U.S. SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-QSB
[X] Quarterly Report Pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934 for the Quarterly Period Ended March 31, 1997
[ ] Transition Report Under Section 13 or 15(d) of the Securities Exchange
Act of 1934 for the Transition Period From ________ to ________
Commission File No. 0-20598
DEFINITION, LTD.
(Name of small business issuer in its charter)
Nevada 75-2293489
(State or other jurisdiction of (IRS Employer
Incorporation or organization) Identification No.)
1334 South Killian Drive, Unit 4, Lake Park, Florida 33403
(Address of principal executive offices, including zip code)
(561) 844-7701
(Issuer's telephone number, including area code)
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such
shorter period that the registrant was required to file such reports), and (2)
has been subject of such filing requirements for the past 90 days.
Yes [ ] No [ X ]
The number of shares outstanding of the issuer's common equity as of May
21, 1997, was 7,161,842 shares of common stock, par value $.001.
Transitional Small Business Disclosure Format (check one): Yes [ ] No [X]
DEFINITION, LTD.
Form 10-QSB for the Quarter Ended March 31, 1997
Table of Contents
PART I - FINANCIAL INFORMATION
Item 1 - Financial Statements
Item 2 - Management's Discussion and Analysis of
Financial Condition and Results of Operations
PART II - OTHER INFORMATION
Item 1 - Legal Proceedings
Item 2 - Changes in Securities
Item 3 - Defaults Upon Senior Securities
Item 4 - Submission of Matters to a Vote of Security Holders
Item 5 - Other Information
Item 6 - Exhibits and Reports on Form 8-K
DEFINITION, LTD.
CONSOLIDATED BALANCE SHEETS
March 31, 1997 (unaudited), and December 31, 1996 (unaudited)
3/31/97 12/31/96
(unaudited) (unaudited)
ASSETS
Current Assets:
Cash and cash equivalents 36,149 63,151
Notes receivable 210,000 210,000
Accounts receivable,
net of doubtful accounts 2,965,479 2,964,036
Accounts receivable, other --- ---
------------- ------------
Total Current Assets 3,211,628 3,237,187
------------- ------------
Property and Equipment:
Broadcast resource library 2,985,536 2,985,536
Computer, production and
other equipment 851,105 851,105
Streaming technology hardware 62,776 62,776
Building and improvements 469,153 469,153
Other 4,470 4,470
------------- ------------
Total Property and Equipment 4,373,040 4,373,040
------------- ------------
Accumulated depreciation (2,063,108) (1,028,959)
------------- ------------
Net Property and Equip. 2,309,932 3,276,402
------------- ------------
Other Assets:
Deposits - Paris office 78,020 78,020
Contracts and accounts
receivable - long term 5,928,071 5,928,071
Equity investment in joint venture 385,142 385,142
Streaming technology R&D 355,262 355,262
Accumulated amortization - R&D (41,447) (23,684)
------------- ------------
Total Other Assets 6,705,048 7,140,849
------------- ------------
TOTAL ASSETS 12,226,608 12,871,612
============= ============
LIABILITIES
Current Liabilities:
Accounts payable - trade 1,677,846 3,010,234
Payroll liabilities 23,612 23,700
Federal income taxes payable 183,656 31,656
Accounts payable - affiliates --- ---
Current portion of debt 1,500 1,500
------------- -----------
Total Current Liabilities 1,886,614 3,067,090
------------- -----------
Long-term Liabilities:
Note payable 27,000 27,000
Mortgage payable - building 79,899 80,601
------------- -----------
Total Long-Term Liabilities 106,899 107,601
------------- -----------
TOTAL LIABILITIES 1,993,513 3,174,691
------------- -----------
SHAREHOLDERS' EQUITY
Capital stock 7,162 6,522
Paid-in capital 10,546,877 10,291,517
Deferred advertising credits (1,568,335) (1,568,335)
Retained earnings 1,247,391 967,216
------------- -----------
Total Shareholders' Equity 10,233,095 9,696,920
------------- -----------
TOTAL LIABILITIES AND
SHAREHOLDERS' EQUITY 12,226,608 12,871,612
============= ===========
The accompanying notes are an integral part of these financial statements.
DEFINITION, LTD.
CONSOLIDATED STATEMENTS OF OPERATIONS
Three Months Ended March 31, 1997, and March 31, 1996
Three Months Three Months
Ended Ended
3/31/97 3/31/96
(unaudited) (unaudited)
Revenues:
Revenue 29,602 2,474,135
------------- -----------
Total Revenue 29,602 2,474,135
------------- -----------
Cost of Revenues --- 899,546
------------- -----------
Gross Profit 29,602 1,574,589
------------- -----------
Operating Expenses:
General and administrative 33,049 68,452
Consulting and other professional 294,934 76,294
Depreciation and amortization 201,407 150,569
------------- -----------
Total Operating Expenses 529,390 295,315
------------- -----------
Income (loss) from Operations (499,788) 1,279,274
------------- -----------
Other Income (Expense):
Interest expense --- (1,978)
Gain on sale of assets 931,962 ---
------------- -----------
Total Other Income (Expense) 931,962 (1,978)
------------- -----------
Income (loss) before tax 432,174 1,277,296
------------- -----------
Provision for income taxes 152,000 434,247
------------- -----------
Net income (loss) 280,174 843,049
============= ===========
The accompanying notes are an integral part of these financial statements.
DEFINITION, LTD.
CONSOLIDATED STATEMENTS OF CASH FLOWS
Three Months Ended March 31, 1997, and March 31, 1996
Three Months Three Months
Ended Ended
3/31/97 3/31/96
(unaudited) (unaudited)
Cash Flows from Operating Activities:
Net income 280,174 843,048
Adjustments to reconcile net income
(loss) to net cash provided by (used
in) operating activities:
Depreciation and amortization 201,407 150,569
Common stock issued for services 256,000 ---
Gain on sale of assets (931,962) ---
(Increase) decrease in:
Accounts receivable (1,443) (1,784,866)
Contracts and long-
term receivables --- 151,162
Increase (decrease) in:
Accounts payable:
Trade (1,332,388) (26,571)
Other (88) ---
Affiliates --- 391,382
Accrued federal income tax 152,000 436,672
------------- ------------
Net cash provided by (used
in) Operating Activities: (1,376,300) 161,396
------------- ------------
Cash Flows from Investing Activities:
Increase in property and equipment --- (253,901)
Proceeds from sale of assets 1,350,000 ---
Increase investment in joint venture --- (71,691)
------------- ------------
Net Cash provided by (used
in Investing Activities: 1,350,000 (325,592)
------------- ------------
Cash Flows from Financing Activities:
Decrease in long-term debt (702) (349)
------------- ------------
Net Cash provided by (used
in Financing Activities: (702) (349)
------------- ------------
Increase (decrease) in cash (27,002) (164,545)
Cash at Beginning of Period 63,151 177,450
------------- ------------
Cash at End of Period 36,149 12,905
============= ============
The accompanying notes are an integral part of these financial statements.
DEFINITION, LTD.
Notes to the Consolidated Financial Statements
Three Months Ended March 31, 1997 and 1996
(unaudited)
Note 1. Interim Consolidated Financial Statements.
In the opinion of management, the accompanying consolidated financial
statements for the three months ended March 31, 1997 and 1996, reflect all
adjustments (consisting only of normal recurring adjustments) necessary to
present fairly the financial condition, results of operation, and cash flows of
Definition, Ltd. and subsidiaries (the Company) and include the accounts of
the Company and all of its subsidiaries. All material inter-company
transactions and balances have been eliminated.
The financial statements included herein have been prepared by the
Company, without audit, pursuant to the rules and regulations of the
Securities and Exchange Commission. Certain information and footnote
disclosures normally included in financial statements prepared in accordance
with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. It is suggested that these
unaudited financial statements be read in conjunction with the financial
statements and notes thereto to be included in the Company's Annual Report
on Form 10-KSB/A which is to be filed in the near future with the Securities
and Exchange Commission for the year ended December 31, 1996. Certain
reclassifications and adjustments may have been made to the financial
statements for the comparative period of the prior fiscal year to conform with
1995 presentation. The results of operations for the interim periods are not
necessarily indicative of the results to be obtained for the entire year.
