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UNITED STATES SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 10-K
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[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the fiscal year ended December 31, 1995
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
For the transition period from to
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Commission File No. 33-9030
MAGNAVISION CORPORATION
(exact name of registrant as specified in its charter)
DELAWARE 22-2741313
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(State or other jurisdiction (IRS Employer
of incorporation Identification No.)
1725 ROUTE 35, WALL, NEW JERSEY 07719
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(Address of principal executive offices)
(Zip Code)
Registrant's telephone number, including area code: (908) 449-1200
Securities registered pursuant to Section 12(b) of the Act: NONE
Securities registered pursuant to Section 12(g) of the Act: NONE
Indicate by check mark whether the Registrant (1) has filed all reports required
to be filed by section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the Registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [ ] No [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant is not available due to the unavailability of price quotations for
the Registrant's securities.
The number of shares of Registrant's Common Stock outstanding on June 24, 1996
was 22,943,086.
Documents Incorporated by Reference: None.
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P A R T I
ITEM 1. BUSINESS
GENERAL
Magnavision Corporation (the "Registrant" or the "Company")
was incorporated under the name Yardley Ventures Inc. in Delaware on April 3,
1986 for the purpose of acquiring one or more potential businesses. Effective
December 30, 1991, the Registrant acquired all of the issued and outstanding
capital stock of Magnavision Corporation, a New Jersey corporation ("Magnavision
- - N.J."), in a tax-free, stock-for-stock acquisition. The shareholders of
Magnavision - N.J. received newly issued shares of common stock in the
Registrant for their Magnavision - N.J. shares. The newly issued shares
constituted approximately 98% of the Registrant's outstanding common stock. In
connection with the acquisition, the Registrant effected a one-for-400 reverse
split of its common stock and changed its name to Magnavision Corporation. In
addition, the board of directors of Magnavision - N.J. became the board of
directors of the Registrant and Magnavision - N.J. became a wholly-owned
subsidiary of the Registrant.
The Registrant does no business and has no significant assets
other than its stock in Magnavision - N.J. Unless otherwise specified herein,
the terms "Magnavision" and the "Company" shall be deemed to refer to the
Registrant and/or Magnavision - N.J.
DEVELOPMENT OF BUSINESS
The Company was initially formed for the purpose of owning and
operating a multi-channel, wireless, cable television system in the New York
market. In August 1990, the Company entered into an agreement to lease channel
capacity (the "Channel Lease Agreement") from the Department of Education of the
Archdiocese of New York (the "Department"). The Channel Lease Agreement
(subsequently amended in January 1994) grants the Company a lease through
January 2004 (with a right to extend for an additional five years, and a right
of first refusal for subsequent renewals), which entitles the Company to use
twenty-eight (28) wireless cable licenses (168 MHz of spectrum), located on
seven different transmitting towers (24 MHz per tower) in New York State. Eight
(8) of these channels (48 MHz of spectrum) are located in New York City.
Since entering into the Channel Lease Agreement, the Company
has conducted various marketing and engineering activities to facilitate the
planned operation of a wireless system and, pursuant to the requirements of the
Channel Lease Agreement, made an escrow deposit of approximately $900,000 to the
Department in September 1995 which is to be utilized for system reconstruction.
However, as of the date hereof, the Company has not commenced operation of a
wireless system, and will require substantial additional funding in order to do
so. Since there is no assurance that such funding will be available, the Company
has retained Allen & Company Incorporated to assist in exploring various
strategic alternatives relating to the Channel Lease Agreement, including
potential strategic alliances, joint ventures or a sale or other disposition of
the Company's rights under the Channel Lease Agreement.
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Apart from development of its wireless television system, the
Company has been engaged, since 1992, in the business of offering a private
cable television service to colleges, universities, nursing homes and hospitals
throughout the East Coast. As of May 31, 1996, the Company had long term
(generally 5-10 years) agreements with a total of 21 institutions located in New
York, New Jersey, Pennsylvania, Massachusetts and North Carolina to offer such
services. For the year ended December 31, 1995, the Company generated
approximately $666,000 of revenues from this business (which constituted 100% of
the Company's total revenues for the year). For the year ended December 31,
1995, revenues from three institutions which utilize the Company's private cable
television service, Seton Hall University, Wagner College and Fordham
University, constituted approximately 32%, 18% and 12% of the Company's
revenues, respectively.
In August 1995, the Company obtained a $5,000,000 lending
facility from IBJ Schroder Bank & Trust Co., IBJS Capital Corporation and KOCO
Capital Company, L.P. Approximately $2,637,000 of that amount was furnished to
the Company at the time the lending facility was entered into, and the remainder
is to be advanced based on the present value of projected cash flow from new
contracts with purchasers of the Company's private cable television service,
with the funds advanced to be used for equipment and construction costs incurred
in connection with installation of the service at the new locations and for
working capital. The proceeds furnished at the time the lending facility was
entered into were utilized to fund an escrow deposit of $900,000 for system
configuration required under the Channel Lease Agreement (as noted above), to
repurchase approximately 18% of the Company's issued and outstanding capital
stock and to provide working capital. In connection with obtaining the lending
facility the Company issued to the lenders warrants to purchase approximately
27% of the Company's Common Stock on a fully diluted basis at exercise prices of
$.38 and $.27 per share. On June 3, 1996, the terms of the lending facility were
amended. Pursuant to the amendment, the lenders agreed to waive existing
defaults and provide up to the sum of $1,200,000 of the remaining amount
available under the existing lending facility toward the Company's working
capital requirements without regard to the present value formula referred to
above. In exchange therefor, the Company agreed to issue warrants to purchase an
additional 12% of the Company's Common Stock on a fully diluted basis at an
exercise price of $.27 per share. In connection therewith the Company's rights
under the Channel Lease Agreement have been transferred to a subsidiary whose
stock has been pledged to the lenders as security for amounts advanced under the
lending facility. See "Item 13-Certain Relationships and Related Transactions"
for further information regarding the transactions with the lenders.
WIRELESS CABLE TELEVISION BUSINESS
Wireless Technology
The wireless cable industry was made commercially possible in
1983 when the Federal Communications Commission ("FCC") reallocated a portion of
the electromagnetic radio spectrum located between 2500 and 2700 MHz and
permitted this spectrum to be used for commercial purposes. Today, there are a
maximum of thirty-three microwave channels used for wireless cable in each
market. These include thirteen Multipoint/Multichannel Distribution Service
("MMDS") channels (Channels 1, 2 or 2A, E1-E4, F1-F4 and H1-H3) and the excess
capacity on up to 20 additional ("ITFS") channels (Channels A1-A4, B1-B4, C1-C4,
D1-D4 and G1-G4). Grandfathered ITFS stations on the eight E and F channels also
lease excess capacity to wireless cable operators. In each geographic service
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area of the 50 largest markets, 33 6 Mhz channels (198 MHz) are available for
wireless cable. Except in limited circumstances, the 20 ITFS channels (120 MHz)
in each market can generally be licensed only to qualified non-profit education
organizations and, in general, each of these channels must be used a minimum of
20 hours per week for instructional programming. The remaining "excess air time"
on an ITFS Channel may be leased to wireless cable operators for commercial use.
In addition, the 13 MMDS channels (78 MHz) are made available by the FCC for
full time usage without programming restrictions.
According to industry experts, wireless cable can provide
customers with the same or superior video television service as that of
traditional hardwire cable. A typical wireless cable system consists of head-end
equipment (satellite signal reception equipment, transmitters and other
broadcast equipment, and a transmission antenna), and reception equipment at
each subscriber location (antenna, frequency conversion device and set-top
converter). Like a traditional hardwire cable system, wireless cable receives
programming by satellite transmission. Unlike hardwire cable systems, however,
the programming is then retransmitted over the air from one or more transmit
sites to the subscriber's location. At the subscriber's location, these wireless
signals are received by a small antenna and then converted to frequencies that
can pass through conventional coaxial cable to a descrambling converter located
on top of a television set.
Wireless systems currently transmit analog signals over
distances of approximately 25 to 35 miles from their central transmission point.
The transmission of wireless frequencies requires clear "line-of-sight" between
the transmitter and the receiving antenna. Dense foliage, hilly terrain or tall
buildings can cause signal interference which can diminish or block signals.
Certain line-of-sight constraints can be ameliorated by changing transmission
power levels and using engineering techniques, such as cross-polarization,
frequency offsets, pre-amplifiers, beambenders and signal repeaters.
Like traditional franchise cable systems, wireless cable
systems are capable of employing "addressable" subscriber authorization
technology which enables the cable operator to centrally control the programming
available to each subscriber without the need for a service call to the
subscriber home. By eliminating service calls, addressable systems reduce
certain operating costs of a pay television system.
The Company believes that wireless cable is the most
economical technology currently available for delivery of pay television
service. Wireless cable systems do not require an extensive network of cable and
amplifiers; therefore, the capital cost per subscriber is substantially lower
than traditional franchise cable. Furthermore, engineering and construction of a
wireless cable transmission facility typically can be completed in 120 days,
whereas construction of a traditional franchise cable system with complete
coverage may take as long as three years. In addition, since wireless signals
are transmitted over the air rather than through underground or aerial networks,
wireless systems are less susceptible to outages and are less expensive to
operate and maintain than traditional franchise cable systems. Most service
problems experienced by wireless cable subscribers are home-specific rather than
system-wide or neighborhood-wide, as is often the case with traditional
franchise cable systems. As a consequence of the foregoing, the rates charged to
subscribers of wireless cable operators are generally lower than hard wire cable
systems.
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Currently, wireless cable companies are transmitting
programming by utilizing analog technology. Analog technology permits a standard
6 MHz wireless cable television channel to carry one full motion audio/video
programming service (such as ESPN or HBO) at a time. However, it is anticipated
that in the near or immediate future wireless operators will be able to
implement digital video compression technology, which is expected to increase
the capacity of each 6 MHz wireless cable channel by four to ten times. As a
consequence of this technology, wireless cable companies are expected to be able
to offer more than 100 channels of video programming services. However, since
digital compression technology is still being tested on an operational basis,
and its use by wireless cable companies is still subject to FCC approval, there
is no assurance that wireless cable companies will be able to implement digital
compression technology in the marketplace in the near or immediate future. If
and when digital compression technology is implemented, wireless cable operators
are also expected to be able to transmit data, such as stock quotes, electronic
mail and news, and to provide services such as home shopping and home banking,
simultaneously without interfering with the video entertainment portion of the
transmission signal.
Channel Lease Agreement
On August 20, 1990, the Company entered into the Channel Lease
Agreement to lease from the Department the use of three (6 MHz) ITFS channels (a
total of 18 MHz) located on seven different tower locations (a total of 126
MHz), with an option to utilize one additional 6 MHz ITFS channel also located
on each of the seven tower locations when the Department obtains the necessary
FCC approvals for such channels. Under the Channel Lease Agreement, the Company
also leases three operationally-fixed microwave service ("OFS") channels (to
serve as links between the ITFS tower sites), with an option for one additional
OFS channel. The Channel Lease Agreement expires in January, 2004, although the
Company has an option to extend the lease for five years if the FCC renews the
Department's license. Following expiration of the option term (if extended) in
2009, the Company has a right of first refusal covering the leased channels.
Extension and/or renewal of the Channel Lease Agreement is contingent upon (as
with all broadcast licenses) FCC renewal of the Department's license for the
channels, of which there can be no assurance.
As noted above, the Company was required to and did make
payment of an escrow deposit to the Department of $900,227 in September 1995.
The Company also paid a total of $90,000 in monthly royalties to the Department
during 1995 and will be required to pay additional monthly royalties during 1996
and beyond as follows:
(a) Through July 1996, the greater of $9,000 ($12,000 if
the option for the additional channels is exercised)
plus four cents ($.04) per subscriber or five (5)
percent of the gross receipts per month.
(b) From August 1996 to the expiration of the Channel
Lease Agreement, the greater of $12,000 ($16,000 if
the option for the additional channels is exercised)
plus five cents ($.05) per subscriber or five (5)
percent of the gross receipts per month.
The Channel Lease Agreement includes the Company's right to
use space leased to the Department at the seven transmission sites, including
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the Empire State Building, Staten Island, NY, Yonkers, NY, Loomis, NY,
Rhinecliff, NY, Haverstraw, NY and Beacon, NY. Additional space is also
available at all other locations owned or leased by the Department and can be
made available to the Company by the Department for use in providing the
Company's service. The Agreement precludes the Company from transmitting movies
rated "R", "NC-17" or "X" over the Department's channels. The agreement further
precludes the Company from transmitting movies Rated "X" or "NC-17" over all
channels controlled by the Company or its affiliates. The Company may, however,
transmit "R" rated movies over non-Department channels that may be either
controlled by the Company, or the Company's affiliates.
Recent Developments Regarding Channel Lease Agreement
The Registrant has been advised by the Department that CAI
Wireless Systems, Inc. ("CAI"), a competitor of the Registrant in the New York
Area of Dominant Interest ("ADI") market, has recently requested the FCC to
delay granting the Department's applications for an extension until December 31,
1996 of a certain construction completion deadline and reinstatement of a
certain construction permit relating to certain of its ITFS facilities pending
the preparation and filing by CAI of comments regarding such applications.
Notwithstanding CAI's request, the Registrant has been advised that on July 5,
1996 the Department's applications were granted by the FCC and that public
notice of the grant is expected to appear shortly.
The Registrant is unaware of the grounds that CAI might cite
as a basis for the FCC to issue a reversal of such grant should CAI petition the
FCC to reverse its decision. Based upon historical precedent, the Registrant
does not expect that the FCC will reverse its decision. However, there is no
assurance as to when any such determination will be made or that the FCC will
not reverse its decision.
Available Market
According to latest available data, there are approximately
seven million households located in the New York ADI market. The Company
estimates that approximately 70% of these households can receive wireless cable
transmission. (Approximately 51% of such households subscribe to cable.) The
Company believes that approximately 70% of all businesses in the New York
metropolitan area are capable of receiving wireless cable. The Company also
believes that transmission capacity in the New York area can be expanded
significantly by activating the additional transmission sites for which it now
has rights in areas north of New York City.
Competition
Wireless cable television operators face competition from a
number of sources, including other MMDS services operating in their areas,
hardwire cable systems and satellite broadcast companies. In addition, several
technologies are under development and a new regulatory environment may
significantly affect the pay television industry and result in new competitors,
such as telephone companies, entering the market. At this time, the Company
cannot predict the competitive impact of these new technologies, new regulations
and competitors to the wireless cable industry. However, the Company expects
that wireless cable operators will be able to expand their programming capacity
and introduce new services through the use of digital technology while
continuing to maintain a cost advantage over other providers of pay television
service.
In the New York metropolitan area there is currently one other
wireless cable operator, CAI, utilizing MMDS and ITFS frequencies.
The traditional franchise cable system operators historically
have been the principal providers of pay television services. Traditional
franchise cable operators have constructed their networks using coaxial cable to
deliver service to customers and typically offer a greater number of channels at
higher prices than wireless systems. In the New York metropolitan market, the
percentage of television households served by traditional cable is estimated at
51% (based on latest figures available from trade services deemed reliable). In
New York, the principal providers of hardwire cable providers include Time
Warner Cable, Cablevision Systems Corp. and Cox Cable Communications.
The Company believes that several traditional franchise cable
companies are experimenting with interactive technology that permits a
subscriber to transmit data from the subscriber's television set back to the
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operator's transmission facility. Wireless cable systems are today technically
capable of offering selected interactive services by transmitting data from the
subscriber's location back to the head-end facility using "response channels"
licensed to wireless operators by the FCC. Potential applications for
interactive technology include, for example, automated pay-per-view service and
home shopping activities. However, the introduction of expanded channel capacity
and interactive services by traditional franchise cable systems will require
substantial new investment. The demand for more expensive, expanded channel
offerings and new services is uncertain, and the Company believes that the
customer base of the hard-wire cable systems may not be willing to pay
substantially higher prices for these expanded channel offerings and new
services.
Wireless cable operators also compete against satellite
systems, which include "backyard dish" services and direct broadcast satellite
("DBS") providers. The satellite systems involve the transmission of an encoded
signal direct from a satellite to the customer's home. Because the DBS systems
transmit a signal at a higher power level and frequency than most
satellite-transmitted signals, its reception can be accomplished with a
relatively small (18-inch) dish mounted on a rooftop or in the yard. In the Fall
of 1994, DirecTV, Inc. and United States Satellite Broadcasting Company, Inc.
began offering nationwide DBS service capable of providing approximately 150
channels of programming. According to trade publications, DirecTV had
approximately 1.25 million customers as of December 31, 1995. AT&T has announced
that it intends to offer DirecTV service with its long distance service. Prime
Star Partners, owned by a group of hard-wire cable companies, provides
nationwide medium power DBS service. According to trade publications, Prime Star
Partners had approximately 1.0 million customers as of December 31, 1995.
Echostar Communications Corporation has successfully launched a high power DBS
satellite and has announced plans to commence nationwide high-power DBS service
in 1996. MCI Communications, Inc. recently acquired high power DBS spectrum at
an FCC auction and intends to offer nationwide DBS service with its partner News
Corp. within two years. Alphastar, Inc. has leased transponders on a
medium-power DBS satellite and has announced plans to commence nationwide medium
power DBS service in 1996. Due to the cost of DBS satellites and receiving
equipment and lack of local programming and interactivity, the Company believes
that wireless cable systems enjoy a comparative advantage over these satellite
systems.
It is also anticipated that wireless cable operators will be
competing with telephone companies. Under the Communications Act of 1934, as
amended (the "Communications Act"), local exchange carriers ("LECs"), including
the Regional Bell Operating Companies, were prohibited from providing video
programming directly to customers in their respective telephone service areas.
The FCC has ruled, however, that LECs may acquire wireless cable operations
without violating the prohibition. The FCC also permitted LECs to provide "video
dialtone" service, allowing LECs to make available to multiple service
providers, on a nondiscriminatory common carrier basis, a basic platform that
will permit end users to access video program services provided by others. The
Telecommunications Act of 1996, however, repealed the FCC's video dialtone
regulations, except that existing systems may continue to operate. Some LECs
have indicated that they intend to construct or acquire separate hard-wire cable
systems within their telephone service areas if authorized. In addition, Bell
Atlantic, NYNEX, and Pacific Telesis have all made acquisitions of and
investments in wireless cable television systems. Recently, US West Media Group
announced that it had an agreement to acquire Continental Cablevision Inc., one
of the largest hardwire cable operators in the U.S.
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The FCC has also proposed to redesignate the 28 GHz band to
create a new video programming delivery service referred to as Local Multi-Band
Distribution Service ("LMDS"). This service has a relatively short broadcast
range and, therefore, would require multiple cellular transmission sites. In
July 1995, the FCC proposed to award licenses for this service in each of 493
geographic areas pursuant to auctions. Sufficient spectrum for up to 49 analog
channels has been designated for the LMDS service. The FCC has not determined
how many licenses it will award in each area. Final rules for LMDS have not been
established and auctions are not expected to begin until the second half of
1996.
Government Regulation
General. The wireless cable industry is subject to regulation
by the FCC pursuant to the Communications Act. The Communications Act empowers
the FCC, among other things, to issue, revoke, modify and renew licenses within
the spectrum available to wireless cable; to approve the assignment and/or
transfer of control of such licenses; to approve the location of wireless cable
systems; to regulate the kind, configuration and operation of equipment used by
wireless cable systems; and to impose certain equal employment opportunity and
other reporting requirements on wireless cable operators.
The FCC has determined that wireless cable systems are not
"cable systems" for purposes of the Communications Act. Accordingly, a wireless
cable system does not require a local franchise and is subject to fewer local
regulations than a hardwire cable system. Moreover, all transmission and
reception equipment for a wireless cable system can be located on private
property; hence, there is no need to make use of utility poles or dedicated
easements or other public rights of way. Although wireless cable operators
typically have to lease the right to use wireless cable channels from the
holders of channel licenses, unlike hardwire cable operators they do not have to
pay local franchise fees. Recently, legislation has been introduced in some
states to authorize state and local authorities to impose on all video program
distributors (including wireless cable distributors) a tax on the distributor's
gross receipts comparable to the franchise fees cable operators pay. While the
proposals vary among states, the bills all would require, if passed, as much as
5% of gross receipts to be paid by wireless distributors to local authorities.
Wireless cable transmissions are governed by FCC regulations
governing interference and reception quality. These regulations specify
important signal characteristics such as modulation (i.e., AM/FM) or encoding
formats (analog or digital). Current FCC regulations require wireless cable
systems to transmit only analog signals and those regulations will have to be
modified, either by rule making or by individual application, to permit the use
of digital transmission. The Company believes that the necessary FCC approvals
will be obtained to permit use of digital compression when digital compression
technology becomes commercially available; however, there can be no assurance
that these approvals will be forthcoming or timely or that interim relief will
be provided by the FCC. The FCC also regulates transmitter locations and signal
strength.
Under current FCC regulations, a wireless cable operator
generally may broadcast anywhere within the line-of-sight of its transmission
facility, provided that its signal does not violate interference standards in
the FCC-protected area of another wireless license holder. Existing wireless
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license holders generally are protected from interference within 35 miles of the
transmission site; however, if that site is moved, the protection remains only
within the original 35 mile zone.
The 1992 Cable Act. On October 5, 1992, Congress enacted the
1992 Cable Act, which imposes additional regulation on traditional hardwire
cable operators and permits regulation of rates in markets in which there is no
"effective competition". The 1992 Cable Act, among other things, directs the FCC
to adopt comprehensive new federal standards for local regulation of certain
rates charged by traditional hardwire cable operators. The legislation also
provides for deregulation of traditional hardwire cable in a given market once
other multi-channel video providers offer comparable programming to at least 50%
of the households in the franchise area and serve, in the aggregate, at least
15% of the households in the cable franchise area. Rates charged by wireless
cable operators, typically already lower than traditional hardwire cable rates,
are not subject to regulation under the 1992 Cable Act.
On May 3, 1993, the FCC issued new regulations implementing
the rate regulation provisions in the 1992 Cable Act, which generally required
traditional hardwire cable operators with rates above a benchmark average price
for basic services to reduce their rates by approximately 10%. On February 22,
1994, the FCC announced that it would require the FCC's rate regulation of
traditional hardwire cable operators to implement a further reduction in rates
of another 7%. These and other aspects of the FCC's rate regulation of
traditional hardwire customer fees, along with several other provisions of the
1992 Cable Act, have been challenged in the courts and at the FCC. Furthermore,
as noted elsewhere, proposals to substantially reduce and in some instances
repeal rate regulation have been adopted by Congress and incorporated into the
1996 Telecommunications Act.
While current FCC regulations are intended to promote the
development of a competitive television subscription industry, the rules and
regulations affecting the wireless cable industry may change, and any future
changes in FCC rules, regulations, policies and procedures could have a material
adverse effect on the Company. In addition, a number of legal challenges to the
1992 Cable Act and the regulations promulgated thereunder have been filed, both
in the courts and before the FCC. These challenges, if successful, could result
in an increase in the operating costs of wireless companies and otherwise have a
material adverse effect on the Company. In particular, those sections of the
1992 Cable Act which prohibit discriminatory or unfair practices in the sale of
satellite programming to competing multi-channel video programming distributors
have been challenged. The cost to acquire satellite programming may be affected
by the outcome of those challenges. Other aspects of the 1992 Cable Act
empowered the FCC to adopt regulations for the basic subscription rates charged
by traditional hardwire cable operators. As described above, the FCC issued
rules requiring such cable operators, under certain circumstances, to reduce the
rates charged for basic services up to a total of 17% from prior levels. Should
these regulations withstand court and regulatory challenges, the extent to which
wireless cable operators may continue to maintain a price advantage over
traditional hardwire cable operators could be diminished. On the other hand,
continued strict regulation of cable rates would tend to impede the ability of
hardwire cable operators to upgrade and gain a competitive advantage over the
wireless cable.
1996 Telecommunications Act. In February 1996, Congress passed
and the President signed into law the Telecommunications Act of 1996 (the
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"1996 Act"). Some of the provisions of the 1996 Act that directly affect
wireless cable television operators are discussed below. Beyond those specific
provisions, the 1996 Act contains provisions intended to increase competition in
the telephone, radio, broadcast television, and hardwire and wireless cable
television businesses. The long term effect on the 1996 Act cannot be determined
at this time, although competition in the video programming delivery industry is
likely to increase as a result of the adoption of the 1996 Act.
The 1996 Act changes the definition of cable television system
so that the definition excludes any systems that serve customers without using
any public right of way. This change will allow wireless cable system operators
to wire together apartment complexes and other similar properties, as long as
the wiring system does not cross a public right-of-way, without the need to
apply for a local cable television franchise.
The 1996 Act expands the effective competition test for
deregulating franchised cable operator basic and cable programming services tier
rates to include the provision of comparable video programming services directly
to customers in a cable operator's franchise area by a telephone company or its
affiliate or any multichannel video programming distributor using the facilities
of such carrier or its affiliate. The 1996 Act also deregulates cable
programming service rates for small cable operators, or such operator's basic
service tier if that was the only tier subject to regulation as of December 31,
1994, and deregulates cable programming service rates for all cable operators as
of March 31, 1999. These changes may limit or eliminate the extent to which a
particular cable operator is subject to rate regulation.
The 1996 Act instructs the FCC to adopt regulations to
prohibit restrictions that impair any customer's ability to receive video
programming services through reception devices. It is likely that such
regulations will prohibit local governments from adopting or enforcing zoning
regulations that limit a person's ability to have wireless video receiving
dishes and panels on their properties.
Prior to 1996, hardwire cable operators could not own any MMDS
license which covered an area that was located in the operator's hardwire cable
franchise. The 1996 Act permits a hardwire cable operator to acquire MMDS
licenses inside a franchised cable area if effective competition exists in such
areas. The 1996 Act also eliminates the cable/broadcast cross-ownership and
cable/telephone company cross ownership prohibitions, freeing broadcasters and
telephone companies to own cable systems within their service areas. This is
likely to increase the competition to which wireless companies are subject.
Other Regulations. Wireless cable license holders are subject
to regulation by the Federal Aviation Administration with respect to the
construction of transmission towers and to certain local zoning regulations
affecting construction of towers and other facilities. There may also be
restrictions imposed by local authorities. There can be no assurance that the
Company will not be required to incur additional costs in complying with such
regulations and restrictions.
Under the retransmission consent provisions of the 1992 Cable
Act, wireless and hardwire cable operators seeking to retransmit certain
commercial television broadcast signals must first obtain the permission of the
broadcast station in order to retransmit the station's signal. However, wireless
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cable and private cable systems, unlike hardwire cable systems, are not required
under the FCC's "must carry" rules to retransmit a specified number of local
commercial television or qualified low power television signals.
Due to the regulated nature of the cable industry, the
Company's growth and operations may be adversely impacted by the adoption of
new, or changes to existing, laws or regulations or the interpretations thereof.
Copyright. Under the federal copyright laws, permission from
the copyright holder generally must be secured before a video program may be
retransmitted. Under Section 111 of the Copyright Act, certain "cable systems"
are entitled to engage in the secondary transmission of programming without the
prior permission of the holders of copyrights in the programming. In order to do
so, a cable system must secure a compulsory copyright license. Such a license
may be obtained upon the filing of certain reports with the payment of certain
fees to the U.S. Copyright Office. In 1994, Congress enacted the Satellite Home
Viewer Act of 1994 which enables operators of wireless cable television systems
to rely on the cable compulsory license under Section 111 of the Copyright Act.
PRIVATE CABLE BUSINESS
General
Private cable television service is a multi-channel
subscription television service where the programming is received at a facility
by satellite receiver and then transmitted via coaxial cable throughout private
property, often multiple dwelling units ("MDUs"), without crossing public rights
of way. Private cable companies operate under agreements with private landowners
to service a specific MDU institution or commercial establishment.
Since 1992, the Company has offered private cable television
services to various colleges, universities, hospitals and nursing home
facilities, primarily in the northeastern United States. To date, the Company
has entered into or been awarded contracts with 21 facilities, of which 16 are
currently receiving programming from the Company. The Company believes that it
has developed the necessary skills and "know-how" over time to deliver a quality
product and that it has achieved a favorable reputation with its existing
customer base. It also believes that this business can be expanded on a national
basis with appropriate funding.
Agreements with Institutions
The Company has long-term agreements to provide service to 21
facilities (16 of which are currently operational) for students and patients,
with approximately 8,350 outlets, at the following locations:
Seton Hall University, South Orange, NJ - on line since 1992
Fairleigh Dickinson University, Teaneck, NJ - on line since
1992
Manhattanville College, Purchase, NY - on line since 1992
- 10 -
<PAGE>
Maritime College, SUNY, Bronx, NY - on line since 1993
Wagner College, SUNY, Bronx, NY - on line since 1993
Greenhill Retirement Community, West Orange, NJ - on line
since 1992
Sarah Frances Nursing Home, Boonton, NJ - on line since 1994
Immaculata College, Immaculata, PA - on line since 1994
Georgian Court College, Lakewood, NJ - on line since 1994
Montclair State College, Montclair, NJ - Phase I on line since
1995
Fordham University, Manhattan, NY - on line since 1995
Jesuits of Fordham, Inc., Bronx, NY - on line since 1995
Kean College, Union, NJ - on line since 1995
Curry College, Milton, MA - on line since 1995
Mount Olive College, Mount Olive, NC - on line since 1995
V.A. Medical Center, East Orange, NJ - on line since February
1996
Montclair State University, Montclair, NJ - Phase II projected
on line in September 1996
North Carolina A&T State University, Greensboro, NC -
projected on line in September 1996
Ohio Valley College, Parkersburg, WV- projected on line in
September 1996
Iona College, New Rochelle, NY - projected on line in
September 1996
College of Mount St. Vincent, Riverdale, NY - projected on
line in September 1996
From the date a contract is signed, it generally takes
approximately three months to complete an installation and to make a site
operational or place it "on line". Except for nursing homes and for
Manhattanville College, where the Company bills students directly, the Company
receives its fees on a monthly basis (nine (9) months a year) from these
institutions, which include such charges in the tuition or other fees to
students or residents of the subject facilities. The Company believes that the
potential market for this segment of its business is, in the near term, located
in the Eastern portion of the United States and is represented by hundreds of
thousands of potential viewers. The Company has the ability under its standard
form of agreement to create its own
- 11 -
<PAGE>
form of "TV Guide" for distribution to students and patients, as the case may
be. None of the Company's revenues to date include fees from advertisers.
However, at such time as the Company's subscriber base achieves "critical mass",
estimated at 15,000 outlets, the Company believes that it will have the ability
to obtain revenues from advertisers seeking to reach the Company's subscribers
who the Company believes are a favored category of consumer for many product
manufacturers and service providers.
Sales and Marketing
The Company's sales and marketing efforts in the private cable
business have and will continue to focus primarily upon institutions with
concentrated populations, such as colleges and universities with dormitories,
hotels, hospitals, nursing homes and other MDUs. The Company also believes that
it will be able to expand its subscriber base by offering service to commercial
businesses such as office buildings. Institutional subscribers are asked to
commit to long-term agreements. Some state institutions are prohibited from
entering into long term agreements, but the Company believes that once it has
wired the subject facility and provided private cable television service the
relationship will become one of long term duration.
Competition
The Company's competition in the residential private cable
business consists of numerous private cable operators located throughout the
United States, none of which is deemed to be a dominant factor. The Company
considers this business to be fragmented and subject to consolidation. Numerous
companies, including local cable operators, across the country have begun to
pursue institutional business in direct competition with the Company. In
addition to this competition, any conventional cable operator as well as any
other cable television programming distributor can service these institutions in
direct competition with the Company. The Company believes, however, that its
experience and "know-how" in this field and customer endorsements to potential
clients will greatly assist the Company when competing for this business.
Regulation
The 1996 Act changed the rules with respect to the 1992 Cable
Act's uniform rate requirement and MDUs. Prior to the adoption of the 1996 Act,
franchised cable operators were required to offer uniform rates within franchise
areas and with respect to bulk service contracts for MDUs. Now franchised cable
operators may establish different rates across franchise areas in which they are
subject to effective competition and may offer bulk service contracts to MDUs
without any uniform pricing requirement, except that the franchised cable
operator may not engage in predatory pricing, which concept is undefined in the
1996 Act. This may result in the Company experiencing more significant price
competition in its private cable business in the future.
TRADEMARKS, COPYRIGHTS, PATENTS
The Company holds no copyrights or patents but has received a
federal service mark registration for the name Magnavision. The Company does not
believe that theses proprietary rights are material to its business.
- 12 -
<PAGE>
PERSONNEL
The Company currently has a staff of 11 full time employees (6
in sales, installation, customer service and marketing, 3 in an administration
capacity, and 2 in management) and various part time consultants, advisors and
subcontractors, none of whom is a member of a union. The Company does not plan
to expand its staff until it begins to generate sufficient revenue or receives
funding to support expansion. The Company considers its relationship with its
employees to be excellent.
CACOMM, INC.
Cacomm, Inc., a New Jersey corporation ("Cacomm"), is the
majority shareholder of the Registrant. As of the date of this Form 10-K, Cacomm
owns approximately 80.3% of the Registrant's outstanding common stock. All of
the directors of the Registrant are also directors of Cacomm. Nicholas
Mastrorilli, Sr., holder of approximately 33% of the capital stock of Cacomm, is
Chairman of the Board and President of the Registrant, and certain other
officers and directors of Cacomm are also directors and officers of the
Registrant.
Cacomm is a 25% partner in a general partnership known as The
Grand MMDS Alliance (the "Alliance"), a designated selectee of the FCC for four
MMDS channels in the New York metropolitan market. The possibility exists that
the Alliance could commence business in direct competition with the Registrant.
However, the Alliance has not commenced operations as of the date of this
report. The Company has initiated discussions with the Alliance (the controlling
persons of which are unaffiliated with the Registrant) for the purpose of
exploring various alternatives relating to the MMDS channels held by the
Alliance. However, such discussions have not proven fruitful in the past, and
there is no assurance that such discussions will be productive in the future.
ITEM 2. PROPERTIES
The Registrant's principal offices are located at 1725 Highway
35, The Wedgewood Building, Wall, New Jersey, where it occupies approximately
1200 square feet under a lease agreement which expires in March, 1997.
As part of the Channel Leasing Agreement with the Department,
the Company acquired the right to use a portion of the Department's transmitting
space at the Empire State Building, in Yonkers, New York and on Staten Island,
New York. The Company pays no additional consideration for this space beyond the
fees due to the Department under the Channel Leasing Agreement.
ITEM 3. LEGAL PROCEEDINGS
The Company is a party to certain litigation incidental to its
business, which management does not believe will have a material adverse effect
on its business.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
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<PAGE>
P A R T I I
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS
(a) The Registrant's Common Stock is traded in the
over-the-counter market. There is no established public trading market. The
range of high and low bid and ask quotations, as reported by the National
Quotation Bureau Incorporated, for the Registrant's common stock through the
quarter ended December 31, 1995 is as follows:
<TABLE>
<CAPTION>
BID PRICES ASK PRICES
1995 HIGH LOW HIGH LOW
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1
Through 0.12 0.12 N/A N/A
March 31
April 1
Through 0.25 0.25 N/A N/A
June 30
July 1
Through 0.25 0.12 N/A N/A
Sept. 30
Oct. 1
Through 0.25 0.12 N/A N/A
Dec. 31
</TABLE>
<TABLE>
<CAPTION>
BID PRICES ASK PRICES
1994 HIGH LOW HIGH LOW
- -----------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C> <C>
January 1
Through 1.00 1.00 3.00 3.00
March 31
April 1
Through .50 .50 1.50 1.50
June 30
July 1
Through * Unpriced - - -
Sept. 30
Oct. 1
Through .13 .13 1.13 1.13
Dec. 31
</TABLE>
- 14 -
<PAGE>
- --------
* Listed in "Pink Sheets" Without Prices
Note: The information is compiled from sources believed to be accurate but the
Registrant cannot guarantee its accuracy. The above quotations represent
prices between dealers and do not include retail markup, markdown or
commission. They do not represent actual transactions.
(b) As of June 24, 1996, according to the Registrant's transfer
agent, the approximate number of holders of record of the Registrant's common
stock was 551.
(c) The Registrant has never paid any cash dividends on its
Common Stock and none are presently anticipated. Under the Company's agreements
with its lenders, the Company is prohibited, without the consent of the lenders,
from declaring or paying any dividends on its Common Stock until the loans made
by the lenders have been repaid in full.
- 15 -
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
The following is a summary of selected financial data. This
data should be read in conjunction with "Item 7 - Management's Discussion and
Analysis of Financial Condition and Results of Operations" and "Item 8-Financial
Statements and Schedules."
Income Statement Data
<TABLE>
<CAPTION>
Years Ended December 31,
---------------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
-------------- ------------- ------------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Revenues $ 666,366 $ 516,053 $ 385,512 $ 273,521 $ 8,336
============= ============= ============= =========== ===========
Net (Loss) (1) $ (844,493) $ (531,863) $ (805,120) $ (432,663) $(1,417,344)
============= ============= ============= =========== ===========
Loss Per
Common Share(2) $ (.03) $ (.02) $ (.03) $ (.02) $ (.06)
============= ============= ============= =========== ===========
</TABLE>
Balance Sheet Data
<TABLE>
<CAPTION>
At December 31,
---------------------------------------------------------------------------------------
1995 1994 1993 1992 1991
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Working Capital (Deficit) $ (213,988) $ (209,103) $ (385,948) $ (117,317) $ 123,698
=========== =========== =========== =========== ===========
Total Assets $ 2,065,771 $ 689,593 $ 569,970 $ 790,557 $ 978,076
=========== =========== =========== =========== ===========
Long Term Debt $ 2,678,784 $ 58,776 $ 142,898 $ 121,232 $ 161,392
=========== =========== =========== =========== ===========
Stockholders' Equity (Deficit) $(1,272,472) $ 12,004 $ (111,133) $ 177,037 $ 434,701
=========== =========== =========== =========== ===========
</TABLE>
(1) The 1993 net loss includes a bad debt of $407,722 relating to a
shareholder loan. In 1991, the Company was not operating and incurred a
loss due to payment of preoperating wages and general and administrative
expenses.
(2) See Note 12 in the financial statements included in Item 8.
- 16 -
<PAGE>
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
All of the Company's current revenues are derived from its
private cable operations. The wireless channel capacity operations have not
commenced; therefore, no revenue has been derived from the wireless operation.
The Registrant and its wholly owned subsidiary began service
in February 1992 to various colleges and nursing home facilities in the New
York/New Jersey area utilizing direct satellite technology. This involves the
use of antennas which are installed at the facility and then separately wired on
a room-by-room basis. As of May 31, 1996, the Company has long-term agreements
with 16 facilities under which it is currently providing service to students and
patients through approximately 5,050 outlets in rooms and common areas at such
institutional facilities. The Company recently entered into contracts with an
additional five institutions representing approximately 3,300 outlets and
expects additional contracts to be signed in the near future. The Company
intends to complete installation at the five new institutions so as to go on
line in September of 1996. The majority of the facilities using the Company's
private cable service are in New Jersey and New York, but the market area
currently reaches from North Carolina to Massachusetts.
Many colleges and nursing homes in the United States do not
have cable television, but the current trend is for these institutions to
install cable television. Management feels that this trend, coupled with the
fact that the Company can offer cable services normally not provided by the
traditional wired cable companies, should permit significant subscriber
expansion in the future. Each installation is comprised of a number of billing
outlets. A billing outlet represents a hookup for a television. The Company
collects revenue from each television on-line. For the most part, the colleges
are on a nine month billing cycle starting in September and ending in June of
the subsequent year. The nursing homes and hospital are on a 12 month billing
cycle.
1995 vs. 1994
The net loss for 1995 was $844,493, compared to $531,863 for
1994. The net loss from the private cable operation was $245,111 in 1995,
compared to $111,341 for 1994. The loss from the Company's wireless cable
business for 1995 was $599,382, which related to expenses such as professional
fees, engineering fees, salaries and channel lease expenses, compared to
$420,522 for 1994.
Revenues in 1995 increased by 29% to $666,366 from $516,053 in
1994. The increase was due to the addition of 1,561 outlets in 1995 and the
inclusion of a full year's income for the outlets added in 1994.
Operating expenses primarily consist of salaries, depreciation
and amortization, and general and administrative expenses. General and
administrative expenses primarily consist of salary payroll taxes, insurance,
professional expenses and channel lease costs. Operating expenses increased 38%
to $1,122,167 in 1995 from $810,361 in 1994. The major increases in general and
- 17 -
<PAGE>
administrative expenses included an increase in professional fees of $138,637
over 1994 and an increase of channel lease expenses of $107,656 over 1994.
Salary increased $64,127 over 1994 to $383,884, primarily due to raises and
increase of staff over 1994.
1994 vs. 1993
The Company had a loss from operations of $492,520 in 1994, or
37% less than the loss sustained in 1993 of $777,952.
Revenues in 1994 increased by 34% to $516,053, compared to
revenues of $385,512 in 1993. The increase was substantially due to a 24%
increase in private cable outlets to 2,640 at the end of 1994. The Company added
628 outlets in 1994 and 689 in 1993. In addition, 1994 reflects the collection
of full year's income from the 1993 installed outlets.
Operating expenses decreased by 15% in 1994 to $810,361 from
$953,512 in 1993. However, after excluding a provision in 1993 of $407,722 for a
doubtful shareholder loan, the 1994 operating expense increased by $264,571 from
1993. Officers' salaries increased by $112,414, primarily due to raises given
personnel who, in management's opinion, were being paid below market. General
and administrative expenses increased by $108,962, which increase was
substantially due to professional fees and channel lease expenses.
LIQUIDITY AND CAPITAL RESOURCES
For the year ending December 31, 1995, the total cash
decreased by $7,704. The net cash used in the operating activities increased
from $374,168 in 1994 to $589,685 in 1995, primarily due to increased losses in
operations.
The cash used in investing activities increased by $1,102,539
to $1,176,683. The increase relates primarily to the investment in the channel
lease of $900,277, coupled with the $281,591 increase in purchases of property
and equipment.
Cash flow provided by financing activities increased
$1,184,585 to $1,758,664 in 1995. Cash flow from financing activities
principally came from the proceeds of senior indebtedness.
For the year ending December 31, 1994, the total cash
increased by $125,767 and total working capital increased by $176,845. The net
cash used in the operating activities increased from $236,095 in 1993 to
$374,168 in 1994 primarily due to increased losses in operations after excluding
the reserve for a shareholder's loan in 1993.
The cash used in investing activities decreased by $97,922 to
$74,144 in 1994. In 1993, the Company used $141,891 to increase loans to
shareholders. The Company also increased capital expenditures from $30,175 in
1993 to $78,704 in 1994. The increase was used to build out more outlets in the
private cable business.
- 18 -
<PAGE>
Cash flow from the financing activities increased by $89,289
to $574,079 in 1994. Cash flows from financing activities principally came from
the sale of the Company's stock.
Since the inception of service in 1992, the Company has
experienced operating losses and negative cash flow. In addition, at December
31, 1995 the Company had a working capital deficiency and shareholder deficit.
The Company's business is not as capital intensive as
traditional cable companies, which should provide it with a competitive
advantage. The Company's capital commitments at December 31, 1995 include
additional capital to construct facilities at the Department of Education of the
Archdiocese of New York and capital to expand the number of institutions the
Company is currently servicing in its private cable business.
The Company plans to meet short term liquidity requirements
with the funds available under the amended lending facility described below. On
a long term basis the Company intends to create liquidity and to take advantage
of the current marketplace interest in wireless spectrum that it controls by
exploring various strategic alternatives relating to the Channel Lease
Agreement, including potential strategic alliances, joint ventures or a sale or
other disposition of the Company's rights under such agreement. Allen & Company
Incorporated has been retained to assist the Company in these endeavors. Also,
management believes that the continued expansion of the Company's private cable
operations should produce positive cash flows in the future.
However, no assurances can be given that the Company will be
able to successfully accomplish the strategic alternatives relating to the
Channel Lease Agreement or expand the private cable operations to produce
positive cash flows.
In August 1995, the Company entered into a $5 million lending
facility with a bank and two small business investment companies. The Company
borrowed $2,637,000 under the lending facility at closing. The funds were used
to pay the $900,277 escrow deposit (recorded as a prepaid lease payment)
required to maintain the wireless license of the Company under its agreement
with the Department and redeem 4,876,354 shares of Common Stock which were being
sold by a bank in partial settlement of a loan to a non-management shareholder
which was secured by the shares. (The Company issued 250,000 shares of Common
Stock to the non-management shareholder in consideration of his assistance in
this transaction and an additional 200,000 shares of Common Stock to other
non-management shareholders who assisted in facilitating this transaction.) The
balance of the proceeds were used to pay closing costs related to the debt
agreement and to provide additional working capital. The remaining amounts
available under the lending facility are to be advanced based on the present
value of projected cash flow from contracts for new outlets, with the funds
advanced to be used for the equipment and construction costs of installation of
additional outlets and for working capital.
The debt agreement contains a prepayment penalty for two years
and places limits on stock sales, payment of dividends and management
compensation. The agreement also contains several covenants covering, among
other items, financial reporting and target performance levels the Company must
meet.
- 19 -
<PAGE>
As of December 31, 1995, the Company had not met several
covenants under the agreement and as of the end of the first quarter of 1996 the
Company had not made the first quarter interest payment required under the
agreement. The Company amended the agreement with the lenders on June 3, 1996.
As part of the amendment, the defaults were either waived or cured. The Company
is to receive $1.2 million of the remaining available amount under the existing
lending facility without regard to the present value of projected cash flow of
new contracts, with the remaining balance of the $5 million to be advanced based
on the present value formula.
The original agreement required the Company to issue warrants
to the lenders to purchase 9,677,486 shares of Common Stock. The exercise
price was $.27 for warrants to purchase 2,438,177 shares and $.38 for warrants
to purchase 7,239,309 shares. The warrants expire on August 27,2003. The Company
is also required to issue additional warrants to purchase 360,000 shares of its
Common Stock at an exercise price of $.38 in satisfaction of certain investment
banker and finders fees previously agreed to. Under the amended agreement the
Company issued warrants to purchase an additional 7,410,930 shares to the
lenders. The exercise price of the new warrants is $.27 and they expire on June
4, 2004. The amendment requires the lenders to surrender to the Company warrants
for the purchase of up to 6,884,890 shares if, as and when the Company complies
with certain conditions outlined in the agreement. The amendment has a put/call
option in the event that the Company sells a significant asset. See "Item
13-Certain Relationships and Related Transactions" for further information with
regard to the transactions described above.
Management feels that inflation and changing prices will have
a minimal effect on operations. The above should be read in conjunction with the
Company's financial statements included elsewhere herein.
- 20 -
<PAGE>
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTAL DATA
See pages 35 and F-1 through F-17.
ITEM 9 CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURES
Effective as of January 1, 1996, at the request of, and
pursuant to agreements entered into by the Company with its lenders, the Company
appointed new independent accountants, KPMG Peat Marwick, LLP, to audit the
Company's financial statements commencing with the fiscal year ending December
31, 1995, replacing Lawson, Rescinio, Schibell & Associates, P.C. The Company's
Board of Directors recommended and approved such decision. The Company's former
accountants' report on the Company's financial statements for the past two years
did not contain an adverse opinion or a disclaimer of opinion and was not
qualified or modified as to uncertainty, audit scope or accounting principles.
During the Company's two most recent fiscal years there were
no disagreements with Lawson, Rescinio, Schibell & Associates, P.C. on any
matter of accounting principles or practices, financial statement disclosure, or
auditing scope or procedure. However, following the appointment of KPMG Peat
Marwick, LLP, both accounting firms consulted with each other and agreed that
amounts carried on the Company's balance sheet as organization costs should have
been written off over a five year period commencing in 1991 and a portion of
amounts carried on the Company's balance sheet as capitalized construction costs
should have been written off in 1992 and the balance reclassified to property
and equipment. Such changes were reflected in the Form 10-K/A for the year
ending December 31, 1995 filed on February 8, 1996 with the Securities and
Exchange Commission (the "SEC") and the report of Lawson, Rescinio, Schibell &
Associates, P.C. is contained therein.
The Company has provided its former accountant with a copy of
the disclosures contained in this item, and has requested such firm to furnish
it with a letter addressed to the SEC stating whether it agrees with the
statements made by the Company. Such letter is included as Exhibit 16 to this
Form 10-K.
- 21 -
<PAGE>
P A R T I I I
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The following table sets forth certain information with
respect to the directors and officers of the Registrant. These individuals serve
in the same capacities with Magnavision - N.J.
<TABLE>
<CAPTION>
Director or
Name Age Position Officer Since
- ---- --- -------- -------------
<S> <C> <C> <C>
Nicholas Mastrorilli, Sr. 56 Director, Chairman, 1989
President
Nicholas Mastrorilli, Jr. 33 Director, Vice President - 1991
Administration
Patrick Mastrorilli 31 Director, Vice President - 1991
Marketing
Keith M. Heilos 33 Vice President - Customer 1991
Relations
Brian Mastrorilli 27 Vice President - 1991
Technical Operations
</TABLE>
The above directors and officers will hold office until the
next annual meeting of shareholders or until their successors are duly elected
and qualified. Nicholas Mastrorilli, Jr., Patrick Mastrorilli and Brian
Mastrorilli are brothers. Their father, Nicholas Mastrorilli, Sr. is a Director,
Chairman and President of the Registrant. Arnold Dauer, an advisor to the
Registrant (see below) performs services that would otherwise be performed by a
senior officer of the Registrant.
Nicholas Mastrorilli, Sr., Chairman of the Board and President
of the Registrant from the Company's inception in June 1989 to the present;
Chairman and President of Cacomm, Inc., a company in the business of producing
television programming and video commercials since April 1991 and Executive Vice
President from 1981 to 1991. Mr. Mastrorilli as Executive Vice President of
Cacomm, Inc. from 1981 to 1989 directed all of such company's video production
and distribution business as well as its research and development activities in
wireless communications. As a result, Mr. Mastrorilli has extensive experience
in cable network broadcasting and information and communication systems. During
his tenure at Cacomm, Inc. Mr. Mastrorilli introduced many original concepts to
cable systems including, in 1981, television home shopping, "The Franchise
Show", a concept created to introduce franchises and business opportunities to
the general public transmitted via satellite nationwide on the Financial News
Network, "Racing From Monmouth Park", a first time thoroughbred racing show, and
"Nightlife" a show produced
- 22 -
<PAGE>
on location at various casinos in Atlantic City, which won the Cape Award from
the Cable Television Network Awards Committee for programming excellence.
Mr. Mastrorilli, while Executive Vice President of Cacomm,
Inc., one of the first cable programming production companies, was one of the
original creators of advertiser supported programming for the cable industry in
New Jersey. Mr. Mastrorilli also established the first regional cable television
advertising interconnect in New Jersey in 1981. Infomercials, as they are called
today, are believed to be a creation of Mr. Mastrorilli who, in 1981, called
them 30 minute sellathons.
Mr. Mastrorilli was also responsible for the successful
acquisition of wireless cable channel capacity for the Registrant from the New
York Catholic Archdiocese. This cooperative business opportunity established the
Registrant as the first company to ever sign an agreement with the New York
Catholic Archdiocese for multiple-channel leasing. Mr. Mastrorilli is listed in
the Who's Who Registry, Worldwide Platinum Edition.
Nicholas Mastrorilli, Jr., Vice President of administration
since April of 1991. Mr. Mastrorilli, Jr. has also served as Vice President of
Cacomm, Inc. from April 1991 to the present. He also served as director of
administration of Cacomm, Inc. from January 1986 to April of 1991. He is
responsible for the administrative functions of the Registrant. Until December
31, 1995 Mr. Mastrorilli, Jr. was the Registrant's Chief Financial Officer. Mr.
Mastrorilli, Jr., now oversees all day-to-day functions of an administrative
nature and assists the Registrant's new Chief Financial Officer with various
financial matters, including accounts receivable, accounts payable, payroll, and
working capital accounts. In addition, Mr. Mastrorilli, Jr. is responsible for
all project construction financial analysis including spreadsheet projection
preparation and profitability recommendations. Mr. Mastrorilli, Jr. prepares all
reports covering all the above areas of responsibility. He has installed a
computerized accounting system for the Company to more efficiently control the
marketing and sales of local and national programming ventures. He has eight
years of experience in the wireless cable industry serving as Director of
Administration of Cacomm, Inc. Cacomm is also an equal partner in the Grand
Alliance, a wireless cable television company. Mr. Mastrorilli, Jr. is currently
serving as Vice President of Administration for Magnavision Corporation and has
been directly involved with the business since its inception.
Patrick F. Mastrorilli, Vice President of Marketing since
April 1991. He also served as Vice President of Cacomm, Inc. from April 1991 to
the present. He also served as Director of Sales and Marketing of Cacomm, Inc.
from January 1986 to April of 1991. He is responsible for all sales and
marketing functions. He institutes and implements advertising campaigns designed
to attract additional subscribers to Magnavision's services, as well as
overseeing all right-of-entry negotiations with building owners, management
companies, colleges, and nursing homes. Mr. Mastrorilli has eight years of
experience in the wireless cable field serving as Director of Sales and
Marketing of Cacomm, Inc. Mr. Mastrorilli, currently serving as Magnavision's
Vice President of Marketing, has worked for the Company since its inception. He
has successfully negotiated and signed agreements totaling over six million
dollars on behalf of the Company. Non-profit volunteer work is also of interest
to Mr. Patrick Mastrorilli who has organized and promoted fund-raising events
for Muscular Dystrophy, the Arthritis Foundation, the Foodbank of New Jersey,
and the American Cancer Society, just to name a few.
- 23 -
<PAGE>
Keith M. Heilos, Vice President, Customer Relations at
Magnavision since April 1991. Prior to 1991, Mr. Heilos served as Director of
Video Production for Cacomm, Inc. from July of 1987 to April 1991. He has
co-produced and co-directed a number of productions for Cacomm, Inc. including
"The Franchise Show", aired on "Financial News Network" nationwide, directed and
co-produced "The United States Shopping Network", a nationwide home shopping
network, and has been directly involved in numerous other video productions. Mr.
Heilos is directly responsible for customer relations and is the liaison between
Magnavision and its client base. Mr. Heilos has served actively in numerous
community affairs. He has been a member of the local volunteer fire company for
the past ten years, presently serving as Chief. He devotes additional free time
to such fund raisers as the New Jersey Burn Center and drug and alcohol
awareness programs.
Brian J. Mastrorilli, Vice President, Technical Operations
since April 1991. Prior to 1991, Mr. Mastrorilli served as Director of Technical
Operations for Cacomm, Inc. from May of 1988 to April 1991 and Vice President of
Cacomm, Inc. from April 1991 to the present. He previously served as Technical
Director for Video and Audio operations for Cacomm, Inc. His accomplishments
have included the design and construction of a complete three camera studio
facility with editing suites. Mr. Mastrorilli is presently responsible for all
the Company's technical projects. He has co-produced and co-directed "The
Franchise Show" aired on the "Financial News Network" nationwide via satellite
and the "United States Shopping Network" a shop-at-home satellite delivered home
shopping network. Mr. Mastrorilli is currently the Company's system designer and
construction coordinator. He is responsible for all job site equipment
requisitions. Mr. Mastrorilli is also responsible for the design and
construction of all the Company's TVRO earth stations and distribution systems.
He has designed CATV systems supplying over 16,200 students in New Jersey, New
York and Pennsylvania. These include Seton Hall University, Fairleigh Dickinson
University, Manhattanville College, State University of New York, Wagner
College, Immaculata College, Georgian Court College, Montclair State University,
Fordham University, Greenhill Memorial Center for Woman and Sarah Frances
Nursing Home. Mr. Mastrorilli is also responsible for all of the company's
"point to point" 18 GHz microwave paths. This includes all FCC licensing,
design, purchase and construction.
Jeffrey Haertlein, age 47, was elected as the Company's Chief
Financial Officer effective as of January 1, 1996 with responsibility for all of
the Registrant's financial matters. Mr. Haertlein was previously Assistant Vice
President of Midlantic Corporation from 1978 to 1995 with responsibility for
day-to-day financial functions including internal reporting, special projects
and financial planning for such bank holding company and its various
subsidiaries. Prior thereto and from 1977 to 1978 Mr. Haertlein was employed by
Chase Manhattan Bank in the capacity of Internal Auditor. Mr. Haertlein received
a B.A. degree from Monmouth College in accounting/marketing and is currently
attending such institution in pursuit of a Masters in Business Administration.
ADVISORS
Arnold Dauer, age 59, is an advisor to the President of
Magnavision regarding all aspects of the Registrant's business and has performed
such function from June 1989 to the present, and has provided general business
consulting services to Cacomm, Inc. (the major shareholder of Magnavision
Corporation) from 1985 to the present. Mr. Dauer was
- 24 -
<PAGE>
creator and founder of various businesses including Allaire State Bank, where he
also served on the Board of Directors from 1971 until the bank merged into The
National Community Bank in December of 1982. Mr. Dauer served as Vice President
in charge of operations and was co-founder of "Cathy Arnold", a small chain of
retail apparel stores, and also served as Vice President of Reid Manufacturing,
Inc., a manufacturer of apparel, from 1959 until the businesses were sold in
1980. Mr. Dauer was President and founder of Professional Auto Leasing ("PAL"),
one of the largest auto and equipment leasing companies operating in the
tri-state area from 1976 to 1989. During the recession in the late 1980's, a
large number of auto leasing defaults occurred, resulting in various corporate
loans being called by the financial institution which financed PAL. Mr. Dauer,
having personally guaranteed such loans, was forced to file for relief with the
U.S. Federal Bankruptcy Court. Mr. Dauer, active in local community affairs, has
served as President for both the Jaycees and Kiwanis.
ITEM 11. EXECUTIVE COMPENSATION
Set forth below is the aggregate remuneration paid or accrued
by the Registrant during the years ended December 31, 1995, 1994 and 1993 to the
Company's Chief Executive Officer. No other executive officer of the Company
received salary and bonus aggregating in excess of $100,000 in any of those
years.
At present, none of the current officers have employment
agreements with the Registrant.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
Securities
Underlying
Restricted Options/
Stock Warrants
Name & Principal Position Year Salary Awards #
- ------------------------- ---- ------ ---------- ------------
<S> <C> <C> <C> <C>
Nicholas Mastrorilli, Sr., 1995 $111,771 $ -- --
CEO 1994 90,591 18,750 1,000,000
1993 88,840 -- --
</TABLE>
- 25 -
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT
(a) Security Ownership of Certain Beneficial Owners:
The following table contains information as of June 24, 1996
as to the beneficial ownership of shares of Common Stock of the Registrant of
each person who, to the knowledge of the Registrant at that date, was the
beneficial owner of 5% or more of its outstanding shares.
Name and Address Amount and Nature
of Beneficial Owner of Beneficial Ownership % of Class
- ------------------- ------------------------ ----------
Cacomm, Inc. 18,417,782 (1) 80.3%
1725 Route 35
Wall, NJ 07719
KOCO Capital Company 6,835,364 (2) 23.0.%
111 Radio Circle
Mt. Kisco, NY 10549
IBJ Schroder Bank & 10,253,046 (3) 30.9%
Trust Company
One State Street
New York, NY 10004
(1) Includes 300,000 shares which are subject to purchase by third parties
pursuant to options granted by Cacomm, Inc. on such shares.
(2) Constitutes shares subject to currently exercisable warrants issued to
KOCO Capital Company.
(3) Constitutes the aggregate number of shares subject to currently
exercisable warrants issued to IBJ Schroder Bank & Trust Company
(6,835,364) and its affiliate, IBJS Capital Corporation (3,417,682).
(b) Security Ownership of Management:
Set forth below is certain information, as of June 24, 1996,
concerning the number and percentage of shares of Common Stock of the Registrant
owned of record and beneficially by each officer and director of the Registrant
(including Nicholas Mastrorilli, Sr., the Company's Chairman of the Board and
President) and by all officers and directors as a group.
- 26 -
<PAGE>
Name of Amount and Nature of
Beneficial Owner Beneficial Ownership % of Class
- ---------------- -------------------- -----------
Nicholas Mastrorilli, Sr. 1,055,535 (1) 4.4%
Nicholas Mastrorilli, Jr. 296,344 (2) 1.3%
Patrick Mastrorilli 331,220 (3) 1.4%
All Officers and Directors
as a Group (5 persons) 2,320,539 (4) 9.7%
- ----------
(1) Includes 994,075 shares subject to currently exercisable warrants and
options held by Mr. Mastrorilli, Sr., but does not include 18,417,782
shares held by Cacomm, Inc., of which Mr. Mastrorilli, Sr. owns
approximately 33% of the outstanding shares (and, with members of his
family, has the right to acquire an additional 19% on a fully diluted
basis) and is the president and a director. Nicholas Mastrorilli, Jr. and
Patrick Mastrorilli are also directors and own an insignificant amount of
Cacomm, Inc. stock. Mr. Mastrorilli, Sr. disclaims any beneficial ownership
of the shares of the Company owned by Cacomm, Inc.
(2) Constitutes shares subject to currently exercisable warrants and options
held by Mr. Mastrorilli, Jr.
(3) Includes 327,799 shares subject to currently exercisable warrants and
options held by Mr. Mastrorilli.
(4) Includes 2,182,174 shares subject to currently exercisable warrants and
options held by all officers and directors.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
As described in Part I of this Form 10-K, in August 1995, the
Company obtained a $5,000,000 lending facility from IBJ Schroder Bank & Trust
Co., IBJS Capital Corporation and KOCO Capital Company, L.P. (the "Lenders").
Approximately $2,637,000 of that amount was furnished to the Company at the time
the facility was entered into, and the remainder is to be advanced based on the
present value of the projected cash flow from new contracts with purchasers of
the Company's private cable television service, with the funds advanced to be
used for equipment and construction costs incurred in connection with
installation of the new outlets and for working capital. In connection therewith
the Company executed 12% interest-only promissory notes, the principal of which
is due on February 26, 2001. The proceeds furnished at the time the lending
facility was entered into were utilized to fund an escrow deposit for system
configuration required under the Channel Lease Agreement, to repurchase
approximately 18% of the Company's issued and outstanding capital stock (see
discussion below) and to provide working capital. In connection with obtaining
the lending facility, the Company issued to the Lenders warrants expiring on
August 27, 2003 to purchase approximately 27% of the Company's Common Stock on a
fully diluted basis at exercise prices of $.38 and $.27 per share. Under the
terms of the
- 27 -
<PAGE>
lending facility, the Lenders also have the right to designate two of the
Company's five directors and the Company has agreed to various covenants. In
connection therewith the Company is also required to issue additional warrants
to purchase 360,000 shares of its Common Stock at an exercise price of $.38 in
satisfaction of certain investment banking and finder fees. The obligations of
the Company under the lending facility are secured by the Channel Lease
Agreement and the Company's private cable service contracts.
On June 3, 1996 the Company and its Lenders amended the terms
of the lending facility. Pursuant thereto, the Lenders agreed to waive existing
defaults and provide up to $1,200,000 of the remaining amount available under
the lending facility toward the Company's working capital requirements (of which
approximately $470,000 was advanced to the Company on June 4, 1996) without
regard to the present value formula referred to above. In exchange therefor, the
Company agreed to issue warrants ("New Warrants") to purchase additional shares
of Common Stock, representing approximately 12% of the Company's Common Stock on
a fully diluted basis, at an exercise price of $.27 per share. The New Warrants
expire on June 4, 2004. The amended agreements require the Lenders to surrender
to the Company warrants representing the right to purchase 6,884,890 shares if,
as and when the Company complies with certain conditions outlined in the amended
agreements. In addition, the Lenders each have the right to require the Company
to repurchase certain, and the Company has the right to repurchase all, of the
warrants held by the Lenders under certain conditions. The Lenders also have the
option, under certain circumstances, to designate three out of the five
directors of a subsidiary which owns the Company's rights under the Channel
Lease Agreement and under such circumstances, will receive a proxy to vote the
shares thereof.
The description of the terms and conditions of the agreements
with the Lenders is qualified in its entirety by reference to the entire
agreements, copies of which have been filed as exhibits to this Form 10-K.
As indicated above, a portion (i.e., $760,000) of the proceeds
advanced by the Lenders to the Company in August 1995 was used to redeem shares
of Common Stock registered to George S. Callas, a non-management shareholder,
which shares represented approximately 18% of the Company's issued and
outstanding Common Stock at the time of the redemption. The redemption of the
shares was required pursuant to the Company's agreements with the Lenders. The
shares had been pledged by Mr. Callas to a bank to secure a loan made to him,
and were being sold by the bank in partial settlement of the loan. The
redemption by the Company was made pursuant to a right of first refusal which
Mr. Callas had been granted by the bank, and which right had been assigned by
Mr. Callas to the Company. The $760,000 paid to redeem the shares matched an
offer received by the bank from an unaffiliated third party. The Company issued
250,000 shares of Common Stock to Mr. Callas in consideration of his assistance
in this transaction and an additional 200,000 shares of Common Stock to other
non-management shareholders who assisted in facilitating this transaction and
obtaining the lending facility from the Lenders.
The Company had previously loaned $407,722 to Mr. Callas in
years prior to 1994. No portion of that loan has been repaid and the Company
wrote off the loan receivable as of December 31, 1993 after learning that Mr.
Callas had filed for bankruptcy protection in 1994.
- 28 -
<PAGE>
P A R T I V
ITEM 14. EXHIBITS, FINANCIAL STATEMENTS, SCHEDULES AND REPORTS
ON FORM 8-K
(a) (1) Financial Statements. The following financial statements are
included in Part II, Item 8:
<TABLE>
<CAPTION>
Page
----
<S> <C>
Reports of Independent Auditors' . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-1
Consolidated Balance Sheets as of December 31, 1995 and 1994 . . . . . . . . . . . . . . . . . . . . . . F-3
Consolidated Statements of Operations for years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-4
Consolidated Statements of Stockholders' Equity as of
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-5
Consolidated Statements of Cash Flows for years ended
December 31, 1995, 1994 and 1993 . . . . . . . . . . . . . . . . . . . . . . . . . . . . F-6
Notes to Consolidated Financial Statements . . . . . . . . . . . . . . . . . . . . . . . . . . F-7
</TABLE>
(a) (2) Schedules. All schedules are omitted since the required information
is either not applicable or not present in amounts sufficient to require
submission of the schedule.
(a) (3) Exhibits
Page or
Document
Item Incorporated
No. Description of Document by Reference
- ---- ------------------------- --------------
(2) Merger Agreement dated September 13, Form 8-K
1991 between Yardley Ventures, Inc. dated 9/17/91
and Magnavision Corporation
(3) (a) Articles of Incorporation and By Laws Form S-1
dated 12/29/86
(3) (b) Amendment to Certificate of Incorporation Form 8-K
dated 9/17/91
(10) (a) License Agreement dated August 20, 1990 Form 10-K
between Magnavision Corporation and dated 12/31/91
Department of Education, Archdiocese
of New York
- 29 -
<PAGE>
(b) Amended License Agreement dated January Form 10-K
6, 1994 between Magnavision Corporation dated 12/31/93
and Department of Education, Archdiocese
of New York
(c) Microcell Systems Corporation Agreement Form 10-K
dated December 15, 1993 dated 12/31/93
(d) Securities Purchase Agreement dated as of
August 25, 1995 among the Registrant,
Magnavision Corporation (N.J.), IBJS Capital
Corporation, IBJ Schroder Bank & Trust
Company and Koco Capital Company, L.P.
(e) Form of Senior Subordinated Note of the
Registrant and Magnavision Corporation (N.J.)
due February 26, 2001
(f) Form of Warrant to Purchase Shares of Registrant's
Common Stock expiring on August 27, 2003
(g) Security Agreement and Collateral Assignment dated
as of August 25, 1995 among Magnavision Corporation
(N.J.), University Connection, Inc. and IBJS Capital
Corporation as agent
(h) Registration Rights Agreement dated as of
August 25, 1995 among the Registrant and the investors
listed therein
(i) Stockholders' Agreement dated as of August 25, 1995
among the Registrant, the investors and the other
parties listed therein
(j) Non-Competition Agreement dated as of August 25, 1995
between Magnavision Corporation (N.J.) and
Nicholas Mastrorilli, Sr.
(k) Indemnification Agreement dated as of August 25, 1995
between the Registrant, Cacomm, Inc., and the investors
listed therein
(l) Lockbox Service Agreement dated as of August 25, 1995
among Magnavision Corporation (N.J.), University
Connection, Inc., IBJS Capital Corporation and IBJ
Schroder Bank & Trust Company
(m) Amendment No. 1 dated as of June 3, 1996 to
Securities Purchase Agreement dated as of August
- 30 -
<PAGE>
25, 1995 among the Registrant, Magnavision Corporation (N.J.),
Magnavision Wireless Cable, Inc., IBJS Capital Corporation, IBJ
Schroder Bank & Trust Company and Koco Capital Company, L.P.
(n) Amended and Restated Stockholders' Agreement dated
as of June 3, 1996 among the Registrant,
Magnavision Corporation (N.J), Magnavision
Wireless Cable, Inc. and the investors and
other parties listed therein
(o) Amendment No. 1 dated as of June 3, 1996
to the Registration Rights Agreement dated as
of August 25, 1995 among the Registrant and
the investors listed therein
(p) Amendment No. 1 dated as of June 3, 1996 to
the Security Agreement and Collateral Assignment
dated as of August 25, 1995 among Magnavision
Corporation (N.J.) Magnavision Wireless Cable,
Inc., Magnavision Private Cable, Inc., University
Connection, Inc. and IBJS Capital Corporation, as agent
(q) Amended and Restated Lockbox Service Agreement dated as of June 3,
1996 among Magnavision Corporation (N.J.), University Connection,
Inc., Magnavision Private Cable, Inc., IBJS Capital Corporation and
IBJ Schroder Bank & Trust Company
(r) Pledge Agreement dated as of June 3, 1996 between
Magnavision Corporation (N.J.) and IBJS Capital
Corporation as agent
(s) Pledge Agreement dated as of June 3, 1996 between
Magnavision Corporation (N.J.) and IBJS Capital
Corporation as agent
(t) General Indenture of Conveyance, Assignment and
Transfer dated as of June 3, 1996 from Magnavision
Corporation (N.J.) and University Connection, Inc.
to Magnavision Private Cable, Inc.
(u) General Indenture of Conveyance, Assignment and
Transfer dated as of June 3, 1996 from Magnavision
Corporation (N.J.) to Magnavision Wireless Cable, Inc.
(v) Indenture of Assumption of Liabilities dated
as of June 3, 1996 from Magnavision Private
Cable, Inc. to Magnavision Corporation (N.J.) and
University Connection, Inc.
- 31 -
<PAGE>
(w) Indenture of Assumption of Liabilities dated
as of June 3, 1996 from Magnavision Wireless
Cable, Inc. to Magnavision Corporation (N.J.)
(x) Irrevocable Proxy dated June 3, 1996 issued by
Magnavision Corporation (N.J.) to IBJS Capital
Corporation as agent
(y) Form of Amended and Restated Senior Subordinated
Notes dated June 3, 1996
(z) Form of Warrant to Purchase Shares of Registrant's
Common Stock expiring on June 4, 2004
(aa) Letter Agreement dated July 11, 1995 between the
Registrant, Cacomm, Inc. and George S. Callas
(bb) Letter Agreement dated August 25, 1995 among the
Registrant, Midlantic Bank, N.A. and George S. Callas
(cc) Form of Five Year Warrant to Purchase Shares of
Registrant's Common Stock issued to various parties
during 1994 and 1995
(dd) Form of Indemnification Agreement for Executive
Officers and Directors
(16) Letter re: change in certifying
accountant
(21) Subsidiaries of Registrant
(27) Financial Data Schedule
(b) Form 8-K
None
- 32 -
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the Registrant has duly caused this report to
be signed on the Company's behalf by the undersigned, thereunto duly authorized.
MAGNAVISION CORPORATION
DATE: July 19, 1996 By: /s/ Nicholas Mastrorilli, Sr.
-----------------------------
NICHOLAS MASTRORILLI, SR.
Principal Executive Officer
By: /s/ Jeffrey Haertlein
-----------------------------
JEFFREY HAERTLEIN
Principal Financial and
Accounting Officer
Pursuant to the requirements of the Securities Exchange Act of 1934,
this report has been signed below by the following persons on behalf of the
Registrant and in the capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
- --------- ----- ----
<S> <C> <C>
/s/ Nicholas Mastrorilli, Sr. Chairman, President, July 19, 1996
- -----------------------------
Nicholas Mastrorilli, Sr. Director
/s/ Nicholas Mastrorilli, Jr. Vice President of Admin- July 19, 1996
- -----------------------------
Nicholas Mastrorilli, Jr. istration, Director
/s/ Patrick Mastrorilli Vice President of Marketing, July 19, 1996
- -----------------------
Patrick Mastrorilli Director
</TABLE>
- 33 -
<PAGE>
Supplemental Information to be Furnished with Reports filed pursuant to Section
15(d) of the Act by Registrants which have not registered securities pursuant to
Section 12 of the Act.
As of the date hereof, the Registrant has never sent any
annual report or proxy material to its security holders. If and when such annual
report or proxy material is furnished to its stockholders, the Registrant shall
furnish to the Commission for its information copies of such material. Such
material, when furnished, shall not be deemed to be "filed" with the Commission
or otherwise subject to liabilities of Section 18 of the Act (except to the
extent that the Registrant specifically incorporates such material by reference
in its Form 10-K).
- 34 -
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Index to Financial Statements
Page
----
Independent Auditors' Reports F-1
Consolidated Balance Sheets F-3
Consolidated Statements of Operations F-4
Consolidated Statements of Shareholders' Equity F-5
Consolidated Statements of Cash Flows F-6
Notes to Consolidated Financial Statements F-7
- 35 -
<PAGE>
Independent Auditors' Report
To the Board of Directors and Shareholders of:
Magnavision Corporation and Subsidiaries
We have audited the accompanying consolidated balance sheet of Magnavision
Corporation and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, shareholders' equity, and cash flows for
the year then ended. These consolidated financial statements are the
responsibility of the Company's management. Our responsibility is to express and
opinion on these financial statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audit provides a reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Magnavision
Corporation and Subsidiaries as of December 31, 1995, and the results of their
operations and their cash flows for the year then ended in conformity with
generally accepted accounting principles.
KPMG Peat Marwick LLP
New York, New York
June 3, 1996
F-1
<PAGE>
Independent Auditors' Report
To the Board of Directors and Stockholders of:
Magnavision Corporation and Subsidiaries
Wall, New Jersey
We have audited the accompanying consolidated balance sheet of Magnavision
Corporation and Subsidiaries as of December 31, 1994, and the related
consolidated statements of operations, stockholders' equity, and cash flows for
each of the years in the two-year period ended December 31, 1994. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these financial
statements based on our audit.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit also includes assessing the accounting principles used
and significant estimates made by management, as well as evaluating the overall
financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the consolidated financial statements referred to above present
fairly, in all material respects, the financial position of Magnavision
Corporation and Subsidiaries as of December 31, 1994, and the results of their
operations and their cash flows for each of the years in the two-year period
ended December 31, 1994, in conformity with generally accepted accounting
principles.
Lawson, Rescinio, Schibell & Assoc., P.C.
Oakhurst, New Jersey
January 30, 1995
F-2
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
As of December 31, 1995 and 1994
<TABLE>
<CAPTION>
Assets l995 1994
---- ----
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 235,327 243,031
Trade accounts and other receivables 108,156 85,026
Prepaid expenses 12,628 22,504
Shareholder loans receivable, net (note 2a) 43,861 49,046
----------- -------
Total current assets 399,972 399,607
----------- -------
Property and equipment:
Property and equipment at cost (notes 3 and 8) 766,779 485,188
Less: accumulated depreciation (333,870) (214,566)
----------- -------
Property and equipment, net 432,909 270,622
----------- -------
Other Assets:
Prepaid lease expense (Note 7) 864,621 --
Deferred financing costs, net of
accumulated amortization, of $23,476 in 1995 363,849 --
Deferred charges -- 15,019
Deposits 4,420 4,345
----------- -------
Total assets $ 2,065,771 689,593
=========== =======
Liabilities and Shareholders' Equity
Current liabilities:
Accounts payable and accrued expenses 338,614 320,195
Due to shareholders (note 2b) 144,889 178,925
Deferred revenues 102,244 70,260
Current portion of obligations under
capital leases (note 8) 23,411 35,616
Current portion of long-term debt (note 5) 3,911 2,873
Income taxes payable (note 4) 891 841
----------- -------
Total Current Liabilities 613,960 608,710
----------- -------
Long-term liabilities
Accounts payable and accrued expenses 14,000 26,000
Security deposits payable 58,821 22,592
Obligations under capital leases (note 8) -- 20,287
Long-term debt (note 5) 14,243 --
Notes payable - senior debt (note 9) 2,637,219 --
----------- -------
Total long-term liabilities 2,724,283 68,879
----------- -------
Commitments and contingencies (notes 6, 7, 8 and 10)
Shareholders' equity (deficit):
Common stock, $0.004 par value -
750,000,000 shares authorized,
27,369,451 issued and 26,816,885 issued
and outstanding in 1995 and 1994, respectively (note 12) 109,478 107,268
Additional paid-in capital 3,988,571 3,670,764
Accumulated deficit (4,610,521) (3,766,028)
----------- -------
(512,472) 12,004
Less 4,626,354 shares of common stock in treasury (760,000) --
----------- -------
Total shareholders' equity (deficit) (1,272,472) 12,004
----------- -------
Total liabilities and shareholders' equity (deficit) $ 2,065,771 689,593
=========== ======
See accompanying notes to consolidated financial statements.
