EXHIBIT 10.13
SUBORDINATED CONVERTIBLE
TERM LOAN AGREEMENT
BY AND BETWEEN
RESNET COMMUNICATIONS, INC.
AS BORROWER
AND
TCI SATELLITE ENTERTAINMENT, INC.
AS LENDER
Dated as of October 21, 1996
$34,603,947
TABLE OF CONTENTS
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Page
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ARTICLE 1 - Definitions...................................................... 1
ARTICLE 2 - Terms of Loan.................................................... 5
2.1 Loans............................................................ 5
2.2 Procedure for Loans.............................................. 5
2.3 Interest......................................................... 5
(a) Interest................................................. 5
(b) Computation of Interest.................................. 5
(c) Maximum Interest Rate.................................... 5
2.4 Payments......................................................... 6
(a) Payments of Loans........................................ 6
(b) No Prepayment............................................ 6
2.5 No Security...................................................... 6
2.6 Subordination.................................................... 6
ARTICLE 3 - Conditions Precedent............................................. 6
3.1 No Existing Default.............................................. 6
3.2 Purchase Order; Invoice.......................................... 6
ARTICLE 4 - Representations and Warranties of Borrower....................... 7
4.1 Due Organization and Authority................................... 7
4.2 Authorization.................................................... 7
4.3 Governmental Requirements........................................ 7
4.4 Consents......................................................... 7
4.5 No Conflict...................................................... 7
4.6 Binding Effect................................................... 7
4.7 Litigation....................................................... 8
ARTICLE 5 - Representations and Warranties of Lender......................... 8
5.1 Due Organization and Authority................................... 8
5.2 Authorization.................................................... 8
5.3 Governmental Requirements........................................ 8
5.4 Consents......................................................... 8
5.5 No Conflict...................................................... 9
5.6 Binding Effect................................................... 9
5.7 Litigation....................................................... 9
(i)
ARTICLE 6 - Covenants....................................................... 9
6.1 Accounting Records.............................................. 9
6.2 Corporate Existence............................................. 9
6.3 Compliance With Governmental Requirements....................... 10
6.4 Taxes and Other Liabilities..................................... 10
6.5 Indemnification................................................. 10
6.6 Use of Proceeds................................................. 10
6.7 Financial Statements............................................ 10
6.8 Insurance....................................................... 10
6.9 Maintenance of Property......................................... 10
6.10 Conduct of Business............................................. 10
6.11 Notification of Events of Default and Adverse Developments...... 10
6.12 Limitation on Transactions with Affiliates...................... 11
6.13 Limitation on Restricted Payments............................... 11
6.14 Merger, Consolidation and Sale of Assets........................ 12
6.15 Limitation on Other Business.................................... 13
ARTICLE 7 - Events of Default............................................... 13
7.1 Events of Default............................................... 13
(a) Bankruptcy............................................... 13
(b) Material Violation of Transaction Documents.............. 14
7.2 Termination of Commitment....................................... 14
7.3 Other Remedies.................................................. 14
ARTICLE 8 - Conversion...................................................... 14
8.1 Conversion by Lender............................................ 14
8.2 Effect of Conversion............................................ 17
8.3 Limitation on Conversion Rights................................. 18
8.4 MANDATORY CONVERSION............................................ 18
ARTICLE 9 - Warrant......................................................... 18
9.1 Issuance of Warrant............................................. 18
9.2 Effect of Issuance of Warrant................................... 18
9.3 Transferability of Warrant...................................... 18
ARTICLE 10 - Further Assurances............................................. 19
ARTICLE 11 - Miscellaneous.................................................. 19
11.1 Successors and Assigns......................................... 19
11.2 No Implied Waiver.............................................. 19
11.3 Amendments; Waivers............................................ 19
11.4 Severability................................................... 20
(ii)
11.5 Notices......................................................... 20
11.6 Construction.................................................... 21
11.7 Survival........................................................ 21
11.8 Governing Law; Choice of Forum.................................. 21
11.9 Integration..................................................... 21
11.10 Counterparts.................................................... 22
(iii)
EXECUTION COPY
SUBORDINATED CONVERTIBLE
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TERM LOAN AGREEMENT
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This SUBORDINATED CONVERTIBLE TERM LOAN AGREEMENT is dated as of October
21, 1996, by and between ResNet Communications, Inc., a Delaware corporation
("Borrower"), and TCI Satellite Entertainment, Inc., a Delaware corporation
("Lender").
RECITALS
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WHEREAS, Borrower has requested Lender to lend funds to Borrower to enable
Borrower to acquire certain equipment from Lender; and
WHEREAS, Lender has agreed to lend to Borrower, subject to the terms and
conditions hereof, and Borrower desires to obtain from Lender, a loan in a
maximum principal amount not to exceed $34,603,947 to be used as a credit
facility for Borrower to draw down the purchase price to be paid by Borrower to
Lender for the purchase of certain equipment.
NOW, THEREFORE, in consideration of the premises set forth above and the
mutual promises and agreements hereinafter set forth, and for other good and
valuable consideration, the receipt and adequacy of which are hereby
specifically acknowledged, the parties hereto agree as follows:
ARTICLE 1
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Definitions
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In addition to any terms defined elsewhere in this Agreement, the following
terms have the meanings indicated for purposes of this Agreement (such
definitions being equally applicable to the singular and plural forms of the
defined term):
"Adjusted Conversion Formula" shall have the meaning set forth in Section
8.1(b).
"Affiliate" of any Person at any time shall mean any other Person directly
or indirectly controlling, controlled by or under common control with such
Person at such time; with "control" for such purposes meaning ownership of
securities representing at least 75% of the economic interests in and 75% of the
voting power of a Person.
"Agreement" means this Subordinated Convertible Term Loan Agreement, as
amended from time to time.
"Base Conversion Formula" shall have the meaning set forth in Section
8.1(a).
"Borrower" shall have the meaning set forth in the heading to this
Agreement.
"Borrower Bank Guaranty" shall mean that certain Guaranty of Borrower dated
as of March 11, 1996, as amended by Amendment No. 1 to Guaranty dated as of
October 21, 1996, executed and delivered in connection with that certain Loan
Agreement dated as of March 11, 1996, as amended by Amendment No. 1 to Loan
Agreement dated as of October 21, 1996, among LodgeNet, the Banks named therein,
National Westminster Bank Plc, New York Branch, as Agent, and National
Westminster Bank of Canada, as Issuing Bank.
"Borrowing Date" shall have the meaning given it in Section 2.2 of this
Agreement.
"Business" shall mean the business of Borrower, operating as a "private
cable operator" under applicable federal law providing video on-demand, basic
and premium cable television programming and other interactive, multi-media
entertainment and information services to subscribers in multiple dwelling units
with facilities that do not use any public right-of-way.
