EXHIBIT 10.8
Portions of this exhibit have been deleted and filed separately with the
Securities and Exchange Commission pursuant to a request for confidential
treatment. The redacted portions are identified by an asterisk indicating
deleted information.
EXHIBIT 10.8
UPLINK-PLAYBACK SERVICE
DEAL MEMORANDUM
This Deal Memorandum, when signed by the undersigned representatives of
their respective companies, will confirm the material deal points agreed upon
during discussions for an agreement between Compact Video Services, Inc. (CVS) a
California Corporation, and TVN Entertainment Corporation a Delaware Corporation
("TVN"), whereby CVS will design, construct, operate and maintain a fully
staffed and equipped, co-located Uplink/Playback facility for TVN's seventeen
(17) channel national direct broadcast satellite ("DBS") television programming
services ("TVN Service") which will be transmitted for TVN by CVS to AT&T's
Telstar 303 satellite. After execution of this document, the mutual objective of
the parties is the preparation and execution, as soon as reasonably feasible, of
a more definitive agreement, which will include these essential terms and such
other terms, conditions, representations and warranties as the parties and their
respective counsel mutually determine are necessary and appropriate to further
evidence the parties' agreement. These deal points are as follows:
1. CVS will provide the following services for TVN:
(a) CVS will design and construct a Tape Playback facility for the TVN
Service, in accordance with a diagram to be mutually agreed upon within thirty
(30) days from the date hereof, and then attached hereto as Exhibit A, and
utilizing the tape/playback equipment set forth on an Exhibit B which will be
mutually agreed upon within seven (7) days from the date hereafter starting with
the July equipment list previously supplied by CVS to TVN. Thereafter, CVS will
operate and maintain this facility for TVN utilizing the CVS staff set forth on
Exhibit C, such that it will remain fully operational on a 24 hour per day,
seven (7) day a week basis, for the term hereof, providing uninterrupted video
and audio service on each of TVN's seventeen (17) channels. CVS is aware that
TVN intends for up to twelve (12) of such channels to offer pay-per-view ("PPV")
----
movies or services requiring 24 hour tape playback, the master tapes for which
it shall be TVN's sole responsibility to license and arrange to make available
to CVS for playback purposes, and for up to ten (10) of such channels to offer
----
"basic" or "pay tier" television programs, which CVS will uplink as
"turn-around" services provided that the total number of channels will not
exceed 17 channels. It shall be TVN's sole responsibility to obtain such license
rights as are required to turn-around/retransmit such basic and/or pay tier
services.
Page 1
(b) CVS will design and construct an Uplink facility co-located with the
Playback facility in accordance with the diagram to be mutually agreed upon
within thirty (30) days from the date hereof, and then attached hereto as
Exhibit D, utilizing the uplink equipment and the encryption, decryption and
control computer equipment set forth on an Exhibit E which will also be mutually
agreed upon within thirty (30) days from the date hereof, starting with the July
6, 1989 equipment list previously supplied by CVS to TVN. Thereafter, CVS will
operate and maintain this facility for TVN utilizing the CVS staff set forth on
Exhibit C, such that it will remain fully operational on a 24 hour per day,
seven (7) day a week basis for the term hereof, providing uninterrupted video
and audio service on each of TVN's seventeen (17) channels. It shall be TVN's
sole responsibility to provide access to seventeen (17) specified transponders
on AT&T's Telestar 303 for CVS transmission of the TVN Service.
(c) TVN may subsequently request that certain Exhibit B and E equipment be
replaced with upgraded or newer equipment, the incremental increased cost for
which shall be paid by TVN.
(d) CVS will handle all shipping and receiving of tape material from TVN's
suppliers and TVN will be responsible for providing the blank tape stock and for
payment of all shipping costs. CVS will check all incoming tapes for both
technical quality and timing, and in the event CVS finds quality problems, it
will report such problems to TVN management. CVS will provide all the required
duplication for backup tapes, and will provide TVN with post-production editing
services, as required, to produce/post produce interstitial/promotional material
for air. CVS will provide TVN with post-production services of up to 40 hours
per week at no additional cost. CVS will provide the full range of technical
operations support required to playback and uplink the TVN programs to the
satellite, including consumer type receiving equipment to monitor each channel.
CVS will provide office space and parking at the facilities for eight (8) TVN
employees. At least half of such offices shall be available to TVN on or before
January 15, 1990. CVS will keep a daily log for each channel of playback
service, with these logs being forwarded to TVN on a weekly basis. CVS will
provide space to library the program tape and interstitial/promotional tape
material for the TVN Service per Exhibit A. CVS will provide appropriate
security facilities and personnel, including a tape vault and log-in, log-out
requirements, for the storage, transfer (dubbing) and playback of all tape (or
otherwise recorded) materials, including licensed materials, provided by or on
behalf of TVN. It shall be TVN's responsibility to obtain required
authorization/clearance for CVS to perform the backup tape transfer/dubbing
function, and CVS shall cause these functions to be performed under conditions
which assure there will be no unauthorized duplication of tapes.