</TABLE>
F-3
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Consolidated Statement of Operations
For the Years Ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Gross revenues $ 666,366 516,053 385,512
Cost of sales 355,001 198,212 209,952
----------- -------- ----------
Gross profit 311,365 317,841 175,560
----------- -------- ----------
Operating expenses
Officers salaries 280,978 264,535 152,121
Other salaries 102,906 55,222 22,644
Depreciation and amortization 142,780 114,035 103,418
General and administrative 595,503 376,569 267,607
Provision for doubtful shareholder loans -- -- 407,722
----------- -------- ----------
Total operating expenses 1,122,167 810,361 953,512
----------- -------- ----------
Operating loss (810,802) (492,520) (777,952)
----------- -------- ----------
Other income (expense)
Interest expense (125,805) (34,008) (34,030)
Interest income 8,913 1,526 7
Other (note 2c) 84,653 771 7,190
----------- -------- ----------
Total other income (expense) (32,239) (31,711) (26,833)
----------- -------- ----------
Loss before provision for income taxes (843,041) (524,231) (804,785)
Provision for income taxes (note 4) 1,452 7,632 335
----------- -------- ----------
Net loss $ (844,493) (531,863) (805,120)
============ ========== ==========
Net loss per common share $ (0.03) (0.02) (0.03)
============ ========== ==========
Weighted average number
of shares outstanding $ 25,530,775 26,274,851 25,627,562
============ ========== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-4
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Shareholders' Equity
For the Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
Common Common Additional Total
Stock Stock Paid-in Accumulated Treasury Share-
Shares Amount Capital Deficit Stock Equity
------ ------ ------- ------- ----- ------
<S> <C> <C> <C> <C> <C> <C>
Balances, December 31,1992 25,531,885 $ 102,128 2,503,954 (2,429,045) -- 177,037
Issuance of common stock
Jan. 1, 1993 to Dec. 31, 1993 517,500 2,070 514,880 -- -- 516,950
Net loss -- -- -- (805,120) -- (805,120)
---------- --------- --------- ---------- -------- ----------
Balances, December 31, 1993 26,049,385 104,198 3,018,834 (3,234,165) -- (111,133)
Issuance of common stock
Jan. 1, 1994 to Dec. 31, 1994 767,500 3,070 651,930 -- -- 655,000
Net loss -- -- -- (531,863) -- (531,863)
---------- --------- --------- ---------- -------- ----------
Balances, December 31, 1994 26,816,885 107,268 3,670,764 (3,766,028) -- 12,004
Issuance of common stock
Jan. 1, 1995 to Dec. 31, 1995 552,566 2,210 317,807 -- -- 320,017
Repurchase of 4,626,354 shares
of common stock, net
(note 12) -- -- -- -- (760,000) (760,000)
Net loss -- -- -- (844,493) -- (844,493)
---------- --------- --------- ---------- -------- ----------
Balances, December 31, 1995 27,369,451 $ 109,478 3,988,571 (4,610,521) (760,000) (1,272,472)
========== ========= ========= ========== ======== ==========
</TABLE>
See accompanying notes to consolidated financial statements.
F-5
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
For the Years ended December 31, 1995, 1994 and 1993
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Cash flows from operating activities
Net loss $ (844,493) (531,863) (805,120)
Depreciation & amortization 142,780 114,035 103,418
Amortization of Channel Lease prepayment 35,656 -- --
(Gain) loss on sale of assets -- (750) 3,281
Provision for doubtful shareholder loans -- -- 407,722
Investment bank fees paid with stock -- 36,900 --
Changes in assets and liabilities:
(Increase) decrease in trade accounts and
other receivables (23,130) (45,378) 1,477
(Increase) decrease in prepaid expenses 9,876 6,880 (22,390)
Increase in deposits (75) (2,007) (1,700)
Increase in accounts payable and accrued expenses 6,419 6,217 74,957
Increase in security deposits payable 36,229 22,592 --
Increase in income taxes payable 50 841 --
Increase in deferred revenues 31,984 10,857 24,787
(Increase) decrease in deferred charges 15,0l9 7,508 (22,527)
----------- ------- ------
Net cash used in operating activities (589,685) (374,168) (236,095)
----------- ------- ------
Cash flows from investing activities
Decrease (increase) in loans to shareholders 5,185 3,810 (141,891)
Purchases of property and equipment (281,591) (78,704) (30,175)
Proceeds from sale of assets -- 750 --
Investment in Channel Lease (900,227) -- --
----------- ------- ------
Net cash used in investing activities (1,176,683) (74,144) (172,066)
----------- ------- ------
Cash flows from financing activities
Net proceeds (payments) of long-term debt 15,281 (5,837) (5,784)
Payments of obligations under capital leases (32,492) (25,106) (26,729)
(Decrease) increase in due to shareholder (34,036) (13,078) 647
Proceeds from issuance of common stock 320,017 618,100 516,656
Proceeds from senior indebtedness 2,637,219 -- --
Payment of financing fees (387,325) -- --
Redemption of common stock (760,000) -- --
----------- ------- ------
Net cash provided by
financing activities 1,758,664 574,079 484,790
----------- ------- ------
Net (decrease) increase in cash
and cash equivalents (7,704) 125,767 76,629
Cash and cash equivalents beginning
of period 243,031 117,264 40,635
----------- ------- ------
Cash and cash equivalents - end of period $ 235,327 243,031 117,264
=========== ======= ======
Supplemental schedule of cash paid during the year
for:
Interest 41,828 33,451 32,930
Income Taxes 1,402 6,312 335
</TABLE>
See accompanying notes to consolidated financial statements
F-6
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
December 31, 1995, 1994 and 1993
(1) Operations and Summary of Significant Accounting Policies
(a) Consolidated Financial Statements
The accompanying financial statements present the consolidated accounts
of Magnavision Corporation, a Delaware corporation (formerly Yardley
Ventures, Inc.), and its wholly owned subsidiary Magnavision
Corporation, a New Jersey corporation, and its wholly owned
subsidiaries, University Connection, Inc., a New Jersey corporation,
Accu-Trek, Inc., a New Jersey corporation, Magnavision Laboratories,
Inc., a Delaware Corporation and Magnavision Private Cable, Inc., a
Delaware Corporation ("the Company"). The consolidated financial
statements include all of the assets, liabilities, income, expenses and
cash flows for these companies. All significant intercompany
transactions and balances have been eliminated.
(b) Organization, Operations and Liquidity
Magnavision Corporation (formerly Yardley Ventures, Inc.) was
incorporated in Delaware on April 3, 1986, to seek to acquire one or
more potential businesses. Magnavision Corporation and its subsidiaries
were established to conduct the business of providing wireless and
private cable television, which is now the business purpose of the
Company, to segments where cable television is not available and as an
alternative to cable television. Magnavision Corporation of New Jersey
was formed on June 15, 1989, pursuant to the laws of the State of New
Jersey.
Since the inception of service in 1992, the Company has experienced
operating losses and negative cash flow. In addition, at December 31,
1995, the Company has a working capital deficiency and shareholders
deficit.
The Company plans to meet short-term liquidity requirements with the
funds available under the amended lending facility described in notes 9
and 13. On a long-term basis, the Company intends to create liquidity
and to take advantage of the current marketplace interest in the
wireless spectrum that it controls by exploring various strategic
alternatives relating to the Channel Lease Agreement (see note 7),
including potential strategic alliances, joint ventures or a sale or
other disposition of the Company's rights under such agreement. Allen &
Company, Incorporated has been retained to assist the Company in these
endeavors. Also, management believes the continued expansion of the
Company's private cable operations should produce positive cash flows in
the future.
However, no assurances can be given that the Company will be able to
successfully accomplish the strategic alternatives relating to the
Channel Lease Agreement or expand the private cable operations to
produce positive cash flows.
(c) Cash and Cash Equivalents
For purposes of the statement of cash flows, the Company considers cash
in banks and certificates of deposit maturing within three months of
date of purchase as cash and cash equivalents.
(Continued)
F-7
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1), Continued
(d) Property and Equipment
Property and equipment are stated at cost. Depreciation, for financial
reporting purposes, is provided for on the straight-line method over the
estimated useful lives of the related assets, which are:
Office Equipment 5 years
Furniture and Fixtures 10 years
Transportation Equipment 5 years
Machinery and Equipment 5 years
Leasehold Improvements 7 years
The Company uses accelerated methods and lives, as allowed by the
Internal Revenue Code, to calculate depreciation for income tax
purposes.
(e) Deferred Revenues
The Company records subscriptions received in advance of the service
being provided as a current liability.
(f) Income Taxes
Deferred tax assets and liabilities are recognized for the expected tax
consequences of temporary differences between the financial statement
carrying amount of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards.
Deferred tax assets and liabilities are measured using enacted tax rates
expected to apply to taxable income in the years in which those
temporary differences are expected to be recovered or settled. The
effect on deferred tax assets and liabilities of a change in tax rates
is recognized in income in the period that includes the enactment date.
(g) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and revenue and
expenses and the disclosure of contingent assets and liabilities to
prepare these financial statements in conformity with generally accepted
accounting principles. Actual results could differ from these estimates.
(Continued)
F-8
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(1), Continued
(h) Fair Value of Financial Instruments
Statement of Financial Accounting Standards No. 107, "Disclosures about
Fair Value of Financial Instruments" (Statement 107), requires
disclosure of fair value information about financial instruments,
whether or not recognized in the balance sheet, for which it is
practicable to estimate that value. In many cases, fair value estimates
cannot be substantiated by comparison to independent market information
and could not be realized in immediate settlement of the instrument.
Statement 107 excludes certain financial instruments and all
nonfinancial instruments from its disclosure requirements.
Accordingly, the aggregate fair value amounts presented do not
represent the underlying value of the Company.
In managements opinion, cash and cash equivalents, trade accounts and
other receivables, shareholder loans receivable, deposits, accounts
payable and accrued expenses, due to shareholders, long-term debt and
notes payable equal or approximate fair value.
(i) Prepaid Lease Expense
Prepaid lease expense represents the Company's deposit relating to the
Channel Lease Agreement (see note 7). The amount is being amortized over
the term of the lease agreement.
(j) Deferred Financing Costs
Deferred financing costs represent expenditures relating to the Senior
Debt financing (see note 9). Such costs are being amortized over the
term of the Senior Debt borrowings.
(k) Earnings Per Share of Common Stock
Primary earnings per share are computed by dividing net income (loss) by
the weighted average number of common and common equivalent shares
outstanding during the year. Common equivalent shares include shares
issuable upon the assumed exercise of stock options and warrants using
the treasury stock method when dilutive.
(2) Related Party Transactions
The following, transactions occurred between the Company and related
parties:
a. Shareholder loans receivable of $43,861 and $49,046 at December 31,
1995 and 1994, respectively are payable on demand and are interest
free.
(Continued)
F-9
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(2), Continued
b. Various operating expenses, such as rent, office expenses and
telephone, amounting to $800, $1,500, and $8,578 during 1995, 1994,
and 1993, respectively were charged to the Company by Cacomm, Inc.,
the Company's majority shareholder. At December 31, 1995 and 1994,
current liabilities include $144,889 and $ 178,925, respectively,
payable to this shareholder in connection with these expenses and
expenses from prior years.
c. Beginning June 24, 1992, a shareholder advanced loans to the Company
in the aggregate amount of $45,036, which were to be repaid at the
Company's earliest convenience. In August 1995, the shareholder
forgave the outstanding loan balance of $20,036 and additional accrued
expenses owed to him resulting in income from forgiveness of debt of
$77,053.
d. Cacomm, Inc., the Company's majority shareholder, is a 25% partner in
a general partnership known as the Grand MMDS Alliance. The Grand
MMDS Alliance holds rights to certain MMDS channels, as a designated
selectee of the FCC. These channels cover similar broadcast areas as
Magnavision, and the possibility exists that The Grand MMDS Alliance
could commence business in direct competition with Magnavision, but
has not commenced business operations as of the date of this report.
Certain officers and directors of Magnavision are also officers and
directors of Cacomm, Inc.
(3) Property And Equipment
Property and equipment at December 31, 1995 and 1994 are summarized by
major classification as follows:
1995 1994
---- ----
Office Furniture and Equipment $ 49,246 47,746
Transportation Equipment 51,559 29,180
Machinery and Equipment 665,974 408,262
-------- --------
766,779 485,188
Less: Accumulated Depreciation (333,870) (214,566)
-------- --------
$ 432,909 270,622
========= =======
(Continued)
F-10
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(3), Continued
Machinery and equipment relates principally to assets owned by the Company
located at the various college and nursing home sites serviced by the
Company.
(4) Income Taxes
Income tax expense attributable to income (loss) from operations consists
of:
Current
-------
Year ended December 31, 1995:
Federal -
State 1,452
------
1,452
------
Year ended December 31, 1994:
Federal -
State 7,632
------
7,632
------
Year ended December 31, 1993:
Federal 335
------
$ 335
======
Income tax expense attributable to net loss before provision for income
taxes was $1,452, $7,632 and $335 for the years ended December 31, 1995,
1994 and 1993 and differed from the amounts computed by applying the U.S.
Federal income tax rate of 34 percent to pretax income from operations as a
result of the following:
(Continued)
F-11
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(4), Continued
<TABLE>
<CAPTION>
1995 1994 1993
---- ---- ----
<S> <C> <C> <C>
Computed expected tax benefit $(286,634) (178,341) (273,627)
Increased (reduction) in income
taxes resulting from:
Increase in valuation allowance for Federal
deferred tax assets 282,179 172,359 265,507
State and local income taxes, net of
Federal income tax benefit 958 5,037 -
Non-deductible portion of
meals and entertainment 303 906 513
Other, net 4,646 7,671 7,942
-------- -------- --------
$ 1,452 7,632 335
======== ======== ========
</TABLE>
The temporary differences and carryforwards which give rise to significant
portions of the deferred tax assets and liabilities at December 31, 1995
and 1994 are presented below:
<TABLE>
<CAPTION>
1995 1994
---- ----
<S> <C> <C>
Deferred tax assets:
Net operational loss carry forward $ 1,617,190 1,249,212
Compensation paid with Company stock 28,297 28,297
Organization and construction costs
capitalized for tax purposes (30,032) -
Less valuation allowance (1,593,638) (1,259,576)
--------------- -----------
Net deferred tax asset 21,817 17,933
--------------- -----------
Deferred tax liabilities:
Property and equipment, principally
due to differences in depreciation (21,817) (17,933)
--------------- -----------
Net deferred tax asset (liability) $ - -
=============== ===========
</TABLE>
At December 31, 1995, the Company has net loss carryforwards for federal
income tax purposes of $4,000,00 which are available to offset future
taxable income. These carryforwards expire in varying amounts through 2010.
The net change in the total valuation allowance for 1995, 1994 and 1993 was
an increase of $334,062, $204,495 and $314,318, respectively.
(Continued)
F-12
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(5) Long-Term Debt
Long-term debt at December 31, 1995 and 1994, consisted of the following:
<TABLE>
<CAPTION>
<S> <C> <C>
1995 1994
---- ----
Note payable to a financing company, payable in
monthly installments of $436, including
interest at 12.25%, final payment due April
2000 collateralized by a vehicle with a book value
of $20,141 $ 17,507 -
Note payable to a financing company, payable in monthly
installments of $222, including interest at 11.5%, final
payment was made in January 1996. 647 2,837
-------- ------
18,154 2,873
Less Current Portion 3,911 2,873
-------- ------
Long-Term Debt $ 14,243 --
======== ======
</TABLE>
At December 31, 1995 maturities of long-term debt are as follows:
For the Year Ending Amount
------------------- ------
1996 $ 3,910
1997 3,686
1998 4,163
1999 4,703
2000 1,692
----------
Thereafter $ 18,154
==========
(6) Operating Leases
The Company leases office space and automobiles for use in its operations
for terms of 1 to 3 years. Minimum lease payments over the remaining lease
terms are as follows:
For the Year Ending Amount
------------------- ----------
1996 $ 31,303
1997 23,343
1998 10,328
----------
$ 64,974
==========
Expenses under operating leases amounted to $24,468,$32,333 and $30,770 for
the years ended December 31, 1995, 1994 and 1993, respectively.
(Continued)
F-13
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(7) Channel Lease Agreement
On August 20, 1990, the Company entered into an agreement with the
Department of Education, Archdiocese of New York ("the Archdiocese") which
would permit the Company to use the Transmission Capacity of the
Archdiocese. The agreement, which was amended in January 1994, grants the
Company a lease through January 2004 with a right to extend for an
additional five years and a right of first refusal for subsequent renewals.
Pursuant to the agreement, the Company must also pay to the Archdiocese a
royalty fee for the use of the Transmission Capacity, in accordance with
the terms and amounts described in the amended agreement. In connection
with the amended agreement the Company had a contingent obligation to fund
the reconstruction of the Archdiocese's system. In 1995, the Company
deposited $900,277 in an escrow account for the purpose of system
reconstruction upgrades. The Company recorded the deposit as prepaid lease
expense, and is amortizing the amount over the life of the agreement
through January 2004.
At December 31, 1995, the minimum royalty payments over the remaining
license term are as follows:
For the Year Ending Amount
------------------- ------
1996 $ 123,000
1997 144,000
1998 144,000
1999 144,000
2000 144,000
Thereafter 444,000
----------
$1,143,000
==========
(8) Obligations Under Capital Leases
The Company leases certain equipment with lease terms through June, 1996.
The obligations under capital leases have been recorded in the accompanying
financial statements at the present value of the future minimum lease
payments, discounted at interest rates from 24.50% to 27.25%. At December
31, 1995, the assets held under the capital leases are included in property
and equipment costs as follows:
1995 1994
---- ----
Office Equipment $ 24,412 24,412
Machinery and Equipment 132,914 132,914
---------- --------
Total assets, at cost 157,326 157,326
Less Accumulated Depreciation (104,025) (75,000)
--------- -------
$ 53,301 82,326
========= ========
(Continued)
F-14
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(8) Continued
Future minimum lease payments under the capital leases and the net present
value of the future minimum lease payments at December 31, 1995 are as
follows:
Future minimum lease payments $ 25,586
Less: Amount Representing Interest 2,175
--------
Present Value of Future Minimum Lease Payments-Current $ 23,411
========
(9) Notes Payable - Senior Debt
In August 1995, the Company entered into a Securities Purchase Agreement
(the "Agreement") with a bank and two small business investment companies.
The agreement provides for a lending facility of $5,000,000, with interest
at 12% payable quarterly on any outstanding balance. Payment of amounts
outstanding under the lending facility is due at the final maturity date,
February 2001. The amount outstanding at December 31, 1995 of $2,637,219
was advanced at closing and was used to fund a deposit required by the
Channel Lease Agreement (see note 7), repurchase common stock (see note
12), pay closing costs relating to the financing and provide additional
working capital to the Company. The unused portion of the lending facility
will be advanced to fund the equipment and construction costs attributable
to new institutional cable contracts, and will also be used to fund working
capital needs of the Company.
The Agreement is secured by the Channel Lease Agreement and the Company's
institutional cable contracts.
The Agreement contains a prepayment penalty for the first two years and
places limits on stock sales and payment of dividends, and also contains
several financial covenants. As of December 31, 1995, the Company had not
met several of the financial covenants under the Agreement. The Company
amended its agreement with the lenders on June 3, 1996 (See note 13), and
as part of the amendment, the defaults were either waived or cured.
As part of the Agreement, the Company sold warrants for $ 1,000 to the note
holders to purchase 9,677,486 of its common shares. The exercise price of
the warrants is $.27 a share and $.38 a share for 2,438,177 and 7,239,309
shares, respectively. The warrants expire on August 27, 2003 and
represented 27% of the Company's common stock on a fully diluted basis.
Related to the Agreement, the Company also agreed to issue 200,000 common
shares in aggregate to two individuals at par value for services provided
in obtaining the above financing. At December 31, 1995, the 200,000 shares
were not issued. Due to the restrictions placed on such shares, their value
is immaterial to the accompanying consolidated financial statements.
(Continued)
F-15
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(10) Pending Litigation
The Company is a party to certain litigation incidental to its business,
which the Company's counsel and its management does not believe will have a
material adverse effect on its financial condition or results of
operations. No material litigation is threatened to management's knowledge.
The Company's current liabilities include accruals for management's
estimate of amounts that will be payable under the above litigation.
(11) Sales To Major Customers
For the year ending December 31, 1995 and 1994, revenue from three and two
customers, respectively, represented 62% and 54%, respectively, of total
revenues.
(12) Stockholders Equity
In August 1995, the Company repurchased 4,626,354 common shares, net, from
a bank for $760,000. The shares purchased were net of 250,000 shares
granted to the original owner of the shares for his assistance in the
transaction.
During 1995, the Company issued 283,000 and 182,500 shares of common stock
at a price of $.25 and $1.00 per share, respectively, for total proceeds of
$253,250.
In December 1995, the Company issued 60,000 shares with a negotiated value
of $1.00 per share to a vendor in lieu of a cash payment. In addition,
27,066 warrants were exercised at $.25 per share effective December 18,
1995 by various officers of the Company.
At December 31, 1995, the Company has unexercised options outstanding,
held by certain former consultants, to purchase 47,000 of its common
shares. The options contain exercise prices from $.004 a share to $.10 a
share and expire at various dates through July 1997.
During 1995, the Company granted 9,997,486 warrants for shares of its
common stock at exercise prices ranging from $.25 to $1.00 per share. At
December 31, 1995, the Company has unexercised warrants outstanding to
purchase 12,813,486 shares of its common stock, which expire at various
dates through May 25, 2005.
Pursuant to the original Securities Purchase Agreement with its Senior
Lenders, the Company was required to issue additional warrants to purchase
360,000 shares of its common stock at an exercise price of $.38 in
satisfaction of certain investment banker and finders fees previously
agreed to. These warrants were issued in 1996.
During 1994, the Company issued 767,500 shares of its common stock at
various prices per share, for total proceeds of $655,000.
(Continued)
F-16
<PAGE>
MAGNAVISION CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
(13) Subsequent Events
On June 3, 1996 the Company and its Senior Lenders amended the terms of the
lending facility related to the Securities Purchase Agreement (see note 9).
Pursuant thereto, the Lenders agreed to waive existing defaults and provide
up to $1,200,000 toward the Company's working capital requirements out of
the existing commitment (of which approximately $470,000 was advanced to
the Company on June 4, 1996). In exchange therefore, the Company agreed to
issue warrants (New Warrants) to purchase additional shares of Common Stock
representing 7,410,930 common shares of the Company's Common Stock on a
fully diluted basis at an exercise price of $.27 per share. The New
Warrants expire on June 4, 2004. The amended agreements require the Lenders
to surrender to the Company that number of warrants representing up to
6,884,890 common shares of the Company's Common Stock on a fully diluted
basis if, as and when the Company complies with certain conditions outlined
in the amended agreements. In addition, the Lenders each have the right to
require the Company to repurchase certain, and the Company has the right to
repurchase all, of the warrants held by the Lenders under such conditions.
In connection with the amended agreements, the Company's rights under the
Channel Lease Agreement were transferred to a special purpose subsidiary
whose stock has been pledged to the lenders as security for amounts
advanced under the lending facility. The lenders also have the option,
under certain circumstances, to designate three out of five directors of
the special purpose subsidiary and under such circumstances, will receive a
proxy to vote shares thereof.
Additionally, at March 31, 1996 the Company did not make a required
interest payment under the Securities Purchase Agreement lending facility
in the amount of $82,710. This default was also cured pursuant to the
June 3, 1996 amended lending facility.
During 1996, the Company has entered into contracts with five additional
institutions to provide cable television service (SMATV).
In June 1996, the Company entered into an agreement to retain Allen &
Company, Inc., a financial advisory company, to advise the Company with
regards to potential strategic alliances, joint ventures, sales or other
opportunities pertaining to the Company's rights under the Channel Lease
Agreement. The term of the agreement is initially for a one year period,
and may be extended by mutual agreement of the parties. In consideration
for services to be rendered, the Company paid Allen & Company, Inc. an
initial fee of $100,000. The agreement calls for additional payments,
based on the occurrence of certain transactions as defined.
F-17
<PAGE>
EXHIBIT LIST
Document
Item Incorporated
No. Description of Document by Reference
- ---- ----------------------- ------------
(2) Merger Agreement dated September 13, Form 8-K
1991 between Yardley Ventures, Inc. dated 9/17/91
and Magnavision Corporation
(3) (a) Articles of Incorporation and By Laws Form S-1
dated 12/29/86
(3) (b) Amendment to Certificate of Incorporation Form 8-K
dated 9/17/91
(10) (a) License Agreement dated August 20, 1990 Form 10-K
between Magnavision Corporation and dated 12/31/91
Department of Education, Archdiocese
of New York
(b) Amended License Agreement dated January Form 10-K
6, 1994 between Magnavision Corporation dated 12/31/93
and Department of Education, Archdiocese
of New York
(c) Microcell Systems Corporation Agreement Form 10-K
dated December 15, 1993 dated 12/31/93
(d) Securities Purchase Agreement dated as of
August 25, 1995 among the Registrant,
Magnavision Corporation (N.J.), IBJS Capital
Corporation, IBJ Schroder Bank & Trust
Company and Koco Capital Company, L.P.
(e) Form of Senior Subordinated Note of the
Registrant and Magnavision Corporation (N.J.)
due February 26, 2001
(f) Form of Warrant to Purchase Shares of Registrant's
Common Stock expiring on August 27, 2003
(g) Security Agreement and Collateral Assignment dated
as of August 25, 1995 among Magnavision Corporation
(N.J.), University Connection, Inc. and IBJS Capital
Corporation as agent
<PAGE>
(h) Registration Rights Agreement dated as of
August 25, 1995 among the Registrant and the investors
listed therein
(i) Stockholders' Agreement dated as of August 25, 1995
among the Registrant, the investors and the other
parties listed therein
(j) Non-Competition Agreement dated as of August 25, 1995
between Magnavision Corporation (N.J.) and
Nicholas Mastrorilli, Sr.
(k) Indemnification Agreement dated as of August 25, 1995
between the Registrant, Cacomm, Inc., and the investors
listed therein
(l) Lockbox Service Agreement dated as of August 25, 1995
among Magnavision Corporation (N.J.), University
Connection, Inc., IBJS Capital Corporation and IBJ
Schroder Bank & Trust Company
(m) Amendment No. 1 dated as of June 3, 1996 to Securities Purchase
Agreement dated as of August 25, 1995 among the Registrant,
Magnavision Corporation (N.J.), Magnavision Wireless Cable, Inc.,
IBJS Capital Corporation, IBJ Schroder Bank & Trust Company and Koco
Capital Company, L.P.
(n) Amended and Restated Stockholders' Agreement dated
as of June 3, 1996 among the Registrant,
Magnavision Corporation (N.J), Magnavision
Wireless Cable, Inc. and the investors and
other parties listed therein
(o) Amendment No. 1 dated as of June 3, 1996
to the Registration Rights Agreement dated as
of August 25, 1995 among the Registrant and
the investors listed therein
(p) Amendment No. 1 dated as of June 3, 1996 to
the Security Agreement and Collateral Assignment
dated as of August 25, 1995 among Magnavision
Corporation (N.J.) Magnavision Wireless Cable,
Inc., Magnavision Private Cable, Inc., University
Connection, Inc. and IBJS Capital Corporation, as agent
(q) Amended and Restated Lockbox Service Agreement
dated as of June 3, 1996 among Magnavision
Corporation (N.J.), University Connection, Inc.,
<PAGE>
Magnavision Private Cable, Inc., IBJS Capital
Corporation and IBJ Schroder Bank & Trust Company
(r) Pledge Agreement dated as of June 3, 1996 between
Magnavision Corporation (N.J.) and IBJS Capital
Corporation as agent
(s) Pledge Agreement dated as of June 3, 1996 between
Magnavision Corporation (N.J.) and IBJS Capital
Corporation as agent
(t) General Indenture of Conveyance, Assignment and
Transfer dated as of June 3, 1996 from Magnavision
Corporation (N.J.) and University Connection, Inc.
to Magnavision Private Cable, Inc.
(u) General Indenture of Conveyance, Assignment and
Transfer dated as of June 3, 1996 from Magnavision
Corporation (N.J.) to Magnavision Wireless Cable, Inc.
(v) Indenture of Assumption of Liabilities dated
as of June 3, 1996 from Magnavision Private
Cable, Inc. to Magnavision Corporation (N.J.) and
University Connection, Inc.
(w) Indenture of Assumption of Liabilities dated
as of June 3, 1996 from Magnavision Wireless
Cable, Inc. to Magnavision Corporation (N.J.)
(x) Irrevocable Proxy dated June 3, 1996 issued by
Magnavision Corporation (N.J.) to IBJS Capital
Corporation as agent
(y) Form of Amended and Restated Senior Subordinated
Notes dated June 3, 1996
(z) Form of Warrant to Purchase Shares of Registrant's
Common Stock expiring on June 4, 2004
(aa) Letter Agreement dated July 11, 1995 between the
Registrant, Cacomm, Inc. and George S. Callas
(bb) Letter Agreement dated August 25, 1995 among the
Registrant, Midlantic Bank, N.A. and George S. Callas
(cc) Form of Five Year Warrant to Purchase Shares of
Registrant's Common Stock issued to various parties
during 1994 and 1995
(dd) Form of Indemnification Agreement for Executive
Officers and Directors
(16) Letter re: change in certifying accountant
(21) Subsidiaries of Registrant
(27) Financial Data Schedule
<PAGE>
Exhibit 10(d)
SECURITIES PURCHASE AGREEMENT, dated as
of August 25, 1995 (the "Agreement"), by
and among MagnaVision Corporation, a New
Jersey corporation and with its
successors and assigns (the
"CompanyPREAMBLE
WHEREAS, the Company, a wholly-owned subsidiary of Holdings, is a provider of
private cable and wireless services and pursuant to a license agreement with the
Department of Education of the Archdiocese of New York (the "License") is the
licensee of twenty-eight (28) cable channel licenses in the State of New York;
WHEREAS, the Company desires to issue to the Investors and the Investors desire
to purchase from the Company up to $5,000,000 of senior subordinated notes (the
"Notes") to finance (i) the payment of $735,000 to Midlantic Bank for the
repurchase of 4,876,354 shares of Holdings common stock held as collateral in
connection with a loan to a Holdings shareholder, Mr. George Callas, (ii) the
payment of $900,277 into an escrow account or to refinance a bridge loan in
connection with the maintenance of the Company's rights under the License, (iii)
working capital and general corporate expenses in the approximate amount of
$463,000, (iv) the payment of fees and expenses, not to exceed $400,000, related
to the issuance of the Notes and (v) expenses arising from providing private
cable service to new customers, subject to the terms and conditions in this
Agreement;
WHEREAS, in consideration for the agreement of the Investors to purchase the
Notes, the Company desires to issue to the Investors and the Investors desire to
purchase from the Company warrants to purchase the common stock of Holdings,
subject to the terms and conditions in this Agreement; and
WHEREAS, in consideration of the purchase of the Notes by the Investors, the
Company agrees to grant to the Investors a first priority security interest in
(i) all of the Company's existing and future private cable contracts with its
customers and (ii) the License, subject to the terms and conditions in this
Agreement.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth herein, the Company and the Investors hereby
agree as follows:
1
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Definitions
1. Definitions.
As used herein the following terms have the following respective meanings:
"Accepted New Contract" shall mean a New Contract consented to in writing by the
Required Investors.
"Adjusted Net Worth" shall mean as at any date of determination thereof, the sum
of the following for the Company determined in accordance with GAAP:
1. the amount of capital stock, PLUS
2. the amount of surplus and retained earnings or, in the case of a surplus and
retained earnings deficit, minus the amount of such deficit, LESS
3. eighty (80) percent of the proceeds received from all issuances
of equity after the date hereof.
"Affiliate" shall mean as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
step-children, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise), or that, in any event,
any Person which owns directly or indirectly more than 5% of the securities
having ordinary voting power for the election of directors or other governing
body of a corporation or more than 5% of the partnership or other ownership
interests of any other Person (other than as a limited partner of such other
Person) will be deemed to control such corporation or other Person.
Notwithstanding the foregoing, no individual shall be deemed to be an Affiliate
of a corporation solely by reason of his or her being an officer or director of
such corporation.
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<PAGE>
"Agreement" shall mean this Securities Purchase Agreement as defined in the
caption hereof.
"Audited Financial Statements" shall mean the audited consolidated financial
statements of the Obligors, dated December 31, 1994.
"Breakfunding Costs" shall mean all interest accrued on the outstanding balance
of the Notes to the date of redemption plus any loss incurred by the Investors
as a result of the Obligors exercising their right of redemption pursuant to
Section 3.5 hereof, including, without limitation, any loss incurred in
liquidating or reemploying deposits from third parties.
"Business Day" shall mean any day other than a Saturday, Sunday and any other
day which is a legal holiday in New York City or a day on which banking
institutions located therein are required or authorized by law to close.
"Business Plan" shall mean the business plan to be delivered to the Investors by
the Company pursuant to Section 6.1(iv) hereof.
"Cable Contracts" shall mean all existing and hereafter entered into contracts
including, without limitation, any New Contracts between the Company and a
customer for the provision of private cable or wireless cable services to such
customer.
"Cacomm" shall mean Cacomm, Inc., a Delaware corporation.
"Callas Shares" shall mean the 4,876,354 shares of Common Stock owned by George
Callas and to be repurchased by Holding from Midlantic Bank.
"Capital Expenditures" shall mean expenditures in respect of fixed or capital
assets by the Company or Holdings, including the capitalized amount of Capital
Lease Obligations incurred during the relevant period, other than (i)
expenditures for the restoration or replacement of fixed assets to the extent
financed by the proceeds of an insurance policy or through a condemnation award
and (ii) expenditures in respect of fixed or capital assets funded through the
incurrence of Indebtedness.
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<PAGE>
"Capital Lease Obligations" shall mean as to any Person, the obligations of such
Person to pay rent or other amounts under a lease of (or other agreement
conveying the right to use) real and/or personal property which obligations are
required to be classified and accounted for as a capital lease on a balance
sheet of such Person under GAAP (including Statement of Financial Accounting
Standards No. 13 of the Financial Accounting Standards Board) and, for purposes
of this Agreement, the amount of such obligations shall be the capitalized
amount thereof, determined in accordance with GAAP (including such Statement No.
13).
"Change in Control" shall mean (a) with respect to the Company, that Holdings
ceases to be the beneficial and record owner of one-hundred (100) percent of the
issued and outstanding capital stock of the Company or, (b) with respect to
Holdings, that Cacomm ceases to be the beneficial and record owner of at least
fifty-one (51) percent of the issued and outstanding Common Stock of Holdings or
(c) with respect to Cacomm, Nicholas Mastrorilli, Sr. and members of his
immediate family shall cease to own beneficially and of record at least 51% of
the voting capital stock of Cacomm on a fully diluted basis.
"Closing Date" shall have the meaning set forth in Section 2.4
hereof.
"Code" shall mean the Internal Revenue Code of 1986, as amended from time to
time, and the regulations and rulings issued thereunder.
"Collateral" shall have the meaning set forth in the Collateral
Assignment.
"Collateral Agent" shall mean IBJSCC, as Collateral Agent under the Collateral
Assignment.
"Collateral Assignment" shall mean the Security Agreement and Collateral
Assignment, dated the date hereof, among the Company, University Connections,
Inc. and IBJSCC with respect to the Collateral.
"Commission" shall mean the SEC, or any other federal agency at the time
administering the Securities Act.
"Commitment" shall mean with respect to each Investor's obligation to make
advancements under a Note (a) for IBJSCC, up to an aggregate principal amount of
$1,000,000, (b) for IBJS, up to an aggregate principal amount of $2,000,000 and
(c) for Koco, up to an aggregate principal amount of $2,000,000.
"Common Stock" shall mean the issued and outstanding shares of all classes of
the common stock of Holdings.
"Company" shall mean MagnaVision Corporation, a New Jersey corporation together
with any of its Subsidiaries, and its successors and assigns.
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<PAGE>
"Completion and Acceptance Date" shall mean, for any New Contract, the date on
which (i) the construction and installation of the cable equipment and systems
have been completed, and (ii) the system is operating at a satisfactory level
that has been deemed acceptable by the user such that billing for the service
will commence, and (iii) billing for service will not be disputed by the
customer.
"Construction Costs" shall mean, for any New Contract, the estimated aggregate
equipment, material and labor costs associated with building and installing a
private cable system on a customer's premises, pursuant to a Cable Contract.
"Contracts" shall have the meaning set forth in Section 4.13
hereof.
"EBITDA" shall mean, for any period, the consolidated net income of the Company
for such period, after all expenses and other proper charges except
depreciation, interest, amortization and income taxes, determined in accordance
with GAAP eliminating (i) all intercompany items, (ii) all earnings attributable
to equity interests in Persons that are not subsidiaries unless actually
received by the Company, (iii) all income arising from the forgiveness,
adjustment, or negotiated settlement of any indebtedness, (iv) any extraordinary
items of income or expenses, (v) any increase or decrease in income arising from
any change in the Company's method of accounting and (vi) any interest income.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974, as
amended from time to time, and the regulations and rulings issued thereunder.
"ERISA Affiliate" shall mean all members of a controlled group of corporations
and all trades or businesses (whether or not incorporated) under common control
that, together with the Company, would be treated as a single employer under
Section 414 of the Code.
"Environmental Laws" shall mean any and all federal, state, local and foreign
statutes, laws, regulations, ordinances, rules, judgments, orders, decrees,
codes, plans, injunctions, permits, concessions, grants, franchises, licenses,
agreements or other governmental restrictions, contracts, indemnities,
assumptions of liability or agreements, relating to the environment or to
emissions, discharges or releases of pollutants, contaminants, petroleum or
petroleum products, chemicals or industrial, toxic or Hazardous Substances or
wastes into the environment including, without limitation, ambient air, surface
water, ground water or land, or otherwise relating to the manufacture,
processing, distribution, use, treatment, storage, disposal, transport or
handling of pollutants, contaminants, petroleum or petroleum products, chemicals
or industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
5
<PAGE>
"Environmental Permits" shall mean any of the permits required by or pursuant to
any applicable Environmental Law.
"Event of Default" shall have the meaning set forth in Article
IX.
"Fixed Obligations" shall mean for any period, the aggregate interest expense of
the Obligors for such period, determined in accordance with GAAP, minus the
aggregate amount of amortization or accretion of debt discount.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Hazardous Substances" shall mean asbestos, asbestos containing materials (as
defined in regulations adopted under the Toxic Substances Control Act, as
amended), urea formaldehyde containing foam, polychlorinated biphenyls (PCBs),
radon, petroleum, petroleum products, fuel oil, derivatives and by-products of
petroleum products or fuel oil, explosives, reactive materials, ignitable
materials, corrosive materials, hazardous chemicals, hazardous waste, hazardous
substances, extremely hazardous substances, toxic substances, toxic chemicals,
radioactive materials, medical waste, biomedical waste, infectious materials and
any other element, compound, mixture, solution or substance which may pose a
present or potential hazard to human health or the environment.
"Holders" shall mean the Investors and any subsequent holder from time to time
of Notes or Warrants.
"Holdings" shall mean MagnaVision Corporation, a Delaware corporation and parent
of the Company, and its successors and assigns.
"IBJSCC" shall mean IBJS Capital Corporation, a Delaware
corporation.
"IBJS" shall mean IBJ Schroder Bank & Trust Company, a Delaware corporation.
6
<PAGE>
"Indebtedness" shall mean, without duplication, (a) all obligations of such
Person for borrowed money or with respect to deposits or advances of any kind,
(b) all obligations of such Person evidenced by (or which customarily would be
evidenced by) bonds, debentures, notes or similar instruments, (c) all
reimbursement obligations of such Person with respect to letters of credit and
similar instruments, (d) all obligations of such Person under conditional sale
or other title retention agreements relating to property or assets purchased by
such Person, (e) all obligations of such Person issued or assumed as the
deferred purchase price of property or services, other than accounts payable
incurred and paid on terms customary in the business of such Person (it being
understood that the "deferred purchase price" in connection with any purchase of
property or assets shall include only that portion of the purchase price which
shall be deferred beyond the date on which the purchase is actually
consummated), (f) all obligations of others secured by (or for which the holder
of such Indebtedness has an existing right, contingent or otherwise, to be
secured by) any Lien on property owned or acquired by such Person, whether or
not the obligations secured thereby have been assumed, (g) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (h) all
obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other property is ever made or tendered, (i)
any guaranties by such Person of obligations of others and (j) all Capital Lease
Obligations of such Person.
"Indemnification Agreement" shall mean the Indemnification Agreement, dated the
date hereof, among Cacomm, Holdings and the Investors.
"Indemnified Person" shall have the meaning set forth in
Section 12.4 hereof.
"Intellectual Property" shall have the meaning set forth in Section 4.12 hereof.
"Interest Payment Date" shall mean March 31, June 30, September 30 and December
31 of each year.
"Interest Rate" shall mean the rate per annum equal to twelve (12) percent.
"Interim Financial Statements" shall mean the unaudited consolidated financial
statements of the Obligors, dated June 30, 1995.
7
<PAGE>
"Investors" shall mean IBJSCC, IBJS and Kisco.
"KOCO" shall mean KOCO Capital Company, L.P., a Delaware limited partnership.
"Lease" shall mean any lease or other periodic payment arrangement for the use
of property (real, personal or mixed).
"Leverage Ratio" shall mean with respect to the Obligors for any period, the
ratio of the Indebtedness to Adjusted Net Worth.
"License" shall mean the License Agreement, dated August 20, 1990, as amended on
January 6, 1994, pursuant to the First Agreement of Amendment to License
Agreement, between the Company and the Department of Education, Archdiocese of
New York and any and all amendments, modifications, supplements and appendices
thereto.
"Lien" shall mean with respect to any asset, any mortgage, lien, pledge, charge,
security interest or encumbrance of any kind in respect of such asset. For the
purposes of this Agreement, the Company shall be deemed to own subject to a Lien
any asset which it has acquired or holds subject to the interest of a vendor or
lessor under any conditional sale agreement, Capital Lease Obligation or other
title retention agreement relating to such asset.
"Lockbox Service Agreement" shall have the meaning given to such term in Section
6.1(a)(xxi) hereof.
"Material Adverse Effect" shall mean a material adverse effect on the business,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of a Person.
"Maturity Date" shall mean February 26, 2001.
"Maximum Legal Rate" shall have the meaning set forth in Section 3.2 hereof.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in Section
4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate is making or
.accruing an obligation to make contributions or has within any of the preceding
five plan years made or accrued an obligation to make contributions.
8
<PAGE>
"Net Present Value" shall mean the value of the estimated net payments (minimum
monthly subscription fees less estimated monthly programming costs of obtaining
and delivering programming pursuant to the terms of an Accepted New Contract)
due the Company during the first half of the term under a New Contract
discounted at a 12% rate to the date the New Contract is signed by the Company
and the customer thereunder.
"New Contract" shall mean the contracts listed on Schedule 1 and any and all
contracts entered into after the Closing Date between the Company or its
Affiliate and a customer for the construction of a private cable system and
provision of private cable services for such customer.
"New Contract Advance" shall have the meaning set forth in Section 2.2(a)
hereof.
"Non-Competition Agreement" shall mean the Non-Competition Agreement dated the
date hereof between the Company and Nicholas Mastrorilli, Sr.
"Notice of Borrowing" shall have the meaning set forth in
Section 2.2(b) hereof.
"Note or Notes" shall mean the Senior Subordinated Notes issued by the Company
hereunder and such term shall include each note which shall be delivered in
substitution or exchange for any such note which is at the time outstanding.
"Obligations" shall mean the due and punctual payment of the principal of,
premium, if any, and interest on the Notes and other monetary obligations
hereunder and the performance of all other obligations of the Obligors to the
Investors, howsoever created, arising or evidenced, whether direct or indirect,
joint or several, absolute or contingent, or now existing or hereafter arising
under this Agreement, the Notes, the Warrants or any other Transaction Document.
"Obligors" shall mean the Company and Holdings.
"Other Taxes" shall have the meaning given to such term in Section 3.8(b)
hereof.
"Pension Plan" shall mean an employee pension benefit plan which is covered by
Title IV of ERISA or subject to the minimum funding standards under Section 412
of the Code and is either (a) maintained by the Company or Holdings or any ERISA
Affiliate for employees of the Company or Holdings or any ERISA Affiliate or (b)
maintained pursuant to a collective bargaining agreement or any other
arrangement under which more than one employer makes contributions and to which
the Company or Holdings or any ERISA Affiliate is then making or accruing an
obligation to make contributions or has within the preceding five plan years
made contributions.
9
<PAGE>
"Permitted Investments" shall mean investments in U.S.
Government obligations, Federal Deposit Insurance Corporation insured
bank certificates of deposits or commercial paper notes rated A-1
or P-1.
"Permitted Liens" shall mean the Liens permitted pursuant to Section 8.2 hereof.
"Person" shall mean any corporation, association, partnership, joint venture,
organization, business, individual, government or any agency or political
subdivision thereof or any other entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Plan" shall mean an employee benefit plan, as defined in Section 3(3) of ERISA,
at any time maintained by the Company or Holdings or any ERISA Affiliate for
employees of the Company or Holdings or any ERISA Affiliate or in which any such
employees participate or at any time participated when employed by the Company
or Holdings or any ERISA Affiliate.
"Post-Closing Business Plan" shall have the meaning set forth in Section 7.17
hereof.
"Registration Rights Agreement" shall mean the Registration Rights Agreement,
dated as of the date hereof, between Holdings and the Investors.
"Regulated Holder" means any Person that is (or that is a subsidiary of a bank
holding company that is) subject to the various provisions of Regulation Y of
the Board of Governors of the Federal Reserve System, 12 C.F.R., Part 225 (or
any successor to Regulation Y) or the Small Business Investment Act of 1958, as
amended, and Title 13 of the C.F.R. that holds any Securities.
"Regulatory Problem" means (a) any set of facts or
circumstances wherein it has been asserted by any governmental regulatory agency
(or any Regulated Holder believes that there is a significant risk of such
assertion) that such Person is not entitled to own, hold, or exercise any
material right with respect to, all or any portion of the Securities of an
Obligor which such Person holds or (b) when a Regulated Holder and its
Affiliates would own, control or have power (including voting rights) over a
greater quantity of Securities of any kind than are permitted under any
requirement of any governmental authority.
10
<PAGE>
"Release" shall have the meaning set forth in 42 U.S.C. Section 9601(22), but
shall not include any "federally permitted release" as defined in 42 U.S.C.
Section 9601(10). The term "Released" shall have a corresponding meaning.
"Required Investors" shall mean Investors holding Notes representing 75% of the
outstanding aggregate principal balance of the Notes.
"Repurchase of the Callas Shares" shall mean the 4,876,354 shares of Common
Stock owned by George Callas and pledged to Midlantic Bank as security for a
loan and to be repurchased from Midlantic Bank by Holdings with part of the
proceeds of the Notes.
"Restricted Payment" shall mean (i) any dividend or other distribution on any
shares of the capital stock of an Obligor (other than stock splits, like kind
stock dividends or the distribution of shares of capital stock of an Obligor
pursuant to the exercise of warrants or contingent equity rights), (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (a)
any shares of capital stock of an Obligor or (b) any option, warrant or other
right to acquire shares of the capital stock of an Obligor and (iii) any
optional redemption of, or other optional prepayment of principal of
Indebtedness, other than any optional redemption utilizing the proceeds of an
equity issuance in accordance with Section 8.3 hereof.
"Restricted Securities" shall mean the Notes, the Warrants, the Warrant Stock
and any shares of capital stock received in respect of any thereof, in each case
which have not then been sold to the public pursuant to (a) registration under
the Securities Act or (b) Rule 144 (or similar or successor rule) promulgated
under the Securities Act.
"Restricted Shares" shall mean the shares of Common Stock constituting
Restricted Securities.
"Scheduled Construction Date" shall mean, for any New Contract, the date upon
which the Company and a customer have contractually agreed to commence the
construction and installation of a private cable system on the customer's
premises.
"Second Closing Date" shall mean two business days after that date upon which
the Company delivers to the investors a copy of the consent attached to the
Collateral Assignment executed by a duly authorized officer of the Archdiocese
of New York.
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<PAGE>
"Securities" means with respect to any Person, such Person's capital stock or
any options, warrants or other Securities which are directly or indirectly
convertible into, or exercisable or exchangeable for, such Person's capital
stock (whether or not such derivative Securities are issued by such Person).
Whenever a reference herein to Securities is referring to any derivative
Securities, the rights of a Regulated Holder shall apply to such derivative
Securities and all underlying Securities directly or indirectly issuable upon
conversion, exchange or exercise of such derivative Securities.
"Securities Act" shall mean the Securities Act of 1933, as
amended.
"Security Interests" shall have the meaning set forth in the
Collateral Assignment.
"Solvency Statement" shall mean a certificate certifying that the
representations and warranties set forth in Section 4.17 hereof are true and
correct.
"Stockholders Agreement" shall mean the Stockholders Agreement, dated the date
hereof, among Holdings, the Investors and Cacomm.
"Subsidiary" or "Subsidiaries" shall mean, with respect to any Person, any
corporation or other entity of which securities or other ownership interests
having ordinary voting power to elect a majority of the board of directors or
other persons performing similar functions are at the time directly or
indirectly owned by such Person.
"Taxes" shall have the meaning given to such term in Section 3.8 hereof.
"Termination Event" shall mean (i) a "reportable event", as such term is
described in Section 4043 of ERISA, unless the 30 day notice requirement with
respect thereto has been waived by PBGC, or an event described in Section
4062(a) of ERISA, (ii) the withdrawal of the Company or Holdings or any ERISA
Affiliate from a Pension Plan having a plan year in which it was a "substantial
employer", as such term is defined in Section 4001(a)(2) of ERISA, or the
incurrence of liability by the Company or Holdings or any ERISA Affiliate under
Title IV of ERISA upon the termination of a Pension Plan, (iii) the provision of
a notice of intent to terminate any Pension Plan under Title IV of ERISA other
than in a standard termination within the meaning of Section 4041 of ERISA, (iv)
the institution of proceedings to terminate a 'Pension Plan by the PBGC, (v) the
complete or partial withdrawal of the Company or Holdings or any ERISA Affiliate
from any Multiemployer Plan, (vi) any other event or condition that might
constitute grounds under Section 4042 of ERISA for the termination of, or the
appointment of a trustee to administer, any Pension Plan or, (vii) any other
event or condition which under the Code or ERISA might constitute grounds for
the imposition of any liability or lien on the assets of the Company or Holdings
or any ERISA Affiliate in respect of any Pension Plan or any Multiemployer Plan.
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<PAGE>
"Transaction Documents" shall mean this Agreement, the Notes, Warrants,
Collateral Assignment, Registration Rights Agreement, Stockholders' Agreement,
Cable Contracts, License, Non-Competition Agreement, Indemnification Agreement
and the Lockbox Service Agreement.
"Transfer" shall include any disposition of any shares of Restricted Securities
or of any interest therein which would constitute a sale thereof within the
meaning of the Securities Act.
"Warrants" shall mean the warrants issued pursuant to Section 2
hereof.
"Warrant Stock" shall mean shares of Common Stock issuable upon exercise of the
Warrants.
1. Accounting Terms and Determinations.
Unless otherwise specified herein, all accounting terms used herein shall be
interpreted, all accounting determinations hereunder shall be made, and all
financial statements required to be delivered hereunder shall be prepared in
accordance with United States GAAP as in effect from time to time, applied on a
basis consistent (except for changes concurred in by the independent public
accountants of the Obligors) with the most recent audited consolidated financial
statements of each of the Obligors delivered to the Investors; provided that, if
the Obligors notify the Investors that the Obligors wish to amend any covenant
hereunder to eliminate the effect of any change in GAAP on the operation of such
covenant (or if the Investors notify the Obligors that the Required Investors
wish to amend this Agreement for such purpose), then the Obligors' compliance
with such covenant shall be determined on the basis of GAAP in effect
immediately before the relevant change in GAAP became effective, until either
such notice is withdrawn or such covenant is amended in a manner satisfactory to
the Obligors and the Required Investors.
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<PAGE>
1.
Issuance of the Notes and Warrants
1. Authorization of Issuance of Senior Subordinated Notes and Warrants.
1. The Company shall authorize the issuance to the Investors of its Notes in an
aggregate principal amount not to exceed $5,000,000 of which (i) $735,000 of the
principal amount shall be purchased on the Closing Date (ii) $1,765,000 shall be
purchased on the Second Closing Date and (iii) up to $2,500,000 of principal
amount of the Notes, shall be advanced, from time to time after the Closing Date
in accordance with Section 2.2(a)(ii) hereof, the Notes to be substantially in
the form of Exhibit A attached hereto. The Company and Holdings shall be
co-obligors with respect to each payment of principal, of premium, and accrued
interest on the Notes, or any other amount due thereunder.
2. Holdings shall authorize the issuance to the Investors of (i) warrants to
purchase 2,438,177 shares of Common Stock of Holdings and (ii) warrants to
purcchase 7,239,309 shares of Common Stock of Holdings (collectively, the
"Warrants"), which Warrants shall be substantially in the form of Exhibits B-1
and B-2 attached hereto.
1. Purchase and Sale of Notes and Warrants.
1. The Company hereby agrees to sell to the Investors and, subject to
the terms and conditions herein set forth, the Investors agree to purchase the
Notes from the Company in an aggregate principal amount not to exceed $5,000,000
of which (i) $735,000 aggregate principal amount of the Notes shall be purchased
on the Closing Date for an aggregate purchase price of $734,000 (ii) $1,765,000
aggregate principal amount of the Notes shall be purchased for $1,765,000 on the
Second Closing Date and (iii) on the Closing Date and from time to time after
the Closing Date, up to $2,500,000 aggregate principal amount of the Notes shall
be advanced to the Company for Accepted New Contracts in an amount equal to
fifty (50) percent of the Net Present Value (a "New Contract Advance"), each New
Contract Advance to be made in two installments as follows: (x) no earlier than
thirty (30) days prior to the Scheduled Construction Date under an Accepted New
Contract in an amount equal to the Construction Costs for such Accepted New
Contract and (y) upon the Completion and Acceptance Date under an Accepted New
Contract in an amount equal to the difference between the New Contract Advance
and the Construction Costs previously advanced to the Company for such Accepted
New Contract.
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2. Upon the Company's delivery to the Investors of a notice (a "Notice of
Borrowing") not later than 12:00 noon (New York City time) four (4) Business
Days preceding each New Contract Advance, signed by the chief financial officer
or treasurer of the Company, specifying the date (which shall be a Business Day)
and aggregate principal amount of the installment to be borrowed under a New
Contract Advance, certifying as to the satisfaction of the conditions set forth
in Section 6.1(b) hereof and accompanied by a copy of the executed Accepted New
Contract and calculation of the New Contract Advance and borrowing thereunder,
each Investor shall make available its ratable share in proportion to its
Commitment of such borrowing, of such New Contract Advance, in immediately
available funds to the Company's account at IBJ Schroder Bank & Trust Company,
account number 620 11203, ABA No. 026007825 not later than 12 noon (New York
City time) on the date of each borrowing specified in a Notice of Borrowing.
Each Notice of Borrowing shall be irrevocable.
3. Notwithstanding anything herein to the contrary, each Investor severally and
not jointly agrees to purchase the Notes as provided hereunder; provided,
however, that each Investor shall have no obligation to purchase the Notes and
make New Contract Advances thereunder in excess of (i) its ratable share in
proportion to its Commitment and (ii) an Investor shall have no obligation under
any circumstances whatsoever to purchase the Notes not purchased by any other
Investor hereunder.
4. Holdings hereby agrees to sell to the Investors and, subject to the terms and
conditions set forth herein, the Investors agree to purchase from Holdings the
Warrants for an aggregate purchase price of $1,000.
1. Delivery of the Notes and Warrants.
On the Closing Date, the Obligors shall deliver to the Investors (payable to the
order of the Investors or their designees) the Notes issuable on the Closing
Date and Holdings shall deliver to the Investors the Warrants (registered in the
names of the Investors or their designees), each of the Notes and Warrants duly
executed by the Obligors and Holdings, respectively. Delivery of the Notes and
Warrants shall be made against delivery by the Investors
of a bank check payable to Midlantic Bank in the amount
of $735,000.
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1. Closing.
Subject to the satisfaction of the conditions precedent set forth in Article VI
hereof as determined by the Investors in their sole discretion, or the waiver of
such conditions by the Investors in writing, the execution of this Agreement and
the other Transaction Documents and other documentation contemplated hereby and
thereby and delivery of the Notes and Warrants shall occur as of August 25,
1995, or such later date as the parties hereto shall mutually agree to in
writing (the "Closing Date") at the offices of O'Sullivan Graev & Karabell, LLP,
30 Rockefeller Plaza, New York, New York 10112.
1.
Provisions of the Notes and the Warrants
1. The Notes.
Subject to the provisions for optional redemption in Section 3.5 hereof and
Article IX hereof, the aggregate principal amount of the Notes together with all
accrued interest thereon shall be due and payable in United States Dollars on
the Maturity Date.
1. Interest Payments.
The Obligors shall pay interest on the outstanding principal balance of each
Note at the applicable Interest Rate. Interest on the outstanding principal
balance of each Note shall be payable quarterly on each Interest Payment Date.
In the event the Interest Rate for a Note exceeds the maximum rate of interest
permissible under any applicable law (the "Maximum Legal Rate"), the Interest
Rate payable on such Note shall be equal to the Maximum Legal Rate.
1. Default Interest.
If the Obligors default in the payment of the principal of, premium, if any,
or accrued interest on the Notes, or on any other amount due hereunder or under
any Related Document, the Obligors shall, on or upon demand from time to time,
pay interest on such overdue amount from the date when due up to and including
the date of actual payment (before as well as after judgment) at the rate per
annum of the lower of eighteen and five-tenths (18.5) percent or the Maximum
Legal Rate. All default interest shall be calculated on the basis of the number
of days elapsed in a 360-day year.
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1. Payments.
The aggregate principal amount of each Note shall be due and payable on the
Maturity Date. The Obligors shall make each payment of principal of and premium,
if any, or accrued interest on the Notes, or any other amount due to the
Investors under this Agreement or the Transaction Documents, as provided in the
Notes on a Schedule attached hereto, or in such other manner as instructed in
writing by the Investors. The Obligors and Investors hereby agree to hold
harmless IBJSCC for any action taken or omitted by it with respect to the
receipt and distribution to the Investors of any payments under this Agreement
or any other Transaction Document except in the case of gross negligence or
willful misconduct. Each payment of principal, premium, accrued interest on the
Notes or any other amount due to the Investors under this Agreement or the
Transaction Documents shall be allocated ratably to each Investor in proportion
to the outstanding principal balance under its Note. All payments hereunder
shall be in United States Dollars by wire transfer of immediately available
funds. Whenever any payment hereunder or under any Transaction Document shall
become due, or otherwise would occur, on a day that is not a Business Day, such
payment shall be made on the next succeeding Business Day, and such extension of
time shall in such case be included in the computation of such interest payable,
or other amount, if applicable. If at any time any payment made by the Obligors
hereunder or under any Transaction Document is rescinded or must otherwise be
restored or returned upon the insolvency, bankruptcy or reorganization of an
Obligor or otherwise, such payment obligations of the Obligor hereunder and
under any such Transaction Document shall be reinstated as though such payment
had been due but not made when due.
1. Optional Redemption of Notes.
1. The Notes shall be subject to redemption at the option of the Obligors at a
redemption price equal to (i) if the redemption of the Notes is effected prior
to the one-year anniversary date following its issuance, the redemption price
shall be one hundred and four (104) percent of the outstanding principal amount
of such Notes on the date of such redemption, (ii) if the redemption of the
Notes is effected during the period between and inclusive of the one-year
anniversary date and the two-year anniversary date following its issuance, the
redemption price shall be one hundred and three (103) percent of the outstanding
principal amount of such Notes on the date of such redemption and (iii) if the
redemption of the Notes is effected after the two-year anniversary date
following its issuance, the redemption price shall be one hundred (100) percent
of the outstanding principal amount of such Notes on the date of such
redemption, together in each case with all accrued and unpaid interest to the
date of redemption. All of the Notes shall be redeemed at the same time and
shall not be redeemed in part.
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2. The Obligors shall give each holder of the Notes irrevocable written notice
of the optional redemption not less than 10 Business Days prior to the
redemption date, specifying the redemption date. Such notice of redemption
having been given, on the redemption date specified in such notice there shall
become due and payable, and the Obligors shall pay, the aggregate principal
amount of the Notes specified therein, together with all interest accrued
thereon, the redemption premium set forth above plus any and all Breakfunding
Costs and expenses incurred by the Investors. Upon request, the Investors shall
deliver to the Obligors a written statement setting forth the calculation of
Breakfunding Cost, such calculation to be conclusive absent manifest error.
1. Payments and Notations.
1. Except as otherwise expressly provided above, each payment of principal of
and premium, if any, and interest on the Notes, including each prepayment of the
principal of the Notes and premium, if any, and interest accrued on the amount
prepaid, shall be applied among the Notes pro rata in accordance with their
respective outstanding principal amounts, first to interest accrued and then
due, and second to any premium then payable and third to principal then due.
2. Prior to any sale or other disposition of any Note, the Holder thereof may
make a notation thereon (or on a paper annexed thereto) of the unpaid principal
amount thereof and the last date to which principal and interest have been paid
thereon; provided, that the Holders shall have no obligation to make such
notation and the obligations of the Obligors under the Notes shall not be
affected by any failure of a Holder to make such notation. Upon payment in full
of the principal of and interest on a Note, it shall be cancelled and returned
to the Obligors.
3. The Obligors hereby expressly and irrevocably authorizes each Investor to
make appropriate notations on the grid attached to such Investor's Note,
including, without limitation, the date, increases in the outstanding principal
amount thereof, interest rate, principal and interest payments made, which
notations shall be conclusive absent manifest error; provided, however, that the
failure of any Investor to make such notation or any error on any Note shall not
affect the obligation of the Obligors to repay, in accordance with the terms of
each Note and this Agreement, the advances made by such Investor hereunder.
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1. Fees.
The Obligors have agreed to pay to the Investors a nonrefundable processing fee
of $125,000 and have heretofore paid to the Investors $62,500 of such processing
fee and shall pay or caused to be paid, to the Investors $62,500 representing
the balance of the processing fee on the Closing Date. The Obligors acknowledge
that the foregoing fees have been fully earned and are not subject to refund for
any reason. The Obligors further agree to pay the Investors on the Closing Date,
all reasonable out-of-pocket costs and expenses, including, without limitation,
legal, credit investigation and other professional fees incurred by the
Investors in connection with the due diligence, negotiation, documentation and
closing of the transactions contemplated by this Agreement and the Transaction
Documents; provided, however, that the Obligors shall not pay more than $400,000
in the aggregate on the Closing Date for all such fees and expenses (including
fees and expenses of counsel for the Obligors).
1. Taxes.
1. Any and all payments by the Obligors in respect of principal or accrued
interest on the Notes, or any other amount due to the Investors hereunder shall
be made, free and clear of and without deduction for, or on account of, any and
all present or future taxes, levies, imposts, deductions, charges or
withholdings, and all liabilities with respect thereto, including taxes imposed
by the United States of America or any political subdivision thereof by means of
withholding at the source but excluding taxes imposed on the Investors' overall
net income, or franchise taxes, in each case, imposed on the Investors by the
jurisdiction in which the Investors' principal office is located (all such
taxes, levies, imposts, deductions, charges, withholdings and liabilities being
hereinafter referred to as "Taxes"). If the Obligors shall be required by law to
deduct any Taxes from or in respect of any sum payable hereunder to the
Investors, (i) the sum payable shall be increased by the amount necessary so
that, after making all required deductions (including deductions applicable to
additional sums payable under this Section 3.8(a)), the Investors shall receive
an amount after accounting for all taxes (including income and franchise taxes),
Taxes and Other Taxes payable with respect to such additional amount, equal to
the sum it would have received had no such deductions been made, (ii) the
Company shall make such deductions and (iii) the Obligors shall pay the full
amount deducted to the relevant taxing authority or other governmental authority
in accordance with applicable law.
2. In addition, the Obligors agree to pay any present or future stamp or
documentary taxes or any other excise or property taxes, recording or other
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charges or similar levies that arise from any payment made hereunder or from the
execution, delivery or registration of, or otherwise with respect to, this
Agreement or any other Transaction Document (hereinafter referred to as "Other
Taxes").
3. The Obligors shall indemnify the Investors for the full amount of Taxes and
Other Taxes (including any taxes (including income and franchise taxes), Taxes
or Other Taxes imposed by any jurisdiction on amounts payable under this Section
3.8(c)) paid by the Investors and any liability (including penalties, interest
and expenses) arising from such Taxes and Other Taxes or with respect thereto,
whether or not such Taxes or Other Taxes were correctly or legally asserted.
Payment to satisfy such indemnification shall be made within thirty (30) days
following the date the Investors makes written demand therefor.
4. Within thirty (30) days after the date of any payment of Taxes or Other Taxes
withheld by the Obligors in respect of any payment to the Investors, the
Obligors shall furnish to the Investors the original or a certified copy of a
receipt evidencing payment thereof and any other documentary evidence reasonably
requested by the Investors. If the Obligors fail to deduct and pay over any such
Taxes or Other Taxes when due to the appropriate taxing authority, or fails to
remit to the Investors any receipts or other requested documentary evidence
possessed by the Obligors, the Obligors shall indemnify the Investors for any
incremental Taxes or Other Taxes that may become payable by any of them and for
all costs and expenses related thereto (including fees and expenses of counsel)
as a result of any such failure.
5. Without prejudice to the survival of any other agreement contained herein,
the agreements and obligations contained in this Section 3.8 shall survive the
payment in full of principal and interest hereunder.
1. Subordination.
In the event the Company seeks additional debt funding from a senior lender or
lenders after the date hereof, the Investors agree to subordinate their Security
Interest in and against the License to the interest of such senior lender or
lenders; provided, that the terms and conditions of such additional debt and
subordination of such Lien are mutually agreed in advance among the Investors,
the Company and the senior lender.
1. Right of Set-Off.
If an Event of Default shall have occurred and be continuing, each Investor is
hereby authorized at any time and from time to time to the fullest extent
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permitted by law, to set-off and apply any and all deposits (general or special,
time or demand, provisional or final) at any time held by such Investor and
other indebtedness at any time owing by such Investor or any of the other
Investors to or for the credit or the account of Holdings or the Company against
any of and all the Obligations, irrespective of whether or not such Investor or
any of the other Investors shall have made any demand under this Agreement or
such other Transaction Document and although such Obligations may be unmatured.
The rights of each Investor under this Section 3.10 are in addition to other
rights and remedies (including, without limitation, other rights of set-off)
which such Investor may have.
1.
Representations and Warranties of the Company
In order to induce the Investors to enter into this Agreement and to purchase
the Notes and Warrants, the Obligors hereby make the following representations
and warranties to the Investors as of the date hereof:
1. Organization.
Each of the Obligors: (i) is a corporation duly organized, validly existing and
in good standing under the laws of the jurisdiction of its incorporation, (ii)
certificate of incorporation and bylaws remain in full force and effect and have
not been amended, modified or supplemented since the date of their filing or
adoption, as the case may be, (iii) has all requisite corporate power, and has
all governmental licenses, authorizations, consents, permits and approvals
(including any license, authorization, consent, permit and approval required
under any Environmental Law) necessary to own its assets and carry on its
business as now being or as proposed to be conducted and to consummate the
transactions contemplated hereunder and (iv) is qualified to do business and in
good standing in all jurisdictions in which the nature of the business conducted
by it makes such qualification necessary and where failure so to qualify would
have a Material Adverse Effect.
1. Corporate Authority; Enforceability.
Each of the Obligors has all necessary corporate power and authority to
consummate the transactions contemplated by this Agreement and the Transaction
Documents and to execute, deliver and perform its obligations under this
Agreement and the Transaction Documents to which it is a party; the execution,
delivery and performance by the Obligors of this Agreement and the Transaction
Documents to which they are parties have been duly authorized by all necessary
corporate action and this Agreement has been duly and validly executed and
delivered by the Company and constitutes the legal, valid and binding obligation
of the Obligors, and on the Closing Date, each of the other Transaction
Documents to which the Company or Holdings is to be a party will constitute its
legal, valid and binding obligation, in each case enforceable in accordance with
its terms.
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1. Capitalization.
1. The Company has authorized capital stock consisting of _______ shares of
common stock. Holdings is the owner of all outstanding share of the capital
stock of the Company. All of such outstanding shares have been duly authorized
and validly issued and are fully paid and nonassessable with no personal
liability attaching to the ownership thereof. Neither the Company nor Holdings
has granted or issued, or agreed to grant or issue, any options, warrants or
similar rights to acquire, subscribe for or receive any of the shares of any
class of capital stock of the Company or any securities convertible into shares
of such capital stock.
2. After giving effect to the Repurchase of the Callas Shares, Holdings
authorized capital stock shall consist of 22,406,031 shares of Common Stock.
Schedule 4.3(b) sets forth the holders and number of outstanding shares of
capital stock of Holdings. All of such outstanding shares have been duly
authorized and validly issued and are fully paid and nonassessable with no
personal liability attaching to the ownership thereof. Except as otherwise set
forth on Schedule 4.3(b) and except for the shares of Common Stock to be issued
upon the exercise of the Warrants, neither Holdings nor Cacomm has granted or
issued, or agreed to grant or issue, any options, warrants or similar rights to
acquire, subscribe for or receive any of the shares of any class of capital
stock of Holdings or any securities convertible into shares of such capital
stock.
3. The Common Stock issuable upon exercise of the Warrants has been duly
authorized and reserved for issuance upon exercise of the Warrants, and, when
issued as provided in the Warrants against payment therefor in accordance with
the terms of the Warrants, such Common Stock will be duly authorized, validly
issued, fully paid and nonassessable and free from any and all restrictions,
including, without limitation, preemptive rights, restrictions with respect to
the voting, transfer and other rights exercisable by a holder of the Common
Stock and any Liens.
4. Upon giving effect to the Repurchase of the Callas Shares, the Callas Shares
repurchased shall be immediately cancelled.
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1. Financial Statements; No Undisclosed Liabilities.
1. Except as set forth on Schedule 4.4(a), the Audited Financial Statements, the
Interim Financial Statements, pro forma balance sheet and sources and uses of
funds statement of the Obligors submitted to the Investors hereunder (i) fairly
present their financial position and their results of operations at the dates
thereof and for the periods covered therein and (ii) disclose all liabilities,
including contingent and/or unmatured liabilities as of the dates thereof, which
are required to be disclosed thereon, in each case in accordance with GAAP.
2. The Interim Financial Statements of the Obligors are based on the books and
records of each, adjusted to reflect the transactions contemplated by this
Agreement, and fairly present the financial condition of each as of the Closing
Date. Except as set forth or provided for in, or as disclosed by the Interim
Financial Statements, as of the Closing Date, neither the Company nor Holdings
will have any liabilities, contingent or other, which could reasonably be
expected to have a Material Adverse Effect.
1. Material Adverse Change.
Except as set forth on Schedule 4.5 and disclosed on the Interim Financial
Statements, the Obligors have been operated in the ordinary course, consistent
with past practice and there has not been any change or development that could
reasonably be expected to have a Material Adverse Effect, except for changes and
developments due to general economic conditions.
1. Litigation.
Except as set forth on Schedule 4.6 attached hereto, there are no legal or
arbitral proceedings or any proceedings by or before any governmental or
regulatory authority or agency, now pending or threatened against or affecting
the Obligors in which there is a reasonable possibility of an adverse decision
which could reasonably be expected to have a Material Adverse Effect on the same
or on the ability of any one of them to perform its obligations under this
Agreement or the Transaction Documents to which it is a party.
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1. No Breach.
The execution and delivery of the Transaction Documents and the transactions
therein contemplated and compliance with the terms and provisions thereof will
not conflict with or result in a breach of, or require any consent under, the
certificate of incorporation or by-laws of the Obligors or any applicable law or
regulation, or any order, writ, injunction or decree of any court or
governmental authority or agency, any Transaction Document, any lease encumbered
by a leasehold mortgage, any other material agreement or instrument to which an
Obligor is a party or by which it is bound or to which it is subject, or
constitute a default under any such lease, agreement or instrument, or (except
for the Liens created pursuant to the Collateral Assignment) result in the
creation or imposition of any Lien upon any of the revenues or assets of the
Obligors pursuant to the terms of any such agreement or instrument.
1. Approvals.
Each of the Obligors has obtained all authorizations, approvals and consents of,
and has made all filings and registrations with, any governmental or regulatory
authority or agency necessary for the execution, delivery or performance by it
of this Agreement and any Transaction Documents to which it is a party, or for
the validity or enforceability thereof.
1. Federal Reserve Regulations.
Neither of the Obligors is engaged principally, or as one of its important
activities, in the business of extending credit for the purpose of purchasing or
carrying any margin security (within the meaning of Regulation G of the Board of
Governors of the Federal Reserve System) and no part of the proceeds of the
Notes or the Warrants will be used, directly or indirectly, to purchase or
carry, or for the purpose of reducing or retiring any Indebtedness which was
originally incurred to carry, any such margin security or for any purpose which
might cause this Agreement and the transactions contemplated hereby to violate
Regulation G, Regulation T, Regulation X, Regulation K or any other Regulation
of the Board of Governors of the Federal Reserve System or the Securities
Exchange Act of 1934, as amended. If requested by the Investors, the Obligors
shall promptly furnish the Investors with a statement in conformity with the
requirements of Federal Reserve Form G-1 referred to in Regulation G.
1. ERISA.
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1. The Obligors and each ERISA Affiliate have fulfilled their obligations under
the minimum funding standards of ERISA and the Code with respect to each Plan
and the Plans and each is in compliance in all material respects with the
presently applicable provisions of ERISA and the Code, other than as set forth
on Schedule 4.10(a) hereto, and have not incurred any liability to the PBGC or a
Plan under Title IV of ERISA (other than to make contributions or premium
payments in the ordinary course).
2. Neither Obligor nor its ERISA Affiliates has received any notification that
any Multiemployer Plan is in reorganization or has been terminated, within the
meaning of Title IV of ERISA, and, to the best of each Obligor's knowledge, no
such Multiemployer Plan is reasonably expected to be in reorganization or to be
terminated within the meaning of Title IV of ERISA.
1. Taxes.
Each of the Obligors has filed all United States federal and state income tax
returns and all other material tax returns which are required to be filed by it
and has paid all taxes due pursuant to such returns or pursuant to any
assessment received by it, except to the extent the same may be contested in
good faith and as to which adequate reserves have been created. The charges,
accruals and reserves on the books of the Obligors in respect of taxes and other
governmental charges are, in the opinion of the Obligors, adequate.
1. Title to Properties.
1. Except as set forth on Schedule 4.12(a), the Obligors have good and
marketable title to all of their properties and assets (including real property
and tangible and intangible personal property), in each case free and clear of
all Liens other than Permitted Liens.
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2. Each of the Obligors owns, or is licensed to use, all licenses, service
marks, franchises, trademarks, tradenames, patents, patent applications,
copyrights, technology, know-how, processes and other intellectual and
proprietary rights (collectively, the "Intellectual Property") necessary for the
conduct of its business. Schedule 4.12(b) contains a list of all licenses,
franchises, patents, patent applications, trademark, tradename and service mark
registrations and applications therefor, and copyright registrations and
applications therefor, owned by each of the Obligors. Except as set forth in
Schedule 4.12(b), as of the date hereof, no material claim has been asserted and
is pending by any Person with respect to the use by the Obligors of any
Intellectual Property or challenging or questioning the validity or
effectiveness of any Intellectual Property necessary or desirable for the
conduct of the business of the Obligors.
1. Contracts.
Schedule 4.13 sets forth a complete list as of the date hereof of each material
agreement, contract, guaranty, indenture or instrument including, without
limitation, each Cable Contract and the License, to which an Obligor is a party
or by which any of its respective properties are or may be bound (collectively,
the "Contracts"), correct and complete copies of which have been provided to the
Investors. Each Contract is the binding obligation of such Obligor and, to the
knowledge of the Obligors, the binding obligation of each of the other parties
thereto, in each case, enforceable in accordance with its terms. Neither of the
Obligors nor the other party thereto is in default in the performance,
observance or fulfillment of any of the obligations, covenants or conditions
contained in any Contract to which it is a party.
1. No Material Misstatements.
All information, including financial information, provided, or to be provided
from time to time, to the Investors in connection with this Agreement and the
Transaction Documents is true and correct and none of the documentation
furnished to the Investors by the Obligors, including the Audited Financial
Statements and the Interim Financial Statements, nor any other statement
furnished by or on behalf of the Obligors to the Investors in connection with
the negotiation or confirmation of the transactions as contemplated hereby or by
the Transaction Documents, contains or will contain any untrue statement of a
material fact or omits or will omit as of such time, a material fact necessary
to make the statements contained therein, in light of the circumstances in which
they were made, not misleading, and all such statements, taken as a whole,
together with this Agreement, do not and will not contain any untrue statement
of a material fact or omit a material fact necessary to make the statements
contained herein or therein not misleading and all expressions of expectation,
intention, belief and opinion contained therein were, and will be, honestly made
on reasonable grounds after due and careful inquiry by the Obligors (and any
other person who furnished such material). There is not, and will not be, any
fact which the Obligors have not disclosed to the Investors in writing which has
had a Material Adverse Effect, or is reasonably likely to have a Material
Adverse Effect.
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1. Outstanding Debt.
Schedule 4.15 lists all Indebtedness of the Obligors. There does not exist any
default under any Contract relating to or evidencing any Indebtedness of the
Obligors (or any event which, with only the giving of notice or the passage of
time or both, would result in such a breach or default).
1. Investment Company Act and Public Utility Holding Company Act.
Neither Obligor is an "investment company" or an "affiliate" of an "investment
company" as defined in, or subject to regulation under, the Investment Company
Act of 1940, as amended. Neither Obligor is a "holding company" as defined in,
or subject to regulation under, the Public Utility Holding Company Act of 1935,
as amended.
1. Solvency.
Immediately following the issuance of the Notes and Warrants on the Closing Date
and giving effect to the obligations of the Obligors and Holdings, respectively,
under the same, neither the Company nor Holdings will be, "insolvent" or an
"insolvent person" within the meaning of the U.S. Bankruptcy Code, the Uniform
Fraudulent Conveyance Act as in effect on the date hereof in the State of New
York or the Uniform Fraudulent Transfer Act as in effect on the date hereof in
the State of New Jersey or any other applicable fraudulent conveyance or
preference laws, as applicable. The fair value of the aggregate assets of each
Obligor exceeds, and immediately following the issue of the Notes and Warrants
on the Closing Date and giving effect to the obligations of each Obligor under
the same, will exceed its total liabilities (including subordinated, unmatured,
unliquidated, disputed and contingent liabilities). Neither the assets of each
Obligor are nor immediately following the sale of the Notes and Warrants on the
Closing Date hereunder will they be, unreasonably small in relation to any
business or transaction in which such corporation is or is about to be engaged.
Each Obligor does not intend to, nor believes that it will, nor should it
reasonably believe it will, incur debts beyond its ability to pay such debts as
they mature (taking into account the timing and amounts of cash to be received
by each Obligor and the amounts to be payable on or in respect of its
obligations).