"Closing Date" means the date of execution of this Agreement by Lender and
Borrower.
"Commitment" means the commitment by Lender to make loans to Borrower under
this Agreement up to a maximum principal amount of $34,603,947.
"Common Control Affiliate" means, with respect to any Person, any other
Person directly or indirectly controlling, controlled by, or under common
control with such Person; with "control" for such purposes meaning the right
generally to elect a majority of the directors (or similar officials) of a
Person or the possession, by contract or otherwise, of authority to direct the
management and policies of a Person.
"Conversion Date" means any date specified in any notice given pursuant to
Section 8.1 hereof for conversion of all or any portion of the principal amount
of the Loans.
"Conversion Stock" shall have the meaning set forth in Section 8.1.
"Conversion Warrant" shall have the meaning set forth in Section 9.1.
"EBITDA" shall mean gross revenues from operations less all operating
expenses, determined on an accrual basis in accordance with GAAP for the most
recent twelve-month period ending as of the end of the month immediately
preceding the date of determination, before non-recurring items of income, gain
or expense (including gain or loss on disposition of any assets) and before
deduction of any amount on account of interest, income taxes, depreciation,
amortization, or other similar non-cash charges.
"Equipment" shall have the meaning set forth in Section 2.2.
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"Equipment Sale Agreement" shall have the meaning set forth in Section 2.2.
"Event of Default" shall have the meaning set forth in Section 7.1.
"Extension" means the right of Borrower to elect to extend the term of this
Agreement for one year beyond the Maturity Date if the maximum amount of the
Commitment has not been advanced under this Agreement on or before the Maturity
Date, which election shall be made by Borrower by giving written notice to
Lender at least 30 and not more than 180 days prior to the Maturity Date.
"FCC" means the United States Federal Communications Commission.
"GAAP" means generally accepted accounting principles set forth in the
opinions and pronouncements of the Accounting Principles Board and the American
Institute of Certified Public Accountants and statements and pronouncements of
the Financial Accounting Standards Board or in such other statements by such
other entity as may be approved by a significant segment of the accounting
profession, which are applicable to the circumstances as of the date of
determination.
"Governmental Authority" means any nation or government, any state,
province or other political subdivision thereof or any entity exercising
executive, legislative, judicial, regulatory or administrative functions of or
pertaining to government.
"Governmental Requirement" means all legal requirements in effect from time
to time including all laws, statutes, codes, acts, ordinances, orders,
judgments, decrees, injunctions, rules, regulations, permits, licenses,
authorizations, certificates, orders, franchises, determinations, approvals,
notices, demand letters, directions and requirements of all governments,
departments, commissions, boards, courts, authorities, agencies, officials and
officers, and all instruments of record, foreseen or unforeseen, ordinary or
extraordinary, including but not limited to any change in any law, regulation or
the interpretation thereof by any Governmental Authority (whether or not having
the force of law), relating now or at any time heretofore or hereafter to the
business or operations of Borrower or to any of the property owned, leased or
used by Borrower, including, without limitation, the development, design,
construction, acquisition, start-up, ownership and operation and maintenance of
property.
"Initial Stock" shall have the meaning set forth in Section 8.1(b).
"Lien" means any lien, mortgage, pledge, security interest, charge or
encumbrance of any kind (including any conditional sale or other title retention
agreement, any lease in the nature thereof, and any agreement to give any
security interest).
"Loans" shall have the meaning set forth in Section 2.1.
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"LodgeNet" means LodgeNet Entertainment Corporation, a Delaware
corporation, the parent of Borrower, including any successor corporation.
"LodgeNet Debt" shall have the meaning set forth in Section 2.6.
"Material Adverse Effect" means a material adverse effect on the business,
assets, operations or financial condition of a Person.
"Maturity Date" means October 21, 2001, subject to the Extension.
"Option Agreement" means the agreement pursuant to which Borrower is
granting to Lender an option to acquire the Option Stock, which agreement is
being executed and delivered on the date of and simultaneously with the
execution of this Agreement.
"Option Stock" shall mean 260,200 shares of common stock of Borrower that
Borrower has granted Lender an option to acquire pursuant to the terms of the
Option Agreement or the Option Warrant.
"Option Warrant" shall mean a warrant that will be issued by Borrower to
Lender to acquire the unexercised portion of the Option Stock upon the
termination of the Option Agreement if Lender has not exercised its option in
full to acquire the Option Stock and the Conversion Warrant is issued by
Borrower to Lender.
"Permitted Third Party Equipment Purchase" shall have the meaning set forth
in Section 2.2.
"Person" means an individual, a corporation, a partnership (general,
limited or limited liability), a joint venture, an association, a trust, a
limited liability company, or any other organization or entity, including a
Governmental Authority.
"Previously Issued Stock" shall have the meaning set forth in Section
8.1(b).
"Reconciliation Stock" shall have the meaning set forth in Section 8.1(f).
"Regulatory Restrictions" shall have the meaning set forth in Section 8.3.
"Signal Availability Agreement" shall mean the Signal Availability
Agreement being entered into between Lender and Borrower on the date of and
simultaneously with the execution of this Agreement pursuant to which Lender
will provide distribution of programming in connection with Borrower's Business.
"SMATV" means satellite master antenna television.
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"Termination Date" means the date that is the earlier of (i) the Maturity
Date, or (ii) the date on which the aggregate principal amount of the Loans
converted pursuant to Section 8.1 is equal to the maximum amount of the
Commitment.
"Transaction Documents" shall have the meaning set forth in Section 11.9.
Each accounting term not defined herein and each accounting term partly defined
herein to the extent not defined shall have the meaning given to it under GAAP.
ARTICLE 2
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Terms of Loan
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2.1 Loans. Subject to the terms and conditions of this Agreement, Lender
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agrees to make loans (the "Loans") from time to time before the Termination Date
in an aggregate principal amount not to exceed the maximum amount of the
Commitment, including the total principal amount of Loans converted into stock
of Borrower pursuant to Section 8.1. Upon prior or contemporaneous satisfaction
of the conditions precedent contained in Article 3, or waiver by Lender of any
conditions not so satisfied, Lender shall advance the Loans on the terms and
conditions and for the uses specified in this Agreement.
2.2 Procedure for Loans. Borrower may borrow pursuant to this Article 2
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by giving Lender a purchase order for integrated receiver-decoders, low-noise
block converters and other equipment (the "Equipment") pursuant to the Equipment
Sale Agreement (the "Equipment Sale Agreement") between Lender and Borrower
dated the same date as this Agreement or by giving Lender an invoice for
Equipment purchased by Borrower from a third party as permitted under the
Equipment Sale Agreement (a "Permitted Third Party Equipment Purchase"). Lender
shall advance Loans under this Agreement to pay the purchase price for the
Equipment upon shipping the Equipment to Borrower or within 30 days after
receipt of an invoice for any Permitted Third Party Equipment Purchase, as
applicable (the "Borrowing Date").
