SUBSCRIPTION AGREEMENT
SUBSCRIPTION AGREEMENT, made as of October 4, 1996, between
NEWS COMMUNICATIONS, INC., a Nevada corporation with its principal offices at
173-15 Xxxxxx Xxxxxxx Expressway, Fresh Xxxxxxx, New York 11365 (the "Company",
which term shall include any corporation or entity which succeeds to or
generally assumes the obligations of the Company), and the Persons listed on
Schedule A annexed hereto (each a "Purchaser").
1. Purchase of Securities.
1.1 Subject to the terms and conditions of this Agreement, the
Company hereby agrees to issue and sell to each Purchaser and each Purchaser
hereby agrees to purchase from the Company, for the sum listed next to such
Purchaser's name on Schedule A in the column entitled "Purchase Price," (a) the
number of shares of the Company's Convertible Preferred Stock, par value $1.00
per share (the "Shares"), listed next to such Purchaser's name in Schedule A in
the Column entitled "No. of Shares," such Shares having designations,
preferences and relative participating, conversion or other special rights or
qualifications, limitations or restrictions as are set forth in the Certificate
of Designation with respect thereto annexed hereto as Exhibit 1, and (b)
warrants, in the form annexed hereto as Exhibit 2, to purchase the number of
shares of the Company's Common Stock, par value $.01 per share (the "Warrants"),
listed next to such Purchaser's name in Schedule A in the column entitled "No.
of Warrants."
1.2 At the Closing (as hereinafter defined), each Purchaser
shall initiate a wire-transfer in the amount of its Purchase Price to a bank
account specified by the Company and the Company shall deliver to such Purchaser
certificates representing the Shares and the Warrants purchased by it.
1.3 The closing of the sale of the Shares and the Warrants
("Closing") shall take place at the offices of Xxxxxxxx Xxxxxx & Xxxxxx, 000
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000, at 10:00 A.M., on the second business
day following the date on which the Certificate of Designation with respect to
the Shares has been filed in the office of the Secretary of State of Nevada. It
shall be a condition to the obligations of each Purchaser hereunder that, (a) on
or before the Closing, the Company and Xxxxx Xxxxxxxxxxx shall have entered into
an agreement extending the term of Xx. Xxxxxxxxxxx'x employment agreement for a
period of five years from its present date of expiration on the terms and
conditions of such employment agreement as are in effect on the date hereof and
(b) the Purchasers shall receive a certificate executed by the President and the
Chief Financial Officer of the Company reaffirming the representations and
warranties of the Company set forth herein as being true and correct on the date
of the Closing. It shall be a condition to the obligations of the Company
hereunder that Mr. Xxxxxx Xxxx shall agree to serve as a director of the
Company, as Chairman of its Executive Committee and as its Chief Executive
Officer, as set forth in Section 6 hereof.
1.4 Promptly after the Closing, the Company shall take such
steps as are necessary to cause the shares of the Common Stock issuable upon
conversion of the Shares and exercise of the Warrants to be listed for trading
on the Nasdaq SmallCap Market, subject to notice of issuance.
2. Representations of the Purchaser. Each Purchaser
represents and warrants for itself as follows:
2.1 It recognizes that making the investment hereby involves a
high degree of risk in that (i) it may not be able to liquidate its investment;
(ii) transferability of its investment may be unavailable or extremely limited;
and (iii) it could sustain the loss of its entire investment.
2.2 It is able to bear the economic risk of this
investment.
2.3 It is an "accredited investor" as such term is defined in
Rule 501 of Regulation D promulgated under the Securities Act of 1933, as
amended (the "Act").
2.4 It has sufficient prior investment experience, including
investment in non-registered securities, to evaluate the merits and risks of
such an investment on its behalf. It recognizes the highly speculative nature of
this investment.
2.5 It has been furnished by the Company during the course of
this transaction with all information regarding the Company which it had
requested or desired to know; that all documents which could be reasonably
provided have been made available for its inspection and review including, but
not limited to, any and all documents filed by the Company with the United
States Securities and Exchange Commission ("SEC") under the Securities Exchange
Act of 1934, or otherwise; that it has been afforded the opportunity to ask
questions of and receive answers from duly authorized officers or other
representatives of the Company concerning the terms and conditions of its
investment hereby, and any additional information which it has requested. It has
made such investigation of the Company, including its business and financial
condition, as it has deemed necessary for its purposes and is not relying upon
any statements or information about the Company, it business, properties,
financial condition and prospects except the representations and warranties set
forth in this Agreement.
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2.6 The Shares and Warrants are being purchased for
its own account, for investment and not for distribution or
resale to others.
2.7 It understands that the Shares and the Warrants will not
be registered under the Act by reason of a claimed exemption under the
provisions of the Act which depends, in part, upon its investment intention. In
this connection, it understands that it is the position of the SEC that the
statutory basis for such exemption would not be present if its representation
merely meant that its present intention was to hold the Shares or the Warrants
for a short period, such as the capital gains period of tax statutes, for a
deferred sale, for a market rise, or for any other fixed period. It realizes
that, in the view of the foregoing, a purchase with an intent to resell would
represent a purchase with an intent inconsistent with its representation to the
Company, and the SEC might regard such a sale or disposition as a deferred sale
to which the exemption is not available.
3. Restriction on Transfer.
3.1 Neither the Shares, the Warrants nor any shares
of Common Stock of the Company issuable upon conversion of the Shares or
exercise of the Warrants (collectively, the "Securities") shall be transferable,
except upon the conditions specified in this Agreement, which conditions are
intended, in part, to insure compliance with the provisions of the Act.
3.2 Each Purchaser covenants and agrees that it will not sell,
assign or otherwise transfer or pledge or hypothecate any of the Securities
except pursuant to an effective registration statement under the Act or in a
transaction which is exempt from the registration provisions of the Act. Each
Purchaser will cause any proposed transferee of the Securities (other than
pursuant to an effective registration statement or pursuant to Rule 144
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promulgated under the Act) to agree to take and hold such Securities subject to
the provisions of this Article 3.
3.3 All certificates representing any of the
Securities will bear a legend of the following or similar
words:
The securities represented by this Certificate have not been
registered under the Securities Act of 1933, as amended. These
securities have been acquired for investment purposes and not
with a view to distribution or resale, and may not be sold,
assigned, pledged, hypothe-
cated or otherwise transferred without an effective
Registration Statement for such securities under the
Securities Act of 1933, as amended, and applicable state
securities laws, or an opinion of counsel satisfactory to News
Communications, Inc. to the effect that registration is not
required under such Act or such state securities laws.
4. Representations by the Company.
4.1 The Company represents and warrants to each
Purchaser that:
(a) The Company is a corporation duly organized,
validly existing and in good standing under the laws of the State of Nevada, and
has the corporate power to conduct the business which it conducts and proposes
to conduct.
(b) The execution, delivery and performance of
this Agreement by the Company has been duly approved by the Board of Directors
of the Company. The Company knows of no pending or threatened action or
proceeding seeking to prevent the Company from consummating the transactions
contemplated by this Agreement.
(c) The Shares, Warrants and shares of Common Stock
issuable upon conversion of the Shares and exercise of the Warrants have been
duly and validly authorized, and, when issued in accordance with the terms
hereof and thereof, will be validly issued, fully paid and non-assessable.
(d) To the best of the knowledge of the Company, the
action entitled Xxxx Xxx v. News Communications, Inc. and all other litigation
brought against the Company or any of its subsidiaries as a defendant is without
merit, fully insured against or will not result in an adverse judgment which
would have a material adverse effect on the Company.