1. Security Interests.
Except as set forth on Schedule 4.18, the provisions of the Collateral
Assignment will, upon the due execution and delivery thereof by the Company, be
in full force and effect and create in favor of the Investors valid, binding
and, upon the due and timely filing of the financing statements, registrations
and other documents related thereto, Security Interests which will have first
priority for all purposes over any other Lien on the Collateral.
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1. Capital Stock; Equity Capital.
There are no restrictions upon the voting rights associated with, or the
transfer of, any of the capital stock of Holdings, except as provided by (a)
United States or state securities laws or (b) the terms and provisions of the
Transaction Documents
1. Small Business Matters.
The Obligors, together with their "affiliates" (as that term is defined in Title
13, Code of Federal Regulations, e121.401), is a "small business concern" within
the meaning of the Small Business Investment Act of 1958 and the regulations
thereunder, including Title 13, Code of Federal Regulations, e121.802. The
information set forth in the Small Business Administration Forms 480 and 652
regarding the Obligors and their affiliates and delivered on the Closing Date is
correct and complete. Copies of such forms have been completed and executed by
each Obligor and are being delivered to the Investors on the Closing Date.
Neither of the Obligors presently engages in, and it shall not hereafter engage
in, any activities, nor shall it use directly or indirectly the proceeds from
the sale of the Notes and the Warrants by any Investor that is an SBIC, or the
exercise of the Warrants by any Investor that is an SBIC, for any purpose for
which a Small Business Investment Company is prohibited from providing funds by
the Small Business Investment Act of 1958 and the regulations thereunder,
including Title 13, Code of Federal Regulations, e107.901. The use of proceeds
from the Company's sale of the Notes and Holdings' sale of the Warrants to the
Investors will be solely for the purposes set forth in the second Whereas clause
hereof in the case of the Notes and for general corporate purposes, including in
the case of the exercise of the Warrants obtaining additional wireless cable
licenses.
If an Obligor breaches this representation in any material respect, then
in addition to all other remedies available to the Investors, an Investor may
demand that the Obligors immediately repurchase all Securities acquired by an
Investor at their original cost plus accrued dividends or interest.
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1. Compliance; Licenses and Permits.
1. The Obligors have complied in all material respects with all federal, state,
local or foreign laws, ordinances, regulations or orders applicable to its
business. The Obligors have all material federal, state, local and foreign
governmental licenses and permits which are required for the conduct of its
business as presently conducted by the Obligors, which licenses and permits are
in full force and effect, and no violations are outstanding or uncured with
respect to any such licenses or permits and no proceeding is pending or, to the
best of each Obligor's knowledge, threatened to revoke or limit any thereof.
Schedule 4.21 attached hereto lists all federal, state, local and foreign
governmental licenses and permits of the Obligors which are used in or relate to
its business.
2. Neither of the Obligors is in material violation of, and none of the
facilities or assets of same as currently used violates in any material respect,
any applicable Environmental Law (as hereinafter defined), and no condition or
event has occurred which, with notice or the passage of time or both, would
constitute a material violation of any Environmental Law.
3. The Obligors are in possession of all material Environmental Permits (as
defined below) required under any applicable Environmental Law for the conduct
or operation of its business (or any part thereof), and is in compliance with
all of the requirements and limitations included in such Environmental Permits.
4. Neither of the Obligors is the subject of federal, state, local or private
litigation or proceedings involving a demand for damages or other potential
liability with respect to violations of Environmental Laws.
5. Neither Obligor, to its best knowledge, is liable, directly or indirectly, in
connection with any release of any hazardous substance into the environment in
violation of Environmental Laws, nor do there exist any facts upon which a
finding of such liability could be based.
6. Each Obligor has complied in all material respects with the filing and
reporting requirements under all applicable Environmental Laws and has
maintained in all material respects all required data, documentation and records
under all applicable Environmental Laws.
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1. Business Plan and Projections.
The Business Plan submitted to the Investors by the Company is complete and
correct in all material respects and the forecasts and projections included
therein are based on estimates and assumptions which are reasonable in light of
the conditions which existed at the time of their preparation and which exist on
the date hereof and constitute reasonable estimations of the future performance
of the Company.
1. Customers.
The customers set forth on Schedule 4.23 attached hereto represent the largest
six (6) customers, in terms of revenue, to the Company.
1. Communications Act.
Neither Obligor qualifies as a "cable television company" prohibited from
leasing transmission time or capacity from a licensee of a station within the
meaning of 47 C.F.R. ss. 74.931(h).
1.
Representations and Warranties of the Investors
1. Representations and Warranties of the Investor.
Each Investor represents and warrants to the Obligors, severally and not
jointly, as of the date hereof as follows:
1. Each Transaction Document to which it is a party constitutes the valid
and binding obligation of the Investor, enforceable against it in accordance
with its respective terms.
2. It is acquiring the Warrants and the Notes, and will acquire the Warrant
Stock for its own account, with the intention of holding the same for investment
and not with a view to the distribution thereof.
3. It understands that the Warrants, the Warrant Shares and the Notes have not
been registered under the Securities Act or any applicable state securities laws
in reliance upon exemptions contained in the Securities Act and such applicable
state securities laws, and that the Company's reliance upon such exemptions is
based in part on the representations of the Investors contained in this
Agreement. The Investor further understands and acknowledges that the Warrants,
the Notes and the Warrant Shares must be held indefinitely unless a subsequent
disposition thereof is registered under the Securities Act and applicable state
securities laws or unless such disposition is exempt from registration
thereunder.
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4. It is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act.
5. It has sufficient knowledge and experience in financial and business matters
so as to be capable of evaluating the merits and risks of making the investment
contemplated hereby.
6. It has received copies of such documents and other information as it has
deemed necessary in order to make an informed investment decision with respect
to the investment being made hereby, and the Company has made its officers
available to the Investors to answer the Investors' questions concerning the
Company and the investment being made hereby.
7. The principal offices of such Investor are located in New York and
substantially all of the decisions with respect to the investment being made
hereby were made at such location.
1. Representations and Warranties of IBJSCC and IBJS.
Each of IBJSCC and IBJS hereby represent and warrant to the Obligors that, as of
the date hereof, it is directly or indirectly controlled by a corporation
organized under the laws of Japan.
1.
Conditions to Purchase of Notes and Warrants
1. Conditions Precedent.
1. The obligations of the Investors to purchase the Notes and the Warrants
hereunder on the Closing Date and the Second Closing Date subject to the prior
satisfaction of the following conditions precedent:
1. The Investors shall have received duly executed Notes from the
Company in accordance with the provisions of Section 2.2 hereof.
2. The Investors shall have received duly executed Warrants from Holdings in
accordance with the provisions of Section 2.2 hereof.
3. The Investors and their counsel shall have satisfactorily completed their due
diligence review with respect to all relevant documents relating to the
Company's Cable Contracts, License, other Contracts, audited and unaudited
financial statements, working capital accounts, accounting, pending or
threatened litigation, customer complaints, billing and management information
systems and such other materials and information as the Investors may reasonably
request.
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4. The Investors shall have received from the Company a long range business and
strategic plan for the college wireless business of the Company in form and
substance satisfactory to the Investors, including, without limitation, monthly
forecasts prepared in accordance with GAAP for the twelve (12) months
immediately succeeding the Closing Date (the "Business Plan").
5. The Investors shall have received from the Obligors (A) the duly executed
Collateral Assignment and consents thereto for the Collateral in substantially
the form of Exhibit C attached hereto, (B) a duly executed Registration Rights
Agreement in substantially the form of Exhibit D attached hereto, and (C) a duly
executed Stockholders Agreement providing the Investors with the rights to
appoint two (2) directors on the Holdings Board of Directors and participate as
observers in Holdings' Board of Director meetings in substantially the form of
Exhibit E attached hereto, (D) a duly executed Non-Competition Agreement in
substantially the form of Exhibit F attached hereto and (E) a duly executed
Indemnification Agreement in substantially the form of Exhibit G attached
hereto, and any other agreements, documents or instruments required in
connection therewith. The Transaction Documents shall be in full force and
effect and no default or event of default shall have occurred and be continuing
thereunder. The Investors shall have received evidence satisfactory to it of the
perfection of first priority Security Interests granted under the Collateral
Assignment or arrangements satisfactory to the Investors shall have been made
for such perfection.
6. The Investors shall have received from each of the Obligors on the Closing
Date (A) a copy of its certificate of incorporation, including all amendments
thereto, certified by the Secretary of State of its jurisdiction of
incorporation and a certificate as to the good standing of such party in such
jurisdiction as of the Closing Date, (B) a certificate of an officer dated as of
the Closing Date and certifying (1) a correct and complete copy of its
certificate of incorporation and bylaws as in effect on the Closing Date and at
all times since a date prior to the date of the resolutions described in the
following clause (2), (2) a correct and complete copy of resolutions duly
adopted by the board of directors authorizing the execution, delivery and
performance of the Transaction Documents, the sale of the Notes and Warrants
hereunder, the granting of the Security Interests pursuant to the Collateral
Assignment and the other transactions contemplated hereby and thereby, as
applicable, (3) that the certificate of incorporation of such party has not been
amended since the date of the last amendment thereto shown on the certificate of
good standing furnished pursuant to clause (A) above, (4) as to the incumbency
and specimen signature of each officer of such party who shall execute any
Transaction Document or any other document delivered in connection therewith;
and (C) such other documents as the Investors and their counsel may reasonably
request.
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7. The Investors shall have received delivery of a pro forma balance sheet of
the Obligors dated as of the Closing Date which shall not be materially
different from that provided in the due diligence materials.
8. The Investors shall have had satisfactory discussions with representatives
from General Instrument Corporation about their compression technology and the
nature of the business relationship between General Instrument Corporation and
the Company.
9. The Investors shall have received a legal opinion from Zimet, Haines,
Friedman & Kaplan, counsel to the Obligors, in substantially the form and
covering the matters set forth on Exhibit H hereto and such other matters as the
Investors shall reasonably request.
10. All processing and closing fees and expenses owing by the Obligors to the
Investors or otherwise, not to exceed $400,000, under the terms of this
Agreement, the other Transaction Documents or any other document executed in
connection herewith or therewith shall be paid to the Investors or other party
to which owed on the Closing Date. The priority of payment shall be (A) first
priority, the $125,000 processing fee for the benefit of Investors, (B) second
priority, all legal fees and expenses not to exceed $125,000, (C) fees and
expenses payable to a credit investigation bureau and (D) other fees and
expenses.
11. After the payment of all fees and expenses and giving effect to the
$2,500,000 to be funded on the Closing Date, the Company shall deliver a
certificate certified by an officer of the Company that the Company shall have a
minimum of $425,000 of cash liquidity on its balance sheet.
12. No litigation shall be pending or threatened against any of the Obligors,
with respect to the Notes or Warrants, any other Transaction Document or
otherwise which the Investors reasonably believe could have a Material Adverse
Effect.
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13. No material adverse changes in the reasonable judgment of the Investors
shall have occurred and be continuing which would have a Material Adverse Effect
on the Obligors from that disclosed to the Investors in the Company's financial
statements dated June 30, 1995.
14. To the extent required by law or advice of counsel, the Investors shall be
satisfied that compliance with the regulatory requirements of any governmental
authority is not required to effect the transactions contemplated by this
Agreement and the other Transaction Documents, including, without limitation,
Federal Communications Commission approvals or authorization with respect to the
Investors first priority security interest in the License.
15. The Investors shall have received and be satisfied with the results of a
search of the Uniform Commercial Code and other filings and registrations of
Liens against the assets of the Obligors in such jurisdictions as the Investors
shall reasonably require, which shall not have disclosed any prior Lien or
security interest in the Collateral, other than Liens being released on the
Closing Date or Permitted Liens.
16. The Investors shall have received and be satisfied with the results of a
high-level investigative report conducted by a firm satisfactory to the
Investors with respect to the Obligors and Messrs. N. Mastrorilli, Sr. and
Dauer.
17. The Investors shall have received, reviewed and be reasonably satisfied with
any and all correspondence and agreements between the Company and Holdings and
the following entities: Microcell Systems Corporation, Cacomm, Inc. and The
Grand MMDS Alliance partnership. In addition the Investors shall have received,
reviewed and be satisfied with the most recent financial statements of Cacomm,
Inc.
18. The Investors shall have received and be satisfied with the terms of all
consulting and financial advisory contracts entered into by each of the
Obligors.
19. The Investors completion of a satisfactory review of documentation
pertaining to any investments (loans, equity, or otherwise) made in the Company
or Holdings during the prior four year period.
20. The Investors shall have received a Solvency Statement from the principal
financial officer of each of the Obligors.
21. The establishment by the Company of a lockbox account (the "Lockbox Service
Agreement") entered into with IBJ Schroder Bank & Trust Company, to which the
proceeds from Cable Contracts are to be directed on terms acceptable to the
Investors.
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22. Delivery and satisfactory review by the Investors of Holdings' June 30, 1995
quarterly financial statements and 10-Q filed with the Commission.
23. The Investors completion of a satisfactory reference check on the six
largest customers of the Company.
24. Subordination of all shareholder loans and obligations of the Obligors in
excess of $20,000, the terms of which must be satisfactory to the Investors.
25. The Investors completion of a satisfactory review of the applicable
documents with respect to the transaction contemplated by the September 13, 1991
agreement between the Company and Yardley Ventures, Inc.
26. The Investors shall have received a detailed statement of the sources and
uses of the financing, to the satisfaction of the Investors, including the
amount of trade payables to be paid on the Closing Date, such that the Company
can satisfy the minimum liquidity cash requirement of $375,000 under the
financing contemplated herein.
27. Such other conditions precedent deemed appropriate to the
transaction by the Investors or their counsel.
28. The Investors completion of a satisfactory review of all documentation in
connection with the Repurchase of the Callas Shares.
29. A certificate of an officer of Holdings certifying that no more than 450,000
newly issued shares of Holdings' Common Stock were or are to be paid to the
agents for the Obligors in connection with the Repurchase of the Callas Shares.
30. Delivery and satisfactory review by the Investors of SBA Forms
480 and 652.
1. The obligations of the Investors to make a New Contract Advance after
the Closing Date with respect to an Accepted New Contract are subject to
the prior satisfaction of the following conditions precedent:
1. the Company shall have delivered to the Investors an executed copy of such
Accepted New Contract;
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2. the representations and warranties of the Obligors contained herein and in
any certificate or other instrument delivered to any of the foregoing shall be
correct and complete as of the date of each borrowing thereunder;
3. the Company shall have delivered to the Investors a Notice of Borrowing at
least 30 days prior to the Scheduled Construction Date or on or before the
Completion and Acceptance Date, as the case may be, detailing the amount of the
borrowing requested;
4. the Obligors shall be in compliance in all material respects with the terms
and provisions of this Agreement and each other Transaction Document to which it
is a party, and at the time of and immediately following a borrowing and each of
the Transaction Documents shall continue to be in full force and effect and no
Event of Default or event or condition that would constitute an Event of Default
with the giving of notice or lapse of time, unless cured or waived, shall have
occurred or be continuing;
5. the Company shall have delivered to the Investors a consent in substantially
the form of Exhibit C to the Collateral Assignment duly executed by the other
party to such Accepted New Contract; and
6. the closing on the Second Closing Date shall have occurred.
1.
Affirmative Covenants
The Obligors covenant and agree with the Investors that, so long as any amount
of the Notes is unpaid, any monetary obligation under this Agreement or the
other Transaction Documents remains outstanding, or any Investor remains
obligated to lend under its Commitment, the Obligors shall comply with the
covenants set forth in this Article VII.
1. Payment of Principal, Premium and Interest.
The Obligors shall duly and punctually pay the principal of (and premium, if
any) and interest on the Notes in accordance with the terms of the Notes and
this Agreement.
1. Corporate Existence.
The Obligors shall do or cause to be done all things necessary to preserve,
renew and keep in full force and effect their corporate existence and any
necessary state or other qualifications (other than any qualifications the
absence of which, in the aggregate, would not result in a Material Adverse
Effect).
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1. Obligations and Taxes.
The Obligors shall pay or discharge, or cause to be paid or discharged, before
the same shall become delinquent (a) all taxes, assessments and governmental
charges or levies imposed upon it or upon its income or profits or in respect of
their business or property unless such taxes, assessments or governmental
charges are being paid in accordance with the terms of an agreement with the
applicable taxing authority, (b) all lawful claims for labor, materials and
supplies, (c) all required payments under any Indebtedness and (d) all other
obligations; provided, however, that it shall not be required to pay or
discharge or to cause to be paid or discharged any such amount so long as the
validity or amount thereof shall be contested in good faith in an appropriate
manner and appropriate reserves and accruals have been made with respect
thereto.
1. Performance Under Agreements.
The Obligors shall perform their obligations under this Agreement, each
Transaction Document, and each other Contract to which it is a party; provided,
however, that an Obligor shall not be required to so perform its obligations
under any Contract (other than this Agreement and any other Transaction
Document) to the extent it is reasonably contesting such obligations in good
faith and in an appropriate manner and, if required by GAAP, it has made
appropriate reserves and accruals with respect thereto.
1. Access to Properties and Inspections.
The Obligors shall maintain financial records in accordance with accounting
practices and controls sufficient to allow the Obligors to prepare the financial
statements, certificates and reports required by Section 7.11 hereof and to
provide such information with respect to the Collateral as the Investors may
reasonably request; and, upon written notice, at all reasonable times and as
often as the Investors may reasonably request, permit any authorized
representative or agent of the Investors to visit and inspect its properties and
records (including all records relating to Collateral), and to make extracts
from such records and permit any authorized representative or agent of the
Investors to discuss its affairs, finances and condition with such officers, key
employees and independent chartered accountants acting as auditors as the
Investors shall deem appropriate. Delivery of a copy of this Agreement to the
respective independent accountants acting as auditors shall constitute
instructions to such accountants to discuss the financial condition of an
Obligor with the Investors and their representatives, and to permit the
Investors and their representatives to inspect, copy and make extracts from all
financial statements, analyses, work papers and other documents and information
(including electronically stored documents and information) prepared by such
accountants with respect to the an Obligor.
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1. Defense of Claims.
The Obligors shall diligently defend themselves and their properties from and
against any lawsuits or claims.
1. Notices of Litigation, Claims, Etc..
The Obligors shall promptly upon obtaining notice of the occurrence thereof (but
in no event more than 10 days after obtaining notice of the occurrence thereof),
provide the Investors with written notice of any of the following events:
1. the issuance by any governmental authority of any injunction,
order or decision involving the Company or Holdings or any of
their respective properties;
2. the filing or commencement of any action, suit or proceeding against or
affecting the Company or Holdings or the properties of any of the same, whether
at law or in equity or by or before any court or any United States, state, or
other governmental authority;
3. the imposition of any Lien which is not a Permitted Lien;
4. any claim, demand or action impairing title to any of the properties or
assets of the Company or Holdings;
5. any other adverse action by or notice from a governmental authority with
respect to the Company or Holdings or any of their respective properties;
6. any default by the Company or Holdings under any contract of Indebtedness;
and
7. any development in the business or affairs of the Company or Holdings which
is likely, in the reasonable judgment of the Company, to have a Material Adverse
Effect.
Each notice shall specify, as applicable, (i) the nature and extent thereof,
(ii) any rights of any other parties thereto with respect to termination,
acceleration or similar provisions and (iii) any corrective action taken or
proposed to be taken with respect thereto.
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1. Proceeds.
The Obligors shall use the proceeds of the sale of the Notes and the Warrants
solely for the purposes set forth in the second Whereas clause under this
Agreement.
1. Compliance.
The Obligors shall comply in all material respects with all applicable laws,
including Environmental Laws and, maintain all required clearances, consents,
permits and approvals of governmental authorities.
1. Business and Properties.
The Obligors shall:
1. at all times do or cause to be done all things necessary to (i) preserve,
renew and keep in full force and effect the material rights, licenses, permits,
franchises and concessions necessary to, or used or useful in the conduct of,
its business and (ii) keep its assets and properties used or useful in the
conduct of their business in good repair, working order and condition, ordinary
wear and tear excepted, and from time to time make, or cause to be made, all
necessary and proper repairs, renewals and replacements, betterments and
improvements thereto, all as in the reasonable judgment of the Obligors may be
necessary so that the business carried on in connection therewith may be
properly and advantageously conducted at all times; and
2. as promptly as possible after obtaining knowledge of the occurrence thereof,
furnish written notice to the Investors of the institution of any proceeding for
the condemnation or other taking of any property of the Obligors.
1. Financial Statements and Reports.
The Obligors shall furnish to the Investors:
1.as soon as available but in any event within ninety (90) days after the end of
each fiscal year (commencing with the fiscal year ending December 31, 1995)
balance sheets, income statements and cash flow statements of the Obligors,
showing its financial condition as at the end of such fiscal year and the
results of its operations for such fiscal year, all the foregoing financial
statements (other than the consolidating schedules) to be audited by independent
chartered accountants of nationally-recognized standing reasonably acceptable to
the Investors and prepared in accordance with GAAP;
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2. as soon as available but in any event no later than the last day of the prior
fiscal year, current and projected annual budgets, operating plans and financial
projections for the Obligors (presented on a monthly basis) for such fiscal
year;
3. as soon as available but in any event within 30 days after the end of each
month, commencing with August 31, 1995, the unaudited balance sheets, income
statements and cash flow statements (along with comparisons to budget), showing
the financial condition as at the end of such month, and the results of
operations for such month and for the then elapsed portion of the fiscal year,
for the Obligors in each case prepared in accordance with GAAP, subject to
normal year-end adjustments (none of which alone or in the aggregate would
result in a Material Adverse Effect) and the absence of notes thereto;
4. as soon as available but in any event within 45 days after the end of each
calendar quarter, commencing with September 30, 1995, the unaudited balance
sheets, income statements and cash flow statements (along with comparisons to
budget), showing the financial condition as at the end of such calendar quarter,
and the results of operations for such calendar quarter and for the then elapsed
portion of the fiscal year, for each Obligor in each case prepared in accordance
with GAAP, subject to normal year-end adjustments (none of which alone or in the
aggregate would result in a Material Adverse Effect) and the absence of notes
thereto;
5. as soon as received, copies of any notice of potential liability or charge or
complaint received by the Company or Holdings from any governmental authority;
6. concurrently with the statements provided pursuant to clauses (a), (c), and
(d), a certificate of the chief financial officer of the Obligors containing a
narrative management discussion and analysis of the financial condition and
results of operation of each Obligor for the periods covered by such statements;
7. promptly upon their becoming available, copies of any statements, reports and
other communications, if any, which the Obligors shall have provided to its
stockholders or the Commission;
8. promptly upon receipt thereof, copies of all financial and management reports
submitted to each Obligor by its independent auditors in connection with each
annual audit of the books of such Obligor; and
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9. promptly, from time to time, such other information (in writing if so
requested) regarding the assets and properties (including the Collateral) and
operations, business affairs and financial condition of each Obligor as the
Investors may reasonably request.
Each certificate of the financial officer of an Obligor (and, in the case of
year-end financial statements and reports, the independent auditors of the
Obligors) delivered under this Section 7.12 shall certify that the statement or
report to which such certificate relates fairly presents in all material
respects the financial position and results of operations of the Obligor at the
dates thereof and for the periods then ended and has been prepared in accordance
with GAAP, in the case of unaudited financial statements, subject to normal
year-end audit adjustments (none of which alone or in the aggregate would result
in a Material Adverse Effect) and the absence of notes thereto, no Event of
Default has occurred and is continuing and to the best of the financial
officer's knowledge no event or condition has occurred which would have a
Material Adverse Effect on such Obligor. The audit report with respect to the
financial statements referred to in clause (a) shall not contain a "going
concern" or like qualification or exception or any qualification arising out of
the scope of the audit.
1. Insurance.
The Obligors shall maintain insurance on their business and properties to such
extent and against such risks, including fire and other risks insured against by
extended coverage, and workers' compensation insurance and public liability
insurance against claims for personal injury or death or property damage
occurring upon, in, about or in connection with, the use of any properties
owned, occupied or controlled by the them, in each case as is customary with
companies similarly situated and in the same or similar businesses, and shall
provide evidence to the Investors of such insurance upon its request.
1. Employee Plans.
If the Obligors or their Affiliates is required to comply with ERISA, the
Obligors shall, and shall cause their Affiliates and ERISA Affiliates, to (a)
comply with the provisions of ERISA, the Code and all other applicable law which
is applicable to any Employee Plan; (b) operate and administer each Employee
Plan in accordance with all Applicable law; (c) not terminate or withdraw from
any Employee Plan if such withdrawal could result in a material liability to
accrue against an Obligor or any of their Affiliates or ERISA Affiliates; (d)
not fail to make full payment when due of all amounts which, under the
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provisions of any Employee Plan, an Obligor or any Affiliate or ERISA Affiliate
is required to pay as a contribution or premium payment thereto; (e) furnish to
the Investors, as soon as possible, and in any event with in 10 days after any
responsible officer of an Obligor knows or has reason to know of any of the
following events, written notice of the same: (i) the withdrawal from or
termination of any Employee Plan by an Obligor or any of its Affiliates or ERISA
Affiliates, if such termination or withdrawal could result in any liability to
the same; (ii) that any Employee Plan is not in compliance with any applicable
law; or (iii) that any required employer or employee contributions or premiums
have not been made on a timely basis.
1. Notification of Event of Default.
The Obligors shall immediately notify the Investors in writing of (a) the
occurrence of any default or any Event of Default hereunder of which it becomes
aware and (b) any event or condition which has or could reasonably be expected
to have a Material Adverse Effect and specify what steps, if any, are being
taken to cure the same.
1. Employment of Financial Officer.
Commencing no later than 120 days after the Closing Date, the Company shall
continuously employ a qualified, full-time financial officer/CPA satisfactory to
the Investors.
1. Accounting Firm.
The Obligors shall engage a nationally recognized accounting firm satisfactory
to the Investors to act as auditors for each of the Obligors, commencing with
the December 31, 1995 fiscal year-end.
1. Post-Closing Business Plan.
Within 45 days after hiring of the Consultant referred to in Section 7.22, the
Company management shall present a detailed business plan for both the private
cable college market and the wireless licenses, such plan to be to the
satisfaction of the Investors (the "Post-Closing Business Plan"). The
Post-Closing Business Plan shall establish short term objectives and a monthly
time-table for the implementation and execution of the strategy, including the
human and financial resources necessary to meet the plan's objectives.
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1. Ownership of the Obligors.
Holdings shall at all times maintain direct or indirect ownership of one-hundred
(100) percent of the outstanding shares of each class of capital stock of the
Company. The Company shall at all times maintain direct and indirect ownership
of one-hundred (100) percent of each class of capital stock of its Subsidiaries.
1. Further Assurances.
The Obligors shall duly execute and deliver, or cause to be duly executed and
delivered, at its own cost and expense, such further instruments and documents
and take or cause to be taken all such action, in each case as may be necessary
or proper in the reasonable judgment of the Investors, to carry out the
provisions and purposes of this Agreement and the other Transaction Documents
and to better assure and confirm unto the Investors, its rights and remedies
under this Agreement and the other Transaction Documents.
1. Accounts Payable.
As of the Closing Date, all accounts payable set forth on Schedule 7.20 shall be
brought current.
1. Exchange Act Compliance.
Within 180 days after the Closing Date, Holdings shall comply with all of the
reporting requirements of the Securities Exchange Act of 1934, as amended, and
not de-register therefrom, and shall comply with all other public information
reporting requirements of the Commission which are conditions to the
availability of Rule 144 for the sale of the Common Stock. The Company shall
cooperate with each stockholder in supplying such information as may be
necessary for such stockholder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of Rule 144.
1. Consultant Hiring.
The Company shall, within 60 days following the Closing Date, employ a business
consultant acceptable to the Investors to assist the Company in the
implementation and execution of the Business Plan for the period commencing on
the Closing Date; provided that
the Obligors may terminate such business consultant at any time after the date
six months after such business consultant is hired with the consent of the
Required Investors.
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1. Information Rights and Related Covenants.
1. Within 75 days after the Closing Date, the Obligors shall provide to the
Investors a certificate of their chief financial officer (i) verifying (and
describing in reasonable detail) the use of the proceeds of Investors' financing
hereunder and (ii) certifying compliance by the Obligors with the provisions of
this Agreement. In addition to any other rights granted hereunder, the Obligors
shall provide the Investors, any Affiliate of the Investors and the U.S. Small
Business Administration (the "SBA") access to its books and records for the
purpose of verifying the use of the proceeds of such Persons' financing and for
all other purposes required by the SBA.
2. Promptly after the end of each fiscal year (but in any event prior to
February 28 of each year), the Obligors shall provide to the Investors a written
assessment, in form and substance satisfactory to the Investors, of the economic
impact of the Investors' financing hereunder, specifying the full-time
equivalent jobs created or retained, the impact of the financing on the
Company's business in terms of expanded revenue and taxes and other appropriate
economic benefits, including, but not limited to, technology development or
commercialization, minority business development, urban or rural business
development, expansion of exports and assistance to manufacturing firms.
3. Upon the request of the Investors, any Affiliate of the Investors or any
subsequent purchaser holding at least 2% of the outstanding Common Stock on a
fully-diluted basis, the Obligors shall (i) provide to such Person such
financial statements and other information as such Person may from time to time
request for the purpose of assessing the Obligors' financial condition and (ii)
furnish to such Person all information requested by it in order for it to
prepare and file SBA Form 468 and any other information requested or required by
any governmental agency asserting jurisdiction over such Person.
4. For a period of one year following the date hereof, neither of the Obligors
nor any of their Subsidiaries will change its business activity if such change
would render such Obligor ineligible to receive financial assistance from a
Small Business Investment Company under the Small Business Investment Act and
the regulations thereunder. If an Obligor breaches this covenant, then, in
addition to all other remedies available to the Investors, the Investors may
demand that the Obligors immediately repurchase all securities acquired by the
Investors at their original cost plus accrued dividends or interest.
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5. The Obligors shall at all times comply with the non-discrimination
requirements of 13 C.F.R., Parts 112, 113 and 117.
1. Regulatory Compliance Cooperation.
1. In the event that a Regulated Holder determines that it has a Regulatory
Problem, the Obligors agree to take all such actions as are reasonably requested
by such Regulated Holder in order to (i) effectuate and facilitate any transfer
of Securities by such Regulated Holder to any Person designated by such
Regulated Holder, (ii) permit such Regulated Holder (or any of its Affiliates)
to exchange all or any portion of the voting Securities then held by such Person
on a share-for-share basis for shares of a class of nonvoting Securities of an
Obligor, which nonvoting Securities shall be identical in all respects to such
voting Securities, except that such new Securities shall be nonvoting and shall
be convertible into voting Securities on such terms as are requested by such
Person in light of regulatory considerations then prevailing, (iii) continue and
preserve the respective allocation of the voting interests with respect to an
Obligor arising out of such Regulated Holder's ownership of voting Securities
before the transfers and amendments referred to above (including entering into
such additional agreements as are requested by such Regulated Holder to permit
any Person(s) designated by such Regulated Holder to exercise any voting power
which is relinquished by such Regulated Holder upon any exchange of voting
Securities for nonvoting Securities of Holdings) and (iv) entering into such
additional agreements, adopting such amendments to this Agreement, the
certificate of incorporation and bylaws of an Obligor and other relevant
agreements and taking such additional actions, in each case as are reasonably
requested by such Regulated Holder in order to effectuate the intent of the
foregoing. Each Obligor shall obtain the agreement of all of its stockholders to
cooperate with such Obligor in complying with this Section 7.24, including
without limitation, the agreement of such stockholders to approve amending its
certificate of incorporation in a manner reasonably requested by such Regulated
Holder to effectuate subsection (i), (ii) and (iii) above.
2. Before an Obligor redeems, purchases or otherwise acquires, directly or
indirectly, or converts or takes any action with respect to the voting rights
of, any Securities, such Obligor shall give written notice of such pending
action to each Regulated Holder. Upon the written request of any Regulated
Holder made within 10 days after its receipt of any such notice stating that
after giving effect to such action such Person would have a Regulatory Problem,
an Obligor shall defer taking such action for such period (not to extend beyond
45 days after such Person's receipt of an Obligor's original notice) as such
Person requests to permit it and its Affiliates to reduce the quantity of such
Obligor's Securities they own in order to avoid the Regulatory Problem.
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3. An Obligor shall not, nor shall it permit any of its Subsidiaries to, redeem,
purchase or acquire any Securities of such Obligor if, after giving effect to
such redemption, purchase or acquisition, a Regulated Holder would own more than
4.99% of any class of voting Securities of such Obligor (other than any class of
voting Securities which is (or is made prior to any such redemption, purchase or
acquisition) convertible into a class of non-voting Securities which are
otherwise identical to the voting Securities and convertible into such voting
Securities on terms reasonably acceptable to such Regulated Holder) or more than
24.99% of the total equity of such Obligor or more than 24.99% of the total
value of all capital stock and subordinated debt of such Obligor (in each case
determined both before the exercise, conversion or exchange of options, warrants
and other convertible or exchangeable securities and on a fully-diluted basis).
An Obligor shall not be a party to any merger, consolidation, recapitalization,
reorganization or other transaction pursuant to which a Regulated Holder would
be required to take any Securities or subordinated debt which might reasonably
be expected to cause such Person to have a Regulatory Problem.
4. In the event a Regulated Holder has the right to acquire any of an Obligor's
Securities (as the result of a preemptive offer, pro rata offer or otherwise),
at such Person's request such Obligor shall offer to sell to such Person
nonvoting Securities on the same terms as would have existed had such Person
acquired the Securities so offered and immediately requested their exchange for
nonvoting Securities pursuant to paragraph (a) above.
5. In the event that any Subsidiary of an Obligor offers to sell any of its
Securities, then such Obligor shall cause such Subsidiary to enter into
agreements with each Regulated Holder substantially similar to those in Sections
7.23 and 7.24 hereof if such Regulated Holder reasonably determines that
entering into the agreement is necessary to carry out the intent of this Section
7.24.
1. Information Rights.
Upon the request of a Regulated Holder or any of its
Affiliates, the Obligors promptly (and in any event within 20 days of such
request) will furnish to such Person all information necessary in order for such
Person to prepare any information requested or required by any governmental
authority asserting jurisdiction over such Person.
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1. Pledge Agreement.
Within 60 days after the Closing Date, the Company shall form a wholly-owned
Subsidiary (the "New Subsidiary") and the Company shall, and the Company shall
cause University Connection, Inc. to, transfer all of its right, title and
interest, in, to and under the Cable Contracts to the New Subsidiary. At the
time of such transfer, the Company shall enter into a stock pledge agreement
with the Required Investors, in form and substance satisfactory to the Required
Investors, pledging all of the Company's right, title and interest, in, to and
under the stock of the New Subsidiary. The Company shall cause the New
Subsidiary to conduct no other business unrelated to the Cable Contracts.
1. NEGATIVE COVENANTS
The Obligors hereby covenant and agree with the Investors that, so long as
any amount of the Notes is unpaid or any monetary obligation under this
Agreement or other Transaction Document remains outstanding, or any Investor
remains obligated to lend under its Commitment, the Obligors shall comply with
the covenants set forth in this Article VIII.
1. Indebtedness.
The Obligors shall not incur, create, assume or suffer or permit to exist any
Indebtedness, except:
1. Indebtedness under this Agreement and the other Transaction
Documents;
2. Indebtedness existing on the date hereof or the Closing Date and identified
on Schedule 8.1;
3. endorsements for collection or deposit in the ordinary course of business;
4. purchase money Indebtedness (including the capital component of Capital Lease
Obligations) incurred after the date hereof not in excess of the book value,
determined in accordance with GAAP, of the items purchased and in no event to
exceed $50,000 in any fiscal year; and
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5. any renewal, extension, refinancing or refunding of any Indebtedness
permitted hereby, provided that such Indebtedness does not exceed the principal
amount of Indebtedness so renewed, extended, refinanced or refunded.
1. Negative Pledge.
The Obligors shall not incur, create, assume or suffer or permit to exist any
Lien on any of its property or assets or on any income or rights in respect of
any thereof, except (the "Permitted Liens"):
1. Liens incurred and arising out of surety bonds, appeal bonds, statutory
obligations, bids, performance and return of money and similar obligations and
pledges or deposits made in the ordinary course of business in connection with
worker compensation, unemployment insurance, old age pensions and other social
security benefits;
2. Liens imposed by law, including carriers', warehousemen's, mechanics',
materialmen's and vendors' Liens incurred in the ordinary course of business and
securing obligations which are not yet due or which are being contested in good
faith by appropriate proceedings, and in any such case as to which it shall have
set aside adequate cash reserves in accordance with GAAP;
3. Liens securing the payment of Taxes, assessments and governmental charges or
levies, either not yet due and payable or being contested in good faith by
appropriate legal or administrative proceedings, and in any such case as to
which it shall have set aside adequate cash reserves in accordance with GAAP;
4. zoning restrictions, easements, licenses, reservations, provisions,
covenants, conditions, waivers, restrictions on the use of property or minor
irregularities of title which do not in the aggregate impair the use of any
parcel of property material to the operation of the business of the Company or
the value of such property for the purpose of the business of the Company;
5. Liens securing purchase money Indebtedness; provided, however, that each such
Lien does not secure any other Indebtedness and does not encumber any property
other than that property acquired with the proceeds of such Indebtedness;
6. extensions and renewals of Liens permitted hereunder; provided, however, that
the Indebtedness secured thereby is not increased and the Lien does not encumber
any property not encumbered by the Lien so extended or renewed; and
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7. Security Interests created by the Collateral Assignment.
1. Restricted Payments.
Neither Obligor shall declare or make any Restricted Payment.
1. Capital and Other Investments.
Except with respect to Capital Expenditures set forth in the Construction Costs
for an Accepted New Contract, the Obligors shall not make any Capital
Expenditures in the aggregate in excess of $50,000 during its fiscal year or
purchase or otherwise acquire for consideration, directly or beneficially, any
stock, other securities or evidences of Indebtedness of, or make or permit to
exist any loans or advances to, or make any investment or acquire any interest
whatsoever in, any other Person, other than Permitted Investments, loans to
employees or suppliers in the ordinary course of business not to exceed $50,000
in the aggregate at any time without the prior written consent of the Investors.
1. Nature of Business.
The Obligors shall not conduct any business or operations other than the
business or operations conducted on the date hereof or contemplated by the
Business Plan; provided, however, that the Company or Holdings may engage in
business or operations which are complementary to the business and operations of
the Company with the consent of the Required Investors which shall not be
unreasonably withheld or delayed. The Obligors shall not conduct any business or
operations that would cause an investment in any of them to become ineligible as
a "portfolio investment" for the Investors under Regulation K promulgated by the
Federal Reserve Board, or any other applicable law, or which would require the
Investors to divest the Notes, Warrants or Warrant Shares under such Regulation
K or any other applicable law.
1. Transactions With Affiliates.
The Obligors shall not enter into any transaction (including, without
limitation, the purchase, sale, lease or exchange of any property or the
rendering of any service) with any Affiliate, without the prior written consent
of the Required Investors. Any such transaction submitted for consent by the
Investors shall include a fairness opinion from an investment bank selected by
the Investors if requested by the Investors.
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1. Merger or Consolidation.
The Obligors shall not (a) merge with or into or consolidate or combine with any
other Person or (b) sell, lease or otherwise transfer any of their assets other
than a sale of inventory in the ordinary course of business.
1. Issuance of Capital Stock or Other Equity Interests.
The Obligors shall not issue any capital stock or other equity interest
exercisable into their capital stock (other than options to purchase up to
2,900,000 shares of Common Stock of Holdings issued to management or employees
and Arnold D. Dauer) without the prior written consent of the Required
Investors, which consent shall not be withheld if in the Required Investors'
judgment reasonably exercised, such issuance is not dilutive to the Investors'
interest (including the Notes and the Warrants) in Holdings and, indirectly, in
the Company.
1. Formation of Affiliates.
Except as provided in Section 7.26, the Obligors shall not form or establish any
Affiliates or Subsidiaries and the Company's Subsidiaries (other than University
Connections, Inc.) shall
remain inactive.
1. Management Compensation.
The Obligors shall not (a) pay management compensation or bonuses in excess of
the amount shown on Schedule 8.10 and (b) for a period of three (3) years after
the Closing Date, hire any relative of any director or officer of an Obligor or
Cacomm or Arnold D. Dauer as a consultant, employee or otherwise.
1. Charter, Bylaw and Transaction Document Amendments.
The Obligors shall not amend, modify or supplement their respective certificates
of incorporation or bylaws in any manner that the Required Investors deem will
adversely affect the rights of the Investors under this Agreement or any other
Transaction Document or their ability to enforce the same or amend, modify or
supplement the Transaction Documents without the consent of the Required
Investors.
1. Programming.
The Obligors shall not, directly or indirectly, engage in the development or
production of cable related or other similar programming.
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1. Financial Covenants.
1. [Intentionally Omitted.]
2. Minimum EBITDA. On each date set forth below, the EBITDA for the period of
six consecutive calendar months ending on such date (or in the case of December
31, 1995, such lesser period as shall have elapsed since the date hereof) shall
not be less than the amount set forth below opposite such date:
Date Amount
---- ------
12/31/95 ($97,402)
3/31/96 ($129,911)
6/30/96 ($156,358)
9/30/96 ($78,520)
12/31/96 $217,072
3/31/97 $329,503
6/30/97 $152,014
9/30/97 $34,150
12/31/97 $691,003
3/31/98 $1,168,858
6/30/98 $851,843
9/30/98 $639,026
12/31/98 $1,640,074
3/31/99 $2,663,810
6/30/99 $2,141,974
9/30/99 $1,429,608
12/31/99 $2,765,052
3/31/2000 $3,477,418
6/30/2000 $2,141,974
9/30/2000 $1,429,608
12/31/2000 $2,765,052
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1. Net Worth. On each date set forth below, the Adjusted Net
Worth shall not be less than the amount set forth below opposite
such date
Date Amount
---- ------
12/31/95 ($261,693)
3/31/96 ($421,959)
6/30/96 ($682,434)
9/30/96 ($959,279)
12/31/96 ($984,070)
3/31/97 ($1,022,854)
6/30/97 ($1,225,142)
9/30/97 ($1,412,614)
12/31/97 ($1,046,276)
3/31/98 ($677,358)
6/30/98 ($620,094)
9/30/98 ($635,292)
12/31/98 $341,122
3/31/99 $1,347,065
6/30/99 $1,849,646
9/30/99 $2,117,933
12/31/99 $2,526,102
3/31/2000 $3,311,292
6/20/2000 $3,782,462
9/30/2000 $4,033,981
12/31/2000 $4,416,639
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1. Debt Service Coverage. On each date set forth below, the ratio of EBITDA to
Fixed Obligations for such period ending on such date (or in the case of
December 31, 1995, such lesser period as shall have elapsed since the date
hereof) shall not be less than the ratio set forth below opposite such date:
Date Ratio
----- -----
12/31/95 -0.74
3/31/96 -0.56
6/30/96 -0.73
9/30/96 -0.32
12/31/96 0.77
3/31/97 1.12
6/30/97 0.52
9/30/97 -0.8
12/31/97 1.50
3/31/98 2.00
6/30/98 2.00
9/30/98 2.00
12/31/98 2.00
3/31/99 2.00
6/30/99 2.00
9/30/99 2.00
12/31/99 2.00
3/31/2000 2.00
6/30/2000 2.00
9/30/2000 2.00
12/31/2000 2.00
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1. Events of Default
1. Events.
In case of the happening of any of the following events (each, an "Event of
Default"):
1. the Obligors shall fail to make any payment on principal of the Notes
when and as the same shall become due and payable including at the due date
thereof, by acceleration or otherwise; or
2. the Obligors shall fail to pay any premium, interest or other Obligation due
hereunder when and as the same shall become due and payable, whether at the due
date thereof, by acceleration or otherwise; or
3. default shall be made in the due observance or performance by
the Obligors of any covenant or agreement contained in Articles
VI, VII or VIII of this Agreement; or
4. a material breach by Holdings of its obligations under the Warrants shall
have occurred; or
5. default shall be made in the due observance or performance by any Obligor of
any other covenant or agreement to be observed or performed under this Agreement
or any other Transaction Document, and such default shall continue unremedied
for thirty (30) days after written notice thereof to such Obligor by the
Required Investors; or
6. any representation or warranty made by any Obligor contained in this
Agreement or in any other Transaction Document or in any certificate, financial
statement or other instrument furnished by or on behalf of an Obligor pursuant
to this Agreement shall prove to have been false or misleading in any material
respect when made or furnished; or
7. any Obligor shall (i) voluntarily commence any proceeding or file any
petition or proposal or any notice of its intent to commence or file any such
proceeding, petition or proposal seeking relief under the U.S. Bankruptcy Code
or any other federal, state bankruptcy, insolvency or similar law, (ii) consent
to the institution of, or fail to controvert in a timely and appropriate manner,
any such proceeding or the filing of any such petition or proposal, (iii) apply
for or consent to the appointment of a receiver, trustee, custodian,
sequestrator or similar official for any such Person or for any substantial part
of its property or assets, (iv) file an answer admitting the material
allegations of a petition filed against it in any such proceeding, (v) make a
general assignment for the benefit of creditors, (vi) fail generally to pay its
debts as they become due or (vii) take any corporate or stockholder action in
furtherance of any of the foregoing; or
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8. an involuntary proceeding shall be commenced or an involuntary petition shall
be filed in a court of competent jurisdiction seeking (i) relief in respect of
any Obligor or of any substantial part of the property or assets thereof, under
Title 11 of the United States Code or any other federal, state bankruptcy,
insolvency or similar law, (ii) the appointment of a receiver, trustee,
custodian, sequestrator or similar official for any Obligor or for any
substantial part of its property or (iii) the winding-up or liquidation of any
Obligor, and such proceeding, petition or order shall continue unstayed and in
effect for a period of 60 consecutive days; or
9. a final judgment for the payment of money in an amount in excess of $50,000
shall be rendered by a court or other tribunal against an Obligor and shall
remain undischarged for a period of 60 consecutive days during which such
judgment and any levy or execution thereof shall not have been effectively
stayed or vacated; or
10. any event shall occur or condition shall exist or fail to occur or exist if
the effect of such occurrence, existence or failure is to accelerate the
maturity of any Indebtedness of an Obligor in a principal amount in excess of
$50,000 or to permit the holder thereof (or a trustee on behalf of such holder)
to cause such Indebtedness to become due prior to the stated maturity thereof
and such occurrence, existence or failure shall not have been remedied within
any applicable period of grace before such holder (or such trustee) is able to
accelerate such Indebtedness, or any such Indebtedness shall not be paid when
due, whether at maturity, by acceleration or otherwise, or the holder of any
Lien upon property of an Obligor shall commence foreclosure of such Lien; or
11. any Transaction Document shall cease to be in full force and effect and
enforceable against an Obligor in accordance with its terms or any Security
Interest purported to be created by the Collateral Assignment shall cease to be
a valid and perfected first priority Security Interest, as applicable, subject
to any Permitted Liens, or any Obligor or University Connection, Inc. shall
assert the invalidity of any such Security Interest; or
12. there shall have occurred with respect to an Obligor a Change in Control; or
13. there shall have occurred any event which would constitute a Material
Adverse Effect; or
14. Nicholas Mastrorilli, Sr. shall have become unable to perform his duties for
90 consecutive days or 90 days in any six month period as an officer, director
or employee of the Obligors in the reasonable discretion of the Required
Investors or shall have or died;
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15. any Obligor or ERISA Affiliate shall fail to pay when due an amount or
amounts aggregating in excess of $25,000 which it shall have become liable to
pay under Title IV of ERISA; or notice of intent to terminate a Plan shall be
filed under Title IV of ERISA by any ERISA Affiliate, any plan administrator or
any combination of the foregoing; or the PBGC shall institute proceedings under
Title IV of ERISA to terminate, to impose liability (other than for premiums
under Section 4007 of ERISA) in respect of, or to cause a trustee to be
appointed to administer any Plan; or a condition shall exist by reason of which
the PBGC would be entitled to obtain a decree adjudicating that any Plan must be
terminated; or there shall occur a complete or partial withdrawal from or a
default, within the meaning of Section 4219(c)(5) of ERISA, with respect to, one
or more Multiemployer Plans which could cause one or more ERISA Affiliates to
incur a payment obligation in excess of $25,000;
then, and in any such event (other than an event described in paragraph (g) or
(h) above in which case each Investor's Commitment shall automatically terminate
and all Obligations shall automatically become due and payable), and at any time
thereafter during the continuance of such event, the Required Investors may, by
notice to the Obligors, take any of the following actions at the same or
different times: (i) terminate forthwith the Commitment hereunder to purchase
the Notes and (ii) declare the Notes (if outstanding) to be forthwith due and
payable, whereupon the entire unpaid principal of the Notes, together with
accrued interest thereon, the then applicable redemption premium, if any, and
all other Obligations, shall become forthwith due and payable, without
presentment, demand, protest or any other notice of any kind, all of which are
hereby expressly waived by the Obligors, anything contained herein or in any
Notes or other Transaction Document to the contrary notwithstanding, and (iii)
exercise any and all other remedies provided under any other Transaction
Document upon the occurrence and continuance of an Event of Default.
1.
Transfer of Securities
1. Restriction on Transfer.
The Restricted Securities and any shares of capital stock received in respect
thereof, whether by reason of a stock split or share reclassification thereof, a
stock dividend thereon or otherwise, shall not be transferable except upon the
conditions specified in this Section 10, which conditions are intended to insure
compliance with the provisions of the Securities Act in respect of the transfer
thereof.
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1. Restrictive Legends.
Each certificate for the Restricted Securities and any shares of capital stock
received in respect thereof, whether by reason of a stock split or share
reclassification thereof, a stock dividend thereon or otherwise, and each
certificate for any such securities issued to subsequent transferees of any such
certificate shall (unless otherwise permitted by the provisions of Section 10.3
hereof) be stamped or otherwise imprinted with a legend in substantially the
following form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933. THESE
SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR
AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE STATE BLUE SKY LAWS.
ADDITIONALLY, THE TRANSFER OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS
SPECIFIED IN ARTICLE X OF THE SECURITIES PURCHASE AGREEMENT DATED AS OF AUGUST
25, 1995, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES THERETO, AND NO
TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS
HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS, THE
ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT
BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY REGISTERED IN THE
NAME OF THE HOLDER HEREOF. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE
SECRETARY OF THE ISSUER HEREOF."
1. Notice of Transfer.
The holder of any Restricted Securities, by acceptance thereof agrees, prior to
any Transfer of any Restricted Securities, to give written notice to the Company
or Holdings, as the case may be, of such holder's intention to effect such
Transfer and to comply in all other respects with the provisions of this Section
10.3. Each such notice shall describe the manner and circumstances of the
proposed Transfer and shall be accompanied by (a) the written opinion, addressed
to the Company or Holdings, as the case may be, of counsel for the holder of
Restricted Securities, as to whether in the opinion of such counsel (which
opinion and counsel shall be reasonably satisfactory to the Company or Holdings,
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as the case may be) such proposed transfer involves a transaction requiring
registration of such Restricted Securities under the Securities Act, and (b) in
the case of Restricted Shares, if in the opinion of such counsel such
registration is required, a written request addressed to the Company or
Holdings, as the case may be, by the holder of Restricted Securities, describing
in detail the proposed method of disposition and requesting the Company or
Holdings, as the case may be, to effect the registration of such Restricted
Shares pursuant to the terms and provisions of the Registration Rights
Agreement; provided, however, that (i) in the case of a holder of Restricted
Securities which is a partnership, no such opinion of counsel shall be necessary
for a Transfer by such holder of Restricted Securities to a partner of such
holder of Restricted Securities, or a retired partner of such holder who retires
after the date hereof, or the estate of any such partner or retired partner, if
in each case the transferee agrees in writing to be subject to the terms of this
Section 10 to the same extent as if such transferee were originally a signatory
to this Agreement, and (ii) no such opinion shall be required in connection with
a Transfer pursuant to Rule 144 (as amended from time to time) promulgated under
the Securities Act (or successor rule thereto), provided, that the Company or
Holdings, as the case may be, shall be provided with customary written
representations relating to such transaction. If in the opinion of such counsel
(if such opinion is required hereunder) the proposed Transfer of Restricted
Securities may be effected without registration under the Securities Act, the
holder of Restricted Securities shall thereupon be entitled to Transfer
Restricted Securities in accordance with the terms of the notice delivered by it
to the Company or Holdings, as the case may be. Each certificate or other
instrument evidencing the securities issued upon the transfer of any Restricted
Securities (and each certificate or other instrument evidencing any
untransferred balance of such securities) shall bear the legend set forth in
Section 10.2 hereof unless (a) in the opinion of such counsel registration of
future Transfer is not required by the applicable provisions of the Securities
Act or (b) the Company or Holdings, as the case may be, shall have waived the
requirement of such legends; provided, however, that such legend shall not be
required on any certificate or other instrument evidencing the securities issued
upon such Transfer in the event such Transfer shall be made in compliance with
the requirements of Rule 144 (as amended from time to time) promulgated under
the Securities Act (or successor rule thereto). The holder of Restricted
Securities shall not Transfer such Restricted Securities until such opinion of
counsel has been given (unless waived by the Company or Holdings, as the case
may be, or unless such opinion is not required in accordance with the provisions
of this Section 10.3) or until registration of the Restricted Shares involved in
the above-mentioned request has become effective under the Securities Act.
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1. Transfer Pursuant to Rule 144.
The Obligors agree to provide to the Holders and upon a Holder's request to any
prospective investors designated by the Holder the financial and other
information specified in Rule 144 under the Securities Act and to take any other
action or to execute any certificates necessary to permit a transfer by any
Holder to qualify for the exemption set forth in Rule 144.
1.
Collateral Agent
1. In order to expedite the various transactions contemplated by this
Agreement, IBJSCC is hereby appointed to act as Collateral Agent under the
Collateral Assignment. Each Investor hereby irrevocably authorizes and directs
the Collateral Agent to take such action on behalf of such Investor under the
terms and provisions of the Collateral Assignment and to exercise such powers as
are specifically delegated to or required of the Collateral Agent by the terms
and provisions thereof, together with such powers as are reasonably incidental
thereto. Nothing in this Agreement shall be construed as imposing any duty on
the Collateral Agent in its capacity as Collateral Agent.
2. The Collateral Agent is hereby expressly authorized on behalf of the
Investors, without hereby limiting any implied authority, (i) to receive and
hold on behalf of the Investors any instrument or certificate which constitutes
Collateral, (ii) to give notice within a reasonable time on behalf of each of
the Investors to the Obligors of any event of default specified in any
Collateral Agreement of which the Collateral Agent has actual knowledge
(provided that the Collateral Agent shall have no liability to any Person for
any failure or delay in giving such notice) and (iii) to take any and all action
on behalf of the Investors permitted under the terms of any Collateral Agreement
and the Obligors may, in the absence of knowledge to the contrary, rely on any
such action. In addition, the Collateral Agent may, without limiting the powers
delegated elsewhere in this Agreement or any other Transaction Document, execute
and deliver, for and on behalf of the Investors, such documents, instruments and
certificates as the Collateral Agent may deem necessary or advisable in
connection with establishing and maintaining the validity, perfection and first
priority of the Liens granted to the Collateral Agent, for the benefit of the
Investors, under the Transaction Documents, and in connection with realizing for
the benefit of the Investors the value of any Collateral, including such
documents, instruments and certificates binding the Investors. The Collateral
Agent may, in its discretion and without the consent of the Investors, appoint
sub-agents to act as the Collateral Agent in any jurisdiction or with respect to
any Collateral.
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3. Neither the Collateral Agent nor any of its respective directors, officers,
employees or agents shall be liable as such for any action taken or omitted by
any of them under the Collateral Assignment or under any other Transaction
Document except for its or his own gross negligence or willful misconduct, or be
responsible for any statement, warranty or representation herein or in the
contents of any document delivered in connection herewith or be required to
ascertain or to make any inquiry concerning the performance or observance by the
Obligors of any of the terms, conditions, covenants or agreements of this
Agreement or any other Transaction Document. The Collateral Agent shall not be
responsible to the Investors for the due execution, genuineness, validity,
enforceability or effectiveness of the Collateral Assignment. The Collateral
Agent shall in all cases be fully protected in acting, or refraining from
acting, in accordance with written instructions signed by the Required
Investors, and, except as otherwise specifically provided herein, such
instructions and any action taken or failure to act pursuant thereto shall be
binding on all the Investors. The Collateral Agent, in the absence of knowledge
to the contrary, shall be entitled to rely on any paper or document believed by
it in good faith to be genuine and correct and to have been signed or sent by
the proper Person or Persons.
4. Any modification or amendment to the Collateral Agreement shall require the
prior written approval of the Required Investors.
1.
Miscellaneous
1. Communication.
Subject to the express provisions of this Agreement, all communications provided
for or permitted hereunder shall be in writing, personally delivered to an
officer or other responsible employee of the addressee or sent by registered
mail, charges prepaid, or by telecopy with confirmed receipt (with hard copy to
follow), telegram or other means of recorded telecommunication, charges prepaid,
to the applicable address set forth below or to such other address as either
party hereto may from time to time designate to the other in such manner. Any
communication so personally delivered shall be deemed to have been validly and
effectively given on the date of such delivery. Any communication so sent by
registered mail shall be deemed to have been validly and effectively given on
the tenth Business Day next following the day on which it is sent. Any
communication so sent by telecopy, telegram or other means of recorded
telecommunication shall be deemed to have been validly and effectively given on
the Business Day next following the day on which it is sent.
Communications sent to the Obligors shall be addressed to:
MAGNAVISION CORPORATION
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Facsimile: (908) 974-1106
With a copy to:
ZIMET, HAINES, FRIEDMAN & KAPLAN
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Facsimile: (212) 223-1151
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Communications sent to the Investors shall be addressed as follows:
IBJS CAPITAL CORPORATION
One State Street
New York, New York 10004
Attention: Paul Echausse
Facsimile: (212) 952-1629
IBJ SCHRODER BANK & TRUST COMPANY
One State Street
New York, New York 10004
Attention: Paul Echausse
Facsimile: (212) 952-1629
KOCO CAPITAL COMPANY, L.P.
111 Radio Circle
Mt. Kisco, New York 10549
Attention: Albert Pastino
Facsimile: 914-241-7476
with a copy to:
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street
Denver, Colorado 80202
Attention: Steven Siegel,
Esq. Facsimile: (303) 623-1956
with a copy to:
O'SULLIVAN GRAEV & KARABELL, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum,
Esq. Facsimile: (212) 408-2420
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1. Survival of Representations, Warranties and Covenants.
All agreements, representations, warranties and covenants made by or on behalf
of the Company or Holdings in the Transaction Documents or otherwise with
respect thereto or any transactions contemplated thereby are material, shall be
considered to have been relied upon by the Investors and shall survive the
execution and delivery of the Transaction Documents or any investigation made at
any time by or on behalf of the Investors and any disposition or payment of the
Notes until repayment in full of all Indebtedness of the Company or Holdings to
the Investors (including the Notes and the other amounts due under this
Agreement). All statements contained in any certificate or other instrument
delivered by or on behalf of the Company or Holdings pursuant to the Transaction
Documents or in connection with the transactions contemplated hereby shall be
deemed representations and warranties made by the Company or Holdings pursuant
hereto. The obligations of the Obligors pursuant to Sections 12.4, 12.5 and
12.15 shall survive the payment in full and the cancellation of the Notes and
the termination of this Agreement.
1. Successors and Assigns.
This Agreement shall enure to the benefit of and be binding on the parties
hereto, their respective successors and any assignees or transferees of some or
all of the parties' rights or obligations hereunder; provided, that neither this
Agreement, nor the benefit hereof, may be assigned by the Obligors without the
prior written consent of the Investors. Any assignment by the Obligors without
such consent shall be null and void.
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1. Indemnification.
1. In addition to all rights and remedies available to the Investors at law or
in equity, the Obligors shall indemnify the Investors, each subsequent holder of
the Notes and the Warrants and their respective affiliates, stockholders,
officers, directors, employees, agents, representatives, counsel, successors and
permitted assigns (collectively, the "Indemnified Persons") and save and hold
each of them harmless against and pay on behalf of or reimburse such party as
and when incurred for any loss (including, without limitation, diminutions in
value and consequential damages which shall not extend to any lost opportunities
which any Indemnified Person might have experienced), liability, demand, claim,
action, cause of action, cost, damage, deficiency, tax (including any taxes
imposed with respect to such indemnity payments), penalty, fine or expense,
whether or not arising out of any claims by or on behalf of the Company or
Holdings including interest, penalties, reasonable attorneys' fees and expenses
and all amounts paid in investigation, defense or settlement of any of the
foregoing (collectively, "Losses") which any such party may suffer, sustain or
become subject to, as a result of, in connection with, relating or incidental to
or by virtue of:
1. any misrepresentation or breach of warranty on the part of any Obligor under
Article IV of this Agreement;
2. without duplication of subsection (a)(i) above, any misrepresentation in or
omission from any of the representations, warranties, statements, schedules and
exhibits hereto, certificates or other instruments or documents furnished to
Investors by an Obligor made in or pursuant to this Agreement;
3. any nonfulfillment or breach of any covenant or agreement on the part of an
Obligor under his Agreement;
4. any action, demand, proceeding, investigation or claim by any third party
(including, without limitation, governmental authorities) against or affecting
any Indemnified Person which, if successful, would give rise to or evidence the
existence of or relate to a breach of any of the representations, warranties or
covenants of an Obligor;
5. any claim (whenever made) relating in any way to the Company or Holdings and
any claim (whenever made) arising out of, relating to, resulting from or caused
by any transaction, status, event, condition, occurrence or situation relating
to, arising out of or in connection with (A) the status or conduct of the
Company or Holdings, (B) the execution, performance and delivery of the
Transaction Documents and the documents and agreements contemplated thereby or
(C) any actions taken by or omitted to be taken by any of the Indemnified
Persons in connection with this Agreement or any of the Transaction Document or
the documents and agreements contemplated hereby and thereby; and
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6. any action, demand, proceeding or investigation taken by the Collateral Agent
to preserve or enforce its Security Interest in the Collateral or by the
Investors with respect to the amendment or modification of this Agreement or any
other Transaction Document.
1. Notwithstanding the foregoing, and subject to the following sentence, upon
judicial determination, which is final and no longer appealable, that the act or
omission giving rise to the indemnification hereinabove provided resulted
primarily out of or was based primarily upon the Indemnified Person's gross
negligence, fraud or willful misconduct (unless such action was based upon the
Indemnified Person's reliance in good faith upon any of the representations,
warranties, covenants or promises made by the Obligors herein, or in any other
Transaction Documents) by the Indemnified Person, the Obligors shall not be
responsible for any Losses sought to be indemnified in connection therewith by
such Indemnified Person, and the Obligors shall be entitled to recover from the
Indemnified Person all amounts previously paid in full or partial satisfaction
of such indemnity with all costs and expenses reasonably incurred in effecting
such recovery, if any.
2. All indemnification rights hereunder shall survive the execution and delivery
of this Agreement and the consummation of the transactions contemplated hereby
for a period of two (2) years after receipt of the final payment (i) of
principal and interest due under the Notes and (ii) all Obligations under the
Transaction Documents, regardless of any investigation, inquiry or examination
made for or on behalf of, or any knowledge of the Investors and/or any of the
Indemnified Persons or the acceptance by the Investors of any certificate or
opinion. In addition, for purposes of determining whether there has been a
breach, and the amount of any Losses that are the subject matter of a claim for
indemnification hereunder, each representation and warranty contained in this
Agreement shall be read without regard and without giving effect to any
materiality or knowledge standard or qualification contained in such
representation or warranty.
3. If for any reason the indemnity provided for in this Section 12.4 is
unavailable to any Indemnified Person or is insufficient to hold each such
Indemnified Person harmless from all such Losses arising with respect to the
transactions contemplated by this Agreement, then the Company and/or Holdings
shall contribute to the amount paid or payable in respect of such Loss in such
proportion as is appropriate to reflect not only the relative benefits received
by the Company and/or Holdings on the one hand and such Indemnified Person on
the other but also the relative fault of the Company and/or Holdings and the
Indemnified Person as well as any relevant equitable considerations. In
addition, the Obligors agree to reimburse any Indemnified Person upon demand for
all reasonable expenses (including legal counsel fees) incurred by such
Indemnified Person or any such other Person in connection with investigating,
preparing or defending any such action or claim. The indemnity, contribution and
expenses reimbursement obligations that the Company has under this Section 12.4
shall be in addition to any liability that the Company may otherwise have. The
Obligors further agree that the indemnification and reimbursement commitments
set forth in this Agreement shall apply whether or not the Indemnified Person is
a formal party to any such lawsuits, claims or other proceedings.
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4. Any indemnification of the Investors or any other Indemnified Person by the
Obligors pursuant to this Section 12.4 shall be effected by wire transfer of
immediately available funds from the Obligors to an account designated by the
Investors or any other Indemnified Person within 15 days after the determination
thereof.
1. GOVERNING LAW; CHOICE OF FORUM.
1. ALL QUESTIONS CONCERNING THE CONSTRUCTION, INTERPRETATION AND VALIDITY OF
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE
DOMESTIC LAWS OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO ANY CHOICE OR
CONFLICT OF LAW PROVISION OR RULE (WHETHER IN THE STATE OF NEW YORK OR ANY OTHER
JURISDICTION) THAT WOULD CAUSE THE APPLICATION OF THE LAWS OF ANY JURISDICTION
OTHER THAN THE STATE OF NEW YORK.
2. THE PARTIES TO THIS AGREEMENT AGREE THAT JURISDICTION AND VENUE IN ANY ACTION
BROUGHT BY ANY PARTY HERETO PURSUANT TO THIS AGREEMENT SHALL EXCLUSIVELY LIE IN
ANY FEDERAL OR STATE COURT LOCATED IN THE STATE OF NEW YORK. BY EXECUTION AND
DELIVERY OF THIS AGREEMENT, THE PARTIES HERETO IRREVOCABLY SUBMIT TO THE
EXCLUSIVE JURISDICTION OF SUCH COURTS FOR THEMSELVES AND IN RESPECT OF THEIR
PROPERTY WITH RESPECT TO SUCH ACTION. THE PARTIES HERETO IRREVOCABLY AGREE THAT
VENUE WOULD BE PROPER IN SUCH COURT, AND HEREBY WAIVE ANY OBJECTION THAT SUCH
COURT IS AN IMPROPER OR INCONVENIENT FORUM FOR THE RESOLUTION OF SUCH ACTION.
3. EACH OBLIGOR HEREBY DESIGNATES AND APPOINTS PRENTICE-HALL CORPORATION SYSTEM,
INC. AND SUCH OTHER PERSONS AS MAY HEREAFTER BE SELECTED BY AN OBLIGOR WITH THE
WRITTEN CONSENT OF THE INVESTOR WHICH IRREVOCABLY AGREE IN WRITING TO SO SERVE
AS ITS AGENT TO RECEIVE ON ITS BEHALF SERVICE OF ALL PROCESS IN ANY SUCH
PROCEEDINGS IN ANY SUCH COURT, SUCH SERVICE BEING HEREBY ACKNOWLEDGED BY THE
OBLIGOR TO BE EFFECTIVE AND BINDING SERVICE IN EVERY RESPECT. A COPY OF ANY SUCH
PROCESS SO SERVED SHALL BE MAILED BY REGISTERED MAIL TO AN OBLIGOR AT ITS
ADDRESS PROVIDED IN SECTION 12.1 EXCEPT THAT UNLESS OTHERWISE PROVIDED BY
APPLICABLE LAW, ANY FAILURE TO MAIL SUCH COPY SHALL NOT AFFECT THE VALIDITY OF
SERVICE OF PROCESS. IF ANY AGENT APPOINTED BY THE OBLIGORS REFUSES TO ACCEPT
SERVICE, EACH OBLIGOR HEREBY AGREES THAT SERVICE UPON IT BY MAIL SHALL
CONSTITUTE SUFFICIENT NOTICE. NOTHING HEREIN SHALL AFFECT THE RIGHT TO SERVE
PROCESS IN ANY OTHER MANNER PERMITTED BY LAW OR SHALL LIMIT THE RIGHT OF AN
INVESTOR TO BRING PROCEEDINGS AGAINST AN OBLIGOR IN THE COURTS OF ANY OTHER
JURISDICTION.
4. DISPUTES ARISING IN CONNECTION WITH COMPLEX FINANCIAL TRANSACTIONS ARE MOST
QUICKLY AND ECONOMICALLY RESOLVED BY AN EXPERIENCED AND EXPERT PERSON.
THEREFORE, THE PARTIES HERETO WAIVE ALL RIGHT TO TRIAL BY JURY IN ANY ACTION,
SUIT OR PROCEEDING BROUGHT TO ENFORCE OR DEFEND ANY RIGHTS OR REMEDIES UNDER
THIS AGREEMENT OR ANY OTHER TRANSACTION DOCUMENTS RELATED HERETO.
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1. Rights and Waivers.
1. The rights and remedies of the Investors under the Transaction Documents and
in connection therewith: (i) are cumulative, (ii) may be exercised as often and
in such order as the Investors considers appropriate, (iii) are in addition to
the rights and remedies of the Investors under the general law, and (iv) shall
not be capable of being waived or varied except by virtue of an express waiver
or variation in writing signed by an officer of the Investors; and in particular
any failure to exercise or any delay in exercising any of such rights and
remedies shall, to the extent permitted by law, not operate as a waiver or
variation of that or any other such right or remedy; any defective or partial
exercise of any of such rights shall, to the extent permitted by law, not
preclude any other or future exercise of that or any other such right or remedy;
and no act or course of conduct or negotiation on the part of the Investors or
on its behalf shall, to the extent permitted by law, in any way preclude the
Investors from exercising any such right or remedy or constitute a suspension or
variation of any such right or remedy.
2. No Transaction Document nor any provision thereof, may be waived, amended or
modified except pursuant to an agreement or agreements in writing entered into
by the Obligors and the Required Investors, except that no amendment, waiver or
modification may be made to Article II, Sections 3.4, 3.5, 12.4, 12.5 or this
Section 12.6 without the consent of each Investor.
3. Where ever in any of the Transaction Documents (i) an action may be taken by
"the Investors" such action may be taken by any Investor or (ii) the Obligors
are required to provide information to or otherwise assist "the Investors", such
information shall be provided to or assistance given to each of the Investors.
1. Independence of Covenants.
All covenants hereunder shall be given in any jurisdiction independent effect so
that if a particular action or condition is not permitted by any of such
covenants, the fact that it would be permitted by an exception to, or be
otherwise within the limitations of, another covenant shall not avoid the
occurrence of an Event of Default if such action is taken or condition exists.
1. No Fiduciary Relationship.
No provision in this Agreement or in any of the other Transaction Documents and
no course of dealing between the parties shall be deemed to create any fiduciary
duty by the Investors to the Company or Holdings.
1. No Duty.
All attorneys, accountants, appraisers, and other professional Persons and
consultants retained by the Investors shall have the right to act exclusively in
the interest of the Investors and shall have no duty of disclosure, duty of
loyalty, duty of care, or other duty or obligation of any type or nature
whatsoever to the Obligors or any of their shareholders or any other Person.
1. Construction.
The Obligors and the Investors acknowledge that each of them has had the benefit
of legal counsel of its own choice and has been afforded an opportunity to
review this Agreement and the other Transaction Documents with its legal counsel
and that this Agreement and the other Transaction Documents shall be construed
as if jointly drafted by the Investors and the Obligors.
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1. Severability.
Whenever possible, each provision of this Agreement will be interpreted in such
manner as to be effective and valid under applicable law, but if any provision
of this Agreement is held to be invalid, illegal or unenforceable in any respect
under any applicable law or rule in any jurisdiction, such invalidity,
illegality or unenforceability will not affect any other provision or any other
jurisdiction, and such invalid, void or otherwise unenforceable provisions shall
be null and void. It is the intent of the parties, however, that any invalid,
void or otherwise unenforceable provisions be automatically replaced by other
provisions which are as similar as possible in terms to such invalid, void or
otherwise unenforceable provisions but are valid and enforceable to the fullest
extent permitted by law.
1. Counterparts.
This Agreement may be executed in two or more counterparts, each of which when
executed and delivered shall deemed to be an original, but all of which when
taken together shall constitute but one and the same instrument; either party
may execute this Agreement by signing any counterpart of it.
1. Headings.
Article and Section headings and the Table of Contents used herein are for
convenience of reference only and are not to affect the construction of, or to
be taken into consideration in interpreting, this Agreement.
1. Entire Agreement.
This Agreement, together with the other Transaction Documents, constitutes the
entire agreement between the parties relating to the subject matter hereof and,
except as stated herein or in the instruments and documents to be executed and
delivered pursuant hereto, contains all the representations and warranties of
the respective parties relating to the subject matter hereof.
1. Environmental Indemnity.
The Obligors shall at all times indemnify and hold harmless the Investors
against and from any and all Losses of any nature whatsoever suffered or
incurred by any Indemnified Person whether upon realization of any security for
the Obligations, or as a lender to the Obligors, or as successor to or assignee
of any right or interest of an Obligor, or as a result of any order,
investigation or action by any governmental authority relating to an Obligor or
its business or assets, or as mortgagee in possession, or
as successor-in-interest to an Obligor by foreclosure deed or deed in lieu of
foreclosure, under or on account of any Environmental Law, including the
assertion of any lien thereunder, with respect to:
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1. the Release or threat of Release of a Contaminant, or the
presence of any Contaminant at, on or near any property owned, leased
or controlled by an Obligor;
2. the Release of a Contaminant owned by, or under the charge, management or
control of an Obligor or any predecessor or assignor of an Obligor, at a place
other than property owned, leased or controlled by an Obligor;
3. any costs of removal or remedial action incurred by any governmental
authority or any costs incurred by any other Person or damages from injury to,
destruction, or loss of natural resources in relation to any property owned,
leased or controlled by an Obligor or any contiguous real property or elsewhere,
including reasonable costs of assessing such injury, destruction or loss
incurred pursuant to any Environmental Laws;
4. liability for personal injury or property damage arising under any statutory
or common law tort theory, including, without limitation, damages assessed for
the maintenance of a public or private nuisance or for the carrying on of a
dangerous activity at, on or near any property owned, leased or controlled by an
Obligor or elsewhere; and/or
5. any other environmental matter within the jurisdiction of any governmental
authority.
The obligation of the Obligors under this Section 12.15 shall arise upon the
discovery of the presence of any Contaminant, whether or not any governmental
authority has taken or threatened any action in connection with the presence of
any Contaminant.
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IN WITNESS WHEREOF, the parties hereto have caused this Securities Purchase
Agreement to be duly executed by their authorized officers, all as of the day
and year first above written.
MAGNAVISION CORPORATION,
as Holdings
By:________________________________
Name:
Title:
MAGNAVISION CORPORATION,
as the Company
By:________________________________
Name:
Title:
IBJS CAPITAL CORPORATION
By:________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By:________________________________
Name:
Title:
KOCO CAPITAL COMPANY, L.P.
By: Kisco Capital Corporation,
its General Partner
By:________________________________
Name: Albert Pastino
Title: President
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Schedule 1
New Contract
New Contract $ Advance
------------ ------------
Cable Service Agreement, dated March 47,650.90
23, 1995, between the Company and
Curry College
Agreement dated March 8, 1995, 38,864.13
between the Company and The Mount Olive
College
Agreement dated April 28, 1995, 50,700.00
between Kean College and the Company
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Exhibit 10(e)
NOTE
THIS NOTE HAS BEEN ACQUIRED FOR INVESTMENT AND HAS NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE
OF SUCH REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR APPLICABLE
STATE BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF THIS NOTE IS SUBJECT TO
CONDITIONS SPECIFIED IN ARTICLE X OF THE SECURITIES PURCHASE AGREEMENT DATED AS
OF AUGUST 25, 1995, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THE NOTES SHALL BE VALID OR EFFECTIVE UNTIL SUCH
CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, THE ISSUER HEREOF HAS AGREED TO DELIVER TO THE HOLDER HEREOF A NEW
NOTE NOT BEARING THIS LEGEND. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO
COST BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS NOTE TO THE
SECRETARY OF THE ISSUER HEREOF.
MAGNAVISION CORPORATION
Senior Subordinated Note
Due February 26, 2001
No.3 August 25, 1995
$2,000,000
MAGNAVISION CORPORATION, a New Jersey corporation (the "Company") and
MAGNAVISION CORPORATION, a Delaware corporation and parent of the Company
("Holdings" and together with the Company collectively, the "Obligors"), for
value received, hereby promise to pay to IBJ Schroder Bank and Trust Company
(such payee and each subsequent holder from time to time of this Note being
hereinafter called the "Holder"), or order, the principal amount of TWO MILLION
UNITED STATES DOLLARS ($2,000,000), or the lesser amount thereof as may be
outstanding from time to time hereunder, together with all interest accrued
thereon from August 26, 1995 until February 26, 2001 (the "Maturity Date").
Interest shall accrue on the unpaid principal balance of this Note from time to
time outstanding until paid in full (computed on the basis of a 360-day year of
twelve 30-day months) from August 26, 1995 at the rate per annum of 12%, as set
forth in the Securities Purchase Agreement, dated as of August 26, 1995 (the
"Securities Purchase Agreement"), by and among the Company and Holdings and IBJS
Capital Corporation, IBJ Schroder Bank & Trust Company and KOCO Capital Company,
L.P. Interest shall be payable to the Holder quarterly in arrears on each March
31, June 30, September 30 and December 31 commencing September 30, 1995.
Unless defined herein, all capitalized terms used in this Note which are defined
in the Securities Purchase Agreement shall have the meanings assigned to them in
the Securities Purchase Agreement.
Payments of principal, of premium, if any, and interest on this Note shall be
made in immediately available funds by 1:00 p.m., New York City time, on the due
date thereof at _________ _______________ Bank, _____________________________,
New York, New York _____ for the account of ________________ account number
_____________, ABA number ____________, or to such other place in the United
States of America as the Holder hereof shall designate in writing to the
Obligors in lawful money of the United States.
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This Note is one of the duly authorized Senior Subordinated Notes issued by the
Obligors on the date hereof in an aggregate original principal amount of up to
$5,000,000 pursuant to and subject to the provisions of the Securities Purchase
Agreement, and is entitled to the benefit of the Securities Purchase Agreement.
Neither this reference to the Securities Purchase Agreement nor any provision
thereof shall affect or impair the obligations of the Obligors to pay the
principal of and interest on this Note as provided herein, which obligations are
absolute, unconditional and not subject to defense, set-off or counterclaim.
This Note is subject to redemption at the option of the Obligors upon the terms
and conditions and in the manner set forth in the Securities Purchase Agreement.