Page 2
(e) The CVS post-production services at said facility provided to TVN will
include:
(1) A dedicated edit bay with a full time chyron capable editor; 40 hrs
per week
(2) A dedicated chyron machine in the edit bay
(3) two channels of ADO
(4) Tape stock to be provided to TVN at CVS cost plus * and
(5) Buy-back of used TVN tape stock at * of the price paid for same by
TVN to CVS
(f) CVS will provide TVN with use of CVS uplinks for Beta Tests by TVN, on
a pre-scheduled basis (i.e., if time is available on an uplink(s) when requested
by TVN, CVS will provide that uplink(s) time to TVN).
(g) TVN will provide CVS with program schedules/logs seven (7) days prior
to scheduled air date, however, CVS will use its best efforts to accommodate any
schedule changes provided CVS by TVN. TVN will handle formal contact with the
studios and/or production houses for access to available promotional materials,
and TVN will be responsible for developing the promotional and interstitial
material to be used by CVS to "build" the tape materials for air. TVN will
designate an individual(s) to serve as the designated interface person(s)
between TVN administrative operation and the CVS technical support operation, so
that ongoing operational and technical matters can be handled efficiently and
expeditiously.
2. CVS agrees that after the signing of this Agreement by the parties,
upon the delivery by TVN to CVS of the Security L/C (as in hereinafter defined
in Exhibit H), and a mutually agreeable AT&T "MTL" Letter, CVS will order and
obtain all equipment reflected in Exhibit K and CVS will continue to timely
order and obtain the balance of the equipment as it is agreed upon. AT&T and TVN
may review the CVS equipment purchase order records to verify the orders. CVS
agrees that the initial staffing for the Playback and Uplink facilities shall be
as shown on Exhibit C, but in any event it shall be CVS' continuing
responsibility at all times to provide sufficient staff so as to provide the
referenced services as described, so that all transmissions to the satellite
meet or exceed the specifications and standards set forth in Exhibit F. These
facilities shall be co-located at 2813 & 2901 W. Alameda Avenue, Burbank, CA,
and CVS shall provide access for AT&T to interface its Info I ANI System. TVN
recognizes that CVS may offer time to other CVS customers on the back-up uplink
and downlinks provided for TVN, however, CVS represents and warrants to TVN that
TVN will be and at all times shall remain the primary customer for the
facilities assigned to TVN, with the right to priority use of these services at
these facilities, and services provided to other customers will not interfere
with the operation or transmission of, or be directly competitive with, TVN's
programming services.
Page 3
Directly competitive shall mean that such facilities cannot be offered for use
to customers as part of a pay-per-view service for the TVRO market. It is
expressly understood that CVS shall be free to use CVS' facilities not assigned
to TVN without any limitation whatsoever.
3. (a) CVS represents and warrants that the TVN transmissions from these
Uplink-Playback facilities shall meet or exceed the audio and video quality
standards and specifications set forth on Exhibit F, and that construction of
the referenced facilities and services shall be (i) substantially completed and
operational for on-air testing by TVN on March 1, 1990 (the "On-Air Test Date")
and (ii) fully complete and operational for the commencement of the TVN service
on all seventeen (17) of TVN's leased transponders on T303 on or before March
30, 1990 (the "Operational Date"). CVS represents and warrants to TVN that CVS
has full and complete authority to provide these facilities and services at
CVS's Burbank location as above described.
(b) TVN has previously requested during the prior 40 days that CVS not
contact the various equipment vendors regarding this TVN project and CVS
represents and warrants that it has not done so. CVS and TVN agree that the
referenced paragraph 3(a) completion dates are predicated on the availability of
said equipment from vendors in time sufficient to enable CVS to meet the
required completion dates. If not, the completion dates and the Exhibit J
Liquidated Damages Provisions shall be extended accordingly. CVS agrees that it
will advise TVN immediately, upon learning that any of the ordered equipment is
not available for delivery in time sufficient to enable CVS to meet required
completion dates.
(c) If the referenced facilities and services are not completed and fully
operational as represented, the parties agree that CVS shall pay to TVN as
liquidated damages the sums reflected on Exhibit J for each day of delay, the
parties having recognized and agreed that it would be extremely difficult to
forecast or determine in advance the amount of damage caused TVN by such delay.
The foregoing sum represents the parties best effort to fairly compensate TVN
for such unanticipated delay. CVS shall have no liability to TVN if such delays
are caused by Acts of God, or acts of third parties which are beyond the
reasonable control of CVS.
(d) If CVS shall have provided TVN with confirmation that the requisite
equipment has been ordered by CVS as agreed hereinabove, TVN shall pay to CVS
the sum of * (the "TVN Front End Payment"), payable as follows:
pursuant to paragraph 3(e) hereof AT&T shall deliver to CVS, on behalf of TVN,
* in cash on December 1, 1989, and * on each of January 1, 1990,
February 15, 1990 and the date when the facilities and services are completed
and fully operational per paragraph 3(a).