2.3 Interest.
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(a) Interest. The Loans shall accrue interest from the date of
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disbursement on the unpaid principal amount thereof until such amount is paid in
accordance with Section 2.4(a) at a rate per annum equal to seven and nine-
tenths percent (7.9%), but not to exceed the Maximum Rate.
(b) Computation of Interest. Interest shall accrue daily and shall be
-----------------------
computed for the actual number of days elapsed on the basis of a year consisting
of 365 days. Accrued but unpaid interest shall be accumulated and shall not be
added to principal.
(c) Maximum Interest Rate. Nothing in this Agreement shall require
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Borrower to pay interest at a rate (the "Maximum Rate") exceeding the maximum
amount permitted by applicable law
-5-
to be charged by Lender. If the amount of interest payable for the account of
Lender on any day in respect of the immediately preceding interest computation
period, computed pursuant to this Article 2, would exceed the Maximum Rate, the
amount of interest payable for its account on such interest payment date shall
automatically be reduced to the Maximum Rate.
2.4 Payments.
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(a) Payments of Loans. On the Maturity Date (subject to the Extension), if
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Lender has not converted the Loans into the maximum amount of Conversion Stock
pursuant to Section 8.1, Borrower shall issue the Conversion Warrant to Lender
pursuant to Article 9, and all principal and accrued and unpaid interest on the
Loans under this Agreement shall be cancelled upon issuance of the Conversion
Warrant to Lender. LENDER'S SOLE RECOURSE WITH RESPECT TO THE LOANS (INCLUDING
ALL ACCRUED AND UNPAID INTEREST) SHALL BE LIMITED TO EITHER CONVERSION PURSUANT
TO SECTION 8.1 OR ISSUANCE OF THE CONVERSION WARRANT PURSUANT TO ARTICLE 9.
(b) No Prepayment. Borrower may prepay the Loans in whole or in part only
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with the consent of Lender and on the terms and conditions agreed by Lender and
Borrower.
2.5 No Security. The Loans made under this Agreement shall be unsecured
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obligations of Borrower.
2.6 Subordination. The Loans (including all accrued and unpaid interest)
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made under this Agreement shall be subordinated to (i) any intercompany loans
made by LodgeNet to Borrower (the "LodgeNet Debt"), (ii) the Borrower Bank
Guaranty, and (iii) to any other debt incurred by Borrower, all in accordance
with the Subordination Provisions attached as Exhibit A. The Subordination
Provisions set forth in Exhibit A hereto are, for every purpose, fully
incorporated and made an integral part of the enforceable terms and conditions
of this Agreement.
ARTICLE 3
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Conditions Precedent
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The obligation of Lender to make any Loan is subject to the following
conditions precedent:
3.1 No Existing Default. No Event of Default shall exist on the Borrowing
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Date; and
3.2 Purchase Order; Invoice. Lender shall have received a purchase order
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for Equipment or an invoice for a Permitted Third Party Equipment Purchase for a
purchase price in the amount of the Loan to be advanced on the Borrowing Date.
-6-
ARTICLE 4
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Representations and Warranties of Borrower
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In order to induce Lender to enter into this Agreement and to make the
Loans, Borrower makes the following representations and warranties to Lender:
4.1 Due Organization and Authority. It (a) is a corporation, duly
------------------------------
organized, validly existing, and in good standing under the laws of the State of
Delaware, (b) is authorized to transact business and is in good standing in each
state where its ownership of assets or conduct of business requires such
qualification, and (iii) has all corporate powers required to carry on its
business as conducted on the date hereof and as proposed to be conducted, with
such exceptions to clauses (ii) and (iii) as would not have a Material Adverse
Effect on Borrower or a material adverse effect on the ability of Borrower to
perform its obligations under this Agreement or under the Transaction Documents.
4.2 Authorization. The execution, delivery and performance by it of
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this Agreement an d the Transaction Documents are within its corporate powers
and have been duly authorized by all necessary corporate action on its part.
Each Person executing this Agreement and the Transaction Documents on behalf of
Borrower is fully authorized to execute and deliver the same.
4.3 Governmental Requirements. The execution, delivery, and performance
-------------------------
by it of this Agreement and the Transaction Documents require no material action
by or in respect of, or material filing with, any Governmental Authority other
than those that have been obtained or made and are in full force and effect.
4.4 Consents. No consent by any Person under any contract to which
--------
it or LodgeNet is a party or to which their respective assets are subject is
required or necessary for the execution, delivery and performance by it of this
Agreement or the Transaction Documents, except those set forth on Schedule 4.4
all of which have been obtained and are in full force and effect.
4.5 No Conflict. The execution, delivery and performance of this
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Agreement and the Transaction Documents by it do not and will not (x) contravene
its certificate of incorporation or bylaws or (y) result in or constitute a
breach or default (including any event that, with the passage of time or giving
of notice, or both, would become a breach or default) under any applicable
Governmental Requirement or any judgment, injunction, order, decree, contract,
license, lease, indenture, mortgage, loan agreement, note or other agreement or
instrument to which it is a party or by which any of its properties may be
bound, the effect of which would be to cause a Material Adverse Effect on
Borrower or a material adverse effect on the ability of Borrower to perform its
obligations under this Agreement or under the Transaction Documents.
4.6 Binding Effect. This Agreement has been duly executed and delivered
--------------
by it and constitutes its valid and binding obligation, enforceable against it
in accordance with its terms, except
-7-
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights generally
or by the principles governing the availability of equitable remedies.
4.7 Litigation. There are no suits, claims, grievances, actions,
----------
proceedings, or governmental investigations pending or, to the best knowledge of
Borrower or LodgeNet, threatened against or affecting Borrower which (i) seek to
restrain or enjoin the consummation of the transactions contemplated by this
Agreement or (ii) might have a Material Adverse Effect on Borrower. Borrower is
not in violation of any term of any judgment, decree, injunction, or order to
which it is subject, which violation could have a Material Adverse Effect on
Borrower or a material adverse effect on the ability of Borrower to perform its
obligations under this Agreement or under the Transaction Documents.
ARTICLE 5
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Representations and Warranties of Lender
----------------------------------------
Lender represents and warrants to Borrower that:
5.1 Due Organization and Authority. It (i) is a corporation duly
------------------------------
organized, validly existing and in good standing under the laws of the State of
Delaware, (ii) is authorized to transact business and is in good standing in
each state in which its ownership of assets or conduct of business requires such
qualification, and (iii) has all corporate powers required to carry on its
business as conducted on the date hereof and as proposed to be conducted, with
such exceptions to clauses (ii) and (iii) as would not have a material adverse
effect on the ability of Lender to perform its obligations under this Agreement
or under the Transaction Documents.
