EXHIBIT 10.11
MAGINET CORPORATION, ISSUER
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FIRST AMENDMENT AGREEMENT
Dated as of May 15, 1996
to
Note Agreement
Dated August 15, 1995
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Re: US$24,900,000
Senior Series A Secured Notes
Due August 15, 2000
FIRST AMENDMENT TO NOTE AGREEMENT
THIS FIRST AMENDMENT dated as of May 15, 1996 (the "First Amendment")
to the Note Agreement dated August 15, 1995 is among MAGINET CORPORATION (the
"Company") and each of the institutions which is signatory to this First
Amendment (collectively, the "Noteholders").
RECITALS:
A. The Company and each of the Noteholders have heretofore entered into a Note
Agreement, dated August 15, 1995 (the "Note Agreement"). The Company has
heretofore issued the US$ 24,900,000 Senior Series A Secured Notes Due
August 15, 2000 dated August 15, 1995 (the "Notes") pursuant to the Note
Agreement. The Noteholders are the holders of 100% of the outstanding
principal amount of the Notes.
B. The Company and the Noteholders have agreed to amend certain provisions of
the Note Agreement in the respects, but only in the respects, hereinafter
set forth.
C. Capitalized terms used herein shall have the respective meanings ascribed
thereto in the Note Agreement unless herein defined or the context shall
otherwise require.
NOW, THEREFORE, upon the full and complete satisfaction of the
conditions precedent to the effectiveness of the First Amendment set forth in
Section 3.1 hereof and in consideration of good and valuable consideration the
receipt and sufficiency of which is hereby acknowledged, the Company and the
Noteholders do hereby agree as follows:
SECTION 1 AMENDMENTS
1.1 Section 1.1 of the Note Agreement and the Notes shall be and are hereby
amended such that the Notes shall bear interest from August 15, 1995
through December 31, 1995 at the rate of 10.5% per annum and from January
1, 1996 through and until June 30, 1997 at the rate of 11.5% per annum.
After June 30, 1997 the rate of interest payable on the Notes shall be
10.5% per annum (subject to adjustments pursuant to Sections 8.6 and 8.9 of
the Note Agreement).
1.2 The final sentence in Section 5.3 of the Note Agreement shall be and is
hereby amended to read in its entirety as follows:
For purposes of determining whether the requirements of clauses (i)
and (ii) have been met, such determination shall be made on a
quarterly basis as of each of March 31, June 30, September 30 and
December 31 of each year, beginning on June 30, 1997.
1.3 (a) Section 8.5 of the Note Agreement shall be and is hereby amended to
read in its entirety as follows:
8.5 Total Debt to Historical EBITDA. The Company will not
permit the ratio of Total Debt to Historical EBITDA (x) at March 31,
1997, to exceed 7:1, (y) at June 30, September 30 and December 31,
1997, to exceed 4:1 and (z) at the end of any calendar quarter
following December 31, 1997 to and until the maturity of the Notes, to
exceed 3.5:1.
(b) The definition of Historical EBITDA in Section 10.1 of the Note
Agreement shall be and is hereby amended to read in its entirety as
follows:
"Historical EBITDA" shall mean as of the date of
determination the sum of all earnings before interest, taxes,
depreciation and amortization of the Company on a consolidated basis
during the immediately preceding four consecutive fiscal quarters, as
set forth in the books and financial records of the Company; provided,
that for purposes of Section 8.5 only, to the extent any Person has
become a Subsidiary of the Company (a "New Subsidiary") at any time
during such four consecutive fiscal quarters, each such New Subsidiary
shall be included on a pro forma basis as a member of the Group for
the entire such four consecutive fiscal quarters for purposes of
determining Historical EBITDA.
1.4 (a) Section 8.6 of the Note Agreement shall be and is hereby amended by
deleting the Projected EBITDA requirements for September 30, 1996 and
December 31, 1996 and by changing the Projected EBITDA for March 31, 1997
to $5,500,000.
1.5 Clause (iv) of Section 9.1 of the Note Agreement shall be and is hereby
amended to read in its entirety as follows:
(iv) any representation, warranty or other statement made by the
Company herein or in the First Amendment Agreement dated as of May 15,
1996 among the Company and the Noteholders, or by or on behalf of the
Company in any instrument furnished in compliance with or in reference
to this Agreement or such First Amendment shall be false or misleading
in any material respect or shall omit or fail to state information,
which omission or failure makes such representation, warranty or other
statement false or misleading in any material respect; or
SECTION 2 REPRESENTATIONS AND WARRANTIES OF THE COMPANY
2.1 To induce the Noteholders to execute and deliver this First Amendment, the
Company represents and warrants to the Noteholders (which representations
shall survive the execution and delivery of this First Amendment) that:
(a) Each of this First Amendment and the issuance of the warrants
substantially in the form of Exhibit A hereto (the "New Warrants") has
been duly authorized,
executed and delivered by it and each of this First Amendment and
the New Warrants constitutes the legal, valid and binding obligation,
contract and agreement of it enforceable against it in accordance with
its terms, except as enforcement may be limited by bankruptcy,
insolvency, reorganization, moratorium or similar laws or equitable
principles relating to or limiting creditors' rights generally.
(b) The Note Agreement, as amended by this First Amendment,
constitutes a legal, valid and binding obligation, contract and
agreement of it enforceable against it in accordance with its terms,
except as enforcement may be limited by bankruptcy, insolvency,
reorganization, moratorium or similar laws or equitable principles
relating to or limiting creditors' rights generally.
