Exhibit 10.15
Portions of this exhibit have been omitted pending a determination by the
Securities and Exchange Commission that certain information contained herein
shall be afforded confidential treatment. The omitted portions are indicated by
three asterisks.
EXHIBIT 10.15
[LETTERHEAD OF PRODUCT INFORMATION NETWORK APPEARS HERE]
August 23, 1996
Mr. Steve Toth, Jr.
Seventh Medium, Inc.
2100 N. Woodward Avenue West 201
Bloomfield Hills, MI 48304-2263
Re: Revised Letter of Agreement for Purchase of Air Time on the Product
Information Network
Dear Rick:
The following sets forth the revised terms of the agreement between
Jones Infomercial Network Ventures, Inc., d/b/a Product Information Network
("PIN"), a Colorado partnership, and Seventh Medium, Inc., d/b/a Consumer
Resource Network ("CRN"), a Vermont corporation, regarding the purchase by CRN
of air time on the cable television network owned by PIN (the "Network").
1. CRN Programming. CRN will provide long-form programming for airing
---------------
on the Network. Such programming (the "CRN Programming") shall consist entirely
of long-form (approximately thirty minutes in length) infomercials featuring the
products and/or services for the so-called CRN charter participants (the "CRN
Participants"), namely Ford Motor Company, State Farm Insurance Company,
Schering-Plough Pharmaceuticals and other participants that may be added in the
future. The types of products and/or services featured in the CRN Programming
will be of high quality, presented in a manner conforming to general standards
of good taste and suitable for general audiences. CRN represents that nothing
contained in the CRN Programming shall violate the civil or property rights,
copyrights, trademark rights, music performance or synchronization rights or
right of privacy of any person, firm or corporation. PIN agrees to provide air
time on the Network for the CRN Programming on the terms and conditions of this
Agreement.
2. Air Times: Billing Rates. PIN agrees to provide, and CRN agrees to
------------------------
purchase, at least eight (8) hours per day of air time on the Network between
the hours
August 23, 1996
Page 2
of 4:00 p.m. to 12:00 a.m. ET (the "Minimum Commitment Level") at the rates set
forth below:
3rd Quarter 1996
----------------
*** per Network subscriber ("Subscribers") per half hour
4th Quarter 1996
----------------
*** per Network subscriber per half hour
1997
----
*** per Network subscriber per half hour
(a) For the purpose of determining the monthly billing to CRN,
Subscribers will be determined based on the actual month's ending "equivalent"
basic subscriber count and will be measured and billed for each half hour that
CRN Programming is aired (it being understood that there will be no billing for
any programming that is preempted or otherwise prevented from being aired).
To be counted as a Subscriber, the cable system must carry PIN
for a period of time during which CRN Programming is aired. CRN shall have the
option, based upon non-contracted available air time and upon ninety (90) days
prior written notice to PIN, of increasing the amount of purchased air time
above the Minimum Commitment Level in half hour increments, up to a total of
twelve hours of air time per day, including the Minimum Commitment Level. In
order to increase the amount of purchased air time, CRN shall provide at least
ninety (90) days prior written notice to PIN as to the time slot(s) CRN desires
to expand into. Promptly upon receipt of CRN's notice, PIN shall notify CRN in
writing as to the availability of the desired time slot(s). Provided such time
slot(s) is not otherwise allocated, PIN shall reserve such time slot(s) for CRN
and notify CRN of such availability. Billing for such additional air time shall
commence as of the day CRN begins to air its programming in the expanded time
slot(s), but shall be invoiced in arrears pursuant to Paragraph 3 of this
Agreement. If the airing of such expanded programming begins on a day other than
the first day of the month, billing shall be pro rated based on the number of
days in the month in which the expanded programming occurs. Each added half hour
increment shall immediately precede 4 p.m., or the earliest start time for CRN
Programming, and shall be billed at the applicable rates set forth above.
Furthermore, CRN shall have the option of returning half hour increments to PIN
upon ninety (90) days prior written notice; provided, however, that CRN shall at
all times maintain the Minimum Commitment Level.
August 23, 1996
Page 3
(b) In computing the number of Subscribers for purposes of the
above, there shall be excluded Subscribers served by the CRN affiliates in the
following areas which will receive the CRN Programming on the Network; Fairfax
County, VA; Knoxville, TN; Colorado Springs, CO; York, PA (the "CRN Systems").