(e) No warrants, options or other securities or
contracts which could lead to the issuance of Common Shares ("Derivative
Securities") have been issued or entered into since May 1, 1996 except for the
issuance in May 1996 of warrants to purchase an aggregate of 600,000 Common
Shares issued to X.X. Xxxxx Investment Banking Corp. and the granting in August
1996 of options to purchase 10,000 Common Shares to each of the Company's
present directors pursuant to the Company's Non-Discretionary Directors' Stock
Option Plan.
(f) No Derivative Securities have been exercised by any
holder thereof since May 1, 1996.
(g) The Company knows of no investigation pending or
threatened by the SEC or any other regulatory or self-regulatory body concerning
the Company.
(h) To the best of the knowledge of the Company, the
Company, the Annual Report of the Company on Form 10-K for the fiscal year ended
November 30, 1995 and the quarterly reports of the Company on Form 10-Q for
subsequent periods through the quarter ended May 31, 1996, as filed with the
SEC, are true and correct in all material respects. To the best of the knowledge
of the Company, since November 30, 1995, there has been no material adverse
change to the business or operations of the Company.
4.2 The representations and warranties of the Company in
Section 4.1 shall survive the Closing until February 28, 1998.
5. Use of Proceeds. The proceeds received by the
Company from the sale of the Shares and Warrants pursuant to
this Agreement shall be used only to pay indebtedness, for
acquisitions of new businesses and for general working
capital.
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6. Directors and Officers.
(a) On or before the Closing, the Company's
Board of Directors shall take such steps as are necessary to increase the size
of the whole Board to 16 members, of whom one-half shall be nominated and
elected by the holders of the Shares in accordance with the provisions of the
Certificate of Designation with respect to the Shares. As so reconstituted, the
Board of Directors shall consist of Xxxx Xxxxxxxx, Xxxx Xxxxxxxx, Xxxx
Xxxxxxxxxxxx, Xxxxx Xxxxxxxxxxx, Xxxxxx Xxxxxxx, Xxxxxxx Xxxxxxxxx Xxxxxx Xxxxx
and Xxxxxx Xxxxxx, as designees of the management of the Company (the "Current
Directors"), and Xxxx Xxxxxxxxx, Xxxx Xxxxxxxxx, Xxxx X. McConnoughty, Jr.,
Xxxxxx X. Xxxxxxxxxxx, Xxxxxx X. Xxxx, Xx., Xx Xxxx, Xxxxxx Xxxxxxxxxx and
Xxxxxx Xxxxxx, as designees of the holders of the Shares (the "New Directors").
Xxxxxx X. Xxxxxx, Xxxxx Xxxxxxxxxxx, Xxxxxxx X. Xxxxxxxx, Xx., Xxxxxxxxxxx
XxXxxxx and Xxxxxx X. XxXxxxxxxx, who are currently serving as directors of the
Company, shall resign as directors and shall be invited to serve as members of
advisory boards to the Company's publications.
(b) If a vacancy occurs among the Current
Directors which will be filled by the Board of Directors, the New Directors
shall vote to elect as a director the person selected by the remaining Current
Directors to fill such vacancy. If a vacancy occurs among the New Directors
which will be filled by the Board of Directors, the Current Directors shall vote
to elect as a director the person selected by the remaining New Directors to
fill such vacancy.
(c) Upon his election to the Board of Directors
of the Company, Xxxxxx X. Xxxx, Xx. shall serve as Chairman of the Executive
Committee of the Board of Directors. Until such time as a full-time paid Chief
Executive Officer is hired by the Company, Xx. Xxxx shall serve in such
capacity. In consideration for the services provided by Xx. Xxxx, he shall be
paid $1 per year and shall be granted five-year options to purchase 200,000
shares of Common Stock, exercisable at $2.00 per share, under the Company's
Discretionary Directors' and Officers' Stock Option Plan.
7. Transfer. The Company shall not be required (i) to transfer on its
books any securities of the Company which shall have been sold or transferred in
violation of any of the provisions of this Agreement or (ii) to treat as owner
of such securities or to accord the right to vote as such owner or to pay
dividends to any transferee to whom such securities have been transferred in
violation of this Agreement.
8. Amendment. No amendment or alteration of the terms
of this Agreement shall be valid unless made in writing and
signed by both of the parties hereto.
9. Governing Law. This Agreement shall be governed by the law of
the State of New York applicable to agreements made and to be performed therein.
10. Severability. The holding of any provision of this
Agreement to be invalid or unenforceable by a court of competent jurisdiction
shall not affect any other provision of this Agreement, which shall remain in
full force and effect.
11. Notices. Any notices required or permitted to be given hereunder
shall be sufficient if made in writing, and if delivered by hand against written
receipt therefor, or sent by certified mail, return receipt requested, to the
addresses set forth above or below or such other address as either party may
from time to time designate in writing to the other, and shall be deemed given
as of the date of the delivery (if delivered by hand) or mailing (if mailed).
12. Waiver. It is agreed that a waiver by either party of a
breach of any provision of this Agreement shall not operate, or be construed, as
a waiver of any subsequent breach by that same party.
13. Entire Agreement. This Agreement and the Exhibits hereto
contain the entire agreement of the parties with respect to the subject matter
hereof and shall be binding upon and inure to the benefit of the parties hereto
and their respective legal representatives, heirs, distributees, permitted
successors and assigns.
14. Further Assurances. The parties agree to execute and deliver
all such further documents, agreements and instruments and take such other and
further action as may be necessary or appropriate to carry out the purposes
and intent of this Agreement.
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15. Headings. The article and section headings and subheadings
appearing in this Agreement are for purposes of easy reference and
shall not be considered a part of this Agreement or in any way to modify,
amend or affect its provisions.
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date and year first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Xxxxxxx Xxxxxxxxx
---------------------------------
Xxxxxxx Xxxxxxxxx, President
[PURCHASERS]
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EXHIBIT 1
CERTIFICATE OF DESIGNATION
OF
$10.00 CONVERTIBLE PREFERRED STOCK
OF
NEWS COMMUNICATIONS, INC.
--------------------------------------
Pursuant to Section 78.195 of the
Nevada Revised Statutes
--------------------------------------
NEWS COMMUNICATIONS, INC., a corporation organized and
existing under the laws of the State of Nevada, DOES HEREBY CERTIFY THAT:
FIRST: News Communications, Inc. (the "Corporation") was
incorporated under the laws of the State of Nevada on May 20, 1986;
SECOND: Pursuant to authority conferred upon the Board of
Directors by the Articles of Incorporation of the Corporation, as amended, under
the provisions of Section 78.195 of the Nevada Revised Statutes, the Board of
Directors of the Corporation on October 3, 1996, fixed the designations,
preferences and relative, participating, optional, conversion or other special
rights, or qualifications, limitations or restrictions of up to 200,000 shares
of preferred stock of the Corporation, $1.00 par value, as follows:
(1) Designation. A series of preferred stock shall be
designated and known as the $10.00 Convertible Preferred Stock (hereinafter
called "$10.00 Convertible Preferred Stock"). Each share of $10.00 Convertible
Preferred Stock shall be identical in all respects with the other shares of
$10.00 Convertible Preferred Stock.
(2) Number of Shares. The number of shares of $10.00
Convertible Preferred Stock shall be 200,000 shares. Shares of $10.00
Convertible Preferred Stock purchased by the Corporation shall be canceled and
shall revert to authorized but unissued shares of preferred stock undesignated
as to series. The shares of $10.00 Convertible Preferred Stock shall not be
callable by the Corporation.
(3) Dividends. Dividends shall be payable on the $10.00
Convertible Preferred Stock at a rate equal to five times the amount of
dividends, if any, per share declared and paid by the Corporation on its Common
Stock, as and when dividends may be declared and paid upon the Common Stock,
payable out of funds legally available for the declaration of dividends.
