LOAN AGREEMENT
THIS LOAN AGREEMENT, dated as of November 5, 1997 is made and entered into
by and between ROTHSCHILD RECOVERY FUND L.P. (together with its successors and
assigns "Lender"), a Delaware Limited Partnership whose address is 1251 Avenue
of the Americas, Xxx Xxxx, Xxx Xxxx, 00000 and DAN'S PAPERS, INC., ("Borrower")
a New York corporation whose address is 0000 Xxxxxxx Xxxxxxx, Xxxxxxxxxxxxx, Xxx
Xxxx, 00000 and NEWS COMMUNICATIONS, INC. ("News") a Nevada corporation whose
address is 174-15 Xxxxxx Xxxxxxx Expressway Fresh Xxxxxxx New York, the parent
of the Borrower.
WHEREAS, the Borrower desires to borrow from Lender the principal sum of
One Million Five Hundred Thousand Dollars ($1,500,000) (the "Loan"); and
WHEREAS, Lender is willing to make the Loan upon the terms and conditions
hereinafter set forth; and
WHEREAS, News is willing to guarantee (the "Guarantee") the Loan; and
WHEREAS, the parties desire to enter into this Loan Agreement to reflect
the terms and conditions of, and to describe their respective rights and
obligations with respect to, the Loan;
NOW THEREFORE, in consideration of the mutual covenants and agreements
herein set forth, the parties hereto agree as follows:
1. The Loan. Lender agrees to make the Loan to the Borrower in the principal
amount of One Million Five Hundred Thousand Dollars ($1,500,000) on the terms
and conditions contained herein and as provided in the Note (as hereinafter
defined).
2. Loan Terms.
(a) The Loan shall be evidenced by a promissory note as such may be
amended, modified, extended or restated, or a promissory note issued as a
replacement or substitution therefore (the "Note") payable to Lender in
substantially the form attached hereto as Exhibit A.
(b) The Loan shall be payable in one installment of all outstanding
principal and unpaid, accrued interest on December 31, 1998 ("the Maturity
Date").
(c) Interest shall accrue on the principal amount outstanding under the
Loan at the rate of nine and three-quarter percent (9.75%) per annum and shall
be payable monthly commencing on December 1, 1997 and on the Maturity Date or
the date of any other payment of principal under the Note. Interest shall be
calculated on a 365 day year basis and actual days elapsed from disbursement
date until paid.
(d) The entire amount of unpaid principal and accrued interest shall, from
and after the Maturity Date and from and after an "Event of Default" (as
hereinafter defined), bear interest at the rate equal to the lesser of (i)
twenty-four percent (24%) per annum and (ii) the maximum interest rate permitted
by law.
(e) The Borrower may at any time prepay in whole or in part the principal
sum, plus accrued interest on the amount so prepaid to date of payment, of the
Note, without premium or penalty. Unless otherwise agreed by Lender, any
prepayments shall be applied first to accrued interest and then to the unpaid
principal amount of the Loan.
(f) The Loan, and each and every modification, extension, renewal, or
refinancing thereof, and the performance of all covenants, duties and
obligations of the Borrower and the compliance by the Borrower with all
conditions, representations and warranties set forth in this Loan Agreement, the
other "Loan Documents" (as hereinafter defined) and all documents executed in
connection herewith, shall be secured by a security interest in all assets of
the Borrower pursuant to a General Security Agreement annexed hereto as Exhibit
B and by the Guarantee Agreement annexed hereto as Exhibit C.
(g) Simultaneously with the execution of this Loan Agreement, News shall
issue to Lender, a five-year warrant to purchase on or after February 28, 1998,
300,000 shares of common stock of News at an initial exercise price of $2.25 per
share pursuant to the Warrant (the "Warrant") annexed hereto as Exhibit D,
unless prior to that date the Lender shall instead elect to receive interest at
the rate of 10.75% per annum, retroactive to the initial date of the Loan.
(h) Lender shall not be required to make the Loan hereunder, unless and
until the following shall be satisfied:
1. The Loan Agreement, the Note, the General Security Agreement and
the Guarantee (collectively, the "Loan Documents") and the Warrant have been
duly executed and delivered to Lender and shall be in full force and effect in
accordance with their terms.
2. The Borrower and News shall have therefor complied with all of
the conditions, terms, covenants and agreements contained in the Loan Documents
and all documents executed in connection herewith, including the Warrant, and
all representations
and warranties of the Borrower and News are true and correct as of the date of
the borrowing.
3. At the time of the borrowing hereunder, the Borrower shall
deliver to the Lender a certificate, dated the date of the borrowing, confirming
that no Event of Default (as hereinafter defined) or any event which upon notice
or passage of time or both would constitute an Event of Default shall have
occurred and be continuing at the time of such borrowing.
4. On or prior to the date of the borrowing hereunder, the Lender
shall have received from Borrower and News:
(x) A Certificate of an officer of each of Borrower and News
dated the date of such borrowing and certifying (i) that attached thereto is a
true and complete copy of the articles and by laws of Borrower and News,
respectively, in effect prior to the adoption of the resolution referred to in
the immediate following clause and at all times since adoption, and (ii) in the
case of the Borrower, that attached thereto is a true and complete copy of the
resolutions adopted by the Board of Directors of Borrower authorizing the
execution, delivery and performance of the Loan Documents by the Borrower, and
in the case of News, that attached thereto is a true and complete copy of the
resolutions adopted by the Board of Director of News authorizing the execution,
delivery and performance of the Loan Documents and the Warrant; and
(y) such other documents as the Lender may reasonably request.
(i) If any payment of principal, interest or any other amount due
hereunder is due upon a day which is not a day which the Lender is open for
business ("Business Day") then such payment plus interest on such payment
computed from the due date to the next succeeding Business Day shall be due on
the next succeeding Business Day.
3. Borrower's and News' Representations, Warranties and Covenants. The Borrower
and News represent, warrant and covenant to Lender that, as of the date hereof,
and as long as any amount hereunder or under the Note remains outstanding (and
with respect to the Warrant, until expiration or exercise of the Warrant):
(a) there is no provision of any contract, agreement, indenture or other
instrument to which the Borrower or News will be a party which would be
contravened or violated by any of the representations, warranties, convenants or
agreements made or actions to be taken hereunder or under the other Loan
Documents or the Warrant by the Borrower or News.
(b) there is no action, suit, proceeding, arbitration or investigation
pending at law or in equity or before any governmental agency or instrumentality
or, to the knowledge of the Borrower or News threatened against or affecting the
Borrower or News or which, in any case, might materially adversely affect the
Borrower or News, or either of their respective operations, business, assets,
properties, condition (financial or otherwise) or ability to perform or
otherwise comply with their obligations to Lender. If, in the future, such
action, suit, proceeding, arbitration or investigation is pending or threatened,
the Borrower and News shall provide Lender with immediate notification and the
details thereof.
(c) each of the Borrower and News is a corporation duly organized and
validly existing under the law of the state of its incorporation. The Borrower
and News have the power and authority to conduct all of the activities conducted
by them and to own or lease all of the assets owned or leased by them and are
duly licensed or qualified to do business as foreign corporations in all
jurisdiction in which the nature of the business require them to be so licensed
or qualified. The Borrower and News are in all material respects in compliance
with all laws, regulations and ordinances applicable to them.
(d) the execution, delivery and performance by the Borrower and News of
the Loan Documents, and by News of the Warrant (i) do not require the approval
of any governmental authorities (ii) do not violate the Certificate of
Incorporation or bylaws of the Borrower or News and (iii) do not violate any
provisions of law, any writ, order or decision of any court or other
governmental authority, or any indenture, agreement or other instrument to which
the Borrower or News is a party or by which their properties may be bound or
affected. The Loan Documents, the Warrant and any other documents executed by
the Borrower or News in connection herewith are, or upon execution and delivery
will be, the legal, valid and binding obligations of the Borrower and News,
enforceable in accordance with their respective terms, and are not and will not
be, without Lender's prior written consent, subordinated in right of payment to
any other obligation of such Borrower or News.
(e) News and Borrower have obtained all necessary corporate and other
approvals for the execution and delivery of the Loan Documents and News had
obtained all necessary corporate and other approvals for the execution and
delivery of the Warrant. The Borrower and News have the power and authority to
execute the Loan Documents and the Warrant, as the case may be, and to
consummate the transactions contemplated hereby and thereby.
(f) no delinquency presently exists with respect to payment of any tax,
assessment or other governmental charge owing by Borrower or News. There are no
material unresolved questions or claims concerning any tax liability of Borrower
or News.
(g) insurance of the types and in the amounts customarily carried in lines
of business similar to those carried on by the Borrower and News is maintained
and kept in force by the Borrower and News.
(h) there is no condition of existing default by the Borrower or News
under any agreement, lease, contract or other instrument which would have a
material adverse effect on the Borrower or News or either of their respective
operations, businesses, assets, properties, condition (financial or otherwise),
or ability to fulfill their obligations to Lender under the Loan Documents or,
in the case of News, the Warrant.
(i) the Borrower and News have no contingent or disputed liabilities or
unrealized or anticipated losses which in the aggregate are material, or any
material commitments of an unusual or burdensome character.
(j) there is no fact that materially adversely affects the ability of the
Borrower or News to perform its obligations to Lender which has not been set
forth herein.
(k) none of the Loan Documents or the Warrant, nor any certificate,
statement or other document furnished or to be furnished to the Lender in
connection with the transactions contemplated hereby or thereby contains or will
contain any untrue statement of material fact or omits or will omit to state a
material fact necessary to make the statements contained herein or therein not
misleading.
4. Covenants. Unless Lender otherwise agrees in writing, until payment in full
of the Loan and performance of all obligations under the Loan Documents, the
Borrower and News, as the case may be, shall:
(a) duly pay or cause to be paid the principal of and interest on the Note
on the dates, in the places and in the manner set forth therein, and perform and
observe all other obligations the Borrower and News under the Loan Documents,
the Warrant and any other instruments or documents executed in connection
herewith.
(b) maintain and preserve their respective existence, rights, privileges
and franchises in good standing under the laws of the state of their corporation
and such states in which they may decide to maintain their existence and
maintain their right to transact business in all other states where their
activities and ownership of assets are such that qualification to transact
business is necessary under laws of such states.
(c) keep and maintain full and accurate accounts and records of their
operations in accordance with generally accepted accounting principles
applicable to the businesses of the type in which they are engaged and
consistent with principles heretofore applied by them in preparation of their
financial statements.
(d) with respect to News, timely file all documents and reports to be
filed by it under Securities Exchange Act of 1934, as amended, and provide
copies of all such filings
documents and reports to Lender immediately after such filings with Securities
and Exchange Commission or any other governmental or regulatory body.
(e) permit Lender to inspect the accounts and records of Borrower and News
at any time during normal business hours.
(f) comply in all material respects with all laws, regulations, rules and
orders of governmental authorities applicable to them or their operations,
business or property.
(g) duly pay and discharge, all wages, indebtedness, obligations,
assessments, governmental charges and taxes, real and personal, including
federal and state income taxes, levied upon or assessed against them or their
properties or income except to the extent such shall be contested in good faith
and by appropriate proceedings diligently conducted by them.
(h) execute and deliver to Lender such other and further instruments,
security agreements, documents and information and perform further acts as may
be reasonably required and requested by Lender in order to fully vest and
maintain in Lender the security interest or rights herein contemplated.
(i) promptly after learning thereof, notify Lender in writing of the
occurrence of (i) any Event of Default or any act, condition, or event that
would constitute an Event of Default upon notice, failure to cure, lapse of time
or all of the foregoing; (ii) any material adverse change in their respective
business, property, assets, operations or condition (financial or otherwise) or
(iii) the pendency or threat of any investigation or litigation or arbitration
and of any tax deficiency, tax determination or other proceeding before any
governmental body or official affecting them.
(j) not voluntarily create, suffer, or permit to be created any new or
additional liens against the "Collateral" (as such term is defined in the
General Security Agreement) except any lien created hereby. Borrower and News
shall not incur any indebtedness, except for trade payables incurred in the
ordinary course of business, without Lender's prior written consent.