(c) The execution, delivery and performance by it of the First
Amendment and of the New Warrants (i) has been duly authorized by all
requisite corporate action (ii) does not require the consent or
approval of any governmental or regulatory body or agency, and (iii)
will not (A) violate (1) any provision of law, statute, rule or
regulation or its certificate of incorporation or bylaws, (2) any
order of any court or any rule, regulation or order of any other
agency or government binding upon it, or (3) any provision of any
material indenture, agreement or other instrument to which it is a
party or by which its properties or assets are or may be bound, or (B)
result in a breach or constitute (alone or with due notice or lapse of
time or both) a default under any indenture, agreement or other
instrument referred to in clause (iii)(A)(3) of this Section 2.1(c).
(d) As of the date hereof and after giving effect to this First
Amendment, no Default or Event of Default has occurred which is
continuing.
(e) The representations and warranties contained in the first sentence
of Section 4.1, Sections 4.2, 4.4, 4.6, 4.11, 4.12, 4.16 and 4.20 are
hereby remade in their entirety with all references therein to the
Agreement and the Notes being deemed to include a reference to this
First Amendment, provided that references to Schedule 4.1 shall be to
Schedule 4.1 to this First Amendment.
(f) The Company has reserved and unissued shares of its Common Stock
at least equal to the shares of Common Stock issuable upon exercise of
both the New Warrants. The shares of Common Stock issuable upon
exercise of any of the New Warrants have been duly authorized, and
upon payment therefor in accordance with the terms of the New
Warrants, shall be validly issued, fully paid and nonassessable
shares, with no liability on the part of the exercising holder with
respect to obligations of the Company.
(g) Neither the Company nor any agent acting on its behalf has,
directly or indirectly, offered the New Warrants or any similar
security of the Company for
sale to, or solicited any offers to buy the New Warrants or any
similar securities of the Company from, or otherwise approached or
negotiated with respect thereto with, any Person other than the
Noteholders and prospective purchasers of the Company's Series D
Preferred Stock and neither the Company nor any agent acting on its
behalf has taken or will take any action which would subject the
issuance or sale of the New Warrants to the provisions of section 5 of
the Securities Act or to the provisions of any securities or Blue Sky
law of any applicable jurisdiction.
SECTION 3 MISCELLANEOUS
3.1 This First Amendment shall become effective and binding upon the Company
and the Noteholders on the date (the "Effective Date") on which each of the
following conditions shall have been satisfied or waived in writing by all
the Noteholders:
(a) executed counterparts of this First Amendment, duly executed by
the Company and the Required Holder(s) shall have been delivered to
the Noteholders;
(b) the Noteholders shall have received a copy of an extract of the
resolutions of the Board of Directors of the Company authorizing the
execution, delivery and performance by the Company of this First
Amendment and the issuance of the New Warrants, certified by the
President or any Vice President or the Secretary;
(c) the representations and warranties of the Company set forth in
Section 2 hereof are true and correct on and with respect to the
Effective Date and the Noteholders shall have received an Officer's
Certificate to such effect;
(d) the Noteholders shall have received the favorable opinions of
counsel to the Company as to the matters set forth in Section 2.1(a),
2.1(b) and 2.1(c) hereof (other than matters set forth in clauses
(iii)(A)(2), (iii)(A)(3) and (iii)(B) of Section 2.1(c)), which
opinion shall be in form and substance satisfactory to Required
Holder(s);
(e) the Company shall have issued the New Warrants to the Noteholders;
(f) The Company shall have provided evidence in form and substance
satisfactory to the Noteholders that an investor acceptable to the
Noteholders shall be committed to make equity investments in the
Company on terms and conditions satisfactory to Noteholders in an
aggregate amount of at least $10,000,000 prior to May 18, 1996;
(g) Pacific Pay Video Limited shall have acknowledged the execution
and delivery of this Amendment and reaffirmed the Collateral
Assignment Agreement
by executing and delivering an instrument substantially in the form of
Exhibit B hereto; and
(h) in consequence of the issuance of the New Warrants, the
Shareholders' Agreement shall be amended as provided in Exhibit C
hereto.
3.2 This First Amendment shall be construed in connection with and as part of
each of the Note Agreement and the Notes, and except as modified and
expressly amended by this First Amendment, all terms, conditions and
covenants contained in the Note Agreement and the Notes are hereby ratified
and shall remain in full force and effect.
3.3 Any and all notices, requests, certificates and other instruments executed
and delivered after the execution and delivery of this First Amendment may
refer to the Note Agreement and the Notes without making specific reference
to this First Amendment but nevertheless all such references shall include
this First Amendment unless the context otherwise requires.
3.4 The Company acknowledges their responsibility to pay the reasonable fees
and expenses of White & Case, counsel to the Noteholders, in connection
with the negotiation, preparation, approval, execution and delivery of this
First Amendment.
3.5 Simultaneous with the execution and delivery of this First Amendment and
upon receipt by the Noteholders of the New Warrants, the Noteholders shall
deliver to the Company for cancellation the original warrants dated August
15, 1995 to acquire the Company's Common Stock, which warrants were issued
in connection with the Note Agreement. The Noteholders agree that such
warrants shall thereafter be of no further force or effect.
3.6 The descriptive headings of the various Sections or parts of this First
Amendment are for convenience only and shall not affect the meaning or
construction of any of the provisions hereof.