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Subject to the foregoing and to any further limitations prescribed in
accordance with the provisions of the Certificate of Incorporation of the
Corporation, the Board of Directors may declare, out of any funds legally
available therefor, dividends upon the then outstanding shares of any junior
stock, and/or any parity stock (other than $10.00 Convertible Preferred Stock),
and no holders of shares of $10.00 Convertible Preferred Stock shall be entitled
to share therein.
(4) Liquidation Preference. In the event of any voluntary or
involuntary liquidation, dissolution or winding up of the affairs of the
Corporation, then, after payment to holders of any series of preferred stock or
other class of securities entitled to a preference over holders of $10.00
Convertible Preferred Stock but before any distribution or payment shall be made
to the holders of any junior stock, the holders of $10.00 Convertible Preferred
Stock shall be entitled to be paid the amount of $10.00 per share, together with
all accrued and unpaid dividends to such distribution or payment date. If such
payment shall have been made in full to the holders of $10.00 Convertible
Preferred Stock, then the remaining assets and funds of the Corporation shall be
distributed among the holders of the other classes and series of capital stock
of the Corporation, according to their respective rights and preferences and in
each case according to their respective shares. If, upon any liquidation,
dissolution or winding up of the affairs of the Corporation, the amounts so
payable are not paid in full to the holders of all outstanding shares of $10.00
Convertible Preferred Stock, then the holders of $10.00 Convertible Preferred
Stock and the holders of all other parity stock shall share ratably in any
distribution of assets in proportion to the full amounts to which they would
otherwise be respectively entitled according to their respective rights and
preferences. The merger or consolidation of the Corporation with or into one or
more other entities or the sale, lease or conveyance of all or a part of its
assets shall not be deemed to be a liquidation, dissolution or winding up of the
affairs of the Corporation within the meaning of the foregoing provisions of
this Section (4).
(5) Voting and Other Rights.
(a) Except as hereinafter specifically
provided, each issued and outstanding share of $10.00 Convertible Preferred
Stock shall be entitled, with respect to all matters presented for a vote to
holders of Common Stock, to such number of votes such share would have had if it
had been converted into shares of Common Stock pursuant to Section (6) on the
record date of stockholders entitled to vote on such matters, or, if no record
date is established, at the date such vote is taken. The holders of $10.00
Convertible Preferred Stock shall be entitled to the same prior notice of all
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stockholders' meetings as is given to other stockholders and to vote together
with such holders as set forth therein upon any matter submitted to such holders
for a vote and not as a separate class. Except as specifically provided herein,
if for any reason holders of $10.00 Convertible Preferred Stock shall be
entitled to vote as a separate class, the holders of a majority in interest of
$10.00 Convertible Preferred Stock entitled to vote in such election shall bind
the entire class of $10.00 Convertible Preferred Stock. The shares of $10.00
Convertible Preferred Stock shall not have any relative, participating, optional
or any other special rights or powers other than as set forth herein.
(b) So long as at least 100,000 shares of
$10.00 Convertible Preferred Stock are outstanding, the holders of record
thereof, acting as a single class, shall be entitled, at all meetings of
stockholders and other times when directors are elected or appointed, to the
exclusion of the holders of the Common Stock, to nominate and elect that number
of directors of the Corporation equal to one-half of the total number of
directors that shall constitute the whole Board of Directors. Any director so
elected may be removed by, and shall not be removed without cause except by, the
vote of the holders of record of a majority of the outstanding shares of the
$10.00 Convertible Preferred Stock acting as a single class. During the period
that the preceding provisions of this Section (5)(b) are in effect, the holders
of the $10.00 Convertible Preferred Stock shall not be entitled to vote for the
election of any other directors except as provided in this Section (5)(b).
The vote of all of the holders of record
of the $10.00 Convertible Preferred Stock shall be necessary for authorizing,
effecting or validating the amendment, alteration or repeal of any of the
provisions of the Certificate of Incorporation or any certificate amendatory
thereof or supplemental thereto (including any Certificate of Designation or any
similar document relating to any series of preferred stock) so as to affect
adversely the powers, preferences or rights of the $10.00 Convertible Preferred
Stock. The increase of the authorized amount of the Preferred Stock shall not be
deemed to affect adversely the powers, preferences or rights of the $10.00
Convertible Preferred Stock.
Unless the vote or consent of the holders
of a greater number of shares shall then be required by law, so long as at least
100,000 shares of $10.00 Convertible Preferred Stock are outstanding, the vote
of the holders of record of a majority of the outstanding shares thereof, acting
as a single class, shall be necessary for authorizing, effecting or validating
(i) the merger or consolidation of the Corporation into or with any other
corporation, (ii) the sale of all or substantially all of the assets of the
Corporation or (iii) the issuance of any parity stock (as hereinafter defined).
In calculating s uch majority, the vote of any holder who has an interest in the
transaction other than solely as a holder shall not be included.
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(6) Conversion.
(a) Any holder of a share of $10.00 Convertible
Preferred Stock may convert each such share, at any time and from time to time,
into shares of Common Stock. The number of shares of Common Stock into which
each share of $10.00 Convertible Preferred Stock may be converted shall be
obtained by dividing $10.00 by the Conversion Price, which shall initially be
$2.00 and shall be subject to adjustment from time to time as hereinafter
provided in Section (6)(c) or (d) below and subject to the provisions regarding
no issuance of fractional shares set forth in Section (6)(i) below. The
conversion of any shares of $10.00 Convertible Preferred Stock shall not affect
the holders' rights to dividends unpaid to the date of conversion but all rights
to future dividends and any interest thereon shall terminate upon conversion.
The shares of Common Stock into which the $10.00 Convertible Preferred Stock is
convertible shall be referred to as the "Converted Securities."
(b) In order to convert shares of $10.00
Convertible Preferred Stock into Converted Securities, the holder thereof shall
surrender the certificate or certificates for $10.00 Convertible Preferred
Stock, duly endorsed or in blank, to the Corporation at its principal office (or
such other place as may be reasonably designated by the Corporation), shall give
written notice to the Corporation at said office that he elects to convert the
same and shall state in writing therein the name or names in which he wishes the
certificates for Converted Securities to be issued and shall make payment to the
Corporation of any applicable transfer or other taxes. The Corporation will, as
soon as practicable thereafter, deliver at said office to such holder of shares
of the $10.00 Convertible Preferred Stock or to his nominee or nominees,
certificates for the number of full Converted Securities to which he shall be
entitled as aforesaid and, if applicable, a check in lieu of any fractional
share of Common Stock as provided in Section (6)(i). Shares of the $10.00
Convertible Preferred Stock shall be deemed to have been converted as of the
date of the surrender of such certificate or certificates for conversion as
provided above, and the person or persons entitled to receive the Converted
Securities issuable upon such conversion shall be treated for all purposes,
including, but not limited to, the right to vote the Common Stock included as
part of the Converted Securities, as the record holder or holders of such Common
Stock on such date.
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(c) The Conversion Price of the $10.00
Convertible Preferred Stock and, accordingly, the number of shares of Common
Stock into which the shares of $10.00 Convertible Preferred Stock may be
converted, shall be subject to adjustment from time to time as follows:
A. In case the Corporation shall (i)
subdivide or split its outstanding shares of Common Stock into a larger number
of shares by recapitalization, reclassification or split-up thereof, or by
issuance of shares of Common Stock as a dividend or distribution on the Common
Stock, or (ii) combine its outstanding shares of Common Stock into a smaller
number of shares by recapitalization, reclassification or combination thereof,
the Conversion Price in effect immediately prior thereto shall be adjusted so
that the holder of any shares of $10.00 Convertible Preferred Stock thereafter
shall be entitled to receive, upon such conversion effected after the happening
of any of the events described above, the same number of shares of Common Stock
as such holder would have received had such shares of $10.00 Convertible
Preferred Stock been converted immediately prior to the happening of such event.