5.2 Authorization. The execution, delivery and performance by it of this
-------------
Agreement and the Transaction Documents are within its corporate powers and have
been duly authorized by all necessary corporate action on its part. Each Person
executing this Agreement and the Transaction Documents on behalf of Lender is
fully authorized to execute and deliver the same.
5.3 Governmental Requirements. The execution, delivery and performance by
-------------------------
it of this Agreement and the Transaction Documents require no material action by
or in respect of, or filing with, any Governmental Authority other than those
that have been obtained or made and are in full force and effect.
5.4 Consents. No consent by any Person under any contract to which it is
--------
a party or to which its assets are subject is required or necessary for the
execution, delivery and performance by it of this Agreement or the Transaction
Documents, with such exceptions as would not have a material adverse effect on
the ability of Lender to perform its obligations under this Agreement or under
the Transaction Documents.
-8-
5.5 No Conflict. The execution, delivery and performance by it of this
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Agreement and the Transactions Documents do not and will not (x) contravene its
certificate of incorporation or bylaws or (y) result in or constitute a breach
or default (including any event that, with the passage of time or giving of
notice, or both, would become a breach or default) under any applicable
Governmental Requirement or any judgment, order, decree, contract, license,
lease, indenture, mortgage, loan agreement, note, security agreement or other
agreement or instrument to which it is a party or by which any of its properties
may be bound, the effect of which would be to cause a material adverse effect on
the ability of Lender to perform its obligations under this Agreement or under
the Transaction Documents.
5.6 Binding Effect. This Agreement has been duly executed and delivered
--------------
by it and constitutes its valid and binding obligation, enforceable against it
in accordance with its terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally or by the principles governing the
availability of equitable remedies.
5.7 Litigation. There are no suits, claims, grievances, actions,
----------
proceedings, or governmental investigations pending or, to the best knowledge of
Lender, threatened against or affecting Lender which (i) seek to restrain or
enjoin the consummation of the transactions contemplated by this Agreement or
the Transaction Documents or (ii) might have a material adverse effect on the
ability of Lender to perform its obligations under this Agreement or under the
Transaction Documents. Lender is not in violation of any term of any judgment,
decree, injunction, or order to which it is subject, which violation could have
a material adverse effect on the ability of Lender to perform its obligations
under this Agreement or under the Transaction Documents.
ARTICLE 6
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Covenants
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Unless Lender shall agree in writing otherwise, Borrower shall comply
with the following provisions so long as any Loans are outstanding:
6.1 Accounting Records. Borrower shall maintain adequate books and
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accounts in accordance with GAAP consistently applied. Borrower shall promptly
furnish to Lender any information regarding its business or finances as Lender
may reasonably request.
6.2 Corporate Existence. Borrower shall preserve and maintain its
-------------------
corporate existence and shall preserve all of its licenses, privileges and
contracts and other rights necessary or desirable in the normal course of its
business, except to the extent that the failure to preserve and maintain such
rights would not have a Material Adverse Effect on Borrower or a material
adverse effect on the ability of Borrower to perform is obligations under this
Agreement or under the Transaction Documents.
-9-
6.3 Compliance With Governmental Requirements. Borrower shall comply
-----------------------------------------
with all Governmental Requirements, except where the failure to do so would not
have a Material Adverse Effect on Borrower or a material adverse effect on the
ability of Borrower to perform is obligations under this Agreement or under the
Transaction Documents.
6.4 Taxes and Other Liabilities. Borrower shall pay and discharge
---------------------------
when due any and all indebtedness, obligations, assessments and real and
personal property taxes, including, but not limited to, federal and state taxes,
except as may be subject to good faith contest diligently pursued.
6.5 Indemnification. Borrower shall indemnify and hold Lender and
---------------
its agents, successors and assigns (collectively, the "Indemnitees") harmless
from and against any and all liabilities, obligations, losses, damages,
penalties, actions, judgments, suits, claims, costs, expenses and disbursements
(including, without limitation, the reasonable fees and disbursements of
counsel) which may be imposed on, incurred by or asserted against such
Indemnitees in any manner relating to or arising out of the making of the Loans.
6.6 Use of Proceeds. Borrower shall use the proceeds of the Loans
---------------
only to purchase Equipment from Lender or to make a Permitted Thirty Party
Equipment Purchase pursuant to the Equipment Sale Agreement.
6.7 Financial Statements. Borrower shall furnish to Lender such
--------------------
financial statements of Borrower and such additional information, reports or
statements as Lender may from time to time reasonably request.
6.8 Insurance. Borrower shall maintain insurance with responsible
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insurance companies against such risks, on such properties and in such amounts
as is customarily maintained by similar businesses and consistent with
Borrower's past practices.
6.9 Maintenance of Property. Borrower shall maintain, keep and
-----------------------
preserve all of its properties in good repair, working order and condition and
from time to time make all necessary and proper repairs, renewals, replacement
and improvements thereto, with such exceptions as would not have a Material
Adverse Effect on Borrower.
6.10 Conduct of Business. Borrower shall (i) use reasonable
-------------------
commercial efforts to preserve, renew and keep in full force and effect all of
its contracts, (ii) use reasonable commercial efforts to preserve, renew and
maintain in full force and effect all of its franchises and licenses necessary
or desirable in the normal conduct of its business, and (iii) comply with the
terms of all instruments which evidence, secure or govern its indebtedness, with
such exceptions as would not have a Material Adverse Effect on Borrower.
6.11 Notification of Events of Default and Adverse Developments.
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Borrower shall promptly notify Lender of the occurrence of (i) any Event of
Default hereunder; (ii) any event, development or circumstance whereby the
financial statements most recently furnished to Lender
-10-
fail in any material respect to present fairly, in accordance with GAAP, the
financial condition and operating results of Borrower as of the date of such
financial statements; (iii) any material litigation or proceedings that are
instituted or threatened (to the knowledge of Borrower) against Borrower;
(iv) each and every event which would be an event of default (or an event which
with the giving of notice or lapse of time or both would be an event of default)
under any indebtedness of Borrower, such notice to include the names and
addresses of the holders of such indebtedness and the amount thereof; and
(v) any other development in the business or affairs of Borrower if the effect
thereof involves a significant risk of a Material Adverse Effect on Borrower; in
each case describing the nature thereof and the action Borrower proposes to take
with respect thereto.
