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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
Date of Report (Date of earliest event reported) July 28, 1999
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News Communications, Inc.
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(Exact name of Registrant as Specified in its Charter)
Nevada 0-18299 13-3346991
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(State or Other Jurisdiction (Commission (IRS Employer
of Incorporation) File Number) Identification No.)
174-15 Horace Harding Expwy., Fresh Meadows, New York 11365
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(Address of Principal Executive Offices) (Zip Code)
Registrant's telephone number, including area code (718) 357-3380
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N/A
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(Former Name or Former Address, if Changed Since Last Report)
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Item 1. Changes in Control of the Registrant.
(a) On July 27, 1999, at a special meeting of the Board of Directors
of News Communications, Inc. (the "Company"), the Board unanimously elected
Steven Farbman ("Farbman") as President and Chief Executive Officer and, subject
to receiving resignations from all incumbent directors other than Jerry
Finkelstein ("Finkelstein"), Wilbur L. Ross ("Ross"), Robert Nederlander and
Michael Schenkler, the Board unanimously approved the reduction in the size of
the Board from 15 to 9 members. The Board then elected Farbman, Steven Price,
Martin A. Bell, Gary Weiss and Martin Mendolsohn ("Mendelsohn") to fill the
newly created vacancies. The reduction in the size of the Board was made
possible by the waiver by the holders of a majority of the Company's $10
Convertible Preferred Stock of their right to designate members representing
one-half of the Board.
At the special meeting of directors, the Board approved, and on July
28, 1999 the Company became a party to, a certain Stockholders' Agreement by and
among the Company; Finkelstein, The Jerry Finkelstein Foundation, Inc. and
Shirley Finkelstein (collectively, the "Finkelstein Group"); Ross; J. Morton
Davis, D.H. Blair Investment Banking Corp., Rivkalex Corporation and Rosalind
Davidowitz (collectively, the "Davis Group"); Melvyn I. Weiss ("Weiss") and the
M&B Weiss Family Partnership (collectively, the "Weiss Group"); and Farbman
(each member of the Finkelstein Group, Ross, the Davis Group, the Weiss Group
and Farbman, individually, a "Stockholder" and collectively the "Stockholders").
The Stockholders' Agreement is attached as an Exhibit to this Report and the
provisions of such Exhibit are incorporated herein by reference in their
entirety.
Under the terms of the Stockholders' Agreement, while Farbman is
President and Chief Executive Officer of the Company, the Stockholders have
agreed to act to maintain the size of the Board at 9 members. The Stockholders
have also agreed to vote their Shares so as to elect as directors of the Company
(i) Finkelstein; (ii) two persons designated by Ross, one of whom shall
initially be Ross and the other of whom shall initially be Robert Nederlander;
(iii) three persons designated by Farbman, one of whom shall be Farbman, one of
whom shall initially be Steven Price and one of whom shall initially be Michael
Schenkler; (iv) one person to be designated by the Weiss Group who shall
initially be Gary Weiss; (v) one person to be designated by the Davis Group who
shall initially be Martin A. Bell; and (vi) one person to be designated by the
Davis Group, the Weiss Group and the Finkelstein Group acting jointly who shall
initially be Mendelsohn. As a result of the Stockholders' Agreement and the
collective ownership by the Stockholders of more than 66% of the Company's
Common Stock, upon the receipt of resignations from the existing Board members
who are not being designated as directors of the Company as described above, the
Stockholders will control the election of the members of the entire Board of
Directors.
Item 5. Other Events.
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As indicated in Item 1 above, on July 27, the Board of Directors
elected Farbman as President and Chief Executive Officer of the Company. On July
28, 1999, Farbman entered into
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an Employment Agreement with the Company (the "Employment Agreement"). The
Employment Agreement expires on November 30, 2004 unless it is terminated
earlier by Farbman or the Company.
In connection with Farbman's employment by the Company, on July 28,
1999, Farbman also entered into a Restricted Stock Agreement and a Stock Option
Agreement with the Company. Under the terms of the Restricted Stock Agreement,
the Company issued to Farbman 250,000 shares of common stock. These shares vest
as to 50% on July 28, 2000 and 50% on July 28, 2001 so long as Mr. Farbman
remains an employee of the Company on such dates. The vesting may be accelerated
upon the occurrence of certain events, including the occurrence of a change of
control of the Company or the termination of Farbman's Employment Agreement by
the Company without Cause or by Farbman for Good Reason.
Under the terms of the Stock Option Agreement, the Company granted
Farbman options to purchase 830,000 shares of its common stock at an exercise
price of $1.8125 per share. The options vest in four equal installments of
207,500 shares commencing on July 28, 2000 and on each July 28 thereafter. The
vesting may be accelerated, such that 10% of the shares shall vest for each
cumulative $.05 improvement in per share earnings before interest, taxes,
depreciation and amortization over that for the fiscal year ended November 30,
1998.
Finally, on July 28, 1999, the maturity of the $1,000,000 aggregate
principal amount of indebtedness of the Company's subsidiaries, Tribco
Incorporated and Access Network Corp., to D.H. Blair Investment Banking Corp.
was extended to January 31, 1999. This indebtedness is now coterminous with the
indebtedness of Dan's Papers Inc. in the principal amount of $1,500,000. With
respect to the repayment of the such indebtedness, on July 28, 1999, Weiss, Ross
and Davis entered into a Subscription Agreement with the Company pursuant to
which Weiss, Ross and Davis have agreed to purchase 445,671, 129,400 and
1,493,625 shares of the Company's Common Stock, respectively, at a purchase
price of $1.75 per share, on January 31, 2000, at the request of the Company in
order to repay this indebtedness and accrued interest thereon.
The Employment Agreement, the Restricted Stock Agreement, the Stock
Option Agreement and the Subscription Agreement are attached as Exhibits to this
Report and the terms of such Exhibits are incorporated herein by reference in
their entirety.
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Item 7. Financial Statements, Pro Form Financial Information and Exhibits.
(c) Exhibits
Exhibit No. Description
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10.1 Employment Agreement dated as of July 28, 1999 by and
between News Communications, Inc. and Steven Farbman.
10.2 Restricted Stock Agreement dated as of July 28, 1999 by and
between News Communications, Inc. and Steven Farbman.
10.3 Stock Option Agreement dated as of July 28, 1999 by and
between News Communications, Inc. and Steven Farbman.
10.4 Stockholders Agreement dated July 28, 1999 by and among the
News Communications, Inc., Wilbur L. Ross, Jr., Melvyn I.
Weiss, The M&B Weiss Family Partnership, Jerry Finkelstein,
Shirley Finkelstein, The Jerry Finkelstein Foundation, Inc.,
J. Morton Davis, D.H. Blair Investment Banking Corp.,
Rivkalex Corporation, Rosalind Davidowitz and Steven
Farbman.
10.5 Subscription Agreement dated July 28, 1999 by and between
News Communications, Inc., Wilbur L. Ross, Jr., Melvyn I.
Weiss and J. Morton Davis.
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Signature
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
NEWS COMMUNICATIONS, INC.
Date: August 9, 1999 By: /s/ Steven Farbman
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Steven Farbman
President and Chief Executive Officer
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<PAGE>
Exhibit 10.1
EMPLOYMENT AGREEMENT
AGREEMENT, dated as of the 28th day of July, 1999, by and between NEWS
COMMUNICATIONS, INC., a Nevada corporation with offices at 174-15 Horace Harding
Expressway, Fresh Meadows, New York 11365 ("NCI"), and STEVEN FARBMAN, residing
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at One North Bridge Terrace, Mt. Kisco, New York 10549 ("Farbman").
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NCI is engaged in the business of publishing and distributing community
oriented newspapers and targeted audience publications; and
NCI is desirous of employing Farbman as the President and Chief Executive
Officer of NCI, and Farbman is desirous of serving NCI in such capacities, all
upon the terms and subject to the conditions hereinafter provided.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
herein contained, the parties hereto, intending to be legally bound, agree as
follows:
1. Employment.
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NCI agrees to employ Farbman, and Farbman agrees to be employed by
NCI, upon the terms and subject to the conditions of this Agreement.
2. Term.
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The term of this Agreement shall commence on the date Farbman informs
NCI that he is able to commence employment with NCI, which shall be no later
than the first business day after the expiration of any termination notice
period under the Prior Employment Agreement (as defined below) (such
commencement date being hereinafter referred to as the "Effective Date"), and
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end on November 30, 2004, unless sooner terminated as hereinafter provided (the
"Term").
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3. Duties; Efforts; Indemnification.
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(a) Farbman shall serve as President and Chief Executive Officer of
NCI and its subsidiaries. Subject to the general policy directions of the Board
of Directors (the "Board") and NCI's Articles of Incorporation and By-Laws,
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Farbman shall have complete supervision and control over, and sole executive
responsibility for, the business operations of NCI and its subsidiaries,
including, but not limited to, the power to hire and fire all personnel and to
establish a corporate office at a reasonable cost at a location in the New York
metropolitan area in his discretion (the "Corporate Office"). Notwithstanding
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the foregoing, Farbman shall not make decisions which materially change the
editorial direction of the publications of NCI without the approval of the
Board. Farbman shall have such other duties as customarily performed by the
President and Chief Executive Officer and also have such other powers and duties
as may be, from time to time, prescribed by the Board of NCI, provided that the
nature of Farbman's powers and duties so prescribed shall not be inconsistent
with Farbman's position and duties hereunder.
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Farbman shall report directly and exclusively to the Board and no other
executive officer will be appointed with authority over the business operations
of NCI or its subsidiaries. During the Term, Farbman shall also be nominated to
serve as a member of the Board.
(b) Farbman shall devote, on a full time and exclusive basis, all of
his business time, attention and energies to the business and affairs of NCI,
shall use his best efforts to advance the best interests of NCI, and shall not
during the Term be engaged in any other business activities, whether or not such
business activities are pursued for gain, profit or other pecuniary advantage
without Board consent; provided, however, that, it shall not be a violation of
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this Agreement for Farbman to (i) serve on corporate, civic or charitable boards
or committees and/or (ii) manage passive personal investments, so long as any
such activities do not interfere with the performance of Farbman's
responsibilities as an employee of NCI in accordance with this Agreement.
(c) Subject to and in accordance with the provisions of the
Certificate of Incorporation of NCI, which shall not, except as required by
applicable law, be amended in this regard without Farbman's consent, NCI shall
indemnify Farbman to the fullest extent permitted by the Nevada General
Corporation Law, as amended from time to time, for all amounts (including,
without limitation, judgments, fines, settlement payments, expenses and
attorney's fees) incurred or paid by Farbman in connection with any action,
suit, investigation or proceeding arising out of or relating to the performance
by Farbman of services for, or the acting by Farbman as a manager, officer or
employee of, NCI, or any other Person (as such term is defined in Appendix A
hereto) or enterprise at NCI's request. NCI shall use its commercially
reasonable efforts to purchase and maintain during the Term directors' and
officers' insurance with a liability limit of not less than $10,000,000,
provided that the Board of Directors of NCI shall have the right to reduce the
amount of insurance coverage if, in its opinion, coverage in such amount is
available only on unreasonable terms but in no event shall such coverage be less
than $2,000,000.
4. Compensation and Benefits.
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(a) Base Salary. NCI shall pay to Farbman a base salary (the "Base
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Salary") of not less than $185,000, payable in accordance with NCI's payroll
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practices for its executive employees. The Base Salary shall automatically
increase at the end of each year of the Term by the annual percentage increase,
if any, in the Consumer Price Index distributed by the United States Department
of Labor and applicable to the New York metropolitan area. In addition, the
Board of NCI will review the Base Salary and other compensation not less than
annually during the Term with a view to their increase based upon Farbman's
performance, the performance of NCI, inflation, then prevailing industry salary
scales and other relevant factors. The Base Salary provided hereunder, as
increased by the Board from time to time, shall not be reduced without Farbman's
consent.
(b) Cash Bonus. Farbman shall be entitled to receive a performance-
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based cash bonus (the "Bonus"), in addition to and separate from Farbman's Base
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Salary, in accordance with the bonus formula attached as Exhibit A hereto. The
Bonus shall be payable within 5 days after the delivery to the Board of NCI's
audited financial statements for the
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preceding fiscal year. Farbman may be awarded an additional cash bonus in the
sole discretion of the Board, it being acknowledged and agreed that the Board
shall be under no obligation to make any additional cash bonus.
(c) Incentive Compensation. In addition to Farbman's Base Salary and
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Bonus, upon the execution of this Agreement, Farbman shall receive (i) a
restricted stock award of 250,000 shares of NCI's common Stock (the "Restricted
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Stock Award") pursuant to a Management Restricted Stock Agreement and (ii)
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options to purchase 830,000 shares of NCI's common stock (the "Option Grant")
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pursuant to a Stock Option Agreement. Additionally, if NCI meets certain
performance thresholds either through improvements in EBITDA (as defined in
Exhibit A) or the appreciation in the trading price of NCI's Common Stock,
Farbman may be awarded additional stock-based awards in the sole discretion of
the Board, it being acknowledged and agreed that the Board shall be under no
obligation to make any additional stock-based awards.
(d) Out-of-Pocket Expenses. NCI shall promptly pay to Farbman the
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reasonable expenses incurred by him in the performance of his duties hereunder,
including, without limitation, those incurred in connection with business
related travel or entertainment, or, if such expenses are paid directly by
Farbman, shall promptly reimburse him for such payment, provided that Farbman
properly accounts therefor in accordance with NCI's policy.
(e) Participation in Benefit Plans. Farbman shall be entitled to
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participate in or receive benefits under any pension plan, health and accident
plan or any other employee benefit plan or arrangement made available now or in
the future by NCI to its employees and key management personnel.
(f) Key Man Life Insurance. NCI shall use commercially reasonable
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efforts to purchase and maintain on Farbman key-man life insurance in such
amount and upon such terms or conditions as NCI may deem reasonable in order to
discharge NCI's obligations under this Agreement; provided that the minimum
amount of key-man life insurance to be maintained on Farbman's life shall be
$3,000,000, of which $1,000,000 shall be payable to a beneficiary designated by
Farbman for so long as Farbman is employed by NCI. Farbman shall cooperate with
NCI in connection with obtaining and maintaining such policy, including the
submission to physical examination and blood testing.
(g) Vacation. Farbman shall be entitled to paid vacation days in each
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calendar year determined by NCI from time to time, but not less than four (4)
weeks in any calendar year. Vacation shall be prorated in any calendar year of
the Term during which Farbman is employed hereunder for less than an entire year
in accordance with the number of days in such year during which he is so
employed. Farbman shall also be entitled to all paid holidays given by NCI to
its employees and key management personnel. No vacation time shall be paid for
if not taken nor carried over into any subsequent calendar year unless NCI's
policies then permit.
(h) Automobile. NCI shall pay and/or reimburse Farbman for up to a
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maximum of $20,000 per year to lease an automobile of Farbman's choice for
Farbman's use, to equip such automobile with a car phone for use by Farbman in
performing his duties hereunder
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and to pay the costs of gas, garage, maintenance and up-keep of and insurance
for the automobile.