(k) not, except with Lender's prior written consent (i) sell, lease,
transfer or otherwise dispose of two or more of the newspapers and/or other
publications or (ii) enter into any arrangement with any person with respect to
any such disposition.
5. Events of Default. If any of the events specified in this Section 5 shall
occur (herein individually referred to as an "Event of Default"):
(a) default in payment of principal or interest under the Note when due;
(b) a default or breach by the Borrower or News of any obligation or any
representation, warranty, covenant or agreement, set forth in the Loan Documents
or the Warrant, or other documents signed by Borrower or News in connection with
the Loan or Guarantee which is not cured or cannot be cured by Borrower or News,
within ten (10) days after the Lender has given Borrower written notice of such
default;
(c) the institution by the Borrower or News of proceedings to be
adjudicated as bankrupt or insolvent, or the consent by it to the institution of
bankruptcy or insolvency proceedings against it or the filing by it of a
petition or answer or consent seeking reorganization or release under the
federal Bankruptcy Code, or any other applicable federal or state law, or the
consent by it to the filing of any such petition or the appointment of a
receiver, liquidator, assignee, trustee or other similar official for all or any
substantial part of its property or the taking of any action by any Borrower or
News in furtherance of any such action;
(d) within sixty (60) days after the commencement of an action against the
Borrower or News seeking any bankruptcy, insolvency, reorganization, liquidation
or similar relief under any present or future statue, law or regulation: such
action shall not have been resolved in favor of the Borrower or News; all orders
or proceedings thereunder affecting the property of such Borrower shall not have
been stayed; the stay of any such order or proceeding shall thereafter be set
aside; or within sixty (60) days after the appointment without the consent or
acquiescence of the Borrower or News of any trustee or receiver for all or any
substantial part of such parties' property, such appointment shall not have been
vacated;
(e) any default of the Borrower or News under any indebtedness or other
obligations which aggregate at least $100,000 if such default is not cured by
the Borrower or News before the earlier of (x) ten (10) days after the Lender
has given the Borrower or News written notice of such default or (y) the obligee
of such indebtedness or other obligation has made demand or notified the
Borrower or News of any acceleration and in either case, any cure period has
lapsed; or
(f) the rendering of one or more judgments or orders against the Borrower
or News for the payment of money exceeding any applicable insurance coverage by
more than $100,000 in the aggregate, and either (x) enforcement proceedings
shall have been commenced by any creditor upon any such judgment or order, or
(y) there shall be any period of 30 consecutive days during which a stay of
enforcement of any such judgment or order, by reasons of a pending appeal or
otherwise, shall not be in effect; or
(g) any event of default under any other Loan Document;
(h) the dissolution or liquidation of the Borrower or News, or the
Borrower or News or their respective directors or shareholders shall take action
approving or authorizing the dissolution or liquidation of Borrower or News as
the case maybe; or
(i) the Guarantee is disclaimed, invalid or its effectiveness is otherwise
vitiated;
then, with the exception of an Event of Default specified in clauses (c)
or (d) above, the Lender may, by notice to the Borrowers or News, declare any
outstanding indebtedness to Lender under the Note and this Loan Agreement and
the Guarantee, all interest thereon and all other amounts payable hereunder or
thereunder to be immediately due and payable, without presentment, demand,
protest or other notice of any kind, all of which are hereby expressly waived by
the Borrower or News, whereupon the principal amount of the Note, all such
interest and all such amounts shall become and be immediately due and payable,
and exercise any and all of its other rights under applicable law.
Upon the occurrence of an Event of Default specified in clauses (c) or (d)
above, any outstanding indebtedness to Lender under the Note and this Loan
Agreement, all interest thereon and all other amounts payable hereunder or
thereunder shall thereupon and concurrently therewith become due and payable,
all without any action by the Lender, and without presentment, demand, protest
or other notice of any kind, all of which are hereby expressly waived by the
Borrower and News, anything in this Loan Agreement or the Note to the contrary
notwithstanding.
In addition to it rights hereunder, Lender may also exercise any or all of it
rights contained in any other Loan Document.
6. Miscellaneous
(a) Any notice required, desired, or permitted to be given to the
Borrower, News or Lender hereunder shall be in writing and shall be delivered
personally, sent certified or registered United States mail, return receipt
requested or sent by overnight courier service addressed
Borrowers: Dan's Papers, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
News Xxxxxxx Xxxxxxxxx, President
News Communications, Inc.
174-15 Xxxxxx Xxxxxxx Expressway
Xxxxx Xxxxxxx, Xxx Xxxx 00000
Lender: Xx. Xxxxx Xxxxxxx
Rothschild Recovery Fund L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by overnight courier service, one (1) business day
after deposit with the courier service. Any party may change its address by
notice to the other parties.
(b) In the event any term or provision of the Loan Documents, the Warrant,
or any other instrument, document or agreement executed pursuant hereto shall be
finally determined to be superseded, invalid, illegal or otherwise unenforceable
pursuant to applicable law by any authority having jurisdiction, such
determination shall not affect the validity, legality or enforceability of the
remaining terms and provisions of the Loan Documents, the Warrant or any such
other instrument, document or agreement, which shall be enforced as if the
unenforceable term or provision were deleted.
(c) No course of dealing on the part of Lender, its officers, directors,
employees, consultants or agents, nor any failure or delay by Lender with
respect to exercising any rights, remedy, power or privilege of Lender under the
Loan Documents, the Warrant, or any other instrument, document or instrument
executed and delivered in connection herewith at law or in equity shall operate
as a waiver thereof, nor shall a single or partial exercise thereof preclude any
other or further exercise or the exercise of any other right, remedy, power or
privilege. No waiver or consent shall be effective unless the same shall be in
writing and signed by Lender and then such waiver or consent shall be effective
only in the specific instance and for the specific purpose for which given. No
notice to or demand on Borrower or News in any case shall entitle the Borrower
or News other or further notice or demand in similar or other circumstances.
(d) Enforcement of any rights of Lender under the Loan Documents shall not
affect the rights of Lender to enforce payment and to recover judgment for any
portion thereof remaining unpaid. The rights and remedies herein expressed are
cumulative and not exclusive of any rights or remedy that Lender shall otherwise
have.
(e) The Loan Documents, the Warrant and all instruments, documents or
agreements executed pursuant hereto and thereto shall be governed by construed
in accordance with the laws of the State of New York without giving effect to
the principles of conflict of laws thereof.
(f) Borrower and News may not assign any of their respective rights or
obligations under any of the Loan Documents or the Warrant, without the prior
written consent of Lender to any such assignment without such consent shall be
void. Lender may assign its rights and obligations under the Loan Documents or
the Warrant without the prior consent of the Borrower.
(g) This Loan Agreement shall be binding upon, and inure to the benefit
of, and be enforceable by the Borrower, News and the Lender, and their
respective successors and permitted assigns.
(h) This Loan Agreement contains the entire agreement between the
Borrower, News and the Lender with respect to the subject matter hereof, and
supersedes and cancels any prior agreements or understandings, whether oral or
written, among the parties hereto with respect to such subject matter. This Loan
Agreement may not be amended or modified except in a writing signed by the
Lender, the Borrower and News.
(i) All representations and warranties contained in the Loan Documents or
made in writing by or on behalf of Borrower or News in connection with the
transactions contemplated hereby shall survive the execution and delivery of the
Loan Documents, regardless of any investigation at any time made by Lender or on
its behalf. The Loan Agreement shall continue in full force and effect so long
as any amount borrowed, or expenses, fees (including legal fees), or interest
remain unpaid.
(j) This Loan Agreement may be executed in any number of counterparts,
each of which shall be an original, but all of which together shall constitute
one agreement. This Loan Agreement will be deemed to be binding agreement among
the parties hereto upon receipt by each party of fully executed copies of this
Agreement by mail, facsimile or otherwise.
(k) Lender is not a partner or a joint venturer with the Borrower or News
with respect to the transaction contemplated hereby or by the other Loan
Documents or the Warrant and the Lender shall not be deemed liable as such with
respect to any liability of the Borrower.
(l) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to the Loan Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be head and determined in any such New York State court
or, to the extent permitted by law, in such federal court. Each of the parties
hereto agrees that a
final judgment in any such action or proceeding shall be conclusive and may be
enforced in other jurisdictions by suit on the judgment or in any other manner
provided by law. Nothing in this Loan Agreement shall affect any right that any
party may otherwise have to bring any action or proceeding relating to the Loan
Documents in the courts of any jurisdiction. Each of the parties hereto
irrevocably and unconditionally waives, to the fullest extent it may legally and
effectively do so, any objection that it may now or hereafter have to the laying
of venue of any suit, action or proceeding arising out of or relating to the
Loan Documents in any New York State or federal court. Each of the parties
hereto hereby irrevocably waives, to the fullest extent permitted by law, the
defense of an inconvenient forum to the maintenance of such action or proceeding
in any such court.
(m) Each of the Borrower, News and the Lender hereby irrevocably waives
all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to the Loan
Documents or the actions of the Lender in the negotiation, administration,
performance or enforcement thereof.
(n) The Borrower and News hereby agree not to raise or interpose any
defense, set-off or counterclaim of any kind or nature whatsoever which it may
have against the Lender in any action brought upon the Loan Documents or the
Warrant and the Borrower and News each acknowledges that they have no defense of
any kind or nature to the enforcement of the Loan Documents and the Warrant or
to the binding nature of the obligations represented hereby or thereby.
(o) The Borrower and News agree to pay all of Lender's legal fees and
expenses incurred in connection with the documentation, negotiation and the
execution of the Loan
Documents and the Warrant, and all expenses incurred, including legal fees and
expenses, in collecting any of Borrower's or News' obligations hereunder or
thereunder.
ROTHSCHILD RECOVERY FUND L.P.
By:
---------------------------
Name:
Title:
DAN'S PAPERS, INC.
By:
-----------------------------
Name:
Title:
NEWS COMMUNICATIONS, INC.
By:
-----------------------------
Xxxxxxx Xxxxxxxxx
President
EXHIBIT A
PROMISSORY NOTE
$1,500,000
New York, New York
November 5, 1997
THIS PROMISSORY NOTE HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933 OR
ANY STATE SECURITIES LAWS. IT MAY NOT BE SOLD, OFFERED FOR SALE, PLEDGED OR
HYPOTHECATED N THE ABSENCE OF A REGISTRATION STATEMENT IN EFFECT WITH RESPECT TO
THIS PROMISSORY NOTE UNDER THE SECURITIES ACT OF 1933 AND QUALIFICATION UNDER
APPLICABLE STATE SECURITIES LAWS OR AN OPINION OF COUNSEL SATISFACTORY TO THE
BORROWER THAT SUCH REGISTRATION IS NOT REQUIRED.
Dan's Papers, Inc., a New York corporation whose address is 0000 Xxxxxxx
Xxxxxxx, Xxxxxxxxxxxxx, Xxx Xxxx 00000, (as Borrower) for value received, hereby
promises to pay to the order of Rothschild Recovery Fund L.P. (the "Lender"), a
Delaware Limited Partnership, the sum of One Million Five Hundred Thousand
Dollars ($1,500,000), or such lesser amount as shall then equal the outstanding
principal amount hereof, on December 31, 1998 (such date, or such earlier date
upon which the principal and interest is due upon acceleration pursuant to
Section 5 of the "Loan Agreement" (as hereinafter defined) hereinafter referred
to as the "Due Date") and to pay interest from the date hereof on the unpaid
principal amount hereof at the rate set forth below, all on the terms and
conditions set forth herein. Payment for all amounts due hereunder shall be made
in lawful money of the United States of America by certified mail, return
receipt requested, to the address of the Lender or by wire transfer to an
account designated in writing by the Lender. The indebtedness evidenced by this
Note is further evidenced by a Loan Agreement, dated the date hereof, between
the Borrower, News Communications, Inc. (the "Guarantor") and the Lender (the
"Loan Agreement") and is secured as provided therein by a Guarantee Agreement
(the "Guarantee") dated the date hereof, executed by the Guarantor and by a
General Security Agreement ("Security Agreement") dated the date hereof,
executed by Borrower. The indebtedness is subject to acceleration upon the
occurrence of an Event of Default as set forth in the Loan Agreement. The Loan
Agreement, the Security Agreement and the Guarantee are incorporated by
reference herein. All terms used herein and not defined herein shall have the
meaning set forth in the Loan Agreement.
