SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, DC 20549
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FORM 10-KSB
(mark one)
[ X ] ANNUAL REPORT PURSUANT TO SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1996
[ ] TRANSITION REPORT UNDER SECTION 13
OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934
Commission File No. 0-16355
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PRINCETON MEDIA GROUP, INC.
(Name of Small Business Issuer in its Charter)
Ontario, Canada 98-0082860
(State or other jurisdiction (IRS Employer
of incorporation or organization) Identification No.)
214 Brazilian Avenue, Suite 300, Palm Beach, Florida 33480
(Address of principal executive offices.
561/659-0121
(Issuer's telephone number.)
-----------------------------------------
Securities registered under Section 12(b) of the Act: None.
Securities registered under Section 12(g) of the Exchange Act as of December
31, 1996: Common Stock, no par value.
Check whether the issuer (1) filed all reports required to be filed by Section
13 or 15(d) of the Exchange Act during the past 12 months (or for such shorter
period that the issuer was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days.
YES [X] NO [ ]
Check if there is no disclosure of delinquent filers pursuant to Item 405 of
Regulation S-B in this form, and no disclosure will be contained, to the best
of Registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-KSB or any amendment to
this Form 10-KSB. [ ]
State issuer's revenues for its most recent fiscal year. $8,542,695
The aggregate market value of the voting stock held by non-affiliates computed
by reference to the average closing bid and ask prices of such stock on April
11, 1997, was approximately $8,000,866.
The number of shares outstanding of the issuer's common stock, no par value,
as of April 14, 1997 was 2,145,108.
Transitional Small Business Disclosure Format (check one):
Yes [ ] No [ X ]
PRINCETON MEDIA GROUP, INC.
FORM 10-KSB
For the Year Ended December 31, 1996
INDEX
HEADING PAGE
PART I
Item 1. Description of Business 1
Item 2. Description of Property 9
Item 3. Legal Proceedings 9
Item 4. Submission of Matters to a Vote of Security Holders 9
PART II
Item 5. Market for Common Equity and Related
Stockholder Matters 10
Item 6. Management's Discussion and Analysis or
Plan of Operation 11
Item 7. Financial Statements 16
Item 8. Changes in and Disagreements with Accountants
on Accounting and Financial Disclosure 16
PART III
Item 9. Directors, Executive Officers of the Registrant 16
Item 10. Executive Compensation 18
Item 11. Security Ownership of Certain Beneficial Owners
and Management 20
Item 12. Certain Relationships and Related Transactions 21
Item 13. Exhibits and Reports on Form 8-K 22
SIGNATURES 25
PART I
ITEM 1. DESCRIPTION OF BUSINESS
HISTORY OF PRIOR BUSINESSES
Princeton Media Group, Inc. (which on October 29, 1996, changed its name from
DeNovo Corporation and herein is referred to as "PMG" or the "Company") was
incorporated under the laws of the Province of Ontario, Canada in September
1986. Through 1994, the principal focus of the Company's activities was the
development of industrial waste heat recovery systems and wastepaper recycling
projects. In July, 1994, a subsidiary of DeNovo merged with Ampac
International Inc. ("Ampac"), the parent company of TeleConcepts International
Inc. ("TeleConcepts" or "TCI"). During 1994, the Company divested itself of
all industrial waste heat recovery and wastepaper recycling projects to focus
on the development of TeleConcepts.
Through October, 1995, TCI was engaged in the design, manufacture, marketing
and distribution of telephones and telecommunications equipment. These
products were designed primarily for residential and small office use and sold
typically through mass merchandisers, catalog showrooms, department stores and
telephone operating companies. As a result of the downturn in the consumer
electronics industry during 1995, as well as TCI's inability to secure
adequate financing, management discontinued TCI's operations as of December
31, 1995. All of the stock of TCI was sold to an investor involved in
management of a party related to PMG by common directorship on August 5, 1996.
The investor received 32,500 shares of common PMG stock with a fair market
value of $269,100 at the time of the transfer in conjunction with assumption
of ownership of the subsidiary which had liabilities in excess of assets.
Simultaneously as part of the transaction a creditor of TCI was given shares
with a fair market value of $61,876 in settlement of a TCI liability resulting
in an approximate $161,000 gain upon settlement. At the time of the sale TCI
had an accumulated deficit of $763,393, and, accordingly, PMG realized a total
gain of $432,417 on the disposition of the subsidiary.
CHANGE TO PUBLISHING, PRINTING, AND MEDIA INDUSTRY - 1996
In 1996 PMG changed its focus to the publishing, printing, and related media
industry by acquiring substantially all of the assets and operations of a
publishing and printing business for $7 million and substantially all of the
assets and operations of a second publishing business also for $7 million.
Each of the acquisitions was accomplished through formation of a wholly-owned
subsidiary corporation which purchased assets and operations of ongoing
publishing businesses.
PMG, through its wholly-owned subsidiaries, Princeton Publishing, Inc. and
Firestone Publishing, Inc. publishes 22 well-established lifestyle and special
interest magazines which are distributed throughout the United States and
internationally. The magazines include Oui, Fitness Plus, Karate
International, Livewire and Lady's Circle Patchwork Quilts. Each magazine
targets a niche market consisting of readers with an active interest in a
particular lifestyle or activity. This type of reader traditionally remains
loyal to particular magazine titles for several years. The magazines'
combined readership is approximately 2.4 million per month.
PMG, through a wholly-owned subsidiary of Princeton Publishing, Inc., leases
and operates a 70,000 square foot printing facility located in Sussex,
Wisconsin, just outside of Milwaukee. The plant prints the majority of PMG's
own magazines and also performs printing services for unrelated third parties.
During 1996, the Company began an equipment upgrade process designed to
increase plant utilization from 50% to 95% printing capacity within the next
12 months. The plant currently prints 9.4 million magazines, 13.8 million
catalogues, and 44.8 million brochures per year.
Princeton Publishing's editorial offices are located in New York City, and
Firestone Publishing's editorial staff operates out of Miami Lakes, Florida.
PMG's executive offices are located in Palm Beach, Florida.
Princeton Trademarks, Inc., another subsidiary of Princeton Publishing, Inc.,
owns or licenses all trademarks relating to the magazines. Applications have
been filed with the United States Patent and Trademark Office to register a
majority of the trademarks, which have been in continuous use for periods
ranging from three to over 20 years.
The Company's magazines are distributed in the United States, Canada and
internationally by major magazine distributors pursuant to distribution
agreements.
As a result of the completion of the two printing and publishing acquisitions
during 1996, the Company currently purchases in excess of one million pounds
of paper per month, thus enabling the Company to take advantage of
competitive pricing and significant savings in paper purchases.
Current Plans
During 1997, management of the Company intends to pursue a plan of
improvements and new opportunities, including achieving operational
efficiencies through synergies of editorial and productions staffs,
expanding several magazine titles into international distribution,
introducing Internet web sites for several magazine titles, increasing
the operating capacity of the printing facility to accommodate new PMG
titles as well as outside assignments, and identifying several complementary
media acquisitions. If some or all of these goals are achieved, management
anticipates that the Company will experience significant growth in total
assets and proportionate net revenue.
Several acquisitions were completed or in process as of the date of this
report as follows.
On March 17, 1997, the Company purchased a magazine for $300,000 worth of
advertising space at standard rates in the Company's publications and
$100,000 to be paid from advertising revenues received in excess of $10,000
per issue of the acquired magazine with the balance due, if any, to be paid
upon publication of the August, 1998 issue.
In March, 1997 the Company signed a letter of intent for the acquisition of
a group of magazines that would add significant revenue to the Company in
1997 and future years. Additionally, during the first quarter of 1997, the
Company is negotiating for the acquisition of certain other magazine titles.
If both acquisitions are completed at the anticipated purchase prices, the
Company would more than triple its total assets shown at December 31, 1996.
Due diligence work is in process and is being performed by an outside
consulting group which specializes only in magazine acquisitions. The
Company is currently in the process of negotiating acquisition financing.
As of December 31, 1996, the Company had approximately 100 full-time employees
of which there were approximately 25 and 15 in the editorial offices in New
York City and Miami respectively, approximately 55 in the printing plant in
Milwaukee, and 5 in the administrative offices in Palm Beach.
ITEM 2. DESCRIPTION OF PROPERTIES
The Company's executive offices are located at 214 Brazilian Avenue, Suite 300
Palm Beach, Florida 33480. This office space is approximately 800 square feet
shared with another company related by common directorship. The Company's
other leased facilities consist of editorial offices in New York City and
Miami, Florida, and a printing plant in Milwaukee, Wisconsin. The plant lease
expires August 31, 1999. The plant lease requires monthly base payments of
$20,400 with annual adjustments tied to the CPI. During 1996 the New York
City offices were rented on a month to month basis. In 1997 the Company
executed a lease extending from February 1, 1997 through January 13, 2001 on
new office space of approximately 5,000 square feet; this new lease requires
annual rent beginning at $65,000 escalating over five years up to $76,040 in
the final year. The Miami lease requires monthly payments of $5,285 through
August 31, 2000, on office space of approximately 5,000 square feet.
All leased facilities are on well-traveled streets in commercial areas and are
in good condition. No significant improvements are planned for any of the
leased facilities. The Company maintains insurance required by each lease and
considers the amounts adequate The Company is purchasing printing equipment
throughout 1997 which will increase the production capacity of the printing
plant. The Company has an option to purchase the land and building where the
plant is located for $1.8 million as adjusted for the consumer price index
increase since May, 1989.
Total rental expense for all facilities detailed above was $280,270 in 1996.
ITEM 3. LEGAL PROCEEDINGS
The Company is a defendant in a litigation commenced in the Ontario Court
(General Division) in the amount of $2,534,002 pursuant to a share exchange
agreement between Mr. Horace Rekunyk and Petroleum Investors Management Ltd.
(PIM) and DeNovo (now PMG). During 1995, DeNovo filed a Statement of
Defense on the initial claim. The Company then filed a counter-claim
against Mr. Rekunyk and PIM for which a Statement of Defense has been filed.
There was no activity on this matter during 1996. Management, upon the
advice of counsel, continues to believe these claims to be without merit
and will continue vigorously defending its position as well as its
counter-claim.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
An annual and special meeting of the shareholders was held on October 24, 1996
in Calgary, Alberta, Canada. At the meeting, shareholders approved
resolutions to:
a.) Amend the by-laws to provide for election and retiring of directors of
the Company in rotation, each for a three-year term, (13,902,527 for, 261,810
against, 150,575 abstaining)
b.) Elect three directors, James J. McNamara, George Seebach, and Joel
Leshinsky, (21,742,059 for, none against or abstaining)
c.) Amend the Articles of Incorporation to change the name of the Company to
"Princeton Media Group, Inc.," (21,152,260 for, 123,970 against, 1,410
abstaining)
d.) Amend the Articles of Incorporation so as to effectuate a consolidation
(reverse split) of the Common Shares of the Company on a one-for-twenty basis,
and (21,625,461 for, 175,080 against, 12,530 abstaining)
e.) Appoint Coopers & Lybrand as the Independent Public Accountant of the
Company for fiscal 1996 and to authorize the Directors to fix their
remuneration (21,728,239 for, 175,080 against, 12,530 abstaining).
PART II
ITEM 5. MARKET FOR COMMON EQUITY AND RELATED STOCKHOLDER MATTERS
The Company's common shares trade on the Nasdaq SmallCap Market under the
symbol "PMGIF" (previously as DeNovo Corporation shares were traded under the
symbol "DNVOF").
The following table sets forth, for the periods indicated, the reported
high and low bid and asked price quotations for the Common Stock for the
periods indicated as reported by the Nasdaq SmallCap Market. Such quotations
reflect inter-dealer prices, but do not include retail mark-ups, mark-downs,
or commissions and may not necessarily represent actual transactions.
Common Stock (1)
Bid
Period of Quotation High Low
1996
Fourth quarter $ 6.25 $ 1.44
Third quarter 10.00 5.00
Second quarter 26.25 8.75
First quarter 20.00 8.75
1995
Fourth quarter 30.60 8.80
Third quarter 44.40 30.00
Second quarter 38.20 18.80
First quarter 35.00 11.20
(1) Quotes have been restated to adjust for the October 29, 1996 one-for-
twenty reverse split.
As of December 31, 1996, there were 865,969 shares of common stock
outstanding. As of the same date, there were 520 holders of record and
approximately 1,925 beneficial holders of the common stock. As of March 31,
1997 there were 503 holders of record.
The Company has not declared or paid any cash dividends on its Common Stock
since its incorporation and anticipates that, for the foreseeable future,
earnings, if any, will continue to be retained for use in the Company's
business and will continue to be used to fund its operations. The receipt of
cash dividends by United States shareholders from a Canadian corporation, such
as the Company, may be subject to Canadian withholding tax.
Recent Sales of Unregistered Securities
During the third and fourth quarters of 1996, the Company sold the following
unregistered securities pursuant to Regulation S:
<TABLE>
<S> <C> <C> <C> <C>
Date Title Amount Gross Proceeds Commissions
6/18/96
thru
10/10/96 Convertible Debentures $3,081,800 $3,081,800 $387,710
8/22/96
thru
8/27/96 Convertible Debentures $345,000 $ 345,000 $172,585
9/3/96 Series D Pref'd 1,200 Shares $1,200,000 $260,000
9/5/96 Series E Pref'd 1,800 Shares $1,800,000 $ 65,000
10/11/96
thru
11/8/96 Convertible Debentures $1,580,000 $1,580,000 $783,680
</TABLE>
The sales agents for the foregoing sales were Select Capital Advisors, Select
International Securities and EuroFutura. The Registrant relied on warranties
and representations made by each purchaser in an Offshore Securities
Subscription Agreement as the basis for claiming the exemption pursuant
to Regulation S.
The Company also sold in a private placement on August 5, 1996, 32,500 shares
of its common stock to an investor in exchange for that investor's acquisition
of the all of the stock in Teleconcepts, Inc., which had a negative net worth.
There was no sales agent involved and no commissions were paid. The Registrant
relied on representations and warranties of the investor as the basis for
claiming the exemption pursuant to Section 4(2) of the Securities Act.
ITEM 6. MANAGEMENT'S DISCUSSION AND ANALYSIS OR PLAN OF OPERATION
Forward-looking Statements
Statements contained in this Form 10-KSB regarding the Company's
future prospects or profitability constitute forward-looking statements and as
such, must be considered with caution and with the understanding that various
factors could cause actual results to differ materially from those in such
forward-looking statements. Such factors include but are not limited to
changes in revenues from distribution, advertising and subscriptions and
changes in costs of materials and operations.
General
The Company, through its wholly-owned subsidiaries, Princeton and Firestone,
is engaged in the publishing, printing, and distribution of 21 periodical
consumer lifestyle magazines. The Princeton and Firestone editorial staffs
and offices are located in New York City and Miami, respectively. A
wholly-owned subsidiary of Princeton, Kingston Press, Inc., leases and
maintains a printing plant in Sussex, Wisconsin. The plant is used for the
printing of the Company's magazines and to perform printing work for third
parties on a contract basis. The Company's executive offices are located in
Palm Beach, Florida.
As of December 31, 1995 the Company discontinued the operations of its
subsidiary, TeleConcepts, Inc., which was engaged in the design, manufacture,
marketing and distribution of telephones and telecommunications equipment.
All of the stock of TeleConcepts was sold to an investor (See Item 1).
Results of Operations
During the year ended December 31, 1996, the Company has completed a
fundamental change in its course of business and now focuses entirely on
publishing, printing and related media. This has been accomplished as a
result of the Company's purchase of two major businesses with extensive and
time-proven histories in the printed media industry. These two businesses had
operating histories of twenty-two years and twenty-five years, respectively,
and included one title continually published for forty years and another for
twenty-five years.
The year ended December 31, 1996 compared to the year ended December 31, 1995
Revenues for the year ended December 31, 1996 amounted to $8,542,695 compared
to $482,847 for the year ended December 31, 1995, reflecting an increase of
$8,059,848. Revenues are almost entirely derived from magazine sales,
subscriptions, advertising, and outside printing. The increase in revenues
reflected for the year ended December 31, 1996 is a result of the Company's
acquisition of magazine publishing assets in March through September of 1996
and the Company's continuing use of those assets in the same business.
Costs and expenses of revenues for the year ended December 31, 1996 were
$8,578,541 compared to $3,440,019 for the year ended December 31, 1995,
resulting in an increase of $5,138,522. In 1996 the Company incurred large
costs for investor relationship consultants to inform the investing public and
the general public that the Company had made the acquisitions and had
established publishing and printing operations. Total expenses for investor
relations was $812,398. Of this amount $685,033 was noncash expense through
the issuance of stock. The Company does not expect such expense to recur in
1997.
Write-off of Debt Discount and Issue Costs
In March, 1997, prior to the issuance of the Company's financial statements
for the year ended December 31, 1996, the SEC clarified its position
regarding the accounting for convertible securities when the conversion
feature provides a beneficial discount to the security holder, resulting
in a write-off of all debt discount and debt issues costs associated with
convertible debentures issued for funding of the acquisitions entirely in 1996.
The total of this noncash writeoff of debt discount and issue costs is
$3,257,350. Under the Company's prior accounting method in 1996 these noncash
charges would have been amortized in 1997 and part of 1998. The change in
accounting method will result in 100% of these debt discounts and debt issue
costs being taken in 1996 and therefore 1997 and 1998 earnings will not be
reduced by these costs as originally anticipated. (See Note 19 of the
financial statements for additional detail).
Deemed Dividend
In addition to the write off of debt discount and debt issue costs, a
conversion discount related to the Company's Series D and Series E preferred
stock resulted in a "deemed" preferred stock dividend (amounting to
$1,526,000 in connection with the issuance of Series D and E preferred
shares.) This noncash "deemed dividend" increased net loss in computation
of earnings per share by $1,526,000. (See Note 19 of the financial statements
for additional detail).
Liquidity and Capital Resources
During the year ended December 31, 1996, $654,431 in interest expense was
charged to operations compared to $49,089 for the year ended December 31,
1995, reflecting an increase of $605,342. Interest expense of $579,716 was
accrued pursuant to two promissory notes delivered by Princeton and Firestone
in connection with the purchases of the magazine publishing assets in March
and September of 1996. Of the $579,716 accrued, $409,747 was paid. The
remaining portion of the interest expense is $74,715 which is a non-cash
expense related to the convertible debentures issued in 1996 to finance the
acquisitions.
Net loss for the year ended December 31, 1996 was $3,403,117 which represents
a decrease of $107,302 from the net loss of $3,573,489 for the year ended
December 31, 1995. Of this loss, $3,257,350 is the noncash writeoff of debt
discount and issue costs noted above. The loss also includes nonrecurring
consulting fees as detailed above. After the debt discount and debt issue
cost writeoff and consulting fees, this decrease in loss from operations
is attributable to the operations and revenue of the Company's subsidiaries,
Princeton and Firestone as well as the discontinuation of the operations of
TeleConcepts.
Monthly interest payments of approximately $43,000 are due pursuant to a $5
million promissory note executed upon acquisition of the publishing assets
acquired March 29, 1996. Interest on the $4 million promissory note executed
upon acquisition of the publishing assets acquired on September 6, 1996 will
be accrued for one year, at which time accrued interest will be added to
principal and payments of principal and interest will be due on a
straight-line amortization schedule over forty-eight months. Accordingly, the
Company will not incur any debt service obligations on the $4 million note
prior to October, 1997. Management is currently involved in negotiation with
several lending institutions to refinance the two notes prior to October,
1997. The Company anticipates that cash flows from operations will be
sufficient to pay all debt service of the two subsidiaries.
Liquidity and capital resources are hereinafter discussed in three broad
categories: operating activities, investing activities and financing
activities.
Cash increased $616,304 to $630,163 at December 31, 1996 from $13,859 at
December 31, 1995. Net cash used for operating activities was $781,492 during
the year ended December 31, 1996 compared to cash used by operating activities
of $677,188 during the year ended December 31, 1995. The increase of $104,304
is primarily attributable to continuing operations in connection with the
change in business of the Company from telecommunications equipment sales to
magazine publishing and printing. Net loss adjusted for non-cash items
including depreciation, amortization, bad debt expense allowance, stock issued
for consulting services, and writeoff of debt discount and issue costs
produced a gain before changes in assets and liabilities of $595,187. Changes
in assets and liabilities constitute uses of working capital to fund the start
up of the new operations in the printing and publishing business. Most
prominent in this use of cash was the build up of accounts receivable of over
$2 million and inventory of approximately $650,000.
During the year ended December 31, 1996, net cash used in investing activities
was $5,179,229 compared with $15,754 used in investing activities during the
year ended December 31, 1995. The increase of $5,163,475 is due to purchase
of trademarks, copyrights and equipment for the Company's publishing
operations.
During the year ended December 31, 1996, net cash provided by financing
activities was $6,577,025 representing an increase of $5,998,113 from net cash
provided by financing activities of $578,912 during the year ended December
31, 1995. The increase is a result primarily of the net proceeds from the
sales of the Company's securities in order to fund the Princeton and Firestone
subsidiaries and the purchases of the publishing, printing, and media assets.
The Company intends to continue the operations of the businesses acquired
during 1996 and to expand these operations into new areas of distribution,
including foreign magazine versions and the establishment of Internet web
sites for several of its well-known magazine titles. The broader introduction
of brand-name magazine content is anticipated to increase substantially the
revenues from the Company's operations, compared with the results realized
during 1996. Management of the Company believes that the results of 1996
operations were consistent with the expectations established during the due
diligence investigation completed prior to the purchases of the two
businesses. Management further anticipates that the implementation of its
business plan during 1997, which includes, among other things, production
efficiencies, cost-saving measures, new market exploration, expansion of the
printing plant, and acquisition of additional businesses, will realize a
substantial growth in assets as well as increases in revenues and profits.
Several acquisitions were completed or in process as of the date of this
report as follow.
On March 17, 1997, the Company purchased a magazine for $300,000 worth of
advertising space at standards rates in the Company's publications and
$100,000 to be paid from advertising revenues received in excess of $10,000
per issue of the acquired magazine with the balance due, if any, to be paid
upon publication of the August, 1998 issue.
In March, 1997 the Company signed a letter of intent for the acquisition of a
group of magazines that would add significant revenue to the Company in 1997
and future years. Additionally, during the first quarter of the Company
is negotiating for the acquisition of certain other magazine titles. If
the two acquisitions were completed at the currently anticipated purchase
prices, the Company would more than triple total assets shown at
December 31, 1996. Due diligence work is in process and is being performed by
an outside consulting group which specializes only in magazine acquisitions.
The Company is currently in the process of negotiating acquisition financing.
Recent Accounting Pronouncements
See Summary of Significant Accounting Policies to the Company's Consolidated
Financial Statements for information relating to recent accounting
pronouncements.
ITEM 7. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
The following financial statements and schedules are included in this Annual
Report on Form 10-KSB following Item 13:
INDEX TO FINANCIAL STATEMENTS
Report of Independent Accountants
Consolidated Balance Sheets December 31, 1996 and 1995
Consolidated Statements of Operations
and Accumulated Deficit
For the Years Ended December 31, 1996 and 1995
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995
Notes to Consolidated Financial Statements
ITEM 8. CHANGES IN AND DISAGREEMENT WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE
Not applicable.
PART III
ITEM 9. DIRECTORS, EXECUTIVE OFFICERS, PROMOTERS AND CONTROL PERSONS;
COMPLIANCE WITH SECTION 16(A) OF THE EXCHANGE ACT
Information concerning the directors, executive officers and significant
employees as of March 31, 1997:
Year First Position
Elected With
Name Age Director Company
J. J. McNamara 48 1996 Chairman/Acting President & CEO/Secretary
G. Seebach 43 1994 Director
J. Leshinsky 43 1996 Director
R. Kendall 48 N/A Treas/CFO/Asst. Sec.
H. McQueeney 58 N/A President - Princeton Publishing, Inc.
W. Weidenbaum 60 N/A President - Firestone Publishing, Inc.
Set forth is a biographical description of each Director, Executive Officer
and significant employee of the Company:
James J. McNamara, Chairman of the Board, identified and secured the
acquisition of all publishing and printing assets purchased by Princeton Media
Group, Inc. He has been since June, 1993 the President and CEO of
Celebrity Entertainment, Inc., a company engaged in the development and
management of destination resorts and other related business interests. From
1991 through 1993 Mr. McNamara was the President and CEO of Production
Services International, Inc., a television and motion picture development
company which became a subsidiary of Celebrity in 1993. For over twenty-five
years Mr. McNamara has developed and produced motion pictures and several
television series. His film industry experience included maintaining a
corporate residence at Twentieth Century-Fox for five years. He produced the
major motion picture "Flipper" in 1995 for Universal Studios. Previously Mr.
McNamara owned and operated a chain of music stores and an international
concert promotion and talent representation company. He also serves as a
consultant to the chairman of Alliance Entertainment, Inc.
George Seebach joined TeleConcepts in 1993 as the Vice President, Product
Development. From 1986 through 1993 he was President of Royal Telecom, a
telecommunications equipment company, and Vice President, Sales and Marketing
of RTI Telecom, its successor. During that period he was responsible for much
of the product development and overseas sourcing for Northwestern Bell
Telephones, a subsidiary of U.S. West, their principal customer.
Joel Leshinsky is President and founder of The Production Team, Inc., a
television production and writing firm based in Fort Lauderdale, Florida.
Prior to founding the firm in 1993, Mr. Leshinsky was a self-employed
television producer and writer for approximately seven years.
Robert F. Kendall, CPA, joined PMG in December, 1995 as part of the due
diligence team on the initial publishing business acquisition. He oversees
all financial aspects of acquisitions, financial statements, audit
supervision, and the tax and compliance filings. From May, 1990 to April,
1996, Mr. Kendall served as assistant controller at MIG Companies, a group of
fifty companies managing over $1.2 billion in assets. Prior affiliations
include the international accounting firm of Laventhol & Horwath and other
regional accounting and auditing firms.
Henry McQueeney became President of Princeton Publishing, Inc. in April,
1996. Prior to that time he served for 20 years as President of the
corporations that made up Kearny Publishing Group, the entity from which
Princeton purchased its first group of publishing assets in March, 1996.
Walter Weidenbaum became President of Firestone Publishing, Inc. upon its
formation in September, 1996, at the time of purchase of the assets of Dugent
Publishing Corp. Mr. Weidenbaum previously served as President of Dugent for
over 20 years.
Directors do not receive any cash remuneration for their services as such,
although they are reimbursed in accordance with the Company policy for their
expenses in connection with attending meetings of the Board. Directors
serving on committees of the Board receive no special compensation for such
activities.
There are no family relationships between any of the Officers or Directors of
the Company.
Officers of the Company are elected by the Board of Directors at its first
meeting after each Annual Meeting of the Shareholders and serve a term of
office until the next Annual Meeting. Officers elected by the Board of
Directors at any other time serve a term of office until the next Annual
Meeting.
Section 16(a) Beneficial Ownership Reporting Compliance
During 1996, the following directors, officers or beneficial owners of more
than ten percent of any class of the Company's equity securities registered
pursuant to section 12 failed to file on a timely basis reports required by
section 16(a) of the Exchange Act:
No. of No. of Transactions Failure to File
Name Late Reports Not Reported Timely Required Form
James J. McNamara 0 0 Forms 3, 5
J. William Metzger 0 1 Forms 3, 4, 5
Robert F. Kendall 1 0 None
Celebrity Entertainment,
Inc. 0 0 Forms 3, 5
UFH Endowment, Ltd. 0 0 Forms 3, 5
ITEM 10. EXECUTIVE COMPENSATION
The following tables set forth all remuneration paid by the Company and its
subsidiaries to named executives during the years ended December 31, 1996 and
1995.<PAGE>
SUMMARY COMPENSATION TABLE
<TABLE>
Long Term Compensation
Annual Compensation Awards Payouts
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Other Restricted All Other
Name and Annual Stock Options/ LTIP Compen-
Principal Year Salary Bonus Compensa- Awards SARs (#) Payments (#) sation
Position ($) ($) tion ($) ($)
($)
M.D. Herman 1996 $115,382(1) - - - - - -
President 1995 $ 63,750 - - - - - -
of Princeton
Media Group,
Inc.
Walter Weidenbaum 1996 $140,000 - - - - - -
President of
Firestone Publish-
ing, Inc.
Henry M. McQueeney 1996 $100,000 - - - - - -
President of
Princeton Publish-
Ing, Inc.
R. Kendall 1996 $ 46,042 (2) - - - - - -
Treas/CFO 1995 N/A - - - - - -
</TABLE>
(1) Based on an annual salary of $100,000; a portion of the amount paid in
1996 represented accrued but unpaid amounts earned in 1995.
(2) Mr. Kendall served as an officer for only a portion of 1996; he was paid a
total of $46,042 based on an annual salary of $65,000.
Mr. Herman resigned at the end of 1996. James J. McNamara, Chairman of the
Board, is acting as President and CEO of PMG without salary until a president
is elected. There are no employment contracts with any director or officer of
the Company. The Company's wholly-owned subsidiaries have entered into
employment contracts as follows:
Princeton Publishing, Inc.
Princeton Publishing, Inc. is a party to an employment contract with Henry M.
McQueeney, its President, providing for a three-year term which commenced
March 29, 1996. Mr. McQueeney's annual salary pursuant to the contract is
$100,000.
Firestone Publishing, Inc.
Firestone Publishing, Inc. is a party to an employment contract with Walter
Weidenbaum, its President, providing for a five-year term which commenced
September 6, 1996. Mr. Weidenbaum's annual salary pursuant to the contract
is $140,000.
Firestone Publishing, Inc. is a party to an employment contract with Steve
Rottenberg, its Vice President - Production, providing for a five-year term
which commenced September 6, 1996. Mr. Rottenberg's annual salary pursuant
to the contract is $75,000.
Firestone Publishing, Inc. is a party to an employment contract with Travis
Allen, its Vice President - Marketing, providing for a five-year term which
commenced September 6, 1996. Mr. Allen's annual salary pursuant to the
contract is $75,000.
OPTION GRANTS IN PAST FISCAL YEAR
No options were granted to, exercised by or held by any of the named executive
officers during the last fiscal year.
ITEM 11. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The following table sets forth certain information concerning share ownership
of all persons known by the Company to own beneficially 5% or more of any
class of the Company's voting securities and all directors and officers of the
Company as a group as of March 31, 1997.
Name and
Address of Amount and Percent
Beneficial Title of Nature of Of
Holder Class Ownership Class
Celebrity Entertainment, Inc. Common Stock 2,604,390 (1) 17.6%
214 Brazilian Ave., Suite 300
Palm Beach, FL 33480
UFH Endowment, Ltd. Common Stock 268,457 (2) 12.2%
c/o Barry Globerman, Esq.
110 East 59th St.
23d Floor
New York, NY 10022
Antonio Buono Common Stock 182,040 (3) 8.5%
c/o Barry Globerman, Esq.
110 East 59th St.
23d Floor
New York, NY 10022
Herschel Goldberg Common Stock 179,119 (4) 8.3%
c/o Barry Globerman, Esq.
110 East 59th St.
23d Floor
New York, NY 10022
Giorgio Farina Common Stock 126,012 (3) 5.9%
c/o Barry Globerman, Esq.
110 East 59th St.
23d Floor
New York, NY 10022
(1) Beneficially owned pursuant to Convertible E Preferred Stock currently
convertible into common stock.
(2) Includes 218,457 shares beneficially owned, held of record by GEM
(Singaport) Limited, as agent; and 50,000 shares beneficially owned pursuant
to warrants currently exercisable.
(3) Beneficially owned; record holder is GEM (Singapore) Limited, as agent.
(4) Includes 155,919 shares beneficially owned, held of record by GEM
(Singaport) Limited, as agent; and 23,200 shares beneficially owned pursuant
to warrants currently exercisable.
ITEM 12. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The Company had a short-term note due upon demand to a company related by
common directorship with interest accruing at prime (8.25% as of December 31,
1996). The note balance and related accrued interest was $6,975 and $83,
respectively, as of December 31, 1996. Interest expense on the note was $9,059
during 1996. The related company also purchased $1.4 million in Preferred
Series E shares. Cumulative unpaid dividends on these shares amounted to
$35,901 at December 31, 1996. The Company entered into an agreement with the
related company pursuant to which the companies recognized consulting services
rendered to both companies in amounts of 85% to PMG and 15% to the related
company by various consultants who had been compensated with common shares of
the Company. The related company therefore paid the Company for 15% of the
services in the amount of $101,767 through surrender of 66 shares of its
Series E preferred stock. The Company shares corporate headquarters office
space with the related company.
PART IV
ITEM 13. EXHIBITS AND REPORTS ON FORM 8-K
(a) Exhibits.
2.1 Asset Purchase Agreement with Kearny Publishing Group dated March 29,
1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K dated
March 29, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on April 12, 1996; incorporated herein by reference.
2.2 Asset Purchase and Sale Agreement with Dugent Publishing Corp. dated
July 18, 1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K
dated July 18, 1996, File No. 0-16355, filed with the Securities and
Exchange Commission on August 1, 1996; incorporated herein by reference.
2.3 Asset Purchase Agreement with Dugent Publishing Corp. dated Sept. 6,
1996, filed as Exhibit 2.1 to the Company's Report on Form 8-K dated
Sept. 6, 1996, File No. 0-16355, filed with the Securities and Exchange
Commission on Sept. 11, 1996; incorporated herein by reference.
3.1 Articles of Incorporation.
3.2 By-Law Number 1 of the Company.
4.1 Designation of Series A, B, C, D and E Preferred Stock, included as part
of Exhibit 3.1
10.1 Promissory Note payable to Kearny Publishing, Inc. dated March 29, 1996.
10.2 Security Agreement in favor of Kearny Publishing, Inc. dated March 29,
1996.
10.3 Promissory Note payable to Dugent Publishing Corp. dated Sept. 6, 1996,
filed as Exhibit 10.1 to the Company's Quarterly Report on Form 10-QSB
for the quarterly period ended Sept. 30, 1996, File No. 0-16355, filed
with the Securities and Exchange Commission on November 15, 1996;
incorporated herein by reference.
10.4 Security Agreement in favor of Dugent Publishing Corp. dated Sept. 6,
1996, filed as Exhibit 10.2 to the Company's Quarterly Report on Form
10-QSB for the quarterly period ended Sept. 30, 1996, File No. 0-16355,
filed with the Securities and Exchange Commission on November 15, 1996;
incorporated herein by reference.
10.5 Distribution Agreement with Curtis Circulation Company dated March 14,
1990.
10.6 Amendment to Distribution Agreement with Curtis Circulation Company
dated Nov. 20, 1990.
10.7 Amendment to Distribution Agreement with Curtis Circulation Company
dated Feb. 24, 1992.
10.8 Amendment to Distribution Agreement with Curtis Circulation Company
dated Aug. 5, 1992.
10.9 Amendment to Distribution Agreement with Curtis Circulation Company
dated Jan. 31, 1995.
10.10 Amendment to Distribution Agreement with Curtis Circulation Company
dated April 8, 1996.
10.11 Agreement with Flynt Distributing Company [now with Curtis Circulation
Company, as successor] dated Aug. 31, 1992.
10.12 Loan and Security Agreement with Curtis Circulation Company dated June
28, 1996.
10.13 Licensing and Purchase Option Agreement with Michael DePasquale Jr.
Enterprises, Inc. dated July 6, 1990.
10.14 Lease of Wisconsin premises with Harvey Geipel, Lessor dated July 14,
1989.
10.15 Option from Harvey Geipel dated July 14, 1989.
10.16 Assumption and Guarantee of Lease in favor of Harvey Geipel dated Dec.
30, 1996.
10.17 Distribution Agreement with Kable News Company, Inc. dated May 14, 1996.
10.18 Cross-Guaranty with Dojo Publishing Inc. in favor of Kable News Company,
Inc. dated May 14, 1996.
10.19 Licensing Agreement with Casey Lee Klinger d/b/a KNC, Inc. dated July
27, 1992.
10.19 Service Agreement with Clark Distribution Systems, Inc. dated April 19,
1996.
10.20 Assignment by Quiltco Corp. dated June 28, 1996.
10.21 License Agreement with Grand International Communications dated April
28, 1992.
10.22 Employment Agreement with Walter Weidenbaum dated September 6, 1996.
10.23 Employment Agreement with Steven Rottenberg dated September 6, 1996.
10.24 Employment Agreement with Travis Allen dated September 6, 1996.
10.25 Severance Agreement with Michael D. Herman dated December 17, 1996.
(b) The following report on Form 8-K was filed during the quarter ended
December 31, 1996 by the Company:
Date Date
of Report Filed Items Reported Financial Statements Filed
11/4/96 11/26/96 Regulation S sales of None
Securities
SIGNATURES
In accordance with Section 13 and 15 (d) of the Exchange Act of 1934,
the Registrant caused this report to be signed on its behalf by the
undersigned, thereunto duly authorized.
Date:
PRINCETON MEDIA GROUP, INC.
/s/ James J. McNamara
By: James J. McNamara,
Chairman of the Board and
Acting Chief Executive Officer
/s/ Joel Leshinsky,
By: Joel Leshinsky, Director
/s/ Robert F. Kendall, CPA
By: Robert F. Kendall,
Treasurer and Chief
Financial Officer
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Shareholders of
Princeton Media Group, Inc.
We have audited the accompanying consolidated balance sheets of Princeton
Media Group, Inc. and Subsidiaries (the "Company") as of December 31, 1996,
and 1995, and the related consolidated statements of operations and
accumulated deficit, and cash flows for the years then ended. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the consolidated financial statements referred to above
present fairly, in all material respects, the consolidated financial position
of Princeton Media Group, Inc. and Subsidiaries as of December 31, 1996 and
1995, and the consolidated results of their operations and their cash flows
for the years then ended in conformity with generally accepted accounting
principles.
/s/ Coopers & Lybrand L.L.P.
COOPERS & LYBRAND L.L.P.
West Palm Beach, Florida
March 20, 1997
<PAGE>
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Balance Sheets
December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Assets
Current assets
Cash $ 630,163 $ 13,859
Accounts receivable, less allowance for returns
and doubtful accounts of of $3,354,941 in 1996 2,535,668 -
Inventories 656,025 -
Deferred income tax benefit 271,300 -
Prepaid expenses 145,911 -
Total current assets 4,239,067 13,859
Property and equipment, net 1,756,212 -
Other assets 49,330 -
Trademarks, copyrights and other intangibles, net 12,094,863 -
Total assets $ 18,139,472 $ 13,859
Liabilities and Shareholders' Equity (Deficiency)
Current liabilities
Accounts payable $ 788,109 $ 75,784
Accrued expenses 934,130 29,860
Current portion of long-term debt 212,753 -
Due to related party 6,975 -
Deferred revenue 469,867 -
Accrued interest 193,562 -
Net liabilities of discontinued operations (Note 3) - 840,358
Total current liabilities 2,605,396 946,002
Long-term debt, less current portion 8,809,905 -
Convertible debentures payable 1,925,000 -
Deferred taxes 166,900 -
Commitments and contingencies (Notes 10, 11, and 18)
Shareholders' Equity (Deficiency):
Series A Preference Shares 28,923 28,923
Series C Preference Shares 739,696 739,696
Series D Preference Shares 1,005,000 -
Series E Preference Shares 1,549,484 -
Common Stock 12,197,802 4,258,755
Deficit (10,888,634) (5,959,517)
Total shareholders' equity (deficiency) 4,632,271 (932,143)
Total liabilities and shareholders' equity (deficiency) $18,139,472 $ 13,859
</TABLE>
See accompanying notes to consolidated financial statements.
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Statements of Operations and Accumulated Deficit
For the Years Ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Distribution, circulation, and other income $ 5,423,890 $ -
Advertising income 2,193,924
Printing income 924,881
Net revenues 8,542,695
Costs and operating expenses:
Cost of sales 4,965,804
Selling and administrative 3,612,737
Loss from operations (35,846)
Interest expense
Convertible debentures ( 74,715)
Other long-term debt (579,716)
Loss before income taxes (690,277)
Provision for income taxes (benefit) (104,400)
Loss from continuing operations before writeoff of debt discount and issue costs (585,877)
Writeoff of debt discount and issue costs (Note 19) (3,257,350)
Loss from continuing operations (3,843,227)
Discontinued operations:
(Loss) income from discontinued operations 440,110 $ (3,573,489)
Net loss (3,403,117) (3,573,489)
Accumulated deficit - beginning of the year (5,959,517) (2,386,028)
Deemed dividend on convertible preferred stock (Note 19) (1,526,000) -
Accumulated deficit - end of the year $ (10,888,634) $ (5,959,517)
Per share:
Loss from continuing operations $ (10.09) $ -
Discontinued operations .81 ( 21.40)
Net loss $ ( 9.28) $ ( 21.40)
Fully diluted $ ( 9.28) $ ( 21.40)
Weighted average number of
shares outstanding 543,900 169,692
See accompanying notes to consolidated financial statements.
</TABLE>
<TABLE>
PRINCETON MEDIA GROUP, INC.
Consolidated Statements of Cash Flows
For the Years Ended December 31, 1996 and 1995
1996 1995
<S> <C> <C>
Cash flows from operating activities:
Net loss $(3,403,117) $(3,573,489)
Adjustments to reconcile net loss
to net cash used in
operating activities
Depreciation 203,489 43,854
Amortization 182,827 -
Interest on convertible debentures 74,715 -
Write-off of debt issue costs and debt
discount on convertible debentures (Note 19) 3,257,350 -
Bad debt expense allowance 35,000 -
Loss on sale of assets - 67,735
Loss on settlement of loan via stock issuance - 47,925
Gain on discontinued operations (440,110) -
Write down of inventory and molds - 223,948
Stock issued as payment for acquisition and
related services, and commissions - 1,937,246
Stock issued for consulting services 685,033
Net income (loss) after adjustments 595,187 (1,252,781)
Changes in assets and liabilities
exclusive of assets and liabilities acquired:
Decrease (increase)in accounts receivable (2,143,138) 640,716
Decrease (increase)in inventories (656,025) 183,915
Increase in income tax benefit (271,300) -
Increase in prepaid expenses (145,911)
Decrease in other current assets - 126,487
Decrease (increase) in other assets ( 49,330) 22,187
Increase (decrease) in accounts payable 490,142 (390,775)
Increase (decrease)in accrued expenses 594,146 (6,937)
Increase in due to related party 6,975 -
Increase in deferred revenue 469,867 -
Increase in accrued interest 160,995 -
Increase in long-term deferred taxes 166,900 -
Net cash used in operating
activities ( 781,492) (677,188)
Cash flows from investing activities:
Proceeds from sale of equipment - 8,200
Capital expenditures (134,841) (23,954)
Cash paid for acquisition of trademarks,
copyrights, equipment, and related
receivables and payables (5,044,388) -
Net cash used in
investing activities (5,179,229) (15,754)
Cash flows from financing activities:
Proceeds from issuance of debt - 115,000
Proceeds from loan from shareholder - 280,000
Repayment of advances from related party - ( 21,059)
Advance from related party - 56,806
Proceeds from issuance of common stock 75,000 20,000
Proceeds from issuance of preferred stock, net 2,740,000 -
Proceeds from issuance of
convertible debentures 3,762,025 128,165
Net cash provided by
financing activities 6,577,025 578,912
Net increase (decrease) in cash 616,304 (114,030)
Cash, beginning of period 13,859 127,889
Cash, end of period $ 630,163 $ 13,859
Supplemental disclosures of cash flow information:
1996 1995
Interest paid $ 409,747 $ 24,912
Noncash Financing Activities
Common stock issued upon conversion of
convertible debt $ 3,142,765 $ 128,165
Common stock issued for consulting fees $ 685,033 -
Common stock issued for settlement of debt $ - $ 162,925
Contribution from shareholder through
forgiveness of debt $ - $ 146,447
Inventory transferred in settlement of debt $ - $ 289,451
Common stock issued in disposal of subsidiary $ 330,975 $ -
</TABLE>
The Company purchased equipment appraised and valued by the parties to the
sale at $1,814,000 and trademarks and copyrights valued at $5,186,000 for
$2,000,000 in cash, of which $1,000,000 was paid at closing and $1,000,000 of
which was paid through a 90 day note, and a long-term note of $5,000,000. The
Company also purchased trademarks and copyrights valued at $107,390 for
$32,390 in cash and an installment loan payable of $75,000 of which $50,000
was paid in 1996 with a final installment of $25,000 paid in March, 1997. The
Company purchased equipment valued at $75,000, accounts receivable of
$429,170, accounts payable and accrued expenses of $439,676 and trademarks and
copyrights of $6,935,506 for $3,000,000 in cash and a long-term note of
$4,000,000. The Company entered into capital leases for equipment capitalized
at $27,263; unpaid balances on leases were $22,657 as of December 31, 1996.
The Company also issued 58,901 shares of common stock for consulting services
resulting in a non-cash charge of $685,033.
See accompanying notes to consolidated financial statements.
PRINCETON MEDIA GROUP, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Organization and Summary of Significant Accounting Policies
Organization
Princeton Media Group, Inc. ("the Company") operates a publishing and printing
business that owns, publishes, and prints twenty-two periodicals that have
national and international distribution. Through several subsidiaries the
Company has editorial staff in New York City and Miami Lakes, Florida, and a
printing plant in the Milwaukee, Wisconsin area. All printing and publishing
operations were acquired in 1996 through two purchases of substantially all of
the assets and operations of existing businesses.
The Company was incorporated in Ontario, Canada, in September, 1986 as DeNovo
Corporation and operated several other businesses which were discontinued in
1995 and in prior years. In October 1996 the Company changed its name to
Princeton Media Group, Inc. in order to reflect its new focus in the
publishing, printing, and related media industries. The Company's common
stock is publicly traded on the Nasdaq SmallCap market under the symbol
"PMGIF."
Summary of Significant Accounting Policies
(A) Basis of Consolidation
The consolidated financial statements include the accounts of Princeton Media
Group, Inc. ("PMG") and its wholly-owned subsidiaries, Princeton Publishing,
Inc., Firestone Publishing, Inc., and Teleconcepts, Inc.(sold in 1996, Note
3). All significant intercompany transactions and balances have been
eliminated.
(B) Cash and Cash Equivalents
Cash and cash equivalents are all cash balances and highly liquid investments
with original maturities of three months or less.
(C) Accounts Receivable
Accounts receivable are recorded net of estimated returns of periodicals,
credits and allowances. Because retail sellers of magazines retain the right
to return magazines for a number of months after the date the periodical is
"off-sale," the allowance for returns is normally a high percentage of the
gross receivables in the magazine publishing industry. The Company has
established an allowance for doubtful accounts for advertising accounts
receivable based on estimates of management. The allowance is periodically
adjusted to reflect the percentage of accounts deemed by management to be
uncollectible.
(D) Inventories
Inventories, including paper, direct art and editorial expenses related to
publications in process but not yet on sale, and other materials used in the
production of the Company's publications, are valued at the lower of cost (on
a FIFO basis) or market.
(E) Property and Equipment
Property and equipment are stated at cost less accumulated depreciation.
Depreciation is provided at rates based on their estimated useful lives using
the straight-line method. Expenditures for maintenance and repairs are
charged to expense as incurred; replacements and major improvements are
capitalized.
(F) Trademarks, Copyrights, and Other Intangibles
Trademarks and copyrights acquired are recorded at their estimated fair values
as of the date of acquisition. Trademarks and copyrights are amortized using
the straight-line method over a period of 35 years. Organization costs are
amortized using the straight line method over 60 months and franchise rights
are amortized using the straight line method over 10 years.
The Company periodically evaluates whether there has been an impairment in the
carrying values of intangibles. Any impairment is recognized when the sum of
expected undiscounted cash flows derived from the acquired businesses is less
than its carrying value. If such an impairment were to occur, the amount of
the impairment would be recognized in operating results and would be based on
the fair value of the acquired business.
(G) Revenue Recognition
Revenues from commercial printing are recognized at the time the printing of a
customer order is completed. Any billings in advance of that time are
recorded as deferred revenue. The sale of magazine subscriptions are recorded
as deferred revenue at the gross subscription price at the time the order and
payment are received. Subscription revenue is then recognized over the term
of the subscription. Sales of magazines (net of estimated returns) are
recorded when each issue is placed on sale.
(H) Income Taxes
The Company uses the liability method of accounting for deferred income
taxes. Under this method, deferred tax assets and liabilities are determined
based on the difference between the financial statement and tax bases of
assets and liabilities using tax rates in effect for the year in which the
differences are expected to reverse.
(I) Use of Estimates
Management of the Company has made estimates and assumptions in the
preparation of the accompanying consolidated financial statements in
conformity with generally accepted accounting principles that affect the
reported amounts of assets and liabilities and disclosures at the dates of the
financial statements, as well as the reported amounts of revenues and expenses
during the reporting period. Actual results could differ from these
estimates.
(J) Net Loss Per Share
Net loss per share is computed using the weighted average number of shares of
common stock outstanding. Common equivalent shares from stock options and
warrants, and additional shares assuming the conversion of debentures and
preferred shares, are excluded from the computation as their effect is
antidilutive.
Cumulative dividends on preferred shares and deemed dividends related to
convertible preferred shares (Note 19) have been added to net loss in the loss
per share computation.
(K) Recent Accounting Pronouncements
On October 23, 1995, the FASB issued Statement of Financial Accounting
Standards No. 123, "Accounting for Stock-Based Compensation." SFAS No. 123
allows companies to retain the current approach set forth in APB Opinion No.
25, "Accounting for Stock Issued to Employees," for recognizing stock-based
expense in their financial statements in lieu of the accounting method
prescribed by SFAS No. 123 based on the estimated fair value of employee stock
options. Companies that do not follow the fair value based method are
required to provide expanded footnote disclosures. The provisions of SFAS No.
123 are effective for fiscal years beginning after December 15, 1995.
However, disclosure of the pro forma net income and earnings per share, as if
the fair value method of accounting for stock-based compensation had been
elected, is required for all awards granted in fiscal years beginning after
December 15, 1994. The Company accounts for stock related compensation using
APB Opinion No. 25 and has adopted the disclosure provisions required under
SFAS No. 123. No such disclosures were required in 1996.
Statement of Financial Accounting Standards No. 121, "Accounting for the
Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of,"
issued by the FASB, is effective for financial statements for fiscal years
beginning after December 15, 1995. This standard establishes guidelines
regarding when impairment losses on long-lived assets, which include plant and
equipment and certain identifiable intangible assets and goodwill, are
recognized and how impairment losses are measured. This statement did not
have a material effect on the Company's financial position or results of
operations in 1996.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 128, "Earnings per Share." This statement
is required to be adopted for financial statements for periods ending after
December 15, 1997, including interim periods. Earlier application of the
Statement is not permitted; however, once adopted all prior period earnings
per share data presented must be restated. Accordingly, the Company will
implement the Statement in the last quarter of 1997 and restate earnings per
share amounts back to January 1, 1997. The Statement will supersede APB
Opinion No. 15 and replaces the presentation of "primary earnings per share"
with "basic earnings per share," which will exclude all potentially dilutive
securities. These dilutive securities will be included in an amount to be
captioned "dilutive earnings per share." The Company has not yet determined
the impact this Statement may have on the amounts of earnings or loss per
share and related financial statement disclosures.
In February 1997, the Financial Accounting Standards Board issued Statement of
Financial Accounting Standards No. 129, "Disclosure of Information about
Capital Structure." This statement is required to be adopted for financial
statements for periods ending after December 15, 1997. The Company's
disclosures in the accompanying financial statements meet all the requirements
of this Standard.
In March, 1997, at a meeting of the Emerging Issues Task Force (EITF), the SEC
expressed views on accounting for convertible debt and preferred stock, as
detailed in Note 19.
(L) Concentrations of Credit Risk and Fair Value
Financial instruments that potentially subject the Company to concentrations
of credit risk consist principally of cash and accounts receivable. The
Company maintains significant cash deposits primarily in one financial
institution. The Company performs periodic evaluations of the relative credit
rating of this institution as part of its investment strategy. Concentrations
of credit risk with respect to accounts receivable are limited due to the
Company's large customer base. At December 31, 1996 primarily all of the
Company's receivables pertain to the publishing and printing industry. The
Company currently distributes its periodicals primarily through three
distributors. In addition, the Company continues to evaluate other
distributor relationships.
2. Acquisitions
During the year the Company acquired substantially all of the assets and
operations of a publishing and printing business for $7 million and
substantially all of the assets and operations of a second publishing business
also for $7 million. Each of the acquisitions was accomplished through
formation and purchase of a wholly-owned subsidiary corporation which
purchased the assets and operations.
First Seller
On January 30, 1996, the Company formed a wholly-owned acquisition subsidiary,
Princeton Publishing, Inc.("Princeton"), with 100 shares of common stock and
capitalized with $1 million cash financed through the issuance of debt
securities of PMG. On March 29, 1996, Princeton purchased from a group of
corporations (collectively, the "First Seller") substantially all of its
assets and major contracts.
The acquired assets consisted of intellectual property, fixed assets, and
contract rights. Trademarks acquired were the titles of periodical magazines,
primarily targeted to the adult sports, entertainment, and lifestyle
marketplace. The fixed assets included furniture, fixtures and equipment,
chiefly, printing equipment. The contracts were magazine distribution
contracts and leases to real property in New York City and Sussex, Wisconsin.
The First Seller was in the business of publishing, printing and selling
periodical magazines. The Company, through its subsidiary, Princeton, is
continuing such use of the acquired assets.
Princeton paid $1 million in cash at the closing and issued two promissory
notes for the remainder of the purchase price. The first note was in the
principal amount of $1 million and was paid on June 28, 1996 with interest at
the rate of 10.25% per annum. The second note is in the principal amount of
$5 million and is collateralized by a security interest in all the purchased
assets (see Note 6).
On the date of closing, Princeton transferred all purchased intellectual
property including trademarks to Princeton Trademarks, Inc., a newly-formed
Delaware corporation, in exchange for 100 shares in Princeton Trademarks,
Inc., resulting in Princeton Trademarks becoming a wholly-owned subsidiary of
Princeton. Also on the same date, Princeton transferred all equipment and
other fixed assets located in Sussex, Wisconsin, to Kingston Press, Inc., a
newly-formed Delaware corporation, in exchange for 100 shares in Kingston
Press, Inc. resulting in that company also becoming a wholly-owned subsidiary
of Princeton.
Second Seller
On July 15, 1996, the Company formed another wholly-owned acquisition
subsidiary, Firestone Publishing, Inc.("Firestone"), with 100 shares of common
stock and capitalized with $1 million cash which was financed through the
issuance of debt securities of PMG. On July 18, 1996, Firestone paid $1
million for an option to purchase substantially all of the assets and
operations of a publishing company (the "Second Seller.")
The agreement provided for a consulting fee due to Firestone in the amount of
the net cash resulting from operations (which resulted in a fee of $11,118)
from July 18 until the closing to occur upon payment of an additional $2
million and interest at prime plus 2%. On September 6, 1996, Firestone
purchased from the Second Seller substantially all of its assets and major
contracts through payment of the $2 million and accrued interest of $23,054
and the issuance of a promissory note in the amount of $4 million, which is
collateralized by the assets acquired (see Note 6).
The acquired assets consisted of intellectual property, fixed assets,
contract rights, receivables, and payables generated from operations between
July 18th and September 6th. Trademarks acquired were the titles of
periodical magazines, primarily targeted to the lifestyle marketplace. The
fixed assets included furniture, fixtures and equipment, chiefly, computer
equipment. The contracts purchased were magazine distribution contracts and a
lease to real property in Miami, Florida.
The Second Seller was in the business of publishing and selling periodical
magazines. The Company, through its subsidiary, Firestone, is continuing such
use of the acquired assets.
The acquisitions described above have been accounted for using the purchase
method; accordingly, (1) the purchase price was allocated to net assets
acquired based on their estimated fair values, and (2) the results of
operations are included in the Company's consolidated results of operations
since the dates of acquisition.
The following unaudited information presents on a pro forma basis, the
acquisitions and the disposition as if they had occurred at the beginning of
the year ended December 31, 1996:
Net sales $18,115,354
Net loss $(2,411,537)
Net loss per common share $ (7.46)
The pro forma information is presented for comparative purposes only and is
not necessarily indicative of the operating results that would have occurred
had these acquisitions been consummated at the beginning of the periods
presented, nor is it necessarily indicative of future operating results.
3. Disposal of Subsidiary and Settlement of Related Liabilities
Effective as of December 31, 1995 the Company discontinued operations of its
wholly-owned subsidiary, Teleconcepts, Inc.("TCI"). On August 5, 1996, 100% of
the stock of TCI was sold to a third party, who is an officer in a company
whose chairman is the chairman of PMG. As part of the sale of Teleconcepts,
Inc., 32,500 shares of PMG stock having a then market value of $269,100 were
issued to the third party. At the time of the sale, Teleconcepts, Inc. had
an accumulated deficit of $763,393 and PMG realized a gain of $432,417 on the
disposition of the subsidiary.
In conjunction with the sale of Teleconcepts, Inc., the Company settled
certain of the Teleconcepts, Inc. liabilities through the issuance of 16,500
shares of PMG common stock with a fair market value of $61,876. The Company
recognized a gain of $161,012 upon the settlement, which is included in the
gain of $432,417 on the disposition of the subsidiary.
The Company's prior years operating results which were entirely from the
discontinued operations have been reclassified to reflect the discontinued
operations.
4. Inventories
Inventories at December 31, 1996, consisted of the following:
Paper $481,151
Ink 10,277
Work in process 164,597
Total inventories $656,025
5. Property and equipment
Property and equipment as of December 31, 1996 and 1995 consisted of the
following assets, all depreciated between 5 and 7 years:
1996 1995
Printing equipment $1,824,311
Computer equipment 103,106
Office furniture and equipment 32,284 $42,976
1,959,701 42,976
Less accumulated depreciation (203,489) (8,742)
Total property and equipment, net $1,756,212 $34,234
6. Trademarks, copyrights and other intangibles
Trademarks, copyrights and other intangibles at December 31, 1996, consist of
the following:
Trademarks and copyrights $12,233,302
Organizational costs 34,388
Franchise rights 10,000
12,277,690
Less accumulated amortization (182,827)
Trademarks, copyrights, and
other intangibles, net $12,094,863
7. Line of Credit
The Company has a line of credit with a distributor for working capital of up
to $500,000 which may be drawn down in multiples of $10,000. Any draw will
bear interest at prime plus 2% and will be payable with equal monthly payments
of principal and interest over a one year period. As of December 31, 1996,
the Company had not drawn funds on this line of credit. In January 1997 the
Company was advanced $420,000 on the line of credit.
8. Assignment of Accounts Receivable
During 1996, the Company has assigned $639,000 of certain accounts receivable
as collateral for its obligation to a paper vendor. After a $100,000 payment
to the vendor in December 1996, the remaining obligation of $539,000 was
reflected in accrued expenses at December 31, 1996. In January 1997, per the
agreement, the Company paid an additional $100,000 to the vendor. Payments of
assigned receivables are scheduled to begin in January 1997 and final payment
is estimated to be in June 1997. Receivables are monthly revenues on sales of
magazines and the amounts vary from month to month.
9. Long - Term Debt
The Company entered into a promissory note agreement on March 29, 1996 with an
individual and a group of corporations (collectively, the "First Seller") in
conjunction with the purchase of substantially all of the assets and
operations of the First Seller's business (see Note 2). The promissory note
is in the amount of $5 million payable over 10 years, with interest payments
only for the first three years, 30-year amortized payments for the next seven
years, with a final payment of all outstanding principal and interest due on
March 28, 2006. The interest rate on this note is prime plus 2% (10.25% at
December 31, 1996), maximum 12%, adjustable two times per year.
The Company entered into a promissory note agreement on September 6, 1996 with
a corporation (the "Second Seller") in conjunction with the purchase of
substantially all of the assets and operations of the Second Seller's business
(see Note 2). The promissory note is in the amount of $4 million with interest
at the rate of prime plus 2% per annum (10.25% at December 31, 1996). Interest
accrues with no payments due for one year at which time interest will be added
to principal and fixed payments of principal and interest are due monthly
through September 5, 2000.
These notes are collateralized by substantially all of the assets acquired in
each of the purchases (see Note 2).