For 1996, arrangements regarding the CRN Systems added to the Network shall be
as follows:
(i) CRN will continue to make payments directly to the CRN
Systems through December 31, 1996.
(ii) For 1996, all amounts ordinarily earned by the CRN Systems
under PIN's revenue sharing plan (i.e. sharing 50% of revenues) will be paid to
CRN. This would only include income earned by PIN from non-CRN Programming
actually aired by the CRN Systems. The calculation of this payment would be
determined using those hours which are strictly PIN broadcast hours. PIN will
not give credit for CRN Programming broadcast hours.
(c) During the term of this Agreement, including any renewal
thereof, CRN agrees not to solicit, negotiate or enter into any affiliation
agreements or carriage agreements with any cable television system or
alternative television distribution system, except for broadcast television
stations. Notwithstanding the foregoing, if the parties have not agreed to renew
this agreement by August 31, 1997 as provided in Paragraph 4 herein, CRN may
enter into discussions at that time with cable television systems and
alternative television distribution systems. However, in no event shall CRN
solicit or enter into discussions with PIN affiliated systems until the
expiration of PIN's contract with such affiliate. In no event, shall CRN Systems
receive the CRN Programming from the Network satellite feed (Satcom C-3;
Transponder 20) without PIN's written consent.
(d) CRN will be afforded the same rights to audit and/or
inspect PIN's revenue information as are usually given to PIN affiliates.
(e) Beginning on January 1, 1997, PIN will offer affiliate
status to all former CRN Systems pursuant to the then standard PIN affiliate
agreement. In addition, effective January 1, 1997, the subscribers served by the
systems entering into affiliate agreements with PIN will be included in the
subscriber counts for the purposes of determining the base rates set forth above
in Paragraph 2.
(f) Should CRN affiliates in Fairfax County, Virginia and
Colorado Springs, Colorado decline PIN affiliation after good faith efforts are
made by CRN to secure such affiliation, CRN will have the right to retain those
systems as CRN affiliates pursuant to the terms of Paragraph 2(b)(ii) above.
(g) The air time hours for the CRN Programming shall be
contiguous, (i.e. in consecutive periods of time). However, CRN will use its
reasonable efforts to incorporate PIN network identification (Network ID's) into
CRN's own on-air
August 23, 1996
Page 4
promotional efforts, subject to client preferences and creative requirements.
The parties agree that CRN will use its reasonable efforts to explain to viewers
that CRN Programming is presented on the PIN Network. CRN agrees to produce the
PIN Network ID's and present them on the average of no less than two times per
hour during CRN programming hours. PIN shall have the exclusive right to approve
the content and presentation of these Network ID's to the extent they refer to
PIN.
(h) All air time not used by CRN will be used for infomercial
and/or informational programming generally consistent with PIN's prior
practices. However, during the term of the Agreement, PIN agrees that during the
periods of time one hour immediately prior to or one hour immediately following
the airing of CRN Programming, PIN shall not air other infomercial programming
which would be directly competitive with respect to the products and services of
those of the CRN Participants. For the purposes of this provision, "directly
competitive" shall mean: for Ford-U.S. and foreign automobile manufacturers;
for State Farm-homeowners, automobile and life insurance and for
Schering-Plough-allergy medicine and respiratory prescription pharmaceuticals.
3. Timing of Payments. PIN agrees to invoice CRN each month, in
------------------
arrears, for PIN air time, with the exception of any payment obligations to
affiliates which may require advance payment in connection with PIN's efforts on
behalf of CRN, which will in turn permit PIN to bill CRN in advance for such
payment obligations. Payment shall be due within twenty (20) days of the date of
the invoice and shall be based upon the actual number of Subscribers for the
month previous to the invoice date. PIN shall be entitled to charge interest at
the rate of 1.5% per month for any payments not made within ten (10) days of the
date due.