<PAGE>
PART II - Item 2. Management's Discussion and Analysis of
Financial Condition and Results of Operations.
General
The discussion below pertains to the financial condition of the Company,
including subsidiary operations, for the three months ended March 31,1997,
and 1996, as well as for each of the business segments of the Company for
such periods. The Company's business segments are: (1) television segment,
which includes the operation of a television station, sales of copies of its
film library to television stations and production of infomercials and
educational programs; (2) multimedia segment, which includes parental education
programs, computer hardware sales and cable television/Internet operations;
and (3) import segment, which involves the import and sale of objects of art
and other items, including furniture. Unless otherwise noted, references to
the Company include all of its subsidiaries.
Results of Operations
Three Months Ended March 31, 1997, versus
Three Months Ended March 31, 1996.
Revenues from the Company's operations for the three months ended March
31, 1997 ("Current Period"), were $29,602 (unaudited), a dramatic decline
in revenues from the three months ended March 31, 1996 ("Prior Period"),
of $2,474,135 (unaudited). This substantial decrease in revenues is due to the
Company's failure to continue to exploit its film library, as well as the lack
of development of its Import Segment. The dramatic changes in the
Company's cost of revenues and gross profit are directly related to the
reduction in revenues. The Company anticipates that such reduced levels of
revenues will continue through the second quarter of 1997 and at least into
the first part of the third quarter of 1997. The Company's operating expenses
for the Current Period were $529,390 (unaudited), a 79% increase from the
Prior Period, when operating expenses were $295,315 (unaudited). This
increase in operating expenses is attributable to: (1) the issuance of 640,000
shares of Company common stock in consideration of consulting services,
which shares were valued in the aggregate at $256,000, or $.40 per share; and
(2) a 52% increase in depreciation and amortization from the Prior Period.
General and administrative expenses for the Current Period were $33,094
(unaudited), a decrease of ---% from the Prior Period, when general and
administrative expenses were $68,452 (unaudited). The Company expects
to continue to incur general and administrative expenses at similar levels
during the remainder of Fiscal 1997, or until such time as its revenues reach
higher levels. The Company experienced a loss from operations for the
Current Period of $499,788 (unaudited) compared to net income for the Prior
Period of $1,279,274 (unaudited). The Company's net income for the
Current Period fell 67%, $280,174(unaudited) from $843,049 (unaudited).
All of the Company's net income for the Current Period is attributable to a
gain realized (approximately $900,000) on the sale of one-half of the
Company's Internet Video Streaming capacity in cancellation of trade
accounts payable to one trade creditor in the amount of $1,350,000.
Subsequent to March 31, 1997, and pursuant to a Consulting and Legal
Services Agreement, the Company issued to its legal counsel 250,000 shares
of its Common Stock in consideration of consulting and legal services to be
rendered on behalf of the Company. Such shares were valued at $.20 per
share, or $50,000, in the aggregate. Such amount will appear in the
Company's financial statements for the period to end June 30, 1997, as an
expense and will, therefore, negatively impact the Company's net income for
such period.
Television Segment - Current Period versus Prior Period.
Revenues of the Television Segment for the Current Period were $24,702
(unaudited) compared to revenues of $2,474,185 (unaudited) for the Prior
Period. This dramatic decrease in revenues of the Television Segment is
attributable to the Company's failure to make any sales of copies of its film
library. In addition, revenues from sales of advertising time continuing to
suffer from its television station's having been removed from the local cable
system during 1996. The Company's television station has been returned to
the local cable operator's basic package. The Current Period's reduced
revenues from sales of television advertising is a result of an adjustment in
the Company's pre-sold advertising, which adjustment was negotiated as a
result of the Company's television station's having been removed from the
local cable operators basic package. The Company does not expect that
revenues from sales of television advertising will return to prior levels until
the third quarter of 1997. No assurance in that regard can be made, however.
As part of a sweeping repositioning by the Company (see Part II - Item 5.
Other Information herein) and in an effort to boost advertising sales in the
long term, the Company has begun to broadcast its television station's signal
live, 24-hours a day on the Internet, which broadcast is available to Internet
users worldwide. No prediction can be made as to the level of success such
a strategy will have. Also within the Television Segment during the Current
Period, no sales of copies of the Company's film library occurred. The
Company anticipates that sales of its film library will continue to be
inconsistent, with some reporting periods showing dramatic increases while
others dramatic decreases. Because sales of the film library are expected to
be sporadic in nature, the fluctuation of this business within the Television
Segment will, for the foreseeable future, result in fluctuations in the
Company's overall performance during any particular reporting period.
Multimedia Segment - Current Period versus Prior Period.
For the Current Period, the Company had revenues of $4,900 (unaudited)
compared to no revenues for the Prior Period. Substantially all of the
revenues from the Current Period were received pursuant to service
agreements relating to prior sales of computer hardware made in connection
with the Company's Parent Academy Network (the Network) project
currently underway in the Baltimore, Maryland, school system. The
Network provides interactive teaching materials to member schools, based
upon a video and computer platform, utilizing educational materials, certain
of which are, and will be, produced by the Company's Television Segment.
The Network attempts to bring parents, teachers and students together in an
educational learning partnership, all with a view to increasing student
attendance and parental involvement, as well as reducing delinquency and
crime in participating schools and their respective communities. The
Company, through a subsidiary, is the exclusive provider of technical support
and consultant to the Network. There are currently six schools participating
in the Network, and the Company is to be paid for its services to each such
school on a monthly basis. However, the Company, during the Prior Period,
was not paid currently by the participating schools. The Company has
resolved its differences with its partner in the Network and is now receiving
payments from participating schools. During the remainder of Fiscal 1997,
the Company expects to generate additional revenues in the Multimedia
Segment through sales of computer hardware and computer software relating
to Internet Video Streaming joint ventures (see Part II - Item 5. Other
Information). There is no assurance that such activities will generate
significant cash flow during the remainder of Fiscal 1997.
Import Segment - Current Period versus Prior Period.
The Import Segment is a newly operating business segment. During the
Current Period, the Import Segment had no revenues. The Import Segment
is attempting to develop its business by importing consumer products, made
in Italy and other foreign countries, for distribution in the United States.
The Company is currently pursuing several opportunities in this segment.
However, there is no assurance that any such opportunity will ever prove to
be profitable.
Segment Information - Domestic/Foreign Revenues.
During the Current Period, all of the Company's revenues were derived from
domestic sources. During the Prior Period, approximately 60% of the
Company's revenues were derived from a single foreign customer, World
Wide Trading of Venice, Italy, while the remainder of its revenues were
derived from domestic sources. Approximately 25% of the Company's
revenues during the Prior Period were derived from a single domestic
customer, Da Verona, Inc., Corpus Christi, Texas.
Liquidity and Capital Resources
March 31, 1997.
The Company's position of liquidity continues to be poor. At March 31,
1997, the Company's cash and cash equivalents totalled $36,149 (unaudited),
down from $63,151 (Unaudited) at December 31, 1996. Nevertheless, the
Company's overall working capital position was improved at March 31,
1997, to $1,325,014 (unaudited), compared to working capital of $170,097
(unaudited) at December 31, 1996. This increase in working capital is
primarily due to a reduction in trade accounts payable of $1,332,388
(unaudited), all of which occurred as a result of a transaction whereby the
Company transferred one-half of its Internet Video Streaming capacity in
cancellation of a portion of trade accounts payable to one creditor. The
Company's working capital available for use in operations remained
significantly impaired at March 31, 1997, and continues to be so impaired
currently, due primarily to the dramatic loss of revenues from sales of
television advertising. As discussed above, the Company hopes to develop
revenues through its Internet Video Streaming business plan. There is no
assurance that the Company's strategy will alleviate its lack of liquidity.
Cash Flow from Operating Activities.
