy) "Subsidiary" has the meaning set forth in Section 2.1.
(zzz) "Supplemental Agreements" has the meaning set forth in
Section 1.1.
(aaaa) "Tax" has the meaning set forth in Section 2.1(h).
(bbbb) "Taxing Authority" has the meaning set forth in Section 2.1(h)
hereof.
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(cccc) "Third-Party Claim Notice" has the meaning set forth in
Section 5.6.
(dddd) "Third-Party Claims" has the meaning set forth in Section 5.6.
(eeee) "Third-Party Consents" has the meaning set forth in
Section 2.1(c).
(ffff) "Xxxxxx" means Xxxxxxx X. Xxxxxx.
(gggg) "Xxxxxx Employment Agreement" has the meaning set forth in the
recitals to this Agreement.
(hhhh) "Xxxxxx Parties" means Xxxxxxx X. Xxxxxx and T&T Productions,
Inc., collectively.
(iiii) "Xxxxxx Termination Agreement" has the meaning set forth in the
Recitals to this Agreement.
(jjjj) "Trademark Assignment" has the meaning set forth in
Section 1.3.
(kkkk) "Transition Services Agreement" has the meaning set forth in
Section 1.1.
(llll) "T&T" means T&T Productions, Inc., a California corporation
controlled by Xxxxxxx X. Xxxxxx.
(mmmm) "TVN" means TVN Entertainment Corporation, a Delaware
corporation.
(nnnn) "TVN Financial Statements" has the meaning set forth in
Section 2.5(c).
(oooo) "TVN Indemnified Person" has the meaning set forth in
Section 5.1(a).
(pppp) "TVN Officer's Certificate" has the meaning set forth in
Section 5.4(b).
(qqqq) "TVN Option" has the meaning set forth in Section 1.7.
(rrrr) "Wex" means Xxxxxxx Xxx.
6.17 Counterparts. This Agreement may be executed in one or more
------------
counterparts, all of which shall be considered one and the same agreement and
shall become effective when one or more counterparts have been signed by each
of the parties and delivered to the other party.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
-50-
IN WITNESS WHEREOF, TVN, Newco, GRTV and Xxxxx-Xxxxxx have caused this
Agreement to be signed by their respective officers thereunto duly authorized,
all as of the date first written above.
TVN ENTERTAINMENT CORPORATION XXXXX-XXXXXX CORPORATION
By: /s/ Xxxxxx Xxxxxx By: /s/ B. Van xx Xxxx
-------------------------- --------------------------
Name: Xxxxxx Xxxxxx Name: B. Van xx Xxxx
------------------------ ------------------------
GRTV NETWORK, INC. XXXXX-XXXXXX TELEVISION NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx By: /s/ B. Van xx Xxxx
-------------------------- --------------------------
Name: Xxxxxx Xxxxxx Name:
------------------------ ------------------------
[SIGNATURE PAGE FOR ASSET ACQUISITION AGREEMENT]
XXXX OF SALE, ASSIGNMENT
AND ASSUMPTION AGREEMENT
THIS XXXX OF SALE, ASSIGNMENT AND ASSUMPTION AGREEMENT is executed on
July 30, 1999 and shall be effective as of July 1, 1999, by and between
Xxxxx-Xxxxxx Television Network, Inc., a Delaware corporation ("Seller"), and
GRTV Network, Inc., a Delaware corporation ("Buyer").
WHEREAS, Seller and Buyer are parties to that certain Asset
Acquisition Agreement of even date herewith and effective as of July 1, 1999, by
and among Seller, Buyer, and certain other parties (the "Asset Purchase
Agreement") pursuant to which Seller has agreed to sell to Buyer, and Buyer has
agreed to purchase, certain assets of Seller and, in connection therewith, Buyer
has agreed to assume certain liabilities of Seller;
NOW THEREFORE, pursuant to the transactions contemplated by the Asset
Purchase Agreement, and for the consideration therein set forth, the parties
hereto take the following actions and make the following agreements:
1. Capitalized Terms. Capitalized terms used herein without
-----------------
definitions shall have the meanings ascribed in the Asset Purchase Agreement.
2. Sale and Assignment. Seller hereby sells, transfers, conveys and
-------------------
assigns to Buyer and its successors and assigns, absolutely and irrevocably, all
of Seller's right, title and interest in and to the GRTV Assets.
3. Assumption. Buyer hereby assumes the GRTV Liabilities and agrees to
----------
pay, perform and discharge the GRTV Liabilities in accordance with the
respective terms thereof.
4. Incorporation of Terms of Asset Purchase Agreement. This Xxxx of
--------------------------------------------------
Sale, Assignment and Assumption Agreement does not, nor shall it be deemed to,
supersede, extinguish or merge any of the representations, warranties,
indemnities and limitations set forth in the Asset Purchase Agreement, including
without limitation, all representations, warranties, indemnities and limitations
therein made with respect to the GRTV Assets and/or the GRTV Liabilities, all of
which are incorporated herein by reference, and which provisions shall remain in
full force and effect as provided therein.
5. Entire Agreement, Amendment and Waivers. This Xxxx of Sale,
---------------------------------------
Assignment and Assumption Agreement and the Asset Purchase Agreement, together
with the exhibits and schedules attached thereto, constitute the entire
agreement between the parties pertaining to the subject matter hereof and
supersede all prior and contemporaneous agreements, understandings, negotiations
and discussions, whether oral or written, of the parties, and there are no
representations, warranties or other agreements among the parties in connection
with the subject matter hereof except as set forth specifically herein or
therein or contemplated hereby or thereby. No supplement, modification or waiver
of this Xxxx of Sale, Assignment and Assumption Agreement shall be binding
unless executed in writing by the party to be bound thereby. No waiver of any of
the provisions of
this Xxxx of Sale, Assignment and Assumption Agreement shall be deemed or shall
constitute a waiver of any other provision hereof (whether or not similar), nor
shall such waiver constitute a continuing waiver unless otherwise expressly
provided.
6. Binding Agreement. This Xxxx of Sale, Assignment and Assumption
-----------------
Agreement constitutes the legal, valid and binding obligations of each party
enforceable in accordance with its terms and shall be binding upon and inure to
the benefit of the parties and their respective successors and assigns.
7. Governing Law. This Xxxx of Sale, Assignment and Assumption
-------------
Agreement shall be deemed to be made under, and shall be governed by, and
construed in accordance with, the laws of the State of California, without
regard to principles of conflict of laws.
8. Counterparts. This Xxxx of Sale, Assignment and Assumption
------------
Agreement may be executed in one or more counterparts, each of which shall be
deemed an original but all of which shall constitute one and the same
instrument.
[THIS SPACE INTENTIONALLY LEFT BLANK]
2
IN WITNESS WHEREOF, the parties have hereunto set their hands on the
day first above written.
WITNESS XXXXX-XXXXXX TELEVISION
NETWORK, INC.
By: /s/ B. Van xx Xxxx
________________________ ---------------------------
Name: /s/ B. Van xx Xxxx
--------------------
Title: /s/ GVP
--------------------
GRTV NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx
________________________ ---------------------------
Name: /s/ Xxxxxx Xxxxxx
---------------------
Title: /s/ Sr. Exec. V.P.
--------------------
3
CERTIFICATION
-------------
State of Calif. )
) ss.
County of Los Angeles )
On this 30 day of July, 1999, before me the undersigned, a Notary Public
in and for the County and State aforesaid, personally appeared
B. Van xx Xxxx, who is personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to within
instrument and acknowledged to me that he executed the same in his authorized
capacity and that by his signature on such instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS, my hand and official seal.
[SEAL APPEARS HERE] /s/ Xxxxxx X. Xxxxxx
----------------------
Signature
State of Calif. )
) ss.
County of Los Angeles )
On this 30 day of July, 1999, before me the undersigned, a Notary
Public in and for the County and State aforesaid, personally appeared
Xxxxxx Xxxxxx, who is personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to within
instrument and acknowledged to me that he executed the same in his authorized
capacity and that by his signature on such instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS, my hand and official seal.
/s/ Xxxxxx X. Xxxxxx
----------------------
[SEAL APPEARS HERE] Signature
SECURITY AGREEMENT
------------------
THIS SECURITY AGREEMENT ("Agreement"), dated as of July 1, 1999, by and
between GRTV Network, Inc., a Delaware corporation ("Debtor"), TVN Entertainment
Corporation, a Delaware corporation ("TVN") and sole stockholder of Debtor, and
Xxxxx-Xxxxxx Television Network, Inc., a Delaware corporation ("Secured Party").
WHEREAS, Debtor, Secured Party and TVN are parties to that certain
Asset Acquisition Agreement, dated as of July 1, 1999, (the "Purchase
Agreement"), pursuant to which Debtor and TVN have become indebted to Secured
Party for the principal sum of $13,000,000, all as more particularly set forth
in that certain Promissory Note dated as of July 1, 1999, executed by Debtor and
TVN to the order of Secured Party (the "Note").
WHEREAS, as additional security for the prompt and complete payment of
all indebtedness evidenced by the Note and for certain other obligations of
Debtor and TVN set forth below, Debtor and TVN agree that Debtor shall grant
Secured Party a security interest in the property hereinafter described.
WHEREAS, capitalized terms used herein but not otherwise defined herein
shall have the meanings ascribed to them in the Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing and the mutual
promises and other agreements hereinafter contained, Debtor and TVN hereby agree
with Secured Party for its benefit as follows:
1 . Grant of Security Interest. Debtor hereby grants, and TVN shall
---------------------------
cause Debtor to grant, to Secured Party a continuing security interest in the
following property of Debtor, wherever located, whether the same is now owned or
hereafter acquired (the "Collateral"):
(a) all inventories and merchandise, including without
limitation raw materials, work in process, finished products, goods in
transit, materials used or consumed in the manufacture or production
thereof, all packing materials, supplies and containers relating to or
used in connection with the foregoing, all goods in which Debtor has an
interest in mass or an interest or right as a consignee and all goods
which are returned to or repossessed by Debtor, whether used or
consumed in Debtor's business, held for sale or lease, furnished under
service contracts, or otherwise, and all bills of lading, warehouse
receipts, documents of title or general intangibles relating to any of
the foregoing (collectively, the "Inventory");
(b) all goods, equipment, machinery, tools, molds, dies,
furniture, fixtures (whether or not attached to real property),
furnishings, trade fixtures, motor vehicles, materials and parts and
all other tangible personal property (collectively, the "Equipment");
(c) all rights to the payment of money or other form of
consideration, accounts, notes, accounts receivable, drafts, documents,
chattel paper, choses in action,
undertakings, surety bonds, insurance policies, acceptances and all
other forms of claims, demands, instruments and receivables, together
with all guarantees, security agreements, leases and rights and
interests securing the same and all right, title and interest of Debtor
in the merchandise which gave or shall give rise thereto, including the
right of stoppage in transit, repossession and resale (collectively,
the "Receivables");
(d) all agreements, contracts, credits, letters of credit,
security indentures, purchase and sale orders, warranty rights and
contract rights of any nature, whether written or oral, and all
consents or other authorizations relating thereto, to the extent
assignable (collectively, the "Contracts");
(e) all licenses, permits, franchises, certificates and other
governmental authorizations and approvals of any nature whatsoever, to
the extent assignable (collectively, the "Licenses and Permits");
(f) all deposit accounts, including without limitation, all
demand, time, savings, passbook, custodial, safekeeping, escrow or like
accounts maintained by Debtor with Secured Party or any bank, savings
and loan association, credit union or like organization, and all money,
cash, cash equivalents, investment securities, deposits and prepayments
of Debtor in any such deposit account (all of the foregoing being
deemed to be in any such account as soon as the same is put in transit
to such account by mail or other courier);
(g) all trademarks, trade names, trade styles, and service
marks (and all prints and labels on which any of the foregoing appear),
designs, letters patent of the United States or any other country,
other general intangibles, and all registrations, recordings, reissues,
extensions, renewals, continuations, continuations-in-part and licenses
thereof (including applications for registration and recording);
(h) all other proprietary rights and confidential
information, technology, processes, trade secrets, computer programs,
source codes, software, customer lists, sales literature and
catalogues, price lists, subscriber information, formulae, goodwill and
all applications and registrations relating to any of the foregoing;
(i) all real property, leases, easements, rights-of-way and
other interests in real property;
(j) all stocks, bonds, debentures, securities, subscription
rights, options, warrants, puts, calls, certificates, partnership
interests, joint venture interests, investments and/or brokerage
accounts and all rights, preferences, privileges, dividends,
distributions, redemption payments or liquidation payments with respect
thereto;
(k) all files, correspondence, books and records of Debtor,
including without limitation, books of account and ledgers of every
kind and nature, all electronically recorded data relating to the
Collateral, Debtor or the business thereof, all computer
2
programs, tapes, discs and data processing software containing the
same, and all receptacles and containers for such records;
(l) all other goods, accounts, general intangibles,
documents, instruments, rights, interests and properties of every kind
and description, tangible or intangible, real or personal;
(m) all rights, remedies, powers and/or privileges of Debtor
with respect to any of the foregoing; and
(n) all cash and non-cash proceeds, replacements, products,
additions, accessions and substitutions of any of the foregoing.
Nothing in this Agreement shall be deemed to constitute an assumption
by Secured Party of any liability or obligation of Debtor with respect to any of
the Collateral.
The security interest hereby assigned, granted and conveyed to Secured
Party shall be a first priority security interest in the Collateral.
2. Security for Obligations. This Agreement secures and the Collateral
------------------------
is collateral security for the prompt payment or performance in full when due,
whether at stated maturity, by acceleration or otherwise (including the payment
of amounts which would become due but for the operation of the automatic stay
under Section 362(a) of the Bankruptcy Code, 11 U.S.C. (S) 362(a)), of all
obligations now or hereafter arising under the Note, this Agreement and any
future pledge by TVN of all of the issued and outstanding shares of Debtor as
additional security for payment of all indebtedness under the Note
(collectively, the "Loan Documents") whether for principal or interest
(including, without limitation, interest which, but for the filing of a petition
in bankruptcy with respect to Debtor, would accrue on such obligations) or
payments of fees and expenses including, without limitation, attorneys' fees
incurred by Secured Party in order to collect amounts due from TVN or Debtor
under the Loan Documents following an Event of Default as defined in Section 7
of this Agreement (all such obligations being the "Secured Obligations").
It is the intention of Debtor and TVN that the continuing grant of
security interests provided for herein shall remain as security for the payment
and performance of the Secured Obligations, whether now existing or hereinafter
incurred. No notice of the continuing grant of such security interests,
therefore, shall be required to be stated on the face of any document
representing any such Secured Obligation nor shall it otherwise be necessary to
identify any such Secured Obligation as being secured hereby. Any such Secured
Obligation shall be deemed to have been made pursuant to Section 9204 of the
Uniform Commercial Code of the State of California (the "Code").
3. Representations and Warranties. Debtor and TVN jointly and severally
------------------------------
represent and warrant as follows as of the date hereof (unless the context
provides otherwise):
3
(a) Status of Debtor. Debtor is a corporation duly organized, validly
----------------
existing and in good standing under the laws of the State of Delaware and
is duly qualified to conduct business in the State of California. Debtor
has the requisite power and authority to own its assets and to transact the
business in which it is presently engaged and in which it proposes to
engage and to grant to Secured Party the security interests in the
Collateral as herein provided;
(b) Binding Agreement. This Agreement has been duly authorized and
-----------------
validly executed and delivered and constitutes the legal, valid and binding
obligations of Debtor and TVN enforceable against each of Debtor and TVN in
accordance with its terms;
(c) Title to Collateral. Except for the security interests granted to
-------------------
Secured Party hereby, Debtor has good and marketable title to all of the
Collateral, free and clear of any lien, pledge, charges, claims, options,
restrictions on transfer, mortgage, security interest or other encumbrance
of any sort (collectively, "Lien"), except as otherwise permitted in
Section 5(a) hereof. No effective financing statement or other instrument
similar in effect covering all or any part of the Collateral has been
executed by Debtor and filed in any recording office, except such as may
have been filed in favor of Secured Party relating to this Agreement;
(d) No Default or Required Consent. Neither the execution and
------------------------------
delivery of this Agreement by Debtor and TVN nor the effectuation by
Secured Party of any of its rights and remedies hereunder, whether upon
default or otherwise, will result in a breach of or constitute a default
under any charter provision or the bylaws of Debtor or any agreement or
instrument to which Debtor or TVN is a party or by which any of the
Collateral is bound, nor violate any law or any rule or regulation of any
administrative agency or any order, writ, injunction or decree of any court
or administrative agency, nor does any of the foregoing require the consent
of any person, entity or governmental agency or any notice or filing with
any governmental or regulatory body;
(e) First Priority. Upon the execution and delivery of this Agreement
--------------
by Debtor and TVN and the filing of appropriate financing statements with
the appropriate governmental agencies or, as applicable, upon Secured
Party's taking possession of the Collateral, Secured Party will have a
perfected first priority security interest in and to the Collateral for the
full amount of all of the Secured Obligations;
(f) Credit Information. Any and all credit or other information
------------------
heretofore furnished to Secured Party by Debtor and TVN in connection with
the Secured Obligations or Debtor's and TVN's financial condition or the
value or condition of the Collateral is true and correct, and all such
information hereafter furnished to Secured Party by Debtor and TVN will be
true and correct when furnished;
(g) No Litigation. There is no legal, administrative or other
-------------
proceeding pending or to the best knowledge of Debtor and TVN, threatened
against Debtor's title to the Collateral or against Debtor's grant of a
security interest therein hereunder, nor does Debtor or TVN know of any
basis for the assertion of any such claim;
4
(h) Location of Debtor and Collateral. Schedule 3(h) hereto
--------------------------------- -------------
identifies the principal place of business of Debtor and the location of
the Collateral; and
(i) Disclosure. Debtor and TVN have disclosed to Secured Party all
----------
facts which are or may be material to this Agreement. No representation or
warranty or other information or statements provided by Debtor or TVN, or
on their behalf in connection with this Agreement contains any untrue
statement of a material fact or omits or will omit to state a material fact
necessary in order to make the statements therein not false or misleading.
4. Affirmative Covenants. Debtor and TVN covenant that until such time as
---------------------
all of the Secured Obligations are paid or satisfied in full (subject to any
rights which Debtor and TVN may have pursuant to Section 5.3 of the Purchase
Agreement), they will, in addition to any representations, warranties and
covenants contained in any of the other Loan Documents, undertake the following
unless Secured Party shall otherwise consent in writing:
(a) Conduct of Business and Maintenance of Assets and Licenses.
----------------------------------------------------------
Debtor shall do, and TVN shall cause to be done, all things necessary to
preserve in full force and effect Debtor's existence, its corporate powers
and authority, its qualifications to carry on business in all applicable
jurisdictions, and all rights, interests and assets necessary to the
conduct of its business;
(b) Delivery of Collateral. With respect to any Collateral as to
----------------------
which Secured Party's security interest may be perfected only by possession
of such Collateral, Debtor shall, and TVN shall cause Debtor to, upon
demand of Secured Party deliver possession of same in pledge to Secured
Party, endorsed or accompanied by such instruments of assignment or
transfer which (i) Secured Party may reasonably require to perfect its
security interest and (ii) shall be stamped or marked in such manner as
Secured Party may reasonably require for such perfection;
(c) Defense of Title, Protection of Security and Legal Proceedings.