Page 4
(e) TVN represents and warrants that AT&T is now holding TVN's *
irrevocable letter of credit issued by Citibank in favor of AT&T, which is
secured by a * Citibank Time Deposit owned by TVN. TVN and AT&T agree
(the latter by separate letter) that said * letter of credit will be
utilized for purposes of providing CVS with (1) the * Security L/C
required to fulfill TVN's Termination Liability obligation pursuant to Exhibit H
hereof and (2) the * required to be paid by TVN to CVS pursuant to
paragraph 3(d). AT&T and TVN will jointly facilitate the timely issuance by
Citibank (or other bank of similar representation) of said * Security
L/C in favor of CVS. AT&T and TVN will jointly facilitate the delivery to CVS of
each required * payment, using * of the * TVN Time
Deposit for this purpose. Each such * payment shall be paid to CVS on the
agreed dates upon CVS having provided to TVN and AT&T documentary proof that CVS
has ordered the equipment which CVS is required to order per Exhibits B and E
hereunder.
4. The term for CVS' provision of these services and TVN's obligation to
accept service shall be five (5) years, commencing March 30, 1990 and continuing
through March 29, 1995.
5. TVN shall pay to CVS monthly, as the price for the services provided to
TVN by CVS hereunder, the sums set forth on Exhibit I hereto. The *
payable to CVS by TVN as above provided in paragraph 3(d), when paid, shall be
deemed a prepayment by TVN of the first monthly payment due, one half of the
next four (4) monthly payments due, and a partial payment for the sixth monthly
payment due per Exhibit I. Thereafter, CVS shall bill TVN for services rendered
on the first of each month, with payment due from TVN to CVS thirty (30) days
thereafter. There shall be no additional charges for CVS' services specified
herein to TVN; any additional services requested by TVN from CVS from time to
time (i.e., occasional uplink services for special events or feeds) shall be
billed separately by CVS to TVN at the completion of service, and due net 30
days from date of invoice, at the lower of the rates set forth on Exhibit G, or
the CVS rates in effect at the time of the request for other major users of such
CVS services.
Page 5
6. (a) In the event TVN fails to make any payment when due, including,
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without limitation to deliver the Security L/C or the TVN Front End Payment,
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provided CVS has timely performed in accordance with this Deal Memorandum, CVS
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shall give TVN written notice of any such default, and TVN will have seven (7)
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days within which to cure such default. If TVN fails to timely cure such
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default, CVS may terminate this Agreement (without any further obligation or
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liability on its part), with termination liability as specified in Exhibit H,
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which termination liability shall be shared between CVS, TVN and American
- -------------------------------------------------------------------------
Telephone & Telegraph, Inc. ("AT&T") as specified on Exhibit H. AT&T's and TVN's
- ---------------------------------------------------------------
respective termination liabilities shall be referred to as the Minimum
Termination Liability ("MTL"). If CVS willfully or through gross negligence
--------------------------------------------
fails to provide service as required hereunder, TVN shall give CVS written
- ---------------------------
notice of any such default and CVS shall have seven (7) days within which to
cure such default. If CVS fails to timely cure such default, TVN may terminate
this Agreement without further payment to CVS and TVN shall have the right to
procure these services elsewhere. Nothing contained in this paragraph shall be
construed as limiting the audio and video standards and specifications with
which CVS must comply per paragraph 3(a).
(b) In the event TVN elects to terminate this Deal Memorandum under
circumstances where CVS is not in default of its obligations hereunder, then, if
TVN shall, within 120 days of such termination, obtain the CVS provided
services (or any portion thereof) from another Uplink/Playback facility, TVN
shall pay to CVS, as liquidated damages and not as penalty, it being agreed that
it would be extremely difficult to forecast or determine in advance the amount
of damage caused CVS by such termination, an amount equal to the present
value, as of the date of such termination, of all unpaid monthly service charges
from TVN to CVS through the end of the term of this Deal Memorandum, discounted
to present value at the rate of prime at Citibank plus 2%.
7. All announcements or press releases to the industry or otherwise
----------------------------------------------------------------
concerning the subject matter of this Deal Memorandum and the transactions
- --------------------------------------------------------------------------
documented herein shall require the approval of both companies. TVN shall have
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the right to issue the initial, mutually approved, announcement or release.
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Copies of all such announcements may be shown to each company's senior executive
- --------------------------------------------------------------------------------
officers and directors prior to release.
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Page 6
8. The parties agree to proceed expeditiously and in good faith to prepare
and execute a mutually acceptable written agreement continuing provisions in
accord with the foregoing, together with such other terms, conditions,
warranties and representations as each may determine are reasonably necessary
and appropriate to protect its respective interests.
9. CVS shall hold in confidence and not disclose to third parties any of
the planning, financial and/or operating information provided to CVS by TVN in
connection with the negotiation of this Deal Memorandum, any subsequent
agreement and the continued performance by CVS hereunder.
10. (a) The parties acknowledge and agree that, in providing these playback
and uplink satellite transmission services, CVS will be required to operate in
accordance with the practices and procedures of the carrier, AT&T, from whom
satellite transponder space or other transmission facilities are utilized, and
to the extent that such carrier's practices and procedures are inconsistent with
the terms hereof, such practices and procedures will control CVS's performance
hereunder.
(b) The satellite uplink transmission services to be provided by CVS
hereunder are subject to regulation by the Federal Communications Commission
(the "FCC"). Throughout the term hereof, CVS will obtain and keep current all
licenses, permits and other approvals of the FCC or other governmental bodies
required for CVS to perform such services for TVN. CVS's performance hereunder
will at all times comply with the rules and regulations of the FCC, and any
other applicable rules and regulations, and to the extent they are inconsistent
with the terms hereof, such rules and regulations will control CVS's performance
hereunder.
