Execution Copy
EXCHANGE AGREEMENT
EXCHANGE AGREEMENT dated as of May 8, 1997 (the "Agreement") among
MagnaVision Corporation, a Delaware corporation (the "Company"), IBJS Capital
Corporation, a Delaware corporation ("IBJSCC"), and KOCO Capital Company, L.P.,
a Delaware limited partnership ("KOCO" and, together with IBJSCC, the
"Investors"). Certain terms used herein are defined in Section 10 below.
A. The Investors presently hold an aggregate of $5,000,000 principal
amount of Senior Subordinated Notes (the "Notes") of MagnaVision Corporation, a
New Jersey corporation and a wholly-owned subsidiary of the Company, and
warrants to purchase an aggregate of 17,088,409 shares of the Common Stock,
$.004 par value (the "Common Stock"), of the Company (the "Existing Warrants").
B. The Company desires to acquire the Notes and Existing Warrants from
the Investors in exchange for an aggregate of 5,000,000 shares of the Company's
Series A Preferred Stock, $.10 par value (the "Preferred Stock"), and warrants
to purchase an aggregate of 1,826,932 shares of Common Stock, representing
approximately 58% of the fully-diluted Common Stock outstanding after giving
effect to a 20-for-1 reverse split of the Common Stock to be effected prior to
the Closing (the "New Warrants").
THEREFORE, in consideration of the mutual undertakings set forth
herein, the parties agree as follows:
Section 1. Authorization of Securities. The Company has previously
authorized the issuance of (i) 5,000,000 shares of its Preferred Stock (the
"Shares") with the terms set forth in the Certificate of Amendment to the
Company's Certificate of Incorporation attached as Exhibit A hereto (the
"Amendment"), and (ii) the New Warrants in the form of Exhibit B hereto.
Section 2. Exchange of Securities. Upon the terms and subject to the
conditions of this Agreement, at the Closing (as defined in Section 3 below),
the Investors agree to acquire the Shares and the New Warrants from the Company
in exchange for the Notes and the Existing Warrants, and the Company agrees to
issue and deliver the Shares and the New Warrants to the Investors. IBJSCC shall
receive 3,000,000 Shares and 1,096,159 New Warrants and KOCO shall receive
2,000,000 Shares and 730,773 New Warrants pursuant to this Section 2. In
connection with such exchange, all accrued and unpaid interest on the Notes
shall be paid at Closing in the form of one-year promissory notes of the Company
bearing interest at 10% per annum.
Section 3. The Closing. The closing of the exchange of securities
pursuant to Section 2 (the "Closing") shall be held at the New York City offices
of Zimet, Haines, Xxxxxxxx & Xxxxxx
on the first business day following the satisfaction or waiver of the conditions
set forth in Section 8 hereof, but in no event later than May 8, 1997 (the
"Closing Date"). At the Closing, (i) the Investors shall deliver to the Company
the certificates representing the Notes and Existing Warrants, and (ii) the
Company shall deliver to the Investors certificates representing the Shares and
the New Warrants duly registered in the names of the Investors or their
designee(s). Concurrently with the Closing, the indebtedness represented by the
Notes shall be discharged and treated as a capital contribution by the Company
to the Subsidiary and the Old Warrants shall be cancelled. On and after the
Closing Date, the Investors shall take all action reasonably requested by the
Company (at the Company's expense) as is necessary to terminate the Securities
Purchase Agreement dated August 25, 1995 and the related Security Agreement and
Collateral Assignment, Lockbox Service Agreement, Pledge Agreements (and
associated General Indentures of Assignment and Transfer and of Assumption of
Liabilities), Irrevocable Proxy from Magnavision Corporation, a New Jersey
corporation, to the Investors and their affiliates and Registration Rights
Agreement, to release the liens securing the Notes and to surrender all
securities in their possession held as collateral for the Notes, in each case
without recourse to or warranty by the Collateral Agent or any Investor (as such
terms are defined in such documents); provided, however, that the provisions of
Article XI and Sections 12.4, 12.5 and 12.15 of the Securities Purchase
Agreement shall survive such termination.
Section 4. Representations and Warranties of the Company. In order to
induce the Investors to enter into this Agreement and to acquire the Shares and
New Warrants, the Company hereby makes the following representations and
warranties to the Investors:
(a) Organization; Corporate Authority. The Company and each direct or
indirect subsidiary of the Company (collectively, the "Subsidiaries"): (i) is a
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation, (ii) has all requisite corporate power
and all governmental licenses, authorizations, consents, permits and approvals
(including any license, authorization, consent, permit and approval required
under any Environmental Law) necessary to own its assets and carry on its
business as now conducted or as proposed to be conducted, and (iii) is qualified
to do business and in good standing in all jurisdictions in which the nature of
the business conducted by it makes such qualification necessary and where
failure to so qualify would have a material adverse effect on the business,
assets, liabilities, operations, results of operations, condition (financial or
otherwise) or prospects of the Company and the Subsidiaries taken as a whole, or
on the Company's ability to perform its obligations under the Transaction
Documents (a "Material Adverse Effect").
(b) Due Authorization; Enforceability. The Company has all requisite
corporate power necessary to consummate the transactions contemplated by this
Agreement, the New Warrants and the related Stockholders Agreement and
Registration Rights Agreement (collectively, the "Transaction Documents"). The
execution, delivery and performance by the Company of the Transaction Documents
have been duly authorized by all necessary corporate action on the part of the
Company. The Transaction Documents have been duly and validly executed and
delivered
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by the Company and constitute the legal, valid and binding obligations of the
Company enforceable in accordance with their respective terms.
(c) Capitalization. Giving effect to a 20-for-1 reverse split of the
Common Stock to be effected prior to the Closing, the Company's outstanding
capital stock consists of 1,152,575 shares of Common Stock which are held,
beneficially and of record, as set forth on Schedule 4(c). All of such
outstanding shares have been duly authorized and validly issued and are fully
paid and nonassessable with no personal liability attaching to the ownership
thereof. The Company owns all of the outstanding capital stock of each
Subsidiary, all of which are listed on Schedule 4(c), and the Company has no
direct or indirect equity or other ownership interest in any other entity.
Except for outstanding options and warrants to purchase a total of 170,375
shares of Common Stock (giving effect to the reverse split and the issuance of
warrants to purchase 15,000 additional shares which the Company is contractually
obligated to issue) as set forth on Schedule 4(c) and except for the shares of
Common Stock issuable upon the exercise of the New Warrants, neither the Company
nor any Subsidiary has granted or issued, or agreed to grant or issue, any
options, warrants or similar rights to acquire, subscribe for or receive any of
the shares of any class of capital stock of the Company or any Subsidiary, any
securities convertible into or exchangeable for shares of such capital stock, or
any stock appreciation, "phantom stock" or similar rights with respect to such
capital stock. After giving effect to the consummation of the transactions
contemplated hereby, the Shares will have been duly authorized and validly
issued and will be fully paid and non-assessable, with no personal liability
attaching to the ownership thereof, and will be free from any and all liens,
charges, pledges, encumbrances, security interests and similar restrictions
(collectively, "Liens"). The Common Stock issuable upon exercise of the New
Warrants has been duly authorized and reserved for issuance and is not subject
to any preemptive rights or rights of first refusal. When issued against payment
therefor in accordance with the terms of the New Warrants, such Common Stock
will be duly authorized, validly issued, fully paid and non-assessable, with no
personal liability attaching to the ownership thereof, and will be free from any
and all Liens.
(d) Financial Statements; No Undisclosed Liabilities. Except as set
forth on Schedule 4(d), the Company's audited consolidated financial statements
for the fiscal years ended December 31, 1996 and 1995 previously submitted to
the Investors (i) fairly present the Company's consolidated financial position
and results of operations at the dates thereof and for the periods covered
thereby, and (ii) disclose all liabilities (including contingent and/or
unmatured liabilities) which are required to be disclosed thereon, in each case
described in clause (i) and (ii) above in accordance with GAAP. Except as set
forth or provided for in the Company's audited consolidated balance sheet as of
December 31, 1996 (the "Latest Balance Sheet"), as of the Closing Date, neither
the Company nor any Subsidiary will have any liabilities, contingent or
otherwise, which could reasonably be expected to have a Material Adverse Effect.