3.7 This First Amendment shall be governed by and construed in accordance with
the laws of the State of New York.
3.8 The execution hereof by you shall constitute a contract between us for the
uses and purposes hereinabove set forth, and this First Amendment may be
executed in any number of counterparts, each executed counterpart
constituting an original, but all together only one agreement.
MAGINET CORPORATION
By: /s/ Kenneth B. Hamlet
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Name: Kenneth B. Hamlet
Title: Ceo
The foregoing Agreement is
hereby accepted as of the
date first above written.
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Himi Kittner
--------------------------------
Name: Himi Kittner
Title: Vice President
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Peter W. Oliver
--------------------------------
Name: Peter W. Oliver
Title: Managing Director
WASLIC COMPANY II
By: /s/ Daniel F. Lindley
--------------------------------
Name: Daniel F. Lindley
Title: President
NAMTOR BVC LP
By: /s/ Michael C. Rotham
--------------------------------
Name: Michael C. Rotham
Title: Partner
Title:
EXHIBIT A
THIS WARRANT AND ANY SHARES OF CAPITAL STOCK TO BE ACQUIRED UPON THE EXERCISE OF
THIS WARRANT HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"). THESE SECURITIES HAVE BEEN ACQUIRED FOR INVESTMENT AND NOT
WITH A VIEW TO, OR IN CONNECTION WITH, THE DISTRIBUTION THEREOF. THESE
SECURITIES MAY NOT BE OFFERED, SOLD, PLEDGED, OR TRANSFERRED UNLESS (I) A
REGISTRATION STATEMENT UNDER THE ACT IS IN EFFECT AS TO THESE SECURITIES OR (II)
THERE IS AN OPINION OF COUNSEL, REASONABLY SATISFACTORY TO THE COMPANY, THAT AN
EXEMPTION THEREFROM IS AVAILABLE.
IT IS UNLAWFUL TO CONSUMMATE A SALE OR TRANSFER OF THIS SECURITY, OR ANY
INTEREST THEREIN, OR TO RECEIVE ANY CONSIDERATION THEREFOR, WITHOUT THE PRIOR
WRITTEN CONSENT OF THE COMMISSIONER OF CORPORATIONS OF THE STATE OF CALIFORNIA,
EXCEPT AS PERMITTED IN THE COMMISSIONER'S RULES.
MAGINET CORPORATION
COMMON STOCK PURCHASE WARRANT
August 15, 1995
as amended May 15, 1996
VOID AFTER AUGUST 15, 2000
Recitals
WHEREAS, on August 15, 1995, MagiNet Corporation, a California
corporation (the "Company"), entered the Note Agreement dated August 15, 1995
(the "Note Agreement") among the Company and certain purchasers, including 1, of
the Company's 10.5% Senior Secured Notes due 2000 (the "Notes") and granted to
each of such purchasers a warrant to acquire shares of the Company's Common
Stock (the "August Warrant");
WHEREAS, in connection with the Company's sale and issuance of its
Series D Preferred Stock (the "Series D Preferred") to certain investors
pursuant to the Series D Preferred Stock Purchase Agreement dated May 15, 1996
among the Company and such investors (the "Series D Agreement"), and as an
inducement to such investors to purchase the Series D Preferred, 1 and certain
other holders of the Notes have agreed to waive certain financial covenants set
forth in the First Amendment of Note Agreement of even date herewith;
WHEREAS, as an inducement to such investors to grant such a waiver, the
Company has agreed to amend and restate the August Warrant as set forth herein.
NOW, THEREFORE, the Company hereby grants this warrant to acquire shares
of its Common Stock on the terms and subject to the conditions set forth herein.
1. Number and Price of Shares Subject to Warrant.
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a. Subject to the terms and conditions set forth herein, 1, or its
registered assigns, is entitled to acquire from the Company (i) at any
time after the date hereof and on or
before the date of termination of this Warrant provided for in Section
3 hereof up to 2 shares (the "Base Shares") and (ii) simultaneously
with the closing of a Liquidity Event (as defined in Section 2), an
additional 3 shares (the "Additional Shares") (subject to adjustment
pursuant to clause 1(b) below) of duly authorized, validly issued,
fully paid, and non-assessable Common Stock of the Company, for a per
share Warrant Price (as defined below in Section 2). The Base Shares
and the Additional Shares are referred to collectively herein as the
"Warrant Stock." This Warrant is one of a series of warrants
(collectively, the "Warrants") such term to include all Warrants issued
in substitution therefor) having substantially similar terms and issued
in connection with the sale of the Notes, and as amended May 15, 1996
in connection with the First Amendment Agreement dated May 15, 1996.
b. Notwithstanding clause 1(a) above, in the event the value of "Z"
obtained as set forth below is greater than or equal to 100,000, then
no adjustment shall be made to the number of Additional Shares issuable
upon exercise of this Warrant. In the event the value of "Z" obtained
as set forth below is less than 100,000, the number of Additional
Shares issuable upon exercise of this Warrant shall be reduced by a
number equal to the product of (i) the difference between 100,000 and
"Z" and (ii) the number obtained by dividing 3 by 100,000, where "Z" is
calculated as follows:
Z = [(X-Y)/(P-W)] - S,
S = 1,522,857;
X = the product of $24,900,000 and (1+(.185/12))/n/, where
"n" equals the number of calendar months elapsed from
August 15, 1995 through the closing date of a
Liquidity Event.