<PAGE>
Long-term debt at December 31, 1996 consists of the following:
Note payable - First Seller $5,000,000
Note payable - Second Seller 4,000,000
Capital lease obligations 22,658
9,022,658
Less current portion 212,753
Total long-term debt $8,809,905
The aggregate scheduled maturities of long-term debt in subsequent years are
as follows:
1997 $ 212,753
1998 879,001
1999 983,636
2000 1,104,564
2001 911,372
Thereafter 4,931,332
Total $9,022,658
Amounts scheduled above do not include accrued interest on the $4 million
note. As of October 6, 1997, accrued interest on the $4 million note, which
is estimated to be $410,000 at that time, will be added to principal which
principal will be amortized over the ensuing 48 months. As of December 31,
1996 accrued interest on the $4 million note of $131,425 was included in
accrued interest.
10. Convertible Debentures
During 1996, the Company initiated private placements of senior secured
convertible debentures to non-U.S. persons under Regulation S issued by the
Securities and Exchange Commission under the Securities Act of 1933, as
amended. A summary of such financings during 1996 follows:
Number of Debentures
Common Shares Outstanding
Original Issued on at
Principal Conversion December 31, 1996
Group I $3,081,800 491,271 None
Group II 444,200 19,351 $ 345,000
Group III 1,580,000 - 1,580,000
Total $5,106,000 510,622 1,925,000
The resulting proceeds from all the debentures sold were $3,762,025 net of
$1,343,975 in investment brokerage commissions, discounts and related fees.
The debentures bear interest at 8% per year and are due in two years from the
dates of issue. They are convertible at any time beginning 45 days after
issue into common shares at a conversion price equal to the lower of:
(a) 65%, 85% or 90% (for Groups I, II, and III, respectively) of the
average closing bid price of the common for the five business days immediately
preceding the conversion date, or
(b) 65%, 85%, or 90% (for Groups I, II, and III, respectively) of the
average of the closing bid price of the common stock for the five business
days immediately preceding the date of subscription to the debenture.
As of December 31, 1996, convertible debentures and preferred stock was
convertible to common shares based on the average closing bid price for the
five days prior to and including December 31, 1996, which was $2.74 computed
as follows:
Face Discount Shares
Convertible debentures - Group II $ 345,000 85% 148,268
Convertible debentures - Group III $1,580,000 90% 641,299
Preferred Stock - Series D $1,200,000 65% 674,394
Preferred Stock - Series E $1,580,000 65% 898,200
Total conversion potential 2,362,161
In March 1997 the Company reached an agreement (the "Agreement") with the
holders of all of its outstanding convertible debentures and convertible
preferred Series D and certain of its Series E stockholders to convert their
holdings to common stock. Pursuant to the Agreement, the convertible debenture
and convertible preferred Series D and E stock (collectively the "Securities"),
converted into approximately 1.1 million shares of the Company's common stock.
Had the conversion occurred pursuant to the original conversion terms of the
Securities, the Securities holders would have received approximately 887,000
shares of common stock.
Under the Agreement, the Securities holders have agreed to sell their common
stock holdings over different periods throughout 1997. Further, pursuant to
the Agreement, if at the end of the selling period the cash proceeds and
market value of any unsold shares of common stock do not equal approximately
$4,423,000, the Company has agreed to either issue additional shares of common
stock or cash to make up any short fall. To the extent such short fall occurs
or is estimated to occur, the Company will recognize either additional deemed
interest expense or dividends. In addition, the Company will incur additional
interest and related charges in 1997.
As additional inducement to the Securities holders, various warrants at
exercise prices ranging from $4.85 to 8.85 have been granted to purchase
102,510 shares of the Company's common stock.
11. Commitments
The Company leases facilities and equipment with minimum payments as follows:
Facilities Equipment Total
1997 $ 445,051 $ 3,624 $ 448,675
1998 447,411 3,624 451,035
1999 344,570 3,624 348,194
2000 115,162 3,624 118,786
2001 75,797 1,511 77,308
Thereafter 6,337 - 6,337
Total $1,434,328 $16,007 $1,450,335
The Company's leased facilities consist of editorial offices in New York City
and Miami, Florida, and a printing plant in Milwaukee, Wisconsin. The plant
lease expires August 31, 1999. The plant lease requires monthly base payments
of $20,400 with annual adjustments tied to the CPI. During 1996 the New York
City offices were rented on a month to month basis. In 1997 the Company
executed a lease extending from February 1, 1997 through January 13, 2001 on
new office space; this new lease requires annual rent beginning at $65,000
escalating over five years up to $76,040 in the final year and is included in
amounts scheduled above. The Miami lease requires monthly payments of $5,285
plus 10.47% of landlord's operating expenses through August 31, 2000.
Rental expense was $280,270 in 1996.
12. Income Taxes
The provision for income taxes (benefit) for 1996 consist of:
Deferred
U.S. Federal $ (86,600)
State and local (17,800)
Total provision for income taxes (benefit) $(104,400)
The components of deferred tax assets and liabilities in the balance sheet at
December 31, 1996 relate to the following:
Deferred tax assets:
Reserve for returns $298,400
Valuation of inventories 69,900
Allowance for doubtful accounts 13,300
Net operating loss carryforward 11,400
Valuation allowance (121,700)
Total deferred income tax benefit $271,300
Long-term deferred tax liabilities:
Depreciation of properties $ 76,400
Amortization of intangibles 90,500
Total long-term deferred tax liabilities $166,900
Deferred tax assets and liabilities in the consolidated balance sheet are
classified based on the related asset or liability creating the deferred tax.
Reconciliations of the differences between income taxes computed at Federal
statutory tax rates and consolidated provisions for income taxes are as
follows:
Loss before income taxes, writeoff of
debt discount and issue costs,
and discontinued operations: $(690,277)
Income taxes computed at statutory rates:
Federal benefit expected at 34% $(234,700)
State tax provisions, net of federal benefits ( 27,600)
Other reconciling items-
Non-deductible items 4,400
Canadian expenses 31,800
Valuation allowance 121,700
Provision (benefit) for income taxes $(104,400)
In 1995, the Company provided a full valuation allowance against the deferred
tax asset since it was more likely than not that the deferred tax asset would
not be realized. There is no net operating loss carryover for years prior to
1996 since the net operating losses pertained to the operations of the
subsidiary disposed of in 1996. At December 31, 1996, the Company had a
valuation allowance of $121,700. The Company establishes a valuation
allowance when it is more likely than not that realization of future tax
benefits are not assured.
13. Capital Stock
A summary of capital stock as of December 31, 1996 is as follows:
Convertible Preferred, Series
Common A C D E
Par value None None None $1,000 $1,000
Shares authorized Unlimited Unlimited 1,100,000 1,500 1,800
Issued and outstanding 865,969 32,500 1,100,000 1,200 1,634
Liquidation preference 5th 1st 2nd 3rd 4th
Aggregate liquidation
preference per share - $1.24 $.80* $1,350* $1,350*
Aggregate preference liquidation for Series A, C, D, and E is $43,300,
$880,000, $1,620,000, and $2,205,900 plus accrued and unpaid dividends
respectively.
(A) Preferred Stock:
The rights, privileges, restrictions and conditions of each series to be
issued are fixed from time to time by the directors.
Series A:
These shares are redeemable at the option of the Company at any time at a
price of $1.24 per share, convertible at the option of the holder at any time
into common shares of the Company at a price equivalent to $1.24 per 1/200th
of a common share.
Series B:
These shares have not been issued and management has no intention of issuing
shares in the future. 1,250,000 shares were designated as $.80 cumulative
redeemable convertible preferred.
Series C:
$.80 Series C voting preference shares are redeemable at the option of the
Company until January 31, 1998 under certain conditions pertaining to the
trading prices of the Company's common shares, and convertible at the option
of the holder at any time into common shares of the Company on the basis of
200 Series C shares for one common share. The conversion ratio is subject to
adjustment under certain conditions, including conditions relating to trading
prices and subsequent share issues. Holders of Series C preference shares are
entitled to receive a cumulative dividend of $.04 per share annually, payable
in cash or common shares of the Company. Dividends in arrears totaled
$184,000 and $140,000 at December 31, 1996 and 1995, respectively.
Series D:
Series D preferred have 4,000 votes per share at all shareholder meetings.
Cumulative dividends at 8% per annum per share (amounting to $80 per share per
year) are payable at the Company's option in cash or common shares, payable
quarterly. There is optional redemption by the Company after 145 days from
issuance at $1,350 per share. Conversion is available at the holder's option
any time 45 days after issuance into common stock at a value of $1,000 per
Series D share, based on a formula utilizing market price of the common
shares. Cumulative unpaid dividends amounted to $30,773 at December 31, 1996.
Series E:
The terms of this security are identical to Series D except preferences are
subordinate to Series A, C, and D. Cumulative unpaid dividends amounted to
$44,580 at December 31, 1996.
(B) Common Stock:
On October 24, 1996, at the annual meeting of the Company, shareholders
approved a one-for-twenty reverse split. On the same date shareholders
approved a name change from DeNovo Corporation to Princeton Media Group, Inc.
to reflect the Company's new 100% focus in the publishing, printing, and media
industry. On October 29, 1996, the reverse split took effect and common stock
commenced trading on the Nasdaq SmallCap Market under the symbol "PMGIF." All
numbers of common shares and related per share amounts have been adjusted for
the split.
(C) Options and Warrants
As of December 31, 1996 500 options granted were currently exercisable;
options granted in 1992 to purchase 250 shares at $150 per share expire June
1997 and options granted in 1993 to purchase 250 shares at $250 per share
expire in July 1998. Warrants granted in 1993 to purchase 7,188 shares at
$280 per share expire January 1998 and warrants granted in 1994 to purchase
61,001 shares at $100 per share expire July 1997. Management anticipates it is
probable that these options and warrants will expire unexercised due to the
high exercise price compared to trading price as of the date of this report.
During 1996 options to purchase 20,000 shares at various prices were granted.
Of the total options 7,500 options were granted to investor relations
consultants. The shares were exercised for $75,000. At the grant date the
fair market value of the shares was $106,875; accordingly, consulting fees
were valued at $31,875. The remaining options for 12,500 shares granted in
1996 expired. There were no options or warrants granted for employee
compensation during 1996.
(D) Changes in Equity
Changes in equity for the years ended December 31, 1996 and 1995 were as
follows:
Preferred Stock Series A and Series C:
Series A Series C
Shares Amount Shares Amount
Balance at January 1, 1995 32,500 $28,923 1,100,000 $739,696
Changes - - - -
Balance at December 31, 1995 32,500 28,923 1,100,000 739,696
Changes - - - -
Balance at December 31, 1996 32,500 $28,923 1,100,000 $739,696
Preferred Stock Series D and Series E:
Series D Series E
Shares Amount Shares Amount
Balance at January 1, 1995 - - - -
Balance at December 31, 1995 - - - -
Issuance 1,200 $1,005,000 1,800 $1,735,000
Conversion to common shares - - ( 100) ( 83,750)
Redemption of Series E ( 66) (101,766)
Balance at December 31, 1996 1,200 $1,005,000 1,634 $1,549,484
Common shares:
Shares Amount
Balance at January 1, 1995 135,977 $1,863,972
Issuance 86,494 2,394,783
Balance at December 31, 1995 222,471 4,258,755
Issuance - consulting fees 51,401 653,160
Issuance - settlement of liabilities 49,000 330,975
Exercise of options - consulting fees 7,500 106,875
Conversion of debentures to common shares including
"deemed" dividend on convertible preferred shares
of $1,526,000 (Note 18) 510,622 6,662,521
Conversion of Preferred Series E to common shares 24,975 185,516
Balance at December 31, 1996 865,969 $12,197,802
14. Related Party Loan, Investment and Transactions
The Company had a short-term note due upon demand to a company related by
common directorship with interest accruing at prime (8.25% as of December 31,
1996). The note balance and related accrued interest was $6,975 and $83,
respectively, as of December 31, 1996. Interest expense on the note was $9,059
during 1996. The related company also purchased $1.4 million of Preferred
Series E shares. Cumulative unpaid dividends on these shares amounted to
$35,901 at December 31, 1996. The Company entered into an agreement with the
related company pursuant to which the companies recognized consulting services
rendered to both companies in amounts of 85% to PMG and 15% to the related
company by various consultants who had been compensated with common shares of
the Company. The related company therefore paid the Company for 15% of the
services in the amount of $101,767 through surrender of 66 shares of its
Series E preferred stock. The Company shares corporate headquarters office
space the related company.
15. Fair Value of Financial Instruments
The carrying amounts reported in the consolidated balance sheets for cash,
accounts receivable, accounts payable and short-term borrowings approximate
fair value due to the short-term maturity of these financial instruments. The
carrying amount reported for long-term debt approximates fair value since the
underlying instrument bears interest at a variable rate that reprices
frequently.
16. 401(K) Plan
Firestone Publishing, Inc., has a 401(K) plan in which the Company contributes
a 5% matching contribution for employees who contribute either 5% or 10% of
their gross wages to the plan. The plan was established by the previous owner
of the operations and was continued as a requirement of the acquisition
agreement. Princeton Publishing, Inc. is establishing a noncontributory
401(K)plan in 1997.
17. Non Monetary Transation
In 1996 the Company incurred significant costs for investor relationship
consultants to inform the investing public and the general public that the
Company had made certain acquisitions and had established publishing and
printing operations. Total expenses for investor relations was $812,398. Of
this amount $685,033 was noncash expense through the issuance of stock.
18. Contingencies
Threatened litigation in the amount of $2,534,002 pursuant to a share exchange
agreement between Mr. Horace Rekunyk and Petroleum Investors Management Ltd.
(PIM) and DeNovo (now PMG). During 1995, DeNovo filed a Statement of Defense
on the initial claim. The Company then filed a counter-claim against Mr.
Rekunyk and PIM for which a Statement of Defense has been filed. There was no
activity on this matter during 1996. Management, upon the advice of counsel,
continues to believe these claims to be without merit and will continue
vigorously defending its position as well as its counter-claim.
19. Write-off of Debt Discount and Issue Costs
In March 1997, at a meeting of the Emerging Issues Task Force (EITF), the SEC
expressed its views on the accounting for convertible debt with a
nondetachable conversion feature and convertible preferred stock where the
conversion feature is "in the money" (that is, a conversion discount) at the
date the security is issued.
The SEC believes that the conversion discount should be valued and recognized
at the date of issue as additional paid-in capital. The value being
determined is the difference between the conversion price and the quoted
market price of the common stock into which the security is convertible,
multiplied by the number of shares into which the security may be converted.
For debt securities, the value of the conversion discount and any related
issue costs should be charged to interest expense from the date of issue to
the date the security first becomes convertible. It is the SEC's view that
the stated maturity of such debt is not substantive and therefore the
conversion discount and related issue costs should be amortized over this
relatively short period. Further, if the security is converted before the
discount or issue costs are fully amortized, the unamortized portions of the
discount or costs should be charged to interest expense in the period of
conversion, rather than to additional paid-in capital as is the current
practice.
Change in Method
In 1996, upon issue of the 8% convertible debt securities, the Company had
recognized the value of the discount (in the manner now prescribed by the SEC)
and was amortizing the discount and related issue costs over the term of the
debt using the interest method. Upon conversion of the debt, the Company had
charged shareholders' equity for any remaining unamortized discount and costs.
As a consequence of the above, in April 1997, the Company revised its method
of accounting for the conversion discount and issue costs to conform with the
SEC's position and wrote off all of the remaining discount and costs to the
1996 statement of operations. Also, the Company charged to 1996 operations
the discount and cost originally charged to shareholders' equity on the
conversion of debt during 1996. This resulted in a noncash writeoff of debt
discount and debt issue costs of $3,257,350.
Deemed Dividend
For convertible preferred securities issued with a conversion discount, the
SEC believes that the fair value of the discount is equivalent to a dividend
and accordingly should be recognized as a return to the preferred shareholders
over the minimum period in which the preferred shareholders can realize that
return which in this case was the date of issuance to the first date the
securities became convertible.
In the 1996 financial statements, the Company reflected this "deemed"
preferred stock dividend (amounting to $1,526,000 in connection with the
issuance of Series D and E preferred shares.
This noncash dividend represents the discount on the conversion price of the
shares of common stock issuable on conversion of the preferred and only
affects the loss per share calculation. The dividend is based on the
difference between the conversion price and the quoted market price of the
common stock on the dates the preferred shares were issued times the number of
common shares issuable.
ARTICLES OF INCORPORATION
1. The name of the corporation is Princeton Media Group, Inc.
2. The address of the registered office is: c/o Michael Armstrong, Esq.,
Armstrong & Dunne, Suite 1400, 141 Adelaide Street West, Toronto,
Ontario
3. Number (or minimum and maximum number) of directors is: A minimum of three
directors and a maximum of seven directors.
4. The first directors are:
[This provision now outdated.]
5. Restrictions, if any, on business the corporation may carry on or on
powers the corporation may exercise.
None.
6. The classes and any maximum number of shares that the corporation is
authorized to issue.
The Corporation is authorized to issue an unlimited number of preference
shares without par value, issuable in series, and an unlimited number of
common shares without par value.
7. Rights, privileges, restrictions and conditions (if any) attaching to each
class of shares and directors authority with respect to any class of shares
which may be issued in series:
PREFERENCE SHARES
The unlimited number of preference shares without per value ("preference
shares") shall, as a class, have attached thereto the following:
(i) the preference shares may from time to time be issued in one or more
series and subject to the following provisions, and subject to the sending of
articles of amendment in prescribed form, and the endorsement thereon of a
certificate of amendment in respect thereof, the directors may fix from time
to time before such issue the number of shares that is to comprise each series
and the designation, rights, privileges, restrictions and conditions attaching
to each series of preference shares including, without limiting the generality
of the foregoing, the rate or amount of dividends or the method of calculating
dividends, the dates of payment thereof, the redemption, purchase and/or
conversion prices and terms and conditions of redemption, purchase and/or
conversion and any sinking fund or other provisions;
(ii) the preference shares of each series shall, with respect to the payment
of dividends and the distribution of assets or return of capital in the event
of liquidation. dissolution or winding up of the Corporation, whether
voluntary or involuntary, or any other return of capital or distribution of
the assets of the Corporation among its shareholders for the purpose of
winding up its affairs, rank on a parity with the preference shares of every
other series and be entitled to preference over the common shares and over any
other shares of the Corporation ranking junior to the preference shares. The
preference shares of any aeries may also be given such other preferences, not
inconsistent with these articles, over the common shares and any other shares
of the Corporation ranking junior to such preference shares as may be fixed in
accordance with clause (i);
(iii) if any cumulative dividends or amounts payable on the return of
capital
in respect of a series of preference shares are not paid in full, all series
of preference shares shall participate rateably in respect of such dividends
and return of capital;
(iv) the preference shares of any series may be made convertible into common
shares; and
(v) unless the directors otherwise determine in the articles of amendment
designating a series, no holder of preference shares shall be entitled to
receive notice of, attend, be represented at or vote in respect thereof at any
annual or special meeting of the Corporation unless the meeting is convened
for considering the winding up of the Corporation, the amalgamation of the
Corporation with another corporation or corporations or to sanction the sale
of all or substantially all of its assets or undertaking or other events
specified in the Act, in any of which events each holder of preference shares
shall have one (1) vote for each such share held;
(vi) the holders of preference shares shall not be entitled to vote
separately as a class or series upon a proposal, and shall not be entitled to
dissent pursuant to section 184(2) of the Business Corporations Act, 1982 (or
any other statutory provision of like or similar effect from time to time in
force) in respect to a resolution to amend the Articles of the Corporation to:
(A) increase or decrease any maximum number of authorized, preference shares
or any series thereof, or increase any maximum number of authorized shares of
a class or series having rights or privileges equal or superior to the
preference shares or any series thereof;
(B) effect an exchange, reclassification or cancellation of the preference
shares or any series thereof; or
(C) create a new class or series of shares equal or superior to the
preference
shares or any series thereof,
(vii) provided that the holders of preference shares shall be entitled to
receive notice of meetings of common shareholders called for the purpose of
authorizing an amendment to the Articles of the Corporation of the nature
referred to above.
COMMON SHARES
The holders of the common shares are entitled to one (1) vote per share
at all meetings of shareholders and to receive the property of the Corporation
upon a dissolution.
SERIES A PREFERENCE SHARES
[As Designated by Amendment dated March 23, 1989; certain provisions are
subject to adjustment and have been adjusted since designation]
The first Series of preference shares shall consist of Thirty-Two
Thousand Five Hundred (32,500) preference shares which shall be designated as
Convertible Redeemable Retractable First Preference Shares, Series A
(hereinafter called the "Series A Preferences Shares") and which, in addition
to the rights, privileges, restrictions and conditions attaching to the
preference shares as a class shall have attached thereto the following right,
privileges, restrictions and conditions:
1. Conversion
Each Series A Preference Share shall be convertible at the option of the
holder at any time into the common shares (the "Common Shares") in the capital
stock of the Corporation as then constituted at a price equivalent to $1.24
per Common Share (the "Conversion Price") upon and subject to the terms and
conditions hereinafter set forth.
The right to convert any Series A Preference Share as hereinbefore
provided shall expire on the close of business on the last business day
preceding the date upon which such share is called for redemption.
In the event of any consolidation, subdivision or reclassification of
the Common Shares of the Corporation at any time while any of the Series A
Preference Shares are convertible into a different number or different class
or classes of shares, the Corporation shall deliver at the time of exercise
thereafter of the right of conversion by the holders of any such Series A
Preference Shares, a certificate or certificates for such different number or
different class or classes of shares as would have resulted from such
consolidation, subdivision or reclassification if the right of conversion had
been exercised prior to the date of such consolidation, subdivision or
reclassification.
If the Corporation shall declare and pay a stock dividend upon Common
Shares, then, from and after the payment date of such dividend, the conversion
shall be increased in proportion to the increase in the number of outstanding
Common Shares resulting from such dividend.
A holder of the Series A Preference Shares desiring to convert such
Series A Preference Shares into Common Shares in accordance with the foregoing
shall surrender the certificate or certificates representing the Series A
Preference Shares so to be converted to the Corporation at its registered
office or to the transfer agent, if any, for the time being of the Series A
Preference Shares, together with a written request for such conversion in such
form and with such verification of signature as the directors of the
Corporation may from time to time require. The conversion shall be deemed to
take effect as of the date upon which the said certificate or certificates
shall be surrendered to the Corporation at its registered office or to the
transfer agent, as the case may be, accompanied by the said written request,
unless such day be a Saturday or a holiday, in which event, it shall take
place on the next business day.
In the event that part only of the Series A Preference Shares
represented by any certificate shall be converted, a certificate for the
remainder of the Series A Preference Shares represented by the said
certificate shall be delivered to the holder without charge. Upon the
conversion of any Series A Preference Shares, there shall be no payment or
adjustment on account of any accumulated or unpaid dividends or premium on
Series A Preference Shares so converted or on account of any dividends on the
Common Shares resulting from such conversion. If, upon the conversion of one
or more Series A Preference Shares at the rate herein provided into the
maximum number of Common Shares into which such Series A Preference Shares are
convertible, a holder of Series A Preference Share shall become entitled to a
fraction of a Common Share, no shares shall be issued in respect thereof, but
in lieu thereof the Corporation shall make a cash adjustment therefor.
2. Redemption at the Option of the Corporation
The Series A Preference Shares shall be redeemable at the option of the
Corporation at any time. The Corporation at its option may, upon giving
notice as hereinafter provided, redeem at any time the whole or from time to
time any part of the then outstanding Series A Preference Shares at the price
of $1.24 per Series A Preference Share.
If the Corporation desires to redeem only part of the outstanding Series
A Preference Shares, the Series A Preference Shares to be redeemed shall be
selected by lot in such manner as the board of directors of the Corporation
may determine or, if the board of directors of the Corporation so determines
pro rata, disregarding fractions, in proportion to the number of Series A
Preference Shares held by each of the registered holders thereof.
Any Series A Preference Shares which are redeemed pursuant to this
clause two shall be cancelled and not reissued and the stated capital of the
Corporation shall be reduced accordingly. If a part only of the Series A
Preference Shares represented by any certificate shall be redeemed, a new
certificate representing the balance of such shares shall be issued to the
holder thereof at the expense of the Corporation upon presentation and
surrender of the first mentioned certificate.
3. Manner of Redemption
In the case of any redemption of Series A Preference Shares pursuant to
clause two hereof the Corporation shall, at least 30 days before the date
fixed for redemption, give notice in writing to each person who at the date of
the giving of such notices is the registered holder of Series A Preference
Shares to be redeemed of the intention of the Corporation to redeem such
Series A Preference Shares. Any such notice shall be validly and effectively
given if delivered personally to the registered holder of Series A Preference
Shares for whom it is intended or, if sent by prepaid first class post,
addressed to such holder at his address as it appears in the books of the
Corporation or, in the event of the address of such holder not so appearing,
to the address of such holder last known to the Corporation; provided,
however, that the accidental failure or omission to give such notice as
aforesaid to one or more of such holders shall not affect the validity of the
redemption, but upon such failure or omission being discovered, notice shall
be given forthwith to such holder or holders as aforesaid and shall have the
same force and effect as if given in due time. Such notice shall set out the
date (the "Redemption Date") on which the redemption is to take place, the
redemption price, the number of Series A Preference Shares held by the person
to whom it is addressed which are to be redeemed, the place or places within
Canada at which holders of Series A Preference Shares may present and
surrender such shares for redemption, whether the Series A Preference Shares
are convertible into shares of a different class at the date of the mailing of
the notice and the place or places within Canada at which holders of Series A
Preference Shares may present and surrender such shares for conversion.
On and after the Redemption Date, the Corporation shall pay or cause to
be paid to or to the order of registered holders of the Series A Preference
Shares so called for redemption the Redemption Price for such Series A
Preference Shares on presentation and surrender at the registered office of
the Corporation or at such other place or places within Canada as may be
designated in such notice of the certificate or certificates representing the
same. Payment of the Redemption Price shall be made by cheque payable at par
at any branch in Canada of the Corporation's bankers for the time being and,
unless such cheque is not paid on presentation, such payment shall be a full
and complete discharge of the Corporation's obligations to pay the Redemption
Price owed to the holders of Series A Preference Shares so called for
redemption. From and after the Redemption Date, the holder of any Series A
Preference Shares called for redemption shall not be entitled to exercise any
of the rights of a shareholder in respect thereof except the receipt of the
Redemption Price therefor, provided that if payment of such Redemption Price
is not duly made by or on behalf of the Corporation in accordance with the
provisions hereof, then the rights of such holder shall remain unaffected.
The Corporation shall have the right at any time after giving notice of
its intention to redeem any Series A Preference Shares, to deposit the
aggregate Redemption Price of the Series A Preference Shares so called for
redemption or of such of the said Series A Preference Shares as are
represented by certificates which have not at the date of such deposit been
surrendered by the holders thereof in connection with such redemption, or
which have not at the date of such deposit been surrendered by the holders
thereof for conversion into shares of another class, in a special account in
any chartered bank or trust company in Canada, to be paid-without interest to
or to the order of the respective holders of the Series A Preference Shares
called for redemption upon presentation and surrenders to such bank or trust
company of the certificates representing such Series A Preference Shares
provided that such bank or trust company has been identified as a place at
which Series A Preference Shares are to be presented and surrendered for
redemption in the notice of redemption given by the Corporation or is so
identified in another notice given by the Corporation to the holders of Series
A Preference Shares as aforesaid prior to such deposit. Upon such deposit
being made or upon the Redemption Date, whichever is the later, Series A
Preference Shares in respect of which such deposit shall have been made shall
be deemed to be redeemed and the rights of the holders thereof shall be
limited to receiving without interest their proportionate part of the funds so
deposited upon the presentation and surrender of the certificates representing
the Series A Preference Shares held by them respectively being redeemed. Any
interest allowed on any such deposit shall belong to the Corporation. Any
such funds not claimed by and paid to holders of Series A Preference Shares
within six years after the date of deposit shall be repaid to the Corporation
on demand and thereafter the holders of the Series A Preference Shares in
respect of which such funds were so repaid to the Corporation shall have no
rights in respect thereof except to obtain payment of the funds due thereon
from the Corporation.
4. Right of Retraction
The Corporation shall on January 31, 1992 (the "Retraction Date") redeem
all Series A Preference Shares tendered to the Corporation on or before
December 31, 1991. The Corporation shall redeem the Series A Preference
Shares duly tendered pursuant to this retraction privilege at a price per
Series A Preference Share equal to $1.24, the aforesaid price being referred
to herein as the "Retraction Price."
During the 40 day period ending November 30, 1991, the Corporation shall
give notice in writing to each person who at the date of the giving of such
notice is the registered holder of a Series A Preference Share of the
aforesaid retraction privilege. Any notice given under this paragraph shall
set out the right of the holder to require the Corporation to redeem his
Series A Preference Shares, the retraction price, the retraction date, the
place or places within Canada at which holders of Series A Preference Shares
may tender such shares pursuant to the exercise of this retraction privilege,
the rights, if any, of the holders of the Series A Preference Shares to
convert their shares into shares of another class, a summary of the material
rights, privileges, restrictions and conditions attaching to the shares of
such other class and the place or places within Canada at which holders of
Series A Preference Shares may present and surrender such shares for
conversion. Any such notice shall be validly and effectively given if
delivered personally to the registered holder of the Series A Preference
Shares for whom it is intended or if sent by prepaid first class mail
addressed to such holder at his address as it appears on the books of the
Corporation, or in the event of the address of such holder not so appearing,
to the address of such holder last known to the Corporation; provided,
however, that the accidental failure or omission to give such notice as
aforesaid to one or more such holders shall not affect the validity of the
notice, but upon such failure or omission being discovered, notice shall be
given forthwith to such holder or holders as aforesaid and shall have the same
force and effect as if given in due time. In the event of a threatened or
actual disruption of the mail service, service by telecopier if the holder
shall have advised the Corporation of a telecopier number and as aforesaid
shall be given to the holders of Series A Preference Shares by means of
publication once in each of two successive weeks in daily newspapers of
general circulation published in the capital cities in each of the provinces
of Canada in which, as of the date of the first publication, there reside
registered holders of Series A Preference Shares (which residency shall be
determined conclusively by reference to the addresses of the said registered
holders of the registry of Series A Preference Shares). Any notice of the
retraction privilege given by publication shall be deemed to be given on the
day on which the first publication is completed in all of the cities in which
publication is required.
In order to elect to have the Corporation redeem Series A Preference
Shares pursuant to this retraction privilege, a holder of Series A Preference
Shares must, on or before December 31, 1991, tender to the Corporation at its
registered office, at any place at which the Series A Preference Shares may be
transferred or at such other place or places in Canada as may be specified in
the aforesaid notice given by the Corporation, the certificate or certificates
representing the Series A Preference Shares which the holder wishes to have
the Corporation redeem. Such tender of Series A Preference Shares shall be
irrevocable unless payment of the Retraction Price shall not be duly made by
the Corporation to the holder on or before January 31, 1992.
Subject as hereinafter provided, the Corporation shall, on the
Retraction Date, redeem all the Series A Preference Shares tendered pursuant
to this retraction privilege. Payment of the Retraction Price shall be made
by cheque payable at par at any branch in Canada of the Corporation's bankers
for the time being delivered to the holders of Series A Preference Shares for
whom it is intended or sent by prepaid first class mail addressed to such
holder at such address as may have been specified by him for such purpose on
tender of the Series A Preference Shares for redemption or, in the event no
address is so specified, at the address of such holder as it appears on the
books of the Corporation or, in the event of the address of such holder not so
appearing, to the address of such holder last known to the Corporation.
Unless the cheque is not paid on presentation, such payment shall be a full
and complete discharge of the Corporation's obligation to pay the Retraction
Price owed to holders of Series A Preference Shares so tendered for
redemption. From and after the Retraction Date, the holder of any Series A
Preference Shares tendered to the Corporation for redemption shall not be
entitled to exercise any of the rights of a shareholder in respect thereof,
except to receive the Retraction Price therefore, provided that if payment of
the Retraction Price is not duly made by or on behalf of the Corporation in
accordance with the provisions thereof, then the rights of such holders shall
remain unaffected. If a holder of Series A Preference Shares wishes to tender
pursuant to this retraction privilege a part only of the Series A Preference
Shares represented by any share certificate or certificates, the holder may
deposit the certificate or certificates and at the same time advise the
Corporation in writing as to the number of Series A Preference Shares with
respect to which tender is being made, when the Corporation shall issue and
deliver to such holder, at the expense of the Corporation, a new share
certificate representing the Series A Preference Shares which are not being
tendered.
If, prior to the mailing or publication of the aforesaid notice of the
retraction privilege in accordance with this clause four, the Corporation
determines that by reason of insolvency provisions or other provisions of
applicable law it will not be permitted to redeem all of the Series A
Preference Shares then outstanding on the Retraction Date, the Corporation
shall include in such notice a statement of the maximum number of Series A
Preference Shares which it then believes it will be permitted to redeem on the
Retraction Date and of the obligation of the Corporation to redeem further
Series A Preference Shares on subsequent dates.
If the Corporation is not permitted by insolvency provisions or other
provisions of applicable law to redeem all of the Series A Preference Shares
duly tendered to the Corporation pursuant to this retraction privilege, it
will redeem the maximum number which the board of directors of the Corporation
determines the Corporation is then permitted to redeem, which shall be
selected as nearly as may be pro rata (disregarding fractions) in proportion
to the total number of Series A Preference Shares so tendered by each holder
thereof.
If all Series A Preference Shares duly tendered to the Corporation for
redemption on the Retraction Date are not redeemed on such date, the
Corporation shall continue to hold the certificates representing the Series A
Preference Shares not so redeemed and shall, as soon as possible thereafter,
give notice to the holders of the Series A Preference Shares so tendered in
the manner provided in this clause four, stating:
a) the number of Series A Preference Shares of each such holder held by the
Corporation;
b) the obligation of the Corporation to redeem at the end of each three
month period (a "Payment Date") thereafter that number of Series A
Preference Shares as have not theretofore been redeemed or withdrawn as
the Corporation is then permitted to redeem; and
c) the right of each such holder to require the Corporation to return to
him all or any part of the certificates for said Series A Preference
Shares, in which event the obligation of the Corporation to redeem any
shares so returned shall cease.
Thereafter on each Payment Date, to the extent that it is permitted to
do so by insolvency provisions or other provisions of applicable law, the
Corporation shall redeem that number of the Series A Preference Shares
presented and surrendered to the Corporation for redemption on the Retraction
Date and not theretofore redeemed or withdrawn as the board of directors of
the Corporation determines the Corporation is permitted to redeem on such
Payment Date, until all such Series A Preference Shares have been so redeemed.
The Series A Preference Shares redeemed on any Payment Date shall be selected
as nearly as may be pro rata (disregarding fractions) in the manner aforesaid.
Payment of the Retraction Price therefor shall be made as aforesaid and shall
be accompanied by a statement to the holders of Series A Preference Shares
redeemed setting out the number registered in the name of each such holder
then held by the Corporation. Except as otherwise provided herein, a holder
of Series A Preference Shares tendered to the Corporation for redemption on
the Retraction Date which are not so redeemed shall continue to be entitled to
exercise all the rights of a shareholder in respect to such Series A
Preference Shares until such shares are redeemed except that, in order to
obtain possession of the share certificate or certificates representing such
Series A Preference Shares, a holder thereof must give ten days prior notice
to the Corporation (given not less than 20 days prior to any Payment Date)
requiring the Corporation to return to him any or all of the said Series A
Preference Shares held by the Corporation. Upon receipt of such written
notice, the Corporation shall promptly send to such holder by delivery or
prepaid first class mail addressed to such holder at his address as it appears
on the books of the Corporation, a share certificate or share certificates for
that number of Series A Preference Shares which such holder has requested the
Corporation to return and thereupon the Corporation shall cease to have any
obligation to redeem such shares under this clause four. Any Series A
Preference Shares which are redeemed pursuant to this clause four shall be
cancelled and not reissued and the stated capital of the Corporation shall be
reduced accordingly.
If the board of directors of the Corporation has acted in good faith in
making any of the determinations referred to above as to the number of Series
A Preference Shares which the Corporation is permitted at any time to redeem,
the Corporation shall have no liability in the event that any such
determination proves inaccurate.
5. Liquidation, Dissolution and Winding Up
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or in the event of any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding up its affairs, whether voluntary or involuntary, the
holders of the Series A Preference Shares shall be entitled to receive from
the assets of the Corporation an amount equal to $1.24 for each Series A
Preference Share held by them respectively, the whole before any amount shall
be paid or any of the assets of the Corporation shall be distributed to the
holders of the Common Shares of the Corporation or shares of any other class
of the Corporation ranking junior to the Series A Preference Shares. After
payment to the holders of the Series A Preference Shares of the amount so
payable to them, they shall not be entitled to share in any further
distribution of the assets of the Corporation.
6. Notice of Meeting
The holders of Series A Preference Shares shall be entitled to notice of
meetings of shareholders called for the purposes of authorizing the winding up
of the Corporation, the amalgamation of the Corporation with another
corporation or corporations or to sanction the sale of all or substantially
all of its assets or undertaking or other events specified in the Act, in any
of which events each holder of Series A Preference Shares shall have one (1)
vote for each such share held, but shall not otherwise be entitled as such
(except as specifically provided by law or as otherwise provided herein) to
receive notice of or attend any meetings of the shareholders of the
Corporation or to vote at any such meeting.
7. Amendments
The rights, privileges, restrictions and conditions attached to the
Series A Preference Shares may be added to, changed or removed by Articles of
Amendment but only with the prior approval of the holders of the Series A
Preference Shares given as hereinafter specified in addition to any vote or
authorization required by law.
8. Approval of Holders of Series A Preference Shares
Any approval of the holders of the Series A Preference Shares with
respect to any and all matters referred to herein or to any other matter
requiring the consent of the holders of the Series A Preference Shares may be
given in such manner as may then be required by law, subject to a minimum
requirement that such approval be given by resolution signed by all the
holders of outstanding Series A Preference Shares or passed by the affirmative
vote of at least two-thirds of the votes cast by the holders of Series A
Preference Shares who voted in respect to that resolution at a meeting of the
holders of Series A Preference Shares duly called for that purpose. The
quorum requirements for, the proxy rules applicable to, the formalities to be
observed in respect to the giving of notice and the formalities to be observed
in respect to the conduct of any such meeting or any adjourned meeting shall
be those from time to time prescribed by the by-laws of the Corporation with
respect to meeting of shareholders, or if not so prescribed, as required by
the Business Corporations Act, 1982 of Ontario as the same may be amended from
time to time. On every poll taken at every meeting of holders of Series A
Preference Shares, each holder of Series A Preference Shares entitled to vote
thereat shall have one vote in respect of each Series A Preference Share held.
9. Entitlement to Receive Notice of Meeting
The holders of the Series A Preference Shares shall be entitled to
receive notice of, attend, be represented at by proxy and vote in respect
thereof at any annual or special meeting of the Corporation at which it is
proposed to amend the Articles of the Corporation to:
A) increase or decrease any maximum number of authorized Preference Shares
or any series thereof, or to increase any number of authorized shares of
a class or series having rights or privileges equal or superior to the
preference shares or any series thereof;
B) effect and exchange, reclassification or cancellation of the preference
shares or any series thereof; or
C) create a new class or a series of shares equal or superior to preference
shares or any series thereof.
and, at any such meeting, shall have one vote for each Series A Preference
Share held.
SERIES B PREFERRED SHARES
[As Designated by Amendment dated January 26, 1993; certain provisions are
subject to adjustment and have been adjusted since designation]
The second series of Preferred Shares shall consist of 1,250,000
Preferred Shares which shall be designated as (U.S.) $0.80 Cumulative
Redeemable Convertible Preferred Shares, Series B (hereinafter called the
"Series B Preferred Shares") and which, in addition to the rights, privileges,
restrictions and conditions attaching to the Preferred Shares as a class,
shall have attached thereto the following rights, privileges, restrictions and
conditions:
1. Dividends
1.1 Payment of Dividends
The holders of the Series B Preferred Shares shall be entitled to
receive, and the Corporation shall pay thereon, as and when declared by the
board of directors of the Corporation, out of monies of the Corporation
properly applicable to the payment of dividends, fixed, cumulative,
preferential cash dividends of (U.S.) $0.04 per share per annum, payable in
equal semi-annual amounts in lawful money of the United States of America on
the first day of January and July in each year (the "Dividend Payment Dates"),
the first Dividend Payment Date to be July 1, 1993. Dividends on the Series B
Preferred Shares issued shall accrue from and including the date of issue
thereof (the date from and including which such dividends shall accrue being
hereinafter called the "Initial Accrual Date").
1.2 Method of Payment
Cheques payable in lawful money of the United States of America at par
at any branch in Canada of the Corporation's bankers for the time being shall
be issued in respect of the dividends on the Series B, Preferred Shares (less
any tax required to be withheld by the Corporation). The mailing from the
Corporation's registered office, or the principal office in Toronto of the
registrar for the Series B Preferred Shares, on or before any Dividend Payment
Date of such a cheque to a holder of Series B Preferred Shares shall be deemed
to be payment of the dividends represented thereby and payable on such
Dividend Payment Date unless the cheque is not paid upon presentation.
Dividends which are represented by a cheque which has not been presented to
the Corporation's bankers for payment or that otherwise remain unclaimed for a
period of six years from the date on which they were declared to be payable
shall be forfeited to the Corporation.
1.3 Alternative Stock Division
Notwithstanding the provisions of paragraphs 1.1 and 1.2 hereof, but
subject to the provisions of the Business Corporations Act (Ontario) or of any
corporations statute to which the Corporation may become subject, in declaring
dividends the board of directors of the Corporation may (but need not) provide
(without making any such provision in respect of the payment of any subsequent
dividend on the Series B Shares) for payment, in whole or in part, of
dividends of the Class B shares by way of a stock dividend of fully paid and
non-assessable Common Shares, provided that the board of directors may
authorize the payment of cash in lieu of or may authorize the issue of script
certificates or fractional share certificates in respect of any fractional
interests in Common Shares which may result from the declaration of any such
dividend; provided that further that the value of any such stock dividend
shall be determined by the board of directors of the Corporation on the basis
of a price per Common Share equal to the average dosing bid price of Common
Shares of the Corporation as quoted on the National Association of Securities
Dealers Automated Quotations for the ten (10) consecutive trading days
immediately prior to the fifth trading day prior to the dividend payment date,
which said day shall exclude the dividend payment date but include such fifth
trading day.
1.4 Cumulative Payment of Dividends
If on any Dividend Payment Date the dividends accrued to such date are
not paid in full on all of the Series B Preferred Shares then outstanding,
such dividends, or the unpaid part thereof, shall be paid on a subsequent date
or dates determined by the board of directors of the Corporation on which the
Corporation shall have sufficient moneys properly applicable to the payment of
such dividends.,: The holders of Series B Preferred Shares shall not be
entitled to any dividends other than or in excess of the cumulative
preferential cash dividends herein provided for.
2. Redemption at the Option of the Corporation
All, and not less than all of the Series B Preferred Shares shall be
redeemable at the option of the Corporation subject to the provisions of this
clause 2 and clause 5 hereof and upon giving notice as herein provided at the
price of (U.S.) $0.80 per Series B Preferred Share:
(i) at any time on or after the 1st day of February, 1993 until the
31st day of January, 1994 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 300% of the Redemption Price, that is (U.S.)
$2.40 per share;
(ii) at any time on or after the 1st day of February, 1994 until the
31st day of January, 1995 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 275% of the Redemption Price, that is (U.S.)
$2.20 per share;
(iii) at any time on or after the 1st day of February, 1995 until the
31st day of February, 1996 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 250% of the Redemption Price, that is (U.S.)
$2.00 per share;
(iv) at any time on or after the 1st day of February, 1996 until the
31st day of January, 1997 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 225% of the Redemption Price, that is (U.S.)
$1.80 per share;
(v) at any time on or after the 1st day of February, 1997 until the
31st day of January, 1998 provided that the average closing bid price of
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 200% of the Redemption Price, that is (U.S.)
$1.60 per share.
together in each case with an amount equal to all accrued and unpaid dividends
thereon which for such purpose shall be calculated as if such dividends were
accruing from day to day for the period from the expiration of the last period
for which such dividends have been paid up to the date of such redemption (the
aforesaid price plus such accrued and unpaid dividends being referred to
herein as the "Redemption Price").
Any Series B Preferred Shares which are redeemed pursuant to this clause
2 shall be cancelled and not reissued and the stated capital of the
Corporation shall be reduced accordingly.
3. Manner of Redemption
In the case of any redemption of Series B Preferred Shares pursuant to
clause 2 hereof, the Corporation shall, at least 30 days before the date fixed
for redemption, give notice in writing to each person who at the date of the
giving of such notice is the registered holder of Series B Preferred Shares to
be redeemed of the intention of the Corporation to redeem such Series B
Preferred Shares. Any such notice shall be validly and effectively given if
delivered personally to the registered holder of Series B Preferred Shares for
whom it is intended or if sent by prepaid first class post addressed to such
holder at his address as it appears in the books of the Corporation, or in the
event of the address of such holder not so appearing, to the address of such
holder last known to the Corporation; provided, however, that the accidental
failure or omission to give such notice as aforesaid to one or more of such
holders shall not affect the validity of the redemption, but upon such failure
or omission being discovered, notice shall be given forthwith to such holder
or holders as aforesaid and shall have the same force and effect as if given
in due time. Such notice shall set out the date (the "Redemption Date") on
which the redemption is to take place, the applicable Redemption Price, the
number of Series B Preferred Shares held by the person to whom it is addressed
which are to be redeemed, the place or places within Canada at which holders
of Series B Preferred Shares may present and surrender such shares for
redemption and the place or places within Canada at which holders of Series B
Preferred Shares may present and surrender such shares for conversion.
On and after the Redemption Date, the Corporation shall pay or cause to
be paid to or to the order of the registered holders of the Series B Preferred
Shares so called for redemption the Redemption Price for such Series B
Preferred Shares on presentation and surrender at the registered office of the
Corporation or at such other place or places within Canada as may be
designated in such notice of the certificate or certificates representing the
same. Payment of the Redemption Price shall be made by cheque payable at par
at any branch in Canada of the Corporation's bankers for the time being or by
certificates for Common Shares of the Corporation as provided in clause 1.3
herein and, unless such cheque is not paid on presentation, or such
certificate is not delivered at such price, such payment shall be a full and
complete discharge of the Corporation's obligation to pay the Redemption Price
owed to the holders of Series B Preferred Shares so called for redemption.
From and after the Redemption Date, the holder of any Series B Preferred
Shares called for redemption shall not be entitled to exercise any of the
rights of a shareholder in respect thereof except to receive the Redemption
Price therefor, provided that if payment of such Redemption Price is not duly
made by or on behalf of the Corporation in accordance with the provisions
hereof, then the rights of such holder shall remain unaffected.
The Corporation shall have the right at any time after giving notice of
its intention to redeem any Series B Preferred Shares, to deposit the
aggregate Redemption Price of the Series B Preferred Shares so called for
redemption or of such of the said Series B Preferred Shares as are represented
by certificates which have not at the date of such deposit been surrendered by
the holders thereof in connection with such redemption, in a special account
in any chartered bank or trust company in Canada, to be paid without interest
to or to the order of the respective holders of the Series B Preferred Shares
called for redemption upon presentation and surrender to such bank or trust
company of the certificates representing such Series B Preferred Shares,
provided such bank or trust company has been identified as a place at which
Series B Preferred Shares are to be presented and surrendered for redemption
In the notice of redemption given by the Corporation or is so identified in
another notice given by the Corporation to the holders of Series B Preferred
Shares as aforesaid prior to such deposit. Upon such deposit being made or
upon the Redemption Date, whichever is the later, the Series B Preferred
Shares in respect of which such deposit shall have been made shall be deemed
to be redeemed and the rights of the holders thereof shall be limited to
receiving without interest their proportionate part of the funds or share
certificates so deposited upon presentation and surrender of the certificates
representing the Series B Preferred Shares held by them respectively being
redeemed. Any interest allowed on any such deposit shall belong to the
Corporation. Any such funds not claimed by and paid to holders of Series B
Preferred Shares within six years after the date of deposit shall be repaid to
the Corporation on demand and any share certificate issued by way of stock
dividends as provided in clause 1.3 shall be cancelled and thereafter the
holders of the Series B Preferred Shares in respect of which such funds were
so repaid to the Corporation shall have no rights in respect thereof except to
obtain payment of the funds due thereon from the Corporation.
4. Purchase for Cancellation
Subject to insolvency provisions and other provisions of applicable law
and the provisions of clause 5 hereof, the Corporation may at any time or
times purchase the whole or any part of the outstanding Series B Preferred
Shares in the open market (including, but without limiting the foregoing,
purchase through or from any investment dealer or firm holding membership on a
recognized stock exchange) or by invitation for tenders addressed to all the
registered holders of Series B Preferred Shares then outstanding at the lowest
price or prices at which, in the opinion of the board of directors of the
Corporation, such shares are then obtainable but not exceeding a price per
share equal to (U.S.) $0.80 plus all accrued and unpaid cumulative dividends
thereon (which for such purpose shall be calculated as if such dividends were
accruing from day to day for the period from the expiration of the last period
for which dividends have been paid up to the date of purchase) or then
applicable Redemption Price if the date of purchase occurs on or after any
consolidation, subdivision or reclassification as provided in clause 8 hereof
together with reasonable costs of purchase. In the case of the purchase of
Series B Preferred Shares by tender, the Corporation shall give notice of its
intention to invite tenders to all the registered holders of the Series B
Preferred Shares by giving notice of such invitation to each such holder of
Series B Preferred Shares in accordance with the provisions from time to time
of the by-laws of the Corporation respecting notice to shareholders and if
upon any such invitation for tenders the Corporation shall receive tenders of
Series B Preferred Shares at a price which the Corporation is willing to pay
in an aggregate number greater than the number for which the Corporation is
prepared to accept tenders, the Series B Preferred Shares so tendered which
the Corporation determines to purchase at such price shall be purchased as
nearly as may be pro rata (disregarding fractions) in proportion to the total
number of Series B Preferred Shares so tendered by each of the holders of
Series B Preferred Shares who submitted tenders at such price provided that
when shares are tendered at different prices, the pro rating shall be effected
only with respect to the shares tendered at the price at which more shares
were tendered than the Corporation is prepared to purchase after the
Corporation has purchased all the shares tendered at lower prices. Any Series
B Preferred Share purchased pursuant to this clause 4 shall be cancelled and
not reissued and the stated capital of the Corporation shall be reduced
accordingly.
5. Restrictions on Dividends and Retirement of Shares
So long as any of the Series B Preferred Shares are outstanding, the
Corporation shall not, without the prior approval of the holders of the Series
B Preferred Shares given as hereinafter specified:
(a) declare, pay or set aside for payment any dividends on the Common Shares
or on any other shares of the Corporation ranking junior to or equal to
the Series B Preferred Shares (other than stock dividends in any shares
of the Corporation ranking junior to the Series B Preferred Shares); or
(b) call for redemption, redeem, purchase or otherwise pay off or retire for
value or make any capital distribution in respect of, any Common Shares
or any other shares of the Corporation ranking junior to the Series B
Preferred Shares (except out of the net cash proceeds of a substantially
concurrent issue of shares ranking junior to the Series B Preferred
Shares); or
(c) call for redemption, redeem, purchase, or otherwise pay off or retire
for value or make any capital distribution in respect of less than all
the Series B Preferred Shares; or
(d) call for redemption, redeem, purchase or otherwise pay off or retire for
value any shares ranking on a parity with the Series B Preferred Shares;
unless in each such case all dividends then payable on the Series B Preferred
Shares and on all other shares ranking as to dividends prior to or on a parity
with the Series B Preferred Shares accrued up to and including the dividends
payable on the immediately preceding respective date or dates for the payment
of dividends thereon shall have been declared and paid or set apart for
payment.
6. Restrictions on Issue of Shares
So long as any of the Series B Preferred Shares are outstanding, the
Corporation shall not, without prior approval of the holders of the Series B
Preferred Shares given as hereinafter specified, issue any shares ranking
prior to or on a parity with the Series B Preferred Shares, other than Common
Shares of the Corporation issued in accordance with the right of conversion
attached to the Series B Preferred Shares to convert Series B Preferred Shares
into Common Shares of the Corporation, unless (i) all dividends then payable
on the Series B Preferred Shares, and on all other shares ranking as to
dividends prior to or on a parity with the Series B Preferred Shares, accrued
up to and including the dividends payable on the immediately preceding
respective date or dates for the payment of dividends thereon shall have been
declared and paid or set apart for payment; and (ii) all Series B Preferred
Shares and all other shares ranking prior to or on a parity with the Series B
Preferred Shares which have been deposited for redemption in accordance with
any retraction privilege attached thereto and required to have been redeemed
shall have been redeemed.
7. Definitions and Determinations
In the event that any date on which any dividend on the Series B
Preferred Shares is payable by the Corporation, or on or by which any other
action is required to be taken by the Corporation hereunder, is not a Business
Day, then such dividend shall be payable, or such other action shall be
required to be taken, on or by the next succeeding date that is a Business
Day.
For all purposes of the rights, privileges, restrictions and conditions
attaching to the Series B Preferred Shares:
(a) "Business Day" means a day other than a Saturday, a Sunday or any other
day that is treated as a statutory holiday in the jurisdiction in which
the Corporation's registered office is located; and
(b) unless the context expressly provides otherwise the words "in priority
to", "on a parity with" and "junior to" or like words have reference to
the order of priority in payment of dividends and in the distribution of
assets in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
8. Conversion
Upon and subject to the terms and conditions hereinafter set forth, each
Series B Preferred Share shall be convertible at the option of the holder
hereof at any time into one Common Share of the Corporation but subject to the
provisions of this clause 8 in the event of any consolidation, subdivision or
reclassification of the Common Shares of the Corporation or dilution therein
as hereinafter provided.
The right to convert any Series B Preferred Share as hereinbefore
calculated shall expire on the close of business of the last Business Day
preceding the date on which such share is called for redemption.
In the event of any consolidation, subdivision or reclassification of
the common shares of the Corporation at any time while any of the Series B
Shares are convertible into a different number or a different class or classes
of shares, the Corporation shall deliver at the time of the exercise
thereafter of the right of conversion by the holders of any such Series B
Shares, a certificate or certificates for such different number or different
class or classes of shares as would have resulted from such consolidation,
subdivision or reclassification if the right of conversion had been exercised
prior to the date of such consolidation, subdivision or reclassification; if
the Corporation shall declare and pay a stock dividend upon Common Shares,
then, from and after the payment date of such dividend, the conversion shall
be increased in proportion to the increase in the number of outstanding Common
Shares resulting from such dividend; a holder of the Series B Preferred Shares
desiring to convert such Series B Preferred Shares into Common Shares in
accordance with the foregoing, shall surrender the certificate or certificates
representing his Series B Preferred Shares so to be converted to the
Corporation at its head office or to the transfer agent, if any, for the time
being of the Series B Preferred Shares, together with a written request for
such conversion in such form and with such verification of signature as the
directors of the Corporation may from time to time require; the conversion
shall be deemed to take effect as of the date upon which the said certificate
or certificates shall be surrendered to the Corporation at its head office or
to the transfer agent, as the case may be, accompanied by the said written
request, unless such date be a Saturday or a holiday, in which event it shall
take place on the next Business Day; in the event that part only of the Series
8 Shares represented by any certificate shall be converted, a certificate for
the remainder of the Series B Preferred Shares represented by the said
certificate shall be delivered to the holder without charge; upon the
conversion of any Series B Preferred Shares, there shall be no payment or
adjustment on account of any accumulated or unpaid dividends or premium on a
Series B Preferred Share so converted or on account of any dividends on the
Common Shares resulting from such conversion; if, upon the conversion of one
or more Series B Preferred Shares at the rate herein provided into the maximum
number of Common Shares into which such Series B Preferred Shares are
convertible a holder of Series B Preferred Shares shall become entitled to a
fraction of a Common Share, fractional shares shall not be issued in respect
thereof, but in lieu thereof the Corporation shall make a cash adjustment
therefor.
In the event that the Corporation shall issue Common Shares for a value
less than the Redemption Price of its Series B Shares at any time while any of
the Series B Shares are outstanding and the aggregate funds so raised shall be
less than (U.S.) $1,000,000 there shall be no adjustment in the Redemption
Price; in the event that an aggregate amount of between (U.S.) $1,000,000 and
$2,000,000 is raised, the Redemption price shall be calculated as follows:
NR=R-[(R-1) x A - 1,000,000]
1,000,000
where
NR = New Redemption Price
R = Original Redemption Price
I = Issue price of Common Stock
A = Amount Raised (U.S.$);
and if the aggregate amount so raised shall be (U.S.) $2,000,000 or more, the
Redemption Price shall be equal to the issue price of such shares.
9. Liquidation, Dissolution and Winding Up
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or in the event of any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding up its affairs, whether voluntary or involuntary, the
holders of the Series B Preferred Shares shall be entitled to receive from the
assets of the Corporation an amount equal to (U.S.) $0.80 for each Series B
Preferred Share held by them respectively plus an amount equal to all accrued
and unpaid dividends thereon up to the date of payment (which for such purpose
shall be calculated as if such dividends were accruing from day to day for the
period from the expiration of the last period for which such dividends have
been paid up to the date of such payment), the whole before any amount shall
be paid or any assets of the Corporation shall be distributed to the holders
of Common Shares of the Corporation or shares of any other class of the
Corporation ranking junior to the Series B Preferred Shares. After payment to
the holders of the Series B Preferred Shares of the amounts so payable to
them, they shall not be entitled to share in any further distribution of the
assets of the Corporation.
10. Voting Rights and Notice of Meeting
The holders of the Series B Preferred Shares shall not be entitled as
such (except as specifically provided by law or as hereinafter specifically
provided) to receive notice of or to attend any meeting of shareholders of the
Corporation.
Notwithstanding the foregoing, the holders of Series B Preferred Shares
shall be entitled to notice of meetings of shareholders called for the purpose
of authorizing the dissolution of the Corporation or the sale of its
undertaking or a substantial part thereof.
11. Amendment
The rights, privileges, restrictions and conditions attached to the
Series B Preferred Shares may be added to, changed or removed by articles of
amendment but only with the prior approval of the holders of the Series B
Preferred Shares given as hereinafter specified in addition to any vote or
authorization required by law.
12. Approval of Holders of Series B Preferred Shares
Any approval of the holders of the Series B Preferred Shares with
respect to any and all matters referred to herein or to any other matter
requiring the consent of the holders of the Series B Preferred Shares may be
given in such manner as may then be required by law, subject to a minimum
requirement that such approval be given by resolution signed by all the
holders of outstanding Series B Preferred Shares or passed by the affirmative
vote of at least 2/3 of the votes cast by the holders of Series B Preferred
Shares who voted in respect of that resolution at a meeting of the holders of
the Series B Preferred Shares duly called for that purpose. The quorum
requirement for, the proxy rules applicable to, the formalities to be observed
in respect of the giving of notice of and the formalities to be observed in
respect of the conduct of any such meeting or any adjourned meeting shall be
those from time to time prescribed by the by-laws of the Corporation with
respect to meetings of shareholders, or if not so prescribed, as required by
the Business Corporations Act, of Ontario as the same may be amended from time
to time. On every poll taken at every meeting of holders of Series B
Preferred Shares, each holder of Series B Preferred Shares entitled to vote
thereat shall have one vote in respect of each Series B Preferred Share held.
13. Registration
After July 31, 1993 once only, and in respect of all Common Shares of
the Corporation into which all Series B Preferred Shares then outstanding can
be converted, the Corporation will, upon receipt of the written request of the
holders of more than 50% of the issue price of the Series B Preferred Shares
then outstanding, file a Registration Statement with the Securities and
Exchange Commission in Washington, D.C. and use its best efforts to register
all such Common Shares. In the event that such demand is not made, the
Corporation will, in any event, proceed with the filing of such Registration
Statement immediately after the expiration of the anniversary date of the
closing of this offering.
SERIES C PREFERRED SHARES
[As Designated by Amendment dated February 5, 1993; certain provisions are
subject to adjustment and have been adjusted since designation]
The third series of Preferred Shares shall consist of 1,250,000
Preferred Shares which shall be designated as (U.S.) $0.80 Cumulative
Redeemable Convertible Preferred Shares, Series C (hereinafter called the
"Series C Preferred Shares") and which, in addition to the rights, privileges,
restrictions and conditions attaching to the Preferred Shares as a class,
shall have attached thereto the following rights, privileges, restrictions and
conditions:
1. Dividends
1.1 Payment of Dividends
The holders of the Series C Preferred Shares shall be entitled to
receive, and the Corporation shall pay thereon, as and when declared by the
board of directors of the Corporation, out of monies of the Corporation
properly applicable to the payment of dividends, fixed, cumulative,
preferential cash dividends of (U.S.) $0.04 per share per annum, payable
annually in lawful money of the United States of America on the first day of
February in each year (the "Dividend Payment Dates"), the first Dividend
Payment Date to be February 1, 1994. Dividends on the Series C Preferred
Shares issued shall accrue from and including the date of issue thereof (the
date from and including which such dividends shall accrue being hereinafter
called the "Initial Accrual Date").
