SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
SCHEDULE 13D
Under the Securities Exchange Act of 1934
Coded Communications Corporation
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(Name of issuer)
Common Stock, par value $0.01 per share
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(Title of Class of Securities)
19-1908102
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(CUSIP Number)
Fernando Pliego
Grupo Information,
Satellites & Advertising, S.A. de C.V.
Orizaba No. 182
Col. Roma, 06700
Mexico, D.F.
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(Name, address and telephone number of person authorized to receive notices and
communications)
July 17, 1996
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(Date of event which requires filing of this statement)
If the filing person has previously filed a statement on Schedule 13G
to report the acquisition which is the subject of this Schedule 13D, and is
filing this schedule because of Rule 13d-1(b)(3) or (4), check the following box
[_]
Check the following box if a fee is being paid with the statement
[X]. (A fee is not required only if the reporting person: (1) has a previous
statement on file reporting beneficial ownership of more than five percent of
the class of securities described in Item 1; and (2) has filed no amendment
subsequent thereto reporting beneficial ownership of five percent or less of
such class.) (See Rule 13d-7.)
Page 1 of 37 Pages
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CUSIP No. 19-1908102 Page 2 of 37 Pages
Response to Question 1: Grupo Information, Satellites &
Advertising, S.A. de C.V.
Response to Question 2: N/A
Response to Question 3: SEC USE ONLY
Response to Question 4: WC,00
Response to Question 5: N/A
Response to Question 6: Mexico
Response to Question 7: 10,000,000
Response to Question 8: 0
Response to Question 9: 10,000,000
Response to Question 10: 0
Response to Question 11: 10,000,000
Response to Question 12: N/A
Response to Question 13: 40.27%
Response to Question 14: CO
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CUSIP No. 19-1908102 Page 3 of 37 Pages
INTRODUCTION
ITEM 1. SECURITY AND ISSUER
This Statement on Schedule 13D (this "Schedule 13D") relates to the
Common Stock, par value $0.01 per share, of Coded Communications Corporation
("Issuer Common Stock"), a Delaware corporation (the "Issuer"). The principal
executive offices of the Issuer are located at 1939 Palomar Oaks Way, Carlsbad,
California 92009.
ITEM 2. IDENTITY AND BACKGROUND
(a) - (c), (f). This Schedule 13D is being filed on behalf of Grupo
Information, Satellites & Advertising, S.A. de C.V. ("ISA").
ISA is one of a privately-held group of 10 affiliated companies
(collectively, "GRUPO ISA"), each of which is legally incorporated under the
laws of Mexico. GRUPO ISA is integrated into three divisions of operations:
Electronic Signage, Telecommunications and Outdoor Advertising. GRUPO ISA is
engaged in the distribution of mobile data products, satellite communications,
computer network systems, electronic signage and advertising. ISA designs,
installs, distributes and operates electronic equipment for information display,
visual communications and advertising. ISA's products and systems include
airport flight information display systems and information display systems for
stock exchanges and stockbrokers. In addition, ISA operates a network of remote
controlled electronic signs throughout Mexico featuring full color, large format
signs used for advertising. Other affiliated companies include a provider of
telecommunications services in Mexico, primarily as a long-distance telephone
carrier with a teleport in Cancun, Mexico; and the largest producer in Mexico of
computerized, full color, large format images. GRUPO ISA also operates over
1,000 billboards throughout Mexico. The principal executive offices of ISA and
GRUPO ISA are located at Orizaba No. 182 Col. Roma 06700, Mexico, D.F.
The name, citizenship, business address and principal occupation or
employment (and the name, principal business and address of any corporation or
other organization in which such employment is conducted) of each director and
executive officer of ISA is set forth in Schedule A hereto. Mr. Hugo R. Camou is
the Chairman of the Board, President and Chief Executive Officer of ISA. Mr.
Camou is also the owner of 85% of the capital stock of ISA. Mr. Camou's spouse
is the owner of 5% of the capital stock of ISA. Additional information about Mr.
Camou is set forth in Schedule A.
(d), (e). Neither ISA nor, to the best of ISA's knowledge, any of the
directors or executive officers of ISA has, during the last five years: (i) been
convicted in a criminal proceeding (excluding
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CUSIP No. 19-1908102 Page 4 of 37 Pages
traffic violations or similar misdemeanors); or (ii) been a party to a civil
proceeding of a judicial or administrative body of competent jurisdiction and as
a result of such proceeding was or is subject to a judgment, decree or final
order enjoining future violations of, or prohibiting or mandating activities
subject to, federal or state securities laws or finding any violation with
respect to such laws.
ITEM 3. SOURCE AND AMOUNT OF FUNDS OR OTHER CONSIDERATION.
The source and amount of the funds or other consideration used by ISA
to acquire the Issuer Common Stock are described in Item 4 hereof, under the
caption "Second Agreement." The cash advanced by ISA pursuant to the Second
Agreement (defined below) came from ISA's working capital funds.
ITEM 4. PURPOSE OF TRANSACTION.
The Issuer Common Stock held by ISA was acquired for and is being
held as an investment. Except as described below, to the best knowledge of ISA,
ISA has not and no director or executive officer of ISA has any present plans or
proposals which relate or would result in: (a) the acquisition or disposition by
any person of additional securities of the Issuer; (b) an extraordinary
corporate transaction, such as a merger, reorganization or liquidation involving
the Issuer or any of its subsidiaries; (c) a sale or transfer of material amount
of assets of the Issuer or of any of its subsidiaries; (d) any change in the
present board of directors or management of the Issuer, including any plans or
proposals to change the number or term of directors or to fill any existing
vacancies on the board; (e) any material change in the present capitalization or
dividend policy of the Issuer; (f) any other material change in the Issuer's
business or corporate structure; (g) any change in the Issuer's charter, by-laws
or instruments corresponding thereto or other actions which may impede the
acquisition of control of the Issuer by any person; (h) causing a class of
securities of the Issuer to be delisted from a national securities exchange or
to cease to be authorized to be quoted in an inter-dealer quotation system of a
registered national securities association; (i) a class of equity securities of
the Issuer becoming eligible for termination of registration pursuant to Section
12(g)(4) of the Securities Exchange Act of 1934; or (j) any action similar to
any of those enumerated above although, ISA reserves the right to develop such
plans or proposals.
Investment Agreement
- --------------------
Pursuant to the Mutual Agreement of Terms and Conditions entered into
May 1, 1996 (the "Investment Agreement") by and among the Issuer, ISA,
Renaissance Capital Partners II Limited ("RenCap") and certain holders of the
Issuers $1,800,000 principal amount Bridge Loan (the "Bridge Lenders"), ISA has
the right, as of the date of the Investment Agreement or pursuant to the
exercise
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CUSIP No. 19-1908102 Page 5 of 37 Pages
of an option granted thereunder (the "Option") to the following: (i) to receive
an amount of Issuer Common Stock equal to 66.7% of the then outstanding Issuer
Common Stock (approximately 49,009,000 shares of newly issued Issuer Common
Stock, of which 5,000,000 shares issued to ISA prior to July 30, 1996 are to be
credited against the shares ISA is to receive pursuant to the Investment
Agreement); (ii) to be appointed as the Issuer's exclusive distributor of mobile
data products in Mexico and Central and South America for 18 months; (iii) to
appoint and thereafter nominate the majority of the members of the Issuer's
Board of Directors, including the Chairman of the Board; and (iv) to manage and
control the daily operations of the Issuer. Except for the right to manage and
control the daily operations of the Issuer and the appointment as the Issuer's
exclusive distributor of mobile data products in Mexico and Central and South
America, which were effective on May 1, 1996, all other rights will become
effective at the time ISA exercises the Option. As extended by ISA, the Option
is exercisable by ISA for a period of up to twenty (20) days after the date of
approval of the Investment Agreement by the Issuer's stockholders. The
Investment Agreement requires stockholder approval on certain matters on or
before June 30, 1996. ISA has extended this date to September 30, 1996. As of
the date of this Schedule 13D, the necessary approval of the stockholders of the
Issuer has not been obtained.