(e) Material Adverse Change. Except as set forth on Schedule 4(e) or as
disclosed on the Latest Balance Sheet, the Company and the Subsidiaries have
been operated in the ordinary
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course, consistent with past practice, and there has been no change or
development that could reasonably be expected to have a Material Adverse Effect.
(f) Litigation. Except as set forth on Schedule 4(f), there are no
legal or arbitral proceedings, or any proceedings by or before any governmental
or regulatory authority or agency, now pending or threatened against or
affecting the Company or any Subsidiary which, if adversely determined, could
reasonably be expected to have a Material Adverse Effect.
(g) No Breach. The execution and delivery of this Agreement and the
Transaction Documents and the consummation of the transactions contemplated
thereby and compliance with the terms and provisions thereof will not conflict
with or result in a breach of, or require any consent, waiver, filing or
notification under, the certificate of incorporation or by-laws of the Company
or any Subsidiary, any applicable law or regulation, any order, writ, injunction
or decree of any court or governmental authority or agency, or any material
agreement or instrument to which the Company or any Subsidiary is a party or by
which it is bound or to which it is subject, or constitute a default under any
such agreement or instrument or result in the creation or imposition of any Lien
upon any of the revenues or assets of the Company or any Subsidiary pursuant to
the terms of any such agreement or instrument.
(h) Approvals. The Company has obtained all authorizations, approvals
and consents of, and has made all filings and registrations with, any
governmental or regulatory authority or agency necessary for the execution,
delivery or performance by it of the Transaction Documents or for the validity
or enforceability thereof.
(i) ERISA. The Company and each of its ERISA Affiliates have fulfilled
their obligations under the minimum funding standards of ERISA and the Code with
respect to each Plan and each is in compliance in all material respects with all
applicable provisions of ERISA and the Code, and have not incurred any liability
to the PBGC or a Plan under Title IV of ERISA (other than to make contributions
or premium payments in the ordinary course). Neither the Company nor its ERISA
Affiliates has any actual or potential liability to any Multiemployer Plan.
(j) Taxes. Except as set forth on Schedule 4(j), the Company and each
Subsidiary has filed all United States federal and state income tax returns and
all other material tax returns which are required to be filed by it. Such
returns are true and accurate in all material respects, and the Company and each
Subsidiary has paid all taxes due pursuant to such returns or pursuant to any
assessment received by it, except to the extent the same may be contested in
good faith and as to which adequate reserves are reflected on the Latest Balance
Sheet. The charges, accruals and reserves on the Latest Balance Sheet in respect
of taxes and other governmental charges are adequate in all material respects.
(k) Title to Properties. Except as set forth on Schedule 4(k), the
Company and the Subsidiaries have good and marketable title to all of their
properties and assets (including real property and tangible and intangible
personal property), in each case free and clear of all Liens
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other than Permitted Liens (as defined in Section 7(b)). The Company and each
Subsidiary owns, or is licensed to use, all licenses, service marks, franchises,
trademarks, tradenames, patents, patent applications, copyrights, technology,
know-how, processes and other intellectual and proprietary rights (collectively,
the "Intellectual Property") necessary for the conduct of its business. Schedule
4(k) contains a list of all licenses, franchises, patents, patent applications,
trademark, tradename and service xxxx registrations and applications therefor,
and copyright registrations and applications therefor, owned by the Company and
the Subsidiaries. Except as set forth in Schedule 4(k), no material claim has
been asserted or is pending with respect to the use by the Company or the
Subsidiaries of any Intellectual Property or challenging or questioning the
validity or effectiveness of any Intellectual Property necessary or desirable
for the conduct of the business of the Company or the Subsidiaries.
(l) Contracts. Schedule 4(l) sets forth a complete list as of the date
hereof of each material agreement, contract, guaranty, indenture or instrument
to which the Company or the Subsidiary is a party or by which any of its
respective properties are or may be bound (collectively, the "Contracts"),
correct and complete copies of which have been provided to the Investors. Each
Contract is the binding obligation of the Company or the applicable Subsidiary
and, to the Company's best knowledge, the binding obligation of each of the
other parties thereto, in each case enforceable in accordance with its terms.
Neither the Company or any Subsidiary nor to the Company's best knowledge the
other party thereto is in default in the performance, observance or fulfillment
of any of the obligations, covenants or conditions contained in any Contract to
which it is a party.
(m) No Material Misstatements. All information, including financial
information, provided or to be provided from time to time to the Investors in
connection with this Agreement and the Transaction Documents is true and
correct, and none of the documentation furnished to the Investors by the
Company, or any other statement furnished by or on behalf of the Company to the
Investors in connection with the negotiation or confirmation of the transactions
contemplated hereby or by the Transaction Documents, contains or will contain
any untrue statement of a material fact or omits or will omit a material fact
necessary to make the statements contained therein, in light of the
circumstances in which they were made, not misleading and all such statements,
taken as a whole, do not and will not contain any untrue statement of a material
fact or omit a material fact necessary to make the statements contained herein
or therein not misleading, and all expressions of expectation, intention, belief
and opinion contained therein were, and will be, honestly made on reasonable
grounds after due and careful inquiry by the Company (and any other Person who
furnished such material). There is not, and will not be, any fact which the
Company has not disclosed to the Investors in writing which has had or is
reasonably likely to have a Material Adverse Effect.
(n) Outstanding Debt. Schedule 4(n) lists all Indebtedness of the
Company and the Subsidiaries. There does not exist any default under any
Contract relating to or evidencing any Indebtedness of the Company or the
Subsidiaries (or any event which, with only the giving of notice or the passage
of time or both, would result in such a breach or default).
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(o) Certain Regulations. Neither the Company nor any Subsidiary is an
"investment company" or an "affiliate" of an "investment company" as defined in,
or subject to regulation under, the Investment Company Act of 1940, as amended.
Neither the Company nor any Subsidiary is a "holding company" as defined in, or
subject to regulation under, the Public Utility Holding Company Act of 1935, as
amended.
(p) Capital Stock. Giving effect to the transactions contemplated
hereby, there are no restrictions upon the voting rights associated with, or the
transfer of, any of the capital stock of the Company, except as provided by (a)
United States or state securities laws or (b) the terms and provisions of the
Stockholders Agreement.
(q) Small Business Matters. The Company, together with its "affiliates"
(as that term is defined in Title 13, Code of Federal Regulations, ss.121.401)
is a "small business concern" within the meaning of the Small Business
Investment Act of 1958 and the regulations thereunder, including Title 13, Code
of Federal Regulations, ss.121.802. The information set forth in the Small
Business Administration Forms 480 and 652 regarding the Company and its
Affiliates to be delivered on the Closing Date is correct and complete. Neither
the Company nor any Subsidiary presently engages in, and shall not hereafter
engage in, any activities, nor shall the Company or any Subsidiary use directly
or indirectly the proceeds from the exercise of the New Warrants by any Investor
that is a Small Business Investment Company, for any purpose for which an SBIC
is prohibited from providing funds by the Small Business Investment Act of 1958
and the regulations thereunder, including Title 13, Code of Federal Regulations,
ss.107.901. If the Company breaches this representation in any material respect,
then in addition to all other remedies available to the Investors, an Investor
may demand that the Company immediately repurchase all securities of the Company
held by such Investor at their original cost plus accrued dividends or interest.
(r) Compliance; Licenses and Permits.
(i) The Company and the Subsidiaries have complied in all material
respects with all federal, state, local or foreign laws, ordinances,
regulations or orders applicable to its business. The Company and the
Subsidiaries have all material federal, state, local and foreign
governmental licenses and permits which are required for the conduct of
their business as presently conducted, which licenses and permits are
in full force and effect, and no violations are outstanding or uncured
with respect to any such licenses or permits and no proceeding is
pending or, to the best of the Company's knowledge, threatened to
revoke or limit any thereof. Schedule 4(r) lists all federal, state,
local and foreign governmental licenses and permits of the Company and
the Subsidiaries which are used in or relate to their respective
businesses.