The Company's operations used $1,376,300 (unaudited) in cash for the
Current Period, substantially all of which is attributable to the cancellation
of trade accounts payable in exchange for one-half of the Company's Internet
Video Streaming capacity. Management expects that operating activities will
continue to use cash during the remainder of Fiscal 1997. No prediction as
to the level of use of cash in operating activities can be made.
Cash Flow from Investing Activities.
Investing activities of the Company provided cash in the Current Period of
$1,350,000 (unaudited). All of such amount is attributable to the cancellation
of trade accounts payable in exchange for one-half of the Company's Internet
Video Streaming capacity. During the remainder of Fiscal 1997, the
Company does not expect to derive any material cash amounts from its
investing activities. Any such cash as may be provided by investing activities
during the remainder of 1997 is expected to be attributable to the Company's
Internet Video Streaming partnerships.
Cash Flow from Financing Activities.
The Company had no significant financing activity during the Current
Period. The Company is currently seeking financing from a bank in the
amount of $1,000,000. There is no assurance that any such financing will be
obtained.
Capital Expenditures
Because of the Company's current substantial lack of liquidity, the Company
does not expect to acquire any capital assets in the foreseeable future.
PART II - OTHER INFORMATION
Item 1. Legal Proceedings.
None
Item 2. Changes in Securities.
During the three months ended March 31, 1997, the Company issued shares
of its Common Stock, as follows:
1. 200,000 shares pursuant to a Consulting Agreement, which shares were
valued at $.40 per share, and were registered under a Registration
Statement on Form S-8;
2. 200,000 shares pursuant to a Consulting Agreement, which shares were
valued at $.40 per share, and were registered under a Registration
Statement on Form S-8; and
3. 240,000 shares pursuant to a Consulting Agreement, which shares were
valued at $.40 per share, and were registered under a Registration
Statement on Form S-8;.
Since March 31, 1997, the Company issued 250,000 shares of its Common
Stock pursuant to a Consulting and Legal Services Agreement. Pursuant to
such Agreement, all of such shares may be registered under a Registration
Statement on Form S-8, at the request of the issuee of such shares.
Item 3. Defaults Upon Senior Securities.
None.
Item 4. Submission of Matters to a Vote of Security Holders.
None.
Item 5. Other Information.
Internet Video Streaming Business. It is the Company's intention to establish
joint ventures as a means of establishing its Internet Video Streaming
business (the "Streaming Joint Ventures"). The concept of the Streaming
Joint Ventures can be described as follows: Each Streaming Joint Venture
will establish an Internet site. Such Internet site will feature the live
televisionbroadcast signal of WINQ-TV, utilizing Internet Video Streaming
technology. The WINQ-TV broadcast signal will appear in the middle of an
Internet user's computer screen. It is contemplated that the WINQ-TV
broadcast signal will be surrounded by icons of advertisers. An Internet user
will be able to click on any of such icons and view information about a
particular advertiser's products or services. The sale of icons that surround
the WINQ-TV broadcast signal to advertisers will be the source of revenues
for each of the Streaming Joint Ventures. It is likely that the Company would
utilize one or more of such icons to advertise certain of the consumer
products associated with the Message of Love, among others. No prediction
can be made in this regard, however. In each of the Streaming Joint
Ventures, the Company will have a 10% interest in profits and losses. Also,
each Streaming Joint Venture will pay to ISI a royalty equal to 12% of gross
revenues, which royalty shall be paid for each Streaming Joint Venture's use
of WINQ-TV broadcast signal.
The Company believes that its position as the first real time television
broadcast on the Internet, through the use of an Internet Video Streaming
technology, will, as a novelty at first, attract a substantial number of
Internet users, which will support the sale of advertising by each of the
Internet Video Streaming joint ventures, if any. Then, after some indeterminate
period of time, the Company expects that, as other video delivery sites
appear on the Internet, the quality of the Company's Internet (WINQ-TV)
broadcast programming, that is, the format of the Internet Video Stream, must
be more attractive than its potential future competitors' programming in
order to continue to attract Internet users. The Company expects that this
type of competition will not begin to appear for at least the next 18 months,
if then.
WINQ-TV Video Streaming (Paris). The Company's first Internet Video
Streaming partnerhsip, WINQ-TV Video Streaming (Paris), Ltd. (the
"Streaming Partnership"), was executed May 12, 1997, with a New York
investor and businessman. The Streaming Partnership has the right to
develop six cities: Paris, France; Dallas, TX; New York City; Atlanta, GA;
Baltimore, MD; and Newark, NJ. The Company's partner has committed to
contribute a total of $125,000 to the capital of the Streaming Partnership,
$32,000 of which has been contributed, the balance of which is to be
contributed over six months in equal installments. The Streaming Partnership
will pay $125,000 to Definition Technologies, Inc., the Company's
subsidiary, for computer hardware and software necessary to operate its
Internet Video Streaming business.
The Company has a 10% interest in profits and losses of the Streaming
Partnership. Also, the Streaming Partnership must pay to the Company a
royalty equal to 12.5% of the Streaming Partnership's gross revenues for use
of its WINQ-TV broadcast signal and name. Also, should the Streaming
Partnership sell the rights to any of its cities, the Company will receive
$60,000 upon any such sales, and its 12.5% royalty will continue to be paid
by the purchaser of one of the cities.
Item 6. Exhibits and Reports on Form 8-K.
Exhibits.
The following exhibits are included in this Quarterly Report on Form 10-QSB:
Exhibit Description
10.1 Agreement of Limited Partnership of WINQ-TV Video
Streaming (Turkey), Ltd., dated May 15, 1997, between
the Company and Al Jones.
10.2 Stock Purchase Agreement, dated May 15, 1997, between
the Company and Gerald L. Beeson.
10.3 Stock Purchase Agreement, dated May 15, 1997, between
the Company and Michael B. DeLuise.
Reports on Form 8-K.
During the three months ended March 31, 1997, the Company filed, on or
about January 27, 1997, a Current Report on Form 8-K relating to its entering
into a joint venture to develop Internet Business and Art Centers, whereby the
Company issued, as part of its contribution to such joint venture's capital,
1,340,000 shares of its Common Stock. Such Current Report on Form 8-K
is incorporated herein by this reference.
SIGNATURES
In accordance with Section 13 or 15(d) of the Exchange Act, the Registrant
caused this report to be signed on its behalf by the undersigned, thereunto
duly authorized.
DEFINITION, LTD.
By: /s/ Gerald L. Beeson
Gerald L. Beeson
Chief Executive Officer
and Principal Financial Officer
<PAGE>
------------------------
EXHIBIT 10.1
------------------------
Agreement of Limited Partnership of
WINQ-TV Video Streaming (Paris), Ltd.
This Agreement of Limited Partnership, dated as of May 15, 1997, by and
between Al Jones, an individual resident of the State of New York (the
"General Partner"), and Definition, Ltd., a Nevada corporation, as limited
partner (the "Limited Partner"), the General Partner and the Limited Partner
hereinafter being collectively referred to as the "Partners".
Section I - General
1.1. Partnership Name. The name of the Partnership is WINQ-TV Video
Streaming (Paris), Ltd. The General Partner may change the name of the
Partnership or adopt such trade or fictitious names as it may determine
appropriate.
1.2. Names and Addresses of Partners. The name and address of the General
Partner is Al Jones, 22 Malvern Lane, Stonybrook, New York 11790.
The name and address of the Limited Partner is Definition, Ltd., 1400 Turtle
Creek Drive, Dallas, Texas 75207.
Section II - Definitions
"Affiliate" means any person or entity directly or indirectly controlling,
controlled by or under common control with another person or entity.
"Agreement" means this Agreement of Limited Partnership of WINQ-TV
Video Streaming (Paris), Ltd.
"Capital Account" means, for each Partner, the amount of its capital
contribution, which amount shall be increased by (i) its additional capital
contributions to the Partnership, if any, and (ii) its proportionate share of
Partnership profits and gains, and decreased by (iii) distributions by the
Partnership to such Partner and (iv) such Partner's proportionate share of
Partnership losses.