Should the indebtedness represented by this Note or any part thereof be
collected in any proceeding provided for in the Securities Purchase Agreement or
be placed in the hands of attorneys for collection, the Obligors agree to pay to
the Holder, in addition to the principal, premium, if any, and interest due and
payable hereon, any and all costs of collecting this Note, including reasonable
attorneys' fees and expenses.
In case an Event of Default shall occur and be continuing, this Note may be
declared by the Holder due and immediately payable upon demand in the amount, in
the manner and with the effect provided in the Securities Purchase Agreement.
The Obligors hereby waive diligence, presentment, demand, protest and notice of
any kind whatsoever, except any notice expressly required by the Securities
Purchase Agreement. The failure of the Holder to exercise any of its rights
under this Note in any particular instance shall not constitute a waiver thereof
in that or any subsequent instance.
All borrowings evidenced by this Note pursuant to Section 2.2 of the Securities
Purchase Agreement and all payments of the principal hereof and premium and
interest hereon and the respective dates and maturity dates thereof and interest
rates therefor shall be noted on the grid attached hereto, and each such
notation shall be conclusive absent manifest error; provided, however, that the
failure of the Holder to make such a notation or any error therein shall not
affect the obligations of the Obligors to repay, in accordance with the terms of
this Note and the Securities Purchase Agreement, the principal amount of this
Note.
The obligations of the Obligors to the Holder under this Note are secured by
first priority Security Interests in all of the Collateral as granted by the
Company and University Connection, Inc. to the Collateral Agent for the benefit
of the Holder pursuant to the Collateral Assignments, dated as of the date
hereof. Such Security Interests in the Collateral are subject to subordination
in part to the liens securing the indebtedness of the Company to a senior lender
to the extent provided in the Securities Purchase Agreement.
This Note shall be construed in accordance with and governed by the laws of the
State of New York without regard to the laws and principles thereof which would
direct the application of the laws of another jurisdiction.
3
<PAGE>
THE OBLIGORS WAIVE TRIAL BY JURY IN ANY LITIGATION IN ANY COURT WITH RESPECT TO,
IN CONNECTION WITH, OR ARISING OUT OF THIS NOTE, THE SECURITIES PURCHASE
AGREEMENT OR THE VALIDITY, PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT
HEREOF OR THEREOF.
NEITHER THE HOLDER, NOR ANY AGENT OR ATTORNEY OF THE HOLDER, SHALL BE LIABLE TO
THE OBLIGORS FOR CONSEQUENTIAL DAMAGES ARISING FROM ANY BREACH OF CONTRACT, TORT
OR OTHER WRONG RELATING TO THE ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF
THE OBLIGATIONS RELATING IN ANY WAY TO THIS NOTE OR THE SECURITIES PURCHASE
AGREEMENT.
This Note shall bind the successors and assigns of the Obligors and is executed
on the date first above written.
MAGNAVISION CORPORATION,
as the Company
By:
Its:
MAGNAVISION CORPORATION,
as Holdings
By:
Its:
4
\
<PAGE>
Loans and Payments
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Payments
------------------- Unpaid Notation
Principal on by
Amount Principal Balance
Date of Loan Interest of Note
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8/25/95 $735,000 $________ $________ $_________ PE
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5
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR INVESTMENT
AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES SECURITIES ACT OF 1933, AS
AMENDED, OR ANY STATE SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE
SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT OR LAWS. IN ADDITION, THE TRANSFER OF THESE SECURITIES
IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE SECURITIES PURCHASE AGREEMENT
DATED AUGUST 25, 1995, AMONG MAGNAVISION CORPORATION AND THE OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE UNTIL
SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH
CONDITIONS, MAGNAVISION CORPORATION HAS AGREED TO DELIVER TO THE HOLDER HEREOF A
NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY,
REGISTERED IN THE NAME OF THE HOLDER HEREOF OR ITS DESIGNEE. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY THE HOLDER
HEREOF TO THE SECRETARY OF MAGNAVISION CORPORATION.
MAGNAVISION CORPORATION
No. 1 Warrant to
Purchase 975,271 Shares
of Common Stock
As of August 25, 1995
Not Transferable or Exercisable
Except Upon Conditions Herein Specified
Void After August 26, 2003
This certifies that, for value received, IBJ Schroder Bank & Trust Company
or assigns, (the "Holder"), is entitled to purchase from MAGNAVISION
CORPORATION, a Delaware corporation (the "Holdings"), Nine Hundred Seventy-Five
Thousand Two Hundred Seventy-One (975,271) shares of Common Stock, $.004 par
value, of Holdings. This Warrant is one of a series of Warrants to purchase the
outstanding shares of Common Stock of Holdings (subject to adjustment from time
to time as hereinafter provided), at a per share price equal to the Warrant
Price (as defined in Section 3), as adjusted from time to time as provided in
Section 3, at any time or from time to time during the Exercise Period.
"Exercise Period" shall mean the period commencing with and including the date
hereof and ending at midnight on August 26, 2003. This Warrant to Purchase
975,271 Shares of Common Stock (the "Warrant") has been issued to the Holder
pursuant to the terms of the Securities Purchase Agreement, dated the date
hereof (the "Securities Purchase Agreement"), among Holdings, MagnaVision
Corporation, the Holder and the other signatories thereto.
SECTION 1. Exercise of Warrant.
The rights represented by this Warrant may be exercised by the Holder
hereof, in whole, or in blocks of at least 200,000 shares of Common Stock unless
fewer than 200,000 shares of Common Stock remain issuable upon the exercise of
this Warrant, in which event this Warrant may be exercised for such remaining
shares, at any time or from time to time during the Exercise Period, but not as
to a fractional share of Common Stock, by the surrender of this Warrant
(properly endorsed) at the office of Holdings, at 1725 Highway 35 South, Wall
Township, New Jersey 07719 (or at such other agency or office of Holdings in the
United States of America as it may designate by notice in writing to the Holder
hereof at the address of such Holder appearing on the books of Holdings), and by
payment to Holdings of the Warrant Price for each share being purchased by
delivery of (i) cash or a check, (ii) delivery of shares of Common Stock, valued
for such purposes, at the Market Price (as defined in Section 4) per share on
the date of exercise, (iii) delivery of Warrants to purchase Common Stock,
valued for such purposes, at the difference between the average Market Price per
share of Common Stock for the prior 10 trading days and the Warrant Price per
share and/or (iv) the cancellation of principal amount of Notes of Holdings
issued pursuant to the Securities Purchase Agreement in the amount of the
Warrant Price for each share being purchased, in each case in effect on the date
of exercise. In the event of any exercise of the rights represented by this
Warrant, a certificate or certificates for the shares of Common Stock so
purchased (the "Warrant Stock"), registered in the name of the person entitled
to receive the same, shall be delivered to the Holder hereof within a reasonable
time, not exceeding 15 days, after the rights represented by this Warrant shall
have been so exercised; and, unless this Warrant has expired, a new Warrant
representing the number of shares (including any fractional share), if any, with
respect to which this Warrant shall not then have been exercised shall also be
issued to the Holder hereof within such time. The person in whose name any
certificate for shares of Warrant Stock is issued upon exercise of this Warrant
shall for all purposes be deemed to have become the Holder of record of such
shares on the date on which this Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of the date of
delivery of such certificate, except that, if the date of such surrender and
payment is a date when the stock transfer books of Holdings are closed, such
person shall be deemed to have become the Holder of record of such shares at the
close of business on the next succeeding date on which the stock transfer books
are open. This Warrant may not be exercised for fractional shares of Common
Stock. In the event that upon the final exercise of this Warrant there is a
remaining fractional share hereunder, Holdings shall pay the Holder hereof an
amount equal to the comparable fraction of the current Market Price per share as
of the date of exercise.
SECTION 2. Covenants as to Common Stock.
Holdings covenants and agrees that all shares of Common Stock which may be
issued upon the exercise of the rights represented by this Warrant will, upon
issuance in accordance with the terms hereof, be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with respect to the
issuance thereof. Without limiting the generality of the foregoing, Holdings
covenants that it will from time to time take all such action as may be required
to assure that the stated or par value per share of the Common Stock is at all
times equal to or less than the then effective Warrant Price. Holdings further
covenants and agrees that Holdings will at all times have authorized and
reserved, free from any and all restrictions, including, without limitation,
preemptive rights, restrictions with respect to the voting, transfer or other
rights exercisable by a Holder, and encumbrances or liens, a sufficient number
of shares of its Common Stock to provide for the exercise of the rights
represented by this Warrant. Holdings also covenants and agrees that if any
shares of capital stock to be reserved for the purpose of the issuance of shares
upon the exercise of this Warrant require registration with or approval of any
governmental authority under any federal or state law (other than the Securities
Act of 1933, as amended) before such shares may be validly issued or delivered
upon exercise of this Warrant, then Holdings will in good faith and as
expeditiously as possible endeavor to secure such registration or approval, as
the case may be.
SECTION 3. Adjustment of Number of Shares and Warrant Price.
(a) The per share price at which the Holder shall be entitled to purchase
the shares of Common Stock upon the exercise of this Warrant shall initially be
equal to $.27 per share (as such price may from time to time be adjusted in
accordance with this Section 3, hereinafter called the "Warrant Price"). The
Warrant Price shall be subject to adjustment from time to time as follows:
(i) If Holdings shall at any time or from time to time after the date
hereof (the "Warrant Issuance Date"), issue any warrant or other securities
exercisable for or exchangeable or convertible into shares of Common Stock,
other than Excluded Stock (as hereinafter defined), without consideration
or for a consideration per share less than the Warrant Price in effect
immediately prior to the issuance of such security, the Warrant Price in
effect immediately prior to each such issuance shall forthwith (except as
provided in this clause (i)) be lowered, effective as of the date of such
issuance, to the price calculated by dividing (x) an amount equal to the
sum of (1) the number of shares of Common Stock Deemed Outstanding on a
fully diluted basis immediately prior to such issuance multiplied by the
then existing Warrant Price plus (2) the aggregate consideration, if any,
received by Holdings upon such issuance (calculated as set forth below), by
(y) the total number of shares of Common Stock Deemed Outstanding on a
fully diluted basis immediately after (and including) such issuance.
(ii) For the purposes of any adjustment of the Warrant Price pursuant
to clause (i), the following provisions shall be applicable:
(1) In the case of the issuance of securities for cash, the
consideration received shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts, commissions or other
expenses allowed, paid or incurred by Holdings for any underwriting or
otherwise in connection with the issuance thereof.
(2) In the case of the issuance of securities for a consideration
in whole or in part other than cash, the consideration received shall
be deemed to be the fair market value thereof as determined in good
faith by the Board of Directors of Holdings, irrespective of any
accounting treatment; provided, however, that such fair market value
as determined by the Board of Directors (plus any cash consideration
received in such issuance) shall not exceed the average Market Price
of the shares of Common Stock being issued calculated for the most
recent 30 consecutive day period for which such Market Price is
available.
(3) The aggregate maximum number of shares of Common Stock
deliverable upon exercise of options to purchase or rights to
subscribe for Common Stock shall be deemed to have been issued at the
time such options or rights were issued and for a consideration equal
to the consideration (determined in the manner provided in
subdivisions (1) and (2) above), if any, received by Holdings upon the
issuance of such options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock covered
thereby.
(4) On any change in the number of shares or exercise price of
Common Stock deliverable upon exercise of any such options or rights
or conversions of or exchange for such convertible or exchangeable
securities, other than a change resulting from the antidilution
provisions thereof, the Warrant Price shall forthwith be readjusted to
the Warrant Price which would have obtained had the adjustment made
upon the issuance of such options, rights or securities not converted
prior to such change been made upon the basis of such change.
(5) On the expiration of any such options or rights, the Warrant
Price shall forthwith be readjusted to the Warrant Price which would
have obtained had the adjustment made upon the issuance of such
options, rights, securities or options or rights related to such
securities been made upon the basis of the issuance of only the number
of shares of the Common Stock actually issued upon the exercise of
such options or rights.
(iii) "Excluded Stock" shall mean:
(A) securities issued pursuant to the acquisition of another
corporation by Holdings by merger, stock acquisition, reorganization,
purchase of substantially all of the assets or otherwise whereby
Holdings owns not less than a majority in voting power of such other
corporation after such transaction;
(B) all Common Stock and all warrants and options to purchase
Common Stock issued or granted prior to the Warrant Issuance Date and
all Common Stock issued upon exercise of such warrants and options;
and
(C) options to purchase up to 2,900,000 shares of Common Stock
issued pursuant to one or more stock option plans adopted by Holdings
for the benefit of its management and employees and all Common Stock
issued upon the exercise of such options;
(iv) If, at any time after the Warrant Issuance Date, the number of
shares of Common Stock outstanding is increased by a stock dividend payable
in shares of Common Stock or by a subdivision or split-up of shares of
Common Stock, then, following the record date fixed for the determination
of holders of Common Stock entitled to receive such stock dividend,
subdivision or split-up, effective as of such record date, the Warrant
Price shall be appropriately decreased so that the number of shares of
Common Stock issuable on exercise of this Warrant (after giving effect to
Section 3(a)(vii) below) shall be increased in proportion to such increase
in outstanding shares.
(v) If, at any time after the Warrant Issuance Date, the number of
shares of Common Stock outstanding is decreased by a combination of the
outstanding shares of Common Stock, then, following the record date for
such combination, effective as of such record date, the Warrant Price shall
be appropriately increased so that the number of shares of Common Stock
issuable on exercise of this Warrant (after giving effect to Section
3(a)(vii) below) shall be decreased in proportion to such decrease in
outstanding shares; provided, however, that if during the twelve (12) month
period subsequent to such combination the average Market Price of the
Common Stock for 120 or more consecutive trading days (the "Mean Price") is
at least twenty (20) percent less than $.56 per share (or its appropriate
equivalent), the Warrant Price (after giving effect to Section 3(a)(viii)
below) shall be appropriately decreased to an amount equal to the then
Warrant Price multiplied by a fraction, the numerator of which is the Mean
Price and the denominator of which is $.56 (or its appropriate equivalent).
(vi) In case, at any time after the Warrant Issuance Date, of any
capital reorganization or any reclassification of the capital stock of
Holdings (other than a change in par value or from par value to no par
value or from no par value to par value or as a result of a stock dividend
or subdivision, split-up or combination of shares), Holdings shall cause
effective provision to be made so that this Warrant shall after such
reorganization or reclassification be exercisable for the kind and number
of shares of stock or other securities or property of Holdings to which
such properties and assets shall have been sold or otherwise disposed to
which the Holder of the number of shares of Common Stock deliverable
(immediately prior to the time of such reorganization or reclassification)
upon exercise of this Warrant would have been entitled upon such
reorganization or reclassification and any such provision shall include
provisions for adjustments in respect of such stock, securities or other
property that shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Warrant. The provisions of this Section
3(a)(vi) shall similarly apply to successive reorganizations or
reclassifications.
(vii) In case, at any time after the Warrant Issuance Date, of any
capital reorganization, or any reclassification of the stock of Holdings
(other than a change in par value or from par value to no par value or from
no par value to par value as a result of a stock dividend or subdivision,
split-up or combination of shares), or the consolidation or merger of
Holdings with or into another corporation, association, partnership, joint
venture, organization, business, individual or any other entity (a
"Person") (other than a consolidation or merger in which Holdings is the
continuing corporation and which does not result in any change in the
Common Stock) or of the sale or other disposition of all or substantially
all the properties and assets of Holdings as an entirety to any other
Person, this Warrant shall after such reorganization, reclassification,
consolidation, merger, sale or other disposition be exercisable to purchase
the kind and number of shares of stock or other securities or property of
Holdings or of the corporation resulting from such consolidation or
surviving such merger or to which such properties and assets shall have
been sold or otherwise disposed to which the Holder of the number of shares
of Common Stock deliverable (immediately prior to the time of such
reorganization, reclassification, consolidation, merger, sale or other
disposition) upon exercise of this Warrant would have been entitled upon
such reorganization, reclassification, consolidation, merger, same or other
disposition. The provisions of this Section 3(a)(vii) shall similarly apply
to successive reorganizations, reclassification, consolidations, mergers,
sales or other disposition.
(viii) In case, at any time after the Warrant Issuance Date, Holdings
shall declare a cash dividend upon its Common Stock payable out of earned
surplus or shall distribute to holders of its Common Stock shares of its
capital stock (other than Common Stock), stock or other securities of other
Persons, evidences of indebtedness issued by Holdings or other Persons,
other assets or options or rights (excluding options to purchase and rights
to subscribe for Common Stock or other securities of the Company
convertible into or exchangeable for Common Stock), then the Warrant Price
shall be appropriately decreased by the amount of such cash dividend or
other distribution on a Common Stock equivalents basis.
(ix) Upon any adjustment to the Warrant Price hereunder, the number of
shares purchasable upon the exercise of this Warrant shall be adjusted to
the number obtained by dividing:
(A) an amount equal to the product of the number of shares
purchasable hereunder immediately prior to such adjustment and the
Warrant Price immediately prior to such adjustment, by
(B) the Warrant Price immediately after such adjustment.
(C) All calculations under this Section 3(a) shall be made to the
nearest one-tenth of a cent ($.001) or to the nearest one-tenth of a
share, as the case may be.
(xi) As used in this Section 3,
(A) "Market Price" at any date of one share of Common Stock shall
be (1) the last reported sales price regular way or, in case no such
reported sales took place on such day, the last reported bid price
regular way on the principal national securities exchange on which the
Common Stock is listed or admitted to trading (or if the Common Stock
is not at the time listed or admitted for trading on any such
exchange, then such price as shall be equal to the last reported sale
price, or if there is no such sale price, the last reported bid price,
as reported by the National Association of Securities Dealers
Automated Quotations System ("NASDAQ") on such day, or if, on any day
in question, the security shall not be quoted on the NASDAQ, then such
price shall be equal to the last reported bid price on such day as
reported by the National Quotation Bureau, Inc. or any similar
reputable quotation and reporting service, if such quotation is not
reported by the National Quotation Bureau, Inc.) or (2) if Holdings'
Common Stock is not listed or admitted to trading on a principal
national securities exchange, the value given such share as determined
in good faith by Holdings' Board of Directors; provided, however, that
if the Holder notifies Holdings in writing disputing such
determination by the Holdings' Board of Directors within 20 days after
such determination, the Holder and Holdings shall mutually agree upon
and select an investment bank to determine the value of one share of
Common Stock, the investment bank's determination to be conclusive,
absent manifest error, and the costs of such determination to be
equally borne by Holdings and the Holder, except that the Holder shall
bear such costs if the investment bank's determination is equal to or
less than the Holdings Board of Directors' determination.
(B) "Common Stock Deemed Outstanding" means, at any given time,
without duplication, the number of shares of Common Stock actually
outstanding at such time, plus the number of shares of Common Stock
issuable upon the exercise of any right to acquire Common Stock of
Holdings or issuable upon the conversion of any security of Holdings.
(xii) In any case in which the provisions of this Section 3(a) shall
require that an adjustment shall become effective as of a record date for
an event, Holdings may defer until the occurrence of such event issuing to
the Holder of this Warrant exercised after such record date and before the
occurrence of such event the additional shares of capital stock issuable
upon such exercise by reason of the adjustment required by such event over
and above the shares of capital stock issuable upon such exercise before
giving effect to such adjustment.
(b) Whenever the Warrant Price and the number of shares subject
to this Warrant shall be adjusted as provided in this Section 3,
Holdings shall within 10 days file, at the office of the transfer
agent for the Common Stock or at such other place as may be designated
by Holdings, a statement, signed by its President or Chief Financial
Officer and by its Treasurer, showing in detail the facts requiring
such adjustment and the Warrant Price and the number of shares subject
to this Warrant that shall be in effect after such adjustment.
Holdings shall also cause a copy of such statement to be given to the
Holder of this Warrant. Where appropriate, such copy may be given in
advance and may be included as part of a notice required to be mailed
under the provisions of Section 3(c).
(c) In the event Holdings shall propose to take any action of the
types described in clauses (i), (iv), (v), (vi), (vii) or (viii) of
Section 3(a), Holdings shall give 20 days advance written notice to
the Holder of this Warrant at such address as such Holder shall have
provided to Holdings, which notice shall specify with respect to any
such action and the date on which such action is to take place. Such
notice shall also set forth such facts with respect thereto as shall
be reasonably necessary to indicate the effect of such action (to the
extent such effect may be known at the date of such notice) on the
Warrant Price and the number, kind or class of shares or other
securities or property which shall be deliverable or purchasable upon
the occurrence of such action or deliverable upon exercise of this
Warrant. In the case of any action which would require the fixing of a
record date, such notice shall be given at least 10 days prior to the
date so fixed. Failure to give such notice, or any defect therein,
shall not affect the legality or validity of any such action. In the
event Holdings proposes to make any distribution to holders of its
Common Stock which would not give rise to any adjustment to the
Warrant Price hereunder, Holdings shall establish a record date for
determining the holders of record of Common Stock who will be entitled
to receive such distribution, and shall give the Holder of record of
this Warrant notice (in the manner specified above) of such
distribution and record date at least 20 days in advance of such
record date.
(d) Holdings shall pay all documentary, stamp or other
transactional taxes attributable to the issuance or delivery of shares
of capital stock of Holdings upon exercise of all or any part of this
Warrant; provided, however, that Holdings shall not be required to pay
any taxes which may be payable in respect of any transfer involved in
the issuance or delivery of any certificate for such shares in a name
other than that of the Holder of this Warrant.
SECTION 4. No Stockholder Rights.
Except for the rights to elect 2 directors to the Board of Directors of
Holdings and to be present at all the Board of Director meetings of Holdings
pursuant to the Stockholders Agreement, dated the date hereof, by and among
Holdings and the Stockholders thereto, the Holder hereof shall not be entitled
to any voting rights or other rights as a stockholder of Holdings by reason of
the rights granted under this Warrant until the Holder hereof shall purchase
shares of Common Stock hereunder.
SECTION 5. Exchange of Warrant.
This Warrant is exchangeable, upon the surrender hereof by the Holder
hereof at the office or agency of Holdings designated in Section 1 hereof, for
new Warrants of like tenor representing in the aggregate the rights to subscribe
for and purchase the number of shares which may be subscribed for and purchased
hereunder, each of such new Warrants to represent the right to subscribe for and
purchase such number of shares as shall be designated by said Holder hereof at
the time of such surrender.
SECTION 6. Lost, Stolen, Mutilated or Destroyed Warrant.
If this Warrant is lost, stolen, mutilated or destroyed, Holdings may, on
such terms as to indemnity or otherwise as it may in its reasonable discretion
impose, including the ability of the indemnitor to pay any such indemnity (which
shall, in the case of a mutilated Warrant, include the surrender thereof), issue
a new Warrant of like denomination and tenor as the Warrant so lost, stolen,
mutilated or destroyed. Any such new Warrant shall constitute an original
contractual obligation of Holdings, whether or not the allegedly lost, stolen,
mutilated or destroyed Warrant shall be at any time enforceable by anyone.
SECTION 7. Listing on Securities Exchanges.
Holdings shall list on each national securities exchange on which any
Common Stock may at any time be listed, subject to official notice of issuance
upon the exercise of this Warrant, and shall maintain, so long as any other
shares of its Common Stock shall be so listed, all shares of Common Stock from
time to time issuable upon the exercise of this Warrant, and Holdings shall so
list on each national securities exchange, and shall maintain such listing of,
any other shares of capital stock of Holdings issuable upon the exercise of this
Warrant if and so long as any shares of capital stock of the same class shall be
listed on such national securities exchange by Holdings. Any such listing shall
be at Holdings' expense.
SECTION 8. Availability of Information.
Holdings shall comply with all applicable public information reporting
requirements of the Securities and Exchange Commission (the "SEC") (including
those required to make available the benefits of Rule 144 under the Securities
Act of 1933) to which it may from time to time be subject. Holdings shall also
cooperate with each Holder of this Warrant and Holder of any Common Stock issued
upon exercise of this Warrant in supplying such information as may be necessary
for such Holder to complete and file any information reporting forms currently
or hereafter required by the SEC as a condition to the availability of an
exemption from the Act for the sale of any Warrant or Common Stock issued upon
exercise of this Warrant.
SECTION 9. Successors.
All the provisions of this Warrant by or for the benefit of Holdings or the
Holder shall bind and inure to the benefit of their respective successors and
assigns. Holdings acknowledges and agrees that the Holder shall have the right
to assign its right, title and interests under this Warrant, in whole or in
part, to any of its affiliates, in its sole discretion.
SECTION 10. Headings.
The headings of sections of this Warrant have been inserted for convenience
of reference only, are not to be considered a part hereof and shall in no way
modify or restrict any of the terms or provisions hereof.
SECTION 11. Governing Law.
This Warrant shall be governed by and construed in accordance with the laws
of the State of New York without regard to the laws and principles thereof which
would direct the application of the laws of another jurisdiction.
<PAGE>
IN WITNESS WHEREOF, MagnaVision Corporation has caused this Warrant to be
executed by its duly authorized officers under its corporate seal, and this
Warrant to be dated as of the date first set forth above.
MAGNAVISION CORPORATION
By:
--------------------------------
Name:
Title:
[CORPORATE SEAL]
ATTEST:
- ---------------------------------
Secretary
<PAGE>
Exhibit 10.(g)
SECURITY AGREEMENT AND
COLLATERAL ASSIGNMENT dated as of
August 25, 1995 (the "Agreement"),
among MAGNAVISION CORPORATION, a
New Jersey corporation (the
"MagnaVision") and UNIVERSITY
CONNECTION, INC., a New Jersey
corporation (together with
MagnaVision collectively, the
"Assignors"), and IBJS CAPITAL
CORPORATION, a Delaware
corporation, as Collateral Agent
(the "Collateral Agent") for the
Investors (as hereinafter defined).
Reference is made to the Securities Purchase Agreement
dated as of the date hereof (as the same may, from time to time,
be supplemented, modified or amended and in effect after the date
hereof, the "Securities Purchase Agreement"), among MagnaVision,
MagnaVision Corporation, a Delaware corporation and parent of
MagnaVision and IBJS Capital Corporation, IBJ Schroder Bank &
Trust Company and Koco Capital Company, L.P. (together with their
succesors and assigns, the "Investors"). Capitalized terms used
and not otherwise defined herein shall have the meanings given to
such terms in the Securities Purchase Agreement.
In order (a) to induce the Investors to enter into the
Securities Purchase Agreement and continue to provide other
financial accommodations to the Obligors pursuant to, and subject
to the terms and conditions of, the Securities Purchase Agreement
and (b) to continue to secure the obligations of the Obligors
under the Securities Purchase Agreement and other Transaction
Documents, the Assignors have agreed to grant to the Collateral
Agent, for the ratable benefit of the Investors, a security
interest in all of the Assignors' right, title and interest under
the License and the Cable Contracts and all equipment and
inventory of the Assignors used in connection with the
performance of their obligations thereunder, by entering into
this Agreement (for the ratable benefit of the Investors).
ACCORDINGLY, the parties hereby agree as follows:
1 Definitions.
1
<PAGE>
(a) As used in this Agreement, the following terms shall have the
following meanings:
"Accepted New Contract" shall mean any and all
contracts entered into after the Closing Date between the Company
or its Affiliate and a customer for the construction of a private
cable system and provision of private cable services which is
consented to in writing by the Required Investors.
"Assigned Contracts" shall mean all of the Assignors'
right, title and interest in, to and under the License and the
Cable Contracts.
"Cable Contracts" shall mean the existing private cable
contracts entered into between the Assignors and the other
parties thereto as set forth on Exhibit A attached hereto and any
and all Accepted New Contracts.
"Collateral" shall mean all of the Assignors' Assigned
Contracts, Equipment and Inventory, whether now existing or owned
or hereafter arising or acquired and regardless of where located,
including all products and proceeds thereof, and all amendments,
assignments, modifications, replacements, additions, accessions
and substitutions of or relating to the foregoing.
"Equipment" shall mean all of the equipment (as defined
in the UCC) of the Assignors used in connection with the
performance of their obligations pursuant to an Assigned
Contract.
"Inventory" shall mean all of the inventory (as defined
in the UCC) of the Assignors used in connection with the
performance of their obligations pursuant to an Assigned
Contract.
"License" shall mean the License Agreement, dated
August 20, 1990, as amended on January 6, 1994, pursuant to the
First Agreement of Amendment to License Agreement, between
MagnaVision and the Department of Education, Archdiocese of New
York.
"Obligations" shall mean the due and punctual payment
of the principal of, premium, if any, and interest on the Notes
and other monetary obligations under this Agreement and the
performance of all other obligations of the Obligors to the
Investors, howsoever created, arising or evidenced, whether
direct or indirect, joint or several, absolute or contingent, or
now existing or hereafter arising under this Agreement or any
other Transaction Document.
2
<PAGE>
"Obligors" shall have the meaning given to such term in
the Securities Purchase Agreement.
"Security Interest" shall have the meaning set forth in
Section 2 hereof.
"UCC" means the Uniform Commercial Code as in effect on
the date hereof in the State of New York and the State of New
Jersey; provided, however, that if by reason of mandatory
provisions of law, the perfection or the effect of perfection or
non-perfection of the Security Interest in any Assigned Contracts
is governed by the Uniform Commercial Code in effect in a
jurisdiction other than New York or New Jersey, "UCC" means the
Uniform Commercial Code as in effect in such other jurisdiction
for purposes of the provisions hereof relating to such perfection
or effect of perfection or non-perfection.
(a) Unless otherwise defined herein, or unless the context otherwise
requires, all terms used herein which are defined in the UCC
shall have the meanings given such terms in the UCC.
(b) Capitalized terms used and not defined in this Agreement shall
have the meanings given to such terms in the Securities Purchase
Agreement.
(c) The definitions in this Section 1 shall apply to the singular and
plural forms of the terms defined. Whenever the context
requires, any pronoun shall include the corresponding masculine,
feminine and neuter forms. The words "include," "includes" and
"including" shall be deemed to be followed by the phrase "without
limitation."
(d) Unless otherwise specified, references in this Agreement to any
Section are references to such Section in this Agreement and
references in any Section or definition to any clause are
references to such clause of such Section or definition.
1 Grant of Security Interest.
In order to secure to the Collateral Agent, for the
ratable benefit of the Investors, the full and punctual payment
(whether at stated maturity, by acceleration or otherwise) and
performance by the Obligors of all of the Obligations, the
Assignors hereby pledge, assign, convey, hypothecate and transfer
for security to the Collateral Agent, for the ratable benefit of
the
3
<PAGE>
Investors as hereinafter provided, and grant to the Collateral Agent,
for the ratable benefit of the Investors as hereinafter provided, a
continuing lien on and continuing first priority security interest
(the "Security Interest") in, all of the Assignors' right, title and
interest in, to and under the Collateral.
1 Rights and Remedies Upon Default.
2 If an Event of Default shall have occurred and be continuing, the
Collateral Agent may exercise all rights of a secured party under
the UCC, and, in addition, the Collateral Agent may exercise the
remedies set forth below, in the Securities Purchase Agreement or
in any other Transaction Document, which remedies are cumulative
and in addition to every other right or remedy available under
applicable law: (i) the Collateral Agent may collect and retain
all rents, payments, issues, profits, proceeds, revenues and
income due or to become due under the Collateral and apply such
amounts to the payment of the Obligations, all as the Collateral
Agent in its sole discretion shall determine; (ii) the Collateral
Agent may succeed to all of the right, title and interest of the
Assignors in, to and under the Collateral and maintain the
Collateral in full force and effect, with the Collateral Agent
substituted for the Assignors therein, and in any such event all
right, title and interest of the Assignors therein shall be
extinguished and the Collateral Agent shall be entitled to
collect and retain all rents, payments and other moneys paid or
payable thereunder; and (iii) the Collateral Agent may sell at
public or private sale, without appraisal, for such price as it
may deem fair, any Collateral and all right, title and interest
of the Assignors in, to and under such Collateral.
3 Sale of the Collateral.
(i) If an Event of Default shall have occurred
and be continuing, the Collateral Agent may, without being
4
<PAGE>
required to give any notice (except as may otherwise be
required by this Agreement or by applicable law), sell the
Collateral or any part thereof at public or private sale,
for cash, upon credit or for future delivery, and at such
price or prices as the Collateral Agent may deem
satisfactory. The Collateral Agent or any Investor may be
the purchaser of any or all of the Collateral so sold at any
public sale, or, if the Collateral is of a type customarily
sold in a recognized market or is of a type which is the
subject of widely distributed standard price quotations, at
any private sale. The Assignors will execute and deliver
such documents and take such other action as the Collateral
Agent deems necessary or advisable in order that any such
sale may be made in compliance with law. Upon any such sale
the Collateral Agent shall have the right to deliver, assign
and transfer the Collateral so sold to the purchaser
thereof. Each purchaser at any such sale shall hold the
Collateral so sold to it absolutely and free from any Lien
or other claim or right of whatever kind, including any
equity or right of redemption of the Assignors which may be
waived, and the Assignors, to the extent permitted by law,
hereby specifically waives all rights of redemption, stay or
appraisal which they have or may have under any law now
existing or hereafter enacted or adopted (as well as any
rights to exoneration, subrogation or reimbursement arising
at law, in equity or otherwise).
(ii) The Collateral Agent shall give the
Assignors not less than ten (10) days' prior written notice
of the time and place of any such sale or other intended
disposition of any of the Collateral, except any Collateral
which is perishable or threatens to decline speedily in
value or is of a type customarily sold on a recognized
market,
5
<PAGE>
and the Assignors agree that such notice constitutes
"reasonable notification" within the meaning of, and for all
purposes of, the applicable provisions of the UCC. Any
notice of such sale required by this Agreement shall, in
case of a public sale, state the time and place fixed for
such sale, and in the case of a private sale, state the day
after which such sale may be consummated. Any such public
sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral
Agent may fix in the notice of such sale. At any such sale
the Collateral may be sold in one lot as an entirety or
separately, as the Collateral Agent may determine. The
Collateral Agent shall not be obligated to make any such
sale pursuant to any such notice. The Collateral Agent may,
without notice or publication, adjourn any public or private
sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for the sale, and
such sale may be made at any time or place to which the same
may be so adjourned. In the case of any sale of all or any
part of the Collateral on credit or for future delivery, the
Collateral so sold may be retained by the Collateral Agent
until the selling price is paid by the purchaser thereof,
but the Collateral Agent shall not incur any liability in
case of the failure of such purchaser to take up and pay for
the Collateral so sold and, in case of any such failure,
such Collateral may again be sold as permitted by and in
accordance with this Agreement, including the application of
proceeds as set forth in Section 3(e).
(iii) At any public sale, any Investor may bid for
or purchase, free from any right of redemption, stay or
appraisal on the part of the Assignors (all said rights
being also hereby waived and released to the full extent
permitted by applicable
6
<PAGE>
law), the Collateral or any part thereof offered for sale and may
make payment on account thereof by using any claim then due and
payable to such Investor from the Assignors as a credit against
the purchase price, and such Investor may, upon compliance with
the terms of sale, hold, retain and dispose of such property
without further accountability to the Assignors therefor. For
purposes hereof, (i) the execution of a written agreement to
purchase the Collateral or any portion thereof shall be treated
as a sale thereof, (ii) the Collateral Agent or the Investors
shall be free to carry out such sale pursuant to such agreement
and (iii) the Assignors shall not be entitled to the return of
the Collateral or any portion thereof subject thereto,
notwithstanding the fact that after the Collateral Agent shall
have entered into such an agreement all Events of Default shall
have been remedied and the Obligations paid in full.
4 Other Rights. In addition to, and not in limitation of any
rights or remedies of the Collateral Agent contained elsewhere in
this Agreement, if an Event of Default shall have occurred and be
continuing, the Collateral Agent may:
(i) require the Assignors to, and the Assignors
agree that they will, at their expense and upon the request
of the Collateral Agent, forthwith assemble all or any part
of the Collateral as directed by the Collateral Agent and
make it available at a place designated by the Collateral
Agent which is, in the Collateral Agent's opinion,
reasonably convenient to the Collateral Agent, whether at
the premises of the Assignors or otherwise; and
(ii) enter upon the premises of the Assignors or
any of their consignees or any other place or places where
the Collateral is located and kept through self-help,
7
<PAGE>
without judicial process, without first obtaining a final
judgment or giving the Assignors notice and opportunity for
a hearing on the validity of the Collateral Agent's claim
and without any obligation to pay rent to the Assignors and
remove the Collateral therefrom to the premises of the
Collateral Agent, for such time as the Collateral Agent may
desire, in order to collect or liquidate the Collateral
effectively.
5 General Authority. Effective only upon the occurrence and
during the continuance of an Event of Default, the Assignors
hereby appoint the Collateral Agent as their true and lawful
attorney, with full power of substitution, in the name of the
Assignors or otherwise, for the sole use and benefit of the
Collateral Agent, but at the expense of the Assignors, to
exercise any power permitted by applicable law with respect to
any Collateral, which appointment is irrevocable and coupled with
an interest. Without limiting the generality of the foregoing,
the Collateral Agent shall have the right (but not the
obligation), upon the occurrence and during the continuance of an
Event of Default to:
(i) demand, sue for, collect, receive and give
acquittance for any and all monies or property due or to
become due on account or in exchange for any of the
Collateral or by virtue of the Collateral;
(ii) settle, compromise, compound, prosecute or
defend any action or proceeding with respect to or otherwise
affecting the Collateral;
(iii) sell, transfer, assign or otherwise deal
therein or therewith or the proceeds or avails of the
Collateral, as fully and effectually as if the Collateral
Agent were the absolute owner thereof;
8
<PAGE>
(iv) extend the time of payment of any or all
accounts or other obligations owed to the Assignors and to
make any allowance and other adjustments with reference
thereto;
(v) open the Assignors' mail;
(vi) notify or direct the Assignors to notify any
or all account debtors under the Collateral that the
accounts have been assigned to the Collateral Agent, for the
ratable benefit of the Investors, and that the Collateral
Agent has a Security Interest therein (the Collateral Agent
shall promptly furnish the Assignors with a copy of any such
notice, and the Assignors hereby agree that any such notice,
in the Collateral Agent's sole discretion, may be sent on
the Assignors' stationery);
(vii) contact account debtors under the Collateral
for any reason, including to direct or cause the Assignors
to direct such account debtors to make all payments due from
them to the Assignors upon the accounts directly to or as
directed by the Collateral Agent;
(viii) prior to the disposition of the Collateral,
use, operate and control the Collateral to preserve the
Collateral or its value, store or transfer the Collateral
without charge in or by means of any storage or
transportation facility owned or leased by the Assignors, or
process, repair or recondition the Collateral or otherwise
prepare it for disposition in any manner and to the extent
the Collateral Agent deems appropriate;
(ix) use the information recorded on or contained
in any data processing equipment and computer hardware and
software relating to the accounts and other obligations owed
to the Assignors under the Collateral to which the Assignors
have access (subject to the
9
<PAGE>
proprietary rights applicable to such computer hardware and
software) and do any other act or thing necessary, in the
Collateral Agent's sole discretion, to fulfill the Assignors'
obligations to the Collateral Agent and the Investors under this
Agreement, the other Transaction Documents or otherwise;
(x) make any payments and do any other acts
which the Collateral Agent deems desirable to protect the
Security Interest in the Collateral, including paying,
purchasing, contesting or compromising any Lien which, in
the judgment of the Collateral Agent, appears to be prior to
or superior to the Security Interest, and to appear in and
defend any action or proceeding purporting to affect the
Security Interest and/or the value of the Collateral, and in
exercising any such power or authority, to pay all
reasonable expenses incurred in connection therewith, the
Assignors' obligations with respect to the repayment thereof
being secured under this Agreement; and
(xi) receive, endorse and collect all checks made
payable to the order of the Assignors representing any
dividend, payment or other distribution in respect of the
Collateral or any part thereof and to give full discharge
for the same.
6 Application of Proceeds. The proceeds of any sale of, or
other realization upon, all or any part of the Collateral shall
be applied by the Collateral Agent in the following order of
priorities:
FIRST, to payment of all reasonable costs
and expenses incurred by the Collateral Agent
in connection with such sale or otherwise in
connection with its duties under this
Agreement, including, but not limited to, all
court costs and the
10
<PAGE>
reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the
Collateral Agent hereunder on behalf of the Assignors and
any other costs or expenses incurred in connection with the
exercise of any right or remedy hereunder;
SECOND, to the payment in full of the Notes then
outstanding or, in the event such proceeds are
insufficient to pay in full the Obligations, ratably to
the Investors in proportion to the outstanding Notes;
THIRD, to the payment in full of the Obligations
or, in the event such proceeds are insufficient to pay
in full the Obligations, ratably to the Investors in
proportion to the outstanding Notes; and
FOURTH, to the Assignors, their successors and
assigns, or as a court of competent jurisdiction may
otherwise direct.
(a) License to Use General Intangibles. If an Event of Default shall
have occurred and be continuing and for the purpose of enabling the
Collateral Agent to exercise its rights and remedies under this
Agreement at such time as the Collateral Agent shall be entitled to
exercise such rights and remedies, the Assignors hereby grant to the
Collateral Agent an irrevocable, nonexclusive license (exercisable
without payment of royalty or other compensation to the Assignors), to
use, assign, license or sublicense any of the Assignors' general
intangibles (including Intellectual Property), now owned or existing
or hereafter acquired or arising by or in the Assignors, and wherever
the same may be located, including in such license reasonable access
to all media in which any of the licensed items may be recorded or
stored. The proceeds from, or other realization upon, any such license
shall constitute Collateral and shall be applied in the manner set
forth in Section 3(e) above. No agreements hereafter acquired or
agreed to or entered into by the Assignors shall prohibit, restrict or
impair the rights granted under this Section.
11
<PAGE>
(b) Deficiency. If the proceeds of the sale, collection or other
realization of or upon all or part of the Collateral pursuant to
the provisions of this Agreement are insufficient to cover the
costs and expenses of such realization and the payment in full of
the Obligations, the Assignors shall remain liable for any
deficiency.
(c) Duration of Agreement; Release of Security.
This Agreement and the Security Interest shall (other
than the provisions of Section 6(c), which shall survive the
termination of this Agreement) terminate when (i) all of the
Obligations have been fully and indefeasibly paid and performed
or otherwise satisfied and (ii) the Investors have no further
commitment to purchase Notes or perform any other obligations
under the Securities Purchase Agreement or any other Transaction
Document. The release of Collateral or reassignment of rights to
the Assignors upon the termination of this Agreement shall be
without recourse to or warranty by the Collateral Agent or any
Investor and shall be made by the Collateral Agent at the expense
of the Assignors. Upon the release of Collateral or reassignment
of rights to the Assignors, the Collateral Agent will, at the
expense of the Assignors, execute and deliver to the Assignors
such documents as the Assignors shall reasonably request to
evidence such release or reassignment.
1 Assignors Remain Liable.
Anything contained in this Agreement to the contrary
notwithstanding, (a) each of the Assignors shall remain solely
liable to perform its duties and obligations under the Collateral
as set forth therein to the same extent as if this Agreement had
not been executed, (b) the exercise by the Collateral Agent of
any of its rights and remedies hereunder shall not release the
Assignors from any of their duties or obligations under any
Collateral, except to the extent that the exercise of such rights
renders the performance of such duties or obligations by the
Assignors impracticable under such Collateral, and (c) none of
the Collateral Agent or the Investors shall have any obligation
or liability under any Collateral by reason of this Agreement,
and none of the Collateral Agent or the Investors shall be
obligated in any manner to perform any of the obligations or
duties of the Assignors thereunder or to take any action to
collect or enforce any claim for payment assigned hereby, except
to the extent that the Collateral Agent has expressly and
affirmatively assumed the rights and the obligations and duties
of the Assignors under such Collateral.
12
<PAGE>
1 Security Interest Absolute.
All rights of the Collateral Agent hereunder, the grant
of the Security Interest in the Collateral and all obligations of
the Assignors hereunder shall be absolute and unconditional
irrespective of (a) except to the extent not permitted to be
waived under applicable law, any lack of validity or
enforceability of the Obligations, the Securities Purchase
Agreement or any other Transaction Document or any other
agreement or instrument relating to any of the foregoing, (b) any
change in the time, manner or place of payment of, or in any
other term of, all or any of the Obligations, or any other
amendment or waiver of or any consent to any departure from the
Securities Purchase Agreement or any other Transaction Document
or any other agreement or instrument relating to any of the
foregoing, (c) any failure by the Collateral Agent to take steps
to perfect or maintain perfected its Security Interest in, or to
preserve its rights to, any of the Collateral, (d) any exchange,
release or non-perfection of any other Collateral for, or any
release or amendment or waiver of or consent to or departure from
any guaranty of, all or any of the Obligations, (e) any
disallowance under Section 502 of the U.S. Bankruptcy Code of all
or any portion of the claims of the Investors for repayment of
the Obligations or (f) any other circumstance which might
otherwise constitute a legal or equitable defense available to,
or a legal or equitable discharge of, the Obligors with respect
to the Obligations or of, the Assignors with respect to this
Agreement, other than the indefeasible payment in full of all of
the Obligations.
1 No Waiver By Collateral Agent.
No failure on the part of the Collateral Agent to
exercise, and no delay in exercising and no course of dealing
with respect to, any right or power under this Agreement shall
operate as a waiver thereof, nor shall any single or partial
exercise by the Collateral Agent of any right or power under this
Agreement, or any abandonment or discontinuance of steps to
enforce such right or power, preclude any other or further
exercise thereof or the exercise of any other right or power.
The rights and remedies of the Collateral Agent in this Agreement
are cumulative and the exercise of any such right or pursuit of
any such remedy shall not preclude the Collateral Agent from
exercising or pursuing any other rights or remedies available to
the Collateral Agent under this Agreement or at law or in equity.
No notice to or demand on the Assignors in any case shall entitle
the Assignors to any other or further notice or demand in similar
or other circumstances.
13
<PAGE>
1 Covenants.
The Assignors hereby agree that (a) the Assignors shall
(i) on or before the Closing Date, cause the Department of
Education, Archdiocese of New York to deliver to the Collateral
Agent a letter agreement in substantially the form of Exhibit B
or otherwise in form and substance acceptable to the Collateral
Agent and (ii) as a condition to entering into any Cable Contract
on and after the Closing Date, cause each other party to such
Cable Contract to deliver to the Collateral Agent a letter
agreement in substantially the form of Exhibit C or otherwise in
form and substance acceptable to the Collateral Agent and (b)
during the term of this Agreement, the Assignors shall
(i) observe and perform all of their obligations under the
Assigned Contracts, (ii) not amend, modify or otherwise
supplement the Cable Contracts and Accepted New Contracts without
the express written consent of the Collateral Agent and (iii) at
the Collateral Agent's request cause the Assigned Contracts and
any amendment or supplement thereto to be legended as follows:
"THIS CONTRACT IS SUBJECT TO A SECURITY INTEREST
HELD BY IBJS CAPITAL CORPORATION, ACTING AS COLLATERAL
AGENT FOR THE INVESTORS' PARTIES TO THE SECURITIES
PURCHASE AGREEMENT DATED AS OF AUGUST 25, 1995, AMONG
IBJS CAPITAL CORPORATION, IBJ SCHRODER BANK & TRUST
COMPANY, KOCO CAPITAL COMPANY, L.P. (THE "INVESTORS")
AND MAGNAVISION CORPORATION AND MAGNAVISION
CORPORATION.
1 Notices.
All notices, demands and requests of any kind to be
delivered to any party in connection with this Agreement shall be
in writing and shall be (a) delivered personally, (b) sent by
nationally-recognized overnight courier, (c) sent by first class,
registered or certified mail, return receipt requested or (d)
sent by facsimile, in each case to such party at its address as
follows:
14
<PAGE>
1. if to the Assignors, to:
MagnaVision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Telephone: (908) 449-1200
Telecopier: (908) 974-1106
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Telephone: (212) 486-1700
Telecopier: (212) 223-1151
1. if to the Collateral Agent, to:
IBJS Capital Corporation,
as Collateral Agent
One State Street
New York, New York 10004
Attention: Paul Echausse
Telephone: (212) 858-2394
Telecopier: (212) 952-1629
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
Any notice, demand or request so delivered shall constitute valid
notice under this Agreement and shall be deemed to have been
received (a) on the day of actual delivery in the case of
personal delivery, (b) on the next Business Day after the date
when sent in the case of delivery by nationally-recognized
overnight courier, (c) on the fifth Business Day after the date
of deposit in the U.S. mail in the case of mailing or (d) in the
case of facsimile transmission, when sent, if sent on a Business
Day, or, if not sent on a Business Day, on the next Business Day
following the day sent. Any party hereto may from time to time
by notice in writing served upon the other as aforesaid designate
a different mailing address or a different person to which all
such notices, demands or requests thereafter are to be addressed.
15
<PAGE>
1 Governing Law.
This Agreement shall be construed in accordance with
and governed by the laws of the State of New York without regard
to the laws and principles thereof which would direct the
application of the laws of another jurisdiction.
1 Successors and Assigns.
This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns. This Agreement is not assignable by the
Assignors. Any purported assignment by the Assignors
inconsistent with this provision shall be null and void.
1 Amendments and Waivers.
Any provision of this Agreement may be amended or
waived, but only pursuant to a written agreement signed by the
Assignors and the Collateral Agent.
1 Severability.
Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and
such jurisdiction, be ineffective to the extent of such
prohibition or unenforceability without invalidating the
remaining provisions of this Agreement or affecting the validity
or enforceability of such provision in any other jurisdiction.
1 Headings.
Section headings used in this Agreement are for
convenience only and are not to affect the construction of or be
taken into consideration in interpreting this Agreement.
1 Counterparts.
This Agreement may be executed in any number of
identical counterparts, each of which shall constitute
16
<PAGE>
an original but all of which when taken together shall constitute
but one contract.
* * * *
17
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Collateral Assignment to be duly executed by their authorized
officers, all as of the date first written above.
MAGNAVISION CORPORATION
By:________________________________
Name:
Title:
UNIVERSITY CONNECTION, INC.
By:________________________________
Name:
Title:
IBJS CAPITAL CORPORATION,
as Collateral Agent
for the Investors
By:________________________________
Name:
Title:
<PAGE>
EXHIBIT A
List of Existing Cable Contracts
-------------------------------------------------------------
| Customer |Date Agreement |Parties to Agreement|
| | Signed | |
| | | |
-------------------------------------------------------------
|Seton Hall |August 30, 1991 |University |
|University | |Connection, Inc. |
| | |("University") and |
|400 South Orange | |Seton Hall |
|Avenue | |University |
| | | |
|South Orange, NJ | | |
|07079 | | |
| | | |
-------------------------------------------------------------
|Fairleigh Dickinson |June 8, 1992 |Magnavision |
|University | |Corporation and |
| | |Fairleigh Dickinson |
|1000 River Road | |Univ. |
| | | |
|Teaneck, NJ 07666 | | |
| | | |
-------------------------------------------------------------
|Manhattanville |May 4, 1992 |Magnavision |
|College | |Corporation and |
| | |Manhattanville |
|2900 Purchase | |College |
|Street | | |
| | | |
|Purchase, NY 10577 | | |
| | | |
-------------------------------------------------------------
|Maritime College |October 26, 1992 |Magnavision |
| | |Corporation and |
|Faculty Student | |Maritime College |
|Association | | |
| | | |
|Fort Schuyler, NY | | |
|10465 | | |
| | | |
-------------------------------------------------------------
|Wagner College |January 11, 1993 |Magnavision |
| | |Corporation and |
|631 Howard Avenue | |Wagner Colleg |
| | | |
|Staten Island, NY | | |
|10301 | | |
| | | |
-------------------------------------------------------------
<PAGE>
-------------------------------------------------------------
|Greenhill Memorial |March 25, 1994 |Magnavision |
|Center for Women | |Corporation and |
| | |Greenhill Memorial |
|103 Pleasant Valley | |Center for Women |
|Way | | |
| | | |
|West Orange, NJ | | |
|07052 | | |
| | | |
-------------------------------------------------------------
|Sarah Frances |February 21, |Magnavision |
|Nursing Home |1994 |Corporation and |
| | |Sarah Frances |
| | |Nursing Home |
| | | |
|Powerville Road | | |
| | | |
|Boonton, NJ 07005 | | |
| | | |
-------------------------------------------------------------
|Immaculata College |March 9, 1994 |Magnavision |
| | |Corporation and |
|Immaculata, PA | |Immaculata College |
|19345-0901 | | |
| | | |
-------------------------------------------------------------
|Georgian Court |June 30, 1994 |Magnavision |
|College | |Corporation and |
| | |Georgian Court |
|900 Lakewood Road | |College |
| | | |
|Lakewood, NJ 08701 | | |
| | | |
-------------------------------------------------------------
|Montclair State |September 23, |Magnavision |
|University |1994 |Corporation and |
| | |Montclair State |
|Rohn Hall | |University |
| | | |
|Upper Montclair, NJ | | |
|07043 | | |
| | | |
-------------------------------------------------------------
|Fordham University |April 13, 1995 |Magnavision |
| | |Corporation and |
|441 East Fordham | |Fordham University |
|Road | | |
| | | |
|Bronx, NY 10458 | | |
| | | |
-------------------------------------------------------------
|Kean College |April 28, 1995 |Magnavision |
| | |Corporation and Kean|
|Morris Avenue | |College |
| | | |
|Union, NJ 07083 | | |
| | | |
-------------------------------------------------------------
|Curry College |March 23, 1995 |Magnavision |
| | |Corporation and |
| | |Curry College |
| | | |
|1071 Blue Hill | | |
|Avenue | | |
| | | |
|Milton, MA 02186 | | |
| | | |
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<PAGE>
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|Mount Olive College |March 8, 1995 |Magnavision |
| | |Corporation and |
| | |Mount Olive College |
|634 Henderson | | |
|Street | | |
| | | |
|Mount Olive, NC | | |
|28365 | | |
| | | |
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|VA Medical Center |April 5, 1995 |Magnavision |
| | |Corporation and VA |
|385 Tremont Avenue | |Medical Center |
| | | |
|East Orange, NJ | | |
|07018-1095 | | |
| | | |
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<PAGE>
Department of Education,
Archdiocese of New York
August 25, 1995
IBJS Capital Corporation,
as Collateral Agent
One State Street
New York, New York 10004
Consent to Assignment of License Agreement
Gentlemen:
Reference is made to (i) the Collateral Assignment
dated as of August 25, 1995 (as the same may, from time to time,
be modified, supplemented or amended and in effect after the date
hereof, the "Collateral Assignment"), among MagnaVision
Corporation, a New Jersey corporation (the "Borrower"),
University Connection, Inc., a New Jersey corporation and IBJS
Capital Corporation, a Delaware corporation, as Collateral Agent
for the Investors (as defined therein), and (ii) the License
Agreement, dated August 20, 1990, as amended on January 6, 1994,
pursuant to the First Agreement of Amendment to License Agreement
(together with all exhibits and schedules thereto and all
subsequent amendments, modifications and supplements thereof, the
"License"), between us and the Borrower. Capitalized terms used
and not otherwise defined herein shall have the meanings given to
such terms in the Collateral Assignment.
We understand that pursuant to the Collateral
Assignment and certain other agreements entered into between the
Borrower, the Collateral Agent and the Investors, the Borrower
has granted to the Collateral Agent a Security Interest in all of
the Borrower's right, title and interest in, to and under the
License and Equipment, to secure the Obligations of the Obligors
to the Investors under the Securities Purchase Agreement referred
to in the Collateral Assignment. We also understand that under
the terms of the Collateral Assignment, if an Event of Default
has occurred and is continuing under the Securities Purchase
Agreement, the Collateral Agent may, among other things, succeed
to all of the
<PAGE>
Borrower's right, title and interest in, to and under the License and
Equipment and thereafter collect and retain all rents, payments and
other moneys paid or payable thereunder.
We recognize and acknowledge that the Borrower has
assigned all of its rights to receive payments which may be due
under the License to the Collateral Agent, and we hereby
expressly agree to deliver any payments required to be made by us
under the License to:
IBJ Schroder Bank & Trust Company, as agent
for IBJS Capital Corporation,
as Collateral Agent,
Lockbox Address:
MagnaVision Corporation
P.O. Box 21548
Newark, New Jersey 07101-4128
We consent to the terms and provisions of the
Collateral Assignment and to the assignment by the Borrower to
the Collateral Agent of all of the Borrower's right, title and
interest in, to and under the License and Equipment. We also
agree that (i) if an Event of Default occurs and is continuing
under the Securities Purchase Agreement, we will continue to
perform all of our obligations under the License and, following
the Collateral Agent's delivery to us of notice thereof (the
"Notice"), we will recognize the Collateral Agent as the lawful
assignee of the Borrower thereunder and possessing all rights, it
being understood that the Collateral Agent shall be liable for
the Borrower's royalty payment obligations under Section 3.3 of
the License, of the Borrower in, to and under the License and
Equipment, (ii) we will forthwith provide the Collateral Agent
with all notices and communications given to the Borrower under
the License, (iii) we will not amend, modify or supplement the
License without the prior written consent of the Collateral
Agent, and (iv) if an Event of Default occurs and is continuing
under the Securities Purchase Agreement and we have recognized
the Collateral Agent as the lawful assignee of the Borrower under
the License, we understand that it is the Collateral Agent's
intention to transfer the license to a third party with our
consent, such consent not to be unreasonably withheld, and,
further, we will recognize any third party we have consented to
as the lawful assignee of the Collateral Agent thereunder and
possessing all rights and assuming all obligations of the
Borrower in, to and under the License and Equipment following the
Collateral Agent's delivery to us of notice thereof. Although
the Borrower has assigned all of its right, title and interest
in, to and under the License and Equipment to the Collateral
Agent pursuant to the Collateral Assignment, we acknowledge that
the Collateral Agent shall have no liability to us arising under
<PAGE>
the License, except to the extent that the Collateral Agent has
expressly and in writing assumed such liability.
We hereby represent to you that in the event the
Borrower delivers the sum of $900,277 to the escrow account
pursuant to Section 7.1 of the License no later than September 5,
1995, the License will be in full force and effect and
constitutes our valid and binding obligation, enforceable against
us in accordance with its terms, that no default by us or by the
Borrower thereunder both (1) has occurred and (2) is continuing
and that the License has not been amended or otherwise modified
except as may be described in the first paragraph hereof and
except for the Collateral Assignment. We agree to promptly
notify you in writing at your address above if the Borrower is in
default in any respect under the License and to allow you 10 days
to cure any such default, but acknowledge and agree that you are
under no obligation to cure any such default except defaults
under the royalty payment obligations of the License after the
Notice has been delivered (as specified above). In addition, we
agree not to set-off against or reduce in any way any payment
payable to the Borrower under the License.
Very truly yours,
DEPARTMENT OF EDUCATION,
ARCHDIOCESE OF NEW YORK
By:______________________________
Name:
Title:
<PAGE>
EXHIBIT C
[Letterhead of Consenting Party]
[Date]
IBJS CAPITAL CORPORATION,
as Collateral Agent
for the Investors
One State Street
New York, New York 10004
Consent to Assignment of [Name of Contract]
Gentlemen:
Reference is made to (i) the Collateral Assignment
dated as of August __, 1995 (as the same may, from time to time,
be modified, supplemented or amended and in effect after the date
hereof, the "Collateral Assignment"), among MagnaVision
Corporation, a New Jersey corporation (the "Borrower"), and
University Connection, Inc., a New Jersey corporation and IBJS
Capital Corporation, a Delaware corporation, as Collateral Agent
for the Investors (as defined therein) and (ii) the [Name of
Contract] dated ____________, 199_ (together with all exhibits
and schedules thereto and all amendments, modifications and
supplements thereof, the "Contract"), between us and the
Borrower. Capitalized terms used and not otherwise defined
herein shall have the meanings given to such terms in the
Collateral Assignment.
We understand that pursuant to the Collateral
Assignment and certain other agreements entered into between the
Borrower and the Collateral Agent the Borrower has granted to the
Collateral Agent a Security Interest in all of the Borrower's
right, title and interest in, to and under its Cable Contracts,
whether existing on the date of the Collateral Assignment or
arising thereafter, including the Contract, to secure the
Obligations of the Obligors to the Investors under the Securities
Purchase Agreement referred to in the Collateral Assignment. We
also understand that under the terms of the Collateral
Assignment, if an Event of Default has occurred and is continuing
under the Securities Purchase Agreement, the Collateral Agent
may, among other things, succeed to all of the Borrower's right,
title and interest in and to the Contract and thereafter collect
and retain all rents, payments and other moneys paid or payable
thereunder.
We recognize and acknowledge that the Borrower has
assigned all of its rights to receive payments under the Contract
to the Collateral Agent, and
<PAGE>
we hereby expressly agree to deliver all payments made by us under the
Contract to:
IBJ Schroder Bank &
Trust Company
as agent for IBJS
Capital Corporation,
as Collateral Agent,
ABA No. [ ]
Collection Account,
Account No. [ ],
Ref. MAGNAVISION
CORPORATION
We consent to the terms and provisions of the
Collateral Assignment and to the assignment by the Borrower to
the Collateral Agent of all of the Borrower's right, title and
interest in, to and under the Contract. We also agree that if an
Event of Default occurs and is continuing under the Securities
Purchase Agreement, we will continue to perform all of our
obligations under the Contract and, following the Collateral
Agent's delivery to us of notice thereof, we will recognize the
Collateral Agent as the lawful assignee of the Borrower
thereunder and possessing all rights of the Borrower in, to and
under the Contract. Although the Borrower has assigned all of
its right, title and interest in, to and under the Contract to
the Collateral Agent pursuant to the Collateral Assignment, we
acknowledge that the Collateral Agent shall have no liability to
us arising under the Contract, except to the extent that the
Collateral Agent has expressly and in writing assumed such
liability.
We hereby represent to you that the Contract is in
full force and effect and constitutes our valid and binding
obligation, enforceable against us in accordance with its terms,
that no default by us or by the Borrower thereunder has occurred
and is continuing and that the Contract has not been amended or
otherwise modified except as may be described in the first
paragraph hereof and except for the Collateral Assignment. We
agree to promptly notify you in writing at your address above if
the Borrower is in default in any respect under the Contract and
to allow you 10 days to cure any such default, but acknowledge
and agree that you are under no obligation to cure any such
default. In addition, we agree not to set-off against or reduce
in any way any payment payable to the Borrower under the
Contract.
Very truly yours,
[CONSENTING PARTY]
<PAGE>
By:________________________________
Name:
Title:
<PAGE>
REGISTRATION RIGHTS AGREEMENT,
dated as of August 25, 1995, among MAGNAVISION
CORPORATION, a Delaware corporation (the
"Company") and certain Investors of the Company
set forth on Schedule I (the "Investors").
Each Investor has the right to acquire upon the exercise of
warrants the number of shares of Common Stock, $.004 par value (the "Common
Stock"), of the Company set forth opposite the name of such Investor on Schedule
I. The parties deem it to be in their best interests to set forth their rights
and obligations in connection with public offerings and sales of shares of
Common Stock. Accordingly, the parties agree as follows:
SECTION 1. Definitions.
As used in this Agreement, the following terms shall have the
following meanings:
"Commission" means the Securities and Exchange Commission or
any other Federal agency at the time administering the Securities Act.
"Exchange Act" means the Securities Exchange Act of 1934, and
the rules and regulations of the Commission promulgated thereunder, all as the
same shall be in effect from time to time.
"Other Shares" means at any time those shares of Common Stock
which do not constitute Primary Shares or Registrable Shares.
"Primary Shares" means at any time the authorized but unissued
shares of Common Stock or shares of Common Stock held by the Company in its
treasury.
"Registrable Shares" means at any time, with respect to any
Stockholder, the shares of Common Stock held by such Stockholder or issuable to
such Stockholder upon the exercise of a warrant, which constitute Restricted
Shares.
<PAGE>
"Registration Date" means the date upon which the registration
statement pursuant to which the Company shall have initially registered shares
of Common Stock under the Securities Act for sale to the public shall have been
declared effective.
"Restricted Shares" means at any time, with respect to any
Stockholder, the shares of Common Stock, any other securities which by their
terms are exercisable or exchangeable for or convertible into Common Stock and
any securities received in respect thereof, which are held by such Stockholder
and which have not previously been sold to the public pursuant to a registration
statement under the Securities Act.
"Rule 144" means Rule 144 promulgated under the Securities Act
or any successor rule thereto or any complementary rule thereto.
"Securities Act" means the Securities Act of 1933, and the
rules and regulations of the Commission thereunder, all as the same shall be in
effect from time to time.
"Stockholders" means at any time the Investors, and any other
person or entity who or which agrees in writing to be treated as an Investor, as
the case may be, and to be bound by and comply with all applicable provisions of
this Agreement.
"Transfer" means any disposition of any Restricted Shares or
of any interest therein which constitutes a sale within the meaning of the
Securities Act, other than any disposition pursuant to an effective registration
statement under the Securities Act and complying with all applicable state
securities and "blue sky" laws.
SECTION 2. Required Registration.
If the Company shall be requested by Investors who or which
hold Restricted Shares (based upon Common Stock equivalents) constituting at
least 15% of the then-outstanding Common Stock and Common Stock equivalents held
by all Investors, to effect the registration under the Securities Act of
Registrable Shares in accordance with this Section, then the Company shall
promptly give written notice of such proposed registration to all holders of
Restricted Shares and shall offer to include in such proposed registration any
Registrable Shares requested to be included in such proposed registration by
such holders who respond in writing to the Company's notice within 30 days after
delivery of such notice (which response shall specify the number of Registrable
Shares proposed to be included in such registration). The Company shall promptly
use its best efforts to effect such registration under the Securities Act of the
Registrable Shares which the Company has been so requested to register;
provided, however, that the Company shall not be obligated to effect any
registration under the Securities Act except in accordance with the following
provisions:
<PAGE>
(a) the Company shall not be obligated to use its
best efforts to file and cause to become effective (i) more than three
registration statements initiated pursuant to this Section or (ii) any
registration statement during any period in which any other
registration statement (other than on Form S-4 or Form S-8 promulgated
under the Securities Act or any successor forms thereto) pursuant to
which Primary Shares are to be or were sold has been filed and not
withdrawn or has been declared effective within the prior 90 days;
(b) the Company may delay the filing or effectiveness
of any registration statement if at the time of a request for
registration pursuant to this Section the Company is registering, or
has fixed plans to register within 60 days of the time of such request,
Primary Shares under the Securities Act, in which event such
registration shall not count as a registration initiated pursuant to
this Section and the holders of Restricted Shares may include
Registrable Shares pursuant to and in accordance with Section 3; and
(c) with respect to any registration pursuant to this
Section, the Company may include in such registration any Primary
Shares or Other Shares; provided, however, that if the managing
underwriter advises the Company that the inclusion of all Registrable
Shares, Primary Shares and Other Shares proposed to be included in such
registration would interfere with the successful marketing (including
pricing) of all such securities, then the number of Registrable Shares,
Primary Shares and Other Shares proposed to be included in such
registration shall be included in the following order:
(i) first, the Registrable Shares held by the
Investors, pro rata based upon the number of Restricted Shares
(based upon Common Stock equivalents) owned by each Investor at
the time of such registration;
(ii) second, the Primary Shares; and
(iii) third, the Other Shares.
A requested registration under this Section may be rescinded
by written notice to the Company by the Investors initiating such request;
provided, however, that such rescinded registration shall not count as a
registration statement initiated pursuant to this Section for purposes of
paragraph (a) above if the Investors initiating such request shall have
reimbursed the Company for all out-of-pocket expenses incurred by the Company in
connection with such rescinded registration.
SECTION 3. Piggyback Registration.
If the Company at any time proposes for any reason to register
Primary Shares or Other Shares under the Securities Act (other than on Form S-4
or Form S-8 promulgated under the Securities Act or any successor forms
thereto), it shall promptly give written notice to each Stockholder of its
intention so to register the Primary Shares or Other Shares and, upon the
written request, given within 30 days after delivery of any such notice by the
Company, of any Stockholder to include in such registration Registrable Shares
(which request shall specify the number of Registrable Shares proposed to be
included in such registration), the Company shall use its best efforts to cause
all such Registrable Shares to be included in such registration on the same
terms and conditions as the securities otherwise being sold in such
registration; provided, however, that if the managing underwriter advises the
Company that the inclusion of all Registrable Shares or Other Shares proposed to
be included in such registration would interfere with the successful marketing
(including pricing) of the Primary Shares proposed to be registered by the
Company, then the number of Primary Shares, Registrable Shares and Other Shares
proposed to be included in such registration shall be included in the following
order:
<PAGE>
(a) first, the Primary Shares;
(b) second, the Registrable Shares held by the
Investors, pro rata based upon the number of Restricted Shares (based
upon Common Stock equivalents) owned by each such Investor at the time
of such registration; and
(c) third, the Other Shares.
SECTION 4. Registrations on Form S-3.
Anything contained in Section 2 to the contrary
notwithstanding, at such time as the Company shall have qualified for the use of
Form S-3 promulgated under the Securities Act or any successor form thereto,
Investors who or which hold Restricted Shares (based upon Common Stock
equivalents) constituting at least 20% of the then-outstanding Common Stock and
Common Stock equivalents held by all Investors shall have the right to request
in writing an unlimited number of registrations on Form S-3 or such successor
form of Registrable Shares, which request or requests shall (i) specify the
number of Registrable Shares intended to be sold or disposed of, (ii) state the
intended method of disposition of such Registrable Shares, and (iii) relate to
Registrable Shares having an anticipated aggregate offering price of at least
$500,000; provided, however, that the Company shall have no obligation to
undertake more than one (1) registration on Form S-3 in any six (6) month
period. A requested registration on Form S-3 or any such successor form in
compliance with this Section shall not count as a registration statement
demanded pursuant to Section 2, but shall otherwise be treated as a registration
initiated pursuant to and shall, except as otherwise expressly provided in this
Section, be subject to Section 2.
<PAGE>
SECTION 5. Holdback Agreement.
If the Company at any time shall register shares of Common
Stock under the Securities Act (including any registration pursuant to Section
2, 3 or 4) for sale to the public, the Stockholders shall not sell, make any
short sale of, grant any option for the purchase of, or otherwise dispose of any
Restricted Shares (other than those shares of Common Stock included in such
registration) without the prior written consent of the Company for a period
designated by the Company in writing to the Stockholders, which period shall not
begin more than 10 days prior to the effectiveness of the registration statement
pursuant to which such public offering shall be made and shall not last more
than 90 days after the effective date of such registration statement.
SECTION 6. Preparation and Filing.
If and whenever the Company is under an obligation pursuant to
the provisions of this Agreement to use its best efforts to effect the
registration of any Registrable Shares, the Company shall, as expeditiously as
practicable:
(a) use its best efforts to cause a registration
statement that registers such Registrable Shares to become and remain
effective for a period of 90 days or until all of such Registrable
Shares have been disposed of (if earlier);
(b) furnish, at least five business days before
filing a registration statement that registers such Registrable Shares,
a prospectus relating thereto or any amendments or supplements relating
to such a registration statement or prospectus, to one counsel selected
by the holders of a majority of such Registrable Shares (the "Selling
Stockholders' Counsel"), copies of all such documents proposed to be
filed (it being understood that such five-business-day period need not
apply to successive drafts of the same document proposed to be filed so
long as such successive drafts are supplied to such counsel in advance
of the proposed filing by a period of time that is customary and
reasonable under the circumstances);
(c) prepare and file with the Commission such
amendments and supplements to such registration statement and the
prospectus used in connection therewith as may be necessary to keep
such registration statement effective for at least a period of 90 days
or until all of such Registrable Shares have been disposed of (if
earlier) and to comply with the provisions of the Securities Act with
respect to the sale or other disposition of such Registrable Shares;
<PAGE>
(d) notify in writing the Selling Stockholders'
Counsel promptly (i) of the receipt by the Company of any notification
with respect to any comments by the Commission with respect to such
registration statement or prospectus or any amendment or supplement
thereto or any request by the Commission for the amending or
supplementing thereof or for additional information with respect
thereto, (ii) of the receipt by the Company of any notification with
respect to the issuance by the Commission of any stop order suspending
the effectiveness of such registration statement or prospectus or any
amendment or supplement thereto or the initiation or threatening of any
proceeding for that purpose and (iii) of the receipt by the Company of
any notification with respect to the suspension of the qualification of
such Registrable Shares for sale in any jurisdiction or the initiation
or threatening of any proceeding for such purposes;
(e) use its best efforts to register or qualify such
Registrable Shares under such other securities or blue sky laws of such
jurisdictions as any seller of Registrable Shares reasonably requests
and do any and all other acts and things which may be reasonably
necessary or advisable to enable such seller of Registrable Shares to
consummate the disposition in such jurisdictions of the Registrable
Shares owned by such seller; provided, however, that the Company will
not be required to qualify generally to do business, subject itself to
general taxation or consent to general service of process in any
jurisdiction where it would not otherwise be required so to do but for
this paragraph (e);
(f) furnish to each seller of such Registrable Shares
such number of copies of a summary prospectus or other prospectus,
including a preliminary prospectus, in conformity with the requirements
of the Securities Act, and such other documents as such seller of
Registrable Shares may reasonably request in order to facilitate the
public sale or other disposition of such Registrable Shares;
(g) use its best efforts to cause such Registrable
Shares to be registered with or approved by such other governmental
agencies or authorities as may be necessary by virtue of the business
and operations of the Company to enable the seller or sellers thereof
to consummate the disposition of such Registrable Shares;
<PAGE>
(h) notify on a timely basis each seller of such
Registrable Shares at any time when a prospectus relating to such
Registrable Shares is required to be delivered under the Securities Act
within the appropriate period mentioned in paragraph (a) of this
Section, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect,
includes an untrue statement of a material fact or omits to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing and, at the request of such seller, prepare and furnish to
such seller a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the offerees of such shares, such prospectus shall not
include an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading in light of the circumstances then
existing;
(i) make available for inspection by any seller of
such Registrable Shares, any underwriter participating in any
disposition pursuant to such registration statement and any attorney,
accountant or other agent retained by any such seller or underwriter
(collectively, the "Inspectors"), all pertinent financial and other
records, pertinent corporate documents and properties of the Company
(collectively, the "Records"), as shall be reasonably necessary to
enable them to exercise their due diligence responsibility, and cause
the Company's officers, directors and employees to supply all
information (together with the Records, the "Information") reasonably
requested by any such Inspector in connection with such registration
statement. Any of the Information which the Company determines in good
faith to be confidential, and of which determination the Inspectors are
so notified, shall not be disclosed by the Inspectors unless (i) the
disclosure of such Information is necessary to avoid or correct a
misstatement or omission in the registration statement, (ii) the
release of such Information is ordered pursuant to a subpoena or other
order from a court of competent jurisdiction or (iii) such Information
has been made generally available to the public. The seller of
Registrable Shares agrees that it will, upon learning that disclosure
of such Information is sought in a court of competent jurisdiction,
give notice to the Company and allow the Company, at the Company's
expense, to undertake appropriate action to prevent disclosure of the
Information deemed confidential;
<PAGE>
(j) use its best efforts to obtain from its
independent certified public accountants "cold comfort" letters in
customary form and at customary times and covering matters of the type
customarily covered by cold comfort letters;
(k) use its best efforts to obtain from its
counsel an opinion or opinions in customary form;
(l) provide a transfer agent and registrar (which
may be the same entity and which may be the Company)
for such Registrable Shares;
(m) issue to any underwriter to which any seller of
Registrable Shares may sell shares in such offering certificates
evidencing such Registrable Shares;
(n) list such Registrable Shares on any national
securities exchange on which any shares of the Common Stock are listed
or, if the Common Stock is not listed on a national securities
exchange, use its best efforts to qualify such Registrable Shares for
inclusion on the automated quotation system of the National Association
of Securities Dealers, Inc. (the "NASD") or such national securities
exchange as the Company shall reasonably determine;
(o) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission and make available
to its securityholders, as soon as reasonably practicable, earnings
statements (which need not be audited) covering a period of 12 months
beginning within three months after the effective date of the
registration statement, which earnings statements shall satisfy the
provisions of Section 11(a) of the Securities Act; and
(p) use its best efforts to take all other steps
necessary to effect the registration of such Registrable Shares
contemplated hereby.
SECTION 7. Expenses.
All expenses incurred by the Company in complying with Section
6, including, without limitation, all registration and filing fees (including
all expenses incident to filing with the NASD), fees and expenses of complying
with securities and blue sky laws, printing expenses, fees and expenses of the
Company's counsel and accountants and fees and expenses of one Selling
Stockholders' Counsel, shall be paid by the Company; provided, however, that all
underwriting discounts and selling commissions applicable to the Registrable
Shares shall be borne by the seller or sellers thereof, in proportion to the
number of Registrable Shares sold by such seller or sellers.
<PAGE>
SECTION 8. Indemnification.
In connection with any registration of any Registrable Shares
under the Securities Act pursuant to this Agreement, the Company shall indemnify
and hold harmless the seller of such Registrable Shares, each underwriter,
broker or any other person acting on behalf of such seller and each other
person, if any, who controls any of the foregoing persons within the meaning of
the Securities Act against any losses, claims, damages or liabilities, joint or
several, (or actions in respect thereof) to which any of the foregoing persons
may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon an untrue statement or alleged untrue statement of a
material fact contained in the registration statement under which such
Registrable Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein or otherwise filed with the
Commission, any amendment or supplement thereto or any document incident to
registration or qualification of any Registrable Shares, or arise out of or are
based upon the omission or alleged omission to state therein a material fact
required to be stated therein or necessary to make the statements therein not
misleading or, with respect to any prospectus, necessary to make the statements
therein in light of the circumstances under which they were made not misleading,
or any violation by the Company of the Securities Act or state securities or
blue sky laws applicable to the Company and relating to action or inaction
required of the Company in connection with such registration or qualification
under such state securities or blue sky laws; and shall reimburse such seller,
such underwriter, such broker or such other person acting on behalf of such
seller and each such controlling person for any legal or other expenses
reasonably incurred by any of them in connection with investigating or defending
any such loss, claim, damage, liability or action; provided, however, that the
Company shall not be liable in any such case to the extent that any such loss,
claim, damage, liability or action arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
said registration statement, preliminary prospectus, final prospectus,
amendment, supplement or document incident to registration or qualification of
any Registrable Shares in reliance upon and in conformity with written
information furnished to the Company through an instrument duly executed by such
seller, its counsel, or such underwriter specifically for use in the preparation
thereof.