1. Interest. Interest shall accrue from the date hereof until all
outstanding principal and interest on this Note shall have been paid in full at
the rate of nine and three-quarters percent (9.75%) per annum on the unpaid
principal balance hereof and shall be payable monthly commencing on December 1,
1997 and on the Due Date or the date of any other payment of principal on the
Note. In the event that the principal amount of this Note is not paid in full on
-1-
the Due Date, interest at the rate equal to the lesser of (i) the maximum
legally permitted interest rate and (ii) twenty-four percent (24%) per annum
shall continue to accrue on the balance of any unpaid principal and accrued
interest from the Due Date until such balance is paid.
2. Prepayment. The Borrower may at any time prepay in whole or in part the
principal sum, plus accrued interest on the amount so prepaid to date of
payment, of this Note, without penalty or premium. All such prepayments shall be
applied in the manner set forth in the Loan Agreement.
3. Waiver of Presentation, Demand, Etc. All parties now or hereafter
liable with respect to this Note, whether the Borrower, guarantor, endorser or
any other person hereby expressly waive presentment, demand of payment, protest,
notice for demand of payment, protest and notice of non-payment, or any other
notice of any kind with respect thereto. No delay or failure on the part of the
Lender in the exercise of any right or remedy hereunder or under the Loan
Agreement, or at law or in equity, shall operate as a wavier thereof, and no
single or partial exercise by the Lender of any right or remedy hereunder or
under Loan Agreement shall preclude or estop another or further exercise or any
other right or remedy.
4. Defense, Set-Offs, Counterclaims. The Borrower hereby agrees not to
raise or interpose any defense, set-off or counterclaim of any kind or nature
whatsoever which it may have against the Lender in any action brought upon this
Note or the Loan Agreement or the other Loan Documents and the Borrower
acknowledges that it has no defense of any kind or nature to the enforcement of
this Note or the Loan Agreement or the other Loan Documents or to the binding
nature of the obligations represented hereby or thereby.
5. Amendments. No amendment, modification, alternation or change of any of
the provisions of this Note shall be effective unless in writing signed by the
Borrower and the Lender and only to the extent therein set forth.
6. Governing Law. This Note shall be governed by and construed in
accordance with the laws of the State of New York, without giving effect to the
principles of conflicts of law thereof.
7. Time of the Essence. Time is of the essence with respect to this Note
and in case this Note is collected by law or through an attorney at law or under
advice therefrom, or any remedy is exercised under the Loan Agreement, the
Borrower agrees to pay all costs of collection or costs associated with the
exercise of any such remedy including reasonable attorneys' fees. The Lender
shall be under no duty to exercise any or all of the rights and remedies given
by this Note or the Loan Agreement and no party to this instrument shall be
discharged from the obligations or undertakings hereunder (a) should the Lender
release or agree not to xxx any person against whom the party has, to the
knowledge of Lender, a right to recourse, or (b) should the Lender agree to
suspend the right to enforce this Note or its interest
-2-
in any collateral pledged to secure this Note against such person or otherwise
discharge such person.
8. Severability. In the event that any term or provision of this Note
shall be finally determined to be superseded, invalid, illegal or otherwise
unenforceable pursuant to applicable law by any authority having jurisdiction,
such determination shall not impair or otherwise affect the validity, legality
or enforceability of the remaining terms and provisions of this Note, which
shall be enforced as if the unenforceable term or provision were deleted.
IN WITNESS WHEREOF, the undersigned has caused this Note to be issued as
of this 5th day of November, 1997.
DAN'S PAPERS, INC.
By:
---------------------------
Name:
Title:
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EXHIBIT B
GENERAL SECURITY AGREEMENT
GENERAL SECURITY AGREEMENT, dated as of November 5, 1997 between Dan's
Papers, Inc., incorporated under the laws of New York (the "Debtor"), and
Rothschild Recovery Fund L.P. (the "Secured Party");
W I T N E S S E T H:
WHEREAS, the Debtor and the Secured Party are parties to a Loan Agreement
(herein, as at any time amended, extended, restated, renewed or modified, the
"Loan Agreement") and conditions set forth therein, to lend to the Debtor an
aggregate principal amount of $1,500,000 and
WHEREAS, it is a condition to the extension of credit by the Secured Party
pursuant to the Loan Agreement that the Debtor enter into this General Security
Agreement and grant to the Secured Party the security interest provided for
herein;
NOW, THEREFORE, FOR VALUE RECEIVED, IT IS AGREED:
Section 1. Terms. Unless otherwise defined herein, capitalized terms used
in this General Security Agreement shall have the meaning specified therefor in
the Loan Agreement. As used herein the following terms shall have the meanings
specified and shall include in the singular number the plural and in the plural
number the singular:
"Assigned Agreements" shall mean all contracts and agreements of the
Debtor.
"Collateral" means all of the Debtor's right, title and interest in and
under or arising out of each and all of the following:
All personal property and fixtures of the Debtor of any type or
description, wherever located and now existing or hereafter arising or acquired,
including but not limited to the following:
(i) all of the Debtor's goods including, without limitation:
(a) all inventory, including without limitation lighting and other
equipment held for lease, whether raw materials, in process or finished, all
material or equipment usable in processing the same and all documents of title
covering any inventory (all of the foregoing, "Inventory");
(b) all equipment (the "Equipment") employed in connection with the
Debtor's business, together with all present and future additions, attachments
and accessions thereto and all substitutions therefor and replacements thereof;
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(ii) all of the Debtor's present and future accounts, accounts receivable
from affiliates, general intangibles, contracts and contract rights (herein
sometimes referred to as "Receivables"), including but not limited to the
Debtor's rights (including rights to payment) under all Assigned Agreements
together with
(a) all claims, rights, powers or privileges and remedies of the
Debtor relating thereto or arising in connection therewith including, without
limitation, all rights of the Debtor to make determinations, to exercise any
election (including, but not limited to, election of remedies) or option or to
give or receive any notice, consent, waiver or approval, together with full
power and authority to demand, receive, enforce, collect or receipt for any of
the foregoing or any property which is the subject of the Assigned Agreements,
to enforce or execute any checks, or other instruments or orders, to file any
claims and to take any action which (in the opinion of the Secured Party) may be
necessary or advisable in connection with any of the foregoing,
(b) all liens, security, guaranties, endorsements, warranties and
indemnities and all insurance and claims for insurance relating thereto or
arising in connection therewith,
(c) all rights to property forming the subject matter of the
Receivables including, without limitation, rights to stoppage in transit and
rights to returned or repossessed property,
(d) all writings relating thereto or arising in connection therewith
including without limitation, all notes, contracts, security agreements,
guaranties, chattel paper and other evidence of indebtedness or security, all
powers-of-attorney, all books, records, ledger cards and invoices, all credit
information, reports or memoranda and all evidence of filings or registrations
relating thereto,
(e) all catalogs, computer and automatic machinery software and
programs, and the like pertaining to operation by the Debtor in, on or about any
of its plants or warehouses, all sales data and other information relating to
sales or service of products now or hereafter manufactured on or about any of
its plants, and all accounting information pertaining to operations in, on or
about any of its plants, and all media in which or on which any of the
information or knowledge or data is stored or contained, and all computer
programs used for the compilation or printout of such information, knowledge,
records or data, and
(f) all accounts, contract rights, general intangibles and other
property rights of any nature whatsoever arising out of or in connection with
the foregoing, including without limitation, payments due and to become due,
whether as repayments, reimbursements, contractual obligations, indemnities,
damages or otherwise;
(iii) all other personal property of the Debtor of any nature whatsoever,
including, without limitation, all accounts, bank accounts, deposits, credit
balances, contract rights, inventory, general intangibles, goods, equipment,
instruments, chattel paper, machinery,
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furniture, furnishings, fixtures, tools, supplies, appliances, plans and
drawings, together with all customer and supplier lists and records of the
business, and all property from time to time described in any financing
statement (UCC-1) signed by the Debtor naming the Lender as secured party; and
(iv) all additions, accessions, replacements, substitutions or
improvements and all products and proceeds including, without limitation,
proceeds of insurance, of any and all of the Collateral described in clauses (i)
through (iii) above.
"Instrument" shall have the meaning specified in Article 3 of the Uniform
Commercial Code, as in effect from time to time in the State of New York and
shall also include any other writing which evidences a right to the payment of
money and is not itself a security agreement or lease and is of a type which is
in the ordinary course of business transferred by delivery with any necessary
endorsement or assignment.
"Receivables" has the meaning specified therefor in clause (ii) of the
definition of Collateral.
"Secured Obligations" means the principal of, and interest on, the Loan
and the Note and all other obligations of the Debtor, whether for fees, expenses
or otherwise, now existing or hereafter arising under this General Security
Agreement, the Loan Documents and any other document executed by Debtor in
connection with any of the foregoing.
Section 2. Security Interests. As security for the payment and performance
of all Secured Obligations the Debtor does hereby grant and assign to the
Secured Party a continuing security interest in all of the Collateral, whether
now existing or hereafter arising or acquired and wherever located.
Section 3. General Representations, Warranties and Covenants. The Debtor
represents, warrants and covenants, which representations, warranties and
covenants shall survive execution and delivery of this General Security
Agreement, as follows:
(a) This General Security Agreement is made with full recourse to the
Debtor and pursuant to and upon all the warranties, representations, covenants,
and agreements on the part of the Debtor contained herein, in the Loan Agreement
and otherwise made in writing in connection herewith or therewith.
(b) The Debtor is, and as to Collateral acquired from time to time after
the date hereof the Debtor will be, the owner of all the Collateral and for as
long as the Secured Obligations remain unpaid the Debtor will not permit any new
or additional lien or other encumbrance on the Collateral.
(c) So long as the Loan Agreement remains in effect or any of the Secured
Obligations of the Debtor remain unpaid, the Debtor will not execute and there
will not be on
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file in any public office any new or additional financing statement (or similar
statement or instrument of registration under the law of any jurisdiction) or
statements relating to the Collateral, except financing statements filed or to
be filed in respect of and covering the security interest of the Secured Party
hereby granted and provided for.
(d) The chief executive office and chief place of business of the Debtor
is located at the address of the Debtor listed on the signature page hereof, and
the Debtor will not move its chief executive office and chief place of business
except to such new location as the Debtor may establish in accordance with the
last sentence of this Section 3(d). The originals of all documents (as well as
all duplicates thereof) evidencing all Receivables and all other contract rights
or accounts and other property of the Debtor and the only original books of
account and records of the Debtor relating thereto are, and will continue to be,
kept at such chief executive office or at such new location as the Debtor may
establish in accordance with the last sentence of this Section 3(d). The Debtor
shall establish no such new location until (i) it shall have given to the
Secured Party not less than 30 days' prior written notice of its intention so to
do, clearly describing such new location and providing such other information in
connection therewith as the Secured Party may reasonably request, and (ii) with
respect to such new location, it shall have taken such action, satisfactory to
the Secured Party (including, without limitation, all action required by Section
7 hereof), to maintain the security interest of the Secured Party in the
Receivables intended to be granted at all times fully perfected and in full
force and effect.)
(e) Debtor has no Collateral located outside the State of New York.
(f) The name of the Debtor is as set forth on the signature page hereto
and the Debtor shall not change such name, conduct its business in any other
name or take title to the Collateral in any other name while this General
Security Agreement remains in effect. The Debtor has never had any name, or
conducted business under any name in any jurisdiction, other than its name set
forth on the signature page hereto, during the past six years.