(c) CVS will obtain and keep current all licenses, permits, and other
approvals required under local (city, county, state) and federal law,
regulation, or ordinance for CVS to perform the services above described.
Page 7
11. If TVN has provided for a Minimum Termination Liability or Guarantee
in form mutually acceptable to CVS and TVN for the encryption, decryption and
computer control equipment, set forth on Exhibit E, to be used for these
purposes at the Uplink facility, CVS will purchase said equipment and TVN agrees
that it will buy back all such equipment from CVS on or before June 30, 1990 at
the price paid by CVS for this equipment, and if such payment is not tendered to
CVS on or before June 30, 1990, then such nonpayment will become an event of
default subject to the MTL payment described in Exhibit H. TVN represents, to
CVS that the cost to CVS of such encryption-decryption computer control
equipment shall not exceed * . TVN may arrange for the purchase and
delivery of such equipment to CVS for use at the Uplink facility. In either
event, CVS shall be responsible for installation of such equipment and
instruction of its personnel in its use and TVN shall be responsible for all
loading and operation of the control computer and all subscriber decoder box
authorization and deauthorization. CVS will, at its expense, provide rack space
in the Exhibit A facility for this equipment, provide sufficient electrical
power to operate such equipment, and will install and operate such equipment in
accordance with TVN's instruction. CVS will coordinate electrical telephone line
and modem installment, and the charges therefor shall be included in the price
to be paid by TVN per Exhibit I. CVS shall not be liable for any failure of
TVN's encryption or decryption equipment, nor the cost of parts or third party
service, freight or any other costs as may be incurred in maintaining this
equipment. At the direction of TVN, CVS will obtain service for this equipment
and will invoice TVN for all costs incurred thereby. TVN may add, remove or
change this equipment as TVN deems necessary. All such changes by TVN at CVS
facilities must be made while accompanied by CVS personnel so as not to cause
service outages or other interference with CVS operations and provided those
changes do not impair CVS's ability to perform under this agreement. CVS will
provide TVN and its representatives and contractors with access at all
reasonable times to these Uplink and/or Playback facilities and equipment on
reasonable notice, and as may be required in emergencies.
12. CVS will perform all routine and emergency maintenance on the
Playback/Uplink facilities and all Exhibit B and E equipment on a 24 hours per
day, 7 days per week basis in order to maintain uninterrupted service per
Exhibit F.
Page 8
12. EXCEPT AS EXPRESSLY SET FORTH IN THIS DEAL MEMORANDUM, CVS MAKES NO
REPRESENTATIONS OR WARRANTIES, EXPRESS OR IMPLIED AS TO THE CONDITION OF ANY
FACILITY CONSTRUCTED PURSUANT TO THIS DEAL MEMORANDUM OR ANY EQUIPMENT USED IN
CONNECTION THEREWITH, OR THE MERCHANTABILITY OR FITNESS FOR ANY PARTICULAR
PURPOSE THEREOF. CVS AND TVN SHALL SHARE IN ANY APPLICABLE MANUFACTURER
WARRANTIES FOR THE BENEFIT OF THE PARTIES TO THE EXTENT OF THEIR RESPECTIVE
INTERESTS, BUT ONLY TO THE EXTENT THAT SUCH MANUFACTURER WARRANTIES PERMIT.
13. (a) Payment of the charges set forth in this Deal Memorandum shall
entitle TVN to receive only the services expressly described herein, and all
other extra, or additional service which TVN may wish to obtain from CVS shall
only be supplied to TVN as provided in paragraph 5.
(b) TVN agrees to indemnify, defend and hold CVS harmless from and against
any and all losses, liabilities, costs and expenses, including reasonable
attorneys' fees, arising out of or related to claims made against CVS based on
(i) the content of TVN's programming, including without limitation any claim of
libel, slander or infringement of copyright, (ii) injury to person or damage to
property as a result of the activity of TVN employees or agents within their
area of responsibility, as provided hereunder. This indemnification shall
survive any termination of this Deal Memorandum, unless and until replaced by a
subsequent agreement.
(c) CVS agrees to indemnify, defend and hold TVN harmless from and against
any and all losses, liabilities, damages, costs and expenses, including
reasonable attorneys' fees, arising out of or relating to claims made against
TVN based on (i) injury to person or damage to property as a result of the
activities of and services provided by CVS or its agents and employees
hereunder, including without limitation their actions in designing,
constructing, operating and/or maintaining these facilities and equipment, and
in playing back, transmitting, and uplinking TVN's programming, (ii)
interference by the playback transmission or uplinking activities of CVS with a
third party's transmission, (iii) the failure of CVS to transmit TVN programming
in accordance with this Deal Memorandum, in which case CVS' indemnity obligation
shall be limited to a refund of a prorated part of the monthly service payment
made by TVN for the period during which such transmission failure shall have
occurred, and (iv) CVS' failure to maintain necessary licenses. This
indemnification shall survive any termination of this Deal Memorandum, unless
and until replaced with a subsequent agreement.