<PAGE>
In connection with any registration of Registrable Shares
under the Securities Act pursuant to this Agreement, each seller of Registrable
Shares shall indemnify and hold harmless (in the same manner and to the same
extent as set forth in the preceding paragraph of this Section) the Company,
each director of the Company, each officer of the Company who shall sign such
registration statement, each underwriter, broker or other person acting on
behalf of such seller, each person who controls any of the foregoing persons
within the meaning of the Securities Act and each other seller of Registrable
Shares under such registration statement with respect to any statement or
omission from such registration statement, any preliminary prospectus or final
prospectus contained therein or otherwise filed with the Commission, any
amendment or supplement thereto or any document incident to registration or
qualification of any Registrable Shares, if such statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company or such underwriter through an instrument duly executed by such seller,
its counsel, or such underwriter specifically for use in connection with the
preparation of such registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document; provided, that the obligation to
indemnify will be individual to each seller and will be limited to the net
amount of proceeds received by such seller from the sale of Registrable Shares
pursuant to such registration statement, preliminary prospectus, final
prospectus, amendment, supplement or document.
Promptly after receipt by an indemnified party of notice of
the commencement of any action involving a claim referred to in the preceding
paragraphs of this Section, such indemnified party will, if a claim in respect
thereof is made against an indemnifying party, give written notice to the latter
of the commencement of such action. In case any such action is brought against
an indemnified party, the indemnifying party will be entitled to participate in
and to assume the defense thereof, jointly with any other indemnifying party
similarly notified to the extent that it may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be responsible for any legal or other
expenses subsequently incurred by the latter in connection with the defense
thereof; provided, however, that if any indemnified party shall have reasonably
concluded that there may be one or more legal or equitable defenses available to
such indemnified party which are additional to or conflict with those available
to the indemnifying party, or that such claim or litigation involves or could
have an effect upon matters beyond the scope of the indemnity agreement provided
in this Section, the indemnifying party shall not have the right to assume the
defense of such action on behalf of such indemnified party and such indemnifying
party shall reimburse such indemnified party and any person controlling such
indemnified party for that portion of the fees and expenses of any counsel
retained by the indemnified party which is reasonably related to the matters
covered by the indemnity agreement provided in this Section.
<PAGE>
If the indemnification provided for in this Section is held by
a court of competent jurisdiction to be unavailable to an indemnified party with
respect to any loss, claim, damage, liability or action referred to herein, then
the indemnifying party, in lieu of indemnifying such indemnified party
hereunder, shall contribute to the amounts paid or payable by such indemnified
party as a result of such loss, claim, damage, liability or action in such
proportion as is appropriate to reflect the relative fault of the indemnifying
party on the one hand and of the indemnified party on the other in connection
with the statements or omissions which resulted in such loss, claim, damage or
liability as well as any other relevant equitable considerations. The relative
fault of the indemnifying party and of the indemnified party shall be determined
by reference to, among other things, whether the untrue or alleged untrue
statement of a material fact or the omission or alleged omission to state a
material fact relates to information supplied by the indemnifying party or by
the indemnified party and the parties' relative intent, knowledge, access to
information and opportunity to correct or prevent such statement or omission.
SECTION 9. Underwriting Agreement.
Notwithstanding the provisions of Sections 5, 6, 7 and 8, to
the extent that the Company and the Stockholders selling Registrable Shares in a
proposed registration shall enter into an underwriting or similar agreement,
which agreement contains provisions covering one or more issues addressed in
such Sections, the provisions contained in such Sections addressing such issue
or issues shall be superseded with respect to such registration by such other
agreement.
SECTION 10. Information by Holder.
Each holder of Registrable Shares to be included in any
registration shall furnish to the Company such written information regarding
such holder and the distribution proposed by such holder as the Company may
reasonably request in writing and as shall be reasonably required in connection
with any registration, qualification or compliance referred to in this
Agreement.
SECTION 11. Exchange Act Compliance.
From and after the Registration Date or such earlier date as a
registration statement filed by the Company pursuant to the Exchange Act
relating to any class of the Company's securities shall have become effective,
the Company shall comply with all of the reporting requirements of the Exchange
Act and with all other public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall cooperate with each Stockholder in supplying
such information as may be necessary for such Stockholder to complete and file
any information reporting forms presently or hereafter required by the
Commission as a condition to the availability of Rule 144.
<PAGE>
SECTION 12. No Conflict of Rights.
The Company represents and warrants to the Stockholders that
the registration rights granted to the Stockholders hereby do not conflict with
any other registration rights granted by the Company. The Company shall not,
after the date hereof, grant any registration rights which conflict with or
impair the registration rights granted hereby.
SECTION 13. Restriction on Transfer.
(a) The Restricted Shares shall not be transferable except
upon the conditions specified in this Section, which conditions are intended to
insure compliance with the provisions of the Securities Act.
(b) Each certificate representing Restricted Shares shall
(unless otherwise permitted by the provisions of paragraph (c) and (d) below) be
stamped or otherwise imprinted with a legend in substantially the following
form:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN
ACQUIRED FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN
EXEMPTION THEREFROM UNDER SUCH ACT. ADDITIONALLY, THE TRANSFER
OF THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN
SECTION 13 OF THE REGISTRATION RIGHTS AGREEMENT DATED AUGUST ,
1995, AMONG MAGNAVISION CORPORATION AND CERTAIN OTHER
SIGNATORIES THERETO, AND NO TRANSFER OF THESE SECURITIES SHALL
BE VALID OR EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN
FULFILLED. UPON THE FULFILLMENT OF CERTAIN OF SUCH CONDITIONS,
MAGNAVISION CORPORATION HAS AGREED TO DELIVER TO THE HOLDER
HEREOF A NEW CERTIFICATE, NOT BEARING THIS LEGEND, FOR THE
SECURITIES REPRESENTED HEREBY REGISTERED IN THE NAME OF SUCH
HOLDER. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY
WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS
CERTIFICATE TO THE SECRETARY OF MAGNAVISION CORPORATION."
<PAGE>
(c) The holder of any Restricted Shares by acceptance thereof
agrees, prior to any Transfer of any Restricted Shares, to give written notice
to the Company of such holder's intention to effect such Transfer and to comply
in all other respects with the provisions of this Section. Each such notice
shall describe the manner and circumstances of the proposed Transfer. Upon
request by the Company, the holder delivering such notice shall deliver a
written opinion, addressed to the Company, of counsel for the holder of
Restricted Shares, stating that in the opinion of such counsel (which opinion
and counsel shall be reasonable satisfactory to the Company) such proposed
Transfer does not involve a transaction requiring registration or qualification
of such Restricted Shares under the Securities Act or the securities or "blue
sky" laws of any state of the United States. Such holder of Restricted Shares
shall be entitled to Transfer such Restricted Shares in accordance with the
terms of the notice delivered to the Company, if the Company does not reasonably
object to such Transfer and request such opinion within five business days after
delivery of such notice, or, if it requests such opinion, does not reasonably
object to such Transfer within five days after delivery of such opinion. Each
certificate or other instrument evidencing the securities issued upon the
Transfer of any Restricted Shares (and each certificate or other instrument
evidencing any untransferred balance of such Registered Shares) shall bear the
legend set forth in paragraph (b) above unless (i) in such opinion of counsel
registration of any future Transfer is not required by the applicable provisions
of the Securities Act or (ii) the Company shall have waived the requirement of
such legends.
(d) Notwithstanding the foregoing provisions of this Section,
the restrictions imposed by this Section upon the transferability of any
Restricted Shares shall cease and terminate when (i) any such Restricted Shares
are sold or otherwise disposed of (A) pursuant to an effective registration
statement under the Securities Act or (B) in a transaction contemplated by
paragraph (c) above which does not require that the Restricted Shares so
transferred bear the legend set forth in paragraph (b) hereof, or (ii) the
holder of such Restricted Shares has met the requirements for Transfer of such
Restricted Shares under Rule 144(k). Whenever the restrictions imposed by this
Section shall terminate, the holder of any Restricted Shares as to which such
restrictions have terminated shall be entitled to receive from the Company,
without expense, a new certificate not bearing the restrictive legend set forth
in paragraph (b) above and not containing any other reference to the
restrictions imposed by this Section.
<PAGE>
SECTION 14. Termination.
This Agreement shall terminate and be of no further force or
effect when there shall not be any Restricted Shares.
SECTION 15. Successors and Assigns.
This Agreement shall bind and inure to the benefit of the
Company and the Stockholders and, subject to Section 16, their respective
successors and assigns.
SECTION 16. Assignment.
Each Stockholder may assign its rights hereunder to any
purchaser from such Stockholder of Restricted Shares (based upon Common Stock
equivalents); provided, however, that such purchaser shall, as a condition to
the effectiveness of such assignment, be required to execute a counterpart to
this Agreement agreeing to be treated as an Investor, as the case may be,
whereupon such purchaser shall have the benefits of, and shall be subject to the
restrictions contained in, this Agreement.
SECTION 17. Entire Agreement.
This Agreement contains the entire agreement among the parties
with respect to the subject matter hereof and supersedes all prior arrangements
or understandings with respect hereto.
SECTION 18. Notices.
All notices, requests, consents and other communications
hereunder to any party shall be deemed to be sufficient if contained in a
written instrument and shall be deemed to have been duly given when delivered in
person, by telecopy, by nationally-recognized overnight courier, or by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor:
<PAGE>
(i) if to the Company, to:
MagnaVision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Facsimile: (908) 976-1106
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Facsimile: (212) 223-1161
(ii) if to any Investor Stockholder, to:
IBJS Capital Corporation
One State Street
New York, New York 10004
Attention: Paul Echausse
Facsimile: (212) 952-1629
IBJ Schroder Bank & Trust Company
One State Street
New York, New York 10004
Attention: Paul Echausse
Facsimile: (212) 952-1629
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum, Esq.
Facsimile: (212) 408-2420
<PAGE>
KOCO Capital Company, L.P.
111 Radio Circle
Mt. Kisco, New York 10549
Attention: Albert Pastino
Facsimile: (914) 241-7476
with a copy to:
Brownstein, Hyatt, Farber & Strickland, P.C.
410 Seventeenth Street
Denver, Colorado 80202
Attention: Steven Siegel, Esq.
Facsimile: (303) 623-1956.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of nationally-recognized
overnight courier, on the next business day and (c) in the case of mailing, on
the third business day following such mailing.
SECTION 19. Modifications; Amendments; Waivers.
The terms and provisions of this Agreement may not be modified
or amended, except pursuant to a writing signed by the Company, the Investors
holding at least 66-2/3% of the Restricted Shares (based upon Common Stock
equivalents) held by all Investors; provided, however, that no modification or
amendment shall discriminate against any Stockholder without the consent of such
Stockholder. This Section may only be amended with the consent of all parties to
this Agreement.
SECTION 20. Counterparts.
This Agreement may be executed in any number of counterparts,
and each such counterpart hereof shall be deemed to be an original instrument,
but all such counterparts together shall constitute but one agreement.
SECTION 21. Headings.
The headings of the various sections of this Agreement have
been inserted for convenience of reference only and shall not be deemed to be a
part of this Agreement.
<PAGE>
SECTION 22. Severability.
It is the desire and intent of the parties that the provisions
of this Agreement be enforced to the fullest extent permissible under the law
and public policies applied in each jurisdiction in which enforcement is sought.
Accordingly, if any provision of this Agreement would be held in any
jurisdiction to be invalid, prohibited or unenforceable for any reason, such
provision, as to such jurisdiction, shall be ineffective, without invalidating
the remaining provisions of this Agreement or affecting the validity or
enforceability of such provision in any other jurisdiction. Notwithstanding the
foregoing, if such provision could be more narrowly drawn so as not to be
invalid, prohibited or unenforceable in such jurisdiction, it shall, as to such
jurisdiction, be so narrowly drawn, without invalidating the remaining
provisions of this Agreement or affecting the validity or enforceability of such
provision in any other jurisdiction.
SECTION 23. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to
principles governing conflicts of laws.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Registration Rights Agreement on the date first written above.
MAGNAVISION CORPORATION
By:
----------------------------
Name:
Title:
INVESTORS:
IBJS CAPITAL CORPORATION
By:
----------------------------
Name:
Title:
IBJ SCHRODER BANK
& TRUST COMPANY
By:
----------------------------
Name:
Title:
KOCO CAPITAL COMPANY, L.P.
By: Kisco Capital Corporation,
its General Partner
By:
----------------------------
Name: Albert Pastino
Title:
<PAGE>
SCHEDULE I
Number of Common Stock
Investor Equivalents
- -------- ----------------------
IBJS Capital Corporation 1,935,496
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
IBJ Schroder Bank & Trust Company 3,870,995
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
KOCO Capital Company, L.P. 3,870,995
111 Radio Circle
Mt. Kisco, New York 10549
Telecopier: (914) 241-7476
Attention: Albert G. Pastino
<PAGE>
STOCKHOLDERS' AGREEMENT, dated as
of August 25, 1995, among MAGNAVISION
CORPORATION, a Delaware corporation (the
"Corporation"), the Investors and the other
parties listed on Schedule I (collectively,
the "Stockholders").
The Corporation is a corporation duly organized and existing
under the laws of the State of Delaware with an authorized capitalization of
750,000,000 shares of Common Stock, $.004 par value, as adjusted from time to
time (the "Common Stock"). Each of the Stockholders owns that number of shares
of Common Stock and/or owns or has the right to acquire (by the exercise of
warrants that are exercisable for Common Stock) that number of shares of Common
Stock set forth opposite the name of each such Stockholder on Schedule I
attached hereto. It is deemed to be in the best interests of the Corporation and
the Stockholders that provision be made for the continuity and stability of the
business and policies of the Corporation and, to that end, the Corporation and
the Stockholders hereby set forth their agreement with respect to the shares of
stock owned by the Stockholders.
NOW, THEREFORE, in consideration of the premises and of the
mutual covenants and obligations hereinafter set forth, the parties hereto
hereby agree as follows:
SECTION 1. Definitions. As used herein, the
following terms have the following respective meanings:
(a) "Cacomm" shall mean Cacomm, Inc., a Delaware
corporation and stockholder of the Corporation.
(b) "Closing Date" shall have the meaning set forth
in the Securities Purchase Agreement.
(c) "Collateral Agent" shall mean IBJS Capital
Corporation, as agent for the Investors.
(d) "Competitive Business" shall mean any business involving
the design, development, construction and marketing of private cable or wireless
cable systems and services to customers.
(e) "IBJS Stock" shall mean that amount of the Investors Stock
issued or issuable upon exercise of the Warrants originally issued to IBJS
Capital Corporation and IBJ Schroder Bank & Trust Company.
(f) "Investors" means IBJS Capital Corporation, IBJ
Schroder Bank & Trust Company and KOCO Capital Company, L.P.,
<PAGE>
which purchased Warrants under the Securities Purchase Agreement, and shall
include any successor to, or assignee or transferee of, any such person who or
which agrees in writing to be treated as an Investor and to be bound by the
terms and comply with the provisions hereof.
(g) "Investors' Stock" means (i) the Common Stock of the
Corporation issued to the Investors (or their permitted assigns) upon exercise
of the Warrants and (ii) any shares of Common Stock issuable upon exercise of
the Warrants.
(h) "KOCO Stock" shall mean that amount of the Investors'
Stock issued or issuable upon exercise of the Warrants originally issued to KOCO
Capital Company, L.P.
(i) "Non-Investor Stockholder" shall mean all
Stockholders excluding the Investors.
(j) "Rule 144" means Rule 144 promulgated under the Securities
Act or any successor rule thereto or any complementary rule thereto.
(k) "Securities Act" means the Securities Act of 1933, and the
rules and regulations of the Securities and Exchange Commission thereunder, all
as the same shall be in effect from time to time.
(l) "Securities Purchase Agreement" means the Securities
Purchase Agreement, dated the date hereof, among the Corporation, MagnaVision
Corporation and the Investors.
(m) "Obligations" shall mean the due and punctual payment of
the principal of, premium, if any, and interest on the Notes and other monetary
obligations under this Agreement and the performance of all other obligations of
the Obligors to the Investors, howsoever created, arising or evidenced, whether
direct or indirect, joint or several, absolute or contingent, or now existing or
hereafter arising under this Agreement or any other Transaction Document.
(n) "Warrants" means the Warrants issued by the Corporation
and purchased by the Investors pursuant to the Securities Purchase Agreement.
SECTION 2. Election of Directors; Voting. (a) Commencing on
the date hereof and until the Investors' Stock constitutes less than five (5)
percent of the Common Stock of the Corporation (on a fully diluted basis)
outstanding from time to time, at each annual meeting of the stockholders of the
Corporation, and at each special meeting of the stockholders of the Corporation
called for the purpose of electing directors of the Corporation, and at any time
at which stockholders of the Corporation shall have the right to, or shall, vote
for or
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<PAGE>
consent in writing to the election of directors of the Corporation, then, and in
each such event, the Stockholders shall vote all shares of stock of the
Corporation owned by them, and their respective transferees shall so vote, for,
or consent in writing with respect to such shares in favor of, the election of a
Board of Directors consisting of not more than five (5) persons, of which the
Investors holding a majority of IBJS Stock shall have the right to designate one
(1) director and the Investors holding a majority of KOCO Stock shall have the
right to designate one (1) director; provided, however, that if an authorized
officer of the Department of Education, Archdiocese of New York does not execute
the consent attached to the Collateral Assignment as Exhibit B on or prior to
September 1, 1995, the Investors shall have the right to designate a majority of
the Board of Directors of Holdings and such Stockholders shall take all action
as is necessary or required to elect such directors. Such right to designate a
majority of the Board of Directors shall terminate upon such execution of the
consent.
(b) The Corporation and Stockholders agree to appoint both of
the directors designated by the Investors to serve on the Corporation's Board of
Directors Audit, Compensation and Executive Committees.
(c) The Stockholders shall vote their shares of stock (i) to
remove any director whose removal is required by the parties with the power to
designate such director and (ii) to fill any vacancy created by the removal,
resignation or death of a director, in each case for the election of a new
director designated and approved, if approval is required, in accordance with
the provisions of this Section 2.
(d) Anything contained herein to the contrary notwithstanding,
commencing from the date hereof, the Investors or their representatives shall
have the right to attend, be present at and observe all Board of Director and
committee meetings of the Corporation; and shall be reimbursed for their
out-of-pocket expenses in attending any such meeting.
(e) The Board of Directors shall meet no less frequently than
quarterly. The Stockholders agree to amend the bylaws of Holdings to provide
that a quorum of the Board of Directors shall require the presence of one of the
Directors nominated by the Investors and any action with respect to compensation
or bonuses shall require the vote of one of the Directors nominated by the
Investors. Such amendments shall not be further amended without the consent of
the Investors.
SECTION 3. Tag-Along Rights. (a) Upon receipt of any offer
from a third party to purchase its shares of Common Stock, in whole or in part,
Cacomm shall promptly notify the Investors in writing of the terms of such offer
and the identity of the offeree. If Cacomm proposes to transfer to a third
party, and
-3-
<PAGE>
any parties related to such third party (collectively, the "Third Party"), in
one or more transactions, Common Stock held by it, which in the aggregate
constitutes twenty (20) percent or more of the Common Stock of the Corporation
on a fully-diluted basis, each Investor shall have the right to participate in
such transfer in accordance with Sections 3(b), 3(c) and 3(d) hereof. Unless
such Third Party purchases the Common Stock that the Investors elect to sell
pursuant to this Section 3, Cacomm shall not transfer its Common Stock to such
Third Party.
(b) If Cacomm proposes to transfer its Common Stock to a third
party, Cacomm shall give written notice to each Investor (a "Tag-Along Notice"),
which notice shall identify the proposed Third Party purchaser and state the
number of shares of Common Stock proposed to be transferred by Cacomm, the
proposed offering price (which shall only be for cash) and any other material
terms and conditions of the proposed Cacomm transfer. The Tag-Along Notice shall
also contain a true and correct copy of any offer to Cacomm by the Third Party
offeror.
(c) Each Investor shall have the right to transfer, at the
same price and upon no less favorable terms and conditions as Cacomm, that
number of shares of Common Stock or Warrants held by such Investor, or any
combination thereof, equal to (i) the percentage of the shares of Common Stock
on a fully-diluted basis which Cacomm proposes to transfer multiplied by (ii)
the Investors' Stock held by such Investor; provided, that the price for any
Warrants to be transferred shall be the difference between the Third Party's
offer price for the Common Stock and the Warrant exercise price.
(d) Within thirty (30) days after the date of delivery of a
Tag-Along Notice, any of the Investors may elect to participate in the Cacomm
transfer pursuant to the terms and conditions of such Tag-Along Notice and this
Agreement by delivery of a written notice to Cacomm. Each Investor shall not be
required to make any representations and warranties to the third party purchaser
or any other person except as to good title and the absence of liens with
respect to such Investor's shares of Common Stock and/or Warrants and the
authority for and the validity and binding effect of any agreements entered into
by such Investor in connection with such transfer.
SECTION 4. Preemptive Rights. (a) In the event that any capital
stock or other securities are issued by the Corporation, other than Excluded
Stock as defined in the Warrants, each Investor shall have the right to purchase
its proportionate share of such issuances in an amount equal to the shares of
capital stock or other securities to be issued multiplied by a fraction (i) the
numerator of which is the number of shares of Investors Stock held by such
Investor and (ii) the denominator of which is the number of shares of capital
-4-
<PAGE>
stock of the Corporation on a fully-diluted basis prior to giving effect to such
issuance by the Corporation.
(b) The Corporation shall give 20 days prior written notice to
the Investors of any issuance of capital stock or other securities by the
Corporation. Each Investor shall have the right to purchase its proportionate
share of such issuance by giving written notice of its intention to exercise its
rights in accordance with Section 4(a) hereof, at a closing to be held no later
than 20 days after such Investor has received notice of the issuance from the
Corporation.
SECTION 5. Subordination. (a) All payment obligations and
liabilities of the Corporation and its subsidiaries to Non-Investor Stockholders
and affiliates of Non- Investor Stockholders in excess of $20,000 shall be
subordinate and junior in right of payment and performance, to the extent and in
the manner provided in this Agreement, to the prior payment and satisfaction in
full in cash of all the Obligations.
(b) Until all Obligations shall have been indefeasibly paid
and satisfied in full in cash, each Non- Investor Stockholder shall not (i)
demand, accelerate the maturity of, sue for or accept, take or receive from the
Corporation or any of its respective subsidiaries (or from any other Person) any
payment, assignment, transfer, grant or acquisition described in the preceding
clause (a) (including, without limitation, taking any action to cause the
rescission of any loan or any other security issued in connection with the
payments owed to it or to otherwise enforce its rights in respect of the
payments owed to it, (ii) cancel, set off or otherwise discharge any part of the
payments owed to it in partial or complete satisfaction of any obligation of any
nature whatsoever owing to the Corporation or any of its respective subsidiaries
by the Non-Investor Stockholder or (iii) without the prior written consent of
the Required Investors, commence or join with any other creditor of the
Corporation or any of its respective subsidiaries in the commencement of any
proceeding against the Corporation or any of its respective subsidiaries under
any bankruptcy, reorganization, readjustment or arrangement of debt,
receivership, liquidation, insolvency, fraudulent conveyance or other similar
law.
(c) If any payment or distribution of any character, whether
in cash, securities or other property, is received by a Non-Investor
Stockholders from the Corporation or any of its respective subsidiaries or any
other Person (including, without limitation, any receiver or trustee appointed
with respect to all or any part of the assets) upon or with respect to any
payment owed to it contrary to or in violation of any provision of this
Agreement, the Non-Investor Stockholder shall receive and hold the same as
trustee in trust for the benefit of the Investors and shall forthwith deliver
the same to the Collateral
-5-
<PAGE>
Agent in precisely the form received (except, where necessary, for the
endorsement or assignment of the Non-Investor Stockholder, which shall be made),
for application to the Obligations, whether or not then due. In the event of the
failure of the Non-Investor Stockholder to make any endorsement or assignment to
the Collateral Agent as required by the immediately preceding sentence, the
Collateral Agent is hereby irrevocably authorized to make the same.
SECTION 6. Tax Consolidation. From the date hereof, Cacomm
hereby agrees that it shall not make any federal, state or local tax filing on a
consolidated basis with the Corporation unless required by law. Cacomm further
agrees that it shall enter into a tax sharing agreement acceptable to the
Investors with respect to such consolidation upon the Investors' request.
SECTION 7. Agreement Not to Compete. (a) Cacomm acknowledges
and agrees that the value and goodwill of the Corporation's business would be
substantially impaired if Cacomm engaged in a Competitive Business. Accordingly,
Cacomm hereby agrees that until all of the Obligations are paid in full, Cacomm
shall not:
(i) engage in any Competitive Business at any
location in the states between Maine and North Carolina, whether such
engagement shall be as an employer, owner, employee, partner, advisor,
consultant, stockholder or other participant in any Competitive
Business (or in any similar capacity in which Cacomm derives an
economic benefit from a Competitive Business);
(ii) assist others in engaging in any
Competitive Business in the manner described in the
foregoing clause (i);
(iii) solicit, entice or induce any employee of
the Corporation or any subsidiary to terminate his or her
employment or engage in any Competitive Business;
(iv) solicit, entice or induce any vendor, customer
or distributor of the Corporation or any subsidiary to terminate or
materially diminish its relationship with the Corporation or such
subsidiary; or
(v) otherwise knowingly damage, disparage or
interfere with the Corporation or any subsidiary;
provided, however, that nothing contained in this Agreement shall prohibit (i)
Cacomm from owning in the aggregate less than 1% of a class of publicly-traded
securities issued by any Competitive Business or (ii) Cacomm from maintaining
its partnership interest in the Grand Alliance Partnership so long
-6-
<PAGE>
as Cacomm does not affirmatively vote for, approve or assist the partnership in
a Competitive Business.
(b) Cacomm acknowledges that a remedy at law for any breach or
threatened breach of the provisions of this Section 7 would be inadequate and
therefore agrees that the Corporation shall be entitled to injunctive relief;
provided, however, that nothing contained herein shall be construed as
prohibiting the Corporation from pursuing any other remedies available for any
such breach or threatened breach.
SECTION 8. Restrictions on Transfer. A Stockholder shall not
sell, transfer, assign, pledge or encumber its stock of the Corporation or any
of its rights hereunder, except to a transferee (a) who or which, prior to such
sale, transfer, assignment, pledge or encumbrance, has executed an agreement to
be bound by all the provisions of this Agreement or (b) pursuant to a sale,
transfer or assignment (i) in compliance with Rule 144 or (ii) as part of a
public offering of the stock of the Corporation pursuant to a registration
statement effective under the Securities Act.
SECTION 9. Additional Shares of Stock. In the event additional
shares of stock are issued by the Corporation to any Stockholder or transferee
thereof at any time during the term of this Agreement, either directly or upon
the conversion, exercise or exchange of securities of the Corporation
convertible into or exercisable or exchangeable for shares of stock, such
additional shares of stock shall, as a condition to such issuance, become
subject to the terms and provisions of this Agreement.
SECTION 10. Legend on Stock Certificates. Each certificate
representing shares of stock held by the Stockholders shall bear a legend
containing the following words:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF THE
SECURITIES REPRESENTED BY THIS CERTIFICATE AND/OR THE RIGHTS OF THE
HOLDER OF THE SECURITIES REPRESENTED BY THIS CERTIFICATE IN RESPECT OF
THE ELECTION OF DIRECTORS ARE SUBJECT TO THE TERMS AND CONDITIONS OF
THE STOCKHOLDERS' AGREEMENT DATED AUGUST 25, 1995, AMONG MAGNAVISION
CORPORATION AND CERTAIN HOLDERS OF THE OUTSTANDING CAPITAL STOCK OF
SUCH CORPORATION. COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST
BY WRITTEN REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF MAGNAVISION CORPORATION."
SECTION 11. Severability; Governing Law. If any provisions of
this Agreement shall be determined to be illegal and unenforceable by any court
of law, the remaining provisions shall be severable and enforceable in
accordance with their terms. This Agreement shall be governed by, and construed
in
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<PAGE>
accordance with, (a) the laws of the State of New York applicable to contracts
made and to be performed wholly therein and (b) the laws of the State of
Delaware with respect to corporations incorporated therein.
SECTION 12. Successors and Assigns. This Agreement shall bind
and inure to the benefit of the parties and their respective successors and
assigns, legal representatives and heirs.
SECTION 13. Notices. All notices, requests, consents and other
communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or by telecopy or sent by
nationally-recognized overnight courier or first class registered or certified
mail, return receipt requested, postage prepaid, addressed to such party at the
address set forth below or at such other address as may hereafter be designated
in writing by such party to the other parties:
(i) if to the Corporation, to:
MagnaVision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Telecopy: (908) 974-1106
Attention: Nicholas Mastrorilli, Sr.
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Telecopy: (212) 223-1151
Attention: Stephen M. Fields, Esq.
(ii) if to the Investors to their respective addresses
set forth on Schedule I hereto, with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopy: (212) 408-2420
Attention: Howard M. Bergtraum, Esq.; and
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street
Denver, Colorado 80202
Telecopy: (303) 623-1956
Attention: Steven Siegel, Esq.
-8-
<PAGE>
(iii) if to the Non-Investor Stockholders to their
respective addresses set forth on Schedule I
hereto.
All such notices, requests, consents and other communications shall be deemed to
have been delivered (a) in the case of personal delivery or delivery by
telecopy, on the date of such delivery, (b) in the case of dispatch by
nationally-recognized overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business day after the
posting thereof.
SECTION 14. Modification. Except as otherwise provided herein,
neither this Agreement nor any provisions hereof can be modified, changed,
discharged or terminated except by an instrument in writing signed by the
Corporation and the Stockholders.
SECTION 15. Headings. The headings of the sections of this
Agreement have been inserted for convenience of reference only and shall not be
deemed to be a part of this Agreement.
SECTION 16. Nouns and Pronouns. Whenever the context may
require, any pronouns used herein shall include the corresponding masculine,
feminine or neuter forms, and the singular form of names and pronouns shall
include the plural and vice-versa.
SECTION 17. Entire Agreement. This Agreement and the other
writings referred to herein or delivered pursuant hereto contain the entire
agreement among the parties hereto with respect to the subject matter hereof and
supersede all prior and contemporaneous agreements and understandings with
respect thereto.
SECTION 18. Counterparts; Facsimile Signatures. This Agreement
may be executed in any number of counterparts, and each such counterpart hereof
shall be deemed to be an original instrument, but all such counterparts together
shall constitute but one agreement. Facsimile counterpart signatures to this
Agreement shall be acceptable on the Closing Date if the originally executed
counterpart is delivered within a reasonable period thereafter.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Stockholders' Agreement on the date first above written.
MAGNAVISION CORPORATION
By:________________________________
Name:
Title:
IBJS CAPITAL CORPORATION
By:_________________________________
Name:
Title:
IBJ SCHRODER BANK & TRUST COMPANY
By:_________________________________
Name:
Title:
KOCO CAPITAL COMPANY, L.P.
By: Kisco Capital Corporation, its
General Partner
By:_________________________________
Name: Albert Pastino
Title:
CACOMM, INC.
By:_________________________________
Name:
Title:
NICHOLAS MASTRORILLI, SR.
By:_________________________________
Name: Nicholas Mastrorilli, Sr.
<PAGE>
SCHEDULE I
Stockholders
Number of Common
Name and Address of Stockholder Stock Equivalents
IBJS Capital Corporation 1,935,496
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
IBJ Schroder Bank & Trust Company 3,870,995
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
KOCO Capital Company, L.P. 3,870,995
111 Radio Circle
Mt. Kisco, New York 10549
Telecopier: (914) 241-7476
Attention: Albert Pastino
Cacomm, Inc. Approximately
[Insert Address] 15,684,222
<PAGE>
Exhibit 10.(j)
NON-COMPETITION
AGREEMENT, dated as of August 25,
1995 (the "Agreement"), between
MAGNAVISION CORPORATION, a New
Jersey corporation (the
"Corporation") and NICHOLAS
MASTRORILLI, SR., an individual
"Mastrorilli").
The Corporation, a wholly-owned subsidiary of
MagnaVision Corporation, a Delaware corporation, is engaged in
the business of designing, engineering, developing, constructing
and marketing private cable and wireless systems and services for
colleges and other end-users. Cacomm, Inc. is the registered
holder of approximately 70 percent of the outstanding capital
stock of Magna-Vision Corporation, Mastrorilli is the registered
holder of approximately 34 percent of the outstanding capital
stock of Cacomm, Inc. Contemporaneously with the execution and
delivery of this Agreement, the Corporation, MagnaVision
Corporation and the Investors (as defined in the Securities
Purchase Agreement) entered into a Securities Purchase Agreement
dated the date hereof.
NOW, THEREFORE, in consideration of and as an
inducement to the Investors entering into the Securities Purchase
Agreement and other documents related thereto, Mastrorilli hereby
agrees with the Corporation as follows:
1. Definition.
For all purposes of this Agreement, "Competitive
Business" shall mean any business involving the design,
engineering, development, construction and/or marketing of
private cable and wireless systems and services in any city or
county in any state from Maine to North Carolina of the United
States, if such business or the cable systems or services
designed, engineered, developed, constructed and/or marketed by
it compete, directly or indirectly, with the Corporation's
business.
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2. Agreement Not to Compete or Interfere with Business.
Mastrorilli acknowledges that (a) he is receiving
benefits from the purchase of securities by the Investors from
his indirect interest in the Corporation, (b) the Corporation and
its affiliates conduct their business throughout [the United
States] and (c) due to the highly competitive nature of the
business, he agrees that the value and goodwill of the business
would be substantially impaired if Mastrorilli engaged in a
Competitive Business. Accordingly, Mastrorilli hereby agrees
that, during the period commencing on the date hereof and for a
period of three years thereafter, he will not:
(a) engage, directly or indirectly, in any Competitive Business at
any location in the United States, whether such engagement shall
be as an employer, officer, director, owner, partner, advisor,
consultant, stockholder or other participant in any Competitive
Business (or in any similar capacity in which Mastrorilli derives
an economic benefit from a Competitive Business);
(b) assist others in engaging in any Competitive Business in the
manner described in the foregoing clause (a);
(c) solicit, entice or induce any employee of the Corporation or any
affiliate thereof to terminate his or her employment or engage in
any Competitive Business;
(d) solicit, entice or induce any vendor, customer or distributor of
the Corporation or any affiliate to terminate or materially
diminish its relationship with the Corporation or such affiliate;
or
(e) otherwise knowingly damage, disparage or interfere with the
Corporation or any affiliate;
provided, however, that nothing contained in this Agreement shall
prohibit (i) Mastrorilli from owning in the aggregate less than
1% of a class of publicly-traded securities issued by any
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<PAGE>
Competitive Business or (ii) Mastrorilli from maintaining his
indirect partnership interest in the Grand Alliance Partnership
so long as Mastrorilli does not affirmatively vote for, approve
or assist the partnership in a Competitive Business.
3. Confidentiality.
(a) Mastrorilli acknowledges and agrees that certain information he
has received or will receive from the Corporation and its
affiliates constitutes the confidential and proprietary trade
secrets of the Corporation and its affiliates and that
Mastrorilli's protection thereof is essential to this Agreement
and a condition to Mastrorilli's use and possession thereof.
Mastrorilli shall retain in strict confidence any and all such
confidential information received from the Corporation and its
affiliates (the "Confidential Information") and under no
circumstances shall Mastrorilli distribute or in any way
disseminate Confidential Information, directly or indirectly, to
any third party without the prior written consent of the
Corporation.
(b) Notwithstanding the above, Mastrorilli shall have no liability to
the Corporation or its affiliates with respect to Confidential
Information which:
(i) was generally known and available in the public domain at the
time it was disclosed or becomes generally known and available in
the public domain through no fault of Mastrorilli;
(ii) is disclosed with the prior written consent of the Corporation or
its affiliate;
(iii) becomes known to Mastrorilli from a source other than the
Corporation's or its affiliates' without breach of this Agreement
by Mastrorilli and otherwise not in violation of the
Corporation's or its affiliates' rights; or
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<PAGE>
(iv) is disclosed pursuant to the order or requirement of a court,
administrative agency, or other governmental body; provided, that
Mastrorilli shall provide prompt, advanced notice thereof to
enable the Corporation or its affiliate to seek a protective
order or otherwise prevent such disclosure.
(c) Mastrorilli agrees to indemnify the Corporation or its affiliates
for any damages the same may suffer as a result of Mastrorilli's
or his agents' failure to abide by the provisions of this Section
3.
(d) The rights and obligations of the parties under this Section 3
shall survive for two (2) years following the expiration or
termination of this Agreement.
4. Acknowledgment.
Mastrorilli acknowledges that the provisions of this
Agreement are not designed to prevent Mastrorilli from earning a
living or fostering his own career. The provisions of this
Agreement are designed to prevent any third party from gaining
unfair advantage from Mastrorilli's knowledge of confidential and
proprietary information relating to the Corporation and any
affiliate or otherwise damaging or interfering with the business
of the Corporation or from his participation in any Competitive
Business.
5. Survival; Remedies.
Mastrorilli's covenants under this Agreement shall
survive termination of Mastrorilli's employment with the
Corporation. Mastrorilli acknowledges that a remedy at law for
any breach or threatened breach of the provisions of this
Agreement would be inadequate and therefore agrees that the
Corporation shall be entitled to injunctive relief; provided,
however, that nothing contained herein shall be construed as
prohibiting the Corporation from pursuing any other remedies
available for any such breach or threatened breach.
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<PAGE>
6. Benefits of Agreement.
This Agreement and the rights and obligations of the
parties hereto shall bind and inure to the benefit of any
successor or successors of the Corporation by reorganization,
merger or consolidation or otherwise and any assignee of all or
substantially all of its business and properties.
7. Severability.
It is the desire and intent of the parties hereto that
the provisions of this Agreement shall be enforced to the fullest
extent permissible under the laws and public policies applied in
each jurisdiction in which enforcement is sought. Accordingly,
if any particular provision of this Agreement shall be
adjudicated to be invalid or unenforceable, such provision shall
be deemed amended to delete therefrom the portion thus
adjudicated to be invalid or unenforceable, such deletion to
apply only with respect to the operation of such provision in the
particular jurisdiction in which such adjudication is made. In
addition, if any one or more of the provisions contained in this
Agreement shall for any reason be held to be excessively broad as
to duration, geographical scope, activity or subject, it shall be
construed by limiting and reducing it, so as to be enforceable to
the extent compatible with the applicable law as it shall then
appear.
8. Notices.
All notices or other communications required or
permitted hereunder shall be in writing and sufficient if (a)
delivered personally, (b) sent by nationally-recognized overnight
courier or (c) sent by certified mail, postage prepaid, return
receipt requested, addressed as follows:
if to the Corporation, to:
MagnaVision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Facsimile: (908) 974-1106
Attention: Nicholas Mastrorilli, Sr.
with a copy to:
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<PAGE>
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Facsimile: (212)223-1151
Attention: Stephen M. Fields, Esq.
if to the Mastrorilli, to:
Mr. Nicholas Mastrorilli, Sr.
517 Morris Avenue
Spring Lake, New Jersey 07762
or, in each case, to such other address as the party to whom
notice is to be given may have furnished to the other party in
writing in accordance herewith. Any such communication shall be
deemed to have been given (a) when delivered, if personally
delivered, (b) on the business day after dispatch, if sent by
nationally-recognized overnight courier and (c) on the third
business day after dispatch, if sent by mail.
9. Entire Agreement; Amendments; Prior Agreements.
The foregoing is the entire agreement of the parties
with respect to the subject matter hereof and may not be amended,
supplemented, canceled or discharged except by a written
instrument executed by both parties hereto. This Agreement
supersedes any and all prior agreements between the parties
hereto with respect to the matters covered hereby.
10. Governing Law.
This Agreement shall be governed by and construed in
accordance with the laws of the State of New Jersey without
regard to the laws and principles thereof which would direct the
application of the laws of another jurisdiction.
11. Headings.
The headings of the sections of this Agreement have
been inserted for convenience of reference only and shall not be
deemed to be part of this Agreement.
*1
6
<PAGE>
IN WITNESS WHEREOF, this Agreement has been executed
and delivered the date first above written.
MAGNAVISION CORPORATION
By:
Name:
Title:
Nicholas Mastrorilli, Sr.
<PAGE>
Exhibit 10.(k)
INDEMNIFICATION AGREEMENT dated as of August 25, 1995, between
CACOMM, INC., a Delaware corporation (the "Company"), and
MAGNAVISION CORPORATION, a Delaware corporation ("Holdings"),
IBJS CAPITAL CORPORATION, a Delaware corporation ("IBJSCC"), IBJ
SCHRODER BANK & TRUST COMPANY, a Delaware corporation ("IBJS")
and KOCO CAPITAL COMPANY, L.P., a Delaware limited partnership
("Koco" together with IBJSCC and IBJS each, an "Investor" and
collectively, the "Investors").
Pursuant to that certain Securities Purchase Agreement
dated as of the date hereof (the "Securities Purchase
Agreement"), among MagnaVision Corporation ("MagnaVision") and
Holdings and the Investors, the Investors have agreed to purchase
Notes and Warrants from MagnaVision and Holdings. The Company is
the registered owner of approximately 70 percent of the
outstanding capital stock of Holdings (the "Common Stock"). In
consideration of the Investors entering into the Securities
Purchase Agreement, the Company has agreed to indemnify each of
the Investors and Holdings from certain losses.
NOW, THEREFORE, the parties hereto hereby agree as
follows:
1. Indemnification.
(a)The Company shall indemnify and hold harmless
each Investor and Holdings from and against all expenses, losses,
claims, damages and liabilities, including, without limitation,
attorneys' fees, judgments, fines and amounts paid in settlement
(all such expenses, collectively, the "Costs"), actually and
reasonably incurred by an Investor or Holdings arising from or
relating to any one or both of the following events (the
"Indemnification Events"):
(i) any claims, including, without limitation,
claims by financial consultants and investments banks,
asserted against Holdings, MagnaVision or the Investors
arising out of or in connection with an option, warrant or
other right exercisable by such claimant for capital stock
of Holdings or MagnaVision, which right was not disclosed to
the Investors on Schedule 4.3(b) to the Securities Purchase
Agreement; or
(ii) any claims asserted against Holdings,
MagnaVision or an Investor arising out of or in connection
with (A) Midlantic
1
<PAGE>
Bank's agreement to sell the Holdings shares owned by George
Callas to Finial Investment Corporation, pursuant to an agreement
dated June 23, 1995, and (B) the rights exercised by George
Callas, dated July 12, 1995, pursuant to a June 27, 1994, letter
agreement between George Callas and Midlantic Bank.
(b) The Company shall reimburse each Investor for
the Costs incurred by it upon presentment to the Company of
appropriate documentation thereof.
(c) If as a result of any Indemnification Event
Holdings is required to issue any shares of its Common Stock or
any option or warrant to purchase shares of its Common Stock, the
Company shall contribute to Holdings for no consideration that
number of shares of Common Stock required to be issued including
upon exercise of any such option or warrant.
2. Assumption of Defense.
Upon notification in writing by the Investors or
Holdings of an actual or threatened Indemnification Event, the
Company shall have the right and option to assume the defense of
such claim by notifying such Investor or Holdings of its decision
within 20 Business Days of receipt of such notice and by
specifically acknowledging its obligation to indemnify the
Investors and Holdings with respect to such Indemnification
Event. Upon such assumption, the Company will consult with the
Investors and Holdings with respect to the defense of such claim.
3. Counterparts.
This Agreement may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an
original instrument, but all such counterparts together shall
constitute but one agreement.
4. Descriptive Headings.
Descriptive headings are for convenience only and shall
not control or affect the meaning or construction of any
provision of this Agreement.
5. Modification.
2
<PAGE>
This Agreement shall not be altered or otherwise
amended except pursuant to an instrument in writing signed by
each of the parties hereto.
6. Notices.
All notices, requests or other communications pursuant
to this Agreement shall be in writing and shall be deemed to be
sufficient if delivered personally, telecopied, sent by
nationally-recognized, overnight courier guaranteeing next day
delivery or mailed by registered or certified mail (return
receipt requested), postage prepaid, to the parties at the
following addresses (or at such other address for a party as
shall be specified by like notice):
(i) if to the Company, to:
Cacomm, Inc.
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Telecopier: (908) 974-1106
(ii) if to Holdings, to:
MagnaVision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Telecopier: (908) 974-1106
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Telecopier: (212) 223-1151
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<PAGE>
(iii) if to IBJSCC or IBJS, to:
IBJS Capital Corporation
One State Street
New York, New York 10004
Attention: Paul Echausse
Telecopier: (212) 952-1629
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum, Esq.
Telecopier: (212) 408-2420
(iv) if to Koco, to:
Koco Capital Company, L.P.
111 Radio Circle
Mt. Kisco, New York 10549
Attention: Albert Pastino
Telecopier: (914) 241-7476
with a copy to:
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street
Denver, CO 80202
Attention: Steven Siegel, Esq.
Telecopier: (303) 623-1956
All such notices, requests and other communications shall be
deemed to have been given and received (i) in the case of
personal delivery, on the date of such delivery, (ii) in the case
of delivery by telecopy, on the date of such delivery, (iii) in
the case of delivery by nationally-recognized, overnight courier,
on the Business Day following dispatch, and (iv) in the case of
mailing, on the third Business Day following such mailing. As
used herein, "Business Day" shall mean any day that is not a
Saturday, Sunday or a day on which banking institutions in New
York, New York are not required to be open.
7. Governing Law.
This Agreement shall be governed by and construed in
accordance with the domestic laws of the State of New York
without giving effect to any choice or conflict of law
4
<PAGE>
provision or rule (whether of the State of New York or any other
jurisdiction) that would cause the application of the laws of any
jurisdiction other than the State of New York.
8. No Third Party Beneficiaries; Successors and
Assigns.
Except as expressly provided herein, this Agreement
shall not confer any rights or remedies upon any person or entity
other than the parties hereto and their respective successors,
permitted assigns, representatives, heirs and estate, as the case
may be. This Agreement shall be binding upon and inure to the
benefit of the parties hereto and their respective successors and
permitted assigns, representatives, heirs and estates, as the
case may be. This Agreement shall not be assignable by either
party without the prior written consent of the other party
hereto.
9. Entire Agreement.
This Agreement contains the entire agreement between
the parties hereto with respect to the transactions contemplated
hereby and supersedes all prior agreements or understandings
between the parties with respect thereto.
10. Waiver of Jury Trial.
Each of the parties hereto irrevocably waives all right
to trial by jury in any action, proceeding or counterclaim
arising out of or relating to this Agreement.
*1
5
<PAGE>
IN WITNESS WHEREOF, each of the undersigned has duly
executed this Indemnification Agreement as of the date first
above written.
CACOMM, INC.
By:
Name:
Title:
MAGNAVISION CORPORATION
By:
Name:
Title:
IBJS CAPITAL CORPORATION
By:
Name:
Title:
IBJ SCHRODER BANK & TRUST
COMPANY
By:
Name:
Title:
KOCO CAPITAL COMPANY, L.P.
By: Kisco Capital
Corporation, its
General Partner
<PAGE>
By:
Name: Albert Pastino
Title:
<PAGE>
Exhibit 10.(l)
LOCKBOX SERVICE AGREEMENT
Lockbox Service Agreement (this "Lockbox Service
Agreement"), dated as of August 25, 1995, among MagnaVision
Corporation, a New Jersey corporation (the "Company"), University
Connection, Inc., a New Jersey corporation ("University" together
with the Company, the "Companies"), IBJS Capital Corporation
("IBJSCC") and IBJ Schroder Bank & Trust Company ("the Bank") is
made pursuant to the Securities Purchase Agreement, dated as of
August 25, 1995, by and among the Companies, the Bank and other
parties thereto (as the same maybe amended, modified or otherwise
supplemented from time to time, the "Securities Purchase
Agreement"). Capitalized terms used herein which are defined in
the Securities Purchase Agreement shall have the same meanings as
defined therein unless the context hereof requires otherwise.
R E C I T A L S
1. Pursuant to the Securities Purchase Agreement, the Investors have
agreed to purchase Notes and Warrants from the Obligors in the
amount and under the terms and conditions set forth therein.
2. One of the conditions precedent to the Investors entering into
the Securities Purchase Agreement is the execution and delivery
of this Lockbox Service Agreement.
3. Pursuant to the Security Agreement and Collateral Assignment,
dated the date hereof, between the Companies and the Bank, the
Companies have authorized the Bank to collect any payments due
the Companies under the Cable Contracts and License upon the
occurrence and during the continuance of and Event of Default.
In consideration of the premises, the terms and
conditions herein contained and other good and valuable
consideration, the receipt and sufficiency of which are hereby
acknowledged, the parties hereto hereby agree as follows:
1. Appointment of Bank as Agent.
IBJSCC hereby appoints the Bank and the Bank hereby
accepts IBJSCC's appointment as its agent for the collection of
Payments (as defined below) payable to IBJSCC as the Collateral
Agent pursuant to the Collateral Assignment.
1. Companies Responsibilities.
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<PAGE>
(a) The Companies shall execute the post office and other forms
necessary to enable the Bank to have access to a post office box
at the post office whose address appears below (the "Lockbox").
The Companies shall and hereby irrevocably designate the Bank as
their agent and authorize it to open the Lockbox and remove its
contents and to act on its behalf in connection with the rental
of the Lockbox.
Lockbox Address:
MagnaVision Corporation
P.O. Box 21548
Newark, New Jersey 07101-4128
(a) Instructing Remitters. The Companies shall irrevocably instruct
the other parties to the Cable Contracts and the License to remit
all payments made under or in respect of the Cable Contracts and
License (the "Payments") to the Lockbox. In the event that
notwithstanding the foregoing the Companies shall receive any
Payments regardless of the form thereof, the same shall be held
in trust for, and immediately be delivered to the Bank. The
Companies shall also advise the other parties to the Cable
Contracts and the License that neither the Companies nor the Bank
shall be responsible for cash or cash equivalent remittances and
that business reply or other acceptable mail such as Registered,
Certified, Postage Due, etc. may not be addressed to the Lockbox.
(b) Authorization. The Bank is irrevocably authorized to collect and
open all mail in the Lockbox, including all Payments for the
Companies.
(c) Bank's Responsibilities.
(d) Collection. The Bank shall from time to time open and remove the
contents of the Lockbox. Upon final collection of any Payments,
the Bank will credit such Payments to a blocked non-interest
bearing cash collateral account established and maintained by the
Bank, and with respect to which the Bank shall have sole control,
possession and dominion (the "Cash Collateral Account"). The
Companies shall have no right to draw checks on or otherwise seek
withdrawals under the Cash Collateral Account.
2
<PAGE>
(e) Upon final collection of any Payments, the Bank will have the
right to set aside and hold in the Cash Collateral Account, and
to apply against the Obligations when due, those amounts, as
determined by the Bank, payable on the Obligations; and provided
that no Event of Default shall exist or be continuing, the Bank
will transfer the balance of such Payments in accordance with the
Companies' instructions.
(f) Endorsement and Deposit. The Bank shall have the right to
receive, indorse, assign and/or deliver in the name of the Bank
or the Companies any and all checks, drafts and other instruments
for the payment of money relating to the Payments, and the
Companies hereby waive notice of presentment, protest and
non-payment of any instrument so indorsed. The Companies hereby
constitute the Bank or the Bank's designee as their attorney with
power to indorse its name upon any notes, acceptances, checks,
drafts, money orders or other evidences of payment.
(g) Discrepancy in Amount. If the numerical amount of a check differs
from the written amount, the check will be deposited for the
written amount.
(h) Returned Items. A check returned unpaid for insufficient funds
will be sent for collection a second time. A check returned
unpaid for any other reason or a check returned unpaid a second
time will, to the extent previously credited pursuant to
subparagraph 2(a), be charged back to the Companies' account and
a copy of the check, together with a debit advice, will be sent
to the Companies.
(i) Rights and Powers of the Bank on Default.
(j) Upon the occurrence and during the continuance of an Event of
Default, all Payments shall, at the option of the Bank,
automatically be credited to the Cash Collateral Account. During
the continuance of any such Event of Default, the Bank shall have
the right to continue to hold as cash collateral all or such
portion as the Bank shall in its sole discretion determine of the
amounts in the Cash Collateral Account or to apply all or such
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portion as the Bank shall in its sole discretion determine of
such amounts against the Obligations of the Obligors under the
Transaction Documents, as the same may be amended, extended,
increased, modified or refinanced from time to time, including
all costs and expenses incurred by the Bank enforcing any
thereof, whether or not such is instituted.
(k) At any time the Bank shall have the right to send notice of the
assignment of, and the Collateral Agent's Security Interest in,
the Payments, to the other parties to the Cable Contracts and the
License. The Bank's actual accrued collection expenses,
including, but not limited to, stationery and postage, telephone
and telegraph, secretarial and clerical expenses and the salaries
of any collection personnel used for collection, shall be charged
to the Companies' account and added to the Obligations.
(l) Limitation of Liability.
The Bank shall not, under any circumstances or in any
event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or
payment of any of the Payments or any instrument received in
payment thereof, or for any damage resulting therefrom unless
done maliciously or with gross negligence. Upon and at any time
during the continuance of an Event of Default, the Bank may,
without notice or consent from the Companies, sue upon or
otherwise collect, extend the time of payment of, or accept to
the Bank, compromise or settle for cash, credit or upon any terms
any of the Payments or any other securities, instruments or
insurance applicable thereto and/or release an obligor thereof.
1. Governing Law; Terms. This Lockbox Service Agreement shall be
governed by and construed in accordance with the laws of the
State of New York without regard to the laws and principles
thereof which would direct the application of the laws of another
jurisdiction.
2. Other Provisions. This Lockbox Service Agreement is the "Lockbox
Service Agreement" referred to in the Securities Purchase
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Agreement and is subject to the provisions of the Securities
Purchase Agreement made expressly applicable hereto.
3. WAIVER OF TRIAL BY JURY. THE BANK, THE COLLATERAL AGENT AND THE
COMPANIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
LOCKBOX SERVICE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREIN. FURTHER, THE COMPANIES HEREBY CERTIFY THAT NO
REPRESENTATIVE OR AGENT OF THE BANK OR COLLATERAL AGENT, OR
COUNSEL TO THE BANK OR COLLATERAL AGENT, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK OR COLLATERAL AGENT WOULD
NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER
OF RIGHT TO JURY TRIAL PROVISION. THE COMPANIES ACKNOWLEDGE THAT
THE BANK AND THE COLLATERAL AGENT HAVE BEEN INDUCED TO ENTER INTO
THIS LOCKBOX SERVICE AGREEMENT AND THE SECURITIES PURCHASE
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.
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IN WITNESS WHEREOF, the Companies, IBJSCC and the Bank
have caused this Lockbox Service Agreement to be duly executed
and delivered by their duly authorized representatives as of the
date first above written.
MAGNAVISION CORPORATION
By:
Name:
Title:
UNIVERSITY CONNECTION, INC.
By:______________________________
Name:
Title:
IBJS CAPITAL CORPORATION
By:______________________________
Name:
Title:
Accepted:
IBJ SCHRODER BANK & TRUST
COMPANY
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By:_________________________
Name:
Title:
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AMENDMENT NO. 1 TO THE SECURITIES PURCHASE AGREEMENT dated as of June 3, 1996
(the "Amendment"), by and among MAGNAVISION CORPORATION, a New Jersey
corporation and with its successors and assigns (the "Company"), MAGNAVISION
CORPORATION, a Delaware corporation and parent of the Company and with its
successors and assigns ("Holdings"), MAGNAVISION WIRELESS CABLE, INC., a
Delaware corporation and with its successors and assigns (the "New Subsidiary"),
IBJS CAPITAL CORPORATION, a Delaware corporation ("IBJSCC"), IBJ SCHRODER BANK &
TRUST COMPANY, a Delaware corporation ("IBJS"), and KOCO CAPITAL COMPANY, L.P.,
a Delaware limited partnership ("KOCO"; and together with IBJSCC and IBJS each,
an "Investor" and collectively, the "Investors").
PREAMBLE
WHEREAS, pursuant to the Securities Purchase Agreement, dated August 25, 1995
(the "Securities Purchase Agreement"), among the Company, Holdings and the
Investors, among other things, the Investors have agreed to make, and have made,
certain loans to the Company;
WHEREAS, the Company and Holdings have requested, and, upon this Amendment
becoming effective, the Investors have agreed to make one or more working
capital loans to the Company out of the existing Commitment, in an aggregate
principal amount not to exceed $1,200,000, subject to the terms and conditions
set forth in this Amendment; and
WHEREAS, in consideration of the one or more loans to be made by the Investors,
(a) the Company has agreed (i) to transfer the License to the New Subsidiary and
to pledge all of its shares in the New Subsidiary to the Investors and (ii) to
make certain amendments to the Stockholders' Agreement, (b) Holdings has agreed
to issue additional warrants to the Investors exercisable for the Common Stock
of Holdings and (c) the New Subsidiary has agreed to grant a security interest
in the License to the Investors.
NOW THEREFORE, in consideration of the foregoing premises and the mutual
covenants and conditions set forth herein, the Company, Holdings, the New
Subsidiary and the Investors hereby agree as follows:
1. Definitions. Unless otherwise defined herein, all capitalized terms
used in this Amendment shall have the meanings given to such terms in
the Securities Purchase Agreement.
2. Amendment to Section 1.1. Section 1.1 of the
Securities Purchase Agreement is hereby
amended as follows:
by adding the following defined terms:
"Advance" shall mean a New Contract Advance,
Interim Advance, Working Capital Advance or
Other Advance.
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"Amended and Restated Lockbox Service Agreement"
shall mean the Amended and Restated Lockbox
Service Agreement dated June 3, 1996, among the
Company, University Connection, Inc., Magnavision
Private Cable, Inc. and the Collateral Agent.
"Amended and Restated Notes" shall mean the
Amended and Restated Notes, dated June 3, 1996,
issued to the Investors by Holdings, the Company
and the New Subsidiary pursuant to the Securities
Purchase Agreement.
"Amended and Restated Stockholders' Agreement"
shall mean the Amended and Restated Stockholders'
Agreement, dated June 3, 1996, among Holdings, the
Company, the New Subsidiary, the Investors and
Cacomm.
"Amendment No. 1 to Registration Rights
Agreement" shall mean Amendment No. 1 to
Registration Rights Agreement dated June 3,
1996, between Holdings and the Investors.
"Asset Sale" shall have the meaning given to such
term in Section 7.27 hereof.
"Assignment and Assumption Agreements" shall mean
the (a) General Indenture of Conveyance,
Assignment and Transfer, dated June 3, 1996 from
the Company to the New Subsidiary and (b)
Indenture of Assumption of Liabilities, dated June
3, 1996 from the New Subsidiary to the Company.
"Cash Liquidity" shall mean the sum of the
Company's cash on deposit with IBJS.
"Cash Receipts" shall mean all cash payments
received by the Company or its Subsidiaries from
customers pursuant to the Cable Contracts,
including, without limitation, such cash payments
for service, maintenance and security deposits.
"Interim Advance" shall have the meaning given to
such term in Section 2.2(c) hereof.
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"Investor New Subsidiary Directors" shall mean the
directors of the New Subsidiary if designated by
the Investors pursuant to Section 2(g) of the
Stockholders' Agreement.
"Irrevocable Proxy" shall mean the irrevocable
proxy dated the date hereof executed by the
Company pursuant to Section 9 of the Stockholders'
Agreement and delivered to the Investors
hereunder.
"New Warrants" shall have the meaning given to
such term in Section 2.1(b) hereof.
"Original Warrants" shall have the meaning given
to such term in Section 2.1(b) hereof.
"Other Advance" shall have the meaning given to
such term in Section 2.2(a) hereof.
"Outlets" shall mean the number of outlets
pursuant to Cable Contracts existing as of the
date hereof and pursuant to Accepted New
Contracts.
"Pledge Agreements" shall mean (a) the Pledge
Agreement, dated June 3, 1996, between the Company
and the Collateral Agent in respect of the New
Subsidiary shares of common stock now or hereafter
owned by the Company and (b) the Pledge Agreement,
dated June 3, 1996, between the Company and the
Collateral Agent in respect of the Magnavision
Private Cable, Inc. shares of common stock now or
hereafter owned by the Company.
"Working Capital Advance" shall have the meaning
given to such term in Section 2.2(a) hereof."
by deleting therefrom the definition of the following defined terms in their
respective entireties and substituting in lieu thereof the following
definitions:
"Agreement" shall mean this Securities Purchase
Agreement as defined in the caption hereof, as
amended by Amendment No. 1 to the Securities
Purchase Agreement, dated June 3, 1996, among the
Company, Holdings, the New Subsidiary and the
Investors.
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"Cacomm" shall mean Cacomm, Inc., a New Jersey
corporation.
"Change in Control" shall mean (a) with respect to
Holdings, that Cacomm ceases to be the beneficial
and record owner of at least fifty (50) percent of
the issued and outstanding Common Stock of
Holdings or (b) with respect to Cacomm, that
Nicholas Mastrorilli, Sr. and members of his
immediate family shall cease to own beneficially
and of record at least fifty (50) percent of the
voting capital stock of Cacomm on a fully-diluted
basis or (c) with respect to the Company, that
Holdings ceases to be the beneficial and record
owner of one-hundred (100) percent of the issued
and outstanding capital stock of the Company or
(d) with respect to the New Subsidiary, that the
Company ceases to be the beneficial and record
owner of one-hundred (100) percent of the issued
and outstanding capital stock of the New
Subsidiary, except with respect to the irrevocable
proxy to vote the shares of common stock of the
New Subsidiary, dated the date hereof, issued by
the Company to the Investors pursuant to Section 9
of the Stockholders' Agreement.
"Collateral Assignment" shall mean the Security
Agreement and Collateral Assignment, dated August
25, 1995, among the Company, University
Connection, Inc. and the Collateral Agent with
respect to the Collateral, as amended by Amendment
No. 1 to the Security Agreement and Collateral
Assignment, dated June 3, 1996, among the Company,
University Connection, Inc., Magnavision Private
Cable, Inc., the New Subsidiary and the Collateral
Agent.
"Lockbox Service Agreement" shall mean the Lockbox
Service Agreement dated August 25, 1995, as
amended by the Amended and Restated Lockbox
Service Agreement.
"Note or Notes" shall mean the Senior Subordinated
Notes issued by Holdings and the Company pursuant
to the Securities Purchase Agreement, dated August
25, 1995, and the Amended and Restated Notes and
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such term shall include each note which shall be
delivered in substitution or exchange for any such
note which is at the time outstanding.
"Obligors" shall mean the Company, Holdings and
the New Subsidiary.
"Registration Rights Agreement" shall mean the
Registration Rights Agreement dated August 25,
1995, as amended by Amendment No. 1 to
Registration Rights Agreement.
"Stockholders' Agreement" shall mean the
Stockholders' Agreement, dated August 25, 1995,
among Holdings, the Investors and Cacomm, as
amended by the Amended and Restated
Stockholders' Agreement.
"Transaction Documents" shall mean this Agreement,
the Notes, Warrants, Collateral Assignment,
Registration Rights Agreement, Stockholders'
Agreement, Cable Contracts, License,
Non-Competition Agreement, Indemnification
Agreement, Lockbox Service Agreement, Pledge
Agreements, Assignment and Assumption Agreements
and Irrevocable Proxy."
"Warrants" shall mean the Original Warrants and
the New Warrants.
3. Amendment to Section 2.1(a). Section 2.1(a)
of the Securities Purchase Agreement is
hereby amended by deleting Section 2.1(a)
thereof in its entirety and substituting in
lieu thereof the following:
"(a) The Company shall authorize
the issuance to the Investors of its Notes in an aggregate principal amount not
to exceed $5,000,000 of which (i) $735,000 of the principal amount shall be
purchased on the Closing Date, (ii) $1,765,000 shall be purchased on the Second
Closing Date and (iii) up to $2,500,000 of principal amount of the Notes, shall
be advanced, from time to time after the Closing Date in accordance with Section
2.2(a)(iii) hereof, the Notes to be substantially in the form of Exhibit A
attached hereto. The Company, Holdings and the New Subsidiary shall be
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co-obligors with respect to each payment of principal, of premium, and accrued
interest on the Notes, or any other amount due thereunder."
4. Amendment to Section 2.1(b). Section 2.1(b)
of the Securities Purchase Agreement is
hereby amended by deleting Section 2.1(b)
thereof in its entirety and substituting in
lieu thereof the following:
"(b) Holdings shall authorize the
issuance to the Investors of (i) warrants to purchase 2,438,177 shares of Common
Stock of Holdings and (ii) warrants to purchase 7,239,309 shares of Common Stock
of Holdings (collectively, the "Original Warrants") and (iii) warrants to
purchase 7,410,924 shares of Common Stock of Holdings (the "New Warrants"),
which Warrants shall be substantially in the form of Exhibits B-1, B-2 and B-3
attached hereto."
5. Amendments to Section 2.2. Section 2.2 of
the Securities Purchase Agreement is hereby
amended as follows:
by deleting Section 2.2(a) thereof in its entirety and
substituting in lieu thereof the following:
"(a) The Obligors hereby agree to
sell to the Investors and, subject to the terms and conditions herein set forth,
the Investors agree to purchase the Notes from the Obligors in an aggregate
principal amount not to exceed $5,000,000 of which (i) $735,000 aggregate
principal amount of the Notes shall be purchased on the Closing Date for an
aggregate purchase price of $734,000, (ii) $1,765,000 aggregate principal amount
of the Notes shall be purchased for $1,765,000 on the Second Closing Date and
(iii) on the Closing Date and from time to time after the Closing Date, up to
$2,500,000 aggregate principal amount of the Notes shall be advanced from time
to time (A) to the Company for Accepted New Contracts in an amount equal to
fifty (50) percent of the Net Present Value until such time as the Company and
its Subsidiaries shall have in the aggregate a minimum of 10,000 Outlets under
their Cable Contracts at which time the amount shall be equal to sixty-five (65)
percent of the Net Present Value (each, a "New Contract Advance"), each New
Contract Advance to be made in two installments as follows: (x) no earlier than
thirty (30) days prior to the Scheduled Construction Date under an Accepted New
Contract in an amount equal to the Construction Costs for such Accepted New
Contract and (y) upon the Completion and Acceptance Date under an Accepted New
Contract in an amount equal to the difference between the New Contract Advance
and the Construction Costs previously advanced to the Company for such Accepted
New Contract, (B) to the Company to pay the expenses set forth on Schedule
2.2(a) (the "Interim Advance"), (C) to the Company and to the New Subsidiary for
working capital loans (each, a "Working Capital Advance"); provided, however,
that (x) no more than one Working Capital Advance shall be made to the Company
within any calendar month, (y) the amount of each Working Capital Advance after
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the initial Advance shall not exceed $250,000 and (z) the aggregate principal
amount of all such Working Capital Advances hereunder shall not exceed
$1,200,000; and (D) following the election of three Investor New Subsidiary
Directors, to the New Subsidiary solely for funding the operations of the New
Subsidiary, so as to effectuate the sale of the capital stock of the New
Subsidiary or an Asset Sale by the New Subsidiary (each, an "Other Advance")
from the then unadvanced balance of the Investors Commitment hereunder."
by deleting Section 2.2(b) thereof in its entirety and
substituting in lieu thereof the following:
"(b) Upon the Company's or the New
Subsidiary's delivery to the Investors of a written notice (a "Notice of
Borrowing") not later than 12:00 noon (New York City time) four (4) Business
Days preceding each Advance signed by the chief financial officer or treasurer
of the Company or the New Subsidiary, specifying the date (which shall be a
Business Day) and aggregate principal amount of the installment to be borrowed
under such Advance certifying as to the satisfaction of (A) with respect to a
New Contract Advance, the conditions set forth in Section 6.1(b) hereof and (B)
with respect to a Working Capital Advance or Other Advance, the conditions set
forth in Section 6.1(c) hereof, and accompanied by (A) for a New Contract
Advance, a copy of the executed Accepted New Contract and calculation of the New
Contract Advance and borrowing thereunder and (B) for a Working Capital Advance
or Other Advance, a copy of the calculation of the Working Capital Advance or
Other Advance, each Investor shall make available its ratable share in
proportion to its Commitment of such borrowing, of such Advance in immediately
available funds to the Company's account at IBJ Schroder Bank & Trust Company,
account number 620 11203, ABA No. 026007825 or the New Subsidiary's account at
IBJ Schroder Bank & Trust Company, as the case may be, not later than 12 noon
(New York City time) on the date of each borrowing specified in a Notice of
Borrowing. Notwithstanding anything contained in this Section 2.2(b) to the
contrary, the attached Schedule 2.2(a) shall be deemed to be delivery of the
Company's Notice of Borrowing to the Investors for the Interim Advance
specifying the principal amount of the Interim Advance to be borrowed. Each
Notice of Borrowing shall be irrevocable."
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by deleting Section 2.2(c) thereof in its entirety and
substituting in lieu thereof the following:
"(c) Notwithstanding anything
herein to the contrary, each Investor severally and not jointly agrees to
purchase the Notes as provided hereunder; provided, however, that each Investor
shall have no obligation to purchase the Notes and make New Contract Advances,
Working Capital Advances and Other Advances thereunder in excess of (i) its
ratable share in proportion to its Commitment and (ii) an Investor shall have no
obligation under any circumstances whatsoever to purchase the Notes not
purchased by any other Investor hereunder."
by deleting Section 2.2(d) thereof (as such Section is identified in the
Securities Purchase Agreement prior to this Amendment) in its entirety and
substituting in lieu thereof the following:
"(d) Holdings hereby agrees to sell
to the Investors and, subject to the terms and conditions set
forth herein, the Investors agree to purchase from Holdings (i)
on August 25, 1995, the Original Warrants for an aggregate purchase price of
$1,000 and (ii) on June 3, 1996, the New Warrants for an aggregate purchase
price of $1,000."
6. Amendment to Section 6.1. Section 6.1 of the
Securities Purchase Agreement is hereby
amended as follows:
by deleting Section 6.1(b)(iv) thereof in its entirety and
substituting in lieu thereof the following:
"(iv) except for the defaults existing
prior to and as of the date hereof set forth on Schedule 6.1(c)(iv) which are
hereby waived, the Obligors shall be in compliance in all material respects with
the terms and provisions of this Agreement and each other Transaction Document
to which it is a party, and at the time of and immediately following a borrowing
each of the Transaction Documents shall continue to be in full force and effect
and no Event of Default or event or condition that would constitute an Event of
Default with the giving of notice or lapse of time, unless cured or waived,
shall have occurred or be continuing and the Company shall have delivered a
certificate to that effect of the Chief Executive Officer and the Chief
Financial Officer of the Company;"
by adding the following subsections (v), (vi), (vii), (viii), (ix) and (x) after
Section 6.1(b)(iv) thereof:
"(v) on or before June 15, 1996, the
Company shall have delivered to the Investors an audit opinion letter of KPMG
Peat Marwick certified public accountants to the Company relating to the
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financial statements of the Company for fiscal year 1995 in form and substance
satisfactory to the Investors;
(vi) Holdings shall have paid all
franchise taxes due and owing to the State of Delaware and delivered evidence of
such payment and of Holdings', Magnavision Private Cable, Inc.'s and Magnavision
Wireless Cable, Inc.'s good standing in the State of Delaware to the Investors
in form and substance satisfactory to the Investors;
(vii) the Company shall have paid all
copyright royalty fees due and owing to the U.S. Copyright Office and delivered
evidence of such payment to the Investors in form and substance satisfactory to
the Investors;
(viii) the Company shall have delivered
to the Investors the financial statements, notices and officer certificates
required by Section 7.11 in form and substance satisfactory to the Investors;
(ix) the Company shall have paid the
interest due on the Notes as of March 31, 1996, plus all default interest due
thereon as of June 3, 1996, and delivered evidence of such payment to the
Investors in form and substance satisfactory to the Investors; and
(x) the Company, Holdings, University
Connection, Inc., the New Subsidiary and Magnavision Private
Cable, Inc. shall deliver to the Investors a written legal
opinion of counsel to the same in form and substance satisfactory
to the Investors and their counsel."
by adding the following subsection (c) after Section 6.1(b)
thereof:
"(c) The obligations of the
Investors to make a Working Capital Advance or Other Advance after the Closing
Date are subject to the prior satisfaction of the following conditions
precedent:
within 20 days, but no less than five (5) days, prior to the date of each
borrowing hereunder, the Company or the New Subsidiary, as the case may be,
shall have delivered to the Investors a certificate of the Chief Executive
Officer and the Chief Financial Officer of the Company or the New Subsidiary, as
the case may be, certifying that (A) the borrowing conforms to the working
capital projections for the Company or the New Subsidiary, as the case may be,
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delivered to the Investors on or prior to June 3, 1996, and (B) the proceeds of
the borrowing shall be used solely for the purposes set forth in this Agreement;
such certificate shall be deemed to be satisfactory to the Investors if in
compliance with the foregoing clauses (A) and (B) of this Section 6.1(c)(i); the
representations and warranties of the Obligors contained herein and in any
certificate or other instrument delivered to any of the foregoing shall be
correct and complete as of the date of each borrowing thereunder; the Company or
the New Subsidiary, as the case may be, shall have delivered to the Investors a
Notice of Borrowing detailing the amount of the borrowing requested and the use
of the proceeds; and except for the defaults existing prior to and as of the
date hereof set forth on Schedule 6.1(c)(iv) which are hereby waived, the
Obligors shall be in compliance in all material respects with the terms and
provisions of this Agreement and each other Transaction Document to which it is
a party, and at the time of and immediately following a borrowing each of the
Transaction Documents shall continue to be in full force and effect and no Event
of Default or event or condition that would constitute an Event of Default with
the giving of notice or lapse of time, unless cured or waived, shall have
occurred or be continuing and the Company or the New Subsidiary, as the case may
be, shall have delivered a certificate to that effect of the Chief Executive
Officer and the Chief Financial Officer of the Company; on or before June 15,
1996, the Company shall have delivered to the Investors an audit opinion letter
of KPMG Peat Marwick certified public accountants to the Company relating to the
financial statements of the Company for fiscal year 1995 in form and substance
satisfactory to the Investors; Holdings shall have paid all franchise taxes due
and owing to the State of Delaware and delivered evidence of such payment and of
Holdings', Magnavision Private Cable, Inc.'s and Magnavision Wireless Cable,
Inc.'s good standing in the State of Delaware to the Investors in form and
substance satisfactory to the Investors; the Company shall have paid all
copyright royalty fees due and owing to the U.S. Copyright Office and delivered
evidence of such payment to the Investors in form and substance satisfactory to
the Investors; the Company shall have delivered to the Investors the financial
statements, notices and officer certificates required by Section 7.11 in form
and substance satisfactory to the Investors; the Company shall have paid the
interest due on the Notes as of March 31, 1996, plus all default interest due
thereon as of June 3, 1996, and delivered evidence of such payment to the
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Investors in form and substance satisfactory to the Investors; and the Company,
Holdings, University Connection, Inc., the New Subsidiary and Magnavision
Private Cable, Inc. shall deliver to the Investors a written legal opinion of
counsel to the same in form and substance satisfactory to the Investors and
their counsel."
7. Amendment to Section 7.8. Section 7.8 of the
Securities Purchase Agreement is amended by
deleting Section 7.8 thereof in its entirety
and substituting in lieu thereof the
following:
"The Obligors shall use the proceeds of
the sale of the Notes and the Warrants solely for (a) the purposes set forth in
the second Whereas clause under this Agreement, (b) for funding the Company's
construction costs in connection with Accepted New Contracts from time to time,
(c) for funding additional working capital required by the Company or the New
Subsidiary from time to time and (d) for the purposes set forth in Section
2.2(a) hereof."
8. Amendment to Section 7.21. Section 7.21 of
the Securities Purchase Agreement is amended
by deleting Section 7.21 thereof in its
entirety and substituting in lieu thereof
the following:
"Upon the written request of the
Required Investors, Holdings shall comply promptly with all of the reporting
requirements of the Securities Exchange Act of 1934, as amended, and not
de-register therefrom, and shall comply with all other public information
reporting requirements of the Commission which are conditions to the
availability of Rule 144 for the sale of Common Stock. Holdings and the Company
shall cooperate with each stockholder in supplying such information as may be
necessary for such stockholder to complete and file any information as may be
necessary for such stockholder to complete and file any information reporting
forms presently or hereafter required by the Commission as a condition to the
availability of Rule 144."
9. Amendment to Article VII. Article VII of the
Securities Purchase Agreement is hereby
amended by adding the following Sections
7.27, 7.28 and 7.29:
"Section 7.27. Mandatory Repayment of
Notes With Proceeds From Sale of Assets or Upon Change in Control. Each of the
Obligors shall repay the Notes using the proceeds arising from the sale of any
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assets of the Obligors or any of their Subsidiaries outside of the ordinary
course of business (an "Asset Sale") or upon a Change in Control (whether by
merger, consolidation or sale or transfer of Holdings', the Company's, Cacomm's
or the New Subsidiary's capital stock). The Commitment with respect to each
Investor to advance funds to the Company hereunder shall be (a) automatically
canceled, pro rata in accordance with their respective outstanding principal
amounts under the Notes, to the extent of the proceeds received by the Obligors
or any of their Subsidiaries from an Asset Sale and (b) automatically canceled
and the obligation of the Investors to advance funds to the Obligors hereunder
immediately terminated, if the proceeds received by the Obligors or any of their
Subsidiaries from an Asset Sale or upon a Change in Control (whether by merger,
consolidation or sale or transfer of Holdings', the Company's, Cacomm's or the
New Subsidiary's capital stock) exceed the aggregate Commitment of the
Investors.
Section 7.28. Delivery of Audit Opinion
Letter. On or prior to June 15, 1996, the Company shall have delivered to the
Investors an audit opinion letter of KPMG Peat Marwick certified public
accountants to the Company relating to the financial statements of the Company
for fiscal year 1995 in form and substance satisfactory to the Investors.
Section 7.29. Waiver of Automatic Stay.
Each of the Obligors hereby consents and shall cause their Subsidiaries to
consent, to each Investor obtaining a waiver or modification of the automatic
stay imposed by 11 U.S.C. ss. 362 in any proceeding involving an Obligor under
Title 11 of the United States Code (the "Bankruptcy Code"). Each Obligor shall
not object to a motion by an Investor for modification or relief from such
automatic stay in any case under the Bankruptcy Code involving an Obligor or any
of their Subsidiaries."
10. Amendment to Section 8.5. Section 8.5 of the
Securities Purchase Agreement is amended by
adding the following sentence to Section 8.5
thereof.
"Notwithstanding the foregoing sentence,
the New Subsidiary shall not engage in any business other than
that contemplated by the License."