(ii) Neither the Company nor any Subsidiary is in material
violation of, and none of their facilities or assets as currently used
violates in any material respect, any applicable Environmental Law, and
no condition or event has occurred which, with
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notice or the passage of time or both, would constitute a material
violation of any Environmental Law.
(iii) The Company and the Subsidiaries are in possession of all
material Environmental Permits required under any applicable
Environmental Law for the conduct or operation of its business (or any
part thereof), and are in compliance with all of the requirements and
limitations included in such Environmental Permits.
(iv) Neither the Company nor any Subsidiary is the subject of
federal, state, local or private litigation or proceedings involving a
demand for damages or other potential liability with respect to
violations of Environmental Laws.
(v) Neither the Company nor any Subsidiary is liable, directly or
indirectly, in connection with any release of any hazardous substance
into the environment in violation of Environmental Laws, nor do there
exist any facts upon which a finding of such liability could be based.
(vi) The Company and each Subsidiary has complied in all material
respects with the filing and reporting requirements under all
applicable Environmental Laws and has maintained in all material
respects all required data, documentation and records under all
applicable Environmental Laws.
(s) Business Plan and Projections. The Company's current Business Plan
set forth on Schedule 4(s) is complete and correct in all material respects and
the forecasts and projections included therein are based on estimates and
assumptions which are reasonable in light of the conditions which existed at the
time of their preparation and which exist on the date hereof and constitute
reasonable estimations of (but do not guarantee) the future performance of the
Company.
(t) Communications Act. Neither the Company nor any Subsidiary
qualifies as a "cable television company" prohibited from leasing transmission
time or capacity from a licensee of a station within the meaning of 47 C.F.R.
ss. 74.931(h).
(u) License Applications. The Company has rights as sublicensee in
wireless frequency license applications covering 16 ITFS channels in Monmouth
and Ocean Counties, New Jersey. To the Company's best knowledge, the applicants
for such licenses have duly filed applications therefor with the Federal
Communications Commission (the "FCC") and have taken all actions required by the
FCC to obtain such licenses, and the Company is not aware of any reason why such
licenses will not be granted by the FCC in the ordinary course.
Section 5. Representations and Warranties of the Investors. Each
Investor represents and warrants to the Company, severally and not jointly, as
follows:
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(a) Each Transaction Document to which it is a party constitutes the
valid and binding obligation of the Investor, enforceable against it in
accordance with its respective terms.
(b) It is acquiring the Shares and the New Warrants, and will acquire
the Common Stock underlying the New Warrants (the "Warrant Shares"), for its own
account with the intention of holding the same for investment and not with a
view to the distribution thereof in violation of applicable securities laws.
(c) It understands that the Shares, the New Warrants and the Warrant
Shares have not been registered under the Securities Act of 1933, as amended
(the "Securities Act"), or any applicable state securities laws in reliance upon
exemptions contained in the Securities Act and such applicable state securities
laws, and that the Company's reliance upon such exemptions is based in part on
the representations of the Investors contained in this Agreement. The Investor
further understands and acknowledges that the Shares, the New Warrants and the
Warrant Shares must be held indefinitely unless a subsequent disposition thereof
is registered under the Securities Act and applicable state securities laws or
unless such disposition is exempt from registration thereunder.
(d) It is an "accredited investor" as such term is defined in Rule 501
promulgated under the Securities Act.
(e) It has sufficient knowledge and experience in financial and
business matters so as to be capable of evaluating the merits and risks of the
investment contemplated hereby.
(f) It has received copies of such documents and other information as
it has deemed necessary in order to make an informed investment decision with
respect to the investment being made hereby, and the Company has made its
officers available to the Investors to answer the Investors' questions
concerning the Company and the investment being made hereby.
(g) The principal offices of such Investor are located in New York and
substantially all of the decisions with respect to the investment being made
hereby were made at such location.
Section 6. Affirmative Covenants. The Company covenants and agrees with
the Investors that, so long as any Shares or New Warrants remain outstanding,
the Company and each Subsidiary (collectively, the "Entities") shall comply with
the covenants set forth in this Section 6, except where such compliance is
prevented by action of a majority of the Investor Directors.
(a) Corporate Existence. Each Entity shall do or cause to be done all
things necessary to preserve, renew and keep in full force and effect its
corporate existence and any necessary state or other qualifications (other than
any qualifications the absence of which, in the aggregate, would not result in a
Material Adverse Effect).
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(b) Obligations and Taxes. Each Entity shall pay or discharge, or cause
to be paid or discharged, before the same shall become delinquent (a) all taxes,
assessments and governmental charges or levies imposed upon it or upon its
income or profits or in respect of its business or property unless such taxes,
assessments or governmental charges are being paid in accordance with the terms
of an agreement with the applicable taxing authority, (b) all lawful claims for
labor, materials and supplies, (c) all required payments under any Indebtedness
and (d) all other obligations; provided, however, that it shall not be required
to pay or discharge or to cause to be paid or discharged any such amount so long
as the validity or amount thereof shall be contested in good faith in an
appropriate manner and appropriate reserves and accruals have been made with
respect thereto.
(c) Performance Under Agreements. Each Entity shall perform its
obligations under each Transaction Document and each other Contract to which it
is a party; provided, however, that an Entity shall not be required to so
perform its obligations under any Contract (other than this Agreement and any
other Transaction Document) to the extent it is reasonably contesting such
obligations in good faith and in an appropriate manner and, if required by GAAP,
it has made appropriate reserves and accruals with respect thereto.
(d) Access to Properties and Inspections. The Entities shall maintain
financial records in accordance with GAAP sufficient to allow the Company to
prepare the financial statements, certificates and reports required by Section
6(h) hereof. Each Entity shall permit any authorized representative or agent of
the Investors to visit and inspect its properties and records and to make
extracts from such records, and permit any authorized representative or agent of
the Investors to discuss its affairs, finances and condition with such of its
officers, key employees and independent accountants as the Investors shall deem
appropriate. Delivery of a copy of this Agreement to the independent accountants
acting as auditors for an Entity shall constitute instructions to such
accountants to discuss the financial condition of such Entity with the Investors
and their representatives, and to permit the Investors and their representatives
to inspect, copy and make extracts from all financial statements, analyses, work
papers and other documents and information (including electronically stored
documents and information) prepared by such accountants with respect to such
Entity.
(e) Notices of Litigation, Claims, Etc. The Company shall promptly upon
obtaining notice of the occurrence thereof (but in no event more than 10 days
after obtaining notice of the occurrence thereof), provide the Investors with
written notice of any of the following events:
(i) the issuance by any governmental authority of any injunction,
order or decision involving any Entity or its respective properties;
(ii) the filing or commencement of any action, suit or proceeding
against or affecting any Entity or its properties, whether at law or in
equity or by or before any court or any United States, state, or other
governmental authority;
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(iii) the imposition of any Lien which is not a Permitted Lien;
(iv) any claim, demand or action impairing title to any of the
properties or assets of any Entity;
(v) any other adverse action by or notice from a governmental
authority with respect to any Entity or any of its respective
properties;
(vi) any default by any Entity under any Indebtedness; and
(vii) any development in the business or affairs of any Entity
which could reasonably be expected to have a Material Adverse Effect.
Each notice shall specify, as applicable, (i) the nature and extent thereof,
(ii) any rights of any other parties thereto with respect to termination,
acceleration or similar provisions and (iii) any corrective action taken or
proposed to be taken with respect thereto.
(f) Legal Compliance. Each Entity shall comply in all material respects
with all applicable laws, including Environmental Laws, and shall maintain all
required clearances, consents, permits and approvals of governmental
authorities.