5. Termination.
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Farbman's employment hereunder shall be terminated upon Farbman's
death or Farbman's voluntarily leaving the employ of NCI (other than for "Good
Reason"), and may be terminated as follows:
(a) For Cause. NCI shall have the right to terminate Farbman's
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employment for "Cause." A termination for "Cause" is a termination evidenced by
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a resolution adopted by a vote of a majority of the members of the entire Board
finding that Farbman has:
(i) breached or failed to comply with any of the material terms
of Section 2, 7, 8, 9 or 12 of this Agreement;
(ii) continually failed in bad faith to perform his material
duties under this Agreement;
(iii) engaged in gross negligence or willful misconduct in connection
with or arising out of the performance of his duties hereunder, including,
without limitation, the misappropriation of funds;
(iv) been repeatedly under the influence of drugs or alcohol (other
than prescription medicine or other medically-related drugs to the extent that
they are taken in accordance with their directions) during the performance of
his duties under this Agreement, or while under the influence of such drugs or
alcohol, engages in grossly inappropriate conduct during the performance of his
duties under this Agreement;
(v) engaged in behavior that would constitute grounds for liability
for sexual harassment (as proscribed by the U.S. Equal Employment Opportunity
Commission Guidelines, the New York State Division of Human Rights and or any
other applicable state regulatory body) or other egregious conduct violative of
laws governing the workplace; or
(vi) committed any act of fraud, larceny, misappropriation of funds or
embezzlement or been convicted of a felony or a crime of moral depravity;
provided, however, that (A) in the case of clauses (i), (ii) and (iii) above,
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Farbman shall receive thirty (30) days' advance written notice that the Board
intends to meet to consider Farbman's termination for Cause and specifying the
actions constituting Cause, Farbman shall have the opportunity to cure the
conduct constituting Cause during such thirty (30) day period and/or Farbman
shall be given a reasonable opportunity to be heard by the Board on the issue
prior to the Board's vote on the matter, (B) any act, or failure to act, based
upon authority given pursuant to a resolution duly adopted by the Board or based
upon the advice of counsel for NCI shall be conclusively presumed to be done, or
omitted to be done, by Farbman in good faith and in the best interests of NCI,
(C) in the case of clauses (i) or (ii), failure to achieve a qualitative level
of
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performance shall not be grounds for termination for Cause and (D) in the case
of clause (i), a breach of subsection 8(a)(iv) without demonstrable harm shall
not constitute Cause.
(b) For Disability NCI shall have the right to terminate Farbman's
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Employment as a result of Farbman's "Disability." For purposes of this
Agreement, a termination for "Disability" shall occur:
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(i) upon the thirtieth (30th) day after the Board has provided a
written termination notice to Farbman supported by a written statement from a
reputable independent physician mutually selected by the parties hereto to the
effect that Farbman shall have become so incapacitated as to be unable to
resume, within 120 days, his employment hereunder by reason of physical or
mental illness or injury, or
(ii) upon rendering of a written termination notice by NCI after
Farbman has been unable to substantially perform his duties hereunder for 180
consecutive days (exclusive of any vacation permitted under Section 4(g) hereof)
or for 180 days in any 360 day period by reason of any physical or mental
illness or injury.
If the Board determines, in good faith, that the Disability of Farbman
has occurred based upon such determination by such physician or by such
absences, it may give to Farbman written notice of its intention to terminate
Farbman's employment. In such event, Farbman's employment with NCI shall
terminate effective on the 30th day after receipt of such notice by Farbman;
provided that, within the 30 days after such receipt, Farbman shall not have
returned to full-time performance of his duties and indicated an ability to
continue to perform such duties on a full-time basis. For purposes of this
Section 5(b), Farbman agrees to make himself available and to cooperate in any
reasonable examination by a reputable independent physician mutually selected by
the parties.
(c) By Farbman for Good Reason. Farbman shall have the right to
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terminate his employment with NCI for "Good Reason." For purposes of this
Agreement, "Good Reason" shall mean:
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(i) Removal from, or failure to be reappointed, elected or reelected
to, his position as President and Chief Executive Officer or member of the Board
(other than for Cause or by reason of Farbman's death or disability); or
(ii) Material diminution in Farbman's title, position, duties or
responsibilities, or the assignment to Farbman of duties that are inconsistent,
in a material respect, with the scope of duties and responsibilities associated
with the positions specified in this Agreement, excluding for this purpose an
isolated, insubstantial and inadvertent action not taken in bad faith; or
(iii) Reduction in Farbman's Base Salary or Bonus opportunity or any
failure by the Board to implement any compensation (including equity)
arrangements contemplated by this Agreement; or
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(iv) The continuous failure of NCI in bad faith to comply with any of
its material obligations under this Agreement, the Restricted Stock Agreement
dated as of the date hereof between NCI and Farbman (the "Restricted Stock
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Agreement"), the Stock Option Agreement dated as of the date hereof between NCI
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and Farbman (the "Option Agreement"), the Stockholders' Agreement dated as of
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the date hereof among NCI, Farbman and certain other stockholders of NCI (the
"Stockholders' Agreement"), the Subscription Agreement dated as of the date
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hereof among NCI, Wilbur L. Ross ("Ross"), J. Morton Davis ("Davis") and Melvyn
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I. Weiss ("Weiss") (the "Subscription Agreement") and any other documents
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relating to the retirement of the $2.5 million debt (collectively, the "Debt
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Documents") and any other benefit plans of NCI pursuant to which NCI may have an
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obligation to Farbman (the "Benefit Plans," and together with the Debt
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Documents, this Agreement, the Restricted Stock Agreement and the Option
Agreement, the "Farbman Agreements"), in any case other than an isolated,
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insubstantial and inadvertent failure and which is remedied by NCI promptly
after receipt of notice thereof given by Farbman; or
(v) Failure of NCI to comply with any material regulatory requirement
applicable to it including, without limitation, the rules and regulations of the
SEC, which failure persists following an objection by Farbman to the compliance
status of NCI, unless such failure is caused by Farbman's acts or his failure to
act by virtue of his position as a director and/or officer of NCI; or
(vi) Relocation without consent of Farbman to an office other than the
Corporate Office or relocation of the Corporate Office to a location outside the
New York metropolitan area;
(vii) Any reason during the 90-day period subsequent to the
expiration of 6 months following a Change of Control (as such term is defined in
Appendix A hereto);
(viii) Failure by NCI to pay amounts due under this Agreement which
continues for 30 business days following notice;
(ix) The failure of any of Ross, Davis or Weiss to perform his
obligations under the Subscription Agreement or the failure of the Board to
permit Farbman to cause NCI to utilize the proceeds from the Subscription
Agreement to retire NCI's $2.5 million indebtedness to D.H. Blair Investment
Banking Corp. and Rothschild Recovery Fund L.P.;
(x) The failure of NCI to reduce the size of the Board of NCI from 16
to 9 members within 30 days of the date hereof or the failure of the Board to be
constituted in the manner set forth in Section 3(b) of the Stockholders'
Agreement.
Farbman shall not terminate his employment for Good Reason unless and
until he has delivered to the Board not less than 15 days notice that he intends
to terminate his employment for Good Reason, which notice shall specify the
reasons for termination, and the Board fails to remedy the circumstances giving
rise to Farbman's notice within such 15 day period.
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6. Effect of Termination.
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(a) Death or Disability. In the event of the termination of Farbman's
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employment as a result of his death or Disability, NCI shall:
(i) pay to Farbman or his estate, as the case may be, the Base Salary
through the date of his death or Disability (pro rated for any partial month);
(ii) pay to Farbman or his estate, as the case may be, any accrued and
unpaid Bonus in accordance with Section 4(b);
(iii) reimburse Farbman, or his estate, as the case may be, for any
expenses pursuant to Section 4(d) (the amounts payable pursuant to the foregoing
clauses (i), (ii) and (iii) are hereafter referred to as the "Accrued
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Obligations");
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(iv) pay to Farbman or his estate in a lump sum an amount equal to his
annual Base Salary then in effect; provided, however, that no such payment shall
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be made in the case of Farbman's death if the life insurance described in
Section 4(f) shall have been maintained at the time of his death; and
(v) provide to Farbman and/or his family, as the case may be, (A) for
the first year after Farbman's death or Disability (or such longer period as is
required under COBRA), continued coverage under all welfare benefit plans
including medical, accident, life or other disability plans and programs in
which Farbman and his family participated immediately prior to his death or
Disability, and sharing in the cost of such benefit coverage in the same
proportion as was in effect for Farbman immediately prior to his death or
Disability and (B) after such 1 year period, Farbman or his estate, as the case
may be, shall be responsible for the full cost of Farbman's COBRA payments.
(b) For Cause by NCI, by Farbman Voluntarily (other than for Good
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Reason) or upon expiration of this Agreement. In the event that Farbman's
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employment is terminated by NCI for Cause, by Farbman voluntarily (other than
for Good Reason) or upon expiration of this Agreement, NCI shall pay to Farbman
the Accrued Obligations, and Farbman shall have no further entitlement to any
other compensation or benefits from NCI, except as set forth herein or in the
Farbman Agreements (other than this Agreement).
(c) Other than as a result of Farbman's death, by NCI for Cause or as
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a result of Farbman's Disability or by Farbman for Good Reason. In the event
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that Farbman's employment is terminated by NCI other than for Cause, death or
Disability or is terminated by Farbman for Good Reason, then in any such event,
subject to receipt of a release of NCI and its directors, officers and employees
and their respective successors and assigns of claims of Farbman against them
solely by reason of his termination of employment hereunder:
(i) NCI shall pay to Farbman the Accrued Obligations;
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(ii) NCI shall pay to Farbman in a lump sum an amount equal to (A) the
sum of (x) the Base Salary then in effect and (y) the greater of the Bonus for
the year preceding his termination or the Bonus that he would have received had
he completed the year in which his termination occurred multiplied by (B) the
lesser of (x) two (2) or (y) the number of years remaining in the Term
(including fractional portions of a year), but in no event shall the multiplier
be less than one (1); and
(iii) NCI shall, provide to Farbman, (A) for the first year after
Farbman's termination (or such longer period as is required under COBRA),
continued coverage under all welfare benefit plans including medical, accident,
life or other disability plans and programs in which Farbman participated
immediately prior to his termination, and sharing in the cost of such benefit
coverage in the same proportion as was in effect for Farbman immediately prior
to his termination and (B) after such 1 year period, Farbman or his estate, as
the case may be, shall be responsible for the full cost of Farbman's COBRA
payments.
(d) This Section 6 and Section 4(f) and the Farbman Agreements (other
than this Agreement) set forth the only obligations of NCI with respect to the
termination of Farbman's employment with NCI, and Farbman acknowledges that upon
the termination of his employment, he shall not be entitled to any payments or
benefits which are not explicitly provided herein, in Section 4(f) or in the
Farbman Agreements (other than this Agreement). Any an all accrued obligations
shall be paid within fifteen (15) days of the termination of Farbman's
employment.
(e) In no event shall Farbman be obligated to seek other employment or
take any other action by way of mitigation of the amounts payable to Farbman
under any of the provisions of this Agreement and such amounts shall not be
reduced whether or not Farbman obtains other employment.
7. Covenant Regarding Inventions and Copyrights.
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Farbman shall disclose promptly to NCI any and all inventions,
discoveries, improvements and patentable or copyrightable works developed,
initiated, conceived or made by him, either alone or in conjunction with others,
during the Term hereof and related to the business or activities of NCI, and he
assigns and shall assign, without additional consideration, all of his interest
therein to NCI or its nominee; whenever requested to do so by NCI, Farbman shall
execute any and all applications, assignments or other instruments which NCI
shall deem necessary to apply for and obtain letters patent, trademarks or
copyrights of the United States or any foreign country, or otherwise protect
NCI's interest therein. These obligations shall continue beyond the conclusion
of the Term with respect to inventions, discoveries, improvements or
copyrightable works initiated, conceived or made by Farbman during the Term and
shall be binding upon Farbman's assigns, executors, administrators and other
legal representatives.
8. Protection of Confidential Information.
--------------------------------------
(a) As a significant inducement to NCI to enter into and perform its
obligations under this Agreement and to deliver to Farbman the Restricted Stock
Award and the
8
<PAGE>
Option Grant, Farbman acknowledges that he has been and will be provided with
information about, and his employment by NCI will, throughout the Term, bring
him into close contact with, many confidential affairs of NCI, including
proprietary information about costs, profits, markets, sales, customers,
advertisers, vendors, products, key personnel, pricing policies, operational
methods, technical processes and other business affairs and methods, plans for
future developments and other information not readily available to the public,
all of which are highly confidential and proprietary and all of which were
developed by NCI at great effort and expense. Farbman further acknowledges that
the services to be performed by him under this Agreement are of a special
unique, unusual, extraordinary and intellectual character and that the nature of
the relationship of Farbman with NCI is such that Farbman is capable of
competing with NCI. In recognition of the foregoing, Farbman covenants and
agrees during the Term and thereafter he will:
(i) keep secret all confidential matters of NCI and not disclose them
to anyone outside of NCI, either during or after the Term, except with NCI's
prior written consent;
(ii) not make use of any of such confidential matters for his own
purposes or the benefit of anyone other than NCI, provided that the confidential
matters referred to in clauses (i) and (ii) of this Section 8(a) shall not apply
to information which is generally known to the public other than as a result of
Farbman's breach of this Section 8(a); and
(iii) deliver promptly to NCI on termination of this Agreement, or at
any time NCI may so request, all confidential memoranda, notes, records, reports
and other confidential documents (and all copies thereof) relating to the
business of NCI, which he may then possess or have under his control, except
that he may retain personal notes, notebooks, journals and diaries provided that
such materials do not contain confidential information; and
(iv) not disparage NCI, any Affiliate (as such term is defined in
Appendix A hereto) of NCI, any Board member, officer or employee of NCI, or any
Affiliate of any such Board member, officer or employee of NCI by making any
oral or written negative statements or representations about any of them.
(b) As an inducement to Farbman to enter into and perform his
obligations under this Agreement , NCI acknowledges that it has been and will be
provided with information about Farbman which is confidential. In recognition
of the foregoing, NCI covenants and agrees during the Term and thereafter it
will:
(i) keep secret all confidential matters of Farbman and not disclose
them to anyone other than Farbman, either during or after the Term, except with
Farbman's prior written consent;
(ii) not make use of any of such confidential matters for its own
purposes or the benefit of anyone other than Farbman, provided that the
confidential matters referred to in clauses (i) and (ii) of this Section 8(b)
shall not apply to information which is generally known to the public other than
as a result of NCI's breach of this Section 8(b); and
9
<PAGE>
(iii) not disparage Farbman or any Affiliate of Farbman by making any
oral or written negative statements or representations about any of them.