Y = $24,900,000
P = the fair market value per share of the Company's
Common Stock as determined in the Liquidity Event;
W = the Warrant Price per share (as adjusted pursuant to
Sections 2 and 9).
2. Warrant Price. Subject to the adjustments set forth in Section 9, this
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Warrant shall be exercisable at a per share purchase price (the "Warrant
Price") of $7.00; provided, however, that if no Liquidity Event (as defined
below) has occurred: (i) on or before June 30, 1998, the Warrant Price shall
be adjusted to $6.00 per share, (ii) on or before June 30, 1999, the Warrant
Price shall be adjusted to $5.00 per share, and (iii) on or before June 30,
2000, the Warrant Price shall be adjusted to $4.50 per share; and provided
further, that each of the per-share prices in (i), (ii), and (iii) of this
Section 2 shall be adjusted, as provided in Section 9, on the same basis as
the then applicable Warrant Price. A "Liquidity Event" for purposes of this
Warrant shall mean the closing of a firm commitment underwritten public
offering of the Common Stock of the Company pursuant to an effective
registration statement under the Act (provided that any such public offering
results in gross proceeds to the Company in excess of $10,000,000); the
exchange of the Company's Common Stock for securities of a corporation which
corporation has a pre-exchange market capitalization of at least $50,000,000
and whose shares are listed for trading on a national securities exchange or
automated quotation system; or any other merger,
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acquisition or similar transaction in which the holders of the Company's
Common Stock receive cash in exchange for such Common Stock, or receive a
combination of cash and such listed securities.
3. Termination. This Warrant (and the right to purchase securities upon
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exercise hereof) shall terminate upon the earlier of (i) August 15, 2000 or
(ii) the closing of a firm commitment underwritten public offering of the
Common Stock of the Company pursuant to an effective registration statement
under the Act, which results in gross proceeds to the Company in excess of
$10,000,000; provided, that if the holder of this Warrant has exercised its
right to include the underlying Warrant Stock in such public offering, and
any such Warrant Stock is excluded from such underwriting by reason of the
underwriter's marketing limitation, then the holder shall have a period of
ten (10) Business Days (as defined in the Note Agreement dated August 15,
1995) to exercise its right pursuant to this Warrant to purchase such
Warrant Stock, or to effect an exchange described in Section 8(d) below, at
the then effective Warrant Price notwithstanding the termination provision
of this Warrant pursuant to either clause (i) or (ii) above. The Company
shall give the holder of this Warrant written notice of such public offering
at least twenty (20) and no more than ninety (90) days prior to the
effectiveness of such registration statement and shall deliver a copy of the
preliminary prospectus with respect to any such public offering to the
holder of this Warrant promptly after it becomes available.
4. No Adjustments. Except as provided in Section 9, no adjustment on account
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of dividends or interest on Warrant Stock will be made upon the exercise
hereof.
5. No Fractional Shares. No fractional shares of Warrant Stock will be issued
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in connection with any subscription hereunder. In lieu of any fractional
shares which would otherwise be issuable, the Company shall pay cash equal
to the product of such fraction multiplied by the Fair Market Value (as
defined in Section 8) of one (1) share of Warrant Stock on the date of
exercise (minus the Warrant Price if unpaid).
6. No Stockholder Rights. This Warrant shall not entitle its holder to any of
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the rights of a shareholder of the Company; or impose any liabilities on
such holder to purchase any securities or as a shareholder of the Company,
whether such liabilities are asserted by the Company or by creditors or
shareholders of the Company or otherwise.
7. Reservation of Stock. The Company covenants that during the period this
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Warrant is exercisable, the Company will reserve from its authorized and
unissued Common Stock a sufficient number of shares to provide for the
issuance of Warrant Stock upon the exercise of this Warrant. The Company
agrees that its issuance of this Warrant shall constitute full authority to
its officers who are charged with the duty of executing stock certificates
to execute and issue the necessary certificates for shares of Warrant Stock
upon the exercise of this Warrant.
8. Exercise of Warrant.
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a. Procedure for Exercise of Base Shares. With respect to Base Shares, this
-------------------------------------
Warrant may be exercised by the registered holder or its registered
assigns, in whole or in part, by the surrender of this Warrant at the
principal office of the Company, accompanied by
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payment in full of the Warrant Price for the Base Shares being
purchased in cash or by check or by the cancellation of any present or
future indebtedness from the Company to the holder hereof, in
accordance with Section 8(c). Upon partial exercise hereof, a new
warrant or warrants containing the same date and provisions as this
Warrant shall be issued by the Company to the registered holder for the
number of shares of Warrant Stock with respect to which this Warrant
shall not have been exercised. A Warrant shall be deemed to have been
exercised with respect to Base Shares immediately prior to the close of
business on the date of its surrender for exercise as provided above,
and the person entitled to receive the shares of Warrant Stock issuable
upon such exercise shall be treated for all purposes as the holder of
such shares of record as of the close of business on such date. As
promptly as practicable on or after such date, and in any event within
ten (10) business days thereafter (unless such exercise shall be in
connection with an underwritten public offering, in which event three
(3) business days after such exercise), the Company at its expense
(including the payment by it of any applicable taxes payable by the
Company) will cause to be issued in the name of and delivered to the
holder hereof or, subject to Section 8, as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, a certificate
or certificates for the number of full shares of Warrant Stock issuable
upon such exercise, together with cash in lieu of any fraction of a
share as provided above in Section 5.