(g) Business and Properties. Each Entity shall:
(i) at all times do or cause to be done all things necessary to (A)
preserve, renew and keep in full force and effect the material rights,
licenses, permits, franchises and concessions necessary to, or used or
useful in the conduct of, its business and (B) keep its assets and
properties used or useful in the conduct of its business in good
repair, working order and condition, ordinary wear and tear excepted,
and from time to time make, or cause to be made, all necessary and
proper repairs, renewals and replacements, betterments and improvements
thereto, all as may be necessary so that the business carried on in
connection therewith may be properly and advantageously conducted at
all times; and
(ii) as promptly as possible after obtaining knowledge of the
occurrence thereof, furnish written notice to the Investors of the
institution of any proceeding for the condemnation or other taking of
any property of such Entity.
(h) Financial Statements and Reports. The Company shall furnish to the
Investors:
(i) as soon as available but in any event within ninety (90) days
after the end of each fiscal year, consolidated balance sheets, income
statements and cash flow statements of the Company and the
Subsidiaries, showing its financial condition as at the end of such
fiscal year and the results of its operations for such fiscal year,
audited by
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independent accountants of nationally-recognized standing reasonably acceptable
to the Investors and prepared in accordance with GAAP;
(ii) as soon as available but in any event no later than the last
day of the prior fiscal year, current and projected annual budgets,
operating plans and financial projections for the Company and the
Subsidiaries (presented on a monthly basis) for such fiscal year;
(iii) as soon as available but in any event within 30 days after
the end of each month, the Company's unaudited consolidated balance
sheets, income statements and cash flow statements (along with
comparisons to budget), showing the financial condition as at the end
of such month, and the results of operations for such month and for the
then elapsed portion of the fiscal year, in each case prepared in
accordance with GAAP, subject to normal year-end adjustments (none of
which alone or in the aggregate would result in a Material Adverse
Effect) and the absence of notes thereto;
(iv) as soon as available but in any event within 45 days after the
end of each calendar quarter, the Company's unaudited consolidated
balance sheets, income statements and cash flow statements (along with
comparisons to budget), showing the financial condition as at the end
of such calendar quarter, and the results of operations for such
calendar quarter and for the then elapsed portion of the fiscal year,
in each case prepared in accordance with GAAP, subject to normal
year-end adjustments (none of which alone or in the aggregate would
result in a Material Adverse Effect) and the absence of notes thereto;
(v) as soon as received, copies of any notice of potential
liability or charge or complaint received by any Entity from any
governmental authority;
(vi) concurrently with the statements provided pursuant to clauses
(i), (iii) and (iv), a certificate of the chief financial officer of
the Company containing a narrative management discussion and analysis
of the consolidated financial condition and results of operation of the
Company for the periods covered by such statements and, concurrently
with the statements provided pursuant to clause (iv), a forecast of the
Company's results of operations for the following four fiscal quarters;
(vii) promptly upon their becoming available, copies of any
statements, reports and other communications, if any, which any Entity
shall have provided to its stockholders, the Securities and Exchange
Commission or the FCC;
(viii) promptly upon receipt thereof, copies of all financial and
management reports submitted to any Entity by its independent auditors
in connection with each annual audit of the books of such Entity; and
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(ix) promptly, from time to time, such other information (in
writing if so requested) regarding the assets and properties,
operations, business affairs and financial condition of each Entity as
the Investors may reasonably request.
Each certificate of the Company's chief financial officer (and, in the case of
year-end financial statements and reports, the Company's independent auditors)
delivered under this Section 7(h) shall certify (A) that the statement or report
to which such certificate relates fairly presents in all material respects the
financial position and results of operations of the Company and the Subsidiaries
at the dates thereof and for the periods then ended and has been prepared in
accordance with GAAP except, in the case of unaudited financial statements, for
normal year-end audit adjustments (none of which alone or in the aggregate would
result in a Material Adverse Effect) and the absence of notes thereto, (B) that
no Event of Default has occurred and is continuing and (C) that, to the best of
the financial officer's knowledge, no event or condition has occurred which has
had or could reasonably be expected to have a Material Adverse Effect. The audit
report with respect to the financial statements referred to in clause (i) shall
not contain any qualification arising out of the scope of the audit.
(i) Insurance. The Entities shall maintain insurance on their business
and properties to such extent and against such risks, including fire and other
risks insured against by extended coverage, and workers' compensation insurance
and public liability insurance against claims for personal injury or death or
property damage occurring upon, in, about or in connection with the use of, any
properties owned, occupied or controlled by the them, in each case consistent
with insurance maintained as of August 25, 1995, and shall provide evidence to
the Investors of such insurance upon request.
(j) Employee Plans. If the Company or its Affiliates are required to
comply with ERISA, the Entities shall, and shall cause their Affiliates and
ERISA Affiliates, to (a) comply with the provisions of ERISA, the Code and all
other laws applicable to any Plan; (b) operate and administer each Plan in
accordance with all applicable laws; (c) not terminate or withdraw from any Plan
if such withdrawal could result in a material liability to accrue against an
Entity or any of their Affiliates or ERISA Affiliates; (d) not fail to make full
payment when due of all amounts which, under the provisions of any Plan, an
Entity or any Affiliate or ERISA Affiliate is required to pay as a contribution
or premium payment thereto; (e) furnish to the Investors, as soon as possible,
and in any event with in 10 days after any responsible officer of an Entity
knows or has reason to know of any of the following events, written notice of
the same: (i) the withdrawal from or termination of any Plan by an Entity or any
of its Affiliates or ERISA Affiliates, if such termination or withdrawal could
result in any liability to the same; (ii) that any Plan is not in compliance
with any applicable law; or (iii) that any required employer or employee
contributions or premiums have not been made on a timely basis.
(k) Ownership of the Entities. The Company shall at all times maintain
direct or indirect ownership of 100% of the outstanding shares of each class of
capital stock of each Subsidiary.
12
(l) Exchange Act Compliance. So long as the Company is subject to the
reporting requirements of the Securities Exchange Act of 1934, as amended, the
Company shall comply with all public information reporting requirements of the
Commission which are conditions to the availability of Rule 144 for the sale of
the Common Stock. The Company shall supply each stockholder with such
information as may be necessary for such stockholder to utilize Rule 144 and
Rule 144A for the resale of the Common Stock and to complete and file any
information reporting forms presently or hereafter required by the Commission as
a condition to the availability of Rule 144 or 144A.
(m) Information Rights and Related Covenants.
(i) Promptly after the end of each fiscal year (but in any event
prior to February 28 of each year), the Company shall provide to the
Investors a written assessment, in form and substance satisfactory to
the Investors, of the economic impact of the Investors' financing
hereunder, specifying the full-time equivalent jobs created or
retained, the impact of the financing on the Company's business in
terms of expanded revenue and taxes and other appropriate economic
benefits, including but not limited to technology development or
commercialization, minority business development, urban or rural
business development, expansion of exports and assistance to
manufacturing firms.
(ii) Upon the request of any Investor, any Affiliate of an Investor
or any transferee of an Investor holding at least 5% of the outstanding
Common Stock on a fully-diluted basis, the Company shall (i) provide
such financial statements and other information as such Person may from
time to time request for the purpose of assessing the Entity's
financial condition and (ii) furnish to such Person all information
requested by it in order for it to prepare and file SBA Form 468 and
any other information requested or required by any governmental agency
asserting jurisdiction over such Person.
(iii) For a period of one year following the date hereof, neither
the Company nor any of the Subsidiaries will change its business
activity if such change would render such Entity ineligible to receive
financial assistance from a Small Business Investment Company under the
Small Business Investment Act and the regulations thereunder. If an
Entity breaches this covenant, then, in addition to all other remedies
available to the Investors, the Investors may demand that the Entities
immediately repurchase all securities acquired by the Investors at
their original cost plus accrued dividends or interest.
(iv) The Entities shall at all times comply with the
non-discrimination requirements of 13 C.F.R., Parts 112, 113 and 117.
(n) Regulatory Compliance Cooperation.