11. Amendment to Section 8.7. Section 8.7 of the
Securities Purchase Agreement is amended by
adding the following sentences to Section
8.7 thereof:
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"Notwithstanding the foregoing sentence,
the Company shall transfer the License to the New Subsidiary provided, that at
the time of such transfer the Company shall enter into a stock pledge agreement
with the Required Investors in form and substance satisfactory to the Required
Investors, pledging all of the Company's right, title and interest, in, to and
under the stock of the New Subsidiary."
12. Amendment to Section 8.13. Section 8.13 of
the Securities Purchase Agreement is hereby
amended by deleting Section 8.13 thereof in
its entirety and substituting in lieu
thereof
the following:
"(a) All breaches of covenants under
Section 8.13 prior to and as of the date hereof are hereby waived by the
Investors.
(b) Minimum EBITDA. On each date set
forth below, the EBITDA for the period of six consecutive calendar months ending
on such date shall not be less than the amount set forth below opposite such
date:
Date Amount
---- ------
6/30/96 (416,523)
9/30/96 (411,593)
12/31/96 (23,484)
3/31/97 446,378)
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13. Amendment to Article VIII. Article VIII of
the Securities Purchase Agreement is hereby
amended by adding the following Section
8.14:
"8.14. Minimum Outlets. On each date
set forth below, the minimum Outlets shall not be less than the number set forth
below opposite such date:
Date Amount
---- ------
06/30/96 6,875
09/30/96 8,430
12/31/96 8,430
14. Conditions to Effectiveness. This Amendment
shall become effective on the date (the
"Amendment Effective Date") on which all of
the following conditions precedent have been
satisfied or waived in writing:
The Company, Holdings and the New Subsidiary shall have duly executed and
delivered this Amendment No. 1 to the Securities Purchase Agreement. The
Company, Holdings and the New Subsidiary shall have duly executed and delivered
the Amended and Restated Notes in the form of Exhibit A. Holdings shall have
duly executed and delivered the New Warrants in the form of Exhibit B.
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The Company, Holdings and the New Subsidiary shall have duly executed the
Amended and Restated Stockholders' Agreement a form of which is attached hereto
as Exhibit C. The Company, Holdings, University Connection, Inc., Magnavision
Private Cable, Inc. and the New Subsidiary shall have duly executed and
delivered Amendment No. 1 to the Security Agreement and Collateral Assignment
dated as of the date hereof a form of which is attached hereto as Exhibit D. The
Company shall have executed the Pledge Agreement dated as of the date hereof, a
form of which is attached hereto as Exhibit E. The Company and the New
Subsidiary shall have duly executed the Assignment and Assumption Agreements
dated as of the date hereof, a form of which is attached hereto as Exhibit F.
Magnavision Private Cable, Inc. and the New Subsidiary shall have duly executed
and delivered the UCC-1 Financing Statements covering the Cable Contracts and
the License and Equipment related thereto and duly signed by an authorized
officer in form and substance satisfactory to the Investors. The Investors shall
have received a copy of the resolutions, in form and substance satisfactory to
the Investors, of the Board of Directors of each of the Company, Holdings,
University Connection, Inc., the New Subsidiary and Magnavision Private Cable,
Inc. authorizing the execution, delivery and performance of this Amendment and
the Transaction Documents, certified by the Secretary or an Assistant Secretary
of such party as of the Amendment Effective Date, which certificate shall state
that the resolutions thereby certified have not been amended, modified, revoked
or rescinded as of the date of such certificate. The Investors shall have
received a certificate of the Secretary or Assistant Secretary of the Company,
Holdings, University Connection, Inc., the New Subsidiary and Magnavision
Private Cable, Inc., dated the Amendment Effective Date, as to the incumbency
and signature of each of the officers signing this Amendment and the Transaction
Documents, and any other instrument or document delivered by such party in
connection herewith, together with evidence of the incumbency of such Secretary
or Assistant Secretary. The Investors shall have received a copy of the consent
of the Department of Education, Archdiocese of New York, to the assignment of
the License to the New Subsidiary, in form and substance satisfactory to the
Investors. The Investors shall have received from the Company a valid and duly
authorized and executed irrevocable proxy together with undated stock powers in
blank dated the date hereof to vote all of the New Subsidiary's common stock
held by the Company in the form of Exhibit G.
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Holdings shall have duly executed and delivered to the Investors Amendment No. 1
to Registration Rights Agreement in the form of Exhibit H.
The Investors shall have received from the Company, University Connection, Inc.
and Magnavision Private Cable, Inc. a duly executed Amended and Restricted
Lockbox Service Agreement in the form of Exhibit I.
Pursuant to Section 4.3(d) of the Securities Purchase Agreement, the Investors
shall have received evidence that the Callas Shares have been canceled by
Holdings in form and substance satisfactory to the Investors.
Pursuant to Section 7.23(a), the Obligors shall deliver the officer's
certificate required thereby in form and substance satisfactory to the
Investors.
Pursuant to Section 7.26 of the Securities Purchase Agreement, (i) the Company
and University Connection, Inc. shall have transferred all of their right, title
and interest in, to and under the Cable Contracts to Magnavision Private Cable,
Inc. pursuant to assignment and assumption agreements entered into with
Magnavision Private Cable, Inc., and (ii) the Company shall have executed and
delivered to the Investors a form of stock pledge agreement and other documents
related thereto all in form and substance satisfactory to the Investors.
15. Representation and Warranty of Holdings and
the Company.
As of the date hereof, Holdings and the Company hereby represent and warrant to
the Investors that (i) Holdings' authorized capital stock consists of
750,000,000 shares of Common Stock, (ii) Holdings' capital stock outstanding
consists of 39,036,506 shares of Common Stock on a fully-diluted basis and (iii)
after giving effect to the issuance of the New Warrants, Holdings' capital stock
outstanding shall consist of 46,447,430 shares of Common Stock on a
fully-diluted basis. Schedule 15 sets forth the holders and number of
outstanding shares of Common Stock of Holdings on a fully-diluted basis. All of
such outstanding shares have been duly authorized and validly issued and are
fully paid and nonassessable with no personal liability attaching to ownership
thereof. Except as otherwise set forth on Schedule 15 and except for the shares
of Common Stock to be issued upon the exercise of the Warrants, neither
Holdings, the Company nor Cacomm has granted or issued, or agreed to grant or
issue, any options, warrants or similar rights to acquire, subscribe for or
receive any of the shares of any class of capital stock of Holdings or any
securities convertible into shares of such capital stock.
The Common Stock issuable upon exercise of the Warrants has been duly authorized
and reserved for issuance upon exercise of the Warrants and, when issued as
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provided in the Warrants against payment therefor in accordance with the terms
of the Warrants, such Common Stock will be duly authorized, validly issued,
fully paid and nonassessable and free from any and all restrictions, including,
without limitation, preemptive rights, restrictions with respect to voting,
transfer and other rights exercisable by a holder of the Common Stock and any
Liens.
16. Representation and Warranty of the New
Subsidiary. As of the date hereof, the New
Subsidiary represents and warrants to the
Investors that the New Subsidiary owns all
right, title and interest in, to and under
the License.
17. Miscellaneous. The Company, Holdings,
University Connection, Inc. and the New
Subsidiary hereby ratify and acknowledge the
validity and binding nature both at the time
of delivery and on the date hereof of all of
the Transaction Documents and the pledge
agreement referred to in Section 8.7 of the
Securities Purchase Agreement.
18. No Other Amendments. Except as expressly
amended, modified and supplemented hereby,
the provisions of the Security Agreement are
and shall remain in full force and effect.
19. Payment of Expenses. As of the date hereof,
the Company, Holdings and the New Subsidiary
shall reimburse the Investors for all of
their out-of-pocket costs and reasonable
expenses incurred in connection with this
Amendment and any other documents prepared
in connection herewith and the transactions
contemplated hereby.
20. No Waiver. Except as expressly provided for
herein, nothing in this Amendment shall be
construed as a waiver of any of the default
provisions of the Securities Purchase
Agreement.
21. Governing Law. This Amendment shall be
construed in accordance with and governed by
the laws of the State of New York without
regard to the laws and principles thereof
which would direct the application of the
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<PAGE>
laws of another jurisdiction.
22. Counterparts. This Amendment may be executed
in any number of identical counterparts,
each of which shall constitute an original
but all of which when taken together shall
constitute but one contract.
* * * * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be signed
by their duly authorized representatives on the date first above written.
MAGNAVISION CORPORATION, as Holdings
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION CORPORATION,
as the Company
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION WIRELESS CABLE, INC.
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
IBJS CAPITAL CORPORATION
By:_____________________________
Paul Echausee, Vice President
and Chief Operating Officer
IBJ SCHRODER BANK & TRUST COMPANY
By:_____________________________
Paul Echausee, Vice President
KOCO CAPITAL COMPANY, L.P.
By:_____________________________
Albert Pastino, President
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<PAGE>
Schedule 2.2(a)
Interim Advance
The Company shall apply the proceeds from the Interim Advance to pay the
following costs and expenses:
Amount
------
1. Fees of KPMG Peat Marwick 127,500.00
2. Legal fees of O'Sullivan Graev &
Karabell, LLP
Amendment No. 1 and Transaction
a. Documents 46,320.02
Post-closing matters 21,637.98
b.
3. Legal fees of Brownstein Hyatt
Farber & Strickland 1,000.00
4. Legal fees of Zimet, Haines,
Friedman & Kaplan 30,000.00
5. Delaware franchise taxes 11,509.00
Allen & Company retainer fees 100,000.00
6.
Interest due on the Notes as of
March 31, 1996 and default
7. interest due as of June 3, 1996 82,709.86
Working Capital 49,958.85
8.
TOTAL $470,635.71
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Schedule 6.1(c)(iv)
The following is a list of defaults pursuant to the Securities
Purchase Agreement existing prior to and as of the date hereof which the
Investors hereby waive:
a)
Section 7.14 - Failure to comply with the provisions of Section 7.14.
As of ____, 1996 the Investors were notified of the defaults set forth
in the Company's April __, 1996, letter delivered to the Investors.
b)
Section 7.15 - Failure to comply with the provisions of Section 7.15.
c)
Section 7.17 - Failure to comply with the provisions of Section 7.17.
d)
Section 7.22 - Failure to comply with the provisions of Section 7.22.
e)
Section 8.13 - Failure to comply with the provisions of Section 8.13.
The Obligors are in default of the Securities Purchase Agreement for failure to
pay when due the accounts payable set forth on Exhibit A hereto. The Obligors'
payment of such overdue accounts payable shall not be a condition precedent to
any initial drawdown by the Obligors of a Working Capital Advance pursuant to
Section 6.1(c) of the Securities Purchase Agreement, however, thereafter the
non-payment of such overdue accounts payable shall be a continuing default under
the Securities Purchase Agreement that is not hereby waived by the Investors.
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Schedule 15
The attachments list the Holdings' stockholders on a
fully-diluted basis as of March 15, 1996.
<PAGE>
Exhibit 10.(n)
AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT, dated as
of June 3, 1996, among MAGNAVISION
CORPORATION, a Delaware corporation
(the "Corporation"), MAGNAVISION
CORPORATION, a New Jersey
corporation ("Subsidiary"),
MAGNAVISION WIRELESS CABLE, INC., a
Delaware corporation ("New
Subsidiary"), the Investors and the
other parties listed on Schedule I
(collectively, the "Stockholders").
The Corporation, Subsidiary and the Stockholders are
parties to a Stockholders' Agreement dated as of August 25, 1995
(the "Original Stockholders' Agreement").
The Corporation is a corporation duly organized and
existing under the laws of the State of Delaware with an
authorized capitalization of 750,000,000 shares of Common Stock,
$.004 par value, as adjusted from time to time (the "Common
Stock"). Each of the Stockholders owns that number of shares of
Common Stock and/or owns or has the right to acquire (by the
exercise of warrants that are exercisable for Common Stock) that
number of shares of Common Stock set forth opposite the name of
each such Stockholder on Schedule I attached hereto.
Subsidiary is a corporation duly organized and existing
under the laws of the State of New Jersey with an authorized
capitalization of 20,000,000 shares of common stock, without par
value, all of which are owned by the Corporation.
New Subsidiary is a corporation duly organized and
existing under the laws of the State of Delaware with an
authorized capitalization of 100 shares of common stock, $.001
par value, all of which are owned by Subsidiary.
It is deemed to be in the best interests of the
Corporation, Subsidiary, New Subsidiary, and the Stockholders
that provision be made for the continuity and stability of the
business and policies of the Corporation, Subsidiary and New
Subsidiary and, to that end, the Corporation, Subsidiary, New
Subsidiary, and the Stockholders hereby agree to amend, restate
and supersede the Original Stockholders' Agreement, to include
New Subsidiary as a party to the Stockholders' Agreement, and to
set forth their agreement with respect to the shares of stock
owned by the Stockholders, the Corporation and Subsidiary.
NOW, THEREFORE, in consideration of the premises and of
the mutual covenants and obligations hereinafter set forth, the
<PAGE>
parties hereto hereby agree that the Original Stockholders'
Agreement be amended and restated as follows:
SECTION 1. Definitions. As used herein, the following
terms have the following respective meanings:
(a) "Asset Sale" shall have the meaning set forth in
Section 2(g) hereof.
(b) "Cacomm" shall mean Cacomm, Inc., a New Jersey
corporation and stockholder of the Corporation.
(c) "Cash Proceeds" shall have the meaning set forth
in Section 3(e) hereof.
(d) "Collateral Agent" shall mean IBJS Capital
Corporation, as agent for the Investors.
(e) "Competitive Business" shall mean any business
involving the design, development, construction and marketing of
private cable systems and services, wireless cable systems and
services and telecommunications systems and services to
customers.
(f) "IBJS Stock" shall mean that amount of the
Investors Stock issued or issuable upon exercise of the Warrants
issued to IBJS Capital Corporation and IBJ Schroder Bank & Trust
Company.
(g) "Investors" means IBJS Capital Corporation, IBJ
Schroder Bank & Trust Company and KOCO Capital Company, L.P.,
which purchased Warrants under the Securities Purchase Agreement,
and shall include any successor to, or assignee or transferee of,
any such person who or which agrees in writing to be treated as
an Investor and to be bound by the terms and comply with the
provisions hereof.
(h) "Investors' Stock" means (i) the Common Stock of
the Corporation issued to the Investors (or their permitted
assigns) upon exercise of the Warrants and (ii) any shares of
Common Stock issuable upon exercise of the Warrants.
(i) "KOCO Stock" shall mean that amount of the
Investors' Stock issued or issuable upon exercise of the Warrants
issued to KOCO Capital Company, L.P.
(j) "Net Proceeds" shall have the meaning given to
such term in Section 3(a) hereof.
(k) "New Subsidiary Stock" shall have the meaning set
forth in Section 9 hereof.
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(l) "Non-cash Proceeds" shall have the meaning set
forth in Section 3(e) hereof.
(m) "Non-Investor Stockholder" shall mean all
Stockholders excluding the Investors.
(n) "Notes" shall mean the Amended and Restated Notes
issued to the Investors pursuant to the Securities Purchase
Agreement.
(o) "Obligations" shall mean the due and punctual
payment of the principal of, premium, if any, and interest on the
Notes and other monetary obligations under the Securities
Purchase Agreement and the performance of all other obligations
of the Obligors to the Investors, howsoever created, arising or
evidenced, whether direct or indirect, joint or several, absolute
or contingent, or now existing or hereafter arising under the
Notes, the Securities Purchase Agreement and this Agreement or
any other agreement or document related hereto or thereto.
(p) "Obligors" shall mean the Corporation, the
Subsidiary and the New Subsidiary.
(q) "Repurchase Notice" shall have the meaning set
forth in Section 3(c) hereof.
(r) "Repurchase Option" shall have the meaning set
forth in Section 3(b) hereof.
(s) "Rule 144" means Rule 144 promulgated under the
Securities Act or any successor rule thereto or any complementary
rule thereto.
(t) "Securities Act" means the Securities Act of 1933,
and the rules and regulations of the Securities and Exchange
Commission thereunder, all as the same shall be in effect from
time to time.
(u) "Securities Purchase Agreement" means the
Securities Purchase Agreement, dated August 25, 1995, among the
Corporation, MagnaVision Corporation and the Investors as amended
by Amendment No. 1 to the Securities Purchase Agreement dated the
date hereof.
(v) "Subsidiary Stock" shall have the meaning set
forth in Section 2(f) hereof.
(w) "Warrants" means the Warrants issued by the
Corporation and purchased by the Investors pursuant to the
Securities Purchase Agreement.
SECTION 2. Election of Directors; Voting. (a)
Commencing on the date hereof and until the Investors' Stock
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constitutes less than five (5) percent of the Common Stock of the
Corporation (on a fully diluted basis) outstanding from time to
time, at each annual meeting of the stockholders of the Corpora-
tion, and at each special meeting of the stockholders of the
Corporation called for the purpose of electing directors of the
Corporation, and at any time at which stockholders of the Corpo-
ration shall have the right to, or shall, vote for or consent in
writing to the election of directors of the Corporation, then,
and in each such event, the Stockholders shall vote all shares of
stock of the Corporation owned by them, and their respective
transferees shall so vote, for, or consent in writing with
respect to such shares in favor of, the election of a Board of
Directors consisting of not more than five (5) persons, of which
the Investors holding a majority of IBJS Stock shall have the
right to designate one (1) director and the Investors holding a
majority of KOCO Stock shall have the right to designate one (1)
director; provided, however, that if an authorized officer of the
Department of Education, Archdiocese of New York does not execute
the consent attached to the Collateral Assignment as Exhibit B on
or prior to September 1, 1995, the Investors shall have the right
to designate a majority of the Board of Directors of the
Corporation and such Stockholders shall take all action as is
necessary or required to elect such directors. Such right to
designate a majority of the Board of Directors shall terminate
upon such execution of the consent. Upon the request of the
Investors, the Corporation shall, and the Stockholders shall
cause the Corporation to, appoint or elect the directors
designated by the Investors.
(b) The Corporation and Stockholders agree to appoint
the directors designated by the Investors to serve on the
Corporation's Board of Directors Audit, Compensation and
Executive Committees.
(c) The Stockholders shall vote their shares of stock
(i) to remove any director whose removal is required by the
parties with the power to designate such director and (ii) to
fill any vacancy created by the removal, resignation or death of
a director, in each case for the election of a new director
designated and approved, if approval is required, in accordance
with the provisions of this Section 2.
(d) Anything contained herein to the contrary
notwithstanding, commencing from the date hereof, the Investors
or their representatives shall have the right to attend, be
present at and observe all Board of Director and committee
meetings of the Corporation and shall be reimbursed for their
out-of-pocket expenses in attending any such meeting.
(e) The Board of Directors shall meet no less
frequently than quarterly. The Stockholders shall amend the
bylaws of the Corporation and the bylaws of the New Subsidiary to
provide that a quorum of the Board of Directors or any Committee
of the Board of Directors shall exist upon timely and lawful
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receipt by the directors designated by the Investors of a duly
issued notice of meeting notwithstanding that such director fails
to attend such meeting. Prior to any exercise of the Repurchase
Option by the Investors or the Corporation pursuant to Section 3
hereof, any action with respect to compensation or bonuses shall
require the vote of one of the directors nominated by the
Investors. Such amendments shall not be further amended without
the consent of the Investors.
(f) Upon the request of the Investors, (i) the
Stockholders shall vote and cause the Corporation to vote to
approve any Asset Sale or sale of the capital stock of the New
Subsidiary approved by the Board of Directors of the Subsidiary
or the New Subsidiary and (ii) the Corporation shall vote all of
the issued and outstanding common stock of the Subsidiary held by
the Corporation (the "Subsidiary Stock") in favor of an Asset
Sale by the New Subsidiary or a sale of the capital stock of the
New Subsidiary. The Corporation shall not transfer, assign or
sell the Subsidiary Stock, without the prior written consent of
the Investors.
(g) Commencing on the date hereof, at each annual
meeting of the stockholders of the New Subsidiary, and at each
special meeting of the stockholders of the New Subsidiary called
for the purpose of electing directors of the New Subsidiary, and
at any time at which stockholders of the New Subsidiary shall
have the right to, or shall, vote for or consent in writing to
the election of directors of the New Subsidiary, then, and in
each such event, the Subsidiary shall vote all shares of stock of
the New Subsidiary owned by the Subsidiary, and their respective
transferees shall so vote, for, or consent in writing with
respect to such shares in favor of, (i) the election of a Board
of Directors consisting of not more than five (5) persons, of
which the Investors shall have the right to designate (A) if on
or prior to six (6) months from the date hereof, two (2)
directors, of which the Investors holding a majority of the IBJS
Stock shall have the right to designate one (1) director and the
Investors holding a majority of the KOCO Stock shall have the
right to designate one (1) director, and (B) if after six (6)
months from the date hereof, three (3) directors, of which the
Investors holding a majority of the IBJS Stock shall have the
right to designate two (2) directors and the Investors holding a
majority of the KOCO Stock shall have the right to designate one
(1) director (all directors designated pursuant to this
Subsection, collectively, the "Investor New Subsidiary
Directors") and (ii) that New Subsidiary shall not engage in any
sale of assets of New Subsidiary outside of the ordinary course
of business (an "Asset Sale") without the unanimous consent of
the Investor New Subsidiary Directors. Upon the request of the
Investors, the New Subsidiary shall, and the Subsidiary shall
cause the New Subsidiary to, appoint or elect the Investor New
Subsidiary Directors. The Investor New Subsidiary Directors
shall serve as Investor New Subsidiary Directors until all of the
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Obligations are paid in full at which time the Investor New
Subsidiary Directors shall resign.
SECTION 3. Put/Call Option. (a) In order to
facilitate the Repurchase Option, the Corporation, the New
Subsidiary or the Subsidiary as applicable shall maintain any
gross proceeds of Asset Sales less (i) the funds applied to the
payment of the Obligations, (ii) the reasonable expenses of such
Asset Sales and (iii) a reserve for taxes payable in connection
therewith after taking into account any tax loss carryforwards or
carrybacks available to the consolidated group for tax purposes
of which the Corporation is the parent (the "Net Proceeds") in
excess of $500,000 in cash or cash equivalent securities until
the earlier of (A) the closing of the Repurchase Option which
shall take place within 60 days following the Corporation's, the
Subsidiary's or the New Subsidiary's receipt of any Proceeds, as
extended by the number of days it takes, if any, the American
Arbitration Association to select a Valuer (as defined below)
pursuant to Section 3(d) or (B) the failure of each Warrant
Holder to deliver a Repurchase Notice with respect to the Asset
Sale giving rise to such Proceeds within 20 days following its
receipt of an Asset Sale Notice. The Corporation shall promptly
notify the Investors in writing of any Asset Sale detailing the
assets sold and the consideration received thereby (the "Asset
Sale Notice").
(b) Within 20 days following each Asset Sale Notice,
(i) each holder of Warrants may, at its option, require the
Corporation to repurchase from such holder of Warrants (each, a
"Warrant Holder" and collectively, the "Warrant Holders") that
number of Warrants equal to the number of Warrants then held by
such Warrant Holder less the number of Warrants the Warrant
Holder is then required to surrender to the Corporation pursuant
to the terms of the Warrants multiplied by a fraction (A) the
numerator of which shall be the Net Proceeds and (B) the
denominator of which shall be the fair market value of the
Corporation and (ii) the Corporation may, at its option,
repurchase from the Warrant Holders all of the Warrants then held
by the Warrant Holders, upon the terms set forth in this Section,
for a purchase price equal to their fair market value net of the
exercise price of such Warrants (the "Repurchase Option"). The
determination of "fair market value" of the Corporation or of the
Warrants for the purposes of this Section 3(b) and any fees and
expenses arising therefrom shall be made in accordance with the
procedures set forth in Section 3(d) hereof.
(c) The rights set forth in this Section may be
exercised by notice of the exercising party setting forth the
number of Warrants to be repurchased (in the case of a notice
sent by the Warrant Holders, such notice shall set forth a good
faith estimate of the number of Warrants to be repurchased and
such estimate shall be fixed upon the determination of fair
market value of the Corporation or of the Warrants in accordance
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<PAGE>
with Section 3(d) hereof) and the date of such repurchase (a
"Repurchase Notice"). The Repurchase Notice shall be delivered
to the non-exercising party at least 20 days prior to the date of
intended repurchase.
(d) Upon the delivery of any Repurchase Notice, the
Corporation and the Warrant Holder shall determine in good faith
the fair market value of the Corporation and of the Warrants
subject to the Repurchase Notice (the "Valuation"). If the
Corporation and the Warrant Holder are unable to make such
Valuation within 10 days following the delivery of such
Repurchase Notice, the Valuation shall be determined by a
nationally recognized investment banking firm (the "Valuer")
mutually agreed upon by the Corporation and the Warrant Holder.
The Corporation and the Warrant Holder shall cooperate with each
other in good faith to select such Valuer. If the Corporation
and the Warrant Holder are unable to select a Valuer within 10
days, either party may petition the American Arbitration
Association to select the Valuer. The Valuation hereunder shall
exclude discounts for the lack of liquidity of the Warrants and
for the Warrants being exercisable for a non-controlling interest
in the Corporation. The Valuer shall make a written Valuation
within 20 days of its selection. The Valuer's Valuation shall be
conclusive and binding upon the Corporation and the Warrant
Holder. The fees and expenses of the Valuer shall be equally
borne by the parties; provided, however, that if the Warrant
Holders mutually agree upon more than one (1) Valuer, the
Corporation shall not be obligated to share equally the fees and
expenses of more than one (1) such Valuer.
(e) All payments to be made by the Corporation
hereunder shall be made in U.S. Dollars to the Warrant Holders in
funds with same day availability in New York City within 10 days
of either: (i) an agreement by the Warrant Holders and the
Corporation as to the Valuation or (ii) the selection by the
Valuer of a Valuation pursuant to this Section, as applicable.
If the Net Proceeds received by the Corporation, the Subsidiary
or the New Subsidiary are in the form of cash ("Cash Proceeds")
and non-cash property ("Non-cash Proceeds"), the Corporation's
payment to each Warrant Holder exercising its Repurchase Option
hereunder shall consist of cash and non-cash property in the same
proportions that the Cash Proceeds and Non-cash Proceeds
represent of the Net Proceeds; provided, however, that any Non-
cash Proceeds payable to a Warrant Holder hereunder in lieu of
cash shall be securities that are listed or admitted to trading
on the New York Stock Exchange, the National Association of
Securities Dealers Automated Quotation System or the American
Stock Exchange; or other readily marketable securities consented
to in writing by the Warrant Holder exercising its Repurchase
Option.
SECTION 4. Tag-Along Rights. (a) Upon receipt of any
offer from a third party to purchase its shares of Common Stock,
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<PAGE>
in whole or in part, Cacomm shall promptly notify the Investors
in writing of the terms of such offer and the identity of the
offeree. If Cacomm proposes to transfer to a third party, and
any parties related to such third party (collectively, the "Third
Party"), in one or more transactions, Common Stock held by it,
which in the aggregate constitutes twenty (20) percent or more of
the Common Stock of the Corporation on a fully-diluted basis,
each Investor shall have the right to participate in such
transfer in accordance with Sections 4(b), 4(c) and 4(d) hereof.
Unless such Third Party purchases the Common Stock or Warrants or
any combination thereof, that the Investors elect to sell
pursuant to this Section 4, Cacomm shall not transfer its Common
Stock to such Third Party.
(b) If Cacomm proposes to transfer its Common Stock to
a third party, Cacomm shall give written notice to each Investor
(a "Tag-Along Notice"), which notice shall identify the proposed
Third Party purchaser and state the number of shares of Common
Stock proposed to be transferred by Cacomm, the proposed offering
price (which shall only be for cash prior to the payment in full
of the Obligations) and any other material terms and conditions
of the proposed Cacomm transfer. The Tag-Along Notice shall also
contain a true and correct copy of any offer to Cacomm by the
Third Party offeror.
(c) Each Investor shall have the right to transfer, at
the same price and upon no less favorable terms and conditions as
Cacomm, that number of shares of Common Stock or Warrants held by
such Investor, or any combination thereof, equal to (i) that
percentage of the Common Stock of the Corporation on a fully
diluted basis represented by the shares of Common Stock that
Cacomm proposes to transfer multiplied by (ii) the Investors'
Stock held by such Investor; provided, that the price for any
Warrants to be transferred shall be the difference between the
Third Party's offer price for the Common Stock and the Warrant
exercise price.
(d) Within thirty (30) days after the date of delivery
of a Tag-Along Notice, any of the Investors may elect to
participate in the Cacomm transfer pursuant to the terms and
conditions of such Tag-Along Notice and this Agreement by
delivery of a written notice to Cacomm. Each Investor shall not
be required to make any representations and warranties to the
third party purchaser or any other person except as to good
title, the full payment therefor and the absence of liens with
respect to such Investor's shares of Common Stock and/or Warrants
and the authority for and the validity and binding effect of any
agreements entered into by such Investor in connection with such
transfer.
SECTION 5. Preemptive Rights. (a) In the event that
any capital stock or other securities are issued by the
Corporation, other than Excluded Stock as defined in the
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<PAGE>
Warrants, each Investor shall have the right to purchase its
proportionate share of such issuances in an amount equal to the
shares of capital stock or other securities to be issued
multiplied by a fraction (i) the numerator of which is the number
of shares of Investors Stock held by such Investor and (ii) the
denominator of which is the number of shares of capital stock of
the Corporation on a fully-diluted basis prior to giving effect
to such issuance by the Corporation.
(b) The Corporation shall give 20 days prior written
notice to the Investors of any issuance of capital stock or other
securities by the Corporation. Each Investor shall have the right
to purchase its proportionate share of such issuance by giving
written notice of its intention to exercise its rights in
accordance with Section 5(a) hereof, at a closing to be held no
later than 20 days after such Investor has received notice of the
issuance from the Corporation.
SECTION 6. Subordination. (a) All payment obligations
and liabilities of the Corporation and its subsidiaries to Non-
Investor Stockholders and affiliates of Non-Investor Stockholders
in excess of $20,000 shall be subordinate and junior in right of
payment and performance, to the extent and in the manner provided
in this Agreement, to the prior payment and satisfaction in full
in cash of all the Obligations.
(b) Until all Obligations shall have been indefeasibly
paid and satisfied in full in cash, each Non-Investor Stockholder
shall not (i) demand, accelerate the maturity of, sue for or
accept, take or receive from the Corporation or any of its
respective subsidiaries (or from any other Person) any payment,
assignment, transfer, grant or acquisition described in the
preceding clause (a) (including, without limitation, taking any
action to cause the rescission of any loan or any other security
issued in connection with the payments owed to it or to otherwise
enforce its rights in respect of the payments owed to it, (ii)
cancel, set off or otherwise discharge any part of the payments
owed to it in partial or complete satisfaction of any obligation
of any nature whatsoever owing to the Corporation or any of its
respective subsidiaries by the Non-Investor Stockholder or (iii)
without the prior written consent of the Required Investors,
commence or join with any other creditor of the Corporation or
any of its respective subsidiaries in the commencement of any
proceeding against the Corporation or any of its respective
subsidiaries under any bankruptcy, reorganization, readjustment
or arrangement of debt, receivership, liquidation, insolvency,
fraudulent conveyance or other similar law.
(c) If any payment or distribution of any character,
whether in cash, securities or other property, is received by a
Non-Investor Stockholders from the Corporation or any of its
respective subsidiaries or any other Person (including, without
limitation, any receiver or trustee appointed with respect to all
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<PAGE>
or any part of the assets) upon or with respect to any payment
owed to it contrary to or in violation of any provision of this
Agreement, the Non-Investor Stockholder shall receive and hold
the same as trustee in trust for the benefit of the Investors and
shall forthwith deliver the same to the Collateral Agent in
precisely the form received (except, where necessary, for the
endorsement or assignment of the Non-Investor Stockholder, which
shall be made), for application to the Obligations, whether or
not then due. In the event of the failure of the Non-Investor
Stockholder to make any endorsement or assignment to the
Collateral Agent as required by the immediately preceding
sentence, the Collateral Agent is hereby irrevocably authorized
to make the same.
SECTION 7. Tax Consolidation. From the date hereof,
Cacomm hereby agrees that it shall not make any federal, state or
local tax filing on a consolidated basis with the Corporation
unless required by law. Cacomm further agrees that it shall
enter into a tax sharing agreement acceptable to the Investors
with respect to such consolidation upon the Investors' request.
SECTION 8. Agreement Not to Compete. (a) Cacomm
acknowledges and agrees that the value and goodwill of the
Corporation's business would be substantially impaired if Cacomm
engaged in a Competitive Business. Accordingly, Cacomm hereby
agrees that until all of the Obligations are paid in full, Cacomm
shall not:
(i) engage in any Competitive Business at any
location in the states between Maine and North Carolina,
whether such engagement shall be as an employer, owner,
employee, partner, advisor, consultant, stockholder or other
participant in any Competitive Business (or in any similar
capacity in which Cacomm derives an economic benefit from a
Competitive Business);
(ii) assist others in engaging in any Competitive
Business in the manner described in the foregoing clause
(i);
(iii) solicit, entice or induce any employee of
the Corporation or any subsidiary to terminate his or her
employment or engage in any Competitive Business;
(iv) solicit, entice or induce any vendor,
customer or distributor of the Corporation or any subsidiary
to terminate or materially diminish its relationship with
the Corporation or such subsidiary; or
(v) otherwise knowingly damage, disparage or
interfere with the Corporation or any subsidiary;
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<PAGE>
provided, however, that nothing contained in this Agreement shall
prohibit (i) Cacomm from owning in the aggregate less than 1% of
a class of publicly-traded securities issued by any Competitive
Business or (ii) Cacomm from maintaining its partnership interest
in the Grand Alliance Partnership so long as Cacomm does not
affirmatively vote for, approve or assist or derive an economic
benefit from the partnership's direct or indirect participation
in a Competitive Business.
(b) Cacomm acknowledges that a remedy at law for any
breach or threatened breach of the provisions of this Section 8
would be inadequate and therefore agrees that the Corporation
shall be entitled to injunctive relief; provided, however, that
nothing contained herein shall be construed as prohibiting the
Corporation from pursuing any other remedies available for any
such breach or threatened breach.
SECTION 9. Transfer of Proxy. As of the date
hereof, the Subsidiary shall execute and deliver to the Investors
an unrestricted and irrevocable proxy coupled with an interest
together with undated stock powers in blank to vote all of the
outstanding shares of common stock of the New Subsidiary then
held by the Subsidiary (the "New Subsidiary Stock"), at any
meeting of the stockholders of the Subsidiary or the New
Subsidiary, as the case may be, and to take any written action to
be taken by the stockholders of the Subsidiary or the New
Subsidiary, as the case may be, in such manner as the Investors,
in their sole discretion, deem appropriate. Such irrevocable
proxy and stock powers shall be effective upon the date which is
six (6) months after the date hereof and shall be in form and
substance satisfactory to the Investors. The foregoing rights of
the Investors represented by the irrevocable proxy shall
terminate upon the repayment in full of the Obligations.
SECTION 10. Restrictions on Transfer. A Stockholder
shall not sell, transfer, assign, pledge or encumber its stock of
the Corporation or any of its rights hereunder, except to a
transferee (a) who or which, prior to such sale, transfer,
assignment, pledge or encumbrance, has executed an agreement to
be bound by all the provisions of this Agreement or (b) pursuant
to a sale, transfer or assignment (i) in compliance with Rule 144
or (ii) as part of a public offering of the stock of the
Corporation pursuant to a registration statement effective under
the Securities Act.
SECTION 11. Termination. This Agreement shall
automatically terminate on the date the Investors' Stock
constitutes less than five (5) percent of the Common Stock of the
Corporation (on a fully diluted basis) outstanding from time to
time.
SECTION 12. Additional Shares of Stock. In the event
additional shares of stock are issued by the Corporation to any
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<PAGE>
Stockholder or transferee thereof at any time during the term of this Agreement,
either directly or upon the conversion, exercise or exchange of securities of
the Corporation convertible into or exercisable or exchangeable for shares of
stock, such additional shares of stock shall, as a condition to such issuance,
become subject to the terms and provisions of this Agreement.
SECTION 13. Legend on Stock Certificates. Each
certificate representing shares of stock held by the Stockholders
shall bear a legend containing the following words:
"THE SALE, TRANSFER, ASSIGNMENT, PLEDGE OR ENCUMBRANCE OF
THE SECURITIES REPRESENTED BY THIS CERTIFICATE AND/OR THE
RIGHTS OF THE HOLDER OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE IN RESPECT OF THE ELECTION OF DIRECTORS ARE
SUBJECT TO THE TERMS AND CONDITIONS OF THE STOCKHOLDERS'
AGREEMENT DATED AUGUST 25, 1995, AS AMENDED, AMONG
MAGNAVISION CORPORATION AND CERTAIN HOLDERS OF THE OUT-
STANDING CAPITAL STOCK OF SUCH CORPORATION. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO THE SECRETARY
OF MAGNAVISION CORPORATION."
SECTION 14. Severability; Governing Law. If any
provisions of this Agreement shall be determined to be illegal
and unenforceable by any court of law, the remaining provisions
shall be severable and enforceable in accordance with their
terms. This Agreement shall be governed by, and construed in
accordance with, (a) the laws of the State of New York applicable
to contracts made and to be performed wholly therein and (b) the
laws of the State of Delaware with respect to corporations
incorporated therein.
SECTION 15. Successors and Assigns. This Agreement
shall bind and inure to the benefit of the parties and their
respective successors and assigns, legal representatives and heirs.
SECTION 16. Notices. All notices, requests, consents
and other communications hereunder to any party shall be deemed
to be sufficient if contained in a written instrument delivered
in person or by telecopy or sent by nationally-recognized
overnight courier or first class registered or certified mail,
return receipt requested, postage prepaid, addressed to such
party at the address set forth below or at such other address as
may hereafter be designated in writing by such party to the other
parties:
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<PAGE>
(i) if to the Corporation, Subsidiary or
New Subsidiary, to:
Magnavision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Telecopy: (908) 974-1106
Attention: Nicholas Mastrorilli, Sr.
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Telecopy: (212) 223-1151
Attention: Stephen M. Fields, Esq.
(ii) if to the Investors to their respective addresses
set forth on Schedule I hereto, with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Telecopy: (212) 408-2420
Attention: Howard M. Bergtraum, Esq.; and
Brownstein, Hyatt, Farber & Strickland
410 Seventeenth Street
Denver, Colorado 80202
Telecopy: (303) 623-1956
Attention: Steven Siegel, Esq.
(iii) if to the Non-Investor Stockholders to their
respective addresses set forth on Schedule I
hereto.
All such notices, requests, consents and other communications
shall be deemed to have been delivered (a) in the case of person-
al delivery or delivery by telecopy, on the date of such
delivery, (b) in the case of dispatch by nationally-recognized
overnight courier, on the next business day following such
dispatch and (c) in the case of mailing, on the third business
day after the posting thereof.
SECTION 17. Modification. Except as otherwise provid-
ed herein, neither this Agreement nor any provisions hereof can
be modified, changed, discharged or terminated except by an in-
strument in writing signed by the Corporation and the
Stockholders.
SECTION 18. Headings. The headings of the sections of
this Agreement have been inserted for convenience of reference
only and shall not be deemed to be a part of this Agreement.
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<PAGE>
SECTION 19. Nouns and Pronouns. Whenever the context
may require, any pronouns used herein shall include the corres-
ponding masculine, feminine or neuter forms, and the singular
form of names and pronouns shall include the plural and vice-
versa.
SECTION 20. Entire Agreement. This Agreement and the
other writings referred to herein or delivered pursuant hereto
contain the entire agreement among the parties hereto with
respect to the subject matter hereof and supersede all prior and
contemporaneous agreements and understandings with respect
thereto.
SECTION 21. Counterparts; Facsimile Signatures. This
Agreement may be executed in any number of counterparts, and each
such counterpart hereof shall be deemed to be an original
instrument, but all such counterparts together shall constitute
but one agreement. Facsimile counterpart signatures to this
Agreement shall be acceptable on the date hereof if the
originally executed counterpart is delivered within a reasonable
period thereafter.
* * *
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed
this Amended and Restated Stockholders' Agreement on the date
first above written.
MAGNAVISION CORPORATION, a Delaware
corporation
By:________________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION CORPORATION, a New Jersey
corporation
By:________________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION WIRELESS CABLE, INC.
By:________________________________
Nicholas Mastrorilli, Sr.,
President
IBJS CAPITAL CORPORATION
By:_________________________________
Paul Echausse,
Vice President and
Chief Operating Officer
IBJ SCHRODER BANK & TRUST COMPANY
By:_________________________________
Paul Echausse,
Vice President
KOCO CAPITAL COMPANY, L.P.
By: Kisco Capital Corporation, its
General Partner
By:_________________________________
Albert Pastino,
President
<PAGE>
CACOMM, INC.
By:_________________________________
Nicholas Mastrorilli, Sr.,
President
NICHOLAS MASTRORILLI, SR.
By:_________________________________
Name: Nicholas Mastrorilli, Sr.
<PAGE>
SCHEDULE I
Stockholders
Number of Common
Name and Address of Stockholder Stock Equivalents
- ------------------------------- -----------------
IBJS Capital Corporation 3,417,682
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
IBJ Schroder Bank & Trust Company 6,835,364
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
KOCO Capital Company, L.P. 6,835,364
111 Radio Circle
Mt. Kisco, New York 10549
Telecopier: (914) 241-7476
Attention: Albert Pastino
Cacomm, Inc. 18,717,782
[Insert Address]
<PAGE>
AMENDMENT NO. 1 dated June 3, 1996
("Amendment No. 1"), to the
REGISTRATION RIGHTS AGREEMENT dated
August 25, 1995 (the "Registration
Rights Agreement"), among
MAGNAVISION CORPORATION, a Delaware
corporation (the "Company"), and
certain Investors of the Company
set forth on Schedule I (the
"Investors").
The Company and the Investors desire to amend the Registration
Rights Agreement by revising Schedule I attached thereto in accordance with the
terms hereof.
NOW, THEREFORE, the parties agree as follows:
1. Schedule I of the Registration Rights Agreement is hereby
amended in its entirety to read as set forth on Schedule I to this Amendment No.
1.
2. This Amendment No. 1 may be executed in any number of
counterparts, and each such counterpart shall be deemed to be an original
instrument, but all such counterparts together shall constitute but one
agreement.
3. This Amendment No. 1 shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
laws and principles thereof or of any other jurisdiction that would direct the
application of the laws of another jurisdiction.
4. Except as amended hereby, the Registration Rights Agreement
shall remain in full force and effect.
* * * * *
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Amendment No. 1 as of the date first above written.
MAGNAVISION CORPORATION
By:________________________________
Nicholas Mastrorilli, Sr.,
President
INVESTORS:
IBJS CAPITAL CORPORATION
By:________________________________
Paul Echausse, Vice President
and Chief Operating Officer
IBJ SCHRODER BANK & TRUST COMPANY
By:________________________________
Paul Echausse, Vice President
KOCO CAPITAL COMPANY, L.P.
By:________________________________
Albert Pastino, President
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<PAGE>
SCHEDULE I
Number of Common
Investor Stock Equivalents
- -------- -----------------
IBJS Capital Corporation 3,417,682
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
IBJ Schroder Bank & Trust Company 6,835,364
One State Street
New York, New York 10004
Telecopier: (212) 952-1629
Attention: Paul Echausse
KOCO Capital Company, L.P. 6,835,364
111 Radio Circle
Mt. Kisco, New York 10549
Telecopier: (914) 241-7476
Attention: Albert G. Pastino
<PAGE>
Exhibit 10.(p)
AMENDMENT NO. 1 TO THE SECURITY AGREEMENT AND COLLATERAL
ASSIGNMENT, dated as of June 3, 1996 (the "Amendment"), among
MAGNAVISION CORPORATION, a New Jersey corporation
("Magnavision"), MAGNAVISION WIRELESS CABLE, INC., a Delaware
corporation (the "New Subsidiary"), MAGNAVISION PRIVATE CABLE,
INC., a Delaware corporation ("MPC"), UNIVERSITY CONNECTION,
INC., a New Jersey corporation ("University"), and IBJS CAPITAL
CORPORATION, a Delaware corporation, as Collateral Agent (the
"Collateral Agent") for the Investors.
Reference is made to the Security Agreement and Collateral
Assignment, dated August 25, 1995 (the "Security Agreement"),
among Magnavision, University and the Collateral Agent, pursuant
to which Magnavision and University granted a first priority
security interest in, to and under the Collateral to the
Collateral Agent. Pursuant to Sections 7.26 and 8.7 of the
Securities Purchase Agreement, dated August 25, 1995, as amended
by Amendment No. 1 to the Securities Purchase Agreement, dated
the date hereof (the "Securities Purchase Agreement"), among
Magnavision Corporation, a Delaware corporation, Magnavision, the
New Subsidiary and the Collateral Agent, IBJ Schroder Bank &
Trust Company and KOCO Capital Company, L.P. (together with their
successors and assigns, the "Investors"), Magnavision agreed to
(i) pledge to the Collateral Agent the MPC stock it owns and to
transfer, together with University, all of their right, title and
interest in, to and under the Cable Contracts to MPC and (ii) to
pledge to the Collateral Agent the New Subsidiary stock it owns
and to transfer all of its right, title and interest in, to and
under the License to the New Subsidiary. In order to preserve
the first priority security interest of the Investors in, to and
under the Cable Contracts and the License in connection with such
transfer, Magnavision, University, MPC, the New Subsidiary and
the Collateral Agent agree to enter into this Amendment.
Capitalized terms used and not defined herein shall have the
meanings given to such terms in the Security Agreement.
ACCORDINGLY, the parties hereby agree as follows:
1. Amendment to Section 1. Section 1 of the Security
Agreement is hereby amended by deleting the definition of
"Assignors" in its entirety and substituting in lieu thereof the
following:
"Assignors" shall mean (i) prior to June 3, 1996, Magnavision and
University and (ii) commencing on June 3, 1996, each of
Magnavision, University, MPC and the New Subsidiary."
2. Amendment to Section 2. Section 2 of the Security
Agreement is hereby amended by adding the following provisions:
"In order to secure to the Collateral Agent, for the ratable
benefit of the Investors, the full and punctual payment (whether
at stated maturity, by acceleration or otherwise) and performance
by the Obligors of all of the Obligations, MPC hereby pledges,
assigns, conveys, hypothecates and transfers for security to the
Collateral Agent, for the ratable benefit of the Investors, as
hereinafter provided, and grants to the Collateral Agent, for the
ratable benefit of the Investors as hereinafter provided, a
Security Interest in all of MPC's right, title and interest in,
1
<PAGE>
to and under that portion of the Collateral consisting of the Cable
Contracts and the Equipment and Inventory related thereto. In order to
secure to the Collateral Agent, for the ratable benefit of the
Investors, the full and punctual payment (whether at stated maturity,
by acceleration or otherwise) and performance by the Obligors of all
of the Obligations, the New Subsidiary hereby pledges, assigns,
conveys, hypothecates and transfers for security to the Collateral
Agent, for the ratable benefit of the Investors, as hereinafter
provided, and grants to the Collateral Agent, for the ratable benefit
of the Investors as hereinafter provided, a Security Interest in all
of the New Subsidiary's right, title and interest in, to and under
that portion of the Collateral consisting of the License and the
Equipment related thereto."
3. Amendment to Parties. The parties hereto hereby agree that MPC and
the New Subsidiary shall become parties to the Security Agreement upon
this Amendment becoming effective in accordance with the terms hereof
as of the Amendment Effective Date (as defined in Section 14 of
Amendment No. 1 to the Securities Purchase Agreement dated the date
hereof).
4. Conditions to Effectiveness. This Amendment shall become effective
on the Amendment Effective Date.
5. Representation and Warranty of MPC and the New Subsidiary. As of
the date hereof, MPC represents and warrants that it owns all right,
title and interest in, to and under that portion of the Collateral
consisting of the Cable Contracts and the Equipment and Inventory
related thereto and the New Subsidiary represents and warrants that it
owns all right, title and interest in, to and under that portion of
the Collateral consisting of the License and the Equipment related
thereto.
6. No Other Amendments. Except as expressly amended, modified and
supplemented hereby, the provisions of the Security Agreement are and
shall remain in full force and effect.
7. Governing Law. This Amendment shall be construed in accordance with
and governed by the laws of the State of New York without regard to
the laws and principles thereof or of another jurisdiction that would
direct the application of the laws of another jurisdiction.
8. Counterparts. This Amendment may be executed in any number of
identical counterparts, each of which shall constitute an original but
all of which when taken together shall constitute but one contract.
* * * * *
2
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
to be duly executed by their authorized officers, all as of the
date first written above.
MAGNAVISION CORPORATION
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION WIRELESS CABLE, INC.
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION PRIVATE CABLE, INC.
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
UNIVERSITY CONNECTION, INC.
By:_____________________________
Nicholas Mastrorilli, Sr.,
President
IBJS CAPITAL CORPORATION,
as Collateral Agent for
the Investors
By:_____________________________
Paul Echausse, Vice President
and Chief Operating Officer
<PAGE>
AMENDED AND RESTATED LOCKBOX SERVICE AGREEMENT
This Amended and Restated Lockbox Service Agreement
(this "Lockbox Service Agreement"), dated as of June 3, 1996,
among Magnavision Corporation, a New Jersey corporation (the
"Company"), University Connection, Inc., a New Jersey corporation
("University"), Magnavision Private Cable, Inc., a Delaware
corporation ("MPC" and together with University and the Company
collectively, the "Companies"), IBJS Capital Corporation
("IBJSCC") and IBJ Schroder Bank & Trust Company ("the Bank") is
made pursuant to the Securities Purchase Agreement, dated as of
August 25, 1995, as amended by Amendment No. 1 to the Securities
Purchase Agreement dated the date hereof by and among the
Companies, the Bank and other parties thereto (as the same maybe
amended, modified or otherwise supplemented from time to time,
the "Securities Purchase Agreement"). Capitalized terms used
herein which are defined in the Securities Purchase Agreement
shall have the same meanings as defined therein unless the
context hereof requires otherwise.
R E C I T A L S
1 Pursuant to the Securities Purchase Agreement the Investors
agreed to purchase Notes and Warrants from the Obligors in the
amount and under the terms and conditions set forth therein. The
repayment of the Notes is secured by the Collateral Assignment
and the Pledge Agreements.
2 Pursuant to the Collateral Assignment, the Company and University
have authorized the Bank to collect any payments due the Company
and University under the Cable Contracts upon the occurrence and
during the continuance of an Event of Default.
3 The Company and University have transferred all of their right,
title and interest in and to the Cable Contracts to MPC.
4 Pursuant to Amendment No. 1 to the Security Agreement and
Collateral Assignment dated the date hereof, MPC became a party
to the Collateral Assignment.
5 The Company, University and the Bank now desire to make MPC a
party to this Lockbox Service Agreement and MPC desires to become
a party to this Lockbox Service Agreement.
1
<PAGE>
6 The execution and delivery of this Lockbox Service Agreement is a
condition precedent to the Investors entering into Amendment No.
1 to the Securities Purchase Agreement.
NOW, THEREFORE, in consideration of the foregoing
premises, the terms and conditions herein contained and for other
good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereto hereby agree as
follows:
1 Appointment of Bank as Agent.
IBJSCC hereby appoints the Bank and the Bank hereby
accepts IBJSCC's appointment as its agent for the collection of
Payments (as defined below) payable to IBJSCC as the Collateral
Agent pursuant to the Collateral Assignment.
1 Companies Responsibilities.
(a) The Companies shall execute the post office and other
forms necessary to enable the Bank to have access to a
post office box at the post office whose address
appears below (the "Lockbox"). The Companies shall and
hereby irrevocably designate the Bank as their agent
and authorize it to open the Lockbox and remove its
contents and to act on its behalf in connection with
the rental of the Lockbox.
Lockbox Address:
Magnavision Corporation
P.O. Box 21548
Newark, New Jersey 07101-4128
(a) Instructing Remitters. The Companies shall irrevocably
instruct the other parties to the Cable Contracts to
remit all payments made under or in respect of the
Cable Contracts (the "Payments") to the Lockbox. In the
event that notwithstanding the foregoing the Companies
shall receive any Payments regardless of the form
thereof, the same shall be held in trust for, and
immediately be delivered to the Bank. The Companies
shall also advise the other parties to the Cable
Contracts that neither the Companies nor the Bank shall
be responsible for cash or cash equivalent remittances
and that business reply or other acceptable mail such
as Registered, Certified, Postage Due, etc. may not be
addressed to the Lockbox.
2
<PAGE>
(b) Authorization. The Bank is irrevocably authorized to
collect and open all mail in the Lockbox, including all
Payments, for the Companies.
(c) Bank's Responsibilities.
(d) Collection. The Bank shall from time to time open and
remove the contents of the Lockbox. Upon final
collection of any Payments, the Bank will credit such
Payments to a blocked non-interest bearing cash
collateral account established and maintained by the
Bank, and with respect to which the Bank shall have
sole control, possession and dominion (the "Cash
Collateral Account"). The Companies shall have no right
to draw checks on or otherwise seek withdrawals under
the Cash Collateral Account.
(e) Upon final collection of any Payments, the Bank will
have the right to set aside and hold in the Cash
Collateral Account, and to apply against the
Obligations when due, those amounts, as determined by
the Bank, payable on the Obligations; and provided that
no Event of Default shall exist or be continuing, the
Bank will transfer the balance of such Payments in
accordance with the Companies' instructions.
(f) Endorsement and Deposit. The Bank shall have the right
to receive, indorse, assign and/or deliver in the name
of the Bank or the Companies any and all checks, drafts
and other instruments for the payment of money relating
to the Payments, and the Companies hereby waive notice
of presentment, protest and non-payment of any
instrument so indorsed. The Companies hereby constitute
the Bank or the Bank's designee as their attorney with
power to indorse its name upon any notes, acceptances,
checks, drafts, money orders or other evidences of
payment.
(g) Discrepancy in Amount. If the numerical amount of a
check differs from the written amount, the check will
be deposited for the written amount.
(h) Returned Items. A check returned unpaid for
insufficient funds will be sent for collection a second
3
<PAGE>
time. A check returned unpaid for any other reason or a
check returned unpaid a second time will, to the extent
previously credited pursuant to subparagraph 2(a), be
charged back to the Companies' account and a copy of
the check, together with a debit advice, will be sent
to the Companies.
(i) Rights and Powers of the Bank on Default.
(j) Upon the occurrence and during the continuance of an
Event of Default, all Payments shall, at the option of
the Bank, automatically be credited to the Cash
Collateral Account. During the continuance of any such
Event of Default, the Bank shall have the right to
continue to hold as cash collateral all or such portion
as the Bank shall in its sole discretion determine of
the amounts in the Cash Collateral Account or to apply
all or such portion as the Bank shall in its sole
discretion determine of such amounts against the
Obligations of the Obligors under the Transaction
Documents, as the same may be amended, extended,
increased, modified or refinanced from time to time,
including all costs and expenses incurred by the Bank
enforcing any thereof, whether or not such is
instituted.
(k) At any time the Bank shall have the right to send
notice of the assignment of, and the Collateral Agent's
Security Interest in, the Payments, to the other
parties to the Cable Contracts and the License. The
Bank's actual accrued collection expenses, including,
but not limited to, stationery and postage, telephone
and telegraph, secretarial and clerical expenses and
the salaries of any collection personnel used for
collection, shall be charged to the Companies' account
and added to the Obligations.
(l) Limitation of Liability.
The Bank shall not, under any circumstances or in any
event whatsoever, have any liability for any error or omission or
delay of any kind occurring in the settlement, collection or
payment of any of the Payments or any instrument received in
payment thereof, or for any damage resulting therefrom unless
4
<PAGE>
done maliciously or with gross negligence. Upon and at any time
during the continuance of an Event of Default, the Bank may,
without notice or consent from the Companies, sue upon or
otherwise collect, extend the time of payment of, or accept to
the Bank, compromise or settle for cash, credit or upon any terms
any of the Payments or any other securities, instruments or
insurance applicable thereto and/or release an obligor thereof.
1 Governing Law; Terms. This Lockbox Service Agreement shall be
governed by and construed in accordance with the laws of the
State of New York without regard to the laws and principles
thereof which would direct the application of the laws of another
jurisdiction.
2 Other Provisions. This Lockbox Service Agreement is the "Lockbox
Service Agreement" referred to in the Securities Purchase
Agreement and is subject to the provisions of the Securities
Purchase Agreement made expressly applicable hereto.
3 WAIVER OF TRIAL BY JURY. THE BANK, THE COLLATERAL AGENT AND THE
COMPANIES HEREBY KNOWINGLY, VOLUNTARILY AND INTENTIONALLY WAIVE
ANY RIGHT THEY MAY HAVE TO A TRIAL BY JURY IN RESPECT OF ANY
LITIGATION ARISING OUT OF, UNDER OR IN CONNECTION WITH THIS
LOCKBOX SERVICE AGREEMENT OR THE TRANSACTIONS CONTEMPLATED
HEREIN. FURTHER, THE COMPANIES HEREBY CERTIFY THAT NO
REPRESENTATIVE OR AGENT OF THE BANK OR COLLATERAL AGENT, OR
COUNSEL TO THE BANK OR COLLATERAL AGENT, HAS REPRESENTED,
EXPRESSLY OR OTHERWISE, THAT THE BANK OR COLLATERAL AGENT WOULD
NOT, IN THE EVENT OF SUCH LITIGATION, SEEK TO ENFORCE THIS WAIVER
OF RIGHT TO JURY TRIAL PROVISION. THE COMPANIES ACKNOWLEDGE THAT
THE BANK AND THE COLLATERAL AGENT HAVE BEEN INDUCED TO ENTER INTO
THIS LOCKBOX SERVICE AGREEMENT AND THE SECURITIES PURCHASE
AGREEMENT BY, INTER ALIA, THE PROVISIONS OF THIS SECTION.
5
<PAGE>
IN WITNESS WHEREOF, the Companies, IBJSCC and the Bank
have caused this Lockbox Service Agreement to be duly executed
and delivered by their duly authorized representatives as of the
date first above written.
MAGNAVISION CORPORATION
By:
Nicholas Mastrorilli, Sr.,
President
UNIVERSITY CONNECTION, INC.
By:______________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION PRIVATE CABLE, INC.
By:______________________________
Nicholas Mastrorilli, Sr.,
President
IBJS CAPITAL CORPORATION
By:______________________________
Paul Echausse, Vice President
and Chief Operating Officer
Accepted:
IBJ SCHRODER BANK & TRUST
COMPANY
6
<PAGE>
By:_________________________
Paul Echausse
Vice President
7
<PAGE>
Exhibit 10.(r)
PLEDGE AGREEMENT dated as
of June 3, 1996 (the "Agreement"),
between MAGNAVISION CORPORATION, a
New Jersey corporation (the
"Pledgor"), and IBJS CAPITAL
CORPORATION, a Delaware
corporation, in its capacity as
collateral agent (together with its
successors and assigns in such
capacity, the "Collateral Agent")
for the Investors (as hereinafter
defined).
PREAMBLE
Reference is made to the Securities Purchase Agreement
dated as of August 25, 1995, as amended by Amendment No. 1 to the
Securities Purchase Agreement dated the date hereof (as the same
may, from time to time, be supplemented, modified, amended or
restated, the "Securities Purchase Agreement"), among the
Pledgor, Magnavision Corporation, a Delaware corporation and
parent of the Pledgor, Magnavision Wireless Cable, Inc., a
Delaware corporation (the "New Subsidiary"), and the Collateral
Agent and the other Investors thereto. This Agreement is the
stock pledge agreement referred to in Section 7.26 of the
Securities Purchase Agreement.
In order to induce the Investors to enter into
Amendment No. 1 to the Securities Purchase Agreement pursuant to,
and subject to the terms and conditions of, the Securities
Purchase Agreement, the Pledgor has agreed, pursuant to Section
7.26 of the Securities Purchase Agreement, (i) to transfer to the
extent permitted thereunder, all of its right, title and interest
in, to and under the Cable Contracts to Magnavision Private
Cable, Inc., a Delaware corporation ("MPC"), and (ii) to pledge
to the Investors, all of the capital stock of MPC now or
hereafter owned by the Pledgor, in accordance with the terms of
this Agreement.
ACCORDINGLY, in consideration of the premises and the
mutual covenants and agreements contained in this Agreement, and
for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
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S1c Defined Terms; Usage. Capitalized terms used and not otherwise
defined in this Agreement shall have the meanings ascribed to
them in the Securities Purchase Agreement.
S2c Pledge. In order to secure to the
Collateral Agent for the ratable benefit
of the Investors, the due and punctual
payment of the principal of, premium, if
any, and interest on the Notes and other
monetary obligations under the Securities
Purchase Agreement and the performance of
all other obligations of the Obligors to
the Investors, howsoever created, arising
or evidenced, whether direct or indirect,
joint or several, absolute or contingent,
or now existing or hereafter arising under
this Agreement or any other Transaction
Document (collectively, the
"Obligations"), the Pledgor hereby
transfers, grants, bargains, hypothecates,
conveys, pledges, sets over, delivers and
confirms unto the Collateral Agent, for
the ratable benefit of the Investors, and
grants to the Collateral Agent, for the
ratable benefit of the Investors, a first
priority lien on and security interest in
the following (collectively, the
"Collateral"): (a) all of the issued and
outstanding shares of capital stock of
MPC, now or at any time hereafter owned by
the Pledgor (the "Pledged Stock"), (b) all
warrants, options or other rights to
acquire shares of the capital stock of MPC
whether now or at any time hereafter owned
by the Pledgor (the "Pledged Rights") and
(c) any and all proceeds of the Pledged
Stock and the Pledged Rights, including
all cash, securities and other property at
any time and from time to time receivable
2
<PAGE>
or otherwise distributed on, with respect
to, or in exchange for any or all of the
Pledged Stock and Pledged Rights; TO HAVE
AND TO HOLD the Collateral, together with
all rights, titles, interests, powers,
privileges and preferences pertaining or
incidental thereto, unto the Collateral
Agent, its successors and assigns,
forever; subject, however, to the terms,
covenants and conditions hereinafter set
forth.
S3c Delivery of Certificates Representing the
Collateral; Opinion.
(a) The Pledgor shall deliver to the
Collateral Agent on or before - the date
hereof, and at any time thereafter upon
the Collateral Agent's request or as
otherwise provided herein, (i)
certificates representing the Pledged
Stock and Pledged Rights duly endorsed in
blank or accompanied by undated stock
powers duly executed in blank, (ii) such
other instruments and documents necessary
to effectuate the purpose and intent of
this Agreement as may be required by the
laws of the jurisdictions under which MPC
is organized or within which MPC operates,
and (iii) such other instruments and
documents as the Collateral Agent may
reasonably request to effectuate the
purpose and intent of this Agreement.
(b) The Collateral Agent shall have no duty as
to any Collateral in its possession or
control or in the possession or control of
any agent or bailee, or any income
3
<PAGE>
thereon, or as to the preservation of
rights against prior parties or any other
rights pertaining thereto. The Collateral
Agent shall be deemed to have exercised
reasonable care in the custody of the
Collateral in the Collateral Agent's
possession if the Collateral is accorded
treatment substantially equal to that
which the Collateral Agent generally
accords its own property of a similar
kind. The Collateral Agent shall not be
liable or responsible for any loss or
damage to any of the Collateral, or for
any diminution in the value thereof, by
reason of the act or omission of any agent
or bailee selected by the Collateral Agent
in good faith.
S4c Representations and Warranties of Pledgor. The Pledgor hereby
makes the following representations and warranties to the
Collateral Agent as of the date hereof:
(a) Organization. MPC (i) is a corporation
duly organized, validly existing and in
good standing under the laws of the
jurisdiction of its incorporation, (ii)
certificate of incorporation and bylaws
remain in full force and effect and have
not been amended, modified or supplemented
since the date of their filing or
adoption, as the case may be, (iii) has
all requisite corporate power, and has all
governmental licenses, authorizations,
consents, permits and approvals (including
any license, authorization, consent,
permit and approval required under any
4
<PAGE>
Environmental Law) necessary to own its
assets and carry on its business as now
being or as proposed to be conducted and
to consummate the transactions
contemplated hereunder and (iv) is
qualified to do business and in good
standing in all jurisdictions in which the
nature of the business conducted by it
makes such qualification necessary and
where failure so to qualify would have a
Material Adverse Effect.
(b) Corporate Authority; Enforceability.
The Pledgor has all necessary corporate
power and authority to consummate the
transactions contemplated by this
Agreement and to execute, deliver and
perform its obligations under this
Agreement. This Agreement has been duly
authorized by all necessary corporate
action and this Agreement has been duly
and validly executed and delivered by the
Pledgor and constitutes the legal, valid
and binding obligation of the Pledgor as
of the date hereof enforceable in
accordance with its terms.
(c) Capitalization. MPC has authorized
capital stock consisting of 100 shares of
common stock. The Pledgor is the owner of
all outstanding shares of the capital
stock of MPC. All of such outstanding
shares have been duly authorized and
validly issued and are fully paid and
nonassessable with no personal liability
attaching to the ownership thereof. MPC
has not granted or issued, or agreed to
5
<PAGE>
grant or issue, any options, warrants or
similar rights to acquire, subscribe for
or receive any of the shares of any class
of capital stock of MPC or any securities
convertible into shares of such capital
stock.
(d) No Restrictions. There are no restrictions
upon the voting rights associated with, or
the transfer of, any of the capital stock
of MPC, except as provided by United
States or state securities law.
(e) Litigation. There are no legal or arbitral
proceedings or any proceedings by or
before any governmental or regulatory
authority or agency, now pending or
threatened against or affecting MPC in
which there is a reasonable possibility of
an adverse decision which could reasonably
be expected to have a Material Adverse
Effect on the same.
(f) No Breach. The execution and delivery of
this Agreement and the transactions
contemplated hereby and compliance with
the terms and provisions hereof will not
conflict with or result in a breach of, or
require any consent under, the certificate
of incorporation or bylaws of the Pledgor
or any applicable law or regulation, or
any order, writ, injunction or decree of
any court or governmental authority or
agency, any other Transaction Document,
any lease encumbered by a leasehold
mortgage, any other material agreement or
instrument to which the Pledgor is a party
6
<PAGE>
or by which it is bound or to which it is
subject, or constitute a default under any
such lease, agreement or instrument.
(g) Transfer of License. The Pledgor has
performed all actions necessary to validly
transfer all of its right, title and
interest in, to and under the Cable
Contracts to MPC and all such right, title
and interest in, to and under the Cable
Contracts is now vested in MPC.
S5c Covenants of the Pledgor. Upon the issuance to the Pledgor by
MPC or the other acquisition by the Pledgor after the date
hereof of any shares of capital stock or other securities of
MPC the Pledgor shall promptly deliver to the Collateral
Agent a certificate or certificates representing such shares
of capital stock or other securities, duly endorsed in blank
or accompanied by undated stock powers duly executed in
blank and do such further acts and things, and execute and
deliver such additional conveyances, assignments, agreements
and instruments, as may be required by the laws of the
jurisdictions under which MPC is organized or within which
MPC operates and such other instruments and documents as the
Collateral Agent may reasonably request to effect the pledge
thereof to the Collateral Agent and the perfection of the
Collateral Agent's security interest therein as contemplated
by this Agreement. The Pledgor shall ensure that at all
times during the term of this Agreement the Collateral shall
constitute not less than all of the issued and outstanding
shares of capital stock, rights to acquire the same and
other securities of MPC.
S6c Voting Rights.
(a) Unless an Event of Default shall have
occurred and be continuing, the Pledgor
shall be entitled to exercise any and all
voting and/or consensual rights and powers
accruing to an owner of the Pledged Stock
and the Pledged Rights, or any part
7
<PAGE>
thereof (whether by law, by contract or
otherwise, "Voting Rights") for any
purpose not inconsistent with the terms of
this Agreement, the Securities Purchase
Agreement or any other Transaction
Document.
(b) If an Event of Default shall have occurred
and be continuing, at the Collateral
Agent's option and following written
notice from the Collateral Agent to the
Pledgor, all rights of the Pledgor to
exercise Voting Rights pursuant to Section
6(a) of this Agreement shall cease, and
all Voting Rights shall thereupon become
vested in the Collateral Agent, who shall
have the sole and exclusive right and
authority to exercise Voting Rights for
the ratable benefit of the Investors. The
Pledgor shall execute and deliver to the
Collateral Agent all such proxies, powers
of attorney and other instruments as the
Collateral Agent shall request for the
purpose of enabling the Collateral Agent
to exercise the Voting Rights which it is
entitled to exercise pursuant to this
Section 6(b).
S7c Dividends. All dividends and distributions paid or payable in
(a) cash, if an Event of Default shall have occurred and be
continuing, (b) securities or (c) other property on or with
respect to the Pledged Stock, or Pledged Rights, whether paid
or payable in cash or otherwise, whether resulting from a
subdivision, combination or reclassification of the
outstanding capital stock of the Pledgor or MPC, or received
in exchange for Pledged Stock or Pledged Rights, or any part
thereof, or in redemption thereof, as a result of any merger,
consolidation, acquisition or other exchange of assets to
which MPC may be a party or otherwise, shall be and become
8
<PAGE>
part of the Collateral, and, if received by the Pledgor,
shall not be commingled by the Pledgor with any of its other
funds or property but shall be held separate and apart
therefrom, in trust for the benefit of the Collateral Agent
and the Investors, and shall be forthwith delivered to the
Collateral Agent as Collateral in the same form as received
but with any necessary endorsements. Nothing contained in
this Section shall be deemed to permit any action by the
Pledgor or MPC that is prohibited by the Securities Purchase
Agreement or any other Transaction Document.
S8c Rights and Remedies Upon Default.
(a) Generally. If an Event of Default shall
have occurred and be continuing, the
Collateral Agent may exercise all rights
of a secured party under the Uniform
Commercial Code of the State of New York,
the State of New Jersey or any other
applicable jurisdiction (the "UCC"), and,
in addition, the Collateral Agent shall
have all of the rights and remedies
provided for in this Agreement, in the
Securities Purchase Agreement or in any
other Transaction Document, which remedies
are cumulative and in addition to every
other right or remedy available under
applicable law: (i) the Collateral Agent
may collect and retain all payments,
issues, profits, proceeds, revenues and
income due or to become due under the
Collateral and apply such amounts to the
payment of the Obligations, all as the
Collateral Agent in its sole discretion
shall determine; (ii) the Collateral Agent
may succeed to all of the right, title and
interest of the Pledgor in, to and under
9
<PAGE>
the Collateral and maintain the Collateral
in full force and effect, with the
Collateral Agent substituted for the
Pledgor therein, and in any such event all
right, title and interest of the Pledgor
therein shall be extinguished and the
Collateral Agent shall be entitled to
collect and retain all payments and other
moneys paid or payable thereunder; and
(iii) the Collateral Agent may sell at
public or private sale, without appraisal,
for such price as it may deem fair, any
Collateral and all right, title and
interest of the Pledgor in, to and under
such Collateral.
(b) Registration in Nominee Name;
Denominations. If an Event of Default
shall have occurred and be continuing, the
Collateral Agent shall have the right (in
its sole and absolute discretion and with
subsequent notice to the Pledgor) to
transfer to or to register the Pledged
Stock and the Pledged Rights in its own
name or the name of its nominee. In
addition, the Collateral Agent shall at
all times have the right to exchange the
certificates or other instruments
representing the Pledged Stock and Pledged
Rights for certificates or other
instruments of smaller or larger
denominations for any purpose not
inconsistent with this Agreement.
(c) Sale of the Collateral.
(i) If an Event of Default shall have occurred
and be continuing, the Collateral Agent
may sell the Collateral, or any part
thereof, at any public or private sale or
10
<PAGE>
at any broker's board or on any securities
exchange, for cash, upon credit or for
future delivery and at such price or
prices as the Collateral Agent shall deem
appropriate. The Collateral Agent shall be
authorized at any such sale (if it deems
it advisable to do so) to restrict the
prospective bidders or purchasers to
persons who will represent and agree that
they are purchasing the Collateral for
their own account for investment and not
with a view to the distribution or sale
thereof, and upon consummation of any such
sale the Collateral Agent shall have the
right to assign, transfer and deliver to
the purchaser or purchasers thereof the
Collateral so sold. Each such purchaser at
any such sale shall hold the property sold
absolutely free from any claim or right on
the part of the Pledgor, and the Pledgor
hereby waives (to the full extent
permitted by Applicable Law) all rights of
redemption, stay and appraisal which the
Pledgor now has or may have at any time in
the future under any applicable law now
existing or hereafter enacted or adopted
(as well as any rights to exoneration,
subrogation or reimbursement arising at
law, in equity or otherwise).
(ii) The Collateral Agent shall give the
Pledgor ten (10) days' prior written
notice (which the Pledgor irrevocably
agrees is reasonable notice within the
meaning of the applicable provisions of
the UCC) of the Collateral Agent's
intention to make any sale of Collateral.
Such notice shall state the time and place
for such sale and, in the case of sale at
a broker's board or on a securities
exchange, shall state the board or
exchange at which such sale is to be made
and the day on which the Collateral, or
any portion thereof, will first be offered
for sale at such board or exchange. Any
such public sale shall be held at such
time or times within ordinary business
hours and at such place or places as the
Collateral Agent may fix and state in the
notice of such sale. At any such sale the
Collateral, or portion thereof, to be sold
may be sold in one lot as an entirety or
in separate lots as the Collateral Agent
may (in its sole and absolute discretion)
determine. The Collateral Agent shall not
be obligated to make any sale of any
Collateral if it shall determine not to do
so, regardless of the fact that notice of
sale of such Collateral shall have been
given. The Collateral Agent may, without
11
<PAGE>
notice or publication, adjourn any public
or private sale or cause the same to be
adjourned from time to time by
announcement at the time and place fixed
for sale, and such sale may be made at the
time and place to which the same was so
adjourned. If any sale of all or any part
of the Collateral is made on credit or for
future delivery, the Collateral so sold
may be retained by the Collateral Agent
until the sale price is paid in full by
the purchaser or purchasers thereof, but
the Collateral Agent shall not incur any
liability in case any such purchaser or
purchasers shall fail to take up and pay
for the Collateral so sold and, in case of
any such failure, such Collateral may be
sold again upon like notice. The parties
agree that any sale of the Collateral
conducted in conformity with reasonable
commercial practices of banks, commercial
finance companies, insurance companies or
other financial institutions disposing of
property similar to the Collateral shall
be deemed to be commercially reasonable.
(iii) At any public sale, any Investor may bid
for or purchase, free (to the extent
permitted by law) from any right of
redemption, stay or appraisal on the part
of the Pledgor (all said rights being also
hereby waived and released to the full
extent permitted by applicable law), the
Collateral or any part thereof offered for
sale and may make payment on account
thereof by using any claim then due and
payable to such Investor from the Pledgor
or any Obligor as a credit against the
purchase price, and such Investor may,
upon compliance with the terms of sale,
hold, retain and dispose of such property
without further accountability to the
Pledgor or any Obligor therefor. For
purposes hereof, (i) the execution of a
written agreement to purchase the
Collateral or any portion thereof shall be
treated as a sale thereof, (ii) the
Collateral Agent or an Investor shall be
12
<PAGE>
free to carry out such sale pursuant to
such agreement and (iii) the Pledgor shall
not be entitled to the return of the
Collateral or any portion thereof subject
thereto, notwithstanding the fact that
after the Collateral Agent or such
Investor shall have entered into such an
agreement all Events of Default shall have
been remedied and the Obligations paid in
full.
(d) Application of Proceeds of Sale. The
proceeds of any sale of, or other
realization upon, all or any part of the
Collateral pursuant to or as contemplated
by this Agreement, as well as any
Collateral consisting of cash, shall be
promptly applied by the Collateral Agent
as follows:
FIRST, to payment of all reasonable costs and expenses
incurred by the Collateral Agent in connection with such sale
or otherwise in connection with its duties under this
Agreement, including, but not limited to, all court costs and
the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the Collateral
Agent hereunder on behalf of the Pledgor and any other
reasonable costs or expenses incurred in connection with the
exercise of any right or remedy hereunder;
SECOND, to the payment in full of the Notes then outstanding
or, in the event such proceeds are insufficient to pay in
full the Notes, ratably to the Investors in proportion to the
then outstanding balance of the Notes;
THIRD, to the payment in full of the Obligations or, in the
event such proceeds are insufficient to pay in full the
Obligations, ratably to the Investors in proportion to the
then outstanding balance of the Notes; and
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<PAGE>
FOURTH, to the Pledgor, its successors and assigns, or as a
court of competent jurisdiction may otherwise direct.
(a) Deficiency. If the proceeds of the sale,
collection or other realization of or upon
all or part of the Collateral pursuant to
the provisions of this Agreement are
insufficient to cover the costs and
expenses of such realization and the
payment in full of the Obligations, the
Obligors shall remain liable for any
deficiency.
S1c Collateral Agent Appointed Attorney-in-
Fact; Proxy.
(b) Effective only upon the occurrence and
during the continuance of an Event of
Default, the Pledgor hereby irrevocably
appoints the Collateral Agent as the
Pledgor's attorney-in-fact for the purpose
of carrying out the provisions of this
Agreement and taking any action and
executing any instrument which the
Collateral Agent may deem necessary or
advisable to accomplish the purposes
hereof, which appointment is irrevocable
and coupled with an interest. Without
limiting the generality of the foregoing,
the Collateral Agent shall have the right,
upon the occurrence and during the
continuance of an Event of Default, with
full power of substitution either in the
Collateral Agent's name or in the name of
the Pledgor, to (i) ask for, demand, sue
for, collect, receive receipt and give
`acquittance for any and all moneys due or
to become due and under and by virtue of
the Collateral, (ii) endorse checks,
drafts, orders and other instruments for
14
<PAGE>
the payment of money payable to the
Pledgor representing any dividend or other
distribution payable on or with respect to
the Collateral or any part thereof or on
account thereof and give full discharge
for the same, (iii) settle, compromise,
prosecute or defend any action, claim or
proceeding with respect to any of the
foregoing or otherwise affecting the
Collateral and (iv) sell, assign, endorse,
pledge, transfer and make any agreement
respecting, or otherwise deal with, the
same as if the Collateral Agent were the
absolute owner thereof.
(c) Effective only upon the occurrence and
during the continuance of an Event of
Default, the Pledgor hereby irrevocably
appoints the Collateral Agent as its
proxy, with full power of substitution, to
exercise all Voting Rights, including
voting and other rights with respect to
the Pledged Stock, or Pledged Rights, at
any annual or special meeting of the
stockholders of the issuer thereof, or any
adjournment or postponement thereof, or by
written consent in lieu of a meeting, or
otherwise. The foregoing appointment is
irrevocable and coupled with an interest.