4. Term. This Agreement shall be effective as of July 1, 1996 and shall
----
continue through December 31, 1997. Both parties agree to commence renewal
negotiations in good faith no later than July 1, 1997. If, by August 31, 1997,
the parties are: (i) unable to agree upon the terms of renewal after good faith
efforts have been made by each party; or (ii) the parties have not agreed in
writing to extend the duration of renewal negotiations, this Agreement shall
terminate as of December 31, 1997. Additionally, this Agreement may be
terminated by either party in the event the other party materially breaches its
obligations hereunder and such breach is not cured within thirty (30) days after
notice of such breach is provided to the breaching party by the non-breaching
party.
5. Indemnification.
---------------
(a) CRN will defend, indemnify and hold harmless PIN and PIN
affiliates, and their respective officers, directors and shareholders, against
any and all claims, damages, litigation, liability, loss and expense, including
reasonable attorney's fees, arising out of: (i) the breach of CRN's
representations, warranties and agreements
August 23, 1996
Page 5
contained herein; (ii) the contents of any CRN Programming: and/or (iii) the use
of any of the products promoted in CRN Programming.
(b) FIN will defend, indemnify and hold harmless CRN, its employees and
partners and their officers, directors, shareholders and employees, against any
and all claims, damages, litigation, liability, loss and expense, including
reasonable attorney's fees, arising out of: (i) the breach of any of PIN's
representations, warranties and agreements contained herein and/or (ii) the
content of any programming, other than CRN Programming, aired on the Network.
6. Miscellaneous.
-------------
(a) Any press releases concerning this Agreement or the arrangements
contemplated herein must be mutually agreed to in advance by both parties.
Additionally, any press releases in any way relating to PIN, PIN affiliates or
the participation of any affiliates in the program contemplated under this
Agreement shall require the prior written approval of PIN.
(b) This Agreement representing the entire understanding of the parties
with respect to the subject matter hereof, superseding any prior agreements,
including, without limitation, that certain letter agreement between the parties
dated November 3, 1995. This Agreement may not be modified or amended, except in
writing signed by both parties.
(c) Each of the parties represents and warrants to the other that it is
duly authorized to enter into and perform this agreement, and that no third
party licenses, approvals or consents (other than those that have been obtained)
are required for such party to fulfill its obligations hereunder.
(d) PIN shall provide to CRN on a monthly basis the following types of
information regarding the carriage of the CRN Programming on the Network: name
of market, number of homes, affiliate cable television systems, contiguous hours
per days -- days of week and channel number of the Network. PIN shall provide to
CRN on a quarterly basis an affidavit certifying that the CRN Programming was
aired by PIN according to the written schedule provided to PIN by CRN. PIN shall
also provide to CRN on a monthly basis a list of any cable systems that added or
deleted the CRN Programming on the Network including: name of market, number of
homes, ZIP code, contiguous hours per day-days of week and channel number of the
Network.
(e) Neither PIN nor any person, firm or corporation acting pursuant to
its authority, shall use the name "Consumer Resource Network", "CRN" or any
other name deceptively similar to such names or any logo, tradename or trademark
used to identify CRN Programming, in connection with any marketing campaigns,
endorsements or promotions, conducted by, or on behalf of, PIN unless PIN shall
have received prior written approval from CRN.
August 23, 1996
Page 6
(f) Except as otherwise permitted under the Agreement, neither PIN nor
any person, firm or corporation acting pursuant to its authority shall use at
any time any name, tradename, logo or trademark of any client of CRN in
connection with any marketing campaigns, endorsements or promotions conducted
by, or on behalf of, PIN or otherwise associate PIN's business or programming
with any client of CRN, or in any way imply any endorsement by CRN's clients of
PIN or the products or services promoted on PIN.
(g) This Agreement shall be binding upon and insure to the benefit of
the parties hereto and their respective successors and assigns; provided,
however, that no assignment of this Agreement shall serve to extinguish or in
any way limit the primary liability of the parties hereto.
(h) Each of the parties are acting as independent contractors. Nothing
herein shall be construed to create a partnership between the parties, and
neither party shall have the right to legally bind or otherwise contractually
commit the other party, without such other party's express written permission.
(i) Any viewer mail concerning CRN or its programs or sponsors that is
delivered to PIN will be deemed the property of CRN and promptly forwarded to
CRN.
(j) Nothing herein shall be deemed to transfer to or create in PIN any
right, title or interest in CRN or the CRN programming. All such rights shall be
retained by CRN and/or its sponsors.
7. ***
If the foregoing accurately sets forth your understanding of the Agreement,
please confirm by signing below and returning a copy of this Agreement to the
undersigned.
