-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, Nnk7YBk9jNLH+JsqmwtUWhX1mXpu2xC2w+07Yb8fgVmCQn549DTjmvGZAoSH2kFI fPbF5z4fXwFqQA9VPVXcgQ== 0001005150-96-000465.txt : 19961225 0001005150-96-000465.hdr.sgml : 19961225 ACCESSION NUMBER: 0001005150-96-000465 CONFORMED SUBMISSION TYPE: 8-K PUBLIC DOCUMENT COUNT: 11 CONFORMED PERIOD OF REPORT: 19961209 ITEM INFORMATION: Acquisition or disposition of assets ITEM INFORMATION: Financial statements and exhibits FILED AS OF DATE: 19961224 SROS: NASD FILER: COMPANY DATA: COMPANY CONFORMED NAME: AFFINITY ENTERTAINMENT INC CENTRAL INDEX KEY: 0000730626 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-MOTION PICTURE & VIDEO TAPE PRODUCTION [7812] IRS NUMBER: 222473403 STATE OF INCORPORATION: DE FISCAL YEAR END: 0630 FILING VALUES: FORM TYPE: 8-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-12193 FILM NUMBER: 96685446 BUSINESS ADDRESS: STREET 1: 15438 N FLORIDA AVE STE 103 CITY: TAMPA STATE: FL ZIP: 33613 BUSINESS PHONE: 8132641778 MAIL ADDRESS: STREET 1: 15436 NORTH FLORIDA AVE STREET 2: STE 103 CITY: TAMPA STATE: FL ZIP: 33613 FORMER COMPANY: FORMER CONFORMED NAME: AFFINITY TELEPRODUCTIONS INC /FL DATE OF NAME CHANGE: 19940322 FORMER COMPANY: FORMER CONFORMED NAME: CBNI DEVELOPMENT CO INC DATE OF NAME CHANGE: 19930702 FORMER COMPANY: FORMER CONFORMED NAME: COMPUTERIZED BUYING NETWORK INC DATE OF NAME CHANGE: 19920703 8-K 1 FORM 8-K 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 -------- ------- ---------- (State or other (Commission File (IRS Employer Jurisdiction of Number) Identification Incorporation) Number) 15310 Amberly Drive, Suite 370, Tampa, FL 33647 - ----------------------------------------------- (Address of Principal Executive Offices) (Zip Code) Registrant's Telephone Number, including area code: 813-975-8180 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 - 2 - 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. - 3 - 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 - 4 - EX-10.01 2 EXHIBIT 10.01 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. 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 2 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. 3 7. Events of Default. ----------------- 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: 4 (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. 5 12. Remedies. -------- 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, 6 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. ------- 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 7 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. 8 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: --------------------- 9 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%). A-1 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: ------------------------- Its: ------------------------- A-2 SCHEDULE OF ADVANCES OF PRINCIPAL ================================================================================ Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- A-3 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 B-1 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 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 B-3 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; B-4 (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 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. 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:_______________________ SCHEDULE OF ADVANCES OF PRINCIPAL ================================================================================ Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ================================================================================ - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- - -------------------------------------------------------------------------------- EX-10.02 3 EXHIBIT 10.02 ASSET PURCHASE AGREEMENT dated as of October 3, 1996, among Affinity Entertainment, Inc. and Tradewinds Television, LLC and Royeric Pack
TABLE OF CONTENTS 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 i 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 ii 10.17 Severability...............................................................................................34
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 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 1 (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 2 (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). 3 "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 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 5 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 6 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 7 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. 8 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 9 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. 10 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 11 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 12 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 13 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, 14 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 15 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 16 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 17 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: 18 (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 19 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. 20 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. 21 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. 22 (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. 23 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. 24 (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; 25 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. 26 (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. 27 (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. 28 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 29 (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 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 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 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 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. SCHEDULE 2.1.1 LIBRARY 1. Film Library 2. Television Library 3. Other? SCHEDULE 2.1.1(a) FILM LIBRARY SCHEDULE 2.1.1(b) TELEVISION LIBRARY SCHEDULE 2.1.2 WORKS IN PROGRESS 1. Bounty Hunters 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 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 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 SCHEDULE 4.15 INSURANCE SCHEDULE 4.20(a) EMPLOYMENT CONTRACTS SCHEDULE 4.20(b) EMPLOYEE BENEFIT PLANS EX-10.03 4 EXHIBIT 10.03 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 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 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 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 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 ITC DISTRIBUTION, INC. By: ________________________________ Dated: ________________ Its: ________________________________ EDUCATIONAL BROADCASTING CORPORATION dba THIRTEEN WNET By: ________________________________ Dated: ________________ Its: ________________________________ 6 EX-10.04 5 EXHIBIT 10.04 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. 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 --------------------- SCHEDULE OF ADVANCES OF PRINCIPAL
============================================================================================== Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ============================================================================================== 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 - ---------------------------------------------------------------------------------------------- - ---------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------
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 ========== 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 ========== 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 ========== 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 ========= 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 ============ SCHEDULE OF ADVANCES OF PRINCIPAL
================================================================================================================= Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ================================================================================================================= 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 - ----------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------
EX-10.05 6 EXHIBIT 10.05 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 EX-10.06 7 EXHIBIT 10.06 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. 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 ------------------------ SCHEDULE OF ADVANCES OF PRINCIPAL
==================================================================================================================================== Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ==================================================================================================================================== 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 - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
TRADEWINDS TELEVISION & BPH PRODUCTIONS Tradewinds' payables 4,112.04 Tradewinds'contractors 34,027.29 BHP Productions 84,857.85 ----------- Grand total 122,997.18 ============ 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 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 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 ================ EX-10.07 8 EXHIBIT 10.07 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 EX-10.08 9 EXHIBIT 10.08 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. 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: ___________________________
SCHEDULE OF ADVANCES OF PRINCIPAL ==================================================================================================================================== Unpaid Amount of Interest Rate Principal Notation Date Advance (8%) Balance Made by ==================================================================================================================================== - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - ----------------------------------------------------------------------------------------------------------------------------------- - -----------------------------------------------------------------------------------------------------------------------------------
EX-10.09 10 EXHIBIT 10.09 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 EX-10.10 11 EXHIBIT 10.10 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 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 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 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 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 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 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 (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 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 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 EXHIBIT A Liabilities ----------- EXHIBIT B Encumbrances ------------ Affinity has a first priority perfected security interest in and to the Collateral. -----END PRIVACY-ENHANCED MESSAGE-----