--------------------------------------------------------------
Except as provided in Article V of the Purchase Agreement, Debtor shall,
and TVN shall cause Debtor to, at its own expense, defend its title to the
Collateral against the adverse claims of all persons, and take any and all
actions necessary or desirable to preserve, protect and defend the security
interests of Secured Party in the Collateral and the perfection and
priority thereof against any and all such adverse claims, including
appearing in and defending all actions and proceedings which purport to
affect any of the foregoing; provided, however, that Debtor shall not be
required hereunder to defend its title to the Collateral against any person
or entity who claims any title to or any interest in the Collateral
pursuant to or in connection with any agreement or transaction with
Secured Party or the GRC Group. Debtor shall, and TVN shall cause Debtor
to, promptly reimburse Secured Party for any and all sums, including costs,
expenses and actual attorneys' fees, which Secured Party may pay or incur
in defending, protecting or enforcing its security interests in the
Collateral or the perfection or priority thereof;
5
(d) Financial Information and Reports. Debtor and TVN shall furnish
---------------------------------
to Secured Party:
(i) as soon as available and in any event within forty-five
(45) days after the end of each interim fiscal quarter of each fiscal
year of TVN, a consolidated and consolidating balance sheet of TVN and
its subsidiaries (including Debtor) as of the end of such interim
fiscal period, and a consolidated and consolidating statement of
earnings and shareholders' equity of TVN and its subsidiaries
(including Debtor) for such fiscal period and for the period beginning
on the first day of such fiscal year and ending on the date of such
balance sheet, setting forth in comparative form the corresponding
figures for the corresponding period of the preceding fiscal year, all
in reasonable detail and certified by the chief financial officer of
TVN;
(ii) as soon as available and in any event within ninety (90)
days after the last day of each fiscal year of TVN, consolidated and
consolidating financial statements which have been examined by TVN's
regular independent public accountants of recognized standing, covering
the operations of TVN and its subsidiaries (including Debtor) as of the
end of such year, and a consolidated and consolidating statement of
earnings, shareholders' equity and changes in financial position for
TVN and its subsidiaries (including Debtor) for the year then ended,
each on a comparative basis with corresponding financial statements for
the preceding fiscal year, which financial statements shall be
accompanied by a report of such independent public accountants stating
in substance that such financial statements have been prepared in
accordance with generally accepted accounting principles consistently
applied;
(iii) promptly upon any officer of TVN or Debtor learning of the
same, notice of the occurrence of any material change in the financial
status of TVN or Debtor, as the case may be, and notice of the
initiation of any litigation against TVN or Debtor which could, if
adversely determined, have a material adverse effect on the financial
condition or operations of TVN or Debtor, as the case may be;
(iv) promptly upon any officer of TVN or Debtor learning of the
same, notice of the occurrence of any material default by Debtor under
any media agreement with any cable, MSO or television programming
company affecting more than one million subscribers which has been
assigned by Secured Party to Debtor in connection with the Purchase
Agreement.
(e) Tax Returns. Debtor and TVN shall furnish to Secured Party within
-----------
ten (10) days following the date of filing, copies of all federal, state
and local income tax and property tax returns of Debtor and TVN.
(f) Payment of Taxes. Debtor shall, and TVN shall cause Debtor to,
----------------
pay or cause to be paid all taxes and other levies with respect to the
Collateral when the same
6
become due and payable other than any taxes required to be paid by Secured
Party or its affiliates pursuant to Section 1.5 of the Purchase Agreement;
(g) Use and Maintenance of Collateral. Debtor shall, and TVN shall
---------------------------------
cause Debtor to, (i) comply with all laws, statutes and regulations
pertaining to its use and ownership of the Collateral and its conduct of
its business; (ii) properly care for and maintain all of the Equipment in
good condition, free of misuse, abuse, waste and deterioration, reasonable
wear and tear of intended use excepted; (iii) keep accurate and complete
books and records pertaining to the Collateral in accordance with generally
accepted accounting principles; and (iv) promptly and completely perform
all of its obligations under the Contracts, and maintain in full force and
effect all of the Licenses and Permits except in each case where the non-
compliance or non-performance of any of the covenants set forth in this
subsection (f) would not have a Material Adverse Effect on Debtor or the
value of the Collateral;
(h) Insurance. Debtor shall, and TVN shall cause Debtor to, at its
---------
own expense, keep the Collateral insured against loss by fire, property
damage, theft and other extended coverage hazards for the full replacement
value thereof and liability coverage in such amounts as Secured Party had
maintained in effect with respect to the business transferred to Debtor as
of the Effective Closing Date. The terms of all such insurance policies
shall be comparable in terms and amount of coverage as those policies in
effect on the Effective Closing Date and shall be written by companies
reasonably satisfactory to Secured Party. Such policies shall provide that
coverage shall not lapse for any reason whatsoever without the insurer
giving to Secured Party fifteen (15) days' prior written notice, and copies
of the policies of such insurance and certificates of insurance shall be
made available to Secured Party and shall be delivered to Secured Party
within thirty (30) days following the date of execution of this Agreement;
(i) Inspection. Debtor shall, and TVN shall cause Debtor to, give
----------
Secured Party such information as may be reasonably requested concerning
the Collateral and shall at all reasonable times and upon reasonable notice
permit Secured Party and its agents and representatives to enter upon any
premises upon which the Collateral is located for the purpose of inspecting
the Collateral. Furthermore, Secured Party and its accountants and other
agents shall at all reasonable times on reasonable notice have full access
to and the right to audit and/or inspect any and all of Debtor's books and
records pertaining to the Collateral, to confirm and verify the value of
the Collateral and to do whatever else Secured Party reasonably may deem
necessary or desirable to protect its interests; provided, however, that
any such action which involves communicating with customers of Debtor shall
be carried out by Secured Party through Debtor's independent auditors
unless an Event of Default (as defined in Section 7 below) occurs and is
continuing, in which case Secured Party shall then have the right directly
to notify such customers; and further provided that Secured Party shall
keep confidential all nonpublic information obtained by Secured Party in
the course of such reviews unless otherwise required by law;
7
(j) Notification. Debtor shall, and TVN shall cause Debtor to, notify
------------
Secured Party in writing within three (3) business days of the actual
knowledge of TVN or Debtor of the occurrence of (i) an Event of Default or
of the occurrence of an event which, with notice or lapse of time, or both,
would constitute an Event of Default, or (ii) any event which materially
and adversely affects the value of the Collateral, the ability of Debtor or
Secured Party to dispose of the Collateral or the rights and remedies of
Secured Party in relation thereto; and
(k) Further Assurances. Debtor and TVN agree that at any time and
------------------
from time to time, at their expense, Debtor and TVN will promptly execute
and deliver all further instruments and documents, and take all further
action, that Secured Party deems necessary or that Secured Party may
reasonably request, in order to perfect and to protect any security
interest granted or purported to be granted hereby or to enable Secured
Party to exercise and to enforce its rights and remedies hereunder with
respect to any Collateral.
5. Negative Covenants. Debtor and TVN covenant that until such time as
------------------
all of the Secured Obligations are paid or satisfied in full, they will not, in
addition to any representations, warranties and covenants contained in any of
the other Loan Documents, undertake the following without the prior written
consent of Secured Party:
(a) Sale or Hypothecation of Collateral. Debtor shall not, and TVN
-----------------------------------
shall not cause Debtor to, directly or indirectly, whether voluntarily,
involuntarily, by operation of law or otherwise (i) sell, assign, transfer,
exchange, lease, lend, grant any option with respect to or dispose of any
of the Collateral (other than inventory items sold or leased in the
ordinary course of Debtor's business), or any of Debtor's rights therein,
nor (ii) create or permit to exist any Lien on or with respect to any of
the Collateral, except for (x) the Lien in favor of Secured Party (y) the
GRTV Liabilities and (z) Liens to secure Permitted Debt (defined as
indebtedness for financing provided to Debtor from time to time by one or
more banks or other financial institutions for working capital or other
ordinary business purposes provided that such Lien is junior to the Lien in
favor of Secured Party. The inclusion of "proceeds" as a component of the
Collateral shall not be deemed a consent by Secured Party to any sale,
assignment, transfer, exchange, lease, loan, granting of an option with
respect to or disposition of all or any part of the Collateral;
(b) Location of Collateral; Changes of Name. Except for inventoried
---------------------------------------
goods sold or leased in the ordinary course of business or vehicles or
other property moved in the ordinary course of business, Debtor shall not,
and TVN shall not cause Debtor to, cause or allow, without giving to
Secured Party at least fifteen (15) days' prior written notice (i) any of
the Collateral to be moved; (ii) move its principal place of business or
the location of its books or records; or (iii) change its name, its trade
or fictitious business name(s) or its form of doing business;
(c) Certain Agreements. Debtor shall not, and TVN shall not cause
------------------
Debtor to, cause, suffer or permit to occur any compromise, adjustment,
amendment, modification,
8
settlement, waiver, substitution or termination in respect of any
Receivable, Contract, License or Permit, other than in the ordinary course
of Debtor's business;
(d) Reservation of Collateral. Debtor shall not, and TVN shall not
-------------------------
cause Debtor to, cause or allow anything to be done which might materially
impair, or fail to do anything necessary or advisable in order to prevent
the destruction of or substantial diminution of the value of the Collateral
and to preserve the security interests of Secured Party therein;
(e) Capital Stock; Distributions. Debtor will not, and TVN shall not
----------------------------
cause Debtor to, issue, sell, assign, transfer, convey, or otherwise
dispose of, or part with control of, or reclassify any shares of its
capital stock, except for shares of its capital stock issued to employees
pursuant to a stock option plan or similar plan, provided that all shares
of capital stock so issued are pledged to Secured Party pursuant to terms
and conditions satisfactory to Secured Party in its sole discretion. Debtor
will not, and TVN shall not cause Debtor to, pay or declare any dividend,
whether cash, stock or otherwise on any class of its capital stock or make
any other distribution on account of any class of its capital stock, or
redeem, purchase or otherwise acquire, directly or indirectly, any shares
of its capital stock;
(f) Extraordinary Transactions. Debtor will not, and TVN shall not
--------------------------
cause Debtor to, merge, consolidate, or combine with any other person or
entity, reorganize, liquidate or dissolve, or sell, lease, transfer or
otherwise dispose of all or any substantial part of its assets;
(g) Prohibition on Hazardous Materials. Debtor will not, and TVN
----------------------------------
shall not cause Debtor to, place, store, or permit to be placed or stored
any hazardous material or substance which requires remediation under any
federal, state, or local statute, regulation, ordinance, or order on any
property owned, controlled or operated by Debtor or for which Debtor is
responsible, other than those such materials or substances which are
actually present on said property on the date of this Agreement; and
(h) Related Party Transactions. Debtor will not, and TVN shall not
--------------------------
cause Debtor to, enter into any transaction with any officer, director or
stockholder of Debtor, any family member of any such person, or any entity
in which any such person has an interest, or make any advance or loan to
any such person or entity except on terms which are not more favorable to
any such person or entity than terms which Debtor could obtain in an arms
length transaction with an unrelated third party.
6. Secured Party May Perform. If Debtor or TVN fail to perform any
-------------------------
agreement or covenant contained herein, Secured Party may itself perform or
cause the performance of such agreement or covenant, and the expenses of Secured
Party incurred in connection therewith, plus interest at the maximum rate
permitted by law from the date of such advance to the date of reimbursement,
shall be deemed "Secured Obligations" for all purposes hereunder and shall be
payable by Debtor pursuant to Section 11. However, nothing in this Agreement
shall obligate Secured Party to so act.
9
7. Events of Default. The occurrence of any of the following shall
-----------------
constitute an event of default ("Event of Default") hereunder:
(a) Default Under Note Etc. The default in the prompt and complete
----------------------
payment or performance of the Note; the default in the prompt and complete
payment and/or performance of any term, condition or covenant in favor of
Secured Party contained in any Loan Document or in any indenture or other
instrument delivered pursuant thereto or hereto; the default in the prompt
and complete payment and performance of any other Secured Obligation; or
the occurrence of any other event of default specified in any of the
foregoing; in each such case, where such default is not cured within any
applicable grace period which may be granted in any such agreement,
indenture or other instrument with respect to such default or, if no
specific grace period is granted with respect to such default, where such
default is not cured within ten (10) days after written notice thereof from
Secured Party or any successor in interest thereto;
(b) Dissolution of Debtor Etc. The cessation of Debtor or TVN as a
-------------------------
going concern;
(c) Breach of Agreement. The material breach of any representation,
-------------------
warranty, covenant or agreement of Debtor or TVN contained in this
Agreement or any other Loan Document or in any document, certificate or
instrument delivered pursuant thereto or hereto which breach is not cured
within ten (10) days after written notice from Secured Party or any
successor of interest thereto;
(d) Adverse Judgments. The entry of a final judgment for the payment
-----------------
of money in excess of $1,000,000 rendered by any court of competent
jurisdiction against Debtor, and if the same is not discharged or execution
thereunder stayed, whether pursuant to appeal or otherwise, within thirty
(30) days of the entry thereof, or if any final order, ruling or direction
of any competent authority is issued with respect to Debtor which
materially adversely affects Debtor, or which requires a substantial or
material adverse change in the business or affairs of Debtor, or a material
disposition of assets of Debtor; or
(e) Adverse Change. Any material adverse change in the financial
--------------
condition of Debtor that continues for a period of thirty (30) days or
more.
8. Remedies upon Default. If any Event of Default shall have occurred
---------------------
hereunder:
(a) Acceleration of Indebtedness. Secured Party may declare any or
----------------------------
all Secured Obligations, or any part thereof, to be immediately due and
payable without demand or notice and Secured Party may proceed to collect
the same.
(b) Notification to Third Parties. Secured Party may notify any
-----------------------------
account debtor obligated on any of the Receivables or any purchaser of
Collateral or any other
10
person of Secured Party's interest in the Collateral and instruct any such
persons to make payments thereon directly to Secured Party.
(c) Compromise of Claims. Secured Party may grant extensions, compromise
--------------------
claims and settle Collateral for less than face value, all without prior notice
to Debtor and TVN.
(d) Use of Trade Names, Etc. Secured Party may use in connection with any
-----------------------
assembly or disposition of the Collateral, any trademark, trade name, trade
style, copyright, patent right, technical process or other proprietary right
used or utilized by Debtor.
(e) Other Rights Against Debtor Hereunder. Secured Party may exercise in
-------------------------------------
respect of the Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a secured
party under the Code, and Secured Party may also without notice except as
specified below sell the Collateral or any part thereof in one or more parcels
at public or private sale, for cash, on credit or for future delivery, and upon
such other terms as Secured Party in its sole and absolute discretion may deem
commercially reasonable. Debtor agrees that, to the extent notice of sale shall
be required by law, at least ten (10) days' notice to Debtor of the time and
place of any public sale or the time after which any private sale is to be made
shall constitute reasonable notification. Secured Party shall not be obligated
to make any sale of Collateral regardless of notice of sale having been given.
Secured Party may adjourn any public or private sale from time to time by
announcement at the time and place fixed therefor, and such sale may, without
further notice, be made at the time and place to which it was so adjourned.
Debtor and TVN hereby waive any claims against Secured Party arising by reason
of the fact that the price at which any Collateral may have been sold at such a
private sale was less than the price which might have been obtained at a public
sale, even if Secured Party accepts the first offer received and does not offer
such Collateral to more than one offeree, and in all events such sale shall be
deemed to be commercially reasonable. At any such public or private sale,
Secured Party may be the purchaser of the Collateral.
(f) Application of Proceeds. Any cash held by Secured Party as Collateral
-----------------------
and all cash proceeds received by Secured Party in respect of any sale of,
collection from, or other realization upon all or any part of the Collateral
may, in the direction of Secured Party, be held by Secured Party as collateral
for, and/or then or at any time thereafter applied (after payment of any amounts
payable to Secured Party pursuant to Section 11) in whole or in part by Secured
Party against all or any part of the Secured Obligations in the following order:
first to late penalties under the Note, next to accrued but unpaid interest
under the Note, next to the principal amount outstanding under the Note, then to
any Secured Obligations due and owing other than those based upon the Note. Any
surplus of such cash or cash proceeds held by Secured Party and remaining after
payment in full of all the Secured Obligations shall be paid over to Debtor or
to whomsoever may be lawfully entitled to receive such surplus. In a like
manner, Debtor shall, and TVN shall cause Debtor to, pay to Secured Party,
without demand, whatever amount of the
11
Secured Obligations remains unpaid after the Collateral has been sold and
the proceeds applied as aforesaid, together with interest thereon from the
date of demand at the highest rate specified in the Note, which interest
shall also constitute a part of the Secured Obligations.
(g) Other Rights. Secured Party shall not be obligated to resort to
------------
its rights or remedies with respect to any other security for or guaranty
or payment of the Secured Obligations before resorting to its rights and
remedies against Debtor hereunder. All rights and remedies of Secured Party
shall be cumulative and not in the alternative.
9. Secured Party Appointed Attorney-in-Fact. Debtor hereby appoints
----------------------------------------
Secured Party as Debtor's attorney-in-fact with full authority in the place and
stead of Debtor and in the name of Debtor or otherwise, after an Event of
Default, in Secured Party's sole and absolute discretion to take any action and
to execute any instrument which Secured Party may deem necessary or advisable to
accomplish the purposes of this Agreement. Debtor acknowledges that the
foregoing grant of power of attorney is coupled with an interest and is
irrevocable.
10. Liability and Indemnification. Secured Party shall not be liable to
-----------------------------
Debtor or TVN for any act (including, without limitation, any act of active
negligence) of or omission by Secured Party with respect to this Agreement
unless Secured Party's conduct constitutes willful misconduct or gross
negligence. Debtor and TVN agree to indemnify and to hold Secured Party harmless
from and against all losses, liabilities, claims, damages, costs and expenses
(including actual attorneys' fees and disbursements) with respect to (a) any
action taken (including, without limitation, any act of active negligence) or
any omission by Secured Party with respect to this Agreement, provided that
Secured Party's conduct does not constitute willful misconduct or gross
negligence, and (b) any claims arising out of Secured Party's security interest
therein.
11. Expenses. Debtor will, and TVN shall cause Debtor to, upon demand pay
--------
to Secured Party the amount of any and all expenses, including the fees and
expenses of its counsel and of any experts and agents, which Secured Party may
incur in connection with (a) the administration of this Agreement, (b) the
custody or preservation of, or the sale of, collection from, or other
realization upon, any of the Collateral, (c) the exercise or enforcement of any
of the rights of Secured Party hereunder, and (d) the failure by Debtor or TVN
to perform or observe any of the provisions hereof.
12. Security Interest Absolute. Except as set forth in Article V of the
--------------------------
Purchase Agreement, all rights of Secured Party and security interests
hereunder, and all Secured Obligations of Debtor and TVN hereunder, shall be
absolute and unconditional irrespective of:
(a) any lack of validity or enforceability of the Note, any other Loan
Document or any other document or any other agreement or instrument
relating thereto;
(b) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other
amendment or waiver of or any consent to any departure from the Note, any
other Loan Document any other document or any other agreement or instrument
relating thereto;
12
(c) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to departure from any
guaranty for all or any of the Secured Obligations; or
(d) any other circumstance which might otherwise constitute a defense
available to, or a discharge of, Debtor.
13. Amendments, Waiver. No amendment or waiver of any provision of this
------------------
Agreement nor consent to any departure by Debtor or TVN herefrom shall in any
event be effective unless the same shall be in writing and signed by Secured
Party, Debtor and TVN, and then such waiver or consent shall be effective only
in the specific instance and for the specific purpose for which given.
14. Notices. All notices, demands and requests of any kind which any party
-------
may be required or desires to serve upon any other party hereunder shall be in
writing and shall be delivered and be effective in accordance with the notice
provision of the Note.
15. Continuing Security Interest; Assignment of Obligations. This
-------------------------------------------------------
Agreement shall create a continuing security interest in the Collateral and
shall (a) remain in full force and effect until payment in full of the Secured
Obligations, (b) be binding upon Debtor and TVN, their successors and assigns,
(c) inure, together with the rights and remedies of Secured Party hereunder, to
the benefit of Secured Party and its successors, transferees and assigns, (d)
constitute, along with the Loan Documents, the entire agreement between Debtor,
TVN and Secured Party, and (e) be severable in the event that one or more of the
provisions herein is determined to be illegal or unenforceable. Without limiting
the generality of the foregoing clause (c), Secured Party may assign or
otherwise transfer any Secured Obligation to any other person or entity, and
such other person or entity shall thereupon become vested with all the benefits
in respect thereof granted to Secured Party herein or otherwise. Upon the
payment in full of the Secured Obligations, Secured Party, within thirty (30)
days thereafter at the expense of Debtor, shall release the security interests
in the Collateral granted herein and execute such termination statements as may
be necessary therefor, to the extent that such Collateral shall not have been
sold or otherwise applied pursuant to the terms hereof.
16. Return of Collateral. Subject to any duty imposed by law or otherwise
--------------------
to the holder of any subordinate lien on the Collateral known to Secured Party,
and subject to the direction of a court of competent jurisdiction, upon payment
in full of the Secured Obligations Debtor shall be entitled to the return of all
Collateral in the possession of Secured Party; provided, however, that Secured
Party shall not be obligated to return to Debtor or deliver to the holder of any
subordinate lien any such Collateral until it is satisfied that all amounts with
respect to the Secured Obligations are no longer subject to being recaptured
under applicable bankruptcy or insolvency laws or otherwise. The return of
Collateral, however effected, shall be without recourse to Secured Party and
Secured Party shall be entitled to receive appropriate documentation to such
effect. The return of Collateral shall be effected without representation or
warranty and shall not entitle Debtor or TVN to any right to any endorsement.
