FORM 8-K
Securities and Exchange Commission
Washington, D.C. 20549
CURRENT REPORT
Pursuant to Section 13 or 15 (d)
of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported) 12/9/96
Affinity Entertainment, Inc.
Formerly Affinity Teleproductions, Inc.
(Exact Name of Registrant as specified in its Charter)
Delaware 0-12193 22-2473403
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(State or other (Commission File (IRS Employer
Jurisdiction of Number) Identification
Incorporation) Number)
15310 Amberly Drive, Suite 370, Tampa, FL 33647
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(Address of Principal Executive Offices) (Zip Code)
Registrant's Telephone Number, including area code: 813-975-8180
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ITEM 2. ACQUISITION OR DISPOSITION OF ASSETS
Acquisition of Tradewinds Television, Inc.
On September 13, 1996, the Registrant and Tradewinds Television, LLC, a
California limited liability company ("Tradewinds"), entered into an Interim
Financing and Security Agreement (the "Security Agreement") pursuant to which
Tradewinds granted the Registrant, as security for the repayment by Tradewinds
of certain loans to be made by the Registrant, a first priority lien on
substantially all of Tradewinds' assets (the "Assets"). The Assets include
accounts receivable, the name and mark "Tradewinds Television," the rights to
the syndicated television series "Bounty Hunters" and distribution rights to
certain other television products. Between September 13, 1996 and November 19,
1996, the Registrant loaned Tradewinds an aggregate of approximately $823,000
(the "Loans") pursuant to the Security Agreement.
Concurrently with the execution of the Security Agreement, the
Registrant and Tradewinds engaged in negotiations pursuant to which the
Registrant would purchase substantially all of the Assets. The parties entered
into an Asset Purchase Agreement dated as of October 3, 1996, as amended, to
provide for such acquisition. The sale of the assets was contingent upon the
resolution to the satisfaction of the Registrant of various bankruptcy issues
concerning other companies affiliated with Royeric Pack, the sole owner of
Tradewinds.
On November 14, 1996, the Registrant filed a complaint in Los Angeles
Superior Court asserting that Tradewinds had defaulted under the Loans and the
Security Agreement, and seeking judicial foreclosure of the Assets, among other
claims. On December 6, 1996, Tradewinds, in lieu of foreclosure on the Assets by
the Registrant, agreed to transfer and assign to the Registrant the Assets,
subject to certain payables associated therewith, in consideration of the
Registrant forgiving the indebtedness evidenced by the Loans. Such indebtedness,
including accrued interest and related costs and expenses, was approximately
$1,000,000. Also on December 6, 1996, the Registrant entered into an Executive
Producer Agreement with Mr. Pack, with respect to Mr. Pack providing executive
producing services in connection with the Bounty Hunters series. Pursuant to
such agreement, Mr. Pack received a $75,000 payment on December 6, 1996 for the
first production season, and is entitled in the second production season to a
fee of $3,000 per episode, payable upon airing of each such episode.
On December 17, 1996, the Registrant agreed with the Trustee of Action
Media Group, Inc., a company affiliated with Mr. Pack
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and which is the subject of a bankruptcy court proceeding ("AMG"), to pay
$275,000 to the Trustee of AMG, and to secure in exchange a release of certain
claims by the Trustee and AMG against Tradewinds and the Registrant with regard
to indebtedness owed by Tradewinds to AMG and the assignment of Assets by
Tradewinds to the Registrant in lieu of foreclosure, as described above. On
December 18, 1996, the Court having jurisdiction over the AMG bankruptcy
proceeding approved the $275,000 payment and release among AMG, Tradewinds and
the Registrant. The Registrant anticipates that an order to this effect will be
entered shortly.
The loans made to Tradewinds by the Registrant and the $275,000 to be
paid to the Trustee of AMG are from internally generated funds of the
Registrant.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS
a) Financial Statements
(1) Audited Financial Statements of Tradewinds
Televison, LLC*
* To be filed by amendment.
b) Exhibits
10.01 Interim Financing and Security Agreement, dated as of
September 13, 1996;
10.02 Asset Purchase Agreement, dated as of October 3, 1996;
10.03 Amendment No. 1 to the Asset Purchase Agreement, dated
as of November 19, 1996;
10.04 $600,000 Secured Promissory Note;
10.05 Acknowledgment regarding $600,000 Note:
10.06 $122,997.18 Secured Promissory Note;
10.07 Acknowledgment regarding $122,997.18 Note;
10.08 $100,000 Secured Promissory Note;
10.09 Acknowledgment regarding $100,000 Note;
10.10 Assignment of Callateral in Lieu of Foreclosure, dated
December 6, 1996.
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
Date: December 23, 1996 AFFINITY ENTERTAINMENT, INC.
--------------------- ----------------------------
By: /s/ William J. Bosso
-----------------------
William J. Bosso
President
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INTERIM FINANCING AND SECURITY AGREEMENT
THIS INTERIM FINANCING AND SECURITY AGREEMENT ("Security Agreement") is
dated as of September 13, 1996 and is entered into by and among TRADEWINDS
TELEVISION, LLC, a California limited liability company ("Debtor"), RICK PACK,
an individual, who is the sole shareholder of Debtor, and AFFINITY
ENTERTAINMENT, INC., a Delaware corporation ("Lender").
WHEREAS, Debtor and Lender have been engaged in negotiations for a
possible acquisition or other business combination as contemplated by that
certain letter agreement dated September 13, 1996; and
WHEREAS, Debtor requires supplemental funding, and Debtor desires that
Lender continue with its due diligence and related efforts toward an acquisition
or business combination; and
WHEREAS, Lender is unwilling to provide funding and to continue with
its due diligence and related efforts toward an acquisition or business
combination unless Lender can obtain reasonable assurances that its funding will
be repaid.
NOW, THEREFORE, in consideration of the foregoing and the agreements
set forth below, Debtor and Lender agree as follows:
1. Interim Funding.
---------------
Lender may, in its sole discretion, upon Debtor's request,
loan funds from time to time to Debtor. In no event shall the outstanding
principal balance of the loans at any time exceed Four Hundred Thousand Dollars
($400,000). Such loans shall be evidenced by a Secured Promissory Note (the
"Note") in the form attached hereto as Exhibit "A," and payment of principal and
interest shall be governed by the terms of the Note.
2. Grant of Security.
-----------------
Debtor hereby assigns and pledges to Lender and hereby
irrevocably grants to Lender (a) a continuing first priority security interest
in and mortgage of copyright on the collateral described as "Episodes" set forth
in Exhibit "B" attached hereto and (b) a security interest in all presently
owned and after acquired assets, including, without limitation, cash, bank
accounts, accounts receivable, fixtures and equipment (the "General Assets") set
forth in Exhibit "B." (The Episodes and the General Assets shall hereinafter be
collectively referred to as the "Collateral".) The Collateral shall secure all
of Debtor's "Obligations" to Lender.
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3. Obligations.
-----------
For purposes of this Security Agreement, the term
"Obligations" means and includes the Note, related transaction costs (including
reasonable attorneys fees of Lender), and all other liabilities of Debtor to
Lender, whether absolute or contingent, due or to become due, now existing or
hereafter arising at any time.
4. Representations and Warranties. Debtor represents and warrants
------------------------------
as follows:
(a) The principal place of business and principal executive office of
Debtor and the office where Debtor keeps its records concerning the
Collateral are located at 5855 Topanga Canyon Boulevard, Woodland
Hills, California 91367.
(b) Debtor owns the Collateral free and clear of any lien, security
interest, charge or encumbrance. No effective financing statement or
mortgage of copyright or other instrument similar in effect covering
all or any part of the Collateral is on file in any recording office,
except such as may have been filed in favor of Lender relating to this
Security Agreement.
(c) This Security Agreement creates and grants to Lender (upon filing of
requisite financing statements and mortgage of copyright filings) a
valid and perfected first priority security interest in and mortgage of
copyright on the Episodes and a valid and perfected first priority
security interest in the General Assets.
(d) Debtor does not do business under any fictitious business names or
trade names and has not changed its name in the past five years.
(e) Except for the filing or recording of any financing statements or
mortgage of copyrights necessary to perfect the security interests
created hereunder, no authorization, approval or other action by, and
no notice to or filing with, any governmental authority or regulatory
body is required either (i) for the grant by Debtor of the security
interest granted hereby or for the execution, delivery or performance
of this Security Agreement by Debtor or (ii) for the perfection of or
the exercise by Lender of its rights and remedies hereunder.
5. Further Assurances.
------------------
(a) Debtor agrees to execute concurrently herewith that certain UCC-1
Financing Statement for the State of California and Copyright Mortgage
and Assignment attached hereto as Exhibits "C" and "D," respectively.
(b) Debtor agrees that from time to time, at the expense of Debtor, Debtor
will promptly execute and deliver all further instruments and
documents, and take all further action, that may be reasonably
necessary or desirable, or that Lender may reasonably request, in order
to perfect and protect any security interest
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granted or purported to be granted hereby or to enable Lender to
exercise and enforce its rights and remedies hereunder with respect to
any Collateral. Without limiting the generality of the foregoing,
Debtor will execute and file such financing or continuation statements,
or amendments thereto, and such other instruments or notices, as may be
necessary or desirable, or as Lender may request, in order to perfect
and preserve the security interests granted or purported to be granted
hereby.
(c) Debtor will furnish to Lender from time to time statements and
schedules further identifying and describing the Collateral and such
other reports in connection with the Collateral as Lender may
reasonably request, all in reasonable detail and Debtor hereby agrees
that Lender or Lender's agents may enter upon Debtor's premises at any
reasonable time and from time to time for the purpose of inspecting the
Collateral and records pertaining thereto.
(d) Debtor will not make any change in its corporate name or conduct its
business operations under any fictitious business name or trade name
without giving to Lender at least 30 days' prior written notice.
6. Maintenance of Collateral and Related Matters.
---------------------------------------------
Debtor shall:
(a) keep the Collateral at the place therefor specified in Section 4(a) or,
upon 30 days' prior written notice to Lender, at such other places in
jurisdictions where all action required by Section 5 shall have been
taken with respect to the Collateral.
(b) cause the Collateral to be maintained and preserved in the same
condition, repair and working order as when acquired (other than
repairs or refurbishings by Debtor), ordinary wear and tear expected,
and in accordance with any manufacturer's manual, and shall forthwith,
or in the case of any loss or damage to any of the Collateral as
quickly as practicable after the occurrence thereof, make or cause to
be made all repairs, replacements, and other improvements in connection
therewith which are necessary or desirable to such end. Debtor shall
promptly furnish to Lender a statement respecting any loss or damage to
any of the Collateral.
(c) pay promptly when due all taxes, assessments and governmental charges
or levies imposed upon, and all claims (including claims for labor,
materials and supplies) against the Collateral, except to the extent
the validity thereof is being contested in good faith.
(d) maintain adequate insurance on the Collateral.
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7. Events of Default.
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Any one or more of the following shall be an Event of Default hereunder:
(a) Debtor shall fail to pay any indebtedness, transaction costs or other
monetary obligations to Lender when due, whether pursuant to the Note,
or otherwise;
(b) Debtor shall breach any nonpayment term, provision, warranty or
representation under this Security Agreement or the Note, not cured
within fifteen (15) days after written notice thereof;
(c) The appointment of any receiver or trustee of all or a substantial
portion of the assets of Debtor.
(d) Debtor shall make a general assignment for the benefit of creditors or
shall voluntarily file under any bankruptcy or similar law.
(e) Any involuntary petition in bankruptcy shall be filed against Debtor
and not be dismissed within 60 days.
(f) Should Debtor or any other party seek to place a lien, security
interest or other interest ahead of or equal to the security interest
of Lender in any of the Collateral;
(g) Should Debtor default with respect to its obligations to any other
party holding a lien, security interest or other interest in the
Collateral where such default, in Lender's opinion, jeopardizes or may
jeopardize its security interest in the Collateral;
(h) Should any levies of attachment, executions, tax assessments or similar
processes be issued against the Collateral which are not released
within ten (10) days after notice from the entity imposing such charge
against the Collateral or, if within said ten (10) day period,
proceedings are not commenced to contest such charge, and which
proceedings are not concluded within sixty (60) days;
(i) Should any statements, schedules or other documents (herein
"statements") furnished by Debtor to Lender prove false or incorrect in
any material respect and should such statements, as furnished, not be
rendered correct in all material respects within thirty (30) days after
written notice from Lender; or
(j) Should Debtor voluntarily or involuntarily discontinue business or
transfer substantially all of its assets, other than to an entity
controlled by Debtor.
8. Transfer and Other Liens.
------------------------
Debtor shall not:
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(a) Sell, assign (by operation of law or otherwise) or otherwise dispose of
any of the Collateral.
(b) Create or suffer to exist any lien, security interest or other charge
or encumbrance upon or with respect to any of the Collateral to secure
debt of any person or entity, except for the security interest created
by this Security Agreement and except for liens, security interests or
encumbrances subordinate thereto.
9. Lender Appointed Attorney-in Fact.
---------------------------------
Debtor hereby irrevocably appoints Lender as Debtor's
attorney-in-fact, with full authority in the place and stead of Debtor and in
the name of Debtor, Lender or otherwise, from time to time in Lender's
discretion upon the occurrence and during the continuance of an Event of
Default, to take any action and to execute any instrument which Lender may deem
necessary or advisable to accomplish the purpose of this Security Agreement
including, without limitation:
(a) to ask, demand, collect, sue for, recover, compound, receive and give
acquaintance and receipts for moneys due and to become due under or in
respect of any of the Collateral;
(b) to receive, endorse, and collect any drafts, documents or other
instruments in connection with clause (a) above; and
(c) to file any claims or take any action or institute any proceedings
which Lender may deem necessary or desirable to enforce the rights of
Lender with respect to any of the Collateral.
10. Lender May Perform.
------------------
If Debtor fails to perform any agreement contained herein,
Lender may itself perform, or cause performance of, such agreement, and the
expenses so incurred in connection therewith shall be payable by the Debtor
under Section 13(b).
11. Lender's Duties.
---------------
The powers conferred on Lender hereunder are solely to protect
its interest in the Collateral and shall not impose any duty upon it to exercise
any such powers. Except for the safe custody of any Collateral in its possession
and the accounting for moneys actually received by it hereunder, Lender shall
have no duty as to any Collateral or as to the taking of any necessary steps to
preserve rights against prior parties or any other rights pertaining to any
Collateral.
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12. Remedies.
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If any Event of Default shall have occurred and be continuing:
(a) Lender may exercise in respect of the Collateral, in addition to other
rights and remedies provided for herein or otherwise available to it,
all rights and remedies of a secured party on default under the Uniform
Commercial Code (the "Code") (whether or not the Code applies to the
affected Collateral) and also may (i) require Debtor to, and Debtor
hereby agrees that it will at its expense and upon request of Lender
forthwith, assemble all or part of the Collateral as directed by Lender
and make it available to Lender at a place to be designated by Lender
which is reasonably convenient to both parties, (ii) without notice or
demand or legal process, enter upon any premises of Debtor and take
possession of the Collateral, and (iii) without notice except as
specified below, sell the Collateral or any part thereof in one or more
parcels at public or private sale, at any of Lender's offices or
elsewhere, at such time or times, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as
Lender may deem commercially reasonable. Debtor agrees that, to the
extent notice of sale shall be required by law, at least five (5) 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. At any sale of the Collateral, if permitted by law,
Lender may bid (which bid may be, in whole or in part, in the form of
cancellation of indebtedness) for and purchase the Collateral or any
portion thereof for the account of Lender. Lender shall not be
obligated to make any sale of Collateral regardless of notice of sale
having been given. Lender 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.
(b) All cash proceeds received by Lender in respect of any sale of,
collection from, or other realization upon all or any part of the
Collateral may only be held by Lender as collateral for, and/or then or
at any time thereafter applied (after payment in any amounts payable to
Lender pursuant to Section 13) in whole or in part by Lender against
all or any part of the obligations in the Note and/or this Agreement.
Any surplus of such cash or cash proceeds held by Lender and remaining
after payment in full of all of the obligations under the Note and/or
this Agreement shall be paid over to the Debtor or to whomsoever may be
lawfully entitled to receive such surplus.
13. Indemnity and Expenses.
----------------------
(a) Debtor agrees to indemnify Lender from and against any and all claims,
losses and liabilities arising out of or resulting from this Security
Agreement (including, without limitation, enforcement of this Security
Agreement), except claims,
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losses or liabilities resulting from Lender's gross negligence or
willful misconduct or breach of this Security Agreement.
(b) Debtor will upon demand pay to Lender the amount of any and all
expenses, including the reasonable fees and disbursements of counsel
and of any experts and agents, which Lender may incur in connection
with (i) the custody, preservation, use or operation of, or the sale
of, collection from, or other realization upon, any of the Collateral,
(ii) the exercise or enforcement of any of the rights of Lender
hereunder or (iii) the failure by the Debtor to perform or observe any
of the provisions hereof.
14. Amendments, Etc.
----------------
No amendment or waiver of any provision of this Agreement nor
consent to any departure by the Debtor herefrom, shall in any event be effective
unless the same shall be in writing and signed by Lender, and then such waiver
or consent shall be effective only in the specific instance and for the specific
purpose for which given.
15. Notices.
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Notices given under this Security Agreement shall be in
writing and shall be served personally, by telecopy or mailed by first class
registered mail, return receipt requested and postage prepaid. Notices shall be
deemed received at the earlier of actual receipt or date of telecopy or three
(3) days following deposit in U.S. mail. Notices shall be directed to the
addresses as follows:
If to Debtor:
Tradewinds Television, LLC
5855 Topanga Canyon Boulevard
Woodland Hills, California 91367
Attention: Rick Pack
Telecopier: 818/592-7626
with a copy to:
Gary W. Marsh, Esq.
Long, Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
Telecopier: 404/527-4198
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If to Lender:
Affinity Entertainment, Inc.
15436 North Florida Avenue, Suite 103
Tampa, Florida 33613
Attention: _______________
Telecopier: ______________
with a copy to
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard
Beverly Hills, California 90210
Attention: Mel Ziontz, Esq.
Telecopier: 310/271-6430
The parties to this Security Agreement may change their
addresses for notice by giving written notice to the other party in accordance
with this section.
16. Continuing Security Interest; Transfer of Note.
----------------------------------------------
This Security Agreement shall create a continuing security
interest in the Collateral and shall (i) remain in full force and effect until
payment in full of the Note and all other Obligations of Debtor to Lender have
been satisfied, (ii) be binding upon Debtor, its successors and assigns and
(iii) inure to the benefit of Lender and its successors, transferees and
assigns. Without limiting the generality of the foregoing clause (iii), Lender
may assign or otherwise transfer the Note held by it to any other person or
entity, and such other benefits in respect thereof granted to Lender herein or
otherwise. Upon the payment in full of the Note and full satisfaction of all
other Obligations of Debtor to Lender, the security interest granted hereby
shall terminate and all rights to the Collateral shall revert to Debtor. Upon
any such termination, Lender will, at Debtor's expense, execute and deliver to
Debtor such documents as Debtor shall reasonably request to evidence such
termination.
17. Severability.
------------
In the event that any one or more of the provisions of this
Agreement shall be declared to be illegal or unenforceable under any law, rule
or regulation, such illegality or unenforceability shall not affect the validity
and enforceability of the other provisions of this Security Agreement.
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18. Governing Law; Terms.
--------------------
This Agreement shall be governed by, and construed and
enforced in accordance with, the laws of the State of California. Unless
otherwise defined herein, terms used in Article 9 of the Uniform Commercial Code
in the State of California are used herein as therein defined.
IN WITNESS WHEREOF, each party hereto has caused this Security
Agreement to be duly executed and delivered by its officers hereunto duly
authorized as of the date first above written.
TRADEWINDS TELEVISION, LLC
By:
------------------------
Title:
---------------------
AFFINITY ENTERTAINMENT, INC.
By:
-------------------------
Title:
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Exhibit "A"
SECURED PROMISSORY NOTE
$400,000 Los Angeles, California
September 13, 1996
FOR VALUE RECEIVED, the undersigned, TRADEWINDS TELEVISION, LLC, a
California limited liability company (the "Borrower") hereby promises to pay to
AFFINITY ENTERTAINMENT, INC., a Delaware corporation (the "Lender"), or order,
on the Maturity Date (as such term is defined herein) the principal sum of Four
Hundred Thousand Dollars ($400,000) or so much thereof as may be borrowed
hereunder, with interest thereon in accordance with the terms set forth herein.
The Maturity Date shall be the date upon which Lender makes written
demand for payment to Borrower which may be made after the earlier of (i) the
date which is 90 days following receipt of written notice ("Demand Notice") by
Borrower from Lender that Lender has determined that the conditions to the
Transaction contemplated by that certain letter agreement dated September 13,
1996 among Borrower, Lender and Rick Pack could not be satisfied, and the
Transaction will not be consummated; or (ii) January 31, 1997 ("Outside Date").