Sincerely,
JONES INFOMERCIAL NETWORK VENTURES, INC.
a Colorado corporation
By: /s/ GREGORY J. LIPTAK
---------------------
Gregory J. Liptak
President
[SIGNATURES CONTINUED ON NEXT PAGE]
August 23, 1996
Page 7
Accepted and Agreed:
SEVENTH MEDIUM, INC.
a VERMONT corporation
-------
By: /s/ T.W. MARQUIS
----------------
Name: T.W. Marquis
--------------
Title: CFO
-------------
ADDENDUM "A" TO REVISED LETTER OF AGREEMENT FOR PURCHASE OF
AIR TIME ON THE PRODUCT INFORMATION NETWORK
THIS ADDENDUM is made effective the 23rd day of August, 1996, between Jones
Infomercial Network Ventures, Inc., d/b/a Product Information Network ("PIN"), a
Colorado partnership, and Seventh Medium, Inc., d/b/a Consumer Resource Network
("CRN"), a Vermont corporation.
WHEREAS, PIN and CRN have entered into a Revised Letter Agreement (the
"Agreement") contemporaneously with this Addendum, whereby CRN has agreed to
purchase air time on the Product Information Network; and
WHEREAS, PIN and CRN desire to agree upon certain provisions regarding
marketing support dollars in addition to the terms specified in the Agreement.
NOW, THEREFORE, for and in consideration of the premises contained herein,
and other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, the parties agree to the following:
1. Marketing Support
-----------------
(a) Commencing July 1, 1996, cable affiliates located within
the top 25 DMAs, who, subsequent to the date of the Agreement, subscribe to PIN
for such periods of time as to include 100% of the then-available CRN
Programming on the PIN Network will be eligible for *** per subscriber per
year in marketing support dollars. For affiliates located within the top 25
DMAs subscribing to PIN subsequent to the date of the Agreement for periods of
time which include a portion but not all of the then-available CRN Programming,
such affiliate shall be eligible for a pro rated portion of the marketing
support dollars calculated by multiplying *** by a fraction, the numerator of
which is the amount of CRN Programming actually carried by the affiliate
(measured in half hour increments) and the denominator of which is the total
amount of CRN Programming available on the PIN Network (measured in half hour
increments) as of the date the affiliate subscribes to PIN. Thus, the formula
would appear as follows:
Amount of CRN Programming actually carried by Affiliate*
--------------------------------------------------------
*** X Total amount of CRN Programming then available on PIN*
*Measured in half hour increments.
For example, if an affiliate subscribes to PIN as of August 1,
1996 for carriage of PIN which includes the hours of 4 p.m. and 12 a.m. EST and
CRN Programming is carried on PIN between the hours of 4 p.m. and 12 a.m., the
affiliate would be entitled to *** of the available marketing support dollars
or *** per subscriber per year. If the same affiliate subscribes to PIN as of
August 1, 1996 for carriage only during the hours of 6 p.m. and 12 a.m. EST and
CRN Programming is carried on PIN between the hours of 4 p.m. and 12 a.m., the
affiliate would be entitled to *** of the available marketing support dollars or
*** per subscriber per year, ie., *** x 12/16 (12 being equal to the amount
of actual carriage of CRN Programming by the affiliate, measured in half hour
increments and 16 being equal to the amount of total available time of CRN
Programming on PIN, measured in half hour increments, as of the date the
affiliate subscribes to PIN, that is, August 1, 1996). Conversely, if the same
affiliate subscribes to PIN as of October 1, 1996 for carriage which includes
the hours of 4 p.m. and 12 a.m. EST but CRN Programming has expanded its
programming to the hours of 3 p.m. to 12 a.m. EST, the affiliate would not be
entitled to 100% of the available marketing support dollars but instead *** or
*** per subscriber per year, i.e. *** x 16/18 (16 being equal to the amount
of actual carriage of CRN Programming by the affiliate, measured in half hour
increments and 18 being equal to the amount of total available time of CRN
Programming on PIN, measured in half hour increments, as of the date the
affiliate subscribers to PIN, that is, October 1, 1996).