(g) At the Debtor's own expense, the Debtor will: (i) without limiting the
provisions of the Loan Agreement, keep the Collateral fully insured at all times
with financially sound and responsible insurance carriers against loss or damage
by fire and other risks, casualties and contingencies and in such manner and to
the same extent that like properties are customarily so insured by other
entities engaged in the same or similar businesses similarly situated and keep
adequate insurance at all times against liability on account of damage to
persons and properties and under all applicable workmen's compensation laws, by
insurers and in amounts approved by the Secured Party, for the benefit of the
Debtor and the Secured Party, (ii) upon request by the Secured Party, promptly
deliver the insurance policies or certificates thereof to the Secured Party, and
(iii) keep the Collateral in good condition at all times (normal wear and tear
excepted) and maintain same in accordance with all manufacturer's specifications
and requirements. Upon any failure of the debtor to comply with its obligations
pursuant to this Section 3(g), the Secured Party may at its option, and without
affecting any of its other rights or remedies provided herein or as a secured
party
-4-
under the Uniform Commercial Code, procure the insurance protection it deems
necessary and/or cause repairs or modifications to be made to the Collateral and
the cost of either or both of which shall be a lien against the Collateral added
to the amount of the indebtedness secured hereby and payable on demand with
interest at a rate per annum equal to 15% per annum.
(h) The Debtor hereby assigns to the Secured Party all of Debtor's right,
title and interest in and to any and all moneys which may become due and payable
with respect to the Collateral under any policy insuring the Collateral,
including return of unearned premium, and shall cause any such insurance company
to make payment directly to the Secured Party for application as provided in the
Loan Agreement.
(i) The Debtor will not use the Collateral in violation of any statute or
ordinance or applicable insurance policy and will promptly pay all taxes and
assessments levied against the Collateral.
(j) The Debtor will not sell, transfer, change the registration, if any,
dispose of, attempt to dispose of, substantially modify or abandon a substantial
portion or all of the Collateral.
(k) The Debtor will not assert against the Secured Party any claim or
defense which the Debtor may have against any seller of the Collateral or any
part thereof or against any other person with respect to the Collateral or any
part thereof.
(l) The Debtor will indemnify and hold the Secured Party harmless from and
against any loss, liability, damage, costs and expenses whatsoever arising from
the Debtor's use, operation, ownership or possession of the Collateral or any
part thereof.
(m) The Debtor will not enter into any agreement that is inconsistent with
the Debtor's obligations under this General Security Agreement, without the
prior written consent of the Secured Party.
Section 4. Special Provisions Concerning Assigned Agreements. The Debtor
represents, warrants and agrees as follows:
(a) The Assigned Agreements constitute the legal, valid and binding
obligations of the Debtor and, to the best of its knowledge, the other parties
thereto, enforceable in accordance with their respective terms.
(b) The Debtor will faithfully abide by, perform and discharge each and
every obligation, covenant and agreement to be performed by the Debtor under the
Assigned Agreements.
-5-
(c) At the request of the Secured Party, and at the sole cost and expense
of the Debtor, the Debtor will enforce or secure the performance of each and
every obligation, covenant, condition and agreement contained in the Assigned
Agreements to be performed by the other parties thereto.
(d) The Debtor will not modify, amend or agree to vary any of the Assigned
Agreements in any material respect or otherwise act or fail to act in a manner
likely (directly or indirectly) to entitle any party thereto to claim that the
Debtor is in default under the terms thereof.
(e) The Debtor will not terminate or permit the termination of any
Assigned Agreement, except in accordance with its terms.
(f) Without the prior written consent of the Secured Party, the Debtor
will not waive or in any manner release or discharge any party to any Assigned
Agreement from any of the material obligations, covenants, conditions and
agreements to be performed by it under such Assigned Agreement including,
without limitation, the obligation to make all payments in the manner and at the
times and places specified.
(g) If the Secured Party so requests, the Debtor will hold any payments
received by it which are assigned and set over to the Secured Party by this
General Security Agreement for and on behalf of the Secured Party forthwith in
the same form in which they are received (together with any necessary
endorsement) for application in accordance with the terms and conditions of this
General Security Agreement and the Loan Agreement.
(h) The Debtor will appear in and defend every action or proceeding
arising under, growing out of or in any manner connected with the Assigned
Agreements or the obligations, duties or liabilities of the Debtor and any
assignee thereunder.
(i) Should the Debtor fail to make any payment or to do any act as herein
provided, the Secured Party may (but without obligation on the Secured Party's
part to do so and without notice to or demand on the Debtor and without
releasing the Debtor from any obligation hereunder) make or do the same in such
manner and to such extent as the Secured Party may deem necessary to protect the
security interests provided hereby, including specifically, without limiting the
general powers, the right to appear in and defend any action or proceeding
purporting to affect the security interests provided hereby and the Secured
Party may also perform and discharge each and every obligation, covenant and
agreement of the Debtor contained in any Assigned Agreement and, in exercising
any such powers, pay necessary costs and expenses, employ counsel and incur and
pay reasonable attorneys' fees.
(j) Upon the request of the Secured Party, the Debtor will send to the
Secured Party copies of all notices, documents and other papers furnished or
received by it with respect to any of the Assigned Agreements.
-6-
Section 5. Special Provisions Concerning Receivables.
(a) As of the time when each Receivable arises, the Debtor shall be deemed
to have warranted as to each such Receivable that such Receivable and all papers
and documents relating thereto are genuine and in all respects what they purport
to be, and that all papers and documents relating thereto:
(i) will be signed by the account debtor named therein (or such
account debtor's duly authorized agent) or otherwise be binding on the account
debtor;
(ii) will represent the genuine, legal, valid and binding obligation
of the account debtor evidencing indebtedness unpaid and owed by such account
debtor arising out of the performance of labor or services or the sale and
delivery of merchandise or both;
(iii) to the extent evidenced by writings, will be the only original
writings evidencing and embodying such obligation of the account debtor named
therein; and
(iv) will be in compliance and will conform with all applicable
federal, state and local laws (including applicable usury laws) and applicable
laws of any relevant foreign jurisdiction.
(b) The Debtor will keep and maintain at the Debtor's own cost and expense
satisfactory and complete records of the Receivables, including, but not limited
to, records of all payments received, all credits granted thereon, all
merchandise returned and all other dealings therewith, and the Debtor will make
the same available to the Secured Party, at the Debtor's own cost and expense,
at any and all reasonable times upon demand of the Secured Party. The Debtor
shall, at the Debtor's own cost and expense, deliver the Receivables (including,
without limitation, all documents evidencing the Receivables) and such books and
records to the Secured Party or to its representatives upon its demand at any
time after the occurrence of an Event of Default. If the Secured Party shall so
request, the Debtor shall legend, in form and manner satisfactory to the Secured
Party, the Receivables and other books, records and documents of the Debtor
evidencing or pertaining to the Receivables with an appropriate reference to the
fact that the Receivables have been assigned to the Secured Party and that the
Secured Party has a security interest therein.
(c) Except in the ordinary course of business prior to an Event of
Default, the Debtor will not rescind or cancel any indebtedness evidenced by any
Receivable or modify any term thereof or make any adjustment with respect
thereto, or extend or renew the same, or compromise or settle any dispute,
claim, suit or legal proceeding relating thereto, or sell any Receivable or
interest therein, without the prior written consent of the Secured Party.
(d) The Debtor will duly fulfill all obligations on its part to be
fulfilled under or in connection with the Receivables and will do nothing to
impair the rights of the Secured Party in the Receivables.
-7-
(e) The Debtor shall endeavor to collect or cause to be collected from the
account debtor named in each receivable, as and when due (including, without
limitation, Receivables which are delinquent, such Receivables to be collected
in accordance with generally accepted lawful collection procedures) any and all
amounts owing under or on account of such Receivable, and apply forthwith (on a
daily basis) upon receipt thereof all such amounts as are so collected to the
outstanding balance of such Receivable. The costs and expenses (including
attorney's fees) of collection, whether incurred by the Debtor or the Secured
Party, shall be borne by the Debtor.
(f) If any of the Receivables becomes evidenced by an Instrument the
Debtor will notify the Secured Party thereof, and upon request by the Secured
Party promptly deliver such Instrument to the Secured party appropriately
endorsed to the order of the Secured Party as further securities for the
satisfaction in full of the Secured Obligations.
Section 6. Special Provisions Concerning Equipment. The Debtor will do
nothing to impair the rights of the Secured Party in the Equipment. The Debtor
shall cause the Equipment to at all times constitute and remain personal
property and shall insure the Equipment with customary insurance. If the Debtor
shall fail to insure the Equipment to the Secured Party's satisfaction, the
Secured Party shall have the right (but shall be under no obligation) to procure
such insurance and the Debtor agrees to reimburse the Secured Party for all
costs and expenses of procuring such insurance, together with interest at a rate
per annum equal to 15% per annum. Subject to the terms of the Loan Agreement,
the Secured Party may apply any proceeds of such insurance when received by it
toward the payment of any of the Secured Obligations, whether or not the same
shall then be due. The Debtor retains all liability and responsibility in
connection with the Equipment and the liability of the Debtor to pay the Secured
Obligations shall in no way be affected or diminished by reason of the fact that
such Equipment may be lost, destroyed, stolen, damaged or for any reason
whatsoever unavailable to the Debtor.
Section 7. Financing Statements: Documentary Stamp Taxes.
(a) The Debtor will, at its own expense, make, execute, endorse,
acknowledge, file and/or deliver to the Secured Party from time to time such
lists, descriptions and designations of Inventory, warehouse receipts, bills of
lading, documents of title, vouchers, invoices, schedules, confirmatory
assignments, conveyances, financing statements, transfer endorsements, powers of
attorney, certificates, reports and other assurances or instruments and take
such further steps relating to the Collateral and other property or rights
covered by the security interest hereby granted, which the Secured Party deems
appropriate or advisable to perfect, preserve or protect its security interest
in the Collateral. The Debtor hereby constitutes the Secured Party its
attorney-in-fact to execute and file in the name and on behalf of the Debtor
such additional financing statements as the Secured Party may request, such acts
of such attorney being hereby ratified and confirmed. Such power, being coupled
with an interest, is irrevocable until the Secured Obligations are paid in full.
Further, to the extent permitted by applicable law, the Debtor authorizes the
Secured Party to file any such
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financing statements without the signature of the Debtor. The Debtor will pay
all applicable filing fees and related expenses in connection with any such
financing statements.
(b) The Debtor agrees to procure, pay for, affix to any and all documents
and cancel any documentary tax stamps required by and in accordance with,
applicable law and the Debtor will indemnify and hold the Secured Party harmless
against any liability (including interest and penalties) in respect of such
documentary stamp taxes.
Section 8. Special Provisions Concerning Remedies and Sale. In addition to
any rights and remedies now or hereafter granted under applicable law and not by
way of limitation of any such rights and remedies, upon the occurrence of an
Event of Default the Secured Party shall have all of the rights and remedies of
a secured party under the Uniform Commercial Code as enacted in any applicable
jurisdiction in addition to the rights and remedies provided herein, in the Loan
Agreement and in any other agreement executed in connection with the Loan
Agreement. Without in any way limiting the foregoing, upon the giving of notice
to the Debtor of Secured Party's intent to pursue any one or all of the
following or any other remedies:
(a) The Secured Party shall have all of the rights and remedies of a
secured party under the Uniform Commercial Code as enacted in any applicable
jurisdiction in addition to the rights and remedies provided herein, in the Loan
Agreement and any other document whereby the Debtor has granted any lien to the
Secured Party. The Secured Party shall have the right, without further notice
to, or assent by, the Debtor, in the name of the Debtor or in the name of the
Secured Party or otherwise:
(i) to ask for, demand, collect, receive, compound and give
acquaintance for the Receivables or any part thereof;
(ii) to extend the time of payment of, compromise or settle for
cash, credit or otherwise, and upon any terms and conditions, any of the
Receivables;
(iii) to endorse the name of the Debtor on any checks, drafts or
other orders or instruments for the payment of moneys payable to the Debtor
which shall be issued in respect of any Receivable;
(iv) to file any claims, commence, maintain or discontinue any
actions, suits or other proceedings deemed by the Secured Party necessary or
advisable for the purpose of collecting or enforcing payment of any Receivable;
(v) to make test verifications of the Receivables or any portion
thereof;
(vi) to notify any or all account debtors under any or all of the
Receivables to make payment thereof directly to the Secured Party for the
account of the Secured Party and to require the Debtor to forthwith give similar
notice to the account debtors;
-9-
(vii) to require the Debtor forthwith to account for and transmit to
the Secured Party in the same form as received all proceeds (other than physical
property) of collection of Receivables received by the Debtor and, until so
transmitted, to hold the same in trust for the Secured Party and not commingle
such proceeds with any other funds of the Debtor;
(viii) to take possession of any or all of the Collateral and, for
that purpose, to enter, with the aid and assistance of any person or persons and
with or without legal process, any premises where the Collateral, or any part
thereof, are, or may be, placed or assembled, and to remove any of such
Collateral;
(ix) to execute any instrument and do all other things necessary and
proper to protect and preserve and realize upon the Collateral and the other
rights contemplated hereby;
(x) upon notice to such effect, to require the Debtor to deliver, at
the Debtor's expense, any or all Collateral to the Secured Party at a place
designated by the Secured Party and after delivery thereof the Debtor shall have
no further claim to or interest in the Collateral; and
(xi) without obligation to resort to other security, at any time and
from time to time, to sell, re-sell, assign and deliver all or any of the
Collateral, in one or more parcels at the same or different times, and all
right, title and interest, claim and demand therein and right of redemption
thereof, at public or private sale, for cash, upon credit or for future
delivery, and at such price or prices and on such terms as the Secured Party may
determine, with the amounts realized from any such sale to be applied to the
Secured Obligations in the manner determined by the Secured Party.