(d) Nothing contained in this Agreement shall
be construed as requiring or obligating
the Collateral Agent to make any
commitment or to make any inquiry as to
the nature or sufficiency of any payment
received by the Collateral Agent, or to
present or file any claim or notice, or to
take any action with respect to the
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<PAGE>
Collateral or any part thereof or the
moneys due or to become due on or with
respect thereto or any property covered
thereby, and no action taken by the
Collateral Agent or omitted to be taken
with respect to the Collateral or any part
thereof shall give rise to any defense,
counterclaim or offset in favor of the
Pledgor or to any claim or action against
the Collateral Agent.
S1c Securities Act, etc. In view of the position of the Pledgor
in relation to the Pledged Stock and the Pledged Rights, or
because of other present or future circumstances, a question
may arise under the Securities Act of 1933, as now or
hereafter in effect (the "Securities Act"), or any other
federal statute hereafter enacted analogous in purpose or
effect (the Securities Act and any such similar statute and
related rules and regulations promulgated thereunder as from
time to time in effect being called the "Federal Securities
Laws") with respect to any disposition of the Pledged Stock
and the Pledged Rights permitted hereunder. The Pledgor
understands that compliance with the Federal Securities Laws
might very strictly limit the course of conduct of the
Collateral Agent if the Collateral Agent were to attempt to
dispose of all or any part of the Pledged Stock and the
Pledged Rights permitted hereunder, and might also limit the
extent to which or the manner in which any subsequent
transferee of any Pledged Stock and the Pledged Rights could
dispose of the same. Similarly, there may be other legal
restrictions or limitations affecting the Collateral Agent in
any attempt to dispose of all or part of the Pledged Stock
and the Pledged Rights under applicable "blue sky" or other
state securities laws or similar laws of foreign
jurisdictions. Under applicable law, in the absence of an
agreement to the contrary, the Collateral Agent might be held
to have certain general duties and obligations to MPC, or to
the Pledgor or to make some effort toward obtaining a fair
price even though the obligations of the Pledgor may be
discharged or reduced by the proceeds of a sale at a lesser
price. The Pledgor clearly understands that the Collateral
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Agent is not to, and shall not, have any such general duty or
obligation to the Pledgor. Without limiting the generality of
the foregoing, the provisions of this Section would apply if,
for example, the Collateral Agent were to place all or any
part of the Pledged Stock or Pledged Rights for private
placement by an investment banking firm, or if such
investment banking firm purchased all or any part of the
Pledged Stock or Pledged Rights for its own account, or if
the Collateral Agent placed all or any part of the Pledged
Stock or the Pledge Rights privately with a purchaser or
purchasers. The provisions of this Section will apply
notwithstanding the existence of a public or private market
upon which the quotations or sales prices may exceed
substantially the price at which the Collateral Agent sells
any Pledged Stock or Pledged Rights.
S2c Security Interest Absolute. All rights of
the Collateral Agent hereunder, the grant
of the security interest in the Collateral
and all obligations of the Pledgor
hereunder shall be absolute and
unconditional irrespective of (a) except
to the extent not permitted to be waived
under applicable law, any lack of validity
or enforceability of the Obligations, the
Securities Purchase Agreement or any other
Transaction Document or any other
agreement or instrument relating to any of
the foregoing, (b) any change in the time,
manner or place of payment of, or in any
other term of, all or any of the
Obligations, or any other amendment or
waiver of or any consent to any departure
from the Securities Purchase Agreement or
any other Transaction Document or any
other agreement or instrument relating to
any of the foregoing, (c) failure by the
Collateral Agent to take steps to perfect
or maintain perfected its security
interest in, or to preserve its rights to,
any of the Collateral, (d) any exchange,
release or non-perfection of any other
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<PAGE>
collateral, or any release or amendment or
waiver of or consent to or departure from
any guaranty, for all or any of the
Obligations, (e) the disallowance under
Section 502 of the Bankruptcy Code of all
or any portion of the claims of the
Investors for repayment of the
Obligations, or (f) any other circumstance
which might otherwise constitute a legal
or equitable defense available to, or a
legal or equitable discharge of, the
Pledgor or Obligors with respect to the
Obligations or with respect to this
Agreement other than the indefeasible
payment in full of all of the Obligations.
S3c Duration of Agreement; Release of
Security. This Agreement and the security
interests hereunder shall terminate when
(a) all of the Obligations (other than
unknown contingent Obligations) have been
fully and indefeasibly paid and performed
or otherwise satisfied and (b) the
Investors have no further Commitment under
the Notes or obligation to perform any
other obligations under the Securities
Purchase Agreement or any other
Transaction Document. The release of
Collateral or reassignment of rights to
the Pledgor upon the termination of this
Agreement shall be free and clear of all
liens, claims and encumbrances, without
recourse to or warranty by the Collateral
Agent or any Investor, except for standard
representations and warranties, and shall
be made by the Collateral Agent at the
expense of the Pledgor. Upon the release
of Collateral or reassignment of rights to
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<PAGE>
the Pledgor, the Collateral Agent shall,
at the expense of the Pledgor, execute and
deliver to the Pledgor such documents as
the Pledgor shall reasonably request to
evidence such release and reassignment and
shall deliver to the Pledgor all
Collateral so released then in its
possession and not applied in satisfaction
of the Obligations.
S4c Further Assurances. The Pledgor agrees to
do such further acts and things, and to
execute and deliver such additional
conveyances, assignments, agreements and
instruments, as the Collateral Agent may
from time to time reasonably request
including, without limitation, upon an
Event of Default, in connection with the
administration and enforcement of this
Agreement or with respect to the
Collateral or any part thereof or in order
better to assure and confirm unto the
Collateral Agent its rights and remedies
hereunder and to permit the exercise
thereof in compliance with applicable law,
Federal Securities Laws and all applicable
laws of any foreign jurisdiction.
S5c No Waiver By Collateral Agent. No failure
on the part of the Collateral Agent to
exercise, and no delay in exercising and
no course of dealing with respect to, any
right or power under this Agreement shall
operate as a waiver thereof, nor shall any
single or partial exercise by the
Collateral Agent of any right or power
under this Agreement, or any abandonment
or discontinuance of steps to preserve or
enforce such right or power, preclude any
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<PAGE>
other or further exercise thereof or the
exercise of any other right or power. The
rights of the Collateral Agent in this
Agreement are cumulative and are not
exclusive of any other rights or remedies
available to Collateral Agent at law or in
equity. No notice to or demand on the
Pledgor in any case shall entitle the
Pledgor to any other or further notice or
demand in similar or other circumstances.
S6c Notices. All notices, demands and requests
of any kind to be delivered to any party
hereto in connection with this Agreement
shall be in writing and (i) delivered
personally, (ii) sent by
nationally-recognized overnight courier
guaranteeing next day delivery, (iii) sent
by first class, registered or certified
mail, return receipt requested or (iv)
sent by facsimile, in each case to such
party at its address as follows:
(i) If to the Pledgor, to:
Magnavision Corporation
1725 Highway 35 South
Wall Township, New Jersey 07719
Attention: Nicholas Mastrorilli, Sr.
Telephone: (908) 449-1200
Telecopier: (908) 974-1106
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Telephone: (212) 486-1700
Telecopier: (212) 223-1151;
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(i) If to Collateral Agent, to:
IBJS Capital Corporation
One State Street
New York, New York 10004
Attention: Paul Echausse
Telephone: (212) 858-2728
Telecopier: (212) 952-1629
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
Any notice, demand or request so delivered shall
constitute valid notice under this Agreement and shall be deemed
to have been received (A) on the day of actual delivery in the
case of personal delivery, (B) on the next day after the date
when sent in the case of delivery by nationally-recognized
overnight courier, (C) on the fifth day after the date of deposit
in the U.S. mail in the case of mailing or (D) upon receipt in
the case of a facsimile transmission. Any party hereto may from
time to time by notice in writing served upon the other as
aforesaid designate a different mailing address or a different
person to which all such notices, demands or requests thereafter
are to be addressed.
S1c Governing Law. This Agreement shall be construed in
accordance with and governed by the laws of the State of New
York without regard to the laws and principles of the State
of New York or of any other jurisdiction which would direct
the application of the laws of another jurisdiction.
S2c Successors and Assigns. This Agreement
shall be binding upon and inure to the
benefit of the Pledgor, the Collateral
Agent, their successors and permitted
assigns. This Agreement is not assignable
except by the Collateral Agent. Any
purported assignment inconsistent with
this provision shall be null and void.
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<PAGE>
S3c Amendments and Waivers. Any provision of
this Agreement may be amended or waived,
but only pursuant to a written agreement
signed by the Pledgor and the Collateral
Agent.
S4c Severability. Any provision of this
Agreement which is prohibited or
unenforceable in any jurisdiction shall,
as to such provision and such
jurisdiction, be ineffective to the extent
of such prohibition or unenforceability
without invalidating the remaining
provisions of this Agreement or affecting
the validity or enforceability of such
provision in any other jurisdiction.
S5c Section Headings. Section headings used
herein are for convenience only and are
not to affect the construction of, or be
taken into consideration in interpreting,
this Agreement.
S6c Counterparts. This Agreement may be
executed in any number of identical
counterparts, each of which shall
constitute an original but all of which
when taken together shall constitute but
one contract.
* * * *
IN WITNESS WHEREOF, the parties hereto have caused this
Pledge Agreement to be duly executed by their authorized
officers, all as of the day and year first above written.
MAGNAVISION CORPORATION,
as Pledgor
By: _______________________________
Nicholas Mastrorilli, Sr.,
President
IBJS CAPITAL CORPORATION,
as Collateral Agent for the
Investors
By: _______________________________
Paul Echausse, Vice President
and Chief Operating Officer
<PAGE>
Exhibit 10.(s)
PLEDGE AGREEMENT dated as
of June 3, 1996 (the "Agreement"),
between MAGNAVISION CORPORATION, a
New Jersey corporation (the
"Pledgor"), and IBJS CAPITAL
CORPORATION, a Delaware
corporation, in its capacity as
collateral agent (together with its
successors and assigns in such
capacity, the "Collateral Agent")
for the Investors (as hereinafter
defined).
PREAMBLE
Reference is made to the Securities Purchase Agreement
dated as of August 25, 1995 as amended by Amendment No. 1 to the
Securities Purchase Agreement dated the date hereof (as the same
may, from time to time, be supplemented, modified, amended or
restated, the "Securities Purchase Agreement") among the Pledgor,
Magnavision Corporation, a Delaware corporation and parent of the
Pledgor, Magnavision Wireless Cable, Inc., a Delaware corporation
(the "New Subsidiary"), and the Collateral Agent and the other
Investors thereto. This Agreement is the stock pledge agreement
referred to in Section 8.7 of the Securities Purchase Agreement.
In order to induce the Investors to enter into
Amendment No. 1 to the Securities Purchase Agreement pursuant to,
and subject to the terms and conditions of, the Securities
Purchase Agreement, the Pledgor has agreed, pursuant to Section
8.7 of the Securities Purchase Agreement, (i) to transfer to the
extent permitted thereunder, all of its right, title and interest
in, to and under the License to the New Subsidiary, and (ii) to
pledge to the Investors, all of the capital stock of the New
Subsidiary now or hereafter owned by the Pledgor, in accordance
with the terms of this Agreement.
ACCORDINGLY, in consideration of the premises and the
mutual covenants and agreements contained in this Agreement, and
for other good and valuable consideration the receipt and
sufficiency of which are hereby acknowledged, the parties hereto
hereby agree as follows:
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S1c Defined Terms; Usage.
Capitalized terms used and not otherwise defined in this
Agreement shall have the meanings ascribed to them in the
Securities Purchase Agreement.
S2c Pledge. In order to secure to the
Collateral Agent for the ratable benefit
of the Investors, the due and punctual
payment of the principal of, premium, if
any, and interest on the Notes and other
monetary obligations under the Securities
Purchase Agreement and the performance of
all other obligations of the Obligors to
the Investors, howsoever created, arising
or evidenced, whether direct or indirect,
joint or several, absolute or contingent,
or now existing or hereafter arising under
this Agreement or any other Transaction
Document (collectively, the
"Obligations"), the Pledgor hereby
transfers, grants, bargains, hypothecates,
conveys, pledges, sets over, delivers and
confirms unto the Collateral Agent, for
the ratable benefit of the Investors, and
grants to the Collateral Agent, for the
ratable benefit of the Investors, a first
priority lien on and security interest in
the following (collectively, the
"Collateral"): (a) all of the issued and
outstanding shares of capital stock of the
New Subsidiary, now or at any time
hereafter owned by the Pledgor (the
"Pledged Stock"), (b) all warrants,
options or other rights to acquire shares
of the capital stock of the New Subsidiary
whether now or at any time hereafter owned
by the Pledgor (the "Pledged Rights") and
(c) any and all proceeds of the Pledged
Stock and the Pledged Rights, including
all cash, securities and other property at
any time and from time to time receivable
2
<PAGE>
or otherwise distributed on, with respect
to, or in exchange for any or all of the
Pledged Stock and Pledged Rights; TO HAVE
AND TO HOLD the Collateral, together with
all rights, titles, interests, powers,
privileges and preferences pertaining or
incidental thereto, unto the Collateral
Agent, its successors and assigns,
forever; subject, however, to the terms,
covenants and conditions hereinafter set
forth.
S3c Delivery of Certificates Representing the
Collateral; Opinion.
(a) The Pledgor shall deliver to the
Collateral Agent on or before the date
hereof and at any time thereafter upon the
Collateral Agent's request or as otherwise
provided herein, (i) certificates
representing the Pledged Stock and Pledged
Rights duly endorsed in blank or
accompanied by undated stock powers duly
executed in blank, (ii) such other
instruments and documents necessary to
effectuate the purpose and intent of this
Agreement as may be required by the laws
of the jurisdictions under which the New
Subsidiary is organized or within which
the New Subsidiary operates, and (iii)
such other instruments and documents as
the Collateral Agent may reasonably
request to effectuate the purpose and
intent of this Agreement.
(b) The Collateral Agent shall have no duty as
to any Collateral in its possession or
control or in the possession or control of
any agent or bailee, or any income
3
<PAGE>
thereon, or as to the preservation of
rights against prior parties or any other
rights pertaining thereto. The Collateral
Agent shall be deemed to have exercised
reasonable care in the custody of the
Collateral in the Collateral Agent's
possession if the Collateral is accorded
treatment substantially equal to that
which the Collateral Agent generally
accords its own property of a similar
kind. The Collateral Agent shall not be
liable or responsible for any loss or
damage to any of the Collateral, or for
any diminution in the value thereof, by
reason of the act or omission of any agent
or bailee selected by the Collateral Agent
in good faith.
S4c Representations and Warranties of Pledgor.
The Pledgor hereby makes the following
representations and warranties to the
Collateral Agent as of the date hereof:
(a) Organization. The New Subsidiary (i) is a
corporation duly organized, validly
existing and in good standing under the
laws of the jurisdiction of its
incorporation, (ii) certificate of
incorporation and bylaws remain in full
force and effect and have not been
amended, modified or supplemented since
the date of their filing or adoption, as
the case may be, (iii) has all requisite
corporate power, and has all governmental
licenses, authorizations, consents,
permits and approvals (including any
license, authorization, consent, permit
and approval required under any
Environmental Law) necessary to own its
4
<PAGE>
assets and carry on its business as now
being or as proposed to be conducted and
to consummate the transactions
contemplated hereunder and (iv) is
qualified to do business and in good
standing in all jurisdictions in which the
nature of the business conducted by it
makes such qualification necessary and
where failure so to qualify would have a
Material Adverse Effect.
(b) Corporate Authority; Enforceability. The
Pledgor has all necessary corporate power
and authority to consummate the
transactions contemplated by this
Agreement and to execute, deliver and
perform its obligations under this
Agreement. This Agreement has been duly
authorized by all necessary corporate
action and this Agreement has been duly
and validly executed and delivered by the
Pledgor and constitutes the legal, valid
and binding obligation of the Pledgor as
of the date hereof enforceable in
accordance with its terms.
(c) Capitalization. The New Subsidiary has
authorized capital stock consisting of 100
shares of common stock. The Pledgor is the
owner of all outstanding shares of the
capital stock of the New Subsidiary. All
of such outstanding shares have been duly
authorized and validly issued and are
fully paid and nonassessable with no
5
<PAGE>
personal liability attaching to the
ownership thereof. The New Subsidiary has
not granted or issued, or agreed to grant
or issue, any options, warrants or similar
rights to acquire, subscribe for or
receive any of the shares of any class of
capital stock of the New Subsidiary or any
securities convertible into shares of such
capital stock.
(d) No Restrictions. There are no restrictions
upon the voting rights associated with, or
the transfer of, any of the capital stock
of the New Subsidiary, except as provided
by United States or state securities law.
(e) Litigation. There are no legal or arbitral
proceedings or any proceedings by or
before any governmental or regulatory
authority or agency, now pending or
threatened against or affecting the New
Subsidiary in which there is a reasonable
possibility of an adverse decision which
could reasonably be expected to have a
Material Adverse Effect on the same.
(f) No Breach. The execution and delivery of
this Agreement and the transactions
contemplated hereby and compliance with
the terms and provisions hereof will not
conflict with or result in a breach of, or
require any consent under, the certificate
of incorporation or bylaws of the Pledgor
or any applicable law or regulation, or
any order, writ, injunction or decree of
any court or governmental authority or
6
<PAGE>
agency, any other Transaction Document,
any lease encumbered by a leasehold
mortgage, any other material agreement or
instrument to which the Pledgor is a party
or by which it is bound or to which it is
subject, or constitute a default under any
such lease, agreement or instrument.
(g) Transfer of License. The Pledgor has
performed all actions necessary to validly
transfer all of its right, title and
interest in, to and under the License to
the New Subsidiary and all such right,
title and interest in, to and under the
License is now vested in the New
Subsidiary.
(h) Communications Act. The New Subsidiary
does not qualify as a "cable television
company" prohibited from leasing
transmission time or capacity from a
licensee of a station within the meaning
of 47 C.F.R. 74.931(h).
S5c Covenants of the Pledgor. Upon the issuance to the Pledgor by the New
Subsidiary or the other acquisition by the Pledgor after the date hereof of
any shares of capital stock or other securities of the New Subsidiary the
Pledgor shall promptly deliver to the Collateral Agent a certificate or
certificates representing such shares of capital stock or other securities,
duly endorsed in blank or accompanied by undated stock powers duly executed
in blank and do such further acts and things, and execute and deliver such
additional conveyances, assignments, agreements and instruments, as may be
required by the laws of the jurisdictions under which the New Subsidiary is
organized or within which the New Subsidiary operates and such other
instruments and documents as the Collateral Agent may reasonably request to
effect the pledge thereof to the Collateral Agent and the perfection of the
7
<PAGE>
Collateral Agent's security interest therein as contemplated by this
Agreement. The Pledgor shall ensure that at all times during the term of
this Agreement the Collateral shall constitute not less than all of the
issued and outstanding shares of capital stock, rights to acquire the same
and other securities of the New Subsidiary.
S6c Voting Rights.
(a) Unless an Event of Default shall have
occurred and be continuing, the Pledgor
shall be entitled to exercise any and all
voting and/or consensual rights and powers
accruing to an owner of the Pledged Stock
and the Pledged Rights, or any part
thereof (whether by law, by contract or
otherwise, "Voting Rights") for any
purpose not inconsistent with the terms of
this Agreement, the Securities Purchase
Agreement or any other Transaction
Document.
(b) If an Event of Default shall have occurred
and be continuing, at the Collateral
Agent's option and following written
notice from the Collateral Agent to the
Pledgor, all rights of the Pledgor to
exercise Voting Rights pursuant to Section
6(a) of this Agreement shall cease, and
all Voting Rights shall thereupon become
vested in the Collateral Agent, who shall
have the sole and exclusive right and
authority to exercise Voting Rights for
the ratable benefit of the Investors. The
Pledgor shall execute and deliver to the
Collateral Agent all such proxies, powers
of attorney and other instruments as the
Collateral Agent shall request for the
purpose of enabling the Collateral Agent
to exercise the Voting Rights which it is
entitled to exercise pursuant to this
Section 6(b).
8
<PAGE>
S7c Dividends. All dividends and distributions paid or payable in (a) cash, if
an Event of Default shall have occurred and be continuing, (b) securities
or (c) other property on or with respect to the Pledged Stock, or Pledged
Rights, whether paid or payable in cash or otherwise, whether resulting
from a subdivision, combination or reclassification of the outstanding
capital stock of the Pledgor or the New Subsidiary, or received in exchange
for Pledged Stock or Pledged Rights, or any part thereof, or in redemption
thereof, as a result of any merger, consolidation, acquisition or other
exchange of assets to which the New Subsidiary may be a party or otherwise,
shall be and become part of the Collateral, and, if received by the
Pledgor, shall not be commingled by the Pledgor with any of its other funds
or property but shall be held separate and apart therefrom, in trust for
the benefit of the Collateral Agent and the Investors, and shall be
forthwith delivered to the Collateral Agent as Collateral in the same form
as received but with any necessary endorsements. Nothing contained in this
Section shall be deemed to permit any action by the Pledgor or the New
Subsidiary that is prohibited by the Securities Purchase Agreement or any
other Transaction Document.
S8c Rights and Remedies Upon Default.
(a) Generally. If an Event of Default shall
have occurred and be continuing, the
Collateral Agent may exercise all rights
of a secured party under the Uniform
Commercial Code of the State of New York,
the State of New Jersey or any other
applicable jurisdiction (the "UCC"), and,
in addition, the Collateral Agent shall
have all of the rights and remedies
provided for in this Agreement, in the
Securities Purchase Agreement or in any
other Transaction Document, which remedies
are cumulative and in
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<PAGE>
addition to every other right or remedy
available under applicable law: (i) the
Collateral Agent may collect and retain
all payments, issues, profits, proceeds,
revenues and income due or to become due
under the Collateral and apply such
amounts to the payment of the Obligations,
all as the Collateral Agent in its sole
discretion shall determine; (ii) the
Collateral Agent may succeed to all of the
right, title and interest of the Pledgor
in, to and under the Collateral and
maintain the Collateral in full force and
effect, with the Collateral Agent
substituted for the Pledgor therein, and
in any such event all right, title and
interest of the Pledgor therein shall be
extinguished and the Collateral Agent
shall be entitled to collect and retain
all payments and other moneys paid or
payable thereunder; and (iii) the
Collateral Agent may sell at public or
private sale, without appraisal, for such
price as it may deem fair, any Collateral
and all right, title and interest of the
Pledgor in, to and under such Collateral.
(b) Registration in Nominee Name;
Denominations. If an Event of Default
shall have occurred and be continuing, the
Collateral Agent shall have the right (in
its sole and absolute discretion and with
subsequent notice to the Pledgor) to
transfer to or to register the Pledged
Stock and the Pledged Rights in its own
name or the name of its nominee. In
addition, the Collateral Agent shall at
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<PAGE>
all times have the right to exchange the
certificates or other instruments
representing the Pledged Stock and Pledged
Rights for certificates or other
instruments of smaller or larger
denominations for any purpose not
inconsistent with this Agreement.
(c) Sale of the Collateral.
(i) If an Event of Default shall have occurred and be continuing, the
Collateral Agent may sell the Collateral, or any part thereof, at any
public or private sale or at any broker's board or on any securities
exchange, for cash, upon credit or for future delivery and at such price or
prices as the Collateral Agent shall deem appropriate. The Collateral Agent
shall be authorized at any such sale (if it deems it advisable to do so) to
restrict the prospective bidders or purchasers to persons who will
represent and agree that they are purchasing the Collateral for their own
account for investment and not with a view to the distribution or sale
thereof, and upon consummation of any such sale the Collateral Agent shall
have the right to assign, transfer and deliver to the purchaser or
purchasers thereof the Collateral so sold. Each such purchaser at any such
sale shall hold the property sold absolutely free from any claim or right
on the part of the Pledgor, and the Pledgor hereby waives (to the full
extent permitted by Applicable Law) all rights of redemption, stay and
appraisal which the Pledgor now has or may have at any time in the future
under any applicable law now existing or hereafter enacted or adopted (as
well as any rights to exoneration, subrogation or reimbursement arising at
law, in equity or otherwise).
(ii) The Collateral Agent shall give the Pledgor ten (10) days' prior written
notice (which the Pledgor irrevocably agrees is reasonable notice within
the meaning of the applicable provisions of the UCC) of the Collateral
Agent's intention to make any sale of Collateral. Such notice shall state
the time and place for such sale and, in the case of sale at a broker's
board or on a securities exchange, shall state the board or exchange at
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<PAGE>
which such sale is to be made and the day on which the Collateral, or any
portion thereof, will first be offered for sale at such board or exchange.
Any such public sale shall be held at such time or times within ordinary
business hours and at such place or places as the Collateral Agent may fix
and state in the notice of such sale. At any such sale the Collateral, or
portion thereof, to be sold may be sold in one lot as an entirety or in
separate lots as the Collateral Agent may (in its sole and absolute
discretion) determine. The Collateral Agent shall not be obligated to make
any sale of any Collateral if it shall determine not to do so, regardless
of the fact that notice of sale of such Collateral shall have been given.
The Collateral Agent may, without notice or publication, adjourn any public
or private sale or cause the same to be adjourned from time to time by
announcement at the time and place fixed for sale, and such sale may be
made at the time and place to which the same was so adjourned. If any sale
of all or any part of the Collateral is made on credit or for future
delivery, the Collateral so sold may be retained by the Collateral Agent
until the sale price is paid in full by the purchaser or purchasers
thereof, but the Collateral Agent shall not incur any liability in case any
such purchaser or purchasers shall fail to take up and pay for the
Collateral so sold and, in case of any such failure, such Collateral may be
sold again upon like notice. The parties agree that any sale of the
Collateral conducted in conformity with reasonable commercial practices of
banks, commercial finance companies, insurance companies or other financial
institutions disposing of property similar to the Collateral shall be
deemed to be commercially reasonable.
(iii) At any public sale, any Investor may bid
for or purchase, free (to the extent
permitted by law) from any right of
redemption, stay or appraisal on the part
of the Pledgor (all said rights being also
hereby waived and released to the full
extent permitted by applicable law), the
Collateral or any part thereof offered for
sale and may make payment on account
thereof by using any claim then due and
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<PAGE>
payable to such Investor from the Pledgor
or any Obligor as a credit against the
purchase price, and such Investor may,
upon compliance with the terms of sale,
hold, retain and dispose of such property
without further accountability to the
Pledgor or any Obligor therefor. For
purposes hereof, (i) the execution of a
written agreement to purchase the
Collateral or any portion thereof shall be
treated as a sale thereof, (ii) the
Collateral Agent or an Investor shall be
free to carry out such sale pursuant to
such agreement and (iii) the Pledgor shall
not be entitled to the return of the
Collateral or any portion thereof subject
thereto, notwithstanding the fact that
after the Collateral Agent or such
Investor shall have entered into such an
agreement all Events of Default shall have
been remedied and the Obligations paid in
full.
(d) Application of Proceeds of Sale. The
proceeds of any sale of, or other
realization upon, all or any part of the
Collateral pursuant to or as contemplated
by this Agreement, as well as any
Collateral consisting of cash, shall be
promptly applied by the Collateral Agent
as follows:
FIRST, to payment of all reasonable costs and expenses
incurred by the Collateral Agent in connection with such
sale or otherwise in connection with its duties under this
Agreement, including, but not limited to, all court costs
and the reasonable fees and expenses of its agents and legal
counsel, the repayment of all advances made by the
Collateral Agent hereunder on behalf of the Pledgor and any
other reasonable costs or expenses incurred in connection
with the exercise of any right or remedy hereunder;
13
<PAGE>
SECOND, to the payment in full of the Notes then outstanding
or, in the event such proceeds are insufficient to pay in
full the Notes, ratably to the Investors in proportion to
the then outstanding balance of the Notes;
THIRD, to the payment in full of the Obligations or, in the
event such proceeds are insufficient to pay in full the
Obligations, ratably to the Investors in proportion to the
then outstanding balance of the Notes; and
FOURTH, to the Pledgor, its successors and assigns, or
as a court of competent jurisdiction may otherwise
direct.
(a) Deficiency. If the proceeds of the sale, collection or
other realization of or upon all or part of the
Collateral pursuant to the provisions of this Agreement
are insufficient to cover the costs and expenses of
such realization and the payment in full of the
Obligations, the Obligors shall remain liable for any
deficiency.
S1c Collateral Agent Appointed Attorney-in- Fact; Proxy.
(b) Effective only upon the occurrence and
during the continuance of an Event of
Default, the Pledgor hereby irrevocably
appoints the Collateral Agent as the
Pledgor's attorney-in-fact for the purpose
of carrying out the provisions of this
Agreement and taking any action and
executing any instrument which the
Collateral Agent may deem necessary or
advisable to accomplish the purposes
hereof, which appointment is irrevocable
and coupled with an interest. Without
limiting the generality of the foregoing,
14
<PAGE>
the Collateral Agent shall have the right,
upon the occurrence and during the
continuance of an Event of Default, with
full power of substitution either in the
Collateral Agent's name or in the name of
the Pledgor, to (i) ask for, demand, sue
for, collect, receive receipt and give
`acquittance for any and all moneys due or
to become due and under and by virtue of
the Collateral, (ii) endorse checks,
drafts, orders and other instruments for
the payment of money payable to the
Pledgor representing any dividend or other
distribution payable on or with respect to
the Collateral or any part thereof or on
account thereof and give full discharge
for the same, (iii) settle, compromise,
prosecute or defend any action, claim or
proceeding with respect to any of the
foregoing or otherwise affecting the
Collateral and (iv) sell, assign, endorse,
pledge, transfer and make any agreement
respecting, or otherwise deal with, the
same as if the Collateral Agent were the
absolute owner thereof.
(c) Effective only upon the occurrence and
during the continuance of an Event of
Default, the Pledgor hereby irrevocably
appoints the Collateral Agent as its
proxy, with full power of substitution, to
exercise all Voting Rights, including
voting and other rights with respect to
the Pledged Stock, or Pledged Rights, at
any annual or special meeting of the
stockholders of the issuer thereof, or any
15
<PAGE>
adjournment or postponement thereof, or by
written consent in lieu of a meeting, or
otherwise. The foregoing appointment is
irrevocable and coupled with an interest.
(d) Nothing contained in this Agreement shall
be construed as requiring or obligating
the Collateral Agent to make any
commitment or to make any inquiry as to
the nature or sufficiency of any payment
received by the Collateral Agent, or to
present or file any claim or notice, or to
take any action with respect to the
Collateral or any part thereof or the
moneys due or to become due on or with
respect thereto or any property covered
thereby, and no action taken by the
Collateral Agent or omitted to be taken
with respect to the Collateral or any part
thereof shall give rise to any defense,
counterclaim or offset in favor of the
Pledgor or to any claim or action against
the Collateral Agent.
S1c Securitie Act, etc. In view of the position of the Pledgor in relation to
the Pledged Stock and the Pledged Rights, or because of other present or
future circumstances, a question may arise under the Securities Act of
1933, as now or hereafter in effect (the "Securities Act"), or any other
federal statute hereafter enacted analogous in purpose or effect (the
Securities Act and any such similar statute and related rules and
regulations promulgated thereunder as from time to time in effect being
called the "Federal Securities Laws") with respect to any disposition of
the Pledged Stock and the Pledged Rights permitted hereunder. The Pledgor
16
<PAGE>
understands that compliance with the Federal Securities Laws might very
strictly limit the course of conduct of the Collateral Agent if the
Collateral Agent were to attempt to dispose of all or any part of the
Pledged Stock and the Pledged Rights permitted hereunder, and might also
limit the extent to which or the manner in which any subsequent transferee
of any Pledged Stock and the Pledged Rights could dispose of the same.
Similarly, there may be other legal restrictions or limitations affecting
the Collateral Agent in any attempt to dispose of all or part of the
Pledged Stock and the Pledged Rights under applicable "blue sky" or other
state securities laws or similar laws of foreign jurisdictions. Under
applicable law, in the absence of an agreement to the contrary, the
Collateral Agent might be held to have certain general duties and
obligations to the New Subsidiary, or to the Pledgor or to make some effort
toward obtaining a fair price even though the obligations of the Pledgor
may be discharged or reduced by the proceeds of a sale at a lesser price.
The Pledgor clearly understands that the Collateral Agent is not to, and
shall not, have any such general duty or obligation to the Pledgor. Without
limiting the generality of the foregoing, the provisions of this Section
would apply if, for example, the Collateral Agent were to place all or any
part of the Pledged Stock or Pledged Rights for private placement by an
investment banking firm, or if such investment banking firm purchased all
or any part of the Pledged Stock or Pledged Rights for its own account, or
if the Collateral Agent placed all or any part of the Pledged Stock or the
Pledge Rights privately with a purchaser or purchasers. The provisions of
this Section will apply notwithstanding the existence of a public or
private market upon which the quotations or sales prices may exceed
substantially the price at which the Collateral Agent sells any Pledged
Stock or Pledged Rights.
S2c Security Interest Absolute. All rights of
the Collateral Agent hereunder, the grant
of the security interest in the Collateral
and all obligations of the Pledgor
hereunder shall be absolute and
unconditional irrespective of (a) except
to the extent not permitted to be waived
under applicable law, any lack of validity
or enforceability of the Obligations, the
Securities Purchase Agreement or any other
Transaction Document or any other
agreement or instrument relating to any of
the foregoing, (b) any change in the time,
manner or place of payment of, or in any
17
<PAGE>
other term of, all or any of the
Obligations, or any other amendment or
waiver of or any consent to any departure
from the Securities Purchase Agreement or
any other Transaction Document or any
other agreement or instrument relating to
any of the foregoing, (c) failure by the
Collateral Agent to take steps to perfect
or maintain perfected its security
interest in, or to preserve its rights to,
any of the Collateral, (d) any exchange,
release or non-perfection of any other
collateral, or any release or amendment or
waiver of or consent to or departure from
any guaranty, for all or any of the
Obligations, (e) the disallowance under
Section 502 of the Bankruptcy Code of all
or any portion of the claims of the
Investors for repayment of the
Obligations, or (f) any other circumstance
which might otherwise constitute a legal
or equitable defense available to, or a
legal or equitable discharge of, the
Pledgor or Obligors with respect to the
Obligations or with respect to this
Agreement other than the indefeasible
payment in full of all of the Obligations.
S3c Duration of Agreement; Release of
Security. This Agreement and the security
interests hereunder shall terminate when
(a) all of the Obligations (other than
unknown contingent Obligations) have been
fully and indefeasibly paid and performed
or otherwise satisfied and (b) the
Investors have no further Commitment under
the Notes or obligation to perform any
other obligations under the Securities
Purchase Agreement or any other
18
<PAGE>
Transaction Document. The release of
Collateral or reassignment of rights to
the Pledgor upon the termination of this
Agreement shall be free and clear of all
liens, claims and encumbrances, without
recourse to or warranty by the Collateral
Agent or any Investor, except for standard
representations and warranties, and shall
be made by the Collateral Agent at the
expense of the Pledgor. Upon the release
of Collateral or reassignment of rights to
the Pledgor, the Collateral Agent shall,
at the expense of the Pledgor, execute and
deliver to the Pledgor such documents as
the Pledgor shall reasonably request to
evidence such release and reassignment and
shall deliver to the Pledgor all
Collateral so released then in its
possession and not applied in satisfaction
of the Obligations.
S4c Further Assurances. The Pledgor agrees to
do such further acts and things, and to
execute and deliver such additional
conveyances, assignments, agreements and
instruments, as the Collateral Agent may
from time to time reasonably request
including, without limitation, upon an
Event of Default, in connection with the
administration and enforcement of this
Agreement or with respect to the
Collateral or any part thereof or in order
better to assure and confirm unto the
Collateral Agent its rights and remedies
hereunder and to permit the exercise
thereof in compliance with applicable law,
Federal Securities Laws and all applicable
laws of any foreign jurisdiction.
19
<PAGE>
S5c No Waiver By Collateral Agent. No failure
on the part of the Collateral Agent to
exercise, and no delay in exercising and
no course of dealing with respect to, any
right or power under this Agreement shall
operate as a waiver thereof, nor shall any
single or partial exercise by the
Collateral Agent of any right or power
under this Agreement, or any abandonment
or discontinuance of steps to preserve or
enforce such right or power, preclude any
other or further exercise thereof or the
exercise of any other right or power. The
rights of the Collateral Agent in this
Agreement are cumulative and are not
exclusive of any other rights or remedies
available to Collateral Agent at law or in
equity. No notice to or demand on the
Pledgor in any case shall entitle the
Pledgor to any other or further notice or
demand in similar or other circumstances.
S6c Notices. All notices, demands and requests
of any kind to be delivered to any party
hereto in connection with this Agreement
shall be in writing and (i) delivered
personally, (ii) sent by
nationally-recognized overnight courier
guaranteeing next day delivery, (iii) sent
by first class, registered or certified
mail, return receipt requested or (iv)
sent by facsimile, in each case to such
party at its address as follows:
(i) If to the Pledgor, to:
MagnaVision Corporation
1725 Highway 35 South Wall
Township, New Jersey 07719
20
<PAGE>
Attention: Nicholas Mastrorilli, Sr.
Telephone: (908) 449-1200
Telecopier: (908) 974-1106
with a copy to:
Zimet, Haines, Friedman & Kaplan
460 Park Avenue
New York, New York 10022
Attention: Stephen M. Fields, Esq.
Telephone: (212) 486-1700
Telecopier: (212) 223-1151;
(i) If to Collateral Agent, to:
IBJS Capital Corporation
One State Street
New York, New York 10004
Attention: Paul Echausse
Telephone: (212) 858-2728
Telecopier: (212) 952-1629
with a copy to:
O'Sullivan Graev & Karabell, LLP
30 Rockefeller Plaza
New York, New York 10112
Attention: Howard M. Bergtraum, Esq.
Telephone: (212) 408-2400
Telecopier: (212) 408-2420
Any notice, demand or request so delivered shall constitute valid
notice under this Agreement and shall be deemed to have been received (A) on the
day of actual delivery in the case of personal delivery, (B) on the next day
after the date when sent in the case of delivery by nationally-recognized
overnight courier, (C) on the fifth day after the date of deposit in the U.S.
mail in the case of mailing or (D) upon receipt in the case of a facsimile
transmission. Any party hereto may from time to time by notice in writing served
upon the other as aforesaid designate a different mailing address or a different
person to which all such notices, demands or requests thereafter are to be
addressed.
21
<PAGE>
S1c Governing Law. This Agreement shall be construed in accordance with and
governed by the laws of the State of New York without regard to the laws
and principles of the State of New York or of any other jurisdiction which
would direct the application of the laws of another jurisdiction.
S2c Successors and Assigns. This Agreement shall be binding upon and inure to
the benefit of the Pledgor, the Collateral Agent, their successors and
permitted assigns. This Agreement is not assignable except by the
Collateral Agent. Any purported assignment inconsistent with this provision
shall be null and void.
S3c Amendments and Waivers. Any provision of this Agreement may be amended or
waived, but only pursuant to a written agreement signed by the Pledgor and
the Collateral Agent.
S4c Severability. Any provision of this Agreement which is prohibited or
unenforceable in any jurisdiction shall, as to such provision and such
jurisdiction, be ineffective to the extent of such prohibition or
unenforceability without invalidating the remaining provisions of this
Agreement or affecting the validity or enforceability of such provision in
any other jurisdiction.
S5c Section Headings. Section headings used herein are for convenience only and
are not to affect the construction of, or be taken into consideration in
interpreting, this Agreement.
S6c Counterparts. This Agreement may be executed in any number of identical
counterparts, each of which shall constitute an original but all of which
when taken together shall constitute but one contract.
* * * *
22
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Pledge
Agreement to be duly executed by their authorized officers, all as of the day
and year first above written.
MAGNAVISION CORPORATION,
as Pledgor
By:
---------------------------
Nicholas Mastrorilli, Sr.
President
IBJS CAPITAL CORPORATION,
as Collateral Agent for the
Investors
By:
----------------------------
Paul Echausse,
Chief Operating Officer
and Vice President
23
<PAGE>
Exhibit 10.(t)
GENERAL INDENTURE
OF
CONVEYANCE, ASSIGNMENT AND TRANSFER
This General Indenture of Conveyance, Assignment and Transfer,
dated as of June 3, 1996, from Magnavision Corporation, a New
Jersey corporation ("Magnavision"), and University Connection,
Inc., a New Jersey corporation ("University" and together with
Magnavision collectively, the "Grantors"), to Magnavision Private
Cable, Inc., a Delaware corporation (hereinafter called the
"Grantee"), is being executed and delivered pursuant to Section
7.26 of the Securities Purchase Agreement dated as of August 25,
1995, as amended by Amendment No. 1 to the Securities Purchase
Agreement dated as of the date hereof (the "Securities Purchase
Agreement"), among Magnavision Corporation, a Delaware
corporation, Magnavision, Magnavision Wireless Cable, Inc., a
Delaware corporation, and IBJS Capital Corporation, a Delaware
corporation ("IBJSCC"), IBJ Schroder Bank & Trust Company, a
Delaware corporation ("IBJ"), and KOCO Capital Company, L.P., a
Delaware limited partnership ("KOCO" and together with IBJSCC and
IBJ collectively, the "Investors").
W I T N E S S E T H:
1 pursuant to the Securities Purchase Agreement Magnavision
and its affiliates have obtained long term financing from
the Investors and Magnavision has agreed to organize a
wholly-owned subsidiary for the purpose of receiving all of
the right, title and interest of the Grantors in, to, and
under the Cable Contracts listed on the attached Schedule
"A" (the "Cable Contracts");
2 Magnavision has organized Grantee as a wholly-owned
subsidiary for the purpose of receiving all of such rights;
and
3 as part of the foregoing transaction, Magnavision has agreed
to pledge all of the issued and outstanding shares of
capital stock of the Grantee to IBJSCC, as collateral agent
for the Investors.
NOW, THEREFORE, pursuant to and in accordance with the
foregoing, the Grantors, for available consideration to it in
hand paid by the Grantee, the receipt, adequacy and sufficiency
of which are hereby acknowledged and in satisfaction of Section
7.26 of the Securities Purchase Agreement, have granted,
bargained, contributed, assigned, transferred, set over,
confirmed and delivered, and by these presents do hereby grant,
bargain, contribute, assign, transfer, set over, confirm and
deliver unto the Grantee, and unto its successors and assigns
forever, all and singular, all of the right, title and interest
of the Grantors in, to and under the following properties, assets
and rights (the "Assigned Assets"): (i) the Cable Contracts, (ii)
<PAGE>
all of the equipment (as such term is defined in the Uniform
Commercial Code as in effect on the date hereof in the State of
New Jersey) of the Grantors used in connection with the
performance of their obligations pursuant to the Cable Contracts
(the "Equipment"), (iii) the use of the name "Magnavision" as the
same does and did exist as of the date hereof (the "Name") and
(iv) all accounts receivables, leases, licenses, permits,
approvals, authorizations and other properties, assets and rights
of every name and description, real, personal and mixed,
wheresoever situated, owned by the Grantors or to which they may
be entitled, all associated with the business and assets arising
out of or derived from the Cable Contracts, the Equipment and the
Name being transferred; provided, however, that anything herein
contained to the contrary notwithstanding, the Grantors do hereby
retain unto themselves all rights of the Grantors, except as
heretofore waived, granted or consented to the use thereof, of
and to the corporate and trade name "Magnavision", all accounts
receivables due to the Grantors from, arising out of or derived
from the Cable Contracts as of the date hereof and all cash in
hand and in certain banks and other accounts and all of the
Grantors interest in any amounts which may be received as the
result of litigations brought by the Grantors as plaintiff.
To have and to hold all and singular the said entire Assigned
Assets hereby transferred, assigned or conveyed or intended to be
transferred, assigned and conveyed unto the Grantee, its
successors and assigns, forever.
Grantors hereby constitute Grantee as their agent and attorney to
receive, collect, enforce and sue for any of the Assigned Assets
hereby granted or assigned in their name or in the name of
Grantee as the legal attorney of the Grantors for the sole
benefit of Grantee.
Grantors covenant and agree that in the event that either (i) any
of the Assigned Assets covered in this General Indenture of
Conveyance, Assignment and Transfer cannot be transferred or
assigned by them without the consent of or notice to a third
party and in respect of which any necessary consent or notice has
not as of the date of delivery of this General Indenture of
Conveyance, Assignment and Transfer been given or obtained or
(ii) any such Assigned Assets are non-assignable in their nature
and will not pass by this General Indenture of Conveyance,
Assignment and Transfer, the beneficial interest in and to the
same will in any event pass to Grantee; and Grantors further
covenant and agree (a) to hold, and hereby declare that they hold
such Assigned Assets in trust for, and for the benefit of,
Grantee, (b) to use all reasonable means to obtain and to secure
such consent and give such notice as may be required to effect a
valid transfer or transfers of such Assigned Assets and (c) to
make or complete such transfer or transfers as soon as reasonably
possible.
-2-
<PAGE>
In connection with the execution and delivery of this General
Indenture of Conveyance Assignment and Transfer, the Grantors
hereby covenant and agree to and with the Grantee, its successors
and assigns, to execute and procure and deliver to the Grantee,
so long as the Grantors are authorized by applicable law to do
so, all instruments of conveyance, assignment or transfer and all
such notices, releases, acquittances and other documents and to
do or cause to be done all such other acts and things, as may be
necessary more fully to convey and assign to and vest in the
Grantee all and singular the Assigned Assets hereby conveyed,
assigned and transferred or intended so to be. Nothing herein
contained shall be deemed to modify, limit or restrict the
interests and rights conveyed and assigned to the Grantee by any
such specific conveyances and assignments.
The Grantors hereby bind themselves to warrant and forever defend
all and singular the said premises unto the Grantee, its
successors and assigns, against every person whomsoever lawfully
claiming or to claim the same or any part thereof by, through or
under the Grantors and not otherwise. This General Indenture of
Conveyance, Assignment and Transfer is made with full
substitution and subrogation of the Grantee in and to all
covenants and warranties by other heretofore given or made in
respect of the said Assigned Assets or any part thereof.
All the terms, and provisions of this General Indenture of
Conveyance, Assignment and Transfer shall be binding upon the
Grantors and their successors and assigns and will inure to the
benefit of Grantee and its successors and assigns and shall be
construed under and governed by the laws of the State of New
York.
This General Indenture of Conveyance, Assignment and Transfer may
be executed in any number of counterparts and all such
counterparts executed and delivered, each to be considered as an
original, shall constitute and have the same force and effect as
one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the Grantors have caused this
General Indenture of Conveyance, Assignment and Transfer to be
duly executed on the date as hereinabove set forth.
MAGNAVISION CORPORATION, a
New Jersey corporation
By:
Nicholas Mastrorilli, Sr.,
President
UNIVERSITY CONNECTION, INC.,
a New Jersey corporation
By:
Nicholas Mastrorilli, Sr.,
President
[Corporate Seal]
Attest:
______________________
Secretary
-4-
<PAGE>
SCHEDULE A
CABLE CONTRACTS
Customer Date Agreement Parties to Agreement
Signed
Seton Hall August 30, 1991 University
University Connection, Inc.
400 South Orange ("University") and
Avenue Seton Hall University
South Orange, NJ
07079
Fairleigh Dickinson June 8, 1992 Magnavision
University Corporation and
1000 River Road Fairleigh Dickinson
Teaneck, NJ 07666 Univ.
Manhattanville May 4, 1992 Magnavision
College Corporation and
2900 Purchase Manhattanville
Street College
Purchase, NY 10577
Maritime College October 26, 1992 Magnavision
Faculty Student Corporation and
Association Maritime College
Fort Schuyler, NY
10465
Wagner College January 11, 1993 Magnavision
631 Howard Avenue Corporation and
Staten Island, NY Wagner College
10301
Greenhill Memorial March 25, 1994 Magnavision
Center for Women Corporation and
103 Pleasant Valley Greenhill Memorial
Way Center for Women
West Orange, NJ
07052
Sarah Frances February 21, Magnavision
Nursing Home 1994 Corporation and Sarah
Powerville Road Frances Nursing Home
Boonton, NJ 07005
<PAGE>
Immaculata College March 9, 1994 Magnavision
Immaculata, PA Corporation and
19345-0901 Immaculata College
Georgian Court June 30, 1994 Magnavision
College Corporation and
900 Lakewood Road Georgian Court
Lakewood, NJ 08701 College
Montclair State September 23, Magnavision
University 1994 Corporation and
Rohn Hall Montclair State
Upper Montclair, NJ University
07043
Fordham University April 13, 1995 Magnavision
441 East Fordham Corporation and
Road Fordham University
Bronx, NY 10458
Kean College April 28, 1995 Magnavision
Morris Avenue Corporation and Kean
Union, NJ 07083 College
Curry College March 23, 1995 Magnavision
1071 Blue Hill Corporation and Curry
Avenue College
Milton, MA 02186
Mount Olive College March 8, 1995 Magnavision
634 Henderson Corporation and Mount
Street Olive College
Mount Olive, NC
28365
VA Medical Center April 5, 1995 Magnavision
385 Tremont Avenue Corporation and VA
East Orange, NJ Medical Center
07018-1095
<PAGE>
Exhibit 10.(u)
GENERAL INDENTURE
OF
CONVEYANCE, ASSIGNMENT AND TRANSFER
This General Indenture of Conveyance, Assignment and Transfer,
dated as of June 3, 1996, from Magnavision Corporation, a New
Jersey corporation (hereinafter called the "Grantor") to
Magnavision Wireless Cable, Inc., a Delaware corporation
(hereinafter called the "Grantee"), is being executed and
delivered pursuant to Section 8.7 of the Securities Purchase
Agreement dated as of August 25, 1995, as amended by Amendment
No. 1 to Securities Purchase Agreement dated as of the date
hereof (the "Securities Purchase Agreement"), among Magnavision
Corporation, a Delaware corporation, Grantor, Grantee and IBJS
Capital Corporation, a Delaware corporation ("IBJSCC"), IBJ
Schroder Bank & Trust Company, a Delaware corporation ("IBJ"),
and KOCO Capital Company, L.P., a Delaware limited partnership
("KOCO" and together with IBJSCC and IBJ collectively, the
"Investors").
W I T N E S S E T H:
1. pursuant to the Securities Purchase Agreement the Grantor
and its affiliates have obtained long term financing from
the Investors and the Grantor has agreed to organize a
wholly-owned subsidiary for the purpose of receiving all of
the Grantor's right, title and interest in, to, and under
the license listed on the attached Schedule "A" (the
"License"); and
2. the Grantor has organized Grantee as a wholly-owned
subsidiary for the purpose of receiving all of such rights;
and
3. as part of the foregoing transaction, the Grantor has agreed
to pledge all of the issued and outstanding shares of
capital stock of the Grantee to IBJSCC, as collateral agent
for the Investors.
NOW, THEREFORE, pursuant to and in accordance with the
foregoing, the Grantor, for available consideration to it in hand
paid by the Grantee, the receipt, adequacy and sufficiency of
which are hereby acknowledged and in satisfaction of Section 8.7
of the Securities Purchase Agreement, has granted, bargained,
contributed, assigned, transferred, set over, confirmed and
delivered, and by these presents does hereby grant, bargain,
contribute, assign, transfer, set over, confirm and deliver unto
the Grantee, and unto its successors and assigns forever, all and
singular, all of the Grantor's right, title and interest in, to
and under the following properties, assets and rights (the
"Assigned Assets"): (i) the License, (ii) all of the equipment
(as such term is defined in the Uniform Commercial Code as in
effect on the date hereof in the State of New Jersey) of the
Grantor used in connection with the performance of its
obligations pursuant to the License (the "Equipment"), (iii) the
1
<PAGE>
use of the name "Magnavision" as the same does and did exist as
of the date hereof (the "Name") and (iv) all accounts
receivables, leases, licenses, permits, approvals, authorizations
and other properties, assets and rights of every name and
description, real, personal and mixed, wheresoever situated,
owned by the Grantor or to which it may be entitled, all
associated with the business and assets arising out of or derived
from the License, the Equipment and the Name being transferred;
provided, however, that anything herein contained to the contrary
notwithstanding, the Grantor does hereby retain unto itself all
rights of the Grantor, except as heretofore waived, granted or
consented to the use thereof, of and to the corporate and trade
name "Magnavision", all accounts receivables due to the Grantor
from, arising out of or derived from the License as of the date
hereof and all cash in hand and in certain banks and other
accounts and all of the Grantor's interest in any amounts which
may be received as the result of litigations brought by the
Grantor as plaintiff.
To have and to hold all and singular the said entire Assigned
Assets hereby transferred, assigned or conveyed or intended to be
transferred, assigned and conveyed unto the Grantee, its
successors and assigns, forever.
Grantor hereby constitutes Grantee its agent and attorney to
receive, collect, enforce and sue for any of the Assigned Assets
hereby granted or assigned in its name or in the name of Grantee
as the legal attorney of Grantor for the sole benefit of Grantee.
Grantor covenants and agrees that in the event that either (i)
any of the Assigned Assets covered in this General Indenture of
Conveyance, Assignment and Transfer cannot be transferred or
assigned by it without the consent of or notice to a third party
and in respect of which any necessary consent or notice has not
as of the date of delivery of this General Indenture of
Conveyance, Assignment and Transfer been given or obtained or
(ii) any such Assigned Assets are non-assignable in their nature
and will not pass by this General Indenture of Conveyance,
Assignment and Transfer, the beneficial interest in and to the
same will in any event pass to Grantee; and Grantor further
covenants and agrees (a) to hold, and hereby declares that it
holds such Assigned Assets in trust for, and for the benefit of,
Grantee, (b) to use all reasonable means to obtain and to secure
such consent and give such notice as may be required to effect a
valid transfer or transfers of such Assigned Assets and (c) to
make or complete such transfer or transfers as soon as reasonably
possible.
In connection with the execution and delivery of this General
Indenture of Conveyance Assignment and Transfer, the Grantor
hereby covenants and agrees to and with the Grantee, its
successors and assigns, to execute and procure and deliver to the
Grantee, so long as the Grantor is authorized by applicable law
to do so, all instruments of conveyance, assignment or transfer
2
<PAGE>
and all such notices, releases, acquittances and other documents
and to do or cause to be done all such other acts and things, as
may be necessary more fully to convey and assign to and vest in
the Grantee all and singular the Assigned Assets hereby conveyed,
assigned and transferred or intended so to be. Nothing herein
contained shall be deemed to modify, limit or restrict the
interests and rights conveyed and assigned to the Grantee by any
such specific conveyances and assignments.
The Grantor hereby binds itself to warrant and forever defend all
and singular the said premises unto the Grantee, its successors
and assigns, against every person whomsoever lawfully claiming or
to claim the same or any part thereof by, through or under the
Grantor and not otherwise. This General Indenture of Conveyance,
Assignment and Transfer is made with full substitution and
subrogation of the Grantee in and to all covenants and warranties
by other heretofore given or made in respect of the said Assigned
Assets or any part thereof.
All the terms, and provisions of this General Indenture of
Conveyance, Assignment and Transfer shall be binding upon Grantor
and its successors and assigns and will inure to the benefit of
Grantee and its successors and assigns and shall be construed
under and governed by the laws of the State of New York.
This General Indenture of Conveyance, Assignment and Transfer may
be executed in any number of counterparts and all such
counterparts executed and delivered, each to be considered as an
original, shall constitute and have the same force and effect as
one and the same instrument.
3
<PAGE>
IN WITNESS WHEREOF, the Grantor has caused this General
Indenture of Conveyance, Assignment and Transfer to be duly
executed on the date as hereinabove set forth.
MAGNAVISION CORPORATION, a
New Jersey Corporation
By:
Nicholas Mastrorilli, Sr.,
President
[Corporate Seal]
Attest:
______________________
Secretary
4
<PAGE>
SCHEDULE A
LICENSE
The License Agreement, dated August 20, 1990, as
amended on January 6, 1994, pursuant to the First Agreement of
Amendment to License Agreement, between the Grantor and the
Department of Education, Archdiocese of New York and any and all
amendments, modifications, supplements and appendices thereto.
[DRAFT 6/2/96]
5
<PAGE>
Exhibit 10.(v)
INDENTURE OF ASSUMPTION OF LIABILITIES
This Indenture of Assumption of Liabilities, dated as of June 3,
1996, from Magnavision Private Cable, Inc., a Delaware
corporation (hereinafter called "Grantee"), to Magnavision
Corporation, a New Jersey corporation (hereinafter called
"Magnavision"), and University Connection, Inc., a New Jersey
corporation (hereinafter called "University" and together with
Magnavision, the "Magnavision Entities"):
W I T N E S S E T H:
WHEREAS, pursuant to a General Indenture of
Conveyance, Assignment and Transfer dated as of the date
hereof, the Magnavision Entities have agreed to transfer,
assign and convey and Grantee has agreed to acquire all
right, title and interest of the Magnavision Entities in, to
and under (i) the cable contracts listed on the attached
Schedule "A" (the "Cable Contracts"), (ii) all of the
equipment of the Magnavision Entities used in connection
with the performance of their obligations pursuant to the
Cable Contracts (the "Equipment"), (iii) the use of the name
"Magnavision" as the same does and did exist as of the date
hereof (the "Name") and (iv) all accounts receivables,
leases, licenses, permits, approvals, authorizations and
other properties, assets and rights of every name and
description, real, personal and mixed, wheresoever situated,
owned by the Magnavision Entities or to which they may be
entitled, all associated with the business and assets
arising out of or derived from the Cable Contracts, the
Equipment and the Name being transferred (the "Assigned
Assets");
WHEREAS, simultaneously with the transfer,
assignment and conveyance to Grantee of the Assigned Assets,
Grantee wishes to deliver to the Magnavision Entities a
written instrument expressly assuming payment of all
liabilities and performance of all obligations of the
Magnavision Entities relating to or arising out of the
Assigned Assets other than the liabilities and obligations
hereinafter expressly excluded; and
NOW, THEREFORE, Grantee has, in consideration of
the foregoing, assumed, and by these presents does hereby
assume, payment of all liabilities and performance of all
obligations of the Magnavision Entities arising from and
after the date hereof, relating to the business and assets
arising out of or derived from the Assigned Assets, of
whatsoever nature or character, whether absolute or
<PAGE>
contingent, including tax liabilities, other than the
following liabilities and obligations:
(i) Any liabilities and obligations of the
Magnavision Entities to their stockholders as
such;
(ii) Any liabilities and obligations of the
Magnavision Entities which may be incident to
or result from the transfer, assignment and
conveyance of the Assigned Assets to Grantee;
(iii) Any liabilities and obligations of the
Magnavision Entities in respect of any of the
rights, properties, or assets of the
Magnavision Entities expressly retained by
the Magnavision Entities; and
(iv) Any liabilities and obligations of the
Magnavision Entities which may be incident to
or result from any suits, actions,
proceedings or claims which were filed,
brought, commenced or asserted prior to the
date hereof, or which are based on events
occurring prior to the date hereof, or which
are based on or related to products sold or
services performed prior to the date hereof,
notwithstanding that the date on which such
suit, action, proceeding or claim is filed,
brought, commenced or asserted is after the
date hereof.
This Indenture of Assumption of Liabilities shall be construed
under and governed by the laws of the State of New York and may
be executed in any number of counterparts, and all such
counterparts executed and delivered, each to be considered as an
original, shall constitute and have the same force and effect as
one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, Magnavision Private Cable, Inc., a Delaware
corporation, has caused this Indenture of Assumption of
Liabilities to be duly executed as of the date hereinabove set
forth.
Magnavision PRIVATE Cable, Inc.
By:
Nicholas Mastrorilli, Sr.,
President
[Corporate Seal]
Attest:
__________________________
Secretary
-3-
<PAGE>
SCHEDULE A
CABLE CONTRACTS
Customer Date Agreement Parties to Agreement
Signed
Seton Hall August 30, 1991 University
University Connection, Inc.
400 South Orange ("University") and
Avenue Seton Hall University
South Orange, NJ
07079
Fairleigh Dickinson June 8, 1992 Magnavision
University Corporation and
1000 River Road Fairleigh Dickinson
Teaneck, NJ 07666 Univ.
Manhattanville May 4, 1992 Magnavision
College Corporation and
2900 Purchase Manhattanville
Street College
Purchase, NY 10577
Maritime College October 26, 1992 Magnavision
Faculty Student Corporation and
Association Maritime College
Fort Schuyler, NY
10465
Wagner College January 11, 1993 Magnavision
631 Howard Avenue Corporation and
Staten Island, NY Wagner College
10301
Greenhill Memorial March 25, 1994 Magnavision
Center for Women Corporation and
103 Pleasant Valley Greenhill Memorial
Way Center for Women
West Orange, NJ
07052
Sarah Frances February 21, Magnavision
Nursing Home 1994 Corporation and Sarah
Powerville Road Frances Nursing Home
Boonton, NJ 07005
-4-
<PAGE>
Immaculata College March 9, 1994 Magnavision
Immaculata, PA Corporation and
19345-0901 Immaculata College
Georgian Court June 30, 1994 Magnavision
College Corporation and
900 Lakewood Road Georgian Court
Lakewood, NJ 08701 College
Montclair State September 23, Magnavision
University 1994 Corporation and
Rohn Hall Montclair State
Upper Montclair, NJ University
07043
Fordham University April 13, 1995 Magnavision
441 East Fordham Corporation and
Road Fordham University
Bronx, NY 10458
Kean College April 28, 1995 Magnavision
Morris Avenue Corporation and Kean
Union, NJ 07083 College
Curry College March 23, 1995 Magnavision
1071 Blue Hill Corporation and Curry
Avenue College
Milton, MA 02186
Mount Olive College March 8, 1995 Magnavision
634 Henderson Corporation and Mount
Street Olive College
Mount Olive, NC
28365
VA Medical Center April 5, 1995 Magnavision
385 Tremont Avenue Corporation and VA
East Orange, NJ Medical Center
07018-1095
-5-
<PAGE>
INDENTURE OF ASSUMPTION OF LIABILITIES
This Indenture of Assumption of Liabilities, dated as of June 3, 1996, from
Magnavision Wireless Cable, Inc., a Delaware corporation (hereinafter called
"Grantee"), to Magnavision Corporation, a New Jersey corporation (hereinafter
called "Magnavision"):
W I T N E S S E T H:
WHEREAS, pursuant to a General Indenture of Conveyance,
Assignment and Transfer dated as of the date hereof, Magnavision has
agreed to transfer, assign and convey and Grantee has agreed to acquire
all of Magnavision's right, title and interest in, to and under (i) the
license agreement listed on the attached Schedule "A" (the "License"),
(ii) all of the equipment of Magnavision used in connection with the
performance of its obligations pursuant to the License (the
"Equipment"), (iii) the use of the name "Magnavision" as the same does
and did exist as of the date hereof (the "Name") and (iv) all accounts
receivables, leases, licenses, permits, approvals, authorizations and
other properties, assets and rights of every name and description,
real, personal and mixed, wheresoever situated, owned by Magnavision or
to which it may be entitled, all associated with the business and
assets arising out of or derived from the License, the Equipment and
the Name being transferred (the "Assigned Assets");
WHEREAS, simultaneously with the transfer, assignment and
conveyance to Grantee of the Assigned Assets, Grantee wishes to deliver
to Magnavision a written instrument expressly assuming payment of all
liabilities and performance of all obligations of Magnavision relating
to or arising out of the Assigned Assets other than the liabilities and
obligations hereinafter expressly excluded; and
NOW, THEREFORE, Grantee has, in consideration of the
foregoing, assumed, and by these presents does hereby assume, payment
of all liabilities and performance of all obligations of Magnavision
arising from and after the date hereof, relating to the business and
assets arising out of or derived from the Assigned Assets, of
whatsoever nature or character, whether absolute or contingent,
including tax liabilities, other than the following liabilities and
obligations:
(i) Any liabilities and obligations of Magnavision to its
stockholders as such;
<PAGE>
(ii) Any liabilities and obligations of Magnavision which may be
incident to or result from the transfer, assignment and
conveyance of the Assigned Assets to Grantee;
(iii) Any liabilities and obligations of magnavision in respect of
any of the rights, properties, or assets of Magnavision
expressly retained by Magnavision; and
(iv) Any liabilities and obligations of Magnavision which may be
incident to or result from any suits, actions, proceedings or
claims which were filed, brought, commenced or asserted prior
to the date hereof, or which are based on events occurring
prior to the date hereof, or which are based on or related to
products sold or services performed prior to the date hereof,
notwithstanding that the date on which such suit, action,
proceeding or claim is filed, brought, commenced or asserted
is after the date hereof.
This Indenture of Assumption of Liabilities shall be construed under and
governed by the laws of the State of New York and may be executed in any number
of counterparts, and all such counterparts executed and delivered, each to be
considered as an original, shall constitute and have the same force and effect
as one and the same instrument.
-2-
<PAGE>
IN WITNESS WHEREOF, Magnavision Wireless Cable, Inc., a Delaware corporation,
has caused this Indenture of Assumption of Liabilities to be duly executed as of
the date hereinabove set forth.
MAGNAVISION WIRELESS CABLE, INC.
By:
-------------------------------
Nicholas Mastrorilli, Sr.,
President
(Corporate Seal]
Attest:
- --------------------------
Secretary
-3-
<PAGE>
SCHEDULE A
LICENSE
The License Agreement, dated August 20, 1990, as amended on January 6, 1994,
pursuant to the First Agreement of Amendment to License Agreement, between
Magnavision and the Department of Education, Archdiocese of New York and any
and all amendments, modifications, supplements and appendices thereto.
-4-
<PAGE>
IRREVOCABLE PROXY
MAGNAVISION CORPORATION
The undersigned, a New Jersey corporation, on the terms hereinafter
provided, hereby irrevocably appoints IBJS Capital Corporation ("IBJS"), as
agent on behalf of IBJS, IBJ Schroder Bank & Trust Company and KOCO Capital
Company, L.P. (collectively, the "Investors"), the attorney-in-fact and proxy of
the undersigned to vote all of the New Subsidiary Stock (as defined in the
Amended and Restated Stockholders' Agreement dated the date hereof, among
Magnavision Corporation, a Delaware corporation (the "Corporation"), Magnavision
Wireless Cable, Inc., a Delaware corporation (the "New Subsidiary"), the
Investors and the undersigned) at any meeting of the stockholders of the New
Subsidiary and to take any written action to be taken by the stockholders of the
New Subsidiary in such manner as such attorney and proxy shall, in its sole
discretion, deem proper, standing in the name of the undersigned (including New
Subsidiary Stock acquired after the date hereof).
This is an irrevocable proxy coupled with an interest, which shall
become effective, valid and irrevocable upon the date which is six (6) months
after the date hereof and shall remain effective, valid and irrevocable, as
contemplated by Section 212 of the Delaware General Corporation Law, as amended,
and otherwise, until the earlier of the date on which (i) the Obligors repay in
full the Obligations (as such terms are defined in the Securities Purchase
Agreement, dated August 25, 1995, as amended, among the Corporation, the New
Subsidiary, the Investors and the undersigned) or (ii) the undersigned no longer
owns any New Subsidiary Stock.
The granting of this proxy shall revoke all prior proxies given by the
undersigned at any time with respect to the New Subsidiary Stock and no proxies
subsequent to the date hereof will be given with respect thereto by the
undersigned, and if given will have no effect.
Dated: June 3, 1996
MAGNAVISION CORPORATION
____________________________
Nicholas Mastrorilli, Sr.,
President
<PAGE>
INDIVIDUAL ACKNOWLEDGMENT
STATE OF )
) : ss.:
COUNTY OF )
On this ___ day of June, 1996, before me personally
came Nicholas Mastrorilli, to me known, who being by me duly
sworn, did depose and say that he is the President of MAGNAVISION
CORPORATION, a New Jersey corporation, and that he is the
individual described in and who executed the foregoing instrument
and acknowledged that he executed the same.
__________________________
Notary Public
2
<PAGE>
AMENDED AND RESTATED NOTE
THIS AMENDED AND RESTATED NOTE HAS BEEN ACQUIRED FOR INVESTMENT
AND HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933.
THIS NOTE MAY NOT BE SOLD OR TRANSFERRED IN THE ABSENCE OF SUCH
REGISTRATION OR AN EXEMPTION THEREFROM UNDER SAID ACT OR
APPLICABLE STATE BLUE SKY LAWS. ADDITIONALLY, THE TRANSFER OF
THIS NOTE IS SUBJECT TO CONDITIONS SPECIFIED IN ARTICLE X OF THE
SECURITIES PURCHASE AGREEMENT DATED AS OF AUGUST 25, 1995, AS
AMENDED, AMONG THE ISSUER HEREOF AND CERTAIN OTHER SIGNATORIES
THERETO, AND NO TRANSFER OF THE NOTES SHALL BE VALID OR EFFECTIVE
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT
OF CERTAIN OF SUCH CONDITIONS, THE ISSUER HEREOF HAS AGREED TO
DELIVER TO THE HOLDER HEREOF A NEW NOTE NOT BEARING THIS LEGEND.
COPIES OF SUCH AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS NOTE TO THE
SECRETARY OF THE ISSUER HEREOF.
MAGNAVISION CORPORATION
MAGNAVISION CORPORATION
MAGNAVISION WIRELESS CABLE, INC.
Senior Subordinated Note
Due February 26, 2001
No. 1 June 3, 1996
$2,000,000
This Amended and Restated Note (the "Note") hereby
amends and restates in its entirety the Note, dated August 25,
1995, issued by MAGNAVISION CORPORATION, a New Jersey corporation
(the "Company"), and MAGNAVISION CORPORATION, a Delaware
corporation ("Holdings"), to KOCO CAPITAL COMPANY, L.P. pursuant
to the Securities Purchase Agreement, dated August 25, 1995.
The Company, Holdings and Magnavision Wireless Cable,
Inc., a Delaware corporation (the "New Subsidiary" and together
with the Company and Holdings collectively, the "Obligors"), for
value received, hereby promise to pay to KOCO Capital Company,
L.P. (such payee and each subsequent holder from time to time of
this Note being hereinafter called the "Holder"), or order, the
principal amount of TWO MILLION UNITED STATES DOLLARS
($2,000,000), or the lesser amount thereof as may be outstanding
from time to time hereunder, together with all interest accrued
1
<PAGE>
thereon from August 25, 1995 until February 26, 2001 (the
"Maturity Date"). Interest shall accrue on the unpaid principal
balance of this Note from time to time outstanding until paid in
full (computed on the basis of a 360-day year of twelve 30-day
months) from August 25, 1995 at the rate per annum of 12%, as set
forth in the Securities Purchase Agreement, dated as of August
25, 1995, as amended by Amendment No. 1 to the Securities
Purchase Agreement, dated the date hereof (the "Securities
Purchase Agreement"), by and among the Company, Holdings, the New
Subsidiary and IBJS Capital Corporation, IBJ Schroder Bank &
Trust Company and KOCO Capital Company, L.P. Interest shall be
payable to the Holder quarterly in arrears on each March 31, June
30, September 30 and December 31 commencing September 30, 1995.
Unless defined herein, all capitalized terms used in
this Note which are defined in the Securities Purchase Agreement
shall have the meanings assigned to them in the Securities
Purchase Agreement.
Payments of principal, of premium, if any, and interest
on this Note shall be made in immediately available funds by 1:00
p.m., New York City time, on the due date thereof at _________
_______________ Bank, _____________________________, New York,
New York _____ for the account of ________________ account number
_____________, ABA number ____________, or to such other place in
the United States of America as the Holder hereof shall designate
in writing to the Obligors in lawful money of the United States.
This Note is one of the duly authorized Senior
Subordinated Notes issued by the Obligors on the date hereof in
an aggregate original principal amount of up to $5,000,000
pursuant to and subject to the provisions of the Securities
Purchase Agreement, and is entitled to the benefit of the
Securities Purchase Agreement. Neither this reference to the
Securities Purchase Agreement nor any provision thereof shall
affect or impair the obligations of the Obligors to pay the
principal of and interest on this Note as provided herein, which
obligations are absolute, unconditional and not subject to
defense, set-off or counterclaim.
This Note is subject to redemption at the option of the
Obligors upon the terms and conditions and in the manner set
forth in the Securities Purchase Agreement.
2
<PAGE>
Should the indebtedness represented by this Note or any
part thereof be collected in any proceeding provided for in the
Securities Purchase Agreement or be placed in the hands of
attorneys for collection, the Obligors agree to pay to the
Holder, in addition to the principal, premium, if any, and
interest due and payable hereon, any and all costs of collecting
this Note, including reasonable attorneys' fees and expenses.
In case an Event of Default shall occur and be
continuing, this Note may be declared by the Holder due and
immediately payable upon demand in the amount, in the manner and
with the effect provided in the Securities Purchase Agreement.
The Obligors hereby waive diligence, presentment,
demand, protest and notice of any kind whatsoever, except any
notice expressly required by the Securities Purchase Agreement.
The failure of the Holder to exercise any of its rights under
this Note in any particular instance shall not constitute a
waiver thereof in that or any subsequent instance.
All borrowings evidenced by this Note pursuant to
Section 2.2 of the Securities Purchase Agreement and all payments
of the principal hereof and premium and interest hereon and the
respective dates and maturity dates thereof and interest rates
therefor shall be noted on the grid attached hereto, and each
such notation shall be conclusive absent manifest error;
provided, however, that the failure of the Holder to make such a
notation or any error therein shall not affect the obligations of
the Obligors to repay, in accordance with the terms of this Note
and the Securities Purchase Agreement, the principal amount of
this Note.
The obligations of the Obligors to the Holder under
this Note are secured by first priority Security Interests in all
of the Collateral as granted by the Company, University
Connection, Inc., Magnavision Private Cable, Inc. and the New
Subsidiary to the Collateral Agent for the benefit of the Holder
pursuant to the Collateral Assignment dated as of the date hereof
and the Company's pledge of the common stock of Magnavision
3
<PAGE>
Private Cable, Inc. and the common stock of the New Subsidiary
now or hereafter owned by the Company and pledged to the
Collateral Agent pursuant to the Pledge Agreements dated as of
the date hereof. Such Security Interests in the Collateral are
subject to subordination in part to the liens securing the
indebtedness of the Company to a senior lender to the extent
provided in the Securities Purchase Agreement.
This Note shall be construed in accordance with and
governed by the laws of the State of New York without regard to
the laws and principles thereof which would direct the
application of the laws of another jurisdiction.
THE OBLIGORS WAIVE TRIAL BY JURY IN ANY LITIGATION IN
ANY COURT WITH RESPECT TO, IN CONNECTION WITH, OR ARISING OUT OF
THIS NOTE, THE SECURITIES PURCHASE AGREEMENT OR THE VALIDITY,
PROTECTION, INTERPRETATION, COLLECTION OR ENFORCEMENT HEREOF OR
THEREOF.
NEITHER THE HOLDER, NOR ANY AGENT OR ATTORNEY OF THE
HOLDER, SHALL BE LIABLE TO THE OBLIGORS FOR CONSEQUENTIAL DAMAGES
ARISING FROM ANY BREACH OF CONTRACT, TORT OR OTHER WRONG RELATING
TO THE ESTABLISHMENT, ADMINISTRATION OR COLLECTION OF THE
OBLIGATIONS RELATING IN ANY WAY TO THIS NOTE OR THE SECURITIES
PURCHASE AGREEMENT.
4
<PAGE>
This Note shall bind the successors and assigns of the
Obligors and is executed on the date first above written.
MAGNAVISION CORPORATION,
as the Company
By:_____________________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION CORPORATION,
as Holdings
By:_____________________________________
Nicholas Mastrorilli, Sr.,
President
MAGNAVISION WIRELESS CABLE, INC.
By:_____________________________________
Nicholas Mastrorilli, Sr.,
President
5
<PAGE>
Loans and Payments
Unpaid
_________Payments
Amount _________ Principal Notati
Date on by
of Loan Principal Balance
Interest
of Note
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7
<PAGE>
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8
<PAGE>
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED
FOR INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED
STATES SECURITIES ACT OF 1933, AS AMENDED, OR ANY STATE
SECURITIES OR BLUE SKY LAWS. THESE SECURITIES MAY NOT BE SOLD OR
TRANSFERRED IN THE ABSENCE OF SUCH REGISTRATION OR AN EXEMPTION
THEREFROM UNDER SAID ACT OR LAWS. IN ADDITION, THE TRANSFER OF
THESE SECURITIES IS SUBJECT TO THE CONDITIONS SPECIFIED IN THE
SECURITIES PURCHASE AGREEMENT DATED AUGUST 25, 1995, AS AMENDED,
AMONG MAGNAVISION CORPORATION AND THE OTHER SIGNATORIES THERETO,
AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR EFFECTIVE
UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED. UPON THE FULFILLMENT
OF CERTAIN OF SUCH CONDITIONS, MAGNAVISION CORPORATION HAS AGREED
TO DELIVER TO THE HOLDER HEREOF A NEW CERTIFICATE, NOT BEARING
THIS LEGEND, FOR THE SECURITIES REPRESENTED HEREBY, REGISTERED IN
THE NAME OF THE HOLDER HEREOF OR ITS DESIGNEE. COPIES OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE BY
THE HOLDER HEREOF TO THE SECRETARY OF MAGNAVISION CORPORATION.
MAGNAVISION CORPORATION
------------------------------------------------------------
| No. 1B | Warrant to |
| |Purchase 2,964,369 |
| |Shares of Common Stock |
| | |
------------------------------------------------------------
As of June 3, 1996
Not Transferable or Exercisable
Except Upon Conditions Herein Specified
Void After June 4, 2004
This certifies that, for value received, IBJ Schroder
Bank & Trust Company, or assigns (the "Holder"), is entitled to
purchase from MAGNAVISION CORPORATION, a Delaware corporation
("Holdings"), TWO MILLION NINE HUNDRED SIXTY FOUR THOUSAND THREE
1
<PAGE>
HUNDRED AND SIXTY NINE shares of Common Stock, $.004 par value,
which shares represent as of the date hereof four and
eight-tenths (4.8) percent of the outstanding shares of all
classes of Common Stock of Holdings on a fully-diluted basis
(subject to adjustment from time to time as hereinafter
provided), at a per share price equal to the Warrant Price (as
defined in Section 4), as adjusted from time to time as provided
in Section 4, at any time or from time to time during the
Exercise Period. "Exercise Period" shall mean the period
commencing with and including the date hereof and ending at
midnight on June 4, 2004. This Warrant to Purchase 2,964,369
shares of Common Stock (the "Warrant") has been issued to the
Holder pursuant to the terms of the Securities Purchase
Agreement, dated August 25, 1995, as amended by Amendment No. 1
to the Securities Purchase Agreement, dated June 3, 1996 (the
"Securities Purchase Agreement"), among Holdings, Magnavision
Corporation (the "Company"), Magnavision Wireless Cable, Inc.