"General Partner" means Al Jones, an individual resident of the State of New
York.
"Gross Receipts" means the amount of Partnership proceeds derived from the
development, utilization, sale, licensing, refinancing or exchange of any
property of the Partnership.
"Interest" means a limited partnership interest in the Partnership.
"Limited Partner" means Definition, Ltd., a Nevada corporation, and each
person who succeeds, as a Substituted Limited Partner, to the interest of the
Limited Partner in such Interest.
"Manager" means Al Jones, the General Partner of the Partnership.
"Net Cash Flow" means Gross Receipts from Partnership operations for each
fiscal year, less cash operating expenses for each fiscal year.
"Partners" means the General Partner or the Limited Partner or all Partners
of the Partnership.
"Partnership" means the Texas limited partnership formed under the name
"WINQ-TV Video Streaming (Paris), Ltd."
"Partnership Agreement" means this Agreement of Limited Partnership of
WINQ-TV Video Streaming (Paris), Ltd.
"Registered Agent" means Gerald L. Beeson, 1400 Turtle Creek Drive,
Dallas, Texas 75207, the person to receive legal service upon the Partnership.
"Registered Office" means the office where all of the Partnership's books and
records will be maintained, 1400 Turtle Creek Drive, Dallas, Texas 75207.
"Working Capital Reserves" means the amount of cash reserves taken from
Net Cash Flow of the Partnership, which the General Partner deems
necessary to the prudent operation of the Partnership.
Section III - Term
3.1. The term of the Partnership shall be from the date of execution hereof,
until December 31, 2030, unless extended or sooner terminated in accordance
with this Agreement.
Section IV - Purpose
4.1. The purpose of the Partnership is to develop, establish and operate a
business consisting of the distribution on the Internet in Paris, France,
Dallas, Texas, New York City, New York, Newark, New Jersey, Atlanta, Georgia,
and Baltimore, Maryland, of video streaming emanating from Television
Station WINQ TV-19, West Palm Beach, Florida, pursuant to license, and to
broadcast commercial advertising over the Internet in combination with the
video programming obtained from WINQ TV-19. It is the further purpose
of this Partnership to earn profits.
Section V - Partnership Office and Registered Agent
5.1. Partnership Office. The Registered Office of the Partnership in the State
of Texas shall be at 1400 Turtle Creek Drive, Dallas, Texas 75207, or at such
other location as the General Partner, in his discretion, may determine. The
General Partner shall notify the Limited Partner in writing of each such
change in location.
5.2. Registered Agent. The Registered Agent of the Partnership in the State
of Texas shall be Gerald L. Beeson, whose address is 1400 Turtle Creek
Drive, Dallas, Texas 75207.
5.3. Documents to be Maintained. The General Partner shall keep the
following documents at the Registered Office of the Partnership specified in
Section 5.1 hereinabove or at such other location as determined by the
General Partner:
(a) a current list of the full name and last known address of each Partner;
(b) a copy of this Agreement, all amendments hereto, and executed copies
of any powers of attorney pursuant to which any such amendment has been
executed;
(c) copies of financial statements of the Partnership for the three (3) most
recent years. Such documents shall be available for inspection and copying
during ordinary business hours at the request of, and at the expense of, a
requesting Partner.
Section VI - Operation of Partnership Business
6.1. Partnership Management. The General Partner will serve as Manager
of the Partnership and carry out the affairs of the Partnership.
Section VII - Capital Contributions
7.1. General Partner. The General Partner will contribute cash in an amount
of $125,000 to the capital of the Partnership. Such contribution will be made
as follows: (a) the sum of $32,000 will be contributed upon execution of this
Agreement; and (b) the balance ($93,000) shall be contributed in six equal
monthly installments of $15,500, begining in July 1997. The General Partner
hereby agrees that the sum of $125,000 shall be payable by the Partnership
to Definition Technologies, Inc., a wholly-owned subsidiary of the Limited
Partner, in payment for the video streaming technology necessary for the
Partnership to carry out its plan of business.
7.2. Limited Partner. Upon the execution of this Agreement, the Limited
Partner will contribute the sum of $100 to the capital of the Partnership.
7.3. Capital Accounts. Each Partner's capital account shall be increased
(credited) by
(a) the amount of its capital contributions to the Partnership pursuant to
Sections 7.1 and 7.2;
(b) the amount of income from operations allocated to it pursuant to Section
8.1;
(c) the amount of gains allocated to it pursuant to Section 8.2;
and shall be decreased (debited) by
(d) the amount of losses from operations allocated to it pursuant to Section
8.1;
(e) all amounts paid or distributed to it pursuant to Section IX (other than
distributions to any Partner in repayment of principal and interest on loans);
and
(f) the amount of any losses allocated to it pursuant to Section 8.2;
except as otherwise provided in this Agreement, whenever it is necessary to
determine the capital account of any Partner for purposes of Sections VIII or
IX, the capital accounts of the Partners shall be determined after giving effect
to the allocation for the Partnership's current year to date of net income and
net losses from operations under Section 8.1 and all distributions paid or
accrued for such year under Section IX excluding, however, any distributions
representing payment of any interest and/or principal with respect to any
loans from a Partner to the Partnership. Loans by any Partner to the
Partnership shall not be considered contributions to the capital of the
Partnership. A Partner shall not be entitled to withdraw any part of his
capital account or to receive any distribution from the Partnership, except as
specifically provided in this Agreement, and no Partner shall be required to
make any additional capital contributions to the Partnership other than as
provided herein. Any Partner, including any Substituted Limited Partner,
who shall receive an interest in the Partnership or whose interest in the
Partnership shall be increased by means of a transfer to him of all or part of
the interest of another Partner, shall have a capital account which reflects
such transfer.
7.4. Liability of Partners. The Limited Partner shall not be liable for any of
the debts of the Partnership nor be required to contribute any capital in
addition to the contribution provided for by Section 7.2, and the Limited
partner shall not have any obligation to the Partnership or to any other
Partner. Notwithstanding the foregoing to the contrary, to the extent required
by applicable law, the Limited Partner, if receiving a distribution in part or
full return of its capital contributions, shall be liable to the Partnership for
any sum, not in excess of such amount returned (with interest), necessary to
discharge the liabilities of the Partnership to creditors who extended credit or
whose claim arose before such distribution.
7.5. No Interest on Capital. No interest shall be paid on any capital
contributed to the Partnership.
Section VIII - Net Income and Losses from Operations;
and Net Gains and Losses from Dissolution and Termination
8.1. Operations. All "net income" and "net losses" of the Partnership from
operations (as distinguished from sales or other dispositions of Partnership
assets) for any year or part thereof, as determined under generally accepted
accounting principles, shall be allocated as follows:
(a) for each fiscal year of the Partnership, all net losses of the Partnership
from operations shall be allocated to the Partners as follows:
(i) to the General Partner, 90%; and
(ii) to the Limited Partner, 10%.
(b) for each fiscal year of the Partnership, all net income of the Partnership
from operations shall be allocated to the Partners as follows:
(i) to the General Partner, 90%; and
(ii) to the Limited partner, 10%.
8.2. Dissolution and Termination. All net gains and net losses of the
Partnership in connection with a sale or other disposition of Partnership
property on dissolution and termination of the Partnership, shall be allocated
in the following manner:
(a) After allocating the appropriate portion of all net income or net loss from
operations for the then current fiscal year in accordance with Section 8.1 and
after giving effect to all amounts distributed or to be distributed for such
fiscal year pursuant to Sections 9.2(a) and 9.2(b), net gains and net losses
shall be allocated between the Partners as follows:
(i) Net Gain shall be allocated to the General Partner, 90%; and
(ii) Net Gain shall be allocated to the Limited Partner, 10%.
Section IX - Distributions
9.1. Definition of "Net Cash Flow". "Net Cash Flow" shall be determined
at the end of each fiscal quarter of the Partnership, and shall mean Gross
Receipts from operations of the Partnership for each fiscal quarter less cash
operating expenses for such period. For purposes of determining Net
Operating Income and Net Cash Flow, "Gross Receipts" shall mean all
revenue derived from the Partnership's disposing of all or a portion of the
Property.