(i) In the event that a Regulated Holder determines that it has a
Regulatory Problem, the Company agrees to take all such actions as are
reasonably requested by such
13
Regulated Holder in order to (A) effectuate and facilitate any transfer
of securities by such Regulated Holder to any Person designated by such
Regulated Holder, (B) permit such Regulated Holder (or any of its
Affiliates) to exchange all or any portion of the voting securities
then held by such Person on a share-for-share basis for shares of a
class of nonvoting securities of the Company, which nonvoting
securities shall be identical in all respects to such voting
securities, except that such new securities shall be nonvoting and
shall be convertible into voting securities on such terms as are
requested by such Person in light of regulatory considerations then
prevailing, (C) continue and preserve the respective allocation of the
voting interests with respect to the Company arising out of such
Regulated Holder's ownership of voting securities before the transfers
and amendments referred to above (including entering into such
additional agreements as are requested by such Regulated Holder to
permit any Person(s) designated by such Regulated Holder to exercise
any voting power which is relinquished by such Regulated Holder upon
any exchange of voting securities for nonvoting securities of the
Company), and (D) entering into such additional agreements, adopting
such amendments to this Agreement, the certificate of incorporation and
bylaws of the Company and other relevant agreements and taking such
additional actions, in each case as are reasonably requested by such
Regulated Holder in order to effectuate the intent of the foregoing.
The Company shall obtain the agreement of all of its stockholders to
cooperate in complying with this Section 7(n), including without
limitation the agreement of such stockholders to approve amending its
certificate of incorporation in a manner reasonably requested by such
Regulated Holder to effectuate clauses (A), (B) and (C) above.
(ii) Before the Company redeems, purchases or otherwise acquires,
directly or indirectly, or converts or takes any action with respect to
the voting rights of, any of its securities, the Company shall give
written notice of such pending action to each Regulated Holder. Upon
the written request of any Regulated Holder made within 10 days after
its receipt of any such notice stating that after giving effect to such
action such Person would have a Regulatory Problem, the Company shall
defer taking such action for such period (not to extend beyond 45 days
after the Company's receipt of such notice) as such Person requests to
permit it and its Affiliates to reduce the quantity of the Company's
securities they own in order to avoid the Regulatory Problem.
(iii) In the event a Regulated Holder has the right to acquire any
of the Company's securities (as the result of a preemptive offer, pro
rata offer or otherwise), at such Person's request the Company shall
offer to sell to such Person nonvoting securities on the same terms as
would have existed had such Person acquired the securities so offered
and immediately requested their exchange for nonvoting securities
pursuant to subsection (i) above.
(iv) In the event that any Subsidiary of the Company offers to sell
any of its securities, then the Company shall cause such Subsidiary to
enter into agreements with each Regulated Holder substantially similar
to those in Sections 7(m) and 7(n) hereof if
14
such Regulated Holder reasonably determines that entering into the
agreement is necessary to carry out the intent of this Section 7(n).
(o) Information Rights. Upon the request of a Regulated Holder or any
of its Affiliates, the Company will promptly (and in any event within 20 days of
such request) furnish to such Person all information necessary in order for such
Person to prepare any information requested or required by any governmental
authority asserting jurisdiction over such Person.
(p) Further Assurances. The Entities shall duly execute and deliver, or
cause to be duly executed and delivered, at their own cost and expense, such
further instruments and documents and take or cause to be taken all such
actions, in each case as may be necessary or proper in the reasonable judgment
of the Investors to carry out the provisions and purposes of this Agreement and
the other Transaction Documents and to better assure and confirm unto the
Investors their rights and remedies under this Agreement and the other
Transaction Documents.
Section 7. Negative Covenants. The Company hereby covenants and agrees
with the Investors that, so long as any Shares or New Warrants remain
outstanding, the Entities shall comply with the covenants set forth in this
Section 7, except where such compliance is prevented by action of a majority of
the Investor Directors.
(a) Indebtedness. The Entities shall not incur, create, assume or
suffer or permit to exist any Indebtedness, except:
(i) Indebtedness for borrowed money in an aggregate amount for all
the Entities not to exceed $1,500,000 outstanding at any time;
(ii) Indebtedness existing on the date hereof and identified on
Schedule 4(n);
(iii) Endorsements for collection or deposit in the ordinary course
of business;
(iv) purchase money Indebtedness (including the capital component
of Capital Lease Obligations) incurred after the date hereof not in
excess of the book value, determined in accordance with GAAP, of the
items purchased and in no event to exceed $50,000 in any fiscal year
for all the Entities; and
(v) any renewal, extension, refinancing or refunding of any
Indebtedness permitted hereby, provided that such Indebtedness does not
exceed the principal amount of Indebtedness so renewed, extended,
refinanced or refunded.
(b) Negative Pledge. The Entities shall not incur, create, assume or
suffer or permit to exist any Lien on any of their property or assets or on any
income or rights in respect of any thereof, except the following (the "Permitted
Liens"):
15
(i) Liens incurred and arising out of surety bonds, appeal bonds,
statutory obligations, bids, performance and return of money and
similar obligations and pledges or deposits made in the ordinary course
of business in connection with worker compensation, unemployment
insurance, old age pensions and other social security benefits;
(ii) Liens imposed by law, including carriers', warehousemen's,
mechanics', materialmen's and vendors' Liens incurred in the ordinary
course of business and securing obligations which are not yet due or
which are being contested in good faith by appropriate proceedings, and
in any such case as to which it shall have set aside adequate cash
reserves in accordance with GAAP;
(iii) Liens securing the payment of taxes, assessments and
governmental charges or levies, either not yet due and payable or being
contested in good faith by appropriate legal or administrative
proceedings, and in any such case as to which it shall have set aside
adequate cash reserves in accordance with GAAP;
(iv) zoning restrictions, easements, licenses, reservations,
provisions, covenants, conditions, waivers, restrictions on the use of
property or minor irregularities of title which do not in the aggregate
impair the use of any parcel of property material to the operation of
the business of the Company or the value of such property for the
purpose of the business of the Company;
(v) Liens securing purchase money Indebtedness; provided, however,
that each such Lien does not secure any other Indebtedness and does not
encumber any property other than that property acquired with the
proceeds of such Indebtedness;
(vi) extensions and renewals of Liens permitted hereunder;
provided, however, that the Indebtedness secured thereby is not
increased and the Lien does not encumber any property not previously
encumbered by the Lien so extended or renewed; and
(vii) Liens securing indebtedness permitted by Section 8(a)(i).
(c) Restricted Payments. No Entity shall declare or make any Restricted
Payment.
(d) Nature of Business. The Entities shall not conduct any business or
operations that would cause an investment in any of them to become ineligible as
a "portfolio investment" for the Investors under Regulation K promulgated by the
Federal Reserve Board or any other applicable law, or which would require the
Investors to divest the Shares, New Warrants or Warrant Shares under such
Regulation K or any other applicable law.
(e) Transactions With Affiliates. The Entities shall not enter into any
transaction (including, without limitation, the purchase, sale, lease or
exchange of any property or the
16
rendering of any service) with any Affiliate, without the prior written consent
of the Investors. Any such transaction submitted for consent by the Investors
shall include a fairness opinion from an investment bank selected by the
Investors if requested by the Investors.
(f) Merger or Consolidation. The Entities shall not (a) merge with or
into or consolidate or combine with any other Person or (b) sell, lease or
otherwise transfer any of their assets other than a sale of inventory in the
ordinary course of business.
(g) Issuance of Capital Stock or Other Equity Interests. The Entities
shall not issue any capital stock or other equity interest exercisable into
their capital stock (other than pursuant to existing options and warrants set
forth on Schedule 4(c) or pursuant to the Company's Management Incentive Option
Plan covering a total of 349,986 shares of Common Stock as approved by the
Investors) without the prior written consent of the Investors, which consent
shall not be withheld or delayed if, in the Investors' judgment, such issuance
is not dilutive to the Investors' interest (including the Shares and the New
Warrants) in the Company. The parties agree to implement the Management
Incentive Option Plan within 90 days after the Closing and to issue options
thereunder as set forth on Schedule 7(g) attached hereto, a portion of which
options shall be fully vested as set forth on Schedule 7(g).