Under the terms of the Investment Agreement, the Issuer is to
receive, (i) a deposit from ISA of $500,000 as advance payment for $1,000,000 in
orders for the Issuer's products; (ii) a deposit from ISA of $400,000 placed in
a third-party escrow, representing a contribution to the capital of the Issuer,
such deposit to be released to the Issuer at the time ISA exercises the Option;
(iii) a commitment to loan the Issuer $1,000,000 for working capital (the
"Working Capital Loan"), with funding of the loan to be made at the time ISA
exercises the Option; (iv) the agreement of RenCap and the Bridge Lenders to
restructure their secured debt, as provided in the Investment Agreement, at the
time ISA exercises the Option; and (v) a commitment from ISA to place
$10,000,000 in orders for the Issuer's products, over an eighteen (18) month
period commencing on the date of the Investment Agreement. ISA's commitment to
place $10,000,000 in orders for the Issuer's products will be secured by ISA
placing in escrow, pursuant to the Investment Agreement, twenty-four (24)
million of the shares of the Issuer's Common Stock to be issued to ISA upon the
exercise of the Option. If ISA places less than $10,000,000 in product orders
with the Issuer, then ISA will forfeit 2.4 shares of the Issuer's Common Stock
for each dollar in orders less than $10,000,000. Further, if ISA does not
exercise the Option and the stockholders of the Issuer approve the transaction
contemplated by the Investment Agreement, the Issuer has the right to retain
$200,000 of the $400,000 capital contribution. The Working Capital Loan will be
due one year from the date made and will bear interest at the rate of 6% per
year, which will be payable quarterly. The Working Capital Loan is convertible
into shares of the Issuer Common Stock at a price of $.25 per share, and will be
collateralized by a security interest in substantially all of the assets of the
Issuer, subject to a more senior priority security interest in the Issuer assets
collateralizing a note to be issued to the Bridge Lenders and any future working
capital loans from third-party lenders.
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CUSIP No. 19-1908102 Page 6 of 37 Pages
Second Agreement
- ----------------
ISA, the Issuer and RenCap entered into an agreement, as of July 17,
1996 (the "Second Agreement") pursuant to which (i) ISA funded in advance the
$1,000,000 principal amount Working Capital Loan required under the Investment
Agreement and immediately converted the Working Capital Loan into 4,000,000
shares of Issuer Common Stock at a price of $.25 per share; (ii) ISA placed in
advance product orders of approximately $2,000,000 together with a cash deposit
of approximately $500,000 against these orders; and (iii) the Issuer issued
6,000,000 shares of Issuer Common Stock to ISA. Of the 6,000,000 shares of
Issuer Common Stock issued to ISA, 5,000,000 shares, will be credited against
the shares of Issuer Common Stock to be issued to ISA pursuant to the Investment
Agreement, if stockholders of the Issuer approve the Investment Agreement and
ISA exercises the Option. The balance of 1,000,000 shares of Issuer Common Stock
were issued to ISA in consideration for, among other things, ISA's early funding
of the Working Capital Loan and its immediate conversion into shares of Issuer
Common Stock, and the release in advance by ISA of $2,000,000 in product orders.
Pursuant to the Second Agreement, the $2,000,000 in orders placed by ISA are to
be credited against ISA's commitment under the Investment Agreement to place
$10,000,000 in orders for the Issuer's products.
ITEM 5. INTEREST IN SECURITY OF THE ISSUER.
(a) & (b). The following table sets forth the separate beneficial
ownership (and information concerning voting and dispositive power) of ISA as of
August 1, 1996:
Number of Percent
Name Shares of Class
- ---- ------ --------
ISA 10,000,000 (1) 40.27%
- ----------------
(1) ISA has sole voting and dispositive power with respect to the shares
owned by it.
(c) Except as set forth in this Item 5, to the best knowledge of ISA,
ISA has not, and no directors or executive officers of ISA and no other person
described in Item 2 hereof has beneficial ownership of, or has engaged in any
transaction during the past 60 days in, any shares of Issuer Common Stock.
(d) Not applicable.
(e) Not applicable.
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CUSIP No. 19-1908102 Page 7 of 37 Pages
ITEM 6. CONTRACTS, ARRANGEMENTS, UNDERSTANDINGS OR RELATIONSHIPS WITH
RESPECT TO SECURITIES OF THE ISSUER.
Except as set forth in this Schedule 13D, to the best knowledge of
ISA, there are no other contracts, arrangements, understandings or relationships
(legal or otherwise) among the persons named in Item 2 and between such persons
and any person with respect to any securities of the Issuer, including, but not
limited to, transfer or voting of any of the securities of the Issuer, finder's
fees, joint ventures, loan or option arrangements, puts or calls, guarantees of
profits, division of profits or loss, or the giving or withholding of proxies,
or a pledge or otherwise subject to a contingency, the occurrence of which would
give another person voting power or investment power over the securities of the
Issuer.
ITEM 7. MATERIAL TO BE FILED AS EXHIBITS.
Exhibit No. Description of Exhibit
----------- ----------------------
1. Agreement, entered into May 1, 1996, by and between Grupo
Information, Satellites & Advertising, S.A. de C.V.,
Renaissance Capital Partners II Limited, certain holders
of the $1.8 million Bridge Loan and Coded Communications
Corporation.
2. Agreement, entered into as of July 17, 1996 by and among
Grupo Information, Satellites & Advertising, S.A. de C.V.,
Renaissance Capital Partners II Limited, and Coded
Communications Corporation.
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CUSIP No. 19-1908102 Page 8 of 37 Pages
SIGNATURE
After reasonable inquiry and to the best of my knowledge and belief,
I certify that the information set forth in this Schedule 13D is true, complete
and correct.
GRUPO INFORMATION, SATELLITES &
ADVERTISING, S.A. de C.V.
BY: /s/ Fernand Pliego
----------------------
NAME: Fernando Pliego
TITLE: Executive Representative Officer
DATED: August 1, 1996
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CUSIP No. 19-1908102 Page 9 of 37 Pages
SCHEDULE A
Board of Directors and Executive Officers of
Grupo Information, Satellites & Advertising, S.A. de C.V.
The directors and executive officers of Grupo Information, Satellites
& Advertising, S.A. de C.V. are identified in the table below. Directors of
Grupo Information, Satellites & Advertising, S.A. de C.V. are indicated by an
asterisk.
Name
Business Address
Citizenship
Principal Occupation
1. Hugo R. Camou*
c/o GRUPO ISA
Orizaba No. 182
Col. Roma, 06700
Mexico D.F.
Mexico
Chairman of the Board and Chief Executive Officer
of GRUPO ISA. Chairman of the Board and President
of ISA.
2. Raul Camou*
c/o GRUPO ISA
Orizaba No. 182
Col. Roma, 06700
Mexico D.F.
Mexico
Chief Executive Officer of the Electronic
Signage Division of GRUPO ISA. Chief Operating Officer,
Treasurer and a Director of ISA
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CUSIP No. 19-1908102 Page 10 of 37 Pages
3. Ernesto A. Pirsch
c/o GRUPO ISA
Orizaba No. 182
Col. Roma, 06700
Mexico D.F.
Mexico
Chief Financial Officer of ISA
4. Ma De Jesus Campoy*+
Av Universidad 1393-301
Col. Florida, 01030
Mexico D.F.
Mexico
Self-employed physician
- --------
+ Ma De Jesus Campoy is the wife of Hugo R. Camou.