Advances may be made under this Note prior to the Maturity Date on the condition
that at the time of any such borrowing, such borrowing has been approved by
Lender in its sole discretion regarding the use of such advances, and no Event
of Default exists under the Security Agreement referred to herein, and provided
further that the aggregate principal amount of all sums borrowed hereunder shall
not exceed the sum of Four Hundred Thousand Dollars ($400,000). Each borrowing
hereunder shall be recorded by the Lender and, prior to any transfer of this
Note, shall be endorsed on the schedule annexed to this Note. The aggregate
unpaid amount of principal set forth on the schedule annexed to this Note shall
be presumptive evidence of the principal amount owing and unpaid on this Note.
However, the failure to record any such amount on such schedule shall not limit
or otherwise affect the obligations of Borrower hereunder to repay the principal
amount of all advances hereunder together with interest accruing thereon.
Amounts repaid hereunder may not be reborrowed.
The undersigned promises to pay, on the Maturity Date, interest on the
unpaid principal balance hereof from time to time outstanding from the date of
the first disbursement hereunder until paid, at a rate per annum of eight
percent (8%).
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This Note is entitled to the benefits and subject to all of the terms
and conditions of the Interim Financing and Security Agreement dated September
13, 1996 among Lender, Borrower and Rick Pack ("Security Agreement").
The undersigned agrees to pay all expenses of Lender incurred in
collection of this Note, including reasonable attorneys' fees in connection
therewith, irrespective of whether suit is brought hereon.
All principal and interest hereunder shall be payable in lawful money
of the United States of America and shall be paid at such place as the holder
hereof may from time to time designate.
Upon the occurrence of any default in the payment of principal or
interest hereunder or upon any Event of Default under the Security Agreement or
any material breach of any other term or condition set forth in the Security
Agreement, the principal hereof with interest accrued thereon shall become, or
may be declared to be, at the option of the Lender, forthwith due and payable.
Borrower hereby waives diligence, presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note and assents to extensions of time of
payment, or forbearance or other indulgence without notice. The right to plead
any and all statutes of limitation as a defense to any demand hereunder is
hereby waived to the full extent permitted by law.
Borrower shall have no right to prepay all or any portion of this Note
until the first to occur of (i) receipt by Borrower of the Demand Notice or (ii)
the Outside Date.
This Note shall be governed by and be construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, this Note has been executed and delivered at Los
Angeles, California, on the date set forth above.
TRADEWINDS TELEVISION, LLC
By:
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Its:
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SCHEDULE OF ADVANCES OF PRINCIPAL
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Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
================================================================================
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EXHIBIT "B"
DESCRIPTION OF COLLATERAL
As security for the due and punctual payment and performance of the Debtor's
obligations under that certain Promissory Note dated September 13, 1996 and the
Security Agreement, Debtor has pledged, hypothecated, assigned, transferred,
conveyed, delivered and set over unto Lender as security, and has granted to
Lender, a continuing first priority security interest in and mortgage of
copyright on, all of the Debtor's right, title and interest of every kind and
nature, if any, in and to the following, including all products and proceeds
thereof, including insurance proceeds (collectively, the "Collateral"):
(i) all episodes currently or hereafter in existence of the following television
series: "Bounty Hunter," "Ghost Writer," "Madison's Adventures, Growing Up
Wild," "Premiere One," and the motion picture entitled "The Night They Saved
Christmas," and all collateral, allied, ancillary, subsidiary and merchandising
rights therein, and all properties and things of value pertaining thereto and
all products and proceeds thereof whether now in existence or hereafter made,
acquired or produced (as used herein, the term "Episodes" shall mean and include
the foregoing episodes and motion picture, all of the aforesaid rights and the
rights and property set forth in a subparagraphs (ii) through (xviii) below),
which includes, without limitation:
(ii) All rights of every kind and nature including, without limitation,
copyrights) in and to any literary, musical, dramatic or other material of any
kind or nature upon which, in whole or in part, the Episodes are or may be
based, or from which they are, or may be adapted or inspired, or which may be or
has been used or included in the Episodes including, without limitation, all
scripts, scenarios, screenplays, bibles, stories, treatments, novels, outlines,
books, titles, concepts, manuscripts or other properties or materials of any
kind or nature in whatever state of completion and all drafts, versions and
variations thereof (collectively, the "Literary Property");
(iii) All physical properties of every kind or nature of relating to the
Episodes and all versions thereof, including, without limitation, all physical
properties relating to the development, production, completion, delivery,
exhibition, distribution or other exploitation of the Episodes, and all versions
thereof or any part thereof, including, without limitations, the Literary
Property, exposed film, developed film, positives, negatives, prints, answer
prints, special effects, pre-print materials (including interpositives,
negatives, duplicate negatives, internegatives, color reversals, intermediates,
lavenders, fine grain master prints and matrices and all other forms of preprint
elements which may be necessary or useful to produce prints or other copies or
additional preprint elements, whether now known or hereafter devised),
soundtracks, recordings, audio and video tapes and discs of all types and
gauges, cutouts, trims and
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any and all other physical properties of every kind and nature relating to the
Episodes in whatever state of completion, and all duplicates, drafts, versions,
variations and copies of each thereof (collectively, the "Physical Properties");
(iv) All rights of every kind or nature in and to any and all music and musical
compositions created for, used in or to be used in connection with the Episodes
including, without limitation, all copyrights therein and all rights to perform,
copy, record, re-record, produce, publish, reproduce or synchronize any or all
of said music and musical compositions as well as all other rights to exploit
such music including record, soundtrack recording, and music publishing rights;
(v) All collateral, allied, ancillary, subsidiary, publishing and merchandising
rights of every kind and nature, without limitation, derived from, appurtenant
to or related to the Episodes or the Literary Property, including, without
limitation, all production, exploitation, reissue, remake, sequel, serial or
series production rights by use of film, tape or any other recording devices now
known or hereafter devised, whether based upon, derived from or inspired by the
Episodes, the Literary Property or any part thereof; all rights to use, exploit
and license others to use or exploit any and all novelization, publishing,
commercial tie-ups and merchandising rights of every kind and nature, including,
without limitation, all novelization, publishing, merchandising rights and
commercial tie-ups arising out of or connected with or inspired by the Episodes
or the Literary Property, the title or titles of the Episodes, the characters
appearing in the Episodes or said Literary Property and/or the names or
characteristics of said characters, and including further, without limitation,
any and all commercial exploitation in connection with or related to the
Episodes, all remakes or sequels thereof and/or said Literary Property;
(vi) All rights of every kind or nature, present and future, in and to all
agreements relating to the development, production, completion, delivery and
exploitation of the Episodes, including, without limitation, all agreements for
personal services, including the services of writers, directors, cast,
producers, special effects personnel, animators, cameramen and other creative,
artistic and technical staff and agreements for the use of studio space,
equipment, facilities, locations, animation services, special effects services
and laboratory contracts;
(vii) All insurance and insurance policies heretofore or hereafter placed upon
the Episodes or the insurable properties thereof and/or any person or persons
engaged in the development, production, completion, delivery or exploitation of
the Episodes and the proceeds thereof;
(viii) All copyrights, rights in copyrights, interests in copyrights and
renewals and extensions hereafter obtained upon the Episodes or the Literary
Property or any part thereof, and the right (but not the obligation) to make
publication thereof for copyright purposes, to register claims under copyright,
and the right (but not the obligation) to
B-2
<PAGE>
renew and extend such copyrights, and the right (but not the obligation) to sue
in the name of Debtor or in the name of Lender for past, present and future
infringements of copyright;
(ix) All rights to produce, acquire, release, sell, distribute, subdistribute,
lease, sublease, market, license, sublicense, exhibit, broadcast, transmit,
reproduce, publicize or otherwise exploit the Episodes, the Literary Property
and any and all rights therein (including, without limitation, the rights
referred to in subsection (iv) above) in perpetuity, without limitation, in any
manner and in any media whatsoever throughout the universe, including, without
limitation, by projection, radio, all forms of television (including, without
limitation, free, pay, toll, cable, sustaining subscription, sponsored and
direct satellite broadcast), in theatres, non-theatrically, on cassettes,
cartridges and discs and by any and all other scientific, mechanical or
electronic means, methods, processes or devises now known or hereafter
conceived, devised or created;
(x) All rights of Debtor of any kind or nature, direct or indirect, to acquire,
produce, develop, reacquire, finance, release, sell, distribute, subdistribute,
lease, sublease, market, license, sublicense, exhibit, broadcast, transmit,
reproduce, publicize, or otherwise exploit the Episodes, or any rights in the
Episodes, including, without limitation, pursuant to agreements between Debtor
and any company controlling, controlled by, or under common control with Debtor
(a "Subsidiary") which relate to the ownership, production or financing of the
Episodes;
(xi) All contract rights and general intangibles which grant to any person any
right to acquire, produce, develop, reacquire, finance, release, sell,
distribute, subdistribute, lease, sublease, market, license, sublicense,
exhibit, broadcast, transmit, reproduce, publicize, or otherwise exploit the
Episodes or any rights in the Episodes including, without limitation, all such
rights pursuant to agreements between Debtor and any Subsidiary which relate to
the ownership, production or financing of the Episodes;
(xii) All rent, revenues, income, compensation, products, increases, proceeds
and profits or other property obtained or to be obtained from the production,
release, sale, distribution, subdistribution, lease, sublease, marketing,
licensing, sublicensing, exhibition, broadcast, transmission, reproduction,
publication, ownership, exploitation or other uses or disposition of the
Episodes and the Literary Property (or any rights therein or part thereof), in
any and all media, without limitation, the properties thereof and of any
collateral, allied, ancillary, merchandising and subsidiary rights therein and
thereto, and amounts recovered as damages by reason of unfair competition, the
infringement of copyright, breach of any contract or infringement of any rights,
or derived therefrom in any manner whatsoever;
(xiii) Any and all general intangibles, contract rights, chattel paper
documents, instruments and goods, including inventory (as those terms are
defined in the California Commercial Code), not elsewhere included in this
definition, which may
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<PAGE>
arise in connection with the creation, production, completion, delivery,
financing, ownership, possession or exploitation of the Episodes;
(xiv) Any and all documents, receipts or books and records, including, without
limitation, documents or receipts of any kind or nature issued by a
pledgeholder, warehouseman or bailee with respect to the Episodes and any
element thereof;
(xv) All accounts receivable, all contracts rights, all general intangibles (as
such terms are defined above) in connection with or relating to the Episodes
including, without limitation, all accounts receivable, all contract rights and
general intangibles constituting rights to receive the payment of money, or
other valuable consideration, all receivables and all other rights to receive
the payment of money including, without limitation, under present or future
contracts or agreements (whether or not earned by performance), from the sale,
distribution, exhibition, disposition, leasing, subleasing, licensing,
sublicensing or other exploitation of the Episodes or the Literary Property or
any part thereof or any rights therein or related thereto in any medium, whether
now known or hereafter developed, by any means, method, process or device in any
market, including Debtor's rights to receive payments thereunder, and all other
rights to receive film rentals, license fees, distribution fees, producer's
shares, royalties and other amounts of every description including, without
limitation, from (a) theatrical exhibitors, exhibitors, television networks and
stations and airlines, cable television systems, pay television operators,
whether on a subscription, per program charge basis or otherwise, and other
exhibitors, (b) distributors, subdistributors, lessees, sublessees, licensees
and sublicensees (including any Subsidiary) and (c) any other person or entity
that distributes, exhibits or exploits the Episodes or the Literary Property or
elements or components of the Episodes or the Literary Property or rights
relating thereto;
(xvi) All proceeds, products, additions and accessions (including insurance
proceeds) of the Episodes, as defined and referred to in subsections (i) through
(xv) above; and
(xvii) The following personal property, whether now owned or hereafter acquired:
(i) the title or titles of the Episodes and all of Debtor's rights to the
exclusive use thereof including rights protected pursuant to trademark, service
mark, unfair competition and/or other laws, rules or principles of law or equity
or industry practice, and (ii) all inventions, processes, formulae, licenses,
patents, patent rights, trademarks, trademark rights, service marks, service
mark rights, trade names, trade name rights, logos, indicia, corporate and
company names, business source or business identifiers and renewals and
extensions thereof, domestic and foreign, whether now owned or hereafter
acquired, and the accompanying good will and other like business property rights
relating to the Episodes, and the right (but not the obligation) to register
claims under trademark or patent and to renew and extend such trademarks or
patents and the right (but not the obligation) to sue in the name of Debtor or
in the name of Lender for past, present or future infringement of trademark or
patent;
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<PAGE>
(xviii) all other presently owned and after acquired assets and interests of the
Debtor including, but not limited to accounts, contract rights, general
intangibles, notes, instruments, chattel paper, machinery, equipment, furniture,
fixtures, leasehold improvements, leases (real property and personal property),
tax refunds, deposit accounts, cash, bank accounts, any and all avoidance rights
and powers existing under the Bankruptcy Code and the proceeds and products of
all of the foregoing (collectively "General Assets").
B-5
<PAGE>
SECURED PROMISSORY NOTE
$100,000.00 Los Angeles, California
November 19,1996
FOR VALUE RECEIVED, the undersigned, TRADEWINDS TELEVISION, LLC, a
California limited liability company (the "Borrower") hereby promises to pay to
AFFINITY ENTERTAINMENT, INC., a Delaware corporation (the "Lender"), or order,
on the Maturity Date (as such term is defined herein) the principal sum of One
Hundred Thousand Dollars ($100,000.00) or so much thereof as may be borrowed
hereunder, with interest thereon in accordance with the terms set forth herein.
The Maturity Date, unless mutually extended by Borrower and Lender, shall
be the date upon which Lender makes written demand for payment to Borrower which
may be made after the date which is 90 days following receipt of written notice
(60 days following receipt of written notice on or after December 1, 1996) by
Borrower from Lender ("Demand Notice") that Lender has determined that the
conditions to the Transaction contemplated by that certain letter agreement
dated September 13,1996 among Borrower, Lender and Rick Pack could not be
satisfied, and the Transaction will not be consummated; provided, however, that
notwithstanding the foregoing, this Note shall become immediately due and
payable without any notice if either of the following conditions are not met at
any time prior to the Maturity Date: (i) all payments due from Borrower to third
parties with respect to the production, distribution, marketing and other
exploitation of the television series "Bounty Hunters" (the "Series") are not
made promptly when due or otherwise Borrower defaults in any monetary or
contractual obligation relating to the Series, or (ii) Borrower shall not have
(a) provided Lender with a two (2) week cash budget of expenditures, acceptable
to Lender, due with respect to the Series by the close of business on the date
of the 'Demand Notice" and on each Friday thereafter, and (b) deposited in an
escrow account, approved by Lender, sufficient cash to meet the monetary
obligations set forth in the budget, initially for the next two (2) week period
and thereafter for the next one (1) week period. Advances may be made under this
Note prior to the Maturity Date on the condition that at the time of any such
borrowing, such borrowing has been approved by Lender in its sole discretion
regarding the use of such advances, and no Event of Default exists under the
Security Agreement referred to herein, and provided further that the aggregate
principal amount of all sums borrowed hereunder shall not exceed the sum of One
Hundred Thousand Dollars ($100,000.00). Each borrowing hereunder shall be
recorded by the Lender and, prior to any transfer of this Note, shall be
endorsed on the schedule annexed to this Note. The aggregate unpaid amount of
principal set forth on the schedule annexed to this Note shall be presumptive
evidence of the principal amount owing and unpaid on this Note. However, the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligations of Borrower hereunder to repay the principal amount of
all advances hereunder together with interest accruing thereon. Amounts repaid
hereunder may not be reborrowed.
<PAGE>
The undersigned promises to pay, on the Maturity Date, interest on the
unpaid principal balance hereof from time to time outstanding from the date of
the first disbursement hereunder until paid, at a rate per annum of eight
percent (8%).
This Note is entitled to the benefits and subject to all of the terms and
conditions of the Interim Financing and Security Agreement dated September
13,1996 among Lender, Borrower and Rick Pack, as amended from time to time
("Security Agreement").
The undersigned agrees to pay all expenses of Lender incurred in collection
of this Note, including reasonable attorneys' fees in connection therewith,
irrespective of whether suit is brought hereon.
All principal and interest hereunder shall be payable in lawful money of
the United States of America and shall be paid at such place as the holder
hereof may from time to time designate.
Upon the occurrence of any default in the payment of principal or interest
hereunder or upon any Event of Default under the Security Agreement or any
material breach of any other term or condition set forth in the Security
Agreement, the principal hereof with interest accrued thereon shall become, or
may be declared to be, at the option of the Lender, forthwith due and payable.
Borrower hereby waives diligence, presentment, demand, notice, protest and
all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note and assents to extensions of time of
payment, or forbearance or other indulgence without notice. The right to plead
any and all statutes of limitation as a defense to any demand hereunder is
hereby waived to the full extent permitted by law.
Borrower shall have no right to prepay all or any portion of this Note
until the receipt by Borrower of the Demand Notice.
This Note shall be governed by and be construed in accordance with the laws
of the State of California.
IN WITNESS WHEREOF, this Note has been executed and delivered at Los
Angeles, California, on the date set forth above.
TRADEWINDS TELEVISION, LLC
By:________________________
Its:_______________________
<PAGE>
SCHEDULE OF ADVANCES OF PRINCIPAL
================================================================================
Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
================================================================================
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ASSET PURCHASE AGREEMENT
dated as of
October 3, 1996, among
Affinity Entertainment, Inc.
and
Tradewinds Television, LLC
and
Royeric Pack
<PAGE>
<TABLE>
<CAPTION>
TABLE OF CONTENTS
<S> <C>
ARTICLE 1 DEFINITIONS............................................................................................1
1.1 Definitions..................................................................................................1
ARTICLE 2 SALE OF ACQUIRED ASSETS, ASSUMPTION OF LIABILITIES AND RELATED TRANSACTIONS...........................7
2.1 Purchase and Sale of Acquired Assets.........................................................................7
2.2 Assumption of Certain Liabilities............................................................................8
2.3 Purchase Price and Allocation................................................................................8
2.4 Sales and Use Taxes..........................................................................................8
ARTICLE 3 CLOSING................................................................................................8
ARTICLE 4 REPRESENTATIONS AND WARRANTIES OF SELLERS..............................................................9
4.1 Organization, Power and Authority............................................................................9
4.2 Authorization of Agreements..................................................................................9
4.3 Effect of Agreement..........................................................................................9
4.4 Financial Statements........................................................................................10
4.5 Receivables.................................................................................................10
4.6 Permits; Conduct of Business................................................................................11
4.7 Material Contracts..........................................................................................11
4.8 Condition and Use of Property...............................................................................11
4.9 Legal Proceedings...........................................................................................11
4.10 Library Rights..............................................................................................11
4.11 Third Party Rights..........................................................................................13
4.12 Library Tangible Assets.....................................................................................14
4.13 Marks and Registrations.....................................................................................14
4.14 Licenses....................................................................................................15
4.15 Insurance...................................................................................................16
4.16 Compliance with Law.........................................................................................16
4.17 Certain Interests...........................................................................................16
4.18 No Brokers or Finders.......................................................................................16
4.19 Tax and Other Returns or Reports............................................................................16
4.20 Employment Contracts; Employee Benefit Plans................................................................17
4.21 Accuracy of Information.....................................................................................17
ARTICLE 5 REPRESENTATIONS AND WARRANTIES OF BUYER................................................................18
5.1 Organization and Related Matters............................................................................18
5.2 Authorization...............................................................................................18
5.3 No Conflicts................................................................................................18
5.4 No Brokers or Finders.......................................................................................19
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ARTICLE 6 ADDITIONAL AGREEMENTS..................................................................................19
6.1 Access......................................................................................................19
6.2 Conduct of Business; Financial Statements...................................................................19
6.3 Permits and approvals; Third Party Consents.................................................................20
6.4 No Solicitations............................................................................................20
6.5 Confidentiality; Publicity..................................................................................21
6.6 Performance by Affiliates...................................................................................21
6.7 Representations and Warranties..............................................................................21
6.8 Payments to Pack............................................................................................21
ARTICLE 7 CONDITIONS OF PURCHASE................................................................................23
7.1 General Conditions..........................................................................................23
7.2 Conditions to Obligations of Buyer..........................................................................23
ARTICLE 8 TERMINATION OF OBLIGATIONS; SURVIVAL...................................................................25
8.1 Termination of Agreement....................................................................................25
8.2 Effect of Termination.......................................................................................26
8.3 Expenses....................................................................................................26
ARTICLE 9 INDEMNIFICATION........................................................................................27
9.1 Indemnification.............................................................................................27
9.2 Procedure...................................................................................................28
ARTICLE 10 GENERAL...............................................................................................29
10.1 Survival...................................................................................................29
10.2. Amendments; Waivers........................................................................................29
10.3 Schedules; Exhibits; Integration...........................................................................29
10.4 Best Efforts; Further Assurances...........................................................................30
10.5 Bulk Sale Law..............................................................................................30
10.6 Governing Law..............................................................................................30
10.7 No Assignment..............................................................................................31
10.8 Headings...................................................................................................31
10.9 Counterparts...............................................................................................31
10.10 Parties in Interest........................................................................................31
10.11 Notices....................................................................................................31
10.12 Remedies; Waiver...........................................................................................33
10.14 Knowledge Convention.......................................................................................33
10.15 Representation By Counsel; Interpretation..................................................................33
10.16 Specific Performance.......................................................................................33
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10.17 Severability...............................................................................................34
</TABLE>
SCHEDULES
SCHEDULE 2.1...........................ACQUIRED ASSETS
SCHEDULE 2.1.1.........................LIBRARY
SCHEDULE 2.1.1(a)......................FILM LIBRARY
SCHEDULE 2.1.1(b)......................TELEVISION LIBRARY
SCHEDULE 2.1.2.........................WORKS IN PROGRESS
SCHEDULE 2.2(b)........................ASSUMED LIABILITIES
SCHEDULE 4.1...........................OWNERSHIP OF TW
SCHEDULE 4.3...........................REQUIRED PERMITS AND APPROVALS
SCHEDULE 4.5...........................ACCOUNTS RECEIVABLE
SCHEDULE 4.6...........................CONDUCT OF BUSINESS EXCEPTIONS
SCHEDULE 4.7...........................CONTRACTS
SCHEDULE 4.9...........................LEGAL PROCEEDINGS
SCHEDULE 4.10(a).......................LIBRARY RIGHTS EXCEPTIONS
SCHEDULE 4.10(b).......................RIGHTS VIOLATIONS
SCHEDULE 4.11(a).......................PARTICIPATIONS
SCHEDULE 4.11(b).......................GUILD ENCUMBRANCE
SCHEDULE 4.13(a).......................MARKS
SCHEDULE 4.13(b).......................COPYRIGHTS
SCHEDULE 4.13(b).......................INSURANCE
SCHEDULE 4.17..........................CERTAIN INTERESTS
SCHEDULE 4.20(a).......................EMPLOYMENT CONTRACTS
SCHEDULE 4.20(b).......................EMPLOYEE BENEFIT PLANS
EXHIBITS
A...Bill of Sale
B...Financial Statements of Tradewinds Television, LLC
iii
<PAGE>
ASSET PURCHASE AGREEMENT
This Asset Purchase Agreement is entered into as of October 3,
1996 among Affinity Entertainment, Inc., a Delaware corporation ("Buyer"),
Tradewinds Television, LLC, a California limited liability company ("TW"), and
Royeric Pack, an individual ("Pack" and, together with TW, the "Sellers" and,
individually, a "Seller").