Page 9
(d) Neither party shall be subject to consequential or indirect damages or
payment for lost profits as a result of any acts, omissions, or other
performance or non-performance requirements under this agreement, except as may
result from the gross negligence of a party in performing hereunder.
(e) Neither party has any authority to make any statement, representation,
warranty or other commitment on behalf of the other party, and this Deal
Memorandum does not create any agency, employment, partnership, joint venture
or similar relationship between the parties.
(f) Neither party may assign any rights or obligations under this Agreement
without the prior written consent of the other party, such consent not to be
unreasonably withheld, provided, however, that either party may assign its
rights hereunder without the consent of the other party to any entity with which
it any be merged or consolidated or which acquires all or substantially all of
its assets, provided that such entity agrees in writing to assume all of the
obligations of TVN or CVS as the case any be, hereunder.
(g) All notices which either party may be required or desire to give to the
other party hereunder shall be given by personal service or by registered or
certified mail, return receipt requested, addressed to:
For TVN: Stuart Z. Levin
President and
Chief Executive Officer
TVN Entertainment Corporation
100 Wilshire Blvd., Suite 1650
Santa Monica, CA 90401
with a copy to: Arthur Fields
Senior Executive V.P.
For CVS: John H. Sabin
Senior V.P. - CFO
William H. Tillson
V.P. of Satellite &
Distribution Services
Compact Video Services, Inc.
2813 W. Alameda Avenue
Burbank, CA 91505
with a copy to: Zellermayer Gratch & Jacobs, P.C.
950 Third Avenue
11th Floor
New York, NY 10022
Attention: Andrew B. Reinhard
Page 10
at the current address for each party. Either party may change the person or
address for notice upon prior written notification to the other party.
(h) No waiver of any breach hereof shall constitute a waiver of any other
breach of the same or any other provision hereof, and no waiver shall be
effective unless made in writing. In the event that any provisions hereof shall
be judged illegal or unenforceable by a court of competent jurisdiction, such
provision shall be severed and the entire agreement shall not fail but the
balance of this agreement shall continue in full force and effect.
(i) TVN and CVS acknowledge that they have read this entire Deal
Memorandum and that it constitutes the entire agreement and understanding
between the parties hereto, and supersedes any and all prior or contemporaneous
oral or written communications or negotiations with respect to the subject
matter hereof, all of which are merged herein. This Deal Memorandum shall not be
modified, amended or any way altered except by an instrument in writing signed
by both of the parties hereto.
(j) This Deal Memorandum shall be construed and enforced in accordance
with the internal laws of the State of California. Any dispute between the
parties regarding the interpretation, enforcement or alleged breach hereof shall
be resolved by arbitration by the parties before the American Arbitration
Association in Los Angeles, California in accordance with their Commercial
Arbitration Rules, each party to bear the arbitrators expenses equally.
COMPACT VIDEO SERVICES, INC. TVN ENTERTAINMENT CORPORATION
By: /s/ WILLIAM H. TILLSON By: /s/ STUART Z. LEVIN
------------------------------ ------------------------------
William H. Tillson Stuart Z. Levin
Title: V.P. Satellite and Title: President and CEO
--------------------------- ---------------------------
Distribution Services
Date: 11-20-89 Date: 11-20-89
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Page 11
[LETTERHEAD OF COMPACT VIDEO]
January 3, 1990
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Gentlemen:
We refer to the Deal Memorandum, dated November 20, 1989 ("the Agreement"),
between you ("TVN") and us ("Compact") and, more particularly, to Section 3(a)
thereof which provides, among other things, for an "On-Air Test Date" and an
"Operational Date" (as those terms are defined therein) of March 1 and March 30,
1990, respectively. This letter will confirm the agreement between TVN and
Compact that such dates will be extended by that number of days elapsing from
December 1, 1989 (including that day) to the day on which the first installment
of the TVN Front End Payment (as that term is defined in the Agreement) is made
(including that day), subject to the force majeure provisions of Section 3(c) of
----- -------
the Agreement. The TVN Front End Payment (as that term is defined in the
Agreement) shall be payable by TVN to CVS as follows: * on January 3,
1990, and * on each of February 1, 1990, March 1, 1990 and the date when
the facilities and services are completed and fully operational per paragraph
3(a) of the agreement as above amended.
The foregoing notwithstanding, Compact will use its best efforts to meet the
originally scheduled On-Air Test Date and Operational Date provided in the
Agreement.
Very truly yours,
COMPACT VIDEO SERVICES, INC
By: /s/ William H. Tillson
-------------------------------
Name: William H. Tillson
-----------------------------
Title: V.P. Satellite and
----------------------------
Distribution Services
----------------------------
ACCEPTED AND AGREED TO:
TVN ENTERTAINMENT CORPORATION
By: /s/ Stuart Z. Levin
------------------------------
Name: Stuart Z. Levin
----------------------------
Title: CEO
---------------------------
[LETTERHEAD OF COMPACT VIDEO SERVICES, INC.]