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CUSIP No. 19-1908102 Page 11 of 37 Pages
EXHIBIT INDEX
Exhibit No. Description of Exhibit
----------- ----------------------
1. Agreement, dated May 1, 1996 by and between Grupo
Information, Satellites & Advertising, S.A. de C.V.,
Renaissance Capital Partners II Limited, certain holders
of the $1.8 million Bridge Loan and Coded Communications
Corporation.
2. Agreement, dated July 17, 1996 by and among Grupo
Information, Satellites & Advertising, S.A. de C.V.,
Renaissance Capital Partners II Limited, and Coded
Communications Corporation.
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CUSIP No. 19-1908102 Page 12 of 37 Pages
Exhibit 1
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CUSIP No. 19-1908102 Page 13 of 37 Pages
AGREEMENT
This Mutual Agreement of Terms and Conditions is entered into by and
between Group Information, Satellites & Advertising, S.A. de C.V. ("ISA"),
Renaissance Capital Partners II Limited ("Renaissance"), certain holders of the
$1.8 million Bridge Loan ("Bridge Lenders") and Coded Communications Corporation
("Coded") this 1st day of May, 1996.
Whereas, all the parties to this agreement desire to recapitalize
Coded so as to enable Coded to operate efficiently and effectively for the
benefit of its customer, shareholders, investors and employees; and
Whereas, the parties have a desire to avoid the liquidation or
foreclosure of the assets of Coded;
Now, therefore, in consideration of mutual promises by and between
the parties to this agreement, and for other valuable consideration, receipt and
sufficiency of which is hereby acknowledged, the parties hereby agree as
follows:
1. Current Arrangements between Coded and ISA.
1.1 ISA Order and Deposit.
Upon execution of this agreement and implementation of paragraph 1.2,
ISA shall immediately place an order for approximately One Million Dollars ($US)
worth of goods and/or services with Coded and shall deposit $500,000 ($US)
against this order placed with Coded.
1.2 Management and Control.
Upon receiving the approximately $1.0 million dollar ($US) order and
receiving the $500,000 ($US) deposit, Coded shall be deemed to have granted ISA
the right to manage and control the day to day operations of Coded, including
but not limited to the right to negotiate and enter into arrangements on behalf
of Coded to restructure the trade payables and other debt of Coded. ISA will
work with Coded to preserve working relationships and vendor good will to the
extent that such can or should be preserved. Coded shall execute such debt
restructure agreements negotiated by ISA on Coded's behalf as partial
consideration for the order and deposit being placed by ISA and the other
provisions of this agreement. This grant to ISA shall terminate upon the
expiration of the Option period described below.
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CUSIP No. 19-1908102 Page 14 of 37 Pages
1.3 Grant of Option to ISA.
Coded hereby grants to ISA an option to (1) acquire 66.7% of the
Coded common stock and (2) to become the exclusive distributor for Coded in all
of Mexico, Central and South America during the eighteen months following
exercise of the option (provided that while ISA is the exclusive distributor for
Coded in these areas ISA can not sell products competitive to the Coded product
line), all in exchange for $400,000 in cash, a loan of $1.0 million, the promise
to place at least $10.0 million in orders over eighteen months from the signing
of this agreement and for inducing Renaissance and the Bridge Lenders to make
modifications to their positions, the other consideration set forth herein, all
as more definitively set forth in this Agreement. This option may be exercised
if at all by faxing a written exercise of option to Coded at (619) 438-8796
within sixty days of execution of this agreement. ISA may, at its sole option,
extend this time period to a date twenty days after shareholder approval is
secured for those terms of this agreement that require shareholder approval.
Upon exercise of the option, Coded shall immediately issue to ISA an
amount of Coded common shares on an "after-conversion" basis (see paragraph 4.1)
equal to 66.7% of outstanding common shares. By way of example, ISA shall be
issued 49,005,703 common shares if there are outstanding on an
"after-conversion" basis 73,441,005 shares of common stock on the date of the
closing of this transaction as shown in paragraph 4.1. This common stock shall
have one demand registration right with reasonable registration costs to be
borne by Coded. The terms of the registration right will be at least as
favorable as the terms of the registration right agreement between Renaissance
and Coded entered into at the time of the original Debenture.
1.4 Contribution to Pay Bridge Loan. Upon signing of this agreement, ISA
shall place $400,000 into escrow at a United States banking or trust
institution selected by Renaissance in the name of Coded to be
release as a capital contribution to Coded or returned as follows:
(a) If the shareholders decline to approve the transactions described
in this agreement that require shareholder approval within sixty days (or as
extended as ISA's sole option), then the funds shall be returned to ISA
immediately. Notwithstanding any other provision of this agreement, if the
shareholders decline to so approve, then ISA shall be deemed to have been
granted a three year exclusive distributorship for Coded products for Mexico,
Central and South America without any performance requirements, but otherwise
with terms similar to distributorship agreements that Coded presently has with
others.
(b) If the shareholders approve the transactions described in this
agreement within sixty days (or as extended at ISA's sole option) and ISA does
not exercise the Option, then $200,000 shall be released to Coded. The remaining
$200,000 shall be immediately returned to ISA.
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CUSIP No. 19-1908102 Page 15 of 37 Pages
(c) If the shareholders approve the transaction described in this
agreement within sixty days (or as extended at ISA's sole option) and ISA
exercises the Option, then $400,000 shall be released to Coded.
Coded agrees the sum released to Coded will be used to pay down the Bridge Loan.
See paragraph 3.2.1. This provision will constitute irrevocable instructions to
the escrow holder.
2. Post-Option Exercise Arrangements between ISA and Coded.
2.1 ISA Orders to Coded. During the 18-month period commencing on the
date of this agreement and provided the Option is exercised, ISA will
cause to be placed with Coded, orders for at least $10 million. Such
orders shall be negotiated at arms length with terms comparable to
Coded's customary terms, prices and conditions offered to its most
favored customer, agent or dealer similarly situated in any part of
the world.
2.2 Escrow of Stock. ISA shall place 24 million shares of common stock
received through exercise of the Option into an escrow account.
During such time as the shares are held in escrow, ISA shall have the
right to vote all shares and will enjoy any other benefits derived
from the beneficial ownership of such shares including dividends. In
the event ISA does not cause to be place with Coded over an 18 month
period beginning on the date of execution of this agreement (and
provided the Option is exercised), order for $10,000,000 (which
includes the initial $1.0 million order referred to in paragraph 1.1
above) with terms and conditions as described in paragraph 2.1 above,
then any shares remaining in escrow shall be transferred to Coded
treasury and retired. The number of shares to be transferred to Coded
shall be equal to an amount calculated by multiplying the difference
between $10 million in orders and the actual amount of orders placed
with Coded over the 18-month period, times 2.4. By way of example, if
$8.5 million in orders are placed or caused to be placed by ISA over
the eighteen month period, then Coded shall receive and retire 3.6
million shares from the escrow. During the 18-month period ISA shall
receive shares certificates on an as earned basis from the escrow
with distribution of share certificates to occur quarterly.
2.3 ISA Loan to Coded. At the transaction closing, ISA shall advance cash
of $1,000,000 to Coded in exchange for a secured promissory note. The
promissory note shall have a maturity date of 12 months, with an
interest rate of 6%, interest payable quarterly. The promissory note
shall be collateralized by a senior security interest in the assets
of Coded and its subsidiaries Decom Systems Inc. and Coded Mobile
Communications. The amount of the funds advanced may be increased
from time to time at the sole discretion of ISA and such advance will
be reflected in the secured promissory note. ISA shall have the right
to convert the entire amount of the initial $1.0 million loan to
common stock at the conversion rate of
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CUSIP No. 19-1908102 Page 16 of 37 Pages
$0.25 to one share of common. This conversion right will be protected
from dilution as follows:
Split up of Combination of Shares:
In case issued and outstanding shares of Common
Stock shall be subdivided or split up into a
greater number of shares of Common Stock, the
Conversion Price shall be proportionally
decreased, and in the case issued and outstanding
shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the
Conversion Price shall be proportionately
increased, such increase or decrease, as the case
may be, becoming effective at the time of record
of the split-up or combination, as the case may
be.