(h) Charter, Bylaw and Transaction Document Amendments. The Entities
shall not amend, modify or supplement their respective certificates of
incorporation or bylaws or any Transaction Document in any manner that the
Investors deem will adversely affect the rights of the Investors under this
Agreement or any other Transaction Document or their ability to enforce the same
without the prior written consent of the Investors.
(i) Programming. The Entities shall not, directly or indirectly, engage
in the development or production of cable-related or other similar programming.
Section 8. Closing Conditions.
(a) Conditions to Investors' Obligations. The obligations of the
Investors to consummate the transactions contemplated hereby are subject to the
satisfaction of the following conditions precedent:
(i) the Amendment shall have been duly approved by the Company's
board of directors and stockholders, the Amendment shall have been
filed with the Delaware Secretary of State and the Company shall have
effected a 20-for-1 reverse split of its Common Stock;
(ii) the Company shall have entered into employment agreements with
each of Xxxxxxxx Xxxxxxxxxxx, Xx., Xxxxxxx Xxxxxxxxxxx and Xxxxxxxx
Xxxxxxxxxxx, Xx. in the form of Exhibit C hereto;
17
(iii) the Company and the existing majority stockholder of the
Company shall have executed and delivered a Stockholders Agreement in
the form of Exhibit D hereto;
(iv) the Company shall have executed and delivered a Registration
Rights Agreement in the form of Exhibit E hereto;
(v) the Company shall have delivered to the Investors duly executed
and completed Small Business Administration Forms 480 and 652;
(vi) the Company shall have obtained directors' and officers'
liability insurance on terms satisfactory to the Investors;
(vii) Cacomm, Inc. shall have exchanged its notes receivable from
the Company in the aggregate amount of $131,889 for 131,889 shares of
Series B Preferred Stock of the Company;
(viii) the Company shall have executed and delivered a Management
Services Agreement in the form of Exhibit F hereto; and
(ix) the Investors shall have received the legal opinion of Zimet,
Haines, Xxxxxxxx & Xxxxxx in the form of Exhibit G hereto and a
certificate from the Company's transfer agent as to the Company's
outstanding capital stock.
(b) Conditions to the Company's Obligations. The Company's obligation
to consummate the transactions contemplated hereby is subject to the following
conditions precedent:
(i) the representations and warranties of the Investors set forth
herein shall be true and correct as if made on and as of the Closing
Date;
(ii) the Investors shall have complied with all of its obligations
required to be performed by it hereunder on or prior to the Closing
Date; and
(iii) the Investors shall have funded the entire $5,000,000
principal amount of the Notes.
Section 9. Termination. Anything herein to the contrary
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date: (i) by mutual written consent of the Company and the Investors;
(ii) by either the Company or the Investors if for any reason the Closing shall
not have occurred on or before May 8, 1997 (or such other date as may be
mutually agreed by the parties); or (iii) by either the Company or the Investors
in the event that a condition to the terminating party's obligations to close
the transactions contemplated by this Agreement shall become incapable of
satisfaction; provided, however, that no party shall be
18
entitled to terminate this Agreement in the event that the failure of the
Closing to occur or any condition to Closing to be satisfied shall be
attributable to such party's breach of this Agreement.
Section 10. Certain Definitions. As used in this Agreement, the
following terms shall have the respective meanings set forth below:
"Affiliate" shall mean as to any Person, any other Person which
directly or indirectly controls, or is under common control with, or is
controlled by, such Person and, if such Person is an individual, any member of
the immediate family (including parents, siblings, spouse, children,
step-children, nephews, nieces and grandchildren) of such individual and any
trust whose principal beneficiary is such individual or one or more members of
such immediate family and any Person who is controlled by any such member or
trust. As used in this definition, "control" (including, with correlative
meanings, "controlled by" and "under common control with") shall mean
possession, directly or indirectly, of power to direct or cause the direction of
management or policies (whether through ownership of securities or partnership
or other ownership interests, by contract or otherwise) of a Person, provided
that, in any event, any Person which owns directly or indirectly more than 5% of
the securities having ordinary voting power for the election of directors or
other governing body of a corporation or more than 5% of the partnership or
other ownership interests of any other Person (other than as a limited partner
of such other Person) will be deemed to control such corporation or other
Person. Notwithstanding the foregoing, no individual shall be deemed to be an
Affiliate of a corporation solely by reason of his or her being an officer or
director of such corporation.
"Capital Lease Obligations" shall mean as to any Person, the
obligations of such Person to pay rent or other amounts under a lease of (or
other agreement conveying the right to use) real and/or personal property which
obligations are required to be classified and accounted for as a capital lease
on a balance sheet of such Person under GAAP (including Statement of Financial
Accounting Standards No. 13 of the Financial Accounting Standards Board) and,
for purposes of this Agreement, the amount of such obligations shall be the
capitalized amount thereof, determined in accordance with GAAP (including such
Statement No. 13).
"Code" shall mean the Internal Revenue Code of 1986, as amended from
time to time, and the regulations and rulings issued thereunder.
"ERISA" shall mean the Employee Retirement Income Security Act of 1974,
as amended from time to time, and the regulations and rulings issued thereunder.
"ERISA Affiliate" shall mean all members of a controlled group of
corporations and all trades or businesses (whether or not incorporated) under
common control that, together with the Company, would be treated as a single
employer under Section 414 of the Code.
"Environmental Laws" shall mean any and all federal, state, local and
foreign statutes, laws, regulations, ordinances, rules, judgments, orders,
decrees, codes, common law, plans,
19
injunctions, permits, concessions, grants, franchises, licenses, agreements or
other governmental restrictions, contracts, indemnities, assumptions of
liability or agreements, relating to the environment or to emissions, discharges
or releases of pollutants, contaminants, petroleum or petroleum products,
chemicals or industrial, toxic or Hazardous Substances or wastes into the
environment including, without limitation, ambient air, surface water, ground
water or land, or otherwise relating to the manufacture, processing,
distribution, use, treatment, storage, disposal, transport or handling of
pollutants, contaminants, petroleum or petroleum products, chemicals or
industrial, toxic or hazardous substances or wastes or the clean-up or other
remediation thereof.
"Environmental Permits" shall mean any of the permits required by or
pursuant to any applicable Environmental Law.
"GAAP" shall mean generally accepted accounting principles,
consistently applied.
"Hazardous Substances" shall mean asbestos, asbestos containing
materials (as defined in regulations adopted under the Toxic Substances Control
Act, as amended), urea formaldehyde containing foam, polychlorinated biphenyls,
radon, petroleum, petroleum products, fuel oil, derivatives and by-products of
petroleum products or fuel oil, explosives, reactive materials, ignitable
materials, corrosive materials, hazardous chemicals, hazardous waste, hazardous
substances, extremely hazardous substances, toxic substances, toxic chemicals,
radioactive materials, medical waste, biomedical waste, infectious materials and
any other element, compound, mixture, solution or substance which may pose a
present or potential hazard to human health or the environment.
"Indebtedness" of a Person shall mean, without duplication, (a) all
obligations of such Person for borrowed money or with respect to deposits or
advances of any kind, (b) all obligations of such Person evidenced by (or which
customarily would be evidenced by) bonds, debentures, notes or similar
instruments, (c) all reimbursement obligations of such Person with respect to
letters of credit and similar instruments, (d) all obligations of such Person
under conditional sale or other title retention agreements relating to property
or assets purchased by such Person, (e) all obligations of such Person issued or
assumed as the deferred purchase price of property or services, other than
accounts payable incurred and paid on terms customary in the business of such
Person (it being understood that the "deferred purchase price" in connection
with any purchase of property or assets shall include only that portion of the
purchase price which shall be deferred beyond the date on which the purchase is
actually consummated), (f) all obligations of others secured by (or for which
the holder of such Indebtedness has an existing right, contingent or otherwise,
to be secured by) any Lien on property owned or acquired by such Person, whether
or not the obligations secured thereby have been assumed, (g) all obligations of
such Person under forward sales, futures, options and other similar hedging
arrangements (including interest rate hedging or protection agreements), (h) all
obligations of such Person to purchase or otherwise pay for merchandise,
materials, supplies, services or other property under an arrangement which
provides that payment for such merchandise, materials, supplies, services or
other property shall be made regardless of whether delivery of such merchandise,
materials, supplies, services or other
20
property is ever made or tendered, (i) any guaranties by such Person of
obligations of others and (j) all Capital Lease Obligations of such Person.