The Debtor hereby agrees that all of the foregoing may be effected
without demand, advertisement or notice (except as otherwise provided herein or
as may be required by law), all of which (except as otherwise provided) are
hereby expressly waived, to the extent permitted by law. The Secured Party shall
not be obligated to do any of the acts hereinabove authorized, but in the event
that the Secured Party elects to do any such act, the Secured Party shall not be
responsible to the Debtor except for its gross negligence or willful misconduct.
(b) The Secured Party may take legal proceedings for the appointment of a
receiver or receivers (to which the Secured Party shall be entitled as a matter
of right) to take possession of the Collateral pending the sale thereof pursuant
either to the powers of sale granted by this General Security Agreement or to a
judgment, order or decree made in any judicial proceeding for the foreclosure or
involving the enforcement of this General Security Agreement. If, after the
exercise of any or all of such rights and remedies, any of the Secured
Obligations shall remain unpaid, the Debtor shall remain liable for any
deficiency. After termination of this General Security Agreement and the Loan
Agreement and the indefeasible payment in full of the Secured Obligations, any
proceeds of the Collateral received or held by the Secured Party shall be turned
over to the Debtor and the Collateral
-10-
shall be reassigned to the Debtor by the Secured Party without recourse to the
Secured Party and without any representations, warranties or agreements of any
kind.
(c) Upon any sale of any of the Collateral, whether made under the power
of sale hereby given or under judgment, order or decree in any judicial
proceeding for the foreclosure or involving the enforcement of this General
Security Agreement:
(i) the Secured Party may, to the extent permitted by law, bid for
and purchase the property being sold, and upon compliance with the terms of sale
may hold, retain and possess and dispose of such property in its own absolute
right without further accountability, and may, in paying the purchase money
therefor, deliver the Note or claims for interest thereon and any other
instruments evidencing the Secured Obligations or agree to the satisfaction of
all or a portion of the Secured Obligations in lieu of cash in payment of the
amount which shall be payable thereon, and the Note and such instruments, in
case the amounts so payable thereon shall be less than the amount due thereon,
shall be returned to the Secured Party after being appropriately stamped to show
partial payment;
(ii) the Secured Party may make and deliver to the purchaser or
purchasers a good and sufficient deed, xxxx of sale and instrument of assignment
and transfer of the property sold;
(iii) the Secured Party is hereby irrevocably appointed the true and
lawful attorney-in-fact of the debtor in its name and stead, to make all
necessary deeds, bills of sale and instruments of assignment and transfer of the
property thus sold and for such other purposes as are necessary or desirable to
effectuate the provisions (including, without limitation, this Section 8) of
this General Security Agreement, and for that purpose it may execute and deliver
all necessary deeds, bills of sale and instruments of assignment and transfer,
and may substitute one or more Persons with like power, the Debtor hereby
ratifying and confirming all that its said attorney, or such substitute or
substitutes, shall lawfully do by virtue hereof; but if so requested by the
Secured Party or by any purchaser, the Debtor shall ratify and confirm any such
sale or transfer by executing and delivering to the Secured Party or to such
purchaser all property, deeds, bills of sale, instruments or assignment and
transfer and releases as may be designated in any such request;
(iv) all right, title, interest, claim and demand whatsoever, either
at law or in equity or otherwise, of the Debtor of, in and to the property so
sold shall be divested; such sale shall be a perpetual bar both at law and in
equity against the Debtor, its successors and assigns, and against any and all
persons claiming or who may claim the property sold or any part thereof from,
through or under the Debtor, its successors or assigns;
(v) the receipt of the Secured Party or of the officer thereof
making such sale shall be a sufficient discharge to the purchaser or purchasers
at such sale for his or their purchase money, and such purchaser or purchasers,
and his or their assigns or personal representatives, shall not, after paying
such purchase money and receiving such receipt of the
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Secured Party or of such officer therefor, be obliged to see to the application
of such purchase money or be in any way answerable for any loss, misapplication
or nonapplication there; and
(vi) to the extent that it may lawfully do so, and subject to any
legal requirement that the Secured Party act in a commercially reasonable
manner, the Debtor agrees that it will not at any time insist upon, or plead, or
in any manner whatsoever claim or take the benefit or advantage of, any
appraisement, valuation, stay, extension or redemption law, or any law
permitting it to direct the order in which the Collateral or any part thereof
shall be sold, now or at any time hereafter in force, which may delay, prevent
or otherwise affect the performance or enforcement of this General Security
Agreement, the Loan Documents, or any other agreement executed in connection
with the Loan Agreement, and the Debtor hereby expressly waives all benefit or
advantage of any such laws and covenants that it will not hinder, delay or
impede the execution of any power granted or delegated to the Secured Party in
this General Security Agreement, but will suffer and permit the execution of
every such power as though no such laws were in force. In the event of any sale
of Collateral pursuant to this Section, the Secured Party shall, at least 10
days before such sale, give the Debtor written, telegraphic or telex notice of
its intention to sell, except that, if the Secured Party shall determine in its
sole discretion that any of the Collateral threatens to decline speedily in
value, any such sale may be made upon 3 days' written, telegraphic or telex
notice to the Debtor.
Section 9. Application of Moneys.
(a) Except as otherwise provided herein or in the Loan Agreement, all
moneys which the Secured Party shall receive, in accordance with the provisions
hereof, shall be applied (to the extent thereof) in the following manner: First,
to the payment of all costs and expenses incurred in connection with the
administration and enforcement of, or the preservation of any rights under, this
General Security Agreement or any of the reasonable expenses and disbursements
of the Secured Party (including, without limitation, the fees and disbursements
of its counsel and agents); Second, to the payment of all Secured Obligations
arising out of the Loan Agreement and the Note and, if not therein provided, in
such order as the Secured Party may determine; and Third, to the payment of all
other Secured Obligations in such order as the Secured Party may determine.
(b) If after applying any amounts which the Secured Party has received in
respect of the Collateral any of the Secured Obligations remain unpaid, the
Debtor shall continue to be liable for any deficiency, together with interest.
Section 10. Fees and Expenses, etc. Any and all fees, costs and expenses
of whatever kind or nature, including but not limited to the reasonable
attorneys' fees and legal expenses incurred by the Secured Party in connection
with this General Security Agreement, the filing or recording of any documents
(including all taxes in connection therewith) in public offices, the payment or
discharge of any taxes, counsel fees, maintenance fees, fees and other costs
relating to the encumbrances or otherwise protecting, maintaining, preserving
the Collateral,
-12-
or in defending or prosecuting any actions or proceedings arising out of or
related to the Collateral, shall be borne and paid by the Debtor on demand by
the Secured Party and until so paid shall be added to the principal amount of
the Secured Obligations and shall bear interest at the rate provided for in the
Loan Agreement. In addition, the Debtor will pay, and indemnify and hold the
Secured Party harmless from and against, any and all liabilities, obligations,
losses, damages, penalties, actions, judgments, suits, costs, expenses or
disbursements of any kind or nature whatsoever with respect to the Collateral,
including (without limitation) claims of patent or trademark infringement and
any claim of unfair competition or anti-trust violation.
Section 11. Miscellaneous.
(a) Any notice or demand upon the Debtor shall be deemed to have been
sufficiently given or served for all purposes thereof on the earlier of (i) 3
days after the date when deposited in the U.S. mails or (ii) when received (in
the case of such mailing), such mailing to be postage prepaid, by registered or
certified mail, return receipt requested, or when telegraphed, telecopied,
telexed or sent by messenger or by Federal Express (or similar overnight express
or courier service), to the Debtor at its address set forth below or at such
other address as the Debtor may designate in a writing delivered to the Secured
Party, provided that in the case where the Secured Party is required to give
only three days' notice of a proposed sale of the Collateral such notice shall
not be deemed given until delivered to the chief executive office of the Debtor
provided for herein. All notices to the Secured Party shall be deemed to have
been given when delivered by mail, telegraph, telecopy, telex, messenger or
Federal Express (or similar overnight express or courier service) to the Secured
Party at its address set forth below or at such other address as the Secured
Party may designate in a writing delivered to the Debtor.
Dan's Papers, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000
Rothschild Recovery Fund L.P.
0000 Xxxxxx xx xxx Xxxxxxxx
Xxx Xxxx, Xxx Xxxx 00000
(b) No delay on the part of the Secured Party in exercising any of its
rights, remedies, powers and privileges hereunder or partial or single exercise
thereof, shall constitute a waiver thereof. None of the terms and conditions of
this General Security Agreement may be changed, waived, modified or varied in
any manner whatsoever unless in writing duly signed by the Debtor and the
Secured Party. No notice to or demand on the Debtor in any case shall entitle
the Debtor to any other or further notice or demand in similar or other
circumstances or constitute a waiver of any of the rights of the Secured Party
to any other or further action in any circumstances without notice or demand.
-13-
(c) The obligations of the Debtor hereunder shall remain in full force and
effect without regard to, and shall not be impaired by, (i) any bankruptcy,
insolvency, reorganization, arrangement, readjustment, composition, liquidation
or the like of the Debtor; (ii) any exercise or non-exercise, or any waiver of,
any right, remedy, power or privilege under or in respect of the Loan Documents,
this General Security Agreement, or any other agreement executed in connection
with any of the foregoing, the Secured Obligations or any security for any of
the Secured Obligations; or (iii) any amendment to or modification of any of the
foregoing; whether or not the Debtor shall have notice or knowledge of any of
the foregoing. The rights and remedies of the Secured Party herein provided are
cumulative and not exclusive of any rights or remedies which the Secured Party
would otherwise have.
(d) This General Security Agreement shall be binding upon the Debtor and
its successors and assigns and shall inure to the benefit of the Secured Party
and its successors and assigns, except that the Debtor may not transfer or
assign any of its obligations, rights or interest hereunder without the prior
written consent of the Secured Party any such purported assignment by the Debtor
shall be void and shall be deemed an Event of Default under the Loan Agreement.
All agreements, representations and warranties made herein shall survive the
execution and delivery of this General Security Agreement.
(e) The descriptive headings of the several sections of this General
Security Agreement are inserted for conveniences only and shall not in any way
affect the meaning or construction of any provision of this General Security
Agreement.
(f) Any provision of this General Security Agreement which is prohibited
or unenforceable in any jurisdiction shall, as to such jurisdiction, be
ineffective to the extent of such prohibition or unenforceability without
invalidating the remaining provisions hereof, and any such prohibition or
unenforceability in any jurisdiction shall not invalidate or render
unenforceable such provision in any other jurisdiction.
(g) All rights, remedies and powers provided by this General Security
Agreement may be exercised only to the extent that the exercise thereof does not
violate any applicable provision of law, and the provisions hereof are intended
to be subject to all applicable mandatory provisions of law that may be
controlling and to be limited to the extent necessary so that they will not
render this General Security Agreement unenforceable.
(h) This General Security Agreement shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of the conflicts of laws thereof.