b. Procedure for Exercise of Additional Shares. With respect to
-------------------------------------------
Additional Shares, this Warrant may be exercised in whole by the
registered holder or its registered assigns by the surrender of this
Warrant at the principal office of the Company not less than twenty-
four (24) hours before the closing of the Liquidity Event, accompanied
by payment in full of the Warrant Price for the Additional Shares being
purchased in cash or check or by the cancellation of any present or
future indebtedness from the Company to the holder hereof, in
accordance with Section 8(c). The Warrant shall be deemed to have been
exercised with respect to Additional Shares simultaneously with the
closing of the Liquidity Event, and the person entitled to receive the
Additional Shares issuable upon such exercise shall be treated for all
purposes as the holder of such shares of record as of such closing. As
promptly as practicable on or after such date, and in any event within
ten (10) business days thereafter (unless such exercise shall be in
connection with an underwritten public offering, in which event three
(3) business days after such exercise), the Company at its expense
(including the payment by it of any applicable taxes payable by the
Company) will cause to be issued in the name of and delivered to the
holder hereof or, subject to Section 8, as such holder (upon payment by
such holder of any applicable transfer taxes) may direct, a certificate
or certificates for the number of full shares of Warrant Stock issuable
upon such exercise, together with cash in lieu of any fraction of a
share as provided above in Section 5.
c. Payment with Notes. Upon any exercise of this Warrant, the holder
------------------
hereof may, at its option, instruct the Company to apply to the payment
required by Section 8(a) or Section 8(b) all or any part of the
principal amount then unpaid, the premium, if any, and the interest on
such principal amount then accrued on any one or more Notes at the time
held by such holder, in which case the Company will accept the
aggregate amount of principal and accrued interest on such principal in
satisfaction of a like amount of such
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payment. In case less than the entire unpaid principal amount of any
Note shall be so specified, the principal amount so specified shall be
credited, as of the date of such exercise, on a pro rata basis against
all future installments of principal of such Note. In the event that
the entire unpaid principal amount of any Note is applied to the
payment of the Warrant Price, such Note shall be promptly surrendered
and canceled and shall be deemed no longer outstanding for all purposes
of the Note Agreement, except as provided in Section 6.4 thereof. Any
interest on the principal amount applied as payment upon such exercise
shall be paid through the date of payment as the next interest payment
date under the Note Agreement. No premium shall be payable on principal
amounts utilized to pay Warrant Price under this Section 8(c).
d. Net Exercise Rights. Notwithstanding the payment provisions set forth
-------------------
in this Section 8, the holder may elect to receive shares of Warrant
Stock equal to the value (as determined below) of this Warrant by
surrender of this Warrant at the principal office of the Company
together with notice of such election, in which event the Company shall
issue to the holder the number of shares of Common Stock determined by
use of the following formula:
X = Y(A-B)
------
A
Where: X = the number of shares of Common Stock to be issued to
the holder, pursuant to this Section 8(d).
Y = the number of shares of Warrant Stock subject to this
Warrant.
A = the Fair Market Value (as defined below) of one (1)
share of Warrant Stock.
B = Warrant Price per share of Warrant Stock.
For purposes of this Section 8, Fair Market Value of a share as of a
particular date shall mean:
i. If the Company's registration statement under the Act, covering
its initial underwritten public offering of stock has been
declared effective by the Securities and Exchange Commission, then
the fair market value of a share shall be the closing price (the
last reported sales price, if not so reported, the average of the
last reported bid and asked prices) of the Company's stock as of
the last business day immediately prior to the exercise of this
Warrant.
ii. If such a registration statement has not been declared effective,
if it has been declared effective but the offering is not
consummated in accordance with the terms of the underwriting
agreement between the Company and its underwriters relating to
such registration statement, or if no such registration statement
has been filed or prepared, then as determined in good faith by
the Company's Board
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of Directors upon a review of relevant factors. If the
Required Holders disagree in writing with such determination,
then an investment banking firm mutually acceptable to the
Company and the Required Holders shall be retained to appraise
the Fair Market Value of the shares of Warrant Stock in
accordance with recognized appraisal standards and the
determination by such investment banking firm shall be final
and binding. If either (1) no such investment banking
appraisal has been performed within the prior six (6) months,
or (2) the appraised value of a share of Warrant Stock is more
than ten percent (10%) higher than the value determined by the
Board of Directors, then the cost of such appraisal shall be
paid by the Company; in all other circumstances, such cost
shall be paid pro rata by the holders of Warrant Stock
requesting such an appraisal.
e. In the event that the Company determines to effect a private sale of
its capital stock for cash or other consideration in an aggregate
amount equal to $1,000,000 or more, and either (x) the securities
held by other holder(s) of the Company's capital stock are included
in such sale or (y) the proceeds of any such sale are used to
repurchase the Company's outstanding securities, then the Company
shall promptly give the holder written notice thereof and include in
such sale (and any related qualification under blue sky laws or
other compliance), and in any placement involved therein, the
Warrant Stock specified in a written request by the holder received
by the Company within fifteen (15) days after the Company mails such
written notice.