6.12 Limitation on Transactions with Affiliates. Borrower will not
------------------------------------------
amend the Borrower Bank Guaranty to extend the liability of Borrower beyond the
LodgeNet Debt; and Borrower will not, and will not permit any of its
subsidiaries to, directly or indirectly, enter into, renew or extend any
transaction (including, without limitation, the purchase, sale, lease or
exchange of property or assets, or the rendering of any service) with any of
their respective Common Control Affiliates, except upon fair and reasonable
terms no less favorable to Borrower than could be obtained, at the time of such
transaction or at the time of the execution of the agreement providing therefor,
in a comparable arm's-length transaction with a Person that is not a Common
Control Affiliate. The foregoing limitation does not limit, and shall not apply
to (i) any sale of Equipment by Borrower to LodgeNet in accordance with the
terms of the Equipment Sale Agreement; (ii) transactions for which Borrower or a
subsidiary delivers to Lender a written opinion of a nationally recognized
investment banking firm stating that the transaction is fair to Borrower or such
subsidiary from a financial point of view; (iii) any transaction solely between
Borrower and any of its wholly owned subsidiaries or solely between wholly owned
subsidiaries; or (iv) any Restricted Payments not prohibited by Section 6.13.
6.13 Limitation on Restricted Payments. Borrower will not, and will
---------------------------------
not permit any of its subsidiaries to, directly or indirectly, (A) declare or
pay any dividend or make any distribution on its capital stock (other than
dividends or distributions payable solely in shares of stock of the same class
or in options, warrants or other rights to acquire such shares); (B) purchase,
redeem, retire or otherwise acquire for value any shares of capital stock of
Borrower or any of its subsidiaries (including options, warrants or other rights
to acquire such shares of capital stock); or (C) make any Investment, other than
a Permitted Investment, in any Person (such payments or any other actions
described in clauses (A) through (C) of this sentence being collectively
"Restricted Payments"). Notwithstanding the foregoing, Restricted Payments shall
not include, and the limitation on Restricted Payments contained in this Section
6.13 shall not be deemed to restrict or limit, (i) payments of principal and
interest on LodgeNet Debt in accordance with the terms and conditions of such
LodgeNet Debt which shall be a direct pass-through of the interest rate and
amortization provisions of debt incurred by LodgeNet from an unrelated third
party some or all of the proceeds of which are used for purposes of making an
intercompany loan to Borrower, (ii) payments of principal and interest on
LodgeNet Debt the terms of which shall provide for regularly scheduled
amortization beginning three years from the date of incurrence of such LodgeNet
Debt based on the weighted average interest rate on and weighted average
term of debt (excluding revolving credit facilities) incurred by LodgeNet
from unrelated third parties if the proceeds of any LodgeNet Debt result from
equity investments in LodgeNet, (iii) payment of a management fee to LodgeNet in
an
-11-
amount equal to three percent (3%) of Borrower's gross revenues from operations,
not including non-recurring items included in gross revenues, with a minimum
annual payment of $500,000 and a maximum annual payment of $2,000,000, or
(iv) payment for goods and services permitted under Section 6.12.
For purposes of this Section 6.13, an "Investment" in any Person
means any direct or indirect advance, loan or other extension of credit
(including, without limitation, by way of guarantee or similar arrangement; but
excluding installations of Equipment and advances to customers in the ordinary
course of business that are, in conformity with GAAP, recorded as assets or
accounts receivable on the balance sheet of Borrower or any of its subsidiaries)
or capital contribution to (by means of any transfer of cash or other property
to others or any payment for property or services for the account or use of
others), or any purchase or acquisition of capital stock, bonds, notes,
debentures or other similar instruments issued by, such Person.
For purposes of this Section 6.13, a "Permitted Investment" means
(i) an Investment in a wholly owned subsidiary of Borrower or a Person which
will, upon the making of such Investment, become a wholly owned subsidiary or be
merged or consolidated with or into or transfer or convey all or substantially
all its assets to, Borrower or a wholly owned subsidiary of Borrower; provided
that such Person's primary business is related, ancillary or complementary to
the businesses of Borrower on the date of such Investment; (ii) an Investment in
a Person that is nonrecourse to Borrower or any of its subsidiaries and for
which Borrower receives reasonably equivalent value as determined in good faith
by Borrower's board of directors; or (iii) a Temporary Cash Investment.
For purposes of this Section 6.13, "Temporary Cash Investment" means
an investment in any of the following: (i) obligations issued or guaranteed by
the United States of America; (ii) certificates of deposit, bankers acceptances
and other "money market instruments" issued by any bank or trust company
organized under the laws of the United States of America or any state thereof
and having capital and surplus in an aggregate amount of not less than
$100,000,000; (iii) open market commercial paper bearing the highest credit
rating issued by Standard & Poor's Corporation or by another nationally
recognized credit rating agency; (iv) repurchase agreements entered into with
any bank or trust company organized under the laws of the United States of
America or any state thereof and having capital and surplus in an aggregate
amount of not less than $100,000,000 relating to United States of America
government obligations; and (v) shares of "money market funds," each having net
assets of not less than $100,000,000; in each case maturing or being due or
payable in full not more than 180 days after Borrower's acquisition thereof.
6.14 Merger, Consolidation and Sale of Assets. Borrower will not
----------------------------------------
consolidate with, merge with or into, or sell, convey, transfer, lease or
otherwise dispose of all or substantially all of its property and assets (as an
entirety or substantially an entirety in one transaction or a series of related
transactions) to, any Person (other than a consolidation or merger with or into
a wholly owned subsidiary with a positive net worth; provided that, in
connection with any such merger or consolidation, no consideration (other than
common stock in the surviving Person or Borrower) shall be issued or distributed
to the shareholders of Borrower) or permit any Person to merge with or into
Borrower unless: (i) Borrower shall be the continuing Person, or the Person (if
other than Borrower)
-12-
formed by such consolidation or into which Borrower is merged or that acquired
or leased such property and assets of Borrower shall be a corporation organized
and validly existing under the laws of the United States of America or any
jurisdiction thereof; (ii) immediately after giving effect to such transaction,
no Event of Default shall have occurred and be continuing; and (iii) immediately
after giving effect to such transaction on a pro forma basis, Borrower or any
Person becoming the successor to Borrower shall have a consolidated EBITDA equal
to or greater than the consolidated EBITDA of Borrower immediately prior to such
transaction. The foregoing limitation shall not apply to (A) any sale, lease,
or other disposition of assets in the ordinary course of business, or (B) any
sale, lease, or other disposition of assets in an aggregate amount not exceeding
ten percent (10%) of the total assets of Borrower determined on a fair market
value basis so long as Borrower receives fair and reasonable consideration for
such assets as determined in good faith by Borrower's board of directors.
6.15 Limitation on Other Business. Borrower will not, during any
----------------------------
three month period, permit less than 90% of the total consolidated gross
revenues of Borrower and its subsidiaries, not including non-recurring items
included in gross revenues, for such period to be derived from the operation and
maintenance of its Business.