13
17. Cumulative Rights, No Waiver. The several rights and remedies of
----------------------------
Secured Party hereunder or referred to herein shall, to the full extent
permitted by law, be construed as cumulative, and no one of them shall be
exclusive of the others. No delay or omission of Secured Party in exercising any
right or remedy provided in this Agreement or arising from any default of any
Secured Obligation shall be construed as an acquiescence therein, a waiver of
such default or a waiver of or limitation upon the right of Secured Party to
exercise, at any time and from time to time thereafter, any right or remedy
under this Agreement. No waiver of any breach of any of the covenants or
conditions of this Agreement shall be construed to be a waiver of or
acquiescence in any preceding or subsequent breach of the same or any other
condition or covenant. If the performance of any Secured Obligation is at any
time secured by any other instrument or instruments, the exercise by Secured
Party of any right or remedy under any such other instrument shall not be
construed as or deemed to be a waiver of any limitation upon the right of
Secured Party to exercise, at any time and from time to time thereafter, any
right or remedy under this Agreement or under any such other instrument.
18. Governing Law; Terms. This Agreement shall be governed by, and
--------------------
construed in accordance with, the laws of the State of California. Each party
hereto irrevocably consents to jurisdiction of any state or federal court
sitting in the County of Los Angeles in the State of California over any suit,
action, or proceeding arising out of or relating to this Agreement. Each party
hereto irrevocably waives, to the fullest extent permitted by law, any objection
that they may now or hereafter have to the laying the venue of any such suit,
action, or proceeding brought in any such court, and any claim that any such
suit, action, or proceeding brought in any such court has been brought in an
inconvenient forum. Unless otherwise defined herein or in the Purchase
Agreement, terms defined in the Code are used herein as therein defined.
19. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
20. Severability. If any one or more of the terms or provisions of this
------------
Agreement shall for any reason be held to be invalid, illegal or unenforceable,
in whole or in part, or in any respect, or in the event that any one or more of
the provisions of this Agreement operate or would prospectively operate to
invalidate this Agreement, then and in either of those events, such provision or
provisions only shall be deemed null and void and shall not affect any other
provision of this Agreement and the remaining provisions of this Agreement shall
remain operative and in full force and effect and shall in no way be affected,
prejudiced or disturbed thereby.
21. TRIAL BY JURY. DEBTOR AND TVN HEREBY WAIVE, AND COVENANT
-------------
THAT THEY WILL NOT ASSERT (WHETHER AS PLAINTIFF, DEFENDANT OR OTHERWISE), ANY
RIGHT TO TRIAL BY JURY IN ANY FORUM IN RESPECT OF ANY ISSUE, CLAIM, DEMAND,
ACTION OR CAUSE OF ACTION ARISING OUT OF OR BASED UPON THIS AGREEMENT, THE
SUBJECT MATTER HEREOF OR ANY LOAN DOCUMENT OR ANY SECURED OBLIGATION, IN EACH
CASE WHETHER NOW EXISTING OR HEREAFTER ARISING OR WHETHER IN CONTRACT OR IN TORT
OR OTHERWISE.
14
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
DEBTOR:
GRTV NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: Sr. Exec. V.P.
TVN:
TVN ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
------------------------------
Name: Xxxxxx Xxxxxx
Title: Sr. Exec. V.P.
15
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
duly executed and delivered by their respective officers thereunto duly
authorized as of the date first above written.
SECURED PARTY:
XXXXX-XXXXXX TELEVISION NETWORK,
INC.
By: /s/ B. Van xx Xxxx
------------------------------
Name: B. Van xx Xxxx
Title: EVP
16
SCHEDULE 3(h)
-------------
Location of Debtor and Collateral
---------------------------------
17
ASSIGNMENT AGREEMENT
THIS ASSIGNMENT AGREEMENT (the "Assignment") is executed as of this
1st day of July, 1999 (the "Effective Date"), by and between XXXXX-XXXXXX
TELEVISION NETWORK, INC., a Delaware Corporation ("Assignor") and GRTV NETWORK,
INC., a Delaware corporation ("Assignee").
WHEREAS, Assignor and Assignee are parties to that certain Asset
Acquisition Agreement dated as of July 1, 1999 (the "Purchase Agreement"),
pursuant to which Assignor is selling to Assignee, and Assignee is acquiring
from Assignor, substantially all of the assets of Assignor;
WHEREAS, Assignor owns all of the issued and outstanding member
interests in Coast-to-Coast Media, LLC, a California limited liability company
("CTC");
WHEREAS, as of the Effective Date, Assignor desires to assign to
Assignee its membership interest in the LLC (the "CTC Interest") pursuant to the
terms and conditions set forth in the Purchase Agreement; and
NOW, THEREFORE, in consideration of the foregoing, the consideration
set forth in the Purchase Agreement and for other good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged, the
parties hereto, intending to be legally bound, hereby agree as follows:
1. Recitals. The foregoing recitals are made a part of this
--------
Agreement.
2. Assignment of Interest. Assignor hereby sells, transfers, grants,
----------------------
conveys and assigns to Assignee all of Assignor's rights, title and interest in
and to the CTC Interest.
3. Representations and Warranties of Assignor. Assignor hereby
------------------------------------------
represents and warrants to Assignee as follows, as of the date hereof:
(i) Assignor is not a party to or bound by any written or oral
contract or agreement which grants to any person or entity, whatsoever, an
option or right of first refusal or other right to acquire the CTC Interest at
any time, or upon the happening of any stated event. Assignor has not sold,
transferred, granted, conveyed or assigned any other right or interest in or to
the CTC Interest.
(ii) Assignor is the lawful owner of record and the beneficial
owner of the CTC Interest, free and clear of all liens, encumbrances, claims and
other charges thereon of every kind. Except for the CTC Interest, there are no
other issued and outstanding member interests in CTC.
4. Further Assurances. From time to time, at the request of any party
------------------
hereto, without further consideration, (i) Assignor shall execute and deliver,
or cause to be executed and delivered, such further instruments of conveyance
and take such other action as reasonably may be required to more effectively
sell, transfer, grant, convey and assign the CTC Interest or any portion thereof
to Assignee; and (ii) each party shall execute and deliver, or cause to be
executed and delivered, such additional or supplemental certificates,
instruments and documents, and take such other action as reasonably may be
required to more effectively carry out the intention of the parties hereto and
facilitate the performance of this Agreement.
5. Miscellaneous.
-------------
(a) Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of California, without regard
to principles of conflicts of laws.
(b) Successors and Assigns. This Agreement shall be binding upon
----------------------
and inure to the benefit of the parties hereto and their respective successors
and assigns.
(c) Execution in Counterparts. This Agreement may be executed in
-------------------------
two or more counterparts, each of which shall be deemed an original, but all
of which shall constitute one and the same instrument.
(d) Titles and Headings. Titles and headings to sections herein
-------------------
are inserted for convenience of reference only and are not intended to be a part
of or to affect the meaning or interpretation of this Agreement.
(e) Gender. In this Agreement, the use of the singular shall
------
include the plural, and the use of the neutral gender shall include the
masculine and feminine genders, and vice versa.
(f) Survival. Subject to the terms and conditions of the Purchase
--------
Agreement, the representations and warranties of Assignee made in this Agreement
shall survive the execution and delivery hereof.
-2-
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first above written.
WITNESS: ASSIGNOR:
--------
XXXXX-XXXXXX TELEVISION
NETWORK, INC.
By: /s/ B. Van xx Xxxx (SEAL)
----------------------- --------------------------
Ben Van xx Xxxx
Corporate Secretary
ASSIGNEE:
--------
GRTV NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx (SEAL)
----------------------- --------------------------
-3-
ASSIGNMENT OF COPYRIGHTS
WHEREAS, Xxxxx-Xxxxxx Television Network, Inc., a Delaware corporation,
having a principal place of business at 0000 Xxxxx Xxxx Xxxxxxxxx, Xxxxx Xxxxxx,
Xxxxxxxxxx 00000 (hereinafter "Assignor"), and GRTV Network, Inc., a Delaware
corporation, having its principal place of business at 0000 Xxxx Xxxxxxx
Xxxxxx, Xxxxxxx, Xxxxxxxxxx 00000 (hereinafter "Assignee") are parties to that
certain Asset Acquisition Agreement effective as of July 1, 1999 (the
"Agreement") between TVN Entertainment Corporation, Assignee, Xxxxx-Xxxxxx
Corporation and Assignor pursuant to which Assignor sold, conveyed, transferred,
assigned and delivered to Assignee all of Assignor's right, title and interest
in and to the GRTV Assets used in the GRTV Business (each, as defined in the
Agreement), including the copyrights listed as Item 6 on Schedule 1 of the
Agreement (collectively, the "Works").
NOW, THEREFORE, for good and valuable consideration the receipt of which is
hereby acknowledged, Assignor hereby transfers, conveys and assigns to Assignee
all of Assignor's right, title and interest whatsoever, throughout the world, in
and under the Works, to have and to hold the same, unto Assignee, its successors
and assigns, for the full duration of all such rights, and any renewals and
extensions thereof.
Assignor further transfers, conveys and assigns unto Assignee the entire
right, title and interest in and to any and all causes of action and rights of
recovery for past infringement of the Works herein assigned, and Assignee shall
bear the costs for recordation of the assignment set forth herein and the
further prosecution and maintenance of the Works.
This Assignment is made pursuant to and is subject to all the terms of the
Agreement.
IN WITNESS WHEREOF, Xxxxx-Xxxxxx Television Network, Inc., has caused this
instrument to be signed in it name by its duly authorized officer to be
effective as of the ___ day of July, 1999.
XXXXX-XXXXXX TELEVISION NETWORK,
INC.
By: /s/ B. Van xx Xxxx
-------------------------------------
Name: B. Van xx Xxxx
Title: EVP
Acknowledged and Accepted:
GRTV NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx
---------------------------
Name: Xxxxxx Xxxxxx
Title: Sr. Exec. V.P.
-2-
CERTIFICATION
-------------
State of Calif. )
---------------- )ss.
County of Los Angeles )
---------------
On this 30 day of July, 1999, before me the undersigned, a Notary
Public in and for the County and State aforesaid, personally appeared Ben Van xx
Xxxx, who is personally known to me or proved to me on the basis of satisfactory
evidence) to be the person whose name is subscribed to within instrument and
acknowledged to me that he executed the same in his authorized capacity and that
by his signature on such instrument the person, or the entity upon behalf of
which the person acted, executed the instrument.
WITNESS, my hand and official seal.
[NOTARY PUBLIC SEAL] /s/ Xxxxxx X. Xxxxxx
---------------------------
Signature
State of Calif. )
---------------- )ss.
County of Los Angeles )
---------------
On this 30 day of July, 1999, before me the undersigned, a Notary
Public in and for the County and State aforesaid, personally appeared Xxxxxx
Xxxxxx, who is personally known to me (or proved to me on the basis of
satisfactory evidence) to be the person whose name is subscribed to within
instrument and acknowledged to me that he executed the same in his authorized
capacity and that by his signature on such instrument the person, or the entity
upon behalf of which the person acted, executed the instrument.
WITNESS, my hand and official seal.
[NOTARY PUBLIC SEAL] /s/ Xxxxxx X. Xxxxxx
---------------------------
Signature
MEDIA ACCESS, CONSULTING AND SERVICES AGREEMENT
This Media Access, Consulting and Services Agreement (the "Agreement") is
made as of July 1, 1999 by and among Xxxxx-Xxxxxx Corporation, a Delaware
corporation ("GRC"), TVN Entertainment Corporation, a Delaware corporation
("TVN"), and GRTV Network, Inc. ("GRTN").
WHEREAS, GRC hereby agrees to provide certain rights and services to TVN
and GRTN and TVN and GRTN hereby agrees to pay GRC for such rights and services
on the terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree as follows:
1. GRC Services and Deliverables.
-----------------------------
(a) Media and Spot Time.
-------------------
(i) GRTN Right to Broadcast GRC Programming. Subject to the terms of
---------------------------------------
this Agreement, GRC hereby grants to GRTN the right to
broadcast, during the Term (as defined below), any available (as
determined in accordance with the procedure set forth in Section
1(d) below) direct response infomercial from the Infomercial
Library (defined below) on any unsold GRTN media time, with
revenue sharing as is more fully set forth in Section 4 below.
(ii) Media Time. During the Term, GRC agrees to buy infomercial/spot
----------
media from GRTN on a priority basis (i.e., GRC shall buy
infomercial/spot media from GRTN, rather than from a third
party, where commercially and economically reasonable to do so
in GRC's sole discretion (in comparison to other long-form
and/or short-form direct-response media opportunities), and at
the then prevailing GRTN market rates.
(b) Consulting Services. GRC agrees to provide TVN and GRTN during the
-------------------
Term with the following consulting services: (i) input regarding GRC's
experiences regarding product selection, infomercial production and worldwide
operations, (ii) similar consulting services as were provided by GRC to Xxxxx-
Xxxxxx Television Network, Inc., ("GRTV") immediately prior to the acquisition
of GRTV's business by TVN, and (iii) such other consulting services as the
parties hereto agree upon from time to time, all of which shall be designed to
assist the ongoing business of GRTN with a minimum of disruption; provided,
however, that in no event shall GRC be required to (A) devote any more than a
reasonable amount of time (as determined by GRC in its reasonable discretion) in
connection with the services to be provided by GRC hereunder, or (B) incur any
out of pocket costs or expenses in connection with such services, without the
prior written consent of GRC.
(c) Merchandise Procurement and Order Fulfillment Relationships. During
-----------------------------------------------------------
the Term, GRC agrees to provide TVN and GRTN with consulting services regarding
merchandise procurement and order fulfillment, including, without limitation,
the identity of domestic and international vendors to utilize therefor;
provided, however, that in no event shall GRC be required to (i) devote any more
than a reasonable amount of time (as determined by GRC in its reasonable
discretion) in connection with the services to be provided by GRC hereunder, or
(ii) incur any out of pocket costs or expenses in connection with such services,
without the prior written consent of GRC.
(d) Direct Response Infomercial Library. During the Term, GRC agrees to
-----------------------------------
continue to provide GRTN access to its full and complete library of all current
GRC direct response infomercial broadcast
Page 1 of 8
Rev. 8.0
quality videotapes relating to the sale of GRC goods and/or services (an
"Infomercial" or collectively, the "Infomercial Library") within a reasonable
time following execution of this Agreement. GRC further agrees to keep current
the Infomercial Library by providing infomercial videotapes relating to new GRC
products within a reasonable time following the conclusion of their production.
In the event that GRTN wishes to utilize any of the Infomercials, GRTN shall
first contact GRC's head of media to determine which Infomercials are currently
available for use, and GRC shall, in accordance with the practices previously in
effect with GRTV but in no event later than one (1) business day from such
request, apprise GRTN as to which of the Infomercials are available for
broadcast and the time frame during which GRTN shall be entitled to broadcast
such without being required to contact GRC again. Notwithstanding any provision
of this subsection 1(d) to the contrary, GRC retains the sole and exclusive
right to determine the Infomercial Library and may make additions, deletions and
other changes and provide notice of such to GRTN. All Infomercials supplied by
GRC shall be of broadcast quality and shall be in such format as GRTN may
reasonably designate, all consistent with the processes in effect prior to the
sale of GRTV to TVN.
(e) GRC Products for Distribution by TSI. During the Term, in the event
------------------------------------
that TVN's television shopping network (Panda/TVN Shopping, Inc., "TSI") wishes
to purchase from GRC any of the products distributed by or through GRC, GRC
agrees to use its best efforts to provide such products to TSI subject to the
terms of one or more separate distribution agreements between GRC and TSI for
one or more of such products, which agreement(s) shall (i) be on terms mutually
satisfactory to GRC and TSI, (ii) provide pricing consistent with that offered
by GRC to its most favored shopping channel clients and (iii) be subject to all
legal and contractual rights, if any, of GRC to sell any such products. TSI
shall only be permitted to sell GRC products purchased under this Section 1(e)
by means of its hosts on its shopping channel and not through the airing of any
GRC Infomercial.
2. Fees for Services and Deliverables.
----------------------------------
(a) The fees payable by GRTN to GRC for the services which GRC has agreed
to provide under Section 1 above (the "GRC Services") shall be FIFTEEN MILLION
DOLLARS ($15,000,000), payable as is more fully set forth in Section 2(b),
below.
(b) At the end of each calendar month during the Term (defined below), GRC
shall invoice GRTN for the sum of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000)
payable for the GRC Services (the "Monthly Fee"), and GRTN shall pay said sum to
GRC within thirty (30) days following GRTN's receipt of such invoice. There
shall be no interest charged, due, or owing on said $250,000 per month payments,
unless paid more than fifteen (15) days late, whereupon interest shall accrue at
ten percent (10%) per annum on the unpaid amount.
3. Term. This Agreement shall commence on the date hereof and shall continue
----
until July 1, 2004 (the "Term").
4. Revenue Sharing. For any GRC direct response infomercial aired by GRTN
---------------
pursuant to Section 1(a) above in which a GRC product or service is sold via
GRTN:
(a) GRTN will receive TWENTY FIVE PERCENT (25%) of all Gross Revenues
(defined below) from cosmetics, fitness, exercise and/or other equipment or hard
goods and related products sold, which shall be paid in accordance with Section
4(b) below, and GRC shall provide GRTN with a report due at the end of each
monthly which lists all data required to determine Gross Revenues and GRTN's
share thereof for that month. GRTN will receive THIRTY-THREE AND ONE-THIRD
PERCENT (33-l/3%) of all Gross Revenues (defined below) from soft goods and
related products, ideas and/or services (including, without limitation, video
tapes and discs, books and audio tapes and discs) sold, which shall be paid in
accordance with Section 4(b) below, and GRC shall provide GRTN with a report due
at the end of each monthly which lists all data required to determine Gross
Revenues and GRTN's share thereof for that month.
Page 2 of 8
Rev. 8.0
(b) All fees due and owing by GRC to GRTN under Section 4(a) shall be
credited against the Monthly Fee payable by GRTN for the following calendar
month. In the event that the fees due and owing under Section 4(a) exceed the
Monthly Fee (or in the event of the final calendar month under the Term), GRC
shall pay such fees directly to GRTN.
(c) For purposes of this Section 4, the term "Gross Revenue" shall be
computed by multiplying the price of each product or service sold via GRTN by
the number of sales made for such item, without deduction for returns, refunds,
credits, charge backs and bad debt. Gross Revenue shall not include uncompleted
sales such as credit card declines or instances where payment is not received by
GRC.
(d) All sales will be deemed complete when merchandise is shipped.
(e) GRTN, or its authorized representative, shall be entitled to audit
GRC's books and records directly relating to GRC's obligations under this
Section 4, upon reasonable advance written notice to GRC. GRTN may conduct such
an audit no more than two (2) times per year. GRC, or its authorized
representative, shall be entitled to audit GRTN's books and records directly
relating to GRTN's obligations under this Section 4, upon reasonable advance
written notice to GRTN. GRC may conduct such an audit no more than two (2) times
per year
5. Returns and Warranties.
----------------------
(a) Except as is provided in Section 5(b) below, for all GRC provided
products sold via GRTN, GRC shall process all product returns, including any
which the customer finds to be defective in workmanship or material, or which
are damaged in shipment from GRC, or which are sent back by the customer within
applicable return periods. GRC agrees to handle all warranty claims with regard
to any GRC products sold via GRTN. GRC agrees to indemnify and hold GRTN
harmless for all damages, liability, loss and expense, including, without
limitation, reasonable attorney's fees ("Claims"), actually incurred by GRTN
resulting from defects or damage arising from any GRC product sold via GRTN, and
for any Claims based upon the content of the Infomercial Library and/or any
products provided by, or on behalf of, GRC. In no event shall GRC, TVN or GRTN
be liable hereunder for any special, consequential or similar damages,
regardless of the foreseeability of such damages.
(b) In the event that GRTN or TSI takes title to GRC provided products and
such products are damaged due to acts or omissions of GRTN or TSI, as
applicable, or any agent of GRTN or TSI, as applicable, then with regard to
products so damaged, the obligations of Section 5(a) above shall not apply to
GRC.