"Investor Directors" means the members of the Company's board of
directors designated by the Investors pursuant to the Stockholders Agreement.
"Multiemployer Plan" shall mean a "multiemployer plan" as defined in
Section 4001(a)(3) of ERISA, to which the Company or any ERISA Affiliate is
making or accruing an obligation to make contributions or has within any of the
preceding five plan years made or accrued an obligation to make contributions.
"Pension Plan" shall mean an employee pension benefit plan which is
covered by Title IV of ERISA or subject to the minimum funding standards under
Section 412 of the Code and is either (a) maintained by the Company or any ERISA
Affiliate for employees of the Company or any ERISA Affiliate or (b) maintained
pursuant to a collective bargaining agreement or any other arrangement under
which more than one employer makes contributions and to which the Company or any
ERISA Affiliate is then making or accruing an obligation to make contributions
or has within the preceding five plan years made contributions.
"Person" shall mean any corporation, association, partnership, joint
venture, organization, business, individual, government or any agency or
political subdivision thereof or any other entity.
"PBGC" shall mean the Pension Benefit Guaranty Corporation.
"Plan" shall mean an employee benefit plan, as defined in Section 3(3)
of ERISA, at any time maintained by the Company or any ERISA Affiliate for
employees of the Company or any ERISA Affiliate or in which any such employees
participate or at any time participated when employed by the Company or any
ERISA Affiliate.
"Regulated Holder" means any Person that is (or that is a subsidiary of
a bank holding company that is) subject to the various provisions of Regulation
Y of the Board of Governors of the Federal Reserve System, 12 C.F.R., Part 225
(or any successor to Regulation Y) or the Small Business Investment Act of 1958,
as amended, and Title 13 of the C.F.R. that holds any securities of any Entity.
"Regulatory Problem" means (a) any set of facts or circumstances
wherein it has been asserted by any governmental regulatory agency (or any
Regulated Holder believes that there is a significant risk of such assertion)
that such Person is not entitled to own, hold, or exercise any material right
with respect to, all or any portion of the securities of an Entity which such
Person holds or (b) when a Regulated Holder and its Affiliates would own,
control or have power (including voting rights) over a greater quantity of
securities of any kind than are permitted under any requirement of any
governmental authority.
21
"Restricted Payment" shall mean (i) any dividend or other distribution
on any shares of the capital stock of an Entity (other than stock splits, like
kind stock dividends or the distribution of shares of capital stock of an Entity
pursuant to the exercise of warrants or contingent equity rights), (ii) any
payment on account of the purchase, redemption, retirement or acquisition of (a)
any shares of capital stock of an Entity or (b) any option, warrant or other
right to acquire shares of the capital stock of an Entity and (iii) any optional
redemption of, or other optional prepayment of principal of Indebtedness, other
than any of the foregoing that results solely in a payment by a Subsidiary to
the Company.
Section 11. Miscellaneous.
(a) Communications. Subject to the express provisions of this
Agreement, all communications provided for or permitted hereunder shall be in
writing, personally delivered to an officer or other responsible employee of the
addressee or sent by registered mail, charges prepaid, or by telecopy with
confirmed receipt (with hard copy to follow), telegram or other means of
recorded telecommunication, charges prepaid, to the applicable address set forth
below or to such other address as either party hereto may from time to time
designate to the other in such manner. Any communication so personally delivered
shall be deemed to have been validly and effectively given on the date of such
delivery. Any communication so sent by registered mail shall be deemed to have
been validly and effectively given on the tenth business day next following the
day on which it is sent. Any communication so sent by telecopy, telegram or
other means of recorded telecommunication shall be deemed to have been validly
and effectively given on the business day next following the day on which it is
sent.
Communications sent to the Entities shall be addressed to:
MagnaVision Corporation
0000 Xxxxxxx 00 Xxxxx
Xxxx Xxxxxxxx, Xxx Xxxxxx 00000
Attention: Xxxxxxxx Xxxxxxxxxxx, Xx.
Facsimile: (000) 000-0000
with a copy to:
Zimet, Haines, Xxxxxxxx & Xxxxxx
000 Xxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
Communications sent to the Investors shall be addressed as follows:
IBJS Capital Corporation
00
Xxx Xxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxx
Facsimile: (000) 000-0000
KOCO Capital Company, L.P.
000 Xxxxx Xxxxxx
Xx. Xxxxx, Xxx Xxxx 00000
Attention: Xxxx Xxxxxxxx
Facsimile: (000) 000-0000
23
with copies to:
Xxxxxxxxxx Xxxxx Xxxxxx & Xxxxxxxxxx, P.C.
000 Xxxxxxxxxxx Xxxxxx, Xxxxx 0000
Xxxxxx, Xxxxxxxx 00000
Attention: Xxxxxx Xxxxxx, Esq.
Facsimile: (000) 000-0000
X'Xxxxxxxx Graev & Karabell, LLP
00 Xxxxxxxxxxx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxxx X. Xxxxxx, Esq.
Facsimile: (000) 000-0000
(b) Survival of Representations, Warranties and Covenants. All
agreements, representations, warranties and covenants made by or on behalf of
the Company in the Transaction Documents or otherwise with respect thereto or
any transactions contemplated thereby are material, shall be considered to have
been relied upon by the Investors and shall survive the execution and delivery
of the Transaction Documents or any investigation made at any time by or on
behalf of the Investors and any disposition of the Shares, New Warrants and/or
Warrant Shares; provided, however, that representations and warranties shall
survive only for a period of two years following the date hereof other than
Section 4(c), which shall survive for an indefinite period of time. All
statements contained in any certificate or other instrument delivered by or on
behalf of the Company pursuant to the Transaction Documents or in connection
with the transactions contemplated hereby shall be deemed representations and
warranties made by the Company pursuant hereto. The obligations of the parties
pursuant to Sections 11(d), 11(e) and 11(g) shall survive the termination of
this Agreement.
(c) Successors and Assigns. This Agreement shall inure to the benefit
of and be binding on the parties hereto, their respective successors and any
assignees or transferees of some or all of the parties' rights or obligations
hereunder; provided, that neither this Agreement, nor the benefit hereof, may be
assigned by the Company without the prior written consent of the Investors. Any
assignment by the Company without such consent shall be null and void.
(d) Indemnification.
(i) In addition to all rights and remedies available to the
Investors at law or in equity, the Company shall indemnify the
Investors, each subsequent holder of the Shares and the New Warrants
and their respective Affiliates, stockholders, officers, directors,
employees, agents, representatives, counsel, successors and permitted
assigns (collectively, the "Indemnified Persons") and save and hold
each of them harmless against and pay on behalf of or reimburse such
party as and when incurred for any loss (including, without limitation,
diminutions in value and consequential damages which shall not extend
to any
24
lost opportunities which any Indemnified Person might have
experienced), liability, demand, claim, action, cause of action, cost,
damage, deficiency, tax (including any taxes imposed with respect to
such indemnity payments), penalty, fine or expense, whether or not
arising out of any claims by or on behalf of the Company including
interest, penalties, reasonable attorneys' fees and expenses and all
amounts paid in investigation, defense or settlement of any of the
foregoing (collectively, "Losses") which any such party may suffer,
sustain or become subject to, as a result of, in connection with,
relating or incidental to or by virtue of:
(A) any misrepresentation or breach of warranty on the part of
the Company under Section 4 of this Agreement, or any
misrepresentation in or omission from any of the representations,
warranties, statements, schedules and exhibits hereto, certificates
or other instruments or documents furnished to Investors by an
Entity made in or pursuant to this Agreement;
(B) any nonfulfillment or breach of any covenant or agreement
on the part of an Entity under this Agreement;
(C) any action, demand, proceeding, investigation or claim by
any third party (including, without limitation, governmental
authorities) against or affecting any Indemnified Person which, if
successful, would give rise to or evidence the existence of or
relate to a breach of any of the representations, warranties or
covenants of an Entity; and
(D) any claim (whenever made) relating in any way to the
Company and any claim (whenever made) arising out of, relating to,
resulting from or caused by any transaction, status, event,
condition, occurrence or situation relating to, arising out of or
in connection with (x) the status or conduct of the Company, (y)
the execution, performance and delivery of the Transaction
Documents and the documents and agreements contemplated thereby, or
(z) any actions taken by or omitted to be taken by any of the
Indemnified Persons in connection with any of the Transaction
Document or the documents and agreements contemplated thereby.