9.2. (a) Operations. During the period commencing on the date of the
Partnership's formation and ending upon the dissolution and termination of
the Partnership, after providing for the satisfaction of the current debts and
obligations of the Partnership and establishing such working capital reserves
(the "Working Capital Reserves") as the General Partner in his reasonable
business judgment deems necessary for Partnership purposes, the General
Partner shall, as expeditiously as possible, but in no event later than thirty
(30) days after the end of each calendar quarter of the Partnership, make
distributions of "Remaining Net Cash Flow" (Net Cash Flow less the above
payments) to the Partners out of the Partnership funds to the extent available,
as follows:
(i) to the General Partner, 90%; and
(ii) to the Limited Partner, 10%.
(b) Dissolution and Termination Proceeds. Upon the dissolution and
termination of the Partnership, the Net Gross Proceeds of the sale of all assets
of the Partnership after making payment of, or provision for, the liabilities
and obligations of the Partnership shall be distributed or paid, as appropriate,
in the following order of priority:
(i) first, an amount equal to the unpaid interest and principal of any unpaid
loan by a Partner to the Partnership, such distributions being treated first as
in payment of accumulated interest and next as payment of principal of such
loans;
(ii) next, Net Gross Proceeds shall be distributed 90% to the General Partner
and 10% to the Limited Partner.
9.3. Cash Distributions. All cash distributions to the Limited partner shall
be made to the Limited Partner at the addresses specified in Section 1.2 or
such other addresses of which the Limited Partner shall notify the Partnership
in writing.
9.4. Limitation to Cash in Return of Capital. No Partner shall be entitled to
demand and receive property other than cash in return for its capital
contributions to the Partnership.
Section X - Control and Management
10.1. Management. The General Partner shall, except as specifically limited
herein, have full, exclusive and complete discretion in the management and
control of the Partnership for the purposes set forth in Section 4.1. In any
exercise of management authority by the General Partner under this Section
X, the General Partner agrees to manage and control the affairs of the
Partnership to the best of his ability, and to conduct the operations
contemplated under this Agreement in a careful and prudent manner and in
accordance with good industry practice.
10.2. Specific Management Rights. Subject to any limitations expressly set
forth in this Agreement, the General Partner shall perform, or cause to be
performed, at the Partnership's expense, any and all activities necessary to
achieve the objectives of the Partnership. Without limiting the generality of
the foregoing, the General Partner is expressly authorized on behalf of the
Partnership to:
(a) operate any business as is normal or customary for licensee of the Video
Streaming Technology to be licensed to the Partnership;
(b) perform any and all acts necessary or appropriate in the performance of
the General Partner's obligations including, without limitation, the
commencement of litigation or defense of the same, the settlement of any
litigation involving the Partnership and the establishment of bank accounts
in which shall be deposited all Partnership funds and from which payments
shall be made;
(c) coordinate all accounting and clerical functions of the Partnership and
employ such accountants, lawyers, managers, leasing agents or other
personnel as may be required from time to time to carry on the business of
the Partnership;
(d) procure and maintain with responsible companies such insurance as may
be available in such amounts and with respect to such risks as are deemed
appropriate by the General Partner;
(e) take and hold all property of the Partnership, real, personal or mixed, in
the Partnership name or in the name of an agent of the Partnership;
(f) execute and deliver on behalf of and in the name of the Partnership, or in
the name of an agent of the Partnership, notes, financing statements, any and
all documents, agreements and undertakings relating to institutional
financing, leases, subleases, bills of sale and any and all other instruments
necessary or incidental to the conduct of the Partnership's business;
(g) borrow money for and on behalf of the Partnership upon such terms and
conditions as it deems necessary for working capital;
(h) convey, sell, mortgage, pledge, hypothecate, for and on behalf of the
Partnership and upon such terms and conditions as it deems necessary or
appropriate, all or any part or the Partnership's assets; and
(i) control and perform, or cause to be performed, all other activities
incident to managing the operations and affairs of the Partnership, unless
otherwise specifically stated in Section 10.3 hereinbelow.
10.3. Limitation on Management Rights. Notwithstanding the generality of
the foregoing Section 10.2, the General Partner shall not, without the consent
of the Limited Partner, be empowered to:
(a) do any act in contravention of this Agreement;
(b) do any act which would make it impossible to carry on the ordinary
business of the Partnership;
(c) confess a judgment against the Partnership;
(d) possess Partnership property or assign any rights in specific Partnership
property for other than a Partnership purpose;
(e) change or reorganize the Partnership into any other legal form;
(f) require any Limited Partner to make any contribution to the capital of the
Partnership not provided for herein; and
(g) amend this Agreement, except as provided for in Section 17.3.
10.4. No Management by Limited Partner. The Limited Partner shall take
no part in the conduct or control of the Partnership business nor have any
right or authority to act for or bind the Partnership. The exercise of the
rights and powers of the Limited partner under Section 10.3 shall not be deemed
taking part in the day-to-day affairs of the Partnership or the exercise of
control over Partnership affairs.
10.5. Conflicts of Interest. Any Partner may engage in or possess an interest
in other business ventures of any nature or description independently or with
others, and neither the Partnership nor any other Partner shall have any rights
in or to such independent ventures or the income or profits derived therefrom.
10.6. Limitations on General Partner's Liability. The General Partner will
not be liable, responsible or accountable in damages or otherwise to any other
Partner for any acts performed by it, or for his failure to act, in good
faith and within the scope of this Agreement, and not attributable to gross
negligence, malfeasance, fraud, breach of fiduciary duty or breach of any
express warranty or representation in this Agreement; and the Partnership,
but not any Partner, shall indemnify and hold harmless the General Partner
from any loss, damage, liability, cost or expense (including reasonable
attorneys' fees) arising out of any act or failure to act by it, if such act
or failure to act is in good faith, within the scope of this Agreement, and
is not attributable to gross negligence, malfeasance, fraud, breach of
fiduciary duty or breach of any express warranty or representation in this
Agreement.
Section XI - Obligations of the General Partner
11.1. Partnership Management. The General Partner shall manage the affairs
of the Partnership and act as the agent of the Partnership as sole Manager and
in such capacity shall perform for the Partnership all services customarily
performed by an entity engaged in the business of Video Streaming,
television broadcasting and related activities, in accordance with sound
management practices. In the event the General Partner resigns for any
reason, the General Partner shall employ a replacement to provide such
services at the then market rate for such services.
Section XII - Assignment of Interests of Partners
12.1. In General. The Interests of any Partner may be assigned only as
permitted by the provisions of this Section XII. Neither the Partnership nor
the Partners shall be bound by any such assignment until a counterpart of the
instrument of assignment, executed and acknowledged by the parties thereto,
is delivered to the Partnership, and such assignment shall be effective as of
the date specified therein. The Assignor shall pay all expenses in connection
with any assignment.
12.2. Restrictions on Transfer. The Limited Partner shall not transfer, sell,
assign, give or otherwise dispose of its Partnership Interest or any part
thereof, whether voluntarily or by operation of law, or at judicial sale or
otherwise, to any person, except with the written consent of the General
Partner.
12.3. Transfer by General Partner. The General Partner may assign his
interest in the Partnership without the written consent of the Limited partner.
12.4. Substituted Limited Partner. No assignee or transferee of all or part of
the Interests of the Limited Partner shall have the right to become a
Substituted Limited Partner, unless:
(a) the assignor has stated such intention in the instrument of assignment;
(b) the assignee has executed an instrument reasonably satisfactory to the
General Partner accepting and adopting the terms and provisions of this
Agreement;
(c) the assignor or assignee has paid any reasonable expenses in connection
with the assignment and/or admission of the assignee as a Limited Partner;
and
(d) in the case of an assignee or transferee who is not otherwise a Limited
Partner, the General Partner consents to such person's becoming a
Substituted Limited Partner (in the uncontrolled discretion of the General
Partner).