9. Adjustment of Warrant Price and Number of Shares. The number and kind of
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securities issuable upon the exercise of this Warrant shall be subject to
adjustment from time to time and the Company agrees to provide written
notice to each holder promptly upon the happening of certain events as
follows:
a. Adjustment for Dividends in Stock. In case at any time or from time
---------------------------------
to time during the term of this Warrant the holders of the Common
Stock of the Company (or any shares of stock or other securities at
the time receivable upon the exercise of this Warrant) shall have
received, or, on or after the record date fixed for the
determination of eligible shareholders, shall have become entitled
to receive, without payment therefor, other or additional securities
or other property of the Company by way of dividend or distribution,
then and in each case, the holder of this Warrant shall, upon the
exercise hereof, be entitled to receive, in addition to the number
of shares of Common Stock receivable thereupon, and without payment
of any additional consideration therefor, the amount of such other
or additional securities or other property of the Company which such
holder would hold on the date of such exercise had it been the
holder of record of such Common Stock on the date hereof and had
thereafter, during the period from the date hereof to and including
the date of such exercise, retained such shares and/or all other
additional securities or other property receivable by it as
aforesaid during such period, giving effect to all adjustments
called for during such period by this Section 9.
b. Adjustment for Reclassification or Reorganization. In case of any
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reclassification or change of the outstanding Common Stock of the
Company or of any reorganization of the Company during the term of
this Warrant (other than a merger of the Company with
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and into another corporation), then and in each such case the
Company shall give the holder of this Warrant at least twenty (20)
days notice of the proposed effective date of such transaction, and
the holder of this Warrant, upon the exercise hereof at any time
after the consummation of such reclassification, change or
reorganization, shall be entitled to receive, in lieu of the stock
or other securities and property receivable upon the exercise hereof
prior to such consummation, the stock or other securities or
property to which such holder would have been entitled upon such
consummation if such holder had exercised this Warrant immediately
prior thereto, all subject to further adjustment as provided in this
Section 9. The terms of this Section 9 shall similarly apply to
successive reclassifications, changes or reorganizations.
c. Stock Splits and Reverse Stock Splits. If at any time during the
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term of this Warrant the Company shall subdivide its outstanding
shares of Common Stock into a greater number of shares, the Warrant
Price in effect immediately prior to such subdivision shall thereby
be proportionately reduced and the number of shares receivable upon
exercise of the Warrant shall thereby be proportionately increased;
and, conversely, if at any time on or after the date hereof the
outstanding number of shares of Common Stock shall be combined into
a smaller number of shares, the Warrant Price in effect immediately
prior to such combination shall thereby be proportionately increased
and the number of shares receivable upon exercise of this Warrant
shall thereby be proportionately decreased.
d. Adjustments with Respect to Certain Diluting Issuances. The Warrant
------------------------------------------------------
Price shall be subject to adjustment from time to time as follows:
i. Warrant Price Adjustment.
(1) If the Company shall issue any Additional Stock (as defined
hereafter) without consideration or for a consideration per
share less than the Warrant Price in effect immediately
prior to the issuance of such Additional Stock, then such
Warrant Price in effect immediately prior to each such
issuance shall (except as otherwise provided in this
Section 9(d)) be adjusted to the Warrant Price determined
by dividing (X) an amount equal to the sum of (a) the
product derived by multiplying the Warrant Price in effect
immediately prior to such issue by the number of shares of
Common Stock (including shares of Common Stock issued or
issuable upon conversion of the outstanding Preferred
Stock, upon exercise of outstanding stock options and
warrants or otherwise under Section 9(d)(i)(5)) outstanding
immediately prior to such issue, plus (b) the
consideration, if any, received by or deemed to have been
received by the Company upon such issuance, by (Y) an
amount equal to the sum of (c) the number of shares of
Common Stock (including shares of Common Stock issued or
issuable upon conversion of the outstanding Preferred
Stock, upon exercise of outstanding stock options and
warrants or otherwise under Section 9(d)(i)(5)) outstanding
immediately prior to such issuance, plus (d) the number of
shares of Common Stock issued or deemed to have been issued
in such issuance;
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(2) No adjustment of the Warrant Price shall be made in an
amount less than one cent per share, provided that any
adjustment that is not required to be made by reason of
this sentence shall be carried forward and taken into
account in any subsequent adjustment. Except to the limited
extent provided for in Sections 9(d)(i)(5)(c) and
9(d)(i)(5)(d), no readjustment of the Warrant Price shall
have the effect of increasing the Warrant Price above the
Warrant Price in effect immediately prior to such
adjustment.
(3) In the case of the issuance of Additional Stock for cash,
the consideration shall be deemed to be the amount of cash
paid therefor before deducting any reasonable discounts,
commissions or other expenses allowed, paid or incurred by
the Company for any underwriting or otherwise in connection
with the issuance and sale thereof.