April 17, 1990
Mr. Stu Levin
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Dear Stu:
This letter, when signed by TVN Entertainment Corporation (TVN) and Compact
Video Services, Inc. (CVS) will serve to amend our "Uplink - Playback Service
Deal Memorandum" dated November 20, 1989.
1. Schedule of Services -
April 15 - May 15, 1990 and thereafter - One promotional (barker) channel shall
- --------------------------------------
be transmitted by CVS to T303 24 hours per day (unencrypted). There will be
occasional testing by TVN on one or two T303 transponders of encrypted
transmission during this period.
May 15 - June 15, 1990 - Testing by TVN utilizing playback, encryption and
- ----------------------
transmission services on up to 15 T303 transponders concurrently, Monday through
Friday, eight hours per day.
June 15 - August 1, 1990 - Full testing of entire system on all 15 T303
- ------------------------
transponders 24 hours per day.
August 1, 1990 on - Full transmission.
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2. Schedule of Charges -
April 15 - May 14, 1990 - No charge
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May 15 - June 14, 1990 - *
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June 1, 1990 - * (if facility is completed and fully operational -
- ------------
balance of TVN Front End Payment)
Mr. Stu Levin
April 17, 1990
Page Two
June 15 - July 31, 1990 - * * in cash, payable in two
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installments of * each due on June 15, 1990 and July 15, 1990 and
* by application of the * TVN Front End Payment)
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August 1 - August 31, 1990 - *
- --------------------------
September 1, 1990 - End of Term - As provided in Exhibit I, beginning with the
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balance of year one.
Commencing August 1, 1990 and provided TVN has secured its equity financing of
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* the balance of the * TVN Front End Payment *
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shall be applied against the monthly charges to the extent of * per
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month until it has been exhausted. Should TVN have failed to secure its
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financing by August 1, 1990, then the * per month application of the
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balance of the * TVN Front End Payment will be postponed until such
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time as the financing has been secured.
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3. TVN's $1 million L/C will be reduced by * commencing June 15, 1993
unless TVN has secured its financing. Provided TVN has secured its financing,
TVN's L/C will be reduced by * per month commencing June 15, 1991, as
provided in the Deal Memorandum. If at any time after June 15, 1991 TVN secures
its financing, TVN's L/C will be reduced, pro rata from that month until June 1,
1995, so that an equal amount is reduced each month and the L/C is released in
full by June, 1995.
4. The "Operational Date" for paragraph 3(a) of the "Uplink - Playback Service
Deal Memorandum" shall be June 1, 1990. The term of this Agreement (per
paragraph 4) and the monthly payment schedule as provided in Exhibit I shall be
June 15, 1990 through June 14, 1995.
5. CVS shall provide TVN with 40 hours of on-line editing per week commencing
April 15, 1990, until the edit facility reflected in paragraph 1(e)(1) of the
"Uplink - Playback Service Deal Memorandum" is completed.
Mr. Stu Levin
April 17, 1990
Page Three
6. Concurrently with the execution of this amendment, CVS shall provide TVN
with written confirmation from CVS' lessor, in form acceptable to TVN, that said
lessor has provided a firm commitment to lease CVS the equipment described in
Exhibit B to the Deal Memorandum required by CVS for CVS to perform its
obligations reflected in the "Uplink - Playback Service Deal Memorandum".
7. Except as expressly provided above, and in the parties January 3, 1990
letter amendment, all other terms, conditions and provisions of the referenced
Deal Memorandum shall remain in full force and effect.
Agreed and Accepted:
COMPACT VIDEO SERVICES, INC.
By: /s/ WILLIAM H. TILLSON
-----------------------------------
Name: WILLIAM H. TILLSON
---------------------------------
Title: V.P. Satellite and Distribution
--------------------------------
Agreed and Accepted:
TVN ENTERTAINMENT CORPORATION
By: /s/ ARTHUR FIELDS
-----------------------------------
Name: ARTHUR FIELDS
---------------------------------
Title: Senior Executive Vice President
--------------------------------
[LETTERHEAD OF COMPACT VIDEO SERVICES, INC.]
June 14, 1990
Mr. Stu Levin
TVN Entertainment Corporation
100 Wilshire Boulevard
Santa Monica, CA 90401
Dear Stu:
This letter, when signed by TVN Entertainment Corporation (TVN) and Compact
Video Services, Inc. (CVS) will serve to amend our Agreement of April 17, 1990.
1. Schedule of Services -
April 15 - May 15, 1990 and thereafter - One promotional (barker) channel shall
- --------------------------------------
be transmitted by CVS to T303 24 hours per day (unencrypted). There will be
occasional testing by TVN on one or two T303 transponders of encrypted
transmission during this period.
May 15 - June 15, 1990 - 1" playback of one promotional (barker) channel and
- ----------------------
transmission of this playback to 2 T303 transponders 24 hours per day seven (7)
days per week. One channel will be encrypted and one channel will be
unencrypted. Purchase by CVS of additional equipment for TVN Encryption Center
as reflected in the attached.
June 15 - August 1, 1990 - Continuation of May 15 - June 15, 1990 playback and
- ------------------------
transmission services, including testing on additional transponders. Full
testing of playback and transmission and of the entire system on all 15 T303
transponders 24 hours per day commencing on July 1, 1990.
August 1, 1990 on - Full transmission.