B. In case the Corporation after the
date hereof shall distribute to all of the holders of outstanding shares of
Common Stock any securities or other assets (other than a cash distribution made
as a dividend payable out of earnings or out of any earned surplus legally
available for dividends under the laws of the State of Nevada), the Board of
Directors shall be required to make such equitable adjustment in the number of
shares of Common Stock into which each share of $10.00 Convertible Preferred
Stock is convertible pursuant to Section (6)(a) hereof, as in effect immediately
prior to the record date for such distribution, as may be necessary to preserve
for the holder rights substantially proportionate to those enjoyed hereunder by
the holder immediately prior to the happening of such distribution.
C. In case the Corporation shall sell
any shares of Common Stock for a consideration per share less than the
then-current Conversion Price, the Conversion Price in effect immediately prior
to such sale shall be changed to a price (including any applicable fraction of a
cent) determined by multiplying the Conversion Price in effect immediately prior
thereto by a fraction, the numerator of which shall be the sum of (i) the number
of shares of Common Stock outstanding immediately prior to the issuance of such
additional shares and (ii) the number of shares of Common Stock which the
aggregate consideration received for the issuance of such additional shares
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would purchase at the Conversion Price in effect immediately prior to such sale
and the denominator of which shall be the number of shares of Common Stock
outstanding immediately after the issuance of such additional shares; provided,
however, that no such adjustment shall be made upon (i) the exercise of any
options, warrants or other rights to acquire Common Stock outstanding on the
date of issuance of the $10.00 Convertible Preferred Stock or (ii) the exercise
of any options, warrants or other rights to acquire Common Stock granted
pursuant to any employee benefit plan of the Corporation, whether such plan is
in effect on the date of issuance of the $10.00 Convertible Preferred Stock or
thereafter adopted.
An adjustment made pursuant to this Section (6)(c) shall
become effective immediately after the record date in the case of a dividend or
distribution and immediately after the effective date in the case of a Section
or combination. Such adjustments shall be made successively whenever any event
described above shall occur.
(d) In the case of any reclassification of the
outstanding Common Stock (other than a change which solely affects the par value
of such shares of Common Stock or a change covered by Section (6)(c) hereof), or
if the Corporation or any successor company shall consolidate or merge with, or
convey all or substantially all its property and assets to, any other company,
then, as a condition precedent to such reclassification, consolidation, merger
or conveyance (other than a consolidation or merger in which the Corporation is
the continuing corporation and which does not result in any reclassification or
reorganization of the outstanding shares of Common Stock), adequate provision
shall be made whereby the holders of shares of $10.00 Convertible Preferred
Stock at the time outstanding shall thereafter be entitled to convert their
shares of $10.00 Convertible Preferred Stock (or any other securities, other
than Common Stock, that may be issued on such reclassification, consolidation,
merger or conveyance with respect to or in exchange for the $10.00 Convertible
Preferred Stock) into such shares of stock, securities or assets as may be
issuable or payable with respect to, or in exchange for, the number of shares of
Common Stock or the other shares of stock, securities or assets, as the case may
be, into which their shares of the $10.00 Convertible Preferred Stock would be
convertible immediately prior to such reclassification, consolidation, merger or
conveyance; and the right which the holders of the $10.00 Convertible Preferred
Stock have to receive additional shares of Common Stock on conversion of their
shares of $10.00 Convertible Preferred Stock on account of any adjustment made
pursuant to Section (6)(c) shall continue and be preserved in respect of any
stock or other securities of the successor company into which shares of the
$10.00 Convertible Preferred Stock shall thereafter become exchangeable.
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In the case the Corporation shall, at any
time prior to the conversion of all of the $10.00 Convertible Preferred Stock,
offer to the holders of its Common Stock any rights to subscribe for additional
shares of Common Stock or shares of any other class of the Corporation, then the
Corporation shall give written notice thereof to the registered holders of the
$10.00 Convertible Preferred Stock not less than 20 days prior to the date on
which the books of the Corporation are closed or a record date is fixed for the
determination of the stockholders entitled to such subscription rights. Such
notice shall specify the date as to which the books shall be closed or record
date fixed with respect to such offer of subscription and the right of the
holder of $10.00 Convertible Preferred Stock to participate in such offer of
subscription shall terminate if the $10.00 Convertible Preferred Stock shall not
be converted on or before the date of such closing of the books or such record
date.
Whenever the number of shares of Common
Stock deliverable upon the conversion of each share of $10.00 Convertible
Preferred Stock shall be adjusted pursuant to the provision of Section (6)(c) or
(d), the Corporation shall promptly (A) file with the transfer agent, if any,
for the shares of $10.00 Convertible Preferred Stock a certificate, signed by
the Chairman of the Board or the President or a Vice President of the
Corporation, and (B) mail, or cause the transfer agent to mail, to all holders
of shares of $10.00 Convertible Preferred Stock, at their last address as they
shall appear upon the stock records of the Corporation, a notice, setting forth
in each case, the increased or decreased number of shares of Common Stock
thereafter deliverable upon the exchange of each share of $10.00 Convertible
Preferred Stock. The certificate filed with the transfer agent shall show, in
addition, in reasonable detail the method of calculation and the facts requiring
such adjustment and upon which such calculation is based.
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The term "Common Stock" shall mean (A) the
class of stock designated as the "Common Stock" of the Corporation at the date
of initial issuance of shares of the $10.00 Convertible Preferred Stock or (B)
any other class of stock resulting from successive changes or reclassifications
of such Common Stock consisting solely of changes in par value, or from par
value to no par value or from no par value to par value, or (C) any capital
stock of the Corporation hereafter authorized which shall not be limited to a
fixed sum or percentage of par or preference value in respect of the rights of
holders thereof to participate in dividends or in the distribution of assets
upon the voluntary or involuntary liquidation, dissolution or winding up of the
Corporation. In the event that, at any time, as a result of an adjustment made
pursuant to Section (6)(c) or (d) above, the holder of any share of the $10.00
Convertible Preferred Stock thereafter surrendered for conversion shall become
entitled to receive any shares of the Corporation other than shares of the
Corporation's Common Stock as in effect on the date hereof, then the shares so
receivable upon conversion of any share of the $10.00 Convertible Preferred
Stock shall be subject to adjustment from time to time in a manner and on terms
as nearly equivalent as practicable to the provisions contained in Section
(6)(c) or (d).
At all times, a sufficient number of the
authorized but unissued shares and/or treasury shares of Common Stock shall be
reserved by the Corporation for the purpose of conversion of all shares of the
$10.00 Convertible Preferred Stock at the time outstanding.
In lieu of fractions of shares of Common
Stock issuable upon conversion of the $10.00 Convertible Preferred Stock, the
Corporation shall pay to the holder in cash the Fair Market Value (as
hereinafter defined) of any such fraction of a share of Common Stock on the date
of conversion.
(7) Preemptive Rights. The holders of shares of $10.00
Convertible Preferred Stock shall, as such, have no preemptive right to purchase
or otherwise acquire shares of any class of stock or other securities of the
Corporation now or hereafter authorized.
(8) Junior and Parity Stock. As used herein with
respect to $10.00 Convertible Preferred Stock, the following
terms shall have the following meanings:
(a) The term "parity stock" shall mean all series of
preferred stock (including, but not limited, to the $10.00 Convertible
Preferred Stock) and any other class of stock of the Corporation
hereafter authorized ranking on a parity with the $10.00 Convertible
Preferred Stock in the payment of dividends or in the distribution of
assets on any liquidation, dissolution or winding up of the
Corporation.