ARTICLE 7
---------
Events of Default
-----------------
7.1 Events of Default. Each of the following shall constitute an
-----------------
Event of Default under this Agreement:
(a) Bankruptcy. Borrower shall institute a voluntary case seeking
----------
liquidation or reorganization under Chapter 7 or Chapter 11, respectively, of
the United States Bankruptcy Code, or shall consent to the institution of an
involuntary case thereunder against it; or Borrower shall file a petition
initiating or shall otherwise institute any similar proceeding under any other
applicable federal or state law, or shall consent thereto; or Borrower shall
apply for, or by consent or acquiescence there shall be an appointment of, or a
decree or order of a court of competent jurisdiction shall have been issued for
the appointment of, a receiver, liquidator, sequestrator, trustee or other
officer with similar power; or Borrower shall make an assignment for the benefit
of creditors; or Borrower shall admit in writing its inability to pay its debts
generally as they become due; or, if an involuntary case shall be commenced
seeking the liquidation or reorganization of Borrower under Chapter 7 or Chapter
11, respectively, of the United States Bankruptcy Code, or any similar
proceeding shall be commenced against Borrower under any applicable federal or
state law, and (i) the petition commencing the involuntary case is not timely
controverted; or (ii) the petition commencing the involuntary case is not
dismissed within 30 days of its filing; or (iii) an interim trustee is appointed
to take possession of all or a portion of the property, to operate all or any
part of the business of Borrower; or (iv) an order for relief shall have been
issued or entered therein; provided, however, that none of the events described
in this Section 7.1(a) shall be deemed to be an Event of Default if upon the
happening of such event, or during the continuation of such event, Lender is
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obligated to continue to perform under and has no right to terminate the
Equipment Sale Agreement, and in such event Lender shall be obligated to
continue to advance Loans under this Agreement in the amount of the purchase
price of Equipment purchased under the Equipment Sale Agreement or to make any
Permitted Third Party Equipment Purchase.
(b) Material Violation of Transaction Documents. Borrower shall
-------------------------------------------
(i) make any material unauthorized use of the Equipment in contravention of the
terms of the Equipment Sale Agreement, (ii) make any material unauthorized use
of the programming service in contravention of the Signal Availability
Agreement, (iii) fail to issue any of the Initial Stock, Conversion Stock,
Reconciliation Stock, or Option Stock to Lender in contravention of the
Transaction Documents, (iv) permit to occur any breach of the covenant contained
in Section 6.15 of this Agreement, (v) fail to make any payment to Lender
required under any of the Transaction Documents, subject to any notice and
opportunity to cure provisions with respect to any such payment obligations
contained in the Transaction Documents, or (vi) fail to consummate the
recapitalization required under and in accordance with the provisions of the
Stockholders' Agreement included in the Transaction Documents.
7.2 Termination of Commitment. If any Event of Default shall occur,
-------------------------
Lender shall have no obligation to make further Loans hereunder.
7.3 Other Remedies. If any Event of Default shall occur and be
--------------
continuing, Lender shall have, in addition to the remedies set forth in Section
7.2 hereof, all other remedies otherwise available at law or in equity.
ARTICLE 8
---------
Conversion
----------
8.1 Conversion by Lender. The Loans (including all accrued and
--------------------
unpaid interest) shall be convertible, in whole or in part, from time to time
into shares of the common stock of Borrower (the "Conversion Stock") in
accordance with the following provisions of this Section 8.1. In order to
exercise the conversion under this Section 8.1, Lender shall send a written
notice to Borrower that Lender is exercising such conversion as of a specified
date that shall be at least five business days, but not more than 30 days, from
the date upon which the notice is sent. Such notice shall specify the total
principal amount of the Loans to be converted.
(a) On or after the first anniversary of the Closing Date,
(i) if the principal amount of the Loans advanced under this
Agreement prior to such first anniversary is $1,405,785 or
less, the entire outstanding principal of and accrued
interest on the Loans will be convertible into shares of
common stock of Borrower that represent, immediately after
issuance of such shares, 1.3% of the issued and outstanding
common stock of Borrower, or (ii) if the principal amount of
the Loans advanced under this Agreement prior to such first
anniversary is more
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than $1,405,785, the entire outstanding principal of and
accrued interest on the Loans will be convertible into
shares of common stock of Borrower that represent,
immediately after issuance of such shares, the percentage of
the issued and outstanding common stock of Borrower based on
the following calculation (the "Base Conversion Formula"):
( )
( ( Outstanding Principal + ) )
( ( of Loans $5,396,053 ) x 36.99 ) - 4.99
( ( ----------------------------------------- ) )
( ( $40,000,000 ) )
( )
(b) On or after the second anniversary of the Closing Date, (i)
if the principal amount of the Loans advanced under this
Agreement as of such second anniversary is $10,608,273 or
less, the entire outstanding principal of and accrued
interest on the Loans will be convertible into shares of the
common stock of Borrower so that, when combined with the
shares of the common stock of Borrower subscribed for by and
issued to Lender on the Closing Date (the "Initial Stock")
and the Conversion Stock issued upon any previous conversion
of the Loans under this Agreement (collectively, the
"Previously Issued Stock"), Lender will hold a total of
14.8% of the issued and outstanding common stock of
Borrower, or (ii) if the principal amount of the Loans
advanced under this Agreement as of such second anniversary
is more than $10,608,273, the entire outstanding principal
of and accrued interest on the Loans will be convertible
into shares of common stock of Borrower that represent,
immediately after issuance of such shares, the percentage of
the issued and outstanding common stock of Borrower based
upon the following calculation (the "Adjusted Conversion
Formula"):
Percentage Previously
Base Conversion Formula - Issued to Lender on
Prior Conversion
(c) On or after the third anniversary of the Closing Date, (i)
if the principal amount of the Loans advanced under this
Agreement as of such third anniversary is $22,600,703 or
less, the entire outstanding principal of and accrued
interest on the Loans will be convertible into shares of the
common stock of Borrower so that, when combined with the
Previously Issued Stock, Lender will hold shares of common
stock of Borrower that represent, immediately after issuance
of such shares, a total of 25.89% of the issued and
outstanding common stock of Borrower, or (ii) if the
principal amount of the Loans advanced under this Agreement
as of such third anniversary is more than $22,600,703, the
entire outstanding principal of and accrued interest on the
Loans will be convertible into shares of common stock of
Borrower that represent, immediately after issuance of such
shares, the percentage of the
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issued and outstanding common stock of Borrower based on the
Adjusted Conversion Formula.
(d) On and after the fourth anniversary of the Closing Date, the
entire outstanding principal of and accrued interest on the
Loans will be convertible into shares of the common stock of
Borrower so that, when combined with the Previously Issued
Stock, Lender will hold shares of common stock of Borrower
that represent, immediately after issuance of such shares, a
total of 36.99% of the issued and outstanding common stock
of Borrower.