(i) This General Security Agreement contains the entire agreement between
the Debtor and the Secured Party with respect to the subject matter hereof, and
supersedes and cancels any prior agreements or understanding, oral or written,
among the parties hereto with respect thereto. This General Security Agreement
may not be amended or modified except in a writing signed by the Secured Party
and the Debtor.
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IN WITNESS WHEREOF, the parties hereto have caused this General Security
Agreement to be executed and delivered by their duly authorized officers as of
the date first above written.
Addresses DAN'S PAPERS, INC.
as Debtor
Dan's Paper's, Inc.
0000 Xxxxxxx Xxxxxxx
Xxxxxxxxxxxxx, Xxx Xxxx 00000 By:
-----------------------------
ROTHSCHILD RECOVERY FUND L.P.
as Secured Party
1251 Avenue of the Xxxxxxxx
00xx Xxxxx
Xxx Xxxx, Xxx Xxxx 00000 By:
-----------------------------
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EXHIBIT C
GUARANTEE AGREEMENT
This GUARANTEE AGREEMENT, dated as of November 5, 1997, is made by News
Communications, Inc. (the "Guarantor"), a Nevada Corporation whose address is
174-15 Xxxxxx Xxxxxxx Expressway, Fresh Xxxxxxx, New York, for the benefit of
Rothschild Recovery Fund L.P. (the "Lender"), a Delaware Limited Partnership
whose address is 1251 Avenue of the Americas New York, New York.
WHEREAS, Dan's Papers, Inc. (the "Borrower"), a wholly-owned subsidiary of
the Guarantor desires to borrow from Lender the principal sum of One Million
Five Hundred Thousand Dollars ($1,500,000) (the "Loan"); and
WHEREAS, Lender is willing to make the Loan provided that the Guarantor
agrees to Guarantee the Loan;
WHEREAS, the Loan is evidenced by a promissory note as such may be
amended, modified, extended, restated or a promissory note issued as a
replacement or substitution therefore (the "Note") payable to Lender in
substantially the form attached hereto as Exhibit A;
WHEREAS, the Loan is also evidenced by a Loan Agreement (the "Loan
Agreement") dated the date hereof between the Borrower, Guarantor and Lender and
a General Security Agreement dated the date hereof between the Borrower and the
Lender;
NOW THEREFORE, in consideration of the covenants and agreements herein set
forth, the Guarantor agrees as follows:
1. Terms
Unless otherwise defined herein, capitalized terms used in the Guarantee
Agreement shall have the meaning specified therefor in the Loan Agreement.
2. The Guarantor
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As consideration for Lender agreeing to make the Loan to the Borrower, the
Guarantor hereby unconditionally and irrevocably guaranties the due and punctual
payment when due of the Loan (whether by required prepayment, declaration,
demand or otherwise) (including amounts that would become due but for the
operation of the automatic stay under Section 362(a) of the Bankruptcy Code, 11
U. S. C. ss.362(a)) of the Borrower, including, without limitation, interest
which, but for the filing of a petition in bankruptcy, would accrue on the Note
whether or not such interest would be an allowable claim in such proceeding.
3. Terms of Guarantee
Guarantor agrees that the Note may be extended or renewed, and the Loan
repaid and reborrowed in whole or in part, without notice or notwithstanding any
extension, renewal or other alteration of any Note or repayment and reborrowing
of the Loan.
Guarantor waives presentation of, demand of, payment from and protest of
the Note and also waives notice of protest for nonpayment. The obligations of
the Guarantor under this Guarantee shall not be affected by, and the Guarantor
hereby waives its rights (to the extent permitted by law) in connection with:
(a) the failure of the Lender to assert any claim or demand or to
enforce any right or remedy against Borrower under the Note, Loan
Agreement or General Security Agreement,
(b) any extension or renewal of any provision of the Note or the
Loan Documents,
(c) any rescission, waiver, amendment or modification of any of the
terms or provisions of the Loan Documents or any instrument executed
pursuant hereto,
(d) the release of any of the security held by the Lender under the
Loan Documents,
(e) the failure of Lender to exercise any right or remedy against
any other guarantor of the Borrower,
(f) the Lender taking and holding security or Collateral for the
payment of the Loan or this Guarantee, any other guaranties of the
obligations or other liabilities of the Borrower, and any
exchanging, enforcing, waiving and releasing of any such security or
collateral,
(g) the Lender applying any such security or Collateral and
directing the order or manner of sale thereof as Lender in its
discretion may determine, or
-2-
(h) the Lender settling, releasing, compromising, collecting or
otherwise liquidating the Note and any security or Collateral
therefor in any manner determined by the Lender.
Guarantor further agrees that this Guarantee constitutes a guarantee of
payment when due and not of collection and waives any right to require that any
resort be had by the Lender or any other person to any of the security held for
payment of the Loan.
The obligations of Guarantor under this Guarantee shall not be subject to
any reduction, limitation, impairment or termination for any reason, including,
without limitation, any claim of waiver, release, surrender, alteration or
compromise, and shall not be subject to any defense or setoff, counterclaim,
recoupment or termination whatsoever by reason of the invalidity, illegality or
unenforceablility of the Note, discharge of Borrower from the Loan in a
bankruptcy or similar proceeding or otherwise. Without limiting the generality
of the foregoing, the obligations of Guarantor under this Guarantee shall not be
discharged or impaired or otherwise affected by the failure of the Lender to
assert any claim or demand or to enforce any remedy under this Guarantee
Agreement or the Loan Documents, by any waiver or modification of any provision
there of by any default, failure or delay, willful or otherwise, in the
performance of the obligations of Borrower or Guarantor, or by any other act or
thing or omission or delay to do any other act or thing that may or might in any
manner or to any extent vary the risk of Guarantor or would otherwise operate as
a discharge of Guarantor as a matter of law or equity.
Lender may, at its election, foreclose on any security held by one or more
judicial or non-judicial sales, whether or not every aspect of any such sale is
commercially reasonable, or exercise any other right or remedy Lender may have
against Borrower or any security without affecting or impairing in any way the
liability of the Guarantor hereunder except to the extent the Note has been
paid. Guarantor waives any defense arising out of such election by the Lender,
even though such election operates to impair or extinguish any right of
reimbursement or subrogation or other right or remedy of Guarantor against the
Borrower or any security.
Guarantor further agrees that, to the extent that the Borrower makes a
payment or payments to the Lender, or the Lender receives any proceeds of
Collateral, which payment or payments or any part thereof are subsequently
invalidated, declared to be fraudulent or preferential, set aside or otherwise
required to be repaid to any other party, including, without limitation, under
any bankruptcy law, state or federal law, common law or equitable cause, then to
the extent of such payment or repayment the obligation or part thereof which has
been paid, reduced or satisfied by such amount and this Guarantee shall be
reinstated and continued in full force and effect as of the date such initial
payment, reduction or satisfaction occurred. Guarantor shall defend and
indemnify the Lender from and against any claim or
-3-
loss hereunder (including reasonable attorneys' fees and expenses) or in the
defense of any action or suit relating to the foregoing matters.
Guarantor further agrees, in furtherance of the foregoing and not in
limitation of any other right that the Lender may have at law or in equity
against the Guarantor by virtue hereof, upon the failure of the Borrower to pay
the Loan when and as the same shall become due (whether by required prepayment,
declaration, demand or otherwise) that Guarantor will forthwith pay or cause to
be paid, in cash to the Lender an amount equal to the sum of the unpaid
principal amount of such Note and accrued and unpaid interest on such Note plus
any other amounts that may be due under the Loan Documents.
Until payment in full of the Note and all other amounts due under any of
the other Loan Documents, Guarantor hereby irrevocably waives any claim or other
rights which it may now or hereafter acquire against the Borrower that arise
from the existence, payment, performance or enforcement of the Guarantor's
obligations under this Guarantee Agreement or any other Loan Document,
including, without limitation, any right of subrogation, reimbursement,
exoneration, contribution, indemnification or any right to participate in any
claim or remedy of the Lender against the Borrower or any Collateral which the
Lender now has or hereafter acquires, whither or not such claim, remedy or right
arises in equity, or under contract, statute or common law, including without
limitation, the right to take or receive from the Borrower, directly or
indirectly, in cash or other property or by set-off or in any other manner,
payment or security on account of such claim or other rights. If any amount
shall be paid to Guarantor in violation of the preceding sentence and the Loan
shall both have been paid in full in cash, such amount shall be deemed to have
been paid to Guarantor for the benefit of, and held in trust for the benefit of,
Lenders, and shall forthwith be paid to the Lender for the benefit of Lender to
be applied (in case of cash) to, or held as collateral (in the case of non-cash
property or securities) for the payment or prepayment of the obligations of
Guarantor in accordance with the terms of this Agreement or the other Loan
Documents.
4. Miscellaneous
(a) Any notice required, desired or permitted to be given to the Guarantor
or the Lender hereunder shall be in writing and shall be delivered personally,
sent certified or registered United States mail, return receipt requested or
sent by overnight courier service addressed to:
Guarantor: News Communications, Inc.
174-15 Xxxxxx Xxxxxxx Expressway
Xxxxx Xxxxxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxxxx Xxxxxxxxx, President
-4-
Lender: Rothschild Recovery Fund L. P.
1251 Avenue of the Americas
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xx. Xxxxx X. Xxxxxxx
Such notices shall be deemed given (i) if delivered personally, upon delivery,
(ii) if mailed as aforesaid, two (2) business days after deposit in the United
States mail and (iii) if sent by overnight courier service, one (1) business day
after deposit with the courier service. Any party may change its address by
notice to the other parties.
(b) In the event that any term or provision of this Guarantee Agreement
shall be finally determined to be superseded, invalid, illegal or otherwise
unenforceable pursuant to applicable law by any authority having jurisdiction,
such determination shall not affect the validity, legality or enforceability of
the remaining terms and provisions of this Guarantee Agreement.
(c) This Guarantee Agreement, shall be governed by and construed in
accordance with the laws of the State of New York without giving effect to the
principles of conflicts as of laws thereof.
(d) The Guarantor may not assign any of its obligations hereunder without
the prior written consent of Lender. Any such assignment without such consent
shall be void and shall constitute an Event of Default under the other Loan
Documents. Lender may assign its rights and obligations hereunder or under the
other Loan Documents without the prior consent of the Guarantor.
(e) This Guarantee Agreement shall be binding upon, and inure to the
benefit of, and be enforceable by the Borrower, the Guarantor and the Lender,
and their respective successors and permitted assigns.
(f) This Guarantee Agreement contains the entire agreement between the
Guarantor and the Lender with respect to the subject matter hereof, and
supersedes and cancels any prior agreement or understanding, oral or written
among the parties hereto with respect thereto. This Guarantee Agreement may not
be amended or modified except in a writing signed by the Lender.
(g) This Guarantee Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one agreement. This Guarantee Agreement will be deemed to be a
binding agreement among the parties hereto upon the receipt by each party of
fully executed copies of this Guarantee Agreement by mail, facsimile or
otherwise.
-5-
(h) Each of the parties hereto hereby irrevocably and unconditionally
submits, for itself and its property, to the nonexclusive jurisdiction of any
New York State court or federal court of the United States of America sitting in
New York City, and any appellate court from any thereof, in any action or
proceeding arising out of or relating to the Loan Documents, or for recognition
or enforcement of any judgment, and each of the parties hereto hereby
irrevocably and unconditionally agrees that all claims in respect of any such
action or proceeding may be heard and determined in any such New York State
court or, to the extent permitted by law, in such federal court. Each of the
parties hereto agrees that a final judgment in any such action or proceeding
shall be conclusive and may be enforced in other jurisdictions by suit on the
judgment or in any other manner provided by law. Nothing in this Loan Agreement
shall affect any right that any party may otherwise have to bring any action or
proceeding relating to the Loan Documents in the courts of any jurisdiction.
Each of the parties hereto irrevocably and unconditionally waives, to the
fullest extent it may legally and effectively do so, any objection that it may
now or hereafter have to the laying of venue of any suit, action or proceeding
arising out of or relating to the Loan Documents in any New York State or
federal court. Each of the parties hereto hereby irrevocably waives, to the
fullest extent permitted by law, the defense of an inconvenient forum to the
maintenance of such action or proceeding in any such court.