14
(b) The term "junior stock" shall mean the
Corporation's Common Stock, par value $.01 per share, and any other
class of stock of the Corporation hereafter authorized over which
preferred stock, including, but not limited to, $10.00 Convertible
Preferred Stock, has preference or priority in the payment of dividends
or in the distribution of assets on any liquidation, dissolution or
winding up of the Corporation.
(9) Senior Stock. The Corporation may not, without the consent
of the holders of a majority of the $10.00 Convertible Preferred Stock, create
any new class or series of preferred stock with rights senior to the $10.00
Convertible Preferred Stock.
(10) Fair Market Value. As used herein with respect
to $10.00 Convertible Preferred Stock, "Fair Market Value"
shall mean:
(a) If the principal market for the Common Stock is a
national securities exchange or the Nasdaq National Market
System or the Nasdaq SmallCap Market, the closing sales price
of the Common Stock on such day as reported by such exchange
or market system, or on a consolidated tape reflecting
transactions on such exchange or market system; or
(b) If the principal market for the Common Stock
is not a national securities exchange or the Nasdaq National
Market System or the Nasdaq SmallCap Market and the Common
Stock is quoted on the National Association of Securities
Dealers Automated Quotation System, the average of the closing
bid and closing asked prices of the Common Stock on the date
in question, as quoted on such System; or
(c) If the principal market for the Common Stock is
not a national securities exchange or the Nasdaq National
Market System or the Nasdaq SmallCap Market and the Common
Stock is not quoted on the National Association of Securities
Dealers Automated Quotation System, the mean between the
highest bid and lowest asked prices for the Common Stock on
the date in question, as reported by the National Quotation
Bureau, Inc. ("NQB") or at least two market makers in the
Common Stock if quotations are not available from NQB but
are available from market makers; or
(d) If the principal market for the Common Stock is
not (a), (b) or (c), "Fair Market Value" shall be determined
by the Corporation's Board of Directors, whose decision shall
be final and binding.
15
(11) Registration Rights.
(a) Demand Registration
Grant of Right. The Corporation,
upon written demand ("Demand Notice") of any holder or holders of not less than
forty percent (40%) of the outstanding Shares ("Converting Holder(s)") made
within five years of the date of this Agreement, agrees to register, on one
occasion, all or any portion, as requested by the Converting Holder(s) in the
Demand Notice, of the shares of Common Stock ("Common Shares") issuable upon
conversion of the Shares of the Converting Holder(s) (collectively the
"Registrable Securities"). On such occasion, the Corporation will use its best
efforts to file a registration statement under the Act covering the Registrable
Securities within ninety days after receipt of the Demand Notice and use its
best efforts to have such registration statement declared effective promptly
thereafter. The Corporation covenants and agrees to give written notice of its
receipt of any Demand Notice by any Converting Holder(s) to all other holders of
the Shares within ten days from the date of the receipt of any such Demand
Notice and will include in the registration statement the Registrable Securities
of all such other holders who convert their Shares into Common Shares and who so
request by written notice to the Corporation within ten days thereafter.
Terms. The Corporation shall bear
all fees and expenses attendant to registering the Registrable Securities
pursuant to this Section 11(a), but the Converting Holder(s) whose Registrable
Securities are included in the registration statement ("Holders") shall pay any
and all underwriting commissions and non-accountable expenses of any underwriter
selected by the Holders to sell the Registrable Securities, together with the
expenses of any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. The Corporation agrees
to use its prompt best efforts to cause the filing required herein to become
effective and to qualify or register the Registrable Securities in such States
as are reasonably requested by the Holders; provided, however, that in no event
shall the Corporation be required to register the Registrable Securities in a
State in which such registration would cause (A) the Corporation to be obligated
to do business in such State, or (B) the principal stockholders of the
Corporation to be obligated to escrow their shares of capital stock of the
Corporation. The Corporation shall cause any registration statement filed
pursuant to the demand rights granted under Section 11(a) to remain effective
for a period of at least nine months from the effective date of such
registration statement.
16
(b) "Piggy-Back" Registration.
(i) Grant of Right. In addition to the
foregoing demand right of registration, the Holders of Registrable Securities
shall have the right until five years from the date of this Agreement to include
the Registrable Securities as part of any other registration of securities filed
by the Corporation if allowable under the Act and the rules promulgated
thereunder; provided however, that if, in the written opinion of the
Corporation's managing underwriter or underwriters, if any, for such offering,
the inclusion of the Registrable Securities, when added to the securities being
registered by the Corporation or selling securityholders, will exceed the
maximum amount of securities which can be marketed (A) at a price reasonably
related to their then current market value, or (B) without materially and
adversely affecting the entire offering, then the Corporation may exclude from
such offering all or any portion of the Registrable Securities to be so
registered.
(ii) Terms. The Corporation shall bear
all fees and expenses attendant to registering the Registrable Securities
pursuant to this Section 11(b), but the Holders shall pay any and all
underwriting commissions and non-accountable expenses of any underwriter
selected by the Holders to sell the Registrable Securities, together with the
expenses of any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. In the event of such
proposed registration, the Corporation shall furnish the then Holders of the
outstanding Registrable Securities with not less than thirty days written notice
prior to the proposed date of filing of such regis-
tration statement. Such notice to the Holders shall continue to be given for
each registration statement filed (during such five-year period) by the
Corporation until such time as all of the Registrable Securities have been
registered and sold, if earlier. The Holders shall exercise the "piggy-back"
rights provided for herein by giving written notice, within twenty days of the
receipt of the Corporation's notice of its intention to file a registration
statement. The Corporation shall cause any registration statement filed pursuant
to the above "piggy-back" rights to remain effective for at least nine months
from the date that the Holders of the Registrable Securities are first given the
opportunity to sell all of such securities.
17
(c) General Terms.
(i) Indemnification.
(A) The Corporation will indemnify
each Holder whose Registrable Securities are included in any such registration
statement, with respect to which registration, qualification or compliance has
been effected or attempted pursuant to this Section 11, and each underwriter, if
any, and each person who controls any underwriter within the meaning of the Act
or the Securities Exchange Act of 1934 (the "Exchange Act"), against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Corporation of the Act or any rule or regulation thereunder applicable to
the Corporation in connection with any such registration, qualification or
compliance, and will reimburse the Holder whose Registrable Securities are
included in such registration statement, each such underwriter and each person
who controls any such underwriter within the meaning of the Act or the Exchange
Act, for any legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action
provided that the Corporation will not be liable in any such case to the extent
that any such claim, loss, damage, liability or expense arises out of or is
based on any untrue statement or omission based upon written information
furnished to the Corporation by the Holder whose Registrable Securities are
included in such registration statement.
(B) It shall be a condition to the
Corporation's obligations under this Section 11 that each Holder whose
Registrable Securities are included in the securities as to which such
registration, qualification or compliance is being effected, indemnify the
Corporation, each of its directors and officers and each underwriter, if any, of
the Corporation's securities covered by such registration statement, each person
who controls the Corporation or such underwriter within the meaning of the
Exchange Act and the Act and the rules and regulations thereunder, each other
securityholder participating in such distribution and each of their officers,
directors and partners, and each person controlling such other securityholder,
against all claims, losses, damages and liabilities (or actions in respect
thereto) arising out of or based on any untrue statement (or alleged untrue
statement) of a material fact contained in any such registration statement,
prospectus, offering circular or other document, or any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, and will reimburse the
Corporation and such other securityholders, directors, officers, partners,
persons, underwriters or control persons for any legal or any other expenses
18
reasonably incurred in connection with investigating or defending any such
claim, loss, damage, liability or action, in each case to the extent, but only
to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such document in reliance upon and in
conformity with written information furnished to the Corporation such Holder;
provided, however, that the obligations of such Holder hereunder shall be
limited to an amount equal to the proceeds received by such Holder of securities
sold as contemplated herein.