1.2 Method of Payment
Cheques payable in lawful money of the United States of America at par
at any branch in Canada of the Corporation's bankers for the time being shall
be issued in respect of the dividends on the Series C Preferred Shares (less
any tax required to be withheld by the Corporation). The mailing from the
Corporation's registered office, or the principal office in Toronto of the
registrar for the Series C Preferred Shares, on or before any Dividend Payment
Date of such a cheque to a holder of Series C Preferred Shares shall be deemed
to be payment of the dividends represented thereby and payable on such
Dividend Payment Date unless the cheque is not paid upon presentation.
Dividends which are represented by a cheque which has not been presented to
the Corporation's bankers for payment or that otherwise remain unclaimed for a
period of six years from the date on which they were declared to be payable
shall be forfeited to the Corporation.
1.3 Alternative Stock Division
Notwithstanding the provisions of paragraphs 1.1 and 1.2 hereof, but
subject to the provisions of the Business Corporations Act (Ontario) or of any
corporations statute to which the Corporation may become subject, in declaring
dividends the board of directors of the Corporation may (but need not) provide
(without making any such provision in respect of the payment of any subsequent
dividend on the Series C Preferred Shares) for payment, in whole or in part,
of dividends on the Series C Preferred shares by way of a stock dividend of
fully paid and non-assessable Common Shares, provided that the board of
directors may authorize the payment of cash in lieu of or may authorize the
issue of script certificates or fractional share certificates in respect of
any fractional interests in Common Shares which may result from the
declaration of any such dividend; provided that further that the value of any
such stock dividend shall be determined by the board of directors of the
Corporation on the basis of a price per Common Share equal to the average
closing bid price of Common Shares of the Corporation as quoted on the
National Association of Securities Dealers Automated Quotations for the ten
(10) consecutive trading days immediately prior to the fifth trading day prior
to the dividend payment date.
1.4 Cumulative Payment of Dividends
If on any Dividend Payment Date the dividends accrued to such date are
not paid in full on all of the Series C Preferred Shares then outstanding,
such dividends, or the unpaid part thereof, shall be paid on a subsequent date
or dates determined by the board of directors of the Corporation on which the
Corporation shall have sufficient moneys properly applicable to the payment of
such dividends. The holders of Series C Preferred Shares shall not be
entitled to any dividends other than or in excess of the cumulative
preferential cash dividends herein provided for.
2. Redemption at the Option of the Corporation
All, and not less than all of the Series C Preferred Shares shall be
redeemable at the option of the Corporation subject to the provisions of this
clause 2 and clause 5 hereof and upon giving notice as herein provided at the
price of (U.S.) $0.80 per Series C Preferred Share:
(i) at any time on or after the 1 st day of February, 1993 until the
31 st day of January, 1994 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 300% of the Redemption Price, that is (U.S.)
$2.40 per share;
(ii) at any time on or after the 1st day of February, 1994 until the
31st day of January, 1995 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 275% of the Redemption Price, that is (U.S.)
$2.20 per share;
(iii) at any time on or after the 1st day of February, 1995 until
the 31st day of February, 1996 provided that the average closing bid price of
the Common Shares of the Corporation during the previous thirty (30) trading
days shall have equalled or exceeded 250% of the Redemption Price, that is
(U.S.) $2.00 per share;
(iv) at any time on or after the 1 st day of February, 1996 until the
31st day of January, 1997 provided that the average closing bid price of the
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 225% of the Redemption Price, that is (U.S.)
$1.80 per share;
(v) at any time on or after the 1st day of February, 1997 until the
31st day of January, 1998 provided that the average closing bid price of
Common Shares of the Corporation during the previous thirty (30) trading days
shall have equalled or exceeded 200% of the Redemption Price, that is (U.S.)
$1.60 per share.
together in each case with an amount equal to all accrued and unpaid dividends
thereon which for such purpose shall be calculated as if such dividends were
accruing from day to day for the period from the expiration of the last period
for which such dividends have been paid up to the date of such redemption (the
aforesaid price plus such accrued and unpaid dividends being referred to
herein as the "Redemption Price").
Any Series C Preferred Shares which are redeemed pursuant to this clause
2 shall be cancelled and not reissued and the stated capital of the
Corporation shall be reduced accordingly.
3. Manner of Redemption
In the case of any redemption of Series C Preferred Shares pursuant to
clause 2 hereof, the Corporation shall, at least 30 days before the date fixed
for redemption, give notice in writing to each person who at the date of the
giving of such notice is the registered holder of Series C Preferred Shares to
be redeemed of the intention of the Corporation to redeem such Series C
Preferred Shares. Any such notice shall be validly and effectively given if
delivered personally to the registered holder of Series C Preferred Shares for
whom it is intended or if sent by prepaid first class post addressed to such
holder at his address as it appears in the books of the Corporation, or in the
event of the address of such holder not so appearing, to the address of such
holder last known to the Corporation; provided, however, that the accidental
failure or omission to give such notice as aforesaid to one or more of such
holders shall not affect the validity of the redemption, but upon such failure
or omission being discovered, notice shall be given forthwith to such holder
or holders as aforesaid and shall have the same force and effect as if given
in due time. Such notice shall set out the date (the "Redemption Date") on
which the redemption is to take place, the applicable Redemption Price, the
number of Series C Preferred Shares held by the person to whom it is addressed
which are to be redeemed, the place or places within Canada at which holders
of Series C Preferred Shares may present and surrender such shares for
redemption and the place or places within Canada at which holders of Series C
Preferred. Shares may present and surrender such shares for conversion.
Upon the written request of holders representing a majority of the
Series C Preferred Shares during the 30 day notice period, the Corporation
shall use its best efforts to promptly file a Registration Statement with the
SEC registering the Common Shares to be issued by the Corporation upon
conversion. In such case, the Redemption Date shall be extended until the
first business day following the effective date of such registration.
On and after the Redemption Date, the Corporation shall pay or cause to
be paid to or to the order of the registered holders of the Series C Preferred
Shares so called for redemption the Redemption Price for such Series C
Preferred Shares on presentation and surrender at the registered office of the
Corporation or at such other place or places within Canada as may be
designated in such notice of the certificate or certificates representing the
same. Payment of the Redemption Price shall be made by cheque payable at par
at any branch in Canada of the Corporation's bankers for the time being or by
certificates for Common Shares of the Corporation as provided in clause 1.3
herein and, unless such cheque is not paid on presentation, or such
certificate is not delivered at such price, such payment shall be a full and
complete discharge of the Corporation's obligation to pay the Redemption Price
owed to the holders of Series C Preferred Shares so called for redemption.
From and after the Redemption Date, the holder of any Series C Preferred
Shares called for redemption shall not be entitled to exercise any of the
rights of a shareholder in respect thereof except to receive the Redemption
Price therefor, provided that if payment of such Redemption Price is not duly
made by or on behalf of the Corporation in accordance with the provisions
hereof, then the rights of such holder shall remain unaffected.
The Corporation shall have the right at any time after giving notice of
its intention to redeem any Series C Preferred Shares, to deposit the
aggregate Redemption Price of the Series C Preferred Shares so called for
redemption or of such of the said Series C Preferred Shares as are represented
by certificates which have not at the date of such deposit been surrendered by
the holders thereof in connection with such redemption, in a special account
in any chartered bank or trust company in Canada, to be paid without interest
to or to the order of the respective holders of the Series C Preferred Shares
called for redemption upon presentation and surrender to such bank or trust
company of the certificates representing such Series C Preferred Shares,
provided such bank or trust company has been identified as a place at which
Series C Preferred Shares are to be presented and surrendered for redemption
in the notice of redemption given by the Corporation or is so identified in
another notice given by the Corporation to the holders of Series C Preferred
Shares as aforesaid prior to such deposit. Upon such deposit being made or
upon the Redemption Date, whichever is the later, the Series C Preferred
Shares in respect of which such deposit shall have been made shall be deemed
to be redeemed and the rights of the holders thereof shall be limited to
receiving without interest their proportionate part of the funds or share
certificates so deposited upon presentation and surrender of the certificates
representing the Series C Preferred Shares held by them respectively being
redeemed. Any interest allowed on any such deposit shall belong to the
Corporation. Any such funds not claimed by and paid to holders of Series C
Preferred Shares within six years after the date of deposit shall be repaid to
the Corporation on demand and any share certificate issued by way of stock
dividends as provided in clause 1.3 shall be cancelled and thereafter the
holders of the Series C Preferred Shares in respect of which such funds were
so repaid to the Corporation shall have no rights in respect thereof except to
obtain payment of the funds due thereon from the Corporation.
4. Purchase for Cancellation
Subject to insolvency provisions and other provisions of applicable law
and the provisions of clause 5 hereof, the Corporation may at any time or
times purchase the whole or any part of the outstanding Series C Preferred
Shares in the open market (including, but without limiting the foregoing,
purchase through or from any investment dealer or firm holding membership on a
recognized stock exchange) or by invitation for tenders addressed to all the
registered holders of Series C Preferred Shares then outstanding at the lowest
price or prices at which, in the opinion of the board of directors of the
Corporation, such shares are then obtainable but not exceeding a price per
share equal to (U.S.) $0.80 plus all accrued and unpaid cumulative dividends
thereon (which for such purpose shall be calculated as if such dividends were
accruing from day to day for the period from the expiration of the last period
for which dividends have been paid up to the date of purchase) or then
applicable Redemption Price if the date of purchase occurs on or after any
consolidation, subdivision or reclassification as provided in clause 8 hereof
together with reasonable costs of purchase. In the case of the purchase of
Series C Preferred Shares by tender, the Corporation shall give notice of its
intention to invite tenders to all the registered holders of the Series C
Preferred Shares by giving notice of such invitation to each such holder of
Series C Preferred Shares in accordance with the provisions from time to time
of the by-laws of the Corporation respecting notice to shareholders and if
upon any such invitation for tenders the Corporation shall receive tenders of
Series C Preferred Shares at a price which the Corporation is willing to pay
in an aggregate number greater than the number for which the Corporation is
prepared to accept tenders, the Series C Preferred Shares so tendered which
the Corporation determines to purchase at such price shall be purchased as
nearly as may be pro rata (disregarding fractions) in proportion to the total
number of Series C Preferred Shares so tendered by each of the holders of
Series C Preferred Shares who submitted tenders at such price provided that
when shares are tendered at different prices, the pro rating shall be effected
only with respect to the shares tendered at the price at which more shares
were tendered than the Corporation is prepared to purchase after the
Corporation has purchased all the shares tendered at lower prices. Any Series
C Preferred Share purchased pursuant to this clause 4 shall be cancelled and
not reissued and the stated capital of the Corporation shall be reduced
accordingly.
5. Restrictions on Dividends and Retirement of Shares
So long as any of the Series C Preferred Shares are outstanding, the
Corporation shall not, without the prior approval of the holders of the Series
C Preferred Shares:
(a) declare, pay or set aside for payment any dividends on the Common Shares
or on any other shares of the Corporation ranking junior to or equal to
the Series C Preferred Shares (other than stock dividends in any shares
of the Corporation ranking junior to the Series C Preferred Shares); or
(b) call for redemption, redeem, purchase or otherwise pay off or retire for
value or make any capital distribution in respect of, any Common Shares
or any other shares of the Corporation ranking junior to the Series C
Preferred Shares (except out of the net cash proceeds of a substantially
concurrent issue of shares ranking junior to the Series C Preferred
Shares); or
(c) call for redemption, redeem,-purchase, or otherwise pay off or retire
for value or make any capital distribution in respect of less than all
the Series C Preferred Shares; or
(d) call for redemption, redeem, purchase or otherwise pay off or retire for
value any shares ranking on a parity with the Series C Preferred Shares.
6. Restrictions on issue of Shares
So long as any of the Series C Preferred Shares are outstanding, the
Corporation shall not, without the prior approval of the holders of the Series
C Preferred Shares, issue any shares ranking prior to or on a parity with the
Series C Preferred Shares, other than Common Shares of the Corporation issued
in accordance with the right of conversion attached to the Series C Preferred
Shares to convert Series C Preferred Shares into Common Shares of the
Corporation.
7. Definitions and Determinations
In the event that any date on which any dividend on the Series C
Preferred Shares is payable by the Corporation, or on or by which any other
action is required to be taken by the Corporation hereunder, is not a Business
Day, then such dividend shall be payable, or such other action shall be
required to be taken, on or by the next succeeding date that is a Business
Day.
For all purposes of the rights, privileges, restrictions and conditions
attaching to the Series C Preferred Shares:
(a) "Business Day" means a day other than a Saturday, a Sunday or any other
day that is treated as a statutory holiday in the jurisdiction in which
the Corporation's registered office is located; and
(b) unless the context expressly provides otherwise the words "in priority
to", "on a parity with" and "junior to" or like words have reference to
the order of priority in payment of dividends and in the distribution of
assets in the event of any liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary.
8. Conversion
Upon and subject to the terms and conditions hereinafter set forth, each
Series C Preferred Share shall be convertible at the option of the holder
hereof at any time into one Common Share of the Corporation but subject to the
provisions of this clause 8 in the event of any consolidation, subdivision or
reclassification of the Common Shares of the Corporation or dilution therein
as hereinafter provided.
The right to convert any Series C Preferred Share as hereinbefore
calculated shall expire on the close of business of the last Business Day
preceding the date on which such share is called for redemption.
In the event of any consolidation, subdivision or reclassification of
the common shares of the Corporation at any time while any of the Series C
Preferred Shares are convertible into a different number or a different class
or classes of shares, the Corporation shall deliver at the time of the
exercise thereafter of the right of conversion by the holders of any such
Series C Preferred Shares, a certificate or certificates for such different
number or different class or classes of shares as would have resulted from
such consolidation, subdivision or reclassification if the right of conversion
had been exercised prior to the date of such consolidation, subdivision or
reclassification; if the Corporation shall declare and pay a stock dividend
upon Common Shares, then, from and after the payment date of such dividend,
the conversion shall be increased in proportion to the increase in the number
of outstanding Common Shares resulting from such dividend; a holder of the
Series C Preferred Shares desiring to convert such Series C Preferred .Shares
into Common Shares in accordance with the foregoing, shall surrender the
certificate or certificates representing his Series C Preferred Shares so to
be converted to the Corporation at its head office or to the transfer agent,
if any, for the time being of the Series C Preferred Shares, together with a
written request for such conversion in such form and with such verification of
signature as the directors of the Corporation may from time to time require;
the conversion shall be deemed to take effect as of the date upon which the
said certificate or certificates shall be surrendered to the Corporation at
its head office or to the transfer agent, as the case may be, accompanied by
the said written request, unless such date be a Saturday or a holiday, in
which event it shall take place on the next Business Day; in the event that
part only of the Series C Preferred Shares represented by any certificate
shall be converted, a certificate for the remainder of the Series C Preferred
Shares represented by the said certificate shall be delivered to the holder
without charge; upon -the conversion of any Series C Preferred Shares, there
shall be no payment or adjustment on account of any accumulated or unpaid
dividends or premium on a Series C Preferred Share so converted or on account
of any dividends on the Common Shares resulting from such conversion; if, upon
the conversion of one or more Series C Preferred Shares at the rate herein
provided into the maximum number of Common Shares into which such Series C
Preferred Shares are convertible a holder of Series C Preferred Shares shall
become entitled to a fraction of a Common Share, fractional shares shall not
be issued in respect thereof, but in lieu thereof the Corporation shall make a
cash adjustment therefor.
In the event that the Corporation shall issue Common Shares for a value
less than the Redemption Price of its Series C Preferred Shares at any time
while any of the Series C Preferred Shares are outstanding and the aggregate
funds so raised shall be less than (U.S.) $1,000,000 there shall be no
adjustment in the number of Common Shares issuable upon conversion of each
Series C Preferred Share (the "Conversion Ratio"); in the event that an
aggregate amount of between (U.S.) $1,000,000 and $2,000,000 is raised, the
Conversion Ratio shall be calculated as follows:
CR = 0.80
{ R - [ (R - 1 ) x A - 1,000,000 ] }
1,000,000
where
CR = Conversion Ratio
R = Original Redemption Price
I = Issue price of Common Stock
A = Amount Raised (U.S.$);
and if the aggregate amount so raised shall be (U.S.) $2,000,000 or more, the
Conversion Ratio shall be equal to $0.80 divided by the issue price of such
shares.
For purposes of computing the Conversion Ratio, each issuance of Common
Shares shall be aggregated with prior issuances and treated as a single
average issuance, except that the Conversion Ratio shall be computed after
each issuance and there shall be no adjustment if such computation would
result in a Conversion Ratio less than the Conversion Ratio in effect
immediately prior to such computation.
9. Liquidation, Dissolution and Winding Up
In the event of the liquidation, dissolution or winding up of the
Corporation, whether voluntary or involuntary, or in the event of any other
distribution of the assets of the Corporation among its shareholders for the
purpose of winding up its affairs, whether voluntary or involuntary, the
holders of the Series C Preferred Shares shall be entitled to receive from the
assets of the Corporation an amount equal to (U.S.) $0.80 for each Series C
Preferred Share held by them respectively plus an amount equal to all accrued
and unpaid dividends thereon up to the date of payment (which for such purpose
shall be calculated as if such dividends were accruing from day to day for the
period from the expiration of the last period for which such dividends have
been paid up to the date of such payment), the whole before any amount shall
be paid or any assets of the Corporation shall be distributed to the holders
of Common Shares of the Corporation or shares of any other class of the
Corporation ranking junior to the Series C Preferred Shares. After payment to
the holders of the Series C Preferred Shares of the amounts so payable to
them, they shall not be entitled to share in any further distribution of the
assets of the Corporation.
10. Voting Rights and Notice of Meeting
The holders of the Series C Preferred Shares shall be entitled as such
to receive notice of and attend all meetings of shareholders of the
Corporation and shall have one vote for that number of Common Shares into
which each Series C Preferred Share could then be converted at all such
meetings.
Notwithstanding the foregoing, the holders of Series C Preferred Shares
shall be entitled to notice of meetings of shareholders called for the purpose
of authorizing the dissolution of the Corporation or the sale of its
undertaking or a substantial part thereof.
11. Amendment
The rights, privileges, restrictions and conditions attached to the
Series C Preferred Shares may be added to, changed or removed by articles of
amendment but only with the prior approval of the holders of the Series C
Preferred Shares.
12. Approval of Holders of Series C Preferred Shares
Any approval of the holders of the Series C Preferred Shares with
respect to any amendment as provided in clause 1 1 hereof may be given in such
manner as may then be required by law, subject to a minimum requirement that
such approval be given by resolution signed by all the holders of outstanding
Series C Preferred Shares or passed by the affirmative vote of at least 2/3 of
the votes cast by the holders of Series C Preferred Shares who voted in
respect of that resolution at a meeting of the holders of the Series C
Preferred Shares duly called for that purpose. The quorum requirement for,
the proxy rules applicable to, the formalities to be observed in respect of
the giving of notice of and the formalities to be observed in respect of the
conduct of any such meeting or any adjourned meeting shall be those from time
to time prescribed by the by-laws of the Corporation with respect to meetings
of shareholders, or if not so prescribed, as required by the Business
Corporations Act, of Ontario as the same may be amended from time to time. On
every poll taken at every meeting of holders of Series C Preferred Shares,
each holder of Series C Preferred Shares entitled to vote thereat shall have
one vote in respect of each Series C Preferred Share held.
13. Registration
After July 31, 1993 once only, the Corporation will, upon receipt of the
written request of holders representing more than 50% of the Series C
Preferred Shares then outstanding, file a Registration Statement with the
Securities and Exchange Commission in Washington, D.C. covering the sale of
the Common Shares issuable upon conversion of the Series C Preferred Shares.
The Company will use its best efforts to maintain such Registration Statement
effective for such period of time as each original purchaser of Series C
Preferred Shares is unable to sell the Common Shares issuable upon conversion
of such purchaser's Series C Preferred Shares free of any transfer
restrictions under the U.S. federal securities laws, such period not to exceed
90 days.
SERIES D PREFERRED SHARES
[As Designated by Amendment dated August 30, 1996; certain provisions are
subject to adjustment and have been adjusted since designation]
The fourth series of Preferred Shares of the Corporation shall consist of
1,500 shares and no more and shall be designated as the Series D Preferred
Shares (the "Series D Preferred Shares" or the "Series D Shares") and in
addition to the preferences, rights, privileges, restrictions and conditions
attaching to all the Preferred Shares as a class, the rights, privileges,
restrictions and conditions attaching to the Series D Shares shall be as
follows:
Part 1 - Voting and Pre-emptive Rights.
1.1 The holders of the Series D Preferred Shares shall be entitled as such
to
receive notice of and attend all meetings of shareholders of the Corporation
and
shall have four thousand (4,000) votes per share of Series D Preferred stock
at
all such meetings.
1.2 The Series D Shares shall not give their holders any pre-emptive rights
to
acquire any other securities issued by the Corporation at any time in the
future.
Part 2 - Liquidation Rights.
2.1. If the Corporation shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any times when any Series D Shares shall be
outstanding, then after provision for the outstanding Series A and C Preferred
Shares, if any, the holders of the then outstanding Series D Shares shall have
a
preference in distribution of the Corporation's remaining property available
for
distribution equal to $1,350 consideration per Series D Share, together with
an
amount equal to all unpaid dividends accrued thereon, if any, to the date of
payment of such distribution, whether or not declared by the Board: provided,
however, that the amalgamation of the Corporation with any Corporation or
corporations, the sale or transfer by the Corporation of all or subsequently
all
of its property, or any reduction of the authorized or issued capital of the
Corporation of any class, whether now or hereafter authorized, shall be deemed
to be a liquidation of the Corporation within the meaning of any of the
provisions of this Part 2.
2.2. Subject to the provisions of Part 6 hereof, all amounts to be paid as
preferential distributions to the holders of Series D Shares as provided in
this
Part 2 shall be paid or set apart for payment after the payment or setting
apart
for payment of any amount for, or the distribution of any of the Corporation's
property to the holders of Series A and C Preferred Shares, and before the
payment or the setting apart for payment of any amount for, or the
distribution
of any of the Corporation's property to the holders of Common Shares, whether
now or hereafter authorized, in connection with such liquidation, dissolution
or
winding up.
Part 3 - Dividends.
3.1. Holders of record of Series D Shares, out of funds legally available
therefor and to the extent permitted by law, shall be entitled to receive
dividends on their Series D Shares, which dividends shall accrue at the rate
per
share of 8% per annum of consideration paid for each Series D Shares ($80.00
per
share per year for each full year) commencing on the date of the issuance
thereof, payable, at the option of the Corporation, (i) in cash or (ii) by the
issuance of that number of whole Common Shares computed by dividing the amount
of the dividend by the market price applicable to such dividend.
3.2. For the purposes of this Part 3 and Part 4 hereof, "market price" means
the average of the daily closing prices of Common Shares for a period of 5
consecutive trading days ending on the date on which any dividend becomes
payable or of any notice of redemption, as the case may be. The closing price
for each trading day shall be (i) for any period during which the Common
Shares
shall be listed for trading on a national securities exchange, the last
reported
bid price per share of Common Shares as reported by the primary stock
exchange,
or the Nasdaq Stock Market, if the Common Shares are quoted on the Nasdaq
Stock
Market or (ii) if last sales price information is not available, the average
closing bid-price of Common Shares as reported by the Nasdaq Stock Market, or
if
not so listed or reported, then as reported by National Quotation Bureau,
Incorporated, or (iii) in the event neither clause (i) nor (ii) is applicable,
the average of the closing bid and asked prices as furnished by any member of
the National Association of Securities Dealers, Inc., selected from time to
time
by the Corporation for that purpose.
3.3. Dividends on Series D Shares shall be cumulative, and no dividends or
other distributions shall be paid or declared and set aside for payment on the
Common Shares until full cumulative dividends on all outstanding Series D
Shares
shall have been paid or declared and set aside for payment.
3.4. Dividends shall be payable in arrears, at the rate of $20.00 per share
for
each full calendar quarter on each February 28, May 31, August 31 and November
30 of each calendar year, to the holders of record of the Series D Shares as
they appear in the securities register of the Corporation on such record dates
not more than 60 nor less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board.
3.5. If, in any quarter, insufficient funds are available to pay such
dividends
as are then due and payable with respect to the Series D Shares and all other
classes and series in the capital of the Corporation ranking superior to or in
parity therewith (or such payment is otherwise prohibited by provisions of the
BCA), such funds as are legally available to pay such dividends shall be paid
or
Common Shares will be issued as stock dividends to the holders of Series D
Shares and to the holders of any other series of Preferred Share then
outstanding as provided in Part 6 hereof, in accordance with the rights of
each
such holder, and the balance of accrued but undeclared and/or unpaid
dividends,
if any, shall be declared and paid on the next succeeding dividend date to the
extent that funds are then legally available for such purpose.
Part 4 - Redemption.
4.1. At any time, and from time to time, on and after 145 days from the date
of
the issuance of any Series D Shares, the Corporation may, at its sole option,
but shall not be obligated to, redeem, in whole or in part, the then
outstanding
Series D Shares at a price per share of U.S. $1,350 each (the "Redemption
Price") (such price to be adjusted proportionately in the event of any change
of
the Series D Shares into a different number of Shares).
4.2. Five (5) days prior to any date stipulated by the Corporation for
the redemption of Series D Shares (the "Redemption Date"), written notice (the
"Redemption Notice") shall be mailed to each holder of record on such notice
date of the Series D Shares. The Redemption Notice shall state (i) the
Redemption Date of such Shares (ii) the number of Series D Shares to be
redeemed
from the holder to whom the Redemption Notice is addressed (iii) instructions
for surrender to the Corporation, in the manner and at the place designated of
a
share certificate or share certificates representing the number of Series D
Shares to be redeemed from such holder and (iv) instructions as to how to
specify to the Corporation the number of Series D Shares to be redeemed as
provided in this Part 4 and the number of shares to be converted into Common
Shares as provided in Part 5 hereof.
4.3. Upon receipt of the Redemption Notice, any Eligible Holder (as defined
in
Section 5.2 hereof) shall have the option, at its sole election, to specify
what
portion of its Series D Shares called for redemption in the Redemption Notice
shall be redeemed as provided in this Part 4 or converted into Common Shares
in
the manner provided in Part 5 hereof.
4.4. On or before the Redemption Date in respect of any Series D Shares, each
holder of such shares shall surrender the required certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and upon the Redemption Date, the
Redemption Price for such shares shall be made payable, in the manner provided
in Section 5.5 hereof, to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered share
certificate shall be canceled and retired. If a share certificate is
surrendered and all the shares evidenced thereby are not being redeemed (as
described below), the Corporation shall cause the Series D Shares which are
not
being redeemed to be registered in the names of the persons whose names appear
as the owners on the respective surrendered share certificates and deliver
such
certificate to such person.
4.5. On the Redemption Date in respect of any Series D Shares or prior
thereto,
the Corporation shall deposit with any bank or trust company having a capital
and surplus of at least U.S. $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all such shares called for redemption (less the
aggregate Redemption Price for those Series D Shares in respect of which the
Corporation has received notice from the Eligible Holder thereof of its
election
to convert Series D Shares into Common Shares), with irrevocable instructions
and authority to the bank or trust company to pay, on or after the Redemption
Date, the Redemption Price to the respective holders upon the surrender of
their
share certificates. The deposit shall constitute full payment for the shares
to
their holders, and from and after the date of the deposit the redeemed shares
shall be deemed to be no longer outstanding, and holders thereof shall cease
to
be shareholders with respect to such shares and shall have no rights with
respect thereto except the rights to receive from the bank or trust company
payments of the Redemption Price of the shares, without interest, upon
surrender
of their certificates thereof. Any funds so deposited and unclaimed at the
end
of one year following the Redemption Date shall be released or repaid to the
Corporation, after which the former holders of shares called for redemption
shall be entitled to receive payment of the Redemption Price in respect of
their
shares only from the Corporation.
Part 5 - Conversion.
5.1. For the purposes of conversion, the Series D Shares shall be valued at
$1000 per share ("Value"), and, if converted, the Series D Shares shall be
converted into such number of Common Shares (the "Conversion Shares") as is
obtained by dividing the aggregate Value of the shares of Series D Shares
being
so converted, together with all accrued but unpaid dividends thereon, by the
"Average Stock Price" per share of the Conversion Shares (the "Conversion
Price"), subject to adjustment pursuant to the provisions of this Part 5. For
purposes of this Part 5, the "Average Stock Price" means the lesser of (x) .80
of the daily closing bid prices of Common Shares for the 5 consecutive trading
days immediately preceding the date of subscription by the Purchaser or (y)
.65
of the average daily closing bid prices of Common Shares for the period of 5
consecutive trading days immediately preceding the date of the conversion of
the
Series D Shares in respect of which such Average Stock Price is determined,
provided, however, that if any combination or split of the Common Shares
occurs
during the 5 days being used for the foregoing calculation, then the prices
prior to such event shall be adjusted accordingly. The closing price for each
trading day shall be determined as provided in the last sentence of Section
3.2.
5.2. Any holder of Series D Shares (an "Eligible Holder") may at any time
commencing 45 days after the issuance of any Series D Shares convert up to
100%
of his holdings of Series D Shares in accordance with this part 5.
5.3. The conversion right granted by Section 5.2 hereof may be exercised only
by an Eligible Holder of Series D Shares, in whole or in part, by the
surrender
of the share certificate or share certificates representing the Series D
Shares
to be converted at the principal office of the Corporation (or at such other
place as the Corporation may designate in a written notice sent to the holder
by
first-class mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole Common Shares as shall
be
computed by dividing (1) the aggregate Value of the Series D Shares so
surrendered plus any accrued but unpaid dividends thereon, if any, by (2) the
Conversion Price in effect at the date of the conversion. At the time of
conversion of a Series D Shares, the Corporation shall pay in cash to the
holder
thereof an amount equal to all unpaid dividends, if any, accrued thereon to
the
date of conversion, or, at the Corporation's option, issue that number of
whole
Common Shares which is equal to the product of dividing the amount of such
unpaid dividends by the Average Stock Price whether or not declared by the
Board. Each Series D Share certificate surrendered for conversion shall be
endorsed by its holder. In the event of any exercise of the conversion right
of
the Series D Shares granted herein (i) share certificates representing the
Common Shares purchased by virtue of such exercise shall be delivered to such
holder within 3 days of notice of conversion, and (ii) unless the Series D
Shares has been fully converted, a new share certificate representing the
Series
D Shares not so converted, if any, shall also be delivered to such holder
within
3 days of notice of conversion. Any Eligible Holder may exercise its right to
convert the Series D Shares by telecopying an executed and completed Notice of
Conversion to the Corporation, and within 72 hours thereafter, delivering the
original Notice of Conversion and the certificate representing the Series D
Shares to the Corporation by express courier. Each date on which a Notice of
Conversion is telecopied to and received by the Corporation in accordance with
the provisions hereof shall be deemed a conversion date. The Corporation will
transmit the Common Shares certificates issuable upon conversion of any Series
D
Shares (together with the certificates representing the Series D Shares not so
converted) to the Eligible Holder via express courier within three business
days
after the conversion date if the Corporation has received the original Notice
of
Conversion and Series D Shares certificate being so converted by such date.
5.4. All Common Shares which may be issued upon conversion of Series D Shares
will, upon issuance, be duly issued, fully paid and nonassessable and free
from
all taxes, liens, and charges with respect to the issue thereof. At all times
that any Series D Shares are outstanding, the Corporation shall have
authorized,
and shall have reserved for the purpose of issuance upon such conversion, a
sufficient number of Common Shares to provide for the conversion into Common
Shares of all Series D Shares then outstanding at the then effective
Conversion
Price. Without limiting the generality of the foregoing, if, at any time, the
Conversion Price is decreased, the number of Common Shares authorized and
reserved for issuance upon the conversion of the Series D Shares shall be
proportionately increased.
5.5. The number of Common Shares issued upon conversion of Series D Shares
and
the Conversion Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.5.1. Change of Designation of the Common Shares or the rights,
privileges, restrictions and conditions in respect of the Common Shares
or
division of the Common Shares into Series. In the case of any amendment
to the Articles to change the designation of the Common Shares or the
rights, privileges, restrictions or conditions in respect of the Common
Shares or division of the Common Shares into series the rights of the
holders of the Series D Shares shall be adjusted so as to provide that
upon conversion thereof the holder of the Series D Shares being
converted
shall procure, in lieu of each Common Share theretofore issuable upon
such
conversion, the kind and amount of shares, other securities, money and
property receivable upon such designation, change or division by the
holder of one Common Share issuable upon such conversion had conversion
occurred immediately prior to such designation, change or division. The
Series D Shares shall be deemed thereafter to provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Part 5. The provisions of this
subsection 5.5.1. shall apply in the same manner to successive
reclassifications, changes, consolidations and mergers.
5.5.2. If the Corporation, at any time while any of the Series D
Shares are outstanding, shall pay a dividend on its Common Shares
payable
in Common Shares, the Conversion Price shall be adjusted, as of the date
the Corporation shall take a record of the holders of its Common Shares
for the purpose of receiving such dividend, (or if no such record is
taken, as of the date of payment of such dividend), to that price
determined by multiplying the Conversion Price therefor in effect by a
fraction (1) the numerator of which shall be the total number of Common
Shares outstanding immediately prior to such dividend, and (2) the
denominator of which shall be the total number of Common Shares
outstanding immediately after such dividend, (plus in the event that the
Corporation paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Corporation issued
fractional shares in connection with said dividend).
5.6. Whenever the Conversion Price shall be adjusted pursuant to Section 5.5
hereof, the Corporation shall make a certificate signed by its President or a
Vice President and by its Treasurer, Assistant Treasurer, Secretary or
Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors made any determination hereunder), and the Conversion Price after
giving effect to such adjustment, and shall cause copies of such certificates
to
be mailed (by first-class mail, postage prepaid) to each holder of Series D
Shares at its address shown on the books of the Corporation. The Corporation
shall make such certificate and mail it to each such holder promptly after
each
adjustment.
5.7. No fractional Common Shares shall be issued in connection with any
conversion of Series D Shares, but in lieu of such fractional shares, the
Corporation shall make a cash payment therefor equal in amount to the product
of
the applicable fraction multiplied by the Conversion Price then in effect.
5.8. No Series D Shares which have been converted into Common Shares shall be
reissued by the Corporation; provided, however, that each such share, after
being retired and canceled, shall be restored to the status of an authorized
but
unissued Preferred Share without designation as to series and may thereafter
be
issued as a Preferred Share not designated a Series D Share.
Part 6 - Parity with Other Shares of Series D Preferred Shares.
6.1. If any cumulative dividends or accounts payable or return of capital in
respect of Series D Shares are not paid in full, the owners of all series of
Series D Preferred Shares shall participate rateably in respect of accumulated
dividends and return of capital.
Part 7 - Amendment.
7.1 In addition to any requirement for a series vote pursuant to the BCA in
respect of any amendment to the rights, privileges, restrictions and
conditions
attaching to the Series D Shares, the rights, privileges, restrictions and
conditions attaching to the Series D Shares may be amended only if the
Corporation has obtained the affirmative vote of a majority at a duly called
and
held meeting of the holders of the Series D Shares or written consent by the
holders of a majority of the Series D Shares then outstanding.
SERIES E PREFERRED SHARES
[As Designated by Amendment dated August 30, 1996; certain provisions are
subject to adjustment and have been adjusted since designation]
The fifth series of Preferred Shares of the Corporation shall consist of
1,800 shares and no more and shall be designated as the Series E Preferred
Shares (the "Series E Preferred Shares" or the "Series E Shares") and in
addition to the preferences, rights, privileges, restrictions and conditions
attaching to all the Preferred Shares as a class, the rights, privileges,
restrictions and conditions attaching to the Series E Shares shall be as
follows:
Part 1 - Voting and Pre-emptive Rights.
1.1 The holders of the Series E Preferred Shares shall be entitled as such
to
receive notice of and attend all meetings of shareholders of the Corporation
and
shall have four thousand (4,000) votes per share of Series E Preferred stock
at
all such meetings.
1.2 The Series E Shares shall not give their holders any pre-emptive rights
to
acquire any other securities issued by the Corporation at any time in the
future.
Part 2 - Liquidation Rights.
2.1. If the Corporation shall be voluntarily or involuntarily liquidated,
dissolved or wound up, at any times when any Series E Shares shall be
outstanding, then after provision for the outstanding Series A, C and D
Preferred Shares, if any, the holders of the then outstanding Series E Shares
shall have a preference in distribution of the Corporation's remaining
property
available for distribution equal to $1,350 consideration per Series E Share,
together with an amount equal to all unpaid dividends accrued thereon, if any,
to the date of payment of such distribution, whether or not declared by the
Board: provided, however, that the amalgamation of the Corporation with any
Corporation or corporations, the sale or transfer by the Corporation of all or
subsequently all of its property, or any reduction of the authorized or issued
capital of the Corporation of any class, whether now or hereafter authorized,
shall be deemed to be a liquidation of the Corporation within the meaning of
any
of the provisions of this Part 2.
2.2. Subject to the provisions of Part 6 hereof, all amounts to be paid as
preferential distributions to the holders of Series E Shares as provided in
this
Part 2 shall be paid or set apart for payment after the payment or setting
apart
for payment of any amount for, or the distribution of any of the Corporation's
property to the holders of Series A, C and D Preferred Shares, and before the
payment or the setting apart for payment of any amount for, or the
distribution
of any of the Corporation's property to the holders of Common Shares, whether
now or hereafter authorized, in connection with such liquidation, dissolution
or
winding up.
Part 3 - Dividends.
3.1. Holders of record of Series E Shares, out of funds legally available
therefor and to the extent permitted by law, shall be entitled to receive
dividends on their Series E Shares, which dividends shall accrue at the rate
per
share of 8% per annum of consideration paid for each Series E Shares ($80.00
per
share per year for each full year) commencing on the date of the issuance
thereof, payable, at the option of the Corporation, (i) in cash or (ii) by the
issuance of that number of whole Common Shares computed by dividing the amount
of the dividend by the market price applicable to such dividend.
3.2. For the purposes of this Part 3 and Part 4 hereof, "market price" means
the average of the daily closing prices of Common Shares for a period of 5
consecutive trading days ending on the date on which any dividend becomes
payable or of any notice of redemption, as the case may be. The closing price
for each trading day shall be (i) for any period during which the Common
Shares
shall be listed for trading on a national securities exchange, the last
reported
bid price per share of Common Shares as reported by the primary stock
exchange,
or the Nasdaq Stock Market, if the Common Shares are quoted on the Nasdaq
Stock
Market or (ii) if last sales price information is not available, the average
closing bid-price of Common Shares as reported by the Nasdaq Stock Market, or
if
not so listed or reported, then as reported by National Quotation Bureau,
Incorporated, or (iii) in the event neither clause (i) nor (ii) is applicable,
the average of the closing bid and asked prices as furnished by any member of
the National Association of Securities Dealers, Inc., selected from time to
time
by the Corporation for that purpose.
3.3. Dividends on Series E Shares shall be cumulative, and no dividends or
other distributions shall be paid or declared and set aside for payment on the
Common Shares until full cumulative dividends on all outstanding Series E
Shares
shall have been paid or declared and set aside for payment.
3.4. Dividends shall be payable in arrears, at the rate of $20.00 per share
for
each full calendar quarter on each February 28, May 31, August 31 and November
30 of each calendar year, to the holders of record of the Series E Shares as
they appear in the securities register of the Corporation on such record dates
not more than 60 nor less than 10 days preceding the payment dates thereof, as
shall be fixed by the Board.
3.5. If, in any quarter, insufficient funds are available to pay such
dividends
as are then due and payable with respect to the Series E Shares and all other
classes and series in the capital of the Corporation ranking superior to or in
parity therewith (or such payment is otherwise prohibited by provisions of the
BCA), such funds as are legally available to pay such dividends shall be paid
or
Common Shares will be issued as stock dividends to the holders of Series E
Shares and to the holders of any other series of Preferred Share then
outstanding as provided in Part 6 hereof, in accordance with the rights of
each
such holder, and the balance of accrued but undeclared and/or unpaid
dividends,
if any, shall be declared and paid on the next succeeding dividend date to the
extent that funds are then legally available for such purpose.
Part 4 - Redemption.
4.1. At any time, and from time to time, on and after 145 days from the date
of
the issuance of any Series E Shares, the Corporation may, at its sole option,
but shall not be obligated to, redeem, in whole or in part, the then
outstanding
Series E Shares at a price per share of U.S. $1,350 each (the "Redemption
Price") (such price to be adjusted proportionately in the event of any change
of
the Series E Shares into a different number of Shares).
4.2. Five (5) days prior to any date stipulated by the Corporation for
the redemption of Series E Shares (the "Redemption Date"), written notice (the
"Redemption Notice") shall be mailed to each holder of record on such notice
date of the Series E Shares. The Redemption Notice shall state (i) the
Redemption Date of such Shares (ii) the number of Series E Shares to be
redeemed
from the holder to whom the Redemption Notice is addressed (iii) instructions
for surrender to the Corporation, in the manner and at the place designated of
a
share certificate or share certificates representing the number of Series E
Shares to be redeemed from such holder and (iv) instructions as to how to
specify to the Corporation the number of Series E Shares to be redeemed as
provided in this Part 4 and the number of shares to be converted into Common
Shares as provided in Part 5 hereof.
4.3. Upon receipt of the Redemption Notice, any Eligible Holder (as defined
in
Section 5.2 hereof) shall have the option, at its sole election, to specify
what
portion of its Series E Shares called for redemption in the Redemption Notice
shall be redeemed as provided in this Part 4 or converted into Common Shares
in
the manner provided in Part 5 hereof.
4.4. On or before the Redemption Date in respect of any Series E Shares, each
holder of such shares shall surrender the required certificate or certificates
representing such shares to the Corporation, in the manner and at the place
designated in the Redemption Notice, and upon the Redemption Date, the
Redemption Price for such shares shall be made payable, in the manner provided
in Section 5.5 hereof, to the order of the person whose name appears on such
certificate or certificates as the owner thereof, and each surrendered share
certificate shall be canceled and retired. If a share certificate is
surrendered and all the shares evidenced thereby are not being redeemed (as
described below), the Corporation shall cause the Series E Shares which are
not
being redeemed to be registered in the names of the persons whose names appear
as the owners on the respective surrendered share certificates and deliver
such
certificate to such person.
4.5. On the Redemption Date in respect of any Series E Shares or prior
thereto,
the Corporation shall deposit with any bank or trust company having a capital
and surplus of at least U.S. $50,000,000, as a trust fund, a sum equal to the
aggregate Redemption Price of all such shares called for redemption (less the
aggregate Redemption Price for those Series E Shares in respect of which the
Corporation has received notice from the Eligible Holder thereof of its
election
to convert Series E Shares into Common Shares), with irrevocable instructions
and authority to the bank or trust company to pay, on or after the Redemption
Date, the Redemption Price to the respective holders upon the surrender of
their
share certificates. The deposit shall constitute full payment for the shares
to
their holders, and from and after the date of the deposit the redeemed shares
shall be deemed to be no longer outstanding, and holders thereof shall cease
to
be shareholders with respect to such shares and shall have no rights with
respect thereto except the rights to receive from the bank or trust company
payments of the Redemption Price of the shares, without interest, upon
surrender
of their certificates thereof. Any funds so deposited and unclaimed at the
end
of one year following the Redemption Date shall be released or repaid to the
Corporation, after which the former holders of shares called for redemption
shall be entitled to receive payment of the Redemption Price in respect of
their
shares only from the Corporation.
Part 5 - Conversion.
5.1. For the purposes of conversion, the Series E Shares shall be valued at
$1000 per share ("Value"), and, if converted, the Series E Shares shall be
converted into such number of Common Shares (the "Conversion Shares") as is
obtained by dividing the aggregate Value of the shares of Series E Shares
being
so converted, together with all accrued but unpaid dividends thereon, by the
"Average Stock Price" per share of the Conversion Shares (the "Conversion
Price"), subject to adjustment pursuant to the provisions of this Part 5. For
purposes of this Part 5, the "Average Stock Price" means the lesser of (x) .80
of the daily closing bid prices of Common Shares for the 5 consecutive trading
days immediately preceding the date of subscription by the Purchaser or (y)
.65
of the average daily closing bid prices of Common Shares for the period of 5
consecutive trading days immediately preceding the date of the conversion of
the
Series E Shares in respect of which such Average Stock Price is determined,
provided, however, that if any combination or split of the Common Shares
occurs
during the 5 days being used for the foregoing calculation, then the prices
prior to such event shall be adjusted accordingly. The closing price for each
trading day shall be determined as provided in the last sentence of Section
3.2.
5.2. Any holder of Series E Shares (an "Eligible Holder") may at any time
commencing 45 days after the issuance of any Series E Shares convert up to
100%
of his holdings of Series E Shares in accordance with this part 5.
5.3. The conversion right granted by Section 5.2 hereof may be exercised only
by an Eligible Holder of Series E Shares, in whole or in part, by the
surrender
of the share certificate or share certificates representing the Series E
Shares
to be converted at the principal office of the Corporation (or at such other
place as the Corporation may designate in a written notice sent to the holder
by
first-class mail, postage prepaid, at its address shown on the books of the
Corporation) against delivery of that number of whole Common Shares as shall
be
computed by dividing (1) the aggregate Value of the Series E Shares so
surrendered plus any accrued but unpaid dividends thereon, if any, by (2) the
Conversion Price in effect at the date of the conversion. At the time of
conversion of a Series E Shares, the Corporation shall pay in cash to the
holder
thereof an amount equal to all unpaid dividends, if any, accrued thereon to
the
date of conversion, or, at the Corporation's option, issue that number of
whole
Common Shares which is equal to the product of dividing the amount of such
unpaid dividends by the Average Stock Price whether or not declared by the
Board. Each Series E Share certificate surrendered for conversion shall be
endorsed by its holder. In the event of any exercise of the conversion right
of
the Series E Shares granted herein (i) share certificates representing the
Common Shares purchased by virtue of such exercise shall be delivered to such
holder within 3 days of notice of conversion, and (ii) unless the Series E
Shares has been fully converted, a new share certificate representing the
Series
E Shares not so converted, if any, shall also be delivered to such holder
within
3 days of notice of conversion. Any Eligible Holder may exercise its right to
convert the Series E Shares by telecopying an executed and completed Notice of
Conversion to the Corporation, and within 72 hours thereafter, delivering the
original Notice of Conversion and the certificate representing the Series E
Shares to the Corporation by express courier. Each date on which a Notice of
Conversion is telecopied to and received by the Corporation in accordance with
the provisions hereof shall be deemed a conversion date. The Corporation will
transmit the Common Shares certificates issuable upon conversion of any Series
E
Shares (together with the certificates representing the Series E Shares not so
converted) to the Eligible Holder via express courier within three business
days
after the conversion date if the Corporation has received the original Notice
of
Conversion and Series E Shares certificate being so converted by such date.
5.4. All Common Shares which may be issued upon conversion of Series E Shares
will, upon issuance, be duly issued, fully paid and nonassessable and free
from
all taxes, liens, and charges with respect to the issue thereof. At all times
that any Series E Shares are outstanding, the Corporation shall have
authorized,
and shall have reserved for the purpose of issuance upon such conversion, a
sufficient number of Common Shares to provide for the conversion into Common
Shares of all Series E Shares then outstanding at the then effective
Conversion
Price. Without limiting the generality of the foregoing, if, at any time, the
Conversion Price is decreased, the number of Common Shares authorized and
reserved for issuance upon the conversion of the Series E Shares shall be
proportionately increased.
5.5. The number of Common Shares issued upon conversion of Series E Shares
and
the Conversion Price shall be subject to adjustment from time to time upon the
happening of certain events, as follows:
5.5.1. Change of Designation of the Common Shares or the rights,
privileges, restrictions and conditions in respect of the Common Shares
or
division of the Common Shares into Series. In the case of any amendment
to the Articles to change the designation of the Common Shares or the
rights, privileges, restrictions or conditions in respect of the Common
Shares or division of the Common Shares into series the rights of the
holders of the Series E Shares shall be adjusted so as to provide that
upon conversion thereof the holder of the Series E Shares being
converted
shall procure, in lieu of each Common Share theretofore issuable upon
such
conversion, the kind and amount of shares, other securities, money and
property receivable upon such designation, change or division by the
holder of one Common Share issuable upon such conversion had conversion
occurred immediately prior to such designation, change or division. The
Series E Shares shall be deemed thereafter to provide for adjustments
which shall be as nearly equivalent as may be practicable to the
adjustments provided for in this Part 5. The provisions of this
subsection 5.5.1. shall apply in the same manner to successive
reclassifications, changes, consolidations and mergers.
5.5.2. If the Corporation, at any time while any of the Series E
Shares are outstanding, shall pay a dividend on its Common Shares
payable
in Common Shares, the Conversion Price shall be adjusted, as of the date
the Corporation shall take a record of the holders of its Common Shares
for the purpose of receiving such dividend, (or if no such record is
taken, as of the date of payment of such dividend), to that price
determined by multiplying the Conversion Price therefor in effect by a
fraction (1) the numerator of which shall be the total number of Common
Shares outstanding immediately prior to such dividend, and (2) the
denominator of which shall be the total number of Common Shares
outstanding immediately after such dividend, (plus in the event that the
Corporation paid cash for fractional shares, the number of additional
shares which would have been outstanding had the Corporation issued
fractional shares in connection with said dividend).
5.6. Whenever the Conversion Price shall be adjusted pursuant to Section 5.5
hereof, the Corporation shall make a certificate signed by its President or a
Vice President and by its Treasurer, Assistant Treasurer, Secretary or
Assistant
Secretary, setting forth, in reasonable detail, the event requiring the
adjustment, the amount of the adjustment, the method by which such adjustment
was calculated (including a description of the basis on which the Board of
Directors made any determination hereunder), and the Conversion Price after
giving effect to such adjustment, and shall cause copies of such certificates
to
be mailed (by first-class mail, postage prepaid) to each holder of Series E
Shares at its address shown on the books of the Corporation. The Corporation
shall make such certificate and mail it to each such holder promptly after
each
adjustment.
5.7. No fractional Common Shares shall be issued in connection with any
conversion of Series E Shares, but in lieu of such fractional shares, the
Corporation shall make a cash payment therefor equal in amount to the product
of
the applicable fraction multiplied by the Conversion Price then in effect.
5.8. No Series E Shares which have been converted into Common Shares shall be
reissued by the Corporation; provided, however, that each such share, after
being retired and canceled, shall be restored to the status of an authorized
but
unissued Preferred Share without designation as to series and may thereafter
be
issued as a Preferred Share not designated a Series E Share.
Part 6 - Parity with Other Shares of Series E Preferred Shares.
6.1. If any cumulative dividends or accounts payable or return of capital in
respect of Series E Shares are not paid in full, the owners of all series of
Series E Preferred Shares shall participate rateably in respect of accumulated
dividends and return of capital.
Part 7 - Amendment.
7.1 In addition to any requirement for a series vote pursuant to the BCA in
respect of any amendment to the rights, privileges, restrictions and
conditions
attaching to the Series E Shares, the rights, privileges, restrictions and
conditions attaching to the Series E Shares may be amended only if the
Corporation has obtained the affirmative vote of a majority at a duly called
and
held meeting of the holders of the Series E Shares or written consent by the
holders of a majority of the Series E Shares then outstanding.
8. The issue, transfer or ownership of shares is not restricted.
9. Other provisions, if any, are:
None.
BY-LAW NUMBER I
A by-law relating generally to the conduct of the affairs of
PRINCETON MEDIA GROUP, INC.
(hereinafter called the "Corporation").
BE IT ENACTED and it is hereby enacted as a by-law of the
Corporation as follows:
INTERPRETATION
1. In this by-law, and all other by-laws of the Corporation, unless the
context otherwise specifies or requires:
(a) "Act" means the Business Corporations Act, S. 0. 1982, c. 4 as
from time to time amended and every statute that may be substituted therefor
and, in the case of such substitution, any references in the by-laws of the
Corporation to provisions of the Act shall be read as references to the
substituted provisions therefor in the new statute or statutes;
(b) "Regulations" means the Regulations made under the Act as from
time to time amended and every regulation that may be substituted therefor
and, in the case of such substitution, any references in the by-laws of the
Corporation to provisions of the Regulations shall be read as references to
the substituted provisions therefor in the new regulations;
(c) "board" means the board of directors of the Corporation;
(d) "articles" shall include articles of incorporation, articles of
amendment and restated articles of incorporation;
(e) "Resident Canadian" shall mean a Canadian citizen who is
ordinarily resident in Canada;
(f) "by-law" means any by-law of the Corporation from time to time
in force and effect;
(g) "offering corporation" means a corporation as defined in the
Act;
(h) all terms which are contained in the by-laws of the Corporation
and which are defined in the Act or the Regulations shall have the meanings
given to such terms in the Act or the Regulations; and
(i) the singular shall include the plural and the the plural shall
include the singular; the masculine shall include the feminine; and the word
"person" shall include bodies corporate, corporations, companies,
partnerships, syndicates, trusts and any number or aggregate of persons.
SEAL
2. The Corporation may but need not have a corporate seal. Any corporate
seal adopted for the Corporation shall be such as the board of directors may
by resolution from time to time approve.
REGISTERED OFFICE
3. Until changed in accordance with the Act, the registered office of the
Corporation shall be in the Regional Municipality of Halton in the Province of
Ontario and at such location therein as the board may from time to time by
resolution determine.
DIRECTORS
4. Duties and Number. Subject to any unanimous shareholder agreement, the
directors shall manage or supervise the management of the business and affairs
of the Coporation. The board of directors shall consist of the number of
directors set out in the articles of the Corporation or, if the number of
directors has since been changed the number of directors in office at the date
hereof or, where a minimum and a maximum number is provided for in the
articles, such number of directors as shall be determined from time to time by
special resolution or, if the special resolution empowers the directors to
determine the number, by resolution of the directors. A majority of the
directors shall be resident Canadians and, if the Corporation is an offering
corporation, at least one-third of the directors shall not be officers or
employees of the Corporation or of any affiliate of the Corporation.
5. Term of Office. A director's term of office (subject to the provisions,
if any, of the articles of the Corporation and to the provisions of the Act)
shall be from the date on which he is elected or appointed until the close of
the third Annual Meeting following such election or appointment; provided,
however, that on the first date on which directors are elected pursuant
hereto, one director, who shall be specified by name, shall be elected to
serve until the third Annual Meeting after such election; a second director,
who shall be specified by name, shall be elected to serve until the second
Annual Meeting after such election; and a third director, who shall be
specified by name, shall be elected to serve until the first Annual Meeting
after such election.
6. Vacation of Office. The office of a director shall ipso facto be
vacated: (a) if he becomes bankrupt or suspends payment of his debts generally
or compounds with his creditors or makes an authorized assignment or is
declared insolvent; (b) if he is found to be a mentally incompetent person or
of unsound mind; or (c) subject to the provisions of the Act, if by notice in
writing to the Corporation he resigns his office. Any such resignation shall
be effective at the time it is received by the Corporation or at the time
specified in the notice, whichever is later.
7.. Election and Removal. Directors shall be elected by the shareholders on
a show of hands unless a ballot is demanded in which case such election shall
be by ballot. One director shall retire at the annual meeting at which the
election of director to take his seat on the Board is to take place but, if
qualified, the retiring director shall be eligible for re-election; provided
always that the shareholders of the Corporation may, by ordinary resolution
passed at an annual or special meeting of shareholders, remove any director or
directors from office and a vacancy created by the removal of a director may
be filled at the meeting of the shareholders at which the director is removed.
Any vacancy on the Board may be filled by the shareholders at a meeting called
for that purpose. If not so filled by the shareholders, such vacancy may be
filled by vote of the then remaining directors for the entire remainder of the
term applicable to such vacant seat(s).
MEETINGS OF DIRECTORS
8. Place of Meeting. Meetings of the board of directors and of the
committee of directors, if any, may be held within or outside Ontario and in
any financial year of the Corporation a majority of the meetings of the board
of directors need not be held at a place within Canada.
9. Notice. A meeting of directors may be convened by the board of
directors, the Chairman of the Board, the Vice-Chairman of the Board, the
Managing Director, the President if he is a director, a Vice-President who is
a director or any two directors at any time and the Secretary, when directed
or authorized by any of such officers or any two directors, shall convene a
meeting of directors. Subject to Subsection 126(8) of the Act the notice of
any such meeting need not specify the purpose of or the business to be
transacted at the meeting. Notice of any such meeting shall be served in the
manner specified in paragraph 82 of this by-law not less than two days
(exclusive of the day on which the notice is delivered or sent but inclusive
of the day for which notice is given) before the meeting is to take place;
provided always that a director may in any manner and at any time waive notice
of a meeting of directors and the attendance of a director at a meeting of
directors shall constitute a waiver of notice of the meeting and a formal
written waiver need not be signed except where a director attends a meeting
for the express purpose of objecting to the transaction of any business on the
grounds that the meeting is not lawfully called. Any waiver of notice shall
be effective whether given before or after the meeting to which it relates and
may be given with respect to all meetings of the board and of committees of
the board held while a director holds office.
For the first meeting of the board of directors to be held immediately
following the election of directors by the shareholders or for a meeting of
the board of directors at which a director is appointed to fill a vacancy in
the board, no notice of such meeting shall be necessary to the newly elected
or appointed director or directors in order to legally constitute the meeting,
provided that a quorum of the directors is present.
10. Quorum. Two-fifths of the directors shall form a quorum for the
transaction of business and, notwithstanding any vacancy among the directors,
a quorum of directors may exercise all the powers of directors. No business
shall be transacted at a meeting of directors unless a quorum of the board is
present and a majority of directors present are resident Canadians.
If all of the directors of the Corporation present at or participating
in the meeting consent, a meeting of directors or of a committee of directors
may be held by means of such telephone, electronic or other communication
facilities as permit all persons participating in the meeting to communicate
with each other simultaneously and instantaneously, and a director
participating in such meeting by such means is deemed for the purpose of the
Act to be present at that meeting. Any such consent shall be effective
whether given before or after the meeting to which it relates and may be given
with respect to all meetings of the board and of committees of the board held
while a director holds office.
11. Voting. Questions arising at any meeting of the board of directors
shall be decided by a majority of votes. In case of an equality of votes the
chairman of the meeting in addition to his original vote shall have a second
or casting vote.
12. Resolution in lieu of meeting. Notwithstanding any of the foregoing
provisions of this by-law, any by-law or resolution in writing signed by all
the directors entitled to vote on that by-law or resolution at a meeting of
the directors or a committee of directors, if any, is as valid as if it had
been passed at a meeting of the directors or the committee of directors, if
any.
13. Regular Meetings. The board may appoint a day or days in any month or
months for regular meetings of the board at a place and hour to be named. A
copy of any resolution of the board f ixing the place and time of such regular
meetings shall be sent to each director forthwith after being passed, but no
other notice shall be required for any such regular meeting except where the
Act requires the purpose thereof or the business to be transacted thereat to
be specified.
14. Adjourned Meeting. Notice of an adjourned meeting of the board is not
required if the time and place of the adjourned meeting is announced at the
original meeting.
REMUNERATION OF DIRECTORS
15. The remuneration to be paid to the directors shall be such as the board
of directors shall from time to time determine and such remuneration shall be
in addition to the salary paid to any officer or employee of the Corporation
who is also a member of the board of directors. The directors may also award
special remuneration to any director undertaking any special services on the
Corporation's behalf other than the routine work ordinarily required of a
director by the Corporation and the confirmation of any such resolution or
resolutions by the shareholders shall not be required. The directors shall
also be entitled to be paid their travelling and other expenses properly
incurred by them in connection with the affairs of the Corporation. Nothing
herein contained shall preclude any director trom serving the Corporation in
any other capacity and receiving remuneration therefor.