Adjustment for Mergers, Consolidations, Etc.:
(1) In case of any capital reorganization,
reclassification of the stock of Borrower (other
than a change in par value or as a result of a
stock dividend, subdivision, split up or
combination of shares), or consolidation or
merger of Borrower with or into another person or
entity (other than a consolidation or merger in
which Borrower is the continuing corporation and
which does not result in any change in the Common
Stock) or of the sale, exchange, lease, transfer
or other disposition of all or substantially all
of the properties and assets of Borrower as an
entity or the participation by Borrower in share
exchange as the corporation the stock of which is
to be acquired, this shall be convertible into
kind and number of shares of stock or other
securities or property of Borrower (or of the
corporation resulting from such consolidation or
surviving such merger or to which such properties
and assets shall have been sold, exchanged,
leased, transferred or otherwise disposed, or
which was the corporation whose securities were
exchanged for those of Borrower), to which the
holder herein would have been entitled to receive
if the Holder owned the Common Stock issuable
upon conversion of this instrument immediately
prior to the occurrence of such event. The
provisions of these foregoing sentence shall
similarly apply to successive organizations,
reclassifications, consolidations, mergers,
sales, exchanges, leases, transfers or other
dispositions or other share exchanges.
2.4 Board. After the Option is exercised Coded shall cooperate to cause
ISA to have the right to appoint a majority of the members of the
Coded Board of Directors, including the Chairman of the Board.
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CUSIP No. 19-1908102 Page 17 of 37 Pages
2.5 Exclusive Distributorship. Provided ISA provides orders of at least
$10 million during the eighteen month period following the execution
of this agreement then ISA's appointment pursuant to paragraph 1.3 as
the exclusive distributor for Coded in Mexico, Central and South
America shall become an exclusive distributorship for an additional
three year period with continuing three year extensions to ISA
provided ISA's performance has been reasonably satisfactory. While
ISA is the exclusive distributor for Coded in these areas ISA can not
sell products competitive to the Coded product line. This exclusive
distributorship shall be on customary terms similar to existing
distributorship agreements that Coded presently has with others.
Should a dispute arise as to what are customary terms, it shall be
settled by arbitration.
3. Modification of Senior Secured Debt Positions Upon Exercise of the
Option.
Should ISA decide, in its sole discretion, that a restructure of the
trade payable and other debt of Coded is feasible, secures enforceable written
agreements evidencing reductions in those debts and it exercises the Option,
then Renaissance and the Bridge Lenders shall be deemed to have immediately
modified their positions with Coded as follows:
3.1 Restructuring of $4.0 Million Debenture
3.1.1 Amendment of Debenture. Upon exercise of the Option,
Renaissance, ISA and Coded agree that Renaissance will amend the $4.0 million
principal amount, 12% Convertible Debenture, and all interest accrued and
payable thereon through the date of execution of this agreement, totaling $4.8
million, for a 6% debenture convertible as set forth below into Series B
Preferred Stock of Coded.
3.1.2 Terms of New Debenture. The amended debenture shall include the
following terms and conditions and otherwise be in the specific form as agreed
upon and distributed to Renaissance, ISA and Coded which is attached hereto as
Exhibit A:
(a) principal amount of $4.8 million;
(b) interest to accrue at 6% per annum, payable semi-annually with
interest to be paid 50% in the common stock of Coded and 50% in cash;
(c) maturity date to 7 years from the Transaction closing date;
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CUSIP No. 19-1908102 Page 18 of 37 Pages
(d) collateralized by existing security interests in assets of Coded
and its Coded Mobile Communications and Decom Systems subsidiaries such security
interest in the assets to be subordinated to existing senior debt, future
working capital debt, the Bridge Lenders as set forth herein and the ISA
promissory note described herein.
3.1.3 Conversion Right. The amended debenture shall be converted into
Series B Preferred Stock under the following conditions:
(a) at any time that the value of the shares of common stock to be
issued upon the conversion of Series B Preferred Stock is equal to 70% or more
of the principal amount of the 6% debenture ($3.36 million if the principal
amount of the 6% debenture is $4.8 million) or
(b) at a time prior to the Coded common stock being listed for
trading on the NASDAQ SmallCap Market or National Market System and Coded
shareholders' equity, under generally accepted accounting principals ("GAAP"),
shall equal or exceed $3.0 million, including the conversion of the 6% debenture
into common or preferred stock.
(c) Minimum Valuation. ISA agrees that Renaissance shall be
guaranteed against a market decline in the underlying value of the 7,344,101
Coded common shares so as to maintain a minimum valuation of $3.36 million
dollars. Therefore, it is agreed that if at the end of three years from the date
of closing, the underlying Coded common stock market value of the Series B
Preferred Stock is less than $3.36 million, then ISA will convey to Renaissance
up to a maximum of 7,344,000 shares of Coded common stock so as to compensate
(as far as that number of shares goes) for the market value deficit below $3.36
million. To assure performance, ISA shall concurrently with the conversion of
the Renaissance convertible debenture into Series B Preferred Stock, escrow
7,344,000 shares of Coded common owned by ISA with an independent party. ISA
shall have the right to vote all shares and will enjoy any other benefits
derived from the beneficial ownership of such shares including dividends.
Renaissance agrees that Coded may require the conversion of the Debenture into
Series B Preferred Stock any time after August 1, 1996 if either of the
following two conditions occur:
* Coded's net worth equals or exceeds $1.0 million with no
more than $500,000 of that net worth attributable to reversal of balance sheet
reserves; or
* at Renaissance's option Coded's net worth equals or
exceeds $500,000 with no reversal of balance sheet reserves.
"Net worth" as used in this paragraph shall not include any goodwill arising on
the balance sheet subsequent to the Closing of this transaction and shall treat
the convertible debenture as converted and, thus, as equity.
<PAGE>
CUSIP No. 19-1908102 Page 19 of 37 Pages
(d) The Series B Preferred Stock is convertible into 7,344,101 shares
of Coded common stock. With respect to Series B Preferred Stock, it is callable
by Coded at any time after the value of the shares of common stock into which
the Series B Preferred Stock is convertible is first equal to or more than 1.5
times the liquidation preference of the Series B Preferred Stock. Value per
share shall be determined by the average of the bid price of Coded common stock
for the 20 trading days following the filing of a Coded 10Q or 10K, as quoted by
the NASD, NASDAQ or other applicable over-the-counter market or applicable stock
exchange.
(e) This conversion right will be protected from dilution as follows:
Split up or Combination of Shares:
In case issued and outstanding shares of Common
Stock shall be subdivided or split up into a
greater number of shares of Common Stock, the
Conversion Price shall be proportionally
decreased, and in the case issued and outstanding
shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the
Conversion Price shall be proportionately
increased, such increase or decrease, as the case
may be, becoming effective at the time of record
of the split-up or combination, as the case may
be.
Adjustment for Mergers, Consolidations, Etc.:
In case of any capital reorganization,
reclassification of the stock of Borrower (other
than a change in par value or as a result of a
stock dividend, subdivision, split up or
combination of shares), or consolidation or
merger of Borrower with or into another person or
entity (other than a consolidation or merger in
which Borrower is the continuing corporation and
which does not result in any charge in the Common
Stock) or of the sale, exchange, lease, transfer
or other disposition of all or substantially all
of the properties and assets of Borrower as on
entity or the participation by Borrower in share
exchange as the corporation the stock of which is
to be acquired, this Debenture shall be
convertible into kind and number of shares of
stock or other securities or property of Borrower
(or of the corporation resulting from such
consolidation or surviving such merger or to
which such properties and assets shall have been
sold, exchanged, leased, transferred or otherwise
disposed, or which was the corporation whose
securities were exchanged for those of Borrower),
to which the holder of the Debenture would have
been entitled to receive if the Holder owned the
Common Stock issuable upon conversion of the
Debenture immediately prior to the occurrence of
such
<PAGE>
CUSIP No. 19-1908102 Page 20 of 37 Pages
event. The provisions of these foregoing sentence
shall similarly apply to successive
organizations, reclassifications, consolidations,
mergers, sales, exchanges, leases, transfers or
other dispositions or other share exchanges.