(ii) Notwithstanding the foregoing, and subject to the following
sentence, upon judicial determination, which is final and no longer
appealable, that the act or omission giving rise to the indemnification
hereinabove provided resulted primarily out of or was based primarily
upon the Indemnified Person's gross negligence, fraud or willful
misconduct (unless such action was based upon the Indemnified Person's
reliance in good faith upon any of the representations, warranties,
covenants or promises made by the Entities herein or in any other
Transaction Documents) by the Indemnified Person, the Entities shall
not be responsible for any Losses sought to be indemnified in
connection therewith by such Indemnified Person, and the Entities shall
be entitled to recover from the Indemnified Person all amounts
previously paid in full or partial satisfaction of such
25
indemnity with all costs and expenses reasonably incurred in effecting
such recovery, if any.
(iii) All indemnification rights hereunder shall survive the
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby for a period of two (2) years after
redemption of all outstanding Shares regardless of any investigation,
inquiry or examination made for or on behalf of, or any knowledge of
the Investors and/or any of the Indemnified Persons or the acceptance
by the Investors of any certificate or opinion. In addition, for
purposes of determining whether there has been a breach, and the amount
of any Losses that are the subject matter of a claim for
indemnification hereunder, each representation and warranty contained
in this Agreement shall be read without regard and without giving
effect to any materiality or knowledge standard or qualification
contained in such representation or warranty.
(iv) If for any reason the indemnity provided for in this Section
11(d) is unavailable to any Indemnified Person or is insufficient to
hold each such Indemnified Person harmless from all such Losses arising
with respect to the transactions contemplated by this Agreement, then
the Company shall contribute to the amount paid or payable in respect
of such Loss in such proportion as is appropriate to reflect not only
the relative benefits received by the Company on the one hand and such
Indemnified Person on the other but also the relative fault of the
Company and the Indemnified Person as well as any relevant equitable
considerations. In addition, the Company agrees to reimburse any
Indemnified Person upon demand for all reasonable expenses (including
legal counsel fees) incurred by such Indemnified Person or any such
other Person in connection with investigating, preparing or defending
any such action or claim. The indemnity, contribution and expenses
reimbursement obligations that the Company has under this Section 11(d)
shall be in addition to any liability that the Company may otherwise
have. The Company further agrees that the indemnification and
reimbursement commitments set forth in this Agreement shall apply
whether or not the Indemnified Person is a formal party to any such
lawsuits, claims or other proceedings.
(v) Any indemnification of the Investors or any other Indemnified
Person by the Company pursuant to this Section 11(d) shall be effected
by wire transfer of immediately available funds from the Entities to an
account designated by the Investors or any other Indemnified Person
within 15 days after the determination thereof.
(e) Governing Law; Choice of Forum. All questions concerning the
construction, interpretation and validity of this Agreement shall be governed by
and construed in accordance with the domestic laws of the state of New York
without giving effect to any choice or conflict of law provision or rule
(whether in the state of New York or any other jurisdiction) that would cause
the application of the laws of any jurisdiction other than the state of New
York. The parties to this Agreement agree that jurisdiction and venue in any
action brought by any part hereto pursuant to this Agreement shall exclusively
lie in any
26
federal or state court located in the state of New York. By execution and
delivery of this Agreement, The parties hereto irrevocably submit to the
exclusive jurisdiction of such courts for themselves and in respect of their
property with respect to such action. The parties hereto irrevocably agree that
venue would be proper in such court, and hereby waive any objection that such
Court is an improper or inconvenient forum for the resolution of such action.
The Company hereby designates and appoints Xxxxxxxx-Xxxx Corporation
System, Inc. and such other person as may hereafter be selected by the Company
with the written consent of the Investors which irrevocably agrees in writing to
so serve as its agent to receive on its behalf service of all process in any
such proceedings in any such court, such service being hereby acknowledged by
the Company to be effective and binding service in every respect. A copy of any
such process so served shall be mailed by registered mail to the Company at its
address provided in Section 11(a) except that unless otherwise provided by
applicable law, any failure to mail such copy shall not affect the validity of
service of process. If any agent appointed by the Company refuses to accept
service, the Company hereby agrees that service upon it by mail shall constitute
sufficient notice. Nothing hereby shall affect the right to serve process in any
other manner permitted by law or shall limit the right of an Investor to bring
proceedings against the Company in the courts of any other jurisdiction.
Disputes arising in connection with complex financial transactions are
most quickly and economically resolved by an experienced and expert person.
Therefore, the parties hereby waive all right to trial by jury in any action,
suit or proceeding brought to enforce or defend any rights or remedies under
this Agreement or any other transaction documents related hereto.
(f) Rights and Waivers. The rights and remedies of the Investors under
the Transaction Documents and in connection therewith: (i) are cumulative, (ii)
may be exercised as often and in such order as the Investors considers
appropriate, (iii) are in addition to the rights and remedies of the Investors
under the general law, and (iv) shall not be capable of being waived or varied
except by virtue of an express waiver or variation in writing signed by the
Investors; and in particular any failure to exercise or any delay in exercising
any of such rights and remedies shall, to the extent permitted by law, not
operate as a waiver or variation of that or any other such right or remedy; any
defective or partial exercise of any of such rights shall, to the extent
permitted by law, not preclude any other or future exercise of that or any other
such right or remedy; and no act or course of conduct or negotiation on the part
of the Investors or on their behalf shall, to the extent permitted by law, in
any way preclude the Investors from exercising any such right or remedy or
constitute a suspension or variation of any such right or remedy. No Transaction
Document nor any provision thereof, may be waived, amended or modified except
pursuant to an agreement or agreements in writing entered into by the Company
and the Investors.
(g) Severability. Whenever possible, each provision of this Agreement
will be interpreted in such manner as to be effective and valid under applicable
law, but if any provision of this
27
Agreement is held to be invalid, illegal or unenforceable in any respect under
any applicable law or rule in any jurisdiction, such invalidity, illegality or
unenforceability will not affect any other provision or any other jurisdiction,
and such invalid, void or otherwise unenforceable provisions shall be null and
void. It is the intent of the parties, however, that any invalid, void or
otherwise unenforceable provisions be automatically replaced by other provisions
which are as similar as possible in terms to such invalid, void or otherwise
unenforceable provisions but are valid and enforceable to the fullest extent
permitted by law. All covenants hereunder shall be given independent effect in
any jurisdiction so that, if a particular action or condition is not permitted
by any of such covenants, the fact that it would be permitted by an exception
to, or be otherwise within the limitations of, another covenant shall not avoid
the occurrence of a breach if such action is taken or condition exists.
(h) Expense Reimbursement. The Company shall reimburse all reasonable
out-of-pocket expenses incurred by the Investors (including attorneys' fees) in
connection with the transactions contemplated hereby, whether or not such
transactions are consummated.
IN WITNESS WHEREOF, the undersigned have caused this Agreement to be
executed by the undersigned thereunto duly authorized as of the date set forth
above.
MAGNAVISION CORPORATION
By:______________________________
IBJS CAPITAL CORPORATION
By:______________________________
KOCO CAPITAL COMPANY, L.P.
By: KOCO Capital Partners, L.P.
Its General Partner
By: Kisco Capital Corporation
Its General Partner
By:______________________________
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