6. Confidentiality. The terms and pricing set forth herein is confidential
---------------
information and shall be held by the parties in strictest confidence and not
disclosed to any third party (other than to any entity controlling, controlled
by, or under common control with a party hereto) without the other party's prior
written consent. The parties confidential obligations of confidentiality
hereunder shall not apply to confidential information which (i) is now, or
hereafter becomes, through no act or failure to act by the party seeking
disclosure (the "Disclosing Party"), generally known or available, (ii) is
hereafter furnished by the non-Disclosing Party to others without restriction on
disclosure; (iii) is authorized in writing by the non-Disclosing Party for
public disclosure; or (iv) is pursuant to a judicial order or government
regulation (provided, however, that the Disclosing Party shall first have given
notice, where practicable, to the non-Disclosing Party and shall either itself
obtain, or allow the Disclosing Party an opportunity to obtain, a protective
order preventing or limiting such compelled disclosure, and then any required
disclosure shall be the minimum required by applicable law. The burden of proof
on any exception under this Section 6 shall be on the Disclosing Party.
7. Representations. Each party hereto represents and warrants that: it has the
---------------
right to enter into this Agreement, it will comply with all of the terms herein,
and that the execution and performance of this
PAGE 3 OF 8
REV. 8.0
Agreement will not result in any violation of, be in conflict with, or
constitute a default under, with or without the passage of time or the giving
of notice of, any other agreement to which it is bound.
8. Breach. No breach committed hereunder shall be grounds for termination of
------
this Agreement unless written notice thereof has been provided to the breaching
party with a thirty (30) day cure period. In the event a default is curable, but
is not cured within such thirty (30) day period, the breaching party must as
soon as practicable within such thirty (30) day period initiate such cure and
thereafter diligently and promptly complete measures to cure such default, in
which case the breaching party shall have such additional cure period as the
parties may reasonably agree given the nature and magnitude of the default, and
the impact of the default on this Agreement.
9. TVN Guarantee. TVN agrees to guarantee GRTN's full and faithful performance
-------------
of all of GRTN's obligations hereunder, as set forth in that certain Guaranty of
even date herewith, a copy of which is attached hereto as Exhibit "A" (the
"Guaranty").
10. Dispute Resolution.
------------------
(a) Resolution by CFO's. If any dispute arises between the GRC and TVN or
-------------------
GRTN, as the case may be, regarding this Agreement or the transactions
contemplated hereby, the persons named in the notice provisions of Section 10
for each interested party shall attempt in good faith to resolve the dispute. If
those individuals have not agreed to a resolution within fifteen (15) days from
the date on which the dispute was first presented to them, any party, by written
notice to the other parties, may require that the dispute be submitted for
resolution to the Chief Financial Officer of each of TVN and GRC. The Chief
Financial Officers shall meet, in person or by other means satisfactory to them,
to attempt to resolve the dispute within fifteen days after the reference of the
matter to them. If the Chief Financial Officers reach a decision within such
fifteen day period their decision shall be final and binding on the parties
hereto. If the Chief Financial Officers fail to resolve the dispute within such
period, either of the Chief Financial Officers may refer the matter, on notice
to the other, to the Chief Executive Officers of TVN and GRC (the "Chief
Executive Officers"). The Chief Executive Officers shall meet, in person or by
other means satisfactory to them, to attempt to resolve the dispute within
fifteen days after the reference of the matter to them. If the Chief Executive
Officers reach a decision within such fifteen day period their decision shall be
final and binding on the parties hereto. If the Chief Executive Officers fail to
resolve the dispute within such period, the matter may be referred by either
party for arbitration as provided in Section 10(b).
(b) Arbitration.
-----------
(i) Except as otherwise provided in Section 10(a) hereof, in the
event of any claim, demand, issue or dispute between TVN or GRTN,
as the case may be, and GRC, or any of GRC's shareholders,
directors, officers, managers, supervisors, and/or employees
(except for claims for workers' compensation, unemployment
insurance, or any matter within the jurisdiction of the state
labor commissioner) (each a "dispute" hereinbelow) the dispute
shall be submitted to and resolved by final and binding
arbitration as provided for by the California Arbitration Act,
California Code of Civil Procedure, Section 1280, et. seq. Except
-------
as provided in this paragraph, arbitration shall be the sole and
exclusive method for resolving any Agreement-related dispute, and
each of TVN or GRTN, as the case may be, and GRC are giving up
any right that each might otherwise have for a judge or jury to
decide the dispute; provided, however, that either TVN or GRTN,
as the case maybe, or GRC may request equitable relief, including
but not limited to injunctive relief, from a court of competent
jurisdiction.
PAGE 4 OF 8
REV. 8.0
(ii) If a written request for arbitration is not made within the
limitations periods applicable to a claim under applicable
federal or state law, that dispute shall be waived. TVN or GRTN,
as the case may be, and GRC will select an arbitrator by mutual
agreement. If TVN or GRTN, as the case may be, and GRC are
unable to agree on a neutral arbitrator, GRC will obtain a list
of seven (7) arbitrators from the Alternative Dispute Resolution
Service. TVN or GRTN, as the case may be, and GRC will
alternately strike names from the list, with TVN or GRTN, as the
case may be, striking the first name, until only one name
remains. The remaining person shall be the arbitrator. Both TVN
or GRTN, as the case may be, and GRC will have the opportunity
to conduct all discovery as provided for the California Code of
Civil Procedure, and the arbitrator shall have the power to
decide any discovery disputes between the parties. The
arbitrator may also hear and decide motions for summary
disposition of any dispute as provided by applicable state law.
(iii) The arbitrator shall conduct a hearing in a manner to be
mutually agreed upon by TVN or GRTN, as the case may be, and
GRC, or by the arbitrator if TVN or GRTN, as the case may be,
and GRC cannot agree, provided, however, that both TVN or GRTN,
as the case may be, and GRC shall have the opportunity to call
witnesses under oath, and to examine and cross-examine all
witnesses who appear at the hearing. Within thirty (30) days
following the hearing and the submission of the matter to the
arbitrator, the arbitrator shall issue a written opinion and
award which shall be signed and dated. The arbitrator's award
shall decide all dispute and issues submitted by TVN or GRTN, as
the case may be, and GRC, and the arbitrator may not decide any
dispute or issue not submitted. The arbitrator shall be
permitted to award only those remedies in law or equity which
are requested by either TVN or GRTN, as the case may be, or GRC
and allowed by law, but in no event may any punitive or
exemplary damages be sought or awarded. The cost of the
arbitrator and other incidental costs of arbitration, including
the cost of a court reporter, shall be shared equally by both
TVN or GRTN, as the case may be, and GRC. Each of TVN, GRTN and
GRC shall bear their own costs for legal representation in any
arbitration proceeding, provided, however, that the arbitrator
shall have the authority to require either party to pay the
reasonable attorney's fees for the prevailing party's
representation during the arbitration (as determined by the
arbitrator) and the cost of the arbitrator, as part of any
remedy that may be ordered.
(iv) Hearings in the proceeding shall commence within 120 days of the
selection of the neutral arbitrator. Arbitration shall take
place in a location selected by the party who is not the party
requesting arbitration. Arbitration proceedings will be
conducted confidentially and all documents, testimony and
records shall be received, heard and maintained by the
arbitrator in confidence under seal, available for the
inspection only by the arbitrator, TVN, GRTN and GRC and their
respective attorneys and their respective experts who shall
agree in advance and in writing to receive all such information
confidentially and to maintain such information in confidence.
The decree or award rendered by the arbitrator may be entered as
a final and binding judgment in any court having jurisdiction
thereof. Reasonable notice of the time and place of arbitration
shall be given to all persons, other than the parties, as shall
be required by law, in which case such persons or those
authorized representatives shall have the right to attend and/or
participate in all the arbitration hearings in such manner as
the law shall require.
(c) All negotiations and proceedings pursuant to Sections 10(a) and (b)
shall be confidential and shall be treated as compromise and settlement
negotiations for purposes of the United States Federal Rules of Evidence and any
applicable state rules of evidence provided that any party may specifically
waive these rights of privileges and confidentiality with respect to any
communications it makes pursuant to those sections. No such confidentiality or
privilege shall apply to communications made to an independent accounting firm.
(d) The resolution of any dispute submitted pursuant to Sections 10(a) or
(b) shall be final and binding upon the parties to this Agreement. No party to
this Agreement shall initiate, and each party to this Agreement shall cause its
affiliates not to initiate, any legal proceeding, except as provided in Section
10(e).
(e) Nothing in this Section 10 shall preclude any party from seeking
interim or permanent injunctive relief, specific performance or other equitable
remedies in relation to any disputes where party reasonably believes that such
relief is necessary to prevent irreparable harm that cannot be calculated or
fully or adequately compensated by recovery of damages.
11. Notices. All notices and other communications hereunder shall be in
--------
writing and shall be deemed given when received if delivered personally or
mailed by registered or certified mail (return receipt requested), sent by
telecopy with a copy via earliest overnight delivery and confirmation of
facsimile received, or sent by recognized overnight delivery service, return
receipt requested, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to TVN or GRTN, to:
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
PAGE 6 OF 8
REV. 8.0
(b) if to Xxxxx-Xxxxxx to:
Xxxxx-Xxxxxx Corporation
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Knee
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Xxxxx-Xxxxxx Corporation
Legal Department
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Van Xx Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxx & Xxxxxxxxx LLP
0000 Xxx Xxxx Xxxxxx XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
12. General Provisions.
------------------
(a) This Agreement shall inure to the benefit of each party's successors
in interest, its affiliates and permitted assigns, and each and every other
corporation or firm which is under its common control. No term or provision of
this Agreement may be amended, waived, released, discharged or modified in any
respect except in writing, signed by the parties hereto.
(b) Neither party may delegate any of its rights or obligations under this
Agreement or assign any of its rights hereunder without the prior written
consent of the other party, which consent may be withheld in such other party's
sole discretion.
(c) No failure or delay on the part of any party to this Agreement 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 hereunder. No breach of any provision hereof can be
waived unless in writing.
(d) This Agreement is made and entered into, and shall be construed in
accordance with, the internal laws of the State of California (without giving
effect to its choice of law principles).
(e) This Agreement and the Guaranty sets forth the entire understanding
between the parties hereto with respect to the subject matter hereof, and there
are no terms, conditions, representations, warranties or covenants other than
those expressly contained herein. This Agreement and the Guaranty supersede any
previous agreements or understandings between the parties with respect to the
subject matter hereof, whether written or oral, all of which are merged herein.
PAGE 7 OF 8
REV. 8.0
(f) Neither party shall be liable for any delay or failure which is
directly attributable to fire, flood, earthquake, or public disaster; strike,
labor dispute or unrest; embargo, riot, war, insurrection or civil unrest; any
act of God, any act of legally constituted authority; or any other cause beyond
the that party's control.
(g) In no event will either party be liable for any indirect, incidental,
consequential, special or punitive damages (including, without limitation,
damages for loss of business, profits or revenues, loss of goodwill, business
interruption, or failure to realize expected savings) arising out this
Agreement, even if said party has been advised of the possibility of such
damages.
(h) The headings herein are for convenience only, and do not modify or
limit the terms of this Agreement, nor shall they be given any effect in the
construction or interpretation thereof.
(i) Each party acknowledges that the language contained in this Agreement
is the product of an arms length negotiation conducted by that party's duly
appointed legal counsel. As a result, neither party (i) shall be deemed to have
drafted this Agreement or (ii) shall be entitled to construe this Agreement,
either in whole or in part, against the other party on the theory that contract
provisions are construed against the party that drafted it.
(j) This Agreement may be executed in one or more counterparts, each of
which shall be deemed an original and will become effective and binding upon the
parties at such time as all of the signatories hereto have signed each
counterpart of the Agreement. Copies of this Agreement may be transmitted via
telefax for signature and each mutually executed fax copy may be used for all
purposes as an original by either party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized representatives as of the day and year first
written above.
GRTV NETWORK, INC. XXXXX-XXXXXX CORPORATION
By: /s/ Xxxxxx Xxxxxx By: /s/ B. Van xx Xxxx
---------------------------- -------------------------------
Name: Xxxxxx Xxxxxx Name: Ben Van xx Xxxx
-------------------------- -----------------------------
Title: Sr. Exec. V.P. Title: EVP and Corporate Secretary
------------------------- ----------------------------
Date: 7/30/99 Date: 7/30/99
-------------------------- -----------------------------
TVN ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
----------------------------
Name: Xxxxxx Xxxxxx
--------------------------
Title: Sr. Exec. V.P.
-------------------------
Date: 7/30/99
--------------------------
PAGE 8 OF 8
REV. 8.0
TRANSITION SERVICES AGREEMENT
This TRANSITION SERVICES AGREEMENT (the "Agreement") is made and entered
into as of July 1, 1999 (the "Effective Date") by and between Xxxxx-Xxxxxx
Corporation, a Delaware corporation ("GRC") and GRTV Network, Inc. ("GRTN").
WHEREAS, GRTN is a wholly owned subsidiary of TVN Entertainment Corporation
("TVN");
WHEREAS, GRC and TVN have entered into a transaction for GRTN to acquire
from GRC substantially all of the assets of Xxxxx-Xxxxxx Television Network,
Inc., a wholly owned subsidiary of GRC ("GRTV");
WHEREAS, GRC, GRTN and TVN wish to facilitate the continued operations of
GRTV's business by GRTN with a minimum of disruption to such business;
WHEREAS, GRC will provide to GRTN the use of that portion of GRC's leased
office space currently occupied by GRTV on the terms and conditions set forth
herein; and
WHEREAS, GRC will provide to GRTN certain accounting, information,
administrative and other services on the terms described below, on the terms and
conditions set forth herein.
NOW, THEREFORE, in consideration of the premises, the covenants contained
herein, and for other good and valuable consideration the receipt and
sufficiency are hereby acknowledged, the parties hereto agree as follows:
1. Office Space.
------------
(a) Premises. GRC presently occupies the premises located at 3340
--------
Xxxxx Xxxx Xxxxxxxxx, Xxxxx Xxxxxx, Xxxxxxxxxx 00000 (the "Premises"), of which
approximately five thousand five hundred (5,500) square feet is currently
occupied by GRTV (the "Office Space"). Additionally, GRTV is currently utilizing
thirty-three (33) parking spaces (the "Parking Spaces").
(b) Term. GRC agrees that GRTN may use the Office Space and Parking
----
Spaces for a period commencing on the Effective Date and ending on the
Termination Date (as defined below) (the "Term").
(c) Rent. During each month of the Term, GRTN shall pay GRC such
----
amounts as GRC is then paying to its landlord for the Premises, currently the
sum of two dollars and thirteen cents ($2.13) per square foot, for GRTN's use
of the Office Space and the sum of sixty six dollars ($66) for each of the
Parking Spaces (the "Monthly Rental"). To the extent that the actual out-of-
pocket costs incurred by GRC to provide the use of the Office Space increases or
decreases during the Term (e.g., the landlord increases the rent for the
Premises or the landlord properly assesses operating expenses which GRC then
actually pays),
Page 1 of 11
Rev. 12.0
as evidenced by reasonably detailed documentation presented to GRTN, the Monthly
Rental may be adjusted upward or downward to reflect such actual cost to GRC;
provided, however, that in no event shall the Monthly Rental increase or
decrease during the Term by more than fifteen percent (15%) of the Monthly
Rental specified in this Section 1.3.
(d) Signs. Except as may be stated below, GRTN shall not affix to any
-----
part of the Premises any sign, advertisement, or notice without the prior
written consent of the landlord, if required, and GRC. GRC will make good faith
efforts to secure any such required consent from the landlord. Notwithstanding
the foregoing, GRTN shall be permitted to place a sign with its name in the
reception area, on the directory board, if any, within the Premises, and in the
vicinity of the Office Space in order to allow for reasonable identification of
the Office Space as occupied by GRTN. In addition, GRTN shall be permitted to
affix a name plate on or near the door of each office included within the Office
Space with the name of GRTN and/or the person(s) occupying such office.
2. Office Furniture and Equipment. During the Term, GRTN may continue to
------------------------------
utilize the existing office furniture and equipment currently located in the
Office Space at no added cost to GRTN.
3. Other Services. During the Term, GRC shall provide GRTN with such of
--------------
the services listed on Exhibit "A" attached hereto (i.e., repairs, maintenance,
copying, printing, telephone and utilities) as GRTN may reasonably request and
as was provided to GRTV immediately prior to the acquisition of its business by
TVN, at the prices set forth on Exhibit "A"; provided, however, that if GRTN
requests that GRC provide Accounting, Information, and/or Administrative
services listed on Exhibit "A", then GRTN will pay for all services listed on
Exhibit "A" under each such requested category. To the extent that the actual
out-of-pocket costs incurred by GRC to provide such services increases or
decreases during the Term, as evidenced by reasonably detailed documentation
presented to GRTN, the prices therefor may be adjusted upward or downward to
reflect such actual cost to GRC; provided, however, that in no event shall such
prices increase or decrease during the Term by more than fifteen percent (15%)
of the prices in effect on the Effective Date.
4. Office Supplies and Postage. During the Term, GRC shall provide GRTN
---------------------------
with such office supplies and postage as GRTN may reasonably request, and as was
provided to GRTV immediately prior to the acquisition of its business by TVN, at
the prices set forth on Exhibit "A". To the extent that the actual out-of-pocket
costs incurred by GRC to provide such supplies and/or postage increases or
decreases during the Term, as evidenced by reasonably detailed documentation
presented to GRTN, the prices therefor may be adjusted upward or downward to
reflect such actual cost to GRC; provided, however, that in no event shall such
prices increase or decrease during the Term by more than fifteen percent (15%)
of the prices in effect on the Effective Date.
5. Accounting, Information and Administrative Services. During the Term,
---------------------------------------------------
GRC shall provide GRTN with such accounting, information and administrative
services as GRTN may reasonably request, and as was provided to GRTV immediately
prior to the acquisition of
Page 2 of 11
Rev. 12.0
its business by TVN, at the prices set forth on Exhibit "A". To the extent that
the actual out-of-pocket costs incurred by GRC to provide such services
increases or decreases during the Term, as evidenced by reasonably detailed
documentation presented to GRTN, the prices therefor may be adjusted upward or
downward to reflect such actual cost to GRC; provided, however, that in no event
shall such prices increase or decrease during the Term by more than fifteen
percent (15%) of the prices in effect on the Effective Date.
6. Employee Differential Payments.
------------------------------
(a) For Xxxxx Xxxxx.
---------------
(i) Salary Differential. GRTN shall pay to GRC a fee in the
-------------------
total sum of seventy two thousand dollars ($72,000), which represents the salary
differential to be paid by GRC to Xxxxx Xxxxx ("Xxxxx") pursuant to a separate
Termination and Release Agreement dated July 30, 1999 between Xxxxx and GRTV
(the "Xxxxx Differential Fee"). GRTN shall pay to GRC the amount of the Xxxxx
Differential Fee in eighteen (18) equal monthly installments of four thousand
dollars ($4,000) each, with the first installment due on September 1, 1999. If
Xxxxx'x employment with GRTN is terminated by reason of Xxxxx'x resignation or
by GRTN for cause prior to Xxxxx receiving an aggregate amount from GRC equal to
the full Xxxxx Differential Fee from GRC, no further monthly installments shall
be payable from GRTV to GRC, except for any installments which were due, but
unpaid, prior to such termination. All payments payable by GRTV to GRC under
this Section 6(a) shall be paid in accordance with the payment procedures of
Section 7(b) below.
(ii) Bonus Differential. In the event that Xxxxx is entitled to
------------------
receive a Performance Bonus (as such term is defined in the Employment Agreement
between Xxxxx and GRTN of even date herewith) from GRTN: (i) GRTN shall notify
GRC in writing of the amount and date such Performance Bonus is payable to
Xxxxx, (ii) GRC shall inform GRTN by written notice of the bonus differential
amount which GRC is obligated to pay to Xxxxx pursuant to his Termination and
Release Agreement with GRC, and (iii) GRTN shall pay to GRC as a fee an amount
equal to such bonus differential amount to be paid by GRC to Xxxxx within three
(3) business days prior to the due date for each such bonus differential as
provided in Xxxxx'x Termination and Release Agreement. The parties mutually
agree that the maximum bonus differential amount to be paid by GRC to Xxxxx (and
GRTN to GRC) for the period ending June 30, 2000 shall be one hundred two
thousand eight hundred twelve dollars ($102,812), and the parties mutually agree
that the maximum bonus differential amount to be paid by GRC to Xxxxx (and GRTN
to GRC) for the period ending March 31, 2001 shall be one hundred two thousand
four hundred thirty eight dollars ($102,438).