9. Restriction of Competition; Interference; and Non-Solicitation.
--------------------------------------------------------------
As a significant inducement to NCI to enter into and perform its
obligations under this Agreement and to deliver to Farbman the Restricted Stock
Award and the Option Grant, Farbman covenants and agrees that, during the Term
and for a period of (x) two (2) years after the termination of his employment by
NCI for Cause or by Farbman without Good Reason or (y) one (1) year after the
termination of Farbman's employment by NCI without Cause, by Farbman for Good
Reason or as a result of Farbman's Disability, (the "Restricted Period"),
-----------------
Farbman will not, and shall not cause any person, partnership, corporation,
limited liability company or other Affiliate of Farbman to, directly or
indirectly or by action in concert with others:
(a) enter into the employ of, or render any services to, any person or
entity engaged in (i) the publication of community oriented newspapers in the
specific local geographic communities to which such publications of NCI are
directed or to which NCI is actively and demonstrably planning to direct
publications at the expiration of the Term, (ii) the publication of any other
newspaper, magazine or periodical the content of which is similar to or
competitive with any publication of NCI (e.g., The Hill) having circulation that
is directed to a specific demographic group to whom publications of NCI are
directed or to which NCI is actively and demonstrably planning to direct
publications at the expiration of the Term (iii) a line or lines of business
that directly competes within the same geographic market in which a line or
lines of business of NCI accounting for more than 5% of NCI's gross revenues
operates at the expiration of the Term or (iv) a line or lines of business that
directly competes within the same geographic market in which a line or lines of
business of NCI operates or NCI is actively and demonstrably proposing to
operate at the expiration of the Term and which line or lines of business are
projected by NCI's then current business plan to represent more than 5% of NCI's
gross revenues within two years following the expiration of the Term (each, a
"Competitive Business");
- ---------------------
(b) become interested in or engage in a Competitive Business for his
own account or as an individual, partner, stockholder, creditor, director,
officer, principal, agent, employee, trustee, consultant, advisor, franchisee or
in any other relationship or capacity; or
(c) interfere with NCI's relationship with, or endeavor to entice away
from NCI, or otherwise induce any Person or entity who or which is or was an
employee, customer or supplier of, or maintained a business relationship with,
NCI at the time of, or within six months prior to, the expiration of the Term or
which NCI has solicited or has definitively prepared to solicit at the time of
termination to terminate or otherwise refrain from renewing or entering into an
employment or other relationship with NCI;
provided, however, that (i) the provisions of clause (a) shall not be deemed to
- --------- -------
preclude Farbman from engagement by a corporation or entity some of the
activities of which are competitive with the Competitive Business if Farbman's
engagement does not, directly or indirectly, relate to, and Farbman is
segregated completely from, such Competitive Business and (ii) nothing contained
in
10
<PAGE>
this Section 9 shall be deemed to prohibit Farbman from directly acquiring or
holding, solely for investment, securities of any corporation or entity some of
the activities of which constitute a Competitive Business so long as such
securities do not, in the aggregate, constitute more than five percent (5%) of
any class or series of outstanding securities of such corporation or entity.
10. Specific Remedies.
-----------------
For the purposes of Sections 7, 8 and 9 of this Agreement, references
to NCI shall include all current and future majority-owned subsidiaries of NCI
and all current and future joint ventures in which NCI may from time to time be
involved. It is understood by Farbman and NCI that the covenants contained in
this Section 10 and Sections 7, 8 and 9 are essential elements of this Agreement
and that, but for the agreement of Farbman to comply with such covenants, NCI
would not have agreed to enter into this Agreement. NCI and Farbman have
independently consulted with their respective counsel and have been advised
concerning the reasonableness and propriety of such covenants with specific
regard to the nature of the business conducted by NCI and all interests of NCI
and its stockholders. Farbman agrees that the covenants of Sections 7, 8 and 9
are reasonable and valid. If Farbman commits a breach of any of the provisions
of Sections 7, 8 or 9 hereof, such breach shall be deemed to be grounds for
termination for Cause. In addition, Farbman acknowledges that NCI may have no
adequate remedy at law if he violates any of the terms hereof. Farbman
therefore understands and agrees that NCI shall have without prejudice as to any
other remedies:
(a) the right upon application to any court of proper jurisdiction and
without posting of any bond or other security whatsoever, to a temporary
restraining order, preliminary injunction, injunction, specific performance or
other equitable relief, it being acknowledged and agreed that any such breach
will cause irreparable injury to NCI and that money damages will not provide an
adequate remedy to NCI; and
(b) the right to apply to any court of proper jurisdiction, to require
Farbman to account for and pay over all compensation, profits, monies, accruals,
increments and other benefits (collectively the "Benefits") derived or received
--------
by Farbman as a result of any transaction constituting a breach of any of the
provisions of Sections 7, 8 or 9, and, if a court so orders, Farbman hereby
agrees to account for and pay over such Benefits to NCI.
11. Independence; Severability and Non-Exclusivity.
----------------------------------------------
Each of the rights enumerated in Sections 7, 8 or 9 hereof and the
remedies enumerated in Section 10 hereof shall be independent of the others and
shall be in addition to and not in lieu of any other rights and remedies
available to NCI at law or in equity. If any provision of this Agreement, or
any part of any of them, is hereafter construed or adjudicated to be invalid or
unenforceable, the same shall not affect the remainder of the covenants or
rights or remedies which shall be given full effect without regard to the
invalid portions. If any of the covenants set forth herein is held to be
invalid or unenforceable because of the duration of such provision or the area
covered thereby, the parties agree that the court making such determination
shall have the power to reduce the duration and/or area of such provision and in
its reduced form said provision shall then be enforceable. No such holding of
invalidity or unenforceability in one
11
<PAGE>
jurisdiction shall bar or in any way affect NCI's right to the relief provided
in Section 10 or otherwise in the court of any other state or jurisdiction
within the geographical scope of such covenants as to breaches of such covenants
in such other respective states or jurisdictions, such covenants being, for this
purpose, severable into diverse and independent covenants.
12. Acknowledgements of Farbman and NCI.
-----------------------------------
(a) Farbman acknowledges that NCI shall have the right but not the
obligation to use Farbman's name or likeness for any publicity or advertising
purpose.
(b) Farbman represents that he has the right to enter into this
Agreement and this Agreement constitutes the valid and binding obligation of him
enforceable in accordance with its terms, except that Farbman makes no
representation as to whether this Agreement conflicts with the provisions of
Section 5 of that certain employment agreement dated August 1, 1998 by and
between Farbman and American Lawyer Media, Inc. (the "Prior Employment
----------------
Agreement"). Except for the Prior Employment Agreement, Farbman is not subject
to any restrictive covenant. Farbman represents that he has not breached and
will not breach the terms of Sections 5(a),(c),(d) or(e) of the Prior Employment
Agreement, and Farbman has not entered into, and he agrees that he will not
enter into, any agreement, either written or oral, in conflict with this
Agreement.
(c) NCI represents that, as of the date hereof, it is in compliance,
in all material respects, with any material regulatory requirement applicable to
it, including without limitation, the rules and regulations of the SEC.
13. Gross-Up in connection with a Change of Control.
-----------------------------------------------
In the event that, as a result of the payments to which he becomes
entitled by reason of a Change of Control pursuant to the terms hereof or the
terms of any of the other Farbman Agreements (including but not limited to the
payments provided for pursuant to Section 5 hereof and the accelerated vesting
of restricted stock awards and stock options pursuant to the terms of the other
Farbman Agreements), Farbman becomes subject to excise tax (the "Excise Tax")
----------
under Section 4999 of the Internal Revenue Code of 1986, as amended (the
"Code"), NCI shall pay to Farbman as additional compensation an amount (the
----
"Gross-Up Payment") equal to one half of the Gross-Up Amount. The term "Gross-
- ----------------- -----
Up Amount" shall be an amount which, after payment by Farbman of all taxes
- ---------
(including any federal, state and local income tax and excise tax) upon such
amount would allow Farbman to retain an amount equal to the Excise Tax. For
purposes of determining whether Farbman will be subject to the Excise Tax and
the amount of such Excise Tax,
(a) any other payments or benefits received or to be received by
Farbman in connection with a Change in Control or Farbman's termination of
employment (whether pursuant to the terms of this Agreement or any other plan,
arrangement or agreement with NCI, any entity whose actions result in a Change
in Control or any entity affiliated with NCI) shall be treated as "parachute
payments" within the meaning of Section 280G(b)(2) of the Code, and all "excess
parachute payments" within the meaning of Section 280G(b)(1) of the Code shall
be
12
<PAGE>
treated as subject to the Excise Tax, unless in the opinion of tax counsel
selected by NCI's independent auditors and reasonably acceptable to Farbman such
other payments or benefits (in whole or in part) do not constitute parachute
payments, including by reason of Section 280G(b)(4)(A) of the Code, or such
excess parachute payments (in whole or in part) represent reasonable
compensation for services actually rendered, within the meaning of Section
280G(b)(4)(B) of the Code, or are otherwise not subject to the Excise Tax,
(b) the amount of payments or benefits treated as subject to the
Excise Tax shall be equal to the lesser of (i) the total amount of payments or
benefits conferred on Farbman by reason of the Change of Control or (ii) the
amount of excess parachute payments within the meaning of Section 280G(b)(1) of
the Code (after applying clause (a), above), and
(c) the value of any non-cash benefits or any deferred payment or
benefit shall be determined by NCI's independent auditors in accordance with the
principles of Sections 280G(d)(3) and (4) of the Code. For purposes of
determining the amount of the Gross-Up Payment, Farbman shall be deemed to pay
federal income taxes at the highest marginal rate of federal income taxation in
the calendar year in which the Gross-Up Payment is to be made and state and
local income taxes at the highest marginal rate of taxation in the state and
locality of Farbman's residence on the date on which the Excise Tax is incurred,
net of the maximum reduction in federal income taxes which could be obtained
from deduction of such state and local taxes. In the event that the Excise Tax
is subsequently determined to be less than the amount taken into account
hereunder, Farbman shall repay to NCI, at the time that the amount of such
reduction in Excise Tax is finally determined, the portion of the Gross-Up
Payment attributable to such reduction (plus that portion of the Gross-Up
Payment attributable to the Excise Tax and federal, state and local income tax
deduction) plus interest on the amount of such repayment at the rate provided in
Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is
determined to exceed the amount taken into account hereunder (including by
reason of any payment the existence or amount of which cannot be determined at
the time of the Gross-Up Payment), NCI shall make an additional Gross-Up Payment
in respect of such excess (plus any interest, penalties or additions payable by
Farbman with respect to such excess) at the time that the amount of such excess
finally is determined. Farbman and NCI each shall reasonably cooperate with the
other in connection with any administrative or judicial proceedings concerning
the existence or amount of liability for Excise Tax.
14. Disputes.
--------
Except as provided in Section 10 hereof, if NCI or Farbman shall
dispute any termination of Farbman's employment hereunder or if a dispute
concerning any provision hereof or of the other Farbman Agreements shall exist:
(a) either party shall have the right (but not the obligation) to
compel binding, enforceable and non-appealable arbitration of the dispute in the
City of New York, County of New York under the rules of the American Arbitration
Association by giving written notice of arbitration to the other party within
thirty (30) days after notice of such dispute has been received by the party to
whom notice has been given;
13
<PAGE>
(b) in any such an arbitration: (i) the panel shall consist of three
attorneys, each with not less than 10 years of experience in employment law,
(ii) the Federal Rules of Evidence shall apply, (iii) the panel shall render
written findings of fact and conclusions of law, and (iv) the findings of fact
shall be binding on the parties and the conclusions of law shall be subject to
appeal; and
(c) if such dispute (whether or not submitted to arbitration pursuant
to Section 14(a) hereof) results in a determination that (i) NCI did not have
the right to terminate Farbman's employment under the provisions of this
Agreement or (ii) the position taken by Farbman is to any extent correct, NCI
shall promptly pay, or if theretofore paid by Farbman, shall promptly reimburse
Farbman for, all reasonable costs and expenses (including reasonable attorney's
fees) incurred by Farbman in connection with such dispute.
15. Attorneys Fees.
--------------
NCI shall promptly, after the date hereof, reimburse Farbman for
reasonable attorneys fees and costs incurred by him in connection with the
negotiation and execution of this Agreement and the other Farbman Agreements,
subject to a maximum amount of $25,000.
16. Successors; Binding Effect; Third Party Beneficiaries.
-----------------------------------------------------
In the event of a future disposition by NCI (whether direct or
indirect, by sale of assets or stock, merger, consolidation or otherwise) of all
or substantially all of its business and/or assets, NCI will require any
successor, by agreement in form and substance reasonably satisfactory to Farbman
or by operation of law, to expressly assume and agree to perform this Agreement
in the same manner and to the same extent that NCI would be required to perform
if no such disposition had taken place. As used in this Agreement, "NCI" shall
mean NCI as herein before defined and any successor to its business and/or
assets as aforesaid which assumes and agrees to perform this Agreement by
operation of law, or otherwise.
This Agreement is personal to Farbman and, without the prior written
consent of NCI, shall not be assignable by Farbman otherwise than by will or the
laws of descent and distribution with respect to Farbman's rights, if any, to be
paid or receive benefits hereunder. This Agreement shall inure to the benefit
of and be enforceable by Farbman's legal representatives. Except for the
foregoing, this Agreement shall not create any rights in favor of any party
other than the parties hereto or their respective successors and assigns.
17. Headings.
--------
The headings of this Agreement are for convenience of reference only
and shall not affect in any manner any of the terms and conditions hereof.
18. Acts and Documents.
------------------
The parties agree to do, sign and execute all acts, deeds, documents
and corporate proceedings necessary or desirable to give full force and effect
to this Agreement.
14
<PAGE>
19. Counterparts.
------------
This Agreement may be executed in two or more counterparts, each of
which shall be deemed an original and all of which together shall constitute one
and the same agreement.
20. Modifications and Waivers.
-------------------------
No term, provision or condition of this Agreement may be modified or
discharged unless such modification or discharge is authorized by the Board and
is agreed to in writing and signed by Farbman. No waiver by either party hereto
of any breach by the other party hereto of any term, provision or condition of
this Agreement to be performed by such other party shall be deemed a waiver of
similar or dissimilar provisions or conditions at the same or at any prior or
subsequent time.
21. Entire Agreement.
----------------
This Agreement, together with the other Farbman Agreements, constitute
the entire agreement between the parties with respect to the subject matter
herein and supersedes all prior agreements, negotiations and discussions between
the parties hereto, there being no extraneous agreements. This Agreement may be
amended only in writing executed by the parties hereto affected by such
amendment.
22. Notices.
-------
Any notice or other communications required or permitted hereunder
shall be in writing and shall be deemed effective (a) upon personal delivery, if
delivered by hand and followed by notice by mail or facsimile transmission, (b)
three (3) days after the date of deposit in the mails, if mailed by certified or
registered mail (return receipt requested), or (c) on the next business day, if
mailed by an overnight mail service to the parties or sent by facsimile
transmission,
if to NCI: if to Farbman:
- ---------- --------------
News Communications, Inc. Mr. Steven Farbman
174-15 Horace Harding Expressway One North Bridge Terrace
Fresh Meadows, New York 11365 Mt. Kisco, New York 10549
Attn.: Chairman of the Board Telecopy: (914) 666-3165
Telecopy: (718) 357-4833
(or the Corporate Office)
with a copy to: with a copy to:
Piper & Marbury L.L.P. Davis Polk & Wardwell
1251 Avenue of the Americas 450 Lexington Avenue
New York, New York 10020 New York, New York 10017
15
<PAGE>
Attn: Paul J. Pollock, Esq. Attn: Beverly Chase, Esq.
Telecopy: (212) 835-6001 Telecopy: (212) 450-4800
or at such other address or telecopy number (or other similar number) as either
party may from time to time specify to the other. Any notice, consent or other
communication required or permitted to be given hereunder shall have been deemed
to be given on the date of mailing, personal delivery or telecopy or other
similar means (provided the appropriate answer back is received) thereof and
shall be conclusively presumed to have been received on the second business day
following the date of mailing or, in the case of personal delivery or telecopy
or other similar means, the day of delivery thereof, except that a change of
address shall not be effective until actually received.
23. Law Governing.
-------------
This Agreement shall be governed by and construed in accordance with
the laws of the State of New York (without giving effect to the principles of
conflicts of law). Each of NCI and Farbman agrees that the federal or state
courts located in the City of New York, State of New York shall have exclusive
jurisdiction in connection with any dispute arising out of this Agreement that
is not being resolved in accordance with Section 13. Any litigation proceeding
under this Agreement shall be confidential in nature to the fullest extent
permitted by applicable law.
24. Acts and Documents.
------------------
The parties agree to do, sign and execute all acts, deeds, documents
and corporate proceedings necessary or desirable to give full force and effect
to this Agreement.
16
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
the day and year first set forth above.
/s/ Steven Farbman
-------------------
Steven Farbman
NEWS COMMUNICATIONS, INC.
By: /s/ Wilbur L. Ross, Jr.
--------------------------
Wilbur L. Ross, Jr.
Chief Executive Officer
17
<PAGE>
Appendix A
Affiliate means, when used with respect to a specified Person, another
Person that directly, or indirectly through one or more
intermediaries, Controls or is Controlled by or is under common
Control with the Person specified.
Change (a) The acquisition by any individual, entity or group (within the
of Control meaning of of Section 13(d)(3) or 14(d)(2) of the Securities
Exchange Act of 1934, as amended (the "Exchange Act")) (a
------------
"Person"), other than the current principal stockholders of NCI,
------
of beneficial ownership (within the meaning of Rule 13d-3
promulgated under the Exchange Act) of fifty percent (50%) or
more of either (A) the then outstanding shares of NCI Common
Stock of NCI (the "Outstanding NCI Common Stock") or (B) the
-----------------------------
combined voting power of the then outstanding voting securities
of NCI entitled to vote generally in the election of members of
the Board or board of any corporate successor to the business of
NCI (the "Outstanding NCI Voting Securities"); provided,
--------------------------------- --------
however, that for purposes of this subsection (a), the following
-------
acquisitions shall not constitute a Change of Control: (1) any
acquisition of securities directly from NCI, (2) any acquisition
by NCI, or (3) any acquisition by any Person pursuant to a
transaction which complies with clauses (A), (B) and (C) of
subsection (c) below; or
(b) Individuals who, as of the Effective Date, constitute the Board
as reconstituted in accordance with the Stockholders' Agreement
(the "Incumbent Board") cease for any reason within any period of
---------------
18 consecutive months to constitute at least a majority of such
Incumbent Board; provided, however, that any individual becoming
-------- -------
a director subsequent to the Effective Date whose election, or
nomination for election, by NCI's stockholders, was approved by a
vote of at least a majority of the members then comprising the
Incumbent Board shall be considered as though such individual
were a member of the Incumbent Board, but excluding, for this
purpose, any such individual whose initial assumption of office
occurs as a result of an actual or threatened election contest
with respect to the election or removal of directors or other
actual or threatened solicitation of proxies or consents by or on
behalf of a Person other than the Incumbent Board; or
(c) Consummation after the Effective Date of a reorganization, merger
or consolidation or sale or other disposition of all or
substantially all of the assets of NCI or the acquisition of
assets of another corporation (a "Business Combination"), in each
--------------------
case, unless, following such Business
18
<PAGE>
Combination, (A) all or substantially all of the individuals and
entities who were the beneficial owners, respectively, of the
Outstanding NCI Securities and Outstanding NCI Voting Securities
immediately prior to such Business Combination beneficially own,
directly or indirectly, more than fifty percent (50%) of,
respectively, the then Outstanding NCI Securities and the
Outstanding NCI Voting Securities, as the case may be, of the
corporation resulting from such Business Combination in
substantially the same proportions as their ownership,
immediately prior to such Business Combination, of the
Outstanding NCI Securities and Outstanding NCI Voting Securities,
as the case may be, (B) no Person (excluding any employee benefit
plan (or related trust) of NCI or such corporation resulting from
such Business Combination) beneficially owns, directly or
indirectly, fifty percent (50%) or more of, respectively, the
then Outstanding NCI Securities and the Outstanding NCI Voting
Securities resulting from such Business Combination or the
combined voting power of the then outstanding voting securities
of such corporation except to the extent that such Person had an
ownership position in excess of such fifty percent (50%) of the
Outstanding NCI Voting Securities prior to the Business
Combination or (C) at least a majority of the members of the
board of the entity resulting from such Business Combination were
members of the Incumbent Board or Persons who replaced such
Incumbent Board without causing a Change in Control pursuant to
Section (b) above at the time of the execution of the initial
agreement, or of the action of the Incumbent Board, providing for
such Business Combination; or
(d) Approval by the securityholders of NCI of a complete liquidation
or dissolution of NCI.
Control means the possession, directly or indirectly, of the power to
direct or cause the direction of the management or policies of a
Person, whether through the ownership of voting securities, by
contract or otherwise.
19
<PAGE>
Exhibit A
Bonus Formula
The amount of the Bonus shall be calculated as set forth below:
(i) for the six month period ended November 30, 1999, 15% of the
amount by which EBITDA for such six month period exceeds EBITDA
for the six month period ended November 30, 1998; and
(ii) for the fiscal years ended November 30, 2000, 2001 and 2002 and
for each fiscal year thereafter, 15% of the amount by which
EBITDA for each such fiscal year exceeds EBITDA for the fiscal
year immediately preceding such fiscal year;
provided, however, that in no case shall the Bonus for any period set
forth above exceed $700,000.
For purposes of the foregoing, "EBITDA" shall mean with respect to any
------
period, earnings of NCI for such period before interest (including without
limitation the interest component of any capital lease obligation), taxes,
depreciation and amortization for such period; provided, that for purposes of
determining EBITDA, (i) cash and non-cash compensation expenses resulting from
Farbman's equity arrangements shall, to the extent deducted from earnings in
calculating EBITDA in accordance with generally accepted accounting principles,
be added back to earnings in calculating EBITDA and (ii) earnings shall exclude
earnings from extraordinary items, including net gains or losses from sales of
assets (other than asset sales in the ordinary course of business) or sales of
stock. In comparing EBITDA of NCI at two different points in time, the parties
agree that the determination of EBITDA shall be adjusted on a basis acceptable
to both parties to reflect extraordinary, non-recurring items and events, such
as acquisitions and divestitures and other corporate events which have occurred
during the time period between the two such reference points in time.
20
<PAGE>
Exhibit 10.2
RESTRICTED STOCK AGREEMENT
RESTRICTED STOCK AGREEMENT by and between NEWS COMMUNICATIONS, INC., a
Nevada corporation ("NCI"), and STEVEN FARBMAN ("Farbman"), dated as of July 28,
--- -------
1999.
WHEREAS, pursuant to an Employment Agreement dated the date hereof (the
"Employment Agreement"), Farbman has agreed to become President and Chief
- ---------------------
Executive
<PAGE>
Officer of NCI and, in connection therewith, is receiving an award of 250,000
shares of NCI's Common Stock (as defined below); and
WHEREAS, the parties hereto believe that it is in the best interests of NCI
and Farbman to provide for certain rights and obligations of NCI and Farbman
with respect to the Shares (as defined below) under certain circumstances.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein, the parties agree as follows:
Section 1. Definitions. For the purposes of this Agreement, the following
-----------
terms shall have the following respective meanings, and terms used but not
otherwise defined herein shall have the meaning set forth in the Employment
Agreement:
1.1. "Act" shall mean the Securities Act of 1933, as amended, and the
---
rules and regulations thereunder.
1.2. "Common Stock" shall mean NCI's Common Stock, par value $.01 per
------------
share.
1.3. "Non-Vested Shares" shall mean all the Shares that are not Vested
-----------------
Shares. Non-Vested Shares shall include any additional shares of Common Stock
received as a dividend to the extent paid on the Non-Vested Shares. Such
additional Non-Vested Shares shall vest at the same time and upon the same
events as the Non-Vested Shares to which such dividends correspond.
1.4. "Permitted Transferees" shall mean Farbman's spouse, children
---------------------
(natural or adopted), stepchildren, grandchildren or descendants or a trust for
the benefit of, or entity or foundation owned by, Farbman and/or any one or more
of them.
1.5. "Register," "Registered" and "Registration" refer to a registration
-------- ---------- ------------
effected by preparing and filing a registration statement in compliance with the
Act, and the declaration or ordering of the effectiveness of such registration
statement.
1.6. "Registration Expenses" means all expenses that NCI incurs in
---------------------
complying with Section 8, including, without limitation, all Registration and
filing fees, printing expenses, fees
- 21 -
<PAGE>
and disbursements of counsel for NCI, Blue Sky fees and expenses, and the
expenses of any special audits incident to or required by any such Registration.
1.7. "Selling Expenses" means (i) all underwriting discounts and selling
----------------
commissions applicable to the sale of securities Registered and sold pursuant to
Section 8, (ii) any additional costs and disbursements of counsel for NCI that
result from inclusion of the Shares in the Registration, and (iii) the expenses
of qualifying the securities covered by the Registration in a jurisdiction to
the extent that the jurisdiction requires such qualification expenses to be
borne by the selling security holders.
1.8. "Shares" shall mean the shares of Common Stock awarded to Farbman on
------
the date hereof and any additional shares of Common Stock received as a dividend
or bonus on, or otherwise on account of, the Shares.
1.9. "Termination Event" shall mean the termination of Farbman as an
-----------------
executive of NCI, whether by reason of retirement, discharge or any other
reason, voluntary or involuntary other than by NCI without Cause or by Farbman
for Good Reason or upon death or Disability.
1.10. "Vested Shares" shall mean fifty percent (50%) of the Shares on the
-------------
first anniversary of the date hereof and fifty percent (50%) of the Shares on
the second anniversary of the date hereof, so long as Farbman remains an
employee of NCI on such dates; provided, however, that all of the Shares issued
-------- -------
to Farbman shall vest upon the occurrence of any one of the following events if
Farbman is an employee of NCI on the day prior to the date of such event: (i) a
Change of Control; (ii) the sale of substantially all of NCI's assets to another
entity; (iii) a dissolution of NCI; or (iv) the termination of Farbman's
employment by NCI without Cause or by Farbman for Good Reason or by reason of
Farbman's death or Disability. Vested Shares shall include any additional
shares of Common Stock received as a dividend on, or otherwise on account of,
Vested Shares; provided further that notwithstanding anything in this Agreement
to the contrary, the term Vested Shares shall include any additional shares of
Common Stock received as a bonus and any additional shares of Common Stock
received as a dividend to the extent paid on the Vested Shares.
- 22 -
<PAGE>
Section 2. Award of Shares.
---------------
2.1. Award. On the date hereof, NCI hereby awards to Farbman 250,000
-----
Shares.
2.2. Unregistered Shares. In connection with the award of the Shares
-------------------
contemplated by Section 2.1 above, Farbman hereby represents and warrants to NCI
that Farbman understands that the Shares are not registered under the Act or any
applicable state securities or "blue sky" laws and may not be sold or otherwise
transferred or disposed of in the absence of an effective registration statement
under the Act and under any applicable state securities or "blue sky" laws (or
exemptions from the registration requirements thereof).
Section 3. Termination Event. Upon a Termination Event, the Non-Vested
-----------------
Shares shall be forfeited by Farbman and the certificate or certificates
representing such Non-Vested Shares shall be canceled by NCI.
Section 4. Restrictions on Transfer of Shares. Farbman may not sell,
----------------------------------
assign, transfer, pledge, hypothecate, give away or in any other manner dispose
of or encumber, whether voluntarily or by operation of law, any Non-Vested
Shares, other than as set forth in Sections 4(a) and (b) below. None of the
Vested Shares now owned or hereafter acquired shall be sold, assigned,
transferred, pledged, hypothecated, given away or in any other manner disposed
of or encumbered, whether voluntarily or by operation of law, except in
compliance with the Stockholders' Agreement dated as of July 28, 1999 by and
among NCI, Farbman and certain other stockholders of the Company (the
"Stockholders' Agreement"), all foreign, federal and state securities laws
- ------------------------
(including, without limitation, the Act), and such disposition is in accordance
with the terms and conditions of this Section 4. Until the Vested Shares shall
have been Registered under the Act, in connection with any transfer of Vested
Shares, NCI may require an opinion of counsel to the transferor, satisfactory to
NCI, that such transfer is in compliance with all foreign, federal and state
securities laws (including, without limitation, the Act). Any attempted
disposition of Vested Shares not in accordance with the terms and conditions of
this Section 4 shall be null and void, and NCI shall not reflect on its records
any change in record ownership of any Vested Shares as a result of any such
disposition, shall otherwise refuse to recognize any such disposition and shall
not in any way give effect to any
- 23 -
<PAGE>
such disposition. Subject to the foregoing general provisions, Non-Vested Shares
may be transferred pursuant to the following specific terms and conditions:
(a) Transfers to Permitted Transferees. Farbman may sell, assign,
----------------------------------
transfer or give away the right to acquire any or all of the Non-Vested Shares
to Permitted Transferees; provided, however, that such Permitted Transferee(s)
shall, as a condition to any such transfer, agree to be subject to the
provisions of this Agreement (including, without limitation, the provisions of
Sections 3 and 4) and shall have delivered a written acknowledgment to that
effect to NCI.
(b) Transfers Upon Death. Upon the death of Farbman, the Non-Vested
--------------------
Shares held by Farbman may be transferred and distributed by will or other
instrument taking effect at his death or by the laws of descent and distribution
to Farbman's estate, executors, administrators and personal representatives, and
then to Farbman's heirs, legatees or distributees whether or not such heirs,
legatees or distributees are Permitted Transferees; provided, however, that any
such transferees shall be subject to the provisions of Sections 3 and 4.
Section 5. Legend. Until the Shares shall have been registered under the
------
Act or otherwise transferred in accordance with Rule 144 under the Act, any
certificate(s) representing the Shares shall carry on their face the following
legends:
"The transferability of this certificate and the shares of stock
represented hereby are subject to the restrictions, terms and
conditions (including repurchase and transfer restrictions) contained
in that certain Restricted Stock Agreement dated July 28, 1999 between
News Communications, Inc. and Steve Farbman and that certain
Stockholders Agreement dated July 28, 1999 between News
Communications, Inc., Steve Farbman and certain other parties thereto
(copies of which are available for examination at the offices of News
Communications, Inc.)."
"The shares represented by this Certificate have not been
registered under the Securities Act of 1933, as amended, or the
- 24 -
<PAGE>
securities laws of any state. The shares may not be sold or
transferred in the absence of such registration or an exemption from
registration."
Section 6. Share Certificates. Certificates issued in respect of Shares
------------------
shall be registered in the name of Farbman or his Permitted Transferees and
shall be deposited by Farbman or such Permitted Transferees, together with a
stock power endorsed in blank, with NCI. When the Non-Vested Shares vest and
are no longer subject to forfeiture as set forth herein, NCI shall deliver such
certificates to Farbman. Such stock certificates shall carry such appropriate
legends, and such written instructions shall be given to NCI's transfer agent,
as may be deemed necessary or advisable by counsel to NCI in order to comply
with (i) the requirements of the Act, any state securities laws or any other
applicable laws and (ii) the Stockholders' Agreement.
Section 7. Withholding Taxes. Farbman acknowledges and agrees that NCI
-----------------
has the right to deduct from payments of any kind otherwise due to Farbman, or
from the Shares held pursuant to Section 6 hereof, or to otherwise collect, any
federal, state or local taxes of any kind required by law to be withheld with
respect to the transfer of the Shares to Farbman. Notwithstanding the
foregoing, NCI agrees that if Farbman elects, in accordance with section 83(b)
of the Internal Revenue Code of 1986, as amended, to recognize ordinary income
in 1999, NCI will pay Farbman an amount equal to 45% of the fair market value of
such Shares as of the date hereof; provided, however, that in the event
Farbman's employment is terminated by NCI for Cause or by Farbman without Good
Reason before all of the Shares become Vested Shares, Farbman shall promptly pay
to NCI the amount of Farbman's taxes paid by NCI as a result of the Section
83(b) election.
Section 8. Registration Rights.
-------------------
8.1 Agreement to Register. On or before the earlier to occur of the first
---------------------
anniversary of this Agreement or the termination of Farbman's employment by NCI
without Cause or by Farbman for Good Reason or upon a Change of Control, NCI
shall prepare and file a registration statement on Form S-8 or such other
appropriate Form under the Act and, if effectiveness is not automatic, use its
best efforts to cause such registration statement to become effective as
- 25 -
<PAGE>
promptly as practicable. Thereafter, NCI shall maintain the effectiveness of
the registration statement until all of the Shares may be sold without
restriction under the Act.
8.2 Piggyback Registration Rights. (a) Notwithstanding Section 8.1, if
-----------------------------
prior to the first anniversary of this Agreement, NCI determines to Register any
of its securities either for its own account or the account of a stockholder or
stockholders exercising Registration rights, other than a Registration relating
solely to employee benefit plans, or a Registration relating solely to a
transaction pursuant to Rule 145 promulgated under the Act or a Registration on
any Registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
Registration statement covering the sale of the Shares, NCI shall promptly give
to Farbman notice thereof and, subject to any registration rights which are
superior to Farbman's, include in such Registration (and any related
qualification under blue sky laws), and in any underwriting involved therein,
the number of Shares specified in a written request made by Farbman within ten
(10) days after receipt of such written notice from NCI.
(b) If the Registration of which NCI gives notice is for a Registered
public offering involving an underwriting, Farbman's rights to Registration
shall be conditioned upon (i) Farbman's participation in such underwriting and
(ii) the inclusion of Farbman's Shares in the underwriting pursuant to an
underwriting agreement in customary form with the underwriter or underwriters
selected by NCI; provided, however, that in the event of any reduction in the
securities to be included in the Registration, the securities that may be
included in the Registration and underwriting shall be allocated (1) first, to
NCI, and (2) second, among Farbman and the other security holders distributing
their securities through such underwriting, in proportion (as nearly as
practicable) to the number of shares owned by each such party unless such other
security holders have rights superior to Farbman hereunder.
8.3 Expenses of Company Registrations. NCI shall bear all Registration
---------------------------------
Expenses incurred in connection with any Registration, qualification or
compliance pursuant to this Section 8 (exclusive of Selling Expenses).
- 26 -
<PAGE>
8.4 Registration Procedures. In the case of each Registration,
-----------------------
qualification or compliance effected by NCI pursuant hereto, NCI shall keep
Farbman advised in writing as to the initiation of each Registration,
qualification and compliance and as to the completion thereof. At its expense,
NCI shall:
(a) Keep such Registration, qualification or compliance effective for
a period of one hundred twenty (120) days or until Farbman has completed the
distribution described in the registration statement relating thereto, whichever
first occurs;
(b) Furnish such number of prospectuses and other documents incident
thereto as Farbman from time to time may reasonably request;
(c) Prepare and file with the Securities and Exchange Commission such
amendments and supplements to such Registration statement and the prospectus
used in connection with such registration statement as may be necessary to
comply with the provisions of the Act with respect to the disposition of all
securities covered by such registration statement;
(d) Use its best efforts to Register and qualify the securities
covered by such registration statement under such other securities or blue sky
laws of such jurisdictions as Farbman reasonably requests; provided, however,
that NCI shall not be required in connection therewith or as a condition thereto
to qualify to do business or to file a general consent to service of process in
any such states or jurisdictions;
(e) In the event of any underwritten public offering, enter into and
perform its obligations under an underwriting agreement, in usual and customary
form, with the managing underwriter of such offering. Farbman shall also enter
into and perform its obligations under such an agreement;
(f) Notify Farbman at any time (i) when a prospectus relating to the
Shares is required to be delivered under the Act, and (ii) 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 a material fact required to be stated therein or
- 27 -
<PAGE>
necessary to make the statements therein not misleading in the light of the
circumstances then existing;
8.4 Indemnification. In connection with any Registration, NCI and Farbman
---------------
shall enter into a customary indemnification and contribution agreement with
respect to the offer and sale of the Shares.
Section 9. Miscellaneous Provisions.
------------------------
9.1 Termination. All provisions of this Agreement shall remain in effect
-----------
until all of the Shares shall have become Vested Shares. Notwithstanding the
foregoing, the provisions of Section 8 shall remain in effect following
termination of this Agreement.
9.2 Equitable Relief. The parties hereto agree and declare that legal
----------------
remedies may be inadequate to enforce the provisions of this Agreement and that
equitable relief, including specific performance and injunctive relief, may be
used to enforce the provisions of this Agreement.
9.3 Change and Modifications. This Agreement may not be orally changed,
------------------------
modified or terminated, nor shall any oral waiver of any of its terms be
effective. This Agreement may be changed, modified or terminated only by an
agreement in writing signed by NCI and Farbman.
9.4 Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York (without giving effect to
principals of conflicts of laws).
9.5 Headings. The headings are intended only for convenience in finding
--------
the subject matter and do not constitute part of the text of this Agreement and
shall not be considered in the interpretation of this Agreement.
9.6 Saving Clause. If any provision(s) of this Agreement shall be
-------------
determined to be illegal or unenforceable, such determination shall in no manner
affect the legality or enforceability of any other provision hereof.
- 28 -
<PAGE>
9.7 Notices. Any notice or other communications required or permitted
-------
hereunder shall be in writing and shall be deemed effective (i) upon personal
delivery, if delivered by hand and followed by notice by mail or facsimile
transmission, (ii) three (3) days after the date of deposit in the mails, if
mailed by certified or registered mail (return receipt requested), or (iii) on
the next business day, if mailed by an overnight mail service to the parties or
sent by facsimile transmission. Notices to NCI or Farbman shall be addressed as
set forth underneath their signatures below, or to such other address or
addresses as may have been furnished by such party in writing to the other.
9.8 Benefit and Binding Effect. This Agreement shall be binding upon and
--------------------------
shall inure to the benefit of the parties hereto, their respective successors,
assigns, and legal representatives. The NCI has the right to assign this
Agreement, and such assignee shall become entitled to all the rights of NCI
hereunder to the extent of such assignment.
IN WITNESS WHEREOF, NCI and Farbman have executed this Agreement as of the
date first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Wilbur L. Ross., Jr.
----------------------------
Name: Wilbur L. Ross, Jr.
Title: Chief Executive Officer
/s/ Steven Farbman
------------------
Steven Farbman
- 29 -
<PAGE>
Exhibit 10.3
STOCK OPTION AGREEMENT
AGREEMENT made as of this 28th day of July, 1999 by and between NEWS
COMMUNICATIONS, INC., a Nevada corporation ("NCI"), and STEVEN FARBMAN
---
("Farbman").
-------
WHEREAS, pursuant to a certain Employment Agreement dated the date hereof
between NCI and Farbman (the "Employment Agreement"), Farbman has become
--------------------
employed as President and Chief Executive Officer of NCI and, in such capacity
will provide valuable services to NCI (terms used but not otherwise defined
herein shall have the meaning set forth in the Employment Agreement);
WHEREAS, NCI desires to reward such services and encourage Farbman's
continued dedication and to afford Farbman the opportunity to acquire stock
ownership in, or otherwise share in the appreciation of the stock of, NCI so
that Farbman may have a direct proprietary interest in NCI's success;
NOW, THEREFORE, in consideration of the covenants and agreements herein
contained, the parties hereto hereby agree as follows:
1. Grant of Option. Upon the terms and subject to the conditions set
---------------
forth herein, NCI hereby irrevocably grants to Farbman, during the period
commencing on the date of this Agreement and, unless earlier terminated pursuant
to Section 5 or Section 6 hereof, ending ten (10) years from the date hereof
(the "Expiration Date"), the right and option (the "Options") to purchase from
--------------- -------
NCI, at a price of $1.8125 per share, 830,000 shares of NCI's Common Stock, par
value $.01 per share (the "Common Stock"). The Options are not intended to
------------
qualify under Section 422 of the United States Internal Revenue Code of 1986, as
amended (the "Code"), as an incentive stock option.
----
2. Vesting and Exercise of Options. The Options shall vest in four equal
-------------------------------
installments of 207,500 shares commencing on the first anniversary of the date
hereof and on each anniversary of the date hereof until the fourth anniversary
of the date hereof when all of the shares subject to the Options shall be
vested; provided, however, that the Options shall be subject to accelerated
vesting as provided on Exhibit A hereto.
3. Method of Exercising Options. Farbman may exercise the Options by
----------------------------
delivering to NCI (i) a written notice stating the number of shares of Common
Stock that Farbman has elected to purchase at that time from NCI and (ii) full
payment of the purchase price of the shares of Common Stock then to be
purchased.
Payment of the exercise price for the shares of Common Stock upon any
exercise of the Options may be made by check payable to the order of NCI;
provided, however, that in the event that Farbman's Employment Agreement is not
renewed by NCI after the expiration of the Term, Farbman's employment is
terminated without Cause or Farbman terminates his employment for Good Reason,
NCI shall approve payment of the exercise price for the shares of Common Stock
upon any exercise of the Options by delivery of shares of Common Stock of NCI or
surrender of such Options (having a fair market value equal to the purchase
price of the Common Stock issuable upon exercise of the Options over the
applicable exercise price) duly endorsed in blank
<PAGE>
or accompanied by appropriate stock powers, together with such amount as NCI
shall, in its sole discretion, deem necessary to satisfy any tax withholding
obligation or tax arising by reason of the transfer of such shares of Common
Stock ("Cashless Exercise").
-----------------
In connection with any Cashless Exercise, only full shares of Common Stock
of NCI with an aggregate fair market value not exceeding the exercise price will
be accepted in payment, and any portion of the exercise price which is in excess
of such aggregate fair market value must be paid in cash or by certified or bank
cashier's check payable to the order of NCI, it being understood that NCI shall
not be required to pay cash in exchange for tendered certificates. If the
tendered certificate(s) evidence more shares of Common Stock than are accepted
for payment, an appropriate replacement certificate shall be issued to Farbman
for the number of excess shares of Common Stock.
4. Issuance of Common Stock and Payment of Cash upon Exercise of Options.
---------------------------------------------------------------------
As promptly as practicable after receipt of such written notification of
Farbman's election to exercise the Options and full payment of such exercise
price and any applicable withholding taxes, NCI shall issue or transfer to
Farbman the number of shares of Common Stock with respect to which the Options
have been so exercised and shall deliver to Farbman a certificate or
certificates therefor, registered in Farbman's name.
5. Death or Disability of Farbman. If the employment of Farbman shall
------------------------------
terminate prior to the Expiration Date as a result of the death of Farbman or by
reason of his Disability, Farbman, the executor or administrator of the estate
or affairs of Farbman or the person or persons to whom the Options shall have
been validly transferred by the executor or administrator pursuant to applicable
laws of descent and distribution shall have the right to exercise the Options
until the Expiration Date to the extent that the Options were vested at the date
of death or Disability.
6. Termination of Employment. In the event that the employment of Farbman
-------------------------
shall be terminated by NCI (other than by reason of death, Disability or for
Cause) or by Farbman for Good Reason, Farbman shall have the right, until the
Expiration Date, to exercise the Options, it being acknowledged and agreed that
any unvested portion of the Options shall immediately vest and become
exercisable upon the date of such termination of employment. In the event that
the employment of Farbman shall be terminated (i) by NCI for Cause, (ii) by
Farbman without Good Reason or (iii) upon the expiration of the Employment
Agreement, the Options, to the extent vested on the date of Farbman's
termination (the "Termination Date"), shall be exercisable until the first
------------------
anniversary of the Termination Date. Nothing in this Agreement shall confer
upon Farbman any right to continue in the employ of NCI or interfere in any way
with the right of NCI to terminate or otherwise modify the terms of Farbman's
employment.
7. Change of Control. Notwithstanding anything in this Agreement to the
-----------------
contrary, unless the Options or any portion thereof shall have been earlier
terminated in accordance with Sections 5 and 6 hereof, the unvested portion of
the Options shall vest, and the Options shall become immediately exercisable in
its entirety immediately prior to a Change of Control.
8. Securities Law Acknowledgments. Farbman acknowledges that the shares
------------------------------
of Common Stock issued upon exercise of the Options may not be registered under
applicable securities laws, that such shares of Common Stock purchased upon the
exercise of the Options
- 2 -
<PAGE>
must be held indefinitely unless subsequently registered under the applicable
securities laws or unless an exemption therefrom is available, and, at the
election of NCI, such certificates may bear such legends regarding the limited
transferability of the shares of Common Stock under applicable securities laws
as counsel for NCI may require. The shares of Common Stock issued pursuant to
the terms of this Agreement shall represent fully paid and non-assessable shares
of Common Stock. . On or before the earlier to occur of the first anniversary of
this Agreement or the termination of Farbman's employment by NCI without Cause
or by Farbman for Good Reason or upon a Change of Control (as such terms are
defined in Farbman's Employment Agreement), NCI shall prepare and file a
registration statement on Form S-8 or such other appropriate Form under the
Securities Act of 1933, as amended (the "Act") and, if effectiveness is not
automatic, use its best efforts to cause such registration statement to become
effective as promptly as practicable. Thereafter, NCI shall maintain the
effectiveness of the registration statement until all of the Shares may be sold
without restriction under the Act.
9. Farbman. Whenever in any provision of this Agreement reference is made
-------
to Farbman, under circumstances where such reference should logically be
construed to apply to the executors, administrators or person or persons to whom
the Options may be transferred by will or by the laws of descent and
distribution, the reference to Farbman shall be deemed to include such person or
persons.
10. Non-Transferability. The Options are not transferable by Farbman
-------------------
otherwise than by applicable laws of descent and distribution and, except as set
forth herein, are exercisable during Farbman's lifetime only by Farbman. No
assignment or transfer of the Options, or of the rights represented thereby,
whether voluntary or involuntary, by operation of law or otherwise (except by
will or the laws of descent and distribution), shall vest in the assignee or
transferee any interest or right herein whatsoever, but immediately upon such
assignment or transfer the Options shall terminate and become of no further
effect.
11. Rights as Stockholder. Farbman shall have no rights as a stockholder
---------------------
with respect to any share of Common Stock covered by the Options until Farbman
shall have become the holder of record of such share of Common Stock, and no
adjustment shall be made for dividends or distributions or other rights in
respect of such share of Common Stock for which the record date is prior to the
date upon which Farbman shall become the holder of record thereof.
12. Adjustment for Recapitalization, Merger, Etc. The aggregate number of
--------------------------------------------
shares of Common Stock that may be purchased pursuant to the Options, the number
of shares of Common Stock covered by the Options and the price per share shall
be appropriately adjusted for any increase or decrease in the number of
outstanding shares of Common Stock resulting from a stock split or other
subdivision or consolidation of shares of Common Stock or for other capital
adjustments or payments of stock dividends or distributions or other increases
or decreases in the outstanding shares of Common Stock effected without receipt
of consideration by NCI.
Subject to any required action by the stockholders, if NCI shall be the
surviving corporation in any merger, combination, consolidation or other
business transaction, the Options shall cover the securities to which a holder
of the number of shares of Common Stock covered by the unexercised portion of
the Options would have been entitled pursuant to the terms of the merger or
consolidation.
- 3 -
<PAGE>
Upon any dissolution or liquidation of NCI, the Options shall terminate;
provided, however, that the surviving corporation may grant an option or options
to purchase its shares on such terms and conditions, both as to the number of
shares and otherwise, which shall substantially preserve the rights and benefits
of the Options. Any such adjustments may provide for the elimination of any
fractional share which might otherwise become subject to the Options.
13. Compliance with Law. Notwithstanding any of the provisions hereof,
-------------------
except in connection with a Change of Control or the dissolution or liquidation
of NCI, Farbman hereby agrees that Farbman will not exercise the Options, and
that NCI will not be obligated to issue or transfer any shares of Common Stock
to Farbman hereunder, if the exercise hereof or the issuance or transfer of such
Common Stock shall constitute a violation by Farbman or NCI of any provisions of
any law or regulation of any governmental authority.
14. Notice. Every notice or other communication relating to this
------
Agreement shall be in writing and shall be mailed to or delivered to the party
for whom it is intended at such address as may from time to time be designated
in a notice mailed or delivered to the other party as herein provided; provided
that, unless and until some other address be so designated, all notices or
communications by Farbman to NCI shall be mailed or delivered to NCI at its
executive offices currently located at 174-15 Horace Harding Expressway, Fresh
Meadows, NY 11365, or such other location as shall then be NCI's principal
corporate office, Attn: Chairman; with a copy to Paul J. Pollock, Esq., Piper &
Marbury, LLP, 1251 Avenue of the Americas, New York, NY 10020, and all notices
or communications by NCI to Farbman may be given to Farbman personally or may be
mailed to Farbman at One North Bridge Terrace, Mt. Kisco, NY 10549, with a copy
to Beverly Chase, Esq., Davis Polk & Wardwell, 450 Lexington Avenue, New York,
NY 10017.
15. Entire Agreement. This Agreement sets forth the complete
----------------
understanding of NCI and Farbman with respect to the subject matter hereof and
supersedes all prior understandings, whether oral or written.
16. Governing Law. This Agreement shall be governed by and construed in
-------------
accordance with the laws of the State of New York (without giving effect to
principles of conflicts of law).
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on the
day and year first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Wilbur L. Ross, Jr.
-----------------------
Name: Wilbur L. Ross, Jr.
Title: Chief Executive Officer
/s/ Steven Farbman
------------------
Steven Farbman
- 4 -
<PAGE>
EXHIBIT A
The Options shall be subject to accelerated vesting such that 10% of the
shares issuable upon exercise of the Options shall vest for each cumulative $.05
of EBITDA Improvement on a per share basis. For the purpose herein, EBITDA
shall mean, with respect to any fiscal year of NCI, earnings of NCI for such
year before interest (including without limitation the interest component of any
capital lease obligation), taxes, depreciation and amortization for such year.
For purposes of the foregoing,
(i) "EBITDA" shall mean with respect to any period, earnings of NCI
------
for such period before interest (including without limitation the interest
component of any capital lease obligation), taxes, depreciation and amortization
for such period; provided, that for purposes of determining EBITDA, (i) cash and
non-cash compensation expenses resulting from Farbman's equity arrangements
shall, to the extent deducted from earnings in calculating EBITDA in accordance
with generally accepted accounting principles, be added back to earnings in
calculating EBITDA and (ii) earnings shall exclude earnings from extraordinary
items, including net gains or losses from sales of assets (other than asset
sales in the ordinary course of business) or sales of stock. In comparing
EBITDA of NCI at two different points in time, the parties agree that the
determination of EBITDA shall be adjusted on a basis acceptable to both parties
to reflect extraordinary, non-recurring items and events, such as acquisitions
and divestitures and other corporate events which have occurred during the time
period between the two such reference points in time.
(ii) "EBITDA Improvement" shall mean the amount by which EBITDA on a
per share basis exceeds EBITDA on per share basis as of the end of the fiscal
year ended November 30, 1998.
- 5 -
<PAGE>
Exhibit 10.4
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT, made this 28th day of July, 1999, by and among
NEWS COMMUNICATIONS, INC. ("NCI"), a Nevada corporation with offices at 174-15
Horace Harding Expressway, Fresh Meadows, New York 11365, JERRY FINKELSTEIN, THE
FINKELSTEIN FOUNDATION, INC. and SHIRLEY FINKELSTEIN (collectively, the
"Finkelstein Group"), each having an address at the Carlyle Hotel, 35 East 76th
- ------------------
Street, New York, NY 10021; WILBUR L. ROSS, JR. ("Ross"), having an address at
----
1251 Avenue of the Americas, New York, NY 10020; MELVYN I. WEISS and M&B WEISS
FAMILY PARTNERSHIP (the "Weiss Group"), having an address c/o Milberg Weiss
-----------
Bershad Hynes & Lerach LLP, One Pennsylvania Plaza, New York, NY 10119; J.
MORTON DAVIS, D.H. BLAIR INVESTMENT BANKING CORP., RIVKALEX CORPORATION and
ROSALIND DAVIDOWITZ (collectively, the "Davis Group"), having an address c/o
-----------
D.H. Blair Investment Banking Corp., 44 Wall Street, New York, NY 10005, and
STEVEN FARBMAN ("Farbman"), residing at One North Bridge Terrace, Mt. Kisco, New
-------
York 10549 (each member of the Finkelstein Group, Ross, the Davis Group and the
Weiss Group and Farbman, individually, a "Stockholder" and collectively the
-----------
"Stockholders").
- -------------
WHEREAS, Farbman and NCI are parties to (i) an Employment Agreement dated
the date hereof (the "Employment Agreement") pursuant to which Farbman has
--------------------
agreed to become President and Chief Executive Officer of NCI and (ii) a
Restricted Stock Agreement (the "Restricted Stock Agreement") dated the date
--------------------------
hereof pursuant to which Farbman received 250,000 shares of NCI common stock
(the "Common Stock") and (iii) a Stock Option Agreement dated the date hereof
------------
pursuant to which NCI has granted to Farbman options to purchase 830,000 shares
of Common Stock.
WHEREAS, each Stockholder beneficially owns the number of shares of Common
Stock and $10 Convertible Preferred Stock (the "Preferred Stock") set forth
---------------
opposite his name on Exhibit A hereto (collectively, the "Shares"); and
------
WHEREAS, the Stockholders desire to provide for voting their Shares in
certain circumstances, the transfer of Shares now owned or hereafter acquired by
the Stockholders and certain other matters relating to NCI.
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained herein and for other good and valuable consideration, the receipt of
and sufficiency of which is hereby acknowledged, the parties agree as follows:
1. Definitions. For the purposes of this Agreement, terms used but not
-----------
otherwise defined herein shall have the meaning set forth in the Employment
Agreement.
2. Representations of the Stockholders and NCI.
-------------------------------------------
<PAGE>
(a) Each Stockholder represents to and agrees with the other
Stockholders that (i) such Stockholder is the legal holder and beneficial owner
of the Shares set forth opposite such Stockholder's name on Exhibit A hereto,
(ii) such Shares and the Shares hereafter acquired by such Stockholder will be
owned free and clear of all liens, claims, charges, options and encumbrances
other than restrictions on transfer under this Agreement, (iii) such Stockholder
will have the right to transfer such Shares upon the terms and subject to the
conditions of this Agreement, (iv) such Stockholder has not entered into, and
agrees that such Stockholder will not enter into, any other agreement or
arrangement the performance of which would in any manner conflict with, restrict
or be inconsistent with the performance of such Stockholder's obligations under
this Agreement and (v) this Agreement constitutes the legal, valid and binding
obligation of such Stockholder, enforceable against such Stockholder in
accordance with its terms.
(b) NCI represents that it is not a party to any agreement which would
contravene the provisions of this Agreement.
3. Corporate Governance and Related Matters.
----------------------------------------
(a) To the extent permitted by applicable law, NCI and each
Stockholder agrees to use commercially reasonable efforts to take any and all
action necessary, including, without limitation, the voting of, or the execution
of consents with respect to, their Shares, the calling of special meetings of
stockholders, the amendment of agreements and designations to the Board of
Directors of NCI (the "Board"), the attending of meetings and the amendment of
-----
NCI's Certificate of Incorporation and By-Laws, to cause the size of the Board
to be reduced to, and to maintain the size of the Board at, nine (9) members,
with such directors selected in accordance with Section 3(b) hereof.
(b) Each Stockholder hereby agrees, so long as Farbman is the Chief
Executive Officer and President of NCI, to vote the Shares owned by such
Stockholder and to use such Stockholder's best efforts to cause his Affiliates
(as defined in Rule 405 of the Securities Act of 1933) to vote their Shares, or
execute consents with respect to their Shares so as to elect, and to take all
other action required to elect, as directors of NCI: (i) Finkelstein; (ii) two
persons designated by Ross, one of whom shall initially be Ross and the other of
whom shall initially be Robert Nederlander; (iii) three persons designated by
Farbman, one of whom shall be Farbman, one of whom shall initially be Steven
Price and one of whom shall initially be Michael Schenkler (in the future, one
of Farbman's designess may, with the consent of the other Stockholders, be NCI's
Chief Financial Officer and both of whom must be reasonably acceptable to the
Board); (iv) one person to be designated by the Weiss Group who shall initially
be Gary Weiss; (v) one person to be designated by the Davis Group who shall
initially be Martin A. Bell; and (vi) one person to be designated by the Davis
Group, the Weiss Group and the Finkelstein Group acting jointly.
(c) Each Stockholder agrees that if, at any time, such Stockholder is
then entitled to vote for the removal of directors of NCI, he will not vote any
of his Shares in favor of the removal of any director who shall have been
designated or nominated pursuant to Section 3(b) unless such removal shall be
for Cause or the person(s) entitled to designate or nominate such director shall
have consented to such removal in writing, provided that if the persons
- 2 -
<PAGE>
entitled to designate or nominate any director pursuant to Section 3(b) shall
request the removal, with or without Cause, of such director in writing, such
Stockholder shall vote such Stockholder's Shares, and shall use such
Stockholder's commercially reasonable efforts (without requiring the expenditure
of funds) to cause such Stockholder's affiliates to vote such affiliates'
Shares, in favor of such removal. Removal for "Cause" shall mean removal of a
director because of such director's (a) willful and continued failure
substantially to perform his duties with NCI in his established position, (b)
willful conduct which is injurious to NCI or any of its subsidiaries, monetarily
or otherwise, (c) conviction for, or guilty plea to, a felony or a crime
involving moral turpitude, (d) abuse of illegal drugs or other controlled
substances or habitual intoxication or (e) willful breach of this Agreement.
(d) If, as a result of death, disability, retirement, resignation,
removal (with or without Cause) or otherwise, there shall exist or occur any
vacancy on the Board:
(i) The person(s) entitled under Section 3(b) to designate or
nominate such director whose death, disability, retirement, resignation or
removal resulted in such vacancy, may, subject to the provisions of
Sections 3(b), designate another individual (the "Nominee") to fill such
-------
vacancy and serve as a director of the Company; and
(ii) each Stockholder then entitled to vote for the election of
the Nominee as a director of NCI agrees that such Stockholder will vote
such Stockholder's Shares, and shall use such Stockholder's reasonable
efforts to cause its Affiliates to vote its shares, or execute a written
consent, as the case may be, in order to ensure that the Nominee is elected
to the Board.
(e) The right to designate one or more members of the Board by any
Stockholder (or group of Stockholders) pursuant to this Section 3 shall
terminate at such time that the ownership of shares by such Stockholder (or
group of Stockholders) is less than 5% of the outstanding Common Stock on a
fully diluted basis (inclusive of (i) any options, warrants or shares of
Preferred Stock owned by such Stockholder and any Affiliate of such Stockholder
and (ii) in the case of Ross, the shares owned by Rothschild North America Inc.,
Rothschild Recovery Fund L.P. and Rothschild Inc.). The obligations imposed on
the Stockholders to give effect to the rights to designate directors set forth
in Section 3(b) shall terminate as to any person when such person's right to
designate a director is terminated.
4. Restriction on Transfer of Shares.
---------------------------------
(a) Each Stockholder hereby agrees that he shall not, as long as this
Agreement is in effect, directly or indirectly sell, pledge, give, transfer,
assign, encumber or in any way dispose of (collectively, a "Transfer") any of
--------
the Shares (or any interest therein) except as may be expressly permitted by
this Agreement or by the Restricted Stock Agreement.
(b) Notwithstanding the general prohibition on Transfers contained in
Section 4(a) hereof, NCI and the Stockholders agree that any of the following
Transfers shall be permitted under this Agreement:
- 3 -
<PAGE>
(i) a Transfer to a spouse, children (natural or adopted),
stepchildren, grandchildren or descendants or a trust for the benefit of
any of them, or entity or foundation owned by a Stockholder, a spouse,
children (natural or adopted), stepchildren, grandchildren or descendants
(the "Trust");
-----
(ii) a Transfer by any Stockholder to an Affiliate of such
Stockholder;
(iii) a Transfer by any Stockholder in an open market
transaction or in connection with an offer to purchase Common Stock of NCI
made to all stockholders, or in connection with the merger of NCI with or
into another company; and
(iv) a Transfer in accordance with Sections 5, 6, or 7 hereof or
pursuant to the Restricted Stock Agreement;
(c) As a further condition of any Transfer pursuant to clauses (i) or
(ii) of this Section 4, each transferee shall, prior to such Transfer, agree in
writing to be bound by all of the provisions of this Agreement, and no such
transferee shall be permitted to make any Transfer that the original transferor
was not permitted to make.
5. Right of First Refusal
----------------------
(a) If at any time any of the Stockholders, other than Farbman,
individually or as a group, propose to sell such number of Shares as shall
represent 20% or more of the outstanding Common Stock on a fully diluted basis
(the "Offered Shares") to any Person other than an Affiliate of such Stockholder
--------------
(or group of Stockholders) in any one transaction or series of related
transaction not permitted by paragraphs (i), (ii) and (iii) of Section 4(b)
(each, a "Disposition"), then the Stockholder (or group of Stockholders) shall,
-----------
prior to agreeing to such Disposition, provide Farbman with written notice (a
"Disposition Notice") of his or its intention to make the Disposition and
- -------------------
describing the terms and conditions of the Disposition in reasonable detail,
including the proposed price per Share, the method of payment and the identity
of the proposed purchaser.
(b) Farbman shall have the exclusive right during the period
commencing on his receipt of the Disposition Notice and expiring twenty (20)
days thereafter (the "Exclusive Period") to elect to purchase the Offered Shares
----------------
at the same price and subject to the same material terms and conditions as
described in the Disposition Notice. Farbman may elect to purchase the Offered
Shares by notifying the Stockholder (or group of Stockholders) in writing before
expiration of such twenty (20) day period.
(c) If Farbman gives notice of his election to purchase the Offered
Shares, then the closing for such Disposition shall be held at the offices of
NCI within twenty (20) days after such notice or on such other date as is
specified in the Disposition Notice. At the closing, Farbman shall pay for the
Offered Shares in accordance with the terms contained in the Disposition Notice,
and the Stockholder (or group of Stockholders) shall deliver certificates
representing the Offered Shares free and clear of all liens, charges and
encumbrances and properly endorsed for transfer.
- 4 -
<PAGE>
(d) If Farbman fails to notify the Stockholder (or group of
Stockholders) during the Exclusive Period, then Farbman shall be deemed to have
waived his Right of First Refusal.
6. Tag-Along Rights.
----------------
(a) To the extent Farbman does not exercise his right of first refusal
as to the Disposition of the Offered Shares pursuant to Section 5, then Farbman
may elect to participate in such Disposition at the same price per Share as that
offered to and subject to the same material terms and conditions as the
Stockholder (or group of Stockholders); provided, however, that Farbman may not
-------- -------
elect to participate in such Disposition if the purchaser is willing to purchase
Shares of Preferred Stock only.
(b) The election pursuant to Subsection 6(a) above shall be exercised
by giving written notice to the Stockholder (or group of Stockholders) within
the Exclusive Period. If Farbman gives notice of his election to sell, he shall
be obligated to sell the number of Shares specified in his notice upon the terms
and subject to the conditions specified in Subsection 6(a) above to the proposed
purchaser, conditional upon the closing of the Disposition.
(c) If the purchaser pursuant to the Disposition has a specified
limited number of (i) Shares of Common Stock that it is willing to purchase in
the aggregate, Farbman shall have the right to sell to the purchaser up to that
number of Shares of Common Stock owned by Farbman which is in the same
proportion to his total ownership of Shares of Common Stock as the number of
Shares being sold by the Stockholder (or group of Stockholders) is to the total
number of Shares of Common Stock owned by the Stockholder (or group of
Stockholders); and (ii) Shares of Common Stock and Preferred Stock that it is
willing to purchase, Farbman shall have the right to sell to the purchaser up to
that number of Shares of Common Stock owned by Farbman which is in the same
proportion to his total ownership of Shares of Common Stock as the number of
Shares of Common Stock into which the Shares of Preferred Stock being sold by
the Stockholder (or group of Stockholders) is convertible at the time of such
Disposition is to the number of Shares of Common Stock into which the total
number of Shares of Preferred Stock owned by the Stockholder (or group of
Stockholders) is convertible at the time of such Disposition.
(d) If Farbman gives notice during the Exclusive Period of his
election to participate in the Disposition, then Farbman will use his best
efforts to cooperate in the Disposition and will take all necessary and
desirable actions in connection with the consummation of the Disposition,
including, but not limited to, (i) the provision of reasonable and customary
representations and warranties; provided, however, that Farbman shall not be
-------- -------
required to incur more than his pro rata portion of any out-of-pocket expenses
in connection with such Disposition which are not reimbursed by the Stockholder
(or group of Stockholders); and provided further that Farbman shall not be
-------- -------
required to provide different representations and warranties or indemnification
than any other selling participant in the Disposition and (ii) the closing of
such Disposition within twenty (20) days of such notice or on such other date as
is provided in the Disposition Notice.
- 5 -
<PAGE>
(e) If Farbman fails to notify the Stockholder (or group of
Stockholders) during the Exclusive Period, then Farbman shall be deemed to have
waived his Tag-Along Right.
7. Drag-Along Rights.
-----------------
(a) If at any time the Stockholders, other than Farbman, individually
or as a group, agree to sell such number of shares as shall represent 50% or
more of the outstanding Common Stock on a fully diluted basis (the "Drag Along
Offered Shares") to any Person other than an Affiliate of such Stockholder (or
group of Stockholders) in any one transaction or series of related transactions
not permitted by paragraphs (i), (ii) or (iii) of Section 4(b), and to the
extent Farbman does not exercise his right of first refusal or his tag-along
right as to the Disposition of the Drag Along Offered Shares pursuant to
Sections 5 and 6, respectively, then the Stockholder (or group of Stockholders)
may, within ten (10) days after the Exclusive Period, give written notice to
Farbman stating that Farbman must participate in the Disposition of the Drag
Along Offered Shares by selling the same percentage of his Shares as the
Stockholder (or group of Stockholders) is selling, at the same price per Share
and otherwise on the same terms and conditions upon which the Stockholder (or
group of Stockholders) is selling his (or its) Shares; provided, however, that
-------- -------
Farbman shall not be required to participate if the purchaser is willing to
purchase Shares of Preferred Stock only.
(b) If the Stockholder (or group of Stockholders) gives notice that
Farbman must participate in the Disposition, Farbman will use his best efforts
to cooperate in the Disposition and will take all necessary and desirable
actions in connection with the consummation of the Disposition, including, but
not limited to, (i) the provision of reasonable and customary representations
and warranties; provided, however, that Farbman shall not be required to incur
-------- -------
more than his pro rata portion of any out-of-pocket expenses in connection with
such Disposition which are not reimbursed by the Stockholder (or group of
Stockholders); and provided further that Farbman shall not be required to
-------- -------
provide different representations and warranties or indemnification than any
other selling participant in the Disposition and the closing of such Disposition
within twenty (20) days of such notice or on such other date as is provided in
the Disposition Notice.
(c) If the purchaser pursuant to the Disposition has a specified
limited number of (i) Shares of Common Stock that it is willing to purchase in
the aggregate, Farbman shall be required to sell to the purchaser up to that
number of Shares of Common Stock owned by Farbman which is in the same
proportion to his total ownership of Shares of Common Stock as the number of
Shares being sold by the Stockholder (or group of Stockholders) is to the total
number of Shares of Common Stock owned by the Stockholder (or group of
Stockholders); and (ii) Shares of Common Stock and Preferred Stock that it is
willing to purchase, Farbman shall be required to sell to the purchaser up to
that number of Shares of Common Stock owned by Farbman which is in the same
proportion to his total ownership of Shares of Common Stock as the number of
Shares of Common Stock into which the Shares of Preferred Stock being sold by
the Stockholder (or group of Stockholders) is convertible at the time of such
Disposition is to the number of Shares of Common Stock into which the total
number of Shares of Preferred Stock
- 6 -
<PAGE>
owned by the Stockholder (or group of Stockholders) is convertible at the time
of such Disposition.
(d) The obligation of Farbman to participate in the Disposition is
also subject to the satisfaction of the following conditions: (i) upon the
consummation of the Disposition, Farbman will receive the same form and amount
of consideration per share for his Shares as the Stockholder (or group of
Stockholders) will receive for his or its Shares, or if the Stockholder (or
group of Stockholders) is given an option as to the form and amount of
consideration to be received, Farbman will be given the same option; and (ii)
the price per Share will be payable in cash or publicly-traded securities;
provided, however, that if the Stockholder (or group of Stockholders) sells any
- -------- -------
Preferred Stock, Farbman will receive the same form of consideration for his
Shares of Common Stock, and the amount of consideration per share payable to him
will be calculated by dividing the total consideration to be received for the
Preferred Stock being sold by the number of Shares of Common Stock into which
such Preferred Stock is convertible at the time of such Disposition.
(e) If the Stockholder (or group of Stockholders) fails to notify
Farbman within ten (10) days after the Exclusive Period, then the Stockholder
(or group of Stockholders) shall be deemed to have waived his (or its) Drag-
Along Right.
8. Injunctive Relief; Specific Performance.
---------------------------------------
Each of the Stockholders acknowledges that the other Stockholders will
be irreparably damaged in the event of a breach or threatened breach of the
terms, covenants and/or conditions of this Agreement by any Stockholder. In
addition to any other remedy to which the Stockholders may be entitled, the
Stockholders shall be entitled to a preliminary and permanent injunction,
without showing any actual damage or threat of irreparable injury, and/or a
decree for specific performance, in accordance with the provisions hereof.
9. Miscellaneous.
-------------
(a) This Agreement constitutes the entire agreement among the
Stockholders with respect to the subject matter hereof, supersedes all prior
agreements or understandings among the parties hereto with respect to the
subject matter hereof and may not be modified, amended or terminated except by a
written agreement signed by all of the parties hereto.
(b) No waiver of any breach or default hereunder shall be considered
valid unless in writing, and no such waiver shall be deemed a waiver of any
subsequent breach or default of the same or similar nature.
(c) If any provision of this Agreement shall be held invalid or
unenforceable, such invalidity or unenforceability shall attach only to such
provision and shall not in any manner affect or render invalid or unenforceable
any other severable provision of this Agreement, and this Agreement shall be
carried out as if any such invalid or unenforceable provision were not contained
herein. In the event that any provision is declared invalid or unenforceable,
the Stockholders agree to substitute for such invalid or
- 7 -
<PAGE>
unenforceable provision a new provision which reflects, to the closest extent
possible, the intent of the parties.
(d) Except as otherwise expressly provided herein, this Agreement
shall be binding upon and inure to the benefit of the parties hereto and their
respective successors, estates, heirs, legal representatives and permitted
assigns and transferees.
(e) The section headings contained herein are for the purposes of
convenience only and are not intended to define or limit the contents of said
actions.
(f) THIS AGREEMENT SHALL BE GOVERNED BY THE LAWS OF THE STATE OF NEW
YORK (WITHOUT GIVING EFFECT TO PRINCIPLES OF CONFLICTS OF LAW) EXCEPT THAT
MATTERS PERTAINING TO THE NEVADA BUSINESS CORPORATION LAW SHALL BE GOVERNED BY
THE NEVADA BUSINESS CORPORATION LAW. The Stockholders consent and agree that
jurisdiction and venue for all legal proceedings relating to the subject matter
of this Agreement shall lie exclusively with the appropriate federal or state
court sifting within the State of New York, County of New York.
(g) A copy of this Agreement shall be filed with the Secretary of NCI
and kept with the records of NCI.
(h) Any notice or other communications required or permitted hereunder
shall be in writing and shall be deemed effective (i) upon personal delivery, if
delivered by hand and followed by notice by mail or facsimile transmission, (ii)
three (3) days after the date of deposit in the mails, if mailed by certified or
registered mail (return receipt requested), or (iii) on the next business day,
if mailed by an overnight mail service to the parties or sent by facsimile
transmission, addressed to the Stockholders and Farbman at their respective
addresses first written above.
(i) This Agreement may be executed in two or more counterparts, each
of which shall be deemed an original, but all of which together shall constitute
one and the same instrument.
(j) All representations, warranties and agreements contained herein
shall survive the execution and delivery of this Agreement.
- 8 -
<PAGE>
IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Wilbur L. Ross, Jr.
-----------------------
Wilbur L. Ross, Jr.
Chief Executive Officer
/s/ Steven Farbman
------------------
Steven Farbman
/s/ Jerry Finkelstein
---------------------
Jerry Finkelstein
THE FINKELSTEIN FOUNDATION, INC.
By:/s/ Jerrry Finkelstein
----------------------
Jerry Finkelstein
President
/s/ Shirley Finkelstein
-----------------------
Shirley Finkelstein
/s/ Wilbur L. Ross, Jr.
-----------------------
Wilbur L. Ross, Jr.
/s/ Melvyn I. Weiss
-------------------
Melvyn I. Weiss
- 9 -
<PAGE>
M&B WEISS FAMILY PARTNERSHIP
By:/s/ Melvyn I. Weiss
-------------------
Name: Melvyn I. Weiss
General Partner
D.H. BLAIR INVESTEMENT BANKING CORP.
By:/s/ J. Morton Davis
-------------------
J. Morton Davis
RIVKALEX CORPORATION
By:/s/ Rosalind Davidowitz
-----------------------
Rosalind Davidowitz
President
/s/ J. Morton Davis
-------------------
J. Morton Davis
/s/ Rosalind Davidowitz
-----------------------
Rosalind Davidowitz
- 10 -
<PAGE>
EXHIBIT A
---------
Stockholder No. of Shares
- ----------- -------------
The Finkelstein Group 264,001
Wilbur L. Ross, Jr. 369,768
The Weiss Group 1,112,857
The Davis Group 2,439,003
Steven Farbman 250,000
- 11 -
<PAGE>
Exhibit 10.5
SUBSCRIPTION AGREEMENT
NEWS COMMUNICATIONS, INC. COMMON STOCK
News Communications, Inc.
174-15 Horace Harding Expressway
Fresh Meadows, NY 11365
Attn: Michael Schenkler
1. Application. The undersigned (the "Purchasers"), intending to be
-----------
legally bound, hereby agree to purchase, at the request of the President and
Chief Executive Officer made on behalf of the Company, on January 31, 2000 an
aggregate number of shares (the "Shares") of the common stock (the "Common
Stock") of News Communications, Inc. (the "Company"), at a purchase price of
$1.75 per Share determined by dividing (i) the unpaid principal balance of the
Company's $2,500,000 indebtedness to D.H. Blair Investment Banking Corp. and
Rothschild Recovery Fund L.P., together with accrued and unpaid interest thereon
by (ii) $1.75. Prior to the closing, the Purchasers shall agree as to the
allocation of the number of shares to be purchased by each them and this
Agreement shall be amended in accordance with such understanding.