R E C I T A L S
WHEREAS, Pack owns the entire membership interest in TW;
WHEREAS, Sellers desire to sell, and Buyer desires to
purchase, certain assets and contract rights representing the film and
television interests directly or indirectly owned and controlled by Sellers, on
the terms and conditions set forth in this Agreement.
A G R E E M E N T
In consideration of the mutual promises contained herein and
intending to be legally bound, the parties agree as follows:
ARTICLE 1
DEFINITIONS
1.1 DEFINITIONS.
For all purposes of this Agreement, except as otherwise
expressly provided or unless the context otherwise requires,
(a) the terms defined in this Article 1 have the meanings
assigned to them in this Article 1 and include the plural as well as the
singular,
(b) all accounting terms not otherwise defined herein have the
meanings assigned under GAAP,
(c) all references in this Agreement to designated "Articles,"
"Sections" and other subdivisions are to the designated Articles, Sections and
other subdivisions of the body of this Agreement,
(d) pronouns of either gender or neuter shall include, as
appropriate, the other pronoun forms,
(e) the words "herein," "hereof" and "hereunder" and other
words of similar import refer to this Agreement as a whole and not to any
particular Article, Section or other subdivision, and
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(f) references to "Sellers" herein shall be deemed to refer to
TW and Pack, jointly and severally.
As used in this Agreement and the Exhibits and Schedules
delivered pursuant to this Agreement, the following definitions shall apply:
"Acquired Assets" has the meaning set forth in Section 2.1.
"Action" means any action, complaint, investigation, petition,
suit or other proceeding, whether civil or criminal, in law or in equity, or
before any arbitrator or Governmental Entity.
"Affiliate" means a Person that directly or indirectly,
through one or more intermediaries, controls, or is controlled by, or is under
common control with, a specified Person.
"Affinity Encumbrance" means the Encumbrance of Buyer pursuant
to the Security Agreement.
"Agreement" means this Agreement by and among Buyer, TW and
Pack as amended or supplemented together with all Exhibits and Schedules
attached hereto or incorporated by reference.
"AMG" means Action Media Group Inc., a corporation.
"Approval" means any approval, authorization, consent,
qualification or registration, or any waiver of any of the foregoing, required
to be obtained from, or any notice, statement or other communication required to
be filed with or delivered to, any Governmental Entity or any other Person.
"Applicable Copyright Law" means the U.S. Copyright Act of
1976, as amended, and, as applicable, common law of any jurisdiction in the
United States, the Copyright Act of 1909, as amended, the Universal Copyright
Convention and the Berne Convention.
"Associate" of a Person means
(a) a corporation or organization (other than a party to this
Agreement) of which such Person is a director, an officer, member,
manager, or partner or is, directly or indirectly, the beneficial owner
of 10% or more of any class of equity securities;
(b) any trust or other estate in which such Person has a
substantial beneficial interest or as to which such Person serves as
trustee or in a similar capacity; and
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<PAGE>
(c) any relative or spouse of such Person or any relative of
such spouse who has the same home as such Person or who is a director,
officer, member or manager of TW.
"Assumed Liabilities" has the meaning specified in Section
2.2(b).
"Bill of Sale" means an instrument of assignment,
substantially in the form of Exhibit A hereto, dated the Closing Date and
assigning and transferring to Buyer all right, title and interest in and to the
Acquired Assets.
"Business" means the film and television businesses of TW.
"Closing" means the consummation of the Transactions.
"Closing Date" means the date of the Closing.
"Contract" means any contract, agreement, arrangement, lease,
license, sales order, purchase order or other legally binding commitment,
instrument or understanding, whether or not in writing.
"Copyright" means legal, economic, moral and neighboring
rights in any work of authorship, including, without limitation, those arising
under Applicable Copyright Law, and all registrations, renewals, and
applications for registration or renewal of any of the foregoing owned or
controlled by Sellers and relating to any asset in the Library, including,
without limitation, the copyrights listed in Schedule 4.13(b) to this Agreement.
"Employee Benefit Plan" means all plans, funds, programs,
policies, arrangements, practices, customs and understandings providing benefits
of economic value to any employee, former employee, or present or former
beneficiary, dependent or assignee of any such employee or former employee other
than regular salary, wages or commissions paid substantially concurrently with
the performance of the services for which paid. Without limitation, the term
"employee benefit plan" includes all employee welfare benefit plans within the
meaning of section 3(1) of the Employee Retirement Income Security Act of 1974,
as amended ("ERISA"), and all employee pension benefit plans within the meaning
of section 3(2) of ERISA.
"Encumbrance" means any claim, charge, lease, covenant,
easement, encumbrance, security interest, lien, pledge, rights of others, or
other similar restriction (whether on sale, transfer, disposition or otherwise),
whether imposed by agreement, understanding, law, equity or otherwise, except
for any restrictions on transfer generally arising under any applicable federal
or state securities law.
"Film Library" means the Library Pictures listed on Schedule
2.1.1(a).
"Financial Statements" has the meaning specified in Section
4.4(a).
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<PAGE>
"GAAP" means generally accepted accounting principles in the
United States, as in effect from time to time.
"Governmental Entity" means any government or any agency,
bureau, board, commission, court, department, official, political subdivision,
tribunal or other instrumentality of any government, whether federal, state or
local, domestic or foreign.
"Guild Encumbrances" means any right or Encumbrance,
including, without limitation, so called "separated rights" and rights similar
thereto, obtained pursuant to the terms of any guild, union or other collective
bargaining agreement applicable to any assets included in the Library, whether
said right is obtained directly or by implication or reference in an individual
Contract, to: (i) receive money or any other valuable consideration for
merchandising any assets included in the Library; or (ii) limit or prohibit the
exercise of any or all of the rights of exploitation of any assets included in
the Library; or (iii) receive money or other valuable consideration for the
exercise of any or all of the rights of exploitation of any or all of the assets
included in the Library.
"Indemnifiable Claim" means any Loss for or against which any
party is entitled to indemnification under this Agreement; "Indemnified Party"
means the party entitled to indemnity hereunder; and "Indemnifying Party" means
the party obligated to provide indemnification hereunder.
"Investment Letter" means the investment letter, in the form
to be agreed to by the parties, dated the Closing Date to be signed by Pack.
"Law" means any constitutional provision, statute or other
law, rule, regulation, or interpretation of any Governmental Entity and any
Order.
"Library" means, collectively, all Library Rights and all
Library Tangible Assets.
"Library Film Properties" means all physical properties of, or
relating to, any item of Library Pictures or Works in Progress, including,
without limitation, prints, negatives, duplicating negatives, fine grains, music
and sound effects tracks, master tapes and other duplicating materials of any
kind, all various language dubbed and titled versions, prints and negatives of
stills, trailers and television spots, all promos and other advertising and
publicity materials, stock footage, trims, tabs, out-takes, cells, drawings,
storyboards, models, sculptures, puppets, sketches, and continuities, including,
without limitation, any of the foregoing in the possession, custody or control
of Sellers, or to the extent owned by Sellers, in the possession of their
predecessors or assigns or any film laboratories, storage facilities or other
third parties.
"Library Literary Properties" means all literary, dramatic or
other works, screenplays, stories, adaptations, scripts, treatments, formats,
bibles, scenarios, characters, titles, and any and all other literary or
dramatic materials of any kind and any rights therein of or relating to any of
the Library Pictures or Works in Progress, including, without limitation, any
4
<PAGE>
remake, sequel, prequel, series, character, legitimate stage, merchandising and
other derivative, compilation and ancillary rights of every kind, whether now or
hereafter recognized, in all media including, without limitation, for
theatrical, non-theatrical, home video, multi-media, interactive, computer,
pay-per-view, television, pay or basic cable, DBS, TVRO, MDS, MMDS, STV or any
other form of exhibition or distribution now known or hereafter devised.
"Library Music Rights" means all music synchronization,
performance, mechanical, publication and other music rights of or relating to
any of the Library Pictures or Works in Progress.
"Library Outstanding Agreements" means all Contracts now in
effect pursuant to which Sellers have any rights to distribute, exhibit, use,
exercise or exploit, any rights in or to, or providing for the acquisition,
sale, purchase, lease, license or other disposition by or to Sellers of or
relating to any of the Library Pictures or Works in Progress.
"Library Pictures" means any and all completed audio, visual
and/or audiovisual works of any kind or character owned, licensed or otherwise
controlled by Sellers, including, without limitation, motion pictures,
television programs, series, mini-series, pilots, specials, documentaries,
cartoons, compilations, promotional films, trailers and shorts, whether
animated, live action or both whether produced for theatrical, non-theatrical,
home video, multi-media, interactive, computer, pay-per-view, television, pay or
basic cable, DBS, TVRO, MDS, MMDS, STV or any other form of exhibition or
distribution now known or hereafter devised, and specifically including the Film
Library and the Television Library.
"Library Rights" means, collectively, all Library Pictures,
Works in Progress, Library Literary Properties, Library Music Rights, Library
Underlying Agreements and Library Outstanding Agreements.
"Library Tangible Assets" means, collectively, all Library
Film Properties and all written Contracts and other documents evidencing,
memorializing or otherwise relating to the Library Rights, including, without
limitation, the Library Underlying Agreements and Library Outstanding
Agreements.
"Library Underlying Agreements" means all Contracts with
writers, directors, producers, actors, artists, animators, voice talent or other
parties relating to the preparation or production of any of the Library
Pictures, pursuant to which Sellers have or purport to have any rights in or
obligations relating to the Library Pictures, Works in Progress or any element
thereof.
"License" has the meaning set forth in Section 4.14(a).
"Loss" means any action, cost, damage, disbursement, expense,
liability, loss, deficiency, diminution in value obligation, penalty or
settlement of any kind or nature, whether foreseeable or unforeseeable,
including but not limited to, interest or other carrying costs, penalties,
legal, accounting and other professional fees and expenses incurred in the
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investigation, collection, prosecution and defense of claims and amounts paid in
settlement, that may be imposed on or otherwise incurred or suffered by the
specified person.
"Mark" has the meaning set forth in Section 4.13(a).
"Material Contract" means any Contract material to the
business of the subject person as of or after the date hereof and includes but
is not limited to those Contracts deemed material by Section 4.7.
"Note" means that certain promissory note dated September 13,
1996 executed by TW in favor of Buyer, as well as any additional notes or
evidences of indebtedness entered into by TW in favor of Buyer prior to the
Closing.
"Order" means any decree, injunction, judgment, order, ruling,
assessment or writ issued by a Governmental Entity.
"Participation" means any contingent right in, or to receive
money or other consideration in respect of, the exploitation of any asset
included in the Library, excluding Guild Encumbrances.
"Permit" means any license, permit, franchise, certificate of
authority, or order, or any waiver of the foregoing, required to be issued by
any Governmental Entity.
"Permitted Encumbrances" means Taxes (a) not yet delinquent or
(b) the validity of which are being contested in good faith by appropriate
actions.
"Person" means an association, a corporation, an individual, a
partnership, a trust or any other entity or organization, including a
Governmental Entity.
"Purchase Price" has the meaning set forth in Section 2.3.
"Registration Rights Agreement" means the Registration Rights
Agreement in the form to be agreed to by the parties.
"Securities Act" means the Securities Act of 1933, as amended.
"Security Agreement" means the Interim Financing and Security
Agreement dated September 13, 1996 among Buyer, TW and Pack, as amended from
time to time, and the security documents executed in connection therewith,
including the UCC-1 Financing Statement dated September 13, 1996, executed by
TW, and the Copyright Mortgage and Assignment, dated September 13, 1996,
executed by TW.
"Tax" means any foreign, federal, state, county or local
income, sales and use, excise, franchise, real and personal property, transfer,
gross receipt, capital stock, production, business and occupation, disability,
employment, payroll, severance or withholding tax or charge
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imposed by any Governmental Entity, any interest and penalties (civil or
criminal) related thereto or to the nonpayment thereof, and any Loss in
connection with the determination, settlement or litigation of any tax
liability.
"Television Library" means the Library Pictures listed on
Schedule 2.1.1(b).
"Termination Date" means, unless mutually extended by TW and
Buyer, 90 days following receipt of written notice by TW (60 days following
receipt of written notice by TW on or after December 1, 1996) that Buyer has
determined that the conditions to the Transactions could not be satisfied and
the Transactions will not be consummated.
"TW Accounts Receivable" means all on and off-balance sheet
accounts receivable relating to the Business as listed on Schedule 4.5.
"Transactions" means the transactions contemplated by this
Agreement.
"Works in Progress" means all audio, visual and/or audio
visual works for which production has commenced and which are not complete
which, if completed, would otherwise constitute Library Pictures, including,
without limitation, those properties listed on Schedule 2.1.2.
ARTICLE 2
SALE OF ACQUIRED ASSETS, ASSUMPTION OF LIABILITIES
AND RELATED TRANSACTIONS
2.1 PURCHASE AND SALE OF ACQUIRED ASSETS.
Subject to the terms and conditions of this Agreement, on the
Closing Date Sellers shall sell, convey, assign, transfer and deliver to Buyer,
and Buyer shall purchase, acquire and accept from Sellers, the assets
specifically identified on Schedule 2.1 attached hereto and incorporated herein
by this reference (the "Acquired Assets") including, without limitation, the
name "Tradewinds Television" and all good will associated therewith, free and
clear of any Encumbrances.
2.2 ASSUMPTION OF CERTAIN LIABILITIES.
(a) Liabilities Not Assumed. Except for the liabilities and
obligations of TW specifically assumed pursuant to and identified in
Section 2.2(b), Buyer shall not assume, shall not take subject to and
shall not be liable for, any liabilities or obligations of any kind or
nature, whether absolute, contingent, accrued, known or unknown, of
Sellers.
(b) Assumed Liabilities. Notwithstanding Section 2.2(a), on
the Closing Date Buyer shall assume and thereafter pay or perform the
liabilities or obligations directly
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related to the Acquired Assets that are identified on Schedule 2.2(b)
(the "Assumed Liabilities").
2.3 PURCHASE PRICE AND ALLOCATION.
The total purchase price (the "Purchase Price") for the
Acquired Assets shall be (i) the assumption of the Assumed Liabilities, plus
(ii) automatic cancellation of the Note, in the event the Closing occurs, plus
(iii) those certain payments to Pack set forth in Section 6.8.
Buyer and Sellers agree to the allocation of the Purchase
Price among the Acquired Assets and Assumed Liabilities to be set forth on an
allocation prepared by Buyer and submitted to Sellers within thirty (30) days
following the Closing. Buyer and Sellers agree that the foregoing allocation
shall be used, reported and implemented for all federal, state, local and other
tax purposes.
2.4 SALES AND USE TAXES.
Buyer and Sellers shall cooperate in preparing and filing use
and sales tax returns relating to, and Sellers shall pay all sales, use and
other similar taxes, if any, imposed on or in connection with the purchase, sale
or transfer of the Acquired Assets to, and the assumption of the Assumed
Liabilities by, Buyer pursuant to this Agreement or on the use thereof by Buyer
after the Closing Date. In accordance with and subject to the provisions of
Article 9, Sellers agree to indemnify and hold harmless Buyer from and against
any Losses related to the failure of Sellers to pay the sales and use taxes
imposed as a result of the Transactions.
ARTICLE 3
CLOSING
Upon the terms and subject to the conditions set forth in this
Agreement, the Closing of the Transactions shall take place at the offices of
Rosenfeld, Meyer & Susman, LLP, 9601 Wilshire Boulevard, Suite 444, Beverly
Hills, California 90210, at 10:00 a.m., on October 31, 1996, or, if later, five
business days after fulfillment of all conditions to the Closing set forth
herein or at such other location or time as Buyer and Sellers may agree, but in
no event later than the Termination Date.
ARTICLE 4
REPRESENTATIONS AND WARRANTIES OF SELLERS
TW and Pack jointly and severally represent, warrant and agree
as follows:
4.1 ORGANIZATION, POWER AND AUTHORITY.
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TW is a limited liability company duly organized, validly
existing and in good standing under the laws of California and is duly qualified
to do business as a foreign limited liability company in the jurisdictions in
which it conducts business, except where the failure so to qualify will not have
a material adverse effect on the Acquired Assets. Sellers have all necessary
power and authority to execute and deliver this Agreement and to perform their
respective obligations hereunder; Pack has the authority to execute this
Agreement and all other agreements and other instruments on behalf of TW. TW has
all requisite power and authority to own its properties and assets and to carry
on its business as now conducted. Schedule 4.1 lists the name and address of
each member of TW, and the number and percentage of membership interests owned
by each member. TW owns no subsidiaries or equity interests in any other entity.
4.2 AUTHORIZATION OF AGREEMENTS.
As of the Closing, the execution, delivery and performance by
Sellers of this Agreement, and the consummation of the Transactions, will have
been duly authorized by all necessary action by Sellers. This Agreement has been
duly executed and delivered by Sellers and constitutes the legal, valid and
binding obligation of Sellers, enforceable against Sellers in accordance with
its terms, except as may be limited by bankruptcy, insolvency, reorganization,
moratorium, and other similar laws and equitable principles relating to or
limiting creditors' rights generally.
4.3 EFFECT OF AGREEMENT
The execution, delivery and performance by Sellers of this
Agreement, and the consummation of the Transactions, will not violate the
organizational documents of TW or any law to which Sellers are subject, or any
judgment, award or decree or any indenture, agreement or other instrument to
which Sellers are subject, or by which Sellers or the Acquired Assets are bound,
or conflict with, result in a breach of or constitute (with due notice or lapse
of time or both) a default under, any such indenture, agreement or other
instrument, or result in the creation or imposition of any Encumbrance of any
nature whatsoever upon any of the Acquired Assets. Except as identified in
Schedule 4.3, the execution, delivery and performance of this Agreement, and the
consummation of the Transactions, by Sellers will not require filing or
registration with, or the issuance of any Permit or granting of any Approval by,
any other third party or Governmental Entity under the terms of any applicable
Law or Contract.