3.1.4 Non Conversion. Notwithstanding the above, the 6% debenture
will not be automatically converted into Series B Preferred Stock until such
time as not more than $1.0 million in past due and disputed vendor claims shall
be outstanding.
3.1.5 Terms of Series B Preferred. The Series B Preferred Stock shall
include the following terms and conditions:
(a) liquidation preference in the amount of $4.8 million or the
principal amount of the 6% debenture if lower;
(b) dividend rate of 6%, cumulative, payable semi-annually, 50% in
common stock and 50% in cash;
(c) no dividend shall be declared or accrue after such time that the
value of the shares of common stock into which the Series B Preferred Stock is
convertible is first equal to or more than 1.5 times the liquidation preference
of the Series B Preferred Stock;
(d) convertible into shares of Coded common stock in an amount equal
to 10% of the outstanding common shares, calculated on an "after-conversion"
basis as shown specifically in section 4.1 (by way of example, a total of
7,344,101 common shares assuming that the "after-conversion" number of
outstanding common shares is equal to 73,441,005 shares at the time of the
transaction closing date); and
(e) the common shares underlying the Series B Preferred Stock shall
have one demand registration right, with reasonable registration costs to be
borne by Coded.
For purposes of this Agreement, value per share shall be determined by the
average of the bid price of Coded common stock for the 20 trading days following
the filing of a Coded 10Q or 10K, as quoted by the NASD, NASDAQ or other
applicable over-the-counter market or applicable stock exchange.
3.1.6 Appointment of Director. Renaissance will have the right tro
appoint one director of the Coded Board of Directors or to have one person
attend board meetings as an advisory member, until its preferred stock is
converted to common. It is the intent of Coded to initially have a five (5)
person Board of Directors.
<PAGE>
CUSIP No. 19-1908102 Page 21 of 37 Pages
3.2 Restructuring of $1.8 Million Bridge Loan
3.2.1 Restructure. The Bridge Lenders, ISA and Coded agree that upon
exercise of the Option, the $1.8 million principal amount Bridge Loan shall be
deemed to be restructured such that in lieu of all existing rights against
Coded, Bridge Lenders accept the following:
(a) principal in the amount of $400,000 shall be paid when all
shareholder approvals have been secured for the transactions described in this
agreement. This will be paid from escrowed funds described in paragraph 1.4;
(b) principal amount of $600,000 payable with 6 percent annual
interest payable quarterly shall be all due one year from the transaction
closing date. The existing Bridge Lenders security interest in the assets of
Coded, including the interest in the assets of Decom Systems, Inc. and Coded
Mobile Communications, Inc. shall continue as it presently exists to secure this
$600,000 debt, except the Bridge Lenders shall upon Option exercise subordinate
its security interest in the accounts receivable of Coded Communications
Corporation and Mobile Data Communications, Inc. to future working capital debt.
The security for the $1.0 million loan to Coded from ISA shall be junior to the
security for this $600,000 loan. If a sale of Decom should occur earlier than
the one year date, then the net cash proceeds, after expenses of sale, will be
applied to the obligation up to the then unpaid balance. This would also be
convertible to common stock of Coded at the conversion rate of $0.25 to one
share of common. This conversion right will be protected from dilution as
follows:
Split up or Combination of Shares:
In case issued and outstanding shares of Common Stock shall
be subdivided or split up into a greater number of shares
of Common Stock, the Conversion Price shall be
proportionally decreased, and in the case issued and
outstanding shares of Common Stock shall be combined into a
smaller number of shares of Common Stock, the Conversion
Price shall be proportionately increased, such increase or
decrease, as the case may be, becoming effective at the
time of record of the split-up or combination, as the case
may be.
Adjustment for Mergers, Consolidations, Etc.:
In case of any capital reorganization, reclassification of
the stock of Borrower (other than a change in par value or
as a result of a stock dividend, subdivision, split up or
combination of shares), or consolidation or merger of
Borrower with or into another
<PAGE>
CUSIP No. 19-1908102 Page 22 of 37 Pages
person or entity (other than a consolidation or merger in
which Borrower is the continuing corporation and which does
not result in any change in the Common Stock) or of the
sale, exchange, lease, transfer or other disposition of all
or substantially all of the properties and assets of
Borrower as an entity or the participation by Borrower in
share exchange as the corporation the stock of which is to
be acquired, this shall be convertible into kind and number
of shares of stock or other securities or property of
Borrower (or of the corporation resulting from such
consolidation or surviving such merger or to which such
properties and assets shall have been sold, exchanged,
leased, transferred or otherwise disposed, or which was the
corporation whose securities were exchange for those of
Borrower), to which the holder herein would have been
entitled to receive if the Holder owned the Common Stock
issuable upon conversion of this instrument immediately
prior to the occurrence of such event. The provisions of
this foregoing sentence shall similarly apply to successive
organizations, reclassifications, consolidations, mergers,
sales, exchanges, leases, transfers or other dispositions
or other share exchanges.
(c) Principal amount of $800,000 to be converted into Series A
Preferred Stock, first position liquidation preference of $800,000, dividend
rate of 8% payable semi-annually, payment to be made 50% in common stock and 50%
in cash. Series A Preferred Stock is to be convertible into Coded common stock
in an amount equal to 2,400,000 shares. With respect to Series A Preferred
Stock, it is callable by Coded at any time after the value of the shares of
common stock into which the Series A Preferred Stock is convertible is first
equal to or more than 1.5 times the liquidation preference of Series A Preferred
Stock. Value per share shall be determined by the average of the bid price of
Coded common stock for the 20 trading days following the filing of a Coded 10Q
or 10K, as quoted by the NASD, NASDAQ or other applicable over-the-counter
market or applicable stock exchange.
(d) All rights under the Share Purchaser Warrant Certificate or any
other rights other than set forth herein to acquire stock rights cease to exist
upon exercise of the Option by ISA.
3.2.2 Distribution to Bridge Lenders. All cash payments and shares of
Series A Preferred Stock shall be distributed by Coded to the Bridge Lenders
pro-rata based upon the principal amount of the Bridge Loan, or in such other
amounts and manner as the Bridge Loan lenders shall mutually agree amongst
themselves.
4. Other Terms and Conditions.
4.1 Post Transaction Stock Ownership. The respective "after-conversion"
common stock ownership interest of Coded, assuming the closing of
this transaction, will be following:
<PAGE>
CUSIP No. 19-1908102 Page 23 of 37 Pages
<TABLE>
<S> <C> <C>
Common shares outstanding (March 1, 1996) 14,688,202 20.0%
ISA (including escrowed shares) 49,008,703 66.7%
Renaissance (for $4.8 million Series B Preferred) 7,344,101 10.0%
Bridge Loan Lenders
(for $0.8 million Series A Preferred) 2,400,000 3.3%
73,441,005 100.0%
</TABLE>
4.2 Contracts and Instruments to Implement Agreement. The parties
anticipated that Coded shall remain a publicly-held Delaware
corporation, and that the contracts and instruments prepared to
effect the terms of this agreement will contain terms, conditions and
obligations requiring compliance by all parties with applicable
United States and State securities laws and regulations. Coded's
shareholder approval will be required for certain provisions of the
final transaction which the board of Coded will use its best efforts
to secure as soon as possible. Coded represents and warrants that to
the best of its knowledge there is no provision of the federal or
state securities laws that would prevent them from carrying out the
terms of this Agreement.