(C) Each party entitled to
indemnification under this subsection 11(c)(i)(the "Indemnified Party") shall
give notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this subsection 11(c)(i). No Indemnifying Party, in the defense of any
such claim or litigation, shall, except with the consent of each Indemnified
Party, consent to entry of any judgment or enter into any settlement which does
not include as an unconditional term thereof the giving by the claimant or
plaintiff to such Indemnified Party of a release from all liability in respect
to such claim or litigation. Each Indemnified Party shall furnish such
information regarding itself or the claim in question as an Indemnifying Party
may reasonably request in writing and as shall be reasonably required in
connection with defense of such claim and litigation resulting therefrom.
19
(D) Notwithstanding the foregoing
provisions of this subsection 11(c)(i), the parties acknowledge that it is the
position of the SEC that indemnification for violations of the securities laws
is unenforceable.
(ii) Information. Each Holder shall
furnish to the Corporation such information regarding the Holder and the
distribution proposed by such Holder as the Corporation may reasonably request
in writing and as shall be reasonably required in connection with any
registration, qualification or compliance referred to in this Section 11.
(d) Termination. The rights granted under
this Section 11 shall terminate upon delivery to the Purchasers of an
unqualified opinion of counsel to the Corporation in form and substance
reasonably acceptable to counsel for the Purchaser to the effect that such
rights are no longer necessary for the public sale of the shares of Common Stock
issuable upon conversion of the Shares.
IN WITNESS WHEREOF, NEWS COMMUNICATIONS, INC. has caused this
Certificate of Designation to be duly executed by its President and attested to
by its Secretary, who affirm that the information contained in the foregoing
Certificate of Designation is true under the penalties of perjury this ____ day
of October 1996.
NEWS COMMUNICATIONS, INC.
By: /s/Xxxxxxx Xxxxxxxxx
-----------------------------------
Xxxxxxx Xxxxxxxxx, President
By: /s/Xxxxxx X. XxXxxxxxxx
----------------------------------
Xxxxxx X. XxXxxxxxxx, Secretary
20
EXHIBIT 2
WARRANT
THIS WARRANT HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE
"ACT") OR UNDER ANY STATE SECURITIES LAW, HAS BEEN ACQUIRED FOR INVESTMENT AND
MAY NOT BE SOLD, TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED IN THE ABSENCE
OF AN EFFECTIVE REGISTRATION STATEMENT WITH RESPECT THERETO UNDER THE ACT AND
ANY APPLICABLE STATE SECURITIES LAW, OR THE COMPANY RECEIVES AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION IS NOT REQUIRED.
News Communications, Inc. (the "Company") hereby grants to
(the
"Holder") the right, privilege, and option to purchase [ ,000] shares of its
Common Stock, par value $.01 per share ("Common Stock"), at the purchase price,
subject to adjustment as hereinafter provided, of U.S. $2.00 per share ("Warrant
Price"), in the manner and subject to the conditions hereinafter provided.
Time of Exercise of Warrant. This Warrant may be
exercised at any time or from time to time at or before 5:00 p.m., Eastern Time,
on the fifth anniversary of the date of issuance hereof. The Company in its sole
discretion may extend the duration of the period in which this Warrant may be
exercised.
Method of Exercise. This Warrant shall be exercised
in whole at any time or in part from time to time, by delivery of this Warrant
with the Purchase Form attached hereto duly completed and executed to the
Company at its principal executive offices accompanied by a certified or
cashier's check payable to the order of the Company in payment of the Warrant
Price, for the number of whole shares specified, together with appropriate
endorsements or transfer documents, if any, and a check for payment of any
applicable transfer or similar tax, if required. Upon clearance of the check,
the Company shall make immediate delivery of a stock certificate evidencing the
number of whole shares to which the Holder may be entitled. The Company shall
not be required to make any cash or other adjustment in respect of any fraction
of a share to which the Holder would otherwise be entitled. The Holder, by
acceptance of this Warrant, expressly waives any right to receive a certificate
for any fraction of a share or cash payment upon the exercise of this Warrant.
In case of the purchase of less than all the shares purchasable under this
Warrant, the Company shall cancel this Warrant upon surrender hereof and shall
execute and deliver a new Warrant of like tenor and date for the balance of the
21
shares purchasable hereunder. The Company agrees at all times to reserve or hold
available a sufficient number of shares of Common Stock to cover the number of
shares issuable upon the exercise of this and all other Warrants of like tenor
then outstanding. All shares of Common Stock issued hereunder and in conformity
herewith shall be validly issued, fully paid and non-assessable.
Anti-Dilution Provisions. If and to the extent that
the number of issued shares of Common Stock of the Company shall be increased or
reduced by change in par value, split up, stock split, reclassification,
distribution of a dividend payable in stock, or the like, the number of shares
subject to this Warrant and the Warrant Price shall be proportionately adjusted
so that the Holder, upon exercise hereof shall be entitled to receive the number
of shares of Common Stock which the Holder would have owned immediately
following such action had this Warrant been exercised immediately prior thereto.
In case of any reorganization or any consolidation or merger
to which the Company is a party other than a merger or consolidation in which
the Company is the continuing corporation, or in case of any sale or conveyance
to another entity of the property of the Company as an entirety or substantially
as an entirety, or in the case of any statutory exchange of securities with
another corporation (including any exchange effected in connection with a merger
of a third corporation into the Company), the Holder of this Warrant shall have
the right thereafter to receive on the exercise of this Warrant the kind and
amount of securities, cash or other property which he would have owned or have
been entitled to receive immediately after such reorganization,
reclassification, consolidation, merger, statutory exchange, sale or conveyance
had this Warrant been exercised immediately prior to the effective date of such
reorganization, reclassification, consolidation, merger, statutory exchange,
sale or conveyance and in any such case, if necessary, appropriate adjustment
shall be made in the application of the provisions set forth in this Section 3
with respect to the rights and interests thereafter of the Holder of this
Warrant to the end that the provisions set forth in this Section 3 shall
thereafter correspondingly be made applicable, as nearly as may reasonably be,
in relation to any shares of stock or other securities or property thereafter
deliverable on the exercise of this Warrant. The above provisions of this
Section 3 shall similarly apply to successive reorganizations, consolidations,
mergers, statutory exchanges, sales or conveyances. The issuer of any shares of
stock or other securities or property thereafter deliverable on the exercise of
this Warrant shall be responsible for all of the agreements and obligations of
the Company hereunder.
22
In case the Company shall sell any shares of Common Stock for
a consideration per share less than the then-current Warrant Price, the Warrant
Price in effect immediately prior to such sale shall be changed to a price
(including any applicable fraction of a cent) determined by multiplying the
Warrant Price in effect immediately prior thereto by a fraction, the numerator
of which shall be the sum of the number of shares of Common Stock outstanding
immediately prior to the issuance of such additional shares and the number of
shares of Common Stock which the aggregate consideration received for the
issuance of such additional shares would purchase at the Warrant Price in effect
immediately prior to such sale and the denominator of which shall be the number
of shares of Common Stock outstanding immediately after the issuance of such
additional shares; provided, however, that no such adjustment shall be made upon
(i) the exercise of any options, warrants or other rights to acquire Common
Stock outstanding on the date of issuance of this Warrant or (ii) the exercise
of any options, warrants or other rights to acquire Common Stock granted
pursuant to any employee benefit plan of the Company, whether such plan is in
effect on the date of issuance of this Warrant or thereafter adopted.