(e) For purposes of any conversion under paragraphs (a), (b),
(c), and (d) above, at all times there shall be deemed to be
at least $1.00 in outstanding principal on the Loans.
(f) In addition to the shares of Conversion Stock issuable to
Lender under the preceding provisions of this Section 8.1,
Borrower agrees to reserve and hold as Treasury Stock for
contingent issuance to Lender 152,750 additional shares of
the common stock of Borrower (subject to appropriate
adjustment in the event of any stock split, reverse stock
split, stock dividend, reclassification, subdivision,
recapitalization, combination, exchange of shares, or a
special dividend or distribution to holders of shares of
Borrower's common stock with respect to such shares as a
result of a disposition of assets, if the record date of
such stock split, reverse stock split, stock dividend,
reclassification, subdivision, recapitalization,
combination, exchange of shares, or special dividend or
distribution is after the date of this Agreement as first
above written but before the issuance of the Option Stock)
(the "Reconciliation Stock"). The intent of the parties in
reserving the Reconciliation Stock for issuance upon
exercise of the Option is to enable Lender, upon purchase or
acquisition of the Initial Stock, the Conversion Stock and
the Option Stock, to own shares of Borrower's common stock
equal to 50% of Borrower's outstanding common stock as of
the Closing Date (but determined after issuance of the
Initial Stock, the Conversion Stock, the Option Stock, and
the Reconciliation Stock), assuming for this purpose that
LodgeNet owns one million such shares and that no other
shares (or securities or instruments convertible into or
exchangeable for shares of common stock) have been issued.
The Reconciliation Stock shall be issued to Lender, without
further consideration payable by Lender, simultaneously with
the issuance of the Option Stock to Lender. If the Option
Agreement is terminated and the Option Warrant is not
required to be issued upon termination of the Option
Agreement or if the Option Warrant expires, in either case
without issuance of the Option Stock to Lender, the
Reconciliation Stock shall be cancelled by Borrower.
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(g) If this Agreement is terminated prior to Lender advancing to
Borrower the full amount of the Commitment, then Lender
acknowledges and agrees that any shares of Conversion Stock
that have been issued or are issuable to Lender in excess of
the number of shares of Conversion Stock that would have
been issued or would be issuable to Lender based upon the
issuance of Conversion Stock representing, immediately after
such issuance, one percent of the issued and outstanding
common stock of Borrower, determined based upon the intent
of the parties and the assumptions set forth in the second
sentence of Section 8.1(f), for each $1,081,373.30 in Loans
advanced hereunder may be cancelled by Borrower for failure
of consideration.
(h) If any event occurs, including, without limitation, the
issuance of additional shares of capital stock by Borrower
or the issuance of any debt or equity securities convertible
or exchangeable into shares of capital stock of Borrower, as
to which in the reasonable opinion of Borrower or Lender, in
good faith, after consideration of the effect and purposes
of the preemptive rights available to LodgeNet and Lender
under the Stockholders' Agreement, the other provisions of
this Section 8.1 are not strictly applicable but the lack of
an adjustment to the number of shares of Conversion Stock or
Reconciliation Stock to be issued to Lender would not fairly
protect the rights of Lender, Borrower, or LodgeNet in
accordance with the basic intent and principles of the
provisions of this Section 8.1, or if strictly applicable,
would not fairly protect the rights of Lender, Borrower, or
LodgeNet in accordance with the basic intent and principles
of the provisions of this Section 8.1, then Borrower and
Lender will negotiate in good faith regarding the
appropriate adjustment to the number of shares of Conversion
Stock or Reconciliation Stock to be issued to Lender
consistent with the basic intent and principles established
in the other provisions of this Section 8.1. If Borrower and
Lender are unable to agree on an appropriate adjustment
within 30 days, then Borrower shall appoint a firm of
certified public accountants (which may be the regular
auditors of Borrower) of recognized national standing, which
shall give their opinion on the adjustment, if any, to the
number of shares of Conversion Stock or Reconciliation Stock
to be issued to Lender, on a basis consistent with the basic
intent and principles established in the other provisions of
this Section 8.1. Upon receipt of such opinion, Borrower,
Lender, and LodgeNet shall forthwith make the adjustments
described therein.
(i) Borrower and Lender agree that Schedule 8.1 sets forth
examples of the calculations contained in the provisions of
this Section 8.1 that reflect the basic intent and
principles of the provisions of this Section 8.1.
8.2 Effect of Conversion. On each Conversion Date, Borrower shall
--------------------
deliver to Lender a certificate representing the number of shares of common
stock of Borrower issued to Lender on
-17-
such Conversion Date based upon Lender's exercise of the conversion as provided
in Section 8.1. In the event and to the extent that Lender exercises the
conversion, the principal amount of the Loans as to which Lender exercises the
conversion (and all accrued and unpaid interest on such principal) shall be
deemed repaid by Borrower to Lender. In the event that Lender exercises the
conversion, the parties to this Agreement agree to execute all documents
necessary to reflect the effect of the exercise of such conversion and the
repayment of such Loans (and all accrued and unpaid interest thereon) as
described in the preceding sentence.
8.3 Limitation on Conversion Rights. Lender shall not convert all or
-------------------------------
any part of the Loans into Conversion Stock to the extent that such conversion
would cause Borrower or Lender to violate any Governmental Requirement,
including, without limitation, a violation of 47 U.S.C. (S) 533(a)(2), or any
successor statute, or any regulations of the FCC promulgated thereunder if any
SMATV service offered by Borrower continued to be offered after such conversion
separate and apart from any applicable franchised cable service (the "Regulatory
Restrictions"), and any purported conversion by Lender under Section 8.1 that
would result in a violation of the Regulatory Restrictions shall be deemed null
and void.
8.4 MANDATORY CONVERSION. LENDER SHALL BE OBLIGATED TO CONVERT THE
--------------------
LOANS INTO CONVERSION STOCK IN FULL IN ACCORDANCE WITH SECTION 8.1 AT ANY TIME
THAT SUCH CONVERSION WOULD NOT VIOLATE ANY GOVERNMENTAL REQUIREMENT, INCLUDING
THE REGULATORY RESTRICTIONS.
ARTICLE 9
---------
Warrant
-------
9.1 Issuance of Warrant. On the Maturity Date (subject to the
-------------------
Extension), if Lender has not fully exercised the conversion right under Section
8.1, Borrower shall issue to Lender a warrant to acquire the number of shares of
the common stock of Borrower equal to the unconverted portion of the Conversion
Stock (the "Conversion Warrant"). The Conversion Warrant shall be in the form
of Exhibit B to this Agreement.
9.2 Effect of Issuance of Warrant. Upon issuance of the Conversion
-----------------------------
Warrant by Borrower to Lender, all principal of (and accrued and unpaid interest
on) the Loans shall be cancelled and shall be deemed repaid in full by Lender.