(i) Each of the Borrower, News and the Lender hereby irrevocably waives
all right to trial by jury in any action, proceeding or counterclaim (whether
based on contract, tort or otherwise) arising out of or relating to the Loan
Documents or the actions of the Lender in the negotiation, administration,
performance or enforcement thereof.
(j) The Guarantor agrees to pay all of the Lender's legal fees and
expenses incurred in connection with the documentation, negotiation and the
execution of this Guarantee Agreement and all expenses incurred, including legal
fees and expenses, in collecting any of Guarantor's obligations hereunder or
thereunder.
IN WITNESS WHEREOF, the Guarantor has caused this Guarantee Agreement to be
executed and delivered by its duly authorized officer as of the date first above
written.
NEWS COMMUNICATIONS, INC.
As Guarantor
By:
---------------------------
-6-
EXHIBIT D
NOTE: February 28, 1998 date amended to March 31, 1998 in this and other
related documents
THE REGISTERED HOLDER OF THIS WARRANT, BY ITS ACCEPTANCE HEREOF,
AGREES THAT IT WILL NOT SELL, TRANSFER OR ASSIGN THIS WARRANT
EXCEPT AS HEREIN PROVIDED
VOID AFTER 5:00 P.M. EASTERN TIME, DECEMBER 31, 2002
WARRANT
For the Purchase of
300,000 Shares of Common Stock
of
NEWS COMMUNICATIONS, INC.
(A Nevada Corporation)
1. Warrant.
THIS CERTIFIES THAT, in consideration of $10.00 and other good and
valuable consideration, duly paid by or on behalf of Rothschild Recovery Fund
L.P. ("Holder"), as registered owner of this Warrant, to News Communications,
Inc. ("Company"), Holder is entitled, at any time or from time to time at or
after February 28, 1998 ("Commencement Date"), and at or before 5:00 P.M.
Eastern Time, December 31, 2002 ("Expiration Date"), but not thereafter, to
subscribe for, purchase and receive, in whole or in part, up to three hundred
thousand (300,000) shares of Common Stock of the Company, $0.01 par value
("Common Stock"). If the Expiration Date is a day on which banking institutions
are authorized by law to close, then this Warrant may be exercised on the next
succeeding day which is not such a day in accordance with the terms herein.
During the period ending on the Expiration Date, the Company agrees not to take
any action that would terminate the Warrant. This Warrant is initially
exercisable at $2.25 per share of Common Stock purchased; provided, however,
that upon the occurrence of any of the events specified in Section 6 hereof, the
rights granted by this Warrant, including the exercise price and the number of
shares of Common Stock to be received upon such exercise, shall be adjusted as
therein specified. The term "Exercise Price" shall mean the initial exercise
price or the adjusted exercise price, depending on the context, of a share of
Common Stock. The term "Securities" shall mean the shares of Common Stock
issuable upon exercise of this Warrant.
2. Exercise.
2.1 Exercise Form. In order to exercise this Warrant, the exercise form
attached hereto must be duly executed and completed and delivery to the Company,
together with this Warrant and payment of the Exercise Price for the Securities
being purchased. If the subscription rights represented hereby shall not be
exercised at or before 5:00 P.M., Eastern time, on the Expiration Date, this
Warrant shall become and be void without further force or effect, and all rights
represented hereby shall cease and expire.
2.2 Legend. Each certificate for Securities purchased under this Warrant
shall bear a legend as follows unless such Securities have been registered under
the Securities Act of 1933, as amended ("Act"):
"The securities represented by this certificate have not been
registered under the Securities Act of 1933, as amended ("Act") or
applicable state law. The securities may not be offered for sale,
sold or otherwise transferred except pursuant to an effective
registration statement under the Act, or pursuant to an exemption
from registration under the Act and applicable state law."
2.3 Conversion Right.
2.3.1 Determination of Amount. In lieu of the payment of the
Exercise Price, the Holder shall have the right (but not the obligation) with
the Company's consent, to convert this Warrant, in whole or in part, into Common
Stock ("Conversion Right") as follows: upon exercise of the Conversion Right,
the Company shall deliver to the Holder (without payment by the Holder of any of
the Exercise Price) that number of shares of Common Stock equal to the quotient
obtained by dividing (x) the "Value" (as defined below) of the portion of the
Warrant being converted at the
time the Conversion Right is exercised by (y) the Exercise Price. The "Value" of
the portion of the Warrant being converted shall equal the remainder derived
from subtracting (a) the Exercise Price multiplied by the number of shares of
Common Stock being converted from (b) the Market Price of the Common Stock
multiplied by the number of shares of Common Stock being converted. As used
herein, the term "Market Price" at any date shall be deemed to be the last
reported sale price of the Common Stock on such date, or, in case no such
reported sale takes place on such day, the average of the last reported sale
prices for the immediately preceding three trading days, in either case as
officially reported by the principal securities exchange on which the Common
Stock is listed or admitted to trading, or, if the Common Stock is not listed or
admitted to trading on any national securities exchange or if any such exchange
on which the Common Stock is listed is not its principal trading market, the
last reported sale price as furnished by the National Association of Securities
Dealers, Inc. ("NASD") through the Nasdaq National Market or SmallCap Market,
or, if applicable, the OTC Bulletin Board, or if the Common Stock is not listed
or admitted to trading on any of the foregoing markets, or similar organization,
as determined in good faith by resolution of the Board of Directors of the
Company, based on the best information available to it.
2.3.2 Exercise of Conversion Right. The Conversion Right may be
exercised by the Holder, with the Company's consent, on any business day on or
after the Commencement Date and not later than the Expiration Date by delivering
the Warrant with a duly executed exercise form attached hereto with the
conversion section completed to the Company, exercising the Conversion Right and
specifying the total number of shares of Common Stock the Holder will purchase
pursuant to such conversion.
3. Transfer.
3.1 General Restrictions. The registered Holder of this Warrant, by its
acceptance hereof, agrees that it will not sell, transfer or assign or
hypothecate this Warrant to anyone except upon compliance with, or pursuant to
exemptions from, applicable securities laws. In order to make any permitted
assignment, the Holder must deliver to the Company the assignment form attached
hereto duly executed and completed, together with this Warrant and payment of
all transfer taxes, if any, payable in connection therewith. The company shall
immediately transfer this Warrant on
the books of the Company and shall execute and deliver a new Warrant or Warrants
of like tenor to the appropriate assignee(s) expressly evidencing the right to
purchase the aggregate number of shares of Common Stock purchasable hereunder or
such portion of such number as shall be contemplated by any such assignment.
3.2 Restrictions Imposed by the Securities Act. This Warrant and the
Securities underlying this Warrant shall not be transferred unless and until (1)
the Company has received the opinion of counsel for the Holder that such
securities may he sold pursuant to an exemption from registration under the Act,
and applicable state law, the availability of which is established to the
reasonable satisfaction of the Company, or (ii) a registration statement
relating to such Securities has been filed by the Company and declared effective
by the Securities and Exchange Commission and compliance with applicable state
law.
4. New Warrants to be issued.
4.1 Partial Exercise or Transfer. Subject to the restrictions in Section 3
hereof, this Warrant may be exercised or assigned in whole or in part. In the
event of the exercise or assignment hereof in part only, upon surrender of this
Warrant for cancellation, together with the duly executed exercise or assignment
form and funds sufficient to pay an Exercise Price and/or transfer tax, the
Company shall cause to be delivered to the Holder without charge a new Warrant
of like tenor to this Warrant in the name of the Holder evidencing the right of
the Holder to purchase the aggregate number of shares of Common Stock and
Warrants purchasable hereunder as to which this Warrant has not been exercised
or assigned.
4.2 Lost Certificate. Upon receipt by the Company of evidence satisfactory
to it of the loss, theft, destruction or mutilation of this Warrant and of
reasonably satisfactory indemnification, the Company shall execute and deliver a
new Warrant of like tenor and date. Any such new Warrant executed and delivered
as a result of such loss, theft, mutilation or destruction shall constitute a
substitute contractual obligation on the part of the Company.
5. Registration Rights.
5.1 "Piggy-Back" Registration.
5.1.1 Grant of Right. The Holders of this Warrant shall have the
right for a period of seven years from the Commencement Date to include all or
any part of this Warrant and the shares of Common Stock underlying this Warrant
(collectively, the "Registrable Securities") as part of any registration of
securities filed by the Company (other than in connection with a transaction
contemplated by Rule 145(a) promulgated under the Act or pursuant to Form S-8 or
any equivalent form) provided, however, that if, in the written opinion of the
Company's managing underwriter or underwriters, if any, for such offering (the
"Underwriter"), the inclusion of the Registrable Securities, when added to the
securities being registered by the Company or the selling stockholder(s) will
exceed the maximum amount of the Company's 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, the Company
shall nevertheless register all or any portion of the Registrable Securities
required to be so registered but such Registrable Securities shall not be sold
by the Holders until 180 days after the registration statement for such offering
has become effective or such date as the company shall consent to and provided
further that, if any securities are registered for sale on behalf of other
stockholders in such offering and such stockholders have not agreed to defer
such sale until the expiration of such 180 day period, the number of securities
to be sold by all stockholders in such public offering during such 180 day
period shall be apportioned pro rata among all such selling stockholders,
including all holders of the Registrable Securities, according to the total
amount of securities of the Company owned by said selling stockholders,
including all holders of the Registrable Securities.
5.1.2 Terms. The Company shall bear all fees and expenses attendant
to registering the Registrable Securities, but the Holders shall pay any and all
underwriting commissions and 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 a proposed registration, the Company shall
furnish the then Holders of 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 by the Company until such time as all of the Registrable Securities have
been sold by the Holder. The holders of the Registrable Securities 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.
5.2 General Terms.
5.2.1 Indemnification. The Company shall indemnify the Holder(s) of
the Registrable Securities to be sold pursuant to any registration statement
hereunder and each person, if any, who controls such Holders within the meaning
Section 15 of the Act or Section 20(a) of the Securities Exchange Act of 1934,
as amended ("Exchange Act"), against all loss, claim, damage, expense or
liability (including all reasonable attorneys' fees and other expenses
reasonably incurred in investigating, preparing or defending against any claim
whatsoever) to which any of them may become subject under the Act, the Exchange
Act or otherwise, arising from such registration statement but only to the same
extent and with the same effect as the provisions pursuant to which the Company
agrees to indemnify the Underwriter. The Holder(s) of the Registrable Securities
to be sold pursuant to such registration statement, and their successors and
assigns, shall severally, and not jointly, indemnify the Company, against all
loss, claim, damage, expense or liability (including all reasonable attorneys'
fees and other expenses reasonably incurred in investigating, preparing or
defending against any claim whatsoever to which they may become subject under
the Act, the Exchange Act or otherwise, arising from information furnished by or
on behalf of such Holders, or their successors or assigns, in writing, for
specific inclusion in such registration statement to the same extent and with
the same effect as the Underwriter agrees to indemnify the Company.
5.2.2 Exercise of Warrants. Nothing contained in this Warrant shall
be construed as requiring the Holder(s) to exercise their Warrants prior to or
after the initial filing of any registration statement or the effectiveness
thereof.
5.2.2 Documents Delivered to Holders. The Company shall furnish to
each Holder participating in any of the foregoing offerings and to each
Underwriter of any such offering, if any, a signed counterpart, addressed to
such Holder or Underwriter, of (i)an opinion of counsel to the Company, dated
the effective date of such registration statement (and, if such registration
includes an underwritten public offering, an opinion dated the date of the
closing under any underwriting agreement related thereto), and (ii) a "cold
comfort" letter dated the effective date of such registration statement (and, if
such registration includes an underwritten public offering, a letter dated the
date of the closing under the underwriting agreement) signed by the independent
public accountants who have issued a report on the Company's financial
statements included in such registration statement, in each case covering
substantially the same matters with respect to such registration statement (and
the prospectus included therein) and, in the case of such accountants' letter,
with respect to events subsequent to the date of such financial statements, as
are customarily covered in opinions of issuer's counsel and in accountants'
letters delivered to underwriters in underwritten public offerings of
securities. The Company shall also deliver promptly to each Holder participating
in the offering requesting the correspondence and memoranda described below and
to the managing underwriter copies of all memoranda relating to discussions with
the Commission or its staff with respect to the registration statement and
permit each Holder and underwriter to do such investigation, upon reasonable
advance notice, with respect to information contained in or omitted from the
registration statement as it deems reasonably necessary to comply with
applicable securities laws or rules of the NASD. Such investigation shall
include access to books, records and properties and opportunities to discuss the
business of the Company with its officers and independent auditors, all to such
reasonable extent and at such reasonable times and as often as any such Holder
shall reasonably request.