- -----------------
2. Schedule of Charges -
April 15 - May 14, 1990 - No charge
- -----------------------
May 15 - June 14, 1990 - * (due June 20, 1990).
- ----------------------
Mr. Stu Levin
June 14, 1990
Page Two
June 15 - July 31, 1990 - * (payable in three installments of *
- -----------------------
due on July 15, 1990, * due August 1, 1990, and * due on August
15, 1990 provided the facility is completed and fully operational)
August 1 - August 31, 1990 - * (due August 31, 1990)
- --------------------------
September 1, 1990 - End of Term - As provided in Exhibit I, beginning with the
- -------------------------------
balance of year one.
Commencing August 1, 1990 and provided TVN has secured its equity financing of
* the TVN Front End Payment * shall be applied against the
monthly charges to the extent of * per month until it has been exhausted.
Should TVN have failed to secure its financing by August 1, 1990, then the
* per month application of the balance of the * TVN Front End
Payment will be postponed until such time as the financing has been secured.
3. TVN's $1 million L/C will be reduced by * commencing June 15, 1993
unless TVN has secured its financing. Provided TVN has secured its financing,
TVN's L/C will be reduced by * per month commencing June 15, 1991, as
provided in the Deal Memorandum. If at any time after June 15, 1991 TVN secures
its financing, TVN's L/C will be reduced, pro rata from that month until June 1,
1995, so that an equal amount is reduced each month and the L/C is released in
full by June, 1995.
4. The "Operational Date" for paragraph 3(a) of the "Uplink - Playback Service
Deal Memorandum" shall be July 1, 1990. The term of this Agreement (per
paragraph 4) and the monthly payment schedule as provided in Exhibit I shall be
June 15, 1990 through June 14, 1995.
5. CVS shall provide TVN with 40 hours of on-line editing per week commencing
April 15, 1990, until the edit facility reflected in paragraph 1(e)(1) of the
"Uplink - Playback Service Deal Memorandum" is completed.
Mr. Stu Levin
June 14, 1990
Page Three
6. Except as expressly provided above, and in the parties January 3, 1990
letter amendment, all other terms, conditions and provisions of the referenced
Deal Memorandum shall remain in full force and effect.
Agreed and Accepted:
COMPACT VIDEO SERVICES, INC.
By: /s/ WILLIAM H. TILLSON
-----------------------------------
Name: WILLIAM H. TILLSON
---------------------------------
Title: V.P. Satellite and
--------------------------------
Distribution Services
Agreed and Accepted:
TVN ENTERTAINMENT CORPORATION
By: /s/ ARTHUR FIELDS
-----------------------------------
Name: ARTHUR FIELDS
---------------------------------
Title: Senior Executive Vice President
--------------------------------
AMENDMENT TO UPLINK-PLAYBACK
----------------------------
SERVICE DEAL MEMORANDUM
-----------------------
THIS AMENDMENT TO UPLINK PLAYBACK SERVICE DEAL MEMORANDUM ("Amendment"),
dated as of March 3, 1993, is made by COMPACT VIDEO SERVICES, INC., a
California corporation ("CVS"), and TVN ENTERTAINMENT CORPORATION, a Delaware
corporation ("TVN").
WHEREAS, CVS and TVN entered into a Uplink-Playback Service Deal Memorandum
dated November 20, 1989 (the "Deal Memorandum"); and
WHEREAS, CVS and TVN desire to amend the Deal Memorandum in certain
respects, all as set forth in this Amendment.
NOW, THEREFORE, in consideration of the foregoing and the mutual covenants
and agreements set forth herein, the parties hereto agree as follows:
1. Definitions. All capitalized terms used herein and not defined herein
-----------
shall have the meanings ascribed to them in the Deal Memorandum.
2. Revised Monthly Charge. Exhibit I to the Deal Memorandum is hereby
---------------------- ---------
revised to provide that the price for services provided by CVS to TVN under the
Deal Memorandum shall be * per month from January 1, 1993 until the end
of the term.
3. Letter of Credit. TVN and CVS acknowledge that TVN owes CVS *
----------------
for services rendered by CVS to TVN under the Deal Memorandum through December
31, 1992 (collectively, the "Amount"). Notwithstanding anything to the contrary
contained in the Deal Memorandum, TVN agrees that CVS shall be entitled,
immediately upon
execution hereof, to draw on the full amount of the Security L/C in
consideration of execution of this Amendment and in full satisfaction of TVN's
obligation to pay the Amount and any other amounts owed to CVS for services
rendered by CVS to TVN under the Deal Memorandum through December 31, 1992. The
parties acknowledge that as of the date hereof, the amount of the Security L/C
is *
4. Level of Service. The Deal Memorandum is hereby amended to provide as
----------------
follows:
(i) The services CVS is to provide to TVN under the Deal Memorandum shall
extend only to twelve (12) channels. TVN may utilize up to twelve (12) of such
channels to offer pay-per-view movies or services requiring 24 hour tape
playback, the master tapes for which shall be TVN's sole responsibility to
license and arrange to make available to CVS for playback purposes, and up to
ten (10) of such channels for "basic" or "pay tier" television programs, which
CVS will uplink as "turn-around" services, provided that the total number of
channels shall not exceed twelve (12) and CVS will not be required to uplink
more than eleven (11) channels; and
(ii) The staffing levels and equipment complements that CVS is required to
utilize and maintain during the term of the Deal Memorandum shall be the
staffing levels and equipment complements being maintained and utilized by CVS
in connection with its services to TVN under the Deal Memorandum as of January
1, 1993. Notwithstanding the foregoing, should TVN default under the Deal
-2-
Memorandum, as amended hereby, and fail to cure such default as provided in the
Deal Memorandum, as amended hereby, and CVS elects to terminate its agreement
with TVN, and AT&T elects to assume TVN's obligations under the Deal Memorandum
in connection with satisfying AT&T's share of the Minimum Termination
Liability, then the service levels that CVS shall be required to provide during
the remainder of the term of the Deal Memorandum, as amended hereby, shall be as
set forth in the Deal Memorandum prior to this Amendment.