4.4 FINANCIAL STATEMENTS.
(a) Financial Statements and Balance Sheet Accounts. TW has
delivered to Buyer a balance sheet for TW at August 31, 1996 and the related
statement of operations as attached as Exhibit B hereto. Such financial
statements have been certified by Pack. All such financial statements and any
additional financial statements of TW delivered to Buyer prior to Closing are
hereafter called the "Financial Statements." The statements of operations
present fairly in all material respects the results of operations of TW for the
periods covered, and the balance sheets present fairly in all material respects
the financial condition of TW as of their respective dates. All such Financial
Statements reflect all adjustments (which consist only of
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normal recurring adjustments not material in amount and include but are not
limited to estimated provisions for year-end adjustments) necessary for such a
fair presentation. At the dates of such balance sheets of TW had no material
liability (actual, contingent or accrued) that, in accordance with GAAP applied
on a consistent basis, should have been shown or reflected therein but were not.
(b) Accounting Records. The accounting books, records and
documents of TW to which Buyer and its authorized representatives have had
access, accurately and validly reflect the business and disposition of assets of
TW in reasonable detail. TW has accounting controls sufficient to insure that
its business and transactions are executed in accordance with management's
general or specific authorization.
4.5 RECEIVABLES.
Schedule 4.5 lists the TW Accounts Receivable, including (a)
the names of the account debtor and payee, (b) balance as of August 31, 1996 and
(c) scheduled due date thereof. Each TW Account Receivable is owned by TW free
and clear of all Encumbrances other than the Affinity Encumbrance and complies
with all requirements of Law applicable thereto and constitutes the legal, valid
and binding payment obligation of the account debtor, enforceable by TW in
accordance with its terms subject to no penalty or disability. The Bill of Sale,
when executed and delivered pursuant hereto, will vest in Buyer all the right,
title and interest in and to the TW Accounts Receivable and the unpaid
indebtedness evidenced thereby and will be valid and enforceable against all
creditors of and purchasers from Sellers. Sellers agree to defend the right,
title and interest of Buyer in and to the TW Accounts Receivable against all
claims of third parties except those claiming by or through Buyer. Each TW
Account Receivable arose in the ordinary course of business and, other than
adjustments related to Nielsen ratings, is not subject to any dispute, offset,
counterclaim or other defense, whether arising out of the transactions
represented by the TW Accounts Receivable or independently thereof and is
unconditionally owed by the account debtor thereof without any conditions to
payment except for the passage of time.
4.6 PERMITS; CONDUCT OF BUSINESS.
Except for business Permits from local Governmental Entities,
Sellers are not required to obtain or have obtained any Permits in connection
with the operation by Sellers of the Business as presently conducted. Except as
set forth in Schedule 4.6, since August 31, 1996, Sellers have conducted the
Business only in the ordinary and usual course, have not entered into any
transactions that are material to the Acquired Assets, incurred any indebtedness
in connection with the Business (other than pursuant to the Security Agreement),
or done or permitted to be done any other acts or things that would cause
Sellers to be in violation of this Agreement.
4.7 MATERIAL CONTRACTS.
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Schedule 4.7 lists each Material Contract, which shall be
deemed to be any Contract to which either TW or Pack is a party that relates to
an Acquired Asset or by which an Acquired Asset is bound that is a License or to
which TW is a party and which was not made in the ordinary course of business.
Except as set forth on Schedule 4.7, each Material Contract is valid and
subsisting; Sellers have duly performed all their obligations thereunder to the
extent that such obligations to perform have accrued; and no breach or default,
alleged breach or default, or event which would (with the passage of time,
notice or both) constitute a breach or default thereunder by Sellers or, to the
best knowledge of Sellers, any other party or obligor with respect thereto, has
occurred or as a result of the Transactions will occur. True copies of the
written Material Contracts listed on Schedule 4.7, including all amendments and
supplements thereto, have been delivered to Buyer, together with full, complete
and accurate descriptions of all oral Material Contracts.
4.8 CONDITION AND USE OF PROPERTY.
TW has good and marketable title to or the right to use, free
of Encumbrances, all of the Acquired Assets, except for (a) Permitted
Encumbrances, (b) the Affinity Encumbrance and (c) with respect to the Library
Rights, the Licenses set forth in Schedule 4.7 and the matters set forth on
Schedules 4.10(a) and 4.11(a).
4.9 LEGAL PROCEEDINGS.
Except as set forth in Schedule 4.9, there is no Order or
Action pending, or, to the best knowledge of Sellers, threatened, against or
affecting the Acquired Assets, nor to the best knowledge of Sellers is there any
reasonable basis therefor.
4.10 LIBRARY RIGHTS
(a) Schedules 2.1.1 and 2.1.2 set forth a list of all Library
Pictures and Works in Progress, respectively. Except as set forth in
Schedule 4.10(a), TW owns, is licensed or otherwise possesses the
exclusive right, title and interest in the Library Pictures to permit
the exploitation thereof in all forms of media now existing or
hereafter created throughout the universe in perpetuity. Except as set
forth in Schedule 4.10(a), TW owns the sole copyright in the Library
Pictures and the Works in Progress. TW possesses the right afforded to
a sole copyright owner by Applicable Copyright Law to maintain a cause
of action under such Law to prevent, or to recover damages arising
from, the use, reproduction, adaptation, publication or display by
third parties not authorized by TW of the Library Pictures and the
Works in Progress. Except as set forth on Schedule 4.10(a), the Library
may be exploited for the full term of the applicable copyright and
renewals and extensions thereof without the consent of any third party,
including without limitation any employee, agent, independent
contractor, employee for hire, consultant, previous rights holder,
underlying rights holder, or successor, heir or descendent thereof.
(b) (i) Except for Permitted Encumbrances and the Affinity
Encumbrance, there are no Encumbrances or Actions, whether
pending or, to the
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best knowledge of Sellers, threatened, involving or against
any of the Library Rights, and Buyer shall be able to exploit
the Library Rights to the full extent provided by applicable
Law.
(ii) Except as set forth on Schedule 4.10(b), neither
the Library Rights, nor any element thereof, nor the
exploitation thereof by TW, libels, defames, violates the
rights of privacy or publicity, or violates or infringes any
copyright, patent, trademark or service mark, common law or
other similar right, including, without limitation, any
literary, dramatic, comedic, musical, distribution, exhibition
or photoplay right, of any Person or violates any other
applicable Law. Except as set forth in Schedule 4.10(b),
Sellers have not received any notice of any claim thereof.
(iii) All material contained in the Library Rights is
either (A) wholly original with writer(s) duly employed for
hire by TW and not copied, in whole or in part, from any other
work, (B) duly licensed to, or otherwise acquired by, TW, (C)
in the pubic domain throughout the world, (D) permitted to be
exploited by TW pursuant to the provisions of 17 U.S.C. ss.
107, as judicially interpreted for all current uses to the
full extent of the Library Rights or (E) a combination of any
of the foregoing.
(iv) All the Library Music Rights are (A) controlled
by American Society of Composers, Authors and Publishers
("ASCAP"), Broadcast Music Inc. ("BMI"), SESAC or other
applicable music performing rights organization, (B) in the
public domain throughout the world or (C) duly licensed or
otherwise owned by TW with sufficient rights to permit their
public performance in connection with, the exploitation of the
Library Pictures and Works in Progress.
(v) The credits that are contained in the Library
Pictures and Works in Progress are complete and accurate in
all material respects and do not omit any party or entity
entitled to any credit for providing services in connection
therewith, and no credit provided in the Library Pictures and
Works in Progress is inaccurate, improper or insufficient in
any material respect under any applicable Law or Contract.
(vi) A valid copyright notice which conforms to the
requirements of Applicable Copyright Law relating to the
elements, placement and other requirements of such notice
appears on each Library Picture.
(vii) TW has conformed to the requirements of Section
507 of the Federal Communications Act concerning broadcast
matter and disclosures required thereunder in all material
respects, insofar as said Section 507 applies to Persons
furnishing program material for television broadcasting, and
the portion of the Library Pictures which consist of
television programs do not include any matter for which any
money, service or other valuable consideration is or was
directly or
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indirectly paid or promised to Sellers by any third party, or
accepted from or charged to any third party by Sellers. As
used herein, the term "service or other valuable
consideration" shall not include any service or property
furnished without charge or at a nominal charge for use in, or
in connection with, the Library Pictures unless such service
or property is furnished in consideration for an
identification in a broadcast of any Person, product, service,
trademark or brand name beyond an identification which is
reasonably related to the use of such service or property
within the Library Pictures.
4.11 THIRD PARTY RIGHTS.
(a) Schedule 4.11(a) sets forth a list of all Participants
payable with respect to the exploitation of the Library Rights setting
forth the name and address of the Person to whom each such
Participation is payable and the terms, method and manner of computing
the amount and payment of each such Participation. Accurate and
complete contracts pursuant to which any Participation described on
such Schedule are payable have been made available to Buyer. No
Participation set forth on such Schedule is subject to acceleration in
any manner whatsoever as a result or by reason of the consummation of
the Transactions. Sellers have paid all Participations that are due and
payable or have accrued for all Participations that should be accrued
in accordance with GAAP consistently applied.
(b) Schedule 4.11(b) sets forth a true, accurate and complete
list of each guild, union or labor organization on behalf of which a
Guild Encumbrance is applicable to the exploitation of any of the
Acquired Assets included in the Library. Sellers have complied in all
material respects with all requirements under any applicable collective
bargaining agreements and have paid all amounts that are due and
payable (and have accrued all amounts that should be accrued in
accordance with GAAP consistently applied) under all applicable
collective bargaining agreements with any union or guild or any other
Contract by reason of any past or current television re-runs or
theatrical, home video, television or other exhibitions or exploitation
of any of the assets included in the Library (or from the exploitation
of any derivative works based thereon) or any so-called "separation of
rights" or similar provisions in any of the foregoing agreements.
4.12 LIBRARY TANGIBLE ASSETS
An original negative and soundtrack, or videotape master (or,
with respect to Works in Progress, film materials created as of the date hereof)
of each of the Library Film Properties has been properly stored. Each negative
and soundtrack within the Library Film Properties is free of cracks, tears,
scratches or abrasions, and all splices in each such negative are sound and
secure and transparent when viewed by transmitted light. An original negative
and soundtrack of each of the Library Pictures may be used for the purpose of
making a first class, fine grain print and a first class, fine grain production
master. Each videotape master within the Library Film Properties is free of
physical damage including, but not limited to, flaking, tearing, oxide loss and
shedding, and may be used for the purpose of creating a first class videotape
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duplicate. All duplicate masters of any such original or elements thereof that
currently exist and that are owned or controlled by Sellers are included in the
Library Tangible Assets. The Library Film Properties are stored and maintained
directly by Sellers or on their behalf by authorized distributors or licensees
in film storage facilities or in film laboratories in accordance with recognized
industry standards for the use and preservation of such materials. Sellers have
customary access sufficient to exploit the Library Film Properties, including
the right to remove such materials. The Library Tangible Assets contain
sufficient Library Film Properties to satisfy the deposit requirements under
Applicable Copyright Law in order to effectuate, on a timely basis, applicable
copyright registration and renewal filings for each Library Picture and Library
Underlying Literary Property. Except for Permitted Encumbrances, there are no
Encumbrances or Actions, whether pending or, to the best knowledge of Sellers,
threatened, against any of the Library Film Properties.
4.13 MARKS AND REGISTRATIONS.
(a) The Marks include all brand names, service marks,
trademarks, tradenames, logos and other words or symbols used to
identify the source of goods or services that are or have been used in
connection with the Library. Each Mark owned by TW and included in the
Acquired Assets or licensed to TW and used in connection with the
exploitation of the Acquired Assets is listed in Schedule 4.13(a)
attached hereto. TW (x) has the sole and exclusive right to use the
Marks listed in Schedule 4.13(a) for the goods and services and in the
jurisdictions indicated, and (y) has applied for or registered the
Marks owned by TW in the jurisdictions and classes shown and such
registrations with respect to such classes and such applications are
valid and pending.
(i) Except for Permitted Encumbrances, there are no
Encumbrances or Actions, whether pending or, to the best
knowledge of Sellers, threatened, involving or against any of
the Marks.
(ii) Except as set forth in Schedule 4.13 (a),
neither the Marks nor any element thereof as they currently
exist, nor the current exploitation thereof (except to the
extent elements unrelated to the Library are used in such
exploitation) by Sellers, libels, defames, violates the rights
of privacy or publicity, or violates any trademark or service
mark, common law or other similar right of any Person or
violates any other applicable Law. Sellers have not received
any claim thereof.
(iii) Except as set forth on Schedule 4.13(a), there
are no third party claims pending against the Marks and, to
the best knowledge of Sellers, there are no brand names,
service marks, trademarks, tradenames, logos or other words or
symbols used to identify the source of goods or services that
conflict with or infringe on the Marks or potential
infringements against the Marks.
(b) The Library Pictures and Works in Progress, and the
elements thereof, the Library Literary Properties and the Library Music
Rights are protected under valid and existing United States copyrights
and none of the Library Pictures, Works in Progress,
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Library Literary Properties or Library Music Rights is in the public
domain in the United States or any country party to the Universal
Copyright Convention or the Berne Convention. Schedule 4.13(b) sets
forth a list of all items included in the Library that have been
registered for copyright or to which a registration has been applied
for in the name of TW and all of which are validly subsisting in the
United States and all other countries in which they are registered and,
to the best knowledge of Sellers, no third parties have a conflicting
copyright with respect thereto outside the United States. All such
registrations and applications, including the schedule expiration dates
thereof and details concerning any pending renewals or extensions, are
listed in Schedule 4.13(b).
4.14 LICENSES
(a) Schedule 4.7 sets forth a complete list of all Contracts
concerning the licensing, distribution, exhibition or any other
exploitation by TW or any assignee of TW of any of the Library Pictures
or Works in Progress (a "License"), currently in effect (except for
sublicenses entered into pursuant to, in accordance with or under any
of the Licenses), including without limitation: (i) all Licensees
authorizing exhibition of the Library Pictures or Works in Progress by
all means now known or hereafter devised; (ii) all Licenses authorizing
exploitation of the Library Rights, Marks or Copyrights in
merchandising, commercial tie-ins, co-promotions, theme parks or
endorsement; (iii) all Licenses authorizing exploitation of the Library
Rights, Marks or Copyrights in merchandising for remakes, prequels and
sequels or other derivative works not otherwise referred to in (ii)
above; and (iv) all options relating to (i)-(iii) above.
(b) Sellers have (i) delivered or (ii) made available, or upon
request by Buyer, will promptly deliver or make available to Buyer a
true and correct copy of each License, in each case as in effect and
together with all amendments or modifications thereof. Each License is
in full force and effect and is valid, binding and enforceable in
accordance with its terms by Sellers and, to the best knowledge of
Sellers, by any other party thereto. Neither Sellers nor to the best
knowledge of Sellers, any other party thereto is in material breach or
default thereunder, and no event has occurred on the part of any party
to any License which with notice or lapse of time or both would
constitute a material breach or default thereunder or permit
termination or acceleration thereunder. Neither Sellers, nor, to the
best knowledge of Sellers, has any other party to a License, threatened
to, or taken, any action that would cause or result in a material
default, a material breach or an anticipatory material breach by such
party thereunder nor has any such party alleged any such default or
breach.
(c) All Licenses that have been entered into by TW were
entered into on an arms length basis.
4.15 INSURANCE.
Schedule 4.15 lists all insurance policies and bonds that are
currently in effect and apply to the Acquired Assets. All insurance policies and
bonds are in full force and effect and
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insure Sellers against all risks normally insured against by companies engaged
in similar businesses. Sellers are not in default under any such policy or bond
and have received no notice of cancellation of any such policy or bond.
4.16 COMPLIANCE WITH LAW.
Sellers have conducted the Business in accordance with all
applicable Laws in all material respects.
4.17 CERTAIN INTERESTS.
Except as set forth on Schedule 4.17, no Affiliate of TW nor
any officer, director, member or manager thereof, nor Associate of any such
individual, has any material interest in any of the Acquired Assets or the
Assumed Liabilities.
4.18 NO BROKERS OR FINDERS.
No agent, broker, finder, or investment or commercial banker,
or other Person or firm in connection with the negotiation, execution or
performance of this Agreement or the consummation of the Transactions, is or
will be entitled to any broker's or finder's or similar fees or other commission
as a result of this Agreement or the Transactions.
4.19 TAX AND OTHER RETURNS OR REPORTS.
All federal, state, local and foreign tax returns, reports,
statements and other similar filings required to be filed by Sellers (the "Tax
Returns") with respect to any Tax have been filed with the appropriate
governmental agencies in all jurisdictions in which such Tax Returns are
required to be filed, and all such Tax Returns properly reflect the liabilities
of Sellers for Taxes for the periods, property or events covered thereby. All
Taxes, including those without limitation which are called for by the Tax
Returns, or heretofore or hereafter claimed to be due by any taxing authority
from Sellers, have been properly accrued or paid. Sellers have not received any
notice of assessment or proposed assessment in connection with any Tax Returns,
and there are not pending tax examinations of or tax claims asserted against
Sellers or any of their assets or properties. Sellers have not extended, or
waived the application of, any statute of limitations of any Taxes. There are no
tax liens (other than any lien for current Taxes not yet due and payable) on any
of the assets or properties of Sellers. Sellers have no knowledge of any basis
for any additional assessment of any Taxes. Sellers have made all deposits
required by law to be made with respect to employees' withholding and other
employment taxes, including without limitation the portion of such deposits
relating to Taxes imposed upon Sellers. Pack shall prepare and file at his sole
expense all final tax returns of TW.
4.20 EMPLOYMENT CONTRACTS; EMPLOYEE BENEFIT PLANS
(a) Except as set forth on Schedule 4.20(a), Sellers are not a
party to any written or oral agreement, contract or commitment with any present
or former employee or consultant for
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the employment of any person, including any consultant who is engaged in the
conduct of the Business.
(b) Except as set forth on Schedule 4.20(b), there are no
Employee Benefit Plans sponsored or maintained by the Sellers.
4.21 ACCURACY OF INFORMATION.
All information furnished by or on behalf of Sellers to Buyer,
its agents or representatives in connection with Sellers, the Acquired Assets,
the Assumed Liabilities, this Agreement and the Transactions is true and
complete in all material respects and does not contain any untrue statement of a
material fact or omit to state a material fact necessary to make any statement
therein not misleading. None of the information supplied or to be supplied in
writing by or on behalf of Sellers to any Person for inclusion, or included, in
any document or application filed with any Governmental Entity having
jurisdiction over or in connection with the Transactions or this Agreement, did
contain, or at the respective times such information is delivered or becomes
effective, will contain any untrue statement of a material fact, or omitted or
will omit to state any material fact required to be stated therein or necessary
in order to make the statements therein, in light of the circumstances under
which they were made, not misleading. If any of such information at any time
subsequent to its delivery and prior to Closing becomes untrue or misleading in
any material respect, Sellers will promptly notify Buyer in writing of such fact
and of the reasons for such change. All documents required to be filed by
Sellers with any Governmental Entity in connection with this Agreement or the
Transactions will comply in all material respects with the provisions of
applicable Law.
Any certificate delivered to Buyer by Sellers shall constitute
a representation and warranty by Sellers that the statements therein are
accurate in all material respects as of the date of such delivery.
ARTICLE 5
REPRESENTATIONS AND WARRANTIES OF BUYER
Buyer represents, warrants and agrees as follows:
5.1 ORGANIZATION AND RELATED MATTERS.
Buyer is a corporation duly incorporated, validly existing and
in good standing under the laws of Delaware. Buyer has the corporate power and
authority to execute, deliver and perform this Agreement.
5.2 AUTHORIZATION.
As of the Closing, the execution, delivery and performance of
this Agreement by Buyer shall have been duly and validly authorized by the Board
of Directors of Buyer and by all
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other necessary corporate action on the part of Buyer. This Agreement
constitutes the legal, valid and binding obligation of Buyer, enforceable
against Buyer in accordance with its terms except as such enforceability may be
limited by bankruptcy, insolvency, reorganization, moratorium and other similar
laws and equitable principles relating to or limiting creditors' rights
generally.
5.3 NO CONFLICTS.
The execution, delivery and performance of this Agreement by
Buyer will not violate the provisions of, or constitute a breach or default
whether upon lapse of time and/or the occurrence of any act or event or
otherwise under (a) the charter documents or bylaws of Buyer, (b) any Law to
which Buyer is subject or (c) any Contract to which Buyer is a party that is
material to the financial condition, results of operations or conduct of the
business of Buyer, provided that the appropriate regulatory approvals are
received as contemplated by Section 7.1.
5.4 NO BROKERS OR FINDERS.
No agent, broker, finder or investment or commercial banker,
or other Person or firms engaged by or acting on behalf of Buyer in connection
with the negotiation, execution or performance of this Agreement or the
Transactions, is or will be entitled to any broker's or finder's or similar fees
or other commissions as a result of this Agreement or the Transactions.