(the "New Subsidiary"; and together with Holdings and the
Company, the "Obligors"), IBJS Capital Corporation ("IBJSCC"),
IBJ Schroder Bank & Trust Company ("IBJS") and KOCO Capital
Company, L.P. ("KOCO"; and together with IBJSCC and IBJS
collectively, the "Investors").
(1) Exercise of Warrant.
The rights represented by this Warrant may be exercised
by the Holder hereof, in whole, or in blocks of at least 200,000
shares of Common Stock unless fewer than 200,000 shares of Common
Stock remain issuable upon the exercise of this Warrant, in which
event this Warrant may be exercisable for such remaining shares,
at any time or from time to time during the Exercise Period, but
not as to a fractional share of Common Stock, by the surrender of
this Warrant (properly endorsed) at the office of Holdings, at
1725 Highway 35 South, Wall Township, New Jersey 07719 (or at
such other agency or office of Holdings in the United States of
America as it may designate by notice in writing to the Holder
hereof at the address of such Holder appearing on the books of
Holdings), and by payment to Holdings of the Warrant Price for
each share being purchased by delivery of (i) cash or a check,
(ii) delivery of shares of Common Stock, valued for such
purposes, at the Market Price (as defined in Section 4) per share
on the date of exercise, (iii) delivery of Warrants to purchase
Common Stock, valued for such purposes, at the difference between
the average Market Price per share of Common Stock for the prior
10 trading days and the Warrant Price per share and/or (iv) the
cancellation of principal amount of Notes of Holdings issued
pursuant to the Securities Purchase Agreement in the amount of
the Warrant Price for each share being purchased, in each case in
effect on the date of exercise. In the event of any exercise of
the rights represented by this Warrant, a certificate or
2
<PAGE>
certificates for the shares of Common Stock so purchased (the
"Warrant Stock"), registered in the name of the person entitled
to receive the same, shall be delivered to the Holder hereof
within a reasonable time, not exceeding 15 days, after the rights
represented by this Warrant shall have been so exercised; and,
unless this Warrant has expired, a new Warrant representing the
number of shares (including any fractional share), if any, with
respect to which this Warrant shall not then have been exercised
shall also be issued to the Holder hereof within such time. The
person in whose name any certificate for shares of Warrant Stock
is issued upon exercise of this Warrant shall for all purposes be
deemed to have become the Holder of record of such shares on the
date on which this Warrant was surrendered and payment of the
Warrant Price and any applicable taxes was made, irrespective of
the date of delivery of such certificate, except that, if the
date of such surrender and payment is a date when the stock
transfer books of Holdings are closed, such person shall be
deemed to have become the Holder of record of such shares at the
close of business on the next succeeding date on which the stock
transfer books are open. This Warrant may not be exercised for
fractional shares of Common Stock. In the event that upon the
final exercise of this Warrant there is a remaining fractional
share hereunder, Holdings shall pay the Holder hereof an amount
equal to the comparable fraction of the current Market Price per
share as of the date of exercise.
(2) Covenants as to Common Stock.
Holdings covenants and agrees that all shares of Common
Stock which may be issued upon the exercise of the rights
represented by this Warrant will, upon issuance in accordance
with the terms hereof, be validly issued, fully paid and
non-assessable, and free from all taxes, liens and charges with
respect to the issuance thereof. Without limiting the generality
of the foregoing, Holdings covenants that it will from time to
time take all such action as may be required to assure that the
stated or par value per share of the Common Stock is at all times
equal to or less than the then effective Warrant Price. Holdings
further covenants and agrees that Holdings will at all times have
authorized and reserved, free from any and all restrictions,
including, without limitation, preemptive rights, restrictions
with respect to the voting, transfer or other rights exercisable
by a Holder, and encumbrances or liens, a sufficient number of
shares of its Common Stock to provide for the exercise of the
rights represented by this Warrant. Holdings also covenants and
agrees that if any shares of capital stock to be reserved for the
purpose of the issuance of shares upon the exercise of this
Warrant require registration with or approval of any governmental
authority under any federal or state law (other than the
Securities Act of 1933, as amended) before such shares may be
3
<PAGE>
validly issued or delivered upon exercise of this Warrant, then
Holdings will in good faith and as expeditiously as possible
endeavor to secure such registration or approval, as the case may
be.
(3) Surrender of Warrant.
(a) On the date on or prior to January 31, 1997, that Magnavision
Corporation, a New Jersey corporation and wholly-owned subsidiary
of Holdings (the "Company"), receives the proceeds from a buyer
(the "Buyer") in connection with a sale of assets outside of the
ordinary course of business (an "Asset Sale") or the sale of the
capital stock of the subsidiary of the Company that holds the
license (the "License") granted to the Company by the Department
of Education, Archdiocese of New York pursuant to the License
Agreement, dated August 20, 1990, as amended on January 6, 1994,
by the First Agreement of Amendment to License Agreement, the
Holder shall, subject to the prior occurrence or satisfaction of
the following events or conditions:
(i) if a written sale memorandum relating to the
License (the "Sale Memorandum") is completed prior to or as of
July 5, 1996, as determined by the Investors in their sole and
reasonable discretion, surrender that number of Warrants as
determined on Exhibit A annexed hereto; or
(ii) if a Sale Memorandum is not completed prior to or
as of July 5, 1996, as determined by the Investors in their sole
and reasonable discretion, surrender that number of warrants as
determined on Exhibit B annexed hereto.
(b) Notice of surrender of this Warrant shall be sent to the Holder,
first-class certified mail, return receipt requested, postage
prepaid, within 15 days of the occurrence of the events set forth
in Sections (a)(i) and (ii) hereof. The surrender of the Warrant
shall take place at the offices of Holdings no earlier than 30
4
<PAGE>
nor more than 45 days after notice of surrender shall have been
given to the Holder, at which time, the Holder shall be entitled
to receive a new Warrant the terms of such new Warrant to be the
same as under this Warrant against receipt by Holdings of the
surrendered Warrant.
(4) Adjustment of Number of Shares and Warrant Price.
(a) The per share price at which the Holder shall be entitled to
purchase the shares of Common Stock upon the exercise of this
Warrant shall initially be equal to $.27 per share (as such price
may from time to time be adjusted in accordance with this Section
4, hereinafter called the "Warrant Price"). The Warrant Price
shall be subject to adjustment from time to time as follows:
(i) If Holdings shall at any time or from
time to time after the date hereof (the "Warrant Issuance
Date"), issue any warrant or other securities exercisable
for or exchangeable or convertible into shares of Common
Stock, other than Excluded Stock (as hereinafter defined),
without consideration or for a consideration per share less
than the Warrant Price in effect immediately prior to the
issuance of such security, the Warrant Price in effect
immediately prior to each such issuance shall forthwith
(except as provided in this clause (i)) be lowered,
effective as of the date of such issuance, to the price
calculated by dividing (x) an amount equal to the sum of (1)
the number of shares of Common Stock Deemed Outstanding on a
5
<PAGE>
fully diluted basis immediately prior to such issuance
multiplied by the then existing Warrant Price plus (2) the
aggregate consideration, if any, received by Holdings upon
such issuance (calculated as set forth below), by (y) the
total number of shares of Common Stock Deemed Outstanding on
a fully diluted basis immediately after (and including) such
issuance.
(ii) For the purposes of any adjustment of
the Warrant Price pursuant to clause (i), the following
provisions shall be applicable:
(1) In the case of the issuance of
securities for cash, the consideration received
shall be deemed to be the amount of cash paid
therefor after deducting therefrom any discounts,
commissions or other expenses allowed, paid or
incurred by Holdings for any underwriting or
otherwise in connection with the issuance thereof.
(2) In the case of the issuance of
securities for a consideration in whole or in part other
than cash, the consideration received shall be deemed to
be the fair market value thereof as determined in good
faith by the Board of Directors of Holdings, irrespective
of any accounting treatment; provided, however, that
such fair market value as determined by the Board of
Directors (plus any cash consideration received in such
issuance) shall not exceed the average Market Price of
the shares of Common Stock being issued calculated for
the most recent 30 consecutive day period for which such
Market Price is available.
(3) The aggregate maximum number of
shares of Common Stock deliverable upon exercise of
options to purchase or rights to subscribe for Common
Stock shall be deemed to have been issued at the time
such options or rights were issued and for a
consideration equal to the consideration (determined in
the manner provided in subdivisions (1) and (2) above),
if any, received by Holdings upon the issuance of such
options or rights plus the minimum purchase price
provided in such options or rights for the Common Stock
covered thereby.
6
<PAGE>
(4) On any change in the number of
shares or exercise price of Common Stock deliverable upon
exercise of any such options or rights or conversions of
or exchange for such convertible or exchangeable
securities, other than a change resulting from the
antidilution provisions thereof, the Warrant Price shall
forthwith be readjusted to the Warrant Price which would
have obtained had the adjustment made upon the issuance
of such options, rights or securities not converted prior
to such change been made upon the basis of such change.
(5) On the expiration of any such
options or rights, the Warrant Price shall forthwith be
readjusted to the Warrant Price which would have obtained
had the adjustment made upon the issuance of such
options, rights, securities or options or rights related
to such securities been made upon the basis of the
issuance of only the number of shares of the Common Stock
actually issued upon the exercise of such options or
rights.
(iii) "Excluded Stock" shall mean:
(A) securities issued pursuant to
the acquisition of another corporation by Holdings
by merger, stock acquisition, reorganization,
purchase of substantially all of the assets or
otherwise whereby Holdings owns not less than a
majority in voting power of such other corporation
after such transaction;
(B) all Common Stock and all warrants
and options to purchase Common Stock issued or granted
prior to the Warrant Issuance Date and all Common Stock
issued upon exercise of such warrants and options;
(C) options to purchase up to 2,900,000
shares of Common Stock issued pursuant to one or more
stock option plans adopted by Holdings for the benefit
of its management and employees and all Common Stock
issued upon the exercise of such options; and
(iv) If, at any time after the Warrant
Issuance Date, the number of shares of Common Stock
outstanding is increased by a stock dividend payable in
shares of Common Stock or by a subdivision or split-up of
shares of Common Stock, then, following the record date
fixed for the determination of holders of Common Stock
entitled to receive such stock dividend, subdivision or
split-up, effective as of such record date, the Warrant
Price shall be appropriately decreased so that the number of
shares of Common Stock issuable on exercise of this Warrant
7
<PAGE>
and the number of Warrants to be surrendered pursuant to
Section 3 hereof (after giving effect to Section 4(a)(vii)
below) shall be increased in proportion to such increase in
outstanding shares.
(v) If, at any time after the Warrant
Issuance Date, the number of shares of Common Stock
outstanding is decreased by a combination of the outstanding
shares of Common Stock, then, following the record date for
such combination, effective as of such record date, the
Warrant Price shall be appropriately increased so that the
number of shares of Common Stock issuable on exercise of
this Warrant and the number of Warrants to be surrendered
pursuant to Section 3 hereof (after giving effect to Section
4(a)(vii) below) shall be decreased in proportion to such
decrease in outstanding shares; provided, however, that if
during the twelve (12) month period subsequent to such
combination the average Market Price of the Common Stock for
120 or more consecutive trading days (the "Mean Price") is
at least twenty (20) percent less than $.56 per share (or
its appropriate equivalent), the Warrant Price (after giving
effect to Section 4(a)(viii) below) shall be appropriately
decreased to an amount equal to the then Warrant Price
multiplied by a fraction, the numerator of which is the Mean
Price and the denominator of which is $.56 (or its
appropriate equivalent).
(vi) In case, at any time after the Warrant
Issuance Date, of any capital reorganization or any
reclassification of the capital stock of Holdings (other
than a change in par value or from par value to no par value
or from no par value to par value or as a result of a stock
dividend or subdivision, split-up or combination of shares),
Holdings shall cause effective provision to be made so that
this Warrant shall after such reorganization or
reclassification be exercisable for the kind and number of
shares of stock or other securities or property of Holdings
to which such properties and assets shall have been sold or
otherwise disposed to which the Holder of the number of
shares of Common Stock deliverable (immediately prior to the
time of such reorganization or reclassification) upon
exercise of this Warrant would have been entitled upon such
reorganization or reclassification and any such provision
shall include provisions for adjustments in respect of such
stock, securities or other property that shall be as nearly
equivalent as may be practicable to the adjustments provided
for in this Warrant. The provisions of this Section
4(a)(vi) shall similarly apply to successive reorganizations
or reclassifications.
8
<PAGE>
(vii) In case, at any time after the Warrant
Issuance Date, of any capital reorganization, or any
reclassification of the stock of Holdings (other than a
change in par value or from par value to no par value or
from no par value to par value as a result of a stock
dividend or subdivision, split-up or combination of shares),
or the consolidation or merger of Holdings with or into
another corporation, association, partnership, joint
venture, organization, business, individual or any other
entity (a "Person") (other than a consolidation or merger in
which Holdings is the continuing corporation and which does
not result in any change in the Common Stock) or of the sale
or other disposition of all or substantially all the
properties and assets of Holdings as an entirety to any
other Person, this Warrant shall after such reorganization,
reclassification, consolidation, merger, sale or other
disposition be exercisable to purchase the kind and number
of shares of stock or other securities or property of
Holdings or of the corporation resulting from such
consolidation or surviving such merger or to which such
properties and assets shall have been sold or otherwise
disposed to which the Holder of the number of shares of
Common Stock deliverable (immediately prior to the time of
such reorganization, reclassification, consolidation,
merger, sale or other disposition) upon exercise of this
Warrant would have been entitled upon such reorganization,
reclassification, consolidation, merger, same or other
disposition. The provisions of this Section 4(a)(vii) shall
similarly apply to successive reorganizations,
reclassification, consolidations, mergers, sales or other
disposition.
(viii) In case, at any time after the Warrant
Issuance Date, Holdings shall declare a cash dividend upon
its Common Stock payable out of earned surplus or shall
distribute to holders of its Common Stock shares of its
capital stock (other than Common Stock), stock or other
securities of other Persons, evidences of indebtedness
issued by Holdings or other Persons, other assets or options
or rights (excluding options to purchase and rights to
subscribe for Common Stock or other securities of Holdings
convertible into or exchangeable for Common Stock), then the
Warrant Price shall be appropriately decreased by the amount
of such cash dividend or other distribution on a Common
Stock equivalents basis.
9
<PAGE>
(ix) Upon any adjustment to the Warrant Price
hereunder, the number of shares purchasable upon the
exercise of this Warrant shall be adjusted to the number
obtained by dividing:
(A) an amount equal to the product of
the number of shares purchasable hereunder immediately
prior to such adjustment and the Warrant Price
immediately prior to such adjustment, by
(B) the Warrant Price immediately after
such adjustment.
(x) All calculations under this Section 4(a)
shall be made to the nearest one-tenth of a cent ($.001) or
to the nearest one-tenth of a share, as the case may be.
(xi) As used in this Section 4,
(A) "Market Price" at any date of one
share of Common Stock shall be (1) the last reported
sales price regular way or, in case no such reported
sales took place on such day, the last reported bid
price regular way on the principal national securities
exchange on which the Common Stock is listed or
admitted to trading (or if the Common Stock is not at
the time listed or admitted for trading on any such
exchange, then such price as shall be equal to the last
reported sale price, or if there is no such sale price,
the last reported bid price, as reported by the
National Association of Securities Dealers Automated
Quotations System ("NASDAQ") on such day, or if, on any
day in question, the security shall not be quoted on
the NASDAQ, then such price shall be equal to the last
reported bid price on such day as reported by the
National Quotation Bureau, Inc. or any similar
reputable quotation and reporting service, if such
quotation is not reported by the National Quotation
Bureau, Inc.) or (2) if Holdings' Common Stock is not
listed or admitted to trading on a principal national
securities exchange, the value given such share as
determined by Holdings' Board of Directors; provided,
however, that if the Holder notifies Holdings in
writing disputing such determination by the Holdings'
Board of Directors within 20 days after such
determination, the Holder and Holdings shall mutually
agree upon and select an investment bank to determine
the value of one share of Common Stock, the investment
bank's determination to be conclusive, absent manifest
error, and the costs of such determination to be
10
<PAGE>
equally borne by Holdings and the Holder, except that
the Holder shall bear such costs if the investment
bank's determination is equal to or less than Holdings
Board of Directors' determination.
(B) "Common Stock Deemed Outstanding"
means, at any given time, without duplication, the
number of shares of Common Stock actually outstanding
at such time, plus the number of shares of Common Stock
deemed to be outstanding pursuant to subdivision (3) of
Section 4(a)(ii) and Common Stock issuable upon the
conversion of any security of Holdings.
A corresponding adjustment in the number of
Warrants to be surrendered pursuant to Section 3 hereof
shall also be made so that the number of Warrants to be
surrendered represents the same percentage of the
number of shares of Common Stock issuable upon exercise
of Warrants prior to the adjustment.
(xii) In any case in which the provisions of
this Section 4(a) shall require that an adjustment shall
become effective as of a record date for an event, Holdings
may defer until the occurrence of such event issuing to the
Holder of this Warrant exercised after such record date and
before the occurrence of such event the additional shares of
capital stock issuable upon such exercise by reason of the
adjustment required by such event over and above the shares
of capital stock issuable upon such exercise before giving
effect to such adjustment.
(b) Whenever the Warrant Price and the number of shares subject to
this Warrant and the number of Warrants to be surrendered shall
be adjusted as provided in this Section 4, Holdings shall within
10 days file, at the office of the transfer agent for the Common
Stock or at such other place as may be designated by Holdings, a
statement, signed by its President or Chief Financial Officer and
by its Treasurer, showing in detail the facts requiring such
adjustment and the Warrant Price and the number of shares subject
to this Warrant that shall be in effect after such adjustment.
Holdings shall also cause a copy of such statement to be given to
the Holder of this Warrant. Where appropriate, such copy may be
11
<PAGE>
given in advance and may be included as part of a notice required
to be mailed under the provisions of Section 4(c).
(c) In the event Holdings shall propose to take any action of the
types described in clauses (i), (iv), (v), (vi), (vii) or (viii)
of Section 4(a), Holdings shall give 20 days advance written
notice to the Holder of this Warrant at such address as such
Holder shall have provided to Holdings, which notice shall
specify with respect to any such action and the date on which
such action is to take place. Such notice shall also set forth
such facts with respect thereto as shall be reasonably necessary
to indicate the effect of such action (to the extent such effect
may be known at the date of such notice) on the Warrant Price and
the number, kind or class of shares or other securities or
property which shall be deliverable or purchasable upon the
occurrence of such action or deliverable upon exercise of this
Warrant. In the case of any action which would require the
fixing of a record date, such notice shall be given at least 10
days prior to the date so fixed. Failure to give such notice, or
any defect therein, shall not affect the legality or validity of
any such action. In the event Holdings proposes to make any
distribution to holders of its Common Stock which would not give
rise to any adjustment to the Warrant Price hereunder, Holdings
shall establish a record date for determining the holders of
record of Common Stock who will be entitled to receive such
distribution, and shall give the Holder of record of this Warrant
notice (in the manner specified above) of such distribution and
record date at least 20 days in advance of such record date.
(d) Holdings shall pay all documentary, stamp or other transactional
taxes attributable to the issuance or delivery of shares of
capital stock of Holdings upon exercise of all or any part of
this Warrant; provided, however, that Holdings shall not be
required to pay any taxes which may be payable in respect of any
transfer involved in the issuance or delivery of any certificate
for such shares in a name other than that of the Holder of this
Warrant.
(5) No Stockholder Rights.
Except for the rights to elect 2 directors to the Board
of Directors of Holdings or to be present at all the Board of
Director meetings of Holdings pursuant to the Amended and
12
<PAGE>
Restated Stockholders' Agreement, dated the date hereof, by and
among Holdings and the Stockholders thereto, the Holder hereof
shall not be entitled to any voting rights or other rights as a
stockholder of Holdings by reason of the rights granted under
this Warrant until the Holder hereof shall purchase shares of
Common Stock hereunder.
(6) Exchange of Warrant.
This Warrant is exchangeable, upon the surrender hereof
by the Holder hereof at the office or agency of Holdings
designated in Section 1 hereof, for new Warrants of like tenor
representing in the aggregate the rights to subscribe for and
purchase the number of shares which may be subscribed for and
purchased hereunder, each of such new Warrants to represent the
right to subscribe for and purchase such number of shares as
shall be designated by said Holder hereof at the time of such
surrender.
(7) Lost, Stolen, Mutilated or Destroyed Warrant.
If this Warrant is lost, stolen, mutilated or
destroyed, Holdings may, on such terms as to indemnity or
otherwise as it may in its reasonable discretion impose,
including the ability of the indemnitor to pay any such indemnity
(which shall, in the case of a mutilated Warrant, include the
surrender thereof), issue a new Warrant of like denomination and
tenor as the Warrant so lost, stolen, mutilated or destroyed.
Any such new Warrant shall constitute an original contractual
obligation of Holdings, whether or not the allegedly lost,
stolen, mutilated or destroyed Warrant shall be at any time
enforceable by anyone.
(8) Listing on Securities Exchanges.
Holdings shall list on each national securities
exchange on which any Common Stock may at any time be listed,
subject to official notice of issuance upon the exercise of this
Warrant, and shall maintain, so long as any other shares of its
Common Stock shall be so listed, all shares of Common Stock from
time to time issuable upon the exercise of this Warrant, and
Holdings shall so list on each national securities exchange, and
shall maintain such listing of, any other shares of capital stock
of Holdings issuable upon the exercise of this Warrant if and so
long as any shares of capital stock of the same class shall be
listed on such national securities exchange by Holdings. Any
such listing shall be at Holdings' expense.
13
<PAGE>
(9) Availability of Information.
Holdings shall comply with all applicable public
information reporting requirements of the Securities and Exchange
Commission (the "SEC") (including those required to make
available the benefits of Rule 144 under the Securities Act of
1933) to which it may from time to time be subject. Holdings
shall also cooperate with each Holder of this Warrant and Holder
of any Common Stock issued upon exercise of this Warrant in
supplying such information as may be necessary for such Holder to
complete and file any information reporting forms currently or
hereafter required by the SEC as a condition to the availability
of an exemption from the Act for the sale of any Warrant or
Common Stock issued upon exercise of this Warrant.
(10) Successors.
All the provisions of this Warrant by or for the
benefit of Holdings or the Holder shall bind and inure to the
benefit of their respective successors and assigns. Holdings
acknowledges and agrees that the Holder shall have the right to
assign its right, title and interests under this Warrant, in
whole or in part, to any of its affiliates, in its sole
discretion.
(11) Headings.
The headings of sections of this Warrant have been
inserted for convenience of reference only, are not to be
considered a part hereof and shall in no way modify or restrict
any of the terms or provisions hereof.
(12) Governing Law.
This Warrant shall be governed by and construed in
accordance with the laws of the State of New York without regard
to the laws and principles thereof which would direct the
application of the laws of another jurisdiction.
14
<PAGE>
IN WITNESS WHEREOF, Magnavision Corporation has caused
this Warrant to be executed by its duly authorized officers under
its corporate seal, and this Warrant to be dated as of the date
first set forth above.
MAGNAVISION CORPORATION
By:___________________________
Nicholas Mastrorilli, Sr.,
President
[CORPORATE SEAL]
ATTEST:
........................
Secretary
15
<PAGE>
EXHIBIT A
IBJS SURRENDERED WARRANTS
WITH SALE MEMORANDUM
<TABLE>
<S> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
| | |
| | |
| | Sale Price |
-------------------------------------------------------------------------------------
| Aggregate Working | |$30,000,000 |$45,000,000| | |
| Capital Advances | | to | to | |
| through the | |$44,999,999 |$70,000,000 | |
| Sale Date |$30,000,000 | | |$70,000,000 |
| | | | | |
-------------------------------------------------------------------------------------
| Up to $400,000 | -2,537,794 | -2,624,964 | -2,711,191 | -2,753,956 |
-------------------------------------------------------------------------------------
| $400,001 to | -2,315,645 | -2,449,667 | -2,581,498 | -2,646,608 |
|$500,000 | | | | |
-------------------------------------------------------------------------------------
| $500,001 to | -2,087,257 | -2,270,475 | -2,449,667 | -2,537,794 |
|$600,000 | | | | |
-------------------------------------------------------------------------------------
| $600,001 to | -1,852,363 | -2,087,257 | -2,315,645 | -2,427,483 |
|$700,000 | | | | |
-------------------------------------------------------------------------------------
| $700,001 to | -1,610,681 | -1,899,876 | -2,179,378 | -2,315,645 |
|$800,000 | | | | |
-------------------------------------------------------------------------------------
| $800,001 to | -1,361,912 | -1,708,187 | -2,040,807 | -2,202,247 |
|$900,000 | | | | |
-------------------------------------------------------------------------------------
| $900,001 to | -1,105,741 | -1,512,041 | -1,899,876 | -2,087,257 |
|$1,000,000 | | | | |
-------------------------------------------------------------------------------------
| $1,000,001 to | -841,831 | -1,311,280 | -1,756,521 | -1,970,640 |
|$1,100,000 | | | | |
-------------------------------------------------------------------------------------
| Over | -569,827 | -1,105,741 | -1,610,681 | -1,852,363 |
|$1,100,001 | | | | |
-------------------------------------------------------------------------------------
</TABLE>
"Aggregate Working Capital Advances" means the
aggregate amount of the Interim Advance and the Working Capital
Advances made pursuant to Section 2.2 of the Securities Purchase
Agreement.
"Sale Date" means the date the Company or a subsidiary
thereof executes a binding and enforceable written agreement with
a Buyer for an Asset Sale or the sale of the capital stock of a
subsidiary of the Company.
"Sale Price" means the gross proceeds received from an
Asset Sale or the sale of the capital stock of the subsidiary of
the Company which holds the License.
16
<PAGE>
EXHIBIT B
IBJS SURRENDERED WARRANTS
WITHOUT SALE MEMORANDUM
<TABLE>
<CAPTION>
<S> <C> <C> <C> <C> <C>
-------------------------------------------------------------------------------------
| | |
| | Sale Price |
| | |
-------------------------------------------------------------------------------------
| Aggregate Working | $30,000,000 | $45,000,000 | |
| Capital Advances | | to | to | |
| through the | |$44,999,999 | $70,000,000 | |
| Sale Date |$30,000,000 | | |$70,000,000 |
| | | | | |
-------------------------------------------------------------------------------------
| Up to $400,000 | -2,087,257 | -2,270,475 | -2,449,667 | -2,537,794 |
-------------------------------------------------------------------------------------
| $400,001 to | -1,852,363 | -2,087,257 | -2,315,645 | -2,427,483 |
|$500,000 | | | | |
-------------------------------------------------------------------------------------
| $500,001 to | -1,610,681 | -1,899,876 | -2,179,378 | -2,315,645 |
|$600,000 | | | | |
-------------------------------------------------------------------------------------
| $600,001 to | -1,361,912 | -1,708,187 | -2,040,807 | -2,202,247 |
|$700,000 | | | | |
| | | | | |
-------------------------------------------------------------------------------------
| $700,001 to | -1,105,741 | -1,512,041 | -1,899,876 | -2,087,257 |
|$800,000 | | | | |
-------------------------------------------------------------------------------------
| $800,001 to | -841,831 | -1,311,280 | -1,756,521 | -1,970,640 |
|$900,000 | | | | |
-------------------------------------------------------------------------------------
| $900,001 to | -569,827 | -1,105,741 | -1,610,681 | -1,852,363 |
|$1,000,000 | | | | |
-------------------------------------------------------------------------------------
| $1,000,001 to | -289,351 | -895,249 | -1,462,290 | -1,732,388 |
|$1,100,000 | | | | |
-------------------------------------------------------------------------------------
| Over | 0.00 | -679,624 | -1,311,280 | -1,610,681 |
|$1,100,001 | | | | |
-------------------------------------------------------------------------------------
</TABLE>
"Aggregate Working Capital Advances" means the
aggregate amount of the Interim Advance and the Working Capital
Advances made pursuant to Section 2.2 of the Securities Purchase
Agreement.
"Sale Date" means the date the Company or a subsidiary
thereof executes a binding and enforceable written agreement with
a Buyer for an Asset Sale or the sale of the capital stock of a
subsidiary of the Company.
"Sale Price" means the gross proceeds received from an
Asset Sale or the sale of the capital stock of the subsidiary of
the Company which holds the License.
17
<PAGE>
MAGNAVISION CORPORATION
The Wedgwood Building
1725 Highway 35 - Suite B
Wall, New Jersey 07719
July 11, 1995
Mr. George S. Callas
c/o Broege Neumann & Fischer
Old Squan Plaza
25 Abe Vorhees Drive
Manasquan, New Jersey 08736
Re: Midlantic Bank
Dear Mr. Callas:
It is our understanding that you have entered into an
agreement with Midlantic Bank (the "Bank") dated June 27, 1994 (copy attached as
Exhibit "A" hereto) regarding, among other things, the disposition of 4,876,354
shares of common stock of Magnavision Corporation ("Magnavision") registered in
your name and held by the Bank as security (the "Shares") in accordance with the
terms of Exhibit A.
It is also our understanding that the Bank has entered into an
agreement with Finial Investment Corporation ("Finial") dated June 23, 1995
(copy attached as Exhibit "B" hereto) pursuant to which the Bank has agreed to
sell the Shares to Finial upon the terms and conditions set forth in Exhibit
"B".
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 2
Pursuant to the terms and conditions of Exhibit A the
Bank has agreed with you that
"In the event that the bank receives an offer that it
intends to accept for the stock, it will give Callas
15 days notice and a right to equal or exceed the
offer received for the Stock. At the conclusion of
the 15 days, unless Callas has tendered good funds to
the Bank in an amount equal to the amount offered the
Bank by an outsider, he will have no further rights
with respect to the stock."
Pursuant to the terms of Exhibit B the Bank has agreed
with Finial that
"In the event that the Bank receives an offer that it
intends to accept for the stock, it will give Mr.
Callas 15 days notice and a right to equal or exceed
the offer received for the Magnavision stock. At the
conclusion of 15 days, unless Mr. Callas has tendered
good funds to the Bank in an amount equal to the
amount offered the Bank by an outsider, he will have
no further rights with respect to that Magnavision
stock."
In addition, pursuant to Exhibit B, Finial has agreed to
purchase the Shares for the sum of $750,000, payable $25,000 on or before June
28, 1995 (which amount you have advised us has previously been paid), $10,000 of
which represents a fee to purchase an option (the "Option") to buy the Shares
and $15,000 of which represents a deposit to be applied toward the purchase
price. Under the terms of Exhibit B Finial has the right to
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 3
exercise the Option at any time after (i) payment of the subject $25,000, and
(ii) providing evidence of its financial ability to consummate the purchase of
the Shares, through 5:00 p.m. Eastern time, August 27, 1995 (the "Option
Period"). The Option shall be exercised by tendering the balance of the purchase
price, $735,000, to the Bank in immediately available funds.
We further understand that you do not currently intend to
exercise your rights under Exhibits A and B because, among other things, you do
not have sufficient funds to effectuate the purchase of the Shares as required
therein.
We have represented to you that Magnavision is currently in
the process of raising substantial funds to expand its business operations,
protect its assets and for general working capital purposes. We believe that it
is in Magnavision's best interests to acquire the Shares and are interested in
doing so upon the terms offered to you pursuant to Exhibits A and B, as
applicable. However, as of the date hereof, our financing sources have not yet
agreed to allow us to utilize a sufficient portion of the contemplated financing
for the purposes of effectuating the purchase of the Shares. We believe however,
but
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 4
cannot guarantee, that we will be successful in arranging such financing so as
to enable us to consummate such purchase within the time frame set forth in
Exhibit B if we were granted the right to effectuate such purchase in an amount,
during the time period and substantially upon the terms and conditions offered
to you.
As a result of all of the foregoing, we propose the following:
1. You hereby assign, set over, transfer and grant to
Magnavision, all of your right, title and interest in Exhibits A and B, as
applicable, with respect to your right to purchase the Shares. Magnavision shall
have the right to assign all or any portion of such rights to such third party,
at such time, and in exchange for such consideration, as it in its sole and
exclusive discretion shall determine. Magnavision shall also have the right to
make successive assignments of such rights as it, in its sole discretion shall
determine.
2. Magnavision hereby appoints you as its agent for
the sole and limited purpose of tendering funds, which we shall
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 5
tender or arrange to have supplied to you, to the Bank, on a timely basis, so as
to enable you to secure all right, title and interest in and to the Shares, as
agent for and solely on our behalf, pursuant to the terms of Exhibits A and B
and pursuant to this letter agreement. In this connection you shall act as an
agent for an undisclosed principal in all of your dealings with the Bank which
shall be conducted on your behalf solely and exclusively by your attorneys,
Messrs. Wood Broege Neumann & Fischer. The aforementioned check for the sum of
$25,000 will be delivered to your attorneys for timely redelivery to the Bank
together with evidence of financial capacity of one or more persons or entities
that will provide the required funds in order to enable you to exercise the
option on Magnavision's behalf as provided herein. The person or entity whose
financial statement is provided with this letter agreement may or may not become
the person or entity for whom the option is exercised, in whole or in part.
3. If and when Magnavision determines to exercise the Option
during the Option Period, it will provide your attorneys with the additional sum
of $735,000 in immediately available funds which, at Magnavision's written
direction, shall be
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 6
required to be delivered to the Bank at a closing in exchange for certificates
evidencing the Shares duly endorsed for transfer in Magnavision's name, such
other name as Magnavision may designate, or endorsed in blank, as Magnavision
may determine together with standard documentation for transactions of this
type, the language of which shall be determined by Magnavision, and you agree to
fully cooperate by endorsing all such certificates registered in your name and
signing such additional documents in such form and substance as Magnavision
shall determine.
4. You shall not communicate with the Bank, nor its
representatives, except in such manner and at such times as Magnavision shall
determine and upon your attorney's receipt of certificates evidencing the Shares
at the closing specified in paragraph 3 above, or otherwise, your attorneys
shall promptly redeliver same to Magnavision or its representatives as
designated. In addition, you agree to provide Magnavision with copies of any and
all correspondence and the substance of any and all communications received from
the Bank or its representatives at the time of receipt thereof, or immediately
thereafter as may be practicable.
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 7
5. If Magnavision determines to, and is successful in
exercising the Option and purchasing the Shares as described above, whether for
its own behalf or on behalf of one or more its investors, Magnavision agrees to
either (i) issue to you, from previously authorized but unissued shares, an
aggregate of 250,000 shares of its common stock, par value $.004 per share ("New
Callas Shares"), in exchange for an amount equivalent to $.004 per share or the
sum of $1,000, or (ii) redeliver certificates aggregating 250,000 shares of
Magnavision Common Stock previously registered in your name ("Old Callas
Shares") out of the Shares delivered to your counsel on our behalf by the Bank.
Certificates evidencing the New Callas Shares, or the Old Callas Shares, as the
case may be, shall be delivered to your counsel as soon as practicable after the
closing described above.
6. If Magnavision is unable or unwilling to exercise the
Option during the Option Period, then and in that event this letter agreement
shall be null and void and neither party shall have any obligations to the
other, whether or not arising out of this letter agreement, except that if any
funds are required to be returned by the Bank pursuant to the terms of Exhibits
A and/or B you will cause your counsel to receipt for same for
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 8
prompt and immediate redelivery to Magnavision or such other entity as we shall
designate in writing. The foregoing sentence shall operate, upon the execution
of this letter agreement, whether or not the option is exercised, as a mutual
general release running from each of the parties to the other regarding any
claims they have had or ever had against each other or against any officer,
director, shareholder, employee or agent of Magnavision or Cacomm, Inc. by you.
7. You represent and warrant to Magnavision as of the date
hereof and as of the date Magnavision provides your counsel with the sum of
$735,000 for the purposes described above, as follows:
A. You own the Shares free and clear of all liens, claims and
encumbrances except for the rights of the Bank which will be extinguished in
full upon the closing of the purchase of the Shares as described above.
B. You have the right, power and authority to
execute, deliver and perform the terms of this letter agreement
and the consummation of the terms thereof will not violate any
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 9
agreement, contract or understanding to which you are a party or by which you or
any of your assets are bound, nor will such execution, delivery or performance
violate the terms of any order, judgment or decree of any governmental, judicial
or administrative authority.
C. Upon the execution, delivery and performance of the terms
hereof, and upon the closing described above, Magnavision will own the Shares
free and clear of all liens, claims and encumbrances subject to your right to
receive, if applicable, 250,000 Old Callas Shares.
D. The execution, delivery and performance of the
terms of this letter agreement does not require the consent of
any third party whose written consent has not previously been
obtained.
E. You have been represented by counsel in this
transaction and are fully informed regarding the business
operations, financial condition and prospects of Magnavision and
have had access to any and all information concerning Magnavision
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 10
and this transaction as you and your advisors have deemed relevant.
F. No representation or warranty made by you contained herein
or otherwise contains or will contain an untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances which they were or are made, not false or
misleading.
8. Magnavision hereby represents and warrants to you
that:
A. It has the right, power and authority to execute, deliver
and perform the terms of this letter agreement and the consummation of the terms
thereof will not violate any agreement, contract or understanding to which it is
a party or by which it or any of its assets are bound, nor will such execution,
delivery or performance violate the terms of any order, judgment or decree of
any governmental, judicial or administrative authority.
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 11
B. The execution, delivery and performance of the
terms of this letter agreement does not require the consent of
any third party whose written consent has not previously been
obtained.
C. No representation or warranty made by it contained herein
or otherwise contains or will contain an untrue statement of a material fact or
omits or will omit to state a material fact required to be stated herein or
therein or necessary to make the statements and facts contained herein or
therein, in light of the circumstances which they were or are made, not false or
misleading.
This letter agreement constitutes the entire agreement between
us and shall not be altered, amended or rescinded except by a writing signed by
each of us. Should any dispute arise regarding the terms thereof, we agree to
arbitrate same before the American Arbitration Association ("AAA") in the City
of New York under the rules of the AAA then in force. This letter agreement
shall be governed by the laws of the State of New York.
<PAGE>
Mr. George S. Callas
July 11, 1995
Page 12
If the foregoing accurately sets forth our understanding,
kindly sign below where indicated at the place provided below and cause your
counsel to do the same with respect to its functions hereunder. We mutually
agree to hold your counsel harmless from and against any and all liabilities
resulting from its performance hereunder except for gross negligence,
intentional acts or fraud. Each of the parties agrees to pay all of its own
expenses, legal or otherwise, in connection with this letter agreement.
Sincerely,
MAGNAVISION CORPORATION
By:/s/ Nicholas Mastrorilli, Sr.
------------------------------
Nicholas Mastrorilli, Sr.
President
Agreed and Accepted:
/s/ George S. Callas CACOMM, INC.
- -------------------------------
George S. Callas
By:/s/ Nicholas Mastrorilli, Sr.
------------------------------
Nicholas Mastrorill, Sr.
Agreed and Accepted President
As its Interest May Appear
BROEGE NEUMANN & FISCHER
By: /s/ Peter Broege
- -------------------------------
Partner
<PAGE>
MIDLANTIC BANK, N.A.
499 Thornall Street
Edison, New Jersey 08818
Dated: August 25, 1995
Mr. George S. Callas
c/o Broege Neumann & Fischer
Old Squan Plaza
25 Abe Vorhees Drive
Manasquan, New Jersey 08736
Dear Mr. Callas:
As you are aware, Midlantic Bank, N.A. (the "Bank") has
entered into a letter agreement with you (the "Callas Agreement") dated June 27,
1994, pursuant to which the Bank granted you the right, among other things, to
equal or exceed any offer received by the Bank to purchase the 4,876,354 shares
of common stock (the "Stock") of Magnavision Corporation ("Magnavision") held by
the Bank as collateral.
As you are also aware, the Bank entered into a letter
agreement with Finial Investment Corporation ("FIC") dated June 23, 1995 (the
"Finial Agreement") pursuant to which FIC agreed to purchase the Stock pursuant
to the terms of the Finial Agreement.
Pursuant to the letter of our counsel, McManimon & Scotland,
dated July 18, 1995, the Bank advised FIC and its principal that the Bank
acknowledged the exercise of your option to purchase the Stock pursuant to the
Callas Agreement and that the Bank considered your exercise thereof to be
effective.
<PAGE>
- 2 -
You have advised us that you have entered into a separate
agreement with Magnavision pursuant to which you and/or Magnavision, directly or
indirectly, will supply the Bank, on or before August 27, 1995, with the sum of
$735,000 so as to consummate the purchase of the Stock (the "Closing"). As a
result of the foregoing, you hereby authorize and direct the Bank to deliver
appropriate certificates evidencing the Stock, together with any required
endorsements thereon, or stock powers as may be appropriate to transfer the
Stock to Magnavision, against receipt of the purchase price as described above,
at the Closing.
In order to effectuate all of the foregoing you hereby
authorize and direct the Bank to exclusively deal with Magnavision directly, for
and on your behalf, to receive the certificates evidencing the Stock together
with any other documents to be executed and delivered by the Bank which may be
required to effectuate such transfer at the Closing.
In connection with the foregoing we understand that you have
represented and warranted to Magnavision that at the Closing, you will, among
other things, own the Stock free and clear of all liens, claims and encumbrances
except for the rights of the Bank which will be extinguished in full upon the
Closing. In this connection, the Bank represents and warrants to you and to
Magnavision that (i) it has the power and authority to (a) enter into and
perform the terms of the Callas Agreement (b) execute, deliver and perform the
terms hereof and (c) deliver
<PAGE>
- 3 -
certificates evidencing the Stock as described above, (ii) other than the Callas
Agreement and the Finial Agreement, it has not created, incurred or permitted to
incur, any liens, claims or encumbrances with respect to the Stock from the date
it has been in receipt or control over certificates evidencing same to the date
of Closing, and (iii) upon delivery of the certificates evidencing the Stock to
Magnavision as described above and receipt by the Bank of $735,000 representing
the balance of the purchase price for the Stock, the rights of the Bank with
respect thereto will be extinguished in full.
If the foregoing accurately represents our understanding with
respect to the foregoing, kindly sign below where indicated. This document may
be executed in one or more counterparts each of which, together with the other
counterparts, shall constitute one entire document as if signed by all parties
thereto.
Sincerely,
MIDLANTIC BANK, N.A.
By: /s/
------------------------------
ACCEPTED AND AGREED:
/s/ George S. Callas
- ------------------------------
George S. Callas
MAGNAVISION CORPORATION
By: /s/ Nicholas Mastrorilli, Sr.
----------------------------------
Nicholas Mastrorilli, Sr.
President
<PAGE>
Warrant for Purchase Of Common Stock
of
Magnavision Corporation
(A Delaware Corporation)
This Warrant may not be sold, transferred, pledged or hypothecated
unless a registration statement under the Securities Act of 1933 is in
effect with respect thereto or the Corporation has received an opinion
of counsel, satisfactory to it, to the effect that such registration is
not required.
This certifies that (the "Holder"), for value received and subject to
the provisions hereinafter set forth, shall be entitled to purchase from
Magnavision Corporation (the "Corporation"), shares of common stock of the
Corporation, par value of $.004 per share, at a purchase price of $1.00 per
share. The Corporation hereby represents and warrants that its capitalization is
as set forth in the letter agreement attached to this Warrant as Exhibit "A". In
connection therewith, the obligations of the Corporation to issue additional
warrants to purchase shares of its common stock and to issue additional shares
of its common stock to various, current and former officers, directors,
employees and consultants have been disclosed to the Holder. The number and
shares of common stock and any other securities or other property to be issued
or delivered to the Holder in accordance with the provisions of Section 5 hereof
shall be collectively referred to herein as "Common Stock". This Warrant is one
of a series of warrants issued at or about the date hereof each at an exercise
price per share as set forth above.
1. Exercise. This Warrant may be exercised during the five (5) year
period commencing the date hereof and expiring as set forth in Section 8(c) (the
"Exercise Period") at any time by the Holder as to the number of whole shares of
Common Stock covered hereby, upon surrender of this Warrant with the
subscription form, attached hereto, duly executed, and accompanied by such
additional documents as may be requested by the Corporation, at the office of
the Corporation accompanied by payment, in cash or by certified or official bank
check payable to the order of the Corporation, in the amount of the purchase
price hereinabove set forth for the shares of Common Stock so purchased.
2. Delivery of Securities. As soon as practicable after the exercise of
this Warrant in whole, the Corporation, at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the Holder (upon payment by the Holder of any applicable transfer
taxes), a certificate or certificates for the number of full shares of Common
Stock to which the Holder is entitled upon such exercise.
3. Transferability. This Warrant may be exercised only by the Holder
and it may not be transferred except with the written consent of the
Corporation.
<PAGE>
4. Covenants and Investment Representations of the Holder. In order to
induce the Corporation to issue the Warrant, the Holder hereby represents,
warrants and covenants that prior to agreeing to acquire the Warrant, the Holder
has requested, received and fully reviewed, to the extent the Holder deemed
appropriate, any documents which the Holder deemed relevant to his investment
decision and has availed himself of full access to the Corporation and all
information relating to the Corporation that the Holder requested or deemed
appropriate. Neither the Warrant represented by this certificate nor the shares
issuable upon the exercise hereof have been registered under the Securities Act
of l933 (the "Act"). In addition, the Holder (i) acknowledges to the Corporation
that (A) the Warrant and the shares of Common Stock being acquired pursuant to
the exercise of this Warrant will not be registered under the Act and will be
issued in reliance upon the exemption afforded by Section 4(2) thereof for
transactions by an issuer not involving any public offering, (B) such shares
must be held indefinitely unless a subsequent disposition thereof is registered
under the Act or is exempt from such registration and (C) the certificates
representing such shares will bear a legend to such effect as set forth below,
and (ii) represents to the Corporation that (A) such shares are being acquired
for investment and without any present view toward distribution thereof to any
other person, (B) the Holder will not sell or otherwise dispose of such shares
except in compliance with the registration requirements or exemption provisions
under the Act and the rules and regulations promulgated thereunder, (C) the
Holder directly, or through business and financial advisors, has such knowledge
and experience in financial and business matters and is capable of evaluating
the risks and merits of an investment in the Corporation represented by such
shares and (D) the Holder is able to bear the economic risks of such an
investment and is either an "accredited investor" within the meaning of Rule
501(a) of Regulation D promulgated under the Act or a person who, because of his
current or prior employment by or relationship with the Corporation or its
senior management, has access to all material information and Corporation
personnel necessary to make an investment decision. Whenever the restrictions
described in (i) above shall terminate as to any shares of Common Stock, the
holder thereof shall be entitled to receive from the Corporation, without
expense, new securities of like tenor not bearing a restrictive legend. Neither
the Warrant nor the shares issuable upon its exercise may be made subject to a
security interest, pledged, hypothecated, or otherwise transferred without an
effective registration statement for such Warrant or shares under the Act or the
Corporation shall have received an opinion of counsel in form and content
reasonably acceptable to it that registration is not required under the Act. Any
shares issued upon the exercise of this Warrant shall bear the following legend:
"The shares represented by this Certificate have not been registered
under the Securities Act of l933. These shares have been acquired for
investment and not with a view to distribution or resale, and may not
be made subject to a security interest, pledged, hypothecated, or
otherwise transferred without an effective registration statement for
such shares under the Securities Act of l933 or an opinion of counsel
in form and content reasonably acceptable to the Corporation that
registration is not required under such Act."
It shall be a condition of exercise that the Holder give such representations
and warranties as the Corporation shall deem necessary to assure that the
exercise of this Warrant does not involve any violation of the Act.
<PAGE>
5. Adjustments. In the event that the Corporation shall, at any time
prior to the expiration date of this Warrant and prior to the exercise thereof:
(i) declare or pay to the holders of its Common Stock a dividend payable in any
kind of shares of stock of the Corporation; or (ii) change or divide or
otherwise reclassify its Common Stock into the same or a different number of
shares with or without par value, or into shares of any class or classes; or
(iii) consolidate or merge with, or transfer its property as an entirety or
substantially as an entirety to, any other corporation; or (iv) make any
distribution of its assets to holders of its Common Stock as a liquidation or
partial liquidation dividend; then, upon the subsequent exercise of this
Warrant, the holder thereof shall receive for the purchase price, in addition to
or in substitution for the shares of Common Stock to which he would otherwise be
entitled upon such exercise, such additional shares of stock or scrip of the
Corporation, or such reclassified shares of stock of the Corporation, or such
shares or the securities or property resulting from such consolidation or merger
or transfer, or such assets of the Corporation, which he would have been
entitled to receive had he exercised this Warrant prior to the happening of any
of the foregoing events or, at the discretion of the Board of Directors, the
Board shall make such alternate provisions as in the judgment of the Board shall
be fair and reasonable including, without limitation, an adjustment in the
exercise price of this Warrant which, in the judgment of the Board would, as
nearly as may be practicable, preserve the economic position of the Holder. The
Corporation will use its best efforts to mail to the Holder a notice at least 5
days prior to the date or expected date of any dividend or distribution or the
date or expected date on which any such reclassification, consolidation, merger,
transfer of property, partial liquidation or liquidation is to take place
describing the material terms and conditions of any such transaction.
6. Notices. All notices and other communications from the Corporation
to the Holder shall be mailed by first class registered or certified mail,
postage prepaid, to such address as may be furnished to the Corporation in
writing by the Holder, or, until an address is furnished, to and at the address
of the last holder of this Warrant who has so furnished an address to the
Corporation.
7. Reservation of Common Stock. The Corporation will at all times
reserve and keep available, solely for issuance and delivery upon exercise of
this Warrant, all shares of Common Stock from time to time issuable upon the
exercise of this Warrant at the time outstanding. All shares of Common Stock
issuable upon exercise of the Warrant shall be duly authorized, and when issued
and paid for in full, validly issued, fully paid and non-assessable with no
liability on the part of the Holder thereof.
<PAGE>
8. Miscellaneous. (a) This Warrant does not confer upon the Holder any
right whatsoever as a stockholder of the Corporation.
(b) Upon the exercise of this Warrant the subscription form attached
hereto must be duly executed and the accompanying instructions for registration
of stock completed.
(c) This Warrant shall be void unless exercised prior
to , 2000.
(d) This document may not be altered or amended except by a writing
duly executed by the party against whom such alteration or amendment is sought
to be enforced.
(e) The provisions of this Warrant shall be binding upon and inure to
the benefit of the parties hereto and their respective successors and assigns;
provided, that the Holder may not assign or otherwise transfer any of his rights
or obligations under this Warrant without the written consent of the
Corporation.
(f) This Warrant shall be construed in accordance with the laws of the
State of Delaware applicable to contracts made and to be performed entirely
therein.
Witness the facsimile seal of the Corporation and the signature of its
duly authorized officer.
Dated: , 1995
MAGNAVISION CORPORATION
By: ______________________________
Nicholas Mastrorilli, Sr.,
President
Accepted
________________________________
<PAGE>
Subscription Form
(To Be Executed if Owner Desires to Exercise the Warrant)
TO: Magnavision Corporation
The Wedgwood Building
1725 Highway 35 -- Suite B
Wall, New Jersey 07719
The undersigned hereby exercises, according to the terms and conditions
thereof, the right to purchase shares of common stock of Magnavision Corporation
evidenced by the within Warrant Certificate, and herewith makes payment of the
purchase price in full. Kindly issue all shares to the undersigned and deliver
them to the undersigned at the address stated below. If such number of shares
shall not be all of the shares purchasable under the within Warrant Certificate,
please issue a new Warrant Certificate of like tenor for the balance of the
remaining shares purchasable hereunder to be delivered to the undersigned at the
address stated below.
Name __________________________
Address __________________________
Signature __________________________
Dated
<PAGE>
INDEMNIFICATION AGREEMENT
INDEMNIFICATION AGREEMENT made and entered into as of the 26th day of
August, 1995, by and between Magnavision Corporation, a Delaware corporation
(the "Company"), and Patrick Mastrorilli, an Executive Officer and a Director of
the Company (who, together with his successors, heirs, personal representatives
and estate, is hereinafter referred to as the "Indemnitee").
WHEREAS, the Company is aware that competent and experienced persons
are becoming more reluctant to serve as directors or executive officers of
publicly-held corporations or their subsidiaries unless they are protected by
comprehensive policies of insurance and/or indemnification, due to the
increasing number of lawsuits against such corporations and their directors and
officers, the attendant expense of defending against such lawsuits, and the
exposure of such directors and officers to unreasonably high damages; and
WHEREAS, the Board of Directors of the Company has concluded that its
directors and executive officers, certain directors and executive officers of
its Subsidiaries (as hereinafter defined), its Counsel and certain consultants
to the Company, should be provided with the maximum available protection against
inordinate risks in order to insure that the most capable persons will be
attracted to such positions; and, therefore, has determined to contractually
obligate the Company to indemnify in a reasonable and adequate manner such
directors, officers, Counsel, and certain consultants to the Company and to
assume for itself liability for all expenses and damages in connection with
claims lodged against such directors, executive officers, Counsel, and certain
consultants to the Company as a result of their service to the Company or its
Subsidiaries to the full extent permitted by law; and
WHEREAS, applicable law empowers corporations to indemnify persons
serving as a director, officer, employee, Counsel, or consultant or other agents
of the Company or a person who serves at the request of the Company as a
director, officer, employee, Counsel or consultant to the Company or agent of
another corporation, partnership, joint venture, trust, or other enterprise, and
further empowers a corporation to purchase and maintain insurance (on behalf of
such persons) against liability which may be asserted against him or them or
incurred by him or them in any such capacity, or arising out of his or their
status as such, whether or not the corporation would have the power to indemnify
him or them against such liability under the provisions of said laws; and
WHEREAS, the Board of Directors of the Company has concluded that the
coverage under currently available directors and officers liability insurance
policies is inadequate, that the level of insurance currently available may not
continue to be so in the future, and that the interest of its stockholders would
be better served by contracting to indemnify its executive officers and
directors, certain directors and executive officers of its Subsidiaries, its
Counsel, and certain employees of and consultants to the Company against
potential liabilities, particularly those which may not be covered by insurance;
and
<PAGE>
WHEREAS, the Company desires to have Indemnitee serve or continue to
serve as director, officer, Counsel, employee or consultant to the Company
and/or a Subsidiary, and Indemnitee desires to serve, or to continue to serve
(provided that he is furnished the indemnity provided for hereinafter) in one or
more of such capacities;
NOW, THEREFORE, in consideration of the mutual premises herein
contained, the parties hereto, intending to be legally bound, hereby agree as
follows:
1. Certain Definitions.
"Agent" shall mean any person or firm who or which (i) is or was a
director, officer, Counsel, employee, consultant or other agent of the Company
or a Subsidiary, (ii) is or was serving at the request of, for the convenience
of, or to represent the interests of, the Company or any Subsidiary as a
director, officer, Counsel, employee, consultant or agent of another domestic,
foreign or alien corporation, partnership, joint venture, trust or other
enterprise, (iii) is or was a director, officer, Counsel, employee, consultant
or agent of a foreign or domestic corporation which was a predecessor
corporation of the Company or Subsidiary, or was a director, officer, Counsel,
employee, consultant or agent of another enterprise at the request of, for the
convenience of, or to represent the interests of such predecessor corporation,
or (iv) is or was serving at the request of, for the convenience of, or to
represent the interests of, the Company or any Subsidiary as an agent, director,
officer, Counsel, consultant, trustee or otherwise served in any capacity any
employee benefit plan, its participants or beneficiaries.
"Change in Control" shall mean the occurrence of the consummation of
any transaction that constituted a Potential Change in Control.
"Claim" shall mean any threatened, pending or completed action, suit
or proceeding, or any inquiry or investigation, whether instituted by the
Company or a Subsidiary, in the name of the Company or a Subsidiary, or a third
party, whether civil, criminal, administrative or investigative, which
Indemnitee in good faith believes may lead to the institution of any such
action, suit or proceeding.
"Counsel" shall mean legal counsel to the Company, including all
persons associated with such counsel as a partner, associate or employee or in
any "of counsel" position with such legal counsel.
"D&O Insurance" shall mean directors and officers
liability insurance.
"Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended, and the rules and regulations promulgated thereunder.
<PAGE>
"Expenses" shall mean all direct and indirect costs of any type or
nature whatsoever, including, without limitation, all attorneys' fees and
related disbursements, and other out-of-pocket costs actually and reasonably
incurred by the Indemnitee in connection with either the investigation, defense,
settlement or appeal of a Claim or establishing or enforcing a right to
indemnification under this Agreement, Section 145 of the Delaware General
Corporation Law or otherwise, and amounts paid in settlement by or on behalf of
Indemnitee, but shall not include any judgments, fines or penalties actually
levied against the Indemnitee.
"Independent Legal Counsel" shall mean an attorney or firm of
attorneys, selected in accordance with the provisions of Sections 5(d) or 5(e).
"Potential Change in Control" shall mean the signing of any contract,
letter of intent, term sheet, other meeting of the minds, understanding or
agreement in principle, or the taking of any other action, by way of a vote,
written or otherwise, or any public announcement thereof, such that upon the
closing of any such transaction contemplated thereby (a) the Company shall cease
to be the beneficial and record owner of one-hundred (100) percent of the issued
and outstanding capital stock of the Subsidiaries, directly or indirectly, or,
(b) Cacomm, Inc. shall cease to be the beneficial and record owner of at least
fifty-one (51) percent of the issued and outstanding common stock of the
Company, or (c) Nicholas Mastrorilli, Sr. and members of his immediate family
shall cease to own beneficially and of record at least 51% of the voting capital
stock of Cacomm, Inc. on a fully diluted basis, or (d) a majority of the Board
of Directors of the Company consists of persons other than nominees of
management of the Company, or (e) the Company contracts to or takes overt steps
leading toward the consummation of a statutory merger or sale of a substantial
portion of its assets to another corporation or otherwise agrees to consolidate
or amalgamate with another corporation, the purpose or result of which would be
a change in "control" of the Company as generally described above, or (f) a
transaction or circumstance occurs or eventuates, or is likely to occur or
eventuate, which reasonably may be construed as effecting or constituting a
clear and present probability of effecting a change in "control" of the Company,
as "control" is generally or reasonably understood in the business community, or
(g) more than 20% of the Company's then issued and outstanding voting stock
shall have been contracted to or otherwise agreed to be purchased or acquired
(or voting rights with respect thereto shall have been contracted to or
otherwise agreed to be acquired) by a person, corporation or group thereof
acting in concert, the purpose or result of which would be a change in "control"
of the Company as generally described above.
"Securities Act" shall mean the Securities Act of 1933, as amended,
and the rules and regulations promulgated thereunder.
"Subsidiary" shall mean Magnavision Corporation, a New Jersey
Corporation, University Connection, Inc., Accu-Trek, Inc., and Magnavision
Private Cable, Inc. and any corporation of which 51% of the outstanding voting
securities is or was owned directly or indirectly by the Company.
<PAGE>
2. Agreement to Serve Company. The Indemnitee shall serve and/or
continue to serve as an Agent at the will of the Company or any Subsidiary, or
pursuant to a written agreement of the Company or any Subsidiary approved by the
Board of Directors of the Company or any Subsidiary, so long as the Indemnitee
is duly appointed or elected and qualified in accordance with the applicable
provisions of the By-laws of the Company or any Subsidiary, or pursuant to
contract, or until such time as the Indemnitee tenders his or its resignation in
writing, or is removed in accordance with the By-laws of the Company or any
Subsidiary, or pursuant to contract. The foregoing is not intended, nor shall it
be construed, to create any right of continued employment or service as an
officer, director, employee, consultant or Counsel in the Indemnitee (express or
implied) with the Company or any Subsidiary.
3. Directors and Officers Insurance. (a) As long as the Indemnitee
shall continue to serve as an Agent and thereafter as long as the Indemnitee
shall be subject to any possible Claim by reason of the fact that the Indemnitee
was an Agent, the Company, subject to Section 3(c) hereof, shall maintain and/or
promptly obtain in full force and effect, D&O Insurance in reasonable amounts
from established and reputable insurers.
(b) In all policies of D&O Insurance, the Indemnitee shall be
named as an insured in such a manner as to provide the Indemnitee the same
rights and benefits as are accorded to the Company's most favorably insured
directors, if the Indemnitee is either a director, or is Counsel, or is a
full-time consultant to the Company, or to the Company's most favorably insured
officers, if the Indemnitee is an officer but not a director of the Company, or
to the Company's or a Subsidiary's most favorably insured key employees, if the
Indemnitee is a key employee but is neither an officer nor director of the
Company.
(c) Notwithstanding the foregoing, the Company shall have no
obligation to obtain or maintain D&O Insurance if the Company determines in good
faith that such insurance is not reasonably available, the premium cost for such
insurance is disproportionate to the amount of coverage provided, the coverage
provided by such insurance is limited by exclusions so as to provide an
insufficient benefit, or the Indemnitee is covered by similar insurance
maintained by a Subsidiary.
4. Indemnification. (a) Except as otherwise herein provided, the
Company shall pay on behalf of Indemnitee, or if Indemnitee shall have paid such
amounts, promptly shall indemnify and pay over to Indemnitee for all Expenses
and liabilities of any nature whatsoever, including but not limited to
judgments, fines, penalties, amounts paid in settlement, interest, assessments
and other charges which Indemnitee is or becomes legally obligated to pay
because Indemnitee is or becomes a party to or witness or other participant to,
or is threatened to be made a party to or witness or other participant in a
Claim, including without limitation a Claim by or in the name of the Company or
a Subsidiary to procure a judgment in its favor, by reason of the fact that
Indemnitee is or was an Agent, or by reason of any action, inaction or omission
by Indemnitee in his capacity as Agent, provided that Indemnitee shall have
acted in good faith and in a manner he or it reasonably believed to be in, or
not opposed to, the best interests of the Company or a Subsidiary, and with
respect to any criminal action or proceeding, had no reasonable cause to believe
his conduct was unlawful.
<PAGE>
(b) Notwithstanding any other provisions of this Agreement to the
contrary, the following exceptions apply to the Company's obligation to
indemnify the Indemnitee:
(i) The Company shall not be obligated to indemnify
Indemnitee in connection with any Claim (or part thereof) initiated by
Indemnitee, except for a Claim to enforce Indemnitee's right to indemnification,
unless such Claim (or part thereof) was authorized in advance or consented to by
the Board of Directors of the Company.
(ii) The Company shall not be obligated to indemnify
Indemnitee for any liabilities (A) for any breach of an Indemnitee's duty of
loyalty to the Company or its stockholders, (B) for acts or omissions not in
good faith or which involve intentional misconduct or a knowing violation of
law, or (C) for any transaction from which the Indemnitee derived an improper
personal benefit.
(iii) The Company shall not be obligated to indemnify
Indemnitee or advance any Expenses incurred by Indemnitee with respect to any
proceeding or Claim initiated voluntarily by Indemnitee, and not by way of
defense, to enforce or interpret this Agreement if Indemnitee does not prevail
in such proceeding.
(iv) The Company shall not be obligated to indemnify
Indemnitee for any amounts paid in settlement of a Claim, if such settlement was
effected without the prior written consent of the Company, which consent shall
not be unreasonably withheld or delayed. Notwithstanding the foregoing, should
the Company withhold its consent to any proposed settlement by the Indemnitee,
the Indemnitee shall have the right to request the Independent Legal Counsel to
arbitrate the issue of the reasonableness of the proposed settlement and the
Independent Legal Counsel shall utilize as the standard in making such
determination, solely, the merits of the issues involved in the Claim, the
ability and cost to prove or defend same, the potential personal exposure of the
Agent and the disruption to be caused to the Company resulting from the failure
to settle such Claim.
(v) The Company shall not be obligated to indemnify
Indemnitee for liabilities in excess of the total amount at which settlement
reasonably could have been made or for any Expenses incurred by Indemnitee
following the time such settlement reasonably could have been effected, if the
Indemnitee shall have unreasonably delayed, refused or otherwise failed to enter
into a settlement of any Claim recommended in good faith, in writing, by the
Company.
<PAGE>
(vi) The Company shall not be obligated to indemnify the
Indemnitee or otherwise act in violation of any undertaking by the Company in
any registration statement filed with the Securities and Exchange Commission
under the Securities Act. The Indemnitee acknowledges that paragraph (i) of Item
512 of Regulation S-K currently generally requires the Company to undertake in
connection with any registration statement filed under the Securities Act to
submit the issue of the enforceability of the Indemnitee's rights under this
Agreement in connection with any liability under the Securities Act to a court
of appropriate jurisdiction the question of whether such indemnification is
against public policy as expressed in the Securities Act, and to be governed by
the final adjudication of such issue. Indemnitee agrees to be bound by such
undertaking and that such undertaking supersedes the provisions of this
Agreement.
(vii) The Company shall not be obligated to indemnify
Indemnitee or advance Expenses arising from the purchase and sale by the
Indemnitee of securities in violation of Section 16(b) of the Exchange Act (or
any successor statute) and the rules and regulations promulgated thereunder,
including disgorgement of profits.
(viii) The Company shall not be obligated to indemnify
Indemnitee where such indemnification is expressly prohibited by law.
(c) Subject to the provisions of Section 4(b) above, the
Company shall advance all Expenses incurred by Indemnitee in connection with the
investigation, defense, settlement or appeal of any Claim as to which Indemnitee
is a party or threatened to be a party or witness by reason of the fact that
Indemnitee served as Agent. Indemnitee hereby undertakes to repay such amounts
advanced only if, and to the extent that, it shall ultimately be determined that
Indemnitee shall not be entitled to be indemnified by the Company pursuant to
this Agreement. The advances to be made hereunder shall be paid by the Company
to or on behalf of the Indemnitee within ten days following the delivery of a
written request therefor to the Company, together where appropriate, with true
and complete copies of invoices therefor.
(d) If the Indemnitee is entitled under any provision of
this Agreement to indemnification by the Company for some or a portion of any
Expenses or liabilities of any type whatsoever (including, but not limited to,
judgments, fines or penalties) actually and reasonably incurred by him in the
investigation, defense, settlement or appeal of a proceeding but is not
entitled, however, to indemnification for the total amount thereof, the Company
shall nevertheless indemnify the Indemnitee for the portion thereof to which the
Indemnitee is entitled.
5. Notice and Determination of Right to Indemnification. (a) Promptly
after receipt by Indemnitee of notice of the commencement, or threat of
commencement, of any Claim which Indemnitee believes will be the subject of a
Claim for indemnification and/or Expense advancement pursuant to this Agreement,
the Indemnitee shall notify the Company of the commencement or threat of
commencement of such Claim.
<PAGE>
(b) To the extent the Indemnitee has been successful on the
merits or otherwise in defense of any Claim, the Company shall indemnify
Indemnitee against Expenses incurred in connection with such Claim in accordance
with the provisions of Section 4(c) hereof.
(c) In the event Section 5(b) is inapplicable, indemnification
pursuant to Section 4(a) hereof shall be made by the Company only upon a
determination in accordance with Section 5(d) that Indemnitee is entitled to
indemnification hereunder. If the Indemnitee believes that upon the disposition
of a Claim Indemnitee is entitled to indemnification pursuant to this Agreement,
Indemnitee shall make written demand therefor upon the Company. The Company
shall indemnify Indemnitee in accordance with such demand within 30 days of
receipt of such demand, unless within such 30 days the Company shall have
notified the Indemnitee that Indemnitee is not entitled to indemnification
("Notice of Denial"), which notice shall state in reasonable detail the basis
for its determination, and the name of counsel selected by the Company to act
pursuant to Section 5(d)(ii).
(d) Provided the Indemnitee notifies the Company of his choice of
forum within 30 days after the receipt of a Notice of Denial, the Indemnitee
shall be entitled to select one of the following four forums to determine
whether he or it satisfied the requirements specified in Section 4 and is
therefore entitled to indemnification under this Agreement:
(i) a vote of majority of a quorum of the Board of Directors
of the Company consisting of directors who are not parties to the Claim for
which indemnification is being sought, based upon written submissions by the
Company and the Indemnitee and, if the Indemnitee or directors so request, an
oral presentation by the Indemnitee and by such other persons as such directors
may request; provided that the Indemnitee shall not have the right to be present
during the deliberations of such directors;
(ii) legal counsel mutually selected by the Board (other
than counsel to any party to the Claim for which indemnification is sought), and
by the Indemnitee, which counsel shall make such determination in a written
opinion based upon written submissions by the Company and the Indemnitee and
responses to such questions as such counsel may have, in such form as such
counsel may request;
(iii) a majority vote of a panel of three arbitrators, one
of whom is selected by the Company, another of whom is selected by the
Indemnitee and the last of whom is selected by the first two arbitrators so
selected, which arbitration shall be conducted in accordance with the rules of
the American Arbitration Association in the City of New York as then in effect;
or
<PAGE>
(iv) the Court of Chancery of Delaware or the court in which
the Claim is or was pending, in accordance with such rules of procedure as may
be applicable to or established by that court.
As soon as practicable, and in no event later than 30 days after the
Indemnitee's written notice to the Company of the Indemnitee's choice of forum
pursuant to this Section 5(d), the Company shall, at its expense, submit to the
selected forum its Claim that the Indemnitee is not entitled to indemnification,
and the Company shall act in good faith to provide the Indemnitee an adequate
opportunity to defend against that Claim. A presumption shall exist that the
Indemnitee is entitled to indemnification hereunder, and the Company shall
indemnify the Indemnitee unless the Company shall prove to the selected forum,
by a substantial preponderance of the evidence, that the Indemnitee has not met
the applicable standard of conduct required to entitle the Indemnitee to such
indemnification. The decision of the selected forum shall constitute a binding
and final adjudication between the Company and the Indemnitee as to the
Indemnitee's right to indemnification under Section 4 of this Agreement.
(e) The Company agrees that if there is a Change in Control of
the Company, then with respect to all matters thereafter arising concerning the
rights of Indemnitee to indemnity payments and Expense advances under this
Agreement or any other agreement, or any Certificate of Incorporation or by-law
provision now or hereafter in effect relating to indemnifiable Claims, the
Company shall seek legal advice only from Independent Legal Counsel selected by
Indemnitee and approved by the Company (which approval shall not be unreasonably
withheld or delayed). Such counsel, among other things, shall render a written
opinion to the Company and Indemnitee as to whether and to what extent the
Indemnitee is entitled to be indemnified under this Agreement, the By-laws of
the Company or applicable law. The Company agrees to pay the reasonable fees of
the Independent Legal Counsel referred to above and to fully indemnify such
counsel against any and all Expenses (including attorneys' fees), Claims,
liabilities and damages arising out of or relating to this Agreement or his
engagement pursuant hereto.
6. Establishment of Trust. In the event of a Potential Change in
Control, the Company shall, upon written request by Indemnitee, create a
separate trust for the benefit of Indemnitee and from time to time upon written
request of Indemnitee shall fund such trust in an amount sufficient to satisfy
any and all Claims and Expenses reasonably anticipated at the time of each such
request to be incurred in connection with investigating, preparing for and
defending any Claim, and any and all judgments, fines, penalties and settlement
amounts of any and all Claims from time to time actually paid or claimed,
reasonably anticipated or proposed to be paid. The amount or amounts to be
deposited in the trust pursuant to the foregoing funding obligation shall be
determined by the Independent Legal Counsel who shall, in the event the amount
of assets available from the Company to fund such trust in the full amount of a
Claim are insufficient, pro rate such available amounts in connection with any
Claims against the Company from other indemnitees similarly situated with
respect to any individual Claim or Claims who have entered into similar
indemnification agreements with the Company. The terms of the trust shall
provide that upon a Change in Control (i) the trust shall not be revoked or the
principal thereof invaded without the written consent of the Indemnitee, (ii)
the trustee shall advance, within two business days of a request by the
Indemnitee, any and all Expenses to the Indemnitee (and the Indemnitee hereby
agrees to reimburse the trust under the circumstances under which the Indemnitee
would be required to reimburse the Company under Section 4(c) of this
Agreement), (iii) the trust shall continue to be funded by the Company in
accordance with the funding obligation set forth above, (iv) the trustee shall
promptly pay to Indemnitee all amounts for which Indemnitee shall be entitled to
indemnification pursuant to this Agreement or otherwise, and (v) all unexpended
funds in such trust shall revert to the Company upon a final determination by
the Independent Legal Counsel or a court of competent jurisdiction, as the case
may be, that Indemnitee has been fully indemnified under the terms of this
Agreement. The trustee shall be chosen by the Independent Legal Counsel. Nothing
in this Section 6 shall relieve the Company of or increase any of its
obligations under this Agreement.
<PAGE>
7. Nonexclusivity, Etc. The rights of the Indemnitee hereunder shall
be in addition to any other rights Indemnitee may have under the Company's
Certificate of Incorporation, By-laws or the Delaware General Corporation Law or
otherwise. To the extent that a change in the Delaware General Corporation Law
or the Securities Act (whether by statute or judicial decision) permits greater
indemnification by agreement than would be afforded currently under such
Certificate of Incorporation, By-laws and this Agreement, it is the intent of
the parties hereto that Indemnitee shall enjoy by this Agreement the greater
benefits so afforded by such change. This Agreement supersedes any prior
agreement, oral or written, of the parties in respect of the subject matter
hereof.
8. Period of Limitations. No legal action shall be brought and no
cause of action shall be asserted by or in the right of the Company against
Indemnitee, Indemnitee's spouse, heirs, executors or personal or legal
representatives after the expiration of one year from the date of accrual of
such cause of action, and any Claim or cause of action of the Company shall be
extinguished and deemed released unless asserted by the timely filing of a legal
action within such one-year period; provided, however, that if any shorter
period of limitations is otherwise applicable to any such cause of action such
shorter period shall govern.
9. Subrogation. In the event of payment under this Agreement, the
Company shall be subrogated to the extent of such payment to all of the rights
of recovery of Indemnitee, who shall execute all papers reasonably required and
shall do everything that may be reasonably necessary to secure such rights,
including the execution of such documents necessary to enable the Company
effectively to bring suit to enforce such rights.
10. No Duplication of Payments. The Company shall not be liable under
this Agreement to make any payment in connection with any Claim made against
Indemnitee to the extent Indemnitee has otherwise actually received payment
(under any D&O Insurance or other insurance policy, or otherwise) of the amounts
otherwise indemnifiable hereunder. Indemnitee shall not be required, however, to
make any claim or to seek payment under any applicable insurance policy in order
to be entitled to the benefit of this Agreement and should Indemnitee seek and
receive any benefits from any such other insurance policy, this Agreement is
intended to indemnify and pay any and all so-called deductible amounts
thereunder not covered by such other insurance policy.
11. Severability. The provisions of this Agreement shall be severable
in the event that any of the provisions hereof (including any provision within a
single section, paragraph or sentence) is held by a court of competent
jurisdiction to be invalid, void or otherwise unenforceable in any respect, and
the validity and enforceability of any such provision in every other respect and
of the remaining provisions hereof shall not be in any way impaired and shall
remain enforceable to the full extent permitted by law.
<PAGE>
12. Governing Law. This Agreement shall be governed by and construed
and enforced in accordance with the laws of the State of Delaware applicable to
contracts made and to be performed in such state. Except as expressly provided
in Sections 5(d) and 5(e) hereof, the Company and Indemnitee each hereby
irrevocably consent to the jurisdiction of the courts of the State of Delaware
for all purposes in connection with any action or proceeding which arises out of
or relates to this Agreement and agree that in any action instituted under this
Agreement shall be brought only in the state courts of the State of Delaware.
13. Merger or Consolidation. In the event that the Company shall be a
constituent corporation in a merger, consolidation or other reorganization, the
Company, if it shall not be the surviving, resulting or acquiring corporation
therein, shall require, as a condition thereto, that the surviving, resulting,
or acquiring corporation agree to indemnify the Indemnitee to the full extent
provided in this Agreement and to adopt and assume the Company's obligations
under this Agreement. Whether or not the Company is the surviving, resulting or
acquiring corporation in any such transaction, the Indemnitee shall also stand
in the same position under this Agreement as he would have with respect to the
Company if its separate existence had continued.
14. Modification and Waiver. No supplement, modification or amendment
of this Agreement shall be binding unless executed in writing by both of the
parties hereto. No waiver of any of the provisions of this Agreement shall be
deemed or shall constitute a waiver of any other provision hereof (whether or
not similar) nor shall such waiver constitute a continuing waiver.
15. Notices. All notices, requests, demands, waivers and other
communications required or permitted to be given under this Agreement shall be
in writing and shall be deemed to have been given when delivered personally or
two business days after being deposited in the U.S. mail, certified or
registered, return receipt requested with postage prepaid, and addressed to the
party to whom such notice, request, demand, waiver or other communication is to
be given as follows, or at such other address as either party shall designate by
notice to the other party pursuant to this section:
The Company: Magnavision Corporation
1725 Highway 35
Wall, New Jersey 07719
Indemnitee: Mr. Arnold Dauer
1725 Highway 35
Wall, New Jersey 07719
16. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original, but all of which
together shall constitute one and the same instrument.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have signed this Indemnification
Agreement as of the day and year first above written.
MAGNAVISION CORPORATION
By:_________________________________
Name:
Title:
____________________________________
Indemnitee
<PAGE>
EXHIBIT 16
Securities and Exchange Commission
450 Fifth Street, N.W.
Washington, DC 20549-1004
ATTN: Filing Desk, Stop 1-4
Re: Magnavision Corporation
Commission File No. 33-9030
Dear Commissioner:
We were previously the independent certified public accountants for
Magnavision Corporation from March 31, 1993 to November 22, 1995. On November
22, 1995, we were dismissed as principal accountants of Magnavision Corporation.
We have read Magnavision Corporation's statements included under Item 9 of its
Form 10-K dated June 28, 1996, and we agree with such statements.
Very truly yours,
Lawson, Rescinio, Schibell & Assoc., P.C.
Oakhurst, New Jersey
June 28, 1996
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF REGISTRANT
Magnavision Corporation (N.J.)
Subsidiaries of Magnavision Corporation (N.J.)
University Connection, Inc. (N.J.)
Accu-Trek, (N.J.)
Magnavision Laboratories, Inc. (Delaware)
Magnavision Private Cable, Inc. (Delaware)
Magnavision Wireless Cable, Inc. (Delaware)
WARNING: THE EDGAR SYSTEM ENCOUNTERED ERROR(S) WHILE PROCESSING THIS SCHEDULE.
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<PAGE>
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<NAME> MAGNAVISION CORPORATION
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-START> DEC-31-1994
<PERIOD-END> DEC-31-1995
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<CASH> 235,327
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