SUBMISSION OF CONTRACTS OR TRANSACTIONS TO
SHAREHOLDERS FOR APPROVAL
16. The board of directors in its discretion may submit anycontract, act or
transaction for approval, confirmation or ratification at any annual meeting
of the shareholders or at any special meeting of the shareholders called for
the purpose of considering the same and, subject to the provisions of Section
132 of the Act, any such contract, act or transaction that shall be approved
or ratified or confirmed by a resolution passed by a majority of the votes
cast at any such meeting (unless any different or additional requirement is
imposed by the Act or by the Corporation's articles or any other by-law) shall
be as valid and as binding upon the Corporation and upon all the shareholders
as though it had been approved, ratified or confirmed by every shareholder of
the Corporation.
CONFLICT OF INTEREST
17. A director or officer who is a party to, or who is a director or officer
or has a material interest in any person who is a party to, a material
contract or transaction or proposed material contract or transaction with the
Corporation shall disclose in writing to the Corporation or request to have
entered in the minutes of the meetings of the directors the nature and extent
of his interest at the time and in the manner provided by the Act. Any such
contract or transaction or proposed contract or transaction shall be referred
to the board or shareholders for approval even if such contract is one that in
the ordinary course of the Corporation's business would not require approval
by the board or shareholders, and a director interested in a contract so
referred to the board shall not vote on any resolution to approve the same
except as permitted by the Act. Subject to the provisions of Section 132 of
the Act the contract or transaction is not void or voidable if made prior to
the board or shareholders approval.
FOR THE PROTECTION OF DIRECTORS AND OFFICERS
18. In supplement of and not by way of limitation upon any rights conferred
upon directors by Section 132 of the Act, it is declared that no director
shall be disqualified by his office from, or vacate his office by reason of,
holding any office or place of profit under the Corporation or under any body
corporate in which the Corporation shall be a shareholder or by reason of
being otherwise in any way directly or indirectly interested or contracting
with the Corporation either as vendor, purchaser or otherwise or being
concerned in any contract or arrangement made or proposed to be entered into
with the Corporation in which he is in any way directly or indirectly
interested either as vendor, purchaser or otherwise nor shall any director be
liable to account to the Corporation or any of its shareholders or creditors
for any profit arising from any such office or place of profit; and, subject
to the provisions of Section 132 of the Act, no contract or arrangement
entered into by or on behalf of the Corporation in which any director shall be
in any way directly or indirectly interested shall be avoided or voidable and
no director shall be liable to account to the Corporation or any of its
shareholders or creditors for any profit realized by or from any such contract
or arrangement by reason of any fiduciary relationship. Notwithstanding the
provisions of the Act, every director and officer shall declare any material
interest in respect of a material transaction, material contract, proposed
material contract or proposed material transaction with the Corporation or an
affiliate of the Corporation in which such director or officer is in any way
directly or indirectly interested and any director shall refrain from voting
in respect of such contract, proposed contract or transaction.
19. Except as otherwise provided in the Act, no director or officer for the
time being of the Corporation shall be liable for the acts, receipts, neglects
or defaults of any other director or officer or employee or for joining in any
receipt or act for conformity or for any loss, damage or expense happening to
the Corporation through the insufficiency or deficiency of title to any
property acquired by the Corporation or for or on behalf of the Corporation or
for the insufficiency or deficiency of any security in or upon which any of
the moneys of or belonging to the Corporation shall be placed out or invested
or for any loss or damage arising from the bankruptcy, insolvency or tortious
act of any person, firm or corporation including any person, firm or
corporation with whom or which any moneys, securities or effects shall be
lodged or deposited or for any loss, conversion, misapplication or
misappropriation of or any damage resulting from any dealings with any moneys,
securities or other assets belonging to the Corporation or for any other loss,
damage or misfortune whatever which may happen in the execution of the duties
of his respective office or trust or in relation thereto unless the same shall
happen by or through his failure to exercise the powers and to discharge the
duties of his office honestly and in good faith with a view to the best
interests ot the Corporation and in connection therewith to exercise the care,
diligence and skill that a reasonably prudent person would exercise in
comparable circumstances. The directors for the time being of the Corporation
shall not be under any duty or responsibility in respect of any contract, act
or transaction whether or not made, done or entered into in the name or on
behalf of the Corporation, except such as shall have been submitted to and
authorized or approved by the board of directors. If any director or officer
of the Corporation shall be employed by or shall perform services for the
Corporation otherwise than as a director or officer or shall be a member of a
firm or a shareholder, director or officer of a company which is employed by
or performs services for the Corporation, the fact of his being a director or
officer of the Corporation shall not disentitle such director or officer or
such firm or company, as the case may be, from receiving proper remuneration
for such services.
INDEMNITIES TO DIRECTORS AND OFFICERS
20. Subject to Section 136 of the Act, every director and officer of the
Corporation and his heirs, executors, administrators and other legal personal
representatives shall from time to time be indemnified and saved harmless by
the Corporation from and against,
(a)any liability and all costs, charges and expenses that he sustains or
incurs in respect of any action, suit or proceeding that is proposed or
commenced against him for or in respect of anything done or permitted by him
in respect of the execution of the duties of his office; and
(b)all other costs, charges and expenses that he sustains or incurs in
respect of the affairs of the Corporation.
The Corporation shall also indemnify such person in such other
circumstances as the Act permits or requires.
INSURANCE
21. The Corporation may purchase and maintain insurance for the benefit of
any person referred to in paragraph 20 of this by-law against such liabilities
and in such amounts as the board may from time to time determine and are
permitted by the Act.
OFFICERS
22. Appointment. The board of directors shall annually or oftener as may be
required appoint a President and a Secretary and, if deemed advisable, may
annually or oftener as may be required appoint a Chairman of the Board, a
Vice-Chairman of the Board, a Managing Director, a President, one or more
Vice-Presidents, a Treasurer, one or more Assistant Secretaries and/or one or
more Assistant Treasurers. A director may be appointed to any office of the
Corporation but none of the officers except the Chairman of the Board, the
Vice-Chairman of the Board and the Managing Director need be a member of the
board of directors. Two or more of the aforesaid offices may be held by the
same person. In case and whenever the same person holds the offices of
Secretary and Treasurer he may but need not be known as the Secretary-
Treasurer. The board may from time to time appoint such other officers and
agents as it shall deem necessary who shall have such authority and shall
perform such duties as may from time to time be prescribed by the board of
directors.
23. Remuneration and Removal. The remuneration of all officers appointed by
the board of directors shall be determined from time to time by resolution of
the board of directors. The fact that any officer or employee is a director
or shareholder of the Corporation shall not disqualify him from receiving such
remuneration as may be determined. All officers, in the absence of agreement
to the contrary, shall be subject to removal by resolution of the board of
directors at any time, with or without cause.
24. Powers and Duties. All officers shall sign such contracts, documents or
instruments in writing as require their respective signatures and shall
respectively have and perform all powers and duties incident to their
respective offices and such other powers and duties respectively as may from
time to time be assigned to them by the board.
25. Duties may be delegated. In the case of the absence or inability to act
of any officer of the Corporation except the Managing Director or for any
other reason that the board of directors may deem sufficient the board of
directors may delegate all or any of the powers of such officer to any other
officer or to any director for the time being.
26. Chairman of the Board. The Chairman of the Board, if any, shall, when
present, preside at all meetings of the board of directors, the committee of
directors, if any, and the shareholders.
27. Vice-Chairman of the Board. If the Chairman of the Board is absent or
is unable or refuses to act, the Vice-Chairman of the Board, if any, shall,
when present, preside at all meetings of the board of directors, the committee
of directors, if any, and the shareholders.
28. President. The President shall be the chief executive officer of the
Corporation unless otherwise determined by resolution of the board of
directors. The President shall be vested with and may exercise all the powers
and shall perform all the duties of the Chairman of the Board and/or Vice-
Chairman of the Board if none be appointed or if the Chairman of the Board and
the Vice-Chairman of the Board are absent or are unable or refuse to act;
provided, however, that unless he is a director he shall not preside as
chairman at any meeting of directors or of any committee of directors, if any,
or, subject to paragraph 54 of this by-law, at any meeting of shareholders.
29. Vice-President. The Vice-President or, if more than one, the Vice-
Presidents, in order of seniority, shall be vested with all the powers and
shall perform all the duties of the President in the absence of or inability
or refusal to act of the President; provided, however, that a Vice-President
who is not a director shall not preside as chairman at any meeting of
directors or of the committee of directors, if any, or, subject to paragraph
54 of this by-law, at any meeting of shareholders.
30. Secretary. The Secretary shall give or cause to be given notices for
all meetings of the board of directors, a committee of directors, if any, and
the shareholders when directed to do so and shall have charge of the minute
books of the Corporation and, subject to the provisions of paragraph 66 of
this by-law, of the records (other than accounting records) referred to in
Section 140 of the Act.
31. Treasurer. Subject to the provisions of any resolution of the board of
directors, the Treasurer shall have the care and custody of all the funds and
securities of the Corporation and shall deposit the same in the name of the
Corporation in such bank or banks or with such other depositary or
depositories as the board of directors may direct. He shall keep or cause to
be kept the accounting records referred to in Section 140 of the Act. He may
be required to give such bond for the faithful performance of his duties as
the board of directors in its uncontrolled discretion may require but no
director shall be liable for failure to require any such bond or for the
insufficiency of any such bond or for any loss by reason of the failure of the
Corporation to receive any indemnity thereby provided.
32. Assistant Secretary and Assistant Treasurer. The Assistant Secretary
or, if more than one, the Assistant Secretaries in order of seniority, and the
Assistant Treasurer or, if more than one, the Assistant Treasurers in order of
seniority, shall respectively perform all the duties of the Secretary and the
Treasurer, respectively, in the absence or inability or refusal to act of the
Secretary or the Treasurer, as the case may be.
33. Managing Director. The Managing Director shall be a resident Canadian
and shall exercise such powers and have such authority as may be delegated to
him by the board of directors in accordance with the provisions of Section 127
of the Act.
34. General Manager or Manager. The board of directors may from time to
time appoint one or more General Managers or Managers and may delegate to him
or them full power to manage and direct the business and affairs of the
Corporation (except such matters and duties as by law must be transacted or
performed by the board of directors and/or by the shareholders) and to employ
and discharge agents and employees of the Corporation or may delegate to him
or them any lesser authority. A General Manager or Manager shall conform to
all lawful orders given to him by the board of directors of the Corporation
and shall at all reasonable times give to the directors or any of them all
information they may require regarding the affairs of the Corporation. Any
agent or employee appointed by a General Manager or Manager shall be subject
to discharge by the board of directors.
35. Agents and Attorneys. The board shall have power from time to time to
appoint agents or attorneys for the Corporation in or outside Canada with such
powers of management or otherwise (including the powers to subdelegate) as may
be thought fit.
36. Fidelity Bonds. The board may require such officers, employees and
agents of the Corporation as the board deemed advisable to furnish bonds for
the faithful discharge of their powers and duties, in such form and with such
surety as the board may from time to time determine but no director shall be
liable for failure to require any such bond or for the insufficiency of any
such bond or for any loss by reason of the failure of the Corporation to
receive any indemnity thereby provided.
37. Vacancies. If the office of any officer of the Corporation shall be or
become vacant by reason of death, resignation, disqualification or otherwise,
the directors by resolution shall, in the case of the President or the
Secretary, and may, in the case of any other office, appoint a person to fill
such vacancy.
BORROWING AND SECURITIES
38. Borrowing Power. Without limiting the borrowing powers of the
Corporation as set forth in the Act, the board may, without authorization of
the shareholders, from time to time:
(a)borrow money upon the credit of the Corporation;
(b)issue, reissue, sell or pledge debt obligations of the Corporation,
whether secured or unsecured;
(c)subject to the Act, give a guarantee on behalf of the Corporation to
secure performance of an obligation ot any person; and
(d)charge, mortgage, hypothecate, pledge or otherwise create a security
interest in all or any currently owned or subsequently acquired real or
personal, movable or immovable, tangible or intangible, property of the
Corporation, including book debts, rights, powers, franchises and undertaking,
to secure any obligation of the Corporation.
Nothing in this section limits or restricts the borrowing of money by the
Corporation on bills of exchange or promissory notes made, drawn, accepted or
endorsed by or on behalf of the Corporation.
39. Delegation. The board may from time to time by resolution delegate to
such one or more of the directors and officers of the Corporation as may be
designated by the board all or any of the powers conferred on the board by
paragraph 4 of this by-law or by the Act to such extent and in such manner as
the board shall determine at the time of each such delegation.
C0MM1TTEES
40. Committee of Directors. The board may appoint a committee of directors,
however designated, and delegate to such committee any of the powers of the
board except those which pertain to items which, under the Act, a committee of
directors has no authority to exercise. A majority of the members of such
committee shall be resident Canadians.
41. Transaction of Business. The powers of a committee of directors may be
exercised by a meeting at which a quorum is present or by resolution in
writing signed by all members of such committee who would have been entitled
to vote on that resolution at a meeting of the committee. Meetings of such
committee may be held at any place within or outside Ontario.
42. Audit Committee. If the Corporation is an offering corporation the
board shall elect annually from among its number an audit committee to be
composed of not fewer than three directors of whom a majority shall not be
officers of employees of the Corporation or its affiliates. The audit
committee shall have the duties and powers provided in the Act.
43. Advisory Committees. The board may from time to time appoint such other
committees as it may deem advisable, but the functions of any such other
committees shall be advisory only.
44. Procedure. Unless otherwise determined by the board, each committee
shall have power to fix its quorum at not less than a majority of its members,
to elect its chairman and to regulate its procedure.
SHAREHOLDERS' MEETINGS
45. Annual Meeting. Subject to the provisions of Section 94 of the Act, the
annual meeting of the shareholders shall be held on such day in each year and
at such time as the directors may by resolution determine and subject to the
articles and any unanimous shareholder agreement shall be held at any place in
or outside Ontario as the directors determine or, in the absence of such
determination, at the place where the registered office of the Corporation is
located.
46. Special Meetings. Special meetings of the shareholders may be convened
by order of the Chairman of the Board, the Vice-Chairman of the Board, the
Managing Director, the President if he is a director, a Vice-President who is
a director or by the board of directors at any date and time and subject to
the articles and any unanimous shareholder agreement shall be held at any
place in or outside Ontario as the directors may determine or, in the absence
of such determination, at the place where the registered office of the
Corporation is located.
47. Notice. A printed, written or typewritten notice stating the day, hour
and place of meeting shall be given by serving such notice on each shareholder
entitled to vote at such meeting, on each director and on the auditor of the
Corporation in the manner specif ied in paragraph 82 of this by-law, not less
than ten days or if the Corporation is an offering Corporation not less than
twenty-one days but in either case not more than fifty days (in each case,
subject to Section 1(1)13 ot the Act, exclusive of the day on which the notice
is delivered or sent and of the day for which notice is given) before the date
of the meeting. Notice of a meeting at which special business is to be
transacted shall state or be accompanied by a statement of (a) the nature of
that business in sufficient detail to permit the shareholder to form a
reasoned judgment thereon, and (b) the text of any special resolution or by-
law to be submitted to the meeting.
48. Waiver of Notice. A shareholder any any other person entitled to attend
a meeting of shareholders may in any maner waive notice of a meeting of
shareholders and attendance of any such person at a meeting of shareholders
shall constitute a waiver of notice of the meeting and a formal written waiver
need not be signed except where such person attends a meeting for the express
purpose of objecting to the transaction of any business on the grounds that
the meeting is not lawfully called.
49. Omission of Notice. The accidental omission to give notice of any
meeting or any irregularity in the notice of any meeting or the non-receipt of
any notice by any shareholder or shareholders, director or directors or the
auditor of the Corporation shall not invalidate any resolution passed or any
proceedings taken at any meeting of shareholders.
50. Persons Entitled to be Present. The only persons entitled to be present
at a meeting of shareholders shall be those entitled to vote thereat, the
directors and the auditor of the Corporation and others who, although not
entitled to vote are entitled or required under any provision of the Act or
the articles or the by-laws to be present at the meeting. Any other person
may be admitted only on the invitation of the chairman of the meeting or with
the consent of the meeting.
51. List of Shareholders Entitled to Notice. For every meeting of
shareholders, the Corporation shall prepare a list of shareholders entitled to
receive notice of the meeting, arranged in alphabetical order and showing the
number of shares held by each shareholder entitled to vote at the meeting. If
a record date for the meeting is fixed pursuant to paragraph 52 of this by-
law, the shareholders listed shall be those registered at the close of
business not later than 10 days after such record date. If no record date is
fixed, the shareholders listed shall be those registered at the close of
business on the day immediately preceding the day on which notice of the
meeting is given, or where no such notice is given, the day of which the
meeting is held. The list shall be available for examination by any
shareholders during normal business hours at the registered office of the
Corporation or at the place where the central securities register is
maintained and at the meeting for which the list was prepared.
52. Record Date for Notice. The board may fix in advance a date, preceding
the date of any meeting of shareholders by not more than 50 days and not less
than 21 days, as a record date for the determination of the shareholders
entitled to notice of the meeting, and notice of any such record date shall be
given not less than seven days before such record date by newspaper
advertisement in the manner provided on the Act and, if any shares of the
Corporation are listed for trading on a stock exchange in Canada, by written
notice to each such stock exchange. if no record date is so fixed, the record
date for the determination of the shareholders entitled to notice of the
meeting shall be at the close of business on the day immediately preceding the
day on which the notice is given or, if no notice is given, the day on which
the meeting is held.
53. Meetings Without Notice. A meeting of shareholders may be held
without notice at any time and place permitted by the Act
(a)if all the shareholders entitled to vote thereat are present in
person or represented by proxy waive notice of or otherwise consent to such
meeting being held, and
(b)if the auditor and the directors are present or waive notice of or
otherwise consent to such meeting being held, so long as such shareholders,
auditor or directors present are not attending for the express purpose of
objecting to the transaction of any business on the grounds that the meeting
is not lawfully called. At such a meeting any business may be transacted
which the Corporation at a meeting of shareholders may transact. If the
meeting is held at a place outside Canada, shareholders not present or
represented by proxy, but who have waived notice of or otherwise consented to
such meeting, shall also be deemed to have consented to the meeting being held
at such place.
54. Votes. Every question submitted to any meeting of shareholder shall be
decided in the first instance by a show of hands unless a person entitled to
vote at the meeting has demanded a ballot and in the case of an equality of
votes the chairman of the meeting shall both on a show of hands and on a
ballot have a second or casting vote in addition to the vote or votes to which
he may be otherwise entitled.
At any meeting unless a ballot is demanded a declaration by
the chairman of the meeting that a resolution has been carried or carried
unanimously or by a particular majority or lost or not carried by a particular
majority shall be conclusive evidence of the fact.
In the event the Chairman of the Board and the Vice-Chairman of the
Board are absent and the President is absent or is not a director and there is
no Vice-President present who is a director, the persons who are present and
entitled to vote shall choose another director as chairman of the meeting and
if no director is present or if all the directors present decline to take the
chair then the persons who are present and entitled to vote shall choose one
of their number to be chairman.
A ballot may be demanded either before or after any vote by show of
hands by any person entitled to vote at the meeting. If at any meeting a
ballot is demanded on the election of a chairman or on the question of
adjournment it shall be taken forthwith without adjournment. If at any
meeting a ballot is demanded on any other question or as to the election of
directors, the vote shall be taken by ballot in such manner and either at
once, later in the meeting or after adjournment as the chairman of the meeting
directs. The result of a ballot shall be deemed to be the resolution of the
meeting at which the ballot was demanded. A demand for a ballot may be
withdrawn.
Where two or more persons hold the same share or shares jointly one of
those holders present at a meeting of shareholders may, in the absence of the
other or others, vote the share or shares but if two or more of those persons
who are present, in person or by proxy, vote, they shall vote as one on the
share or shares jointly held by them.
55. Right to Vote. Subject to the provisions of the Act as to authorized
representatives of any body corporate or association, at any meeting of
shareholders for which the Corporation has prepared the list referred to in
paragraph 51 of this by-law, every person who is named in such list shall be
entitled to vote the shares shown opposite his name except to the extent that,
where the Corporation has fixed a record date in respect of such meeting
pursuant to paragraph 52 of this by-law, such person has transferred any of
his shares after such record date and the transferee, having produced properly
endorsed certificates evidencing such shares or having otherwise established
that he owns such shares, has demanded not later than 10 days before the
meeting that his name be included in such list. In any such case the
transferee shall be entitled to vote the transferred shares at the meeting.
At any meeting of shareholders for which the Corporation has not prepared the
list referred to in paragraph 51 of this by-law, every person shall be
entitled to vote at the meeting who at the time is entered in the securities
register as the holder of one or more shares carrying the right to vote at
such meeting.
56. Proxies. Every shareholder entitled to vote at a meeting of
shareholders may appoint a proxyholder, or an attorney authorized in writing
who may appoint a proxyholder, or one or more alternate proxyholders, who need
not be shareholders, to attend and act at the meeting in the manner and to the
extent authorized and with the authority conferred by the proxy. A proxy
shall be in writing executed by the shareholder or his attorney authorized in
writing and shall conform with the requirements of the Act. If the
Corporation is an offering corporation a proxy appointing a proxyholder ceases
to be valid one year from its date.
57. Time for Deposit of Proxies. The board may by resolution specify in a
notice calling a meeting of shareholders a time, preceding the time of such
meeting or an adjournment thereof by not more than 48 hours exclusive of any
part of a non-business day, before which time proxies to be used at such
meeting must be deposited. A proxy shall be acted upon only if, prior to the
time so specified, it shall have been deposited with the Corporation or an
agent thereof specified in such notice or, if no such time is specified in
such notice, only if it has been received by the Secretary of the Corporation
or by the chairman of the meeting or any adjournment thereof prior to the time
of voting.
The directors may from time to time make regulations regarding the
lodging of proxies at some place or places other than the place at which a
meeting or adjourned meeting of shareholders is to be held and for particulars
of such proxies to be cabled or telegraphed or sent by telex or in writing
before the meeting or adjourned meeting to the Corporation or any agent of the
Corporation for the purpose of receiving such particulars and providing that
proxies so lodged may be voted upon as though the proxies themselves were
produced at the meeting or adjourned meeting and votes given in accordance
with such regulations shall be valid and shall be counted. The chairman of
any meeting of shareholders may, subject to any regulations made as aforesaid,
in his discretion accept telegraphic or cable or telex or written
communication as to the authority of any person claiming to vote on behalt of
and to represent a shareholder notwithstanding that no proxy conferring such
authority has been lodged with the Corporation, and any votes given in
accordance with such telegraphic or cable or telex or written communication
accepted by the chairman of the meeting shall be valid and shall be counted.
58. Adjournment. The chairman of any meeting may with the consent of the
meeting adjourn the same from time to time to a fixed time and place and no
notice of such adjournment need be given to the shareholders unless the
meeting is adjourned by one or more adjournments for an aggregate of thirty
days or more in which case subject to subsection 96(4) of the Act notice of
the adjourned meeting shall be given as for an original meeting. Any business
may be brought before or dealt with at any adjourned meeting for which no
notice is required which might have been brought before or dealt with at the
original meeting in accordance with the notice calling the same.
59. Quorum. All of the shareholders or two shareholders, whichever number
be the lesser, personally present or represented by proxy, shall constitute a
quorum of any meeting of any class of shareholders. No business shall be
transacted at any meeting unless the requisite quorum be present at the time
of the transaction of such business. If a quorum is not present at the time
appointed for a meeting of shareholders or within such reasonable time
thereafter as the shareholders present may determine, the persons present and
entitled to vote may adjourn the meeting to a fixed time and place but may not
transact any other business and the provisions of paragraph 58 of this by-law
with regard to notice shall apply to such adjournment.
60. Resolution in lieu of meeting. Notwithstanding any of the foregoing
provisions of this by-law a resolution in writing signed by all the
shareholders entitled to vote on that resolution at a meeting of the
shareholders is, subject to Section 104 of the Act, as valid as if it had been
passed at a meeting of the shareholders.
61. Only One Shareholder. Where the Corporation has only one shareholder or
only one holder of any class or series of shares, the shareholder present in
person or by proxy constitutes a meeting.
SHARES
62. Allotment and Issuance. Subject to the provisions of Section 23 of the
Act and any unanimous shareholder agreement, shares in the capital of the
Corporation may be allotted and issued by resolution of the board of directors
at such time and on such terms and conditions and to such persons or class or
classes of persons as the board of directors determines provided that no share
shall be issued until it is fully paid as provided by the Act.
63. Certificates. Share certificates and the form of stock transfer
power on the reverse side thereof shall (subject to Section 56 of the Act) be
in such form as the board of directors may be resolution approve and such
certificates shall be manually signed by the Chairman of the Board or the
Vice-Chairman of the Board or the President or a Vice-President and the
Secretary or an Assistant Secretary holding office at the time of signing and
need not be under corporate seal.
The signature of the Chairman of the Board, the Vice-Chairman of the
Board, the President or a Vice-President may be printed, engraved,
lithographed or otherwise mechanically reproduced upon certificates for shares
of the Corporation. Certificates so signed shall be deemed to have been
manually signed by the Chairman of the Board, the Vice-Chairman of the Board,
the President or a Vice-President whose signature is so printed, engraved,
lithographed or otherwise mechanically reproduced thereon and shall be as
valid to all intents and purposes as if they had been signed manually. Where
the Corporation has appointed a registrar, transfer agent or branch transfer
agent or other authenticating agent for the shares (or for the shares of any
class or classes) of the Corporation the signature of the Secretary or
Assistant Secretary may also be printed, engraved, lithographed or otherwise
mechanically reproduced on certificates representing the shares (or the shares
of any class or classes in respect of which any such appointment has been
made) of the Corporation and when manually countersigned by or on behalf of a
registrar, transfer agent or branch transfer agent or other authenticating
agent such certificates so signed shall be as valid to all intents and
purposes as if they had been manually signed by the aforesaid officers. A
share certificate containing the signature of a person which is printed,
engraved, lithographed or otherwise mechanically reproduced thereon may be
issued notwithstanding that the person has ceased to be an officer of the
Corporation and shall be as valid as it he were an officer at the date of its
issue.
64. Commissions. The board may from time to time authorize the Corporation
to pay a reasonable commission to any person in consideration of his
purchasing or agreeing to purchase shares of the Corporation, whether from the
Corporation or from any other person, or procuring or agreeing to procure
purchasers for any such shares.
TRANSFER OF SECURITIES
65. Registration of Transfers. Subject to the provisions of the Act, no
transfer of shares shall be registered in a securities register except upon
presentation of the certificate representing such shares with an endorsement
which complies with the Act made thereon or delivered therewith duly executed
by an appropriate person as provided by the Act, together with such reasonable
assurance that the endorsement is genuine and effective as the board may from
time to time prescribe, upon payment of all applicable taxes and any fees
prescribed by the board. Certificates representing shares to be transferred
shall be surrendered and cancelled.
66. Transfer Agent and Registrar. The directors may from time to time by
resolution appoint or remove one or more transfer agents and/or branch
transfer agents and/or registrars and/or branch registrars (which may or may
not be the same individual or body corporate) for the securities issued by the
Corporation in registered form (or for such securities of any class or
classes) and may provide for the registration of transfers of such securities
(or such securities of any class or classes) in one or more places and such
transfer agents and/or branch transfer agents and/or registrars and/or branch
registrars shall keep all necessary books and registers of the Corporation for
the registering of such securities (or such securities of the class or classes
in respect of which any such appointment has been made). In the event of any
such appointment in respect of the shares (or the shares of any class or
classes) of the Corporation, all share certificates issued by the Corporation
in respect of the shares (or the shares of the class or classes in respect of
which any such appointment has been made) of the Corporation shall be
countersigned by or on behalf of one of the said transfer agents and/or branch
transfer agents and by or on behalf of one of the said re istrars and/or
branch registrars, if any. One person may be designated both registrar and
transfer agent.
67. Securities Registers. The securities register and the register of
transfers of the Corporation shall be kept at the registered office of the
Corporation or at such other office or place in Ontario as may from time to
time be designated by resolution of the board of directors and a branch
register or registers of transfers may be kept at such office or offices of
the Corporation or other place or places, either within or outside Ontario, as
may from time to time be designated by resolution of the directors.
68. Surrender of Certificates. No transfer of shares shall be recorded or
registered unless or until the certificate representing the shares to be
transferred has been surrendered and cancelled.
69. Non-recognition of Trusts. Subject to the provisions provided by the
Act, the Corporation may treat as absolute owner of any share the person in
whose name the share is registered in the securities register as if that
person had full legal capacity and authority to exercise all rights of
ownership, irrespective of any indication to the contrary through knowledge or
notice or description in the Corporation's records or on the share
certificate.
70. Shareholder indebted to the Corporation. Subject to subsection 40(2) of
the Act, the Corporation has a lien on a share registered in the name of a
shareholder or his legal representative for a debt of that shareholder to the
Corporation. By way of enforcement of such lien the directors may refuse to
permit the registration of a transfer of such share.
71. Replacement of Share Certificates. The board or any officer or agent
designated by the board may in its or his discretion direct the issue of a new
share certificate in lieu of and upon cancellation of a share certificate that
has been mutilated or in substitution for a share certificate claimed to have
been lost, destroyed or wrongfully taken on payment of such fee, not exceeding
$3.00, and on such terms as to indemnity, reimbursement of expenses and
evidence of loss and of title as the board may from time to time prescribe,
whether generally or in any particular case.
72. Joint Shareholders. If two or more persons are registered as joint
holders of any share, the Corporation shall not be bound to issue more than
one certificate in respect thereof, and delivery of such certificate to one of
such persons shall be sufficient delivery to all of them. Any one of such
persons may give effectual receipts for the certificate issued in respect
thereof or for any dividend, bonus, return of capital or other money payable
or warrant issuable in respect of such shares.
73. Deceased Shareholders. In the event of the death of a holder, or of one
of the joint holders, of any share, the Corporation shall not be required to
make any entry in the securities register in respect thereof or to make
payment of any dividends thereon except upon production of all such documents
as may be required by law and upon compliance with the reasonable requirements
of the Corporation and its transfer agent.
DIVIDENDS
74. The directors may from time to time by resolution declare and the
Corporation may pay dividends on the issued and outstanding shares in the
capital of the Corporation subject to the provisions (if any) of the articles
of the Corporation.
75. Dividend Cheques. A dividend payable in cash shall be paid by cheque
drawn on the Corporation's bankers or one of them to the order of each
registered holder of shares of the class or series in respect of which it has
been declared and mailed by prepaid ordinary mail to such registered holder at
his recorded address, unless such holder otherwise directs. In the case of
joint holders the cheque shall, unless such joint holders otherwise direct, be
made payable to the order of all of such joint holders and mailed to them at
their recorded address. The mailing of such cheque as aforesaid, unless the
same is not paid on due presentation, shall satisfy and discharge the
liability for the dividend to the extent of the sum represented thereby plus
the amount of any tax which the Corporation is required to and does withhold.
76. Non-receipt of Cheques. In the event of non-receipt of any dividend
cheque by the person to whom it is sent as aforesaid, the Corporation shall
issue to such person a replacement cheque for a like amount on such terms as
to indemnity, reimbursement of expenses and evidence of non- receipt and of
title as the board may from time to time prescribe, whether generally or in
any particular case.
77. Record Date for Dividends and Rights. The board may fix in advance a
date, preceding by not more than 50 days the date for the payment of any
dividend or the date for the issue of any warrant or other evidence of the
right to subscribe for securities of the Corporation, as a record date for the
determination of the persons entitled to receive payment of such dividend or
to exercise the right to subscribe for such securities, and notice of any such
record date shall be given not less than seven days before such record date in
the manner provided by the Act. If no record date is so fixed, the record
date for the determination of the persons entitled to receive payment of any
dividend or to exercise the right to subscribe for securities of the
Corporation shall be at the close of business on the day on which the
resolution relating to such dividend or right to subscribe is passed by the
board.
78. Unclaimed Dividends. Any dividend unclaimed after a period of six years
from the date on which the same has been declared to be payable shall be
forfeited and shall revert to the Corporation.
VOTING SHARES AND SECURITIES IN OTHER COMPANIES
79. All of the shares or other securities carrying voting rights of any
other body corporate held from time to time by the Corporation may be voted at
any and all meetings of shareholders, bondholders, debenture holders or
holders of other securities (as the case may be) of such other body corporate
and in such manner and by such person or persons as the board of directors of
the Corporation shall from time to time determine. The proper signing
officers of the Corporation may also from time to time execute and deliver for
and on behalf of the Corporation proxies and/or arrange for the issuance of
voting certificates and/or other evidence of the right to vote in such names
as they may determine without the necessity of a resolution or other action by
the board of directors.
INFORMATION AVAILABLE TO SHAREHOLDERS
80. Except as provided by the Act, no shareholder shall be entitled to
discovery of any information respecting any details or conduct of the
Corporation's business which in the opinion of the directors it would be
inexpedient in the interests of the Corporation to communicate to the public.
81. The directors may from time to time, subject to rights conferred by the
Act, determine whether and to what extent and at what time and place and under
what conditions or regulations the documents, books and registers and
accounting records of the Corporation or any of them shall be open to the
inspection of shareholders and no shareholder shall have any right to inspect
any document or book or register or accounting record of the Corporation
except as conferred by statute or authorized by the board of directors or by a
resolution of the shareholders.
NOTICES
82. Service. Any notice or other document required by the Act, the
Regulations, the articles or the by-laws to be sent to any shareholder or
director or to the auditor shall be delivered personally or sent by prepaid
mail or by prepaid transmitted or recorded communication to any such
shareholder at his latest address as shown in the records of the Corporation
or its transfer agent and to any such director at his latest address as shown
in the records of the Corporation or the most recent notice filed under the
Corporations Information Act, whichever is the most current and to the auditor
at his business address. If a notice or document is sent to a shareholder by
prepaid mail in accordance with this paragraph and the notice or document is
returned on three consecutive occasions because the shareholder cannot be
found, it shall not be necessary to send any further notices or documents to
the shareholder until he informs the Corporation in writing of his new
address. A notice so delivered shall be deemed to have been given when it is
delivered personally or to the recorded address as aforesaid; a notice so
mailed shall be deemed to have been given when deposited in a post office or
public letter box and shall be deemed to have been received on the fifth day
after so depositing; and a notice so sent by any means of transmitted or
recorded communication shall be deemed to have been given when dispatched or
delivered to the appropriate communication company or agency or its
representative for dispatch. The Secretary may change or cause to be changed
the recorded address of any shareholder, director, officer, auditor or member
of a committee of the board in accordance with any information believed by him
to be reliable.
83. Shares registered in more than one name. All notices or other documents
with respect to any shares registered in more than one name shall be given to
whichever of such persons is named first in the records of the Corporation and
any notice or other document so given shall be sufficiently given to all the
holders of such shares.
84. Persons becoming entitled by operation of law. Subject to Section 67 of
the Act every person who by operation of law, transfer or any other means
whatsoever shall become entitled to any share or shares shall be bound by
every notice or other document in respect of such share or shares which,
previous to his name and address being entered in the records of the
Corporation, shall be duly given to the person or persons from whom he derives
his title to such share or shares.
85. Deceased Shareholders. Subject to Section 67 of the Act any notice or
other document delivered or sent by post, prepaid transmitted, recorded
communication or left at the address of any shareholder as the same appears in
the records of the Corporation shall, notwithstanding that such shareholder be
then deceased, and whether or not the Corporation has notice of his decease,
be deemed to have been duly served in respect of the shares held by such
shareholder (whether held solely or with any other person or persons) until
some other person be entered in his stead in the records of the Corporation as
the holder or one of the holders thereof and such service shall for all
purposes be deemed a sufficient service of such notice or document on his
heirs, executors or administrators and on all persons, if any, interested
through him or with him in such shares.
86. Signature to notices. The signature of any director or officer of the
Corporation to any notice or document to be given by the Corporation may be
written, stamped, typewritten or printed or partly written, stamped,
typewritten or printed.
87. Proof of Service. A certificate of the Chairman of the Board (if any),
the President, a Vice-President, the Secretary or the Treasurer or of any
other officer of the Corporation in office at the time of the making of the
certificate or of a transfer officer or any transfer agent or branch transfer
agent of shares of any class of the Corporation as to the facts in relation to
the mailing or delivery of any notice or other document to any shareholder,
director, officer or auditor or publication of any notice or other document
shall be conclusive evidence thereof and shall be binding on every
shareholder,
director, officer or auditor of the Corporation as the case may be.
88. Computation of Time. Subject to paragraph 9 of this by-law, in
computing the date when notice must be given under any provision requiring a
specified number of days notice of any meeting or other event both the date of
giving the notice and the date of the meeting or other event shall be
excluded.
89. Omissions and Errors. The accidental omission to give any notice to any
shareholder, director, officer, auditor or member of a committee of the board
or the non-receipt of any notice by any such person or any error in any notice
not affecting the substance thereof shall not invalidate any action taken at
any meeting held pursuant to such notice or otherwise found thereon.
90. Waiver of Notice. Any shareholder (or his duly appointed proxyholder),
director, officer, auditor or member of a committee of the board may at any
time waive notice, or waive or abridge the time for any notice, required to be
given to him under any provision of the Act, the regulations thereunder, the
articles, the by-laws or otherwise such waiver or abridgement, whether given
before or after the meeting or other event of which notice is required to be
given shall cure any default in the giving or in the time of such notice, as
the case may be. Any such waiver or abridgement shall be in writing except a
waiver of notice of a meeting of shareholders or of the board or of a
committee of the board which may be given in any manner.
EXECUTION OF INSTRUMENTS
91. Contracts, documents or instruments in writing requiring the signature
of the Corporation may be signed by:
(a) the Chairman of the Board, the Vice-Chairman of the Board, the
Managing Director, the President or a Vice-President and the
Secretary or the Treasurer, or
(b) any two directors
and all contracts, documents and instruments in writing so signed shall be
binding upon the Corporation without any further authorization or formality.
The board of directors shall have power from time to time by resolution to
appoint any officer or officers, or any person or persons, on behalf of the
Corporation either to sign contracts, documents and instruments in writing
generally or to sign specific contracts, documents or instruments in writing.
The corporate seal of the Corporation, if any, may be affixed to
contracts, documents and instruments in writing signed as aforesaid or by any
officer or officers, person 4 or persons, appointed as aforesaid by resolution
of the board of directors but any such contract, document or instrument is not
invalid merely because the corporate seal, if any, is not affixed thereto.
The term "contracts, documents or instruments in writing" as used in
this by-law shall include deeds, mortgages, hypothecs, charges, conveyances,
transfers and assignments of property real or personal, immovable or movable,
agreements, releases, receipts and discharges for the payment of money or
other obligations, conveyances, transfers and assignments of shares, share
warrants, stocks, bonds, debentures or other securities and all paper
writings.
In particular without limiting the generality of the foregoing:
(a) the Chairman of the Board, the Vice-Chairman of the Board, the
Managing Director, the President or a Vice-President and the
Secretary or the Treasurer, or
(b) any two directors
shall have authority to sell, assign, transfer, exchange, convert or convey
any and all shares, stocks, bonds, debentures, rights, warrants or other
securities owned by or registered in the name of the Corporation and to sign
and execute (under the seal of the Corporation or otherwise) all assignments,
transfers, conveyances, powers of attorney and other instruments that may be
necessary for the purpose of selling, assigning, transferring, exchanging,
converting or conveying any such shares, stocks, bonds, debentures, rights,
warrants or other securities.
The signature or signatures of the Chairman of the Board, the Vice-
Chairman of the Board, the Managing Director, the President, a Vice-President,
the Secretary, the Treasurer, an Assistant Secretary or an Assistant Treasurer
or any director of the Corporation and/or of any other officer or officers,
person or persons, appointed as aforesaid by resolution of the board of
directors may, if specifically authorized by resolution of the directors, be
printed, engraved, lithographed or otherwise mechanically reproduced upon any
contracts, documents or instruments in writing or bonds, debentures or other
securities of the Corporation executed or issued by or on behalf of the
Corporation and all contracts, documents or instruments in writing or bonds,
debentures or other securities of the Corporation on which the signature or
signatures of any of the foregoing officers or persons authorized as aforesaid
shall be so reproduced pursuant to special authorization by resolution of the
directors shall be deemed to have been manually signed by such officers or
persons whose signature or signatures is or are so reproduced and shall be as
valid to all intents and purposes as if they had been signed manually and
notwithstanding that the officers or persons whose signature or signatures is
or are so reproduced may have ceased to hold office at the date of the
delivery or issue of such contracts, documents or instruments in writing or
bonds, debentures or other securities of the Corporation.
FINANCIAL YEAR
92. The financial year of the Corporation shall terminate on such date in
each year as the directors may from time to time by resolution determine.
EFFECTIVE DATE
93. This by-law shall come into force upon being passed by the board except
with respect to those provisions, if any, which may require the prior approval
of shareholders in which event those portions of this by-law shall come into
effect upon having been approved by the shareholders.
ENACTED this 3rd day of September, 1986 [as amended August 23, 1996 by
the directors and confirmed by the shareholders on October 24, 1996].
WITNESS the corporate seal of the Corporation.
/s/ c.s. /s/
President Secretary
The foregoing by-law is hereby consented to by all of the directors of the
Corporation as evidenced by their signatures hereto pursuant to the provisions
of the Business Corporations Act, 1982.
/s/ /s/
/s/
The foregoing by-law is hereby confirmed b the sole shareholder of the
Corporation as evidenced by his signature hereto pursuant to the provisions of
the Business Corporations Act, 1982.
/s/
EXHIBIT 10.1
NON-NEGOTIABLE PROMISSORY NOTE
$5,000,000 March 29, 1996
For value received, Princeton Publishing, Inc., a Delaware corporation
("Princeton") promises to pay to Kearny Publishing, Inc. (the "Holder") the
principal sum of Five Million Dollars ($5,000,000) with annual interest at the
prime rate of Chase Manhattan Bank of New York plus 2 percent (not to exceed
12%) per annum, to be adjusted each September 1 and April 1. Principal and
interest shall be due and payable as follows:
Interest shall accrue on unpaid principal commencing on the date of this
Note and shall continue to accrue until the indebtedness evidenced by this
Note has been paid in full. Interest only shall be payable monthly on the
10th day of each month commencing August 10th, 1996 and through July 10th,
1999. Interest shall be computed based on the actual number of days elapsed
in a particular month over a 365-day year. Commencing on August 10th, 1999,
payments of principal and interest in an amount determined based on 30-year
amortization shall be due on the 10th day of each month, with a final payment
of all principal and interest then remaining unpaid due on March 28, 2006.
This Note may be prepaid in whole or in part at any time prior to the
due date at the option of Princeton without premium, penalty or other fees.
All payments made pursuant to this Note shall be applied first to interest due
and then to principal.
Princeton has full rights of set-off against payments due pursuant
hereto with respect to all damages, loss, deficiency, costs and expenses
actually incurred by Princeton due to any of the following:
1. Any failure by the Holder to cause the timely and proper
completion of all matters required by the State of Wisconsin
regarding environmental issues;
2. Commencement of any legal proceeding or action by Fidelcor, its
successors or assigns, naming Princeton or any affiliate of
Princeton arising out of claims by Fidelcor against the Holder or
its affiliates;
3. Any lien existing on any asset purchased by Princeton or an
affiliate of Princeton this date from the Holder or its
affiliates, which exceeded the amount disclosed to Princeton or
was not disclosed to Princeton; or
4. Any misrepresentation, breach of warranty, or nonfulfillment of
any agreement or covenant by any Seller or Seller Stockholder
pursuant to an Asset Purchase Agreement of even date herewith, in
which this Note is described;
provided, however, that with respect to item 4, Princeton shall have no right
to set-off unless and until such a judgment from a court of competent
jurisdiction is obtained.
An Event of Default shall be deemed to have occurred hereunder upon a
failure by Princeton to cause or make any payment when due which continues
unremedied for twenty (20) days after written notice from the Holder;
provided, however, that if there occur more than two Events of Default within
one calendar year, Holder need not give any written notice upon the third or
greater failure within the same calendar year to cause or make a payment when
due; and the twenty (20) day cure period shall be deemed to commence from the
date of such failure without any action being taken by the Holder. The Holder
shall be entitled to retain all payments previously made hereunder in the
event of default hereunder, and all claims to same are hereby relinquished by
Princeton. The Holder does not hereby waive its right to pursue any remedies
upon default.
In an Event of Default all amounts to be paid hereunder shall become
immediately due and payable in full.
Payments due pursuant to this Note are secured as set forth in a
Security Agreement between the parties of even date herewith.
No delay or omission by the Holder in exercising or enforcing any of the
Holder's powers, rights, privileges, remedies or discretions hereunder shall
operate as a waiver thereof on that occasion nor on any other occasion. No
waiver of any default hereunder shall operate as a waiver of any other default
hereunder, nor as a continuing waiver. Princeton agrees to pay on demand all
costs of collection, including reasonable attorneys' fees, incurred by the
Holder in enforcing the obligations created by this Note.
Princeton acknowledges that the Holder may assign its rights hereunder;
however, the parties acknowledge that under no circumstance shall any such
assignee be a "holder in due course," but shall be subject to all defenses,
claims and rights of Princeton hereunder, past, present and future, regardless
of consideration paid, knowledge of defenses or claims, or otherwise.
THIS NOTE SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW YORK
AND SHALL TAKE EFFECT AS A SEALED INSTRUMENT.
WITNESS: Princeton Publishing, Inc.
/s/ By: /s/ James J. McNamara
James J. McNamara, President
EXHIBIT 10.2
SECURITY AGREEMENT
This SECURITY AGREEMENT (the "Agreement"), dated as of March 29 ,
1996, is made by Princeton Publishing, Inc., Princeton Trademarks, Inc., and
Kingston Press, Inc., each a Delaware corporation having an office at 214
Brazilian Ave., Suite 400, Palm Beach, FL 33480 (collectively, the
"Debtor"), in favor of Kearny Publishing, Inc. ("Secured Party").
R E C I T A L S :
A. Pursuant to a certain Asset Purchase Agreement of even date
herewith, by and between Debtor and Secured Party (the "Asset Purchase
Agreement"), Debtor has executed certain promissory notes payable to Secured
Party, copies of which are attached hereto (the "Notes"), and has agreed to
secure repayment under the Notes as set forth herein.
B. Debtor is the owner of the Pledged Collateral (as hereinafter
defined).
C. This Agreement is given by Debtor in favor of the Secured Party
for its benefit to secure the payment and performance of Debtor's
obligations pursuant to the Notes (the "Secured Obligations").
A G R E E M E N T :
NOW, THEREFORE, in consideration of the foregoing premises and for
other good and valuable consideration, the receipt and sufficiency of which
are hereby acknowledged, Debtor and Secured Party hereby agree as follows:
Section 1. Grant of Security Interests. As collateral security for
the prompt and complete payment and performance when due of Debtor's
obligations pursuant to the Notes, Debtor hereby pledges, assigns, transfers
and grants to Secured Party a continuing first priority security interest in
and to all those assets purchased by Debtor from Secured Party this date
pursuant to the Asset Purchase Agreement and the proceeds thereof (which
includes, but is not limited to, receivables and work in process) (the
"Pledged Collateral"); provided that, notwithstanding anything set forth
herein to the contrary, the foregoing grant of a security interest shall not
include a security interest in, and the Pledged Collateral shall not
include, any contract or intangible if the granting of a security interest
therein is prohibited by law or by the terms and provisions of the written
agreement, document or instrument creating or evidencing such contract or
intangible or rights related thereto.
Section 2. Representations, Warranties and Covenants. Debtor
represents, warrants and covenants as follows:
(a) No liens. Debtor is as of the date hereof, and, as to Pledged
Collateral acquired by it from time to time after the date hereof, Debtor
will be the owner of all Pledged Collateral free from any lien or other
right, title or interest of any person or entity, other than specifically
provided in the Asset Purchase Agreement, and Debtor shall defend the
Pledged Collateral against all claims and demands of all persons and
entities at any time claiming any interest therein adverse to Secured Party.
(b) Other Financing Statements. So long as any of the Secured
Obligations remains unpaid and this Agreement remains in effect, Debtor
shall not execute or authorize to be filed in any public office any
financing statement (or similar statement or instrument of registration
under the law of any jurisdiction) or statements relating to the Pledged
Collateral, except financing statements filed or to be filed in respect of
and covering the security interests granted hereby by Debtor.
(c) Chief Executive Office; Records. The chief executive office of
Debtor is located at 214 Brazilian Ave., Suite 400, Palm Beach, FL 33480.
Debtor also has a place of business in Wisconsin. Debtor shall not move its
chief executive office, except to such new location as Debtor may establish
in accordance with the last sentence of this Section 2(c). Other than with
respect to transactions occurring in the ordinary course of Debtor's
business (to which Secured Party consents notwithstanding contrary
provisions of this Agreement), all Pledged Collateral and all books of
account and records of Debtor relating to the Pledged Collateral are, and
will continue to be, kept at such chief executive office, or at such new
location for such chief executive office as Debtor may establish in
accordance with the last sentence of this Section 2(c). Debtor shall not
establish a new location for its chief executive office nor shall it change
its name until (i) it shall have given to Secured Party not less than 45
days' prior written notice of its intention so to do, clearly describing
such new location or name (which shall be in the continental United States
of America) and providing such other information in connection therewith as
Secured Party may request, and (ii) with respect to such new location or
name, Debtor shall have taken all action satisfactory to Secured Party to
maintain the perfection and proof of the security interest of Secured Party
in the Pledged Collateral intended to be granted hereby, including, without
limitation, obtaining waivers of landlord's or warehouseman's liens with
respect to such new location.
(d) Authorization, Enforceability. Debtor has full corporate power,
authority and legal right to pledge and grant a security interest in all the
Pledged Collateral pursuant to this Agreement, and this Agreement
constitutes the legal, valid and binding obligation of Debtor, enforceable
against Debtor in accordance with its terms.
(e) No Consents, etc. No consent of any other party and no consent,
authorization, approval, or other action by, and no notice to or filing
with, any governmental authority (other than a court in connection with the
exercise of judicial remedies by Secured Party) or regulatory body is
required either (x) for the pledge by Debtor of the Pledged Collateral
pursuant to this Agreement, or for the execution, delivery or performance of
this Agreement by Debtor or (y) for the exercise by Secured Party of the
rights provided for in this Agreement or the remedies in respect of the
Pledged Collateral pursuant to this Agreement.
Section 3. Provisions Concerning Pledged Collateral.
(a) Protection of Secured Party's Security. Debtor shall not take
any action that impairs the rights of Secured Party in the Pledged
Collateral. Debtor shall at all times keep the tangible Pledged Collateral
insured in favor of Secured Party, at the Debtor's own expense, to Secured
Party's reasonable satisfaction against fire, theft and all other risks to
which the Pledged Collateral may be subject, in such amounts (but in no
event greater than the replacement cost thereof) and with such deductibles
as would be maintained by operators of businesses similar to the business of
Debtor or as Secured Party may otherwise require. Each policy or
certificate with respect to such insurance shall be endorsed to Secured
Party's satisfaction for the benefit of Secured Party (including, without
limitation, by naming Secured Party as an additional named insured or an
additional loss payee as Secured Party may request) and such policy or
certificate shall be delivered to Secured Party. Each such policy shall
state that it cannot be canceled without 30 days' prior written notice to
Secured Party. At least 30 days prior to the expiration of any such policy
of insurance, Debtor shall deliver to Secured Party an extension or renewal
policy or an insurance certificate evidencing renewal or extension of such
policy. If Debtor shall fail to insure such Pledged Collateral to Secured
Party's reasonable satisfaction or if Debtor shall fail to so endorse and
deposit, or to extend or renew, all such insurance policies or certificates
with respect thereto, Secured Party shall have the right (but shall be under
no obligation) to advance funds to procure or renew or extend such insurance
and Debtor agrees to reimburse Secured Party for all costs and expenses
thereof, with interest on all such funds from the date advanced at the
highest rate then payable under the Notes. In the event of insurable loss
or damage to any Pledged Collateral, then Secured Party must use such
proceeds to repair, replace or improve damaged Pledged Collateral unless
Secured Party within thirty (30) days after the receipt of such proceeds
commences the repossession of the Pledged Collateral upon an Event of
Default in accordance with the provisions of Section 5 hereof.
(b) Maintenance of Pledged Collateral. Subject to transactions in
the ordinary course of Debtor's business, Debtor shall cause the Pledged
Collateral to be maintained and preserved in the same condition, repair and
working order as when purchased by Debtor, ordinary wear and tear excepted,
and to the extent consistent with past business practice.
(c) Payment of Taxes; Claims. Debtor shall pay promptly when due
all property and other taxes, assessments and governmental charges or levies
imposed upon, and all claims (including claims for labor, materials and
supplies) against, the Pledged Collateral.
(d) Financing Statements. Debtor shall sign and deliver to Secured
Party such financing and continuation statements, in form acceptable to
Secured Party, as may from time to time be reasonably requested by Secured
Party in order to continue and maintain a valid, enforceable, first priority
security interest in, the Pledged Collateral as provided herein and the
other rights, as against third parties, provided hereby. Debtor authorizes
Secured Party to file any such financing or continuation statements without
the signature of Debtor.
(e) Ordinary Course. Nothing in this Section 3 shall be deemed to
prohibit (i) the sale of inventory and the collection of receivables by
Debtor in the ordinary course of business, or (ii) the disposition and
replacement of obsolete assets.
Section 4. Transfers and Other Liens. Debtor agrees that it will
not, except as otherwise expressly permitted by Secured Party (i) sell,
convey, assign or otherwise dispose of, or grant any option with respect to,
any of the Pledged Collateral or (ii) create or permit to exist any lien
upon or with respect to any of the Pledged Collateral other than the lien
and security interest granted to Secured Party under this Agreement.
Notwithstanding the foregoing, Debtor may transfer Pledged Collateral to an
affiliate controlled by, which controls, or which is under common control
with, Debtor, but in any such case the transferee shall be bound by all the
provisions of this Agreement.
Section 5. Remedies.
(a) Remedies; Obtaining the Pledged Collateral Upon Event of
Default. If any Event of Default (as defined in the Notes) shall have
occurred, and subsequent thereto the Secured Party has accepted payment of
all arrearages under the Notes, and a period of not less than six (6) months
has elapsed since the date of payment of all such arrearages without the
occurrence of another Event of Default, then the original Event of Default
shall be automatically deemed a "Waived Event of Default" hereunder.
If any Event of Default which is not a Waived Event of Default shall
have occurred, then and in every such case, Secured Party may, at any time
or from time to time thereafter (until such Event of Default becomes a
Waived Event of Default, if ever):
(i) Personally, or by agents or attorneys, immediately take
possession of the Pledged Collateral or any part thereof, from Debtor
or any other person or entity who then has possession of any part
thereof with or without notice or process of law, and for that purpose
may enter upon Debtor's premises where any of the Pledged Collateral
is located and remove such Pledged Collateral and use in connection
with such removal any and all services, supplies, aids and other
facilities of Debtor;
(ii) Instruct the obligor or obligors on any agreement,
instrument or other obligation constituting the Pledged Collateral to
make any payment required by the terms of such instrument or agreement
directly to Secured Party; provided, however, that in the event that
any such payments are made directly to Debtor, Debtor shall segregate
all amounts received pursuant thereto in a separate account and pay
the same promptly to Secured Party;
(iii) Sell, assign or otherwise liquidate, or direct Debtor to
sell, assign or otherwise liquidate, any or all investments made in
whole or in part with the Pledged Collateral or any part thereof, and
take possession of the proceeds of any such sale, assignment or
liquidation;
(iv) Take possession of the Pledged Collateral or any part
thereof, by directing Debtor in writing to deliver the same to Secured
Party at any place or places designated by Secured Party, in which
event Debtor shall at its own expense: (a) forthwith cause the same
to be moved to the place or place so designated by Secured Party and
there
delivered to Secured Party; (b) store and keep any Pledged Collateral so
delivered to Secured Party at such place or places pending further action
by
Secured Party; and (c) while the Pledged Collateral shall be so stored
and
kept, provide such guards and maintenance services as shall be necessary
to
protect the same and to preserve and maintain them in good condition.
Debtor's obligation to deliver the Pledged Collateral is of the essence
of
this Agreement. Upon application to a court of equity having
jurisdiction,
Secured Party shall be entitled to a decree requiring specific
performance
by the Debtor of such obligation.
(b) Remedies: Disposition of the Pledged Collateral.
(i) In connection with the Secured Party's proper exercise of
its rights and remedies provided in subsection 5(a) above, the Secured
Party may from time to time exercise in respect of the Pledged
Collateral, in addition to other rights and remedies provided for
herein or otherwise available to it, all the rights and remedies of a
secured party under the Uniform Commercial Code at the time of an
event of default, and the Secured Party may also in its sole
discretion, without notice except as specified below, sell the Pledged
Collateral or any part thereof in one or more parcels at public or
private sale, at any exchange, broker's board or at any of the Secured
Party's offices or elsewhere, for cash, on credit or for future
delivery, and at such price or prices and upon such other terms as are
commercially reasonable. The Secured Party may be the Purchaser of
any or all of the Pledged Collateral at any such sale and shall be
entitled, for the purpose of bidding and making settlement or payment
of the purchase price for all or any portion of the Pledged Collateral
sold at such sale, to use and apply any of the Secured Obligations
owed to such Person as a credit on account the purchase price of any
Pledged Collateral payable by such Person at such sale. Each
purchaser at any such sale shall acquire the property sold absolutely
free from any claim or right on the part of Debtor, and Debtor hereby
waives, to the full extent permitted by law, all rights of redemption,
stay or appraisal hereafter enacted. The Secured Party shall not be
obligated to make any sale of Pledged Collateral regardless of notice
of sale having been given. The Secured Party may adjourn any public
or private sale from time to time by announcement at the time and
place fixed therefor, and such sale may, without further notice, be
made at the time and place to which it was so adjourned.
(ii) Debtor agrees that, to the extent notice of sale shall be
required by law, 10 days' notice from Secured Party of the time and
place of any public sale or of the time after which a private sale or
other intended disposition is to take place shall be commercially
reasonable notification of such matters. No notification need be
given to Debtor if it has signed, after the occurrence of an Event of
Default, a statement renouncing or modifying any right to notification
of sale or other intended disposition. In addition to the rights and
remedies provided in this Agreement and in the Notes, Secured Party
shall have all the rights and remedies of a secured party under the
Uniform Commercial Code.
(c) In the event Secured Party shall have instituted any proceeding
to enforce any right, power or remedy under this Agreement by foreclosure,
sale, entry or otherwise, and such proceeding shall have been discontinued
or abandoned for any reason or shall have been determined adversely to
Secured Party, then and in every such case, Debtor and Secured Party shall
be restored to their respective former positions and rights hereunder with
respect to the Pledged Collateral and the Notes, and all rights, remedies
and powers of Secured Party shall continue as if no such proceeding had been
instituted.
(d) Reversion of Title to Pledged Collateral. In the event the
Secured Party properly exercises any of its rights and remedies provided in
subsection 5(a) above, then immediately upon the exercise of any such right,
all Pledged Collateral shall be deemed to have reverted to ownership by
Secured Party. Any such action by Secured Party shall operate to divest all
rights, title, interest, claim and demand, either at law or in equity, of
Debtor in and to the Pledged Collateral, and shall be a perpetual bar both
at law and in equity against Debtor and against any and all persons and
entities claiming or attempting to claim the Pledged Collateral, or any part
thereof, from, through or under Debtor. In such event, if Secured Party
chooses to retain the Pledged Collateral, the indebtedness then remaining
unpaid pursuant to the Notes shall be deemed reduced by the fair market
value of the Pledged Collateral at the time.
Section 6. Application of Proceeds. The proceeds of any Pledged
Collateral obtained pursuant to the exercise of any remedy set forth in
Section 5 shall be applied, together with any other sums then held by
Secured Party pursuant to this Agreement, promptly by Secured Party:
First, to the payment of all costs and expenses, fees, commissions and
taxes of such sale, collection or other realization, including, without
limitation, reasonable compensation to the Secured Party and its agents and
counsel, and all expenses, liabilities and advances made or incurred by the
Secured Party in connection therewith;
Second, to the indefeasible payment in full in cash of the Secured
Obligations, ratably according to the unpaid amounts thereof, without
preference or priority of any kind among amounts
so due and payable; and
Third, to Debtor, or its successors or assigns, or to whomsoever may
be lawfully entitled to receive the same or as a court of competent
jurisdiction may direct, of any surplus remaining from such proceeds.