ARTICLE 6
ADDITIONAL AGREEMENTS
6.1 ACCESS.
Sellers will authorize and permit Buyer and its
representatives (which shall include its independent accountants and counsel) to
have reasonable access during normal business hours, upon reasonable notice, to
all of TW's properties, books, records, operating instructions and procedures,
and all other information, to the extent they relate to the Acquired Assets as
Buyer may from time to time request, and to make copies of such books, records
and other documents and to discuss its Business with such other Persons,
including, without limitation, Sellers' directors, officers, employees,
accountants, counsel, suppliers, customers, and creditors, as Buyer considers
necessary or appropriate for the purposes of familiarizing itself with the
Acquired Assets or the Assumed Liabilities, obtaining any necessary Approvals of
or Permits for the Transactions and conducting an evaluation of the organization
and business of Sellers as it relates to the Acquired Assets and Assumed
Liabilities.
6.2 CONDUCT OF BUSINESS; FINANCIAL STATEMENTS.
(a) From the date hereof through the earlier of the Closing
Date and the date on which this Agreement is terminated in accordance
wtih Article 8, Sellers will not, without the prior consent in writing
of Buyer:
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(i) terminate, or renegotiate any Material Contract
or default (or take or omit to take any action that with or
without the giving of notice or passage of time or both, would
constitute a default) in any of its obligations under any
Material Contract or enter into any new Material Contract; or
(ii) incur or agree to incur in connection with its
Business an obligation or liability (absolute or outright)
except pursuant to the Security Agreement; or
(iii) terminate or fail to renew any existing
insurance coverage in connection with the Business or present
any notice or claim under such policies in a timely fashion;
or
(iv) make or cause to be made any loans, advances or
payments to Sellers or their Affiliates or Associates; or
(v) do or permit to be done any other acts or things
that would cause them to be in violation of this Agreement.
(b) Sellers will furnish to Buyer monthly unaudited balance
sheets and statements of operations of TW and such other reports as
Buyer may reasonably request relating to Sellers or the Acquired Assets
or Assumed Liabilities. Each of the financial statements delivered
pursuant to this Section 6.2(b) shall be accompanied by a certificate
of Pack to the effect that such financial statements present fairly in
all material respects the financial condition and results of operations
of TW for the periods covered and reflect all adjustments (which
consist only of normal recurring adjustments not material in amount)
necessary for such a fair presentation.
6.3 PERMITS AND APPROVALS; THIRD PARTY CONSENTS.
(a) Sellers and Buyer each agree to cooperate and use their
best efforts to obtain from governmental bodies and other regulatory
authorities all Approvals and Permits that may be necessary or that may
be reasonably requested by Buyer to consummate the transactions
contemplated by this Agreement. Sellers and Buyer shall furnish each
other such necessary information and reasonable assistance as the other
may request in connection with its preparation of necessary filings or
submissions under the provisions of such laws.
(b) To the extent that the Approval of a third party with
respect to any Material Contract is required in connection with the
transactions contemplated by this Agreement, Sellers shall obtain such
approval prior to the Closing Date and in the event that any such
approval is not obtained prior to the Closing Date notwithstanding
Sellers' best efforts (but without limitation on Buyer's rights under
Section 7.2), Sellers shall cooperate with Buyer to ensure that Buyer
obtains the benefits of each such Material Contract and shall indemnify
and hold harmless Buyer for and against any and all Losses as a result,
directly or indirectly, of the failure to obtain any such Approval,
except with
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respect to Material Contracts relating to "The Night They Saved
Christmas." In addition, Sellers shall obtain from each TW Accounts
Receivable account debtor an acknowledgment confirming the information
about such account set forth on Schedule 4.5 and an agreement to pay
all such amounts to Buyer.
6.4 NO SOLICITATIONS.
During the period from the date of this Agreement until the
Closing Date, Sellers agree that, except as required by law or court order,
neither of them will, and that they will cause the officers, directors, members
and managers of TW not to, initiate or solicit any proposal for, or provide any
non-public information to or hold negotiations or discussions with any other
person or entity regarding, any transaction regarding the sale of the Acquired
Assets or any transaction, including, but not limited to, a sale of the
membership interests or merger of TW, having a similar effect. Sellers will
immediately cease and cause to be terminated any such negotiations or
discussions currently in progress.
6.5 CONFIDENTIALITY; PUBLICITY.
Each of the parties hereto, and their respective counsel,
accountants and other parties assisting in the Transactions, agrees to keep the
terms contained in this Agreement, and all other related agreements and
documents contemplated hereby, and the Transactions and all information provided
by the other party in connection herewith and therewith, confidential and shall
not disclose the same to any other party except to the extent that such
information (i) was known by the recipient when received, (ii) it is or
hereafter becomes lawfully obtainable from other sources, (iii) is necessary or
appropriate to disclose to a Governmental Entity having jurisdiction over the
parties, (iv) as may otherwise be required by Law or (v) to the extent such duty
as to confidentiality is waived in writing by the other party. The parties
hereto shall endeavor to coordinate all publicity on or prior to the Closing
Date relating to this Agreement or the Transactions. No party shall issue any
press release, publicity statement or other public notice relating to this
Agreement or the Transactions without the prior consent of the other parties,
unless such party has been advised by its securities counsel that such press
release, publicity statement or other public notice is advisable under
applicable securities laws. In such case, the issuing party shall give an
advance copy of the release to the other parties if practicable. The parties
shall also consult with one another as to the content of any communication to
any Governmental Entity relating to this Agreement or the Transactions.
6.6 PERFORMANCE BY AFFILIATES.
Pack agrees to cause TW to comply with any obligations
hereunder relating to such entity and to cause such entity to take any other
action which may be necessary or reasonably requested by Buyer in order to
consummate the Transactions.
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6.7 REPRESENTATIONS AND WARRANTIES.
Sellers shall do nothing to cause their representations and
warranties made in this Agreement to become untrue as of the Closing Date.
6.8 PAYMENTS TO PACK.
(a) Subject to the Closing, Buyer shall provide, agree or
otherwise arrange for the following to Pack:
(i) An executive producer's fee for Bounty Hunters
(without screen credit) of $5,000 per episode, up to 26 episodes for the first
broadcast season (96/97), payable every two weeks based upon delivered episodes;
it being anticipated by the parties that approximately 24 to 26 episodes will be
delivered by the end of February, 1997. If Bounty Hunters is renewed for a
second season, the above terms shall apply; however the producer's fee shall be
$7,500 per episode. Buyer shall use its commercially reasonable efforts to
ensure that all episodes of Bounty Hunters are produced on schedule and in a
timely manner.
(ii) $150,000 cash payment at the Closing (subject to
reduction in the event that Buyer, in its sole discretion, prepays any portion
of such fee prior to Closing, which prepayment will be documented and approved
by TW).
(iii) A certificate for 50,000 shares of the common
stock of Buyer bearing a legend regarding restrictions under the Securities Act;
provided, however, that Buyer will agree to register all of such shares for
resale as soon as practicable following the Closing on a Form S-3 Registration
Statement or other comparable form; and provided further, that Pack shall be
limited to the sale of not more than 10,000 of such shares during any one month
period.
(b) Pack acknowledges that an aggregate of $60,000 with
respect to Sections 6.8(a)(i) and (ii) has been prepaid to Pack by Buyer,
allocated first to the fees set forth in Section 6.8(a)(i) for delivered
episodes.
6.9 NAME. On the Closing Date, Sellers shall deliver to Buyer
all such executed documents as may be required to change TW's name on that date
to another name bearing no similarity to Tradewinds Television, including but
not limited to a name change amendment of articles of organization with the
Secretary of State of California and an appropriate name change notice for each
state where TW is qualified to do business. Sellers hereby appoint Buyer as
their attorney-in-fact to file all such documents on or after the Closing Date.
6.10 INSURANCE. Sellers shall be named as additional insureds
on Buyer's errors and omissions policy with respect to the Acquired Assets for a
three year period following the Closing.
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ARTICLE 7
CONDITIONS OF PURCHASE
7.1 GENERAL CONDITIONS.
The obligations of the parties to effect the Closing shall be
subject to the following conditions unless waived in writing by all parties:
(a) No Orders; Legal Proceedings. No Law or Order shall have
been enacted, entered, issued, promulgated or enforced by any
Governmental Entity, nor shall any Action have been instituted and
remain pending or, to the best knowledge of Sellers, have been
threatened and remain so at what would otherwise be the Closing Date,
that prohibits or restricts or would (if successful) prohibit or
restrict the Transactions.
(b) Approvals. To the extent required by applicable Law, all
Permits and Approvals required to be obtained from any Governmental
Entity, shall have been received or obtained on or prior to the Closing
Date without the imposition of any burdens or conditions materially
adverse to the party or parties entitled to the benefit thereof.
(c) Indemnification. The parties shall have agreed as to any
of their indemnification obligations with respect to those certain
current trademark claims relating to "Bounty Hunters" set forth as item
4 in Schedule 4.9.
7.2 CONDITIONS TO OBLIGATIONS OF BUYER.
The obligations of Buyer to effect the Closing shall be
subject to the following conditions except to the extent waived in writing by
Buyer:
(a) Representations and Warranties and Covenants of Sellers.
The representations and warranties of Sellers herein contained shall be
true in all material respects at the Closing Date with the same effect
as though made at such time; Sellers shall have in all material
respects performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with
by them at or prior to the Closing Date; and Sellers shall have
delivered to Buyer a certificate, in form and substance satisfactory to
Buyer, dated the Closing Date and signed by the principal executive
officer of TW and by Pack to such effect.
(b) Transfer Documents. Sellers shall have executed and
delivered the Bill of Sale, and any trademark assignment, copyright
assignment, and other transfer documents reasonably requested by Buyer.
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(c) Information on Conduct of Business. Buyer shall have
received supplements to the Schedules to the Agreement reflecting
changes from the date hereof to the Closing Date and solely to the
extent permitted in accordance with Section 6.2. Such supplements shall
be subject to Buyer's review and approval prior to Closing.
(d) Observance of Provisions; No Disbursement. TW shall have
observed all the provisions of the Note and Security Agreement, and
shall not have, in any way, compromised Buyer's position thereunder. TW
shall not have disbursed any funds without the prior approval of Buyer;
(e) No Liens. There shall have been no liens or other security
interests or pledges recorded against the assets or property rights of
TW, other than the Affinity Encumbrance, and all contractual rights of
TW, including those serving as collateral for the Note shall be valid
and enforceable in all material respects, and no third party claims
that would interfere with TW's rights under such contracts shall have
been made;
(f) Weekly Statement. TW shall have provided to Buyer weekly
in advance a statement of its cash requirements for the following week
period, for approval by Buyer in its sole discretion;
(g) AMG Release. Buyer shall have obtained a release or
releases with regard to the indebtedness owed by TW to AMG, on such
terms and conditions and in exchange for such payment and other
consideration as Buyer shall determine in its sole discretion,
including such approvals or orders from the court having jurisdiction
over AMG.
(h) Employment Agreements. TW and/or Buyer shall have entered
into mutually satisfactory employment agreements with key personnel of
TW, as determined by Buyer in its sole discretion.
(i) Due Diligence. Buyer shall have performed its "due
diligence" review to confirm the data provided and the statements made
to Buyer concerning TW, with results satisfactory to Buyer.
(j) Registration Rights Agreement. Pack shall have executed
and delivered the Registration Rights Agreement.
(k) Investment Letter. Pack shall have executed and delivered
the Investment Letter.
(l) Board Approval. The Board of Directors of Buyer shall have
approved this Agreement.
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7.3 CONDITIONS TO OBLIGATIONS OF SELLERS.
The obligations of Sellers to effect the Closing shall be
subject to the following conditions, except to the extent waived in writing by
the affected party(ies):
(a) Representations and Warranties and Covenants of Buyer. The
representations and warranties of Buyer herein contained shall be true
in all material respects at the Closing Date with the same effect as
though made at such time; Buyer shall have in all material respects
performed all obligations and complied with all covenants and
conditions required by this Agreement to be performed or complied with
by it at or prior to the Closing Date; and Buyer shall have delivered
to Sellers a certificate of Buyer, in form and substance satisfactory
to Sellers, dated the Closing Date and signed by an officer of Buyer.
(b) Purchase Price. The Purchase Price shall have been
delivered as required by Section 2.3.
(c) Note Cancellation. The Note shall have been cancelled in
the event of the Closing.
(d) Registration Rights Agreement. Buyer shall have executed
and delivered the Registration Rights Agreement.
(e) Certificate. A certificate for 50,000 shares of common
stock of Buyer issued in the name of Pack and bearing a restrictive
legend under the Securities Act shall have been delivered to Pack.
(f) Assumption Agreement. Buyer shall have executed and
delivered an instrument of assumption relating to the Assumed
Liabilities in a form to be agreed to by the parties.
ARTICLE 8
TERMINATION OF OBLIGATIONS; SURVIVAL
8.1 TERMINATION OF AGREEMENT.
Anything herein to the contrary notwithstanding, this
Agreement and the Transactions may be terminated at any time before the Closing
as follows and in no other manner:
(a) Mutual Consent. By mutual consent in writing of Buyer and
Sellers.
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(b) Conditions to Buyer's Performance Not Met. By Buyer upon
written notice to Sellers if any event occurs which would render
impossible the satisfaction of one or more conditions to the
obligations of Buyer to consummate the transactions contemplated by
this Agreement as set forth in Section 7.1 or 7.2.
(c) Conditions to Sellers' Performance Not Met. By Sellers
upon written notice to Buyer if any event occurs which would render
impossible the satisfaction of one or more conditions to the obligation
of Sellers to consummate the transactions contemplated by this
Agreement as set forth in Section 7.1 or 7.3.
(d) Material Breach. By Buyer or Sellers if there has been a
material misrepresentation or material breach on the part of the other
party in its representations, warranties or covenants set forth herein;
provided, however, that if such breach or misrepresentation is
susceptible to cure, Sellers or Buyer, as the case may be, shall have 5
days after receipt of notice from the other party of its intention to
terminate this Agreement pursuant to this Section 8.1(d) if such
misrepresentation or breach continues in which to cure such breach or
misrepresentation before the other party may so terminate this
Agreement.
(e) Expiration Date. By Buyer or Sellers if the Closing shall
not have been consummated before the Termination Date.
8.2. EFFECT OF TERMINATION.
In the event that this Agreement shall be terminated pursuant
to Section 8.1, all further obligations of the parties under this Agreement (but
not under the Security Agreement or Note) shall terminate without further
liability of any party to another; provided that the obligations of the parties
contained in Section 6.5 [Confidentiality], Section 8.3 [Expenses] and Section
10.6 [Governing Law] shall survive any such termination; provided further that a
termination under Section 8.1 shall not relieve any party of any liability for a
breach of, or for any misrepresentation under this Agreement, or be deemed to
constitute a waiver of any available remedy (including specific performance if
available) for any such breach or misrepresentation.
8.3 EXPENSES.
(a) If this Agreement or the Transactions are terminated or
abandoned because of:
(i) Any breach by Sellers of this Agreement;
(ii) Failure of Sellers to satisfy any of the
conditions to Closing (other than failure due to Buyer's
breach of its obligations hereunder or any matter beyond
Sellers' control) by the Termination Date;
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Sellers shall promptly (and in any event within five days after such
event) pay Buyer, in immediately available funds, all Buyer's Expenses
(as defined below).
(b) Except as otherwise provided in Section 8.3(a), Sellers,
on the one hand, and Buyer, on the other hand, shall each pay their own
Expenses.
(c) If Sellers fail to pay the amounts due Buyer pursuant to
Section 8.3(a) when due, Sellers shall pay interest thereon from the
date due until the date paid at 8% and shall reimburse Buyer for all
reasonable attorneys' fees and other expenses incurred in collecting
any of such amounts.
ARTICLE 9
INDEMNIFICATION
9.1 INDEMNIFICATION.
(a) (i) Buyer, on the one hand, and Sellers, on the other
hand, agree to indemnify and hold the other party(ies), and its or
their respective directors, officers, agents, representatives,
employees, Affiliates, successors and permitted assigns, harmless, from
and against any and all Losses arising out of or resulting from a
breach of any representation, warranty or covenant made by the
Indemnifying Party or its Affiliates in this Agreement ("RW&C Losses").
(ii) Sellers agree to indemnify and hold Buyer and
its respective directors, officers, agents, representatives,
employees, Affiliates, successors and permitted assigns,
harmless, from and against (A) any and all Losses arising out
of any liabilities or obligations not assumed under Section
2.2(b) other than with respect to that certain lawsuit
entitled "Bountiful Entertainment, Inc. et al. v. Forever Blue
Entertainment Group, Inc., et al. (Case H-96-0196) in District
Court in Houston, Texas (the "Lawsuit"), and (B) any and all
Losses arising from any Order or Action pending or threatened
against the Acquired Assets as of the Closing Date, including
those set forth on Schedule 4.9 other than with respect to the
Lawsuit.
(iii) Either Buyer or Sellers may assign its rights
to indemnification hereunder to one or more Affiliates,
provided that (A) no such assignment shall increase the Losses
for which the Indemnifying Party is responsible beyond those
that would be payable to the Indemnified Party if there were
no such assignment, (B) one law firm shall represent the
Indemnified Party and all Affiliates in connection with any
claims asserted and (C) there shall not be a material increase
in administrative expenses of the Indemnifying Party as a
result of such assignment.
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(b) Notwithstanding anything to the contrary contained in this
Agreement, no amounts of indemnity shall be payable by Sellers with respect to
any RW&C Loss unless the Losses suffered by Buyer and its Affiliates exceed
$25,000; provided that if the aggregate Losses exceed such amount, Buyer and its
Affiliates shall be entitled to recover all of their Losses including such
amount; and provided further that in no event shall Sellers be required to
indemnify Buyer and its Affiliates with respect to such Losses in an aggregate
amount of more than $1,000,000.
9.2 PROCEDURE.
(a) Notice. Losses for or against which any person is entitled
to indemnification pursuant to Sections 2.4, 6.3, 9.1 or 10.5 are
"Indemnifiable Claims". Any person seeking indemnification (an
"Indemnified Party") with respect to an Indemnifiable Claim shall give
notice (the "Indemnity Notice") providing in reasonable detail the
basis for and factual circumstances surrounding the Indemnifiable
Claim, to the person required to provide indemnification (the
"Indemnifying Party") within one year of becoming aware of any such
Indemnifiable Claim. The Indemnifying Party and the Indemnified Party
shall cooperate with one another and the Indemnifying Party shall have
reasonable access to all relevant books and records. Notwithstanding
the foregoing, the rights of any Indemnified Party to be indemnified in
respect of Indemnifiable Claims resulting from the assertion of
liability by third parties shall not be adversely affected by the
Indemnified Party's failure to give notice unless (and then only to the
extent that) the Indemnifying Party is prejudiced thereby. In case any
such liability is asserted against any Indemnified Party, the
Indemnifying Party may, at its option, promptly assume the defense
thereof with counsel reasonably satisfactory to the Indemnified Party.
So long as the Indemnifying Party is diligently prosecuting such
defense, the Indemnifying Party shall not be liable for any other legal
expenses of the Indemnified Party, other than reasonable costs of
investigation. Any Indemnified Party may participate in such defense at
its own expense. Notwithstanding the foregoing, in the case of any
claim or other assertion of liability by any Governmental Entity
relative to Taxes, the Indemnified Party and the Indemnifying Party
shall, at their own expense, jointly assume the defense of such claim.
A party may not compromise or settle a Tax claim affecting the
liability of the other party without the consent of the other party
either at such time or in the future, which consent shall not be
unreasonably withheld.
(b) Defense. If the Indemnifying Party fails reasonably
promptly to assume the defense of an Indemnified Party against such
Indemnifiable Claim, the Indemnified Party shall have the right to
undertake the defense of the Indemnifiable Claim at the expense of the
Indemnifying Party.
(c) Settlement. The Indemnifying Party shall not, without the
written consent of the Indemnified Party, settle or compromise any
Indemnifiable Claim or consent to entry of any judgment in respect
thereof unless such settlement, compromise or consent includes an
unconditional release by the claimant or the plaintiff of the
Indemnified Party from all liability in respect of such Indemnifiable
Claim.
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(d) Set Off. In addition to any rights now or hereafter
granted under applicable law and not by way of limitation of any such
rights, if Sellers fail to make any payment required to be made by them
when due to Buyer under this Section 9, Buyer and each of its
Affiliates is hereby authorized by Pack, any time or from time to time
thereafter, to set off and to appropriate and to apply any and all
amounts owed at any time by Buyer or any of its Affiliates to or for
the credit or the account of Pack, including, without limitation, under
the agreements identified in Section 6.8, against and on account of
such obligations, irrespective of whether or not Buyer or such
Affiliate shall have made any demand hereunder.