Section XIII - Dissolution and Termination
13.1. General. The Partnership shall be dissolved and, except as provided
in Section 13.2, its business wound up, upon the earliest to occur of:
(a) December 31, 2030;
(b) the General Partner, with the consent of the Limited Partner, determining
that the Partnership should be dissolved;
(c) the death, incompetency, bankruptcy, insolvency, retirement or
dissolution of the General Partner; or
(d) the sale of all or substantially all of the Partnership's assets.
13.2. Continuation of Partnership. Subject to his right to assign his interest
in the Partnership herein otherwise granted, the General Partner agrees to
serve as General Partner of the Partnership until the Partnership is terminated
without reconstitution as provided below. The General Partner agrees not to
take any action which will intentionally cause the termination of the
Partnership. Upon the occurrence of any event set forth in Section 13.1(c)
with respect to the General Partner or upon resignation of the General
Partner, the business of the Partnership shall be continued on the terms and
conditions of this Agreement if, within ninety (90) days after such event, the
Limited Partner shall elect in writing that the business of the Partnership
should be continued and shall designate one or more persons to be substituted
as General Partner or General Partners. In the event that the Limited Partner
elects so to continue the Partnership with a new General Partner(s), such new
General Partner(s) shall succeed to all of the powers, privileges and
obligations of the then existing General Partner(s) hereunder.
13.3. No Release of Contractual Obligations. It is understood and agreed,
however, that no dissolution of the Partnership shall release or relieve any of
the parties hereto of their contractual obligations under this Agreement.
13.4. Distributions of Cash or In Kind. Upon any such dissolution, all
Partnership assets shall be sold and the proceeds distributed, or such assets
distributed in kind if the General Partner so elects, to the Partners in their
respective shares as provided herein.
Section XIV - Accounting
14.1. Fiscal Year. The fiscal year of the Partnership shall be the calendar
year.
14.2. Method of Accounting. The General Partner shall maintain the
Partnership's management reports on a cash basis.
14.3. Books of Account. All of such books of account shall at all times, be
maintained at the Registered Office of the Partnership in the State of Texas,
1400 Turtle Creek Drive, Dallas, Texas 75207, or at such other location as
the General Partner, in his discretion, may determine, and shall be open
during reasonable business hours for the reasonable inspection and
examination by the Limited Partner or its authorized representatives, who
shall have the right to make copies thereof.
14.4. Tax Returns. The General Partner shall prepare, at Partnership
expense, or cause to be prepared such income tax returns for the Partnership
as may be necessary to comply with the laws of the United States and any
state, and shall provide to the Limited Partner a true and correct copy of each
such return promptly upon its completion.
Section XV - Reports and Statements
15.1. (a) Within seventy-five (75) days after the end of each fiscal year of
the Partnership, the General Partner shall cause to be delivered to the Limited
Partner an annual Cash Flow Report for the prior fiscal year of the
Partnership showing all income and expenses for said fiscal year. Said report
shall be delivered to the Limited partner together with any amounts
distributable to such Limited Partner pursuant to Section IX.
(b) On or before March 15th of the year following the end of each fiscal year
of the Partnership, the General Partner shall cause to be delivered to the
Limited Partner such information as shall be necessary (including a statement
for that year of each such Partner's share of net income, net gains and losses,
and other items of the Partnership) for the use by the Limited Partner in
preparation of its United States income and other tax returns.
(c) Within one hundred twenty (120) days after the end of each fiscal year
of the Partnership, beginning with the fiscal year ending December 31, 1997,
the General Partner shall cause to be delivered to the Limited partner
financial statements, at the expense of the Partnership, which financial
statements shall be prepared in accordance with generally accepted
accounting principles applied on a consistent basis and certified by an officer
of the General Partner as being true and complete.
Section XVI - Bank Accounts
16.1. The General Partner shall open and maintain a bank account or
accounts in which shall be deposited all funds of the Partnership.
Withdrawals from such account(s) shall be made upon the signature or
signatures of such person or persons as the General Partner shall designate.
Section XVII - Power of Attorney; Amendments
17.1. Power of Attorney. The Limited Partner hereby irrevocably makes,
constitutes and appoints the General Partner as its true and lawful attorney,
to make, sign, execute, acknowledge and file with respect to the Partnership:
(a) such Certificates of Limited Partnership and such Amended Certificates
of Limited Partnership as may be required by law pursuant to the provisions
of this Agreement;
(b) such assumed name certificates as the General Partner deems appropriate;
(c) documents or instruments which are required or helpful to conduct the
business of the Partnership or to comply with the laws of any country in
which it does business; and
(d) such amendments to this Agreement as are prescribed in Section 17.3
hereof.
17.2. Execution and Negotiation of Checks. The Limited Partner hereby
irrevocably makes, constitutes and appoints the General Partner as its true
and lawful attorney, to execute and negotiate any and all checks made
payable to the Partnership.
17.3. Amendments. Notwithstanding the provisions of this Section, when
acting in a representative capacity, the General Partner shall not have any
right, power or authority to amend or modify this Agreement except to
reflect:
(a) a change in the name of the Partnership;
(b) the admission, substitution and/or withdrawal of a limited partner;
(c) changes of addresses of the Partnership and any Partner;
(d) distributions of capital;
(e) compliance with the laws of any country in which the Partnership does
business;
(f) amendments which would not materially change the rights, duties and
obligations of the parties to this Agreement.
Section XVIII - Notices
18.1. Whenever any notice is required or permitted to be given under any
provisions of this Agreement, such notice shall be in writing, signed by or on
behalf of the person giving the notice, and shall be deemed to have been
given when delivered by personal delivery or mailed by certified mail,
postage prepaid, return receipt requested, addressed to the person or persons
to whom such notice is to be given as follows (or at such other address as
shall be stated on a notice similarly given):
(a) if to the General Partner, such notice shall be given at 22 Malvern Lane,
Stonybrook, New York 11790.
(b) if to the Limited Partner, such notice shall be given at 1400 Turtle Creek
Drive, Dallas, Texas 75207.
Section XIX - Binding Effect
19.1. Except as herein otherwise provided to the contrary, this Agreement
shall be binding upon and inure to the benefit of the parties hereto, their
personal representatives, successors and assigns.
Section XX - No Oral Modification
20.1. No modification or waiver of this Agreement or any part hereof shall
be valid or effective unless in writing and signed by the party or parties
sought to be charged therewith; and no waiver of any breach or condition of
this Agreement shall be deemed to be a waiver of any other subsequent
breach or condition, whether of like or different nature.
Section XXI - Applicable Laws
21.1. This Agreement shall be governed by and construed in accordance with
the laws of the State of Texas.
Section XXII - Counterparts
22.1. This Agreement may be executed in several counterparts, each of
which shall be deemed an original, and said counterparts shall constitute but
one and the same instrument which may be sufficiently evidenced by one
counterpart.
Section XXIII - Entire Agreement
23.1. This Agreement constitutes the entire agreement and understanding
between the parties and may not be modified or amended except as
specifically provided for in this Agreement.
IN WITNESS WHEREOF, the parties hereto have executed and certified this
Certificate and Agreement of Limited Partnership of WINQ-TV Video
Streaming (Paris), Ltd. as of the day and year first above written.
GENERAL PARTNER: LIMITED PARTNER:
/s/ Al Jones By: /s/ Gerald L. Beeson
Al Jones Gerald L. Beeson
Chief Executive Officer
<PAGE>
------------------------
EXHIBIT 10.2
------------------------
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of May 15, 1997, by and
between Definition, Ltd., a Nevada corporation with offices at 1400 Turtle
Creek Drive, Dallas, Texas 75207 ("DFNL"), and Gerald L. Beeson, an
individual resident of the State of Texas ("Beeson"), in light of the following
facts:
1. DFNL, through subsidiaries, is engaged in certain aspects of the
communications industry;
2. Beeson desires to acquire shares of Common Stock of DFNL; and
3. DFNL desires to issue shares of its Common Stock to Beeson.
WITNESSETH:
THEREFORE, the Agreement of the parties, the promises of each being
consideration for the promises of the other:
I. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below, including amendments hereof.