Section 7. Modifications in Writing. No amendment, modification,
supplement, termination or waiver of or to any provision of this Agreement,
nor consent to any departure by Debtor therefrom, shall be effective unless
the same shall be writing and signed by the Secured Party. Any amendment,
modification or supplement of or to any provision of this Agreement, any
waiver of any provision of this Agreement, and any consent to any departure
by Debtor from the terms of any provision of this Agreement, shall be
effective only in the specific instance and for the specific purpose for
which made given. Except where notice is specifically required by this
Agreement or the Notes, no notice to or demand on Debtor in any case shall
entitle Debtor to any other or further notice or demand in similar or other
circumstances.
Section 8. Termination; Release. When all the Secured Obligations
have been indefeasibly paid in full and have been terminated, this Agreement
shall terminate. Upon termination of this Agreement, Secured Party shall,
upon the request and at the expense of Debtor, forthwith assign, transfer
and deliver to Debtor, proper instruments (including Uniform Commercial Code
termination statements on Form UCC-3) acknowledging the termination of this
Agreement.
Section 9. Notices. Unless otherwise provided herein or in the
Notes, any notice or other communication herein required or permitted to be
given shall be in writing and may be personally served, telecopied, telexed
or sent by United States mail, to Debtor or Secured Party, as the case may
be, addressed to it at the respective address set forth in the Notes, or at
such other address as shall be designated by Debtor or Secured Party, as the
case may be, in a written notice to the other party complying as to delivery
with the terms of this Section 9. All such notices and other communications
shall be deemed to have been given when delivered in person, or received by
telecopy or telex; or four business days after deposit in the United States
mail, registered or certified, with postage prepaid and properly addressed;
provided that notices to Secured Party shall not be effective until received
by Secured Party.
Section 10. Governing Law; Terms. This Agreement shall be governed
by, and shall be construed and enforced in accordance with, the laws of the
State of New York, without regard to principles of conflicts of laws, except
to the extent that the validity or perfection of the security interest
hereunder, or remedies hereunder, in respect of any particular property are
governed by the laws of a jurisdiction other than the State of New York.
Section 11. Severability of Provisions. Any provision of this
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 or
affecting the validity or enforceability of such provision in any other
jurisdiction.
Section 12. Execution in Counterparts. This Agreement and any
amendments, waivers, consents or supplements hereto may be executed in any
number of counterparts and by different parties hereto in separate
counterparts, each of which when so executed and delivered shall be deemed
to be an original, but all such counterparts together shall constitute one
and the same agreement.
Section 13. Headings. The Section headings used in this Agreement
are for convenience of reference only and shall not affect the construction
of this Agreement.
Section 14. Obligations Absolute. All obligations of Debtor
hereunder shall be absolute and unconditional irrespective of:
(a) any bankruptcy, insolvency, reorganization, arrangement,
readjustment, composition, liquidation or the like of Debtor;
(b) any lack of validity or enforceability of the Notes, or any
other agreement or instrument relating thereto;
(c) any change in the time, manner or place of payment of, or in any
other term of, all or any of the Secured Obligations, or any other amendment
or waiver of or any consent to any departure from the Notes, or any other
agreement or instrument relating thereto;
(d) any exchange, release or non-perfection of any other collateral,
or any release or amendment or waiver of or consent to any departure from
any guarantee, for all or any of the Secured Obligations;
(e) any exercise or non-exercise, or any waiver of any right,
remedy, power or privilege under or in respect of this Agreement or the
Notes except as specifically set forth in a written waiver or as otherwise
provided in Section 5 hereof; or
(f) any other circumstances which might otherwise constitute a
defense available to, or a discharge of, the Debtor.
Section 15. Bankruptcy. Debtor may not file any voluntary bankruptcy
petition, or make any voluntary assignment for the benefit of creditors,
without, at least four months prior thereto, advising Secured Party as to
Debtor's intention to do so. Such notification shall be deemed an Event of
Default. In the event that a bankruptcy petition is filed by or against
Debtor, such an event shall be deemed an additional Event of Default, and
the Pledged Collateral shall be deemed to have been reconveyed to Secured
Party four months and one day prior to such filing, and Secured Party shall
be deemed the owner of the Pledged Collateral Assets as of that time.
Additionally, in the event of any such bankruptcy filing, Secured Party
shall, with the permission of the Court, be appointed the Trustee of the
Pledged Collateral for bankruptcy purposes and shall take the place and
stead of a debtor in possession.
IN WITNESS WHEREOF, Debtor has caused this Agreement to be executed
and delivered under seal by its duly authorized officer as of the date first
above written.
Princeton Publishing, Inc.,
as Debtor
By:/s/ James J. McNamara, Pres.
Princeton Trademarks, Inc.,
as Debtor
By:/s/ James J. McNamara, Pres.
Kingston Press, Inc.,
as Debtor
By:/s/ James J. McNamara, Pres.
Kearny Publishing, Inc.
as Secured Party
By: /s/ Murray Traub
EXHIBIT 10.5
[This Agreement now between Curtis Circulation Company and Princeton
Publishing, Inc., as assignee of Scott Mag. Dist. Corp.]
CURTIS CIRCULATION COMPANY
DISTRIBUTION AGREEMENT
DATED MARCH 14,1990
Between Curtis Circulation Company, 433 Hackensack Avenue, Hackensack,
New Jersey 07601 (hereinafter called "Curtis") and Scott Mag. Dist. Corp., 300
W. 43rd Street, New York, New York 10036 (hereinafter called "Publisher").
1. Curtis shall be the exclusive distributor in the United States,
Canada and overseas of all present and future publications published by
Publisher, its subsidiaries or affiliates at any time during the term of this
agreement, (hereinafter called "Publications") including, but not limited to
the following subsidiaries: J.Q. Adams Productions, Inc., Adult Movie Review,
Inc., Leemar Publishing, Inc., Manor Book, Inc.
2. The initial Publications to be distributed under this agreement,
the initial issues thereof to be so distributed and the frequency of
Publication are listed on Attachment A.
3. Publisher warrants and represents to Curtis the following:
(a) Publisher is the owner or licensee of (i) each of the titles to
the Publications covered by this distribution agreement, (ii) the logos and/or
(iii) trademarks to be used in connection with such Publications and there are
no liens or encumbrances on those titles, logos and trademarks;
(b) Publisher has the ability and authority to deliver to Curtis
without liens or encumbrances, sufficient copies of each issue of the
Publications covered by this agreement in salable condition to comply with the
terms contained herein;
(c) Publisher has the full right, power and authority to enter into
this agreement and neither the execution or delivery of this agreement nor the
consummation of the transactions contemplated by this agreement shall
constitute or result in a breach of any agreement to which the Publisher is a
party;
(d) Upon completion and delivery of each issue of each Publication
covered by this agreement, Publisher will own or control to the fullest extent
permitted by applicable law all rights of whatsoever kind and character in and
to: (i) the title of the Publication, (ii) its logo, (iii) trademark, (iv)
copyright for each issue and (v) the material contained in each issue, without
any mortgages, liens or encumbrances of any kind and without rights being in
other persons not party hereto;
(e) Upon completion and delivery of each issue of the Publications
covered by this agreement, nothing contained in each of such issues will be
grounds for an action either to prevent distribution thereof or for damages by
reason of the tact that the material contained therein is libelous,
slanderous, obscene, invades any right of privacy, a violation of any
copyright or other personal or property rights or for any other reason
whatsoever, and
(f) Publisher will regularly issue each issue of the Publications
covered by this agreement during the term of this agreement and any renewal
thereof and will cause its printer(s) to send to Curtis written notice
confirming that all copies of the respective issues of each Publication have
been printed and shipped to Curtis' wholesalers and/or retailers ("customers")
in accordance with the galleys prepared by Curtis pursuant to Paragraph 7
(hereinafter such notice shall be referred to as "Notice of Completion of
Shipment").
4. If Publisher desires to change the frequency of publishing issues
of any Publications, it shall first obtain the consent of Curtis at least 60
days before the proposed shipping date of any affected issue. If Publisher
changes such frequency without first obtaining such consent, Curtis will bill
and Publisher shall pay to Curtis all costs and damages which Curtis may incur
by reason thereof. Publisher will supply to Curtis a schedule of shipping and
on-sale dates for each issue of the Publication at least six (6) months in
advance of the on-sale date and at such times thereafter as requested.
5. The colophon of the Curtis Circulation Company shall be printed on
the cover of each magazine distributed by Curtis hereunder. The Publication's
code number assigned by Curtis shall also appear on each cover. The print
order and cover price for distributions hereunder will be mutually agreed upon
by Curtis and Publisher, providing, however, that if Publisher and Curtis do
not agree, then Curtis shall not be required to advance to Publisher any money
under Paragraph 12 hereof. Publisher hereby authorizes Curtis to adjust
claims made by any of Curtis' customers for delivery shortages or damages to
copies of the issues of the Publications and agrees to pay to Curtis on demand
all such shortages and damage allowances granted by Curtis to its customers.
6. Publisher shall be responsible for shipping and traffic costs
(including, without limitation, import and other duties) incurred to ship
copies of the Publications to all customers of Curtis located throughout the
world.
7. Individual shipments to Curtis' customers shall be specified on a
galley which, with the Publisher's cooperation, Curtis shall supply to the
Publisher sufficiently in advance so that shipments can be prepared and
shipped to arrive at customers' locations approximately ten (10) days prior to
the Publications' on-sale dates. Any cost incurred for reshipping copies at
Publisher's request while a Publication is on sale will be borne by Publisher.
All copies of Publications shall be fully returnable. Publisher will accept
whole copies, front covers, headings, Curtis' certification of customers'
affidavit statements as the basis for the adjustment of unsold copies covered
by such acceptance. Should Publisher require whole copy returns, notice of
the quantities and full return address must be supplied to Curtis at least
fifteen (15) days prior to on-sale date. Curtis will use its best efforts to
comply with Publisher's request for whole copy returns, for which Publisher
shall pay Curtis the actual charge made by its customers, and pay all freight,
shipping and other charges incurred by Curtis (or Curtis' agents) in
connection therewith. Publisher shall bear the risk of loss for all copies of
Publications until the time they are received by Curtis' customers and during
any time they are being returned or reshipped at Publisher's instructions.
Publisher shall keep all returned whole copies from entering the stream of
commerce for at least 180 days after off-sale date, except to fill
subscriptions and mail order requests, or such other sale as is mutually
agreed upon.
8. It is understood by both parties that Curtis shall be responsible
for only those returns of those issues of Publisher that Curtis has billed and
distributed, it being distinctly understood that any and all returns of any
issues not billed and distributed by Curtis shall remain the responsibility of
Publisher and/or that of Publisher's prior distributor. In the event that
Curtis does credit its customers for returns not originally billed and
distributed by Curtis, Publisher hereby authorizes Curtis, at its option, to
(1) charge such returns against any other open or subsequent issues of
Publications or (ii) bill the amount of such returns to Publisher for payment
within five (5) days.
9. Publisher authorizes Curtis to offer on Publisher's behalf, a
Retail Display Allowance ("RDA") to any retailer which engages in the sale of
Publications and agrees to be bound by the terms of Publisher's RDA program.
Publisher further warrants that it will give notice at least once a year to
retailers of the availability of this allowance. Publisher hereby authorizes
Curtis to charge against the account of Publisher, Curtis' expense for
administering this plan and also the Retail Display Allowance of 10% of the
cover price of each copy sold of Publications to the extent that such Retail
Display Allowance shall become payable by Curtis.
10. Publisher shall pay Curtis for its distribution services as
described an Attachment C for each copy of each issue of any Publication sold
through primary wholesalers (the "distribution fee"). Curtis' distribution
fee for sale through Curtis' Specialty Sales Operation (sales to retail
accounts and secondary wholesalers) will be the difference between the amount
per copy remitted to Publisher for sales to primary Wholesalers and the price
per copy charged accounts serviced by the Specialty Sales Operation, as
provided on Attachment A.
11. For all copies distributed in certain wholesaler areas as listed
on Attachment B and other such areas as may be so classified from time to time
by Curtis, or to wholesalers which Publisher presently pays subsidies or
grants discounts of any kind, Curtis may bill Publisher and Publisher will pay
to Curtis the greater of (a) such additional amounts per copy as shown on the
attachment hereto or (b) the amount(s) presently paid by Publisher. Curtis
will attempt to limit areas and amounts to those specified in Attachment B.
Payment to Publisher for copies of Publications sold other than in the
United States will be paid by Curtis to Publisher in United States funds at
the exchange rates Curtis is charged by its banks.
12. Curtis shall advance to Publisher, providing Publisher does not
then owe Curtis any monies under this agreement, the following amounts at the
following times with respect to each issue of each Publication distributed
hereunder:
(a) FIRST ADVANCE: 80% of Curtis' Estimated Net Sale (billings
to Curtis' customers less allowance for unsold copies) ("ENS") less Curtis'
distribution fee paid 10 days after receipt of Completion of Shipment Notice.
(b) SECOND ADVANCE: 90% of Curtis' ENS less any previous
advance(s) and Curtis' distribution fee paid 60 days after the off-sale date.
(c) THIRD ADVANCE: 100% of Curtis' ENS less any previous
advance(s) and Curtis' distribution fee paid 120 days after the off -sale
date.
(d) Payment for all copies sold outside the United States and
Canada, and to secondary wholesalers and individual retailers as noted in
Attachment A items 2 and 3 shall be made 90 days later than each payment
deacribed in 12 (a, (b) and (c) above.
13. (a) Final Settlement for each issue of each Publication
distributed hereunder shall be made 180 days after off-sale date for both
United States and Canadian sales and 90 days later for sales outside the
United States and Canada and to secondary wholesalers and individual retail
customers; but Publisher agrees to accept returns thereafter until 360 days
after the off-sale date and hereby authorizes Curtis to (i) charge such
returns against any other open or subsequent issues of Publications or (ii)
bill the amount of such returns to Publisher for payment within five (5) days.
(b) The balance due to Publisher, or overadvances due to Curtis,
as the case may be, as of Final Settlement, shall be determined by multiplying
the price per copy charged by Curtis to its customers by the number of copies
sold and not returned and subtracting therefrom to the extent same have not
been previously paid, (i) the fees of Curtis for distribution, (ii) all other
costs, expenses and charges for which Publisher is responsible under the terms
of this agreement, and (iii) all other costs, expenses and charges incurred
by Curtis on behalf of Publisher.
(c) Publisher's suggested price per copy to Curtis' customers
will be the cover price less those discounts as described on Attachment A and
B (or as otherwise provided by Paragraph 11 hereof). Any exceptions shall be
mutually agreed upon.
(d) (i) The fees of Curtis for distribution, (ii) all other
costs, expenses and charges for which Publisher is responsible under the terms
of this agreement, and (iii) all other costs, expenses and charges incurred by
Curtis on behalf of Publisher, shall be paid by Publisher to Curtis within
five (5) days after notification by Curtis or at the option of Curtis may be
deducted from any advances or payments due Publisher on any issue of any
Publication distributed hereunder.
(e) Regardless of (i) Curtis' ongoing method for accounting for
copies received, copies unsold and copies sold, (ii) the basis for any
advances made by Curtis to Publisher, be it upon draw, copies shipped,
estimated net sales or otherwise, or (iii) any other provision in this
agreement, the obligation of Curtis to make payment to Publisher shall be
based solely upon the calculation made upon Final Settlement pursuant to
subparagraph (b) of this Paragraph 13.
(f) The Final Settlement for each issue of each Publication
shall be shown by a written statement prepared by Curtis, setting forth the
totals of all items debited and credited and the resultant balance and
Publisher agrees to accept such statement as an account stated and the items
therein enumerated as true and correct, except as to any specific item or
items to which Publisher may object in writing within fifteen (15) days from
the date of the mailing of such statements.
14. In the event a customer of Curtis shall take advantage of any
federal or state insolvency statute or any involuntary proceeding under any
such statute shall be filed or convened against such customer, in the event
such customer shall cease its business operation with the effect that such
customer shall not return its unsold copies of the Publication(s), Curtis
shall use the average net sale percentage of the Publication(s) as reported by
such retailer, distributor or customer for the twelve (12) months (or lesser
period if applicable) prior to those months for which such retailer,
wholesaler or customer shall not have submitted all unsold copies of the
Publication(s). This average shall be used in determining and computing the
net sales of the Publication(s) shipped to such retailer, wholesaler or
customer for said months.
15. (a) If for any reason, Curtis makes an overadvance or
overpayment to Publisher, on any one or more issues of any Publications it
distributes for Publisher, such overadvance or overpayment, at the option of
Curtis, shall (i) be deducted by Curtis from any subsequent advances or
payments due on any issue of any Publication which Curtis distributes for
Publisher or (ii) be paid to Curtis within five (5) days after Curtis' demand
for payment. In any event, any and all such overadvances and overpayments
shall promptly be remitted by Publisher to Curtis upon termination of this
agreement or at such time as Curtis shall have discontinued distributing any
Publication or issue for Publisher for any reason whatsoever.
(b) The Publisher shall assume and be held liable for any and
all debts and obligations owed Curtis as a result of prior agreements between
Publisher's affiliates or subsidiaries and Curtis.
16. Publisher hereby authorizes Curtis to charge $2,,000 against the
account of the Publisher, for administering each Publisher request for the
Audit Bureau of Circulation county reports. No charge will be made for the
State Circulation analyses for the Publication(s).
17. At no cost to Publisher, Curtis shall give such space as it deems
reasonable in its house magazine and/or bulletins for the promotion of the
Publications. However, the cost of all special promotions authorized by
Publisher shall be borne by Publisher. Publisher agrees that in a11 trade
press advertising pertaining to single copy circulation, it will include a
phrase substantially as follows: "Exclusively (internationally) distributed by
Curtis Circulation Company, Hackensack, New Jersey."
18. Publisher shall indemnify and hold harmless Curtis, its parent,
subsidiary or affiliated corporations, their officers, agents, representatives
or any of its customers, wholesalers, and their respective retailers against
any loss, damages, fines, judgments, expenditures or claims including counsel
fees, legal expenses and other costs, actually incurred by them or any of them
in connection with any claim arising out of a relationship which exists or may
have existed between Publisher and another distributor, or in connection with
the distribution of any Publications, or any issue thereof, or any promotional
material provided by Publisher, when same is questioned or objected to by
public authorities, or other authorities, or in defending or settling any
claim, civil action or criminal prosecution against them, garnishment or any
of them arising out of the use of the title of said Publication or the
contents and printed matter, including advertisements, pictures or photographs
contained in the covers or any page of said Publication, or in any
supplementary questioning or challenging their right to distribute said
Publication or other proceeding or action. Should any such event occur or
reasonably be anticipated, Curtis may retain a reasonable reserve from any
monies payable to Publisher hereunder as security for this indemnity
provision. Publisher will name Curtis as an additional named insured under
any Publisher's liability insurance carried by Publisher and will deliver a
certificate of such insurance to Curtis.
19. (a) Curtis shall not take title to any of the copies of any of
the issues of any of the Publications covered by this agreement and, for all
purposes covered by this agreement, the parties mutually understand and agree
that Curtis is acting as an agent for the sale of such copies of such issues
of such Publications on behalf of Publisher as its principal, except as
specified at subparagraph (b) of this Paragraph.
(b) All monies paid by, or due and owing from Curtis' customers for
copies of Publications not returned to Curtis, are and shall at all times
belong to and remain the absolute property of Curtis, it being distinctly
understood and agreed by the parties that the obligation of Curtis to make any
remittances to Publisher under the terms of this agreement is that of the
obligation of a debtor to a creditor only. Curtis alone shall bill its
customers for such monies and Curtis alone shall have the right to demand
payment or institute legal proceedings for collection thereof.
(c) Notwithstanding anything to the contrary contained in this
agreement, Curtis shall have the unqualified right in its sole discretion to
withhold all or any portion of any advance payments or any other payments due
in order to protect itself from a potentially overpaid position.
20. The term of this agreement shall commence upon the execution of
this agreement and shall expire on November 29, 1992. This agreement shall be
renewable for additional one year terms automatically, unless advance written
notice is given by either party to tho other at least one hundred and ninety
(90) days prior to the commencement of the following renewable term. Provided,
however, (a) that this agreement may be terminated by Curtis at any time in
its entirety or with respect to any particular issue of any Publication, upon
notice to Publisher should any issue or any Publication, in the sole judgment
of Curtis, be deemed to be libelous, obscene or indecent, or contain any facts
or statements which are untrue or Publisher fails to abide by the specific
terms of this agreement, copy allotment, payment of its shipping costs or
frequency of issue or (b) that any one hundred and ninety (90) day notice not
to renew given by Publisher shall not be operative if at the end of the then
existing term, or renewal term, Publisher shall owe any monies to Curtis.
In the event that this agreement is (i) terminated, Curtis has the
right to withhold any or all further advances (as described in Paragraph 12)
from all issues distributed by Curtis or (ii) if not renewed, Curtis has the
right to withhold any or all advances (as described in Paragraph 12) on the
last two issues distributed or to be distributed by Curtis.
21. Publisher agrees not to assign this contract or any part thereof,
without first obtaining the consent of Curtis to such assignment. Publisher
agrees that any assignment of an advance or payment hereunder shall be made
only on a form, satisfactory to Curtis, which shall include the executed
acknowledgment of any assignee that, among other things, such assignee shall
be subject to all rights that Curtis shall have against the Publisher.
22. Curtis shall have the unqualified right to refuse to distribute
any titles published by Publisher not listed in Attachment A, in which event,
Publisher shall be free to distribute said title through other means of
distribution.
23. For purposes of this agreement, the "On-Sale" date shall mean the
date a Publication is placed on sale to the public and the "Off-Sale" date
shall mean the date that Publisher and Curtis agree that a Publication should
be removed from such sale.
24. Notwithstanding anything contained in this agreement, Curtis shall
not be obligated to make any payments hereunder, and shall consider it to be a
material breach of this agreement, unless all copies of each issue of the
Publication are printed and shipped by Publisher's printer(s) to Curtis'
customers in accordance with the galleys prepared by Curtis pursuant to
Paragraph 7 on the date provided in the Notice of Completion of Shipment sent
to Curtis by Publisher's printer(s).
25. This agreement sets forth the understanding of the parties with
respect to the distribution of Publications and may not be amended except in
writing signed by the parties and shall be binding upon the parties, their
respective successors and assignees; and, in particular, this agreement shall
be binding for its terms upon any transferees, successors or assigns of
Publisher who shall publish any of the Publications, it being the intent of
the parties that this agreement run with and apply to all Publications.
This agreement is to be signed in two counterparts, both of which shall be
deemed to be originals.
SCOTT MAG DIST. CORP. CURTIS CIRCULATION COMPANY
BY: /s/ BY: /s/
TITLE: TITLE:
DATE: DATE:
ATTACHMENT A
<TABLE>
<S> <C> <C> <C> <C>
FREQUENCY INITIAL ISSUE
OF TO BE COVER PRICE
PUBLISHER'S
TITLES PUBLICATIONS DISTRIBUTED U.S. CANADA
SUGGESTED DISCOUNT
IRON HORSE 9X/YEAR TO BE DETERMINED $3.95 $4.95 1.Primary
Wholesalers'
RUNNIN' FREE 4X/YEAR TO BE DETERMINED $4.95 $5.95 (those who
receive the full
IRON HORSE YEARBOOK 1X/YEAR TO BE DETERMINED $4.95 $5.95 line of
Curtis titles)
ADULT CINEMA REVIEW 1OX/YEAR TO BE DETERMINED $4.95 $5.95 discount
is 40% off cover
BLUEBOY 6X/YEAR TO BE DETERMINED $5.95 $6.95 price.
NUMBERS 6X/YEAR TO BE DETERMINED $5.95 $6.95
VIDEO-X 4X/YEAR TO BE DETERMINED $4.95 $5.95
2.Secondary Wholesalers'
ORIENTAL WOMEN 6X/YEAR TO BE DETERMINED $4.95 $5.95 (those who
do not receive
ADULT CINEMA REVIEW SPECIALS TO BE DETERMINED TO BE DETERMINED $4.95 $5.95 the full
line of Curtis
VIDEO-X SPECIALS TO BE DETERMINED TO BE DETERMINED TO BE DETERMINED titles)
discount is 36%
MANOR MAGAZINE SPECIALS TO BE DETERMINED TO BE DETERMINED TO BE DETERMINED off cover
price.
3.
Individual Retailers'
discount
is 30% off cover price.
</TABLE>
ATTACHMENT B
CURTIS CIRCULATION COMPANY
DESIGNATED WHOLESALER AREAS
PER COPY
DISCOUNT OFF RETURN
NET BILLING TO HANDLING
WHOLESALERS WHOLESALER ALLOWANCE
Melville, New York 7.0% $.01
Edison, New Jersey 7.0% $.01
Paterson, New Jersey 6.0% $.01
Spring Valley, New York 1.5% $.01
Chicago, Illinois 3.5% $.01
Philadelphia, Pennsylvania 2.0% $.01
Detroit, Michigan .5% $.01
Boston, Massachusetts 1.0% $.01
North Bergen, New Jersey 7.0% $.01
STARS & STRIPES - EUROPE - 5 CENTS PER COPY SOLD
ATTACHMENT C
The distribution fee shall be 7.0% for each copy of each issue sold of the
following titles:
IRON HORSE
RUNNIN' FREE
IRON HORSE YEARBOOK
NUMBERS
BLUEBOY
VIDEO-X
VIDEO-X SPECIALS
The distribution fee shall be 8.0% for each copy of each issue sold of the
following titles:
ADULT CINEMA REVIEW
ADULT CINEMA REVIEW SPECIALS
ORIENTAL WOMEN
The distribution fee shall be 8.0% for each copy of each issue sold of any new
publication.
EXHIBIT 10.6
[This Agreement now between Curtis Circulation Company and Princeton
Publishing, Inc., as assignee of the addressees listed below.]
CURTIS CIRCULATION COMPANY
Gerald A. Steinberg, Vice President, Finance and Operations
November 20, 1990
Woodhill Press, Inc.
Celeb Publishing
Adult Movie Review, Inc.
Lipstick Publishing, Inc.
Adult Mens Review, Inc.
Blueboy Incorporated
J. Q. Adams, Inc.
Focus Publishing Limited
Scott Magazine Distribution Corp.
300 West 43rd Street
New York, NY 10036
Attn: Mr. Henry McQueeney
Dear Mr. McQueeney:
The purpose of this letter is to set forth terms on which
Curtis Circulation Company ("Curtis"), is willing to advance to
Woodhill Press, Inc., Celeb Publishing, Adult Movie Review, Inc.,
Lipstick Publishing, Inc., Adult Mens Review, Inc., Blueboy
Incorporated, J. Q. Adams, Inc., Focus Publishing Limited
and Scott Magazine Distribution Corp., the sum of $50,000, as a Super
Advance (as such term is hereinafter defined).
The terms of the Super Advance is as follows:
1. The Distribution Agreement executed April 14, 1990 between
Curtis and the Publishers (the "Distribution Agreement"), shall be and
hereby is amended to add the following new subparagraph E to Paragraph 12:
"E" SUPER ADVANCE. (i) For the purposes of this subparagraph E
(a) the term "Publisher" shall mean any one of Woodhill Press, Inc.,
Celeb Publishing, Inc., Adult Movie Review, Inc., Lipstick
Publishing, I nc., Adult Mens Review, Inc., Blueboy Incorporated,
J.Q. Adams, Inc., Focus Publishing Limited and Scott Magazine
Distribution Corp., and any other publishers deemed to be included,
at any time, within the term Publisher (as that term is defined for
purposes of the Distribution Agreement), and (b) the term
"Publishers" shall mean each and every "Publisher" as that term is
defined in the subsection (i) (a), above.
(ii) From time to time during the term of this agreement, Curtis
shall advance, on Publisher's written request, to such Publisher a
sum of money ("Super Advance") which shall not (a) exceed the
difference between one hundred percent (100%) of the aggregate amount
of Curtis' estimates of final net sales for all issues of
Publications published by such Publisher for which there have not
been final settlements (as contemplated by Paragraph 13) and the
aggregate of all advances previously made hereunder for all
Publications published by such Publisher for which there have not
been final settlements, or (b) cause the aggregate of all advances
previously made hereunder for all Publications published by the
Publisher for which there have not been final settlements to exceed
one hundred percent (100%) of the aggregate amount of Curtis'
estimates of final net sales for all issues of Publications published
by the Publisher.
(iii) Curtis shall not be obligated to make a Super Advance unless
Curtis and Publisher have agreed on the amount of the Super Advance,
the interest rate to be charged by Curtis on the Super Advance, the
repayment date(s) of the Super Advance and such other terms thereof
as Curtis may require.
(iv) In no event (a) shall the aggregate amount of Super Advances
outstanding at any time from any Publisher, including estimated
interest thereon through the anticipated repayment dates of same,
exceed the aggregate amount of funds estimated by Curtis to be due
such Publisher in connection with Publications published by such
Publisher for which there have not been final settlements, or (b)
shall the aggregate amount of Super Advances outstanding at any time
from all of the Publishers, including estimated interest thereon
through the anticipated repayment dates of same, exceed the aggregate
amount of funds estimated by Curtis to be due the Publishers in
connection with Publications published by the Publishers for which
there have not been final settlements.
(v) In the event any Publisher fails to make any of the repayments
of Super Advances due to Curtis on its or their due dates, Curtis
shall have the right without prior notice to any of the Publishers to
deduct any part or all of the unpaid Super Advances from any amounts
payable to the Publishers. In the event (a) the aggregate amount of
Super Advances outstanding from any Publisher including estimated
interest thereon, exceeds the aggregate amount of funds estimated by
Curtis to be due such Publisher in connection with Publications
published by such Publisher for which there have not been final
settlements, or (b) the aggregate amount of Super Advances
outstanding from the Publishers including estimated interest thereon,
exceeds the aggregate amount of funds estimated by Curtis to be due
the Publishers in connection with the Publications for which there
have not been final settlements, Curtis shall have the right without
prior notice to any of the Publishers to deduct from any amounts
payable to any of the Publishers an amount which shall cause (y) the
aggregate amount of Super Advances outstanding from any Publisher
including estimated interest thereon (after such deduction is made)
to be less than the aggregate amount of funds estimated by Curtis
(after such deduction is made) to be due such Publisher in connection
with Publications published by such Publisher for which there have
not been final settlements and (z) the aggregate amount of Super
Advances outstanding from the Publisher including estimated interest
thereon (after such deduction is made) to be less than the aggregate
amount of funds estimated by Curtis (after such deduction is made) to
be due such Publishers in connection with the Publications for which
there have not been final settlements.
(vi) Each of the Publishers agrees to execute and deliver to Curtis,
at any time there is a Super Advance outstanding, such documentation
as Curtis might request to evidence a Publisher's obligation to repay
the Super Advance(s).
2. The $50,000 is to be repaid in consecutive equal monthly
installments of $10,000 beginning August 1, 1991, together with interest on
the unpaid balance at 2% over the prime rate of interest established from
time to time by Chemical Bank, N.A. Curtis may, at any time, deduct,
subject to the terms of this letter agreement, repayments of the Super
Advances and the interest thereon from any payments or advances due under
the Distribution Agreement.
Please sign and date the enclosed copy of this letter on the lines
provided to indicate your consent to the terms set forth herein and your
willingness to be legally bound by them. Please return the dated and
executed copy to me.
Acknowledged and agreed:
WOODHILL PRESS, INC. CURTIS CIRCULATION COMPANY
by: /s/ Henry McQueeney By: /s/ Gerald A. Steinberg
CELEB PUBLISHING, INC. Title: V.P. Finance and
Operations
by: /s/ Henry McQueeney Date: 11-20-90
ADULT MOVIE REVIEW, INC.
by: /s/ Henry McQueeney
LIPSTICK PUBLISHING, INC.
by: /s/ Henry McQueeney
ADULT MENS REVIEW, INC.
by: /s/ Henry McQueeney
BLUEBOY INCORPORATED
by: /s/ Henry McQueeney
J.Q. ADAMS, INC.
by: /s/ Henry McQueeney
FOCUS PUBLISHING, LIMITED
by: /s/ Henry McQueeney
SCOTT MAGAZINE DISTRIBUTION CORP.
by: /s/ Henry McQueeney
DATE: 11/20/90
EXHIBIT 10.7
[This Agreement now between Curtis Circulation Company and Princeton
Publishing, Inc., as assignee of the addressees listed below.]
February 24, 1992
Woodhill Press, Inc.
Celeb Publishing
Adult Movie Review, Inc.
Lipstick Publishing, Inc.
Adult Mens Review, Inc.
Blueboy Incorporated
J. Q. Adams, Inc.
Focus Publishing Limited
Scott Magazine Distribution Corp.
John T. Edwards, Ltd.
519 8th Avenue
15th Floor
New York, NY 10018
Attn: Mr. Henry McQueeney
Dear Hank:
Pursuant to your request, Curtis Circulation Company ("Curtis") will
issue to Woodhill Press, Inc., Celeb Publishing, Adult Movie Review, Inc.,
Lipstick Publishing, Inc., Adult Mens Review, Inc., Blueboy Incorporated, J.
Q. Adams, Inc., Focus Publishing Limited and Scott Magazine Distribution Corp.
and John T. Edwards, Ltd. ("Publisher"), a Super Advance (as defined in the
Amendment to the Distribution Agreement, dated November 20, 1990) in the
amount of $80,000.
The $80,000 Super Advance will be repaid in eight (8) consecutive equal
monthly installments of $10,000 beginning September 1, 1992, with a final
installment of $10,000 on April 1, 1993, together with interest on the unpaid
balance at 2% over the prime rate of interest established from time to time by
Chemical Bank, N.A. Curtis may, at any time, deduct installments of the Super
Advance and the interest thereon from any payments or advances due to the
Publisher under the Distribution Agreement.
The term of the Distribution Agreement, executed April 14, 1990, as
amended November 20, 1990, October 28, 1991 and December 10, 1991, will be
extended an additional four (4) years to terminate November 29, 1998 for all
titles except for "Creem", to expire as previously agreed.
Please sign and date this letter below to indicate your consent to the
terms set forth herein and your willingness to be legally bound by them.
Please return the dated and executed original copy to me.
Sincerely yours,
/s/ Gerald A. Steinberg
V.P. - Finance and Operations
Curtis Circulation Company
Acknowledged and agreed:
WOODHILL PRESS, INC.
by: /s/ Henry McQueeney
CELEB PUBLISHING, INC.
by: /s/ Henry McQueeney
ADULT MOVIE REVIEW, INC.
by: /s/ Henry McQueeney
LIPSTICK PUBLISHING, INC.
by: /s/ Henry McQueeney
ADULT MENS REVIEW, INC.
by: /s/ Henry McQueeney
BLUEBOY INCORPORATED
by: /s/ Henry McQueeney
J.Q. ADAMS, INC.
by: /s/ Henry McQueeney
FOCUS PUBLISHING, LIMITED
by: /s/ Henry McQueeney
SCOTT MAGAZINE DISTRIBUTION CORP.
by: /s/ Henry McQueeney
JOHN T. EDWARDS, LTD.
by: /s/ Henry McQueeney
DATE: 2/26/92
EXHIBIT 10.8
[This Agreement now between Curtis Circulation Company and Princeton
Publishing, Inc., as assignee of the addressees listed below.]
CURTIS CIRCULATION COMPANY
Dennis F. Porti, Director, Client Services/Business Development
August 5, 1992
Scott Magazine Distribution Corp.
Leemar Publishing, Inc.
Adult Movie Review, Inc.
J.Q. Adams, Inc.
Focus Publishing Limited
John T. Edwards, Ltd.
Laurant Publishing, Ltd.
519 8th Avenue
New York, NY 10018
Attn: Mr. Henry McQueeney
Dear Hank:
The Distribution Agreement ("DA") executed April 14, 1990, as amended
November 20, 1990, October 28, 1991, December 10, 1991, and February 24, 1992,
between Curtis Circulation Company ("Curtis") and Scott Magazine Distribution
Corp., Leemar Publishing, Inc., Adult Movie Review, Inc., J. Q. Adams, Inc.,
Focus Publishing Limited, and John T. Edwards, Ltd., ("Publisher"), is herein
amended as follows:
(1) Laurant Publishing Ltd. is herein added to the DA, as previously
amended, with all the rights, conditions, and obligations of the DA as
amended, and is included to the description "Publisher".
(2) The distribution fees for "Oui", "Oui" specials and "Oui"
digests will be as follows:
DISTRIBUTION
FEE AS A
% TO COVER UNIT SALES AT
PUBLICATION ALL COPIES SOLD ANNUAL RETAIL $
Oui 6% $0 - $2,750,000
7% $2,750,001 - $3,500,000
8% $3,500,001 +
Oui specials 6%
Oui digests 6%
The distribution fee shall be adjusted on an annual basis, and the
calculation will include every copy sold at the highest distribution fee of
retail per the third column above, to apply to all Laurant Publishing Ltd.
titles, with the distribution fee as a % to retail determined by the level of
net sales at retail achieved by the title "Oui".
Example: If annual unit sales at retail for "Oui" are $4,000,000, the
distribution fee would be 8% X $4,000,000 for "Oui" and 8% for all Laurant
Publishing Ltd. titles.
(3) The estimated net sale ("ens") to be used to calculate payments
for "Oui", "Oui" digests will be based upon historical results, and will not
be calculated based upon the new title provision of the DA.
(4) All international and direct distribution for "Oui", "Oui"
specials and "Oui" digests will be exclusively distributed by Curtis. Curtis
reserves the right to refuse direct accounts at Curtis' discretion.
(5) The initial distribution for the Laurant Publishing, Ltd. titles
by Curtis will be as follows:
"Oui" US/Canada - December, 1992 Issue
"Oui" Foreign - December, 1992 Issue
"Oui" Digests - December, 1992 Issue
"Oui" Specials - December, 1992 Issue
(6) Provided that provisions (1) through (5) are consummated or
apparently are or will be consummated, Curtis will issue a Super Advance (as
defined in the Amendment to the DA, dated November 20, 1990), to the Publisher
in the amount of $175,000 at the on sale date of the first issue of "Oui" to
be distributed by Curtis.
Publisher will sign a UCC-1 form and a Security Interest Agreement, to
be recorded in the state of Now York prior to the transfer of said Super
Advance, naming Curtis as the secured party in the Publisher's receivable from
Curtis, and all of the Publisher's right, title and interest in and to the
trademarks, logos, licenses, and title to the publications of "Oui", "Oui"
specials and "Oui" digests.
Said Super Advance will be repaid, commencing six months after the on
sale date of the December 1992 issue of "Oui", in thirty (30) consecutive
equal monthly installments of $5,833.33, together with interest on the unpaid
balance, at 1% over the prime rate of interest established from time to time
by Chemical Bank, N.A. Curtis may, at any time, deduct installments of the
Super Advance and the interest thereon from any payments or advances due to
the Publisher under the Distribution Agreement. Interest due, until the first
installment of principal is paid, will be deducted from funds due to the
Publisher on a monthly basis.
Please sign and date the attached to indicate your consent to the terms
set forth herein and your willingness to be legally bound by said terms.
Sincerely,
/s/ Dennis F. Porti
Dennis P. Porti
ADULT MOVIE REVIEW, INC.
by: /s/ Henry McQueeney, Pres.
LEEMAR PUBLISHING, INC.
by: /s/ Henry McQueeney, Pres.
FOCUS PUBLISHING, LIMITED
by: /s/ Henry McQueeney, Pres.
SCOTT MAGAZINE DISTRIBUTION CORP.
by: /s/ Henry McQueeney, Pres.
J.Q. ADAMS, INC.
by: /s/ Henry McQueeney, Pres.
JOHN T. EDWARDS, LTD.
by: /s/ Henry McQueeney, Pres.
LAURANT PUBLISHING, LTD.
by: /s/ Henry McQueeney, Pres.
CURTIS CIRCULATION COMPANY
by: /s/
Executive V.P.
Date: 8/17/92
EXHIBIT 10.9
[This Agreement now between Curtis Circulation Company and Princeton
Publishing, Inc., as assignee of the addressees listed below.]
CURTIS CIRCULATION COMPANY
433 Hackensack Avenue
Hackensack, New Jersey 07601
January 31, 1995
Mr. Henry McQueeney, as President of the following publishing corporations:
Scott Magazine Distribution Corp.
Kearny Publishing, Inc.
Adult Movie Review, Inc.
J.Q. Adams, Inc.
Focus Publishing Limited
Leemar Publishing Inc.
John T. Edwards, Ltd
Laurant Publishing, Ltd.
Woodhill Press, Inc.
Lipstick Publishing, Inc.
Blueboy Incorporated
Celeb Publishing
519 8th Avenue
New York, New York 10018
Dear Mr. McQueeney:
This is to confirm the agreement between the above addressed companies
and our company that the Distribution Agreement, dated March 14, 1990 and
executed on April 14, 1990, amended on November 20, 1990, October 28, 1991,
December 10, 1991, February 24, 1992, August 5, 1992, and July 1, 1993
(hereinafter collectively referred to as "the Distribution Agreement") was and
is hereby extended for a period of three years (3) from November 29, 1998 to
November 29, 2001 for all titles upon the same terms and conditions as set
forth in the Distribution Agreement.
Please confirm the agreement of all of the above named corporations by
signing in the space below. In so signing, you, Mr. McQueeney, as President
of each and every one of the above named corporations and its affiliates,
represent that you have been duly authorized by the directors and controlling
shareholder of all of the above named corporations and its unnamed affiliates
to execute this letter agreement. Upon your so signing, this letter agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors and assigns.
AGREED AND ACCEPTED ON BEHALF Very truly yours,
OF EACH AND ALL OF THE ABOVE
NAMED PUBLISHING CORPORATIONS CURTIS CIRCULATION COMPANY
By: /s/ Henry McQueeney By: /s/ Gerald A. Steinberg
Henry McQueeney, as President Gerald A. Steinberg
of all of the above named Vice-President-Finance
corporations
EXHIBIT 10.10
CURTIS CIRCULATION COMPANY
433 Hackensack Avenue
Hackensack, New Jersey 07601
March 29, 1996
Mr. Murray Traub
Mr. Henry McQueeney, as President of the following publishing corporations:
Scott Magazine Distribution Corp.
Kearney Publishing, Inc.
Adult Movie Review, Inc.
J.Q. Adams, Inc.
Focus Publishing Limited
Leemar Publishing Inc.
John T. Edwards, Ltd
Laurant Publishing, Ltd.
Woodhill Press, Inc.
Lipstick Publishing, Inc.
Blueboy Incorporated
Celeb Publishing
519 Eighth Avenue
New York, New York 10018
Mr. James McNamara, President
Princeton Publishing, Inc.
Dear Messrs. Traub, McQueeney and McNamara:
You have advised us, Curtis Circulation Company ("Curtis"), that as of
April 1, 1996, all of the publications published by the above named
corporations (hereinafter collectively referred to as "Sellers") are being
sold and assigned to Princeton Publishing, Inc. (hereinafter referred to as
"Buyer"). Mr. Traub as the principal shareholder of the Sellers and Mr.
McQueeney as the president of all of the Sellers have requested Curtis'
agreement to permit the sale and assignment of said publication as required
under (i) the Distribution Agreement between Curtis, as Distributor, and all
of the Sellers, as Publisher, dated March 14, 1990, but executed on April 14,
1990, and amended an November 20, 1990, October 28, 1991, December 10, 1991,
February 24, 1992, August 5, 1992, July 1, 1993, January 31, 1995 and November
29, 1995 (collectively hereafter referred to as "the Distribution Agreement"),
and (ii) the Security Agreement between Curtis and all of the Sellers dated
September 18, 1992, as supplemented by a letter agreement dated July 1, 1993
and amended by a Loan Agreement and Amendment to Security Agreement dated
December 10, 1993, and further amended by the Second Amendment and Third
Amendment to the Distribution Agreement and Security Agreement dated January
31, 1995 and November 29, 1995 (collectively hereinafter referred to as
"Security Agreement). Curtis is willing to give its consent to such sale and
assignment does hereby give such consent upon compliance with the following
terms and conditions:
1. At the closing or promptly thereafter, there shall be delivered to
Curtis a bank or certified check to its order in the sum of $136,020.29
(inclusive of interest through March 28, 1996) in full payment of the loans
which Curtis had advanced to the Sellers as evidenced by the Security
Agreement. The payment of the $136,020.29 is to be made on behalf of the
Sellers from the proceeds of the sale and assignment or from other funds of
the Sellers. If the payment of the said sum of $136,020.29 is not made by
March 28, 1996, interest shall be paid from March 29, 1996 through date of
payment.
2. Upon the closing, the Buyer shall assume all of the obligations,
terms and conditions of the Distribution Agreement, and shall be entitled to
all of the rights granted thereunder, as if it were a signatory thereto with
respect to all publications which it has acquired from the Sellers, and all of
the terms and conditions of the Distribution Agreement shall apply to issues
published and distributed on or after April 1, 1996, but Buyer shall have no
liability for any issues published and distributed prior to April 1, 1996, and
Buyer shall not be entitled to any income and other benefits ("rights")
accruing to issues published prior to April 1, 1996. See Paragraph 4, below,
with respect to rights and liability of Sellers for issues distributed prior
to April 1, 1996.
3. If the payment is made to Curtis as provided in Paragraph l,
above, then the Security Agreement shall be of no further force and effect,
and Curtis shall forthwith release and discharge its security interest and
lien against the publications of the above named corporations, their
copyrights, trademarks, and, logos by executing UCC Form-3's and delivering
same to the Buyer.
4. All of the terms and conditions of the Distribution Agreement
shall continue in full force and effect as to all issues published prior to
April 1, 1996, and nothing herein shall affect such terms and conditions
except that the Sellers shall have no rights, nor any liability and obligation
under the Distribution Agreement for all issues of publications sold to Buyer
published on or after April 1, 1996.
5. In the event that the payments for copies sold, less all expenses
and commissions, attributable to issues of the Sellers published prior to
March 31, 1996 do not equal by March 31, 1997 the advances made by Curtis to
the Sellers under the Distribution Agreement based on estimated net sales or
otherwise, and the costs and expenses advanced by Curtis on behalf of the
Sellers, inclusive of Retail Display allowance for issues published prior to
March 31, 1996, then Sellers shall be unconditionally jointly and severally
liable for and pay for such deficiency. Failure of the Sellers to make
payment of any deficiency shall also render them liable for interest at the
legal rate, attorneys fees and court costs.
6. With respect to issues published prior to March 31, 1996, Curtis
shall continue to send Sellers statements on copies sold, copies returned,
expenses (including retail display allowance), commissions, etc., as
heretofore provided and as provided in the Distribution Agreement. Based upon
current rate of returns, expenses and estimated retail display allowances, it
is probable that the Sellers will be receiving payments on a monthly basis.
In any event, if after the Final Settlement on all issues of the Sellers
published prior to March 31, 1996, there shall be a positive amount due
Sellers, same shall be promptly remitted to the Sellers as provided in the
Distribution Agreement.
If the foregoing correctly states the understanding and agreement among
all of the parties hereto, (i.e., the Sellers, and Mr. Traub, collectively, as
one of the parties, Princeton Publishing, Inc., the Buyer, as a second party,
and Curtis, as the third party), then they shall sign this letter agreement in
the spaces provided below. In so signing, Mr. McQueeney, as President of each
and every one of the above named corporations constituting the Sellers,
represents that Mr. McQueeney has been duly authorized by the directors
thereof; and Mr. Traub, as principal shareholder of the Sellers, confirms Mr.
McQueeney's authority. The Buyer and Curtis represent that each has been duly
authorized to enter into this agreement. This letter agreement shall be
binding upon and inure to the benefit of the parties hereto, and their
respective estates, heirs, personal representatives, successors and assigns.
Very truly yours,
CURTIS CIRCULATION COMPANY
By: /s/ Gerald A. Steinberg
Gerald A. Steinberg
Vice-President
AGREED AND ACCEPTED ON BEHALF
OF EACH AND ALL OF THE ABOVE
NAMED PUBLISHING CORPORATIONS
/s/ Henry McQueeney, as President
of all of the above named
corporations, designated
Sellers
AGREED AND ACCEPTED:
Princeton Publishing Inc.
By: /s/ James McNamara, Chairman
James McNamara, Chairman
PARAGRAPH 5 ABOVE AGREED AND
ACCEPTED and REPRESENT THAT
HENRY McQUEENEY IS AUTHORIZED
TO BIND EACH OF THE ABOVE NAMED
PUBLISHING CORPORATIONS
/s/ Murray Traub
Murray Traub
EXHIBIT 10.11
[This Agreement now between Curtis Circulation Company (as successor to Flynt
Distributing Company) and Princeton Publishing, Inc., as assignee of GT
Publications, Inc.]
AGREEMENT
This agreement (hereinafter referred to as "Agreement") is entered into this
31 day of August, 1992 by and between FLYNT DISTRIBUTING COMPANY, a Division
of L.F.P., INC., whose principal place of business is located at 9171 Wilshire
Boulevard, Suite 300, Beverly Hills, California, 90210 (hereinafter referred
to as "FLYNT") and GT PUBLICATIONS, INC., a New York corporation, whose
principal place of business is located at 519 8th Avenue, New York, New York
10018 (hereinafter referred to as "PUBLISHER").
In consideration of the covenants and agreements hereinafter contained, the
parties hereto do hereby agree as follows:
1. DEFINITIONS.
a. PUBLICATIONS: The term "Publications" shall individually and
collectively mean the publications listed and described in Exhibit "A"
attached hereto and incorporated herein by this reference. It is hereby
understood that publications may be added to Exhibit "A" from time to time by
either written amendment or by actual publication and sale to Customers.
b. ON-SALE DATE: The term "on-sale date" shall mean the date each issue of
the Publication is scheduled to be placed on display and made available for
sale to the general public by retailers and dealers. The on-sale date shall
be determined by Publisher subject to the approval of Flynt, whose approval
shall not be unreasonably withheld.
c . OFF-SALE DATE: The term "off-sale date" shall mean the date each issue
of each Publication which has been made available for sale to the general
public is scheduled to be removed from display by the retailers and dealers,
pursuant to off-sale dates published within Flynt's allotment notices to its
Customers.
d. CUSTOMER: The term "Customer" shall mean all persons or entities (except
for Flynt) who sell Publications, wholesale, retail, or otherwise, directly or
indirectly on behalf of Publisher.
e. AFFILIATE: The term "affiliate" includes parent, subsidiary and
"brother-sister" corporations.
2. RIGHTS GRANTED.
a. EXCLUSIVE WORLDWIDE RIGHTS: Publisher hereby grants to Flynt the
exclusive worldwide rights and licenses to provide for the distribution and
sale of the Publications to Customers, except as to subscriber copies which
may be marketed directly by Publisher. Flynt shall be the sole recipient of
all orders for each of the Publications; it being understood that any orders,
except those for subscriber copies received by Publisher, or its agents, or
its direct wholesale and retail customers that are not customers of Flynt, are
to be turned over to Flynt for fulfillment.
b. RIGHT QF FIRST REFUSAL. Publisher further grants to Flynt the right of
first refusal to provide for the distribution and sale of any other
publications produced by the Publisher, its agents or any other person or
entity owned or controlled, in whole or in part, by the same person or persons
who manage or control Publisher, except as to subscriber copies.
c. RIGHT TO COMMINGLE ACCOUNTS. Flynt shall have the right to commingle
all accounts of Publisher, and its affiliates, and/or related companies and to
make the necessary off-sets and credits with respect to all Publisher, its
affiliates, and/or related companies.
3. PARTY RELATIONSHIP.
a. INDEPENDENT CONTRACTOR AND DEBTOR/CREDITOR RELATIONSHIP: This
Agreement
does not create any employer-employee, agency, joint venture, or partnership
relationship between Publisher and Flynt. The relationship of Flynt and
Publisher shall only be that of creditor and debtor and independent
contractors.
b. PROHIBITED ACTS: Publisher shall not permit the doing of any act which
would indicate or tend to indicate that (i) Publisher, or any place of
business controlled or used by Publisher is a branch, subsidiary or part of
Flynt or (ii) that the status of Flynt is anything other than that of an
independent contractor and creditor and/or debtor.
4. PRINTING, SHIPMENT AND DISTRIBUTION.
a. PUBLISHING AND PRINTING: Publisher shall publish and cause to be
printed, for distribution and sale, each issue of each Publication at least
four (4) weeks prior to the on-sale date of each particular issue. Each
Publication shall conform to (i) the specifications for such Publication as
set forth in Exhibit "A" and (ii) the specimen copy of each such Publication
set forth in Exhibit "A", which specimen copy shall be attached hereto as an
Exhibit and incorporated herein by this reference. Each Publication shall be
of original content and shall not reuse previously published material.
occasionally, however, Publisher may publish and Flynt may distribute certain
"Special" issues or "Annual" issues or "One-Shot" issues that contain
previously published material. After each issue of each Publication is
printed, Publisher shall immediately deliver to Flynt five (5) specimen copies
of each such issue. If those specimen copies do not substantially conform to
the specifications for each Publication as set forth in Exhibit "A" and the
specimen copy attached hereto, Publisher shall not receive and shall not be
due the initial payments for that issue of that Publication as otherwise
provided for herein.
b. NUMBER OF COPIES: The number of copies of each issue of each of the
Publications to be distributed is to be determined by Flynt and by specific
orders from its Customers subject to the approval of the Publisher, whose
approval shall not be unreasonably withheld. Excluding the copies for
subscriptions, Publisher agrees to cause to be printed for each issue the
number of copies so determined.
c. DELIVERY: Publisher shall, at least fifteen (15) days before the on-sale
date, deliver to the Customers the number of copies of each issue of each of
the Publications as determined by Flynt. Any deviation from that number must
be consented to by Flynt. Delivery of Publications shall not be deemed
completed until actual receipt by customers, or receipt by designated national
shipping agent of Publisher. No shipments shall be made by Publisher to any
Customers without written instructions from Flynt pursuant to Paragraph 5a.
d. SHORTAGES IN DELIVERY: In the event Publisher delivers less than the
total designated number of copies of any issue of any of the Publications to
any Customers, Flynt shall make a downward adjustment in the amounts it would
otherwise pay Publisher pursuant to Paragraph 5c (1) and (2).Flynt shall in no
way be responsible for any shortages in the number of Publications shipped by
Publisher or received by Customers. Flynt will supply all necessary
documentation and reports of such shortages to Publisher so that Publisher may
file claims against shippers.
e. CONDITIONS OF COPIES DELIVERED: All copies that are delivered by
Publisher must be in saleable condition, free of all liens and/or
encumbrances.
f. TRANSPORTATION CHARGES: Flynt shall advance on behalf of Publisher any
transportation charges or costs related to delivery of the Publications to
Customers.
g. CONTENTS OF PUBLICATIONS: Publisher shall not publish any issue of any
of the Publications if, in its opinion, any such Publication or any portion of
its contents is obscene, libelous, scandalous or invades the privacy of any
person or is any way violative of any applicable laws, rules or regulations,
or if the post office refuses to mail the Publication under the Publisher's
second class entry privilege.
h. FLYNT'S RIGHTS CONCERNING CONTENTS OF LIABILITY: Notwithstanding
anything to the contrary in this Agreement, Flynt may, at any time without
prior notice, and without incurring any liability therefor, refuse to provide
for the distribution and sale of any issue or issues of any of the
Publications covered by this Agreement, or at Flynt's sole option terminate
this Agreement without incurring any liability therefore, if at any time it
shall be brought to Flynt's attention that such issue or issues may contain
possible libelous, privacy invading, obscene or indecent material, or, any
matter of any kind that is in violation of law, civil or criminal, or if such
issue or issues shall be refused the use of the mail by the United States
postal authorities or such public corporation as may exist for the handling of
mail. Inasmuch as Flynt (i) does not, and is not capable of having, any
editorial involvement in the Publications, and (ii) does not receive copies of
the Publications until after they are printed and shipped, therefore Flynt's
performance under this Agreement does not, and shall not, establish nor
constitute approval by Flynt of the contents of said issue or issues.
i. TITLE AND RISK OF LOSS: On all shipments to Customers, title and risk of
loss shall pass from Publisher to Customer at Customer's named point of
destination. The loss, damage, or destruction of copies of Publications, or
evidence of returns of unsold copies of Publications while in transit or in
Flynt's or in Customer's possession shall be at the sole risk of Publisher.
j. RETURN PRIVILEGES: Retailers may return copies of the Publications to
wholesalers who will return them to Flynt who will, in turn, return them to
Publisher. Flynt shall have the right, at any time for any reason to return
to Publisher any copies of the Publications that have been previously sold to
Customers. Publisher shall, at the discretion of Flynt, either pay Flynt for
all such returns at the price Flynt invoiced the Customers, less Flynt's fee
pursuant to Paragraph 5 (b), or in the alternative, Flynt shall receive a
credit for such returns on any amounts due or to become payable to Publisher
by Flynt pursuant to this Agreement. Front cover headings, or affidavit
returns may be accepted, in Flynt's discretion, from customers in lieu of full
copy returns and shall constitute conclusive evidence of such returns.
k. WHOLE COPY RETURNS: If Publisher shall desire whole copy returns,
Publisher shall give Flynt written notice of the quantities thereof desired
not less than thirty (30) days prior to the on-sale date of such issue. Upon
receipt of such written notice, Flynt shall make a request for the same from
Customers. Upon receipt of such whole-copy returns from Customers and
Publisher's request to warehouse, Flynt shall, at its sole discretion and
judgment decide if it desires to warehouse such returns, and shall furnish
Publisher statements of said returns which shall be accepted by Publisher as
conclusive evidence thereof. Nothing herein contained shall require Flynt to
take any other action with respect to such written request. If Flynt shall
not agree to warehouse the whole-copy returns requested, Publisher shall
specify in the aforementioned written request where such returns are to be
sent. Publisher will pay all transportation costs and customer handling
charges with respect to any and all returns, in any form whatsoever.
Publisher shall fully reimburse Flynt in the form of a credit on any and all
amounts due or to become due to Publisher for any and all Customer charges for
whole-copy returns. If Flynt shall choose to warehouse the whole-copy returns
requested and received, Publisher will pay to Flynt its usual warehousing
charges in effect at the time of warehousing said return.
1. RETURN INFORMATION: Notwithstanding anything to the contrary herein
contained, Flynt may not destroy wholesaler statements and/or affidavits of
returns for a period of one (1) year from the date of receipt by Flynt of such
statements and/or affidavits of returns. All wholesaler statements and/or
affidavits of returns ("Return Information") may be destroyed by Flynt at its
expense unless Publisher shall serve Flynt with a written objection and
perform an audit pursuant to the terms and conditions of sub-paragraphs 5f (i)
and (ii). Said written objection shall also request that the Return
Information not be destroyed. Unless Publisher shall have served Flynt with
such written notice requesting such an audit and shall have actually completed
such an audit within sixty (60) days from the date of such written notice,
Flynt may at its discretion destroy the Return Information. Any Return
Information which is destroyed shall be deemed conclusively binding upon
Publisher, accurate and not subject to any further objection by Publisher.
m. RECEIVABLE RIGHTS: Flynt shall have the irrevocable, right to invoice
for, and to receive, all collections from Customers for Publications. In that
regard, and in consideration of Flynt providing Publisher with Customer
information, Publisher hereby irrevocably assigns to Flynt all of its right,
title and interest in and to billing rights, proceeds of sale and accounts
receivable with respect to distribution and sale of the Publications.
Publisher hereby grants Flynt the right to adjust claims for shortages in
deliveries of the Publications made by or to Customers; it being specifically
agreed that such adjustments actually made by Flynt shall be conclusively
binding upon Publisher.
n. Publisher shall assume outstanding debt to Flynt incurred by Grand
International Communications, Inc., CIN, Inc. and The Klinger Group, aka:
Beverly Hills Bluebook, Inc. This outstanding debt was the result of
overpayments by Flynt to Grand International Communications, Inc., CIN, Inc.
and The Klinger Group, aka: Beverly Hills Bluebook, Inc. The outstanding debt
balance is $325,784.05. This balance may or may not increase once currently
unsettled issues of Jock magazine, CIN magazine, Trade magazine or Jock
Collectors Edition magazine, Dream magazine, Stars magazine, obsessions
magazine or Iniquity magazine become due for settlement. Publisher will pay
back Flynt at a rate of $5,000.00 per month out of the proceeds of each
settlement payment by Flynt or each advance payment by Flynt scheduled for
payment during the month. Flynt will deduct $5,000.00 from each payment, but
never deduct greater than $5,000.00 per calendar month in total, no matter how
many payments are made to Publisher during calendar month.