ARTICLE 10
GENERAL
10.1 SURVIVAL.
The representations, warranties, covenants and agreements
contained in this Agreement shall survive the Closing Date and shall continue
until the third anniversary of the Closing Date; provided, however, that any
obligations of each of the parties with respect to the payment and accurate
reporting of Taxes shall survive until the expiration of the applicable statute
of limitations. Any representation, warranty, covenant or agreement that would
otherwise terminate in accordance with this Section 10.1 will continue to
survive if an Indemnity Notice meeting the standard therefor set forth in
Section 9.2 shall have been given in good faith based on facts reasonably
expected to establish a valid Indemnifiable Claim under Article 9 on or prior to
such termination date, until such claim for indemnification has been satisfied
or otherwise resolved and provided in Article 9.
10.2. AMENDMENTS; WAIVERS.
This Agreement and any schedule or exhibit attached hereto may
be amended only by agreement in writing of all parties. No waiver of any
provision nor consent to any exception to the terms of this Agreement or any
agreement contemplated hereby shall be effective unless in writing and signed by
the party to be bound and then only to the specific purpose, extent and instance
so provided.
10.3 SCHEDULES; EXHIBITS; INTEGRATION.
Each schedule and exhibit delivered pursuant to the terms of
this Agreement shall be in writing and shall constitute a part of this
Agreement, although schedules need not be attached to each copy of this
Agreement. This Agreement, together with such schedules and exhibits,
constitutes the entire agreement among the parties pertaining to the subject
matter hereof and supersedes all prior agreements and understandings of the
parties in connection therewith except that the Note and Security Agreement
shall continue in full force and effect.
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10.4 BEST EFFORTS; FURTHER ASSURANCES.
(a) Commitment to Best Efforts. Each party will use its best
efforts to cause all conditions to its obligations hereunder to be
timely satisfied and to perform and fulfill all obligations on its part
to be performed and fulfilled under this Agreement, to the end that the
transactions contemplated by this Agreement shall be effected
substantially in accordance with its terms as soon as reasonably
practicable. The parties shall cooperate with each other in such
actions and in securing requisite Approvals. Each party shall execute
and deliver both before and after the Closing Date such further
certificates, agreements and other documents and take such other
actions as the other party may reasonably request to consummate or
implement the Transactions or to evidence such events or matters. After
the Closing Date, Sellers agree to provide Buyer any information
reasonably requested with respect to the calculation and payment of any
of the Assumed Liabilities and otherwise as required in connection with
Buyer's administration and exploitation of the Acquired Assets.
(b) Limitation. As used in this Agreement, the term "best
efforts" shall not mean efforts which require the performing party to
do any act that is unreasonable under the circumstances or to expend
any funds other than in payment of reasonable out-of-pocket expenses
incurred in satisfying obligations hereunder, including but not limited
to the fees, expenses and disbursements of its accountants, actuaries,
counsel and other professional advisers.
10.5 BULK SALE LAW.
In connection with the Transactions, Buyer waives compliance
with the provisions of the California and any other applicable state's Uniform
Commercial Code relating to bulk transfers, subject to the representations,
warranties and indemnities of Sellers contained in this Agreement. Nothing in
this paragraph shall estop or prevent Buyer from asserting the inapplicability
of the bulk sales provisions in any action or proceeding brought by a third
party. Sellers hereby indemnify Buyer against any liability or expense arising
from the failure to comply with such provisions.
10.6 GOVERNING LAW.
This Agreement and the legal relations between the parties
shall be governed by and construed in accordance with the laws of the State of
California applicable to contracts made and performed in such state and without
regard to conflicts of law doctrines except to the extent that certain matters
are preempted by federal law or are governed by the law of the jurisdiction of
organization or incorporation of the respective parties.
10.7 NO ASSIGNMENT.
Neither this Agreement (nor related agreements pursuant to
this Agreement) nor any rights or obligations under any of them are assignable
except that Buyer may assign its rights
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(including but not limited to its rights under Article 9) to any Affiliate of
Buyer or to any entity which, by way of merger, consolidation or sale of
substantially all the assets of Buyer becomes a successor to Buyer, so long as
such successor assumes in writing Buyer's obligation under this Agreement, and,
after the Closing Date, to any party.
10.8 Headings.
The descriptive headings of the articles, sections and
subsections of this Agreement are for convenience only and do not constitute a
part of this Agreement.
10.9 Counterparts.
This Agreement and any amendment hereto or any other agreement
(or document) delivered pursuant hereto may be executed in one or more
counterparts and by different parties in separate counterparts. All of such
counterparts shall constitute one and the same agreement (or other document) and
shall become effective (unless otherwise therein provided) when one or more
counterparts have been signed by each party and delivered to the other party.
10.10 Parties in Interest.
This Agreement shall be binding upon and inure to the benefit
of each party, and nothing in this Agreement, express or implied, is intended to
confer upon any other person any rights or remedies of any nature whatsoever
under or by reason of this Agreement. Nothing in this Agreement is intended to
relieve or discharge the obligation of any third person to or to confer any
right of subrogation or action over against, any party to this Agreement.
10.11 Notices.
All notices and other communications required or permitted
hereunder shall be in writing and shall be delivered (a) in person, (b) by
registered or certified mail (air mail if addressed to an address outside of the
country in which mailed), postage prepaid, return receipt requested, or (c) by
facsimile or other generally accepted means of electronic transmission (provided
that a copy of any notice delivered pursuant to this clause (c) shall also be
sent pursuant to clause (b)), addressed as follows:
If to Buyer, to:
Mr. William Bosso
Affinity Entertainment, Inc.
15436 North Florida Avenue, Suite 103
Tampa, Florida 33613
Fax No.: 813/264-6626
30
<PAGE>
With copies to:
Mel Ziontz, Esq.
Rosenfeld, Meyer & Susman, LLP
9601 Wilshire Boulevard, Suite 444
Beverly Hills, California 90210
Fax No.: 310/271-6430
If to Sellers, to:
Royeric Pack
Tradewinds Television, LLC
5855 Topanga Canyon Boulevard
Woodland Hills, California 91367
Fax No: 818/592-2913
If to Pack, to:
Royeric Pack
23254 Friar Street
Woodland Hills, California 91367
Fax No.: 818/888-7626
With a copy to:
Gary W. Marsh, Esq.
Long, Aldridge & Norman
One Peachtree Center, Suite 5300
303 Peachtree Street
Atlanta, Georgia 30308
Fax No: 404/527-4198
or to such other address as such party may have furnished to the other in
writing in accordance herewith. Notices delivered in person by cable, telegram
or facsimile transmission shall be deemed given when so delivered, and notices
given by mail shall be deemed given three days after mailing; provided that
notices of a change of address shall only be effective upon receipt.
10.12 Remedies; Waiver.
To the extent permitted by Law all rights and remedies
existing under this Agreement and any related agreements or documents are
cumulative to, and not exclusive of, any rights or remedies otherwise available
under applicable Law. No failure on the part of any party to exercise or delay
in exercising any right hereunder shall be deemed a waiver thereof, nor shall
any single or partial exercise preclude any further or other exercise of such or
any other right.
31
<PAGE>
10.13 Attorneys' Fees.
In the event of any Action, controversy, claim or dispute
between the parties hereto arising out of or relating to this Agreement or any
of the documents provided for herein, or the breach thereof, the prevailing
party shall be entitled to recover from the losing party reasonable attorneys'
fees, expenses and costs. For the purposes of this Section 10.13, the
"prevailing party" shall mean the party whose final settlement offer (or other
monetary position or claim) prior to the commencement of such court or
arbitration proceeding is closest to the judgment awarded by the court or
arbitrator, regardless of whether such judgment is entered into in favor of or
against such party.
10.14 Knowledge Convention.
Whenever any statement herein or in any schedule, exhibit,
certificate or other documents delivered to any party pursuant to this Agreement
is made "to the knowledge" or "to the best knowledge" or words of similar intent
or effect of any party or its representative, such person shall make such
statement only after conducting a diligent investigation of the subject matter
thereof, and each statement shall be deemed to include a representation that
such investigation has been conducted.
10.15 Representation By Counsel; Interpretation.
Sellers and Buyer each acknowledge that each party to this
Agreement has been represented by counsel in connection with this Agreement and
the Transactions. Accordingly, any rule of Law, including but not limited to
Section 1654 of the California Civil Code, or any legal decision that would
require interpretation of any claimed ambiguities in this Agreement against the
party that drafted it has no application and is expressly waived. The provisions
of this Agreement shall be interpreted in a reasonable manner to effect the
intent of Buyer and Sellers.
10.16 Specific Performance.
Sellers acknowledge that, in view of the uniqueness of the
Transactions, Buyer would not have an adequate remedy at law for money damages
in the event that this Agreement has not been performed by Sellers in accordance
with its terms or the Transactions not consummated as contemplated hereunder.
Sellers therefore agree that Buyer shall be entitled to specific enforcement of
the terms hereof in addition to any other remedy to which it may be entitled at
law or in equity.
10.17 Severability.
If any provision of this Agreement is determined to be
invalid, illegal or unenforceable by any Governmental Entity, these remaining
provisions of this Agreement shall remain in full force and effect provided that
the economic and legal substance of the Transactions is not affected in any
manner materially adverse to any party. In the event of any such determination,
the parties agree to negotiate in good faith to modify this Agreement to fulfill
as
32
<PAGE>
closely as possible the original intents and purposes hereof. To the extent
permitted by Law, the parties hereby to the same extent waive any provision of
Law that renders any provision hereof prohibited or unenforceable in any
respect.
IN WITNESS WHEREOF, each of the parties hereto has caused this
Agreement to be executed as of the day and year first above written.
AFFINITY ENTERTAINMENT, INC.
By:_______________________________
Its:______________________________
TRADEWINDS TELEVISION, LLC
By:_______________________________
Its:______________________________
----------------------------------
ROYERIC PACK
33
<PAGE>
SCHEDULE 2.1
ACQUIRED ASSETS
1. Library
2. Works in Progress
3. TW Accounts Receivable as of the Closing Date
4. The name and mark "Tradewinds Television"
5. Cash
6. Fixed Assets
7. All other physical and intangible property as determined by Buyer.
<PAGE>
SCHEDULE 2.1.1
LIBRARY
1. Film Library
2. Television Library
3. Other?
<PAGE>
SCHEDULE 2.1.1(a)
FILM LIBRARY
<PAGE>
SCHEDULE 2.1.1(b)
TELEVISION LIBRARY
<PAGE>
SCHEDULE 2.1.2
WORKS IN PROGRESS
1. Bounty Hunters
<PAGE>
SCHEDULE 2.2(b)
ASSUMED LIABILITIES
1. Payables as of 8/31/96. The assumed liabilities also include payables
as of 10/3/96 per the attached schedule incurred in the ordinary course
of business and all additional approved payables incurred through the
closing date.
2. Bounty Hunters Productions Budget
3. Mark Rafalowski
4. All contracts as listed on Schedule 4.7 denoted by asterisk (*)
5. Producers - AMG: World of Nature (WNET)
Jonathan Goodson (Lottery shows)
MST-3000
Hands of a Murderer
Tradewinds: Ghostwriter (CTW)
Madison's Adventures (BBC-Worldwide)
6. Jon Ferro exit agreement
<PAGE>
SCHEDULE 4.1
OWNERSHIP OF TW
<PAGE>
SCHEDULE 4.3
REQUIRED PERMITS AND APPROVALS
<PAGE>
SCHEDULE 4.5
ACCOUNTS RECEIVABLE
<PAGE>
SCHEDULE 4.6
CONDUCT OF BUSINESS EXCEPTIONS
<PAGE>
SCHEDULE 4.7
CONTRACTS
<PAGE>
SCHEDULE 4.9
LEGAL PROCEEDINGS
<PAGE>
SCHEDULE 4.10(a)
LIBRARY RIGHTS EXCEPTIONS
<PAGE>
SCHEDULE 4.10(b)
RIGHTS VIOLATIONS
<PAGE>
SCHEDULE 4.11(a)
PARTICIPATIONS
<PAGE>
SCHEDULE 4.11(b)
GUILD ENCUMBRANCE
<PAGE>
SCHEDULE 4.13(a)
MARKS
<PAGE>
SCHEDULE 4.13(b)
COPYRIGHTS
1. Bounty Hunters - United States
Registration #: PAu1-989-006
Date: July 24, 1995
Forever Blue Entertainment
Trademark Application Serial #: 74/646,257
Date: March 13, 1995
<PAGE>
SCHEDULE 4.15
INSURANCE
<PAGE>
SCHEDULE 4.20(a)
EMPLOYMENT CONTRACTS
<PAGE>
SCHEDULE 4.20(b)
EMPLOYEE BENEFIT PLANS
AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT
AMENDMENT NO. 1 TO THE ASSET PURCHASE AGREEMENT ("Amendment No. 1")
dated as of November 19, 1996 by and among Affinity Entertainment, Inc., a
Delaware corporation ("Buyer"), Tradewinds Television, LLC, a California limited
liability company ("TW"), and Royeric Pack, an individual ("Pack" and together
with TW, the "Sellers").
WHEREAS, Buyer and Sellers are parties to an Asset Purchase Agreement
dated as of October 3, 1996 (the "Agreement"), pursuant to which Sellers would
sell to Buyer certain assets and contract rights representing the film and
television interests directly or indirectly owned and controlled by Sellers; and
WHEREAS, Buyer and Sellers desire to amend certain provisions of the
Agreement as set forth herein.
NOW, THEREFORE, the parties hereto hereby agree as follows:
1. Section 1.1 of the Agreement is amended by deleting the following
definitions: "Investment Letter," "Registration Rights Agreement," and
"Securities Act."
2. Section 6.1 of the Agreement is amended by adding the following
sentence at the end thereof:
"Sellers shall make immediately available for inspection by Buyer
and its representatives the foregoing books, records and other
documents."
3. Section 6.2(a) of the Agreement is amended by (i) adding a new
subparagraph (v) thereof to read as follows, and (ii) relettering existing
subparagraph (v) thereof as subparagraph (vi) thereof:
"(v) pay or cause to be paid any bills or other obligations or
indebtedness of TW. In this regard, subject to immediately
providing substantiating documentation to Buyer, Sellers, as soon
as reasonably practicable, shall be permitted to pay off up to
$20,000 in American Express Card bills and up to $14,000 in legal
fees to Long, Aldridge and Norman; or"
4. Section 6.2 of the Agreement is amended by adding a new subparagraph
(c) to read as follows:
"(c) From the date of this Amendment No. 1 through the earlier of
the Closing Date and the date on which this
<PAGE>
Agreement is terminated in accordance with Article 8, Sellers
agree to cooperate fully with any designee of Buyer (initially,
Peter Newgard) as to all business decisions relating to TW, and
Pack, if requested by Buyer, shall meet with such designee daily
with respect thereto. Such designee shall have complete authority
to act on behalf of TW and to speak and otherwise deal directly
with anyone doing business with TW, and Sellers agree to
facilitate same, including, if requested by Buyer, by promptly
advising any such third parties in writing of the authority of
such designee."
5. Section 6.8 of the Agreement is amended in its entirety to read as
follows:
"Subject to the Closing, Buyer shall make a $200,000 cash payment
to Pack at the Closing (subject to reduction and offset on a
dollar for dollar basis in the event that (i) Buyer, in its sole
discretion, prepays any portion of such fee prior to Closing,
which prepayment will be documented and approved by TW, or (ii)
Sellers violate 6.2(a)(v) of the Agreement, or (iii) any expenses
paid out of TW bank accounts from September 1, 1996 until the
date of this Amendment No. 1 were other than legitimate expenses
of TW)."
6. Section 7.1 of the Agreement is amended by adding a new subparagraph
(d) to read as follows:
"(d) Releases. The parties shall have provided each other with
mutual releases of any claims, except as arising out of this
Agreement, and Sellers shall cause AMG to provide Buyer with a
release of any claims AMG may have against Buyer."
7. Section 7.2(g) of the Agreement is amended in its entirety to read
as follows:
"(g) AMG Release. Buyer shall have obtained a release or releases
with regard to the indebtedness owed by TW to AMG and any other
claims AMG may have or assert against the assets of TW, on such
terms and conditions and in exchange for such payment and other
consideration (but in no event to exceed $275,000) as Buyer shall
determine in its sole discretion, including such approvals or
orders from the court having jurisdiction over AMG."
2
<PAGE>
8. Section 7.2 of the Agreement is amended by deleting subparagraph (j)
and (k) and relettering subparagraph (l) as subpararaph (j).
9. Section 7.3 of the Agreement is amended by deleting subparagraphs
(d) and (e) and relettering subparagraph (f) as subparagraph (d).
10. Sellers agree not to file a voluntary petition for bankruptcy on
behalf of TW.
11. Subject to compliance by Sellers with the terms of this Amendment
No. 1, and with Sellers immediately furnishing Buyer's counsel with due
diligence material requested by such counsel pursuant to letter dated October 7,
1996, as may be supplemented hereafter, Buyer agrees to postpone until December
5, 1996 the ex parte hearing originally scheduled for November 15, 1996, in the
Los Angeles Superior Court. In addition, TW will, and shall cause AMG to,
cooperate fully with the creditors of AMG, including without limitation, World
Champion Wrestling, Inc., the Creditors Committee of AMG, and Buyer to obtain
bankruptcy court approval of that certain motion entitled "Debtor's Motion for
Authority to Compromise Controversies between Debtor and Tradewinds Television .
. ." currently scheduled for December 4, 1996.
12. The effectiveness of this Amendment No. 1 shall be subject, in
Buyer's sole discretion, to the receipt by Buyer no later than November 21, 1996
of an Acknowledgment in the form of Exhibit A hereto signed by either or both of
the parties indicated thereon.
13. Nothing herein shall be deemed to waive, rescind or amend any
notices heretofore provided by Buyer to Sellers pursuant to this Agreement or
otherwise, including without limitation the Demand Notice dated November 5, 1996
and the further Notice dated November 7, 1996 with respect to that certain
Interim Financing and Security Agreement dated September 13, 1996 and those
certain Secured Promissory Notes dated September 13, 1996 and October 17, 1996
in the aggregate amount of $722,997.18; provided, however, in the event of the
Closing (as defined in the Agreement), all such Notices shall be deemed
withdrawn and of no further force or effect.
14. This Amendment No. 1 shall be governed by the laws of the State of
California, applicable to agreements made and to be performed entirely within
such State.
15. This Amendment No. 1 may be executed in one or more counterparts,
each of which shall be deemed an original, with all of which together shall
constitute one in the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Amendment No. 1 on
the date first written above.
AFFINITY ENTERTAINMENT, INC.
By: _____________________________
Its: ____________________________
TRADEWINDS TELEVISION, LLC
By: _____________________________
Its: ____________________________
-------------------------------
ROYERIC PACK, an individual
4
<PAGE>
Exhibit A
Acknowledgment
The undersigned creditors of Action Media Group, Inc. hereby
acknowledge that they have reviewed the Asset Purchase Agreement dated as of
October 3, 1996 and Amendment No. 1 thereto dated as of November 19, 1996 among
Affinity Entertainment, Inc., a Delaware corporation ("Affinity"), Tradewinds
Television, LLC, a California limited liability company, and Royeric Pack, an
individual, and that they approve the form and substance of the transaction
therein set forth and will take no action to object to the consummation of the
transaction or assert any claims against Affinity in connection therewith or the
assets acquired by Affinity pursuant to such transaction.
WORLD CHAMPIONSHIP WRESTLING, INC.
By: ________________________________
Dated: ________________ Its: ________________________________
The Official Creditors Committee
of ACTION MEDIA GROUP, INC.
HEARST ENTERTAINMENT, INC.
By: ________________________________
Dated: ________________ Its: ________________________________
HALLMARK ENTERTAINMENT, INC.
By: ________________________________
Dated: ________________ Its: ________________________________
BOHBOT ENTERTAINMENT & MEDIA, INC.
By: ________________________________
Dated: ________________ Its: ________________________________
5
<PAGE>
ITC DISTRIBUTION, INC.
By: ________________________________
Dated: ________________ Its: ________________________________
EDUCATIONAL BROADCASTING
CORPORATION dba THIRTEEN WNET
By: ________________________________
Dated: ________________ Its: ________________________________
6
SECURED PROMISSORY NOTE
$600,000 Los Angeles, California
September 13, 1996
FOR VALUE RECEIVED, the undersigned, TRADEWINDS TELEVISION, LLC, a
California limited liability company (the "Borrower") hereby promises to pay to
AFFINITY ENTERTAINMENT, INC., a Delaware corporation (the "Lender"), or order,
on the Maturity Date (as such term is defined herein) the principal sum of Six
Hundred Thousand Dollars ($600,000) or so much thereof as may be borrowed
hereunder, with interest thereon in accordance with the terms set forth herein.