(b) For Xxxx Xxxxxx. GRTN shall pay to GRC a fee in the total sum of
---------------
one hundred eighty seven thousand five hundred dollars ($187,500), which
represents the salary differential to be paid by GRC to Xxxx Xxxxxx ("Xxxxxx")
pursuant to a separate Termination and Release Agreement dated July 30, 1999
between Xxxxxx and GRTV (the "Xxxxxx Differential Fee"). GRTN shall pay to GRC
the amount of the Xxxxxx Differential Fee in forty-two (42) equal monthly
installments, with the first installment due on September
Page 3 of 11
REV. 12.0
1, 1999. In the event that Xxxxxx does not receive the full Xxxxxx Differential
Fee from GRC, the monthly installments payable from GRTV to GRC shall be
adjusted pro-rata to reflect the actual amount of salary differential paid by
GRC to Xxxxxx, which shall be paid by GRTV to GRC in accordance with the payment
procedures of Section 7(b) below.
7. Payment.
-------
(a) GRTN shall pay GRC a fee for GRC's accounting, information, and
administrative and management services during the "Transition Period" commencing
as of July 1, 1999 and expiring on July 31, 1999 (the "Management Fee"). The
Management Fee shall be in an amount equal to (1) the aggregate amount of pre-
tax net income recognized by GRTN during the Transition Period and (2) the
amount of capital expenditures and prepaid expenses (currently anticipated not
to exceed the sum of $100,000), employee payroll and cost of employee benefits
paid by GRTV during the Transition Period, actually incurred by GRC (on behalf
of GRTV) and/or GRTV and supported by reasonably particularized invoices, all as
mutually determined by TVN and GRC. No later than forty-five (45) days following
the expiration of the Transition Period, GRC shall deliver to GRTN a detailed
income statement for the Transition Period (the "Transition Period Income
Statement") in a form substantially similar to the form of monthly income
statement regularly prepared by GRC, on behalf of GRTV, prior to the sale of
GRTV's assets to GRTN. The Transition Period Income Statement shall calculate
the amount of pre-tax net income of the GRTV Business during the Transition
Period and be accompanied by reasonably sufficient workpapers and other backup
documents and data with respect to such calculation of pre-tax net income,
reflecting the gross sales, revenues, costs and expenses of the GRTN business
during such Transition Period. No later than five (5) business days following
delivery of the Transition Period Income Statement GRTN shall pay GRC by wire
transfer an amount equal to the amount of such pre-tax net income set forth on
the Transition Period Income Statement as the Management Fee pursuant to this
Subsection 7(a), provided that if GRTN disagrees with the amount or the
calculation of the pre-tax income reflected on the Transition Period Income
Statement, GRTN shall provide written notice to GRC no later than the expiration
of such 5 day period, which notice shall set forth in reasonable detail the
basis for its disagreement. If GRTN provides such notice to GRC, then GRC and
GRTN agree to resolve any dispute pursuant to the provisions of Section 11
below, except that if GRC and GRTN are unable to resolve such dispute by mutual
agreement pursuant to the provisions of Section 11, then, in lieu of
arbitration, the parties will select a mutually acceptable independent
accounting firm in accordance with the procedure set forth in Section 11 (with
respect to the selection of an arbitrator) to resolve such dispute and the
determination of such independent accounting firm shall be final and binding on
the parties. GRTN shall pay GRC (i) that part of the Management Fee relating to
the pre-tax net income of GRTN within five (5) business days following final
determination of the amount of such pre-tax net income by the parties or by the
independent accounting firm pursuant to the provisions of this Section 7(a) and
Section 11 and (ii) that part of the Management Fee relating to the capital
expenditures, prepaid expenses, employee payroll and benefits costs paid by GTRV
within five (5) business days following the determination of such amount by GRTN
and GRC.
Page 4 of 11
Rev. 12.0
(b) During the Term, GRC will submit to GRTN monthly invoices for the
Monthly Rent, the pro-rated portion of the Xxxxx Differential Fee, the pro-rated
portion of the Xxxxxx Differential Fee, and for the services which GRC has
provided to GRTN since the prior invoice, payable net thirty (30) days. Such
monthly invoices shall not include any services which GRTN did not actually
receive, nor shall it include any amounts which GRTN has otherwise directly paid
to GRC pursuant to this Agreement (such as rent and parking). Payments shall be
sent to GRC's address as provided in Section 14 hereof or at such other place as
shall be designated in writing by GRC. If this Agreement shall commence or
terminate on a day other than the first day of a month, any and all Monthly Rent
payments for any such partial month shall be prorated on a per diem basis.
Payments which are more than fifteen (15) days late, whereupon interest shall
accrue at ten percent (10%) per annum.
8. Termination/Expiration.
----------------------
(a) Expiration. The obligations of the parties with respect to
----------
Sections 1 through 5, inclusive, shall terminate one (1) year from the date
hereof, unless sooner terminated in accordance with Section 8(b).
(b) Termination. Except as is set forth in Section 8(e) below, either
-----------
party shall have the right to terminate this Agreement (or any of Sections 1
through 5, inclusive) by providing sixty (60) days prior written notice to the
other party; provided, however, that in all events, Section 10 hereof shall
survive any such termination. In the event that one party terminates only part
of this Agreement, such party shall include a description of those services
which it is terminating. In the event that GRC elects to partially terminate
this Agreement, GRTN shall have the right, but not the obligation, to terminate
the remainder of the Agreement effective as of the partial termination date upon
written notice provided to GRC no later than such partial termination date.
Notwithstanding the above, GRC may not tender notice of its intent to terminate
this Agreement, in whole or in part, within the initial six (6) months of the
Term.
(c) Termination Date. As used herein, the term "Termination Date"
----------------
shall mean the date upon which GRC's obligation to render services under
Sections 1 through 5, inclusive, have expired in accordance with Section 8(a) or
have been terminated in accordance with Section 8(b).
(d) Subordination. This Agreement is expressly subject and subordinate
-------------
to each and every provision contained in the Office Lease, by and between Xxxxx-
Xxxxxx Corporation and Xxxxxxx Properties, L.P., a California limited
partnership by Xxxxxxx Properties, Inc., a Maryland corporation, its General
Partner, as successor-in-interest to Xxxxxxx-Xxxxx Investment Company, a
California general partnership, as Landlord, dated June 26, 1997, including but
not limited to Article 28.
(e) Continuation of Differential Fee. Notwithstanding anything to the
--------------------------------
contrary contained herein, (i) the obligations of the parties with respect to
Section 6(a) shall continue until such time as GRTN has fully paid to GRC the
amounts owed to GRC as
Page 5 of 11
Rev. 12.0
provided in Section 6(a) and (ii) the obligations of the parties with respect to
Section 6(b) shall continue until such time as GRTN has fully paid to GRC the
amount owed to GRC as provided in Section 6(b).
9. Insurance. Each of GRC and GRTN agree to cause the naming of the other
---------
as a loss payee and additional insured under their respective comprehensive
general or commercial liability insurance policies within a reasonable time
following the mutual execution of this Agreement.
10. Indemnity. GRTN agrees to indemnify and hold GRC, its officers,
---------
directors, employees, shareholders, successors, assigns and affiliates
(collectively, the "GRC Indemnitees") harmless for all damages, liability, loss
and expense, including, without limitation, reasonable attorney's fees, incurred
by the GRC Indemnitees resulting from GRTN's or TVN's (or any of their
respective affiliates, employees, agents and representatives) use of the Office
Space.
11. Dispute Resolution.
------------------
(a) Resolution by CFOs. If any dispute arises between GRTN and GRC
------------------
regarding this Agreement or the transactions contemplated hereby, the parties
shall attempt in good faith to resolve the dispute. If the parties have not
agreed to a resolution within fifteen (15) days from the date on which the
dispute was first presented, either party, by written notice to the other party,
may require that the dispute be submitted for resolution to the Chief Financial
Officer of each of GRC and GRTN. The Chief Financial Officers shall meet, in
person or by other means satisfactory to them, to attempt to resolve the dispute
within fifteen days after the reference of the matter to them. If the Chief
Financial Officers reach a decision within such fifteen day period their
decision shall be final and binding on the parties hereto. If the Chief
Financial Officers fail to resolve the dispute within such period, either of the
Chief Financial Officers may refer the matter, on notice to the other, to the
Chief Executive Officers of GRC and GRTN (the "Chief Executive Officers"). The
Chief Executive Officers shall meet, in person or by other means satisfactory to
them, to attempt to resolve the dispute within fifteen days after the reference
of the matter to them. If the Chief Executive Officers reach a decision within
such fifteen day period their decision shall be final and binding on the parties
hereto. If the Chief Executive Officers fail to resolve the dispute within such
period, the matter may be referred by either party for arbitration as provided
in Section 11(b).
(b) Arbitration.
-----------
(i) Except as otherwise provided in Section 11(a) hereof, in the
event of any claim, demand, issue or dispute between GRC and
GRTN, or any of GRTN's shareholders, directors, officers,
managers, supervisors, and/or employees (except for claims for
workers' compensation, unemployment insurance, or any matter
within the jurisdiction of the state labor commissioner) (each
a "dispute" hereinbelow) the dispute shall be submitted to and
Page 6 of 11
Rev. 12.0
resolved by final and binding arbitration as provided for by
the California Arbitration Act, California Code of Civil
Procedure, Section 1280, et. seq. Except as provided in this
paragraph, arbitration shall be the sole and exclusive
method for resolving any Agreement-related dispute, and each
of GRC and GRTN are giving up any right that each might
otherwise have for a judge or jury to decide the dispute;
provided, however, that GRC or GRTN may request equitable
relief, including but not limited to injunctive relief, from
a court of competent jurisdiction.
(ii) If a written request for arbitration is not made within the
limitations periods applicable to a claim under applicable
federal or state law, that dispute shall be waived. GRC and
GRTN will select an arbitrator by mutual agreement. If GRC
and GRTN are unable to agree on a neutral arbitrator, GRTN
will obtain a list of seven (7) arbitrators from the
Alternative Dispute Resolution Service. GRC and GRTN will
alternately strike names from the list, with GRC striking
the first name, until only one name remains. The remaining
person shall be the arbitrator. Both GRC and GRTN will have
the opportunity to conduct all discovery as provided for the
California Code of Civil Procedure, and the arbitrator shall
have the power to decide any discovery disputes between the
parties. The arbitrator may also hear and decide motions for
summary disposition of any dispute as provided by applicable
state law.
(iii) The arbitrator shall conduct a hearing in a manner to be
mutually agreed upon by GRC and GRTN, or by the arbitrator
if GRC and GRTN cannot agree, provided, however, that both
GRC and GRTN shall have the opportunity to call witnesses
under oath, and to examine and cross-examine all witnesses
who appear at the hearing. Within thirty (30) days following
the hearing and the submission of the matter to the
arbitrator, the arbitrator shall issue a written opinion and
award which shall be signed and dated. The arbitrator's
award shall decide all dispute and issues submitted by GRC
and GRTN, and the arbitrator may not decide any dispute or
issue not submitted. The arbitrator shall be permitted to
award only those remedies in law or equity which are
requested by either GRC or GRTN and allowed by law, but in
no event may any punitive or exemplary damages be sought or
awarded. The cost of the arbitrator and other incidental
costs of arbitration, including the cost of a court
reporter, shall be shared equally by both GRC
Page 7 of 11
Rev. 12.0
and GRTN. Each of GRC and GRTN shall bear their own costs
for legal representation in any arbitration proceeding,
provided, however, that the arbitrator shall have the
authority to require either party to pay the reasonable
attorneys fees for the prevailing party's representation
during the arbitration (as determined by the arbitrator),
and the costs of the arbitrator as part of any remedy that
may be ordered.
(iv) Hearings in the proceeding shall commence within 120 days of
the selection of the neutral arbitrator. Arbitration shall
take place in a location selected by the party who is not
the party requesting arbitration. Arbitration proceedings
will be conducted confidentially and all documents,
testimony and records shall be received, heard and
maintained by the arbitrator in confidence under seal,
available for the inspection only by the arbitrator, GRC and
GRTN and their respective attorneys and their respective
experts who shall agree in advance and in writing to receive
all such information confidentially and to maintain such
information in confidence. The decree or award rendered by
the arbitrator may be entered as a final and binding
judgment in any court having jurisdiction thereof.
Reasonable notice of the time and place of arbitration shall
be given to all persons, other than the parties, as shall be
required by law, in which case such persons or those
authorized representatives shall have the right to attend
and/or participate in all the arbitration hearings in such
manner as the law shall require.
(c) All negotiations and proceedings pursuant to Sections 11(a) and
(b) shall be confidential and shall be treated as compromise and settlement
negotiations for purposes of the United States Federal Rules of Evidence and any
applicable state rules of evidence provided that any party may specifically
waive these rights of privileges and confidentiality with respect to any
communications it makes pursuant to those sections. No such confidentiality or
privilege shall apply to communications made to an independent accounting firm.
(d) The resolution of any dispute submitted pursuant to Sections 11(a)
or (b) shall be final and binding upon the parties to this Agreement. No party
to this Agreement shall initiate, and each party to this Agreement shall cause
its affiliates not to initiate, any legal proceeding, except as provided in
Section 11(e).
(e) Nothing in this Section 11 shall preclude any party from seeking
interim or permanent injunctive relief, specific performance or other equitable
remedies in relation to any disputes where party reasonably believes that such
relief is necessary to prevent irreparable harm that cannot be calculated or
fully or adequately compensated by recovery of damages.
Page 8 of 11
Rev. 12.0
12. Breach. No breach committed hereunder shall be grounds for termination
------
of this Agreement unless written notice thereof has been provided to the
breaching party with a reasonable opportunity to cure.
13. Assignment. GRTN shall not have the right to assign any of its rights
----------
under this Agreement without the prior written consent of GRC, which consent may
be withheld in GRC's sole discretion.
14. Notices. All notices and other communications hereunder shall be in
-------
writing and shall be deemed given when received if delivered personally or
mailed by registered or certified mail (return receipt requested), sent by
telecopy with a copy via earliest overnight delivery and confirmation of
facsimile received, or sent by recognized overnight delivery service, return
receipt requested, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(a) if to GRTN, to:
c/o TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Page 9 of 11
Rev. 12.0
(b) if to Xxxxx-Xxxxxx to:
Xxxxx-Xxxxxx Corporation
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Knee
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Xxxxx-Xxxxxx Corporation
Legal Department
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxxx Van xx Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxx & Xxxxxxxxx LLP
0000 Xxx Xxxx Xxxxxx XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
15. Entire Agreement. This Agreement contains the entire agreement and
----------------
understanding of the parties hereto with respect to the subject matter contained
herein, and supercedes any and all prior agreements or understanding whether
written or oral. No modification or amendment to this Agreement shall be
effective unless such modification or amendment is in writing and signed by the
party to be bound thereby.
16. Binding Effect. This Agreement shall be binding upon and inure to the
--------------
benefit of the parties hereto, and their respective successors.
17. Headings. The headings herein are for convenience only, and do not
--------
modify or limit the terms of this Agreement, nor shall they be given any effect
in the construction or interpretation thereof.
18. Construction. Each party acknowledges that the language contained in
------------
this Agreement is the product of an arms length negotiation conducted by each
party's duly appointed legal counsel. As a result, neither party (i) shall be
deemed to have drafted this Agreement nor (ii) shall be entitled to construe
this Agreement, either in whole or in part,
Page 10 of ll
Rev. 12.0
against the other party on the theory that contract provisions are construed
against the party that drafted them.
19. Relationship Between the Parties. This Agreement does not create a
--------------------------------
partnership or a joint venture between the parties and neither party shall be
deemed an agent or partner of the other or have the power or right to bind the
other party in any manner whatsoever unless previously confirmed in writing by
the other party.
20. Governing Law. This Agreement shall be construed, interpreted,
-------------
governed, and enforced in accordance with the laws of the State of California
without regard to principles of conflict of laws.
21. Counterparts. This Agreement may be executed in one or more
------------
counterparts, each of which shall be deemed an original and will become
effective and binding upon the parties at such time as all of the signatories
hereto have signed each counterpart of the Agreement. Copies of this Agreement
may be transmitted via telefax for signature and each mutually executed fax copy
may be used for all purposes as an original by either party.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed
by their duly authorized representatives as of the day and year first written
above.
XXXXX-XXXXXX CORPORATION GRTV NETWORK, INC.
By: /s/ B. Van xx Xxxx By: /s/ Xxxxxx Xxxxxx
------------------------------ ------------------------------
Name: B. Van xx Xxxx Name: Xxxxxx Xxxxxx
----------------------------- -----------------------------
Title: EVP Title: Sr. Executive V.P.
---------------------------- ----------------------------
Date: 7-30-99 Date: 7/30/99
---------------------------- ----------------------------
Transition Services Agreement
Exhibit "A"
GRTV
SUMMARY OF ANNUAL OVERHEAD COSTS
FOR THE YEAR ENDING 12/31/99
ALLOCATED TOTAL
----------- -------
WAGES
----- Employee
(INCLUDING 20% BENEFITS) Equivalent 120%
-------------------------
ACCOUNTING
CONTROLLER 5% 0.05 5,400 $6,500
ACCOUNTING MANAGER 20% 0.20 15,000 18,000
DIVISION ACCOUNTANT 100% 1.00 48,200 55,400
GENERAL ACCOUNTANT 15% 0.15 7,128 8,600
ACCTS PAYABLE 50% 0.50 15,101 18,100
A/P SUPERVISOR 5% 0.05 2,046 2,500
PAYROLL 20% 0.20 7,920 9,500
--------- ---------
TOTAL ACCOUNTING 2.15 118,600
--------- ---------
INFORMATION SERVICES
SYSTEMS PROGRAMMER - GENERAL 50% 0.50 33,000 39,600
SYSTEMS MAINTENANCE - PD 20% 0.20 9,372 11,200
SYSTEMS SUPPORT - SM 43% 0.43 21,589 25,900
--------- ---------
TOTAL INFO SYSTEMS 1.13 78,700
--------- ---------
ADMINISTRATIVE
RECEPTIONIST 43% 0.43 15,855 19,000
FACILITIES ADMIN & MAINTENANCE 43% 0.43 48,155 57,800
--------- ---------
TOTAL ADMINISTRATIVE 0.86 76,800
--------- ---------
TOTAL ALLOCATED WAGES 4.14 272,100 272,100
--------- ---------
TOTAL WAGES & BENEFITS
OTHER COSTS
-----------
DEPRECIATION (COMPUTERS & FACILITIES) 3.0% 61,000
EQUIPMENT LEASE 28.0% of SM Cost 16,600
REPAIRS & MAINTENANCE 28.0% of SM Cost 50,900
SUPPLIES & PRINTING 20.0% 65,200
POSTAGE 20.0% 35,800
TELEPHONE & UTILITIES 20.0% 69,800
SATELLITE RENTAL CHG - SANTA XXXXXX 1,200
---------
TOTAL OTHER COSTS 300,600 300,600
--------- ---------
TOTAL OVERHEAD COSTS $572,700 $572,700
--------- ---------
TOTAL PER MONTH $47,725
---------
TOTAL EMPLOYEES SM PO Other Total
-- -- ----- -----
GRTV/CTC 33 0 0 33
OTHER GRC 44 88 3 135
---------------------------------------------
TOTAL 77 88 3 168
---------------------------------------------
PCT OF GRTV TO TOTAL 43% 0% 0% 20%
---------------------------------------------
RENTABLE SQUARE FEET
TOTAL SANTA XXXXXX SQUARE FEET 21,971
GRTV SQUARE FEET 6,102
PCT OF GRTV TO TOTAL 28%
----------
GUARANTY
THIS GUARANTY (the "Guaranty") is made by TVN ENTERTAINMENT CORPORATION, a
Delaware corporation (the "Guarantor"), to and for the benefit of XXXXX-XXXXXX
CORPORATION, a Delaware corporation (the "Beneficiary"). For good and valuable
consideration, the receipt and sufficiency of which are hereby acknowledged,
Guarantor hereby covenants and agrees as follows:
1. Purpose. GRTV Network, Inc., a Delaware corporation (the "Company"),
-------
and Beneficiary have entered into that certain Media Access, Consulting and
Services Agreement of even date herewith (the "Media Access Agreement") and that
certain Transition Services Agreement of even date herewith (the "Transition
Services Agreement"), and such Media Access Agreement and such Transition
Services Agreement are of direct interest and benefit to Guarantor. To induce,
and as a condition of, the execution and delivery of the Media Access Agreement
and the Transition Services Agreement by Beneficiary, Guarantor has agreed to
guarantee the full and prompt payment when due of all obligations of the Company
to Beneficiary arising out of the Media Access Agreement and out of the
Transition Services Agreement (collectively, the "Obligations").