5. PRICE AND PAYMENT.
a. BILLING, COLLECTION, SHIPPING AND CUSTOMS: Flynt shall bill to and
collect from Customers for all sales of the Publications by Publisher to
Customers. Flynt shall furnish shipping instructions and information to
Publisher and/or Publisher's printer or shipping agent in order to provide for
the sale of the Publications by Publisher to Customers. Flynt will furnish
Publisher and/or Publisher's printer or shipping agent with a list of the
exact number of copies of each issue of each of the Publications to be shipped
to each Customer. Flynt shall have, in its sole discretion, the right to
designate or eliminate Customers from time to time.
b. NET SALES AND FEES: Flynt shall remit to Publisher the amount of the net
sales (defined as Flynt's gross billings to Customers less actual returns and
other deductions pursuant to this Agreement) as computed by Flynt for each
issue of each of the Publications, at the per copy charge billed to the
Customer (defined as sixty percent (60%) of the cover price per copy of each
Publication) less Flynt's fee of six and one-half percent (6.50%) per copy
computed on the Publisher's price as set forth on the cover of each
Publication. The cover price of any of Publisher's Publications shall remain
unchanged unless Flynt shall first give prior approval of such change, whose
approval shall not be unreasonably withheld.
C. PAYMENTS: Flynt shall pay to Publisher, the amount determined by
Paragraph 5b above, as follows:
(1) INITIAL PAYMENTS FOR THE FIRST THREE ISSUES: An initial payment of
twenty percent (20%) ("initial payment") of Flynt's gross billings to
Customers less Flynt's fee; payable ten (10) days after receipt of a sworn
affidavit from the Publisher's printer or shipping agent that the number of
copies shipped to each Customer was in accordance with Flynt's shipping
instructions and that the copies met all of the specifications of Exhibit "A"
and the specimen copy(ies) attached hereto as an exhibit(s); provided,
however, that if the Publisher's printer and/or shipping agent is owned or
controlled, in whole or in part, by Publisher, its agents or any other person
or entity owned or controlled, in whole or in part, by Publisher, or by the
same person or persons who manage, own, or control, in whole or in part, by
Publisher then such payment shall be subject to Flynt's verification that the
copies are actually in transit to or have been received by the Customers. The
above initial payments are payable for only the first three (3) issues of each
of the Publications distributed hereunder. This twenty percent (20%) initial
payment formula excludes those Publications specifically listed on the
attached Exhibit "A" dated May 13, 1992 since those specific Publications have
already been distributed by Flynt for greater than three (3) prior issues and
therefore receive an initial payment formula as outlined in Paragraph (2)
below.
(2) INITIAL PAYMENTS BEGINNING WITH FOURTH ISSUE: Notwithstanding the
foregoing Paragraph 5c (1), and providing Publisher is not indebted to Flynt
except for the debt specifically outlined in Paragraph 4 (n) of this
Agreement, initial payments for the fourth (4th) through sixth (6th) issues
shall be eighty percent (80%) of Flynt's estimate of the average final copy
sales of available prior issues distributed by Flynt. The initial payment for
each issue of each Publication shipped to Customer hereunder for the seventh
(7th) issue and for each issue thereafter shall be eighty percent (80%) of
Flynt's estimate of the average final copy sales for the last three (3) issues
which are more than one hundred twenty (120) days off-sale for each issue of
each Publication.
(3) INTERIM SETTLEMENT (2ND PAYMENT): A second payment, if any, shall be due
for each issue approximately sixty (60) days after the off-sale date of such
issue, calculated at eighty percent (80%) of Flynt's estimate of final sale of
such issue.
(4) FINAL SETTLEMENT PAYMENT: A settlement payment, if any, shall be due,
for each issue approximately one-hundred (100) days after the off-sale date of
such issue, which will include returns to ninety (90) days after the off-sale
date.
(5) CANADIAN TRANSACTIONS: All Canadian transactions will be billed in U.S.
dollars and paid by Customer in Canadian dollars substituted for U.S. dollars
on a dollar for dollar basis. The resulting exchange differential, if any, at
the time of payment by Customer to Flynt will be used to adjust the amounts
due Publisher or Flynt as a result of Flynt paying the Publisher in U.S.
dollars. The foregoing adjustment will be made in such a way as to insure
that Flynt does not incur any loss or expenses as a result of the exchange
differential and paying the Publisher in U.S. dollars.
d. RETURN CREDITS: Flynt will have the right to receive immediate credit or
payment (at Flynt's option) for returns of the Publications received or
processed at any time after the settlement. Such returns may be deducted by
Flynt from any payment for any later issues of any of the Publications, or if
after termination of this Agreement, Publisher shall make prompt payment to
Flynt upon receipt of Flynt's statement of amount due. Flynt shall not accept
any returns from its U.S. Customers which Flynt receives after three hundred
sixty five (365) days after off-sale. There will be no time limit, however,
on returns made by foreign Customers operating outside the United States.
e. FINAL PAYMENT ON LAST ISSUE: Final payment on the last issue of each
Publication shipped to Customer hereunder shall be payable approximately three
hundred sixty-five (365) days after the off-sale date and shall include
returns up to three-hundred fifty five (355) days after the off-sale date of
such terminated Publication. The off-sale date shall be the later of the
first day of the month designated by the cover month or thirty (30) days after
the on-sale date should no month be specified on the cover.
f. SETTLEMENTS, STATEMENTS, AND ACCOUNTS RENDERED: Publisher shall be
deemed to have consented to and approved all Flynt's settlements, statements
of settlements, and/or all other accounts rendered, which shall be deemed
conclusively binding on Publisher, accurate, and not subject to any objection
by Publisher for any reason, unless (i) specific objection in writing by
registered or certified mail, return receipt requested, or by telegram,
stating the specific items objected to and the precise basis for objecting to
each such item, including, but not limited to, the dollar amount each such
objection and why such amount of each such objected item is inaccurate, shall
be given to Flynt within' thirty (30) days from the date such settlements,
statement of settlements, and all other accounts rendered are mailed to
Publisher, and (ii within sixty (60) days from the date of such written
objection Publisher shall have requested and completed, at its sole expense
and at Flynt's offices in Los Angeles, an audit of such objected settlements,
statements of settlement and/or other accounts rendered, and (iii) Publisher
files suit against Flynt based on such specific objections in accordance with
Paragraph 17a of this Agreement within one (1) year after Flynt's receipt of
written notice pursuant to this paragraph. Notwithstanding the foregoing, if
any dispute arises between the parties respecting the accuracy of Flynt's
claims for credits as set forth in any statement of settlement or other
account rendered, the credits issued by Flynt to Customers as reflected on the
books of Flynt shall be conclusively binding upon, and not subject to any
objection by Publisher for the purpose of determining credits to which Flynt
shall be entitled to receive from the Publisher.
g. RIGHT TO OFFSET OR IMMEDIATE PAYMENT UPON DEMAND: Notwithstanding
anything herein to the contrary, Flynt shall have the right, in its sole
discretion and judgment, to offset any and all amounts due directly or
indirectly, from Publisher (or any other person, corporation, or entity owned
or controlled, in whole or in part, by Publisher or owned or controlled, in
whole or in part, by the same person or persons or entities that own or
control, in whole or in part, Publisher) to Flynt against any and all sums
directly or indirectly due to Publisher hereunder or otherwise, except for the
debt specifically outlined in Paragraph 4n of this Agreement. Without
limiting the generality of the foregoing provision, all sums payable to Flynt
by Publisher shall be refunded or paid by Publisher to Flynt immediately upon
demand by Flynt. In addition to the foregoing, should Flynt conclude that
based upon the intermediate sales reports the net sales of any unsettled issue
might be less than the amounts paid to Publishers pursuant to Sub-Paragraph 5c
(1) and/or 5c (2) above and, therefore, result in a deficiency payable by
Publisher to Flynt, Flynt may withhold making any initial payments, interim
payments or final payments to Publisher until deficiency has been paid by
Publisher to Flynt.
h. INITIAL PAYMENTS FOR FINAL TWO ISSUES: Should either party serve a
notice of termination as herein provided, no initial payments shall be made
for the final.,two (2) issues of any Publications shipped hereunder; said
final two (2) issues to be determined by the effective date of said
termination as determined by Flynt in its sole discretion and judgment. If
Publisher is not indebted to Flynt at time of termination, no initial payments
shall be made for the final one (1) issue shipped hereunder.
i. PAYMENTS FOR LAST ISSUE:- Notwithstanding anything to the contrary in
this Agreement, Publisher shall not be entitled to any initial or interim
payment as provided for in this Agreement, and the final settlement of such
issue shall be made three-hundred sixty five (365) days after the off-sale
date if Flynt believes that said issue will be the last issue of said
Publication to be published.
6. PUBLISHER'S INDEMNIFICATION: Publisher hereby agrees to indemnify and
promptly reimburse Flynt and Customers, their affiliates and their officers,
agents, and representatives against any losses, damages, fines, judgments,
expenditures or claims, or cross-claims, including attorney's fees as well as
any and all other costs incurred by Flynt and Customers in connection with
Flynt providing for the sale of any issue(s) covered by this Agreement when
the same is questioned or objected by any federal, state and/or governmental
agency or authority or in defending or settling any claim, civil action or
proceeding and/or criminal prosecution and/or supplementary proceedings
instituted as a result of and/or arising out of the publication, shipment,
and/or sale of-any issue(s) covered by this Agreement. Should any of such
events occur, Flynt shall have the right to retain any monies otherwise
payable by Flynt to Publisher for the performance by the Publisher of its
obligations pursuant to this paragraph. Flynt shall give to Publisher notice
of any claims, demands, suits or actions against Flynt or any of the Customers
of which Flynt has been apprised; and, in the event Flynt shall have received
any notice of claim or summons or other process instituting such claim or suit
or action, then Flynt shall deliver the same promptly to the Publisher.
7. LIMITATION OF LIABILITY, WARRANTIES, REPRESENTATIONS AND REMEDIES:
Flynt
will furnish Publisher and/or its agents with (i) names and addresses of
Customers, (ii) numbers of copies of each issue of Publication to be shipped
to each customer, and (iii) information as determined by Flynt concerning the
sales and returns for each issue of each Publication. In no event, however,
will Flynt be liable to Publisher for any losses, expenses, costs, or damages
(special, consequential, or otherwise) caused by, or resulting from, Flynt's
failure to perform and/or failure to properly and/or timely perform any of its
obligations under this Agreement (other than the payment of monies due);
regardless of whether such failure of performance and/or delay and/or
nonperformance (and/or failure to give notice of failure of performance and/or
delay or nonperformance) was caused by or resulted from negligence. Flynt's
sole obligation and Publisher's sole and exclusive remedy for failure to pay
monies when due (for which Flynt has no right to withhold under the provisions
of this Agreement) shall be (i) a suit to recover such money plus interest at
the legal rate; and/or (ii) to terminate this Agreement after giving Flynt
fifteen (15)days prior written notice to cure any such default. Flynt shall
not be liable for any claim of any kind whatsoever with respect to late
performance or nonperformance (or failure to give notice of late performance
or nonperformance), and whether or not based upon, or resulting from,
negligence unless (i) Flynt receives written notice of such claim from
Publisher by certified or registered letter, return receipt requested, or by
telegram, within thirty (30) days after Publisher knows, or reasonably should
have known of such claim, and (ii) Publisher files suit against Flynt based
upon such claim in accordance with Paragraph 17a of this Agreement within one
(1) year after Flynt's receipt of written notice pursuant to this sub-
paragraph.
8. FORCE MAJEURE: Without limiting the generality of other damage exclusion
and/or disclaimer provisions in this Agreement, Flynt shall not, in any manner
whatsoever, be liable for delay in performing, or failing to perform (or
failing to give notice of such delay or failure to perform), any obligation
caused, in whole or in part by circumstances beyond Flynt's reasonable
control.
9. ALLOWANCES, CIRCULATION ANALYSIS, DISPLAY EQUIPMENT.
a. PAYMENT FOR SPECIAL ALLOWANCES: For Publisher's sole benefit, Flynt may
in its discretion, pass on special discounts, allowances, and/or incentives to
Customers payable by Publisher in accordance with the terms herein. The
following special charges and allowances are to be borne by Publisher on any
issue of any of the Publications:
(1) The actual charges for all reshipping agencies.
(2) Any cash discount, cash allowance, special allowance, rack allowance,
returns allowance or pricing differential granted to Customers.
Flynt will supply Publisher with a listing of current recipients of such
special allowances and will seek Publisher's approval of future allowances
granted, whose approval shall not be unreasonably withheld.
b. ANALYSIS OF CIRCULATION: A charge of $2,500 will be made if an analysis
of circulation by county population of any of the Publications is requested by
Publisher or required for the Audit Bureau of Circulation report. No charge
will be made for the State Circulation analyses which are customarily made
twice a year for the Publications.
c. DISPLAY EQUIPMENT: Subject to Publisher's approval, Flynt shall have the
right to furnish display equipment to Customers. Flynt shall charge the cost
thereof to Publisher in the form of a credit to Flynt on any and all amounts
due, or to become payable, to Publisher.
10. TERM AND TERMINATION.
a. INITIAL TERM AND RENEWAL: The initial term of the Agreement shall be for
seven (7) years from the date hereof. The Agreement shall automatically be
renewed for successive three (3) year periods upon the same terms and
conditions, except that either party may prevent renewal of this Agreement by
giving written notice of non-renewal to the other party by certified or
registered mail, return receipt requested, at the address first above given,
or at such address as may hereinafter be designated in writing, at least one-
hundred twenty (120) days prior to the expiration of the initial term or any
renewal term thereof.
b. TERMINATION: Notwithstanding anything in this Agreement to the contrary,
either party shall have the right to terminate this Agreement upon written
notice by certified or registered mail, return receipt requested, at the
address first above given or at such address as may be hereinafter designated
in writing, to the party sought to be charged therewith upon the occurrence of
any of the following events:
(1) The party sought to be charged therewith is adjudicated a bankrupt or
becomes insolvent or invokes the jurisdiction of any of the remedies of the
bankruptcy court.
(2) The party sought to be charged therewith is convicted or pleads guilty
or no contest to a charge of violating any law relating to the Publication or
sale of any of the Publications.
c. LIMITATION OF PUBLISHERS RIGHT TO TERMINATE: Notwithstanding anything in
this Agreement to the contrary, Publisher shall not have the right to
terminate this Agreement at any time if the Publisher is indebted to Flynt for
any reason whatsoever, without first reimbursing and/or paying Flynt the full
amount of such indebtedness.
11. PUBLISHER WARRANTIES AND REPRESENTATIONS: Publisher warrants and
represents to Flynt that Publisher is not under any disability, restriction,
or prohibition with respect to Publisher's right to enter into this Agreement
and perform all of the terms and conditions thereof, and that this Agreement
will not constitute a breach of any other existing agreement to which
Publisher is, or was, a party. Publisher further warrants and represents that
Publisher is the owner and/or licensee of each of the titles to and logos
and/or trademarks to be used in connection with the Publications covered by
this Agreement and there are no liens or encumbrances on those titles, logos,
and trademarks. Publisher also agrees not to permit any liens or encumbrances
against such titles, logos, and/or trademarks without Flynt's prior written
consent.
12. WAIVER: No omission or delay on the part of any party hereto in
requiring a due and/or punctual fulfillment by the other party shall be deemed
to constitute a waiver by the omitting or delaying party of any of its rights
and/or remedies to require such due and/or punctual fulfillment of any other
or future obligations hereunder, whether similar or otherwise, or a waiver of
any remedy it might have hereunder.
13. ASSIGNMENT: This Agreement shall be binding upon the parties hereto and
their respective heirs and assigns provided that Publisher may not assign this
Agreement or any sums payable to it by Flynt to any third party without the
prior written consent of Flynt.
14. NOTICES: Any notices to be given to the parties hereto shall be deemed
to have been given when sent by registered or certified mail, return receipt
requested, or by telegram, to the respective addresses of the parties as above
provided or at such address as shall be designated by notice given to the
other party as provided herein.
15. ENTIRE AGREEMENT: This Agreement shall constitute the entire agreement
between the parties and shall supersede any and all agreements heretofore
entered into between Flynt and Publisher, or any of their predecessors,
pertaining to the sale and shipment of the Publications. This Agreement may
not be changed or modified in any manner whatsoever unless such change or
modification is in writing and executed by the parties hereto.
Notwithstanding anything herein to the contrary, in the event that Flynt
actually provides for the shipment and sale of any publication not set forth
in Exhibit "A" such actual performance by Flynt shall constitute a binding
amendment-in-fact and shall result in such publication being subject to all
the terms and conditions of this Agreement.
16. APPLICABLE LAW, JURISDICTION, VENUE, LITIGATION COSTS AND WAIVER
OF JURY
TRIAL.
a. APPLICABLE LAW, JURISDICTION, VENUE AND LITIGATION COSTS: The
validity, performance, and interpretation of this Agreement shall only be
governed by the laws of the State of California. Both parties hereby agree to
submit to the jurisdiction of the Courts in and of the State wherein Flynt's
corporate headquarters are located (including the U.S. District Court in that
State) and hereby agree that any dispute, claim, or cause of action arising
under this Agreement shall only be submitted to the Courts in and of the State
wherein Flynt's corporate headquarters are located (including the U.S.
District Court in that State) and the venue shall lie exclusively in the
County wherein Flynt's corporate headquarters are located. The prevailing
party in any action brought hereunder shall be entitled to recover all its
litigation costs and expenses in connection therewith, including, but not
limited to, attorneys' fees.
17. INVALIDITY OF PROVISIONS: If any provision of this Agreement is declared
by a Court to be invalid, said invalidity shall not affect the remaining
provisions herein.
18. COMMENCEMENT OF AGREEMENT: A valid contract binding upon the parties
hereto shall come into being only upon execution of this Agreement by a duly
authorized agent, officer, or representative of all the parties hereto.
The effective date shall be that which is set forth in the introduction above.
GT PUBLICATIONS, INC.
By: /s/ Gil Traub,,President
FLYNT DISTRIBUTING COMPANY,
a Division of L.F.P., INC.
By: /s/
EXHIBIT A
MINIMUM MINIMUM
NUMBER OF NUMBER OF
FREQUENCY OF COVER 4-COLOR PAGES OF
TITLES SIZE DISTRIBUTION PRICE PAGES BODY TEXT
Jock 8-3/8" x Monthly $5.50 US 84* 84*
10-7/8" $6.95 CAN
Jock 8-3/811 x Nine (9) $5.50 US 80* 80*
Collectors 10-7/8" Times $6.95 CAN
Edition Per Year
Stars 8-3/8" x Nine (9) $5.95 US 84* 84*
10-7/8" Times $6.95 CAN
Per Year
Obsessions 8-3/8" x Nine (9) $5.95 US 100* 100*
10-7/8" Times $6.95 CAN
Per Year
Iniquity 8-3/811 x Nine (9) $5.95 US 84* 84*
10-7/8" Times $6.95 CAN
Per Year
*Includes cover
Paper Stock: Body Text 44#
Cover 70#
Prepared June 19, 1992
RDA RIDER
This rider (hereinafter referred to as "RDA RIDER") is entered into this
31 day of August, 1992 by GT PRODUCTIONS, INC. (hereinafter referred to as
"Publisher") and FLYNT DISTRIBUTING COMPANY, a Division of L.F.P., INC.
(hereinafter referred to as "Flynt"). The parties hereby agree as follows:
Publisher has determined that it would be in its best interest to make
available a Retail Display Allowance ("RDA") to all retailers displaying any
of its Publications listed on Exhibit "A" to the Agreement and any "special
issues" related thereto (hereinafter referred to as "RDA program").
The RDA program would be implemented in the following manner:
1. Flynt will pay to participating Customers on a calendar quarterly basis
the sum of thirty cents ($0.30) of the cover price per copy for each copy of
any of the Publications sold by such Customers. Flynt will charge to
Publisher all RDA payments made on behalf of Publisher by Flynt to Customers
by deducting equivalent sums from remittances it would otherwise make to
Publisher under this Agreement. In that regard, Flynt shall deduct from
remittances made by Flynt to Publisher the sum of four cents ($0.04) per copy
of each of the Publications for all copies sold, so as to create a reserve to
fund the RDA program. In order to defray its costs of administering the RDA
program, Flynt will be compensated from the RDA fund at the rate of one cent
($0.01) per copy sold by participating Customers.
2. Should said four cents ($0.04) per copy sum to be withheld by Flynt
prove to be inadequate at any time to fund the RDA program, then additional
sums as needed may be deducted from any payment due Publisher by Flynt under
the terms of the Agreement. If at any time followings quarterly RDA payment
by Flynt to participating Customers the fund has a surplus based on its
current balance and projections of contributions before the next quarter RDA
payments are made, then said surplus or a substantial portion thereof shall be
returned to Publisher, or expended in such programs as Publisher and Flynt may
hereafter agree upon.
3. For purposes of determining any surplus or shortage in the fund; the
Publisher and Flynt shall review the RDA fund within thirty (30) days
following the close of each calendar year.
4. Publisher appoints Flynt to act as special attorney-in-fact for the
purpose of signing, executing or acknowledging RDA agreements with retailers.
Publisher hereby agrees to indemnify and hold harmless Flynt, its affiliates,
officers, agents, and representatives against any losses, damages, judgments,
expenditures or claims, or cross-claims, including attorney's fees as well as
any and all other costs incurred by Flynt in connection with Flynt so acting.
5. Publisher agrees to provide the requisite notice to all Customers cf the
RDA program by printing such notice in the first release of each of the
Publications.
6. Flynt shall not nave any obligation, of any kind or nature whatsoever,
to audit or review, in any manner whatsoever, the Customer's claims for
payment pursuant to the RDA program. Accordingly, Flynt shall have the right
to accept and pay such claims when received from Customers and such claims
when paid by Flynt shall be deemed accurate and conclusively binding upon
Publisher.
7. Publisher shall indemnify and hold harmless Flynt from any and all
claims, causes of action, suit, or other proceedings brought or made to
enforce any participating Customer's claim for payment pursuant to this RDA.
IN WITNESS WHEREOF, the parties hereto have duly executed this Rider to
the Agreement on the day and year first above written.
GT PRODUCTIONS, INC. FLYNT DISTRIBUTING COMPANY,
a Division of L.F.P., INC.
By:/s/ Gil Traub By:/s/
Gil Traub, President
EXHIBIT 10.12
LOAN AND SECURITY AGREEMENT
THIS AGREEMENT, made the 18th day of June 1996, under the laws of the
State of New Jersey between PRINCETON PUBLICATIONS [sic], INC., a New York
corporation, herein called the "Debtor", whose principal place of business is
519 Eighth Avenue, New York, New York 10018, and CURTIS CIRCULATION COMPANY, a
New Jersey corporation, herein called the "Secured Party", whose principal
place of business is 433 Hackensack Avenue, Hackensack, New Jersey 07601.
WITNESSETH:
WHEREAS, the Debtor on or about April 1, 1996 has acquired by purchase
all of the right title and interest in various publications and titles to be
published and issued after March 31, 1996 (collectively hereinafter referred
to as "Publications"[1]) from corporations owned and controlled by Murray
Traub, among then being, Scott Magazines Services, Inc., Kearney Publications,
Inc., Laurant Publishing Inc., Adult Movie Review, Inc., Focus Publications,
Inc., J.Q. Adams, Inc., John T. Edwards, Inc., Woodhill Publishing, Inc.,
Lipstick Publications, Inc., Blueboy Publications, Inc., and Celeb
Publications, Inc. (collectively hereinafter referred to as "Sellers"); and
[1] A list of the Publications covered by the Distribution Agreement and this
Agreement is annexed hereto and made part hereof as Exhibit 1.
WHEREAS, the Sellers were parties to a Distribution Agreement with
Secured Party dated March 14, 1990, but executed on April 14, 1990, and
amended on November 20, 1990, October 28, 1991, December 10, 1991, February
24, 1992, August 5, 1992, July 1, 1993 and January 31, 1995 (hereinafter
referred to collectively as "Distribution Agreement"); and
WHEREAS, the Sellers assigned all of their rights under the Distribution
Agreement to Debtor for the Publications published after March 31, 1996 and
Debtor assumed all of Sellers' obligations and duties under the Distribution
Agreement for the publications published subsequent to March 31, 1996 in
accordance with a certain letter agreement among the Sellers, the Debtor and
Secured Party dated March 29, 1996 (hereinafter referred to as "Assignment and
Assumption Letter"); and
WHEREAS, the Debtor is the "Publisher" as that term is used in the
Distribution Agreements for the Publications published after March 31, 1996;
WHEREAS, the Secured Party will be lending to the Debtor pursuant to the
terms hereof up to the am of $500,000; and
WHEREAS the Debtor has agreed to grant to the Secured Party a security
interest in the Debtor's receivables from the Secured Party payable under the
Distribution Agreement and otherwise, including receivables due from
advertisers (hereafter collectively referred to as "Collateral").
NOW, THEREFORE, in consideration of the foregoing and in consideration
of the covenants, terms, and conditions hereof, the parties covenant and agree
to the following:
1. Loan.
(a) Upon written request of Debtor made at anytime within one year of
date hereof and on condition that the Debtor is not in default under the terms
hereof or under the Distribution Agreement, the Secured Party shall lend to
the Debtor in multiples of $10,000 up to the sum of $500,000. Written request
for specified amount of the loan (hereinafter referred to as "Draw Down")
shall be by executing a promissory note in the form set forth in SubParagraph
(b), immediately below, and delivering same to the Secured Party. Each Draw
Down by Debtor shall be repayable in twelve equal monthly installments as
provided below. Debtor shall pay interest on each Draw Down as provided
below.
(b) In order for the Debtor to request the Draw Down, and in
consideration for the Draw Down, Debtor shall execute, and deliver to the
Secured Party a negotiable promissory note in the form annexed hereto ("Note")
whereby the Debtor promises to repay the principal owing on the Draw Down in
12 equal consecutive monthly installments commencing on the first day of the
month immediately following the Draw Down, together with interest accrued
thereon from the date of the Note. The Note shall be dated two business days
after the Note is delivered to the Secured Party. In any event, the entire
principal of each of the Draw Downs and interest accrued thereon as evidenced
by the Notes shall be paid by the Debtor no later than twelve months from the
date of each Note. Each Note shall provide for acceleration in the event
Debtor fails to pay interest or principal on any one or more notes or fails to
observe the terms of this agreement or the Distribution Agreement all as more
fully set forth below. The Debtor has the right to prepay the Draw Downs in
whole or in part as provided in the Notes. If there should be any
inconsistencies between the terms of this Agreement and the terms of the
Notes, the terms of this Agreement shall control.
(c) Interest shall be accrued and computed on the first day of each
month on the unpaid principal of each Draw Down (or Note) at the annual prime
rate charged by Chemical Bank, N.A. (or its successor by merger with Chase
Manhattan Bank) in New York City plus two percent. The Debtor shall commence
paying interest on each Draw Down on the first day of each month following the
Draw Down. All payments made an account of the Draw Down shall first be
applied to interest and then Principal.
(d) On the first day of each month during the term of each Draw Down,
the Debtor hereby irrevocably authorizes the Secured Party to deduct from the
proceeds of the receivable due and owing from the Secured Party to the Debtor
under the Distribution Agreement and pay the monthly installment of interest
and principal. In the event that the proceeds from the Distribution Agreement
are insufficient to pay the monthly installment then due plus accrued
interest, then the Debtor within five business days of the due date of the
monthly installment shall make up the difference by paying the difference from
the Debtor's own funds. All payments made by the Debtor to the Secured Party
shall first be applied against accrued interest and then against principal.
(e) Status of Receivable from Secured Party. Although the Secures
Party is granted a security interest in, among other assets, the proceeds of
any monies which the Secured Party may be paying to the Debtor under the
Distribution Agreement (hereinafter "receivable"), the Debtor hereby agrees
that: (i) the Secured Party has the right to withhold payments of such monies
upon the terms and conditions provided in the Distribution Agreement,
including the right to offset against any monies payable to the Debtor under
the Distribution Agreement any advances, loans (including the Principal of the
Loan), or overpayment made to the Debtor; (ii) the Secured Party is not
required to first pay such monies or segregate such monies for the benefit of
the Debtor or its creditors; and (iii) until the Secured Party pays such
monies which are due under the Distribution Agreement, such monies are not
receivable for purposes of this Agreement.
(f) Conditions to Secured Party Making the Payments on the Draw Down.
In order for the Debtor to obtain a Draw Down from the Secured Party the
following conditions shall be in effect or extant:
(i) Debtor shall not be in default under the Distribution
Agreement and this agreement;
(ii) Debtor shall not be in default in any payments due under the
Notes than outstanding and unpaid;
(iii) Debtor's financial condition shall not be so weak or
precarious that in Secured Party's reasonable judgment any further payments by
the Secured Party on the Draw Down would be inadvisable and imprudent.
(iv) Debtor supplying financial information which Secured Party
may request pursuant to Paragraph 3(e) below.
2. Security Interest.
(a) In order to secure the Draw Downs, the Debtor hereby assigns and
grants to the Secured Party a first lien and security interest in and to the
collateral consisting of the following:
(i) Debtor's right to receive any and all monies now or
hereafter payable to the Debtor from the Secured Party under the Distribution
Agreement;
(ii) Debtor's right to receive any and all monies now or
hereafter payable to the Debtor by the advertisers in the Debtor's
publications. Annexed hereto is a schedule of the names and addresses of the
advertisers ("Schedule of Advertisers") which schedule also shows the amount
each advertiser currently owes.
(iii) Debtor's right, title, and interest, both present and
future, include all rights of copyright and trademark, in and to the
Publications and their titles, and Debtor's right title and interest in any
subsequently published titles or publications not now in existence, including
all rights of copyright and trademark.
All of the foregoing collateral shall hereafter collectively be referred as
"the Collateral". Of the Collateral referred to in sub-paragraphs (i) and
(ii) above, now or hereafter existing, at various times hereafter shall be
referred to as "Assigned Accounts". Included in the right to receive the
monies due on the Assigned Accounts, is the Secured Party's right to the
Assigned Accounts themselves and the Secured Party's right to enforce
collection of such monies with expenses of collection chargeable to the
Debtor. Debtor shall update the schedule of Advertisers every three months
commencing July 1, 1996.
(b) Upon five business days written notice, the Secured Party and its
agents and accountants may from time to time, at Debtor's expense, inspect the
Debtor's books and records pertaining to the Collateral, and to take such
extracts therefrom as deemed advisable.
(c) Debtor shall cause its accounts receivable ledger, and other books
and records pertaining to the Assigned Accounts, to be marked or notated to
reflect the assignment and security interest granted hereunder in a form
acceptable to the Secured Party.
(d) Until there is an "event of default", Debtor, as agent of Secured
Party, shall continue to collect the Assigned Accounts in the same manner as
the Debtor has heretofore collected such accounts and deposit same in Debtor's
bank accounts for use by Debtor in paying its debts and obligations incurred
in the ordinary course of Debtor's business. Upon the happening of an event
of default, all monies received on account of the Assigned Accounts
("Proceeds") shall be promptly transferred in form received to the Secured
Party, except for Debtor's indorsement when required, and until the Proceeds
are so transferred to the Secured Party, same shall be held in trust in the
hands of the Debtor, its officers, agents and employees, for the Secured Party
and shall not be commingled with any other funds or property of Debtor.
(e) Upon the happening of an event of default:
(i) the secured party may notify each advertiser to remit the
amount the advertiser owes to the Debtor to the Secured Party;
(ii) the Secured Party may also request the Debtor to give notice
with all bills and statements that the account bas been assigned to Secured
Party and that the debt arising from each account is due and payable to the
Secured Party;
(iii) the Secured Party may indorse the Debtor's name on all
notes, checks and commercial paper of any kind on any Proceeds received from
the Assigned Accounts;
(iv) the Secured Party, or any of its officers, agents or
employees, is hereby irrevocably appointed the agent and attorney for the
Debtor to permit the Secured Party to withdraw Proceeds from any bank or trust
company; and any bank or trust company upon receiving a true or certified copy
of this Agreement is hereby irrevocably authorized to permit such withdrawals
without inquiry as to the circumstances of indorsement, without inquiring
as to the purpose of withdrawal, and without responsibility for the
application by the Secured Party of the Proceeds so withdrawn;
(v) the Secured Party may without notice to Debtor, extend the
time of payment of, compromise, or settle for cash, credit, or otherwise any
Assigned Account, and thereby discharge or release the person or persons
liable for the payment of such account; and the Secured Party shall not be
liable for so doing to the Debtor; and the Secured Party shall not be liable
to the Debtor for Secured Party's failure to collect any of the Assigned
Accounts.
(vi) The Collateral consisting of the Publications, both now or
hereafter existing, their copyright and trademarks, shall be promptly turned
over to the Secured Party's possession, management and control in such manner
as the Secured Party shall direct.
3. Debtor's Covenants.
(a) Debtor covenants and agrees to make the payments of interest and
principal on the Draw Downs (or Notes) as provided in Article 1, above.
(b) The Debtor has not pledged, sold, assigned or otherwise disposed
of or granted an interest in any part of the Collateral. The Debtor shall
defend the title to the Collateral against all persons and against all claims
whatsoever except for the security interest granted hereby. The Collateral is
lawfully owned by the Debtor and is now free and clear of any liens, security
interests, claims, charges, encumbrances, taxes and assessments.
(c) On demand of the Secured Party, the Debtor shall furnish further
assurance of title which may be required, execute any written agreement or
instrument, including, but not limited to, assignments, of copyrights and
trademarks to the Publications now or hereafter in existence in form suitable
for filing with the United States Copyright Office and United States Patent
and Trademark Office, or do any other acts necessary to effectuate the
purposes and provisions of this Agreement so as to perfect, continue or
terminate the security interest at the Secured Party in the Collateral and pay
all costs of filing in connection therewith and all costs in connection with
the preparation of such documents including the costs for the preparation of
this agreement and its related documents.
(d) The Debtor shall not assign, pledge, lien, or otherwise encumber
the Collateral, and the Debtor otherwise will keep the Collateral free and
clear of all liens, charges, incumbrance, taxes and assessments.
(e) Upon request of the Secured Party, the Debtor shall deliver to the
Secured Party its latest financial statement and corporate federal and state
income tax returns. Such financial statement and income tax returns shall
accurately and fully reflect the financial condition of the Debtor as of their
respective dates, including the reflection of any and all liabilities of the
Debtor, whether liquidated or not, whether absolute or contingent. In the
event that the Secured Party desires information on the financial condition of
the Debtor before making any Draw Down, Debtor agrees to supply same, whether
or not it be the financial statements and income tax returns or other relevant
information, and until Debtor supplies such financial information in manner
satisfactory to Secured Party, Secured Party need not make any payments to the
Debtor.
(f) The Debtor's principal and only place of business is located in
New York County, State of New York. In the event Debtor shall change its
principal place of business, it will promptly inform Secured Party thereof in
writing.
4. Consent to Extensions of Time for Payments.
In the event that the Secured Party consents to allowing the Debtor any
extension of time for payment, the Debtor consents to such extensions of time
without releasing the Collateral covered hereby.
5. Non-Waiver.
Waiver of or acquiescence in any default by the Debtor or failure of the
Secured Party to insist upon strict performance of any one or more of the
payments, or any one or more or the covenants, terms and conditions contained
herein or in the Distribution Agreement, shall not constitute a waiver of any
subsequent or other default or failure on the part of the Debtor.
6. Notices.
Notices to the Debtor or to the Secured Party shall be in writing and
shall be delivered personally, or by telefax, confirmed by mail, addressed to
the party at the addresses herein set forth, or by delivery by licensed
carriers such as U.S. Postal Service, Express Mail, Federal Express, DHL, UPS,
or by certified mail, return receipt requested, addressed to the party at the
address herein set forth or otherwise designated in writing. Notices shall
also been sent to:
7. Default of Debtor.
The following shall constitute events of default by the Debtor whichever
shall first occur:
(a) Failure to pay the Principal or any installment of principal, or
interest within five days after written notice to the Debtor from the Secured
Party that the receivables due from the Secured Party to Debtor are not
sufficient to pay the installment of principal or interest then due on the
Notes;
(b) Failure of the Debtor to comply with or perform any other
provision of the Distribution Agreement or this Agreement (other than non-
payment) capable of being cured within ten business days after receiving
written notice from the Secured Party;
(c) False or misleading representations or covenants made or given by
the Debtor in connection with this Agreement or the Distribution Agreement;
(d) The Debtor permitting the Collateral to be subject to levy of
execution, tax assessment or other judicial process.
(e) Commencement of a proceeding by or against the Debtor for relief
under the bankruptcy laws of the United States or for any other insolvency
proceeding, or the Debtor making an assignment for the benefit of creditors.
(f) Sale, transfer or assignment of any one of the titles covered by
the Distribution Agreement without first obtaining the written consent of the
Secured Party.
(g) Cessation of publication of any of the titles covered by the
Distribution Agreement without first obtaining the written consent of the
Secured Party unless the title is not making a profit.
8. Remedies on Default.
(a) Upon default of the Debtor, and at the option of the Secured
Party, all unpaid installments of principal on each outstanding unpaid Note
with interest accrued thereon shall be accelerated and shall immediately
become due and payable in full without notice or demand and the Secured Party
shall have the rights, remedies and privileges with respect to retention,
possession, and sale of the Collateral (at either or public or private sale in
accordance with the Uniform Commercial Code) and distribution of proceeds as
are accorded to a secured party by applicable sections of the Uniform
Commercial Code respecting "Default", in effect as of the date of this
Security Agreement. In addition, the Secured Party shall have the rights of
collection of the Proceeds of the Assigned Accounts as provided in Article 2
(e), above. In the event of a default under Article 7, Paragraph (a) above,
no default will occur unless and until Secured Party gives notice of such
default in writing and Debtor fails to cure within five (5) business days of
giving notice as provided in the Promissory Note annexed.
(b) In addition to the rights provided by the Uniform Commercial Code,
Secured Party has the right upon default of the Debtor to deduct from the
proceeds of the receivable owing to the Debtor under the Distribution
Agreement the unpaid amount of the Notes with interest accrued thereon.
(c) Upon any default, the Secured Party's reasonable attorneys' fees
and legal and other expenses in connection with the enforcement of this
Agreement and for advertising and selling the Collateral shall be chargeable
to the Debtor. The Debtor shall remain liable for any deficiency resulting
from a sale of the Collateral and shall pay such deficiency forthwith on
demand.
9. Applicable Law.
The Uniform Commercial Code of the State of New York shall govern the
rights, duties, and remedies of the parties, and any provisions herein
declared invalid under the law shall not invalidate any other provision of
this Agreement.
10. Financing Statement.
The Secured Party is hereby authorized by the Debtor to file Forms UCC-1
with the appropriate authorities in the State of New York, or in such other
jurisdictions where Debtor is located, reflecting the security interests
granted to it by the Debtor hereunder without any further writing from the
Debtor. Upon execution hereof, the Debtor shall execute the Form UCC-1.
11. Loan Expenses.
The Debtor shall reimburse the Secured Party for its legal expenses in
the preparation of this and related documents plus filing fees not to exceed
$1,800.
12. Captions.
The captions are inserted only as a matter of convenience and for
reference and in no way define, limit or describe the scope of this agreement
nor the intent of any provisions thereof.
13. Other Provisions.
(a) The Secured Party may assign this Agreement and if assigned the
Assignee shall be entitled, upon notifying the Debtor, to all of Debtor's
obligations and agreements hereunder, and the Assignee shall be entitled to
all the rights and remedies of the Secured Party hereunder. Debtor will
assert no claim or defenses to the Assignee which the Debtor may have against
the Secured Party. Upon written request of the Secured Party, Debtor will
confirm in writing the amount Debtor owes on the interest and Principal of the
Loan and that there are no defenses, offsets, or counterclaims with respect
thereto.
(b) The covenants, terms, and conditions herein contained shall bind
and inure to the benefit of the respective parties hereto and the respective
legal representatives, successors and assigns.
(c) The gender and number used in this Agreement are used as a
reference term only and shall apply with the same effect whether the parties
are of masculine or feminine gender, corporate or other form, and singular
shall likewise include the plural.
(d) This Agreement may not be changed orally.
IN WITNESS WHEREOF, the parties have respectively signed and sealed this
Agreement, on the date and year first above written.
PRINCETON PUBLICATIONS [sic], INC.
By: /s/ James McNamara
James McNamara, President
CURTIS CIRCULATION COMPANY
By: /s/
STATE OF NEW YORK
COUNTY OF NEW YORK SS.:
On the 28th day of June, 1996, before me personally came JAMES MCNAMARA,
to me known, who, being by me duly sworn, did depose and say that he resides
at Palm Beach, Florida, that he is the President of PRINCETON PUBLICATIONS
[sic], Inc., the corporation described in and which executed the foregoing
Loan and Security Agreement; that he knows the seal of said corporation; that
the seal affixed to said instrument is such corporate seal; that it was so
affixed by order of the board of directors of said corporation, and that he
signed his name thereto by like order.
/s/
Notary Public
Exhibit 1
LIST OF THE PUBLICATIONS
All of the titles covered by and to be covered by Publisher' Code P-11 as
currently and hereafter maintained by Curtis Circulation Company.
NEGOTIABLE PROMISSORY NOTE
$000,000.00 , 1996
In consideration for the loan of [ ] ($000,000) dollars from
Curtis Circulation Company to the undersigned, receipt of which is hereby
acknowledged, the undersigned, Princeton Publications [sic], Inc., promises to
pay to the order of Curtis Circulation Company ("Curtis" or "Holder") at 2500
McClellan Avenue, Pennsauken, New Jersey 08109 (or at such other address as
Curtis or Holder shall inform the undersigned of), the sum of [ ]
dollars ($0,000.00) ("Principal") in twelve (12) equal consecutive monthly
installments of [ ] dollars ($0,000.00) ("Principal
Installment") commencing [ ] 1, 1996 and on the first day of each month
thereafter together with interest payable monthly with the Principal
Installment on the unpaid Principal balance (before crediting the Principal
Installment) at the rate of two percent (2%) above the annual prime rate
charged by the Chemical Bank, N.A. in New York City in effect five (5)
business days before the dates on which each monthly Principal Installment is
due, except that interest payable on Principal from date hereof to [ ] 1,
1996 shall be paid on [ ] 1, 1996. In any event, the unpaid Principal and
all unpaid accrued interest shall be payable by [ ] 1, 1997.
This note is one of a series of notes issued under a Loan and Security
Agreement made by the Maker with Curtis under date of June [ ] 1996.
The undersigned hereby waives demand, notice of presentment and protest.
The undersigned consents to any extensions that Curtis or Holder may give with
respect to any payment required hereunder.
The undersigned has the right to prepay this note in whole or in part at
any time provided that the pre-payment is equal to the Principal Installment
or multiples thereof with interest accrued thereon through date of pre-
payment, and same shall be applied against the last payments due in reverse
order to regular payments.
The entire unpaid Principal shall became accelerated and immediately due
and payable in the event of a default as set forth in a Loan and Security
Agreement of this date between the undersigned as Debtor, and Curtis as
Secured Party.
In the event legal proceedings are instituted to collect upon this note,
the undersigned shall pay the Holder of this note all court costs and
reasonable attorneys fees incurred by the holder.
PRINCETON PUBLICATIONS [sic], INC.
By:
James McNamara, President
EXHIBIT 10.13
[This Agreement now between MICHAEL DEPASQUALE JR. ENTERPRISES, INC. and
Princeton Publishing, Inc., as assignee of DOJO PUBLISHING, INC.]
LICENSING AND PURCHASE OPTION AGREEMENT
Agreement, made this 6 day of July, 1990, by and between DOJO
PUBLISHING, INC. ("Licensee"), a New York corporation with offices at 300
West 43rd Street, New York, New York 10036 and MICHAEL DEPASQUALE JR.
ENTERPRISES, INC. ("Licensor"), residing at 658 Poplar Road, Rivervale,
N.J. 07675.
WITNESSETH:
WHEREAS, Licensor is the publisher of a certain magazine of general
circulation to the public entitled "Karate International" (the "Magazine"),
and
WHEREAS, Licensee is desirous of obtaining a license from Licensor for
the use of the name, trademark and style of the Magazine; and
WHEREAS, Licensee is desirous of retaining Licensor for the purpose of
producing future issues of the Magazine.
NOW, THEREFORE, in consideration of the mutual covenants and conditions
heretofore set forth herein, the parties hereto hereby agree as follows:
1. GRANT OF LICENSE AND WARRANTEE - Licensor grants to Licensee the
right to secure registration in Licensor's name at Licensee's sole cost of
a trademark "Karate International" (the "Trademark") for periodicals with
the United States Patent and Trademark Office and in foreign countries
outside the United States. Licensee shall at Licensee's discretion and cost
secure and maintain said registrations. Licensor shall execute a power of
attorney and/or any and all other necessary documents to appoint Licensee
as Licensor's attorney-in-fact for the purpose of, at Licensee's sole
discretion, obtaining and maintaining said registrations. Licensor grants
to Licensee an exclusive license (the "License") to employ the Trademark
and/or the logo, style, and good will associated therewith and/or the
editorial style, content and good will associated with the Magazine
(collectively the "Licensed Rights") in (a) all editions of the Magazine
(and/or special editions, yearbooks and/or one-shots bearing the Trademark)
to be published in the United States and distributed by Licensee in the
United
States and other parts of the world, and (b) and (b) upon any and all other
products, goods and/or services manufactured, sold and/or provided by
Licensee, upon the terms and conditions hereinafter set forth. The said
License shall commence with issue number 9 of the Magazine, bearing a cover
date of October 1990 and a scheduled on-sale date of September 11, 1990.
Licensee accepts such License, and agrees to use the Trademark on all
copies of the Magazine published pursuant to this Agreement, commencing
with Volume 2, number 3 of the Magazine. Any and all debts or obligations
incurred in connection with any issues of the Magazine prior to Volume 2,
number 3 thereof shall, at all times, remain the exclusive obligations of
Licensor and Licensee shall incur no obligations with respect thereto.
Licensor agrees that while this Agreement remains in effect, Licensor will
not use, or grant to anyone other than Licensee the right to use, any of
the Licensed Rights anywhere in the world. Licensee agrees to execute all
license and registered user agreements that may be necessary and proper in
order to obtain and maintain trademark registrations for the Trademark.
Notwithstanding anything herein stated to the contrary, Licensor retains
the right to utilize the Trademark in connection with seminars,
demonstrations and tournaments.
2. LICENSING FEE - Licensee shall pay to Licensor, in full
consideration of the License granted pursuant to this Agreement, the
aggregate sum of $25,000.00 (the "Licensing Fee). The Licensing Fee shall
be paid as follows: (i) the sum of $5,000.00 upon the execution of this
Agreement; (ii) the sum of $5,000.00 upon the publication of the first
issue of the Magazine to be published pursuant to this Agreement; and (iii)
the balance of $15,000.00 in three equal monthly installments of $5,000.00
each, commencing thirty days after the publication of the first issue of
the Magazine to be published pursuant to this Agreement and continuing each
thirty days thereafter until the entire Licensing Fee is paid. In the
event of a default by Licensee in the payment of any portion of the
Licensing Fee, which default remains uncured for a period of fourteen days
after written notice thereof, the entire Licensing Fee shall accelerate and
become immediately due and payable to Licensor.
3. OPTION TO PURCHASE - Licensor hereby grants to Licensee an
irrevocable option to purchase the Licensed Rights outright for a purchase
price of $100.00. The said option to purchase may be exercised by Licensee
at any time after the Licensing Fee (as defined in paragraph 2 of this
Agreement) has been paid in full. The said option to purchase shall become
effective as of the date of this Agreement and shall remain in effect
through and including June 30, 2040.
4. FURTHER CONSIDERATION FOR OPTION TO PURCHASE - As further
consideration for the irrevocable option described in paragraph 1 of this
Agreement, upon the execution of this Agreement, Licensee shall deliver to
Licensor share certificates evidencing ownership of thirty percent (30%) of
the issued and outstanding common stock of Licensee ("Licensor's Stock
Interest") and shall note such issuance on Licensee's stock transfer
ledger. Nothing contained in this paragraph, or otherwise in this
Agreement, shall be construed as preventing the issuance, sale, transfer or
other disposition of any other shares of stock of Licensee, whether
presently existing, hereafter issued or authorized, or otherwise, provided
that such issuance shall not dilute Licensor's percentage ownership of
thirty percent (30%) of the stock of Licensee. Licensor, as thirty percent
(30%) owner of the common stock of Licensee, shall be paid yearly by
Licensee thirty percent (30%) of any and all profits of Licensee. Licensee
shall have the right to examine, during normal business hours and upon
reasonable notice, the records maintained by Licensee as received from the
National Distributor of the Magazine reflecting sales of the Magazine.
Licensor (and/or Licensor's representatives) shall have access, upon
reasonable notice and during working hours) to such books and records of
Licensee as are actually needed to determine Licensee's profits, if any.
5. EMPLOYMENT OF LICENSOR
5.1 EMPLOYMENT - Licensee hereby employs Licensor, and Licensor accepts
such employment, as the publisher of the Magazine for a period of two years
from the date of this Agreement (the "Term"). During the Term, Licensor
shall be listed on the masthead of the Magazine as the Publisher thereof.
Licensor's employment as publisher shall be as an independent contractor
and shall be terminable for cause at any time and at will after the
expiration of the Term. Nothing contained in this Agreement shall be
deemed a waiver of the Licensee's right to terminate the Licensor's
Employment at any time for cause or for any reason or for no reason after
the expiration of the Term. Nothing contained in this Agreement shall be
deemed to create an employment for any fixed term other than the Term, it
being understood that Licensor's retention as an independent contractor is
severable from the remaining provisions of this Agreement and is terminable
at the will of Licensor after the expiration of the Term. Upon such
termination, Licensee shall be under no obligation to Licensor except to
pay him such compensation as he may be entitled to receive up to the time
of such termination. The rights and powers granted to Licensor are those
of an independent contractor only and this Agreement shall not, and is not
intended to, create any other relationship nor make, constitute or appoint
Licensor an agent or joint venturer of Licensee.
5.2 COMPENSATION - Licensor shall receive the sum of $36,000.00 per
annum, payable in equal installments every two weeks while Licensor's
employment with Licensee continues, as full compensation for his employment
by Licensee as publisher of the Magazine.
5.3 DUTIES OF LICENSOR - Licensor shall deliver to Licensee, in
sufficient time to meet Licensee's production schedules (which shall be
delivered to Licensor in advance in writing in sufficient time to comply
therewith), editorial text and photographs sufficient to produce no more
that ten (10) eighty (80) page, four-color issues of the Magazine. In the
event that more than ten (10) issues of the magazine are published pursuant
to this Agreement in any calendar year, Licensee's compensation set forth
in paragraph "5.2" of this Agreement shall be modified accordingly.
Additionally, Licensor shall use his best efforts (and Licensee shall fully
cooperate) to retain the advertisers that presently advertise in the
Magazine, a Schedule of which is annexed hereto, made a part of this
Agreement, and labeled Schedule "A". Licensor warrants and represents that
the information contained on Schedule "A" is accurate as of the date of
this Agreement. Additionally, Licensor shall, at his discretion, assist
Licensee in attempting to obtain additional future advertising from any and
all sources available. All advertising revenues shall, at all times, be
billed by, collected by, and remain the exclusive property of Licensee.
5.4 DUTIES OF LICENSEE - Licensee shall pay all costs for the materials
necessary to publish all issues of the Magazine, which costs shall not
exceed $4,500.00 per issue of the Magazine. Licensor shall submit to
Licensee all proposed expenses intended to be incurred in excess of
$3,000.00 to obtain the materials necessary for the publication of the
Magazine for approval prior to incurring any such bills. Licensee shall be
responsible for the payment of only those bills in excess of $3,000.00
which Licensee has approved prior to the time that the same are incurred.
5.5 SUBSCRIPTIONS - Annexed to this Agreement, made a part hereof, and
labeled Schedule "B" is a list of existing subscriptions for the Magazine.
Licensor warrants and represents that all information contained on Schedule
"B" is accurate as of the date of this Agreement. Licensee shall be
responsible for fulfilling all Subscriptions listed on Schedule B through
the expiration dates indicated thereon.
6. INDEMNITIES - Licensor agrees to, and does, indemnify, defend and
hold Licensee harmless against any claims or suits of third parties
arising out of the use by Licensee of the Licensed Rights with the
Magazine. Each party shall give the other prompt notice of any such claim
or suit. Licensor shall have the option to settle, or to undertake and
conduct the defense of, any suit so brought; except that Licensor shall
not, without Licensee's consent (which consent shall not be unreasonably
withheld), enter into any settlement agreement which prohibits the use of
any of the Licensed Rights on the understanding that if Licensee fails to
consent to such Settlement, Licensee shall undertake and conduct the
defense at Licensee's
expense. Each party shall cooperate with the other in the defense of any
suit at the sole cost and expense of the party not defending such suit
shall have the right, at its sole cost and expense, to join in the defense
of any such suit.
7. RESTRICTION ON USE OF CONFIDENTIAL INFORMATION - As part of the
consideration required of him under this Agreement, Licensor agrees that he
will not at any time during the Term of his Employment with Licensee
(except in connection with Licensor's production of an illustrated comic
magazine entitled "Karate Kreatures") divulge to any person, firm or
corporation, or use for his own benefit or for the benefit of any other
person, firm or corporation, (a) any of the materials obtained by Licensor
for the publication of the Magazines or (b) any Confidential Information
(as hereinbelow defined) received by him during the course of his
employment with regard to the personal, financial or other affairs of
Licensee and all such information shall be kept confidential and shall not
in any manner be revealed to anyone. For the purposes of this Agreement,
the term "Confidential Information" shall mean (1) the identity of
potential advertisers of Licensee and/or the Magazine; (2) the address,
requirements, or person to contact with respect to any advertisers or
potential advertisers of Licensee and/or the Magazine; (3) the methods,
processes or manner of doing business of Licensee; (4) the identity of any
and all sources of supply or potential sources of supply to Licensee; (5)
the terms of any distribution agreement to which Licensee is a party or a
beneficiary; and (6) any sales, distribution and/or demographic information
concerning the Magazine and/or the purchasers and/or potential purchasers
of the Magazine. For the purposes of this Agreement, the term Confidential
Information shall apply to any information of the type described in this
paragraph, whether the same was information in the possession of Licensee
prior to the employment of Licensor or otherwise, and whether the same came
into the possession of Licensee as a result of Licensor's efforts, it being
the intention of the parties to irrevocably deem any information which
Licensor brings to Licensee, or learns of while employed with Licensee, to
be the sole and exclusive property of Licensee for all time. Upon the
termination of Licensor's employment with Licensee, irrespective of the
time, manner or cause of such termination, Licensor shall surrender to
Licensee all lists, books and records of or in connection with Licensee's
advertisers, sources of supply and/or business, and all other property
belonging to Licensee.
8. COVENANT NOT TO COMPETE - As part of the consideration given by
Licensor for the making of this Agreement, Licensor agrees that he will
not:
A. At any time during, or for a period of two years after the
termination of this Agreement, endeavor to entice away from Licensee any of
the readers or potential readers and/or any advertisers or potential
advertisers of the Magazine, or any person, firm or corporation in the
habit of dealing with Licensee, or interfere with or entice away any other
employee of Licensee; or
B. For a period of two (2) years from the termination of Licensor's
employment with Licensee, irrespective of the time, manner or cause of such
termination, Licensor shall not, on his own behalf or on behalf of any
other person, firm or corporation, either as principal, agent, employee,
employer, stockholder, copartner or in any other individual or
representative capacity whatsoever, solicit, serve or cater to or engage,
assist, be interested in or connected with or engaged in the publication of
any magazine distributed in the United States or Canada dealing with the
martial arts in general or karate in particular, other than the Karate
Kreatures comic magazine referred to in paragraph 7. Employee specifically
agrees that the geographical and time scope of the restriction on competi-
tion set forth in this paragraph are reasonable, and that if either is
deemed unreasonable by any Court, that particular provision shall not be
severed and eliminated, but shall be deemed reformed to be within the scope
that is held reasonable by the Court.
9. INJUNCTIVE RELIEF APPROPRIATE - Licensor agrees that a violation of
paragraph "8" of this Agreement will cause such damage to Licensee as will
be irreparable and for that reason further agrees that Licensee shall be
entitled, as a matter of right, and in addition to any monetary damages
which Licensee is able to prove, to an ex parte injunction out of any Court
of competent jurisdiction, restraining any further violation of the said
covenants by Licensor and/or his agents or employees --- such right to an
injunction, however, to be cumulative and in addition to whatever other
remedies Licensee may have in the premises.
10. LITIGATION OF DISPUTES - Any disagreement, claim or dispute of any
kind whatsoever concerning this Agreement, or the performance hereof, shall
be resolved by an action commenced in the Supreme Court of the State of New
York in and for the County of New York. For the purposes of this
Agreement, the parties hereto irrevocably consent to the jurisdiction and
venue of the said Court and agree that service of process may be made by
certified mail, return receipt requested, at the address set forth in the
preamble of this Agreement, or such other address as any party may, in
writing, notify the other.
11. EXECUTION OF DOCUMENTS - The parties to this Agreement shall
execute and deliver such documents and instruments of any kind as are
necessary to carry this Agreement into effect.
12. NOTICES TO BE GIVEN - All notices and/or demands required or
permitted to be given pursuant to this Agreement shall be in writing and
shall be personally delivered to, or mailed by certified mail, return
receipt requested, to the party to receive such notice, at the address
appearing in the preamble to this Agreement, or at such other address as
any party may, by written notification, advise the other party.
Notification shall be completed upon the personal delivery of the notice or
the execution of the return receipt in the case of notice by mail.
13. CONTRACT BINDING - This Agreement shall be binding upon and inure
to the benefit of the parties hereto, and their heirs, executors,
administrators and successors. This Agreement may not be assigned by
either party hereto without the written consent of the other party.
14. WAIVER OF BREACH - The waiver by any party to this Agreement of a
breach of any provision of this Agreement by the other party shall not act
as a waiver of any subsequent breach of such provision, or other provision,
of this Agreement by such breaching party or any other party hereto.
15. INDEPENDENT REPRESENTATION - It is acknowledged by the parties
hereto that Michael L. Levine, Esq. is counsel to Licensee for the purposes
of this Agreement and has acted exclusively on behalf of Licensee in
connection herewith. It is further acknowledged that Licensor has retained
and consulted with independent counsel of his choice for the purposes of
this Agreement, which counsel has acted exclusively on behalf of Licensor
in connection herewith. The parties acknowledge that the attorney
representing the other party to this Agreement has not counseled, advised
or otherwise acted, in any manner, on behalf of the party who is not such
attorney's client. Additionally, the parties agree that this Agreement has
resulted from substantial negotiation and modification of
prior drafts hereof. As such, any ambiguity appearing in this Agreement
shall not be held against either party hereto and neither party shall be
charged with any adverse inference as a result of any ambiguity appearing
in this Agreement.
16. MAINTENANCE OF QUALITY - The quality of the Magazine produced by
Licensee shall be the same or better than the quality of the Magazine as
currently produced by Licensor.
17. ENTIRE AGREEMENT - This instrument constitutes the entire
agreement between the parties hereto and supersedes and replaces any prior
negotiations, discussions and writings. No representations, warranties,
statements of fact, or agreements of any kind, unless specifically stated
in this Agreement, shall survive the execution of this Agreement. The
parties acknowledge that they have conducted such investigation as they
determined necessary to adequately assess the viability of this Agreement
and the transaction contemplated hereby, have had the opportunity to
examine all relevant books and records and are satisfied therewith. The
parties further acknowledge that no representations, other than those
contained in this Agreement, have been made by either party and
specifically waive any claim of nondisclosure or improper disclosure which
may subsequently be raised. This Agreement may not be changed other than
by a written instrument, executed by the parties hereto.
IN WITNESS WHEREOF, the parties hereto have set their hand on the date
and year first above-written.
DOJO PUBLISHING, INC.
By: /s/ Henry M. McQueeney, Pres.
MICHAEL DEPASQUALE ENTERPRISES, INC.
By: /s/ Michael DePasquale, Jr., Pres.
EXHIBIT 10.14
[This Agreement now between Harvey Geipel and Kingston Press, Inc., as
assignee of Raven Press, Inc.]
LEASE
THIS LEASE, made and entered into this 14th day of July, 1989, by and
between HARVEY GEIPEL, hereinafter referred to as "LESSOR", and RAVEN
PRESS, INC., a Wisconsin corporation, of Sussex, Wisconsin, hereinafter
referred to as "LESSEE".