The Maturity Date, unless mutually extended by Borrower and Lender,
shall be the date upon which Lender makes written demand for payment to Borrower
which may be made after the date which is 90 days following receipt of written
notice (60 days following receipt of written notice on or after December 1,
1996) by Borrower from Lender ("Demand Notice") that Lender has determined that
the conditions to the Transaction contemplated by that certain letter agreement
dated September 13,1996 among Borrower, Lender and Rick Pack could not be
satisfied, and the Transaction will not be consummated; provided, however, that
notwithstanding the foregoing, this Note shall become immediately due and
payable without any notice if either of the following conditions are not met at
any time prior to the Maturity Date: (i) all payments due from Borrower to third
parties with respect to the production, distribution, marketing and other
exploitation of the television series "Bounty Hunters" (the "Series") are not
made promptly when due or otherwise Borrower defaults in any monetary or
contractual obligation relating to the Series, or (ii) Borrower shall not have
(a) provided Lender with a two (2) week cash budget of expenditures, acceptable
to Lender, due with respect to the Series by the close of business on the date
of the "Demand Notice" and on each Friday thereafter, and (b) deposited in an
escrow account, approved by Lender, sufficient cash to meet the monetary
obligations set forth in the budget, initially for the next two (2) week period
and thereafter for the next one (1) week period. Advances may be made under this
Note prior to the Maturity Date on the condition that at the time of any such
borrowing, such borrowing has been approved by Lender in its sole discretion
regarding the use of such advances, and no Event of Default exists under the
Security Agreement referred to herein, and provided further that the aggregate
principal amount of all sums borrowed hereunder shall not exceed the sum of Six
Hundred Thousand Dollars ($600,000). Each borrowing hereunder shall be recorded
by the Lender and, prior to any transfer of this Note, shall be endorsed on the
schedule annexed to this Note. The aggregate unpaid amount of principal set
forth on the schedule annexed to this Note shall be presumptive evidence of the
principal amount owing and unpaid on this Note. However, the failure to record
any such amount on such schedule shall not limit or otherwise affect the
obligations of Borrower hereunder to repay the principal amount of all advances
hereunder together with interest accruing thereon. Amounts repaid hereunder may
not be reborrowed.
<PAGE>
The undersigned promises to pay, on the Maturity Date, interest on the
unpaid principal balance hereof from time to time outstanding from the date of
the first disbursement hereunder until paid, at a rate per annum of eight
percent (8%).
This Note is entitled to the benefits and subject to all of the terms
and conditions of the Interim Financing and Security Agreement dated September
13,1996 among Lender, Borrower and Rick Pack, as amended from time to time
("Security Agreement").
The undersigned agrees to pay all expenses of Lender incurred in
collection of this Note, including reasonable attorneys' fees in connection
therewith, irrespective of whether suit is brought hereon.
All principal and interest hereunder shall be payable in lawful money
of the United States of America and shall be paid at such place as the holder
hereof may from time to time designate.
Upon the occurrence of any default in the payment of principal or
interest hereunder or upon any Event of Default under the Security Agreement or
any material breach of any other term or condition set forth in the Security
Agreement, the principal hereof with interest accrued thereon shall become, or
may be declared to be, at the option of the Lender, forthwith due and payable.
Borrower hereby waives diligence, presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note and assents to extensions of time of
payment, or forbearance or other indulgence without notice. The right to plead
any and all statutes of limitation as a defense to any demand hereunder is
hereby waived to the full extent permitted by law.
Borrower shall have no right to prepay all or any portion of this Note
until the receipt by Borrower of the Demand Notice.
This Note shall be governed by and be construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, this Note has been executed and delivered at Los
Angeles, California, on the date set forth above.
TRADEWINDS TELEVISION, LLC
By: Roy Park
---------------------
Its: President/CEO
---------------------
<PAGE>
SCHEDULE OF ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
==============================================================================================
Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
==============================================================================================
<C> <C>
9/16/96 $118,249.76 (BHP)
- ----------------------------------------------------------------------------------------------
9/16/96 47,552.40 (Acct.Pay)
- ----------------------------------------------------------------------------------------------
9/16/96 104,050.75 (Contractors)
- ----------------------------------------------------------------------------------------------
9/16/96 36,161.61 (ADP)
- ----------------------------------------------------------------------------------------------
9/16/96 19,240.00 (Stations)
- ----------------------------------------------------------------------------------------------
9/17-10/3/96 211,478.71
- ----------------------------------------------------------------------------------------------
10/4-10/17/96 48,437.12 (Payables)
- ----------------------------------------------------------------------------------------------
10/4-10/17/96 14,829.65 (PayroLL)
- ----------------------------------------------------------------------------------------------
TOTAL $600,000.00
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TRADEWINDS TELEVISION & BPH PRODUCTIONS
Tradewinds' payables 152,641.05
Tradewinds' contractors 191,293.13
Tradewinds'employees 50,816.00
BHP Productions 141,983.05
----------
Grand total 536,733.23
==========
<PAGE>
Tradwinds' Payables
Adam Weston Graphics 431.65
Airtouch Cellular 368.36
All Post 9,987.59
Ameritech 88.74
Arrowhead Mt Spring Water 212.30
AT&T 68.31
Camerry Consultants 3,000.00
Century Parking 148.50
Coast Communications 135.00
Compuserve 50.04
Designatory 11,250.00
Entertainment Comm Network 1,136.71
Federal Express 1,077.00
Furst Group 933.39
General Parking 480.00
Guardian Insurance 9,661.00
Lon Materna 729.29
NAPTE 11,000.00
Neopost Leasing 448.18
Nowell Color Lab 946.32
Nielsen 42,650.00
Omni-Ch 12,272.34
Omni-Ny 9,243.47
Pacific Bell 2,315.01
Pacific Communications 1,008.61
Pryor & Associates 3,500.00
Shari Jennings 21.60
Sharp Electronics 470.31
Silver Star Information Systems 270.00
Topanga Warner 10,320.00
Video Central 10,467.25
WCIU-TV 6,500.00
Western Office Interiors 911.10
Woodland Printing 351.71
Xerox 187.27
----------
152,641.05
==========
<PAGE>
Tradewinds' contractors
Chris Rovtar 43,250.00
expenses 1,167.94
Bette Alofsin 14,000.00
expenses 408.43
Diana Foster 7,000.00
expenses 554.33
Jon Ferro 13,333.32
expenses 249.35
bonus 7,500.00
Jan Mansfield 6,000.00
expenses 829.76
Stan Singer 10,000.00
Mark Rafalowski 12,000.00
Rick Pack 75,000.00
----------
191,293.13
==========
<PAGE>
Tradewind Employees
Karen Osterheldt 4,506.00
Chris Dahl 4,374.99
Shari Jennings 3,500.00
vacation 184.13
Milie Sheets 590.00
Yolanda Wright 3,912.48
Len Materna 18,124.98
William Gallie-BHP 3,400.00
Jane Roundy 2,200.00
Gerallie Legaspi 2,250.00
---------
43,042.58
Payroll taxes 7,773.42
---------
Total to ADP 50,816.00
=========
<PAGE>
BHP Productions
AGK Studios 1,315.00
Band Pr 216.50
Broatch Berry 100.00
Courtesy Printing 244.65
Crystal Patent 169.50
Don Morea 1,264.50
Flower Power 4,200.00
Forever Blue 51,153.31
Fresno Shoot 3,975.25
Gabriel Miller 150.00
Gary Cates 600.00
Harris Tulchin 1,500.00
Jerry Petemon 10,575.00
John Young 600.00
Kuhn & Miller 2,010.00
Lewinter Rosman 1,960.45
Logo Edition 4,800.00
Mark Jeanette 5,548.00
Michael Hawks 800.00
Nicholas Blair 1,167.00
Nick Richards Ent. 3,500.00
NK & Associates 567.00
Outlaw Hunter 3,922.00
Peter Jordan 150.00
Robert Clark 300.00
Scott Bernstein 300.00
Sharpshooters 32,902.84
Sherwood Animatiori 125.00
Steve Sanzeri 1,965.23
Tom Drew 250.00
Video Central 3,409.72
Visionary Music 202.10
William Gallie 2,040.00
------------
141,983.05
============
<PAGE>
SCHEDULE OF ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
=================================================================================================================
Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
=================================================================================================================
<S> <C>
9/16/96 $118,249.76 (BHP)
- -----------------------------------------------------------------------------------------------------------------
9/16/96 47,552.40 (Acct.Pay)
- -----------------------------------------------------------------------------------------------------------------
9/16/96 104,050.75 (Contractors)
- -----------------------------------------------------------------------------------------------------------------
9/16/96 36,161.61 (ADP)
- -----------------------------------------------------------------------------------------------------------------
9/16/96 19,240.00 (Stations)
- -----------------------------------------------------------------------------------------------------------------
9/17-10/3/96 211,478.71
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------
</TABLE>
ACKNOWLEDGMENT
The undersigned, for himself, individually, and on behalf of
Tradewinds Television, LLC ("TW"), acknowledges that, since the September 13,
1996 execution of the Interim Financing and Security Agreement (the
"Agreement"), together with the Secured Promissory Note (the "Note"), the
interim financial requirements of TW will exceed the originally anticipated
$400,000 maximum. Accordingly, the undersigned has requested that the maximum be
raised to $600,000. This acknowledgment will serve to amend the Agreement to
increase the maximum to $600,000, and to substitute for the existing Note a new
secured promissory note in the form attached as Exhibit A hereto (the "New
Note"). Reference in the Agreement to the "Note" shall be deemed to refer to the
New Note. In all other respects, the Agreement is unchanged and remains in full
force and effect.
Executed this 17th day of September, 1996.
TRADEWINDS TELEVISION, LLC
By: ___________________________
Rick Pack, President
------------------------------
RICK PACK, an individual
SECURED PROMISSORY NOTE
$122,997.18 Los Angeles, California
October 17,1996
FOR VALUE RECEIVED, the undersigned, TRADEWINDS TELEVISION, LLC, a
California limited liability company (the "Borrower") hereby promises to pay to
AFFINITY ENTERTAINMENT, INC., a Delaware corporation (the "Lender"), or order,
on the Maturity Date (as such term is defined herein) the principal sum of One
Hundred Twenty-Two Thousand Nine Hundred Ninety-Seven Dollars and Eighteen Cents
($122,997.18) or so much thereof as may be borrowed hereunder, with interest
thereon in accordance with the terms set forth herein.
The Maturity Date, unless mutually extended by Borrower and Lender,
shall be the date upon which Lender makes written demand for payment to Borrower
which may be made after the date which is 90 days following receipt of written
notice (60 days following receipt of written notice on or after December 1,
1996) by Borrower from Lender ("Demand Notice") that Lender has determined that
the conditions to the Transaction contemplated by that certain letter agreement
dated September 13,1996 among Borrower, Lender and Rick Pack could not be
satisfied, and the Transaction will not be consummuated; provided, however, that
notwithstanding the foregoing, this Note shall become immediately due and
payable without any notice if either of the following conditions are not met at
any time prior to the Maturity Date: (i) all payments due from Borrower to third
parties with respect to the production, distribution, marketing and other
exploitation of the television series "Bounty Hunters" (the "Series") are not
made promptly when due or otherwise Borrower defaults in any monetary or
contractual obligation relating to the Series, or (ii) Borrower shall not have
(a) provided Lender with a two (2) week cash budget of expenditures, acceptable
to Lender, due with respect to the Series by the close of business on the date
of the "Demand Notice" and on each Friday thereafter, and (b) deposited in an
escrow account, approved by Lender, sufficient cash to meet the monetary
obligations set forth in the budget, initially for the next two (2) week period
and thereafter for the next one (1) week period. Advances may be made under this
Note prior to the Maturity Date on the condition that at the time of any such
borrowing, such borrowing has been approved by Lender in its sole discretion
regarding the use of such advances, and no Event of Default exists under the
Security Agreement referred to herein, and provided further that the aggregate
principal amount of all sums borrowed hereunder shall not exceed the sum of One
Hundred Twenty-Two Thousand Nine Hundred Ninety-Seven Dollars and Eighteen Cents
($l22,997.18). Each borrowing hereunder shall be recorded by the Lender and,
prior to any transfer of this Note, shall be endorsed on the schedule annexed to
this Note. The aggregate unpaid amount of principal set forth on the schedule
annexed to this Note shall be presumptive evidence of the principal amount owing
and unpaid on this Note. However, the failure to record any such amount on such
schedule shall not limit or otherwise affect the obligations of Borrower
hereunder to repay the principal amount of all advances hereunder together with
interest accruing thereon. Amounts repaid hereunder may not be reborrowed.
<PAGE>
The undersigned promises to pay, on the Maturity Date, interest on the
unpaid principal balance hereof from time to time outstanding from the date of
the first disbursement hereunder until paid, at a rate per annum of eight
percent (8%).
This Note is entitled to the benefits and subject to all of the terms
and conditions of the Interim Financing and Security Agreement dated September
13,1996 among Lender, Borrower and Rick Pack, as amended from time to time
("Security Agreement").
The undersigned agrees to pay all expenses of Lender incurred in
collection of this Note, including reasonable attorneys' fees in connection
therewith, irrespective of whether suit is brought hereon.
AU principal and interest hereunder shall be payable in lawful money of
the United States of America and shall be paid at such place as the holder
hereof may from time to time designate.
Upon the occurrence of any default in the payment of principal or
interest hereunder or upon any Event of Default under the Security Agreement or
any material breach of any other term or condition set forth in the Security
Agreement, the principal hereof with interest accrued thereon shall become, or
may be declared to be, at the option of the Lender, forthwith due and payable.
Borrower hereby waives diligence, presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note and assents to extensions of time of
payment, or forbearance or other indulgence without notice. The right to plead
any and all statutes of limitation as a defense to any demand hereunder is
hereby waived to the full extent permitted by law.
Borrower shall have no right to prepay all or any portion of this Note
until the receipt by Borrower of the Demand Notice.
This Note shall be governed by and be construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, this Note has been executed and delivered at Los
Angeles, California, on the date set forth above.
TRADEWINDS TELEVISION, LLC
By: /s/ Royeric Pack
------------------------
Its: President/CEO
------------------------
<PAGE>
SCHEDULE OF ADVANCES OF PRINCIPAL
<TABLE>
<CAPTION>
====================================================================================================================================
Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
====================================================================================================================================
<C> <C>
10/17/96 $ 4,112.04 TW Payables
- -----------------------------------------------------------------------------------------------------------------------------------
10/17/96 34,027.29 TW contractors
- -----------------------------------------------------------------------------------------------------------------------------------
10/17/96 84,857.85 BHP Productions
- -----------------------------------------------------------------------------------------------------------------------------------
TOTAL $122,997.18
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
TRADEWINDS TELEVISION & BPH PRODUCTIONS
Tradewinds' payables 4,112.04
Tradewinds'contractors 34,027.29
BHP Productions 84,857.85
-----------
Grand total 122,997.18
============
<PAGE>
Tradwinds' Payables
Adam Weston Graphics
Airtouch Cellular
All Post
Already There Messenger
Ameritech
Arrowhead Mt Spring Water
AT&T
Camerry Consultants
Catalogue Stationers
Century Parking
Coast Communications
Compuserve
DARB Insurance
Designatory
Diners Club
Entertainment Comm Network
Federal Express
For Media Company
Furst Group
General Parking
Gerallie Legaspi
Guardian Insurance 4,112.04
Ken Larreiras
Len Materna
Monarch Business Forms
Monarch Communications
NAPTE
Neopost Leasing
Newell Color Lab
Nielsen
Omni-Ch
Omni-Ny
Pacific Bell
Pacific Communications
Pryor & Associates
Rick Pack
Shari Jennings
Sharp Electronics
Silver Star Information Systems
Topanga Warner
Video Central
WABU
WCIU-TV
WPXI
WUPA
Western Office Interiors
Woodland Printing
Xerox
-------------
4,112.04
<PAGE>
Tradewinds' Contractors
Chris Rovtar 12,500.00
expenses 1,066.09
Bett Alofsin 3,500.00
expenses
Diana Foster 2,000.00
expenses 211.52
Jon Feffo
expenses
bonus
Jan Mansfield 1,500.00
expenses 449.68
Stan Singer 2,000.00
Mark Rafalowski 6,000.00
Parker Publications(Lamerias) 4,800.00
Rick Pack
--------------
34,027.29
<PAGE>
BHP Productions
AGK Studios
Al Almond 300.00
Band Pro 4,871.25
B Berry
Courtesy Printing
Crystal Patent
Don Morea 3,379.29
Ed Springer 835.00
Flower Power 2,800.00
Forever Blue 29,732.65
Fresno Shoot
Frontine Productions 3,728.84
Gabriel Miller
Gary Cates
Harris Tulchin
Jerry Peterson
John Young
Kuhn & Miller 8,397.58
K-Zaw Productions 275.00
Lewinter Rosman
Logo Edition
Mark Jeanette
Michael Hawks 400.00
Nicholas Blair 210.00
Nick Richards Ent
NK & Associates 2,553.50
Outlaw Hunter 1,661.00
Peter Jordan 600.00
Rick Dunbar 900.00
Rick Gurley 300.00
Robert Clark
SW Garda 600.00
Scott Bernstein 300.00
Sharpshooters 10,403.24
Sherwood Animation 745.00
Steve Sanzeri
Tom Drew
Vansa Insurance 11,700.00
Video Central
Visionary Music 165.50
William Gallie
---------------
84,857.85
================
ACKNOWLEDGMENT
The undersigned, for himself, individually, and on behalf of Tradewinds
Television, LLC ("TW"), acknowledges that, since the September 13, 1996
execution of the Interim Financing and Security Agreement (the "Agreement"),
together with the original Secured Promissory Note in the maximum amount of
$400,000 and substituted Secured Promissory Note in the maximum amount of
$600,000 (the "Old Note"), the interim financial requirements of TW will exceed
the originally anticipated $400,000 maximum and substituted $600,000 maximum.
Accordingly, the undersigned has requested that the maximum be raised to
$722,997.18. This acknowledgment will serve to amend the Agreement to increase
the maximum to $722,997.18 and to provide an additional secured promissory note
in the maximum amount of $122,997.18 in the form attached as Exhibit A hereto
(the "New Note"). Reference in the Agreement to the "Note" shall be deemed to
refer to the Old Note and the New Note. In all other respects, the Agreement is
unchanged and remains in full force and effect.
Executed this 17th day of October, 1996.
TRADEWINDS TELEVISION, LLC
By: ___________________________
Rick Pack, President
------------------------------
RICK PACK, an individual
10863 v2/RMS
10863 v2/RMS
SECURED PROMISSORY NOTE
$100,000.00 Los Angeles, California
November 19, 1996
FOR VALUE RECEIVED, the undersigned, TRADEWINDS TELEVISION, LLC, a
California limited liability company (the "Borrower") hereby promises to pay to
AFFINITY ENTERTAINMENT, INC., a Delaware corporation (the "Lender"), or order,
on the Maturity Date (as such term is defined herein) the principal sum of One
Hundred Thousand Dollars ($100,000.00) or so much thereof as may be borrowed
hereunder, with interest thereon in accordance with the terms set forth herein.
The Maturity Date, unless mutually extended by Borrower and Lender,
shall be the date upon which Lender makes written demand for payment to Borrower
which may be made after the date which is 90 days following receipt of written
notice (60 days following receipt of written notice on or after December 1,
1996) by Borrower from Lender ("Demand Notice") that Lender has determined that
the conditions to the Transaction contemplated by that certain letter agreement
dated September 13, 1996 among Borrower, Lender and Rick Pack could not be
satisfied, and the Transaction will not be consummated; provided, however, that
notwithstanding the foregoing, this Note shall become immediately due and
payable without any notice if either of the following conditions are not met at
any time prior to the Maturity Date: (i) all payments due from Borrower to third
parties with respect to the production, distribution, marketing and other
exploitation of the television series "Bounty Hunters" (the "Series") are not
made promptly when due or otherwise Borrower defaults in any monetary or
contractual obligation relating to the Series, or (ii) Borrower shall not have
(a) provided Lender with a two (2) week cash budget of expenditures, acceptable
to Lender, due with respect to the Series by the close of business on the date
of the "Demand Notice" and on each Friday thereafter, and (b) deposited in an
escrow account, approved by Lender, sufficient cash to meet the monetary
obligations set forth in the budget, initially for the next two (2) week period
and thereafter for the next one (1) week period. Advances may be made under this
Note prior to the Maturity Date on the condition that at the time of any such
borrowing, such borrowing has been approved by Lender in its sole discretion
regarding the use of such advances, and no Event of Default exists under the
Security Agreement referred to herein, and provided further that the aggregate
principal amount of all sums borrowed hereunder shall not exceed the sum of One
Hundred Thousand Dollars ($100,000.00). Each borrowing hereunder shall be
recorded by the Lender and, prior to any transfer of this Note, shall be
endorsed on the schedule annexed to this Note. The aggregate unpaid amount of
principal set forth on the schedule annexed to this Note shall be presumptive
evidence of the principal amount owing and unpaid on this Note. However, the
failure to record any such amount on such schedule shall not limit or otherwise
affect the obligations of Borrower hereunder to repay the principal amount of
all advances hereunder together with interest accruing thereon. Amounts repaid
hereunder may not be reborrowed.