For purposes of the Agreement and this Addendum, DMA shall be as
defined in the 1995 Television and Cable Television Factbook(R). Of the total
annual marketing support contribution, CRN shall contribute ***, not to exceed
*** per subscriber per year, and PIN shall contribute ***, not to exceed ***
per subscriber per year. It is agreed and understood that CRN's contribution to
the marketing support dollars shall be used to purchase local spot-market avails
to promote CRN's then-current advertising clients. PIN's contribution to the
marketing support dollars shall be used to purchase local spot-market avails to
promote PIN's Network and CRN's programming.
(b) Commencing January 1, 1997, CRN and PIN shall contribute up
to a total of *** per subscriber per year in marketing support dollars to
eligible affiliates of PIN who, as of the date of the Agreement: (i) are located
within the top 25 DMAs and (ii) carry some portion of CRN Programming
("Pre-existing Affiliates"). Pre-existing Affiliates, as listed on Exhibit A,
attached to and made a part hereof, shall be eligible for the marketing support
dollars pursuant to the formula described in Paragraph 1(a) of this Addendum and
based upon the actual amount of
-2-
carriage of CRN Programming by the Pre-existing Affiliate as of the date of the
Agreement; provided, however, that payment of the marketing support dollars for
eligible Pre-existing Affiliates shall not commence until January 1, 1997.
For PIN affiliates existing as of the date of the Agreement who
do not carry PIN during hours which include CRN Programming, but, who subsequent
to the date of the Agreement, expand their PIN carriage to include hours which
include CRN Programming ("Expanded Affiliates"), eligibility for the marketing
support dollars will become effective as of the date the affiliate expands its
PIN carriage to include CRN Programming. In which case, the amount of marketing
support dollars to be paid shall be calculated using the formula outlined in
Paragraph 1(a) of this Addendum. Similarly, Pre-existing Affiliates who expand
their carriage of CRN Programming shall be eligible for marketing support
dollars, using the formula in Paragraph 1(a) of this Addendum, for the amount of
expanded carriage containing CRN Programming effective as of the date of
expanded carriage, but only for that portion of CRN Programming added subsequent
to the date of the Agreement. Such affiliates will therefore be eligible for
immediate payment of marketing support dollars for that portion of CRN
Programming added subsequent to the date of the Agreement and shall additionally
be eligible for payment of marketing support dollars as of January 1, 1997 for
that portion of CRN Programming carried as of the date of the Agreement.
(c) PIN shall be responsible for administering and managing the
payment of the marketing support dollars to the affiliates. PIN shall ensure
that CRN's obligations to provide its portion of the marketing support dollars
contemplated under this Addendum does not extend beyond the term of the
Agreement, other than a renewal thereof upon mutual written agreement. CRN shall
pay to PIN CRN's portion of the contribution on a monthly basis, regardless of
whether spots are actually aired during the month in question, and PIN shall
forward the total marketing support dollars to the affiliates. All checks paid
to affiliates for marketing support dollars shall identify CRN's contribution
and amounts thereof. PIN shall have exclusive control over the content of any
other correspondence with affiliates. Each month, PIN shall provide a statement
to CRN detailing the payments of marketing support dollars to affiliates and
a summary affidavit of the number of spots aired by each system receiving
marketing support dollars under the terms of Paragraphs 1(a) and 1(b) of this
Addendum. PIN additionally agrees to manage the verification and reporting
process with PIN cable television affiliates to ensure the compliance of those
affiliates with the marketing support program contemplated under this Addendum.
(d) PIN agrees to use its reasonable efforts to cause the CRN
Programming to be included in weekly television programming schedules which
describe the Network's programming and scheduling. PIN also agrees to use its
reasonable efforts to run :30 second spots promoting CRN on the Network, which
spots will be produced by CRN. PIN also agrees to make reasonable efforts to
cause PIN cable television affiliates to offer CRN the lowest spot-market
advertising rate
-3-
offered by such affiliate to its other programmers, plus 20% in bonus spots. In
addition, PIN agrees to cooperate with and generally assist CRN in connection
with its other marketing efforts.
(c) In 1997, PIN shall not obligate CRN to provide marketing
support dollars in excess of $2,250,000 to cable affiliates in the top 25 DMAs
without the prior written consent of CRN. PIN shall not obligate CRN to any
marketing support dollars beyond 12/31/97.