(4) In the case of the issuance of Additional Stock for a
consideration in whole or in part other than cash, the
consideration other than cash shall be deemed to be the
fair value thereof as determined in good faith by the Board
of Directors. If the Required Holders disagree in writing
with such determination, then (A) if such consideration
other than cash is not securities, an appraisal firm
experienced in valuing property of such type which is
mutually acceptable to the Company and the Required Holders
shall be retained to appraise the fair market value of such
consideration in accordance with recognized appraisal
standards, and the determination by such appraisal firm
shall be final and binding, and (B) if such consideration
other than cash consists of securities, then an investment
banking firm mutually acceptable to the Company and the
Required Holders shall be retained to appraise the fair
market value of the securities in accordance with
recognized appraisal standards, and the determination by
such investment banking firm shall be final and binding. If
either (1) no such appraisal has been performed within the
prior six (6) months with respect to the same property or
securities, or (2) the appraised value of the consideration
is more than ten percent (10%) higher than the value
determined by the Board of Directors, then the cost of such
appraisal shall be paid by the Company; in all other
circumstances, such cost shall be paid pro rata by the
holders of Warrant Stock requesting such an appraisal
(5) In the case of the issuance of options to purchase or
rights to subscribe for Common Stock, securities by their
terms convertible into or exchangeable for Common Stock or
options to purchase or rights to subscribe for such
convertible or exchangeable securities (where the shares of
Common Stock issuable upon exercise of such options or
rights or upon conversion or exchange of such securities
are not excluded from the definition of Additional Stock),
the following provisions shall apply:
(a) the aggregate maximum number of shares of Common Stock
deliverable upon exercise of such options to purchase
or rights to
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subscribe for Common Stock shall be deemed to have
been issued at the time such options or rights were
issued and for a consideration equal to the
consideration (determined in the manner provided in
Sections 9(d)(i)(3) and 9(d)(i)(4)), if any, received
by the Company upon the issuance of such options or
rights plus the minimum purchase price provided in
such options or rights for the Common Stock covered
thereby;
(b) the aggregate maximum number of shares of Common Stock
deliverable upon conversion of or in exchange for any
such convertible or exchangeable securities or upon
the exercise of options to purchase or rights to
subscribe for such convertible or exchangeable
securities and subsequent conversion or exchange
thereof shall be deemed to have been issued at the
time such securities were issued or such options or
rights were issued and for a consideration equal to
the consideration, if any, received by the Company for
any such securities and related options or rights
(excluding any cash received on account of accrued
interest or accrued dividends), plus the additional
consideration, if any, to be received by the Company
upon the conversion or exchange of such securities or
the exercise of any related options or rights (the
consideration in each case to be determined in the
manner provided in Sections 9(d)(i)(3) and
9(d)(i)(4));
(c) in the event of any change in the number of shares of
Common Stock deliverable upon exercise of such options
or rights or upon conversion of or in exchange for
such convertible or exchangeable securities,
including, but not limited to, a change resulting from
the anti-dilution provisions thereof, the Warrant
Price in effect at the time shall forthwith be
readjusted to such Warrant Price as would have applied
had the adjustment that was made upon the issuance of
such options, rights or securities not converted prior
to such change or the options or rights related to
such securities not converted prior to such change
been made upon the basis of such change, but no
further adjustment shall be made for the actual
issuance of Common Stock upon the exercise of any such
options or rights or the conversion or exchange of
such securities; and
(d) upon the expiration of any such options or rights, the
termination of any such rights to convert or exchange
or the expiration of any options or rights related to
such convertible or exchangeable securities (or upon
purchase by the Company and cancellation or retirement
of any such options or rights not exercised or of any
such convertible securities, the rights of conversion
or exchange under which shall not have been
exercised), the Warrant Price
-9-
shall forthwith be readjusted to such Warrant Price as
would have applied had the adjustment which was made
upon the issuance of such options, rights or
securities or options or rights related to such
securities been made upon the basis of the issuance of
only the number of shares of Common Stock actually
issued upon the exercise of such options or rights,
upon the conversion or exchange of such securities or
upon the exercise of the options or rights related to
such securities.
ii. "Effective Date" means the date of the first sale by the
Company of the Notes.
iii. "Additional Stock" shall mean any shares of Common Stock
issued (or deemed to have been issued pursuant to Section
9(d)(i)(5)) by the Company after the Effective Date other
than:
(1) Common Stock issued in a transaction deemed to be a
"liquidation" within the meaning of the Company's
Articles of Incorporation in effect as of the
Effective Date.
(2) Common Stock issued or issuable to employees,
officers, or directors of, or consultants to the
Company approved by the Board.
(3) Common Stock issued pursuant to the acquisition of
another corporation by merger, purchase of all or
substantially all of the assets, or other
reorganization.
(4) Common Stock issued or issuable upon conversion of the
shares of Series A, Series B and Series C Preferred
Stock.
(5) Common Stock issued or issuable pursuant to the
exercise of warrants granted in connection with any
lease, loan, or other financing transaction, approved
by the Board.
10. Certificate of Adjustment. Whenever the Warrant Price or the number or
-------------------------
type of securities issuable upon exercise of this Warrant is adjusted or
readjusted, as herein provided, the Company at its expense shall promptly
deliver to the record holder of this Warrant a certificate of an officer of
the Company setting forth such adjustment or readjustment and showing in
reasonable detail the facts upon which such adjustment or readjustment is
based, including without limitation a statement of (a) the consideration
received or to be received by the Company for any Additional Stock issued
or sold or deemed to have been issued, (b) the number of shares of Common
Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in
effect immediately prior to such issue or sale and as adjusted and
readjusted (if required by Section 9) on account thereof.
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11. No Dilution or Impairment. The Company covenants that it shall not, by
-------------------------
amendment of its Articles of Incorporation or through any reorganization,
consolidation, merger, transfer of assets, dissolution, issue or sale of
securities or any other voluntary action, avoid or seek to avoid the
observance or performance of any of the terms of this Warrant, but shall at
all times in good faith assist in carrying out all those terms and in
taking all actions necessary or appropriate to protect the rights of the
holder of this Warrant against dilution or other impairment. Without
limiting the generality of the above provision, the Company (a) will not
take any action which results in any adjustment of the Warrant Price then
in effect if the total number of shares of Common Stock (or other
securities) issuable after the action upon the exercise of all of the
Warrants would exceed the total number of shares of Common Stock (or other
securities) then authorized by the Company's Articles of Incorporation and
available for the purpose of issue upon such exercise, and (b) will take
all necessary or appropriate action in order that the Company may validly
and legally issue fully paid and nonassessable shares upon the exercise of
this Warrant.