Upon delivery of the Conversion Warrant by Borrower to Lender, the parties to
this Agreement agree to execute all documents necessary to reflect the effect of
issuance of the Conversion Warrant and the repayment of the Loans (and all
accrued and unpaid interest thereon) as described in the preceding sentence.
9.3 Transferability of Warrant. The Conversion Warrant may be
--------------------------
transferred only in accordance with its terms and only simultaneously with and
to the same Person to whom the Option
-18-
Warrant (if the Option Warrant is issued, unless the Option Warrant has been
previously terminated or is terminated simultaneously with the transfer of the
Conversion Warrant) is transferred.
ARTICLE 10
----------
Further Assurances
------------------
From time to time after the date hereof and without further
consideration, Borrower and Lender will execute and deliver, or arrange for the
execution and delivery of, such other instruments or documents and take or
arrange for such other actions as may reasonably be requested to give full
effect to this Agreement and the Transaction Documents.
ARTICLE 11
----------
Miscellaneous
-------------
11.1 Successors and Assigns. Neither Lender nor Borrower may assign
----------------------
any of its rights or delegate any of its duties hereunder without the prior
written consent of the other; provided that either Lender or Borrower may assign
this entire Agreement to an Affiliate of such Person or to a Person that
acquires all or substantially all of the assets or business of such Person if
such Person gives prior written notice to the other party and delivers an
assumption agreement of such assignee in form and substance reasonably
satisfactory to the other party pursuant to which such assignee assumes the
obligations of the assigning party under this Agreement. Each of Lender and
Borrower agrees that it will cause any acquiror of all or substantially all of
the assets or business of such Person to assume this Agreement. Subject to the
foregoing, this Agreement shall be binding upon and shall inure to the benefit
of the Lender and Borrower, their respective successors and permitted assigns.
For purposes of this Section 11.1, "assign" shall mean to directly or indirectly
sell, assign, convey, lease, sublease or permit the use of, in any manner, any
rights or obligations under this Agreement.
11.2 No Implied Waiver. Either party's failure to enforce any
-----------------
provision of this Agreement shall not in any way be construed as a waiver of any
such provision as to any future violations thereof or prevent that party
thereafter from enforcing each and every other provision of this Agreement. No
waiver of any right or remedy hereunder shall be effective unless contained in a
writing signed by the waiving party. The rights granted to the parties herein
are cumulative and the waiver by a party of any single remedy shall not
constitute a waiver of such party's right to assert all other legal remedies
available to it under the circumstances.
11.3 Amendments; Waivers. No amendment, modification or waiver of,
-------------------
or consent with respect to, any provision of this Agreement shall be effective
unless the same shall be in writing and signed and delivered by Borrower and
Lender. Any amendment, modification, waiver or consent hereunder shall be
effective only in the specific instance and for the specific purpose for which
given.
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11.4 Severability. If any portion or portions of this Agreement
------------
shall be deemed, for any reason, invalid or unenforceable, the remaining portion
or portions shall nevertheless be valid, enforceable, and in effect, unless such
remaining portion or portions are not reasonably adequate to accomplish the
basic purposes and intent of the parties.
11.5 Notices. All notices, demands, requests, or other
-------
communications which may be or are required to be given, served, or sent by one
party to the other party pursuant to this Agreement (except as otherwise
specifically provided in this Agreement) shall be in writing and shall be
delivered personally, by overnight messenger or mailed by first-class certified
mail, return receipt requested, postage prepaid, addressed as follows:
If to ResNet: ▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇
Attn: Chief Operating Officer
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy similarly addressed to the
attention of ▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇, Vice President
and General Counsel
With a copy to: Pillsbury Madison & Sutro L.L.P.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
If to TCI-Satellite: ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
With a copy similarly addressed to the
attention of Corporate Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
-20-
With a copy to: ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇ L.L.C.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
Attn: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Either party may designate by notice in writing a new address or
addressee to which any notice, demand, request, or communication may thereafter
be so given, served or sent. Each notice, demand, request, or communication
shall be deemed sufficiently given, served, sent or received for all purposes at
such time as it is delivered to the addressee named above as to each party, with
the signed messenger receipt, return receipt, or the delivery receipt being
deemed conclusive evidence of such delivery, or at such time as delivery is
refused by the addressee upon presentation.
11.6 Construction. All documentation, notices, reports and
------------
correspondence under this Agreement shall be submitted and maintained in the
English language. As used herein, the singular shall include the plural and the
plural may refer only to the singular. The use of any gender shall be
applicable to all genders. The captions contained herein are for purpose of
convenience only and are not part of the Agreement. Unless otherwise specified,
all references to Sections and Exhibits in this Agreement are references to
Sections of, and Exhibits to, this Agreement.
11.7 Survival. Termination or expiration of this Agreement for any
--------
reason shall not release either party from any liabilities or obligations set
forth in this Agreement which the parties have expressly agreed shall survive
any termination or expiration, or remain to be performed or by their nature
would be intended to be applicable following any such termination or expiration.
11.8 Governing Law; Choice of Forum. This Agreement shall be
------------------------------
governed and interpreted by the laws of the State of Delaware, without regard to
its conflict of law rules. The parties agree that all litigation relating to
this Agreement shall be brought in the state and federal courts of appropriate
subject matter jurisdiction in Delaware and each party hereby submits itself to
the non-exclusive in personam jurisdiction of such courts for purposes of any
such litigation. Neither party shall object to venue in such courts on the
grounds of an inconvenient forum or otherwise. In the event of any litigation
between the parties relating to this Agreement, the prevailing party shall be
entitled to recover, in addition to any other relief awarded by the court, its
reasonable attorneys fees and other costs of preparing for and participating in
the litigation, including all appeals.
11.9 Integration. This Agreement, together with all exhibits,
-----------
schedules, appendices, and other attachments, expresses the understanding of the
parties thereto and supersedes all prior agreements, whether oral or written,
relating to the subject matters specifically expressed herein; provided,
however, that the parties acknowledge that simultaneously with the execution of
this Agreement they or their affiliates are entering into the Equipment Sale
Agreement, a Subscription Agreement, the Signal Availability Agreement, the
Option Agreement, a Stockholders' Agreement, and a Standstill Agreement, which
documents are related to this Agreement in that they collectively
-21-
document a transaction between the parties of which this Agreement is a part
(collectively, the "Transaction Documents").
11.10 Counterparts. This Agreement may be executed in any number of
------------
counterparts each of which shall be an original with the same effect as if the
signatures thereto and hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to
be duly executed as of the date first above written.
RESNET COMMUNICATIONS, INC. TCI SATELLITE ENTERTAINMENT, INC.
By: By:
------------------------------ --------------------------------
Name: Name:
---------------------------- --------------------------------
Title: Title:
--------------------------- -----------------------------
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