2. Guaranty. Guarantor hereby unconditionally and irrevocably guarantees
--------
the full and punctual payment of the Obligations when and as due in accordance
with the terms and conditions of the Media Access Agreement and the Transition
Services Agreement. If the Company fails to pay any of the Obligations when due,
Guarantor shall pay or satisfy on demand in full all of the Obligations then
due. Such guaranty is absolute, continuing, unconditional and not subject to any
recoupment, set off, reduction or defense, without regard to the liability of
any other person, and shall not be affected in any manner by reason of any
action or omission by Beneficiary. Beneficiary shall be under no obligation to
pursue any of Beneficiary's rights against the Company before pursuing
Beneficiary's rights against Guarantor hereunder.
3. Rights of Beneficiary to Deal with Guarantor. Beneficiary may, without
--------------------------------------------
compromising, impairing, diminishing, or in any way releasing Guarantor from
Guarantor's obligations hereunder, following notice to Guarantor, at any time
or from time to time: (a) waive or excuse a default or defaults by the Company
of any of the Obligations, or delay in exercising any or all of Beneficiary's
rights or remedies with respect to such default or defaults; (b) grant
extensions of time for payment or performance by the Company of any of the
Obligations; (c) release the Company of any of the Obligations; or (d) modify,
change, renew, extend, or amend the Media Access Agreement or the Transition
Services Agreement in any respect.
4. Waivers by Guarantor. Guarantor hereby waives (a) any and all notices
--------------------
whatsoever with respect to the enforceability of this Guaranty or with respect
to the Obligations, including, but not limited to, the notice and enforceability
of (i) Beneficiary's acceptance hereof or Beneficiary's intention to act, or
Beneficiary's action, in reliance herein, and (ii) any default by the Company
with respect to any of the Obligations; and (b) any right of subrogation against
the Company until the Obligations have been paid in full.
5. Duration. This Guaranty shall be a continuing one and shall be binding
--------
upon Guarantor, until the entire amount of the Obligations due to Beneficiary
has been paid or satisfied in full.
6. Remedies Cumulative. All rights and remedies hereunder are irrevocable
-------------------
and cumulative, and shall be in addition to all rights and remedies set forth in
any other instrument or document or available under any law or at equity,
whether now existing or hereafter enacted.
7. Governing Law. This Guaranty is to be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of California, without regard
to principles of conflict of laws.
8. Binding Agreement. This Guaranty is binding upon and enforceable
-----------------
against Obligor, its successors and assigns, and shall inure to the benefit of,
and may be enforced by, Beneficiary and its successors and assigns.
IN WITNESS WHEREOF, the undersigned has duly executed this Guaranty as
of this 1st day of July, 1999.
TVN ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
----------------------------
Name: Xxxxxx Xxxxxx
-------------------------
Title: Sr. Exec. V.P.
-------------------------
ONLY PAGE
Rev. 8.0
NON-COMPETITION AGREEMENT
THIS NON-COMPETITION AGREEMENT (the "Agreement") is executed on July 30,
1999 (the "Execution Date"), by and among TVN Entertainment Corporation, a
Delaware corporation ("TVN"), GRTV Network, Inc., a Delaware corporation
("Newco"), Xxxxx-Xxxxxx Corporation, a Delaware corporation ("Xxxxx-Xxxxxx") and
Xxxxx-Xxxxxx Television Network, Inc., a Delaware corporation ("GRTV").
Background
----------
A. TVN, Newco, Xxxxx-Xxxxxx and GRTV are parties to that certain Asset
Acquisition Agreement of even date herewith (the "Purchase Agreement"),
providing for the acquisition (the "Acquisition") by Newco of substantially all
of the GRTV Assets including the goodwill associated with the GRTV Business.
Unless otherwise provided in this Agreement, the definitions used herein shall
have the meanings given to them in the Purchase Agreement.
X. Xxxxx-Xxxxxx and GRTV are receiving the Aggregate Consideration in
consideration for the sale of the GRTV Assets.
C. As a condition to the Acquisition, the Purchase Agreement contemplates,
among other things, that Xxxxx-Xxxxxx and GRTV will enter into this Agreement as
of the Execution Date.
NOW THEREFORE, in consideration of the Aggregate Consideration and mutual
promises made herein, TVN, Newco, Xxxxx-Xxxxxx and GRTV (collectively referred
to as the "Parties") hereby agree as follows:
1. Covenant Not to Compete or Solicit.
----------------------------------
(a) Non-Competition. During the period commencing on the Execution
---------------
Date and ending on the date 42 months from the Execution Date (the "Noncompete
Period"), Xxxxx-Xxxxxx and GRTV will not, directly or indirectly, as a member,
partner or stockholder or in any other capacity of or for any person, firm,
partnership, company or corporation (other than TVN and Newco or any of their
respective affiliates), without the prior written consent of Newco or TVN:
(i) own, manage, operate, control or participate in the
ownership, management, operation or control of, any business engaged (in the
geographic area referred to in Section 1(d) below) in the same or substantially
similar business as the GRTV Business, engaged in by GRTV as of the Execution
Date; or
(ii) solicit, encourage, hire or take any other action which is
intended to induce any then current employee of TVN, Newco or any subsidiary
of TVN, including Newco, to terminate his or her employment with TVN or any
subsidiary of TVN to become an employee or consultant of Xxxxx-Xxxxxx or GRTV,
its subsidiaries or any other affiliate of Xxxxx-Xxxxxx or knowingly interfere
in any manner with the contractual or employment relationship between TVN, Newco
or any subsidiary of TVN and any employee of Newco or TVN.
For purposes of this Agreement, the term "GRTV Business" shall mean the
business of acquiring media time in quantities from cable service operators and
television broadcasters and reselling media time in packages to direct response
infomercial and product sales fulfillment companies.
(b) Limitations.
-----------
(i) Notwithstanding anything herein to the contrary, the
Noncompete Period shall terminate immediately upon (A) any Default by TVN or
Newco as defined in and pursuant to that certain Promissory Note dated as of
July 1, 1999 in the aggregate principal amount of $13,000,000 payable by TVN and
Newco to GRTV, or (B) the material failure of either TVN or Newco to perform
their obligations pursuant to that certain Media Access, Consulting and Services
Agreement of even date herewith, by and among TVN, Newco and Xxxxx-Xxxxxx,
and/or the Guaranty to such agreement executed by TVN, which failure is not
cured within 30 days following written notice from Xxxxx-Xxxxxx or GRTV to TVN
and Newco.
(ii) The parties hereto acknowledge and agree that nothing in
this Agreement is intended to prohibit, restrict or otherwise limit the ability
of Xxxxx-Xxxxxx and its affiliates (collectively, the "GRC Group") to continue
the GRC Group's existing business activities other than the GRTV Business
including to (A) continue to sell, market, promote and distribute the GRC
Group's products and infomercials and (B) acquire media time for use by the GRC
Group in connection with the transmission and broadcasting of the GRC Group's
infomercial and other direct response content and to sell or otherwise transfer
any media time which was originally intended to be used by the GRC Group in the
event such acquired media time cannot reasonably be utilized by the GRC Group in
connection with its infomercial and direct response business, all of which is
reasonably consistent with the GRC Group's media acquisition and sales prior to
the Execution Date (except that upon the occurrence of unusual events such as
wars or other "Acts of God," the GRC Group may sell such media time in greater
quantities than it has in the past).
(c) Severability. The covenants contained in the preceding paragraphs
------------
shall be construed as a series of separate covenants, one for each county, city
and state of any geographic area where any business is presently carried on by
GRTV or TVN with respect to the GRTV Business. Except for geographic coverage,
each such separate covenant shall be identical in terms to the covenant
contained in the preceding paragraphs. If, in any judicial proceeding, a court
refuses to enforce any of such separate covenants (or any part thereof), then
such unenforceable covenant (or such part) shall be eliminated from this
Agreement to the extent necessary to permit the remaining separate covenants (or
portions thereof) to be enforced. In the event that the provisions of this
Section 1 are deemed to exceed the time, geographic or scope limitations
permitted by applicable law, then such provisions shall be reformed to the
maximum time, geographic or scope limitations, as the case may be, permitted by
applicable laws.
(d) Worldwide Effect. Xxxxx-Xxxxxx, GRTV, TVN and Newco acknowledge
----------------
that Xxxxx-Xxxxxx'x and GRTV's covenants not to compete or solicit contained in
this Section 1 are given in conjunction with the Acquisition. Xxxxx-Xxxxxx,
GRTV, TVN and Newco also acknowledge that the business of TVN and GRTV are
worldwide and, therefore, any actions taken
-2-
by Xxxxx-Xxxxxx or GRTV in violation of this Agreement anywhere would harm TVN's
and Newco's business.
(e) Injunctive Relief. Xxxxx-Xxxxxx and GRTV acknowledge that breach
-----------------
of this Section 1 would cause irreparable injury to TVN and Newco and agree that
in the event of such breach, TVN and Newco shall have available, in addition to
any other right or remedy available (including ascertainable damages), the right
to seek injunctive relief without the necessity of proving actual damages.
2. Dispute Resolution and Arbitration.
----------------------------------
(a) Resolution by Officers. If any claim, demand, issue or dispute
----------------------
arises between TVN or Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as
the case may be, regarding this Agreement or the transactions contemplated
hereby (each, a "Dispute"), the persons named in the notice provisions of
Section 3(c) for each interested party shall attempt in good faith to resolve
the Dispute. If those individuals have not agreed to a resolution within fifteen
(15) days from the date on which the Dispute was first presented to them, any
party, by written notice to the other parties, may require that the Dispute be
submitted for resolution to the Chief Financial Officer of each of Xxxxx-Xxxxxx
and TVN. The Chief Financial Officers shall meet, in person or by other means
satisfactory to them, to attempt to resolve the Dispute within fifteen days
after the reference of the matter to them. If the Chief Financial Officers reach
a decision within such fifteen day period their decision shall be final and
binding on the parties hereto. If the Chief Financial Officers fail to resolve
the Dispute within such period, either of the Chief Financial Officers may refer
the matter, on notice to the other, to the Chief Executive Officers of Xxxxx-
Xxxxxx and TVN (the "Chief Executive Officers"). The Chief Executive Officers
shall meet, in person or by other means satisfactory to them, to attempt to
resolve the Dispute within fifteen days after the reference of the matter to
them. If the Chief Executive Officers reach a decision within such fifteen day
period their decision shall be final and binding on the parties hereto. If the
Chief Executive Officers fail to resolve the Dispute within such period, the
matter may be referred by either party for arbitration as provided in Section
2(b).
(b) Arbitration.
-----------
(i) Except as otherwise provided in Section 2(a) hereof, in the
event of any Dispute, such Dispute shall be submitted to and resolved by final
and binding arbitration as provided for by the Commercial Arbitration Rules of
the American Arbitration Association ("AAA"). Except as provided in Section
2(a), arbitration shall be the sole and exclusive method for resolving any
Dispute, and each of TVN or Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV,
as the case may be, are giving up any right that each might otherwise have for
a judge or jury to decide the Dispute subject to Section 2(e) hereof. If a
written request for arbitration is not made within the limitations periods
applicable to a claim under applicable federal or state law, that Dispute shall
be waived.
(ii) TVN or Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV,
as the case may be, will select an arbitrator by mutual agreement. If TVN or
Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as the case may be, are
unable to agree on a neutral arbitrator, the
-3-
parties will obtain a list of seven (7) arbitrators from the AAA. TVN or Newco,
as the case may be, and Xxxxx-Xxxxxx or GRTV, as the case may be, will
alternately strike names from the list, with Xxxxx-Xxxxxx, as the case may be,
striking first, until only one name remains. The remaining person shall be the
arbitrator. Both TVN and Newco, as the case may be, and Xxxxx-Xxxxxx or GRTV, as
the case may be, will have the opportunity to conduct all discovery as provided
for in the Federal Rules of Civil Procedure, and the arbitrator shall have the
power to decide any discovery disputes between the parties. The arbitrator may
also hear and decide motions for summary disposition of any dispute as provided
by applicable state law and other motions.
(iii) The arbitrator shall conduct a hearing in accordance with the
commercial arbitration rules of the AAA, except as expressly provided herein or
as otherwise agreed by the parties to such Dispute. Within thirty (30) days
following the hearing and the submission of the matter to the arbitrator, the
arbitrator shall issue a written opinion and award which shall be signed and
dated. The arbitrator's award shall decide all Disputes and issues submitted by
Xxxxx-Xxxxxx or GRTV, as the case may be, and TVN or Newco, as the case may be,
and the arbitrator may not decide any Dispute or issue not submitted. The
arbitrator shall be permitted to award only those remedies in law or equity
which are requested by either TVN or Newco, as the case may be, or Xxxxx-Xxxxxx
and GRTV, as the case may be, and allowed by law, but in no event may any
punitive or exemplary damages be sought or awarded. The cost of the arbitrator
and other incidental costs of arbitration, including the cost of a court
reporter, shall be shared equally by both Xxxxx-Xxxxxx or GRTV, as the case may
be, and TVN or Newco, as the case may be. Each of Xxxxx-Xxxxxx, GRTV, TVN and
Newco shall bear their own costs for legal representation in any arbitration
proceeding, provided, however, that the arbitrator shall have the authority to
require either party to pay the reasonable attorney's fees for the prevailing
party's representation during the arbitration (as determined by the arbitrator)
and the costs of the arbitrator, as part of any remedy that may be ordered.
(iv) Arbitration hearings hereunder shall commence within 120 days of
the selection of the neutral arbitrator, and such hearings shall take place in
Los Angeles, California. Arbitration proceedings will be conducted
confidentially and all documents, testimony and records shall be received, heard
and maintained by the arbitrator in confidence, available for the inspection
only by the arbitrator, Xxxxx-Xxxxxx, GRTV, TVN and Newco and their respective
attorneys and their respective experts who shall agree in advance and in writing
to receive all such information confidentially and to maintain such information
in confidence. The decree or award rendered by the arbitrator may be entered as
a final and binding judgment in any court having jurisdiction thereof.
(c) All negotiations and proceedings pursuant to Sections 2(a) and (b)
shall be confidential and shall be treated as compromise and settlement
negotiations for purposes of the United States Federal Rules of Evidence and any
applicable state rules of evidence provided that any party may specifically
waive these rights of privileges and confidentiality with respect to any
communications it makes pursuant to those sections. No such confidentiality or
privilege shall apply to communications made to any independent accounting firm.
(d) The resolution of any dispute submitted pursuant to Sections 2(a) or
(b) shall be final and binding upon the parties to this Agreement. No party to
this Agreement shall initiate,
-4-
and each party to this Agreement shall cause its affiliates not to initiate, any
legal proceeding, except as provided in Section 2(e), and except to enforce the
decisions of the arbitrator hereunder.
(e) Nothing in this Section 2 shall preclude any party from seeking
pre-arbitral interim or permanent injunctive relief, specific performance or
other equitable remedies in relation to any Disputes (prior to the appointment
of an arbitrator as provided herein) where such party reasonably believes that
such relief is necessary to prevent irreparable harm that cannot be calculated
or fully or adequately compensated by recovery of damages.
3. Miscellaneous.
-------------
(a) Severability. If any portion of this Agreement is held by a court
------------
of competent jurisdiction to conflict with any federal, state or local law and
is not reformed, such portion of this Agreement shall be of no force or effect
and this Agreement shall otherwise remain in full force and effect and be
construed as if such portion had not been included in this Agreement.
(b) No Assignment. Except as expressly provided herein, Xxxxx-Xxxxxx
-------------
and GRTV shall not assign this Agreement or any rights or obligations under this
Agreement without the prior written consent of TVN. Except as expressly provided
herein, TVN and Newco shall not assign this Agreement without the prior written
consent of Xxxxx-Xxxxxx.
(c) Notices. All notices and other communications hereunder shall be
-------
in writing and shall be deemed given when received if delivered personally or
mailed by registered or certified mail (return receipt requested), sent by
telecopy with a copy via earliest overnight delivery and confirmation of
facsimile received, or sent by recognized overnight delivery service, return
receipt requested, to the parties at the following addresses and telecopy
numbers (or at such other address or number for a party as shall be specified by
like notice):
(i) if to TVN or Newco, to:
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
-5-
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
(ii) if to GRTV or Xxxxx-Xxxxxx to:
Xxxxx-Xxxxxx Corporation
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Knee
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Xxxxx-Xxxxxx Corporation
Legal Department
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Bennet Van xx Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxx & Xxxxxxxxx LLP
0000 Xxx Xxxx Xxxxxx XX
Xxxxx 0000
Xxxxxxxxxx, X.X. 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
(d) Entire Agreement. This Agreement and the Purchase Agreement
----------------
contain the entire agreement and understanding of the parties and supersedes all
prior discussions, agreements and understandings relating to the subject matter
of this Agreement. This Agreement may not be changed or modified, except by an
agreement in writing executed by TVN, GRTV and Xxxxx-Xxxxxx; provided, however,
--------- -------
that any consent or waiver permitted under this Agreement may be in a writing
executed solely by TVN or Xxxxx-Xxxxxx, as the case may be.
(e) Waiver of Breach. The waiver of a breach of any term or provision
----------------
of this Agreement shall not operate as or be construed to be a waiver of any
other previous or subsequent breach of this Agreement.
-6-
(f) Governing Law. This Agreement shall be governed in all respects,
-------------
including validity, interpretation and effect, by the laws of the State of
California (without giving effect to its choice of law principles).
(g) Headings. All captions and section headings used in this Agreement
--------
are for convenient reference only and do not form a part of this Agreement.
(h) Counterparts. This Agreement may be executed in counterparts, and
------------
each counterpart shall have the same force and effect as an original and shall
constitute an effective, binding agreement on the part of each of the
undersigned.
[REMAINDER OF PAGE INTENTIONALLY BLANK]
-7-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the day
and year first above written.
TVN ENTERTAINMENT CORPORATION XXXXX-XXXXXX CORPORATION
By: /s/ Xxxxxx Xxxxxx By: /s/ B. Van xx Xxxx
------------------------- --------------------------
Name: Xxxxxx Xxxxxx Name: B. Van xx Xxxx
------------------------ ------------------------
GRTV NETWORK, INC. XXXXX-XXXXXX TELEVISION
NETWORK, INC.
By: /s/ Xxxxxx Xxxxxx By: /s/ B. Van xx Xxxx
------------------------- --------------------------
Name: Xxxxxx Xxxxxx Name: B. Van xx Xxxx
------------------------ ------------------------
[SIGNATURE PAGE FOR NON-COMPETITION AGREEMENT]
-8-
ASSUMPTION OF AND FIRST AMENDMENT TO
EMPLOYMENT AGREEMENT
THIS ASSUMPTION OF AND FIRST AMENDMENT TO EMPLOYMENT AGREEMENT, shall be
effective as of July 1, 1999, (this "First Amendment") and is entered into by
and between GRTV Network, Inc. (the "Company") and Xxxxxxx X. Xxxxxx (the
"Executive"). All terms not defined herein shall have the same definitions as
those ascribed to them in the Agreement (defined below).
WHEREAS, Executive and Xxxxx-Xxxxxx Television Network, Inc. ("GRTV") are
parties to that certain Employment Agreement effective as of January 1, 1998
(the "Agreement"); and
WHEREAS, substantially all of the assets of GRTV have been purchased by TVN
Entertainment Corporation ("TVN"); and
WHEREAS, the Company, a wholly owned subsidiary of TVN, desires to assume
the Agreement, as amended herein, to retain the services of Executive.
NOW, THEREFORE, in consideration of the mutual covenants contained herein,
the parties hereto agree that the Agreement shall be assumed by the Company, as
amended hereby:
A. All references in the Agreement, as amended hereby, to the "Company" shall
mean "GRTV Network, Inc." and all references in this First Amendment to the
"Company" shall be as defined in this First Amendment.
B. All references in the Agreement, as amended hereby, to "Xxxxx-Xxxxxx
Corporation" shall mean "TVN Entertainment Corporation" and all references
in this First Amendment to "Xxxxx-Xxxxxx Corporation" shall continue to
mean "Xxxxx-Xxxxxx Corporation".