2. In the event of a conflict between the terms and conditions of
the Agreement and the terms and conditions of this Addendum, the Addendum shall
prevail.
Except as expressly addressed herein, all of the terms and
conditions of the Agreement shall remain in full force and effect and unaltered
by this Addendum.
IN WITNESS WHEREOF, the parties have signed this Addendum "A" as of the
day and year first written above.
JONES INFOMERCIAL NETWORK VENTURES, INC.
a Colorado corporation
By: /s/ GREGORY J. LIPTAK
---------------------
Gregory J. Liptak
President
SEVENTH MEDIUM, INC.
a Vermont corporation
-------
By: /s/ T.W. MARQUIS
----------------
Name: T.W. Marquis
--------------
Title: CFO
-------------
-4-
Exhibit B
GUARANTY
--------
Visual Services, Inc., a Michigan corporation ("Guarantor"), whose address is
2100 N. Woodward Avenue, West 201, Bloomfield Hills, MI, as a material
inducement to and in consideration of Product Information Network, a Colorado
Partnership ("PIN") entering into that certain Purchase of Air Time Agreement
dated October 23, 1995 (the "Agreement") with Seventh Medium, Inc., d/b/a
Consumer Resource Network ("CRN"), unconditionally guarantees and promises to
pay to PIN all amounts that CRN owes PIN from time-to-time and at any time under
the Agreement and Guarantor further unconditionally guarantees to PIN that CRN
shall perform its obligations under the Agreement.
The provisions of the Agreement may be changed by written agreement between PIN
and CRN at any time without the consent of or without notice to Guarantor;
provided, however, that Guarantor's liability shall not be modified except upon
guarantor's prior written consent. Permitted assignment of the Agreement shall
not affect this Guaranty.
If CRN defaults under the Agreement, PIN can proceed immediately against
Guarantor or CRN, or both, or PIN can enforce against Guarantor or CRN, or both,
any rights that it has under the Agreement, or pursuant to applicable laws.
Guarantor waives all presentments, demands for performance, notices of
nonperformance, protests, notices of protest, notices of dishonor, and notices
of acceptance of this guaranty; and
Without limiting the generality of the foregoing, the obligations of Guarantor
hereunder shall in no way be released, diminished or otherwise affected by
reason of any voluntary or involuntary proceedings by or against CRN in
bankruptcy or from any arrangement or reorganization or for any other relief
under any provision of the Bankruptcy Act as from time to time in effect.
However, nothing herein shall require Guarantor to act in any manner prohibited
by law or court proceeding.
Guarantor further agrees that if any of its obligations hereunder shall be held
to be unenforceable, the remainder of this guaranty and its application to all
obligations other than those with respect to which it is held unenforceable
shall not be affected thereby and shall remain in full force and effect.
This Guaranty shall continue and remain unconditionally unaffected by any
assignment of the Agreement by CRN or any change in the entity comprising CRN.
Upon any assignment of the Agreement, approved by PIN. Guarantor shall continue
to remain liable and obligated for the full performance by CRN's
Exhibit B
successor of the guaranteed obligations. "CRN" as used in this Guaranty shall
include all successors and assigns of CRN.
PIN may not, without notice, assign, transfer, hypothecate, encumber or
otherwise dispose of, in whole or in part, any of PIN's rights, claims or
interests in the Guaranty without the written approval of Guarantor. No
assignment, hypothecation, encumbrance, disposition or other transfer of the
Agreement or this Guaranty shall operate to extinguish or diminish, in any way,
the obligations of Guarantor hereunder.
If PIN is required to enforce Guarantor's obligations by legal proceedings,
Guarantor shall pay to PIN all costs incurred, including, without limitation,
reasonable attorneys' fees if awarded by the court.
Guarantor's obligations under this guaranty shall be binding on Guarantor's
successors and assigns.
IN WITNESS WHEREOF, Guarantor has executed this Guaranty this 23rd day of
August, 1996, with the intent to be legally bound thereby.
GUARANTOR:
VISUAL SERVICES, INC.
By: /s/ Steve Toth, Jr. By: /s/ T.W. Marquis
-------------------------- ----------------------------
Its: President Its: Chief Financial Officer
------------------------- ---------------------------
Date: 11/3/96 Date: 8/23/96
------------------------ --------------------------