4.3 Bonus Shares. Coded shall cause to be issued and held in escrow for
the benefit of Renaissance and the Bridge Lenders, 3.0 millon
authorized common shares to be delivered to Renaissance and the
Bridge Lenders upon exercise of the Option by ISA as follows:
(a) one million shares when Coded common stock is trading at or above
$0.25 per share, distributed as follows:
* 200,000 pro rata to the holders of Series A
Preferred Stock
* 800,000 to Renaissance;
(b) one million shares when Coded common stock is trading at or above
$0.50 per share distributed as follows:
* 200,000 pro rata to the holders of Series A
Preferred stock
* 800,000 to Renaissance;
<PAGE>
CUSIP No. 19-1908102 Page 24 of 37 Pages
(c) one million shares when Coded common stock is trading at or above
$1.00 per share distributed as follows:
* 200,000 pro rata to the holders of Series A
Preferred Shares
* 800,000 to Renaissance;
For purposes of this Agreement, Coded value per share shall be determined by the
average of the bid price of Coded common stock for the 20 trading days following
the filing of a Coded 10Q or 10K, as quoted by the NASD, NASDAQ or other
applicable over-the-counter market or stock exchange. The issuance of these
shares will dilute each of those shown on the table in 4.1 above.
4.4 Stock Option Plans. ISA and Coded intend to install a stock option
plan for the benefit and incentive of the employees and management of
Coded. The options available under the Plan shall not exceed fifteen
percent of the total outstanding common stock of Coded, counting all
conversion rights to acquire common stock as if exercised. Options
eventually exercised, if any, under the stock option plan shall be
dilutive of the shareholders then existing.
4.5 Authorized Shares. The parties understand that certain of the share
issuances contemplated herein are subject to shareholder approval of
the increase in the authorized shares. If the shareholders fail to
approve such increase ISA, may, at its sole option, withdraw from
this agreement and have no obligation to any party.
4.6 Disclosure of Employment Agreements. ISA and the senior management of
Coded shall immediately disclose to Renaissance any pending oral or
written agreements concerning compensation or other employment
arrangements that may go into effect during the Option period or at
exercise of the Option. After exercise of the Option Renaissance
shall be provided with reports and information consistent with its
representation on the board of directors.
4.7 Mutual Agreement. During the Option period Renaissance shall not
commence foreclosure under any of its security agreements with Coded
without first securing the written consent of ISA. Under the terms of
this agreement ISA cannot foreclose without Renaissance's written
agreement.
4.8 Mutual Agreement. During the Option period the Bridge Lenders shall
not commence foreclosure under any of its security agreement with
Coded without first securing the written consent of ISA. Under the
terms of this agreement ISA cannot foreclosure without the Bridge
Lenders' written agreement.
<PAGE>
CUSIP No. 19-1908102 Page 25 of 37 Pages
4.9 Closing. The Closing date is hereby defined to be as soon as possible
but no later then the tenth day following execution and delivery by
fax of a writing evidencing ISA's approval of the debt restructuring
accomplished and exercise of the Option.
4.10 Time is of the Essence. The parties agree to use their best efforts
to close the transaction contemplated by this Agreement in a timely
manner with due haste.
4.11 Post Option Exercise Board of Directors. Upon exercise of the ISA
Option, the authorized number of Coded directors will be changed by
resolution of the board of five members. Then the present members of
the board of directors , except Jack Robinson, shall resign seriatim
so that ISA may appoint three directors and Renaissance may appoint
one director. Should Jack Robinson resign or be removed for any
reason from the board of directors, then a committee composed of one
representative of ISA and one representative of Renaissance shall
submit a replacement nominee to the board of directors.
5. Important Miscellaneous Provisions.
Each of the parties hereto has read and agrees to the important
miscellaneous provisions which follows the signatory page of this contract.
6. Authority as Signatories
6.1 The individuals executing this Agreement for and on behalf of the
parties hereto hereby warrant and represent that they are dully
authorized to enter into this Agreement for and on behalf of said
parties by a resolution of the Board of Directors, or other governing
body, of the respective parties.
6.2 This Agreement may be signed in counterparts and when so signed shall
be fully enforceable as if each party signed one agreement.
IN WITNESS WHEREOF, this Agreement is executed by the parties
effective as of May 1, 1996.
GRUPO INFORMATION, SATELLITES & ADVERTISING, S.A. de C.V.
By: /s/ Hugo Camou
--------------------------
Its: President
--------------------------
Dated: May 1, 1996
--------------------------
<PAGE>
CUSIP No. 19-1908102 Page 26 of 37 Pages
CODED COMMUNICATIONS CORPORATION
By: /s/ John Robinson
--------------------------
Its: President
--------------------------
Dated: May 1, 1996
--------------------------
Renaissance Capital Partners II LTD.
(as Bridge Lender and a Debenture Holder)
By: /s/ Vance Arnold
--------------------------
Its: President
--------------------------
Dated: April 19, 1996
--------------------------
Bridge Lender
JERSEY INVEST, LTD.
By: /s/ James Curtis
--------------------------
Its: President & CEO
--------------------------
Dated: May 2, 1996
--------------------------
Bridge Lender
STEWART LEASING COMPANY
By: /s/ JoAnna McMichael
--------------------------
Its: Vice President, Secretary
--------------------------
Dated: May 2, 1996
--------------------------
Bridge Lender
MINDFULL PARTNERS, L.P.
By: /s/ Stuart Rudick
--------------------------
Its: General Partner
--------------------------
Dated:May 2, 1996
--------------------------
<PAGE>
CUSIP No. 19-1908102 Page 27 of 37 Pages
Bridge Lender
STUART L. RUDICK IRA
By: /s/ Stuart L. Rudick
Its:
Dated: May 2, 1996
Bridge Lender
MAHROOK DRIVER
By: /s/ Mahrook Driver
--------------------------
Its:
--------------------------
Dated: May 2, 1996
--------------------------
Bridge Lender
HERMAN HODGES
By: /s/ Herman Hodges
--------------------------
Its:
--------------------------
Dated: May 2, 1996
--------------------------
<PAGE>
CUSIP No. 19-1908102 Page 28 of 37 Pages
IMPORTANT MISCELLANEOUS PROVISIONS
Entire Agreement
This Agreement constitutes the entire Agreement between the parties on
the subject matter hereof and supersedes all previous discussions, promises,
representations or agreements respecting the subject matter contained herein,
except the parties acknowledge the continuing existence of security agreements
and registration rights agreements. There are no representations, agreements,
arrangements, promises or understandings, oral or written, between and among the
Parties relating to the subject matter of this Agreement that are not fully
expressed herein. No alteration or modification of this Agreement shall be valid
unless agreed to in writing and duly signed by both the parties. This Agreement
was drafted by representatives of both parties and shall not be construed
against either party on the basis of that party being the drafter of the
Agreement.
Amendments
The provisions of this Agreement may be amended by the written consent of
the Parties. Any amendment of this Agreement shall be in writing, dated, and
executed by all Parties. If any conflict arises between the provisions of any
amendment and the original Agreement as previously amended, the most recent
provisions shall control.
Successors
Subject to the restrictions against assignment contained herein, this
Agreement shall inure to the benefit of and shall be binding upon the assigns,
successors in interest, personal representatives, estates, heirs, and legatees
of each of the parties hereto.
Governing Law; Forum; Arbitration
All matters effecting the interpretation, form, validity, enforcement and
performance of this Agreement shall be decided under the laws of the State of
California and in a forum located in San Diego County, California. This forum
selection and choice of law selection are material considerations for entering
into this contract. Any and all disputes concerning the rights and obligations
of the parties hereto except claims of monetary default or misrepresentation or
fraud in the inducement but including any other claimed breach shall be resolved
by binding arbitration under the rules of the American Arbitration Association
and if International portions are present using the rules of the International
Chamber of Commerce. The parties shall have the right to conduct full discovery,
as that term is commonly used under California Law, in the arbitration. The
decision of the arbitrator(s) shall be final and binding upon the parties
without right of appeal.