1. Lessor does hereby lease, rent and let unto the said Lessee the
industrial building located at N63 W22777 Main Street in the Sussex
Industrial Park, in the Village of Sussex, Waukesha county, Wisconsin, more
particularly described as follows:
Land and building of approximately 57,600 square feet of space
located and described on the attached Exhibit A, to hold for a term of five
(5) years beginning on the 1st day of September, 1989, and ending on the
31st day of August, 1994, unless extended or sooner terminated as
hereinafter provided. The building is located on the real estate more
particularly described as Lot 8 in Block 1 of Certified Survey Map No.
3793, recorded with the Waukesha County Register of Deeds as Document No.
1121332, Tax Key No. 242.008.
2. For and in consideration of the leasehold so rented, Lessee
shall pay to Lessor a base rent in the amount of $20,400.00, per month, due
and payable in advance on the first day of each month of the lease term.
Occupancy shall be given on the date of signing this lease, at which time
the rent for September, 1989, shall be due. No rent shall be payable for
the period from July 14 through August 31, 1989. The base monthly rental
of $20,400.00 shall be adjusted annually on the anniversary date of the
lease by the same percentage increase as the increase in the Milwaukee All
Urban Consumer Price Index for the Milwaukee Metropolitan area, with the
January, 1990, being the base year. In addition to this base rent, Lessee
agrees to pay each month one-twelfth (1/12) of any increase in real estate
taxes above the real estate taxes for the base year 1989. Such additional
payments for tax increases shall be made each month with the rent payments.
Written notice from Lessor shall show in reasonable detail the calculation
of any increase in taxes.
3. Lessee shall pay Lessor $20,400.00 upon the signing of this
Lease as a security deposit and not as any portion of the rent. Lessor
need not hold the security deposit in a separate trust fund. At the end of
the Lease term, the security deposit shall be returned to Lessee within ten
(10) days after Lessee vacates the premises in broom-clean condition, after
deducting the cost of any necessary repairs or extra-ordinary clean-up
expenses or unpaid obligations of Lessee.
4. Lessee will pay for all heat, gas, electric, water and sewer
service for the leased premises. Lessee will provide and pay for its own
telephone service. Lessor shall pay all real estate taxes on the premises,
(subject to Lessee's responsibilit as described in Paragraph 1). Personal
property taxes on Lessee's property, if any, shall be paid by Lessee, along
with all sales, use, excise, income and other taxes connected with Lessee's
operations. Lessor will pay all fire insurance premiums to cover insurance
for fire, premises liability and casualty relating to the premises.
5. Lessee may install its own removable partitions, equipment and
fixtures which may be removed by Lessee at the end of the term or any
renewal period, provided that upon vacating the premises' Lessee restores
the premises to the condition prior to installation. Lessee will be
responsible for maintenance of the interior of its leased premises and for
the truck docks on the leased premises.
The Lessor shall be responsible for the repair and the upkeep of the
exterior of the property, including all major structural components,
including roof repair and parking areas.
Responsibility for the upkeep of meters and piping providing utility
service to the property shall remain with the Lessor during the lease
terms.
The Lessee shall be responsible for maintaining the interior premises
keeping them in a clean and tenantable condition and responsible for
snowplowing, grass cutting and any other normal and routine exterior
maintenance.
6. Lessee will pay the said rent promptly to Lessor, at 9400 North
107th Street, Milwaukee, Wisconsin 53224, on the first day of each month
during the said term.
7. The premises herein leased and every part thereof shall, during
said term, be used only for Lessee's printing business purposes and no
other purpose without the consent of Lessor first had and obtained in
writing, such consent shall not unreasonably withheld by Lessor, and will
not use or keep in or about the said premises any article or thing which
would anywise affect the validity of the Standard Fire Insurance Policy of
the State of Wisconsin.
8. Lessee shall keep the said premises in as good repair the same
are in at the commencement of said term, reasonable use and wear thereof
and damage by accidental fire or other accidents, not happening through the
neglect of Lessee, only excepted. Lessee shall keep the said premises in a
clean and tenantable condition. Lessee shall have a right to maintain
signs on outer walls.
9. Lessee shall obey all lawful orders, rules and regulations of
the health officers, and all the health ordinances of Waukesha County and
the Village of Sussex.
10. In the event the leased premises shall be partially or totally
destroyed by fire or other casualty insurable under full standard extended
coverage insurance, as to become partially or totally untenantable, the
same shall be repaired as speedily as possible at the expense of Lessor,
and a just and proportionate part of the basic annual rent shall be abated
until so repaired. If area of destroyed is greater than 70% of the total
area of the premises, premises shall be deemed totally untenantable.
11. If the Lessee shall abandon or vacate said premises before the
expiration of said term, the Lessor shall be at liberty, at his option, to
relet the same and apply the money derived from such reletting to the rent
due or to become due on this Lease, and the Lessee shall remain liable for
any deficiency and agrees to pay the same.
12. For all purposes under this Lease, the parties hereto are
identified as follows:
Lessor: Harvey Geipel
9400 North 107th Street
Milwaukee, Wisconsin 53224
Lessee: Raven Press, Inc.
N63 W22777 Main Street
Sussex, Wisconsin 53089
Where formal notices are required, certified mail may be used in lieu
of personal service.
13. The Lessee agrees to purchase, maintain and carry, at all times
during the term of this Lease, public liability insurance with limits of
not less than $1,000,000, per occurrence, primary coverage, and a
$1,000,000 umbrella policy, in a policy approved by Lessor. The Lessee
will provide a Certificate of such insurance to Lessor.
Lessor and Lessee mutually waive any and all right of subrogation
which Lessor and Lessee, or their respective insurers, might have against
the other or against the other party's insurer as the result of any loss or
liability arising from the leasing, use or occupancy of the premises leased
under this Lease. Upon request, Lessor and Lessee agree to obtain such
Certificates from their respective insurance carriers as may be necessary
to effect the waivers recited in this paragraph.
14. At the end of the Lease term, Lessee shall have the right to
remove Lessee's fixtures which can be removed without substantial damage to
the premises. Any damage occasioned by the removal of said fixtures shall
be repaired by Lessee.
15. The Lessee shall keep the glass in the windows and doors in
good repair and whole.
16. The Lessee will repair all electric fixtures, plumbing
fixtures, heating and air conditioning equipment, and other mechanical
equipment on its leased premises.
17. Lessor shall hold Lessee harmless and defend Lessee against any
and all claims or liability for any injury or damage to any person in, on
or about the premises, when such injury or damage shall be caused by the
act, neglect, fault of or omission of any duty with respect to same by
Lessor, its agents, servants and employees. Lessee will indemnify Lessor
and save it harmless from and against any and all claims, actions, damages,
liability and expense in connection with loss of life, personal injury
and/or damage to property arising from or out of any occurrence, in, upon
or at the leased premises. In case Lessor shall, without fault on its
part, be made a party to any litigation commenced by or against Lessee,
then Lessee shall protect and hold Lessor harmless and shall pay all costs,
expenses and reasonable attorney fees incurred or paid by Lessor in
connection with such litigation. Lessee shall also pay all costs, expenses
and reasonable attorney fees that may be incurred or paid by Lessor in
enforcing the covenants and agreements of this Lease.
18. Lessee agrees within ten (10) days after request therefor by
Lessor to execute the recordable form and deliver to Lessor a statement, in
writing, certifying (a) that this Lease is in full force and effect, (b)
the date of commencement and termination of the term of this lease, (c)
that rent is paid currently without any off-set or defense thereto, (d) the
amount of rent, if any, paid in advance, and (e) that there are no uncured
defaults by lessor or stating those claimed by Lessee provided that, in
fact, such facts are accurate and ascertainable.
19. Lessee shall, in the event any proceedings are brought for the
foreclosure of or in the event of exercise of the power of sale under any
mortgage made by Lessor covering the leased premises, attorn to the
purchaser upon any such foreclosure or sale and recognize such purchaser as
the Lessor under this Lease.
20. Lessee agrees that this Lease shall, at the request of Lessor,
be subordinate to any first mortgages that may hereafter be placed upon
said premises and to any and all advances to be made thereunder, and to the
interest thereon, and all renewals, replacements and extensions thereof,
provided the mortgagee named in said mortgages shall agree to recognize the
lease of Lessee in the event of foreclosure if Lessee is not in default.
Lessee also agrees that any mortgagee may elect to have this Lease a prior
lien to its mortgage, and in the event of such election and upon
notification by such mortgagee to Lessee to that effect, this Lease shall
be deemed prior in lien to the said mortgage, whether this Lease is dated
prior to or subsequent to the date of said mortgage. Tenant agrees that,
upon the request of Landlord, any mortgagee, it shall execute whatever
instruments may be required to carry out the intention of this Paragraph
20.
21. Failure of Lessee to execute any of the above instruments
within fifteen (15) days upon written request so to do by Lessor shall
constitute a breach of this Lease, and Lessor may, at its option, cancel
this Lease and terminate Lessee's interest therein.
22. Lessee will not, directly or indirectly, permit the leased
premises to be occupied or used in whole or in part by any other person,
firm or corporation, and will not sublet the same nor any part thereof, nor
assign this lease without, in each case, first obtaining the written
consent of Lessor. Lessor agrees not to unreasonably withhold its consent
to any assignment or subletting or demised premises or any part thereof.
In the event such consent is given, Lessee shall remain liable to Lessor
for the payment of rent then due or to become due, and the performance of
all other obligations of Lessee hereunder for the balance of the lease
term.
Lessee may, at its expense, with Lessor's prior approval, modify or
alter the demised premises in order to accommodate the requirements of a
sublessee or assignee from Lessee. Such improvements so installed, not the
trade fixtures of the sublessee or assignee, shall be subject to all of the
conditions in favor of Lessor as set out in the Lease.
23. Lessee shall not commit or suffer to be committed a waste upon
the leased premises or any nuisance or other act thing which may disturb
the quiet enjoyment of any other tenant in the building in which the leased
remises may be located.
24. In the event of any failure of Lessee to pay any rent or other
charges due hereunder within ten (10) days after the same shall be due, or
any failure to perform any other of the terms, conditions or covenants of
this Lease to be observed or performed by Lessee for more than thirty (30)
days after written notice of such default shall have been mailed to Lessee,
or Lessee shall abandon said premises or permit this Lease to be taken
under any writ of execution, then Lessor, besides other rights or remedies
it may have, shall have the right to declare this lease terminated and the
term ended and/or shall have the immediate right of re-entry and may remove
all persons and property from the leased premises, and such property may
removed and stored in a public warehouse or elsewhere at the cost of, and
for the account of, Lessee, without evidence of notice or resort to legal
process and without being deemed guilty of trespass, or becoming liable for
any loss or damage which may be occasioned thereby.
25. Should Lessor elect to re-enter, as herein provided, or should
it take possession pursuant to legal proceedings or pursuant to any notice
provided by law, it may either terminate this Lease or it may, from time to
time, without terminating this Lease, make such alterations and repairs as
may be necessary in order to relet the premises, and relet said premises,
or any part thereof, for such term or terms (which may be for a term
extending beyond the term of this lease), and at such rental or rentals and
upon such other terms and conditions as Lessor, in its sole discretion, may
deem advisable. Upon such reletting all rentals and other sums received by
Lessor from such reletting shall be applied, first, to the payment of any
indebtedness other than rent due hereunder from Lessee to Lessor; second,
to the payment of any costs and expenses of such reletting, including
reasonable brokerage fees and attorney's fees and of costs of such
alterations and repairs; third, to the payment of rent and other charges
due and unpaid hereunder; and the residue, if any, shall be held by Lessor
and applied in payment of future rent as the same may become due and
payable hereunder. If such rentals and other sums received from such
reletting during any month be less than that to be paid during that month
by Lessee hereunder, Lessee shall pay such deficiency to Lessor. Such
deficiency shall be calculated and paid monthly. No such re-entry or
taking possession of said premises by Lessor shall be construed as an
election on its part to terminate this Lease unless a written notice of
such intention be given to Lessee or unless the termination thereof be
decreed by a court of competent jurisdiction. Notwithstanding any such
reletting without termination, Lessor may at any time hereafter elect to
terminate this Lease for such previous breach. Should Lessor at any time
terminate this Lease for any breach, in addition to any other remedies it
may have, it may recover from Lessee all damages it may incur by reason of
such breach, including the cost of recovering the leased premises,
reasonable attorney fees and including the worth at the time of such
termination of the excess, if any, of the amount of rent and charges
equivalent to rent reserved in this Lease for the remainder of the stated
term over the then reasonable rental value of the leased premises for the
remainder of the stated term, all of which amounts shall be
immediately due and payable from Lessee to Lessor.
26. In case suit shall be brought for recovery possession of the
leased premises, for the recovery of rent or any other amount due under the
provisions of this Lease, or because of the breach of any other covenant
herein contained on the part of the parties to be kept performed, and a
breach shall be established, the prevailing party shall be entitled to
their expenses incurred therefor, including a reasonable attorney fee.
27. Neither this Lease, nor any interest therein, nor any estate
thereby created, shall pass to any trustee or receiver or assignee for the
benefit of creditors or otherwise by operatiion of law.
28. In the event the leasehold created hereby shall be taken in
execution or by other process of law, or if Lessee shall be adjudicated
insolvent or bankrupt pursuant to the provisions of any state or federal
insolvency or bankruptcy act, or if a receiver or trustee of the property
of Lessee shall be appointed by reason of Lessee's insolvency or inability
to pay its debts, or if any assignment shall be made of Lessee's property
for the benefit of creditors, then and in any such event, Lessor may, at
its option, terminate this Lease and all rights of Lessee hereunder by
giving to Lessee notice in writing of the election of Lessor to so
terminate.
29. Lessee shall not cause or give cause for the institution of
legal proceedings seeking to have Lessee adjudicated bankrupt, reorganized
or rearranged under the bankruptcy laws of the United States, and shall not
cause or give cause for the appointment of a trustee or receiver for
Lessee's assets, and shall not make any assignment for the benefit of
creditors or become or be adjudicated insolvent. The allowance of any
petition under the bankruptcy law or the appointment of a trustee or
receiver of Lessee or its assets shall be conclusive evidence that Lessee
caused, or gave cause therefor, unless such allowance of the petition, or
the appointment of a trustee or receiver, is vacated within thirty (30)
days after such allowance or appointment. Any act described in this
paragraph shall be deemed a material breach of Lessee's obligation
hereunder, and upon such breach of Lessee, Lessor may, at its option, and
in addition to any other remedy available to lessor, terminate this Lease
and all rights of Lessee hereunder, by giving to Lessee notice in writing
of the election of Lessor to so terminate.
30. Lessor or Lessor's agent shall, on prior notice, have the right
to enter the leased premises at all reasonable times to examine the same,
and to show them to prospective purchasers or mortgagees of the building,
and to make such repairs, alterations, improvements or additions as Lessor
may deem necessary or desirable, and Lessor shall be allowed to take all
material into and upon said premises that may be required therefor without
the same constituting an eviction of Lessee in whole or in part, and the
rent reserved shall in no wise abate while said repairs, alterations,
improvements, or additions are being made by reason of loss or interruption
of business of Lessee or otherwise, unless such presence by Lessor for
repairs or alterations renders the premises totally untenantable as defined
above in Paragraph 25. During the ninety (90) days prior to the expiration
of the term of this Lease or any renewal term, Lessor may exhibit the
premises to prospective tenants and place upon the premises the usual
notice "To Let" and "For Rent" which notices Lessee shall permit to remain
thereon without molestation, unless Lessee gives Lessor prior notice of its
intent to extend or renew this Lease or to exercise its Option to Purchase.
31. Lessee shall be responsible for and shall pay, before
delinquency, all municipal, county, state and federal taxes assessed during
the term of this Lease against any leasehold interest or personal property
of any kind, owned by or placed in, upon or about the leased premises by
Lessee.
33. Lessee shall give immediate notice to Lessor in case of fire or
accidents in the leased premises or in the building of which the premises
are a part, or of defects therein or in any fixtures or equipment.
34. Any holding over after the expiration of the term hereof, with
the consent of Lessor, shall be construed to be a tenancy from month to
month at the rents herein specified (prorated on a monthly basis) and shall
otherwise be on the terms and conditions herein specified, so far as
applicable.
35. All rights and liabilities herein given to, or imposed upon,
the respective parties hereto, shall extend to and bind the several
respective heirs, successors and assigns.
36. Incorporated herein and made a part hereof is a Guaranty of this
lease by Raven Press, Inc. and Woodhill Press, Inc.
37. Upon payment by Lessee of the rents herein provided, and upon
the observance and performance of all the covenants, terms and conditions
on Lessee's part to be observed and performed, Lessee shall peaceably and
quietly hold and enjoy the leased premises for the term hereby demised, and
any extension thereof, without hindrance or interruption by Lessor or any
other person or persons lawfully or equitably claiming by, through or under
Lessor, subject, nevertheless, to the terms and conditions or this Lease.
38. One or more waivers of any covenant or condition by Lessor
shall not be construed as a waiver of a subsequent breach of the same
covenant or condition, and the consent or approval by Lessor to or of any
act by Lessee requiring Lessor's consent or approval shall not be deemed to
render unnecessary Lessor's consent or approval to or of any subsequent
similar act by Lessee. No breach of a covenant or condition of this Lease
shall be deemed to have been waived by Lessor, unless such waiver be in
writing signed by Lessor.
39. This lease, the Guaranty, the Exhibits and the Option of the
same date, set forth all the covenants, promises, agreements, conditions
and understandings between Lessor and Lessee concerning the leased
premises and there are no covenants, promises, agreements, conditions or
understandings, either oral or written, between them other than are herein
set forth. No
alteration, amendment, change or addition to this Lease or option shall be
binding upon Lessor or Lessee unless reduced to writing and signed by each
party.
40. Any amount due from Lessee to Lessor hereunder which is not
paid when due shall bear interest at the highest legal rate from the date
due until paid, unless otherwise specifically provided herein, but the
payment of such interest shall not excuse or cure the default by Lessee
under this Lease.
41. Extension of Lease Term. Lessee shall have the right and
option to extend this Lease for one (1) additional term of five (5) years
by giving Lessor written notice of such extension at least 180 days prior
to the end of the original lease term or the first extension term, as the
case may be. During any extension term, all the terms of the original
Lease shall apply.
And the Lessee expressly agrees to quit and deliver up said premises
to the Lessor peaceably and quietly at the end of said term, and deliver
the keys to the Lessor.
This Lease shall be governed by the laws of the State of Wisconsin
and shall be binding upon the parties hereto and upon their successors,
personal representatives and assigns.
IN WITNESS WHEREOF, the said parties have hereunto, interchangeably,
set their hands and seals the day and year first above written.
HARVEY GEIPEL (Lessor) RAVEN PRESS, INC. (Lessee)
By: /s/ Harvey Geipel By: /s/ Bill Minick
Harvey Geipel Bill Minick, President
Attest:
Murray Traub, Secretary
EXHIBIT A
Legal Description of Leased Premises
Lot 8, Block 1, of Certified Survey Map No. 3793, recorded in Volume 29 of
Certified Survey Maps on pages 141, 142, and 143, as Document No. 1121332,
being a part of the Northwest 1/4 of Section 25, Town 8 North, Range 19
East, Village of Sussex, Waukesha County, Wisconsin.
EXHIBIT 10.15
[This Agreement now between Kingston Press, Inc., as assignee of Raven
Press, Inc., and Harvey Geipel.]
0PTI0N
IN CONSIDERATION of the sum of One Dollar and 00/100 ($1.00) and other
good and valuable consideration by RAVEN PRESS, INC., a Wisconsin
corporation, or its assigns, hereinafter together referred to as "Optionee",
receipt whereof is hereby acknowledged, HARVEY GEIPEL hereby grants to said
Optionee an exclusive and irrevocable option to purchase the premises located
at N63 W22777 Main Street, in the Village of Sussex, Waukesha County,
Wisconsin, together with building and all improvements thereon (as shown on
the attached Exhibit "A"), for a sum equal to One Million Eight Hundred
Thousand Dollars ($1,800,000.00) for the land, the building and the
improvements on the approximately 3.71 acres of land shown on Exhibit "A",
plus any amount payable under the provisions of this Option and the Lease of
this date incorporated herein by reference.
A. This Option may be exercised by Optionee at any time during the
term of the Lease or any extension thereof. Optionee may exercise this option
by delivering to GEIPEL at 9400 North 107th Street, Milwaukee, Wisconsin
53224, written notice of the exercise of this Option or by mailing such notice
to GEIPEL by certified mail addressed as aforesaid at least sixty (60) days
before the date on which this Option shall expire.
B. Within twenty (20) days after receipt of notice of Optionee's
exercise of this Option, GEIPEL shall obtain and furnish to Optionee, at N63
W22777 Main Street, P.O. Box 246, Sussex, WI 53089, an Owner's Policy of Title
Insurance in the amount of the full purchase price, naming Optionee as the
assured, as its interests may appear, written by a responsible title insurance
company licensed by the State of Wisconsin, which policy shall guarantee
GEIPEL's title to be in the condition called for by this Agreement. A
commitment by such title company agreeing to issue such a title policy upon
the recording of the proper documents as agreed herein, shall be deemed
sufficient performance. if such commitment for title from such title company
does not show title in GEIPEL or if a physical inspection and survey indicates
a possible disputed boundary, encroachment or other adverse claim or a
shortage of area or of lineal distance on any boundary, then GEIPEL shall
promptly take such steps as shall be necessary to establish merchantable title
in GEIPEL and to satisfy Optionee's requirements with regard to the physical
inspection and survey.
C. If Optionee elects to exercise this Option then, provided title or
title satisfactory to Optionee has been established in GEIPEL, GEIPEL shall
transfer and convey to Optionee by good and sufficient Warranty Deed, the
premises described on Exhibit "A", free and clear of all liens and
encumbrances, except for recorded building restrictions and easements, liens
resulting from acts of the tenant or Optionee, and assessments and taxes not
then payable. Said Warranty Deed shall be delivered to Optionee or to
Optionee's duly authorized agent upon not more than ten (10) days written
notice by either party to the other at the address shown above for the party
receiving such notice. At the time of the delivery of said Warranty Deed,
Optionee shall pay to GEIPEL the purchase price above specified, plus the
following additions and less the following deductions:
I. Additions to purchase price:
(i) GEIPEL's cost for the title insurance to be supplied by GEIPEL to
Optionee as provided in Paragraph B above.
(ii) If Optionee assumes GEIPEL's mortgage obligation, any charge made
by GEIPEL's mortgagee for Optionee to assume GEIPEL's mortgage obligation on
the premises at closing.
(iii) Any prepayment penalty charged by GEIPEL's mortgagee upon
satisfaction of any mortgage by GEIPEL on the premises at closing if said
mortgage is not assumed by Optionee.
(iv) An amount equal to the percentage of the base purchase price
(GEIPEL's costs) by which the Consumer Price Index available for the month
preceding the date of exercise of Option exceeds the Consumer Price Index for
June 1, 1987. For purposes of this Option, "Consumer Price Index" means
Consumer Price Index National Series, United States City Average, published
monthly by the United States Department of Labor, Bureau of Labor Statistics,
for the base year 1982. It is agreed that the Consumer Price Index for May,
1989, was 123.8, which shall serve as the basic index figure for this Option.
Provided, however, that any increase in price under this subparagraph (iv)
shall not exceed five per cent (5%) in any one twelve-month period.
(v) The amount of any assessments on the premises paid by GEIPEL from
the date of this Option.
II. Deductions from purchase price:
(i) The amount of the balance then due on any GEIPEL mortgage on the
premises that is to be assumed by Optionee.
(ii) The amount of the security deposit under the Lease which the
Lessee has had credited to the purchase price and any security deposit
pursuant to a lease between Geipel and Raven Press, Inc. of even date.
E. The provisions of the Option are intended to be specifically enforceable
and shall inure to the benefit of and shall bind Optionee and GEIPEL, their
heirs, designee personal representatives, successors or its assigns.
F. Incorporated herein by reference is a Lease dated July 14, 1989, between
HARVEY GEIPEL, as Lessor, and RAVEN PRESS, INC., as Lessee, to the premises
described in Exhibit "A"; all references to leasehold terms refer to the terms
of such Lease.
IN WITNESS WHEREOF, the said parties, by their respective officers and
individuals, have subscribed this document on the day and year written below.
Signed at Milwaukee, Wisconsin, this 14th day of July, 1989.
HARVEY GEIPEL
By: /s/ Harvey Geipel
Harvey Geipel
IN WITNESS WHEREOF, the said RAVEN PRESS, INC., has caused these
presents to be signed by Murray Traub, its President, and countersigned by
[ ], its Secretary, at [ ], and its corporate seal to be hereunto
affixed, this [ ] day of July, A.D., 1989.
OPTIONEE, RAVEN PRESS, INC.
By: /s/ Bill Minick
Bill Minick, President
Attest: /s/ Murray Traub
Murray Traub, Secretary
EXHIBIT 10.16
ASSUMPTION AND GUARANTEE OF LEASE
THIS ASSUMPTION AND GUARANTEE OF LEASE is made and entered into as of
this 30th day of December, 1996 by and among HARVEY GEIPEL (GEIPEL), an
individual residing in Mequon, Wisconsin, and KINGSTON PRESS, INC. (KINGSTON),
a Delaware corporation with offices located in Palm Beach, Florida.
WHEREAS, on July 14, 1989, GEIPEL, as Lessor, entered into a Lease with
RAVEN PRESS, INC., a Wisconsin corporation, as Lessee, for the leasing of an
industrial building located at N63 W22777 Main Street in the Village of
Sussex, Waukesha County, Wisconsin located on a property more particularly
described as follows:
Lot 8, Block 1 of Certified Survey Map No. 3793, recorded on March 3, 1980 in
Volume 329 of Certified Survey Maps on Pages 141, 142 and 143 as Document No.
1121332, being a part of the Northwest 1/4 Section 25, Town 8 North Range 19
East, Village of Sussex, County of Waukesha, State of Wisconsin; and
WHEREAS, said Lease ran for an initial term of five (5) years from
September 1, 1989 through August 31, 1994; and
WHEREAS, in 1994 RAVEN PRESS, INC. exercised its right and option under
Paragraph 41 for said Lease to extend the lease term for an additional term of
five (5) years, that is through the 31st day of August, 1999; and
WHEREAS, in all other respects the Lease continues in full force and
effect, and
WHEREAS, on March 29, 1996, Kingston (as assignee of Princeton
Publishing, Inc.) entered into an agreement with Raven Press, Inc., whereas
among the things, Raven Press Inc. assigned its rights pursuant to the Lease
to Kingston; and whereas, Kingston has agreed to assume the future obligation
of Raven Press, Inc. in and of the lease; and
WHEREAS, the parties hereto wish to reduce the assumption to a written
agreement.
NOW THEREFORE, in consideration of the sum of $10.00 and of other good
and valuable consideration, the receipt and sufficiency of which is hereby
acknowledged, the undersigned hereby agree as follows:
1. KINGSTON PRESS, INC. hereby assumes all of the future obligations,
duties and responsibilities of RAVEN PRESS, INC. under the lease dated July
14, 1989, a copy of which is attached hereto, including the payment of future
rent and all other future obligations of the Lessee under said Lease.
2. For purpose of a notice under the Lease, the parties hereto and all
notices to the parties shall be given to the following:
LESSOR:
Harvey Geipel
Attn: Mr. John H. Neibler
N95 W16975 Richfield Way
PO Box 444
Menomonee Falls, Wisconsin 53052-0444
LESSEE:
Robert F. Kendall
Kingston Press, Inc.
214 Brazilian Ave., Suite 300
Palm Beach, Florida 33480
3. In all other respects the terms, conditions and provisions of the Lease
dated July 14, 1989 are in full force and effect.
ACKNOWLEDGED & ACCEPTED BY:
LESSEE
KINGSTON PRESS, INC.
/s/ Robert F. Kendall
Robert F. Kendall, Vice President - Finance, Treasurer
12/30/96
Date
LESSOR
/s/ Harvey Geipel
HARVEY GEIPEL
2/7/97
Date
EXHIBIT 10.17
AGREEMENT made and entered into at New York, New York this 14th day of
May, 1996 by and between Princeton Publishing, Inc., a New York corporation,
whose place of business is at 28 West 25th St., New York, NY 10010-2905
(hereafter PUBLISHER) and KABLE NEWS COMPANY, INC., an Illinois corporation,
whose place of business is at Mount Morris, Illinois, with its executive
offices at 641 Lexington Avenue, New York, New York (hereafter DISTRIBUTOR).
1. DEFINITIONS
(a) "Completion of Shipping" with respect to each issue of a Publication
shall mean the date the PUBLISHER's printer completed shipping all copies of
such issue to Distributor's Sales Outlets in accordance with DISTRIBUTOR's
shipping instructions as stated on the Printer's Completion Notice.
(b) "Cover Price" with respect to each issue of a Publication shall mean the
suggested retail selling price of such issue specified on the cover of each
copy thereof.
(c) "Distributor's Estimated Final Not Billings" with respect to each issue
of a Publication shall mean DISTRIBUTOR's estimate of what the Not Billings of
such issue will be at such time as when all Returns have been received from
Distributor's Sales Outlets.
(d) "Distributor's Sales Outlets shall mean customers of DISTRIBUTOR.
(e) "Net Billings" with respect to each issue of a Publication shall mean
Publisher's Gross Billings with respect to such issue, less Return Credits
with respect to such issue.
(f) "Off-Sale Date" with respect to each issue of a Publication shall mean
the On-Sale Date of such Publication's next issue, or such other date as
designated by PUBLISHER and agreed to by DISTRIBUTOR, that all copies of such
issue are scheduled to be removed from retail outlets for sale to the general
public.
(g) "On-Sale Date" with respect to each issue of a Publication shall mean
the date as designated by PUBLISHER that such issue is scheduled to be placed
in retail outlets for sale to the general public.
(h) "Printer's Completion Notice" with respect to each issue of a
Publication shall mean a notice delivered to DISTRIBUTOR and executed by an
appropriate representative of the printer of such issue, which shall certify
the specific number of copies of such issue shipped in accordance with
DISTRIBUTOR's instructions, and the date of completion of such shipping.
(i) "Publisher's Billing Price with respect to each issue of a Publication
shall mean the amount charged DISTRIBUTOR by PUBLISHER for each copy of such
issue distributed hereunder.
(j) "Publisher's Gross Billings" with respect to each issue of a Publication
shall mean the product of Publisher's Billing Price with respect to such issue
multiplied by the number of copies distributed hereunder in accordance with
the Printer's Completion Notice with respect to such issue.
(k) "Publication(s)" shall mean the title(s) listed on Schedule "A"
including any "one-shots," annuals or titles derived therefrom, as
amended from time to time to include any additional titles subsequently
covered by the terms hereof as provided herein or as provided by agreement of
the parties.
(1) "RDA" still mean a retail display allowance offered pursuant to a
PUBLISHER authorized program to retailer engaged in the sale of PUBLISHER'S
Publication(s) for (i) each copy sold of each Publication and/or (ii) a
specified position in a retailer sales fixture.
(m) "Returns" with respect to each issue of a Publication shall mean any and
all copies of such issue returned for credit by Distributor's Sales Outlets
pursuant to Paragraph 9 hereof and for which DISTRIBUTOR has issued such a
credit.
(n) "Return Credit" with respect to each issue of a Publication shall mean
the product of Publisher's Billing Price multiplied by the number of Returns
of such issue.
(o) "Territory" shall mean the United States of America and all its
possessions, all Army and Fleet Post Office designations, Canada and the rest
of the world.
2. GRANT OF RIGHTS.
PUBLISHER hereby gives and grants unto the DISTRIBUTOR, effective as of the
date of this Agreement and during the term hereof (and any renewal term
thereof) the sole and exclusive right to purchase from PUBLISHER and to resell
and distribute throughout the Territory, the Publication(s) of PUBLISHER,
except that PUBLISHER reserves the right to sell copies thereof to individual
subscribers at subscription prices. Al purchases shall be subject to
DISTRIBUTOR's right to receive Return Credits for Returns as set forth in
Paragraph 9 hereof. This grant of rights shall survive the sale, assignment,
transfer or other disposition of PUBLISHER's rights in and to the
Publications, or the failure to publish same.
3. TERM.
(a) The term of this Agreement shall be for a period of four (4) years
from the On-Sale Date of the first issue distributed hereunder and shall
include all issues of all Publications whose scheduled On-Sale Date(s) are
prior to the expiration of such Period. This Agreement shall automatically
continue for successive terms of equal length thereafter unless either party
hereto shall give written notice of its intention to terminate ("Notice of
Termination") no less than ninety (90) days prior to the last day of any such
term; such Notice of Termination to be sent by certified mail, return receipt
requested, and addressed to the other party at its last known place of
business.
(b) It is agreed that the On-Sale Date of the first issue to be distributed
hereunder will be no later than two hundred and ten (210) days after the date
of this Agreement and that the failure of PUBLISHER to comply with this
provision shall give DISTRIBUTOR the unequivocable right to terminate this
Agreement upon ten (10) days written notice thereof.
(c) Any and all of the respective rights and duties of the PUBLISHER and
DISTRIBUTOR under this Agreement shall survive its termination with regard to
copies of the Publication(s) distributed hereunder, the distribution of which
had commenced before such termination.
(d) Termination of this Agreement for any reason shall not affect any right
of either party to receive any money owed by the other hereunder, the amount
of which shall be calculated in the manner which would have otherwise been
required hereby, absent such termination. Anything to the contrary in this
Agreement notwithstanding, PUBLISHER shall not have the right to terminate
this Agreement at any time that the PUBLISHER is indebted to the DISTRIBUTOR
for any reason whatsoever without first reimbursing the DISTRIBUTOR to the
full amount of such indebtedness.
4. PUBLISHER REPRESENTATIONS
(a) PUBLISHER represents and warrants that (i) it is the sole and exclusive
owner of all rights, including but not limited to, copyrights, titles,
trademarks, tradenames, trade dress, logos, formats, in and to the
Publication(s) (collectively the "Rights") and that such Rights are not
subject to any liens or encumbrances of any nature; (ii) the Rights herein
granted to DISTRIBUTOR have not been granted to any other person, firm, or
corporation, (iii) it has the right and authority to enter into this Agreement
and to perform the obligations hereunder to be performed by PUBLISHER; (iv)
there are no existing contracts, agreements or other arrangements which in any
way whatsoever prevent or interfere with the PUBLISHER's making and entering
into this Agreement or performing hereunder (v) that to the best of
PUBLISHER's knowledge, there are no suits or proceedings pending or threatened
against or affecting PUBLISHER which, if adversely determined, would impair
the Rights herein granted to DISTRIBUTOR or prevent PUBLISHER from performing
hereunder; (vi) and nothing contained in any Publication will be grounds for
an action either to prevent distribution thereof or for damages by reason of
the fact that the material contained therein is libelous, slanderous, obscene,
invades any right of privacy, a violation of any copyright, trademark, or
other personal property rights or for any reason whatsoever.
(b) PUBLISHER represents and agrees that all issues of said Publication(s)
shall substantially conform to the specimen copy(ies) or facsimile(s), or to
any specifications or other descriptions, exhibited by PUBLISHER to
DISTRIBUTOR, and approved by DISTRIBUTOR.
5. FIRST OPTION
DISTRIBUTOR shall have the first option to purchase from PUBLISHER, and to
resell and distribute any and all additional periodical(s) or publication(s)
intended to be published by PUBLISHER and/or any of its principals,
stockholders, officers and/or directors during the term of this Agreement (or
any other renewal term thereof) on the same terms and conditions as set forth
in this Agreement. PUBLISHER and/or the above named parties shall
promptly notify the DISTRIBUTOR in writing of its (their) intention to publish
and distribute any such additional publication(s), and DISTRIBUTOR shall
within fifteen (15) days after receipt of said written notice advise
of its willingness or refusal to distribute any such additional
publication(s).
6. NUMBER OF COPIES, COVER PRICE AND FREQUENCY
The Cover Price, the number of copies to be printed and the frequency of each
issue of the publication(s) shall be as PUBLISHER and DISTRIBUTOR shall
mutually agree upon, and the PUBLISHER agrees to deliver or promptly cause to
be delivered the specified number of copies of each issue of the
Publication(s) with the assigned bipad number, Universal Product Code Symbol,
Cover Price and the letter "K" imprinted on the front cover of each copy
thereof to each and every Distributor's Sales Outlet designated by DISTRIBUTOR
in accordance with DISTRIBUTOR's shipping instructions. PUBLISHER further
agrees that only copies distributed by DISTRIBUTOR shall have the letter "K,"
the Universal Product Code Symbol, and the bipad number assigned by
DISTRIBUTOR imprinted on the front cover.
7. TRANSPORTATION AND RELATED COSTS
PUBLISHER shall pay all transportation costs, including without limitation,
insurance costs, Canadian Goods and Service Tax (hereafter GST), import-export
charges or tariffs and other duties relating to the shipment of each issue of
the Publication(s) to Distributor's Sales Outlets.
8. PUBLISHER's BILLING PRICE, FOREIGN CURRENCY
(a) The Publisher's Billing Price to DISTRIBUTOR shall be in accordance with
the price(s) set forth in Schedule "A"; provided, however, that upon any
change in the Cover Price of a Publication, the Publisher's Billing Price
shall automatically be revised pro rata with respect to the issues with the
changed Cover Price so that the ratio of Publisher's Billing Price to Cover
Price shall remain consistent with that determined by reference to the prices
then in effect in Schedule "A," which shall, following each change in Cover
Price, be deemed amended with or without a written amendment as otherwise
required by Paragraph 29(a).
(b) All monies which may be due PUBLISHER pursuant to the terms of this
Agreement shall be paid in United States dollars, and PUBLISHER will reimburse
DISTRIBUTOR for any losses realized by DISTRIBUTOR, due to a difference in
foreign exchange rates, including those of Canada, on monies received from
Distributor's Sales Outlets in payment for Publication(s) distributed
hereunder, and DISTRIBUTOR agrees to pay PUBLISHER any gains realized due to
said difference. DISTRIBUTOR has the right to make any adjustment for foreign
exchange rates prior to making any payment(s) to PUBLISHER.
9. RETURNS
(a) DISTRIBUTOR has the option and is authorized to accept as Returns from
Distributor's Sales Outlets whole copies, front covers, headings of front
covers, and affidavits or statements of returns including those electronically
transmitted, of the Publication(s). DISTRIBUTOR has the exclusive right to
determine the method of return from Distributor's Sales Outlets. DISTRIBUTOR
is specifically authorized by PUBLISHER to destroy or arrange for the
destruction of said Returns at any time after receiving same in any manner
deemed suitable by DISTRIBUTOR, unless at least thirty (30) days prior to the
On-Sale Date of any particular issue of the Publication(s), PUBLISHER shall
have given DISTRIBUTOR notice in writing of PUBLISHER's request that the
Returns of said issue be held for thirty (30) days after date of Settlement
with respect thereof so that PUBLISHER can audit said Returns at its own cost
and expense. Said audit and count must be made by PUBLISHER during such
thirty (30) day period at the particular place of storage thereof maintained
by DISTRIBUTOR at such time. PUBLISHER agrees not to request more than one
(1) audit per year per Publication unless, as a result of two (2) or more
prior audits, substantial discrepancies were discovered by PUBLISHER.
(b) In the event that DISTRIBUTOR has not received all Returns of any
issue(s) distributed hereunder from any of the Distributor's Sales Outlets for
any reason, including without limitation, that such outlets or that any one of
them (i) are subject to the appointment of a receiver, or (ii) are adjudicated
a bankrupt after filing of a petition of voluntary or involuntary bankruptcy,
or (iii) are reorganized or managed by a trustee or committee of creditors
under the Federal Bankruptcy Act, or (iv) are dissolved, terminated or no
longer in business, or (v) are destroyed by fire, flood or other disaster, or
(vi) are unable to return all unsold copies of any such issue due to strikes,
lockouts, other labor disputes, bankruptcy or for any other reason, then
DISTRIBUTOR shall be entitled to charge PUBLISHER for Returns from such
Distributor's Sales Outlets, in an amount equal to the product of the average
return-percentage of the applicable Distributor's Sales Outlet(s) for such
Publication(s) for the twelve (12) month period (or such lesser period if
applicable) prior to the issue(s) for which DISTRIBUTOR has not received all
Returns, multiplied by the number of copies received by said Distributor's
Sales Outlet(s) for such issue(s).
(c) In the event PUBLISHER desire to receive whole copy Returns, written
notice of the quantities thereof desired, and the address to which such whole
copy Returns shall be sent, shall be supplied to DISTRIBUTOR not less than
thirty (30) days prior to the On Sale Date of such issue. PUBLISHER shall pay
DISTRIBUTOR at the rate of six ($.06) cents per copy for packing and handling
costs for whole copy returns received by DISTRIBUTOR, and PUBLISHER shall
reimburse DISTRIBUTOR for all direct costs incurred by DISTRIBUTOR, including
all shipping costs, all container costs and all costs charged by Distributor's
Sales Outlets, for arranging, receiving and delivering such whole copy
Returns. Upon receipt of such written notice requesting whole copy Returns,
the sole obligation of DISTRIBUTOR in this regard shall be to make written
request for the same from Distributor's Sales Outlets, it being understood and
agreed that nothing herein contained shall require DISTRIBUTOR to take any
other action with respect to such request. PUBLISHER represents and warrants
that it will only use said whole copy Returns to fulfill subscription orders
or for such other purpose that is mutually agreed upon between PUBLISHER and
DISTRIBUTOR.
10. RDA
(a) DISTRIBUTOR is authorized to offer on PUBLISHER's behalf PUBLISHER's RDA
program and PUBLISHER agrees to be bound by the term of its RDA program as
offered by DISTRIBUTOR. PUBLISHER further agrees to execute any necessary
documents in connection therewith.
(b) DISTRIBUTOR shall administer PUBLISHER's RDA program and PUBLISHER shall
pay to DISTRIBUTOR on demand any and all amounts paid or due to be paid by
DISTRIBUTOR on PUBLISHER's behalf to retailers participating in PUBLISHER's
RDA program as administered by DISTRIBUTOR.
(c) In consideration of the services performed by DISTRIBUTOR in
administering PUBLISHER's RDA program, PUBLISHER will pay to DISTRIBUTOR a fee
of forty-five ($.45) cents per issue per retailer for each payment made by
DISTRIBUTOR on PUBLISHER's behalf to participating retailers.
(d) Notwithstanding the provision of Paragraph 10(b), DISTRIBUTOR may
decline to advance sums due to retailers participating in PUBLISHER's RDA
Program in the event PUBLISHER becomes indebted to DISTRIBUTOR on an actual or
estimated basis, or PUBLISHER refuses to pay DISTRIBUTOR for sums paid to
retailers. In the event DISTRIBUTOR declines to pay retailers, PUBLISHER
shall pay retailers directly.
11. DISCOUNTS AND ALLOWANCES
PUBLISHER shall pay DISTRIBUTOR for any and all discounts and allowances,
which are in excess of DISTRIBUTOR's national billing discount for each
Publication, made by DISTRIBUTOR to any of Distributor's Sales Outlets in
locations where special labor conditions and/or other situations and
conditions exist causing such discounts or allowances.
12. RISK OF LOSS; SHORTAGES, etc.
Any loss, shortage, destruction of, or damage to copies of any issue(s) of
each Publication, including, but not limited to, any loss, shortage, or damage
to such copies as reported by DISTRIBUTOR's Sales Outlets and for which
credits are claimed, or to any Returns as defined in Paragraph 9 hereof, shall
at all times be at the risk of and be borne solely by PUBLISHER, and
DISTRIBUTOR shall be entitled to charge PUBLISHER's account with DISTRIBUTOR
for such copies, and same may be deducted by DISTRIBUTOR from any sums
otherwise due PUBLISHER. The parties specifically agree that credits granted
to Distributor's Sales Outlets by DISTRIBUTOR for shortages, lost or damaged
copies shall be conclusive and binding upon the PUBLISHER, and upon
PUBLISHER's written request DISTRIBUTOR shall furnish to PUBLISHER such
information DISTRIBUTOR may have with respect to any loss, shortage,
destruction or damage. The right and responsibility of filing any shortage
claims with the shipper of record and/or carrier is the obligation of the
PUBLISHER, provided, however, that DISTRIBUTOR shall assist PUBLISHER in the
filing of such claims. In the event that DISTRIBUTOR shall recover any part
of such loss, then the DISTRIBUTOR shall include same in Net Billings and
shall charge PUBLISHER the DISTRIBUTOR's actual costs, including counsel fees
and other expenses, incurred in recovering such loss; however, DISTRIBUTOR
shall not be under any obligation to institute any action or proceeding for
recovery of any such loss. In the event PUBLISHER recovers any part of such
loss directly from the shipper, PUBLISHER will pay DISTRIBUTOR a sum equal to
the amount DISTRIBUTOR would have earned if such recovery were included in Net
Billings for such Publication, or in the alternative, DISTRIBUTOR may deduct
such sums from any payments thereafter due PUBLISHER or charge PUBLISHER's
account. PUBLISHER acknowledges and agrees that DISTRIBUTOR is not liable for
any losses to copies of Publications or other materials stored at
DISTRIBUTOR's warehouse(s) occasioned by fire, water damage, natural
catastrophes, acts of God and/or theft, and that it is the obligation of the
PUBLISHER to obtain insurance to cover any such loss at its own expense.
13. PROMOTION AND SOLICITATION COSTS
PUBLISHER shall at its own expense provide DISTRIBUTOR with reasonable
quantities of promotional materials for DISTRIBUTOR's use. PUBLISHER shall
pay DISTRIBUTOR for all direct costs in connection with all promotion and
solicitation mailings, including those associated with PUBLISHER's RDA
program, made for PUBLISHER's Publications. If PUBLISHER requests DISTRIBUTOR
to incur advertising or promotional expenses on behalf of PUBLISHER or for any
of the Publication(s), PUBLISHER shall pay DISTRIBUTOR for all such expenses.
PUBLISHER agrees that in all trade press advertising pertaining to single copy
circulation, it will include a phrase substantially as follows: "Exclusively
(internationally) distributed by KABLE NEWS COMPANY, INC."
14. MISCELLANEOUS CHARGES
PUBLISHER shall pay DISTRIBUTOR for the following charges:
(a) Administration fee of two hundred ($200.00) dollars for each Audit
Bureau of Circulation ABC State Circulation Analysis requested by PUBLISHER
and fifteen hundred ($1,500.00) dollars for each ABC County Report requested
by PUBLISHER.
(b) Fee of one hundred and twenty-five ($125.00) dollars for producing a
galley for an issue which is cancelled or for producing any additional
shipping galleys occasioned by PUBLISHER's errors, omissions or failure to
notify DISTRIBUTOR of changes on a timely basis.
(c) Any reshipment charges incurred by DISTRIBUTOR.
(d) Any other charges or expenses incurred by DISTRIBUTOR specifically on
PUBLISHER's behalf or for its Publication(s).
15. PAYMENTS TO PUBLISHER
DISTRIBUTOR shall pay PUBLISHER the Net Billings of each issue of each
Publication distributed pursuant to this Agreement less all credits to which
DISTRIBUTOR shall be entitled, as follows:
(a) "GST Advance Payment" paid on PUBLISHER's behalf to the Canadian
government of an amount equal to the GST required to be paid with respect to
such issue; said GST advance to be deducted from the Initial Advance Payment
required in sub-paragraph 15(b) hereof, and the GST Advance shall be repaid by
DISTRIBUTOR to PUBLISHER sixty (60) days after payment by DISTRIBUTOR of the
Initial Advance Payment for such issue.
(b) "Initial Advance Payment" of an amount equal to twenty * See Rider "A"
(20%) of Publisher's billings with respect to such issue, less the GST Advance
Payment for such issue ten (10) days after the Completion of Shipping or five
(5) days after receipt by Distributor of the Printer's Completion Notice,
whichever date is later, of such issue and to continue this method of making
Initial Advance Payments on subsequent issues if in DISTRIBUTOR's sole
judgment the sales warrant them; DISTRIBUTOR's obligation to make such Initial
Advance Payment being conditioned upon timely shipment by PUBLISHER of the
particular issue to meet its scheduled On Sale Date, and that PUBLISHER is in
compliance with all of the terms of this Agreement.
*Such advance to be paid upon receipt of notification of shipment by MSA via
next day mail (at Publishers expense).
(c) "Second Advance Payment" of an amount equal to eighty (80%) percent of
Distributor's Estimated Final Net Billings with respect to such issue, less
the aggregate amount of the Initial Advance Payment made by DISTRIBUTOR to
PUBLISHER for such issue, the GST Advance Payment, and all charges,
allowances, discounts, other advances and other credits and reimbursements
incurred or accrued to which DISTRIBUTOR shall be entitled, forty-five(45)
days after the Off-Sale Date of such issue of each Publication. If on the
Second Advance Payment date of any issue, the previous advances made by
DISTRIBUTOR to PUBLISHER on that issue exceed the amount due as a result of
the Second Advance Payment calculation, then DISTRIBUTOR may deduct such
excess from any monies due or thereafter due PUBLISHER pursuant to this
Agreement, or any other Agreement between the parties, or DISTRIBUTOR at its
sole option may require PUBLISHER to pay DISTRIBUTOR for such excess within
ten (10) days following DISTRIBUTOR's request thereof.
(d) "Settlement Payment" of an amount equal to the Net Billings with respect
to such issue less the aggregate amount of all advance payments made by
DISTRIBUTOR to PUBLISHER or for is account, and all charges, allowances
discounts and other credits or reimbursements incurred or accrued to which
DISTRIBUTOR shall be entitled for such issue or which have been incurred or
accrued by DISTRIBUTOR for other issues and which were not previously
deducted, and any reserve DISTRIBUTOR, in its sole judgment, estimates is
needed for Return Credits for Returns yet to be received; all of the foregoing
to be set forth on a "Publisher Statement" prepared by the DISTRIBUTOR ninety-
five (95) days after the Off-Sale Date with respect to such issue and sent
thereafter to PUBLISHER together with the amount shown due, if any. In the
event that the Publisher Statement indicates an amount due DISTRIBUTOR
("Overpayment"), then DISTRIBUTOR at its sole option may deduct such
Overpayment from any monies due or thereafter due PUBLISHER, and/or require
PUBLISHER to pay DISTRIBUTOR for such Overpayment on demand. Any Returns
received and/or charges or credits incurred or accrued by DISTRIBUTOR with
respect to any issue of PUBLISHER's Publication(s) subsequent to the
preparation of the Publisher Statement with respect to such issue of the
Publication(s) shall be included as a credit to DISTRIBUTOR on any subsequent
Publisher Statement and deducted from any monies thereafter payable to
PUBLISHER, or DISTRIBUTOR at its option may require PUBLISHER to pay
DISTRIBUTOR on demand for any such charges and credits. PUBLISHER agrees to
accept any Publisher Statement from DISTRIBUTOR as an account stated and the
items therein enumerated as true and correct, except as to any specific item
or item appearing therein to which the PUBLISHER may object in writing within
thirty (30) days from the date of the mailing of said Statement.
(e) If, at any time after an issue has been On-Sale for at least thirty (30)
days, the DISTRIBUTOR, in its sole judgment, determines that the total of
advance payments, disbursements, allowances, discounts and other credits
incurred or accrued for which DISTRIBUTOR shall be entitled to reimbursement,
are in excess of Distributor's Estimated Final Net Billings with respect to
such issue, then DISTRIBUTOR may deduct any such excess from any payments
thereafter due PUBLISHER, or DISTRIBUTOR at its option may require PUBLISHER,
and PUBLISHER agrees, to pay DISTRIBUTOR for such excess within ten (10) days
following DISTRIBUTOR's request thereof.
(f) Notwithstanding anything in this Agreement to the contrary, DISTRIBUTOR
may at any time withhold any funds otherwise due PUBLISHER and apply same to
any monies due and owing to DISTRIBUTOR from PUBLISHER.
(g) No advances or other payments shall be payable by DISTRIBUTOR to
PUBLISHER:
(i) For any issue(s) for which DISTRIBUTOR has exercised its right not to
distribute pursuant to Paragraph 19 hereof, or
(ii) For any issue(s) following a party's exercise of its option to terminate
pursuant to Paragraph 22(b) hereof, or
(iii) For any issue(s) of any Publication it DISTRIBUTOR has reason to believe
and has notified PUBLISHER that PUBLISHER has not published said issue in
accordance with this Agreement or if DISTRIBUTOR has reason to believe
PUBLISHER will not continue to publish further issues of said Publication as
provided for in this Agreement, or
(iv) For the last two (2) issues of each Publication to be distributed by
DISTRIBUTOR for PUBLISHER hereunder subsequent to the giving by either party
to the other a Notice of Termination pursuant to Paragraph 3 of this Agreement
(h) Settlement Payment for the two (2) issues of each Publication
immediately preceding the exercise of an option to terminate pursuant to
Paragraph 22(b) and for any issues distributed thereafter, or for the two (2)
issues immediately preceding a notice by DISTRIBUTOR pursuant to Paragraph
15(g)(iii), or for the last two (2) issues of each Publication to be
distributed by DISTRIBUTOR under this Agreement following a Notice of
Termination pursuant to Paragraph 3, shall be made by DISTRIBUTOR to PUBLISHER
one hundred and eighty (180) days after the Off-Sale Date of the last issue of
all Publication(s) being terminated. DISTRIBUTOR shall be entitled to
withhold a reasonable reserve from the sum otherwise due PUBLISHER from the
Settlement Payment of such last two (2) issues. Said reserve shall be in an
amount equal to (i) DISTRIBUTOR's estimate of Return Credits for Returns yet
to be received, (ii) DISTRIBUTOR's estimate of RDA claims yet to be received
from retailers participating in PUBLISHER's RDA program as so forth in
Paragraph 10 hereof, (iii) the amount which DISTRIBUTOR estimates will be
needed to reimburse DISTRIBUTOR for charges, allowances and discounts to be
made or given on behalf at PUBLISHER and, (iv) for such other credits for
which DISTRIBUTOR will be entitled to be reimbursed, which will or may be
incurred subsequent to the preparation of the Publisher Statement for such
last two (2) issues. In the event that such reserve is insufficient,
PUBLISHER agrees to pay DISTRIBUTOR any such sum within ten (10) days
following DISTRIBUTOR's request thereof.
(i) The parties agree that payment(s) for copies of Publications distributed
to Distributor's Sales Outlets located outside the United States of America
and Canada will be made ninety (90) days later than the dates indicated in
Paragraphs 15(c), 15(d) and 15(h).
(j) Any and all overpayment shall be repaid by PUBLISHER to DISTRIBUTOR upon
termination of this Agreement or at such time as DISTRIBUTOR shall have
discontinued distributing, for any reason whatsoever, any Publication, or any
particular issue of any Publication.
(k) The respective obligations of PUBLISHER and DISTRIBUTOR under this
Paragraph 15 shall survive the termination of this Agreement.
16. INDEMNIFICATION
(a) PUBLISHER shall indemnify, hold harmless and promptly reimburse the
DISTRIBUTOR, and Distributor's Sales Outlets and their retail outlets and all
of their respective officers, directors, employees, agents and representatives
(here collectively referred to as Indemnities), from and against any losses,
damages, fines, judgments, expenditures, claims, reasonable counsel fees,
legal and court expenses, bond and bail charges and premiums, as well as any
and all other costs of any kind or nature, resulting from defending or
settling any claims, civil or criminal actions or proceedings and/or
supplementary proceedings, or in connection with any inquiries, proceedings or
actions by any federal, state, local and/or any other governmental agencies or
authorities (collectively "Claims") which in anyway relate to, or arise from
or by reason of: (i) the title, contents or any printed matter contained
within any of the Publication(s), including, but not limited to, editorial
contents, photographs, pictures. cartoons, caricatures, drawings or other
artwork, advertisements, and classifieds, whether contained on any cover, or
any page or advertisement contained in or for said Publication(s), or any
promotional material for PUBLISHER or the Publication(s); (ii) the breach or
alleged breach of any of PUBLISHER's representations and warranties contained
in Paragraph 4 of this Agreement, (iii) any services performed, or terms or
program offered by DISTRIBUTOR pursuant to the specific request of PUBLISHER,
or pursuant to incorrect information supplied by PUBLISHER, or (iv) any other
act of PUBLISHER relating to or affecting the distribution or sale of the
Publication(s) or the services performed by any of the Indemnities in
connection with the Publications.
(b) If any such Claim is brought or made against the aforesaid Indemnities,
DISTRIBUTOR shall have the right at the PUBLISHER's expense to (i) retain
counsel of its own choosing for itself and/or Distributor's Sales Outlets
and/or their retail outlets and/or (ii) authorize the retention of counsel by
Distributor's Sales Outlets and/or their retail outlets if PUBLISHER shall
also be named a party thereto. PUBLISHER shall have the right to its own
counsel at its expense. DISTRIBUTOR shall give PUBLISHER notice of any such
suits, proceedings, actions, claims or demands as soon as practicable after
receipt of same.
(c) PUBLISHER agrees that PUBLISHER shall have no right to compromise or
settle any Claim in which DISTRIBUTOR is named unless DISTRIBUTOR is given ten
(Do) days notice and such compromise or settlement shall result in a full and
final release of all Claims against DISTRIBUTOR.
(d) During the pendency of any such Claim, DISTRIBUTOR may withhold payments
as security, to the extent reasonably necessary, which otherwise would be due
to the PUBLISHER under this or any other agreement between PUBLISHER and
DISTRIBUTOR. DISTRIBUTOR may apply the payments so withhold to satisfy in
whole or in part, PUBLISHER's obligations under this Paragraph 16.
(e) PUBLISHER will name DISTRIBUTOR as an additional named insured under any
PUBLISHER's liability insurance carried by PUBLISHER and will deliver a
certificate of such insurance to DISTRIBUTOR.
(f) PUBLISHER's obligations hereunder shall survive the termination of this
Agreement.
17. GALLEYS AND SHIPPING INSTRUCTIONS
DISTRIBUTOR shall supply the PUBLISHER or at PUBLISHER's request, its printer
or forwarding agent with one set per issue of shipment galleys, shipping
instructions and labels designating the names and addresses of Distributor's
Sales Outlets specifying the number of copies of each issue of each
Publication to be sent to each of them or computer tapes containing such
information or electronically transmit such information, sufficiently in
advance of the Completion of Shipping with respect to such issue so that such
issue can be shipped to arrive at Distributor's Sales Outlets receiving
point(s) prior to the On-Sale Date of such issue.
18. ACCESS TO RECORDS
DISTRIBUTOR shall give PUBLISHER or its duly authorized representatives,
during business hours, reasonable access to DISTRIBUTOR's draw, sale and
Return figures relating to each issue of the Publication(s) and other
necessary records in support of all items of charges and credits made by
DISTRIBUTOR to PUBLISHER pursuant to this Agreement and shall permit PUBLISHER
at its own cost and expense reasonable access, to inspect and make copies of
the same; said records to be maintained for a period of twelve (12) months
following the Off-Sale Date of each issue of each Publication.
19. DISTRIBUTOR'S RIGHT TO REFUSE DISTRIBUTION
Anything to the contrary in this Agreement notwithstanding, the DISTRIBUTOR
may at any time, without prior notice, and without incurring any liability
therefor, refuse to distribute any issue(s) of any Publication(s) covered by
this Agreement, or at its option exercise the right to terminate this
Agreement, if it comes to the attention of DISTRIBUTOR that such issue(s) may
contain libelous, obscene or indecent material, or invade any person's right
of privacy or other personal right, or infringe a copyright or trademark owned
by a third party, or contain any matter of any kind that is in violation of
law, or if such Publication still be refused the use of the mails by the
United States Postal Service or such public corporation as may then exist for
the handling of mail, or if any such issue is refused entry into the United
States or Canada. In the event DISTRIBUTOR refuses distribution hereunder
with respect to an issue of a Publication no payments shall be due PUBLISHER
under Paragraph 15 with respect to such issue. Distribution of any issue of
any Publication(s)covered by this Agreement or receipt of promotional copies
does not and shall not establish nor constitute knowledge or approval by the
DISTRIBUTOR of the contents of such issue. The PUBLISHER is aware that
DISTRIBUTOR does not regularly, and is not obligated, to examine or pass upon
any issues of the Publication(s). Nothing contained in this Paragraph 19
shall affect any rights of DISTRIBUTOR under Paragraph 16.
20. FORCE MAJEURE
Neither party shall be liable for any damage due to causes beyond its control,
including but not limited to, acts of civil or military authority, orders,
rules or other actions by appropriate regulatory authorities, labor
difficulties, fire, flood, power failure, or other natural or human
catastrophes, acts of God, national emergencies, quarantine, insurrection,
riots and failure of transportation and equipment, nor shall any of the above
be deemed a default by either party.