No adjustment in the Warrant Price shall be required unless
such adjustment would require an increase or decrease of at least $0.05 per
share of Common Stock; provided, however, that any adjustments which by reason
of this paragraph are not required to be made shall be carried forward and taken
into account in any subsequent adjustment. All calculations under this Section 3
shall be made to the nearest cent or to the nearest 1/100th of a share, as the
case may be. The Company shall not issue fractional shares of Common Stock upon
exercise of this Warrant.
Upon the happening of any event requiring an adjustment of the
Warrant Price, the Company shall forthwith give written notice thereto to the
Holder of this Warrant stating the adjusted Warrant Price and the adjusted
number of shares purchasable upon the exercise hereof resulting from such event
and setting forth in reasonable detail the method of calculation and the facts
upon which such calculation is based.
Rights Prior to and Subsequent to Exercise of Warrant. This
Warrant does not entitle the Holder to any of the rights of a stockholder of the
company, including, without limitation, the right to receive dividends or other
distributions, to exercise any preemptive rights, to vote, or to consent or to
receive notice as a stockholder of the Company. If, however, at any time prior
to the expiration or redemption of this Warrant and prior to its exercise, any
of the following events shall occur:
23
the Company shall declare any dividend payable
in any securities upon its shares of Common Stock or make any
distribution (other than a regular cash dividend) to the holders of its
shares of Common Stock; or
the Company shall offer to the holders of its
shares of Common Stock any additional shares of Common Stock or
securities convertible into or exchangeable for shares of Common Stock
or any right to subscribe for or purchase any thereof; or
a dissolution, liquidation or winding up of the
Company (other than in connection with a consolidation, merger, sale,
transfer or lease of all or substantially all of its property, assets,
and business as an entirety) shall be proposed,
then in any one or more of said events the Company shall give notice in writing
of such event to the Holder at his last address as it shall appear on the
Company's records at least twenty (20) days' prior to the date fixed as a record
date or the date of closing the transfer books for the determination of the
stockholders entitled to such dividends, distribution, or subscription rights,
or for the determination of stockholders entitled to vote on such proposed
dissolution, liquidation or winding up. Such notice shall specify such record
date or the date of closing the transfer books, as the case may be. Failure to
publish, mail or receive such notice or any defect therein or in the publication
or mailing thereof shall not affect the validity of any action taken in
connection with such dividend, distribution or subscription rights, or such
proposed dissolution, liquidation or winding up. Each person in whose name any
certificate for shares of Common Stock is to be issued shall for all purposes be
deemed to have become the holder of record of such shares on the date on which
this instrument was surrendered and payment of the Warrant Price was made,
irrespective of the date of delivery of such stock certificate, except that, if
the date of such surrender and payment is a date when the stock transfer books
of the Company are closed, such person shall be deemed to have become the holder
of such shares of Common Stock at the close of business on the next succeeding
date on which the stock transfer books are open.
Condition to Exercise of Warrant. In order to enable
the Company to comply with the Securities Act of 1933, as amended (the
"Securities Act"), and relevant state law, the Company may require the Holder as
a condition of the exercising of this Warrant, to give written assurance
satisfactory to the Company that the shares subject to this Warrant are being
acquired for his own account, for investment only, with no view to the
distribution of same, and that any subsequent resale of any such shares either
shall be made pursuant to a registration statement under the Securities Act
which has become effective and is current with regard to the shares being sold,
or shall be pursuant to an exemption from registration under the Securities Act.
If the shares of Common Stock purchased pursuant to the exercise of this Warrant
are not subject to an effective registration statement under the Securities Act,
the certificate(s) evidencing shares of Common Stock purchased upon exercise of
this Warrant shall bear the following restrictive legend or a similar legend to
the same effect:
THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933 (THE "ACT") OR
UNDER ANY STATE SECURITIES LAW, HAS BEEN ACQUIRED FOR
INVESTMENT AND MAY NOT BE SOLD,
TRANSFERRED, PLEDGED, HYPOTHECATED OR ASSIGNED IN
THE ABSENCE OF AN EFFECTIVE REGISTRATION STATEMENT
WITH RESPECT THERETO UNDER THE ACT AND ANY APPLICA-
BLE STATE SECURITIES LAW, OR THE COMPANY RECEIVES AN OPINION
OF COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH
REGISTRATION IS NOT REQUIRED.
24
Registration Rights.
6.1 Demand Registration
(a) Grant of Right. If any holder or holders
of not less than forty percent (40%) of the outstanding Shares ("Exercising
Holder(s)") exercises the right to exercise its or their Warrants into shares of
Common Stock ("Common Shares"), the Company, upon written demand ("Demand
Notice") of such Exercising Holder(s) made within five years of the date of this
Warrant, agrees to register, on one occasion, all or any portion, as requested
by the Exercising Holder(s) in the Demand Notice, of such Common Shares
(collectively the "Registrable Securities"). On such occasion, the Company will
use its best efforts to file a registration statement under the Act covering the
Registrable Securities within ninety days after receipt of the Demand Notice and
use its best efforts to have such registration statement declared effective
promptly thereafter. The Company covenants and agrees to give written notice of
its receipt of any Demand Notice by any Exercising Holder(s) to all other
holders of the Shares within ten days from the date of the receipt of any such
Demand Notice and will include in the registration statement the Registrable
Securities of all such other holders who convert their Shares into Common Shares
and who so request by written notice to the Company within ten days thereafter.
(b) Terms. The Company shall bear all fees and
expenses attendant to registering the Registrable Securities pursuant to this
Section 6.1, but the Exercising Holder(s) whose Registrable Securities are
included in the registration statement ("Holders") shall pay any and all
underwriting commissions and non-accountable expenses of any underwriter
selected by the Holders to sell the Registrable Securities, together with the
expenses of any legal counsel selected by the Holders to represent them in
connection with the sale of the Registrable Securities. The Company agrees to
use its prompt best efforts to cause the filing required herein to become
effective and to qualify or register the Registrable Securities in such States
as are reasonably requested by the Holders; provided, however, that in no event
shall the Company be required to register the Registrable Securities in a State
in which such registration would cause (I) the Company to be obligated to do
business in such State, or (ii) the principal stockholders of the Company to be
obligated to escrow their shares of capital stock of the Company. The Company
shall cause any registration statement filed pursuant to the demand rights
granted under Section 6.1 to remain effective for a period of at least nine
months from the effective date of such registration statement.
6.2 "Piggy-Back" Registration.
(a) Grant of Right. In addition to the
foregoing demand right of registration, the Holders of Registrable Securities
shall have the right until five years from the date of this Agreement to include
the Registrable Securities as part of any other registration of securities filed
by the Company if allowable under the Act and the rules promulgated thereunder;
provided however, that if, in the written opinion of the Company's managing
underwriter or underwriters, if any, for such offering, the inclusion of the
Registrable Securities, when added to the securities being registered by the
Company or selling securityholders, will exceed the maximum amount of securities
which can be marketed (I) at a price reasonably related to their then current
market value, or (ii) without materially and adversely affecting the entire
offering, then the Company may exclude from such offering all or any portion of
the Registrable Securities to be so registered.
(b) Terms. The Company shall bear all fees and
expenses attendant to registering the Registrable Securities pursuant to this
Section 6.2, but the Holders shall pay any and all underwriting commissions and
non-accountable expenses of any underwriter selected by the Holders to sell the
Registrable Securities, together with the expenses of any legal counsel selected
by the Holders to represent them in connection with the sale of the Registrable
Securities. In the event of such proposed registration, the Company shall
furnish the then Holders of the outstanding Registrable Securities with not less
than thirty days written notice prior to the proposed date of filing of such
registration statement. Such notice to the Holders shall continue to be given
for each registration statement filed (during such five-year period) by the
Company until such time as all of the Registrable Securities have been
registered and sold, if earlier. The Holders shall exercise the "piggy-back"
rights provided for herein by giving written notice, within twenty days of the
receipt of the Company's notice of its intention to file a registration
statement. The Company shall cause any registration statement filed pursuant to
the above "piggyback" rights to remain effective for at least nine months from
the date that the Holders of the Registrable Securities are first given the
opportunity to sell all of such securities.