C. All references in the Agreement, as amended hereby, to "Xxxxx-Xxxxxx
Television Network, Inc." shall mean "GRTV Network, Inc." and all
references in this First Amendment to "Xxxxx-Xxxxxx Television Network,
Inc." shall continue to mean "Xxxxx-Xxxxxx Television Network, Inc."
D. All references in the Agreement, as amended hereby, to "GRC" shall mean
"TVN" and all references in this First Amendment to "TVN" shall be as
defined in this First Amendment.
E. All references in the Agreement to a "Guaranteed Bonus" are deleted.
F. The following text is added to the end of Section 2(a) of the Agreement:
At some point, TVN may change the name of the Company, or combine the
Company's business with another wholly owned TVN subsidiary with a
different name, but this employment agreement will continue in effect
in either event.
G. Sections 2(c) and 2(d) of the Agreement are deleted in their entirety.
H. The following text is added as a new Section 2(c):
(c) Executive shall report to the Chief Executive Officer of Company.
Currently Xxxxx Xxxx is the Acting Chief Executive Officer, but a new
Chief Executive Officer may be later appointed by TVN or Company.
Company and/or TVN shall determine
Page 1 of 8
Rev. 6.0
the timing, in its/their sole discretion, of such appointment, if any,
and the identity of the individual so appointed. Executive shall not
have any right of approval or prior notice of such appointment, but if
Xxxxxxx Xxx is so appointed and Executive determines that he does not
wish to report to him, Executive may terminate this Agreement by
written notice to Company, in which event Company shall have no
further obligations or liabilities under this Agreement (including,
without limitation, under Section 4 hereof) except to pay Executive
solely the following sums: (i) any accrued but unpaid amounts of Base
Salary for the period through the date of termination and (ii) an
amount equal to six (6) months of Executive's then current Base Salary
as severance, all paid within thirty (30) calendar days of Executive's
notice of termination hereunder.
I. Section 3 of the Agreement is modified so that the term shall commence as
of July 1, 1999.
J. Section 4 of the Agreement is deleted in its entirety and is replaced by
the following text:
4. Compensation.
------------
4.1 Base Salary. During the period of July 1, 1999 through
-----------
March 31, 2000, Executive will be paid on the basis of an
annual salary (each, the "Base Salary") of TWO HUNDRED THOUSAND DOLLARS
($200,000.00) per year. During the period of April 1, 2000 through March 31,
2001, Executive will be paid on the basis of an annual salary of TWO HUNDRED
TWENTY FIVE THOUSAND DOLLARS ($225,000.00) per year. During the period of April
1, 2001 through December 31, 2001, Executive will be paid on the basis of an
annual salary of TWO HUNDRED FIFTY THOUSAND DOLLARS ($250,000.00) per year.
4.2 Bonuses.
-------
(a) Performance Bonus. Provided that the Executive is not
-----------------
then in material breach of this Agreement the Executive will be eligible to
receive a performance bonus (a "Performance Bonus") of up to ONE HUNDRED TWENTY
FIVE PERCENT (125%) of the Executive's blended average salary in effect during
such period (the "Maximum Bonus"), based upon annual milestones achieved by the
Company relative to those projected in the Company Business Plan for that fiscal
year, and also taking into account the overall financial results at the Company
and TVN during that year, but, subject to Section 4.2(a)(iii), the Executive's
Performance Bonus will be guaranteed at ONE HUNDRED THOUSAND DOLLARS
($100,000.00) per fiscal year and paid in cash. The Executive's Performance
Bonus shall be calculated as follows:
(i) For Fiscal Year 2000. For the Company's fiscal
--------------------
year ending 2000 (July 1, 1999 through March 31, 2000):
(A) If the Company generates at least THREE
MILLION DOLLARS ($3,000,000.00) of Net Profits during such period, the Executive
will be entitled to receive THREE QUARTERS (3/4) of the Maximum Bonus as the
Executive's Performance Bonus.
(B) If the Company generates less than THREE
MILLION DOLLARS ($3,000,000.00) of Net Profits during such period, the Executive
will receive a pro-rated portion of the Maximum Bonus as his Performance Bonus.
For example, in the event that the Company generates ONE MILLION EIGHT HUNDRED
THOUSAND DOLLARS
Page 2 of 8
Rev. 6.0
($1,800,000.00) of Net Profits during fiscal year 2000, which is SIXTY PERCENT
(60%) of the such milestone, the Executive will receive the sum of ONE HUNDRED
TWELVE THOUSAND FIVE HUNDRED DOLLARS ($112,500.00) as the Executive's
Performance Bonus.
(ii) For Fiscal Year 2001 and Beyond. For the
-------------------------------
Company's fiscal year ending 2001 and each fiscal year thereafter:
(A) If the Company attains the milestones
mutually agreed upon for each such fiscal year, and subject to Section
4.2(a)(iii) below, the Executive will be entitled to receive the Maximum Bonus
as the Executive's Performance Bonus.
(B) If the Company fails to attain such
mutually agreed upon milestones for each such fiscal year, the Executive will
receive a pro-rated portion of the Maximum Bonus as the Executive's Performance
Bonus. For example, in the event that the parties mutually agree that a
milestone for fiscal year 2001 is FIVE MILLION DOLLARS ($5,000,000) of Net
Profits, and the Company generates FOUR MILLION DOLLARS ($4,000,000.00) of Net
Profits during such fiscal year, which is EIGHTY PERCENT (80%) of such
milestone, the Executive will receive the sum of TWO HUNDRED TWENTY FIVE
THOUSAND DOLLARS ($225,000.00), which is EIGHTY PERCENT (80%) of ONE HUNDRED
TWENTY FIVE PERCENT (125%) of the Executive's salary in effect during fiscal
year 2001.
(iii) Proration of Bonus. In the event that the
------------------
Executive is not employed with the Company at the conclusion of a fiscal year
because either (A) Executive was terminated by Company without cause or (B)
Executive resigns or otherwise terminates his employment other than pursuant to
Section 2(c), the Executive's Performance Bonus (including the Minimum Bonus)
for such fiscal year shall be pro-rated based upon the number of months which
the Executive was employed with the Company during such fiscal year.
(b) Net Profits. For purposes of this Agreement, "Net
-----------
Profits" shall mean the net profits before income taxes solely for the Company's
business, but shall not include amounts paid by or on behalf of Company to Guthy
Renker Corporation under that certain Media Access, Consulting and Services
Agreement, dated as of July 1, 1999. For purposes of calculating "Net Profits",
the amount of the expenses of TVN, owner of a majority of the issued and
outstanding common stock of the Company, attributed to the Company as an
indirect expense for TVN services provided to the Company (the "Indirect
Expenses") shall be a fixed amount (as opposed to a percentage of gross
revenues) jointly calculated and agreed upon by the Executive and TVN's
Financial Officer, and the Executive and he shall make good faith efforts to
agree upon such amounts; provided, however, that if no agreement is reached
after such good faith efforts, then TVN's Financial Officer determination shall
prevail.
(c) Payment. Each bonus payable under this Section 4.2
-------
will be payable within ninety (90) days after each March 31 fiscal year-end,
based upon the applicable Company milestone figures compiled by TVN's finance
department.
4.3 Stock Options.
-------------
(a) Grant. Upon the Executive's execution of this document
-----
and the assumption of the Agreement, as amended hereby, by the Company, and upon
the Executive's meeting eligibility requirements, the Executive will be granted
a stock option, which shall be, to the extent permitted under the applicable
rules of Section 422(d) of the Internal Revenue Code of 1986 (IRC), as amended,
an "incentive stock option" (as defined in Section 422 of the IRC) to purchase a
Page 3 of 8
Rev. 6.0
total of ONE HUNDRED THOUSAND (100,000) shares of TVN Common Stock, with a per
share exercise price as determined by TVN's Board of Directors, based on the
then current fair market value of TVN's Common Stock (currently anticipated to
be approximately $11.00 per share). This option shall be exercisable for a
term of ten (10) years (or shorter upon any termination of the Executive's
employment other than for "cause") and shall vest as is set forth below. This
option grant will be subject to the terms, definitions and provisions of TVN's
Stock Option Plan and an appropriate Stock Option Agreement which will be
entered into by the Executive and TVN, both of which will be provided to the
Executive within a reasonable time following the mutual execution of this letter
agreement.
(b) Vesting.
-------
(i) FIFTY THOUSAND (50,000) shares of the stock
options granted under Section 4.3(a) shall vest as follows:
(A) Contingent upon the Executive's continued
employment by the Company on December 31, 1999, the Executive will vest at that
time the same percentage of the Executive's TVN option shares as the percentage
that had vested under the Executive's prior stock option agreement with GRC had
the Executive still been employed by GRC, (i.e., 1/3 of the Executive's GRC
option shares vested upon the Executive's completion of one (1) year of
employment by GRC (i.e., on January 1, 1999); so 1/3 of this TVN option shares
grant will be vested on December 31, 1999).
(B) Contingent upon the Executive's continued
employment by the Company on April 1, 2000, the Executive will vest an
additional 1/3 of this TVN option shares grant at that time, and the remaining
1/3 unvested portion of this TVN option shares grant will vest per the vesting
provisions of the TVN Stock Option Plan (5 year vesting commencing July 1,
1999).
(ii) FIFTY THOUSAND (50,000) shares of the stock
options grant under Section 4.3(a) shall vest as provided in TVN's Stock Option
Plan, over five (5) years at the rate of 20% of the shares originally subject to
the option one year from the commencement date of the Term, and one-sixtieth
(1/60) of the shares originally subject to the option each month thereafter,
conditioned upon Executive's continued employment with the Company as of each
vesting date. This option grant will be subject to the terms, definitions and
provisions of TVN's Stock Option Plan and the standard form Stock Option
Agreement which will be entered into by the Executive and TVN, both of which
will be provided to the Executive upon signing this First Amendment.
4.4 Adjustments to Compensation. During the Term, the Company
---------------------------
shall not reduce the Executive's Base Salary or Annual Bonus without the
Executive's prior written consent.
K. Section 5(a) of the Agreement is deleted in its entirety and is replaced by
the following text:
Subject to meeting eligibility requirements, the Executive will be
included in the Company's employee benefit plans then available to
other employees at the same level as the Executive, including a health
care plan that has a waiting period for eligibility, and qualification
requirements, including those applicable to pre-existing medical
conditions. This will be described in the plan, which will be provided
to the Executive.
Page 4 of 8
Rev. 6.0
L. The following text is added as a new Section 5(d):
(d) The Company will reimburse Executive for the COBRA premiums
incurred by him if any, between July 1, 1999 and such time as the
Executive becomes eligible for coverage under the Company's health
care plan.
M. The last sentence of Sections 6(c), 6(d)(l), 6(e)(l) and 6(g) of the
Agreement are deleted in their entirety.
N. Section 6(e)(2)(vi) of the Agreement is deleted in its entirety and is
replaced with the following text:
(vi) the appropriation by Executive of any material business
opportunity which the TVN board of directors, in good faith,
reasonably believes to be a corporate opportunity of the Company.
In the event that Executive has not previously made a material
misrepresentation of his intention with regard to such
appropriation, Executive will have five (5) days following notice
of such determination by the board to cure such business
opportunity appropriation.
0. Section 6(f)(i) is modified to delete the text, "Guaranteed Bonus".
P. Section 6(f)(ii) is modified so that the phrase "the Executive's Guaranteed
Bonus pursuant to Section 4.2(c) hereof or any other" is deleted.
Q. The second sentence (commencing with "For example,") of Section 7(a)(5) is
deleted in its entirety.
R. Section 7(b)(3) of the Agreement is deleted in its entirety and is replaced
by the following text:
(3) Nothing in this Section 7 is intended to prohibit the Executive
from (a) for a period not to extend beyond December 31, 1999,
actively participating in the completion of Executive's current
infomercial project relating to a Windows '98 product; provided that
Executive shall not do so during Company's normal business hours of
9:00AM through 6:00PM, Monday through Friday, or (b) providing passive
financing of third-party infomercials so long as (i) such infomercials
are produced by someone other than Executive and who is not under
Executive's direction or control, (ii) Executive's financing of such
infomercials does not take away from, or interfere with, Executive's
focus on his full-time duties for the Company, and (iii) Executive
does not manage/oversee the media buying for or backend process of
such infomercials. If the Company believes that Executive's passive
financing of infomercials or work on the Windows '98 infomercial
project is taking away from his full-time duties for the Company, it
shall notify Executive and give him fifteen (15) days to cure. If
Executive fails to so cure, then the Company may elect to terminate
this Agreement. It is understood that passive financing (i.e., acting
solely in the manner of a limited partner) of third party infomercials
undertaken in accordance with this Section 7(b)(3) shall not be deemed
to be in competition with the Company.
Page 5 of 8
Rev. 6.0
S. The following text is added as a new Section 7(d):
(d) Nonsolicitation.
---------------
(i) Executive agrees that he and his agents and
representatives will not, during the twelve (12)-month
period following the cessation of Executive's employment,
or in contemplation of the cessation of his employment
hereunder, induce, entice or solicit employees of Company,
its parent company, or its subsidiaries (each, a "Company
Employee"), to leave his or her employment with Company,
its parent company, or its subsidiaries, without first
obtaining the written consent of the Chief Operating
Officer of TVN.
(ii) With the sole exception of those activities permitted
under Section 7(b)(3) above, during the term of this
Agreement, Executive will not (i) become employed by, (ii)
perform consulting services for, or (iii) engage in any
other occupation for an entity which, primarily, is in the
infomercial, media buying or television direct response
business.
(iii) Commencing six (6) months following the cessation of
Executive's employment hereunder, in the event that a
Company Employee initiates a solicitation to Executive for
employment with Executive, Executive shall be presumed not
to have violated Section 7(d)(i) above if both Executive
and such Company Employee provide Company with sworn
statements that Executive had not induced, enticed or
solicited such Company Employee to leave Company's employ
and to become employed by Executive.
T. Section 13 of the Agreement is deleted in its entirety and is replaced by
the following text:
13. Notices. All notices and other communications hereunder shall be
------------
in writing and shall be deemed given when received if delivered
personally or mailed by registered or certified mail (return receipt
requested), sent by telecopy with a copy via earliest overnight
delivery and confirmation of facsimile received, or sent by recognized
overnight delivery service, return receipt requested, to the parties
at the following addresses and telecopy numbers (or at such other
address or number for a party as shall be specified by like notice):
If to the Executive:
Xxxxxxx X. Xxxxxx
0000 Xxxxxxx Xxxxx
Xxxxxxx Xxxxxxxxx, XX 00000
Page 6 of 8
Rev. 6.0
with a copy to:
Xx Xxxxxx, West & Chodorow, Inc.
Fourteenth Floor East
00000 Xxxxxxxx Xxxxxxxxx
Xxx Xxxxxxx, Xxxxxxxxxx 00000-0000
Attn: Xxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
If to the Company, to:
c/o TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx X. Xxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with a copy to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
or to such other address as a party provides (in accordance herewith)
to the other party from time to time. Notice shall be effective when
so delivered personally or by courier service, or if by facsimile,
upon receipt, or if mailed, three (3) days after the date of mailing.
U. Section 1 5 of the Agreement is deleted in its entirety, and is replaced
with the following text:
15. Successors and Assigns. This Agreement shall be binding upon and
----------------------
inure to the benefit of the parties hereto and their respective
heirs, personal representatives, successors and permitted
assigns. The Executive may not assign any of his rights or
obligations hereunder without the prior written consent of the
Company.
V. Section 20 of the Agreement is deleted in its entirety, and is replaced
with the following text:
20. Guarantee. The performance and obligations of the Company under
---------
this Agreement, as amended hereby, shall be guaranteed by TVN.
W. Each party represents and warrants that it has full power and authority to
enter into this First Amendment and to undertake each of the amendments set
forth herein.
Page 7 of 8
Rev. 6.0
X. This First Amendment may be executed in one or more counterparts, each of
which shall be deemed an original, and will become effective and binding
upon the parties at such time as all of the signatories hereto have signed
each counterpart of this Agreement. Each of the parties hereto shall sign a
sufficient number of counterparts so that each party will receive a fully
executed originals of this Agreement.
Y. All provisions of the Agreement not herein expressly modified shall remain
in full force and effect as originally presented in the Agreement.
IN WITNESS WHEREOF, the parties hereto have caused this First Amendment to be
executed by their duly authorized representatives as of the day and year first
written above.
GRTV NETWORK, INC. XXXXXXX X. XXXXXX
By: /s/ Xxxxxx Xxxxxx /s/ Xxxxxxx X. Xxxxxx
------------------------------- --------------------------
Name: Xxxxxx Xxxxxx Date: July 30, 1999
Title: Senior Executive Vice President
Date: July 30, 1999
The undersigned is executing this document solely to agree to be bound it
obligations under Section V of this First Amendment, and for no other purpose.
TVN ENTERTAINMENT CORPORATION
By: /s/ Xxxxxx Xxxxxx
-------------------------------------
Name: Xxxxxx Xxxxxx
Title: Senior Executive Vice President
Date: July 30, 1999
Page 8 of 8
Rev. 6.0
THIS CONVERTIBLE PROMISSORY NOTE (THE "NOTE") AND THE
SECURITIES ISSUABLE ON THE CONVERSION HEREOF HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), AND MAY NOT BE OFFERED, SOLD OR OTHERWISE
TRANSFERRED, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF
SUCH REGISTRATION, AN EXEMPTION THEREFROM UNDER SUCH ACT,
OR THE DELIVERY OF AN OPINION OF COUNSEL IN A FORM
AND SUBSTANCE REASONABLY SATISFACTORY TO TVN
ENTERTAINMENT CORPORATION THAT SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS NOT REQUIRED UNDER
THE ACT.
CONVERTIBLE PROMISSORY NOTE
---------------------------
$13,000,000.00 As of July 1, 1999
FOR VALUE RECEIVED, the undersigned, TVN ENTERTAINMENT CORPORATION, a
Delaware corporation ("TVN"), and GRTV NETWORK, INC., a Delaware corporation
("Newco"), jointly and severally promise to pay to the order of XXXXX-XXXXXX
TELEVISION NETWORK, INC., a Delaware corporation ("Holder"), at 00-000 Xxxxxxxx,
Xxxxx 000, Xxxx Xxxxxx, Xxxxxxxxxx 00000, or at such other place, either within
or without the State of California, as Holder may from time to time designate in
writing, the principal sum of THIRTEEN MILLION DOLLARS ($13,000,000.00) (the
"Principal Amount") together with interest thereon in accordance with the terms
and conditions set forth in this promissory note (the "Note"). For purposes of
this Note, (i) the portion of the initial Principal Amount equal to Four Million
Dollars ($4,000,000.00) is referred to herein as the "First Principal Amount,"
and (ii) the remaining Nine Million Dollars ($9,000,000.00) of the initial
Principal Amount is referred to herein as the "Second Principal Amount."
1. Interest. The unpaid First Principal Amount of this Note and the
--------
unpaid Second Principal Amount of this Note shall bear interest at a rate equal
to six percent (6%) and nine percent (9%), respectively, per annum, compounded
semi-annually, and calculated on the basis of a 365 day year. Interest on both
the First Principal Amount and the Second Principal Amount shall accrue from
July ___, 1999, and shall be payable from time to time in accordance with
Sections 2, 3 and 4 hereof. This Note shall not be construed to require payment
of any interest in excess of the maximum amount permitted by law.
2. Repayment. The Principal Amount and all accrued but unpaid
---------
interest thereon shall be repaid (in lawful money of the United States of
America, except as expressly provided in Section 4 hereof) as follows:
(a) On the first anniversary date hereof, Two Million Dollars
($2,000,000.00) of the First Principal Amount, and all accrued but unpaid
interest on the entire Principal Amount, shall be due and payable.
(b) On the second anniversary date hereof, Two Million Dollars
($2,000,000.00) of the First Principal Amount, and all accrued but unpaid
interest on the entire remaining Principal Amount (including, without
limitation, that portion of the First Principal Amount which is due and payable
at such time pursuant to this Section 2(b)), shall be due and payable.
(c) At any time, and from time to time, commencing on the earlier
to occur of (i) the fifth anniversary date hereof or (ii) the consummation by
TVN of a "TVN Initial Public Offering" (as defined herein), Holder may demand
payment of all or any portion of the Second Principal Amount and all accrued but
unpaid interest thereon (each, a "Demand"). With respect to each such Demand,
Holder shall deliver a written notice to TVN and Newco setting forth (i) the
Second Principal Amount (and all accrued but unpaid interest thereon) to be paid
by TVN and Newco in connection with such Demand, and (ii) the date on which such
payment shall be due and payable, which date shall be no earlier than five (5)
business days from the date such notice is provided to TVN and Newco.