21. RELATIONSHIP OF PARTIES
It is understood and agreed that the relationship between PUBLISHER and
DISTRIBUTOR is that of creditor and debtor. All monies paid by, or due and
owing from Distributor's Sales Outlets for copies of said Publication(s) not
returned to DISTRIBUTOR, are and shall at all times belong to and remain the
absolute property of the DISTRIBUTOR. It is further agreed that DISTRIBUTOR
is not the agent of the PUBLISHER except in connection with any services
performed pursuant to Paragraph 10 of this Agreement, nor is PUBLISHER the
agent of DISTRIBUTOR. Further, this Agreement does not constitute and shall
not be construed as constituting a partnership or joint venture between
PUBLISHER and DISTRIBUTOR. Neither party shall have any right to obligate or
bind the other party in any manner whatsoever, except as otherwise
specifically set forth herein, and nothing herein contained shall give, or is
intended to give, any right of any kind whatsoever to any third persons.
22. ASSIGNMENT, TRANSFERS AND SALE OF RIGHTS, ETC.
(a) PUBLISHER may not assign this Agreement or any rights thereunder to any
other person, firm or corporation without the prior written consent of the
DISTRIBUTOR; provided, however, nothing herein contained shall be construed to
prevent PUBLISHER from assigning any right to receive any advance(s) or
payment(s) which the DISTRIBUTOR may make to the PUBLISHER under this
Agreement to any printer in connection with the production of any particular
issue of any Publication covered by the Agreement provided, however, that such
assignment shall be on a form provided by DISTRIBUTOR and shall expressly
state therein that at all times the same is subject and subordinate in all
respects to any and all of the rights of DISTRIBUTOR under this Agreement and
under any other agreement between PUBLISHER and DISTRIBUTOR, and provided
further that a copy of such assignment shall be first submitted and approved
by DISTRIBUTOR at least forty (40) days prior to the On-Sale Date of the
particular issue. PUBLISHER agrees to pay DISTRIBUTOR a thirty-five ($35.00)
dollar administration fee for each assignment processed by DISTRIBUTOR,
payable at the time the assignment is delivered to DISTRIBUTOR.
(b) Either party hereto may terminate this Agreement at any time during the
term hereof in the event that the other party shall make a general assignment
for the benefit of creditors, have a receiver appointed of its assets, be
adjudicated a bankrupt, make a petition for reorganization, or take advantage
of any insolvency statute. However, should any of the foregoing events occur
with respect to PUBLISHER, DISTRIBUTOR may elect to continue this Agreement
without payment of any advances otherwise due under paragraph 15(a) and 15(b).
(c) In the event PUBLISHER enters into an agreement to (i) sell, transfer or
dispose of all or substantially all of the assets of PUBLISHER, or (ii) sell,
transfer, assign, license or otherwise relinquish or dispose of any of its
rights to any or all of the Publication(s) or their title(s) or trademark(s)
covered under, or distributed pursuant to, this Agreement, to a third party
(hereinafter "Acquiring Party"), then PUBLISHER guarantees that any such
agreement between PUBLISHER and Acquiring Party shall contain a provision
requiring, (x) at DISTRIBUTOR's option, that either any such Acquiring Party
be bound by and enter into an agreement assuming all the terms and conditions
of this Agreement, relating to the title or titles acquired, including any
liabilities to DISTRIBUTOR hereunder, or in the alternative, that the
Acquiring Party enter into a New Distribution Agreement with DISTRIBUTOR under
the same terms and conditions of this Agreement for a term equal to the then
remaining term of this Agreement, and (y) that the DISTRIBUTOR be named as a
third party beneficiary with regard to that required provision. However, any
such sale, transfer, assignment or license, or the entering into of a New
Distribution Agreement, shall not relieve PUBLISHER of any existing or
estimated obligation or liability to DISTRIBUTOR, or any subsequent obligation
or liability if same concerns Publications distributed prior to such sale,
transfer, assignment or license (hereafter "Continuing Obligations"). Any
existing obligation together with any DISTRIBUTOR's estimate of any sums to be
owed, shall be paid by PUBLISHER prior to such sale, transfer, assignment or
license of any Publication(s). Any Continuing Obligations of PUBLISHER shall
be paid by PUBLISHER to DISTRIBUTOR upon demand. DISTRIBUTOR has the right to
require that any proceeds to be paid by an Acquiring Party to PUBLISHER should
first be paid to DISTRIBUTOR to satisfy any sums or estimated to be owed to
DISTRIBUTOR by PUBLISHER hereunder.
(d) DISTRIBUTOR may not assign this Agreement or any rights hereunder to any
other person, firm or corporation without the prior written consent of the
PUBLISHER, except in connection with the sale or transfer of all or
substantially all of the assets of DISTRIBUTOR.
23. ONE-SHOTS AND/OR ANNUALS
Any one-shots and/or annuals derived from any of the Publication(s) as may
hereafter be published shall be included in this Agreement on the same terms
and conditions as set forth herein. Notwithstanding the foregoing, in the
event the DISTRIBUTOR wishes to change the amount and/or timing of advance
payments and the timing of Settlement, the parties hereby agree to negotiate
in good faith as to the amount and timing of such payments.
24. WAREHOUSING
In the event that any Publication(s) or other materials of PUBLISHER are
stored at DISTRIBUTOR's warehouse, PUBLISHER agrees to pay DISTRIBUTOR its
handling and storage costs as they may be increased from time to time.
DISTRIBUTOR reserves the right to limit the amount of space allotted to
PUBLISHER. PUBLISHER agrees to remove any Publication(s) or other material
from DISTRIBUTOR's premises upon thirty (30) days notice. In the event
PUBLISHER does not remove its property within such thirty (30) day period,
DISTRIBUTOR may remove and dispose of same as it sees fit at PUBLISHER's
expense. Nothing contained in this Paragraph 24 shall affect PUBLISHER's risk
of loss as set forth in Paragraph 12.
25. NOTICES
Except as otherwise specifically provided herein, all notices permitted or
required hereunder shall be in writing and shall be given by receipted
personal delivery, registered or certified mail, or Federal Express (or
similar overnight service) at the respective addresses set forth below, or at
such other address or addresses as may be designated by either party. Such
notices shall be deemed given when mailed or delivered to the post office or
such overnight delivery service, except that a notice of change of address
shall be effective only from the date of its receipt. A copy of each notice
shall be sent simultaneously to:
TO DISTRIBUTOR: with a copy to: TO PUBLISHER:
Kable News Company, Inc. Kable Non Company, Inc. Princeton Publishing,
Inc.
Attention: President Attention: Vice President Attention: President
641 Lexington Avenue of Finance 28 West 25th St., 7th
Fl.
New York, NY 10022 16 South Wesley Avenue New York, NY 10010-2905
Kable Square
Mount Morris, IL 61054
or to such other person(s) or address(es) as such parties shall designate to
the other by written notice.
26. NON-DISCLOSURE
(a) The parties each acknowledge that the terms and conditions contained in
this Agreement constitute confidential business information, and that
therefore, each agree that they, their representatives, agents and employees
will not disclose the terms and conditions of this Agreement to any person or
organization except as otherwise provided in subparagraph (b)of this Paragraph
26.
(b) Notwithstanding the provisions of subparagraph (a) of this Paragraph 26
to the contrary,
(i) Either party may disclose the provisions of this Agreement to any
potential purchaser, assignee, or licensee of any Publication or other asset
of such party or to underwriters, accountants, lawyers, bankers or other
lenders, or such other party or parties as such party may reasonably require
in the ordinary course of business; provided that such potential purchaser,
assignee, licensee, underwriter, accountant, lawyer, banker or other lender,
or other party agree in willing to hold the provisions of this Agreement
confidential in the same manner as required by the terms of this Paragraph 26;
and
(ii) Either party may disclose the existence or provisions of this
Agreement
if required to do so by any court order or subpoena, or if in the reasonable
opinion of its counsel it is required to do so by any state of Federal
securities or other law or regulation; and
(iii) Either party may disclose the existence or any provisions of this
Agreement if any such information has already been publicly disclosed.
27. CONSTRUCTION
This Agreement shall be governed by and construed in accordance with the laws
of the State of Now York applicable to agreements executed and fully performed
therein. The courts of Now York (state and federal) will have exclusive
jurisdiction over any controversies regarding this Agreement; any action or
proceedings which involves such a controversy will be brought only in those
courts, in New York County. Any process in any such action or proceeding may,
among other methods, be served by delivery or certified mail, return receipt
requested. Any such delivery or mail service shall be deemed to have the same
force and effect as personal service within the State of New York.
28. HEADINGS
The headings in this Agreement are for convenience of reference only, and
shall not limit or otherwise affect the meaning hereof.
29. GENERAL
(a) No waiver of any breach of this Agreement shall be held to be a waiver
of any other or subsequent breach. No waiver, modification or cancellation of
any term or condition of this Agreement or any amendment thereto shall be
effective unless executed in writing by the party to be charged. All remedies
afforded by this Agreement shall be taken and construed as cumulative, that
is, in addition to every other remedy provided herein or by law.
(b) In the event that the date on which any payment is to be made under this
Agreement is a Saturday, Sunday, or legal holiday, the payment shall be made
on the next business day thereafter.
(c) This Agreement shall be binding upon the parties hereto and their
respective legal representatives, heirs, successors and assigns.
(d) No oral or other representations, understandings or agreements have been
made or relied upon in the making of this Agreement other than these
specifically set forth herein. This Agreement supersedes all existing
agreements by and between the parties hereto and constitutes final expression
of their agreement with respect to the subject matter hereof and is a complete
and exclusive statement of the terms thereof.
(e) The Schedules attached to this Agreement are incorporated into and
hereby made a part hereof.
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers, as the day and year first written
above.
Princeton Publishing, Inc. KABLE NEWS COMPANY, INC.
"PUBLISHER" "DISTRIBUTOR"
By: /s/ Hank McQueeney By: /s/ Michael Duloc 10/26/96
Hank McQueeney - President Michael Duloc- Sr. V.P., Client
Relations
SCHEDULE "A"
PUBLISHER'S
TITLE FREQUENCY COVER PRICE BILLING PRICE
U.S. CANADA U.S. CANADA
KARATE INTERNATIONAL Bi-monthly $3.95 $4.95 $2.0935 $2.6235
RIDERS TO THE DISTRIBUTION CONTRACT DATED MAY 14, 1996 BETWEEN PRINCETON
PUBLISHING, INC. AND KABLE NEWS COMPANY, INC.
RIDER "A"
Commencing with the next Initial Advance Payment due subsequent to the date of
final payment of the third issue distributed hereunder for each title, the
Initial Advance Payment shall be in an amount equal to eighty (80%) percent of
the average final net sale percentage of prior three (3) settled issues.
RIDER "B"
Distributor shall be entitled to withhold from the Final Payment of each
issue, as provided for in Paragraph 15 (d , a reasonable reserve for estimated
late returns to be received from Foreign and Military sales outlets. Said
Reserve shall be closed out at such time as the Distributor determines that
the majority of the Returns have been received. Any net balance in the
Reserve shall be paid to the Publisher by the Distributor. In the event that
the Reserve is insufficient to cover the Returns, the Distributor shall be
entitled to deduct the deficiency from the next available monies due the
Publisher under this contract.
EXHIBIT 10.18
DOJO PUBLISHING, INC.
PRINCETON PUBLISHING, INC.
28 WEST 25TH STREET, 7TH FLOOR.
NEW YORK, NY 10010-2905
May 14, 1996
KABLE NEWS COMPANY, INC.
641 Lexington Avenue
New York, NY 10022
SUBJECT: Cross-Guaranty by DOJO PUBLISHING, INC. and
PRINCETON PUBLISHING, INC. of their accounts
with KABLE NEWS COMPANY, INC.
Gentlemen:
DOJO PUBLISHING, INC. (herein DOJO) and PRINCETON PUBLISHING, INC. (herein
PRINCETON), both of whom occupy the same offices at 28 West 25th St., 7th
Floor, New York, NY 10010-2905, jointly and severally represent that they are
affiliated and associated with each other and that for their mutual gain and
benefit said companies have major areas of joint operations, ownership and
control, including but not limited to, sharing certain costs and obligations.
("Affiliated" and "associated" shall be interpreted in their broadest sense
and shall not be limited to a parent-subsidiary relationship.)
On or about August 22, 1990, DOJO and KABLE NEWS COMPANY, INC. ("KABLE")
entered into a Distribution Agreement (referred to as the DOJO PUBLISHING,
INC. Agreement).
DOJO and PRINCETON Jointly and severally affirm that they desire to have
KABLE NEWS COMPANY, INC. (herein KABLE) enter into the following separate
agreement under which KABLE would provide certain work, services and materials
to PRINCETON, and under which KABLE may advance certain sums of money on
behalf of PRINCETON (referred to herein as the "WOMAN Agreement"):
Agreement, dated May 14, 1996
between PRINCETON PUBLISHING, INC.
and KABLE NEWS COMPANY, INC.
KABLE has advised DOJO and PRINCETON that because of good and sound
business reasons, KABLE would not be willing to enter into said Agreement with
PRINCETON unless and until DOJO and PRINCETON enter into this Cross-Guaranty
whereby they jointly and severally guarantee each other's accounts with, and
obligation to KABLE to whatever extent the same may be at any time during the
respective and renewal terms of the Agreements, and thereafter to the extent
of any liabilities remain owed to KABLE following termination of either the
DOJO or PRINCETON Agreements, as they may be amended or extended.
In consideration of the above, and for other good and valuable
consideration, the receipt of which each of the parties hereto acknowledge, it
is agreed by and among them as follows:
1. Simultaneously with the execution of this Cross-Guaranty by the
parties hereto, PRINCETON and KABLE will execute the PRINCETON Agreement.
2. DOJO and PRINCETON (herein sometimes referred to as 'Cross-
Guarantors") , jointly and severally, agree to and hereby do guarantee to
KABLE the payment of any debt or loss which KABLE may sustain as a result of
its entering into said PRINCETON or DOJO Agreements or providing services
thereunder for either or both Cross-Guarantors, including, but not limited to
any liability for any and all invoices, statements, advances, prepayments,
overdrafts and/or deficits, loans or indemnities which may hereafter exist,
and/or become due and owing to KABLE from either Cross-Guarantors during the
terms of their respective Agreements or remain due thereafter, together with
any attorneys fees or costs of collection incurred by KABLE (hereinafter
referred to collectively as the "Indebtedness") . Each of the Cross-Guarantors
hereby authorizes KABLE to apply any and all monies now or hereafter in the
possession of KABLE, and/or for which KABLE might otherwise be required to
account to either of them, to the account of, and toward the repayment of, any
Indebtedness.
3. The jointly and several liability of each Cross-Guarantor shall
continue until repayment in full of any Indebtedness from either Cross-
Guarantor to KABLE or until payment is made of any loss or damage incurred by
KABLE with the termination of the Agreements, which ever occurs last in time.
4. Each Cross-Guarantor consents, without affecting its liability.,to
KABLE hereunder, that KABLE may, without notice to or consent of said Cross-
Guarantor, upon such terms as KABLE may deem advisable:
a) extend, in whole or in part, by renewal or otherwise the time of
payment of the Indebtedness owing by the other Cross-Guarantor to KABLE;
b) release, surrender, exchange, modify, impair or extend the period
of duration, or the time for performance or payment;
c) extend, renew, modify or amend in any way, the Agreements.
Each Cross-Guarantor hereby ratifies and affirms in advance any such
extensions, renewals, release, surrenders, exchanges, modifications or
impairment, and all such actions shall be binding upon each Cross-Guarantor.
5. Each Cross-Guarantor represents that, at the time of the execution
and delivery of this Cross-Guaranty, nothing exists to impair the
effectiveness of the liability of any Cross-Guarantor to KABLE hereunder, or
the immediate taking of effect of this Cross-Guaranty as the sole agreement
between the Cross-Guarantor and KABLE with respect to guaranteeing the
Indebtedness of each Cross-Guarantor to KABLE.
6. KABLE is not and shall not be required to inquire into or
otherwise investigate the authority of any officer (a), director (s) , or
agent (s) , acting on, or purporting to act on, behalf of either Cross-
Guarantor and each of itself represents and warrants to KABLE that it has
taken all necessary corporate action and has full corporate power and
authority, to make this guarantee, that the same is supported by good and
valuable consideration, and that the officer(s) or representatives of each
Cross-Guarantor executing and delivering this Cross-Guaranty represent that
each has been expressly authorized to do so and are acting within the scope of
such authority.
7. KABLE may at its option proceed in the first instance against
either Cross-Guarantor to collect any Indebtedness or obligation covered by
this Guaranty without first proceeding against the other Cross-Guarantor.
KABLE is specifically authorized by each Cross-Guarantor to apply any and all
monies of either Cross-Guarantor now or hereafter in this possession of KABLE,
and/or for which KABLE might otherwise be required to account and pay to the
benefit of either Cross-Guarantor, and apply same against the Indebtedness in
order to reduce or eliminate any or both Cross-Guarantor's Indebtedness to
KABLE. KABLE shall not be required to first exercise or exhaust its remedies
against one or the other, or in any particular formula based upon the amount
of Indebtedness, the date is accrued, or otherwise.
8. The whole of this Cross-Guaranty is herein set forth, and there it
no verbal or other written agreement, and no understanding or custom affecting
the terms hereof. This Cross-Guaranty can be modified only by written
instrument signed by the party to be charged therewith.
9. This Cross-Guaranty is delivered and made in, and shall be
construed and enforced pursuant to, the laws of the State of New York, and is
binding upon the Cross-Guarantors and their respective successors, assigns and
representatives, and shall inure to the benefit of KABLE, its successors and
assigns.
Very truly yours,
DOJO PUBLISHING, INC.
EXHIBIT 10.19
[This Agreement now between Princeton Publishing, Inc., as assignee of G.T.
Publishing, Inc., and Casey Lee Klinger d/b/a KNC, Inc.]
LICENSING AGREEMENT BETWEEN KNC, INC. AND G.T. PUBLISHING, INC.
G.T. Publishing, Inc., hereinafter called GT, whose principal place of
business is located at 519 Eighth Avenue, New York, NY 10018, and Casey Lee
Klinger d/b/a KNC, Inc., hereinafter called KNC, whose principal place of
business is located at 3228 Apache Avenue, San Diego, CA 92117, hereby agree
to the following:
GT shall pay KNC an initial licensing fee of $5,000 each for Dream, Obsessions
and Stars magazines (for a total of $15,000) payable in monthly increments of
$1500 per month over the next consecutive ten (10) months beginning with May
1992. Thereafter the license fee shall be renewed with an annual fee of $1
per magazine per year during the life of this agreement.
GT shall further pay KNC a packaging fee of $5,000 per magazine issue for
finished artwork of a minimum of nine issues per year (or a minimum of one
issue of each title every five and one half weeks) for each of the following
titles: Dream, Obsessions, Stars and Numbers. Payment will be divided as one
half ($2,500) on inception of each issue of each magazine and the balance of
$2,500 per issue per magazine on delivery of each issue of each magazine to
GT's offices.
KNC shall also receive two advertising pages for each issue of each magazine
to use at its discretion providing said ads are not sold or traded in conflict
with advertising sales generated by GT. Revenues, if any, generated by the
sales of said ads will be split equally between GT KNC and will meet with GT's
approval.
KNC and GT agree to share revenues generated by the Malebox classified section
of STARS magazine beginning with the September 1992 (Vo. 1 No. 9) issue and
its related 900 ad identified as 900 903-2858, with GT receiving 70% of
combined revenues and KNC receiving 30% of combined revenues for monitoring
the 900 line and administering the forwarding of letters. KNC will provide GT
with a monthly computer report of revenues received, accompanied by a check
representing GT's 70% share.
Advertising space sales are to be handled and collected by GT.
If at any point the magazine sales of Dream, Stars, Obsessions and/or any
other replacement or newly developed GT/KNC title individually exceed a thirty
(30) percent sale, those revenues for each title generated in excess of thirty
(30) percent shall be divided evenly between GT and KNC.
GT shall also employ KNC exclusively for subscription development of all GT
magazines, licensed or otherwise, including Dream, Obsessions, Stars, Numbers,
Blueboy, Jock and Jock Collection, and any and all new gay titles, one shots
and spin offs.
GT will pay KNC three dollars and twenty-five cents ($3.25) for each new
subscription generated plus one-half dollar ($.50) per month per subscription
for file maintenance, customer service and generating mailing labels for
subscription fulfillment on new and existing subscriptions. This same
arrangement shall apply to any other magazines GT or Scott Magazine
Distributors, Inc. chooses to place with KNC for subscription building. GT
will likewise offer KNC said subscription building contracts for any other
publishing entities associated with GT or Scott, including, but not limited
to, Oui and Creem magazines providing KNC can match or better any other valid
bids by competitive subscription fulfillment companies.
GT shall accept responsibility for prior approved printing of brochures, cost
of mailing lists, postage, any and all peripheral charges in association with
subscription campaigns.
GT further agrees to pay Casey Lee Klinger a salary of $50,000 per year to
oversee production of magazines and to design and manage subscription
campaigns.
GT also agrees to accept all responsibility for any debts of Klinger Group,
Beverly Hills Bluebook or KNC, Inc., or the magazines herein named due to
Raven Press, Inc. and Flynt Distributing Company.
This agreement shall cover an initial period of sixty (60) months beginning
with the first day of June, 1992, and expiring on the thirtieth day of May,
1997. The agreement will thereafter be renewable annually with the mutual
assent of both parties three months prior to the end of the five-year
agreement and sealed by the payment and acceptance of one dollar ($1) per
year, per title for Dream, Obsessions and Stars magazines.
In the event GT elects to discontinue publishing any title herein by reason of
non-profitability, the remaining titles affected by this licensing agreement
shall remain unaffected and all terms herein enforced providing the following
conditions are met:
1) GT provides notice on issue prior to said cancellation;
2) GT agrees to transfer or convert all remaining paid subscriptions to an
existing or new GT/KNC title to be bound under the same terms of this
agreement or refund the monies due subscribers for non-received magazines and
will, in either event, hold KNC harmless from all liability resulting
therefrom.
KNC and Casey Lee Klinger agree to work exclusively for the corporation in the
publication of gay magazines. It is understood that any breach of this
exclusive agreement by Klinger or any other person working in his behalf will
automatically trigger a suit for damages and summary judgment in behalf of
GT. This covers advertising sales, production, art preparation on these or
any other gay titles KNC or Casey Klinger work on.
Agreed: /s/ Casey Lee Klinger Agreed: /s/ Gil Traub
Casey Lee Klinger for G.T. Publishing, Inc.
for KNC, Inc.
Dated: 07-27-92
EXHIBIT 10.20
Clark Distribution Systems, Inc.
121 New York Avenue
P.O. Box 438
Trenton, New Jersey 08603
Service Agreement
SERVICE AGREEMENT between Clark Distribution Systems, Inc. (CDS), located at
121 New York Avenue, Trenton, NJ 08638 and Princeton Publishing (PRINCETON),
located at 28 West 25th Street, New York, NY 10010, dated this 19th day of
April, 1996.
1. PRINCETON appoints CDS to provide the physical distribution of the
newsstand copies of all publications it publishes and prints consigned to ID
wholesalers and international freight forwarders as listed in the 1995 "Roster
of National Distributors and Magazine Wholesalers" published by Playboy.
The rate for distribution if $7.50 per 100 lbs. which is applicable ex CD's
dock to ID wholesalers as listed in the "Roster of National Distributors and
Magazine Wholesalers". Further, CDS extends this rate to the select group of
non-wholesalers listed on the Alternate Wholesaler sheet. All other shipments
are rated at $.50 per pound, with each subject to a $10.00 minimum charge.
Except for any fuel surcharges which may be imposed, these rates will remain
in effect for a period of one year.
2. CDS agrees to transport at its expense all trailers containing a minimum
of 38,000 lbs. that move directly to its terminals beyond Alsip, IL.
3. PRINCETON agrees to prepare four sortations, one for each CDS terminal
located in Alsip, Nashville, Kansas City and Scranton, and to load these for
direct dispatch to the respective terminal facilities at CDS' request.
PRINCETON shall be responsible for and pay to third party trucks the expense
of transporting loads from Sussex, WI to Alsip, IL.
4. Payment by PRINCETON to CDS is to be made as follows:
For those titles distributed by Flynt, CDS shall invoice and shall be
paid directly by Flynt.
For those titles distributed by Curtis, CDS shall invoice PRINCETON and
be paid directly by CURTIS per the assignments, consistent with part practices
for SCOTT.
Those shipments distributed by PRINCETON to other than ID wholesalers
that are not billed to the national distributor shall be invoiced by CDS to
PRINCETON and be paid to CDS by PRINCETON.
5. PRINCETON agrees that national distributors shall advance and pay all
Canadian GST taxes. PRINCETON further agrees that national distributors are
to provide proper export documentation and clearance for Canadian border
crossing and that national distributors shall be responsible to deliver such
documentation to CDS in advance of shipment.
6. PRINCETON agrees that CDS shall be responsible for forty percent (40%)
of wholesale invoice value for all loss, damage, shortage and non-delivery of
publications.
7. CDS agrees to provide completion notices by facsimile as per agreement.
The term of this Agreement shall be for a period of one (1) year commencing
May 20, 1996 through May 20, 1997.
PRINCETON PUBLISHING CLARK DISTRIBUTION SYSTEMS, INC.
By: /s/ Henry McQueeney By: Edward Karashevian
Title: President Title: Vice President
Date: 5/20/96 Date: 5/24/96
EXHIBIT 10.21
CURTIS CIRCULATION COMPANY
Dennis F. Porti, Vice President, Publisher Planning & Development
CURTIS CIRCULATION COMPANY
433 Hackensack Avenue
Hackensack, New Jersey 07601
DATE: June 28, 1996
Assignor Publisher: Assignee Publisher:
QUILTCO CORP. PRINCETON PUBLISHING, INC.
(Formally Alternate Periodicals Corp.) 28 West 25th Street, 7th Floor
1700 Broadway New York, NY 10010
New York, NY 10019
Dear Sirs:
This is to acknowledge that QUILTCO CORP. (Formally [sic] Alternate
Periodicals Corp.) ("Assignor"), has assigned all of its right, title and
interest in and to the publication listed on Exhibit 1, annexed
("Publication"), to PRINCETON PUBLISHING, INC. ("Assignee"), including
Assignor's rights under the Distribution Agreement between Assignor and Curtis
Circulation Company ("Curtis"), dated February 3, 1995, as amended, pertaining
to the Publication.
Curtis hereby consents to the assignment of Assignor's rights under the
Distribution Agreement and to the assignment of the Publications. The
Assignee hereby assumes all of the liabilities and obligations under the
Distribution Agreement, as amended, effective with all issues subsequent to
the August/September 1996 issue, as if it were an original signatory thereof,
and such assumption by the Assignee is binding upon the Assignee, its
successors and assigns. The Assignee acknowledges that: W the Distribution
Agreement is applicable to each of the Publications, (ii) the Assignee can not
assign its rights to the Publications or to the Distribution Agreement as
amended except with the written consent of Curtis, and (iii) the Assignee has
received and-read copies of the Distribution Agreement and its amendments, if
any.
If any monies are owed by Assignor to Curtis on issues prior to and including
the August/September 1996 issue of the Publication, then Assignor agrees to
pay such monies as provided in the Distribution Agreement. If any monies are
owed to Assignor by Curtis on said issues same will be paid to Assignor when
due.
Nothing herein shall amend or modify the Distribution Agreement, as amended,
and nothing shall release the Assignor of its obligations under the
Distribution Agreement, as amended.
Upon the Assignor and Assignee signing below, this document shall be binding
upon and inure to the benefit of each of them and their respective successors
and assigns.
AGREED AND CONSENTED TO:
/s/
QUILTCO
(Formally [sic] Alternate Periodicals Corp.)
ASSIGNEE:
/s/
PRINCETON PUBLISHING, INC.
BY:
TITLE:
EXHIBIT 1
TITLE
LADY'S CIRCLE PATCHWORK QUILTS MAGAZINE
EFFECTIVE ISSUE
ALL ISSUES SUBSEQUENT
TO THE AUGUST/SEPTENBER
1996 ISSUE.
EXHIBIT 10.22
[This Agreement now between Grand International Communications and Princeton
Publishing, Inc., as assignee of Raven Press, Inc.]
April 28, 1992
Mr. Don Embinder, Publisher
Jock Magazine
Dear Mr. Embinder,
Grand International Communications owes Raven Press $170,000. Since you say
that you cannot pay this debt, and you do not have the financial resources to
continue this publication, we have no choice but to accept your offer of a 20
year lease on the publication and any other entities emerging from it. In
addition, Jock will pay back the $170,000 debt to Raven Press at the rate of
$8,000.00 per month.
Raven will guarantee payment to Flynt on a per issue basis of $2,500.00 per
issue and will pay you a royalty of 10 cents per copy on sales over 25,000
copies per issue.
We accept your offer immediately based on the July 1992 issue. Please signify
your acceptance and agreement by signing below:
Thank you.
Agreed by:
/s/
Donald Embinder
Grand International Communications
Agreed by:
/s/
Raven Press, Inc.
John Bittner
EXHIBIT 10.22
EMPLOYMENT AGREEMENT
This Employment Agreement is made effective as of the 6th day of
September, 1996, by and between Firestone Publishing, Inc., a Delaware
corporation (the "Company") and Walter Weidenbaum ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ Employee in accordance with the
terms of this Agreement and Employee desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Term. Subject to earlier termination as hereinafter provided,
Employee's period of employment pursuant to this Agreement shall be for a
period of five (5) years commencing on the effective date hereof. The entire
period of Employee's employment by the Company pursuant hereto is hereinafter
referred to as the "Term."
2. Duties.
(a) During the Term, Employee shall serve the Company as its
President, upon the terms and subject to the conditions set forth
herein.
(b) During the Term, Employee shall be employed by the Company
and shall perform such duties as the Board of Directors of the Company
may from time to time reasonably direct and as are consistent with the
position of President. Employee shall devote such amount of time to the
performance of his duties as shall reasonably be required (which shall
not necessarily be full-time but which shall be commensurate with the
amount of time required to do same prior to the purchase of the
Company's assets by the Company in July of 1996). Employee shall comply
with all reasonable directions given him by the Board of Directors of
the Company consistent with the foregoing sentence. Employee shall have
discretion to approve reasonable expense vouchers of all employees.
(c) During the Term, Employee shall devote his best efforts,
business judgment, skill and knowledge exclusively to the advancement of
the business and interests of the Company and to the discharge of his
duties and responsibilities hereunder. Employee shall not engage in any
other business activity or serve in any industry, trade, or professional
position during the Term, except as a passive investor, and except as
may be expressly approved in advance by the Board in writing.
3. Compensation; Benefits. The Company shall pay to Employee an
annual salary of $140,000, payable at the same intervals as salaries of other
employees of the Company, and subject to the usual withholding taxes, not less
frequently than semi-monthly. The Company shall provide similar health
insurance and other benefits to Employee as it provides its other full-time
employees, if any. The Company shall provide Employee with a leased car at a
cost of approximately $1,000 per month. The Company shall reimburse Employee
for all reasonable travel and business expenses, subject to periodic review by
the Board of Directors.
4. Vacations. During the Term, Employee shall be entitled to an
unlimited amount of vacation per year, subject to Employee's reasonable
discretion, to be taken at such times and intervals as shall be determined by
Employee, subject to the reasonable business needs of the Company.
5. Representations and Warranties. Employee hereby represents and
warrants to the Company that Employee's execution of this Agreement and
performance pursuant to this Agreement do not and will not breach or conflict
with any other agreement, contract, or restriction to which Employee is
subject.
6. Termination. Notwithstanding the provisions of Section 1 hereof,
the Term shall be subject to termination as follows:
(a) The death of Employee shall terminate the Term. After
Employee's death, Employee's estate or other successors in interest
shall be entitled to receive any compensation earned or accrued and
unpaid to the date of his death.
(b) The Term may, at the option of the Company, be terminated
for Cause (as hereinafter defined) upon at least five (5) days' prior
written notice to Employee. As used herein Cause shall be limited to
(i) theft, embezzlement or fraud by Employee, or other misconduct or
dishonesty by Employee which, in the opinion of the Company's Board of
Directors, jeopardizes the Company or Employee's ability to perform in
accordance with the terms hereof; (ii) Employee's willful and material
failure to perform, or material malfeasance in the performance of, his
duties and responsibilities to the Company or any other willful and
material breach by Employee of this Agreement; or (iii) any mental or
physical disability of Employee which renders him unable to perform his
duties for a period of not less than ninety (90) consecutive business
days, as confirmed by Employee's medical or psychiatric doctor, whose
examination Employee will agree to undergo if the Company reasonably so
requests.
(c) Employee may terminate the Term for any reason upon sixty
(60) days' written notice to the Company.
(d) At any time subsequent to the payment in full of all amounts
owed by the Company to Dugent Publishing Corp. pursuant to a promissory
note in the original principal amount of $4,000,000, or at any time
subsequent to the sale or transfer of such note to any unaffiliated
party, Company may terminate the Term upon thirty (30) days' written
notice to Employee.
7. Covenant Not to Disclose.
(a) Other than as necessary in the ordinary course of the
Company's business, Employee shall not disclose or make accessible in
any manner to or use for the benefit of any person or entity, at any
time during or after the Term, any information of a confidential or
secret nature relating to the business, products or activities of the
Company (the "Confidential Information"). Such Confidential Information
shall include, but not be limited to, information relating to
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship, customer lists,
projects, plans and proposals), but only if specifically listed and
presented to Employee in writing and identified as Confidential.
Employee shall keep secret all matters entrusted to him and shall not
use or attempt to use any such information in any manner which may
injure or cause loss or may be calculated to injure or cause loss
whether directly or indirectly to the Company. Information shall be
Confidential Information whether or not such information was developed,
devised or otherwise created in whole or in part by the efforts of
Employee, and whether or not such information is a matter of public
knowledge, unless the Company has authorized disclosure of such
information to the general public.
(b) Employee agrees that during his employment he shall not
make, use or permit to be used any Confidential Information relating to
any matter within the scope of the business of the Company or concerning
any of its dealings or affairs otherwise than for the benefit of the
Company. Employee further agrees that he shall not, after the
termination of his employment, use or permit to be used any such
Confidential Information, it being agreed that all of the foregoing
shall be and remain the sole and exclusive property of the Company,
whether or not prepared by Employee, and that immediately upon the
termination of his employment he shall deliver all of the foregoing, and
all copies thereof, to the Company, at its main offices.
8. Non-Competition.
(a) While Employee is employed at the Company and for a period
of two (2) years after termination of such employment, Employee will
not, whether alone or as a partner, officer, director, consultant,
agent, employee or stockholder of any company or other commercial
enterprise, directly or indirectly engage in any business or other
activity in the United States or Canada which is competitive with the
Company and which publishes or distributes any of the same types of
products or services being published, marketed, distributed, planned in
writing or developed by the Company during his employment or at the time
of termination of such employment.
(b) The ownership of securities of a public company not in
excess of five percent (5%) of any class of such securities shall not of
itself be deemed a violation of any of the provisions of this Section 8.
9. No Solicitation. While Employee is employed at the Company and
for a period of two (2) years after termination of his employment (for any
reason, whether voluntarily or involuntary), Employee will not directly or
indirectly solicit, recruit or hire or attempt to solicit, recruit or hire any
employee of the Company to work for a third party other than the Company or
engage in any activity that would cause any employee to violate any agreement
with the Company.
10. Equitable Relief. Employee agrees that any breach of Section 7,
8, or 9 of this Agreement by him will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in addition to
any and all remedies at law, the right to an injunction, specific performance
or other equitable relief to prevent the violation of his obligations
hereunder.
11. Reasonable Restrictions; Severability. Employee hereby
acknowledges that the type and periods of restriction imposed in the
provisions of this Agreement are fair and reasonable and are reasonably
required for the protection of Company and the goodwill associated with the
Company. Employee further agrees that each provision herein shall be treated
as a separate and independent clause, and the enforceability of any one clause
shall in no way impair the enforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable at law, such provision or provisions shall
be construed by the appropriate judicial body by limiting and reducing it or
them, so as to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear.
12. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13. No Waiver. Any waiver by the Company of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
14. Notices. Any notice or communication required or permitted
hereunder shall be deemed given when delivered in hand or sent by first class
mail, postage prepaid:
If to Employee, to him at:
If to the Company, to it at:
Firestone Publishing, Inc.
c/o DeNovo Corporation
214 Brazilian Ave., Suite 300
Palm Beach, FL 33480
or to such other address of which either party may notify the other party by
notice similarly given.
15. Survival. Employee's obligations under this Agreement shall
survive the termination of his employment regardless of the manner of such
termination and shall be binding upon his heirs, executors, administrators and
legal representatives.
16. Assignment. Neither party may assign any rights or obligations
under this Agreement.
17. Entire Agreement; Amendment. This instrument contains the entire
agreement between the parties with respect to the subject matter addressed
herein and all prior discussions, understandings, negotiations and agreements
are merged herein. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
19. Submission to Jurisdiction. Each party hereto submits to the
jurisdiction of any state court sitting in Dade County, Florida and any
federal court for the Southern District of Florida, Dade County Division, in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other Court.
Each party waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Firestone Publishing, Inc.
By: /s/ /s/ Walter Weidenbaum
Walter Weidenbaum
Print Name and Title:
Witness: Witness:
/s/ /s/
EXHIBIT 10.23
EMPLOYMENT AGREEMENT
This Employment Agreement is made effective as of the 6th day of
September, 1996, by and between Firestone Publishing, Inc., a Delaware
corporation (the "Company") and Steve Rottenberg ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ Employee in accordance with the
terms of this Agreement and Employee desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Term. Subject to earlier termination as hereinafter provided,
Employee's period of employment pursuant to this Agreement shall be for a
period of five (5) years commencing on the effective date hereof. The entire
period of Employee's employment by the Company pursuant hereto is hereinafter
referred to as the "Term."
2. Duties.
(a) During the Term, Employee shall serve the Company as its
Vice President - Production, upon the terms and subject to the
conditions set forth herein.
(b) During the Term, Employee shall be employed by the Company
on a full-time basis and shall perform such duties as the President of
the Company may from time to time reasonably direct and as are
consistent with the position of Vice President - Production. Employee
shall comply with all reasonable directions given him by the President.
(c) During the Term, Employee shall devote his full business
time and his best efforts, business judgment, skill and knowledge
exclusively to the advancement of the business and interests of the
Company and to the discharge of his duties and responsibilities
hereunder. Employee shall not engage in any other business activity or
serve in any industry, trade, or professional position during the Term,
except as may be expressly approved in advance by the Board in writing.
3. Compensation; Benefits. The Company shall pay to Employee an
annual salary of $75,000, payable at the same intervals as salaries of other
employees of the Company, and subject to the usual withholding taxes, not less
frequently than semi-monthly. The Company shall provide similar health
insurance and other benefits to Employee as it provides its other full-time
employees, if any.
4. Vacations. During the Term, Employee shall be entitled to such
amount of vacation per year as is commensurate with Company policy (which
shall be substantially similar to the policy of the prior owner of the
Company's assets), to be taken at such times and intervals as shall be
determined by Employee, subject to the reasonable business needs of the
Company.
5. Representations and Warranties. Employee hereby represents and
warrants to the Company that Employee's execution of this Agreement and
performance pursuant to this Agreement do not and will not breach or conflict
with any other agreement, contract, or restriction to which Employee is
subject.
6. Termination. Notwithstanding the provisions of Section 1 hereof,
the Term shall be subject to termination as follows:
(a) The death of Employee shall terminate the Term. After
Employee's death, Employee's estate or other successors in interest
shall be entitled to receive any compensation earned or accrued and
unpaid to the date of his death.
(b) The Term may, at the option of the Company, be terminated
for Cause (as hereinafter defined) upon at least five (5) days' prior
written notice to Employee. As used herein Cause shall be limited to
(i) theft, embezzlement or fraud by Employee, or other misconduct or
dishonesty by Employee which, in the opinion of the Company's Board of
Directors, jeopardizes the Company or Employee's ability to perform in
accordance with the terms hereof; (ii) Employee's failure to perform,
or negligence in the performance of, his duties and responsibilities to
the Company or any willful and material breach by Employee of this
Agreement; or (iii) the President's reasonable determination that any
representation or warranty made by Employee to the Company was false or
misleading when made, or thereafter became false or misleading and
Employee failed to notify the Company thereof.
(c) Employee may terminate the Term for any reason upon sixty
(60) days' written notice to the Company.
(d) At any time subsequent to the payment in full of all amounts
owed by the Company to Dugent Publishing Corp. pursuant to a promissory
note in the original principal amount of $4,000,000, or at any time
subsequent to the sale or transfer of such note to any unaffiliated
party, Company may terminate the Term upon thirty (30) days' written
notice to Employee.
7. Covenant Not to Disclose.
(a) Other than as necessary in the ordinary course of the
Company's business, Employee shall not disclose or make accessible in
any manner to or use for the benefit of any person or entity, at any
time during or after the Term, any information of a confidential or
secret nature relating to the business, products or activities of the
Company (the "Confidential Information"). Such Confidential Information
shall include, but not be limited to, information relating to
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship, customer lists,
projects, plans and proposals), but only if specifically listed and
presented to Employee in writing and identified as Confidential.
Employee shall keep secret all matters entrusted to him and shall not
use or attempt to use any such information in any manner which may
injure or cause loss or may be calculated to injure or cause loss
whether directly or indirectly to the Company. Information shall be
Confidential Information whether or not such information was developed,
devised or otherwise created in whole or in part by the efforts of
Employee, and whether or not such information is a matter of public
knowledge, unless the Company has authorized disclosure of such
information to the general public.
(b) Employee agrees that during his employment he shall not
make, use or permit to be used any Confidential Information relating to
any matter within the scope of the business of the Company or concerning
any of its dealings or affairs otherwise than for the benefit of the
Company. Employee further agrees that he shall not, after the
termination of his employment, use or permit to be used any such
Confidential Information, it being agreed that all of the foregoing
shall be and remain the sole and exclusive property of the Company,
whether or not prepared by Employee, and that immediately upon the
termination of his employment he shall deliver all of the foregoing, and
all copies thereof, to the Company, at its main offices.
8. Non-Competition.
(a) While Employee is employed at the Company and for a period
of two (2) years after termination of such employment, Employee will
not, whether alone or as a partner, officer, director, consultant,
agent, employee or stockholder of any company or other commercial
enterprise, directly or indirectly engage in any business or other
activity in the United States or Canada which is competitive with the
Company and which publishes or distributes any of the same types of
products or services being published, marketed, distributed, planned in
writing or developed by the Company during his employment or at the time
of termination of such employment.
(b) The ownership of securities of a public company not in
excess of five percent (5%) of any class of such securities shall not of
itself be deemed a violation of any of the provisions of this Section 8.
9. No Solicitation. While Employee is employed at the Company and
for a period of two (2) years after termination of his employment (for any
reason, whether voluntarily or involuntary), Employee will not directly or
indirectly solicit, recruit or hire or attempt to solicit, recruit or hire any
employee of the Company to work for a third party other than the Company or
engage in any activity that would cause any employee to violate any agreement
with the Company.
10. Equitable Relief. Employee agrees that any breach of Section 7,
8, or 9 of this Agreement by him will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in addition to
any and all remedies at law, the right to an injunction, specific performance
or other equitable relief to prevent the violation of his obligations
hereunder.
11. Reasonable Restrictions; Severability. Employee hereby
acknowledges that the type and periods of restriction imposed in the
provisions of this Agreement are fair and reasonable and are reasonably
required for the protection of Company and the goodwill associated with the
Company. Employee further agrees that each provision herein shall be treated
as a separate and independent clause, and the enforceability of any one clause
shall in no way impair the enforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable at law, such provision or provisions shall
be construed by the appropriate judicial body by limiting and reducing it or
them, so as to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear.
12. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13. No Waiver. Any waiver by the Company of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
14. Notices. Any notice or communication required or permitted
hereunder shall be deemed given when delivered in hand or sent by first class
mail, postage prepaid:
If to Employee, to him at:
If to the Company, to it at:
Firestone Publishing, Inc.
c/o DeNovo Corporation
214 Brazilian Ave., Suite 300
Palm Beach, FL 33480
or to such other address of which either party may notify the other party by
notice similarly given.
15. Survival. Employee's obligations under this Agreement shall
survive the termination of his employment regardless of the manner of such
termination and shall be binding upon his heirs, executors, administrators and
legal representatives.
16. Assignment. Neither party may assign any rights or obligations
under this Agreement.
17. Entire Agreement; Amendment. This instrument contains the entire
agreement between the parties with respect to the subject matter addressed
herein and all prior discussions, understandings, negotiations and agreements
are merged herein. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
19. Submission to Jurisdiction. Each party hereto submits to the
jurisdiction of any state court sitting in Dade County, Florida and any
federal court for the Southern District of Florida, Dade County Division, in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other Court.
Each party waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Firestone Publishing, Inc.
By: /s/ /s/ Steve Rottenberg
Steve Rottenberg
Print Name and Title:
Witness: Witness:
/s/ /s/
EXHIBIT 10.24
EMPLOYMENT AGREEMENT
This Employment Agreement is made effective as of the 6th day of
September, 1996, by and between Firestone Publishing, Inc., a Delaware
corporation (the "Company") and Travis Allen ("Employee").
W I T N E S S E T H :
WHEREAS, the Company desires to employ Employee in accordance with the
terms of this Agreement and Employee desires to be so employed by the Company.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein, and for other good and valuable consideration, the receipt and
sufficiency of which are hereby acknowledged, the parties hereby agree as
follows:
1. Term. Subject to earlier termination as hereinafter provided,
Employee's period of employment pursuant to this Agreement shall be for a
period of five (5) years commencing on the effective date hereof. The entire
period of Employee's employment by the Company pursuant hereto is hereinafter
referred to as the "Term."
2. Duties.
(a) During the Term, Employee shall serve the Company as its
Vice President - Marketing and Advertising, upon the terms and subject
to the conditions set forth herein.
(b) During the Term, Employee shall be employed by the Company
on a full-time basis and shall perform such duties as the President of
the Company may from time to time reasonably direct and as are
consistent with the position of Vice President - Marketing and
Advertising. Employee shall comply with all reasonable directions given
him by the President.
(c) During the Term, Employee shall devote his full business
time and his best efforts, business judgment, skill and knowledge
exclusively to the advancement of the business and interests of the
Company and to the discharge of his duties and responsibilities
hereunder. Employee shall not engage in any other business activity or
serve in any industry, trade, or professional position during the Term,
except as may be expressly approved in advance by the Board in writing.
3. Compensation; Benefits. The Company shall pay to Employee an
annual salary of $75,000, payable at the same intervals as salaries of other
employees of the Company, and subject to the usual withholding taxes, not less
frequently than semi-monthly. The Company shall provide similar health
insurance and other benefits to Employee as it provides its other full-time
employees, if any.
4. Vacations. During the Term, Employee shall be entitled to such
amount of vacation per year as is commensurate with Company policy (which
shall be substantially similar to the policy of the prior owner of the
Company's assets), to be taken at such times and intervals as shall be
determined by Employee, subject to the reasonable business needs of the
Company.
5. Representations and Warranties. Employee hereby represents and
warrants to the Company that Employee's execution of this Agreement and
performance pursuant to this Agreement do not and will not breach or conflict
with any other agreement, contract, or restriction to which Employee is
subject.
6. Termination. Notwithstanding the provisions of Section 1 hereof,
the Term shall be subject to termination as follows:
(a) The death of Employee shall terminate the Term. After
Employee's death, Employee's estate or other successors in interest
shall be entitled to receive any compensation earned or accrued and
unpaid to the date of his death.
(b) The Term may, at the option of the Company, be terminated
for Cause (as hereinafter defined) upon at least five (5) days' prior
written notice to Employee. As used herein Cause shall be limited to
(i) theft, embezzlement or fraud by Employee, or other misconduct or
dishonesty by Employee which, in the opinion of the Company's Board of
Directors, jeopardizes the Company or Employee's ability to perform in
accordance with the terms hereof; (ii) Employee's failure to perform,
or negligence in the performance of, his duties and responsibilities to
the Company or any willful and material breach by Employee of this
Agreement; or (iii) the President's reasonable determination that any
representation or warranty made by Employee to the Company was false or
misleading when made, or thereafter became false or misleading and
Employee failed to notify the Company thereof.
(c) Employee may terminate the Term for any reason upon sixty
(60) days' written notice to the Company.
(d) At any time subsequent to the payment in full of all amounts
owed by the Company to Dugent Publishing Corp. pursuant to a promissory
note in the original principal amount of $4,000,000, or at any time
subsequent to the sale or transfer of such note to any unaffiliated
party, Company may terminate the Term upon thirty (30) days' written
notice to Employee.
7. Covenant Not to Disclose.
(a) Other than as necessary in the ordinary course of the
Company's business, Employee shall not disclose or make accessible in
any manner to or use for the benefit of any person or entity, at any
time during or after the Term, any information of a confidential or
secret nature relating to the business, products or activities of the
Company (the "Confidential Information"). Such Confidential Information
shall include, but not be limited to, information relating to
inventions, products, designs, methods, know-how, techniques, systems,
processes, software programs, works of authorship, customer lists,
projects, plans and proposals), but only if specifically listed and
presented to Employee in writing and identified as Confidential.
Employee shall keep secret all matters entrusted to him and shall not
use or attempt to use any such information in any manner which may
injure or cause loss or may be calculated to injure or cause loss
whether directly or indirectly to the Company. Information shall be
Confidential Information whether or not such information was developed,
devised or otherwise created in whole or in part by the efforts of
Employee, and whether or not such information is a matter of public
knowledge, unless the Company has authorized disclosure of such
information to the general public.
(b) Employee agrees that during his employment he shall not
make, use or permit to be used any Confidential Information relating to
any matter within the scope of the business of the Company or concerning
any of its dealings or affairs otherwise than for the benefit of the
Company. Employee further agrees that he shall not, after the
termination of his employment, use or permit to be used any such
Confidential Information, it being agreed that all of the foregoing
shall be and remain the sole and exclusive property of the Company,
whether or not prepared by Employee, and that immediately upon the
termination of his employment he shall deliver all of the foregoing, and
all copies thereof, to the Company, at its main offices.
8. Non-Competition.
(a) While Employee is employed at the Company and for a period
of two (2) years after termination of such employment, Employee will
not, whether alone or as a partner, officer, director, consultant,
agent, employee or stockholder of any company or other commercial
enterprise, directly or indirectly engage in any business or other
activity in the United States or Canada which is competitive with the
Company and which publishes or distributes any of the same types of
products or services being published, marketed, distributed, planned in
writing or developed by the Company during his employment or at the time
of termination of such employment.
(b) The ownership of securities of a public company not in
excess of five percent (5%) of any class of such securities shall not of
itself be deemed a violation of any of the provisions of this Section 8.
9. No Solicitation. While Employee is employed at the Company and
for a period of two (2) years after termination of his employment (for any
reason, whether voluntarily or involuntary), Employee will not directly or
indirectly solicit, recruit or hire or attempt to solicit, recruit or hire any
employee of the Company to work for a third party other than the Company or
engage in any activity that would cause any employee to violate any agreement
with the Company.
10. Equitable Relief. Employee agrees that any breach of Section 7,
8, or 9 of this Agreement by him will cause irreparable damage to the Company
and that in the event of such breach the Company shall have, in addition to
any and all remedies at law, the right to an injunction, specific performance
or other equitable relief to prevent the violation of his obligations
hereunder.
11. Reasonable Restrictions; Severability. Employee hereby
acknowledges that the type and periods of restriction imposed in the
provisions of this Agreement are fair and reasonable and are reasonably
required for the protection of Company and the goodwill associated with the
Company. Employee further agrees that each provision herein shall be treated
as a separate and independent clause, and the enforceability of any one clause
shall in no way impair the enforceability of any of the other clauses herein.
Moreover, if one or more of the provisions contained in this Agreement shall
for any reason be held to be excessively broad as to scope, activity or
subject so as to be unenforceable at law, such provision or provisions shall
be construed by the appropriate judicial body by limiting and reducing it or
them, so as to be enforceable to the maximum extent compatible with the
applicable law as it shall then appear.
12. Counterparts. This Agreement may be executed simultaneously in
two or more counterparts, each of which shall be deemed an original and all of
which together shall constitute but one and the same instrument.
13. No Waiver. Any waiver by the Company of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
14. Notices. Any notice or communication required or permitted
hereunder shall be deemed given when delivered in hand or sent by first class
mail, postage prepaid:
If to Employee, to him at:
If to the Company, to it at:
Firestone Publishing, Inc.
c/o DeNovo Corporation
214 Brazilian Ave., Suite 300
Palm Beach, FL 33480
or to such other address of which either party may notify the other party by
notice similarly given.
15. Survival. Employee's obligations under this Agreement shall
survive the termination of his employment regardless of the manner of such
termination and shall be binding upon his heirs, executors, administrators and
legal representatives.
16. Assignment. Neither party may assign any rights or obligations
under this Agreement.
17. Entire Agreement; Amendment. This instrument contains the entire
agreement between the parties with respect to the subject matter addressed
herein and all prior discussions, understandings, negotiations and agreements
are merged herein. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver, change, modification, extension or discharge is sought.
18. Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Florida.
19. Submission to Jurisdiction. Each party hereto submits to the
jurisdiction of any state court sitting in Dade County, Florida and any
federal court for the Southern District of Florida, Dade County Division, in
any action or proceeding arising out of or relating to this Agreement and
agrees that all claims in respect of the action or proceeding may be heard and
determined in any such court. Each party also agrees not to bring any action
or proceeding arising out of or relating to this Agreement in any other Court.
Each party waives any defense of inconvenient forum to the maintenance of any
action or proceeding so brought and waives any bond, surety, or other security
that might be required of any other party with respect thereto. Each party
agrees that a final judgment in any action or proceeding so brought shall be
conclusive and may be enforced by suit on the judgment or in any other manner
provided by law or in equity.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Firestone Publishing, Inc.
By: /s/ /s/ Travis Allen
Travis Allen
Print Name and Title:
Witness: Witness:
/s/ /s/
EXHIBIT 10.25
SEVERANCE AGREEMENT
This Severance Agreement is made effective as of the 17th day of
December,
1996, by and between Princeton Media Group, Inc., f/k/a DeNovo Corporation, an
Ontario, Canada corporation (the "Company") and Michael D. Herman of Coral
Springs, Florida ("Herman").
W I T N E S S E T H :
WHEREAS, Herman has previously resigned his positions as President and
Director of the Company, the Company having agreed to provide to Herman the
severance terms described below in recognition of the superior services Herman
has rendered to the Company during his tenure as President and Director.
NOW, THEREFORE, in consideration of the mutual covenants contained
herein,
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged, the parties hereby agree as follows:
1. Resignation. Herman has previously resigned his positions as
President and Director of the Company.
2. Severance Package. The Company shall provide Herman with the
following severance compensation:
(a) Cash payments for a period of three years at the level of Mr.
Herman's current salary, payable at intervals substantially similar to
payment intervals of salaries of employees of the Company, commencing on
the date of this Agreement; provided, however, that at any time from the
date of this Agreement until the date one year after the date of this
Agreement, Mr. Herman may, by written notice to the Company, require the
Company to issue to him, within 5 days of such notice, 50,000 shares
(post-reverse split) of registered common stock of the Company in lieu of
payments which would otherwise be made during the second and third years
after the date hereof pursuant to this subsection (a). Payments for the
first year shall continue in any case.
(b) 35,000 shares (post-reverse split) of registered common stock
of the Company, to be issued within 5 days of the date hereof.
3. Covenant Not to Disclose. Herman shall not disclose or make
accessible in any manner to or use for the benefit of any person or entity at
any time any information of a confidential or secret nature relating to the
business, products or activities of the Company (the "Confidential
Information"). Such Confidential Information shall include, but not be
limited
to, information relating to inventions, products, designs, methods, know-how,
techniques, systems, processes, software programs, works of authorship,
customer
lists, projects, plans and proposals). Herman shall keep secret all matters
entrusted to him and shall not use or attempt to use any such information in
any
manner which may injure or cause loss or may be calculated to injure or cause
loss whether directly or indirectly to the Company. Information shall be
Confidential Information whether or not such information was developed,
devised
or otherwise created in whole or in part by the efforts of Herman, and whether
or not such information is a matter of public knowledge, unless the Company
has
authorized disclosure of such information to the general public.
4. Non-Competition.
(a) For a period of three (3) years commencing on the date of this
Agreement, Herman will not, whether alone or as a partner, officer,
director, consultant, agent, employee or stockholder of any company or
other commercial enterprise, directly or indirectly engage in any
business
or other activity in the United States or Canada which is or may be
competitive with or render services to any firm or business organization
which competes with the Company in, the products or services being
manufactured, marketed, distributed, planned in writing or developed by
the Company on the date of execution of this Agreement without the prior
written consent of the Company.
(b) The ownership of securities of a public company not in excess
of two percent (2%) of any class of such securities shall not of itself
be
deemed a violation of any of the provisions of this Section 4.
5. No Solicitation. For a period of three (3) years commencing on the
date of this Agreement, Herman will not directly or indirectly solicit,
recruit
or hire or attempt to solicit, recruit or hire any employee of the Company to
work for a third party other than the Company or engage in any activity that
would cause any employee to violate any agreement with the Company.
6. Counterparts. This Agreement may be executed simultaneously in two
or more counterparts, each of which shall be deemed an original and all of
which
together shall constitute but one and the same instrument.
7. No Waiver. Any waiver by the Company of a breach of any provision
of this Agreement shall not operate or be construed as a waiver of any
subsequent breach of such provision or any other provision hereof.
8. Binding Effect. This Agreement shall be binding upon and inure to
the benefit of the parties hereto and all of their successors and assigns.
Specifically, but not by way of limitation, the Company's obligations under
this
Agreement shall survive the death or disability of Herman and shall in such
case inure to the benefit of Herman's heirs, executors, administrators and
legal
representatives.
9. Entire Agreement; Amendment. This instrument contains the entire
agreement between the parties with respect to the subject matter addressed
herein and all prior discussions, understandings, negotiations and agreements
are merged herein. This Agreement may not be changed orally but only by an
agreement in writing signed by the party against whom enforcement of any
waiver,
change, modification, extension or discharge is sought.
10. Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Florida.
11. Continuing Indemnification. The Company hereby acknowledges its
continuing indemnification obligations to Mr. Herman with respect to actions
of
Mr. Herman while an officer or director of the Company, as set forth in
Section
20 of By-Law Number 1 of the Company. The Company further agrees to provide,
at
its expense, legal representation of Mr. Herman and reimbursement for costs in
the event of any action or threatened action naming Mr. Herman in connection
with his actions while an officer or director of the Company, which legal
representation shall be of a level of quality equal to or superior to that
used
by the Company.
IN WITNESS WHEREOF, the undersigned have executed this Agreement as a
sealed instrument as of the day and year first above written.
Princeton Media Group, Inc.
By:/s/ Robert F. Kendall, CFO /s/ Michael D. Herman
Michael D. Herman
Witness: Witness:
/s/ /s/
<TABLE> <S> <C>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM FINANCIAL
STATEMENTS INCLUDED IN FORM 10-KSB AND IS QUALIFIED IN ITS ENTIRETY BY
REFERENCE
TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-END> DEC-31-1996
<CASH> 630,163
<SECURITIES> 0
<RECEIVABLES> 2,535,668
<ALLOWANCES> 0
<INVENTORY> 656,025
<CURRENT-ASSETS> 4,239,067
<PP&E> 1,959,701
<DEPRECIATION> 203,489
<TOTAL-ASSETS> 18,139,672
<CURRENT-LIABILITIES> 2,605,396
<BONDS> 8,809,905
28,923
3,294,180
<COMMON> 12,197,802
<OTHER-SE> (10,888,634)
<TOTAL-LIABILITY-AND-EQUITY> 18,139,472
<SALES> 8,542,695
<TOTAL-REVENUES> 8,542,695
<CGS> 4,965,804
<TOTAL-COSTS> 8,578,541
<OTHER-EXPENSES> 35,846
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 654,431
<INCOME-PRETAX> (690,277)
<INCOME-TAX> (104,400)
<INCOME-CONTINUING> (3,843,227)
<DISCONTINUED> 440,110
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (3,403,117)
<EPS-PRIMARY> (9.28)
<EPS-DILUTED> (9.28)
</TABLE>