(a) "Agreement" shall mean this Stock Purchase Agreement and all
amendments hereof.
(b) "Beeson" shall mean Gerald L. Beeson, an individual resident of the
State of Texas and an officer and director of DFNL.
(c) "DFNL" shall mean Definition, Ltd., a Nevada corporation, and its
subsidiaries: (1) Interactive Systems, Inc., a Florida corporation;
and (2) Definition Technologies, Inc., a Texas corporation.
(d) "Knowledge of DFNL" or matters "known to DFNL" shall mean
matters actually known to the Board of Directors or officers of
DFNL, or which reasonably should be or should have been known
by them upon reasonable investigation.
(e) "Securities Act" shall mean the Securities Act of 1933, as amended,
and includes the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, as such shall then be in effect.
Any term used herein to which a special meaning has been ascribed shall be
construed in accordance with either (1) the context in which such term is
used, or (2) the definition provided for such terms in the place in this
Agreement at which such term is first used.
II. DISCLOSURES
Beeson hereby acknowledges that he is an officer and a director of DFNL and
has gained, in such capacities, knowledge of the business and financial status
of DFNL.
III. PURCHASE AND SALE
DFNL hereby sells to Beeson and Beeson hereby buys from DFNL 75,000
shares of the $.001 par value Common Stock of DFNL, at the price and
subject to all of the terms and conditions set forth herein.
IV. PURCHASE PRICE - PAYMENT
Beeson shall deliver to DFNL the sum of $5,000 in payment of the 75,000
shares of DFNL Common Stock purchased by Beeson hereunder, a per share
price of $.066, which payment shall be delivered as provided in paragraph VI
hereinbelow.
V. ISSUANCE OF THE COMMON STOCK
DFNL shall cause the 75,000 shares of its Common Stock purchased and sold
hereunder to be issued and delivered herewith.
VI. THE EXCHANGE
DFNL is delivering, along with an executed copy of this Agreement, a stock
certificate representing 75,000 shares of its Common Stock. Upon execution
by Beeson of this Agreement, Beeson agrees to deliver forthwith the sum of
$5,000 required to be delivered pursuant to paragraph IV hereinabove.
VII. REPRESENTATIONS AND WARRANTIES OF DFNL
DFNL represents and warrants to Beeson:
(a) Organization and Corporate Authority. DFNL is a corporation duly
organized, validly existing and in good standing under the laws of
the State of Nevada and is qualified to do business as a foreign
corporation in all jurisdictions where the ownership of property
or maintenance of an office would require qualification. DFNL
has all requisite corporate power and authority, governmental
permits, consents, authorizations, registrations, licenses and
memberships necessary to own its property and to carry on its business
in the places where such properties are now owned and operated
or such business is being conducted.
(b) Subsidiaries. DFNL, the issuer of the Common Stock sold hereunder,
has two subsidiary corporations: (1) Interactive Systems, Inc., a
Florida corporation; and (2) Definition Technologies, Inc., a
Texas corporation.
(c) Options, Warrants and Rights. DFNL has no outstanding options,
warrants or rights, conversion rights or other agreements for the
purchase or acquisition from DFNL of any shares of its capital stock.
(d) Issuance of the Common Stock. The shares of Common Stock of DFNL,
when issued and delivered in accordance with this Agreement, will be
duly and validly issued, fully paid and nonassessable, and will be
free and clear of any liens or encumbrances and, to the knowledge
of DFNL, will be issued in compliance with applicable state and
federal laws.
(e) Financial Condition. Currently, DFNL operates at a loss, and has
so operated for not less than the six months preceding the date
of this Agreement.
(f) Undisclosed or Contingent Liabilities. To the best knowledge of
DFNL, DFNL has no contingent liabilities.
(g) Litigation. DFNL is not a party to any suit, action, proceeding,
investigation or labor dispute (collectively "actions") pending or
currently threatened against it other than administrative matters arising
in the ordinary course of business and which, if determined against
DFNL would result in a materially adverse effect.
(h) Compliance with Agreements. The execution and performance
of this Agreement will not result in any violation or be in conflict
with any agreement to which DFNL is a party.
(i) Title to Property and Assets. DFNL has good and marketable title
to its properties and assets free and clear of all mortgages, liens,
security interests and incumbrances, except as is known by Beeson.
(j) Franchises, Permits, etc. To the knowledge of DFNL, it has all
franchises, permits, licenses, orders and approvals of any federal,
state, local or foreign government of self regulatory body
(collectively, the "Permits") that are material to or necessary for
the conduct of its business.
(k) Governmental Consents. To the knowledge of DFNL, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental authority
on the part of DFNL is required in connection with the valid
execution, delivery and performance of this Agreement, except
for the possible filing of a Notice under Regulation D promulgated
under the Securities Act and any filings required by applicable
state securities laws, all of which shall be properly and timely
filed by DFNL.
(l) Authorization. All corporate action on the part of DFNL and its
officers, directors and shareholders necessary for the authorization,
execution and delivery of this Agreement, for the performance
of DFNL's obligations hereunder and for the issuance and delivery
of the Common Stock has been taken or will be taken prior to
the Closing. This Agreement, when executed and delivered, shall
constitute a legal, valid and binding obligation of DFNL.
VIII. REPRESENTATIONS AND WARRANTIES OF BEESON
(a) Beeson represents and warrants to DFNL that he is under no legal
disability with respect to entering into this Agreement.
(b) Beeson represents and warrants that he is an "accredited investor"
within the meaning of that term as used in Rule 501 of Regulation
D of the Rules and Regulations of the Securities and Exchange
Commission and is capable, through experience and financial
strength, to make and understand an investment decision
leading to the purchase of the Common Stock of DFNL
contemplated herein.
(c) Beeson represents and warrants that the shares of Common Stock
are being purchased by him solely for his own account for
investment purposes only and not for the account of any other
person and not for distribution, assignment or resale to others.
(d) Beeson further consents to the placement of the following legend, or
a legend similar thereto, on the certificates representing shares of
Common Stock:
THESE SECURITIES HAVE BEEN ISSUED IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2)
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED WITHOUT AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT
ANY SUCH PROPOSED TRANSFER IS IN ACCORDANCE WITH ALL
APPLICABLE LAWS, RULES AND REGULATIONS.
IX. MISCELLANEOUS
(a) Survival of Covenants. Unless otherwise waived as provided herein, all
covenants agreements, representations and warranties of the parties made in
this Agreement and in the financial statements or other written information
delivered or furnished in connection therewith and herewith shall survive the
Exchange hereunder, and shall be binding upon, and inure to the benefit of,
the parties and their respective successors and assigns.
(b) Governing Law. This Agreement shall be deemed to be a contract made
under, governed by and construed in accordance with the substantive laws of
the State of Texas.
(c) Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute but one and the
same documents.
(d) Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(e) Entire Agreement. This Agreement, the other agreements and the other
documents delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year first above written.
"DFNL":
DEFINITION, LTD.
By: /s/ Miguel O. Coindreau
Miguel O. Coindreau
Executive Vice President
"BEESON":
/s/ Gerald L. Beeson
Gerald L. Beeson
<PAGE>
------------------------
EXHIBIT 10.3
------------------------
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of May 15, 1997, by and
between Definition, Ltd., a Nevada corporation with offices at 1400 Turtle
Creek Drive, Dallas, Texas 75207 ("DFNL"), and Michael B. DeLuise, an
individual resident of the State of New York ("DeLuise"), in light of the
following facts:
1. DFNL, through subsidiaries, is engaged in certain aspects of the
communications industry;
2. DeLuise desires to acquire shares of Common Stock of DFNL; and
3. DFNL desires to issue shares of its Common Stock to DeLuise.
WITNESSETH:
THEREFORE, the Agreement of the parties, the promises of each being
consideration for the promises of the other:
I. DEFINITIONS
Whenever used in this Agreement, the following terms shall have the
meanings set forth below, including amendments hereof.
(a) "Agreement" shall mean this Stock Purchase Agreement and all
amendments hereof.