<PAGE>
CUSIP No. 19-1908102 Page 29 of 37 Pages
Waiver and Estoppel
The failure of either party hereto to enforce, or the delay by either
party in enforcing, any of its rights under this Agreement shall not be deemed a
continuing waiver or a modification hereof and either party may, within the time
provided by applicable law, commence appropriate legal proceedings to enforce
any or all of such rights. Only an admitted oral representation (or promise) or
a writing clearly and unequivocally expressing either a waiver of a known right
or a promise not to enforce a particular provision in the future shall be
sufficient to prevent any party from taking any action sanctioned or allowed by
this agreement. No party will be deemed to be estopped from taking any action
sanctioned by this agreement on account of any other alleged conduct.
Severability
In case any of the provisions contained in this Agreement should be held
invalid, illegal or unenforceable in any respect, then the validity, legality
and enforceability of the remaining provisions shall not in any way be affected
or impaired thereby unless the provision was a material consideration inducing
one or both of the parties to enter into this agreement. In such a case the
parties hereto agree to attempt to negotiate a substitution for the provision
held invalid, illegal or unenforceable. Should that effort fail, then the matter
shall be referred to arbitration an the arbitrator is empowered to amend or
modify any of the terms of this agreement to compensate for the loss of the
provision held invalid, illegal or unenforceable.
Representations and Warranties.
The parties hereto, and each of them, represent and warrant to each other
and agree with each other, as follows:
(a) Each of the parties hereto has had the opportunity to receive
independent legal advice from attorneys of its, or his own choice, with respect
to the advisability of entering into this contract and, prior to the execution
of this Agreement.
(b) In negotiating this Agreement, each party and its or his
attorneys have made various statements and representations to other parties and
their attorneys. Nevertheless, each party specifically does not rely upon any
statement, representation, legal opinion or promise of any other party in
executing this Agreement, except as expressly stated in this Agreement.
(c) There have been no other agreements or understandings between the
parties hereto concerning this restructuring, except as stated in this
Agreement.
<PAGE>
CUSIP No. 19-1908102 Page 30 of 37 Pages
(d) Each party, together with its or his attorneys, has had the
opportunity to make such investigation of the facts and of the law pertaining to
this Agreement, and all the matters pertaining thereto, as it or he deems
necessary.
(e) The terms of this Agreement are contractual, not a mere recital.
(f) This Agreement had been carefully read by, the contents hereof
are known and understood by, and it is signed freely by each person executing
this Agreement.
(g) Each party hereto agrees that such party will not take any action
which would interfere with the performance of this Agreement by the other party
hereto or which would adversely affect any of the rights provided for herein.
(h) The party each represent and warrant that he had the right to
grant the rights granted to the other parties in this contract and represents
that no portion of the rights granted herein has been assigned or transferred or
given as security to a person, firm or entity which is not a party to this
agreement. In the event that any claim, demand or suit shall be made or
instigated against any party because of any such purported assignment, transfer
or grant of security interest, each party hereto as the case may be hereby
indemnifies and holds the other free and harmless from and against any such
claim or demand.
Subsequent Attorneys' Fees.
(a) In the event that any action, suit, or other proceeding is
instituted to remedy, prevent, or obtain relief from a breach of this Agreement,
or arising out of a breach of this Agreement, the prevailing party shall recover
all of such party's attorneys' fees incurred in each and and every such action,
suit, or other proceeding, including any and all appeals or petitions therefrom.
(b) As used herein, attorney's fees shall be deemed to mean the full
and actual cost of any legal services actually performed in connection with the
matters involved, calculated on the basis of the usual fees charged by the
attorneys performing such services and shall not be limited to reasonable
"attorneys' fees" as defined in any statute or rule of court.
<PAGE>
CUSIP No. 19-1908102 Page 31 of 37 Pages
Exhibit 2
<PAGE>
CUSIP No. 19-1908102 Page 32 of 37 Pages
AGREEMENT
This Agreement is entered into as of July 17, 1996, by and among
Grupo Information, Satellites & Advertising, S.A. de C.V. ("ISA"), Renaissance
Capital Partners II Limited ("RenCap"), and Coded Communications Corporation, a
California Corporation ("Coded"), each of whom agree as follows:
1. Recitals. This Agreement is entered into based on the following
essential facts, the accuracy of which the parties acknowledge:
1.1 Coded is suffering severe cash flow problems and needs
financing for working capital and the retirement of debt.
In an attempt to satisfy its financial needs, Coded
entered into the Mutual Agreement of Terms and Conditions
as of May 1, 1996, with ISA, RenCap, and others (the
"Multi-Party Agreement").
1.2 Because of the delays in closing the transactions
contemplated by the Multi-Party Agreement and in
restructuring the debt of Coded, ISA's relationship with
Coded has become strained and Coded's potential business
opportunities in Mexico and Latin America are in jeopardy
if it does not soon provide its products and services.
1.3 To help meet Coded's needs, ISA is willing to immediately
make the $1,000,000.00 loan to Coded described in Section
2.3 of the Multi-Party Agreement (the "Loan"), and to
concurrently convert the Loan into equity in accordance
with the Multi-Party Agreement. By the conversion, Coded
will avoid the burden of additional debt, and improve its
liquidity and capital position.
1.4 ISA additionally is willing to accelerate its purchase
orders described in the Multi-Party Agreement (to which
ISA is not required to make). In accordance with this
Agreement, ISA will place $1,000,000.00 in purchase orders
with Coded (along with a $250,000.00 deposit in accordance
with Coded's standard international terms of sale),
thereby raising the amount of its purchase orders with
Coded to $2,000,000.00 (which is approximately 20 percent
of its total order requirement under the Multi-Party
Agreement). The parties intend that ISA receive Five
Million of the approximately Forty-Nine Million shares to
which ISA is entitled under the Multi-Party Agreement
(which represents about ten percent of the shares released
to ISA on account of ISA's potential purchase orders).
<PAGE>
CUSIP No. 19-1908102 Page 33 of 37 Pages
1.5 The parties intend that ISA accelerate an additional
$1,000,000.00 of purchase orders to Coded (along with an
additional $250,000.00 advance in accordance with Coded's
standard international terms of sale), on which Coded is
expected to realize a gross margin of $450,000.00, in
exchange for the issuance to ISA of One Million shares of
Coded's stock.
1.6 Upon consummation of this Agreement, Coded will have
recieved $3,000,000.00 of the $10,000,000.00 (i.e., Thirty
Percent) worth of orders to which ISA may ultimately be
committed under the Multi-Party Agreement (which includes
$1,000,000.00 of ISA's orders placed with Coded before the
date of this Agreement), along with total deposits on such
orders in the amount of $1,000,000.00, as well as
$1,000,000.00 of additional equity; and ISA will own Ten
Million shares of Coded's common stock.
2. ISA Orders to Coded.
2.1 Acceleration of Orders Under Multi-Party Agreement. On or
before July 24, 1996, ISA shall place with Coded a binding
purchase order for at least One Million Dollars (US
$1,000,000) worth of Coded's goods and services, and shall
deposit Two Hundred Fifty Thousand Dollars (US $250,000)
with Coded towards the purchase order. The purchase order
will be made pursuant to the Multi-Party Agreement, and
the order will be credited towards the purchase orders
required by ISA under Section 2.1 of the Multi-Party
Agreement. Because ISA is accelerating the purchase orders
to Coded, promptly on Coded's receipt of the orders
described in this paragraph, Coded shall issue ISA or its
assignee Five Million shares of Coded's common stock. Such
shares will be credited towards the stock to be issued to
ISA under Section 1.3 of the Multi-Party Agreement (i.e.,
Forty-Four Million Eight Thousand Seven Hundred and Three
[44,008,703] shares of Coded's common stock will remain
subject to the Option described in the Multi-Party
Agreement). The Shares will be issued in the name of ISA
or its permitted assignee, in the form of five separate
certificates, each in the amount of One Million shares,
and ISA or its assignee will be entitled to one demand
registration right of the same nature to which ISA is
entitled in connection with the stock it receives under
the Multi-Party Agreement.