25
6.3 General Terms.
(a) Indemnification.
(i) The Company will indemnify each Holder
whose Registrable Securities are included in any such registration statement,
with respect to which registration, qualification or compliance has been
effected or attempted pursuant to this Section 6, and each underwriter, if any,
and each person who controls any underwriter within the meaning of the Act or
the Securities Exchange Act of 1934 (the "Exchange Act"), against all claims,
losses, damages and liabilities (or actions in respect thereof) arising out of
or based on any untrue statement (or alleged untrue statement) of a material
fact contained in any prospectus, offering circular or other document (including
any related registration statement, notification or the like) incident to any
such registration, qualification or compliance or based on any omission (or
alleged omission) to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, or any violation by
the Company of the Act or any rule or regulation thereunder applicable to the
Company in connection with any such registration, qualification or compliance,
and will reimburse the Holder whose Registrable Securities are included in such
registration statement, each such underwriter and each person who controls any
such underwriter within the meaning of the Act or the Exchange Act, for any
legal and any other expenses reasonably incurred in connection with
investigating and defending any such claim, loss, damage, liability or action
provided that the Company will not be liable in any such case to the extent that
any such claim, loss, damage, liability or expense arises out of or is based on
any untrue statement or omission based upon written information furnished to the
Company by the Holder whose Registrable Securities are included in such
registration statement.
(ii) It shall be a condition to the
Company's obligations under this Section 6 that each Holder whose Registrable
Securities are included in the securities as to which such registration,
qualification or compliance is being effected, indemnify the Company, each of
its directors and officers and each underwriter, if any, of the Company's
securities covered by such registration statement, each person who controls the
Company or such underwriter within the meaning of the Exchange Act and the Act
and the rules and regulations thereunder, each other securityholder
participating in such distribution and each of their officers, directors and
partners, and each person controlling such other securityholder, against all
claims, losses, damages and liabilities (or actions in respect thereto) arising
out of or based on any untrue statement (or alleged untrue statement) of a
material fact contained in any such registration statement, prospectus, offering
26
circular or other document, or any omission (or alleged omission) to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, and will reimburse the Company and such other
securityholders, directors, officers, partners, persons, underwriters or control
persons for any legal or any other expenses reasonably incurred in connection
with investigating or defending any such claim, loss, damage, liability or
action, in each case to the extent, but only to the extent, that such untrue
statement (or alleged untrue statement) or omission (or alleged omission) is
made in such document in reliance upon and in conformity with written
information furnished to the Company such Holder; provided, however, that the
obligations of such Holder hereunder shall be limited to an amount equal to the
proceeds received by such Holder of securities sold as contemplated herein.
(iii) Each party entitled to
indemnification under this subsection 6.3(a) (the "Indemnified Party") shall
give notice to the party required to provide indemnification (the "Indemnifying
Party") promptly after such Indemnified Party has actual knowledge of any claim
as to which indemnity may be sought, and shall permit the Indemnifying Party to
assume the defense of any such claim or any litigation resulting therefrom,
provided that counsel for the Indemnifying Party, who shall conduct the defense
of such claim or any litigation resulting therefrom, shall be approved by the
Indemnified Party (whose approval shall not be unreasonably withheld), and the
Indemnified Party may participate in such defense at such party's expense, and
provided further that the failure of any Indemnified Party to give notice as
provided herein shall not relieve the Indemnifying Party of its obligations
under this subsection 6.3(a). No Indemnifying Party, in the defense of any such
claim or litigation, shall, except with the consent of each Indemnified Party,
consent to entry of any judgment or enter into any settlement which does not
include as an unconditional term thereof the giving by the claimant or plaintiff
to such Indemnified Party of a release from all liability in respect to such
claim or litigation. Each Indemnified Party shall furnish such information
regarding itself or the claim in question as an Indemnifying Party may
reasonably request in writing and as shall be reasonably required in connection
with defense of such claim and litigation resulting therefrom.
(iv) Notwithstanding the foregoing
provisions of this subsection 6.3(a), the parties acknowledge that it is the
position of the SEC that indemnification for violations of the securities laws
is unenforceable.
(b) Information. Each Holder shall furnish to
the Company such information regarding the Holder and the distribution proposed
by such Holder as the Company may reasonably request in writing and as shall be
reasonably required in connection with any registration, qualification or
compliance referred to in this Section 6.
6.4 Termination. The rights granted under this
Section 6 shall terminate upon delivery to the Holder of an opinion of counsel
to the Company to the effect that such rights are no longer necessary for the
public sale of the shares of Common Stock issuable upon exercise of this
Warrant.
Loss, etc. of Warrant. Upon receipt of evidence
satisfactory to the Company, of the loss, theft, destruction or mutilation of
this Warrant, and of indemnity reasonably satisfactory to the Company, if lost,
stolen, or destroyed, and upon reimbursement to the Company of all reasonable
expenses incidental thereto, and upon surrender and cancellation of this
Warrant, if mutilated, the Company shall execute, and deliver to the Holder a
new Warrant of like date, tenor and denomination.
Governing Law. This Warrant and any dispute,
disagreement, or issue of construction or interpretation arising hereunder
whether relating to its execution, its validity, the obligations provided herein
or performance shall be governed or interpreted according to the law of the
State of New York.
27
IN WITNESS WHEREOF, News Communications, Inc. has caused
this Warrant to be executed on the ____ day of October, 1996.
(SEAL) NEWS COMMUNICATIONS, INC.
By: /s/Xxxxxxx X. Xxxxxxxxx
---------------------------------
Xxxxxxx X. Xxxxxxxxx, President
ATTEST:
----------------------------------
XXXXXX X. XxXXXXXXXX, Secretary
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PURCHASE
The undersigned, ________________________________, pursuant to
the provisions of the foregoing Warrant, hereby agrees to subscribe for and
purchase _______________ shares of the Common Stock of NEWS COMMUNICATIONS, INC.
covered by said Warrant, and makes payment therefor in full at the price per
share provided by said Warrant.
The undersigned represents that the exercise of the foregoing
Warrant was solicited by __________________________. If not solicited by
_________________________, please write "unsolicited" in the space below. Unless
otherwise indicated, it will be assumed that the exercise was solicited by
________________________.
______________________________________
(Write "unsolicited" on above line if
not solicited by ___________________)
Dated:___________________ Signature: __________________________
Address: ____________________________
____________________________
FULL ASSIGNMENT
FOR VALUE RECEIVED ___________________________hereby sells, assigns and
transfers unto _______________________________ the foregoing Warrant and all
rights evidenced thereby, and does irrevocably constitute and appoint
______________________, attorney, to transfer said Warrant on the books of NEWS
COMMUNICATIONS, INC.
Dated:___________________ Signature: __________________________
Address: ____________________________
____________________________
PARTIAL ASSIGNMENT
FOR VALUE RECEIVED _______________________ hereby assigns and transfers
unto _____________________________ the right to purchase ________________ shares
of Common Stock of NEWS COMMUNICATIONS, INC. by the foregoing Warrant, and a
proportionate part of said Warrant and the rights evidenced hereby, and does
irrevocably constitute and appoint ______________________, attorney, to transfer
that part of said Warrant on the books of NEWS COMMUNICATIONS, INC.
Dated:___________________ Signature: __________________________
Address: ____________________________
____________________________
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