EXHIBIT 10.28
SECOND AMENDMENT TO NOTE AGREEMENT DATED AUGUST 15, 1995
SUMMARY OF TERMS
EFFECTIVE DATE: NOVEMBER 21, 1996
MagiNet Corporation, a California corporation (the "Company"), and each of
the institutions (collectively, the "Noteholders") which is a signatory to this
Summary of Terms amend the Note Agreement dated August 15, 1995, as amended by
the First Amendment Agreement dated May 15, 1996 (the "Note Agreement"), and the
outstanding warrants, as amended, issued to the Noteholders pursuant to the Note
Agreement (the "Warrants"). The following summarizes the principal terms of
such amendment to the Note Agreement.
Amendment to Note Agreement
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. Section 8.3 of the Note Agreement concerning Adjusted Consolidated Net
Worth will be amended as set forth in Exhibit A.
---------
. Section 8.4 of the Note Agreement concerning Total Debt to Total
Adjusted Capitalization will be amended as set forth in Exhibit A.
---------
. Section 8.5 of the Note Agreement concerning Total Debt to Historical
EBITDA will be amended as set forth in Exhibit A.
---------
. Section 8.6 of Note Agreement concerning Historical EBITDA will
be amended as set forth in Exhibit A.
---------
. Section 8.9 of the Note Agreement concerning Cumulative Installed
Rooms will be amended as set forth in Exhibit A.
---------
. The Company will covenant to use its best efforts to effectuate an
initial public offering with gross proceeds to the Company of at least
$40,000,000 prior to December 31, 1996.
. The Noteholders agree that the Note Agreement, and all agreements
thereunder, may be assigned by the Company to its successor
corporation in connection with its redomiciliation in Delaware by
appropriate legal instruments, including amendments to the Note
Agreement. Any such assignment shall not relieve the Company of its
obligations under the Note Agreement and related agreements.
. Section 1 of the Warrants will be amended to eliminate the claw-back
provision of the Warrants.
If and when the Company obtains new equity financing in excess of $40,000,000:
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. Sections 8.4 and 8.9 of the Note Agreement concerning Total Debt to
Total Adjusted Capitalization and Cumulative Installed Rooms,
respectively, will be amended to the original covenant levels provided
for in the Note Agreement.
. Section 8.1(d)(y) of the Note Agreement will be amended to read in its
entirety as follows: "(y) a security interest granted in connection
with a financing, the proceeds of which were used to pay for the
purchase, construction or improvement of such After-Acquired Property
or to reimburse the Company for the purchase price of such After-
Acquired Property
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(including a Lien incurred in connection with a sale-leaseback
transaction or the subsequent financing of equipment purchased with
cash); provided that such Liens shall only be permitted (pursuant to
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this clause (d)) to the extent to which they shall attach to the
assets acquired, constructed or improved;"
. Section 8.3 of Note Agreement concerning Adjusted Consolidated Net
Worth will be amended as set forth in Exhibit B.
---------
. Section 8.5 of Note Agreement concerning Total Debt to Historical
EBITDA will be amended as set forth in Exhibit B.
---------
. Section 8.6 of Note Agreement concerning Historical EBITDA will be
amended as set forth in Exhibit B.
---------
. Section 8.10 of the Note Agreement will be amended so that the
Company's negative covenant to not have, at any one time, Adult Titles
represent more than 30% of all video entertainment offered by the
Group and its Joint Venture Vehicles shall exclude from its
calculation all video entertainment offered by the Group and its Joint
Venture Vehicles in Europe for a period of two years from the
effective date of this Agreement. During the two-year period, Adult
Titles will not represent more than 50% of all video entertainment
offered by the Group and its Joint Venture Vehicles in Europe.
. Section 10.1 of the Note Agreement will be amended as follows
(a) "CUMULATIVE INSTALLED ROOMS" shall mean the aggregate
number of rooms the Company, its Subsidiaries and Joint
Venture Vehicles have under contract to provide an in-
room, on-demand or scheduled broadcast, pay-per-view
entertainment and information system in hotels and in
which rooms such a system has been installed, is fully
operational and is capable of generating income; provided
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however, that "Cumulative Installed Rooms" shall not
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include rooms installed with systems acquired as a result
of a merger or consolidation with, or acquisition of, any
single competitor of the Company if the number of rooms
installed with systems so acquired in any such
transaction exceeds 10,000, except "Cumulative Installed
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Rooms" shall include all rooms in which systems were
installed, became operational or became capable of
generating income subsequent to the effectiveness of such
merger, consolidation or acquisition.