2.2 Additional Orders for Additional Shares. On or before July
24, 1996, ISA shall place with Coded a binding purchase
order for an additional One Million
<PAGE>
CUSIP No. 19-1908102 Page 34 of 37 Pages
Dollars (US $1,000,000) worth of Coded's goods and
services and shall deposit Two Hundred Fifty Thousand
Dollars (US $250,000) with Coded towards the purchase
order. The purchase order will be credited towards the
purchase orders referenced in the Multi-Party Agreement.
In consideration of, and promptly on receipt of, the
additional purchase order and deposit described in the
preceding sentence, Coded shall issue ISA or its assignee
One Million shares of Coded's common stock. Such shares do
not apply to the stock to be issued to ISA under Section
1.3 of the Multi-Party Agreement. The shares will be
issued in the form of a single certificate in the name of
ISA or its permitted assignee, and ISA or its assignee
will be entitled to one demand registration right of the
same nature to which ISA is entitled in connection with
the stock it receives under the Multi-Party Agreement.
3. Production of ISA Orders. Ing. Fernando Pliego, a representative
of ISA, may inspect, monitor and coordinate Coded's production and delivery of
products and services to ISA. Coded shall reimburse ISA Ten Thousand Dollars (US
$10,000) per month for ISA's costs of retaining Mr. Pliego until Coded completes
the products and services under the purchase orders made in accordance with
Section 1.2 above. Mr. Pliego will be granted access to the operations of Coded
as reasonably necessary to inspect, monitor and coordinate such orders, except
that Mr. Pliego will not be provided access to any areas, documents, or
information relating to Coded's (or its subsidiaries') operations pursuant to
contracts with the United States Department of Defense (the "DOD") or to any
arcas, documents or information relating to material deemed classified by the
DOD. Mr. Pliego will have no right to control any aspect of Coded's (or any of
Coded's subsidiaries') operations and in no way may Mr. Pliego be deemed an
agent or employee of Coded or any subsidiary of Coded. ISA is solely responsible
for Mr. Pliego's employment and actions.
4. Funding of ISA Loan and Exercise of Conversion Election. ISA shall
make the Loan on or before July 24, 1996. ISA elects that the Loan immediately
be converted to shares of Coded's common stock in accordance with Section 2.3 of
the Multi-Party Agreement, so that immediately on Coded's receipt of the Loan
funds: (a) Coded shall issue ISA or its assignee the shares of Coded's common
stock required under the conversion provisions of Section 2.3 of the Multi-Party
Agreement, (i.e., four million shares); and (b) the Loan is extinguished and
Coded has no repayment obligation in connection with the Loan funds.
5. No Shareholder Approval Required. This Agreement is effective
immediately on mutual execution by ISA and Coded and no approval by Coded's
shareholders is required. The enforceability of this Agreement is unaffected by
any approval or disapproval by Coded's shareholders of the transactions
contemplated by the Multi-Party Agreement.
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CUSIP No. 19-1908102 Page 35 of 37 Pages
6. ISA's Rights as Shareholder. Upon ISA's or its assignee's receipt
of the shares issued to it under this Agreement, ISA will own all legal and
beneficial right, title and interest in and to the shares, subject to the rights
of no other person or entity, and ISA will have all rights of a common-stock
shareholder in Coded, including the right to vote its shares.
7. Waiver of Conversion Price Reduction Under Debenture. RenCap
waives the provisions of Paragraph 5(b)(i) and (ii) of the Coded 12% Convertible
Debentures as such provisions would apply to the issuance of Coded's shares
under this Agreement, notwithstanding the fact that the shares being issued to
ISA in connection with this Agreement are at a value per share less than the
conversion price set forth in the Coded 12% Convertible Debentures.
8. Miscellaneous.
8.1 Governing Law, Venue and Jurisdiction. This Agreement is
governed by and construed in accordance with the laws of
the State of California, irrespective of California's
choice-of-law principles. All actions and proceedings
arising in connection with this Agreement must be tried
and litigated exclusively in the State and Federal courts
located in the County of San Diego, State of California,
which courts have personal jurisdiction and venue over
each of the parties to this Agreement for the purpose of
adjudicating all matters arising out of or related to this
Agreement. Each party authorizes and accepts service of
process sufficient for personal jurisdiction in any action
against it as contemplated by this paragraph by registered
or certified mail, return receipt requested, postage
prepaid, to its address for the giving of notices set
forth in this Agreement.
8.2 Further Assurances. Each party to this Agreement shall
execute and deliver all instruments and documents and take
all actions as may be reasonably required or appropriate
to carry out the purposes of this Agreement.
8.3 Counterparts. This Agreement may be executed in
counterparts, each of which is deemed an original and all
of which together constitute one document.
8.4 Time of Essence. Time and strict and punctual performance
are of the essence with respect to each provision of this
Agreement.
8.5 Attorney's Fees. The prevailing party(ies) in any
litigation, arbitration, mediation, bankruptcy, insolvency
or other proceeding ("Proceeding") relating
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CUSIP No. 19-1908102 Page 36 of 37 Pages
to the enforcement or interpretation of this Agreement may
recover from the unsuccessful party(ies) all costs,
expenses, and actual attorney's fees (including expert
witness and other consultants' fees and costs) relating to
or arising out of (a) the Proceeding (whether or not the
Proceeding proceeds to judgment), and (b) any
post-judgment or post-award proceeding including, without
limitation, one to enforce or collect any judgment or
award resulting form the Proceeding. All such judgments
and awards shall contain a specific provision for the
recovery of all such subsequently incurred costs,
expenses, and actual attorney's fees.
8.6 Modification. This Agreement may be modified only by a
contract in writing executed by the party to this
Agreement against whom enforcement of the modification is
sought.
8.7 Prior Understandings. This Agreement and all documents
specifically referred to and executed in connection with
this Agreement: (a) contain the entire and final agreement
of the parties to this Agreement with respect to the
subject matter of this Agreement, and (b) supersede all
negotiations, stipulations, understandings, agreements,
representations and warranties, if any, with respect to
such subject matter, which precede or accompany the
execution of this Agreement.
8.8 Partial Invalidity. Each provision of this Agreement is
valid and enforceable to the fullest extent permitted by
law. If any provision of this Agreement (or the
application of such provision to any person or
circumstance) is or becomes invalid or unenforceable, the
remainder of this Agreement, and the application of such
provision to persons or circumstances other than those as
to which it is held invalid or unenforceable, are not
affected by such invalidity or unenforceability.
8.9 Successors-in-Interest and Assigns. This Agreement is
binding on and inures to the benefit of the
successors-in-interest and assigns of each party to this
Agreement.
CODED COMMUNICATIONS CORPORATION,
a California corporation
By: /s/ John Robinson
--------------------------
John Robinson, President and Chief Executive Officer
<PAGE>
CUSIP No. 19-1908102 Page 37 of 37 Pages
GRUPO INFORMATION, SATELLITES & ADVERTISING, S.A. de C.V.
By: /s/ Hugo Camou
--------------------------
Hugo Camou, President
RENAISSANCE CAPITAL PARTNERS II LTD.
By: Renaissance Capital Group, Inc., its Managing General Partner
By: /s/ Gene Roelke
--------------------------
Gene Roelke, Executive Vice-President