<PAGE>
The undersigned promises to pay, on the Maturity Date, interest on the
unpaid principal balance hereof from time to time outstanding from the date of
the first disbursement hereunder until paid, at a rate per annum of eight
percent (8%).
This Note is entitled to the benefits and subject to all of the terms
and conditions of the Interim Financing and Security Agreement dated September
13, 1996 among Lender, Borrower and Rick Pack, as amended from time to time
("Security Agreement").
The undersigned agrees to pay all expenses of Lender incurred in
collection of this Note, including reasonable attorneys' fees in connection
therewith, irrespective of whether suit is brought hereon.
All principal and interest hereunder shall be payable in lawful money
of the United States of America and shall be paid at such place as the holder
hereof may from time to time designate.
Upon the occurrence of any default in the payment of principal or
interest hereunder or upon any Event of Default under the Security Agreement or
any material breach of any other term or condition set forth in the Security
Agreement, the principal hereof with interest accrued thereon shall become, or
may be declared to be, at the option of the Lender, forthwith due and payable.
Borrower hereby waives diligence, presentment, demand, notice, protest
and all other demands and notices in connection with the delivery, acceptance,
performance and enforcement of this Note and assents to extensions of time of
payment, or forbearance or other indulgence without notice. The right to plead
any and all statutes of limitation as a defense to any demand hereunder is
hereby waived to the full extent permitted by law.
Borrower shall have no right to prepay all or any portion of this Note
until the receipt by Borrower of the Demand Notice .
This Note shall be governed by and be construed in accordance with the
laws of the State of California.
IN WITNESS WHEREOF, this Note has been executed and delivered at Los
Angeles, California, on the date set forth above.
TRADEWINDS TELEVISION, LLC
By: ___________________________
Its: ___________________________
<PAGE>
<TABLE>
<CAPTION>
SCHEDULE OF ADVANCES OF PRINCIPAL
====================================================================================================================================
Unpaid
Amount of Interest Rate Principal Notation
Date Advance (8%) Balance Made by
====================================================================================================================================
<S> <C>
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------------
</TABLE>
ACKNOWLEDGMENT
The undersigned for himself, individually, and on behalf of Tradewinds
Television, LLC ("TW"), acknowledges that, since the September 13, 1996
execution of the Interim Financing and Security Agreement (the "Agreement"),
together with the original Secured Promissory Note in the maximum amount of
$400,000, substituted Secured Promissory Note in the maximum amount of $600,000
(the "Old Note"), and additional Secured Promissory Note in the maximum amount
of $722,997.18 (the "Additional Note") the interim financial requirements of TW
will exceed the originally anticipated $400,000 maximum, substituted $600,000
maximum and increased $722,997.18 maximum. Accordingly, the undersigned has
requested that the maximum be raised to $822,997.18. This acknowledgment will
serve to amend the Agreement to increase the maximum to $822,997.18 and to
provide an additional secured promissory note in the maximum amount of
$100,000.00 in the form attached as Exhibit A hereto (the "New Note"). Reference
in the Agreement to the "Note" shall be deemed to refer to the Old Note, the
Additional Note and the New Note. In all other respects, the Agreement is
unchanged and remains in full force and effect.
Executed this 19th day of November, 1996.
TRADEWINDS TELEVISION, LLC
By: ___________________________
Rick Pack, President
------------------------------
RICK PACK, an individual
ASSIGNMENT OF COLLATERAL IN LIEU OF FORECLOSURE
-----------------------------------------------
THIS ASSIGNMENT, dated December 6, 1996, is made by and among
Affinity Entertainment, Inc., a Delaware corporation ("Affinity"), Tradewinds
Television, LLC, a California limited liability company ("Tradewinds"), and
Royeric Pack, an individual ("Pack") (Tradewinds and Pack are collectively
referred to herein as "Transferors").
W I T N E S S E T H
-------------------
WHEREAS, Affinity and Tradewinds have entered into that
certain Interim Financing and Security Agreement (the "Security Agreement")
dated as of September 13, 1996 pursuant to which Tradewinds granted Affinity as
security for the repayment by Tradewinds of Obligations (as defined in the
Security Agreement), including those certain loans made by Affinity in the
aggregate principal amount of $822,997.18 (represented by those certain secured
promissory notes dated September 13, 1996, October 17, 1996 and November 19,
1996, respectively), which security is in the form of a perfected first priority
lien (the "Lien") on those assets of Tradewinds identified in the Security
Agreement and in Schedule A attached hereto (the "Collateral"), as well as for
the performance, observance and discharge by Transferors of various covenants,
conditions and agreements made to, with, in favor of and for the benefit of
Affinity with respect to the repayment of the Obligations and such Lien (the
"Conditions");
WHEREAS, Transferors acknowledge that on November 5, 1996,
Tradewinds received a demand notice from Affinity notifying Tradewinds that the
Maturity Date (as defined in the September 13, 1996 and October 17, 1996 notes)
would be 90 days following receipt of such demand notice;
WHEREAS, Transferors acknowledge that on November 7, 1996,
they received notice from Affinity, in accordance with the Security Agreement,
of Transferors' default under the Security Agreement and the September 13, 1996
and October 17, 1996 notes;
WHEREAS, Transferors acknowledge that they failed to satisfy
the Conditions under the Security Agreement and acknowledge that Affinity,
pursuant to the Security Agreement, possesses the immediate right to foreclose
on its Lien;
WHEREAS, on November 14, 1996, Affinity filed a complaint in
Los Angeles Superior Court, LASC no. BC160833, naming Transferors as defendants
thereunder, asserting, among
1
<PAGE>
other things, claims for judicial foreclosure, specific performance, injunctive
relief and waste;
WHEREAS, Transferors acknowledge that on November 14, 1996,
December 5, 1996 and December 6, 1996, they received notice from Affinity that
Affinity would seek a writ of possession or alternatively appointment of a
receiver for the Collateral pursuant to Affinity's rights under the Security
Agreement;
WHEREAS, Transferors, to avoid the imposition of the foregoing
remedies by Affinity and in lieu of foreclosure on the Collateral, have agreed
to irrevocably and absolutely grant, transfer and assign to Affinity all right,
title and interest in and to the Collateral;
NOW THEREFORE, in consideration of the premises and of the
mutual covenants herein contained and for other good and valuable consideration,
consisting of the forgiveness of the Obligations, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as follows:
1. Assignment.
Transferors hereby unconditionally and irrevocably sell, grant,
transfer, assign, convey and warrant to Affinity, all of Transferors' right,
title and interest in and to the Collateral, free and clear of any liens,
charges, options, adverse claims or security interests, except (i) those
liabilities listed on Exhibit A and (ii) those encumbrances listed on Exhibit B,
and to hold the same with rights thereto unto Affinity, its successors and
assigns forever to its and their own use. In consideration of the foregoing,
Affinity forgives the Transferors' indebtedness represented by the Obligations.
2. Representations and Warranties.
a) Transferors hereby make, as if set forth in full herein, the
representations and warranties of Sellers related to the Collateral
made in that certain Asset Purchase Agreement, dated as of October 3,
1996, as amended, by and among Affinity and Transferors, subject to any
required consents of any third parties to the transfer of any Contracts
included within the Collateral.
b) Transferors, for themselves and their successors and assigns, hereby
covenant and agree that, without further consideration, at any time and
from time to time after the date hereof, each of them will execute and
deliver to
2
<PAGE>
Affinity such further instruments of sale, conveyance, assignment and
transfer, and take such other action, all upon the reasonable request
of Affinity, in order more effectively to sell, convey, grant, assign,
transfer and deliver all or any portion of the Collateral to Affinity,
and to assure and confirm to any other person the ownership of the
Collateral by Affinity, and to permit Affinity to exercise any of the
franchises, rights, licenses or privileges intended to be sold,
conveyed, assigned, transferred and delivered by Transferors to
Affinity pursuant to this Assignment.
3. Appointment of Affinity as Attorney-in-Fact.
Transferors do hereby constitute and appoint Affinity, its
successors or assigns the true and lawful attorney-in-fact of
Transferors with full power of substitution for them and in their name,
place and stead or otherwise by or on behalf of Transferors, their
successors and assigns, and for the benefit of Affinity, its successors
and assigns, to demand and receive from time to time any and all
moneys, property and assets, personal and mixed, tangible and
intangible, hereby conveyed and assigned or intended so to be and to
make, execute, acknowledge, swear to and file in the name of
Transferors or their successors or assigns any deeds, assignments,
notices, filings, applications, registrations and other instruments of
further assurance and transfer and registration of same and to give
receipts and releases in respect of the same, and from time to time to
institute and prosecute in the name of Affinity, or Transferors for the
benefit of Affinity, any and all proceedings at law, in equity or
otherwise which Affinity, its successors or assigns may deem proper in
order to collect, assert, perfect, improve or enforce any claims,
rights, interest or title of any kind in and to the Collateral, and to
defend and compromise any and all actions, suits or proceedings in
respect of any of the Collateral and to do any and all such acts and
things in furtherance of the purposes of this Assignment as Affinity,
its successors or assigns shall deem advisable. Transferors hereby
declare that the appointment hereby made and the powers hereby granted
are coupled with an interest and are and shall be irrevocable and
perpetual and shall not be terminated by any act of Transferors or
their successors or assigns, by the bankruptcy, insolvency or
dissolution of Transferors or their successors or assigns or otherwise
by operation of law.
3
<PAGE>
4. Governing Law.
This Assignment shall be construed and enforced in accordance
with the laws of the State of California (without giving effect to
conflict of laws principles).
5. Remedies Cumulative.
All of Affinity's remedies hereunder shall be cumulative to
all other remedies afforded Affinity with respect to the subject matter
hereof.
6. Reinstatement.
Notwithstanding anything to the contrary herein, in the event
this Assignment shall be invalidated or set aside, then automatically
and without any further action required, the Obligations shall be
immediately reinstated, and the Lien shall be deemed to continue in
full force and effect.
7. No Third Party Beneficiaries.
Nothing in this Assignment, whether express or implied, is
intended to confer any rights or remedies under or by reason of this
Assignment on any persons other than the parties hereto, nor is
anything in this Assignment intended to relieve or discharge the
obligations or liabilities of any third parties to any party to this
Assignment, nor shall any provision give any third parties any right of
subrogation or action over against any party to this Assignment.
4
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has freely
caused this Assignment to be executed as of the 6th day of December, 1996.
TRADEWINDS TELEVISION, LLC
By: ______________________________
Its: ______________________________
---------------------------------
ROYERIC PACK
AFFINITY ENTERTAINMENT, INC.
By: ______________________________
Its: _____________________________
5
<PAGE>
Schedule A
Collateral
----------
All of Tradewinds' right, title and interest of every kind and nature, if any,
in and to the following, including all products and proceeds thereof, including
insurance proceeds (collectively, the "Collateral"):
(i) all episodes currently or hereafter in existence of the television series
entitled "Bounty Hunters," "Ghost Writer," "Madison's Adventures, Growing Up
Wild," and "Mystery Science Theatre 3000," and the feature packages entitled
"Premiere One" and "Classic Collection," and all collateral, allied, ancillary,
subsidiary and merchandising rights therein, and all properties and things of
value pertaining thereto and all products and proceeds thereof whether now in
existence or hereafter made, acquired or produced (as used herein, the term
"Episodes" shall mean and include the foregoing episodes and motion pictures,
all of the aforesaid rights and the rights and property set forth in a
subparagraphs (ii) through (xviii) below), which includes, without limitation:
(ii) All rights of every kind and nature (including, without limitation,
copyrights) in and to any literary, musical, dramatic or other material of any
kind or nature upon which, in whole or in part, the Episodes are or may be
based, or from which they are, or may be adapted or inspired, or which may be or
has been used or included in the Episodes including, without limitation, all
scripts, scenarios, screenplays, bibles, stories, treatments, novels, outlines,
books, titles, concepts, manuscripts or other properties or materials of any
kind or nature in whatever state of completion and all drafts, versions and
variations thereof (collectively, the "Literary Property");
(iii) All physical properties of every kind or nature of relating to the
Episodes and all versions thereof, including, without limitation, all physical
properties relating to the development, production, completion, delivery,
exhibition, distribution or other exploitation of the Episodes, and all versions
thereof or any part thereof, including, without limitations, the Literary
Property, exposed film, developed film, positives, negatives, prints, answer
prints, special effects, pre-print materials (including interpositives,
negatives, duplicate negatives, internegatives, color reversals, intermediates,
lavenders, fine grain master prints and matrices and all other forms of preprint
elements which may be necessary or useful to produce prints or
A-1
<PAGE>
other copies or additional preprint elements, whether now known or hereafter
devised), soundtracks, recordings, audio and video tapes and discs of all types
and gauges, cutouts, trims and any and all other physical properties of every
kind and nature relating to the Episodes in whatever state of completion, and
all duplicates, drafts, versions, variations and copies of each thereof
(collectively, the "Physical Properties");
(iv) All rights of every kind or nature in and to any and all music and musical
compositions created for, used in or to be used in connection with the Episodes
including, without limitation, all copyrights therein and all rights to perform,
copy, record, re-record, produce, publish, reproduce or synchronize any or all
of said music and musical compositions as well as all other rights to exploit
such music including record, soundtrack recording, and music publishing rights;
(v) All collateral, allied, ancillary, subsidiary, publishing and merchandising
rights of every kind and nature, without limitation, derived from, appurtenant
to or related to the Episodes or the Literary Property, including, without
limitation, all production, exploitation, reissue, remake, sequel, serial or
series production rights by use of film, tape or any other recording devices now
known or hereafter devised, whether based upon, derived from or inspired by the
Episodes, the Literary Property or any part thereof; all rights to use, exploit
and license others to use or exploit any and all novelization, publishing,
commercial tie-ups and merchandising rights of every kind and nature, including,
without limitation, all novelization, publishing, merchandising rights and
commercial tie-ups arising out of or connected with or inspired by the Episodes
or the Literary Property, the title or titles of the Episodes, the characters
appearing in the Episodes or said Literary Property and/or the names or
characteristics of said characters, and including further, without limitation,
any and all commercial exploitation in connection with or related to the
Episodes, all remakes or sequels thereof and/or said Literary Property;
(vi) All rights of every kind or nature, present and future, in and to all
agreements relating to the development, production, completion, delivery and
exploitation of the Episodes, including, without limitation, all agreements for
personal services, including the services of writers, directors, cast,
producers, special effects personnel, animators, cameramen and other creative,
artistic and technical staff and agreements for the use of studio space,
equipment, facilities, locations, animation services, special effects services
and laboratory contracts;
A-2
<PAGE>
(vii) All insurance and insurance policies heretofore or hereafter placed upon
the Episodes or the insurable properties thereof and/or any person or persons
engaged in the development, production, completion, delivery or exploitation of
the Episodes and the proceeds thereof;
(viii) All copyrights, rights in copyrights, interests in copyrights and
renewals and extensions hereafter obtained upon the Episodes or the Literary
Property or any part thereof, and the right (but not the obligation) to make
publication thereof for copyright purposes, to register claims under copyright,
and the right (but not the obligation) to renew and extend such copyrights, and
the right (but not the obligation) to sue in the name of Tradewinds or in the
name of Lender for past, present and future infringements of copyright;
(ix) All rights to produce, acquire, release, sell, distribute, subdistribute,
lease, sublease, market, license, sublicense, exhibit, broadcast, transmit,
reproduce, publicize or otherwise exploit the Episodes, the Literary Property
and any and all rights therein (including, without limitation, the rights
referred to in subsection (iv) above) in perpetuity, without limitation, in any
manner and in any media whatsoever throughout the universe, including, without
limitation, by projection, radio, all forms of television (including, without
limitation, free, pay, toll, cable, sustaining subscription, sponsored and
direct satellite broadcast), in theatres, non-theatrically, on cassettes,
cartridges and discs and by any and all other scientific, mechanical or
electronic means, methods, processes or devises now known or hereafter
conceived, devised or created;
(x) All rights of Tradewinds of any kind or nature, direct or indirect, to
acquire, produce, develop, reacquire, finance, release, sell, distribute,
subdistribute, lease, sublease, market, license, sublicense, exhibit, broadcast,
transmit, reproduce, publicize, or otherwise exploit the Episodes, or any rights
in the Episodes, including, without limitation, pursuant to agreements between
Tradewinds and any company controlling, controlled by, or under common control
with Tradewinds (a "Subsidiary") which relate to the ownership, production or
financing of the Episodes;
(xi) All contract rights and general intangibles which grant to any person any
right to acquire, produce, develop, reacquire, finance, release, sell,
distribute, subdistribute, lease, sublease, market, license, sublicense,
exhibit, broadcast, transmit, reproduce, publicize, or otherwise exploit the
Episodes or any rights in the Episodes including, without limitation, all
A-3
<PAGE>
such rights pursuant to agreements between Tradewinds and any Subsidiary which
relate to the ownership, production or financing of the Episodes;
(xii) All rent, revenues, income, compensation, products, increases, proceeds
and profits or other property obtained or to be obtained from the production,
release, sale, distribution, subdistribution, lease, sublease, marketing,
licensing, sublicensing, exhibition, broadcast, transmission, reproduction,
publication, ownership, exploitation or other uses or disposition of the
Episodes and the Literary Property (or any rights therein or part thereof), in
any and all media, without limitation, the properties thereof and of any
collateral, allied, ancillary, merchandising and subsidiary rights therein and
thereto, and amounts recovered as damages by reason of unfair competition, the
infringement of copyright, breach of any contract or infringement of any rights,
or derived therefrom in any manner whatsoever;
(xiii) Any and all general intangibles, contract rights, chattel paper
documents, instruments and goods, including inventory (as those terms are
defined in the California Commercial Code), not elsewhere included in this
definition, which may arise in connection with the creation, production,
completion, delivery, financing, ownership, possession or exploitation of the
Episodes;
(xiv) Any and all documents, receipts or books and records, supporting
documentation relating to paid and unpaid invoices, including, without
limitation, documents or receipts of any kind or nature issued by a
pledgeholder, warehouseman or bailee with respect to the Episodes and any
element thereof;
(xv) All accounts receivable, all contracts rights, all general intangibles (as
such terms are defined above) in connection with or relating to the Episodes
including, without limitation, all accounts receivable, all contract rights and
general intangibles constituting rights to receive the payment of money, or
other valuable consideration, all receivables and all other rights to receive
the payment of money including, without limitation, under present or future
contracts or agreements (whether or not earned by performance), from the sale,
distribution, exhibition, disposition, leasing, subleasing, licensing,
sublicensing or other exploitation of the Episodes or the Literary Property or
any part thereof or any rights therein or related thereto in any medium, whether
now known or hereafter developed, by any means, method, process or device in any
market, including Tradewinds' rights to receive payments thereunder, and all
other rights to receive film rentals, license fees, distribution fees,
producer's shares, royalties and other amounts of every description
A-4
<PAGE>
including, without limitation, Tradewinds Television advertising sales proceeds,
from (a) theatrical exhibitors, exhibitors, television networks and stations and
airlines, cable television systems, pay television operators, whether on a
subscription, per program charge basis or otherwise, and other exhibitors, (b)
distributors, subdistributors, lessees, sublessees, licensees and sublicensees
(including any Subsidiary) and (c) any other person or entity that distributes,
exhibits or exploits the Episodes or the Literary Property or elements or
components of the Episodes or the Literary Property or rights relating thereto;
(xvi) All proceeds, products, additions and accessions (including insurance
proceeds) of the Episodes, as defined and referred to in subsections (i) through
(xv) above; and
(xvii) The following personal property, whether now owned or hereafter acquired:
(i) the title or titles of the Episodes and all of Tradewinds' rights to the
exclusive use thereof including rights protected pursuant to trademark, service
mark, unfair competition and/or other laws, rules or principles of law or equity
or industry practice, and (ii) all inventions, processes, formulae, licenses,
patents, patent rights, trademarks, trademark rights, service marks, service
mark rights, trade names, trade name rights, logos, indicia, corporate and
company names, business source or business identifiers and renewals and
extensions thereof, domestic and foreign, whether now owned or hereafter
acquired, and the accompanying good will and other like business property rights
relating to the Episodes, and the right (but not the obligation) to register
claims under trademark or patent and to renew and extend such trademarks or
patents and the right (but not the obligation) to sue in the name of Tradewinds
or in the name of Lender for past, present or future infringement of trademark
or patent;
all other presently owned and after acquired assets and interests of Tradewinds
including, but not limited to accounts, contract rights, general intangibles,
notes, instruments, chattel paper, machinery, equipment, furniture, fixtures,
leasehold improvements, leases (real property and personal property), tax
refunds, deposit accounts, cash, bank accounts, Tradewinds Television
advertising sales proceeds, any and all avoidance rights and powers existing
under the Bankruptcy Code and the proceeds and products of all of the foregoing
(collectively "General Assets").
A-5
<PAGE>
EXHIBIT A
Liabilities
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<PAGE>
EXHIBIT B
Encumbrances
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Affinity has a first priority perfected security interest in and to the
Collateral.