5. Elimination of Tape Stock Buy Back Provision. Section 1(e) of the Deal
--------------------------------------------
Memorandum is hereby amended to: (i) delete Section 1(e)(5) thereof; (ii) to
delete the word "and" at the end of Section 1(e)(4); (iii) to replace the comma
at the end of Section 1(e)(4) with a period; and (iv) to add the phrase ",and"
at the end of Section 1(e)(3).
6. Right of First Refusal. The Deal Memorandum is hereby amended to add
----------------------
thereto a Section 13(l), which shall read as follows:
"(l) In the event TVN proposes to enter into any agreement or
arrangement with any person other than CVS relating to the providing of
any uplink and/or playback services (the "Services") to TVN for any
period commencing after the end of the term of this Deal Memorandum,
TVN shall deliver a notice (the "First Refusal Notice") in writing to
CVS stating TVN's bona fide intention to enter into such an agreement
or relationship and the terms of the proposed agreement or
relationship. For a period of fifteen (15) days after its receipt of
the First Refusal Notice, CVS shall have the option ("Option") to
enter into an agreement or arrangement with TVN to provide such
Services on terms
-3-
substantially equivalent to those set forth in the First Refusal
Notice. If CVS wishes to exercise the Option it shall give TVN written
notice within the fifteen (15) day term of the Option and, within
fifteen (15) days after the date CVS gives notice of its exercise of
the Option, CVS and TVN shall enter into a written agreement pursuant
to which CVS shall provide TVN with, and TVN will accept, the Services
specified in the First Refusal Notice on substantially the terms set
forth in the First Refusal Notice. If CVS does not exercise the
Option, at any time within thirty (30) days from the expiration of the
term of the Option (the "Agreement Period"), TVN may enter into an
agreement pursuant to which a third person shall render the Services
specified in the First Refusal Notice to TVN on the terms, or on terms
which are not materially less favorable to TVN than those, set forth
in the First Refusal Notice. If TVN does not enter into such an
agreement within the Agreement Period, TVN shall be required again to
comply with the provisions of this Section 13(l) before it may enter
into any agreement or arrangement for the provision of any Services to
TVN. Notwithstanding anything to the contrary contained herein,
Section 13(d) hereof shall not apply to this Section 13(l). This
Section 13(l) shall survive any termination or expiration of this Deal
Memorandum, unless and until replaced by a subsequent agreement."
7. Option to Extend. The Deal Memorandum is hereby amended to add
----------------
thereto a Section 13(m), which shall read as follows:
"(m) CVS hereby grants TVN an option to extend the term of this
Deal Memorandum to June 15, 1997. In order to exercise such option,
TVN must provide CVS with written notice of the extension of the term
of this Deal Memorandum to June 15, 1997 not later than December 31,
1994."
8. Long Form Agreement. The Deal Memorandum is hereby amended to delete
-------------------
therefrom Section 8 thereof.
9. Deal Memorandum in Full Force. The Deal Memorandum, as
-----------------------------
-4-
amended by this Amendment, shall remain in full force and effect.
IN WITNESS WHEREOF, the undersigned have executed this Amendment as of the
date first written above.
COMPACT VIDEO SERVICES, INC. TVN ENTERTAINMENT CORPORATION
By: /s/ John Sabin By: /s/ Stuart Levin
---------------------------- ----------------------------
Title: Sr. Vice President Title: President
------------------------- -------------------------
Date: 3-3-93 Date: 3-3-93
-------------------------- --------------------------
The undersigned hereby acknowledges and accepts the foregoing amendment to
the Deal Memorandum dated November 20, 1989 between Compact Video Services,
Inc., a California corporation ("CVS"), and TVN Entertainment Corporation, a
Delaware corporation, and agrees that such amendment, to the best of its
knowledge and information, does not impair or affect the undersigned's
obligation to CVS pursuant to the Minimum Termination Liability (as such term is
defined in the Deal Memorandum) to CVS in accordance with the provisions of the
Deal Memorandum.
AMERICAN TELEPHONE & TELEGRAPH, INC.
By: /s/ TED CORUS
---------------------------------
Name: TED CORUS
-------------------------------
Title: MARKETING MANAGER -
------------------------------
SKYNET(R) TRANSPONDER SERVICES