12. Transfer of Warrant. The rights and obligations of the Company and the
-------------------
holders of this Warrant shall be binding upon and benefit the successors,
assignors, heirs, administrators and transferees of the parties. Any
transferee hereof agrees to be bound by the restrictions set forth herein
and in the Note Agreement.
13. Compliance with Securities Laws. This Warrant or the Warrant Stock may not
-------------------------------
be transferred or assigned, in whole or in part, by the holder hereof
(except to any affiliate hereof) without compliance with applicable federal
and state securities laws. The holder represents and agrees that this
Warrant is being acquired only for investment, for holder's own account,
and not with a view to or for sale in connection with any distribution
thereof within the meaning of the Act, and the holder acknowledges and
agrees that, at any time that it exercises its Warrant, it will represent,
among other things, to the Company that the Warrant Stock that it acquires
through exercise of the Warrant is being acquired by it for its own account
and not with a view to or for sale in connection with any distribution
thereof within the meaning of the Act; provided, that in any case, the
disposition of its property shall at all times be and remain within its
control. The holder of this Warrant acknowledges and agrees that this
Warrant and the Shares have not been registered under the Securities Act
and accordingly will not be transferable except as permitted under the
various exemptions contained in the Securities Act, or upon satisfaction of
the registration and prospectus delivery requirements of the Securities
Act. Therefore, the Warrant and the Warrant Stock must be held indefinitely
unless they are subsequently registered under the Securities Act or an
exemption from such registration is available. The holder understands that
the certificate evidencing the Warrant Stock will be imprinted with a
legend which prohibits the transfer of the Warrant Stock unless they are
registered or unless the Company receives an opinion of counsel (which may
be an opinion of in-house counsel) reasonably satisfactory to the Company
that such registration is not required. The holder is aware of the adoption
of Rule 144 by the Securities and Exchange Commission and that Company is
not now and, at the time it wishes to sell the Warrant Stock, may not be
satisfying the current public information requirements of Rule 144 and, in
such case, holder would be precluded from selling the securities under Rule
144. The holder understands that a stop-transfer instruction will be in
effect with respect to transfer of the Warrant and the Warrant Stock
consistent with the requirements of the securities laws.
-11-
14. Waiver and Amendment. Any provision of this Warrant may be amended or
--------------------
waived upon the written consent of the Company and the Required Holders,
and any such amendment or waiver shall be binding upon the remaining
holders of Warrants, except that, without the written consent of the holder
of each Warrant, no amendment or waiver to this Warrant that increases the
Warrant Price, changes the Termination Date, changes the number of shares
purchasable hereunder, changes the method set forth in Sections 8 and 9 for
calculating adjustments thereto, amends this Section 14, or reduces the
percentage required for modification, may be made. All holders of Warrants,
by acceptance hereof, specifically consent to the binding effect of a
written consent authorized by this Section 14. No failure or delay by any
party in exercising any right or remedy hereunder shall operate as a waiver
thereof, and a waiver of a particular right or remedy on one occasion shall
not be deemed a waiver of any other right or remedy or a waiver of the same
right or remedy on any subsequent occasion.
15. Miscellaneous. This Warrant shall be governed by the laws of the State of
-------------
New York. The headings in this Warrant are for purposes of convenience and
reference only, and shall not be deemed to constitute a part hereof.
Neither this Warrant nor any term hereof may be changed, waived, discharged
or terminated orally but only by an instrument in writing signed by the
Company and, except as provided in Section 14 hereof, the registered holder
hereof. All notices and other communications from the Company to the holder
of this Warrant shall be sent either by facsimile copy to such number and
to the attention of such person as the last holder of this Warrant shall
have furnished to the Company, or shall be mailed by first-class registered
or certified mail, postage prepaid , or sent by courier, to the address
furnished to the Company in writing by the last holder of this Warrant who
shall have furnished an address to the Company in writing.
[REMAINDER OF PAGE LEFT BLANK INTENTIONALLY]
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ISSUED this 15th day of May 1996.
MAGINET CORPORATION
By:
----------------------------------------
James A. Barth, Chief Financial Officer
[SIGNATURE PAGE TO COMMON STOCK PURCHASE WARRANT]
[AS AMENDED MAY 15, 1996]
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Exhibit B
---------
[date]
To the Noteholders Named
in the First Amendment
Agreement Referred to Below
Ladies and Gentlemen:
Reference is made to the First Amendment Agreement dated as of May 15,
1996 (the First Amendment"), among Maginet Corporation, a California corporation
(the "Company"), and each of the holders (the "Noteholders") of the Company's
10.5% Senior Series A Secured Notes due 2000 and to the Collateral Assignment
Agreement dated as of August 15, 1995, between ourselves and The Chase Manhattan
Bank, N.A., as collateral agent for the Noteholders (the "Collateral
Assignment").
We hereby acknowledge receipt of a copy of the First Amendment and
agree that the execution, delivery and performance of the First Amendment by the
parties thereto does not adversely affect our obligations under the Collateral
Assignment, which obligations we hereby reaffirm. We understand that the
Noteholders are relying on this letter and that they would not enter into the
First Amendment in the absence of this letter.
PACIFIC PAY VIDEO LIMITED
By
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Title: