As filed with the Securities and Exchange Commission on , 1998
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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INMARK ENTERPRISES, INC.
(Exact name of registrant as specified in its charter)
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Delaware 06-134048
(State or other jurisdictio (I.R.S. Employer
of incorporation or organization) Identification No.)
One Plaza Road
Greenvale, New York 11548
(516) 625-3500
(Address, including zip code, and telephone
number, including area code, of
registrant's principal executive offices)
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Donald A. Bernard
Executive Vice President, Chief Financial Officer and Secretary
Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
(516) 625-3500
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
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Copy to:
Joseph S. Hellman, Esq.
Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
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Approximate date of commencement of proposed sale to public:
From time to time after the effective date of this Registration Statement.
If the only securities being registered on this form are being
offered pursuant to dividend or interest reinvestment plans, please check the
following box. / /
If any of the securities being registered on this form are to
be offered on a delayed or continuous basis pursuant to Rule 415 under the
Securities Act of 1933, other than securities offered only in connection with
dividend or interest reinvestment plans, check the following box. /X/
If this Form is filed to register additional securities for an
offering pursuant to Rule 462(b) under the Securities Act, please check the
following box and list the Securities Act registration statement number of the
earlier effective registration statement for the same offering. / /
If this Form is a post-effective amendment filed pursuant to
Rule 462(c) under the Securities Act, check the following box and list the
Securities Act registration statement number of the earlier effective
registration statement for the same offering. / /
If delivery of the prospectus is expected to be made pursuant
to Rule 434, please check the following box. / /
<TABLE>
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CALCULATION OF REGISTRATION FEE
<S> <C> <C> <C> <C>
Title of Securities Amount to be Proposed Maximum Aggregate Proposed Maximum Amount of
to be Registered Registered Price Per Share (1) Aggregate Price Registration Fee
=============================================================================================================
Common Stock, 508,750 shares $8.6875 $4,419,765.63 $1,303.83
$.001 par value per
share
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</TABLE>
(1) Estimated solely for the purpose of calculating the registration fee.
The aggregate offering price has been determined pursuant to Rule
457(c) promulgated under the Securities Act of 1933, as amended, on the
basis of the average of the high and low sale prices of the
Registrant's common stock as reported on the National Association of
Securities Dealers, Inc. Automated Quotation System on July 28, 1998.
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<PAGE>
The Registrant hereby amends this Registration Statement on such date or
dates as may be necessary to delay its effective date until the Registrant shall
file a further amendment which specifically states that this Registration
Statement shall thereafter become effective in accordance with Section 8(a) of
the Securities Act of 1933 or until this Registration Statement shall become
effective on such date or dates as the Commission, acting pursuant to said
Section 8(a), may determine.
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<PAGE>
SUBJECT TO COMPLETION, DATED ________ __, 1998
PRELIMINARY PROSPECTUS
INMARK ENTERPRISES, INC.
508,750 Shares of Common Stock
This Prospectus is being used in connection with the offering from time
to time by certain holders (the "Selling Securityholders") of shares (the
"Shares") of common stock, par value $.001 per share (the "Common Stock"), of
Inmark Enterprises, Inc., a Delaware corporation ("Inmark"). The Selling
Securityholders may acquire 508,750 shares of Common Stock from Inmark pursuant
to the exercise of warrants.
The Shares may be sold from time to time to purchasers directly by the
Selling Securityholders. Alternatively, the Selling Securityholders may from
time to time offer the Shares through brokers, dealers or agents who may receive
compensation in the form of discounts, concessions or commissions from the
Selling Securityholders and/or the purchasers of the Shares for whom they may
act as agent. The Selling Securityholders and any such brokers, dealers or
agents who participate in the distribution of the Shares may be deemed to be
"underwriters", and any profits on the sale of the Shares by them and any
discounts, commissions or concessions received by any such brokers, dealers or
agents might be deemed to be underwriting discounts and commissions under the
Securities Act of 1933, as amended (the "Securities Act"). To the extent the
Selling Securityholders may be deemed to be underwriters, the Selling
Securityholders may be subject to certain statutory liabilities of the
Securities Act, including, but not limited to, Sections 11, 12 and 17 of the
Securities Act and Rule 10b-5 under the Securities Exchange Act of 1934, as
amended (the "Exchange Act"). See "Plan of Distribution." The Selling
Securityholders and any other person participating in such distribution will be
subject to applicable provisions of the Exchange Act and the rules and
regulations thereunder, including, without limitation, Regulation M, which may
limit the timing of purchases and sales of any of the Shares by the Selling
Securityholders and any other such person and market-making activities with
respect to the particular Shares being distributed. All of the foregoing may
affect the marketability of the Shares and the ability of any person or entity
to engage in market-making activities with respect to the Shares.
The Company will receive proceeds only from the exercise of the
warrants to purchase the Shares (the "Warrants"). Except for the sale of the
Shares upon the exercise of the Warrants, Inmark is not selling any of the
Shares and will not receive any proceeds from the sale of the Shares by the
Selling Securityholders. Inmark has agreed to pay all of the expenses incidental
to the registration, offering and sale of the Shares to the public other than
the cost of counsel to the Selling Securityholders and underwriting discounts
and commissions, except as prohibited by blue sky laws.
On July 28, 1998, the closing price for the Common Stock as quoted on
the National Association of Securities Dealers, Inc. Automated Quotation System
Nasdaq Small Cap Market, under the symbol "IMKE", was $8.625 per share.
PROSPECTIVE INVESTORS SHOULD CONSIDER CAREFULLY MATTERS
DISCUSSED UNDER THE CAPTION "RISK FACTORS" ON PAGE 2.
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THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE COMMISSION OR
ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR ADEQUACY OF THIS
PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
---------------------
No dealer, salesman or any other person has been authorized to give any
information or to make any representation other than those contained in this
Prospectus, and, if given or made, such information or representation must not
be relied upon as having been authorized by Inmark. Neither the delivery of this
Prospectus nor any sale made hereunder shall under any circumstances create any
implication that there has been no change in the affairs of Inmark since the
date hereof.
Information contained herein is subject to completion or amendment. A
Registration Statement relating to these securities has been filed with the
Securities and Exchange Commission. These securities may not be sold nor may
offers to buy be accepted prior to the time this Registration Statement becomes
effective. This Prospectus shall not constitute an offer to sell or a
solicitation of an offer to buy nor shall there be any sale of these securities
in any
i
<PAGE>
jurisdiction in which such offer, solicitation or sale would be unlawful prior
to registration or qualification under the securities laws of any such
jurisdiction.
The date of this Prospectus is ______________ , 1998.
ii
<PAGE>
AVAILABLE INFORMATION
Inmark is subject to the informational requirements of the Exchange Act
and, in accordance therewith, files reports, proxy statements and other
information with the Securities and Exchange Commission (the "Commission"). Such
reports, proxy and information statements and other information can be inspected
and copied at the public reference facilities maintained by the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549, its Midwest Regional Office, 500
West Madison Street, Suite 1400, Chicago, Illinois 60661-2511 and at its
Northeast Regional Office, 7 World Trade Center, Suite 1300, New York, New York
10048. Copies of such material can be obtained from the Public Reference Section
of the Commission at 450 Fifth Street, N.W., Washington, D.C. 20549, at
prescribed rates. Such material can also be inspected at the Web site of the
Commission located at http://www.sec.gov. The Common Stock trades on the Nasdaq
SmallCap Market under the symbol "IMKE". Reports, proxy and information
statements, and other information concerning Inmark can also be inspected at the
Nasdaq SmallCap Market at 1735 K Street, N.W., Washington, D.C. 20006-1500.
Statements contained in this Prospectus as to the contents of any
contract or other document are not necessarily complete, and reference is made
to the copy of such contract or other document filed as an exhibit to this
Registration Statement of which this Prospectus forms a part, each such
statement being qualified in all respects by such reference.
INCORPORATION OF CERTAIN DOCUMENTS BY REFERENCE
The following documents or information have been filed by Inmark with
the Commission and are incorporated herein by reference:
Inmark's Annual Report on Form 10-K for the fiscal year ended March 31,
1998.
The portions of the Proxy Statement for the Annual Meeting of
Stockholders of Inmark to be held on September 15, 1998 that have been
incorporated by reference into Inmark's Annual Report on Form 10-K for
the fiscal year ended March 31, 1998.
Inmark's Current Report on Form 8-K filed with the Commission on April
13, 1998. Inmark's Current Report on Form 8-K/A filed with the
Commission on June 8, 1998.
The description of the capital stock contained in Inmark's registration
statements on Form 8-A under the Exchange Act, filed June 10, 1992
(File No. 000-20394).
All documents subsequently filed by Inmark with the Commission pursuant
to Section 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date of this
Prospectus and prior to the termination of the offering covered by this
Prospectus will be deemed incorporated by reference into this Prospectus and to
be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated by reference herein shall be deemed to be
modified or superseded for purposes of this Prospectus to the extent that a
statement contained herein modifies or supersedes such statement. Any statement
so modified or superseded shall not be deemed, except as so modified or
superseded, to constitute a part of this Prospectus.
Inmark hereby undertakes to provide without charge to each person to
whom a copy of this Prospectus has been delivered, upon the written or oral
request of such person to Inmark Enterprises, Inc., One Plaza Road, Greenvale,
New York 11548 (Telephone (516) 625-3500), Attention: Secretary, a copy of any
or all of the documents referred to above (other than exhibits to such
documents) which have been incorporated by reference in this Prospectus.
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<PAGE>
FORWARD LOOKING STATEMENTS
This Prospectus contains or incorporates by reference forward-looking
statements within the meaning of Section 27A of the Securities Act and Section
21E of the Exchange Act that are based on beliefs of the Company's management as
well as assumptions made by and information currently available to the Company's
management. When used in this Prospectus, the words "estimate," "project,"
"believe," "anticipate," "intend," "expect," "plan," "predict," "may," "should,"
"will," the negative thereof or other variations thereon or comparable
terminology are intended to identify forward-looking statements. Such statements
reflect the current views of the Company with respect to future events based on
currently available information and are subject to risks and uncertainties that
could cause actual results to differ materially from those contemplated in those
forward-looking statements. Factors that could cause actual results to differ
materially from the Company's expectations are set forth below under "Risk
Factors", including but not limited to "Dependence on Key Personnel,"
"Competition," "Customers," "Expansion Risk and Risks Associated with
Acquisitions," "Outstanding Indebtedness; Security Interest," "Control by
Executive Officers and Directors," "Shares Eligible for Future Sale," and "Lack
of Dividend History." Other factors may be described from time to time in the
Company's public filings with the Commission, news releases and other
communications. The forward-looking statements contained in this Prospectus
speak only as of the date hereof. The Company does not undertake any obligation
to release publicly any revisions to these forward- looking statements to
reflect events or circumstances after the date hereof or to reflect the
occurrence of unanticipated events.
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<PAGE>
THE COMPANY
Inmark Enterprises, Inc. ("Inmark"), together with its wholly-owned
subsidiaries, Inmark Services, Inc. ("Services"), Optimum Group, Inc.
("Optimum") and North American Holding Corp. (collectively, the "Company"), is a
full service marketing, sales promotion and new age communications organization
which designs, develops and implements customized, national, regional and local
consumer and trade promotion programs principally for Fortune 500 consumer
product manufacturers. The Company's promotional programs are designed to
enhance the value of its clients' budgeted expenditures and achieve, in an
objectively measurable way, its clients' specific marketing and promotional
objectives. The Company's programs in the industry are commonly referred to as
"account specific," as they may target the participation and cooperation of a
specific retail chain or groups of retailers or other sources of distribution to
attain results in the form of increased in-store product displays, related
consumer purchases and enhanced product brand name recognition. In addition to
the traditional marketing and sales promotional services, the Company's services
and programs include new media services consisting of Internet web site
activities, interactive computerization and animation and video production,
thereby affording clients a one-stop shop resource for strategic planning,
creative development, production and implementation.
The Company was initially formed under the laws of the State of
Delaware in March 1992 as Health Image Media, Inc. Its principal offices are
located at One Plaza Road, Greenvale, New York 11548, and its telephone number
is (516) 625- 3500.
The Company began to engage in its current operations on September 29,
1995 upon consummation of its merger transaction (the "Merger") as a result of
which Inmark Services, Inc., a New York corporation, became a wholly-owned
subsidiary of the Company and the management of Inmark Services, Inc. became the
executive management of the Company. Previously, the Company had been engaged in
unrelated activities which were discontinued in June 1993.
On March 31, 1998, Inmark consummated the acquisition (the "Optimum
Acquisition") of the assets of OG Holding Corporation (formerly known as Optimum
Group, Inc.) through its wholly-owned subsidiary Optimum.
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RISK FACTORS
Prospective investors should consider carefully the following factors
relating to the business of Inmark and this offering, in addition to other
information set forth elsewhere in this Prospectus and in Inmark's Annual Report
on Form 10-K and otherwise incorporated herein by reference, before purchasing
the Shares offered hereby.
Dependence on Key Personnel. The Company's business is managed by a
relatively small number of key management and operating personnel, the loss of
certain of whom could have a material adverse impact on the Company's business.
The Company believes that its future success will depend in large part on its
continued ability to attract and retain highly skilled and qualified personnel.
Each of the Company's key executives is a party to an employment agreement that
expires in either 2001 or 2002 and thereafter renews for an additional term of
one year unless either party thereto elects to terminate the agreement upon at
least 60 days notice prior to the expiration of the then current term.
Competition. The market for promotional services is highly competitive,
with hundreds of companies claiming to provide various services in the promotion
industry. In general, the Company's competition is derived from two basic groups
(which market their services to consumer product manufacturers): (a) other full
service promotion agencies and (b) companies which specialize in one specific
aspect or niche of a general promotional program. Other full service promotion
agencies may be a part of or affiliated with larger general advertising agencies
such as the Cato Johnson relationship with Young & Rubicam and J. Brown/LMC with
Grey Advertising, which have greater financial and marketing resources available
than the Company. Niche competitors include Don Jagoda, Inc., which specializes
in sweepstakes; Act Media, Inc., a subsidiary of Heritage Media, Inc., which
specializes in a broad range of in-store programs; and Catalina Marketing, Inc.,
which specializes in cash register couponing programs. Certain of these niche
companies may have greater financial and marketing resources than those
available to the Company. The Company competes on the basis of the quality and
the degree of comprehensive service which it provides to its clients. There can
be no assurance that the Company will be able to continue to compete
successfully with existing or future industry competitors.
Customers. The Company's principal clients are packaged goods and other
consumer product manufacturers, generally among the Fortune 500, which are
actively engaged in promoting their products both to specific retail chains,
groups of retailers or other sources of distribution and to consumers. Inmark's
clients include, among others, Colgate-Palmolive Company, The Pillsbury Company,
The Minute Maid Company, Bestfoods Specialty Products, Novartis Consumer Health,
Inc., Bayer Corporation, Lamb Weston Inc., Menley & James Laboratories, Inc.,
Hunt Foods Company, Perdue Farms, Inc., The Quaker Oats Company, American Home
Products Corporation, Fender Musical Instruments Corporation and Duracell
Corporation. For the fiscal year ended March 31, 1998, before giving effect to
the Optimum Acquisition and on a pro forma basis giving effect to the Optimum
Acquisition by including the revenues of the predecessor of Optimum for the year
ended December 31, 1997, the Company had one client, Colgate-Palmolive Company,
which accounted for approximately 34.4% and 24.5% of its revenues, respectively.
For the fiscal year ended March 31, 1996, Colgate-Palmolive Company accounted
for approximately 51.6% of the Company's revenues. To the extent the Company
continues to have a heavily weighted sales concentration with one or more
clients, significant fluctuations in revenues, results of operations and
liquidity could arise should such client or clients reduce their budgets
allocated to the Company's activities.
Unlike traditional general advertising firms, which are engaged as
agents of record on behalf of consumer product manufacturers, promotional
companies, including the Company, typically are engaged on a product-by-product,
or project-by- project basis. Although the relationship of the Company and its
predecessors with certain of their clients has continued for in excess of 20
years, because the Company's contracts with its clients are executed on a
project-by-project basis, there is no guarantee that such relationships will
continue on a long-term basis. In addition, there can be no assurance that the
budgets of the Company's clients will continue to permit the engagement of
outside promotional companies such as the Company or that such clients will
continue to utilize the type of promotional services and means of advertising
provided by the Company.
Expansion Risk and Risks Associated with Acquisitions. The Company is
experiencing a period of rapid expansion which management expects will increase
in the near future. This growth has increased the operating complexity of the
Company as well as the level of responsibility for both existing and new
management personnel. The Company's ability to manage its expansion effectively
will require it to continue to implement and improve its operational and
financial systems and to expand, train and manage its employee base. The
Company's inability to effectively manage its expansion could have a material
adverse effect on its business.
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<PAGE>
A portion of the Company's expansion may occur through acquisitions as
an alternative to direct investments in the assets required to implement the
expansion. Consistent with its strategy, the Company is currently evaluating,
has made offers with respect to, and is engaged in discussions regarding,
various acquisition and strategic relationship opportunities. These acquisitions
or strategic relationships could be funded by cash on hand, Inmark's securities
and/or additional borrowings. It is possible that one or more of such possible
future acquisitions or strategic relationships, if completed, could adversely
affect the Company's funds from operations or cash otherwise available, in the
short term or the long term or both, or increase the Company's debt, or such an
acquisition could be followed by a decline in the market value of Inmark's
securities. No assurance can be given that suitable acquisitions can be
identified, financed and completed on acceptable terms, or that the Company's
future acquisitions, if any, will be successful or will not impair the Company's
ability to service its outstanding obligations.
Outstanding Indebtedness; Security Interest. In connection with the
Optimum Acquisition, Inmark, Services, and Optimum entered into a loan agreement
dated as of March 31, 1998, with PNC Bank, National Association (the "Loan
Agreement"), providing for a $5,000,000 five-year term loan and a $5,000,000
revolving loan credit facility. The prompt and full payment and other
performance of all of the obligations of Services and Optimum under the Loan
Agreement or otherwise to the lender or any affiliate of the lender are
guaranteed by Inmark. As security for all of its obligations under the Loan
Agreement, (a) Inmark, Services and Optimum granted the lender a first priority
lien on and security interest in all of the assets of Inmark, Services and
Optimum, including the stock of Services and Optimum and (b) Inmark and Services
pledged their shares of Services and Optimum, respectively, to the lender. In
the event that an event of default under the Loan Agreement occurs, at the
lender's option, (i) the revolving line of credit shall terminate, (ii) the
principal and interest of all loans and all other obligations under the Loan
Agreement shall be immediately due and payable, and (iii) the lender shall be
entitled to exercise any and all rights and remedies provided for in the Loan
Agreement and in any document delivered to the lender in connection with the
Loan Agreement, all rights and remedies of a secured party under the Uniform
Commercial Code, and all other rights and remedies that may otherwise be
available to the lender by agreement or at law or in equity.
Control by Executive Officers and Directors. The executive officers of
the Company collectively beneficially own a significant percentage of the voting
stock of Inmark and, in effect, have the power to influence strongly the outcome
of all matters requiring stockholder approval, including the election or removal
of directors and the approval of significant corporate transactions. Such voting
could also delay or prevent a change in control of Inmark in which the holders
of the Inmark common stock could receive a substantial premium. In addition, the
Loan Agreement requires the executive officers of Inmark to maintain a minimum
percentage of beneficial ownership of Inmark's Common Stock during the term of
the Loan Agreement.
Shares Eligible for Future Sale. Future sales of shares by officers,
directors and certain shareholders under Rule 144 of the Securities Act, or
through the exercise of outstanding registration rights or the issuance of
shares of Common Stock upon the exercise of options or warrants or conversion of
convertible securities could materially adversely affect the market price of
shares of Common Stock and could materially impair Inmark's future ability to
raise capital through an offering of equity securities. Substantially all of
Inmark's outstanding shares, other than those held by affiliates, are
transferable without restriction under the Securities Act. No predictions can be
made as to the effect, if any, that market sales of such shares or the
availability of such shares for future sale will have on the market price of
shares of Common Stock prevailing from time to time.
Lack of Dividend History. Inmark has never declared or paid any cash
dividends on its Common Stock and does not expect to declare any such dividends
in the foreseeable future. Payment of any future dividends will depend upon
earnings and capital requirements of the Company, the Company's debt facilities
and other factors the Board of Directors considers appropriate. The Company
intends to retain earnings, if any, to finance the development and expansion of
its business, and therefore does not anticipate paying any dividends in the
foreseeable future. In addition, the terms of the Loan Agreement impose
limitations on the payment of dividends on the Shares.
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USE OF PROCEEDS
The Company will receive proceeds only from the exercise of the
Warrants. Such proceeds will total approximately $445,250, unless some or all of
the Shares which Messrs. William J. Barrett and Herbert M. Gardner have a right
to acquire pursuant Warrants registered in their names are acquired pursuant to
a cashless exercise provision contained in such Warrants, in which event the
proceeds to the Company will be reduced.
Except for the sale of the Shares upon the exercise of the Warrants,
Inmark is not selling any of the Shares and will not receive any proceeds from
the sale of the Shares by the Selling Securityholders. Any proceeds received by
Inmark upon the exercise of the Warrants will be used for general corporate
purposes.
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THE SELLING SECURITYHOLDERS
The following table sets forth, as of July 29, 1998 certain information
regarding the Selling Securityholders' ownership of Inmark's Common Stock.
Unless otherwise disclosed in the footnotes to the table, no Selling
Securityholder has held any position, office or had any other material
relationship with Inmark, its predecessors or affiliates during the past three
years. To the extent of Inmark's knowledge, except as disclosed below, the
Selling Securityholders own all of the Shares and do not own, nor have any
rights to acquire, any other shares of Common Stock as of the date of this
Prospectus.
<TABLE>
=====================================================================================================
Beneficially Owned Prior Offered Beneficially Owned
Name of Selling Securityholder to This Offering(1) for Sale After This Offering(1)
- ------------------------------ ---------------------------- -------- ----------------------
<S> <C> <C> <C> <C>
Number of Percent of
Shares Shares
--------- ----------
William J. Barrett (2) 37,500(5) * 37,500 0
Herbert M. Gardner (3) 77,530(6) 1.71% 37,500 40,030
Robert F. Hussey (4) 344,743(7) 7.59% 281,250 63,493
Miles M. Stuchin 152,500(8) 3.29% 152,500 0
=====================================================================================================
*Less than one percent. Based on 4,480,326 shares of common stock outstanding on July 29, 1998.
</TABLE>
(1) Under the rules of the Commission, a person is deemed to be the
beneficial owner of a security if such person has or shares the power
to vote or direct the voting of such security or the power to dispose
or direct the disposition of such security. A person is also deemed to
be a beneficial owner of any securities if that person has the right to
acquire beneficial ownership within 60 days. Accordingly, more than one
person may be deemed to be a beneficial owner of the same securities.
Unless otherwise indicated by footnote, the named individuals have sole
voting and investment power with respect to the securities beneficially
owned.
(2) Mr. Barrett is a Senior Vice President of Janney Montgomery Scott Inc.,
an investment banking firm which provides financial advisory services
to the Company.
(3) Mr. Gardner is a Director of Inmark and a Senior Vice President of
Janney Montgomery Scott Inc., an investment banking firm which provides
financial advisory services to the Company.
(4) Mr. Hussey was a Director of Inmark from May 1992 until March 3, 1997,
Chairman of the Board of Inmark from May 1994 until October 16, 1996,
and President and Chief Executive Officer of Inmark (then known as
Health Image Media, Inc.) from June 1993 until September 29, 1995.
(5) Represents 37,500 Warrant Shares which Mr. Barrett has the right to
acquire at an exercise price of $4.00 per share.
(6) Represents 14,718 shares of Common Stock held directly by Mr. Gardner,
7,500 shares of Common Stock held in an individual retirement account
for the benefit of Mr. Gardner, 7,500 shares of Common Stock owned by
Mr. Gardner's wife (as to which Mr. Gardner disclaims beneficial
ownership), 10,312 shares of Common Stock issuable upon exercise of
options held by Mr. Gardner, and 37,500 Warrant Shares which Mr.
Gardner has the right to acquire at an exercise price of $4.00 per
share. Excludes 2,500 shares of Common Stock owned by The Gardner
Family Foundation, a charitable organization, of which Mr. Gardner is
President and a board member.
(7) Represents 282,243 shares of Common Stock and 62,500 Warrant Shares
which Mr. Hussey has the right to acquire at an exercise price of $0.86
per share.
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(8) Represents 152,500 Warrant Shares which Mr. Stuchin has the right to
acquire at an exercise price of $0.60 per share.
The 508,750 Shares to be offered by the Selling Securityholders
represent all of the securities covered by this Registration Statement of which
this Prospectus is a part. The Warrants require Inmark to file a registration
statement covering the Shares and to use its reasonable efforts to keep such
registration statement continuously effective until (a) the earlier of one year
following the date on which it is declared effective or (b) the completion of
the period of distribution of the Shares. Inmark has filed this Registration
Statement to fulfill its obligations under the Warrants.
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PLAN OF DISTRIBUTION
The Company will not receive any proceeds from the sale of the Shares
offered hereby except for up to approximately $445,250, which may be received
upon the exercise of the Warrants. The Shares may be sold from time to time to
purchasers directly by the Selling Securityholders. Alternatively, the Selling
Securityholders may from time to time offer the Shares through brokers, dealers
or agents who may receive compensation in the form of discounts, concessions or
commissions from the Selling Securityholders and/or the purchasers of the Shares
for whom they may act as agent. The Selling Securityholders and any such
brokers, dealers or agents who participate in the distribution of the Shares may
be deemed to be "underwriters", and any profits on the sale of the Shares by
them and any discounts, commissions or concessions received by any such brokers,
dealers or agents might be deemed to be underwriting discounts and commissions
under the Securities Act. To the extent the Selling Securityholders may be
deemed to be underwriters, the Selling Securityholders may be subject to certain
statutory liabilities under the Securities Act, including, but not limited to,
Sections 11, 12 and 17 of the Securities Act and Rule 10b-5 under the Exchange
Act.
The Shares offered hereby may be sold by the Selling Securityholders
from time to time in one or more transactions at fixed prices, at prevailing
market prices at the time of sale, at varying prices determined at the time of
sale or at negotiated prices. The Shares may be sold by one or more of the
following methods, without limitation: (a) a block trade in which the broker or
dealer so engaged will attempt to sell the Shares as agent but may position and
resell a portion of the block as principal to facilitate the transaction; (b)
purchases by a broker or dealer as principal and resale by such broker or dealer
for its account pursuant to this Prospectus; (c) ordinary brokerage transactions
and transactions in which the broker solicits purchasers; (d) an exchange
distribution in accordance with the rules of such exchange; (e) face-to-face
transactions between sellers and purchasers without a broker-dealer; (f) through
the writing of options; and (g) other methods. At any time a particular offer of
the Shares is made, a revised Prospectus or Prospectus Supplement, if required,
will be distributed which will set forth the aggregate amount and type of
securities being offered and the terms of the offering, including the name or
names of any underwriters, dealers or agents, any discounts, commissions and
other items constituting compensation from the Selling Securityholders and any
discounts, commissions or concessions allowed or reallowed or paid to dealers.
Such Prospectus Supplement and, if necessary, a post-effective amendment to the
Registration Statement of which this Prospectus is a part, will be filed with
the Commission to reflect the disclosure of additional information with respect
to the distribution of the Shares. In addition, the Shares covered by this
Prospectus may be sold in private transactions or under Rule 144 rather than
pursuant to this Prospectus.
To the extent of the Company's knowledge, there are currently no plans,
arrangements or understandings between any Selling Securityholders and any
broker, dealer, agent or underwriter regarding the sale of the Shares by the
Selling Securityholders. There is no assurance that any Selling Securityholder
will sell any or all of the Shares offered by it hereunder or that any such
Selling Securityholder will not transfer, devise or gift such Shares by other
means not described herein.
The Selling Securityholders and any other person participating in such
distribution will be subject to applicable provisions of the Exchange Act and
the rules and regulations thereunder, including, without limitation, Regulation
M, which may limit the timing of purchases and sales of any of the Shares by the
Selling Securityholders and any other such person and market-making activities
with respect to the particular Shares being distributed. All of the foregoing
may affect the marketability of the Shares and the ability of any person or
entity to engage in market-making activities with respect to the Shares.
Pursuant to the Warrants entered into in connection with the offer and
sale of the Shares by the Company, each of the Company and the Selling
Securityholders will be indemnified by the other against certain liabilities,
including certain liabilities under the Securities Act. The Company has agreed
to pay substantially all of the expenses incidental to the registration,
offering and sale of the Shares to the public other than the cost of counsel to
the Selling Securityholders and underwriting discounts and commissions, except
as prohibited by blue sky laws.
7
<PAGE>
LEGAL MATTERS
The legality of the securities offered hereby has been passed upon for
Inmark by Kronish, Lieb, Weiner & Hellman LLP, 1114 Avenue of the Americas, New
York, New York 10036-7798. Joseph S. Hellman, a partner of Kronish, Lieb, Weiner
& Hellman LLP and a director of Inmark, beneficially owns 4,000 shares of the
Common Stock. Kronish, Lieb, Weiner & Hellman LLP owns of record and
beneficially, and Mr. Hellman may be deemed to own beneficially, an immediately
exercisable option to purchase 6,875 shares of Common Stock at an exercise price
of $4.00 per share and an option to purchase 6,875 shares of Common Stock at an
exercise price of $10.00 per share (which is immediately exercisable as to 3,437
shares and which becomes exercisable as to the remaining 3,438 shares on April
30, 1999).
EXPERTS
The consolidated financial statements of Inmark appearing in Inmark's
Annual Report (Form 10-K) for the year ended March 31, 1998, have been audited
by KPMG Peat Marwick LLP, independent certified public accountants, as set forth
in their report thereon included therein and incorporated herein by reference.
Such consolidated financial statements are incorporated herein by reference in
reliance upon such report given upon the authority of such firm as experts in
accounting and auditing.
8
<PAGE>
PART II
INFORMATION NOT REQUIRED IN THE PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following statement sets forth the expenses payable in connection
with this Registration Statement (estimated except for the registration fee),
all of which will be borne by Inmark:
Securities and Exchange Commission filing fee.....................$ 1,303.83
Legal fees and expenses...........................................$ 15,000.00
Accountant's fees and expenses....................................$ 1,000.00
Miscellaneous (including printing and distribution costs).........$ 5,000.00
---------
Total.............................................................$ 22,303.83
=========
Item 15. Indemnification of Directors and Officers.
The Delaware General Corporation Law (the "DGCL") permits a
corporation to indemnify its directors and officers (among others) against
expenses (including attorneys' fees), judgments, fines and amounts paid in
settlement actually and reasonably incurred by them in connection with any
action, suit or proceeding brought (or threatened to be brought) by third
parties, if such directors or officers acted in good faith and in a manner they
reasonably believed to be in or not opposed to the best interests of the
corporation and, with respect to any criminal action or proceeding, had no
reasonable cause to believe their conduct was unlawful. In a derivative action,
i.e., one by or in the right of the corporation, indemnification may be made for
expenses (including attorneys' fees) actually and reasonably incurred by
directors and officers in connection with the defense or settlement of such
action if they had acted in good faith and in a manner they reasonably believed
to be in or not opposed to the best interests of the corporation, except that no
indemnification shall be made in respect of any claim, issue or matter as to
which such person shall have been adjudged liable to the corporation unless and
only to the extent that the Court of Chancery or the court in which such action
or suit was brought shall determine upon application that, despite the
adjudication of liability but in view of all the circumstances of the case, such
person is fairly and reasonably entitled to indemnity for such expenses. The
DGCL further provides that, to the extent any director or officer has been
successful on the merits or otherwise in defense of any action, suit or
proceeding referred to in this paragraph, or in defense of any claim, issue or
matter therein, such person shall be indemnified against expenses (including
attorneys' fees) actually and reasonably incurred by him in connection
therewith.
Inmark's Certificate of Incorporation provides that the directors
of the corporation shall be entitled to the benefits of all limitations on the
liability of directors generally that are now or hereafter become available
under the DGCL. Inmark's Certificate of Incorporation provides further that
without limiting the generality of the foregoing, no director of the corporation
shall be liable to the corporation or its stockholders for monetary damages for
breach of fiduciary duty as a director, except for liability (i) for any breach
of the director's duty of loyalty to the corporation or its stockholders, (ii)
for acts or omissions not in good faith or which involve intentional misconduct
or a knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for
any transaction from which the director derived an improper personal benefit.
Article VII of Inmark's By-laws provides in general that Inmark
shall have the power to indemnify any officer or director expenses (including
attorneys' fees), judgments, fines and amounts paid in settlement, actually and
reasonably incurred by such officer or director, to the fullest extent permitted
by law in connection with and including those instances in which such
indemnification as deemed by a majority of a quorum of directors who were not
parties to such action, suit or proceeding or by independent legal counsel,
after due investigation, to be in the best interests of Inmark, with any
threatened, pending or completed action, suit or proceeding, or by independent
legal counsel, after due investigation, to be in the best interests of Inmark,
with any threatened, pending or completed action, suit or proceeding, whether
civil, criminal, administrative or investigative, brought or threatened to be
brought against him or her by reason of his or her performance as a director,
officer, employee or agent of Inmark or any of its subsidiaries, or in any other
capacity on behalf of Inmark or any of its subsidiaries, or in any other
capacity on behalf of Inmark or any of its subsidiaries. Article VII of Inmark's
By-laws also provides that Inmark may advance expenses incurred by an officer or
director in defending a civil, criminal, administrative or investigative action,
suit or proceeding as authorized by Inmark's Board of Directors upon receipt of
an
9
<PAGE>
undertaking, by or on behalf of such director or officer, to repay such amount
if it shall ultimately be determined that he or she is not entitled to be
indemnified by the corporation as authorized by law. Inmark has indemnification
insurance under which directors and officers are insured against certain
liability that may occur in their capacity as such.
Item 16. Exhibits and Financial Data Schedules.
(a) Exhibits
4.1 -- Warrant dated as of May 1, 1997 by and between Inmark
Enterprises, Inc. and William J. Barrett.
4.2 -- Warrant dated as of May 1, 1997 by and between Inmark
Enterprises, Inc. and Herbert M. Gardner.
4.3 -- Warrant dated as of January 25, 1995 by and between Inmark
Enterprises, Inc. and Robert F. Hussey.
4.4 -- Warrant dated as of April 25, 1995 by and between Inmark
Enterprises, Inc. (formerly known as Health Image Media,
Inc.) and Robert F. Hussey.
4.5 -- Warrant dated as of February 16, 1996 by and between Inmark
Enterprises, Inc. and Miles M. Stuchin.
5.1 -- Opinion of Kronish, Lieb, Weiner & Hellman LLP.
10.1 -- Lease Agreement, dated as of June 16, 1998, by and between
415 Northern Blvd. Realty Corp. and Inmark Services, Inc.
23.1 -- Consent of Kronish, Lieb, Weiner & Hellman LLP is contained
in their opinion filed as Exhibit 5.1 to this Registration
Statement.
23.2 -- Consent of KPMG Peat Marwick LLP
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
(b) Financial Data Schedules
Financial Data Schedules are not required to be filed since all financial
statements have been previously included in filings with the Commission.
10
<PAGE>
Item 17. Undertakings.
The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are
being made, a post-effective amendment to this Registration Statement:
(i) To include any prospectus required by Section
10(a)(3) of the Securities Act;
(ii) To reflect in the Prospectus any facts or events
arising after the effective date of this Registration Statement (or the most
recent post-effective amendment thereof) which, individually or in the
aggregate, represent a fundamental change in the information set forth in this
Registration Statement. Notwithstanding the foregoing, any increase or decrease
in volume of securities offered (if the total dollar value of securities offered
would not exceed that which was registered) and any deviation from the low or
high end of the estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in the
aggregate, the changes in volume and price represent no more than a 20 percent
change in the maximum aggregate offering price set forth in the "Calculation of
Registration Fee" table in the effective Registration Statement;
(iii) To include any material information with respect
to the Plan of Distribution not previously disclosed in this Registration
Statement or any material change to such information in this Registration
Statement;
provided, however, that paragraphs (i) and (ii) above do not apply if the
information required to be included in a post-effective amendment by those
paragraphs is contained in periodic reports filed or furnished to the Commission
by Inmark pursuant to Section 13 or Section 15(d) of the Exchange Act that are
incorporated by reference in this Registration Statement.
(2) That, for the purpose of determining any liability under
the Securities Act, each such post-effective amendment shall be deemed to be a
new registration statement relating to the securities offered therein, and the
offering of such securities at that time shall be deemed to be the initial bona
fide offering thereof.
(3) To remove from registration by means of a post-effective
amendment any of the securities being registered which remain unsold at the
termination of the offering.
(4) That, for purposes of determining any liability under the
Securities Act, each filing of the registrant's annual report pursuant to
Section 13(a) or Section 15(d) of the Exchange Act (and, where applicable, each
filing of an employee benefit plan's annual report pursuant to Section 15(d) of
the Exchange Act) that is incorporated by reference in this Registration
Statement shall be deemed to be a new registration statement relating to the
securities offered therein, and the offering of such securities at that time
shall be deemed to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the
Securities Act may be permitted to directors, officers or persons controlling
the registrant pursuant to the foregoing provisions, the registrant has been
informed that in the opinion of the Commission such indemnification is against
public policy as expressed in the Securities Act and is therefore unenforceable.
In the event that a claim for indemnification against such liabilities (other
than the payment by registrant of expenses incurred or paid by a director,
officer or controlling person of the registrant in the successful defense of any
action, suit or proceeding) is asserted by such director, officer or controlling
person in connection with the securities being registered, the registrant will,
unless in the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
11
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933,
the Registrant certifies that it has reasonable grounds to believe that it meets
all of the requirements for filing on Form S-3 and has duly caused this
Registration Statement to be signed on its behalf by the undersigned, thereunto
duly authorized, in the City of Greenvale, State of New York, on this 30th
day of July, 1998.
INMARK ENTERPRISES, INC.
By: /s/ Donald A. Bernard
-------------------------
Donald A. Bernard,
Executive Vice President
and Chief Financial Officer
Pursuant to the requirements of the Securities Act of 1933,
this Registration Statement has been signed below by the following persons in
the capacities and on the dates indicated. Each person whose signature appears
below authorizes Donald A. Bernard and John P. Benfield, or either of them, as
attorney-in-fact to sign and file in each capacity stated below, all amendments
and post-effective amendments to this Registration Statement.
<TABLE>
<S> <C> <C>
Signature Title Date
- --------- ----- ----
Principal Executive Officer:
President and
Chief Executive Officer July 30, 1998
/s/ John P. Benfield
- ---------------------------------
John P. Benfield
Principal Financial and Accounting Officer:
Executive Vice President
/s/ Donald A. Bernard and Chief Financial Officer July 30, 1998
- ---------------------------------
Donald A. Bernard
Other Directors:
/s/ Paul A. Amershadian Director July 30, 1998
- ---------------------------------
Paul A. Amershadian
/s/ Herbert M. Gardner Director July 30, 1998
- ---------------------------------
Herbert M. Gardner
/s/ Joseph S. Hellman Director July 30, 1998
- ---------------------------------
Joseph S. Hellman
/s/ Thomas E. Lachenman Director July 30, 1998
- ---------------------------------
Thomas E. Lachenman
</TABLE>
12
<PAGE>
Exhibit Index
Number Exhibit
- ------ -------
4.1 -- Warrant dated as of May 1, 1997 by and between Inmark
Enterprises, Inc. and William J. Barrett.
4.2 -- Warrant dated as of May 1, 1997 by and between Inmark
Enterprises, Inc. and Herbert M. Gardner.
4.3 -- Warrant dated as of January 25, 1995 by and between Inmark
Enterprises, Inc. and Robert F. Hussey.
4.4 -- Warrant dated as of April 25, 1995 by and between Inmark
Enterprises, Inc. (formerly known as Health Image Media,
Inc.) and Robert F. Hussey.
4.5 -- Warrant dated as of February 16, 1996 by and between Inmark
Enterprises, Inc. and Miles M. Stuchin.
5.1 -- Opinion of Kronish, Lieb, Weiner & Hellman LLP.
10.1 -- Lease Agreement, dated as of June 16, 1998, by and between
415 Northern Blvd. Realty Corp. and Inmark Services, Inc.
23.1 -- Consent of Kronish, Lieb, Weiner & Hellman LLP is contained
in their opinion filed as Exhibit 5.1 to this Registration
Statement.
23.2 -- Consent of KPMG Peat Marwick LLP
24.1 -- Power of Attorney is set forth on the signature page of this
Registration Statement.
<PAGE>
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
INMARK ENTERPRISES, INC.
THIS CERTIFIES THAT, for value received,
WILLIAM J. BARRETT
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Inmark Enterprises, Inc., a Delaware corporation (the "Company"), at any
time during the five (5) year period commencing on May 1, 1997 (the
"Commencement Date"), Thirty Thousand (30,000) shares of the Company's Common
Stock, par value $.001 per share (the "Common Shares"), at an exercise price of
$5.00 per share, in lawful money of the United States of America. The number of
Common Shares purchasable hereunder and the exercise price therefor are subject
to adjustment from time to time as hereinafter set forth. This Warrant shall
expire on the Expiration Date.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"Commencement Date" shall be May 1, 1997.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Inmark Enterprises, Inc., a Delaware
corporation.
"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
1
<PAGE>
"Exercise Price" shall mean the exercise price of $5.00 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean April 30, 2002.
"Gardner Warrant Shares" shall mean the Common Shares issuable
by the Company upon exercise of that certain Warrant to Purchase Common Stock of
the Company, dated as of May 1, 1997, granted by the Company to Herbert M.
Gardner (the "Gardner Warrant Shares").
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. Method of Exercise. To exercise this Warrant in whole or in
part, the registered holder hereof shall complete the Subscription Form attached
hereto (specifying the number of Common Shares as to which this Warrant is being
exercised) and deliver to the Company at its principal executive office, or to
the stock transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and payment in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Payment of the
aggregate Exercise Price shall be made in cash (by certified check or official
bank check) payable to the order of the Company. In the alternative, the holder
may exercise its right to receive Warrant Shares on a net basis, such that
without the exchange of any funds, the holder receives that number of Common
Shares otherwise issuable upon the exercise of this Warrant less that number of
Warrant Shares having a fair market value equal to the aggregate Exercise Price
that would otherwise have been paid by the holder of the Warrant Shares. For
purposes of the preceding sentence, (i) "fair market value" of the Warrant
Shares shall be the Market Price of the Warrant Shares on the date immediately
preceding the date of payment of the Exercise Price and (ii) "Market Price" at
any date shall be deemed to be the
2
<PAGE>
last reported sale price of the Common Shares (if such Market Price is being
calculated for the Common Shares) or if no such reported sale takes place on
such day, the average of the last reported sale prices for the last three (3)
trading days, in either case as officially reported by the principal securities
exchange on which the Common Shares are listed or admitted to trading or by
NASDAQ, or if the Common Shares are not listed or admitted to trading on any
such securities exchange or quoted by NASDAQ, the average closing bid price as
furnished by the National Quotation Bureau or a similar organization if NASDAQ
is no longer reporting such information, or if such information is no longer
being provided with respect to the Common Shares, then as determined in good
faith by written resolution of the Board of Directors of the Company, based on
the best information available to it.
B. Delivery of Certificates. Upon receipt of the items
specified in subsection A of this Section 2, the Company shall, as promptly as
practicable, and in any event, within ten (10) business days thereafter, execute
or cause to be executed and deliver to the Warrantholder, a certificate or
certificates representing the aggregate number of Common Shares specified in
said Subscription Form. Each certificate so delivered shall be in such
denomination as reasonably may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or in the name of such other
Warrantholder as shall be designated by the Warrantholder. If the Warrantholder
elects to transfer the Warrants to such other Warrantholder, the Warrantholder
will provide such evidence (including an opinion from counsel reasonably
acceptable to the Company) as is necessary to establish that the issuance of
Warrant Shares to such other Warrantholder may be made without registration
under the Securities Act (unless an appropriate registration statement covering
the Warrant Shares has been ordered effective by the Commission and remains in
effect). If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said certificate or certificates, deliver to
the Warrantholder a new Warrant evidencing the right of the Warrantholder to
purchase the remaining Common Shares covered by this Warrant. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of certificates pursuant to this Section 2,
including certificates to be issued to such Warrantholders as shall be the
initial Warrantholders. Thereafter, in the event that certificates shall be
registered in the name of a person other than the initial Warrantholder, funds
sufficient to pay all transfer taxes which shall be payable upon the execution
and delivery of such certificate or certificates shall be paid by the
Warrantholder to the Company at the time of delivering this Warrant to the
Company as mentioned above.
C. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective
3
<PAGE>
unless and until the terms and conditions of said Section 4 of said
Warrant shall have been complied with. The shares represented hereby
have not been registered under the Securities Act of 1933, as amended,
and may be offered or sold only if registered pursuant to the
provisions of the Securities Act or if an exemption from registration
is available."
D. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
E. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof, this Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the Warrantholder in person or by duly authorized attorney, and a new
Warrant shall be made and delivered by the Company, of the same tenor as this
Warrant but registered in the name of the transferee, upon surrender of this
Warrant duly endorsed to the Company at its office or to the stock transfer
agent of the Company at its office on or after such date. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
4
<PAGE>
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in accordance with the intended method of
disposition specified in the notice delivered by such holder to the Company
without registration in reliance on an exemption from the registration
provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
5
<PAGE>
C. Registration Rights. The Warrantholder shall have the
following piggyback registration rights, excluding registration statements filed
under Commission Forms S-4 and S-8 and any successor forms thereto:
1. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4C(1), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond affirmatively within thirty (30)
business days after delivery of such notice. In connection with this piggyback
registration right, the Company shall bear all expenses attendant to registering
such securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions, except as prohibited by Blue Sky laws).
2. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(1)
hereof shall be determined to be, in the aggregate, an amount which would
adversely affect the success of the Company's registration of its securities for
its own account, then, as to the amount of Common Shares to be registered on
behalf of persons other than the Company and the Warrant Shares to be included
in the registration statement, such persons shall agree to delay the offer and
sale of such Warrant Shares for a period of forty-five (45) days from the date
of completion of the underwritten distribution of the securities being
registered for the account of the Company; provided, that no other security
holder may sell securities owned by it in such underwritten offering.
3. If William J. Barrett ("Barrett"), as the
Warrantholder, has not previously had the opportunity to exercise piggyback
registration rights with respect to the Warrant Shares, then Barrett and Herbert
M. Gardner ("Gardner"), jointly but not individually, shall have the right,
exercisable by written notice to the Company executed by Barrett and Gardner, to
have the Company prepare and file with the Commission, on one occasion, a
registration statement and such other documents, including a prospectus,
covering all, but not less than all, of the Warrant Shares and the Gardner
Warrant Shares, as may be necessary in the opinion of counsel for the Company,
in order to comply with the provisions of the Securities Act, so as to permit a
public offering and sale of the Warrant Shares and the Gardner Warrant Shares by
Barrett and Gardner for the period set forth in Section 4D(1) hereof. Barrett
and Gardner, on the one hand, and the Company, on the other hand, shall each
bear fifty percent (50%) of the expenses attendant to registering such
securities (provided, however, that each party shall bear the cost of its own
counsel and that Barrett and Gardner shall jointly and severally bear the cost
of any underwriting discounts and commissions).
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D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement with respect to all outstanding Warrant Shares and cause
such registration statement to become effective and file such amendments
necessary to maintain the effectiveness of the registration statement for a
period of not less than one (1) year, except that the Company shall not be
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto after the period of distribution of the
registered securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur expenses exceeding
$10,000 in the aggregate, in connection with such registration or qualification;
and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances then
existing, provided that no such supplement or amendment need be filed after
distribution of the registered securities has been completed.
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<PAGE>
E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Warrantholder or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act that there shall have been delivered to the Company an
agreement or agreements duly executed by each Warrantholder for whom Warrant
Shares are to be registered, whereby such Warrantholder agrees to indemnify and
hold harmless the Company, each other person referred to in subparts (1), (2),
(3) and (5) of Section 11(a) of the Securities Act in respect of such
registration statement and each other person, if any, which controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Securities Act or otherwise, but only to the extent that such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
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<PAGE>
any material fact contained, on the effective date thereof, in any registration
statement under which such Warrant Shares were registered under the Securities
Act, in any preliminary prospectus or final prospectus contained therein or in
any amendment or supplement thereto or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
which, in each such statement, said preliminary or final prospectus or said
amendment or supplement in reliance upon, and in conformity with, written
information furnished to the Company by such Warrantholder specifically for use
in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
reasonably necessary to enable the Warrantholders to utilize Form S-2, if
available, or Form S-3 for the sale of the Warrant Shares, such action to be
taken immediately after the first registration statement filed by the Company
for the offering of its securities to the general public is declared effective;
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares
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<PAGE>
purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Common Shares outstanding and deemed outstanding immediately
after such issue or sale. No adjustment of the Exercise Price, however, shall be
made in an amount less that $.01 per share, but any such lesser adjustment shall
be carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which Common Shares are issued or
sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities (and, if such convertible securities
constitute obligations of the Company, the principal amount of
such obligations so converted) and upon the conversion or
exchange thereof, by (b) the total maximum number of Common
Shares issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect
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<PAGE>
immediately prior to the time of the granting of such rights
or options, then the total maximum number of Common Shares
issuable upon the exercise of such rights or options (or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such
rights or options) shall be deemed to be outstanding and to
have been issued for such price per share. Except as provided
in Clause (3) below, no further adjustments of the Exercise
Price shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common
Shares upon conversion or exchange of such Convertible
Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued for such
price per share; except as otherwise specified in Clause (3)
below, no further adjustments of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, if any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any
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such option or right or the termination of any such right to
convert or exchange such Convertible Securities, the Exercise
Price then in effect hereunder shall forthwith be increased to
such Exercise Price as would have obtained at the time of such
expiration or termination had such option, right or
convertible securities never been issued. If the purchase
price provided for in any right or option referred to in
Clause (1) of subsection C of this Section 5, or the
additional consideration payable upon the exchange or
conversion of any Convertible Securities referred to in Clause
(1) and (2) of this Section 5, or the rate at which any
Convertible Securities referred to in Clauses (1) and (2) of
subsection C of this Section 5 are convertible into or
exchangeable for Common Shares, shall decrease at any time
under or by reason of provisions with respect thereto designed
to protect against dilution, then in the case of the delivery
of Common Shares upon the exercise of any such right or option
or upon conversion or exchange of any such right or option or
upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall
forthwith be decreased to such Exercise Price as would have
obtained had the adjustments made upon issuance of such right
or option or Convertible Securities been made upon the basis
of the issuance of (and the total consideration computed in
accordance with Clause (1) or (2) of this subsection C of
Section 5, as the case may be, received for) the Common Shares
delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company
therefor, without deduction therefrom of any expenses incurred
or any underwriting or selling commissions or concessions paid
by the Company in connection therewith and plus any
underwriting or selling discounts allowed by the Company in
connection therewith. In case any Common Shares or Convertible
Securities or any rights or options to purchase any such
Common Shares or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith and plus any underwriting or
selling discounts allowed by the Company in connection
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therewith. In case any Common Shares or Convertible Securities
shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value, as determined
by the Board of Directors of the Company, of such portion of
the assets of such merged corporation as such Board shall
determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Common Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned surplus (other than in a partial or total liquidation
or dissolution of the Company) and otherwise than in Common Shares or
Convertible Securities, the per share Exercise Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per Common Share or,
in the case of any other dividend, to the fair value thereof per Common Share as
determined by the Board of Directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or if a record is not taken, the date as of which the holders of
record of Common Shares entitled to such dividends are to be determined. As used
in this subsection D, the term "dividend" shall mean any distribution to the
holders of Common Shares. Except as provided in this subsection D, no adjustment
in the Exercise Price and no change in the number of Warrant Shares so
purchasable shall be made pursuant to this Section 5 as a result of or by reason
of any such dividend.
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E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled to receive, and containing the express assumption of such successor
corporation of the performance and observance of the provisions of this Warrant
to be performed and observed by the Company and of all liabilities and
obligation of the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the
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Company will promptly obtain a certificate of a firm of independent certified
public accountants of recognized standing selected by the Company's Board of
Directors, who may be the regular auditors of the Company, stating, the adjusted
Exercise Price and the new number of Warrant Shares so issuable, or specifying
the other shares of stock, securities or assets and the amount thereof
receivable as a result of such change in rights, and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based. The Company will promptly mail a copy of such accountant's certificate to
the Warrantholders, which certificate shall be conclusive evidence of the
correctness of the computation with respect to any such adjustment of the
Exercise Price and any such change in the number of such Warrant Shares so
issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all of the provisions of this Warrant and in taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
this Warrant against dilution or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up unless such rights shall be
limited to a fixed sum or percentage or par value in respect of participation in
dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the
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Exchange Act, it will, at its expense, obtain and maintain the approval for
listing upon official notice of issuance of all Warrant Shares at the time
outstanding and maintain the listing of such shares after their issuance so long
as listing for such Common Shares is otherwise maintained; and the Company will
so list on such national securities exchange, will register under the Exchange
Act (or any similar statute then in effect) and will maintain such listing of,
any other securities that at any time are issuable upon exercise of the Warrants
if and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company for so long as such securities shall
be listed on such national securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Shares of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up as the case may be. Such written notice shall be
given not less
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than 10 days and not more than 90 days prior to the record date or the date on
which the Company's transfer books are closed in respect thereto and such notice
may state that the record date is subject to the effectiveness of a registration
statement under the Securities Act, or to a favorable vote of stockholders, if
either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at One Plaza Road, Greenvale, New York, New York 11548, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
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IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal and to be dated
as of May 1, 1997.
INMARK ENTERPRISES, INC.
By:
John P. Benfield, President
(Corporate Seal)
WARRANTHOLDER:
William J. Barrett
18
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
INMARK ENTERPRISES, INC.
THIS CERTIFIES THAT, for value received,
HERBERT M. GARDNER
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Inmark Enterprises, Inc., a Delaware corporation (the "Company"), at any
time during the five (5) year period commencing on May 1, 1997 (the
"Commencement Date"), Thirty Thousand (30,000) shares of the Company's Common
Stock, par value $.001 per share (the "Common Shares"), at an exercise price of
$5.00 per share, in lawful money of the United States of America. The number of
Common Shares purchasable hereunder and the exercise price therefor are subject
to adjustment from time to time as hereinafter set forth. This Warrant shall
expire on the Expiration Date.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"Barrett Warrant Shares" shall mean the Common Shares issuable
by the Company upon exercise of that certain Warrant to Purchase Common Stock of
the Company, dated as of May 1, 1997, granted by the Company to William J.
Barrett (the "Barrett Warrant Shares").
"Commencement Date" shall be May 1, 1997.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Inmark Enterprises, Inc., a Delaware
corporation.
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"Exchange Act" shall mean the Securities Exchange Act of 1934,
as amended, or any successor federal statute, and the rules and regulations of
the Commission thereunder, all as the same shall be in effect at the time.
"Exercise Price" shall mean the exercise price of $5.00 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean April 30, 2002.
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. Method of Exercise. To exercise this Warrant in whole or in
part, the registered holder hereof shall complete the Subscription Form attached
hereto (specifying the number of Common Shares as to which this Warrant is being
exercised) and deliver to the Company at its principal executive office, or to
the stock transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and payment in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Payment of the
aggregate Exercise Price shall be made in cash (by certified check or official
bank check) payable to the order of the Company. In the alternative, the holder
may exercise its right to receive Warrant Shares on a net basis, such that
without the exchange of any funds, the holder receives that number of Common
Shares otherwise issuable upon the exercise of this Warrant less that number of
Warrant Shares having a fair market value equal to the aggregate Exercise Price
that would otherwise have been paid by the holder of the Warrant Shares. For
purposes of the preceding sentence, (i) "fair market value" of the Warrant
Shares shall be the Market Price of the Warrant Shares on the date immediately
preceding the date of payment of the Exercise Price and (ii) "Market Price" at
any date shall be deemed to be the last reported sale price of the Common Shares
(if such Market Price is being calculated for
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the Common Shares) or if no such reported sale takes place on such day, the
average of the last reported sale prices for the last three (3) trading days, in
either case as officially reported by the principal securities exchange on which
the Common Shares are listed or admitted to trading or by NASDAQ, or if the
Common Shares are not listed or admitted to trading on any such securities
exchange or quoted by NASDAQ, the average closing bid price as furnished by the
National Quotation Bureau or a similar organization if NASDAQ is no longer
reporting such information, or if such information is no longer being provided
with respect to the Common Shares, then as determined in good faith by written
resolution of the Board of Directors of the Company, based on the best
information available to it.
B. Delivery of Certificates. Upon receipt of the items
specified in subsection A of this Section 2, the Company shall, as promptly as
practicable, and in any event, within ten (10) business days thereafter, execute
or cause to be executed and deliver to the Warrantholder, a certificate or
certificates representing the aggregate number of Common Shares specified in
said Subscription Form. Each certificate so delivered shall be in such
denomination as reasonably may be requested by the Warrantholder and shall be
registered in the name of the Warrantholder or in the name of such other
Warrantholder as shall be designated by the Warrantholder. If the Warrantholder
elects to transfer the Warrants to such other Warrantholder, the Warrantholder
will provide such evidence (including an opinion from counsel reasonably
acceptable to the Company) as is necessary to establish that the issuance of
Warrant Shares to such other Warrantholder may be made without registration
under the Securities Act (unless an appropriate registration statement covering
the Warrant Shares has been ordered effective by the Commission and remains in
effect). If this Warrant shall have been exercised only in part, the Company
shall, at the time of delivery of said certificate or certificates, deliver to
the Warrantholder a new Warrant evidencing the right of the Warrantholder to
purchase the remaining Common Shares covered by this Warrant. The Company shall
pay all expenses, taxes and other charges payable in connection with the
preparation, execution and delivery of certificates pursuant to this Section 2,
including certificates to be issued to such Warrantholders as shall be the
initial Warrantholders. Thereafter, in the event that certificates shall be
registered in the name of a person other than the initial Warrantholder, funds
sufficient to pay all transfer taxes which shall be payable upon the execution
and delivery of such certificate or certificates shall be paid by the
Warrantholder to the Company at the time of delivering this Warrant to the
Company as mentioned above.
C. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective unless and until the
terms and conditions of said Section 4 of said Warrant shall have
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been complied with. The shares represented hereby have not been
registered under the Securities Act of 1933, as amended, and may be
offered or sold only if registered pursuant to the provisions of the
Securities Act or if an exemption from registration is available."
D. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
E. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof, this Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the Warrantholder in person or by duly authorized attorney, and a new
Warrant shall be made and delivered by the Company, of the same tenor as this
Warrant but registered in the name of the transferee, upon surrender of this
Warrant duly endorsed to the Company at its office or to the stock transfer
agent of the Company at its office on or after such date. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
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connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in accordance with the intended method of
disposition specified in the notice delivered by such holder to the Company
without registration in reliance on an exemption from the registration
provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
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C. Registration Rights. The Warrantholder shall have the
following piggyback registration rights, excluding registration statements filed
under Commission Forms S-4 and S-8 and any successor forms thereto:
1. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4C(1), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond affirmatively within thirty (30)
business days after delivery of such notice. In connection with this piggyback
registration right, the Company shall bear all expenses attendant to registering
such securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions, except as prohibited by Blue Sky laws).
2. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(1)
hereof shall be determined to be, in the aggregate, an amount which would
adversely affect the success of the Company's registration of its securities for
its own account, then, as to the amount of Common Shares to be registered on
behalf of persons other than the Company and the Warrant Shares to be included
in the registration statement, such persons shall agree to delay the offer and
sale of such Warrant Shares for a period of forty-five (45) days from the date
of completion of the underwritten distribution of the securities being
registered for the account of the Company; provided, that no other security
holder may sell securities owned by it in such underwritten offering. 3. If
Herbert M. Gardner ("Gardner"), as the Warrantholder, has not previously had the
opportunity to exercise piggyback registration rights with respect to the
Warrant Shares, then Gardner and William J. Barrett ("Barrett"), jointly but not
individually, shall have the right, exercisable by written notice to the Company
executed by Gardner and Barrett, to have the Company prepare and file with the
Commission, on one occasion, a registration statement and such other documents,
including a prospectus, covering all, but not less than all, of the Warrant
Shares and the Barrett Warrant Shares, as may be necessary in the opinion of
counsel for the Company, in order to comply with the provisions of the
Securities Act, so as to permit a public offering and sale of the Warrant Shares
and the Barrett Warrant Shares by Gardner and Barrett for the period set forth
in Section 4D(1) hereof. Gardner and Barrett, on the one hand, and the Company,
on the other hand, shall each bear fifty percent (50%) of the expenses attendant
to registering such securities (provided, however, that each party shall bear
the cost of its own counsel and that Gardner and Barrett shall jointly and
severally bear the cost of any underwriting discounts and commissions).
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D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement with respect to all outstanding Warrant Shares and cause
such registration statement to become effective and file such amendments
necessary to maintain the effectiveness of the registration statement for a
period of not less than one (1) year, except that the Company shall not be
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto after the period of distribution of the
registered securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur expenses exceeding
$10,000 in the aggregate, in connection with such registration or qualification;
and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances then
existing, provided that no such supplement or amendment need be filed after
distribution of the registered securities has been completed.
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E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Warrantholder or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act that there shall have been delivered to the Company an
agreement or agreements duly executed by each Warrantholder for whom Warrant
Shares are to be registered, whereby such Warrantholder agrees to indemnify and
hold harmless the Company, each other person referred to in subparts (1), (2),
(3) and (5) of Section 11(a) of the Securities Act in respect of such
registration statement and each other person, if any, which controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Securities Act or otherwise, but only to the extent that such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of
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any material fact contained, on the effective date thereof, in any registration
statement under which such Warrant Shares were registered under the Securities
Act, in any preliminary prospectus or final prospectus contained therein or in
any amendment or supplement thereto or arise out of or are based upon the
omission or the alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading,
which, in each such statement, said preliminary or final prospectus or said
amendment or supplement in reliance upon, and in conformity with, written
information furnished to the Company by such Warrantholder specifically for use
in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Exchange Act, as is
reasonably necessary to enable the Warrantholders to utilize Form S-2, if
available, or Form S-3 for the sale of the Warrant Shares, such action to be
taken immediately after the first registration statement filed by the Company
for the offering of its securities to the general public is declared effective;
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares
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purchasable pursuant hereto immediately prior to such adjustment and dividing
the product thereof by the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Common Shares outstanding and deemed outstanding immediately
after such issue or sale. No adjustment of the Exercise Price, however, shall be
made in an amount less that $.01 per share, but any such lesser adjustment shall
be carried forward and shall be made at the time and together with the next
subsequent adjustment which together with any adjustments so carried forward
shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which Common Shares are issued or
sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities (and, if such convertible securities
constitute obligations of the Company, the principal amount of
such obligations so converted) and upon the conversion or
exchange thereof, by (b) the total maximum number of Common
Shares issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect
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immediately prior to the time of the granting of such rights
or options, then the total maximum number of Common Shares
issuable upon the exercise of such rights or options (or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such
rights or options) shall be deemed to be outstanding and to
have been issued for such price per share. Except as provided
in Clause (3) below, no further adjustments of the Exercise
Price shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common
Shares upon conversion or exchange of such Convertible
Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued for such
price per share; except as otherwise specified in Clause (3)
below, no further adjustments of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, if any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any
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such option or right or the termination of any such right to
convert or exchange such Convertible Securities, the Exercise
Price then in effect hereunder shall forthwith be increased to
such Exercise Price as would have obtained at the time of such
expiration or termination had such option, right or
convertible securities never been issued. If the purchase
price provided for in any right or option referred to in
Clause (1) of subsection C of this Section 5, or the
additional consideration payable upon the exchange or
conversion of any Convertible Securities referred to in Clause
(1) and (2) of this Section 5, or the rate at which any
Convertible Securities referred to in Clauses (1) and (2) of
subsection C of this Section 5 are convertible into or
exchangeable for Common Shares, shall decrease at any time
under or by reason of provisions with respect thereto designed
to protect against dilution, then in the case of the delivery
of Common Shares upon the exercise of any such right or option
or upon conversion or exchange of any such right or option or
upon conversion or exchange of any such Convertible
Securities, the Exercise Price then in effect hereunder shall
forthwith be decreased to such Exercise Price as would have
obtained had the adjustments made upon issuance of such right
or option or Convertible Securities been made upon the basis
of the issuance of (and the total consideration computed in
accordance with Clause (1) or (2) of this subsection C of
Section 5, as the case may be, received for) the Common Shares
delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company
therefor, without deduction therefrom of any expenses incurred
or any underwriting or selling commissions or concessions paid
by the Company in connection therewith and plus any
underwriting or selling discounts allowed by the Company in
connection therewith. In case any Common Shares or Convertible
Securities or any rights or options to purchase any such
Common Shares or Convertible Securities shall be issued or
sold for a consideration other than cash, the amount of the
consideration other than cash payable to the Company shall be
deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith and plus any underwriting or
selling discounts allowed by the Company in connection
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therewith. In case any Common Shares or Convertible Securities
shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value, as determined
by the Board of Directors of the Company, of such portion of
the assets of such merged corporation as such Board shall
determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Common Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned surplus (other than in a partial or total liquidation
or dissolution of the Company) and otherwise than in Common Shares or
Convertible Securities, the per share Exercise Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per Common Share or,
in the case of any other dividend, to the fair value thereof per Common Share as
determined by the Board of Directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or if a record is not taken, the date as of which the holders of
record of Common Shares entitled to such dividends are to be determined. As used
in this subsection D, the term "dividend" shall mean any distribution to the
holders of Common Shares. Except as provided in this subsection D, no adjustment
in the Exercise Price and no change in the number of Warrant Shares so
purchasable shall be made pursuant to this Section 5 as a result of or by reason
of any such dividend.
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E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled to receive, and containing the express assumption of such successor
corporation of the performance and observance of the provisions of this Warrant
to be performed and observed by the Company and of all liabilities and
obligation of the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the
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Company will promptly obtain a certificate of a firm of independent certified
public accountants of recognized standing selected by the Company's Board of
Directors, who may be the regular auditors of the Company, stating, the adjusted
Exercise Price and the new number of Warrant Shares so issuable, or specifying
the other shares of stock, securities or assets and the amount thereof
receivable as a result of such change in rights, and setting forth in reasonable
detail the method of calculation and the facts upon which such calculation is
based. The Company will promptly mail a copy of such accountant's certificate to
the Warrantholders, which certificate shall be conclusive evidence of the
correctness of the computation with respect to any such adjustment of the
Exercise Price and any such change in the number of such Warrant Shares so
issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all of the provisions of this Warrant and in taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
this Warrant against dilution or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up unless such rights shall be
limited to a fixed sum or percentage or par value in respect of participation in
dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the
15
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Exchange Act, it will, at its expense, obtain and maintain the approval for
listing upon official notice of issuance of all Warrant Shares at the time
outstanding and maintain the listing of such shares after their issuance so long
as listing for such Common Shares is otherwise maintained; and the Company will
so list on such national securities exchange, will register under the Exchange
Act (or any similar statute then in effect) and will maintain such listing of,
any other securities that at any time are issuable upon exercise of the Warrants
if and at the time that any securities of the same class shall be listed on such
national securities exchange by the Company for so long as such securities shall
be listed on such national securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Shares of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up as the case may be. Such written notice shall be
given not less
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than 10 days and not more than 90 days prior to the record date or the date on
which the Company's transfer books are closed in respect thereto and such notice
may state that the record date is subject to the effectiveness of a registration
statement under the Securities Act, or to a favorable vote of stockholders, if
either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at One Plaza Road, Greenvale, New York, New York 11548, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
17
<PAGE>
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal and to be dated
as of May 1, 1997.
INMARK ENTERPRISES, INC.
By:
John P. Benfield, President
(Corporate Seal)
WARRANTHOLDER:
Herbert M. Gardner
18
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
INMARK ENTERPRISES, INC.
THIS CERTIFIES THAT, for value received,
ROBERT F. HUSSEY
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Inmark Enterprises, Inc., a Delaware corporation (the "Company"), at any
time from and after January 25, 1997 and during the ten (10) year period
commencing on the Commencement Date, One Hundred Seventy-Five Thousand (175,000)
shares of the Company's Common Stock, par value $.001 per share (the "Common
Shares"), at an exercise price of $1.00 per share, in lawful money of the United
States of America. The number of Common Shares purchasable hereunder and the
exercise price therefor are subject to adjustment from time to time as
hereinafter set forth. This Warrant shall expire on the Expiration Date.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"Commencement Date" shall be January 25, 1995.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Inmark Enterprises, Inc., a Delaware
corporation.
"Exercise Price" shall mean the exercise price of $1.00 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean January 25, 2005.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. General. To exercise this Warrant in whole or in part, the
registered holder hereof shall complete the Subscription Form attached hereto
and deliver to the Company at its principal executive office, or to the stock
transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and cash in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event, within
ten (10) business days thereafter, execute or cause to be executed and deliver
to the Warrantholder, a certificate or certificates representing the aggregate
number of Common Shares specified in said Subscription Form. Each certificate so
delivered shall be in such denomination as reasonably may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or in the
name of such other Warrantholder as shall be designated by the Warrantholder. If
the Warrantholder elects to transfer the Warrants to such other Warrantholder,
the Warrantholder will provide such evidence (including an opinion from counsel
reasonably acceptable to the Company) as is necessary to establish that the
issuance of Warrant Shares to such other Warrantholder may be made without
registration under the Securities Act (unless an appropriate registration
statement covering, the Warrant Shares has been ordered effective by the
Commission and remains in effect). If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said certificate or
certificates, deliver to the Warrantholder a new Warrant evidencing the right of
the Warrantholder to purchase the remaining Common Shares covered by this
Warrant. The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of certificates pursuant
to this Section 2, including certificates to be issued to such Warrantholders as
shall be the initial Warrantholders. Thereafter, in the event that certificates
shall be registered in the name of a person other than the initial
Warrantholder, funds sufficient to pay all transfer taxes which shall be payable
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<PAGE>
upon the execution and delivery of such certificate or certificates shall be
paid by the Warrantholder to the Company at the time of delivering this Warrant
to the Company as mentioned above.
B. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective unless and until the
terms and conditions of said Section 4 of said Warrant shall have been
complied with. The shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may be offered or
sold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available."
C. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
D. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof,
3
<PAGE>
this Warrant and all rights hereunder are transferable in whole or in part upon
the books of the Company by the Warrantholder in person or by duly authorized
attorney, and a new Warrant shall be made and delivered by the Company, of the
same tenor as this Warrant but registered in the name of the transferee, upon
surrender of this Warrant duly endorsed to the Company at its office or to the
stock transfer agent of the Company at its office on or after such date. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in
4
<PAGE>
accordance with the intended method of disposition specified in the notice
delivered by such holder to the Company without registration in reliance on an
exemption from the registration provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
C. Registration Rights. The Warrantholder shall have the
following demand and piggyback registration rights, excluding registration
statements filed under Commission Forms S-4 and S-8 and any successor forms
thereto:
1. The Warrantholder (or if there is more than one
Warrantholder then the Warrantholders beneficially owning at least 66 2/3 % of
the Warrant Shares represented hereby), shall have the right on two separate
occasions to demand that the Company expeditiously file a registration statement
under the Securities Act covering, all, but not less than all, of the Warrant
Shares beneficially owned by such requesting Warrantholder. Each such demand may
be made at any time after six (6) months from the Commencement Date, but in no
event later than the Expiration Date. Should this registration be delayed by the
Company, the period when such demand may be made will be extended for a period
of time equal to the length of the delay in registering such securities. In
connection with the first demand, the Company shall bear all expenses attendant
to registering such securities (other than the cost of counsel to selling
stockholders and underwriting discounts and commissions, except as prohibited by
Blue sky laws) and in connection with the second demand, the holders will bear
all such expenses.
2. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4C(2), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond affirmatively within thirty (30)
business days after delivery of such notice. In connection with this piggyback
registration right, the Company shall bear all expenses attendant to registering
such securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions, except as prohibited by Blue sky laws).
3. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(2)
hereof shall be determined to be, in the
5
<PAGE>
aggregate, an amount which would adversely affect the success of the Company's
registration of its securities for its own account, then, as to the amount of
Common Shares to be registered on behalf of persons other than the Company and
the Warrant Shares to be included in the registration statement, such persons
shall agree to delay the offer and sale of such Warrant Shares for a period of
forty-five (45) days from the date of completion of the underwritten
distribution of the securities being registered for the account of the Company;
provided, that no other security holder may sell securities owned by it in such
underwritten offering.
D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement with respect to all outstanding Warrant Shares and cause
such registration statement to become effective and file such amendments
necessary to maintain the effectiveness of the registration statement for a
period of not less than one (1) year, except that the Company shall not be
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto after the period of distribution of the
registered securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur expenses exceeding
$10,000 in the aggregate, in connection with such registration or qualification;
and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the
6
<PAGE>
light of the circumstances then existing, and at the request of any such holder,
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein not
misleading in the light of the circumstances then existing, provided that no
such supplement or amendment need be filed after distribution of the registered
securities has been completed.
E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Warrantholder or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act
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<PAGE>
that there shall have been delivered to the Company an agreement or agreements
duly executed by each Warrantholder for whom Warrant Shares are to be
registered, whereby such Warrantholder agrees to indemnify and hold harmless the
Company, each other person referred to in subparts (1), (2), (3) and (5) of
Section 11(a) of the Securities Act in respect of such registration statement
and each other person, if any, which controls the Company within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company may become subject under the Securities Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Warrant Shares were registered under the Securities Act, in any preliminary
prospectus or final prospectus contained therein or in any amendment or
supplement thereto or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
statement, said preliminary or final prospectus or said amendment or supplement
in reliance upon, and in conformity with, written information furnished to the
Company by such Warrantholder specifically for use in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), as is reasonably necessary to enable the
Warrantholders to utilize Form S- 2, if available, or Form S-3 for the sale of
the Warrant Shares, such action to be taken immediately after the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
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<PAGE>
SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Conunon Shares outstanding and deemed outstanding
immediately after such issue or sale. No adjustment of the Exercise Price,
however, shall be made in an amount less that $.01 per share, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which Common Shares are issued or
sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which
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<PAGE>
relate to such Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities (and, if such
convertible securities constitute obligations of the Company,
the principal amount of such obligations so converted) and
upon the conversion or exchange thereof, by (b) the total
maximum number of Common Shares issuable upon the exercise of
such rights or options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of
such rights or options) shall be less than the Exercise Price
in effect immediately prior to the time of the granting of
such rights or options, then the total maximum number of
Common Shares issuable upon the exercise of such rights or
options (or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the
exercise of such rights or options) shall be deemed to be
outstanding and to have been issued for such price per share.
Except as provided in Clause (3) below, no further adjustments
of the Exercise Price shall be made upon the actual issuance
of such Common Shares or of such Convertible Securities upon
exercise of such rights or options or upon the actual issue of
such Common Shares upon conversion or exchange of such
Convertible Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued for such
price per share; except as otherwise specified in Clause (3)
below, no further adjustments of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, in any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
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<PAGE>
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right or the
termination of any such right to convert or exchange such
Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be increased to such Exercise Price
as would have obtained at the time of such expiration or
termination had such option, right or convertible securities
never been issued. If the purchase price provided for in any
right or option referred to in Clause (1) of subsection C of
this Section 5, or the additional consideration payable upon
the exchange or conversion of any Convertible Securities
referred to in Clause (1) and (2) of this Section 5, or the
rate at which any Convertible Securities referred to in
Clauses (1) and (2) of subsection C of this Section 5 are
convertible into or exchangeable for Common Shares, shall
decrease at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in
the case of the delivery of Common Shares upon the exercise of
any such right or option or upon conversion or exchange of any
such right or option or upon conversion or exchange of any
such Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be decreased to such Exercise Price
as would have obtained had the adjustments made upon issuance
of such right or option or Convertible Securities been made
upon the basis of the issuance of (and the total consideration
computed in accordance with Clause (1) or (2) of this
subsection C of Section 5, as the case may be, received for)
the Common Shares delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company there
for, without deduction therefrom of any expenses incurred or
any underwriting or selling commissions or concessions paid by
the Company in connection therewith and plus any underwriting
or selling discounts allowed by the Company in connection
therewith. In case any Common Shares or
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<PAGE>
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount
of the consideration other than cash payable to the Company
shall be deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith and plus any underwriting or
selling discounts allowed by the Company in connection
therewith. In case any Common Shares or Convertible Securities
shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value, as determined
by the Board of Directors of the Company, of such portion of
the assets of such merged corporation as such Board shall
determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Conunon Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned surplus (other than in a partial or total liquidation
or dissolution of the Company) and otherwise than in Common Shares or
Convertible Securities, the per share Exercise Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per Common Share or,
in the case of any other dividend, to the fair value thereof per Common Share as
determined by the Board of Directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or if a record is not taken, the date as of which the holders of
record of Common Shares entitled
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<PAGE>
to such dividends are to be determined. As used in this subsection D, the term
"dividend" shall mean any distribution to the holders of Common Shares. Except
as provided in this subsection D, no adjustment in the Exercise Price and no
change in the number of Warrant Shares so purchasable shall be made pursuant to
this Section 5 as a result of or by reason of any such dividend.
E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled
13
<PAGE>
to receive, and containing the express assumption of such successor corporation
of the performance and observance of the provisions of this Warrant to be
performed and observed by the Company and of all liabilities and obligation of
the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the Company will promptly obtain a certificate of a firm of
independent certified public accountants of recognized standing selected by the
Company's Board of Directors, who may be the regular auditors of the Company,
stating, the adjusted Exercise Price and the new number of Warrant Shares so
issuable, or specifying the other shares of stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
accountant's certificate to the Warrantholders, which certificate shall be
conclusive evidence of the correctness of the computation with respect to any
such adjustment of the Exercise Price and any such change in the number of such
Warrant Shares so issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all of the provisions of this Warrant and in taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
this Warrant against dilution or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon
14
<PAGE>
voluntary or involuntary liquidation, dissolution or winding-up unless such
rights shall be limited to a fixed sum or percentage or par value in respect of
participation in dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the Securities Exchange Act of 1934, as amended
(hereinafter called the "Exchange Act"), it will, at its expense, obtain and
maintain the approval for listing upon official notice of issuance of all
Warrant Shares at the time outstanding and maintain the listing of such shares
after their issuance so long as listing for such Common Shares is otherwise
maintained; and the Company will so list on such national securities exchange,
will register under the Exchange Act (or any similar statute then in effect) and
will maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants if and at the time that any securities of
the same class shall be listed on such national securities exchange by the
Company for so long as such securities shall be listed on such national
securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record
15
<PAGE>
shall be taken for such dividend, distribution or subscription rights, or (b)
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Shares of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up as the case may be. Such
written notice shall be given not less than 10 days and not more than 90 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto and such notice may state that the record date is
subject to the effectiveness of a registration statement under the Securities
Act, or to a favorable vote of stockholders, if either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at 405 Park Avenue, 16th Floor, New York, New York 10022, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
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This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal and to be dated
as of January 25, 1995.
INMARK ENTERPRISES, INC.
By: /s/ John P. Benfield
--------------------
John P. Benfield, President
(Corporate Seal)
WARRANTHOLDER
/s/ Robert F. Hussey
--------------------
Robert F. Hussey
17
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
HEALTH IMAGE MEDIA, INC.
THIS CERTIFIES THAT, for value received,
ROBERT F. HUSSEY
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Health Image Media, Inc., a Delaware corporation (the "Company"), at any
time from during the ten (10) year period commencing on the Commencement Date,
Fifty Thousand (50,000) shares of the Company's Common Stock, par value $.001
per share (the "Common Shares"), at an exercise price of $1.07 per share, in
lawful money of the United States of America. The number of Common Shares
purchasable hereunder and the exercise price therefor are subject to adjustment
from time to time as hereinafter set forth. This Warrant shall expire on the
Expiration Date.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"Commencement Date" shall be April 25, 1995.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Health Image Media, Inc., a Delaware
corporation.
"Exercise Price" shall mean the exercise price of $1.07 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean April 25, 2005.
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<PAGE>
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. General. To exercise this Warrant in whole or in part, the
registered holder hereof shall complete the Subscription Form attached hereto
and deliver to the Company at its principal executive office, or to the stock
transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and cash in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event, within
ten (10) business days thereafter, execute or cause to be executed and deliver
to the Warrantholder, a certificate or certificates representing the aggregate
number of Common Shares specified in said Subscription Form. Each certificate so
delivered shall be in such denomination as reasonably may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or in the
name of such other Warrantholder as shall be designated by the Warrantholder. If
the Warrantholder elects to transfer the Warrants to such other Warrantholder,
the Warrantholder will provide such evidence (including an opinion from counsel
reasonably acceptable to the Company) as is necessary to establish that the
issuance of Warrant Shares to such other Warrantholder may be made without
registration under the Securities Act (unless an appropriate registration
statement covering, the Warrant Shares has been ordered effective by the
Commission and remains in effect). If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said certificate or
certificates, deliver to the Warrantholder a new Warrant evidencing the right of
the Warrantholder to purchase the remaining Common Shares covered by this
Warrant. The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of certificates pursuant
to this Section 2, including certificates to be issued to such Warrantholders as
shall be the initial Warrantholders. Thereafter, in the event that certificates
shall be registered in the name of a person other than the initial
Warrantholder, funds sufficient to pay all transfer taxes which shall be payable
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upon the execution and delivery of such certificate or certificates shall be
paid by the Warrantholder to the Company at the time of delivering this Warrant
to the Company as mentioned above.
B. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective unless and until the
terms and conditions of said Section 4 of said Warrant shall have been
complied with. The shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may be offered or
sold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available."
C. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
D. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all purposes and shall not be affected by any notice
to the contrary, until presentation of this Warrant for registration of transfer
as provided in this Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof,
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this Warrant and all rights hereunder are transferable in whole or in part upon
the books of the Company by the Warrantholder in person or by duly authorized
attorney, and a new Warrant shall be made and delivered by the Company, of the
same tenor as this Warrant but registered in the name of the transferee, upon
surrender of this Warrant duly endorsed to the Company at its office or to the
stock transfer agent of the Company at its office on or after such date. Upon
receipt by the Company of evidence reasonably satisfactory to it of the loss,
theft, destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in
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accordance with the intended method of disposition specified in the notice
delivered by such holder to the Company without registration in reliance on an
exemption from the registration provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
C. Registration Rights. The Warrantholder shall have the
following demand and piggyback registration rights, excluding registration
statements filed under Commission Forms S-4 and S-8 and any successor forms
thereto:
1. The Warrantholder (or if there is more than one
Warrantholder then the Warrantholders beneficially owning at least 66 2/3 % of
the Warrant Shares represented hereby), shall have the right on two separate
occasions to demand that the Company expeditiously file a registration statement
under the Securities Act covering, all, but not less than all, of the Warrant
Shares beneficially owned by such requesting Warrantholder. Each such demand may
be made at any time after six (6) months from the Commencement Date, but in no
event later than the Expiration Date. Should this registration be delayed by the
Company, the period when such demand may be made will be extended for a period
of time equal to the length of the delay in registering such securities. In
connection with the first demand, the Company shall bear all expenses attendant
to registering such securities (other than the cost of counsel to selling
stockholders and underwriting discounts and commissions, except as prohibited by
Blue sky laws) and in connection with the second demand, the holders will bear
all such expenses.
2. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4C(2), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond affirmatively within thirty (30)
business days after delivery of such notice. In connection with this piggyback
registration right, the Company shall bear all expenses attendant to registering
such securities (other than the cost of counsel to selling stockholders and
underwriting discounts and commissions, except as prohibited by Blue sky laws).
3. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(2)
hereof shall be determined to be, in the
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aggregate, an amount which would adversely affect the success of the Company's
registration of its securities for its own account, then, as to the amount of
Common Shares to be registered on behalf of persons other than the Company and
the Warrant Shares to be included in the registration statement, such persons
shall agree to delay the offer and sale of such Warrant Shares for a period of
forty-five (45) days from the date of completion of the underwritten
distribution of the securities being registered for the account of the Company;
provided, that no other security holder may sell securities owned by it in such
underwritten offering.
D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement with respect to all outstanding Warrant Shares and cause
such registration statement to become effective and file such amendments
necessary to maintain the effectiveness of the registration statement for a
period of not less than one (1) year, except that the Company shall not be
required to keep such registration statement effective, or to prepare and file
any amendments or supplements thereto after the period of distribution of the
registered securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur expenses exceeding
$10,000 in the aggregate, in connection with such registration or qualification;
and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the
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light of the circumstances then existing, and at the request of any such holder,
prepare and furnish to such holder a reasonable number of copies of a supplement
to or an amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statement therein not
misleading in the light of the circumstances then existing, provided that no
such supplement or amendment need be filed after distribution of the registered
securities has been completed.
E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any such loss, claim, damage or liability arises out of
or is based upon an untrue statement or alleged untrue statement or omission or
alleged omission made in such registration statement, said preliminary or final
prospectus or said amendment or supplement in reliance upon and in conformity
with written information furnished to the Company by such Warrantholder or such
controlling or participating person, as the case may be, specifically for use in
the preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act
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that there shall have been delivered to the Company an agreement or agreements
duly executed by each Warrantholder for whom Warrant Shares are to be
registered, whereby such Warrantholder agrees to indemnify and hold harmless the
Company, each other person referred to in subparts (1), (2), (3) and (5) of
Section 11(a) of the Securities Act in respect of such registration statement
and each other person, if any, which controls the Company within the meaning of
the Securities Act, against any losses, claims, damages or liabilities, joint or
several, to which the Company may become subject under the Securities Act or
otherwise, but only to the extent that such losses, claims, damages or
liabilities (or proceedings in respect thereof) arise out of or are based upon
any untrue statement or alleged untrue statement of any material fact contained,
on the effective date thereof, in any registration statement under which such
Warrant Shares were registered under the Securities Act, in any preliminary
prospectus or final prospectus contained therein or in any amendment or
supplement thereto or arise out of or are based upon the omission or the alleged
omission to state therein a material fact required to be stated therein or
necessary to make the statements therein not misleading, which, in each such
statement, said preliminary or final prospectus or said amendment or supplement
in reliance upon, and in conformity with, written information furnished to the
Company by such Warrantholder specifically for use in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), as is reasonably necessary to enable the
Warrantholders to utilize Form S- 2, if available, or Form S-3 for the sale of
the Warrant Shares, such action to be taken immediately after the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
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SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Conunon Shares outstanding and deemed outstanding
immediately after such issue or sale. No adjustment of the Exercise Price,
however, shall be made in an amount less that $.01 per share, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any options for the purchase
of, Common Shares or any stock or securities convertible into
or exchangeable for Common Shares (such convertible or
exchangeable stock or securities being hereinafter called
"Convertible Securities") whether or not such rights or
options or the right to convert or exchange any such
Convertible Securities are immediately exercisable, and the
consideration per share for which Common Shares are issued or
sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which
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<PAGE>
relate to such Convertible Securities, the minimum aggregate
amount of additional consideration, if any, payable upon the
issue or sale of such Convertible Securities (and, if such
convertible securities constitute obligations of the Company,
the principal amount of such obligations so converted) and
upon the conversion or exchange thereof, by (b) the total
maximum number of Common Shares issuable upon the exercise of
such rights or options or upon the conversion or exchange of
all such Convertible Securities issuable upon the exercise of
such rights or options) shall be less than the Exercise Price
in effect immediately prior to the time of the granting of
such rights or options, then the total maximum number of
Common Shares issuable upon the exercise of such rights or
options (or upon conversion or exchange of the total maximum
amount of such Convertible Securities issuable upon the
exercise of such rights or options) shall be deemed to be
outstanding and to have been issued for such price per share.
Except as provided in Clause (3) below, no further adjustments
of the Exercise Price shall be made upon the actual issuance
of such Common Shares or of such Convertible Securities upon
exercise of such rights or options or upon the actual issue of
such Common Shares upon conversion or exchange of such
Convertible Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued for such
price per share; except as otherwise specified in Clause (3)
below, no further adjustments of the Exercise Price shall be
made upon the actual issuance of such Common Shares upon
conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, in any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
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different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right or the
termination of any such right to convert or exchange such
Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be increased to such Exercise Price
as would have obtained at the time of such expiration or
termination had such option, right or convertible securities
never been issued. If the purchase price provided for in any
right or option referred to in Clause (1) of subsection C of
this Section 5, or the additional consideration payable upon
the exchange or conversion of any Convertible Securities
referred to in Clause (1) and (2) of this Section 5, or the
rate at which any Convertible Securities referred to in
Clauses (1) and (2) of subsection C of this Section 5 are
convertible into or exchangeable for Common Shares, shall
decrease at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in
the case of the delivery of Common Shares upon the exercise of
any such right or option or upon conversion or exchange of any
such right or option or upon conversion or exchange of any
such Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be decreased to such Exercise Price
as would have obtained had the adjustments made upon issuance
of such right or option or Convertible Securities been made
upon the basis of the issuance of (and the total consideration
computed in accordance with Clause (1) or (2) of this
subsection C of Section 5, as the case may be, received for)
the Common Shares delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the case may be,
issuable in payment of such dividend or distribution shall be
deemed to have been issued or sold without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company there
for, without deduction therefrom of any expenses incurred or
any underwriting or selling commissions or concessions paid by
the Company in connection therewith and plus any underwriting
or selling discounts allowed by the Company in connection
therewith. In case any Common Shares or
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Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for a consideration other than cash, the amount
of the consideration other than cash payable to the Company
shall be deemed to be the fair value of such consideration as
determined by the Board of Directors of the Company, without
deduction therefrom of any expenses incurred or any
underwriting or selling commissions or concessions paid by the
Company in connection therewith and plus any underwriting or
selling discounts allowed by the Company in connection
therewith. In case any Common Shares or Convertible Securities
shall be issued in connection with any merger of another
corporation into the Company, the amount of consideration
therefor shall be deemed to be the fair value, as determined
by the Board of Directors of the Company, of such portion of
the assets of such merged corporation as such Board shall
determine to be attributable to such Common Shares,
Convertible Securities, rights or options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Conunon Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned surplus (other than in a partial or total liquidation
or dissolution of the Company) and otherwise than in Common Shares or
Convertible Securities, the per share Exercise Price in effect immediately prior
to the declaration of such dividend shall be reduced by an amount equal, in the
case of a dividend in cash, to the amount thereof payable per Common Share or,
in the case of any other dividend, to the fair value thereof per Common Share as
determined by the Board of Directors of the Company. For the purposes of the
foregoing a dividend other than in cash shall be considered payable out of
earnings or earned surplus only to the extent that such earnings or earned
surplus are charged an amount equal to the fair value of such dividend as
determined by the Board of Directors of the Company. Such reductions shall take
effect as of the date on which a record is taken for the purpose of such
dividend, or if a record is not taken, the date as of which the holders of
record of Common Shares entitled
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to such dividends are to be determined. As used in this subsection D, the term
"dividend" shall mean any distribution to the holders of Common Shares. Except
as provided in this subsection D, no adjustment in the Exercise Price and no
change in the number of Warrant Shares so purchasable shall be made pursuant to
this Section 5 as a result of or by reason of any such dividend.
E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to the
rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled
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to receive, and containing the express assumption of such successor corporation
of the performance and observance of the provisions of this Warrant to be
performed and observed by the Company and of all liabilities and obligation of
the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the Company will promptly obtain a certificate of a firm of
independent certified public accountants of recognized standing selected by the
Company's Board of Directors, who may be the regular auditors of the Company,
stating, the adjusted Exercise Price and the new number of Warrant Shares so
issuable, or specifying the other shares of stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
accountant's certificate to the Warrantholders, which certificate shall be
conclusive evidence of the correctness of the computation with respect to any
such adjustment of the Exercise Price and any such change in the number of such
Warrant Shares so issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets, consolidation, merger, issue or sale of securities or
otherwise, avoid or take any action which would have the effect of avoiding the
observance or performance of any of the terms to be observed or performed
hereunder by the Company, but will at all times in good faith assist in carrying
out all of the provisions of this Warrant and in taking of all such action as
may be necessary or appropriate in order to protect the rights of the holders of
this Warrant against dilution or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon
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voluntary or involuntary liquidation, dissolution or winding-up unless such
rights shall be limited to a fixed sum or percentage or par value in respect of
participation in dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the Securities Exchange Act of 1934, as amended
(hereinafter called the "Exchange Act"), it will, at its expense, obtain and
maintain the approval for listing upon official notice of issuance of all
Warrant Shares at the time outstanding and maintain the listing of such shares
after their issuance so long as listing for such Common Shares is otherwise
maintained; and the Company will so list on such national securities exchange,
will register under the Exchange Act (or any similar statute then in effect) and
will maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants if and at the time that any securities of
the same class shall be listed on such national securities exchange by the
Company for so long as such securities shall be listed on such national
securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record
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shall be taken for such dividend, distribution or subscription rights, or (b)
such reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation or winding-up shall take place, as the case may be. Such notice
shall also specify the date as of which the holders of Common Shares of record
shall participate in such dividend, distribution or subscription rights, or
shall be entitled to exchange their Common Shares for securities or other
property deliverable upon such reorganization, reclassification, consolidation,
merger, sale, dissolution, liquidation, or winding up as the case may be. Such
written notice shall be given not less than 10 days and not more than 90 days
prior to the record date or the date on which the Company's transfer books are
closed in respect thereto and such notice may state that the record date is
subject to the effectiveness of a registration statement under the Securities
Act, or to a favorable vote of stockholders, if either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at 405 Park Avenue, 16th Floor, New York, New York 10022, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price or as a
stockholder of the Company, whether such liability is asserted by the Company or
by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
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This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal and to be dated
as of January 25, 1995.
HEALTH IMAGE MEDIA, INC.
By: ____________________________________
(Corporate Seal)
WARRANTHOLDER
/s/ Robert F. Hussey
--------------------
Robert F. Hussey
17
THIS WARRANT AND THE SECURITIES ISSUABLE UPON EXERCISE THEREOF
HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, OR THE
SECURITIES LAWS OF ANY STATE. THIS WARRANT AND THE SECURITIES THEREFORE MAY NOT
BE SOLD OR OTHERWISE ASSIGNED WITHOUT REGISTRATION UNDER SUCH ACT AND APPLICABLE
STATE LAW OR UNLESS AN EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE.
WARRANT
to Purchase Common Stock of
INMARK ENTERPRISES, INC.
THIS CERTIFIES THAT, for value received,
MILES M. STUCHIN
the holder or registered assigns (the "Warrantholder") is entitled to purchase
from Inmark Enterprises, Inc., a Delaware corporation (the "Company"), at any
time during the ten (10) year period commencing on the Commencement Date, One
Hundred Twenty-Two Thousand (122,000) shares of the Company's Common Stock, par
value $.001 per share (the "Common Shares"), at an exercise price of $0.75 per
share, in lawful money of the United States of America. The number of Common
Shares purchasable hereunder and the exercise price therefor are subject to
adjustment from time to time as hereinafter set forth. This Warrant shall expire
on the Expiration Date.
This Warrant is one of the Common Stock Purchase Warrants (the
"Warrants") originally issued as of the Commencement Date and evidencing the
right to purchase an aggregate of 122,000 Common Shares, subject to adjustment,
as provided herein.
SECTION 1
DEFINITIONS
-----------
For all purposes of this Warrant, the following terms shall
have the meanings indicated:
"Commencement Date" shall be April 24, 1995.
"Commission" shall mean the Securities and Exchange
Commission, or any other federal agency then administering the Securities Act of
1933, as amended.
"Common Shares" shall mean shares of the Common Stock, par
value $.001 per share, of the Company.
"Company" shall mean Inmark Enterprises, Inc., a Delaware
corporation.
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"Exercise Price" shall mean the exercise price of $0.75 per
share or such exercise price as adjusted from time to time pursuant to the
provisions hereof.
"Expiration Date" shall mean April 24, 2005.
"Market Price" shall have the meaning set forth in Section
5C(7).
"Securities Act" shall mean the Securities Act of 1933, as
amended, or any successor federal statute, and the rules and regulations of the
Commission thereunder, all as the same shall be in effect at the time.
"Transfer" as used in Section 4 shall include any disposition
of any Warrants, or of any interest therein which would constitute a sale
thereof within the meaning of the Securities Act.
"Warrant Shares" shall mean the aggregate number of Common
Shares issuable by the Company upon the exercise of this Warrant.
"Warrantholder" shall mean the owners of the Warrant issued
hereby.
All terms used in this Warrant which are not defined in this
Section 1 shall have the meanings respectively set forth therefor elsewhere in
this Warrant.
SECTION 2
EXERCISE OF WARRANT
-------------------
A. General. To exercise this Warrant in whole or in part, the
registered holder hereof shall complete the Subscription Form attached hereto
and deliver to the Company at its principal executive office, or to the stock
transfer agent of the Company at its principal executive office, the
Subscription Form, this Warrant and cash in an amount equal to the then
aggregate Exercise Price of the Common Shares being purchased. Upon receipt
thereof, the Company shall, as promptly as practicable, and in any event, within
ten (10) business days thereafter, execute or cause to be executed and deliver
to the Warrantholder, a certificate or certificates representing the aggregate
number of Common Shares specified in said Subscription Form. Each certificate so
delivered shall be in such denomination as reasonably may be requested by the
Warrantholder and shall be registered in the name of the Warrantholder or in the
name of such other Warrantholder as shall be designated by the Warrantholder. If
the Warrantholder elects to transfer the Warrants to such other Warrantholder,
the Warrantholder will provide such evidence (including an opinion from counsel
reasonably acceptable to the Company) as is necessary to establish that the
issuance of Warrant Shares to such other Warrantholder may be made without
registration under the Securities Act (unless an appropriate registration
statement covering, the Warrant Shares has been ordered effective by the
Commission and remains in effect). If this Warrant shall have been exercised
only in part, the Company shall, at the time of delivery of said certificate or
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<PAGE>
certificates, deliver to the Warrantholder a new Warrant evidencing the right of
the Warrantholder to purchase the remaining Common Shares covered by this
Warrant. The Company shall pay all expenses, taxes and other charges payable in
connection with the preparation, execution and delivery of certificates pursuant
to this Section 2, including certificates to be issued to such Warrantholders as
shall be the initial Warrantholders. Thereafter, in the event that certificates
shall be registered in the name of a person other than the initial
Warrantholder, funds sufficient to pay all transfer taxes which shall be payable
upon the execution and delivery of such certificate or certificates shall be
paid by the Warrantholder to the Company at the time of delivering this Warrant
to the Company as mentioned above.
B. Transfer Restriction Legend. Each certificate for the
Warrant Shares (unless at the time of exercise the Warrant Shares have been sold
pursuant to a registration statement under the Securities Act) shall bear the
following legend on the face thereof:
"The transfer of the securities represented hereby is subject
to the restrictions set forth in Section 4 of Warrant No. , dated as of
, and delivered to the original holder hereof, a copy of which is
available for inspection at the office of the Company, and no transfer
of such securities shall be valid or effective unless and until the
terms and conditions of said Section 4 of said Warrant shall have been
complied with. The shares represented hereby have not been registered
under the Securities Act of 1933, as amended, and may be offered or
sold only if registered pursuant to the provisions of the Securities
Act or if an exemption from registration is available."
C. Acknowledgement of Continuing Obligation. Upon the request
of the Warrantholder at the time of the exercise of this Warrant, in whole or in
part, the Company will acknowledge in writing its continuing obligation to such
Warrantholder in respect of the rights to which such Warrantholder shall
continue to be entitled after such exercise in accordance with this Warrant,
provided, however, that the failure of such Warrantholder to make any such
request shall not affect the continuing obligation of the Company to the
Warrantholder in respect of such rights.
D. Character of Warrant Shares. All Common Shares issuable
upon the exercise of this Warrant, when paid for in accordance with this
Warrant, shall be duly authorized, validly issued, fully paid and nonassessable
Common Shares of the Company.
SECTION 3
OWNERSHIP OF THIS WARRANT
-------------------------
A. Persons Deemed Owners. The Company may deem and treat the
person in whose name this Warrant is registered as the holder and owner hereof
(notwithstanding any notations of ownership or writing hereon made by anyone
other than the Company) for all
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<PAGE>
purposes and shall not be affected by any notice to the contrary, until
presentation of this Warrant for registration of transfer as provided in this
Section 3.
B. Exchange, Transfer and Replacement. This Warrant is
exchangeable, upon the surrender hereof by the Warrantholder to the Company at
its office or to the stock transfer agent of the Company at its office, for new
Warrants of like tenor representing in the aggregate the right to purchase such
number of Common Shares as shall be equal to the number of Common Shares set
forth on the face of this Warrant. Subject to Section 4 hereof, this Warrant and
all rights hereunder are transferable in whole or in part upon the books of the
Company by the Warrantholder in person or by duly authorized attorney, and a new
Warrant shall be made and delivered by the Company, of the same tenor as this
Warrant but registered in the name of the transferee, upon surrender of this
Warrant duly endorsed to the Company at its office or to the stock transfer
agent of the Company at its office on or after such date. Upon receipt by the
Company of evidence reasonably satisfactory to it of the loss, theft,
destruction or mutilation of this Warrant, and, in case of loss, theft or
destruction, of indemnity or security reasonably satisfactory to it, and upon
surrender and cancellation of this Warrant, if mutilated, the Company will make
and deliver a new Warrant of like tenor, in lieu of this Warrant. This Warrant
shall be promptly cancelled by the Company upon the surrender hereof in
connection with any exchange, transfer or replacement. The Company shall pay all
expenses, taxes (other than stock transfer taxes) and other charges payable in
connection with the preparation, execution and delivery of Warrants pursuant to
this Section 3.
SECTION 4
RESTRICTIONS ON EXERCISE AND TRANSFER
-------------------------------------
A. General. Notwithstanding any provisions contained in this
Warrant to the contrary, this Warrant shall not be exercisable or transferable
except upon the conditions specified in this Section 4, which conditions are
intended, among other things, to insure compliance with the provisions of the
Securities Act in respect of the exercise or transfer of such Warrant or
transfer of such Warrant Shares. The Warrantholder agrees that it will not (i)
transfer this Warrant prior to delivery to the Company of an opinion of counsel
as described in subsection B of this Section 4, (ii) exercise this Warrant prior
to delivery to the Company of an opinion of counsel as described in subsection B
of this Section 4, or (iii) transfer Warrant Shares prior to delivery to the
Company of an opinion of counsel as described in subsection B of this Section 4,
or until registration of such Warrant Shares under the Securities Act has become
effective provided that such registration statement remains effective at the
time of such transfer.
B. Notice of Intention to Exercise or Transfer: Opinion of
Counsel. The Warrantholder agrees that prior to any exercise or transfer of this
Warrant, the Warrantholder will give written notice to the Company of its
intention to effect such exercise or such transfer. The following provisions
shall then apply:
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<PAGE>
1. If there shall have been delivered to the Company
an opinion of counsel selected by the Warrantholder as shall be approved by the
Company (which approval shall not be unreasonably withheld), to the effect (and
in form and substance acceptable to the Company) that the proposed exercise or
transfer of this Warrant or the proposed transfer of the Warrant Shares in
accordance with the intended method of disposition specified in the notice to
the Company may be effected without registration under the Securities Act and
applicable state securities laws, then the Warrantholder of this Warrant shall
be entitled to exercise or transfer this Warrant or transfer such Warrant
Shares, as the case may be, in accordance with the intended method of
disposition specified in the notice delivered by such holder to the Company
without registration in reliance on an exemption from the registration
provisions of federal and state securities laws.
2. If an opinion of such Warrantholder's counsel to
the effect described in Clause (1) of this subsection B shall not have been
delivered to the Company, the Warrantholder shall not be entitled to transfer
this Warrant, and shall not be entitled to exercise this Warrant or to transfer
such Warrant Shares, as the case may be, until registration under the Securities
Act of such Warrant Shares, as the case may be, is effective.
C. Registration Rights. The Warrantholder shall have the
following demand and piggyback registration rights, excluding registration
statements filed under Commission Forms S-4 and S-8 and any successor forms
thereto:
1. The Warrantholder (or if there is more than one
Warrantholder then the Warrantholders beneficially owning at least 66 2/3 % of
the Warrant Shares represented hereby), shall have the right on two separate
occasions to demand that the Company expeditiously file a registration statement
under the Securities Act covering, all, but not less than all, of the Warrant
Shares beneficially owned by such requesting Warrantholder. Each such demand may
be made at any time after six (6) months from the Commencement Date, but in no
event later than the Expiration Date. Should this registration be delayed by the
Company, the period when such demand may be made will be extended for a period
of time equal to the length of the delay in registering such securities. In
connection with the first demand, the Company shall bear all expenses attendant
to registering such securities (other than the cost of counsel to selling
stockholders and underwriting discounts and commissions, except as prohibited by
Blue sky laws) and in connection with the second demand, the holders will bear
all such expenses.
2. If the Company shall intend to file a registration
statement, then the Warrantholder and any successor Warrantholders and the
initial Holder and the first and second transferee of the Warrant Shares (it
being acknowledged that no transferee of the Warrant Shares following the second
transfer shall be entitled to the rights provided under this Section 4(2), and
that an affiliate of the initial Holder shall not be deemed a transferee for
this purpose) shall have the right to piggyback the Warrant Shares in the
registration statement, provided that after the Company delivers written notice
by registered mail of its intention to file a registration statement under the
Securities Act, the holders must respond
5
<PAGE>
affirmatively within thirty (30) business days after delivery of such notice. In
connection with this piggyback registration right, the Company shall bear all
expenses attendant to registering such securities (other than the cost of
counsel to selling stockholders and underwriting discounts and commissions,
except as prohibited by Blue sky laws).
3. If, in the sole judgment of the managing
underwriter of any public offering by the Company, the amount of securities to
be registered pursuant to the aforementioned piggyback rights of Section 4C(2)
hereof shall be determined to be, in the aggregate, an amount which would
adversely affect the success of the Company's registration of its securities for
its own account, then, as to the amount of Common Shares to be registered on
behalf of persons other than the Company and the Warrant Shares to be included
in the registration statement, such persons shall agree to delay the offer and
sale of such Warrant Shares for a period of forty-five (45) days from the date
of completion of the underwritten distribution of the securities being
registered for the account of the Company; provided, that no other security
holder may sell securities owned by it in such underwritten offering.
D. Company's Obligations in Registration. If and whenever the
Company is required by the provisions of this Section 4 to effect the
registration of the Warrant Shares under the Securities Act, the Company will:
1. Prepare and file with the Commission a
registration statement
with respect to all outstanding Warrant Shares and cause such registration
statement to become effective and file such amendments necessary to maintain the
effectiveness of the registration statement for a period of not less than one
(1) year, except that the Company shall not be required to keep such
registration statement effective, or to prepare and file any amendments or
supplements thereto after the period of distribution of the registered
securities has been completed;
2. Furnish to the holders for whom such Warrant
Shares are registered or are to be registered such numbers of copies of the
preliminary prospectus included in such registration statement and the
prospectus included in such registration statement at the time it is ordered
effective by the Commission as such holders may reasonably request in order to
facilitate the disposition of the registered securities;
3. Use reasonable efforts to register or qualify the
Warrant Shares covered by such registration statement under such other
securities or Blue Sky laws of such jurisdictions as the Warrantholders for whom
the Warrant Shares are registered or are to be registered shall reasonably
request, provided, however, that the Company will not be required to: (i)
qualify generally to do business in any jurisdiction where it would not be
required to do so but for this Clause 3; (ii) subject itself to taxation in such
jurisdiction; (iii) consent to general service of process; (iv) register in any
state requiring, as a condition to registration, the escrow or surrender of any
Company securities held by any security holder; and (v) incur
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<PAGE>
expenses exceeding $10,000 in the aggregate, in connection with such
registration or qualification; and
4. Notify each holder for whom such Warrant Shares
are registered or are to be registered covered by such registration statements,
at any time when a prospectus relating thereto is required to be delivered under
the Securities Act, of the happening of any event as a result of which the
prospectus included in such registration statement, as then in effect, includes
an untrue statement of a material fact or omits to state any material fact
required to be stated therein or necessary to make the statements therein not
misleading in the light of the circumstances then existing, and at the request
of any such holder, prepare and furnish to such holder a reasonable number of
copies of a supplement to or an amendment of such prospectus as may be necessary
so that, as thereafter delivered to the purchasers of such securities, such
prospectus shall not include an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make the
statement therein not misleading in the light of the circumstances then
existing, provided that no such supplement or amendment need be filed after
distribution of the registered securities has been completed.
E. Information From Warrantholders. Notices and requests
delivered by Warrantholders to the Company pursuant to this Section 4 shall
contain such information regarding the Warrant and the Warrant Shares and the
intended method of disposition of the Warrant Shares and such other information
regarding the Warrantholders as shall reasonably be required by counsel to the
Company in order to appropriately disclose matters pertaining to the
Warrantholders in the registration statement.
F. Company's Indemnification. In the event of any registration
under the Securities Act of any Warrant Shares pursuant to this Section 4, the
Company hereby agrees to indemnify and hold harmless each Warrantholder
disposing of such Warrant Shares and each other person, if any, who controls
such Warrantholder within the meaning of the Securities Act and each other
person (including underwriters) who participates in the offering of such
underlying securities, against any losses, claims, damages or liabilities, joint
or several, to which such Warrantholder or controlling person or participating
person may become subject under the Securities Act or otherwise, in so far as
such losses, claims, damages or liabilities (or proceedings in respect thereof)
arise out of or are based upon any untrue statement or alleged untrue statement
of any material fact contained, on the effective date thereof, in any
registration statement under which such Warrant Shares were registered under the
Securities Act, in any preliminary prospectus or final prospectus contained
therein, or in any amendment or supplement thereto, or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading,
and will reimburse such Warrantholder and each such controlling person or
participating person for any legal or any other expenses reasonably incurred by
such Warrantholder or such controlling person or participating person in
connection with investigating or defending any such loss, damage, liability or
proceeding; provided, however, that the Company will not be liable in any such
case to the extent that any
7
<PAGE>
such loss, claim, damage or liability arises out of or is based upon an untrue
statement or alleged untrue statement or omission or alleged omission made in
such registration statement, said preliminary or final prospectus or said
amendment or supplement in reliance upon and in conformity with written
information furnished to the Company by such Warrantholder or such controlling
or participating person, as the case may be, specifically for use in the
preparation thereof.
G. Warrantholder's Indemnification. It shall be a condition of
the Company's obligation under this Section 4 to effect any registration under
the Securities Act that there shall have been delivered to the Company an
agreement or agreements duly executed by each Warrantholder for whom Warrant
Shares are to be registered, whereby such Warrantholder agrees to indemnify and
hold harmless the Company, each other person referred to in subparts (1), (2),
(3) and (5) of Section 11(a) of the Securities Act in respect of such
registration statement and each other person, if any, which controls the Company
within the meaning of the Securities Act, against any losses, claims, damages or
liabilities, joint or several, to which the Company may become subject under the
Securities Act or otherwise, but only to the extent that such losses, claims,
damages or liabilities (or proceedings in respect thereof) arise out of or are
based upon any untrue statement or alleged untrue statement of any material fact
contained, on the effective date thereof, in any registration statement under
which such Warrant Shares were registered under the Securities Act, in any
preliminary prospectus or final prospectus contained therein or in any amendment
or supplement thereto or arise out of or are based upon the omission or the
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, which, in each such
statement, said preliminary or final prospectus or said amendment or supplement
in reliance upon, and in conformity with, written information furnished to the
Company by such Warrantholder specifically for use in the preparation thereof.
H. Rule 144 Reporting. With a view to making available the
benefits of certain rules and regulations of the Commission which may permit the
sale of the Warrant Shares to the public without registration, the Company
agrees to:
(1) Make and keep public information available as
those terms are understood and defined in Rule 144 under the Securities Act, at
all times from and after ten (10) days following the effective date of the first
registration under the Securities Act filed by the Company for an offering of
its securities to the public;
(2) Take such action, including the voluntary
registration of its Common Stock under Section 12 of the Securities Exchange Act
of 1934, as amended ("Exchange Act"), as is reasonably necessary to enable the
Warrantholders to utilize Form S- 2, if available, or Form S-3 for the sale of
the Warrant Shares, such action to be taken immediately after the first
registration statement filed by the Company for the offering of its securities
to the general public is declared effective;
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<PAGE>
(3) File with the Commission in a timely manner all
reports and other documents required of the Company under the Securities Act and
the Exchange Act at any time after it has become subject to such reporting
requirements; and
(4) Furnish to the Warrantholders forthwith upon
request a written statement by the Company as to its compliance with the
reporting requirements of Rule 144 and of the Securities Act and the Exchange
Act, a copy of the most recent annual or quarterly report of the Company, and
such other reports and documents so filed as the Warrantholder shall be required
to have to avail itself of any rule or regulation of the Commission allowing,
the Warrantholder to sell any such securities without registration.
SECTION 5
ANTI-DILUTION PROVISIONS
------------------------
A. Adjustment of Exercise Price. The Exercise Price shall be
subject to adjustment from time to time as hereinafter provided. Upon each
adjustment of the Exercise Price, the Warrantholder shall thereafter be entitled
to purchase, at the Exercise Price resulting from such adjustment, the number of
Warrant Shares obtained by multiplying the Exercise Price in effect immediately
prior to such adjustment by the number of Warrant Shares purchasable pursuant
hereto immediately prior to such adjustment and dividing the product thereof by
the Exercise Price resulting from such adjustment.
B. Exercisable Price Adjustment Formulas. If and whenever
after the date of this Warrant, the Company shall issue or sell any Common
Shares (except as provided in Subsection H of this Section 5) for a
consideration per share less than the Exercise Price in effect immediately prior
to the time of issue or sale, then forthwith the Exercise Price shall be reduced
to the prices (calculated to the nearest tenth of a cent) determined by dividing
(1) an amount equal to the sum of (aa) the number of Common Shares outstanding
immediately prior to such issue or sale (assuming the conversion of all
securities convertible into Common Shares) multiplied by the Exercise Price in
effect immediately prior to such issue or sale, and (bb) the consideration, if
any, received and deemed received by the Company upon such issue or sale, by (2)
the total number of Conunon Shares outstanding and deemed outstanding
immediately after such issue or sale. No adjustment of the Exercise Price,
however, shall be made in an amount less that $.01 per share, but any such
lesser adjustment shall be carried forward and shall be made at the time and
together with the next subsequent adjustment which together with any adjustments
so carried forward shall amount to $.01 per share or more.
C. Constructive Issuances of Stock, Convertible Securities;
Rights and Options; Stock Dividends. For the purposes of subsection B of this
Section 5, the following provisions (1) to (8), inclusive, shall also be
applicable:
(1) In case at any time subsequent to the date
hereof, the Company shall in any manner grant any rights to
subscribe for or to purchase, or any
9
<PAGE>
options for the purchase of, Common Shares or any stock or
securities convertible into or exchangeable for Common Shares
(such convertible or exchangeable stock or securities being
hereinafter called "Convertible Securities") whether or not
such rights or options or the right to convert or exchange any
such Convertible Securities are immediately exercisable, and
the consideration per share for which Common Shares are issued
or sold upon the exercise of such Convertible Securities
(determined by dividing (a) the total amount, if any, received
or receivable by the Company as consideration for the granting
of such rights or options, plus the minimum aggregate amount
of additional consideration, if any, payable to the Company
upon the exercise of such rights or options, plus, in the case
of any such rights or option, which relate to such Convertible
Securities, the minimum aggregate amount of additional
consideration, if any, payable upon the issue or sale of such
Convertible Securities (and, if such convertible securities
constitute obligations of the Company, the principal amount of
such obligations so converted) and upon the conversion or
exchange thereof, by (b) the total maximum number of Common
Shares issuable upon the exercise of such rights or options or
upon the conversion or exchange of all such Convertible
Securities issuable upon the exercise of such rights or
options) shall be less than the Exercise Price in effect
immediately prior to the time of the granting of such rights
or options, then the total maximum number of Common Shares
issuable upon the exercise of such rights or options (or upon
conversion or exchange of the total maximum amount of such
Convertible Securities issuable upon the exercise of such
rights or options) shall be deemed to be outstanding and to
have been issued for such price per share. Except as provided
in Clause (3) below, no further adjustments of the Exercise
Price shall be made upon the actual issuance of such Common
Shares or of such Convertible Securities upon exercise of such
rights or options or upon the actual issue of such Common
Shares upon conversion or exchange of such Convertible
Securities.
(2) In case at any time the Company shall in any
manner issue or sell any Convertible Securities, whether or
not the rights to exchange or convert thereunder are
immediately exercisable, and the price per share for which
Common Shares are issuable upon such conversion or exchange
(determined by dividing (a) the total amount received or
receivable by the Company as consideration for the issue or
sale of such Convertible Securities, plus the minimum
aggregate amount of additional consideration, if any, payable
to the Company upon the conversion or exchange thereof, by (b)
the total maximum number of shares which would be issuable
upon the conversion or exchange of all such Convertible
Securities) shall be less than the Exercise Price in effect
immediately prior to the time of such issue or sale, then the
total maximum number of Common Shares issuable upon conversion
or exchange of all such Convertible Securities shall (as of
the date of the issue or sale of such Convertible Securities)
be deemed to be outstanding and to have been issued
10
<PAGE>
for such price per share; except as otherwise specified in
Clause (3) below, no further adjustments of the Exercise Price
shall be made upon the actual issuance of such Common Shares
upon conversion or exchange of such Convertible Securities.
(3) If the purchase price provided for in any right
or option referred to in Clause (1) of this subsection 5, or
the additional consideration, in any, payable upon the
conversion or exchange of any convertible securities referred
to in Clause (i) or (ii) of this Section 5, or the rate at
which any Convertible Securities referred to in Clauses (1)
and (2) of this subsection C of this Section 5 are convertible
into or exchangeable for Common Shares, shall change or a
different purchase price or rate shall become effective at any
time or from time to time (other than under or by reason of
provisions designed to protect against dilution) then, upon
such change becoming effective, the Exercise Price then in
effect at the time of such event shall forthwith be increased
or decreased to such Exercise Price as would have obtained had
the rights, options or Convertible Securities still
outstanding provided for such changed purchase price,
additional compensation or rate of commission or exchange, as
the case may be, at the time initially granted, issued or
sold. On the expiration of any such option or right or the
termination of any such right to convert or exchange such
Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be increased to such Exercise Price
as would have obtained at the time of such expiration or
termination had such option, right or convertible securities
never been issued. If the purchase price provided for in any
right or option referred to in Clause (1) of subsection C of
this Section 5, or the additional consideration payable upon
the exchange or conversion of any Convertible Securities
referred to in Clause (1) and (2) of this Section 5, or the
rate at which any Convertible Securities referred to in
Clauses (1) and (2) of subsection C of this Section 5 are
convertible into or exchangeable for Common Shares, shall
decrease at any time under or by reason of provisions with
respect thereto designed to protect against dilution, then in
the case of the delivery of Common Shares upon the exercise of
any such right or option or upon conversion or exchange of any
such right or option or upon conversion or exchange of any
such Convertible Securities, the Exercise Price then in effect
hereunder shall forthwith be decreased to such Exercise Price
as would have obtained had the adjustments made upon issuance
of such right or option or Convertible Securities been made
upon the basis of the issuance of (and the total consideration
computed in accordance with Clause (1) or (2) of this
subsection C of Section 5, as the case may be, received for)
the Common Shares delivered as aforesaid.
(4) In case of the issuance of Common Shares or
Convertible Securities of the Company as a dividend or
distribution upon any Common Shares of the Company, such
Common Shares or Convertible Securities, as the
11
<PAGE>
case may be, issuable in payment of such dividend or
distribution shall be deemed to have been issued or sold
without consideration.
(5) In case at any time any Common Shares or
Convertible Securities or any rights or options to purchase
any such Common Shares or Convertible Securities shall be
issued or sold for cash, the consideration received therefor
shall be deemed to be the amount payable to the Company there
for, without deduction therefrom of any expenses incurred or
any underwriting or selling commissions or concessions paid by
the Company in connection therewith and plus any underwriting
or selling discounts allowed by the Company in connection
therewith. In case any Common Shares or Convertible Securities
or any rights or options to purchase any such Common Shares or
Convertible Securities shall be issued or sold for a
consideration other than cash, the amount of the consideration
other than cash payable to the Company shall be deemed to be
the fair value of such consideration as determined by the
Board of Directors of the Company, without deduction therefrom
of any expenses incurred or any underwriting or selling
commissions or concessions paid by the Company in connection
therewith and plus any underwriting or selling discounts
allowed by the Company in connection therewith. In case any
Common Shares or Convertible Securities shall be issued in
connection with any merger of another corporation into the
Company, the amount of consideration therefor shall be deemed
to be the fair value, as determined by the Board of Directors
of the Company, of such portion of the assets of such merged
corporation as such Board shall determine to be attributable
to such Common Shares, Convertible Securities, rights or
options, as the case may be.
(6) In case at any time the Company shall take a
record of the holders of its Common Stock for the purpose of
entitling them (a) to receive a dividend or other distribution
payable in Common Shares or in Convertible Securities, or (b)
to subscribe for or purchase Common Shares or Convertible
Securities, then such record date shall be deemed to be the
date of the issue or sale of the Common Shares deemed to have
been issued or sold upon the declaration of such dividend or
the making of such other distribution or the date of the
granting of such right or subscription or purchase, as the
case may be.
(7) The number of Conunon Shares outstanding at any
given time shall include shares owned or held by or for the
account of the Company, and the disposition of any such shares
shall not be considered an issue or sale of Common Shares for
the purposes of subsection B of this Section 5.
D. Effect of Certain Dividends. In case at any time the
Company shall declare a dividend upon the Common Shares payable otherwise than
out of earnings or earned
12
<PAGE>
surplus (other than in a partial or total liquidation or dissolution of the
Company) and otherwise than in Common Shares or Convertible Securities, the per
share Exercise Price in effect immediately prior to the declaration of such
dividend shall be reduced by an amount equal, in the case of a dividend in cash,
to the amount thereof payable per Common Share or, in the case of any other
dividend, to the fair value thereof per Common Share as determined by the Board
of Directors of the Company. For the purposes of the foregoing a dividend other
than in cash shall be considered payable out of earnings or earned surplus only
to the extent that such earnings or earned surplus are charged an amount equal
to the fair value of such dividend as determined by the Board of Directors of
the Company. Such reductions shall take effect as of the date on which a record
is taken for the purpose of such dividend, or if a record is not taken, the date
as of which the holders of record of Common Shares entitled to such dividends
are to be determined. As used in this subsection D, the term "dividend" shall
mean any distribution to the holders of Common Shares. Except as provided in
this subsection D, no adjustment in the Exercise Price and no change in the
number of Warrant Shares so purchasable shall be made pursuant to this Section 5
as a result of or by reason of any such dividend.
E. Stock Splits and Reverse Splits. In case at any time the
Company shall subdivide its outstanding Common Shares into a greater number of
shares, the Exercise Price in effect immediately prior to such subdivision shall
be proportionately reduced and the number of shares purchasable pursuant to this
Warrant immediately prior to such subdivision shall be proportionately
increased, and conversely, in case at any time the Company shall combine its
outstanding Common Shares into a smaller number of shares, the Exercise Price in
effect immediately prior to such combination shall be proportionately increased
and the number of Common Shares purchasable upon the exercise of this Warrant
immediately prior to such combination shall be proportionately reduced. Except
as provided in this subsection E, no adjustment in the Exercise Price and no
exchange in the number of Warrant Shares so purchasable shall be made pursuant
to this Section 5 as a result of or by reason of any such subdivision or
combination.
F. Effect of Reorganization and Assets Sales. If any capital
reorganization or reclassification of the capital stock of the Company, or
consolidation of the Company with or merger of the Company into another
corporation, or the sale of all or substantially all of its assets to another
corporation, shall be effected in such a way that holders of Common Shares shall
be entitled to receive stock, securities or assets with respect to or in
exchange for Common Shares, then, as a condition of such reorganization,
reclassification, consolidation, merger or sale, lawful and adequate provision
shall be made whereby each holder of Warrants shall thereafter have the right to
receive upon the basis and upon their terms and conditions specified herein and
in lieu of the shares of the Common Shares of the Company immediately
theretofore receivable upon the exercise of such Warrants, such shares of stock,
securities or assets as may be issued or payable with respect to or in exchange
for a number of outstanding Common Shares equal to the number of shares of such
stock immediately theretofore so receivable upon exercise had such
reorganization, reclassification, consolidation, merger or sale not taken place,
and in any such case appropriate provision shall be made with respect to
13
<PAGE>
the rights and interests of such holder to the end that the provisions hereof
(including, without limitation, provisions for adjustment of the Exercise Price
and of the number of shares issuable upon exercise and for the registration of
the Warrants and the underlying Common Shares as provided in Section 4) shall
thereafter be applicable, as nearly as may be, in relation to any shares of
stock, securities or assets thereafter deliverable upon the exercise of such
Warrants. The Company shall not effect any such consolidation, merger or sale
unless prior to or simultaneously with the consummation thereof the successor
corporation (if other than the Company) resulting from such consolidation or
merger, or of the corporation purchasing such assets shall assume by written
instrument executed and mailed or delivered to each Warrantholder, the
obligation to deliver to such Warrantholder such shares of stock, securities or
assets as, in accordance with the foregoing provisions such Warrantholder may be
entitled to receive, and containing the express assumption of such successor
corporation of the performance and observance of the provisions of this Warrant
to be performed and observed by the Company and of all liabilities and
obligation of the Company hereunder.
G. Accountants' Certificate. Upon each adjustment of the
Exercise Price and upon each change in the number of Warrant Shares, then and in
each such case, the Company will promptly obtain a certificate of a firm of
independent certified public accountants of recognized standing selected by the
Company's Board of Directors, who may be the regular auditors of the Company,
stating, the adjusted Exercise Price and the new number of Warrant Shares so
issuable, or specifying the other shares of stock, securities or assets and the
amount thereof receivable as a result of such change in rights, and setting
forth in reasonable detail the method of calculation and the facts upon which
such calculation is based. The Company will promptly mail a copy of such
accountant's certificate to the Warrantholders, which certificate shall be
conclusive evidence of the correctness of the computation with respect to any
such adjustment of the Exercise Price and any such change in the number of such
Warrant Shares so issuable.
H. No Adjustments Required. Notwithstanding anything herein to
the contrary, there shall be no adjustment in the Exercise Price in connection
with (i) the grant of any option, or the exercise of any option granted under an
employee benefit plan or stock option plan or (ii) upon the exercise of any
Convertible Security outstanding on the date of this Warrant.
SECTION 6
SPECIAL AGREEMENT OF THE COMPANY
--------------------------------
A. Reservation of Shares. The Company will reserve and set
apart and have at all times, free from preemptive rights, a number of authorized
but unissued Common Shares deliverable upon the exercise of the Warrants
sufficient to enable it any time to fulfill all its obligation hereunder.
B. Avoidance of Certain Actions. The Company will not, by
amendment of its certificate of incorporation or through any reorganization,
transfer of assets,
14
<PAGE>
consolidation, merger, issue or sale of securities or otherwise, avoid or take
any action which would have the effect of avoiding the observance or performance
of any of the terms to be observed or performed hereunder by the Company, but
will at all times in good faith assist in carrying out all of the provisions of
this Warrant and in taking of all such action as may be necessary or appropriate
in order to protect the rights of the holders of this Warrant against dilution
or other impairment.
C. Restriction on Issuance of Stock. With the exception of a
corporate merger or acquisition which has been approved by the Company's
shareholders in accordance with the law of the State of Delaware, the Company
will not issue any capital stock of any class which has rights to be preferred
as to dividends or as to the distribution of assets upon voluntary or
involuntary liquidation, dissolution or winding-up unless such rights shall be
limited to a fixed sum or percentage or par value in respect of participation in
dividends and in the distribution of such assets.
D. Listing on Securities Exchanges; Registration. If, and so
long as the Company's Common Shares are listed on any national securities
exchange, as defined in the Securities Exchange Act of 1934, as amended
(hereinafter called the "Exchange Act"), it will, at its expense, obtain and
maintain the approval for listing upon official notice of issuance of all
Warrant Shares at the time outstanding and maintain the listing of such shares
after their issuance so long as listing for such Common Shares is otherwise
maintained; and the Company will so list on such national securities exchange,
will register under the Exchange Act (or any similar statute then in effect) and
will maintain such listing of, any other securities that at any time are
issuable upon exercise of the Warrants if and at the time that any securities of
the same class shall be listed on such national securities exchange by the
Company for so long as such securities shall be listed on such national
securities exchange by the Company.
E. Notices of Certain Events. The Company agrees to give
notice to the Warrantholders within ten (10) days after the Company shall have
filed with the Commission or with any national securities exchange, as defined
in the Exchange Act, an application to register any securities of the Company
pursuant to Section 12 of the Exchange Act, or any comparable federal statute.
SECTION 7
NOTIFICATIONS BY THE COMPANY
----------------------------
In case at any time:
(1) the Company shall declare any dividend payable in Common
Shares or any distribution (other than cash dividends which are not in a greater
amount per share than most recent cash dividend) to the holders of the Common
Shares;
15
<PAGE>
(2) the Company shall make an offer for subscription pro rata
to the holders of its Common Shares of any additional shares of stock of any
class or other rights;
(3) there shall be any capital reorganization, or
reclassification of the capital stock of the Company, or consolidation or merger
of the Company with, or sale of all or substantially all of its assets to,
another corporation; or
(4) there shall be a voluntary or involuntary dissolution,
liquidation or winding-up of the Company;
then, in any one or more of such cases, the Company shall give notice to the
Warrantholder of this Warrant of the date on which (a) the books of the Company
shall close or a record shall be taken for such dividend, distribution or
subscription rights, or (b) such reorganization, reclassification,
consolidation, merger, sale, dissolution, liquidation or winding-up shall take
place, as the case may be. Such notice shall also specify the date as of which
the holders of Common Shares of record shall participate in such dividend,
distribution or subscription rights, or shall be entitled to exchange their
Common Shares for securities or other property deliverable upon such
reorganization, reclassification, consolidation, merger, sale, dissolution,
liquidation, or winding up as the case may be. Such written notice shall be
given not less than 10 days and not more than 90 days prior to the record date
or the date on which the Company's transfer books are closed in respect thereto
and such notice may state that the record date is subject to the effectiveness
of a registration statement under the Securities Act, or to a favorable vote of
stockholders, if either is required.
SECTION 8
NOTICES
-------
Any notice or other document required or permitted to be given
or delivered to Warrantholders shall be delivered at, or sent by certified or
registered mail to each Warrantholder at such address as shall have been
furnished to the Company in writing by such Warrantholder. Any notice or other
document required or permitted to be given or delivered to the Company shall be
delivered at, or sent by certified or registered mail to, the principal office
of the Company at 405 Park Avenue, 16th Floor, New York, New York 10022, or such
other address as shall have been furnished to the Warrantholders by the Company.
SECTION 9
NO RIGHTS AS STOCKHOLDER; LIMITATION OF LIABILITY
-------------------------------------------------
This Warrant shall not entitle any holder hereof to any of the
rights of a stockholder of the Company including without limitation, the right
to vote and receive dividends or other distributions. No provision hereof, in
the absence of affirmative action by the holder hereof to purchase Common
Shares, and no mere enumeration herein of the rights of privileges of the holder
hereof, shall give rise to any liability of such for the Exercise Price
16
<PAGE>
or as a stockholder of the Company, whether such liability is asserted by the
Company or by creditors of the Company.
SECTION 10
LAW GOVERNING
-------------
This Warrant shall be governed by, and construed and enforced
in accordance with, the laws of the State of Delaware.
SECTION 11
MISCELLANEOUS
-------------
This Warrant and any provision hereof may be changed, waived,
discharged or terminated only by an instrument in writing signed by the party
(or any predecessor in interest thereof) against which enforcement of the same
is sought. The headings in this Warrant are for purposes of reference only and
shall not affect the meaning or construction of any of the provisions hereof.
IN WITNESS WHEREOF, the Company has caused this Warrant to be
signed by its duly authorized officer under its corporate seal, attested by its
duly authorized officer and to be dated this 16th day of February, 1996.
INMARK ENTERPRISES, INC.
By: /s/ Donald A. Bernard
-------------------------
Donald A. Bernard, Executive Vice President
(Corporate Seal)
/s/ Miles M. Stuchin
--------------------
Miles M. Stuchin
17
Exhibit 5.1
July 29, 1998
Inmark Enterprises, Inc.
One Plaza Road
Greenvale, New York 11548
Ladies and Gentlemen:
We have acted as counsel to Inmark Enterprises, Inc., a
Delaware corporation (the "Company"), in connection with its Registration
Statement on Form S-3 (the "Registration Statement"), filed pursuant to the
Securities Act of 1933, as amended (the "Securities Act"), relating to the
offering from time to time by certain holders of 508,750 shares (the "Shares")
of common stock, $.001 par value per share, of the Company (the "Common Stock").
We have reviewed the Registration Statement, all amendments
thereto, and such other documents and instruments as we have deemed appropriate.
In such review, we have assumed the genuineness of all signatures, the
authenticity of all documents submitted as originals and the conformity to the
original documents of all documents submitted to us as copies.
On the basis of such review, and having regard to such legal
consideration as we have deemed relevant, it is our opinion that the Shares are
duly authorized and, upon exercise of the warrants to purchase the Shares and
upon payment of the exercise price for the Shares, the Shares shall be duly and
validly issued, fully paid and nonassessable.
We are members of the Bar of the State of New York and do not
purport to be experts or give any opinion except as to matters involving the
laws of such State, the general corporation laws of the State of Delaware and
the federal laws of the United States.
We hereby consent to the use of our name under the caption
"Legal Matters" in the prospectus included in the Registration Statement and to
the use of this opinion as an exhibit to the Registration Statement.
Very truly yours,
/s/ KRONISH, LIEB, WEINER & HELLMAN LLP
LEASE AGREEMENT
BY AND BETWEEN
415 NORTHERN BLVD. REALTY CORP., Landlord
and
INMARK SERVICES, INC., Tenant
<PAGE>
TABLE OF CONTENTS
Page
----
PREAMBLE ..............................................................1
LEASE PROVISIONS.......................................................2
RENT .....................................................2
LATE CHARGES..................................................3
OCCUPANCY.....................................................4
ALTERATIONS...................................................4
REPAIRS .....................................................6
WINDOW CLEANING...............................................9
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOAD...............9
SUBORDINATION................................................11
TENANT'S LIABILITY INSURANCE, PROPERTY LOSS, DAMAGE
INDEMNITY...........................................12
DESTRUCTION, FIRE AND OTHER CASUALTY.........................13
EMINENT DOMAIN...............................................16
ASSIGNMENT, MORTGAGE, ETC....................................17
UTILITIES, WATER, SEWER AND TAXES............................18
ACCESS TO PREMISES...........................................20
BANKRUPTCY...................................................23
DEFAULT ....................................................26
REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION................28
FEES AND EXPENSES............................................31
NO REPRESENTATIONS BY LANDLORD...............................31
END OF TERM..................................................35
QUIET ENJOYMENT..............................................36
FAILURE TO GIVE POSSESSION...................................36
NO WAIVER....................................................37
WAIVER OF TRIAL BY JURY......................................38
INABILITY TO PERFORM........................38
BILLS AND NOTICES............................................38
CLEANING AND ALL INTERIOR MAINTENANCE........................39
SECURITY ....................................................41
CAPTIONS ....................................................43
DEFINITIONS..................................................43
NON-DISTURBANCE AGREEMENT....................................44
GLASS ....................................................44
SUCCESSORS AND ASSIGNS.......................................44
MISCELLANEOUS................................................45
<PAGE>
AGREEMENT OF LEASE (the "Lease") made as of this day of June , 1998,
between 415 NORTHERN BLVD. REALTY CORP. located at 265 Great Neck Road, Great
Neck, New York, party of the first part, hereinafter referred to as LANDLORD,
and INMARK SERVICES, INC. located at 415 Northern Boulevard, Great Neck, New
York, party of the second part, hereinafter referred to as TENANT.
PREAMBLE
--------
WITNESSETH: Landlord hereby leases to Tenant and Tenant hereby hires from
Landlord the first floor containing 5,428 square feet and the second floor
containing 5,428 square feet and the entire basement or lower level floor (the
"basement space") containing 5,850 square feet for a total of 16,706 square feet
in the premises located at 415 Northern Boulevard, in the Village of Great Neck,
Town of Hempstead, in the county of Nassau, State of New York, for the term
("Term") of ten (10) years (or until such earlier time as the Lease shall cease
and expire as hereinafter provided) to commence on the 1st day of August, 1998,
and to end on the 31st day of July, 2008, both dates inclusive, at an annual
base rental rate of Two Hundred Ninety-One Thousand Nine Hundred and Four
($291,904.00) Dollars payable in equal monthly installments of Twenty-Four
Thousand Three Hundred Twenty-five and 33/100 dollars ($24,325.33), payable on
the first day of each month, which Tenant agrees to pay in lawful money of the
United States which shall be legal tender in payment of the monthly base rent
due at the time
1
<PAGE>
specified for payment, at the office of Landlord or such other place as Landlord
may designate, without any set off or deduction whatsoever, except as otherwise
provided for in the Lease.
The parties hereto, for themselves, their heirs, distributees,
executors, administrators, legal representatives, successors and assigns, hereby
covenant as follows:
LEASE PROVISIONS
----------------
RENT:
1. (a) Initial Year. Tenant shall pay the base rent as above described
and as hereinafter provided. This base rent payable at the commencement of the
Lease shall be based upon the base annual rent of $21.50 per square foot, for
each of the first and second floor, and base annual rent of $10.00 per square
foot for the basement space.
(b) Years Two (2) through Ten (10). For years two (2) through
ten (10) of the Lease, commencing with the anniversary of the Lease and for each
year thereafter, the annual base rent shall be increased by 3.5% or the local
Consumer Price Index, whichever is less, but such increase shall not be less
than 3% or greater than 4%.
(c) Work Allowance. In consideration of Tenant entering into
the Lease, Landlord hereby grants Tenant a work allowance of $150,000 to be
credited towards Tenant's rent obligations in 24 monthly installments of $6,250
commencing with the first base rent payment due August 1, 1998.
2
<PAGE>
(d) Renewal Option. Tenant shall have the option to renew the
Lease for two (2) additional five (5) year terms at an increased annual base
rent consistent with the terms of Article 1(b). In the event Tenant exercises
the first five (5) year option, Landlord shall give Tenant a work allowance of
$3 per square foot for the first and second floor space and $1.25 per square
foot for the basement space. In the event Tenant exercises the second five (5)
year option, Landlord shall give Tenant an additional work allowance of $2 per
square foot for the first and second floor space and $1.00 per square foot for
the basement space. In the event Tenant exercises both five (5) year options at
the same time, Landlord shall give Tenant a work allowance of $5.00 per square
foot for the first and second floor space and $2.50 per square foot for the
basement space. Such work allowance for renewal terms shall be credited towards
Tenant's base rent payment obligations during the applicable renewal term(s)
such that Tenant shall not be obligated to make base rent payments during a
renewal term until the applicable work allowance credit has been credited.
LATE CHARGES:
2. If any payment of base rent or additional rent or any part
of the same, shall not be received within ten (10) days after notice that the
same was due and payable, Tenant shall be liable to pay Landlord interest on the
unpaid sums at an annual rate of ten percent (10%) per annum.
3
<PAGE>
OCCUPANCY:
3. Tenant shall use and occupy Demised Premises for any lawful
purpose except that Tenant shall not use the Demised Premises for retail
purposes except to an immaterial extent.
ALTERATIONS:
4. Tenant shall make no structural changes in or to the
Demised Premises of any nature without Landlord's prior written consent which
shall not be unreasonably withheld. Landlord will respond within ten (10) days
of submission to it of Tenant's plans and in the event Landlord does not consent
to Tenant's request, it shall give detailed reasons for denial of consent, with
the view that if Tenant can respond to or address Landlord's concerns, Landlord
will approve Tenant's requests therefor. For the purposes of the Lease, to the
extent Landlord conditions its approval of structural changes on Tenant removing
such structural changes and/or restoring the Demised Premises to its condition
prior to such structural changes at the expiration of the Term, Landlord's so
conditioning its approval shall not be deemed to be "reasonable" unless such
structural changes alter the Demised Premises (i) in a manner materially and
fundamentally inconsistent with office or storage use, or (ii) so as to result
in a material reduction of square footage in the Demised Premises. Subject to
the provisions of this article, Tenant, at Tenant's expense, may make
alterations, installations, additions or improvements in or to the Demised
Premises which are non-structural by using licensed contractors or
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mechanics. All fixtures and all panelling, partitions, railings and like
installations, installed in the premises, either by Tenant or by Landlord on
Tenant's behalf, shall, to the extent remaining at the expiration of the Term
and any renewal terms (the "Lease Expiration") become the property of Landlord.
Nothing in this article shall be construed to prevent Tenant's removal of trade
fixtures, so long as the Demised Premises are left in vacant and broom-clean
condition at the Lease Expiration. All property permitted or required to be
removed by Tenant at the Lease Expiration and remaining in the premises after
Tenant's removal shall be deemed abandoned and may, at the election of Landlord,
either be retained as Landlord's property or may be removed from the premises by
Landlord at Tenant's expense. Tenant shall, before making any alterations,
additions, installations or improvements, at its expense, obtain all permits,
approvals and certificates as may be required by any governmental bodies and
(upon completion of alteration) obtain certificates of final approval thereof
and shall deliver copies of all such permits, approval and certificates to
Landlord. Tenant further agrees to carry and will cause Tenant's contractors and
sub-contractors to carry such workman's compensation, general liability,
personal and property damage insurance as Landlord may reasonably require.
Tenant agrees to obtain and deliver to Landlord, written and unconditional
waivers of mechanic's liens upon the real property in which the Demised Premises
are located for all work, labor and services to be performed and materials to be
furnished in connection with such
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work, signed by all contractors, sub-contractors, materialmen and laborers to
become involved in such work. Notwithstanding the foregoing, if any mechanic's
lien is filed against the Demised Premises, or the building of which the same
forms a part, for work claimed to have been done for or materials furnished to
Tenant, whether or not done pursuant to this article, the same shall be
discharged by Tenant within sixty (60) days thereafter, at Tenant's expense or
by the filing of bond in connection therewith.
REPAIRS:
5. Landlord shall maintain and repair all items ordinarily or
customarily identified as capital items or expenditures including, without
limitation, significant repairs or expenses relating to the replacement of the
roof, HVAC system, elevator and exterior walls, and Landlord shall also maintain
all structural elements of the Building and shall make all structural repairs.
In addition, Landlord at its expense, shall maintain and repair the parking lot
so as to ensure no less than 45 parking spaces and Landlord shall, at its
expense, maintain the landscaping in a clean and kempt manner in at least
comparable condition to similar buildings. Landlord shall allow Tenant to erect
on the outside of the building a sign or signs, or a hoist, lift or sidewalk
elevator for the exclusive use of Tenant, Tenant shall maintain such exterior
installations in good appearance and shall cause the same to be operated in a
good and workmanlike manner and condition, at Tenant's own cost and expense, and
shall cause the
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same to be covered by the insurance provided for hereafter in Article 9. Tenant
shall, throughout the term of the Lease, take good care of the Demised Premises
and the fixtures and appurtenances therein and, at its sole cost and expense,
make all non-structural repairs thereto (excluding HVAC, plumbing or electrical
lines unless the work was performed by Tenant) as and when needed to preserve
them in good working order and condition, reasonable wear and tear, obsolescence
and damage from the elements, fire or other casualty, excepted. Notwithstanding
the foregoing, all damage or injury to the Demised Premises or to any other part
of the building, or to its fixtures, equipment and appurtenances, whether
requiring structural or non-structural repairs, caused by or resulting from
carelessness, omission, neglect or improper conduct of Tenant, its servants,
employees, invitees or licensees (collectively, "Agents"), shall be repaired
promptly by Tenant at its sole cost and expense, to the reasonable satisfaction
of Landlord. Tenant shall also repair all damage to the building and the Demised
Premises caused by the moving of Tenant's fixtures, furniture or equipment.
Notwithstanding the foregoing, all damage or injury to the Demised Premises or
to any other part of the building, or to its fixtures, equipment and
appurtenances, whether requiring structural or non-structural repairs, caused by
or resulting from carelessness, omission, neglect or improper conduct of
Landlord or its Agents, shall be repaired promptly by Landlord at its sole cost
and expense, to the reasonable satisfaction of Tenant. Landlord shall also
repair all
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damage to the building and the Demised Premises caused by the moving of
Landlord's fixtures, furniture or equipment. All the aforesaid repairs shall be
of quality or class similar to the original work or construction. If Tenant
fails within thirty (30) days' notice to proceed with due diligence to make
repairs required to be made by Tenant, the same may be made by Landlord at the
expense of Tenant and the expenses thereof incurred by Landlord shall be paid by
Landlord and shall be collectible as additional rent after rendition of a bill
or statement therefor. If Landlord fails within thirty (30) days' notice to
proceed with due diligence to make repairs required to be made by Landlord, the
same may be made by Tenant at the expense of Landlord and the expenses thereof
incurred by Tenant shall be paid by Landlord within ten (10) days after
rendition of a bill or statement therefor. To the extent Tenant makes such
payments on behalf of Landlord and Landlord does not pay the bill within ten
(10) days after rendition, Tenant shall be entitled to offset such payments
against the base rent or additional rent amounts next due. If the Demised
Premises be or become infested with vermin, Tenant shall at Tenant's expense,
cause the same to be exterminated from time to time to the satisfaction of
Landlord. Tenant shall give Landlord prompt written notice of any defective
conditions in any plumbing, heating system or electrical lines located in,
servicing or passing through the Demised Premises and following such notice and
Landlord shall remedy the condition with due diligence at Landlord's expense
unless the condition was caused by Tenant. Except as specifically
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provided in this Article, Article 10, Article 19 or elsewhere in the Lease,
there shall be no allowance to the Tenant for the diminution of rental value and
no liability on the part of Landlord by reason of inconvenience, annoyance or
injury to business arising from Landlord, Tenant or others making or failing to
make any repairs, alterations, additions or improvements in or to any portion of
the building or the Demised Premises or in and to the fixtures appurtenances or
equipment thereof. The provisions of this Article 5 with respect to the making
of repairs shall not apply in the case of fire or other casualty which are dealt
with in Article 10 hereof.
WINDOW CLEANING:
6. Tenant, at its expense, shall be responsible to clean the
interior of the windows and Landlord, at its expense, shall be responsible to
clean the exterior of the windows.
REQUIREMENTS OF LAW, FIRE INSURANCE, FLOOR LOAD:
7. Landlord represents and warrants the Building is in
compliance with all Laws (hereinafter defined). Upon commencement of the Term,
and at all times thereafter, Tenant, at Tenant's sole cost and expense, shall
promptly comply with all present and future laws, orders and regulations of all
state, federal, municipal and local governments, departments, commissions and
boards and any direction of any public officer pursuant to law, and all orders,
rules and regulations of the New York Board of Fire Underwriters or
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any similar body which shall impose any violation, order of duty upon Landlord
or Tenant with respect to the Demised Premises of the building (collectively,
the "Laws") arising out of Tenant's particular use or particular occupancy
thereof, except to the extent the Laws apply generally to office use in which
event it shall be Landlord's obligation, at its expense, to comply. Prior to the
commencement of the Term, and at all times thereafter, Landlord, at Landlord's
sole cost and expense, shall promptly comply with all Laws applicable to the
Building except to the extent this Article imposes the obligation upon Tenant.
Either party, after securing the other party's satisfaction against all damage,
interest, penalties and expenses, including, but not limited to, reasonable
attorneys' fees, by cash deposit or by surety bond in an amount and in a company
satisfactory to the other party, may contest and appeal any Laws provided same
is done with all reasonable promptness and provided such appeal shall not
subject the other party to prosecution for a criminal offense or constitute a
default beyond applicable grace and notice periods or cause the Demised Premises
or any part thereof to be condemned or vacated. Neither party shall do or permit
any act or thing to be done in or to the Demised Premises which is contrary to
any Law, or which will invalidate or be in conflict with any public liability,
fire or other policies of insurance at any time carried by or for the benefit of
either party with respect to the Demised Premises or the building of which the
Demised Premises form a part, or which shall or might subject either party to
any liability or
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responsibility to any person or for property damage. Tenant shall not place a
load upon any floor of the Demised Premises exceeding the floor load per square
foot area which Landlord will represent to Tenant in writing. Landlord reserves
the right to prescribe the weight and position of all safes, business machines
and mechanical equipment if the floor load per square foot as represented to
Tenant in writing is exceeded. Such installations shall be placed and maintained
by Tenant, at Tenant's expense, in settings sufficient to absorb and prevent
vibration, noise and annoyance.
SUBORDINATION:
8. The Lease shall be subject and subordinate to all ground or
underlying leases and to all mortgages which may now or hereafter affect such
lease or the real property of which Demised Premises are a part and to all
renewals, modifications, consolidations, replacements and extensions of any such
underlying leases and mortgages so long as the parties to such documents enter
into "non-disturbance" agreements with Tenant that guarantee to Tenant that for
so long as Tenant is not in default beyond applicable grace and notice periods,
Tenant's occupancy and quiet enjoyment of the Demised Premises shall not be
disturbed, and is otherwise in accordance with the provision of Article 32
hereof. In confirmation of such subordination, Tenant shall execute promptly any
certificate that Landlord may reasonably request.
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TENANT'S LIABILITY INSURANCE, PROPERTY LOSS, DAMAGE INDEMNITY:
9. Landlord agrees, at its expense, to maintain at all
times, liability and fire and other all-risk casualty insurance in such amounts
and in such forms and type of coverage as would be carried by a prudent Landlord
insuring its building and all such insurance shall name Tenant as an additional
insured. Landlord or its agents shall not be liable for any damage to property
of Tenant or of others entrusted to employees of the building, nor for loss of
or damage to any property of Tenant by theft or otherwise, nor for any injury or
damage to persons or property resulting from any cause of whatsoever nature, nor
shall Landlord or its Agents be liable for any such damage caused by other
persons in, upon or about said building or caused by operations in construction
of any private, public or quasi public work except in each case to the extent
caused by the negligence of Landlord or its Agents. Tenant agrees, at Tenant's
sole cost and expenses, to maintain general public liability insurance in
standard form in favor of Landlord and Tenant naming Landlord as additional
insured against claims for bodily injury or death or property damage occurring
in or upon the Demised Premises, effective from the date Tenant enters into
possession and during the term of the Lease. Such insurance shall be in the
amount of THREE MILLION ($3,000,000.00) DOLLARS with carriers acceptable to the
Landlord or its successors. Tenant's current insurance carrier shall be deemed
acceptable to Landlord. Copies of such policy or policies or certificate thereof
shall be delivered to the other party. Upon a party's default in obtaining
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or delivering any such policy or policies or failure to pay the charges therefor
for any such policy or policies, the non-defaulting party shall have the right
to obtain the applicable policy or policies and charge the other for the cost of
same. Landlord and Tenant each agree to indemnify and save harmless the other
from and against any and all liabilities, obligations, damages, penalties,
claims, costs and expenses for which the other shall not be reimbursed by
insurance, including reasonable attorney's fees, paid, suffered or incurred as a
result of any breach by a party or such party's Agents, of any covenant or
condition of the Lease, or the carelessness, negligence or improper conduct of
such party or such party's Agents. In case any action or proceeding is brought
against a party by reason of any such claim, the negligent party, upon written
notice from the non- negligent party, will, at the negligent party's expense,
resist or defend such action or proceeding by counsel approved by the non-
negligent party in writing, such approval not to be unreasonably withheld.
Notwithstanding the foregoing, the parties agree, in good faith, to attempt to
obtain mutual waivers of subrogation.
DESTRUCTION, FIRE AND OTHER CASUALTY:
10. (a) If the Demised Premises or any part thereof shall be
damaged by fire or other casualty, Tenant shall give immediate notice thereof to
Landlord and the Lease shall continue in full force and effect except as
hereinafter set forth.
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(b) If the Demised Premises are partially damaged
or rendered partially unusable, i.e. less than 30% of the Demised Premises as
measured on a square footage basis, by fire or other casualty, the damages
thereto shall be repaired by and at the expense of Landlord, and the base rent
and any additional rent, until such repair shall be substantially completed,
shall be apportioned from the date following the casualty according to the part
of the premises which is usable, but such undertaking to make such repairs shall
not impair Landlord's right to seek redress and/or reimbursement for such loss,
costs, or expenses which gave rise to such repair. Such action for redress or
reimbursement shall not be inconsistent with the other provisions of the Lease
including, without limitation, any of Tenant's rights.
(c) If the Demised Premises are totally damaged or
rendered wholly unusable by fire or other casualty, then the rent shall be
proportionately paid up to the time of the casualty and thenceforth shall cease
until the earlier of (x) 150 days, or (y) the date when the premises shall have
been fully repaired and restored by Landlord, subject to Landlord's right to
elect not to restore, the same as hereinafter provided.
(d) If the Demised Premises are rendered wholly
unusable or (whether or not the Demised Premises are damaged in whole or in
part) if the building shall be so damaged that the Landlord shall in good faith
decide to demolish it or to rebuild it, then, in any of such events, Landlord
may elect to terminate the Lease by written notice to Tenant given within
forty-five (45)
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days after such fire or casualty specifying a date for the expiration of the
lease, which date shall not be more than thirty (30) days after the giving of
such notice, and upon the date specified in such notice, the Lease shall expire
as fully and completely as if such date were the date set forth above for the
termination of the Lease and Tenant shall forthwith quit, surrender and vacate
the premises without prejudice however, to either party's rights and remedies
against the other under the lease provisions in effect prior to such
termination, and any base rent and additional rent owing shall be paid up to
such date and any payments of base rent and additional rent made by Tenant which
were on account of any period subsequent to such date, as well as any security
plus interest earned thereon, shall be returned to Tenant.
Unless Landlord shall serve a termination notice as provided
for herein, Landlord shall make the repairs and restorations under the
conditions of (b) and (c) hereof, with all reasonable expedition subject to
delays due to adjustment of insurance claims, labor troubles and causes beyond
Landlord's control. To the extent Landlord has not completed its repairs so that
Tenant shall have full enjoyment and use of the Demised Premises within 150 days
from the date of fire or other casualty, Tenant shall have the right to
terminate the Lease and upon lease termination of the Lease, neither party shall
have any obligation to the other except for those obligations expressly stated
to survive the Lease Expiration.
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Notwithstanding the foregoing, each party shall look first to
any insurance in its favor before making any claim against the other party for
recovery for loss or damage resulting from fire or other casualty, and to the
extent that such insurance is in force and collectible and to the extent
permitted by law, Landlord and Tenant each hereby releases and waives all right
of recovery against the other or any one claiming through or under each of them
by way of subrogation or otherwise. The foregoing release and waiver shall be in
force only if both releasors' insurance policies contain a clause providing that
such a release or waiver shall not invalidate the insurance and also, provided
that such a policy can be obtained without additional premiums. Tenant
acknowledges that Landlord will not carry insurance on Tenant's furniture and/or
furnishings or any fixtures or equipment, improvements, or appurtenances
removable by Tenant and Tenant agrees that Landlord will not be obligated to
repair any damage thereto or replace the same except to the extent caused by
Landlord's or its Agents' negligence. Any differences or disputes between
Landlord and Tenant in respect to any matters in this article shall be summarily
determined by submitting the same to the American Arbitration Association in New
York City, New York. Both parties shall cooperate in expediting the hearing.
EMINENT DOMAIN:
11. If the whole or any part of the Demised Premises shall be
acquired or condemned by Eminent Domain for any public or
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quasi public use or purpose, then and in that event, the term of the Lease shall
cease and terminate from the date of title vesting in such proceeding. The
parties agree to jointly pursue any claim against the applicable authorities,
and the parties agree, in good faith, to allocate between them any award
received.
ASSIGNMENT, MORTGAGE, ETC.:
12. Tenant, for itself, its heirs, distributees, executors,
administrators, legal representatives, successors and assigns, expressly
covenants that it shall not assign, mortgage or encumber this agreement, nor
underlet, or suffer or permit the Demised Premises or any part thereof to be
used by others, without the prior written consent of Landlord in each instance,
which consent shall not be unreasonably withheld or delayed. If the Lease be
assigned, or if the Demised Premises or any part thereof be underlet or occupied
by anybody other than Tenant, Landlord may, after default beyond applicable
grace and notice periods by Tenant, collect rent from the assignee under-Tenant
or occupant, and apply the net amount collected to the rent herein reserved, but
no such assignment, underletting, occupancy or collection shall be deemed a
waiver of this covenant, or the acceptance of the assignee, under-Tenant or
occupant as Tenant, or a release of Tenant from the further performance by
Tenant of covenants on the part of Tenant herein contained. The consent by
Landlord to an assignment or underletting shall not, in any way, be construed to
relieve Tenant from obtaining the express consent in writing of Landlord to any
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further assignment or underletting. Notwithstanding the foregoing, any sublet or
assignment by Tenant to an entity controlling, controlled by or under common
control of, Tenant or any transaction involving the merger or consolidation of
Tenant or the transfer of stock of Tenant shall not be deemed an assignment or
sublet transaction requiring the consent of Landlord.
UTILITIES, WATER, SEWER AND TAXES:
13. (a) Utility (Gas and Electric). Tenant
--------------------------
shall be responsible for all costs an expenses associated with utility usage
supplied to the premises as periodically billed to the premises as
well as additional assessments that may occur, from time to time,
on bills to or usages by user of electricity. Tenant shall not
have any obligation for capital expenses associated with the
providing of utility usage to the premises. Tenant covenants and
agrees that at all times its use of electric current shall not
exceed the capacity of existing feeders to the building or the
risers or wiring installation and Tenant may not use any electrical
equipment which, in Landlord's opinion, reasonably exercised, will
overload such installations. The change at any time of the
character of electric service shall in no way make Landlord liable
or responsible to Tenant, for any loss, damages or expenses which
Tenant may sustain. Notwithstanding the foregoing, to the extent
Tenant does not have reasonable electric service as would be
required by a normal office, Tenant shall from the third business
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day of such non-availability of reasonable electric service, abate base rent and
additional rent.
(b) Water and Sewer. The Tenant shall be responsible for all
water and sewer charges together with other rents, taxes, levies and charges
which may be imposed upon the property related to water and sewer use other than
capital charges associated with providing of water and sewer services to the
Demised Premises. Tenant covenants and agrees to make all payments in a timely
manner and shall pay the sewer rent, charge or any other tax, rent, levy or
charge related to such water and sewer usage which now or hereafter is assessed,
imposed or a lien upon the Demised Premises or the realty of which they are part
pursuant to law, order or regulation made or issued in connection with the use,
consumption, maintenance or supply of water, water system or sewage or sewage
connection or system. In the event the Tenant does not pay these costs directly,
the Landlord reserves the right to bill the Tenant for such usage cost and/or
expense. The bill rendered by Landlord for any one or more of these items shall
be payable by Tenant as additional rent. Landlord may install a water meter at
Landlord's expense and thereby measure Tenant's water consumption for all
purposes. Tenant agrees to pay for water consumed, as shown on said meter as and
when bills are rendered, and on default beyond applicable grace and notice
periods in making such payment Landlord may pay such charges and collect the
same from Tenant.
(c) Real Estate Taxes. Tenant shall be responsible for
the payment of one hundred (100%) percent of the increase in real
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estate taxes applicable to the tax parcel known as Section 2, Lot 209, Block 242
during the term of the Lease, which is in excess of the real estate taxes
imposed for the base year 1998/1999.
If during the term of the Lease the present method of taxation
or assessment shall be so changed that there shall be substituted, in whole or
in part, for real estate taxes as set forth herein, a tax, the proceeds of which
are applied wholly or partly in payment of all or a portion of the municipal
and/or county obligations or services which are being paid or borne by the
present method of taxation of the Town of North Hempstead, Village of Russell
Gardens real estate, and Landlord is obligated to pay such tax as applied for
such purpose or purposes, which is attributable to or results from Landlord's
ownership of the land and building in which the Demised Premises are located or
the value thereof and/or the rents derived therefrom, such tax shall be added to
the amount of real estate taxes assessed against the land and building and shall
be the responsibility of the Tenant provided, however, that there shall be an
appropriate adjustment so as to account for the fact that Tenant is only
obligated to pay taxes in excess of the base year 1998/99.
ACCESS TO PREMISES:
14. (a) Tenant shall have access to the premises no later than
June 16, 1998. For each day after June 16, 1998 Tenant does not have access to
the Demised Premises, there shall be a day for delay in the commencement of the
base rent and other rent
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obligations from the intended August 1, 1998 rent commencement date. For
illustration purposes, if Tenant is not granted access until June 30, 1998, base
rent and any other rent obligations shall not commence until August 14, 1998,
although Tenant will have been granted access from June 30, 1998.
(b) To the extent Tenant is not granted occupancy by August 1,
1998, the Tenant shall have the unilateral right to terminate the Lease upon
written notice delivered to Landlord. Subject to the second to last sentence in
this Article, Landlord or Landlord's Agents shall have the right(but shall not
be obligated) to enter the Demised Premises in an emergency at any time, and, at
other reasonable times upon notice, to examine the same and to make such
repairs, replacements and improvements as Landlord may deem necessary and
reasonably desirable to the Demised Premises or to any other portion of the
building or which Landlord may elect to perform following Tenant's failure
(after applicable notice and grace period) to make repairs or perform any work
which Tenant is obligated to perform under the Lease, or for the purpose of
complying with Laws. Tenant shall permit Landlord to use and maintain and
replace pipes and conduits in and through the Demised Premises and to erect new
pipes and conduits therein provided there is no interference with Tenant's use
and enjoyment of the Demised Premises and provided there is no reduction in the
Demised Premises on account of Landlord's actions other than a de minimis
reduction. Subject to the foregoing, Landlord may, during the progress of any
work in the Demised Premises, take all necessary materials and
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equipment into said premises without the same constituting an eviction nor shall
Tenant be entitled to any abatement of rent (subject to the foregoing sentence)
while such work is in progress nor to any damages by reason of loss or
interruption of business or otherwise. Throughout the term hereof, Landlord
shall have the right, after notice, to enter the Demised Premises at reasonable
hours for the purpose of showing the same to prospective purchasers or
mortgagees of the building, and during the last six (6) months of the term (or
the last applicable renewal term if renewal options have been exercised) for the
purpose of showing the same to prospective Tenants and may, during said six (6)
months period, place under the premises the usual notices "To Let" and "For
Sale" which notices Tenant shall permit to remain thereon without molestation.
In an emergency only, and only after having exercised reasonable efforts to
contact Tenant's building manager, if Tenant is not present to open and permit
an entry into the premises, Landlord or Landlord's agents may enter the same
whenever such entry may be necessary or permissible by master key or forcibly,
and provided reasonable care is exercised to safeguard Tenant's property, and
such entry shall not render Landlord or Landlord's Agents liable therefor, nor
in any event shall the obligations of Tenant hereunder be affected. If during
the last month of the term Tenant shall have removed all or substantially all of
Tenant's property therefrom, Landlord may immediately enter, alter, renovate or
redecorate the Demised Premises without limitation or abatement of rent, or
incurring liability to Tenant for any compensation and
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such act shall have no effect on the Lease or Tenant's obligations
hereunder.
BANKRUPTCY:
15. (a) If, at the date fixed as the commencement of the Term,
or if at any time during the Term hereby demised there shall be filed by or
against Tenant in any court pursuant to any statute either of the United States
or of any state, a petition in bankruptcy or insolvency or for reorganization or
for the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within one hundred twenty (120) days thereof, Tenant fails to
secure a dismissal thereof, or if Tenant make an assignment for the benefit of
creditors or petition for or enter into an arrangement, the Lease, at the option
of Landlord, exercised within a reasonable time after notice of the happening of
any one or more of such events, may be cancelled and terminated by written
notice to the Tenant (but if any of such events occur prior to the commencement
date, the Lease shall be ipso facto cancelled and terminated) and whether such
cancellation and termination occur prior to or during the Term, neither Tenant
nor any person claiming through or under Tenant by virtue of any statute or of
any order of any court, shall be entitled to possession or to remain in
possession of the premises demised but shall forthwith quit and surrender the
premises, and Landlord, in addition to the other rights and remedies Landlord
has by virtue of any other provision herein or elsewhere in the Lease contained
or by virtue of any
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statute or rule of law, may retain as liquidated damages, any rent, security
deposit or moneys received by him from Tenant or others on behalf of Tenant. If
the Lease shall be assigned in accordance with its terms, the provisions of this
Article 15 shall be applicable only to the party then owning Tenant's interest
in the Lease.
(b) If, at the date fixed as the commencement of the Term, or
if at any time during the Term hereby demised there shall be filed by or against
Landlord in any court pursuant to any statute either of the United States or of
any state, a petition in bankruptcy or insolvency or for reorganization or for
the appointment of a receiver or trustee of all or a portion of Tenant's
property, and within one hundred twenty (120) days thereof, Landlord fails to
secure a dismissal thereof, or if Landlord make an assignment for the benefit of
creditors or petition for or enter into an arrangement, the Lease, at the sole
option of Tenant, exercised within a reasonable time after notice of the
happening of any one or more of such events, may be cancelled and terminated by
written notice to the Landlord (but if any of such events occur prior to the
commencement date, the Lease shall be ipso facto cancelled and terminated) and
whether such cancellation and termination occur prior to or during the term,
neither Tenant nor any person claiming through or under Tenant by virtue of any
statute or of any order of any court, shall be entitled to possession or to
remain in possession of the premises demised but shall forthwith quit and
surrender the premises, and
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Tenant, in addition to the other rights and remedies Tenant shall be entitled to
the return of any pre-paid has by virtue of any other provision herein or
elsewhere in the Lease contained or by virtue of any statute or rule of law,
Tenant rent, security deposit or moneys received by Landlord from Tenant or
others on behalf of Tenant. If the Lease shall be assigned in accordance with
its terms, the provisions of this Article 15 shall be applicable only to the
party then owning Tenant's interest in the Lease.
(c) It is stipulated and agreed that in the event of the
termination of the Lease pursuant to (a) hereof, Landlord shall forthwith,
notwithstanding any other provisions of the Lease to the contrary, be entitled
to recover from Tenant as and for liquidated damages an amount equal to the
difference between the rent reserved hereunder for the unexpired portion of the
term demised and the fair and reasonable rental value of the Demised Premises
for the same period. In the computation of such damages the difference between
any installment of rent becoming due hereunder after the date of termination and
the fair and reasonable rental value of the Demised Premises for the period for
which such installment was payable shall be discounted to the date of
termination at the rate of seven percent (7%) per annum. If such premises or any
part thereof be re-let by the Landlord for the unexpired term of said lease, or
any part thereof, Landlord having acted in good faith used reasonable efforts to
re-let the premises, before presentation of proof of such liquidated damages to
any court, commission or tribunal, the amount of rent reserved upon such
reletting shall be
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deemed to be the fair and reasonable rental value for the part of the whole of
the premises so re-let during the term of the re- letting.
(d) Notwithstanding any other provision herein to the
contrary, the Tenant hereby warrants its solvency to the Landlord, as defined by
State law.
(e) Notwithstanding any other provision herein to the
contrary, the Tenant hereby warrants its solvency to the Landlord, as defined by
State law.
DEFAULT:
16. (a) If (x) Tenant defaults in fulfilling any of the
covenants of the Lease other than the covenants for the payment of base rent or
additional rent or additional rent (as to which payments Tenant shall be limited
to a ten day period to cure after notice); or (y) the Demised Premises are
damaged by reason of negligence or carelessness of Tenant, or its Agents; or if
any execution or attachment shall be issued against Tenant or any of Tenant's
property whereupon the Demised Premises shall be taken or occupied by someone
other than Tenant; or if the Tenant shall be in default under any other
provisions of the Lease and the same is not cured within 30 days after written
notice unless Tenant has commenced cure and is diligently pursuing completion of
the cure in which event the 30 days shall be extended for as long as Tenant is
diligently pursuing the curing of the alleged default; or (z) Tenant shall fail
to move into or take possession of the premises
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within sixty (60) days after the commencement of the term of the Lease; then, in
any one or more of such events, upon Landlord serving a written ten (10) days
notice upon Tenant specifying the nature of said incurred default and upon the
expiration of said ten (10) days, if Tenant shall have failed to comply with or
remedy such default, or if the said default or omission complained of shall be
of a nature that the same cannot be completely cured or remedied within said ten
(10) day period, and if Tenant shall not have diligently commenced curing such
default within such ten (10) day period, and shall not thereafter with
reasonable diligence and good faith proceed to remedy or cure such default, then
Landlord may serve a written five (5) days notice of cancellation of the Lease
upon Tenant, and upon the expiration of said five (5) days, the Lease and the
term thereunder shall end and expire as fully and completely as if the
expiration of such five (5) day period were the day herein definitely fixed for
the Lease Expiration and the term thereof and Tenant shall then quit and
surrender the Demised Premises to Landlord, but Tenant shall remain liable to
Landlord as hereinafter provided.