6. Adjustments.
6.1 Adjustments to Exercise Price and Number of Securities. The Exercise
Price and the number of shares of Common Stock underlying this Warrant shall be
subject to adjustment from time to time as hereinafter set forth:
6.1.1 Stock Dividends-Recapitalization, Reclassification, Split-Ups.
If, after the date hereof, and subject to the provisions of Section 6.3 below,
the number of outstanding shares of Common Stock is increased by a stock
dividend on the Common Stock payable in shares of Common Stock or by a split-up,
recapitalization or reclassification of shares of Common Stock or other similar
event, then, on the effective date thereof, the number of shares of Common Stock
issuable on exercise of this Warrant shall be increased in proportion to such
increase in outstanding shares.
6.1.2 Aggregation of Shares. If after the date hereof, and subject
to the provisions of Section 6.3, the number of outstanding shares of Common
Stock is decreased by a consolidation, combination or reclassification of shares
of Common Stock or other similar event, then, upon the effective date thereof,
the number of shares of Common Stock issuable on exercise of this Warrant shall
be decreased in proportion to such decrease in outstanding shares.
6.1.3 Adjustments in Exercise Price. Whenever the number of shares
of Common Stock purchasable upon the exercise of this Warrant is adjusted, as
provided in this Section 6.1, the Exercise Price shall be adjusted (to the
nearest cent) by multiplying such Exercise Price immediately prior to such
adjustment by a fraction (x) the numerator of which shall be the number of
shares of Common Stock purchasable upon the exercise of this Warrant immediately
prior to such adjustment, and (y) the denominator of which shall be the number
of shares of Common Stock so purchasable immediately thereafter.
6.1.4 Replacement of Securities upon Reorganization, etc. In case of
any reclassification or reorganization of the outstanding shares of Common Stock
other than a change covered by Section 6.1.1 hereof or which solely affects the
par value of such shares of Common Stock, or in the case of any merger or
consolidation of the Company with or into another corporation (other than a
consolidation or merger in which the Company is the continuing corporation and
which does not result in any reclassification or reorganization of the
outstanding shares of Common Stock), or in the case of any sale or conveyance to
another corporation or entity of the property of the Company as an entirely or
substantially as an entirely in connection with which the Company is dissolved,
the Holder of this Warrant shall have the right thereafter (until the
expiration of the right of exercise of this Warrant) to receive upon the
exercise hereof, for the same aggregate Exercise Price payable hereunder
immediately prior to such event, the kind and amount of shares of stock or other
securities or property (including cash) receivable upon such reclassification,
reorganization, merger or consolidation, or upon a dissolution following any
such sale or other transfer, by a Holder of the number of shares of Common Stock
of the Company obtainable upon exercise of this Warrant immediately prior to
such event; and if any reclassification also results in a change in shares of
Common Stock covered by Sections 6.1.1 or 6.1.2, then such adjustment shall be
made pursuant to Sections 6.1.1, 6.1.2, 6.1.3 and this Section 6.1.4. The
provisions of this Section 6.1.4 shall similarly apply to successive
reclassifications, reorganizations, mergers or consolidations, sales or other
transfers.
6.1.5 Changes in Form of Warrant. This form of Warrant need not be
changed because of any change pursuant to this Section, and Warrants issued
after such change may state the same Exercise Price and the same number of
shares of Common Stock and Warrants as are stated in the Warrants initially
issued pursuant to this Agreement. The acceptance by any Holder of the issuance
of new Warrants reflecting a required or permissive change shall not be deemed
to waive any rights to a prior adjustment or the computation thereof.
6.2 Elimination of Fractional Interests. The Company shall not be required
to issue certificates representing fractions of shares of Common Stock upon the
exercise of this Warrant, nor shall it be required to issue scrip or pay cash in
lieu of any fractional interests, it being the intent of the parties that all
fractional interests shall be eliminated by rounding any fraction up or down to
the nearest whole number of shares of Common Stock or other securities,
properties or rights.
7. Reservation and Listing. The Company shall at all times reserve and keep
available out of it authorized shares of Common Stock, solely for the purpose of
issuance upon exercise of this Warrant, such number of shares of Common Stock or
other securities, properties or rights as shall be issuable upon the exercise
thereof. The Company covenants and agrees that, upon exercise of the Warrants
and payment of the Exercise Price therefore, all shares of Common Stock and
other securities issuable upon such exercise shall be duly and validly issued,
fully paid and non-assessable and not subject to preemptive rights of any
stockholder. As long as the Warrants shall be
outstanding, the Company shall use its best efforts to cause all shares of
Common Stock issuable upon exercise of the Warrants to be listed (subject to
official notice of issuance) on all securities exchanges (or, if applicable on
Nasdaq) on which the Common Stock is then listed and/or quoted.
8. Certain Notice Requirements.
8.1 Holder's Right to Receive Notice. Nothing herein shall be construed as
conferring upon the Holders the right to vote or consent or to receive notice as
a stockholder for the election of directors or any other matter, or as shaving
any rights whatsoever as a stockholder of the Company. If, however, at any time
prior to the expiration of the Warrants and their exercise, any of the events
described in Section 8.2 shall occur, then, in one or more of said events, the
Company shall give written notice of such event at least fifteen 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 dividend, distribution,
conversion or exchange of securities or subscription rights, or entitled to vote
on such proposed dissolution, liquidation, winding up or sale. Such notice shall
specify such record date or the date of the closing of the transfer books, as
the case may be.
8 8.2 Events Requiring Notice. The Company shall be required to give
the notice described in this Section 8 upon one or more of the following events:
(i) if the Company shall take a record for the holders of its shares of Common
Stock for the purpose of entitling them to receive a dividend or distribution
payable otherwise than in cash, or a cash dividend or distribution payable
otherwise than out of retained earnings, as indicated by the accounting
treatment of such dividend or distribution on the books for the Company, or (ii)
the Company shall offer to all the holders of its Common Stock any additional
shares of capital stock of the Company or securities convertible into or
exchangeable for shares of capital stock of the Company, or any option, right or
warrant to subscribe therefor, or (iii) a dissolution, liquidation or winding up
of the Company (other than in connection with a consolidation or merger) or a
sale of all or substantially all of its property, assets and business shall be
proposed.
8.3 Notice of Change in Exercise Price. The Company shall, promptly after
an event requiring a change in the Exercise Price pursuant to Section 6 hereof,
send notice to the Holders of
such event and change ("Price Notice"). The Price Notice shall describe the
event causing the change and the method of calculating same and shall be
certified as being true and accurate by the Company's President and Chief
Financial Officer.
8.4 Transmittal of Notices. All notices, requests, consents and other
communications under this Warrant shall be in writing and shall be deemed to
have been duly made on the date of delivery if delivered personally or sent by
overnight courier, with acknowledgment of receipt to the party to which notice
is given, or on the fifth day after mailing if mailed to the party to whom
notice is to be given, by registered or certified mail, return receipt
requested, postage prepaid and properly addressed as follows: (i) if to the
registered Holder of this Warrant, to the address of such Holder as shown on the
books of the Company, or (ii) if to the Company, to its principal executive
office.
9. Miscellaneous.
9.1 Headings. The headings contained herein are for the sole purpose of
convenience of reference, and shall not in any way limit or affect the meaning
or interpretation of any of the terms or provisions of this Warrant.
9.2 Entire Agreement. This Warrant (together with other agreements and
documents being delivered pursuant to or in connection with this Warrant)
constitutes the entire agreement of the parties hereto with respect to the
subject matter hereof, and supersedes all prior agreements and understandings of
the parties, oral and written, with respect to the subject matter hereof.
9.3 Binding Effect. This Warrant shall inure solely to the benefit of and
shall be binding upon, the Holder and the Company and their respective
successors, legal representatives and assigns, and no other person shall have or
be construed to have any legal or equitable rights, remedy or claim under or in
respect of or by virtue of this Warrant or any provisions herein contained.
9.4 Governing Law; Submission to Jurisdiction. This Warrant shall be
governed by and construed and enforced in accordance with the law of the State
of New York, without giving effect to conflict of laws. The Company hereby
agrees that nay action, proceeding or claim against it
arising out of, or relating in any way to this Warrant shall be brought and
enforced in the courts of the State of New York, or of the United States of
America for the Southern District of New York, and irrevocably submits to such
jurisdiction, which jurisdiction shall be exclusive. The Company hereby waives
any objection to such exclusive jurisdiction and that such courts represent an
inconvenient forum. Any process or summons to be served upon the Company may be
served by transmitting a copy thereof by registered or certified mail, return
receipt requested, postage prepaid, addressed to it at the address set forth in
Section 98 hereof. Such mailing shall be deemed personal service and shall be
legal and binding upon the Company in any action, proceeding or claim. The
Company agrees that the prevailing party(ies) in any such action, shall be
entitled to recover from the other party(ies) all of it reasonable attorneys'
fees and expenses relating to such action or proceeding and/or incurred in
connection with the preparation therefor.
9.5 Waiver, Etc. The failure of the Company or the Holder to at any time
enforce any of the provisions of this Warrant shall not be deemed or construed
to be a waiver of any such provision, nor to in any way affect the validity of
this Warrant or any provision hereof or the right of the Company or any Holder
to thereafter enforce each and every provision of this Warrant. No waiver of any
breach, non-compliance or non-fulfillment of any of the provisions of this
Warrant shall be effective unless set forth in a written instrument executed by
the party or parties against whom or which enforcement of such waiver is sought,
and no waiver of any such breach, non-compliance or non-fulfillment shall be
construed or deemed to be a waiver of any other or subsequent breach,
non-compliance or non-fulfillment.
9.6 Execution in Counterparts. This Warrant may be executed in one or more
counterparts, and by the different parties hereto in separate counterpart, each
of which shall be deemed to be an original, but all of which taken together
shall constitute one and the same agreement, and shall become effective when one
or more counterparts has been signed by each of the parties hereto and delivered
to each of the other parties hereto.
IN WITNESS WHEREOF, the Company has caused this Warrant to be signed by
its duly authorized officer as of the 5th day of November, 1997.
NEWS COMMUNICATIONS, INC.
By:
---------------------------
Name: Xxxxxxx Xxxxxxxxx
Title: President
Form to be used to exercise Warrant:
NEWS COMMUNICATIONS, INC.
174-15 Xxxxxx Xxxxxxx Expressway
Xxxxx Xxxxxxx, Xxx Xxxx 00000
Date:___________________, 19____
The undersigned hereby elects irrevocably to exercise the within Warrant
and to purchase ____ shares of Common Stock of News Communications, Inc. and
hererby makes payment of $____________ (at the rate of $________ per share of
Common Stock) in payment of the Exercise Price pursuant thereto. Please issue
the Common Stock as to which this Warrant is exercised in accordance with the
instructions given below.
or
The undersigned hereby elects irrevocably to convert its right to purchase
____________ shares of Common Stock to purchase _________ shares of Common Stock
purchasable under the within Warrant into _______ shares of Common Stock of News
Communications, Inc. (Based on a "Market Price" of $________ per share of Common
Stock). Please issue the Common Stock in accordance with the instructions given
below.
------------------------------------
Signature
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Signature Guaranteed
NOTICE: The signature to this form must correspond with the names as
written upon the face of the within Warrant in every particular without
alteration or enlargement or any change whatsoever, and must be guaranteed by a
bank, other than a savings bank, or by a trust company or by a firm having
membership on a registered national securities exchange.
INSTRUCTIONS FOR REGISTRATION OF SECURITIES
Name ______________________________________________________________
(Print in Block Letters)
Address ______________________________________________________________