(b) "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 Sections 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 four consecutive fiscal quarters for
purposes of determining Historical EBITDA, and historical
EBITDA shall exclude amortization of all intangible
assets and additional consideration paid in connection
with the acquisition of Prodac GmbH ("Prodac"); and
further provided, that for purposes of Section 8.6 only,
to the extent that Prodac has become a Subsidiary of the
Company prior to April 1, 1997, Prodac shall be included
on a pro forma basis as a member of the Group for the
entire four consecutive fiscal quarters for purposes of
determining Historical EBITDA, and Historical EBITDA
shall exclude amortization of all intangible assets and
additional consideration paid in connection with the
acquisition of Prodac.
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If the Company fails to obtain new equity financing in excess of $40,000,000
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through a public offering or other means prior to March 31, 1997:
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. On April 1, 1997, the Company will grant the Noteholders warrants to
purchase up to 1,000,000 additional shares of Common Stock of the
Company at an exercise price of $7.00 per share (the "New Warrants")
on substantially the same terms set forth in the Warrants issued in
connection with Note Agreement on August 15, 1995, as amended May 15,
1996.
This Summary of Terms is binding upon the parties to the Note Agreement and
the Warrants and will operate as an amendment thereto. The parties hereby agree
to undertake their best efforts to enter into a Second Amendment Agreement on
the terms hereof as soon as possible, which Second Amendment Agreement will
supersede this Summary of Terms. The foregoing is hereby accepted as of the
date first written above:
MAGINET CORPORATION
By: /s/ Authorized Signature
-------------------------------------------
Name:
Title:
NEW YORK LIFE INSURANCE COMPANY
By: /s/ Authorized Signature
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Name:
Title:
THE MUTUAL LIFE INSURANCE COMPANY
OF NEW YORK
By: /s/ Authorized Signature
-------------------------------------------
Name:
Title:
WASCIC COMPANY II
By: /s/ Authorized Signature
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Name:
Title:
NAMTOR BVC LP
By: /s/ Authorized Signature
-------------------------------------------
Name:
Title:
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EXHIBIT A
No IPO and No Prodac
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SECTION 8.3 ADJUSTED CONSOLIDATED NET WORTH - Default Level
------------------------
09/30/96 Waive
12/31/96 Waive
03/31/97 8,000,000
06/30/97 6,000,000
09/30/97 4,000,000
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SECTION 8.4 TOTAL DEBT TO TOTAL ADJUSTED CAPITAL - Default Level
09/30/97 85%
SECTION 8.5 DEBT TO HISTORICAL EBITDA - Default Level
03/31/97 Waive
06/30/97 Waive
09/30/97 Waive
12/31/97 6.5
SECTION 8.6 HISTORICAL EBITDA - Default Level
------------------------
03/31/97 Waive
06/30/97 Waive
09/30/97 1
12/31/97 5,675,000
03/31/98 15,907,000
06/30/98 22,093,000
09/30/98 28,085,000
12/31/98 28,445,000
03/31/99 30,333,000
06/30/99 32,097,000
09/30/99 33,738,000
12/31/99 35,223,000
03/31/00 36,507,000
06/30/00 37,700,000
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SECTION 8.9 CUMULATIVE INSTALLED ROOMS - 2x Default Level
06/30/97 138,284
09/30/97 138,284
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EXHIBIT B
IPO + MagiNet and Prodac Consolidated
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SECTION 8.3 ADJUSTED CONSOLIDATED NET WORTH - Default level
9/30/96 Waive
12/31/96 Waive
3/31/97 35,000,000
6/30/97 35,000,000
9/30/97 35,000,000
12/31/97 35,000,000
03/31/98 35,000,000
06/30/96 35,000,000
09/30/96 35,000,000
SECTION 8.5 DEBT TO HISTORICAL EBITDA - Default Level
03/31/97 Waive
06/30/97 Waive
09/30/97 6.5
12/31/97 4.5
SECTION 8.6 HISTORICAL EBITDA - Default Level
03/31/97 Waive
06/30/97 2,500,000
09/30/97 4,500,000
12/31/97 10,000,000
03/31/98 16,000,000
06/30/98 22,000,000
09/30/98 30,000,000
12/31/98 40,000,000
03/31/99 45,000,000
06/30/99 50,000,000
09/30/99 55,000,000
12/31/99 62,000,000
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