(b) If Landlord defaults in fulfilling any of the covenants of
the Lease for a period of ten business days after notice -- except in the event
of an emergency in which case such notice period as is reasonable under the
circumstances (which may include no notice) shall be the applicable notice
period -- the Tenant may proceed to cure the default at Landlord's expense
without incurring any liabilities. Further, if Landlord fails to
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reimburse Tenant within ten (10) days after notice then Tenant shall be entitled
to deduct the cost of such cure from the next existing rent payment or rent
payments due under the Lease.
(c) If the notices provided for in (a) hereof shall have been
given, and the term shall expire as aforesaid; or if Tenant shall default beyond
the applicable grace and notice periods set forth above in the payment of the
rent reserved herein or any item of additional rent herein mentioned or any part
of either or in making any other payment herein required; then and in any of
such events Landlord may without notice, re-enter the Demised Premises either by
force or otherwise, and dispossess Tenant by summary proceedings or otherwise,
and the legal representative of Tenant or other occupancy of Demised Premises
and remove their effects and hold the premises as if the Lease had not been
made, and Tenant hereby waives the service of notice of intention to reenter or
to institute legal proceedings to that end. Notwithstanding the foregoing,
Landlord shall not have the right to terminate for the non-payment of rent until
after Landlord shall have commenced non-payment proceedings or similar judicial
remedies against Tenant in three separate months (for three separate months of
actual default) in a calendar year.
REMEDIES OF LANDLORD AND WAIVER OF REDEMPTION:
17. In case of any such default, re-entry, expiration and/or
dispossess by summary proceedings or otherwise; (a) the rent shall become due
thereupon and be paid up to the time of such re entry, dispossess and/or
expiration, together with such reasonable expenses as Landlord may incur for
legal expenses, attorneys' fees, brokerage and/or putting the Demised Premises
in good order, or for preparing the same for re-rental; and/or (b) provided
Landlord acts in good faith and exercises reasonable efforts to mitigate damages
by re-renting the Demised Premises, Landlord may re-let the premises or any part
or parts thereof, either in the name of Landlord or otherwise, for a term or
terms which may at Landlord's option be less than or exceed the period which
would otherwise have constituted the balance of the Term of the Lease and may
grant concessions or free rent or charge a higher rental than that in the Lease;
and/or (c) Tenant or the legal representatives of Tenant shall also pay Landlord
as liquidated damages for the failure of Tenant to observe and perform said
Tenant's covenants herein contained, any deficiency between the rent hereby
reserved and/or covenanted to be paid and the net amount, if any, of the rents
collected on account of the lease or leases of the Demised Premises for each
month of the period which would otherwise have constituted the balance of the
Term of the Lease. The good faith failure or refusal of Landlord to re-let the
premises or any part or parts thereof shall not release or affect Tenant's
liability for damages. Notwithstanding the foregoing, Landlord shall not have
the right to "accelerate" rent or receive liquidated damages until after
Landlord shall have commenced non-payment proceedings or similar judicial
remedies against Tenant in at least three separate months (for three separate
months of actual default) in a calendar year.
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In computing such liquidated damages there shall be added to the said deficiency
such reasonable expenses as Landlord may incur in connection with re-letting,
such as legal expenses, attorneys' fees, brokerage, advertising and for keeping
the demised premised premises in good order or for preparing the same for
re-letting. Any such liquidated damages shall be paid in monthly installments by
Tenant on the rent day specified in the Lease and any suit brought to collect
the amount of the deficiency for any month shall not prejudice in any way the
rights of Landlord to collect the deficiency for any subsequent month by a
similar proceeding. Landlord, in putting the Demised Premises in good order or
preparing the same for re-rental may, at Landlord's option, make such
alterations, repairs, replacements, and/or decorations in the Demised Premises
as Landlord, in Landlord's sole judgment, considers advisable and necessary for
the purpose of re-letting the Demised Premises, and the making of such
alternations, repairs, replacements, and/or decorations shall not operate or be
construed to release Tenant from liability hereunder as aforesaid. Landlord
shall in no event be liable in any way whatsoever for failure to re-let the
Demised Premises although Landlord shall be obligated to act in good faith in
attempting to mitigate damages by re-letting the Demised Premises, or in the
event that the Demised Premises are re-let, for failure to collect the rent
thereof under such re- letting, and in no event shall Tenant be entitled to
receive any excess, if any, of such net rents collected over the sums payable by
Tenant to Landlord hereunder.
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Mention in the Lease of any particular remedy shall not
preclude Landlord or Tenant, after expiration of all applicable grace and notice
periods from any other remedy that it may be entitled to in law or in equity.
FEES AND EXPENSES:
18. If Tenant shall default in the observance or performance
of any term or covenant on Tenant's part to be observed or performed under or by
virtue of any of the terms or provisions in any article of the Lease, then,
unless otherwise provided elsewhere in the Lease, Landlord may immediately or at
any time thereafter and without notice perform the same for the account of
Tenant, and if Landlord makes any expenditures or incurs any obligations for the
payment of money in connection therewith including, but not limited to,
reasonable attorneys' fees incurred in connection with the Lease for services,
including, but not limited, to efforts in instituting, prosecuting or defending
any action or proceeding such sums paid or obligations incurred with interest
and costs shall be deemed to be additional rent hereunder and shall be paid by
Tenant to Landlord within thirty (30) days of rendition of any bill or statement
to Tenant therefor.
NO REPRESENTATIONS BY LANDLORD:
19. (a) Except as set forth in the Lease, neither Landlord nor
Landlord's Agents have made any representations or promises with respect to the
physical condition of the building,
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the land upon which it is erected or the Demised Premises, the expenses of
operation or any other matter or thing affecting or related to the premises
except as herein expressly set forth and no rights, easements or licenses are
acquired by Tenant by implication or otherwise except as expressly set forth in
the provisions of the Lease. Except as set forth in the Lease, Tenant has
inspected the building and the Demised Premises and is thoroughly acquainted
with their condition, and agrees to take the same "as is" and acknowledges that
the taking of possession of the Demised Premises by Tenant shall be conclusive
evidence that the said premises and the building of which the same form a part
were in good and satisfactory condition at the time such possession was so
taken, except as to latent defects. All understandings and agreements heretofore
made between the parties hereto are merged in this contract, which alone fully
and completely expresses the agreement between Landlord and Tenant and any
executory agreement hereafter made shall be ineffective to change, modify,
discharge or effect an abandonment of it in whole or in part, unless such
executory agreement is in writing and signed by the party against whom
enforcement of the change, modification, discharge or abandonment is sought.
(b) Notwithstanding the foregoing, Landlord represents and
warrants the Building and associated land is in compliance with all applicable
Laws. With respect to the parking lot, Landlord represents and warrants that it
will repair, regrade, repave and restripe the parking lot to a condition
reasonably acceptable to
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Tenant, prior to commencement of the Term so to provide no less than 45 parking
spaces. Landlord further agrees to hereafter maintain the parking lot in
condition reasonably satisfactory to Tenant. Landlord further represents and
warrants that it will repair the facade of the building to a condition
reasonably acceptable to Tenant prior to commencement of the Term and hereafter
Landlord further agrees to maintain the facade of the building in a condition
reasonably acceptable to Tenant. Landlord also agrees that prior to commencement
of the Term it will landscape the property to a condition reasonably acceptable
to Tenant and hereafter Landlord further agrees to maintain the landscaping in a
condition reasonably acceptable to Tenant.
To the extent either party breaches the obligations stated in
this paragraph, or if the presence of any Hazardous Materials (hereinafter
defined) in or about the Demised Premises caused or permitted by either party
results in contamination of the premises, or if contamination of the Demised
Premises by any Hazardous Materials otherwise occurs for which a party is
legally liable, then such party shall indemnify the other party and its agents
against all claims, judgments, damages, penalties, fines, costs, liabilities or
losses (including, as may be applicable, diminution in value of the premises,
damages arising from any adverse impact on marketing of space, moving and
relocation costs and sums paid in settlement of claims, attorneys' fees,
consultant fees and expert fees) which arise during or after the term as a
result of such breach and/or contamination. This indemnification
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includes but is not limited to costs incurred in connection with any
investigation of side conditions and any clean-up, remedial, removal or
restoration work required by any governmental or quasi-governmental authority
because of any Hazardous Materials being present in the soil or ground water on
or under the premises. Without limiting the foregoing, if the presence of any
Hazardous Materials on the premises caused or permitted by a party results in
contamination of the premises, such party shall promptly take all actions at its
sole expense as are necessary to return the premises to their condition existing
prior to the introduction of such Hazardous Materials to the premises; provided
that the other party's approval of such actions shall first be obtained, which
approval shall not be unreasonably withheld so long as such actions would not
potentially have any material adverse long-term or short-term effect on the
premises.
As used herein, the term "Hazardous Materials" means any
hazardous or toxic substance, material or waste which is or becomes regulated by
any governmental or quasi-governmental authority; such term includes but is not
limited to any material or substance which is (a) petroleum, (b) designated as a
"hazardous substance" pursuant to Section 311 of the Federal Water Pollution
Control Act (33 USC Section 1317), (c) defined as a "hazardous waste" pursuant
to Section 1004 of the Federal Resource Conservation and Recovery Act, 12 USC
Section 6901, et seq. (12 USC, Section 6903), or (d) defined as a "hazardous
substance" pursuant to Section 101 of the Comprehensive Environmental Response,
Compensation and Liability
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Act, 42 USC Section 9601, et seq. (42 USC, Section 9601). Notwithstanding the
foregoing, routine quantities of items that may be deemed as Hazardous Materials
or Hazardous Substances shall not be deemed as such if they are in such amounts
and such quantities as would customarily be used in or stored in an office
environment by a tenant similar to Tenant.
For the purpose of determining compliance with this article,
each party hereby grants the other and its Agents the right to cause testing
and/or examination of the premises to be made from time to time at the testing
party's expense.
(C) Survival. This Article shall survive the expiration or
earlier termination of the Lease.
END OF TERM:
20. Upon the Lease expiration or other termination of the
Lease, Tenant shall quit and surrender to Landlord the Demised Premises, broom
clean, in good order and condition, ordinary wear excepted, and Tenant shall
remove all its property. Tenant's obligation to observe or perform this covenant
shall survive the Lease Expiration. If the last day of the term of the Lease or
any renewal thereof, falls on Sunday, the Lease shall expire at noon on the
Saturday immediately before (i.e., the day before) unless it is a legal holiday,
in which case, it shall expire at noon on the preceding business day.
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ENVIRONMENTAL:
21. Landlord represents and warrants that the Demised Premises
presently comply with all Federal, State and environmental laws, rules and
regulations and that there are no Hazardous Materials (hereinafter defined) in
the Demised Premises and Landlord will not hereafter release or allow any of its
Agents to release any Hazardous Materials onto the Demised Premises. Tenant
represents and warrants it will keep the Demised Premises free from any
Hazardous Materials except to the extent that any Hazardous Materials are
hereafter brought onto the Demised Premises by Landlord or its Agents.
QUIET ENJOYMENT:
22. Landlord covenants and agrees with Tenant that upon Tenant
paying base rent and additional rent on Tenant's part to be observed and
performed, Tenant may peaceably and quietly enjoy the premises hereby demised,
subject, nevertheless, to the terms and conditions of the Lease.
FAILURE TO GIVE POSSESSION:
23. If Landlord is unable to give possession of the Demised
Premises on the date of the commencement of the term hereof by August 1, 1998,
Tenant shall have the unilateral and sole right to terminate the Lease.
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NO WAIVER:
24. The failure of either Landlord or Tenant to seek redress
for violation of, or to insist upon the strict performance of any covenant or
condition of the Lease shall not prevent a subsequent act which would have
originally constituted a violation from having all the force and effect of an
original violation. The receipt by Landlord of rent with knowledge of the breach
of any covenant of the Lease shall not be deemed a waiver of such breach and no
provision of the Lease shall be deemed to have been waived by either Landlord or
Tenant unless such waiver be in writing signed by Landlord. No payment by Tenant
or receipt by Landlord of a lesser amount than the monthly rent herein
stipulated shall be deemed to be other than on account of the earliest
stipulated rent, nor shall any endorsement or statement of any check or any
letter accompanying any check or payment as rent be deemed an accord and
satisfaction, and Landlord may accept such check or payment without prejudice to
Landlord's right to recover the balance of such rent or pursue any other remedy
in the Lease provided. No act or thing done by Landlord or Landlord's Agents
during the term hereby demised shall be deemed an acceptance of a surrender of
said premises and no agreement to accept such surrender shall be valid unless in
writing and signed by Landlord. No employee of Landlord or Landlord's Agent
shall have any power to accept the keys of said premises prior to the
termination of the Lease and the delivery of keys to such agent or employee
shall not operate as a termination of the lease or a surrender of the premises.
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WAIVER OF TRIAL BY JURY:
25. It is mutually agreed by and between Landlord and Tenant
that the respective parties hereto shall and they hereby do waive trial by jury
in any action, proceeding or counterclaim brought by either of the parties
hereto against the other (except for personal injury or property damage) on any
matters whatsoever arising out of or in any way connected with the Lease, the
relationship of Landlord and Tenant, Tenant's use of or occupancy of said
premises, and any emergency statutory or any other statutory remedy. It is
further mutually agreed that in the event Landlord commences any summary
proceeding for possession of the premises, Tenant will not interpose any
counterclaim of whatever nature or description in any such proceeding.
INABILITY TO PERFORM:
26. The Lease and the obligation of Tenant to pay rent
hereunder and perform all of the other covenants and agreements hereunder on
part of Tenant to be performed shall in no way be affected, impaired or excused
except as otherwise expressly set forth in the Lease.
BILLS AND NOTICES:
27. Except as otherwise provided in the Lease, a bill,
statement, notice or communication which either party may desire or be required
to give to the other, shall be deemed sufficiently given or rendered if, in
writing and delivered to the other party
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personally or sent by registered or certified mail addressed to the
party as follows:
Landlord: 415 Northern Blvd. Realty Corp.
265 Great Neck Road
Great Neck, New York
With a copy to: Stephen Gilbert, Esq.
P.O. Box 340
Morristown, New Jersey 07963-0340
Tenant: Inmark Service, Inc.
One Plaza Road
Greenvale, New York 11548
With a copy to: Kronish, Lieb, Weiner & Hellman LLP
1114 Avenue of the Americas
New York, New York 10036-7798
Attn: Mark S. Levenson, Esq.
The time of the rendition of such bill or statement and of the giving of such
notice or communication shall be deemed to be the time when the same is
delivered to the party and receipted for, if by hand or overnight courier, or
three business days after mailing if sent by registered or certified mail.
28. INTENTIONALLY OMITTED.
CLEANING AND ALL INTERIOR MAINTENANCE:
29. (a) Tenant's Responsibility (Tenant's Expense). The Tenant
shall be exclusively responsible for all costs and expense associated with
cleaning and maintenance of the interior of the Demised Premises. Tenant shall
at Tenant's expense, keep Demised Premises clean and in order, to the reasonable
satisfaction
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of Landlord, and as all internal walkways and areas that would be entrances,
lobbies, doorways and areas of ingress and egress, Tenant shall, at Tenant's own
expense, make all repairs and replacements to such interior walkways, sidewalks
and areas described and shall remove all rubbish from the interior of the
Demised Premises and place this rubbish neatly in the dumpsters and garbage bins
provided by Landlord.
(b) Landlord's Responsibility (Landlord's Expense). The
----------------------------------------------
Landlord shall be exclusively responsible for all costs and
expenses associated with cleaning and maintenance of the exterior
of the Demised Premises and the grounds including, without
limitation, exterior landscaping, maintenance and snow and ice
removal. In addition, Landlord shall make provision for rubbish
and ice removal service which shall periodically remove the rubbish
from the premises at the Landlord's expense.
(c) Landlord's Responsibility (Removal of Existing Sign).
Prior to the commencement of the Lease, the Landlord has agreed, at Landlord's
expense, to remove the existing signage currently visible at the premises, and,
in any location where the removal of the signage requires repair and maintenance
to the brick at the facade of the premises, the Landlord shall be responsible
for these repairs and shall make such repairs to the reasonable satisfaction of
Tenant.
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SECURITY:
30. Tenant agrees to deposit with Landlord, within one
business day of Tenant having been satisfied that all of Landlord's pre-lease
commencement obligations including, without limitation, the obligations of
Landlord under Articles 19, 29 and 36 of the Lease, have been satisfied to
Tenant's reasonable satisfaction, for the entire duration of the Lease, an
amount equal to two (2) months' base rent as security for the faithful
performance and observance by Tenant of the terms, provisions and conditions of
the Lease, which security, at Tenant's option, shall be either (x) by check, or
(y) letter of credit; it is agreed that in the event Tenant defaults beyond
applicable grace and notice periods, in respect of any of the terms, provisions
and conditions of the Lease, including, but not limited to, the payment of rent
and additional rent, Landlord may use, apply or retain the whole or any part of
the security so deposited to the extent required for the payment of any rent and
additional rent or any other sum as to which Tenant is in default beyond
applicable grace and notice periods, or for any sum which Landlord may expend or
may be required to expend by reason of Tenant's default beyond applicable grace
and notice periods in respect of any of the terms, covenants and conditions of
the Lease, including but not limited to, any damages or deficiency in the
re-letting of the premises in accordance with the applicable provisions of the
Lease, whether such damages or deficiency accrued before or after summary
proceedings or other re-entry by Landlord. In the event that
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Tenant shall fully and faithfully comply with all of the terms, provisions,
covenants and conditions of the Lease, the security, together with interest
earned thereon, shall be promptly returned to Tenant after the Lease Expiration
and after delivery of entire possession of the Demised Premises to Landlord. To
the extent any of the security has been applied by Landlord, then the remainder
of the security plus interest earned therein will be promptly returned to Tenant
after the Lease Expiration and after delivery of entire possession of the
Demised Premises to Landlord. In the event of a sale of the land and building or
leasing of the building, Landlord shall have the right to transfer the security
to the vendee or lessee and, upon written acknowledgement and assumption by the
assignee, Landlord shall thereupon be released by Tenant from all liability for
the return of such security; and Tenant agrees to look to the new landlord
solely for the return of said security; and it is agreed that the provisions
hereof shall apply to every transfer or assignment made of the security to a new
Landlord. Tenant further covenants that it will not assign or encumber or
attempt to assign or encumber the monies deposited herein as security and that
neither Landlord nor its successors or assigns shall be bound by any such
assignment, encumbrance, attempted assignment or attempted encumbrance. Landlord
agrees to deposit the security in an interest bearing or money market account at
a nationally recognized banking institution.
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CAPTIONS:
31. The Captions are inserted only as a matter of convenience
and for reference and in no way define, limit or describe the scope of the Lease
nor the intent of any provision thereof.
DEFINITIONS:
32. The term "Landlord" as used in the Lease means only the
owner, or the mortgagee in possession, for the time being of the land and
building (or the owner of a lease of the building or of the land and building)
of which the Demised Premises form a part, so that in the event of any sale or
sales of said land, and building or of said lease, or in the event of a lease of
said building, or of the land and building and the written assumption by the
successor Landlord, existing Landlord shall be and hereby is entirely freed and
relieved of all covenants and obligations of Landlord hereunder arising after
the date of such sale, and it shall be deemed and construed without further
agreement between the parties or their successors in interest, or between the
parties and the purchaser, at any such sale, or the said lessee of the building,
or of the land and building, that the purchaser or the lessee of the building,
or of the land and building, that the purchaser or the lessee of the building
has assumed and agreed to carry out any and all covenants and obligations of
Landlord hereunder. The words "re-enter" and "re-entry" as used in the Lease are
not restricted to their technical legal meaning. The
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term "business days" as used in the Lease shall exclude Saturdays (except such
portion thereof as is covered by specific hours in Article 29 hereof), Sundays
and all days observed by the State or Federal Government as legal holidays.
NON-DISTURBANCE AGREEMENT:
33. Notwithstanding Article 8 hereof, Landlord agrees that it
will use all reasonable efforts to cause any existing mortgagee to enter into a
Non-Disturbance Agreement with Tenant in form reasonably acceptable to Tenant.
Landlord agrees that it will use best efforts to cause any future mortgagee to
enter into a Non- Disturbance Agreement with Tenant in form reasonably
acceptable to Tenant.
GLASS:
34. Landlord shall replace, at its expense, any and all plate
and other large glass damaged or broken from any cause whatsoever in and about
the Demised Premises. Tenant shall replace at its expense all small glass panels
damaged or broken from any cause whatsoever in or about the premises. Landlord
may insure, and keep insured, all plate and other glass in the Demised Premises
for and in the name of Landlord.
SUCCESSORS AND ASSIGNS:
35. The covenants, conditions and agreements contained in the
Lease shall bind and insure to the benefit of Landlord and
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Tenant and their respective heirs, distributees, executors, administrators,
successors, and except as otherwise provided in the Lease, their assigns.
MISCELLANEOUS:
36. (a) Option to Purchase. In the event Landlord desires to
sell the building, Tenant shall be given the right of first refusal. In
connection therewith, Landlord shall promptly provide the Tenant with a copy of
an independent bona fide offer from a prospective purchaser. The offer shall be
subject to the Tenant's rights herein granted. Tenant shall have thirty (30)
days within which to exercise this option, in which event, the Tenant shall
provide to Landlord written confirmation of its intention to purchase the
property. If Tenant fails to exercise this option within thirty (30) days
Tenant's receipt of Landlord's notice along with a copy of the independent bona
fide offer, then such option shall expire unexercised without further right. To
the extent Tenant declines and thereafter Landlord enters into a Contract with a
independent bona fide prospective purchaser at a price or consideration less
than what is provided for in the bona fide offer presented to Tenant, Tenant
shall have the right thereafter to match such lower or revised offer.
(b) Parking Lot. Landlord shall repave and restripe the
parking lot to permit the maximum amount of parking spaces, which is estimated
to be between forty-five (45) and fifty (50) spaces.
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(c) Reimbursement for Renovation. Landlord has agreed to
credit/reimburse Tenant as a work allowance the amount of $150,000.00 which
shall be paid by Tenant ratably over a period of twenty-four (24) months
commencing with the base rent payment due on August 1, 1998.
(d) Brokerage. Landlord and Tenant each warrant and represent
to the other that it has dealt with no broker or finder with respect to the
lease of the Demised Premises other than American Corporate Real Estate
(hereinafter referred to as "American") and Majestic Property Affiliate, Inc.
(hereinafter referred to as "Majestic"). Landlord and Tenant agree to indemnify
and hold the other harmless from and against any and all loss, cost, claim,
liability, damage and expense (including, without limitation, reasonable
attorneys' fees) which the indemnified party may incur or sustain in connection
with any claim by any broker or finder other than American or Majestic which may
be asserted against the indemnified party as a result of any conversations,
correspondence or other dealings between the indemnifying party and such broker
or finder relating to the Subleased Demised Premises. At or prior to execution
of the Lease, Landlord shall pay the commission to American and Majestic in
accordance with a separate agreement between Landlord and American and Landlord
and Majestic.
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IN WITNESS WHEREOF, Landlord and Tenant have respectively
signed and sealed the Lease as of the day and year first above
written.
Witness for Landlord: 415 NORTHERN BLVD. REALTY CORP.:
BY:
HILBERT ESHAGHPOUR, President
Witness for Tenant: INMARK SERVICES, INC.
BY:
46
Exhibit 23.2
Consent of Independent Certified Public Accountants
The Board of Directors
Inmark Enterprises, Inc.
We consent to the use of our report dated June 10, 1998, on the consolidated
financial statements of Inmark Enterprises, Inc. and subsidiaries as of March
31, 1998 and 1997, and for each of the years in the three-year period ended
March 31, 1998, included in the annual report on Form 10-K of Inmark
Enterprises, Inc. and incorporated by reference herein and to the reference to
our firm under the heading "Experts" in the prospectus and registration
statement.
/s/ KPMG Peat Marwick LLP
Jericho, New York
July 29, 1998
<PAGE>