For purposes of this Note, the term "TVN Initial Public Offering" shall mean any
underwritten public offering of shares of TVN's common stock ("TVN Shares")
under the Act and declared effective pursuant to a registration statement filed
by TVN under the Act with the United States Securities and Exchange Commission
(the "Commission") (a "Registration Statement"), as a result of which TVN Shares
are listed or traded on any United States nationally recognized stock exchange
or quotation system.
3. Optional Prepayment. TVN and Newco shall have the right, at any
-------------------
time and from time to time, upon at least five (5) business days' prior written
notice by TVN or Newco to Holder, to prepay this Note in whole or in part,
together with all accrued but unpaid interest on the Principal Amount to be
paid, without premium or penalty, on the date specified in such notice,
whereupon the Principal Amount specified in such notice (and all accrued but
unpaid interest thereon) shall become due and payable on the date specified;
provided, however, that each such payment of Principal Amount shall be not less
than One Million Dollars ($1,000,000.00).
4. Payment in TVN Shares.
---------------------
(a) Notwithstanding anything in Sections 2 and 3 hereof to the
contrary:
(i) At Holder's option, exercisable upon written notice to
TVN and Newco any time after the occurrence of a TVN Initial Public Offering
(including, without limitation, in the event, any time after the occurrence of a
TVN Initial Public Offering, Holder receives a notice of prepayment pursuant to
Section 3 hereof), all
-2-
or any portion of the Second Principal Amount (in the case of prepayment
pursuant to Section 3 hereof, such portion not to exceed the amount to be
prepaid) shall be payable, in lieu of cash as provided in Sections 2(c) and 3
hereof, by converting such portion of the Second Principal Amount into TVN
Shares to be issued by TVN to Holder on the terms and conditions set forth in
this Section 4; or
(ii) At TVN's and Newco's option, exercisable upon written
notice to Holder (A) within three (3) business days after TVN's and Newco's
receipt of a Demand pursuant to Section 2(c) hereof, or (B) included in TVN's
and Newco's notice of prepayment pursuant to Section 3 hereof any time after the
occurrence of a TVN Initial Public Offering, all or any portion of the Second
Principal Amount to be paid in accordance with the Demand (or to be prepaid by
TVN and Newco, as the case may be) shall be payable, in lieu of cash as provided
in Sections 2(c) and 3 hereof, by converting such portion of the Second
Principal Amount into TVN Shares to be issued by TVN to Holder on the terms and
conditions set forth in this Section 4.
(b) All TVN Shares issued to Holder hereunder shall be valued
based on the initial offering price per share in connection with the TVN Initial
Public Offering (if Holder makes a Demand or TVN and Newco provide notice of
prepayment, as the case may be, within thirty (30) days after consummation of
the TVN Initial Public Offering), or alternatively (if Holder makes such Demand
or TVN and Newco provide notice of prepayment any time after such thirty (30)
day period), based on the average closing trading price per share of such TVN
Shares as reported on the appropriate stock exchange for the five (5) trading
days immediately preceding the date of such issuance.
(c) In addition, all TVN Shares issued to Holder hereunder shall
be, at TVN's and Newco's option, either (i) properly registered and freely
transferable under the Act pursuant to an effective Registration Statement with
respect to such TVN Shares, subject only to a "Standoff Restriction" (as
defined herein), or (ii) TVN shall permit Holder to (A) include the TVN Shares
issued to Holder hereunder in any Registration Statement filed by TVN either for
its own account or the account of any other security holder (other than a
Registration Statement relating solely to TVN's employee benefit plans or an
acquisition), and (B) require TVN on a one-time basis to file a Registration
Statement with respect to the TVN Shares issued to Holder hereunder, subject to
standard limitations, in either case subject to Section 4(e) hereof; provided,
however, that Holder shall not have the rights set forth in clauses (i) or (ii)
of this subsection (c) if at the time of issuance of such TVN Shares to Holder,
Holder may freely transfer such TVN shares under Rule 144(k) promulgated under
the Act and Holder receives an opinion of its counsel to this effect, in form
and substance reasonably satisfactory to Holder. For purposes hereof, "Standoff
Restriction" means that (x) Holder shall not sell, make any short sale of, loan,
grant any option for the purchase of, or otherwise dispose of any TVN Shares
(except as permitted by the underwriter in connection with the registration)
without the prior written consent of TVN or its underwriters, as the case may
be, for such period of time (not to exceed one hundred eighty (180) days) from
the effective date of such Registration Statement as may be requested by TVN or
such underwriters, and (y) Holder shall be subject to such
-3-
underwriters' standard form of lock-up agreement, if such underwriter requires
Holder to enter into such agreement.
(d) TVN covenants and agrees to:
(i) make and keep public information available, as those
terms are defined in Rule 144 promulgated under the Act, at all times after the
effective date as of which TVN becomes subject to the reporting requirements of
the Securities Act or the Securities Exchange Act of 1934, as amended (the
"Exchange Act");
(ii) use its best efforts to file with the Commission in a
timely manner all reports and other documents required of TVN under the Act and
the Exchange Act;
(iii) furnish to Holder, promptly upon Holder's request, (i)
a written statement by TVN as to its compliance with the reporting requirements
of Rule 144 (at any time, and from time to time, after ninety (90) days after
the effective date of the TVN Initial Public Offering) and the Act and the
Exchange Act, (ii) a copy of the most recent annual or quarterly report of TVN,
and (iii) such other reports and documents of TVN and other information in the
possession of or reasonably obtainable by TVN as an investor may reasonably
request in availing itself of any rule or regulation of the Commission allowing
an investor to sell any such securities without registration;
(iv) if TVN Shares are issued to Holder hereunder, TVN will
use its best efforts to register and qualify TVN Shares under such state
securities or blue sky laws of such jurisdictions as shall be reasonably
requested by Holder, provided that TVN shall not be required in connection
therewith or as a condition thereto to qualify to do business or to file a
general consent to service of process in any such states or jurisdiction; and
(v) in the event that TVN issues to Holder unregistered TVN
Shares, TVN further covenants to use commercially reasonable efforts to cause
such TVN Shares to be registered pursuant to a shelf Registration Statement
within six (6) months following the issuance of such shares. TVN covenants to
keep such Registration Statement continuously effective, in compliance with all
applicable laws, for a reasonable period of time, not to exceed six (6) months,
subject to customary blackout periods. The six (6) month period shall be
extended by the duration of any blackout period in the event Holder has not sold
all registered shares prior to the end of said six (6) month period. At its
option, TVN may, within the time periods set forth above, satisfy its
obligations to register such TVN Shares under this subsection (d)(v) by
permitting Holder to "Piggy Back" on a TVN Registration Statement. Holder and
TVN shall, as a condition of such registration, enter into a customary
registration agreement including, without limitation, mutual indemnification
provisions.
(e) In the event Holder receives payment of the Second Principal
Amount in TVN Shares pursuant to this Section 4 and such TVN Shares issued
-4-
to Holder hereunder cannot be sold or transferred without restriction pursuant
to Rule 144(k), or such TVN Shares are not properly registered and immediately
transferrable without any Standoff Restriction, then, at Holder's option, TVN
and Newco shall be required to pay to Holder, in cash at the time such TVN
Shares are issued to Holder, that portion of the Second Principal Amount equal
to the amount of any and all federal, state, local or foreign income or other
taxes payable by Holder as a result of Holder's receipt of such TVN Shares, and
the remainder of the Second Principal Amount shall be converted into TVN Shares
pursuant to this Section 4.
(f) No fractional shares of TVN Shares shall be issued upon
conversion of this Note. In lieu of any fractional share to which Holder would
otherwise be entitled, TVN and Newco, will pay to Holder cash in an amount equal
to the Principal Amount that would otherwise constitute a fractional share.
(g) Upon conversion of the Second Principal Amount pursuant to
this Section 4, TVN shall, as soon as practicable thereafter (and at TVN's sole
cost and expense), issue and deliver to Holder a certificate or certificates for
the number of TVN Shares to which Holder is entitled upon conversion, together
with a certified or cashier's check (or wire transfer of immediately available
funds) payable to Holder for all cash amounts payable as described herein.
(h) In the event any portion of the Second Principal Amount is
paid by converting such portion into TVN Shares in accordance with this Section
4, any and all accrued but unpaid interest on such Second Principal Amount shall
be paid by converting such interest into TVN Shares in the same manner as such
Second Principal Amount.
5. Late Interest and Costs. Any payment required to be made hereunder
-----------------------
(including any payment of interest and/or Principal Amount) which is not made on
the date that such payment is due and payable shall continue as a joint and
several obligation of TVN and Newco until it is fully paid, and TVN and Newco
agree to pay, to the extent permitted by law, late interest thereon at a rate
equal to twelve percent (12%) per annum, compounded quarterly, such late
interest to accrue from the date such overdue payment becomes due and payable
until all such amounts are paid. TVN and Newco shall also pay, promptly upon
demand, all reasonable costs of collection, including reasonable attorneys' fees
if this Note is referred to an attorney for collection after "Default" (as
defined herein), whether or not any action shall be instituted to enforce or
collect this Note.
6. Default Interest Rate. Upon any failure by TVN and Newco to pay
---------------------
the full amount of the Principal Amount, accrued but unpaid interest thereon,
and/or costs of collection permitted hereunder, as and when any payment under
this Note becomes due and payable, the interest rate applicable to the remaining
Principal Amount under the Note shall be increased, without notice or demand
upon TVN and Newco, to fifteen percent (15%) per annum, compounded quarterly.
-5-
7. Offset. Pursuant to the terms and conditions, and subject to the
------
limitations, set forth in Article V of that certain Asset Acquisition Agreement
by and among TVN, Newco, Holder and Xxxxx-Xxxxxx Corporation, a Delaware
corporation ("GRC"), dated as of July 1, 1999 (the "Asset Acquisition
Agreement"), TVN and Newco have the right to offset, on a dollar for dollar
basis, any "Approved Claim" (as defined in the Asset Acquisition Agreement)
against any portion or all of the remaining Principal Amount due to the Holder
under this Note. In the event TVN and Newco exercise such right of offset, the
remaining Principal Amount of this Note shall be reduced to an amount equal to
the remaining Principal Amount of the Note immediately prior to such offset,
less the amount of "Damages" (as defined in the Asset Acquisition Agreement)
properly offset against the Principal Amount under the Asset Acquisition
Agreement. Any such reduction of Principal Amount shall be made pro-rata between
the First Principal Amount and the Second Principal Amount in accordance with
the "Applicable Percentages" (as defined herein); provided, however, that to
the extent such pro-rata reduction would exceed the remaining First Principal
Amount or Second Principal Amount, as the case may be, such excess shall offset
and reduce any remaining Principal Amount. For purposes hereof, the Applicable
Percentages shall be 30.77% for the First Principal Amount and 69.23% for the
Second Principal Amount.
8. Application of Payments. All payments on this Note shall be
-----------------------
applied first to costs of collection permitted hereunder, then to accrued but
unpaid interest, and any remainder shall be applied to the First Principal
Amount and then to the Second Principal Amount outstanding under the Note. All
payments under Sections 2, 3 or 4 hereof shall be reflected on Schedule A
attached hereto as soon as practicable after such payments are made.
9. Waiver of Presentment, etc. Each of TVN and Newco waives
--------------------------
presentment and demand for payment, notice of intent to accelerate maturity,
notice of acceleration of maturity, protest or notice of protest and nonpayment,
bringing of suit and diligence in taking any action to collect any sums owing
hereunder. From time to time, without affecting the obligation of TVN and Newco
to pay the outstanding Principal Amount of this Note, without giving notice to
or obtaining the consent of TVN and Newco, and without liability on the part of
the Holder, the Holder may, at its option, extend the time for payment of
interest hereon and/or the Principal Amount hereof, reduce the payments
hereunder, release anyone liable on this Note, accept a renewal of this Note,
modify the terms and time of payment of this Note, join in any extension or
subordination or exercise any option or election hereunder, or modify the rate
of interest or period of principal repayment or principal due date of this Note.
No one or more of such actions shall constitute a novation.
10. Default.
-------
(a) For purposes of this Note, a "Default" shall be deemed to
occur if (i) TVN and Newco fail to pay any amount due under this Note and such
payment is not made within ten (10) days after Holder provides written notice to
TVN and Newco of TVN and Newco's failure to pay; (ii) either TVN or Newco
becomes
-6-
insolvent or makes an assignment for the benefit of creditors; (iii) either TVN
or Newco applies for the benefit of, or files a case under, any provision of the
federal bankruptcy law or any other law relating to insolvency or relief of
debtors; (iv) a case or proceeding is brought against TVN or Newco under any
provision of the federal bankruptcy law or any other law relating to insolvency
or relief of debtors which is not dismissed within sixty (60) days after the
commencement thereof (v) either TVN or Newco fails to fully perform, comply
with or observe any of its respective covenants, agreements or other obligations
under (A) that certain Media Access, Consulting and Services Agreement of even
date herewith, by and among GRC, TVN and Newco, and/or that certain related
Guaranty of even date herewith, by TVN, (B) any future pledge agreement by TVN
pursuant to which TVN pledges shares of the issued and outstanding stock of
Newco as additional security for payment of this Note; (C) that certain Security
Agreement of even date herewith, by and between TVN, Newco and Holder; and/or
(D) that certain Transition Services Agreement of even date herewith, by and
between GRC and Newco; or (vi) an "Event of Default" occurs under (and as
defined in) that certain Indenture dated as of July 29, 1998, by and between
TVN, as issuer, and The Bank of New York, as trustee.
(b) Upon the occurrence of a Default, Holder may, at its option,
without further notice or demand, (i) declare the entire unpaid Principal
Amount, net of any Approved Claims, and all accrued but unpaid interest thereon,
immediately due and payable, (ii) pursue any and all other rights, remedies and
recourses available to Holder (including, without limitation, the rights of
Holder set forth in Article V of the Asset Acquisition Agreement), or (iii)
pursue any combination of the foregoing, all remedies hereunder being
cumulative.
(c) Holder shall have the right to rescind any acceleration in
payment of this Note for Default as aforesaid, if the Holder so elects, in which
event this Note shall be construed, interpreted and enforced in the same manner
as if Holder had not elected to declare the unpaid Principal Amount, net of any
Approved Claims, and accrued but unpaid interest thereon at once due and
payable.
(d) Failure by Holder to exercise any of the foregoing options
upon the occurrence of a Default shall not constitute a waiver of the right to
exercise the same or any other option at any subsequent time in respect of the
same or any other Default, and no single or partial exercise of any right or
remedy shall preclude any other or further exercise of the same or any other
right or remedy. Holder shall have no duty to exercise any or all of the rights
and remedies herein provided or contemplated. The acceptance by Holder of any
payment hereunder that is less than payment in full of all amounts due and
payable at the time of such payment shall not constitute a waiver of the right
to exercise any of the foregoing options at that time or at any subsequent time,
or nullify any prior exercise of any such option without the express written
consent of Holder.
11. Mutilated, Destroyed, Lost or Stolen Note. If this Note becomes
-----------------------------------------
mutilated or defaced, or is destroyed, lost or stolen, Newco and TVN shall
execute and
-7-
deliver a new note of like Principal Amount in exchange and substitution for the
mutilated or defaced Note, or in lieu of, and in substitution for, the
destroyed, lost or stolen Note. In the case of any destroyed, lost or stolen
Note, Holder shall furnish to Newco and TVN (i) evidence to TVN and Newco's
reasonable satisfaction of the destruction, loss or theft of such Note and (ii)
such security or indemnity as may be reasonably required to hold Newco and TVN
harmless from liability in connection therewith.
12. Assignment. The respective rights and obligations of Newco, TVN
----------
and Holder under this Note shall be binding upon and inure to the benefit of
their respective successors, heirs and assigns, administrators and transferees.
Notwithstanding the foregoing, Holder may not assign, pledge or otherwise
transfer this Note without the prior written consent of Newco and TVN, which
shall not be unreasonably withheld; provided, however, that Holder shall be
permitted to assign, pledge or otherwise transfer this Note to any member of the
"GRC Group" (as defined in the Asset Acquisition Agreement) without obtaining
such consent, but Holder shall give TVN and Newco written notice of such
transfer to a member of the GRC Group within thirty (30) days after the
effective date of such transfer and such transferee shall be obligated to
fulfill the Holders' obligations hereunder, including the right of offset set
forth in Section 7 hereof and Article V of the Asset Acquisition Agreement, and
shall evidence its assumption of such obligations in writing satisfactory to TVN
and Newco in their reasonable discretion.
13. Waiver and Amendment. Any provision of this Note including,
--------------------
without limitation, the due date hereof, and the observance of any term hereof,
may be amended, waived or modified (either generally or in a particular instance
and either retroactively or prospectively) only with the written consent of
Newco, TVN and Holder.
14. Confession of Judgement. Any attorney at law may appear in any
-----------------------
court of record in the State of California or in the United States, after demand
on this Note following a Default, and waive the issuing of service of process
and confess a judgment against TVN and/or Newco in favor of Holder for the
amount then appearing due hereunder, together with interest, costs of suit and
reasonable attorneys' fees, and thereupon release all errors and waive all right
of appeal.
15. Remedies Cumulative. All rights and remedies hereunder are
-------------------
irrevocable and cumulative, and shall be in addition to all rights and remedies
set forth in any other instrument or document or available under any law or at
equity, whether now existing or hereafter enacted.
16. Governing Law. This Note is to be governed by, and construed and
-------------
enforced in accordance with, the laws of the State of California, without regard
to principles of conflict of laws.
17. Notice. All notices and other communications hereunder shall be
------
in writing and shall be deemed given when received if delivered personally or
mailed by registered or certified mail (return receipt requested), sent by
telecopy with a copy via
-8-
earliest overnight delivery and confirmation of facsimile received, or sent by
recognized overnight delivery service, return receipt requested, to the parties
at the following addresses and telecopy numbers (or at such other address or
number for a party as shall be specified by like notice):
(a) if to TVN or Newco, to:
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Legal Department
TVN Entertainment Corporation
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx Xxxxxx
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx
000 Xxxx Xxxx Xxxx
Xxxx Xxxx, Xxxxxxxxxx 00000
0000 Xxxx Xxxxxxx Xxxxxx
Xxxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxxx X. Xxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
-9-
(b) if to Holder, to:
Xxxxx-Xxxxxx Corporation
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Xxxxx Knee
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
with copies to:
Xxxxx-Xxxxxx Corporation
Legal Department
0000 Xxxxx Xxxx Xxxx. #0000
Xxxxx Xxxxxx, Xxxxxxxxxx 00000
Attn: Bennet Van xx Xxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
Xxxxxxx Xxxxxxx Xxxxxx & Xxxxxxxxx LLP
Suite 1000
0000 Xxx Xxxx Xxxxxx, XX
Xxxxxxxxxx, XX 00000-0000
Attn: Xxxxxx X. Xxxxxx, Esq.
Telecopy No.: (000) 000-0000
Telephone No.: (000) 000-0000
18. Amendments. This Note may not be modified or changed except by an
----------
agreement in writing signed by Obligor and Holder.
19. Binding Agreement. This Note is binding upon and enforceable
-----------------
against Obligor, its successors and assigns, and shall inure to the benefit of,
and may be enforced by, Holder and its successors and assigns.
20. Time of the Essence. Time is of the essence hereof for all
-------------------
purposes.
21. Counterparts. This Note may be executed in one or more
------------
counterparts, all of which shall be considered one and the same instrument and
shall become effective when one or more counterparts have been signed by each of
the parties and delivered to the other party.
-10-
IN WITNESS WHEREOF, the undersigned have duly executed this Note as of
date first above written.
TVN ENTERTAINMENT CORPORATION
By: /s/
------------------------
Name:
Title:
GRTV NETWORK, INC.
------------------
By: /s/
------------------------
Name:
Title:
Acknowledged and Accepted:
XXXXX-XXXXXX TELEVISION NETWORK, INC.
By: /s/
--------------------------
Name:
Title:
-11-
PROMISSORY NOTE
OF
TVN ENTERTAINMENT CORPORATION
AND
GRTV NETWORK, INC.
Schedule A
----------
Original Principal Amount: $13,000,000.00
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Payment of First Principal Payment of Second Principal Initials Initials Intials
First Prinicpal Amount Following Second Principal Amount Following of of of
Date Amount Payment Amount Payment TVN Newco Holder
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