(b) "DeLuise" shall mean Michael B. DeLuise, an individual resident of the
State of New York and a director of DFNL.
(c) "DFNL" shall mean Definition, Ltd., a Nevada corporation, and
its subsidiaries: (1) Interactive Systems, Inc., a Florida corporation;
and (2) Definition Technologies, Inc., a Texas corporation.
(d) "Knowledge of DFNL" or matters "known to DFNL" shall mean
matters actually known to the Board of Directors or officers of DFNL,
or which reasonably should be or should have been known by them
upon reasonable investigation.
(e) "Securities Act" shall mean the Securities Act of 1933, as amended, and
includes the rules and regulations of the Securities and Exchange
Commission promulgated thereunder, as such shall then be in effect.
Any term used herein to which a special meaning has been ascribed shall be
construed in accordance with either (1) the context in which such term is
used, or (2) the definition provided for such terms in the place in this
Agreement at which such term is first used.
II. DISCLOSURES
DeLuise hereby acknowledges that he is a director of DFNL and has gained,
in such capacity, knowledge of the business and financial status of DFNL.
III. PURCHASE AND SALE
DFNL hereby sells to DeLuise and DeLuise hereby buys from DFNL 75,000
shares of the $.001 par value Common Stock of DFNL, at the price and
subject to all of the terms and conditions set forth herein.
IV. PURCHASE PRICE - PAYMENT
DeLuise shall deliver to DFNL the sum of $5,000 in payment of the 75,000
shares of DFNL Common Stock purchased by DeLuise hereunder, a per share
price of $.066, which payment shall be delivered as provided in paragraph VI
hereinbelow.
V. ISSUANCE OF THE COMMON STOCK
DFNL shall cause the 75,000 shares of its Common Stock purchased and sold
hereunder to be issued and delivered herewith.
VI. THE EXCHANGE
DFNL is delivering, along with an executed copy of this Agreement, a stock
certificate representing 75,000 shares of its Common Stock. Upon execution
by DeLuise of this Agreement, DeLuise agrees to deliver forthwith the sum
of $5,000 required to be delivered pursuant to paragraph IV hereinabove.
VII. REPRESENTATIONS AND WARRANTIES OF DFNL
DFNL represents and warrants to DeLuise:
(a) Organization and Corporate Authority. DFNL is a corporation duly
organized, validly existing and in good standing under the laws of the State
of Nevada and is qualified to do business as a foreign corporation in all
jurisdictions where the ownership of property or maintenance of an office
would require qualification. DFNL has all requisite corporate power and
authority, governmental permits, consents, authorizations, registrations,
licenses and memberships necessary to own its property and to carry on its
business in the places where such properties are now owned and operated or
such business is being conducted.
(b) Subsidiaries. DFNL, the issuer of the Common Stock sold hereunder,
has two subsidiary corporations: (1) Interactive Systems, Inc., a Florida
corporation; and (2) Definition Technologies, Inc., a Texas corporation.
(c) Options, Warrants and Rights. DFNL has no outstanding options,
warrants or rights, conversion rights or other agreements for the purchase or
acquisition from DFNL of any shares of its capital stock.
(d) Issuance of the Common Stock. The shares of Common Stock of DFNL,
when issued and delivered in accordance with this Agreement, will be duly
and validly issued, fully paid and nonassessable, and will be free and clear of
any liens or encumbrances and, to the knowledge of DFNL, will be issued in
compliance with applicable state and federal laws.
(e) Financial Condition. Currently, DFNL operates at a loss, and has so
operated for not less than the six months preceding the date of this
Agreement.
(f) Undisclosed or Contingent Liabilities. To the best knowledge of DFNL,
DFNL has no contingent liabilities.
(g) Litigation. DFNL is not a party to any suit, action, proceeding,
investigation or labor dispute (collectively "actions") pending or currently
threatened against it other than administrative matters arising in the ordinary
course of business and which, if determined against DFNL would result in a
materially adverse effect.
(h) Compliance with Agreements. The execution and performance of this
Agreement will not result in any violation or be in conflict with any
agreement to which DFNL is a party.
(i) Title to Property and Assets. DFNL has good and marketable title to its
properties and assets free and clear of all mortgages, liens, security interests
and incumbrances, except as is known by DeLuise.
(j) Franchises, Permits, etc. To the knowledge of DFNL, it has all
franchises, permits, licenses, orders and approvals of any federal, state, local
or foreign government of self regulatory body (collectively, the "Permits")
that are material to or necessary for the conduct of its business.
(k) Governmental Consents. To the knowledge of DFNL, no consent,
approval, order or authorization of, or registration, qualification,
designation, declaration or filing with, any governmental authority on the part
of DFNL is required in connection with the valid execution, delivery and
performance of this Agreement, except for the possible filing of a Notice under
Regulation D promulgated under the Securities Act and any filings required by
applicable state securities laws, all of which shall be properly and timely
filed by DFNL.
(l) Authorization. All corporate action on the part of DFNL and its officers,
directors and shareholders necessary for the authorization, execution and
delivery of this Agreement, for the performance of DFNL's obligations
hereunder and for the issuance and delivery of the Common Stock has been
taken or will be taken prior to the Closing. This Agreement, when executed
and delivered, shall constitute a legal, valid and binding obligation of DFNL.
VIII. REPRESENTATIONS AND WARRANTIES OF DeLUISE
(a) DeLuise represents and warrants to DFNL that he is under no legal
disability with respect to entering into this Agreement.
(b) DeLuise represents and warrants that he is an "accredited investor"
within the meaning of that term as used in Rule 501 of Regulation D of the
Rules and Regulations of the Securities and Exchange Commission and is
capable, through experience and financial strength, to make and understand
an investment decision leading to the purchase of the Common Stock of
DFNL contemplated herein.
(c) DeLuise represents and warrants that the shares of Common Stock are
being purchased by him solely for his own account for investment purposes
only and not for the account of any other person and not for distribution,
assignment or resale to others.
(d) DeLuise further consents to the placement of the following legend, or a
legend similar thereto, on the certificates representing shares of Common
Stock:
THESE SECURITIES HAVE BEEN ISSUED IN RELIANCE UPON THE
EXEMPTION FROM REGISTRATION AFFORDED BY SECTION 4(2)
OF THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE TRANSFERRED WITHOUT AN OPINION OF COUNSEL
SATISFACTORY TO THE CORPORATION TO THE EFFECT THAT
ANY SUCH PROPOSED TRANSFER IS IN ACCORDANCE WITH ALL
APPLICABLE LAWS, RULES AND REGULATIONS.
IX. MISCELLANEOUS
(a) Survival of Covenants. Unless otherwise waived as provided herein, all
covenants agreements, representations and warranties of the parties made in
this Agreement and in the financial statements or other written information
delivered or furnished in connection therewith and herewith shall survive the
Exchange hereunder, and shall be binding upon, and inure to the benefit of,
the parties and their respective successors and assigns.
(b) Governing Law. This Agreement shall be deemed to be a contract made
under, governed by and construed in accordance with the substantive laws of
the State of Texas.
(c) Counterparts. This Agreement may be executed simultaneously in
counterparts, each of which when so executed and delivered shall be taken to
be an original; but such counterparts shall together constitute but one and the
same documents.
(d) Successors and Assigns. Except as otherwise expressly provided herein,
the provisions hereof shall inure to the benefit of, and be binding upon, the
successors, assigns, heirs, executors and administrators of the parties hereto.
(e) Entire Agreement. This Agreement, the other agreements and the other
documents delivered pursuant hereto and thereto constitute the full and entire
understanding and agreement between the parties with regard to the subjects
hereof and thereof.
IN WITNESS WHEREOF, the parties have signed this Agreement as of the
day and year first above written.
"DFNL":
DEFINITION, LTD.
By: /s/ Gerald L. Beeson
Gerald L. Beeson
Chief Executive Officer
"DeLUISE":
/s/ Michael B. DeLuise
Michael B. DeLuise
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<PERIOD-END> MAR-30-1997
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