THE SECURITIES OFFERED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES
ACT OF 1933, AS AMENDED (THE "SECURITIES ACT"), OR THE SECURITIES ACT OF
ANY STATE. THEY ARE BEING OFFERED PURSUANT TO AN EXEMPTION FROM
REGISTRATION UNDER SECTION 4(2) OF THE SECURITIES ACT. THE SECURITIES MAY
NOT BE SOLD OR OTHERWISE TRANSFERRED UNLESS THE SECURITIES ARE REGISTERED
UNDER THE SECURITIES ACT AND APPLICABLE STATE SECURITIES LAWS, OR SUCH
SALES AND TRANSFERS ARE MADE PURSUANT TO AVAILABLE EXEMPTIONS FROM THE
REGISTRATION REQUIREMENTS OF THOSE LAWS.
2. Representations and Warranties of the Purchasers. Each of the
------------------------------------------------
Purchasers represents and warrants, severally and not jointly, to the Company as
follows:
(a) Each Purchaser, in making the decision to enter into this
Agreement and to commit to purchase the Shares, has relied upon independent
investigations made by him and his representatives, if any. No oral
representations have been made or oral information furnished to any
Purchaser in connection with the commitment to purchase of the Shares; and
each Purchaser and/or his advisors have had a reasonable opportunity to ask
questions of and receive answers from the Company concerning the Shares.
<PAGE>
(b) Each Purchaser has been or will be supplied with or has and
will have sufficient access to all information, including financial
statements and other financial information of the Company, and has been
afforded with an opportunity to ask questions of and receive answers
concerning information to which a reasonable investor would attach
significance in making investment decisions, so that as a reasonable
investor the undersigned has been able to make the undersigned's decision
to commit to purchase the Shares.
(c) As applicable, each Purchaser is able and will be able to
bear the substantial economic risks of an investment in the Shares for an
indefinite period of time, has no need for liquidity in such investment,
has made and will have made commitments to investments that are not readily
marketable which are reasonable in relation to the undersigned's net worth
and, at the present time, could afford a complete loss of such investment.
(d) Each Purchaser has such knowledge and experience in
financial, tax and business matters so as to enable him to utilize the
information made available to him in connection with the commitment to
purchase and the purchase of the Shares to evaluate the merits and risks of
an investment in the Shares and to make an informed investment decision
with respect thereto.
(e) Each Purchaser acknowledges that the purchase of the Shares
involves a high degree of risk and further acknowledges that he can bear
the economic risk of the purchase of the Shares, including the total loss
of his investment. No Purchaser is relying on the Company with respect to
the tax and other economic considerations of an investment in the Shares,
and each Purchaser has relied on the advice of, or has consulted with, only
his own advisor(s).
(g) Each Purchaser has and will have full right and power to
perform pursuant to this Subscription Agreement and make an investment in
the Company and is authorized and otherwise duly qualified to purchase and
hold the Shares and to enter into this Subscription Agreement.
(h) Each Purchaser will be purchasing the Shares for his own
account, for investment and not with a view to resale or distribution
except in compliance with the Securities Act.
(i) Each Purchaser understands that the Shares are being offered
and sold in reliance on an exemption from the registration requirements of
federal and state securities laws under Section 4(2) of the Securities Act
and that the Company is relying upon the truth and accuracy of the
representations, warranties, agreements, acknowledgments and understandings
of each Purchaser set forth herein in order to determine the applicability
of such exemptions and the suitability of each Purchaser to acquire the
Shares. The representations, warranties and agreements contained herein
are true and correct as of the date hereof and may be relied upon by the
Company, and the undersigned will notify the Company immediately of any
adverse change in any such
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<PAGE>
representations and warranties which may occur prior to the acceptance of
the subscription and will promptly send the Company written confirmation
thereof. The representations, warranties and agreements of each Purchaser
contained herein shall survive the execution and delivery of this
Subscription Agreement and the purchase of the Shares.
(j) No Purchaser nor any of his respective affiliates or agents
will, directly or indirectly, maintain any short position in the Shares or
any other securities of the Company for so long as any of the Shares are
owned by the undersigned.
3. Accredited Investor Status. Each Purchaser further represents and
--------------------------
warrants that he is an "accredited investor" within the meaning of Regulation D
under the Securities Act.
4. Registration Rights.
-------------------
(a) Agreement to Register. At any time from the date of purchase of
---------------------
the Shares until the fifth anniversary of the date hereof, at the request
of the Purchasers holding a majority of the Shares (the "Registration
Request"), the Company shall prepare and use its best efforts to file with
the Securities and Exchange Commission (the "SEC") within 60 days of the
Registration Request a registration statement covering the resale of the
Shares (each, a "Registration Statement"), shall use its best efforts to
cause such Registration Statement to become effective as soon as possible
thereafter and to do all other things necessary to cause such Registration
Statement to be declared effective by the SEC (including, without
limitation, the execution of an undertaking to file post-effective
amendments, appropriate qualification under applicable blue sky and other
state securities laws in such jurisdictions as the Purchasers may
reasonably request, and appropriate compliance with applicable regulations
issued under the Securities Act) and as would permit or facilitate the sale
and distribution of all or such portion of such Shares. The Purchasers
shall have the right to make such Registration Request on one occasion.
(b) If the Purchasers of a majority of the Shares desire to distribute
the Shares by means of an underwriting, they shall make a Registration
Request and so advise the Company and shall select an underwriter
reasonably acceptable to the Company. The Company and the Purchasers
proposing to distribute their Shares through such underwriter shall enter
into an underwriting agreement in customary form with the underwriter
selected for such underwriting by the Company. The Company shall not be
required to effect more than two underwritten offerings of Shares. The
Company shall pay all expenses, other than underwriters' discounts and
commissions and fees and disbursements of experts and counsel retained by
the undersigned, relating to an underwriting of the Shares covered by the
first request, and the Purchasers requesting an underwriting shall pay all
reasonable registration expenses arising from the second such underwriting.
Notwithstanding any other provision of this Section 4, if the underwriter
advises the Purchasers in writing that marketing factors require a
limitation on the number of shares to be underwritten, the number of Shares
that may be included in the registration and underwriting shall be
allocated among the Purchasers, in proportion (as
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<PAGE>
nearly as practicable) to the amount of Shares of the Company owned by each
Purchaser; provided, however, that the number of Shares to be included in
such underwriting shall not be reduced unless all other securities are
first entirely excluded from the underwriting.
(c) If, at any time during the five-year period following the
date hereof, the Company proposes to file with the SEC a Registration
Statement with respect to any class of securities (other than pursuant to a
registration statement on Forms S-4 or S-8 or any successor form) under the
Securities Act, the Company shall notify the Purchasers at least twenty
(20) days prior to the filing of the Registration Statement and will offer
to include all or any portion of the Shares in the Registration Statement.
At the written request of any of the Purchasers, delivered to the Company
within ten (10) days after the date of the Company's notice, the Purchaser
shall state the number of Shares that he wishes to sell under the proposed
Registration Statement.
(d) If the Registration Statement is filed with respect to an
underwritten offering, the Company and the Purchasers shall enter into an
underwriting agreement in customary form with the underwriter selected for
such underwriting by the Company. The Company shall pay all expenses,
other than underwriters' discounts and commissions and fees and
disbursements of experts and counsel retained by the Purchasers, relating
to an underwriting of the Shares.
(e) The Purchasers, if reasonably requested by the Company or by
the underwriter with respect to any public offering, shall agree not to
sell, make any short sale of, loan, grant any options for the purchase of,
or otherwise dispose of any of the Shares (other than those included in the
Registration Statement) without the prior written consent of the Company or
such underwriters, as the case may be, for such period of time (not to
exceed one hundred eighty (180) days), from the effective date of such
Registration Statement, or the commencement of the offering, as applicable,
as may be requested by the underwriters, provided that all other holders of
the class of securities being registered pursuant to the Registration
Statement shall make the same agreements as those made by the Purchasers
under this section 4(e);
(f) The Purchasers shall promptly provide the Company with such
non-confidential and non-proprietary information as it shall reasonably
request and that is available to the Purchasers in order to prepare the
Registration Statement;
(g) All reasonable and necessary expenses in connection with the
preparation of the Registration Statement, including, without limitation,
any and all legal, accounting and filing fees, but not including fees and
disbursements of experts and counsel retained by the Purchasers or
underwriting discounts and commissions to be paid by the Purchasers, shall
be borne by the Company;
(h) The Company shall use its best efforts to cause the
Registration Statement to become effective, permitting the sale of the
Shares in accordance with the
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<PAGE>
intended method or methods of distribution thereof, and pursuant thereto,
the Company shall as expeditiously as possible:
(i) prepare and file with the SEC a Registration Statement
relating on any appropriate form under the Securities Act, which form
shall be available for the sale of the Shares in accordance with the
intended method or methods of distribution thereof and use its best
efforts to cause such Registration Statement to become effective and
keep such Registration Statement effective in accordance with section
4(h)(ii) below;
(ii) prepare and file with the SEC such amendments and post-
effective amendments to the Registration Statement as may be necessary
to keep the Registration effective until all such Shares are sold;
cause the prospectus to be supplemented by any required prospectus
supplement, and as so supplemented to be filed pursuant to Rule 424
under the Securities Act; and comply with the provisions of the
Securities Act with respect to the disposition of all securities
covered by such Registration Statement during the applicable period in
accordance with the intended method or methods of distribution by the
sellers thereof as set forth in such Registration Statement or
supplement to the prospectus; provided, however, that the Company may,
from time to time, request that the Purchasers immediately discontinue
the disposition of the Shares if the Company determines, in the good
faith exercise of its reasonable business judgment, that the offering
and disposition of the Shares could materially interfere with bona
fide financing, acquisition or other material business plans of the
Company or would require disclosure of non-public information, the
premature disclosure of which could materially and adversely affect
the Company (it being acknowledged that the Company is not required to
disclose in such request any such transaction, plan or non-public
information), so long as the Company promptly after the disclosure of
such transaction, plan or non-public information complies with this
section 4(h)(ii);
(iii) notify the Purchasers and the underwriter, if any,
promptly, and (if requested by any such person) confirm such advice in
writing, (A) when the prospectus or any prospectus supplement or post-
effective amendment has been filed, and, with respect to the
Registration Statement or any post-effective amendment thereto, when
the same has become effective, (B) of any request by the SEC for
amendments or supplements to the Registration Statement or the
prospectus or for additional information, (C) of the issuance by the
SEC of any stop order suspending the effectiveness of the Registration
Statement or the initiation of any proceedings for that purpose, (D)
of the receipt by the Company of any notification with respect to the
suspension of the qualification of the Shares for sale in any
jurisdiction or the initiation of any proceedings for such purpose and
(E) subject to the proviso below, 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 a material fact
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<PAGE>
required to be stated therein or necessary to make the statements
therein not misleading in light of the circumstances then existing
and, subject to section 4(g)(ii) above, at the request of any such
person, prepare and furnish to such person 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
shares, 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 statements therein not misleading in
light of the circumstances then existing; provided, however, the
Company need not disclose the event if it otherwise has not disclosed
such event to the public;
(iv) if requested by the underwriter or any of the
Purchasers, promptly incorporate in a prospectus supplement or post-
effective amendment such information as the underwriter and the
Purchaser agree should be included therein relating to the plan of
distribution with respect to such Shares, including, without
limitation, the purchase price being paid therefor by such
underwriters and with respect to any other terms of the underwritten
offering of the Shares to be sold in such offering; and make all
required filings of such prospectus supplements or post-effective
amendments as soon as notified of the matters to be incorporated in
such prospectus supplements or post-effective amendments;
(v) deliver to the Purchasers and the underwriters, if any,
without charge, as many copies of the prospectus (including each
preliminary prospectus) in conformity with the requirement of the
Securities Act and any amendments or supplements thereto as such
persons may reasonably request and such other documents as they may
reasonably request to facilitate the prior sale or other disposition
of the Shares;
(vi) prior to any public offering of Shares, register or
qualify or cooperate with the Purchasers, or the underwriters, if any,
in connection with the registration or qualification of such Shares
for offer and sale under the securities or blue sky laws of such
jurisdictions as the Purchasers or underwriters, if any, reasonably
requests in writing and do any and all other acts or things necessary
or advisable to enable the disposition in such jurisdictions of the
Shares covered by the Registration Statement; provided, however, that
the Company shall not be required to qualify to do business in any
jurisdiction where it is not then so qualified or to take any action
that would subject it to general service of process in any such
jurisdiction where it is not then so subject or would subject the
Company to any tax in any such jurisdiction where it is not then so
subject; and
(vii) with a view to making available the benefits of
certain rules and regulations of the SEC which may at any time permit
the sale of Shares to the public without registration, during such
time as a public market exists for its equity securities, the Company
agrees to:
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<PAGE>
(A) make and keep public information available, as
those terms are understood and defined in Rule 144 under the
Securities Act, at all times after the effective date of the
first registration under the Securities Act filed by the Company
for an offering of its equity securities to the general public;
(B) use its best efforts to file with the SEC in a
timely manner all reports and other documents required of the
Company under the Securities Act and the Securities Exchange Act
of 1934, as amended (the "Exchange Act") (at any time after it
has become subject to such reporting requirements); and
(C) furnish to the Purchasers forthwith upon request a
written statement by the Company as to the Company's compliance
with the reporting requirements of said 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 of the Company as the Purchasers may reasonably
request in availing itself of any rule or regulation of the SEC
allowing a holder to sell any such securities without
registration;
(i) Notwithstanding the provisions of this section 4 to the
contrary, the Company:
(i) may require the Purchasers to furnish to the Company
such information regarding the distribution of such securities as the
Company may from time to time reasonably request in writing, and the
Company may limit such registration rights to situations where a
proposed distribution of Shares is to be effected forthwith upon the
effectiveness of the Registration Statement; and
(ii) may require each of the Purchasers to covenant that he
has not taken, and will not take, directly or indirectly, any action
designed, or which might reasonably be expected, to cause or result
in, under the Exchange Act or otherwise, or which has caused or
resulted in, stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares; and
(j) each Purchaser agrees by acquisition of such Shares that,
upon receipt of the request referred to in the proviso of section 4(h)(ii)
or of any notice from the Company of the happening of any event of the kind
described in section 4(h)(iii) hereof (other than as provided in section
4(h)(iii)(A) hereof), such Purchaser shall forthwith discontinue
disposition of Shares until he is advised in writing by the Company that
the use of the prospectus may be resumed, and has received copies of any
additional or supplemental documents or filings that are incorporated by
reference in the prospectus, and, if so directed by the Company, each
Purchaser shall deliver to the Company (at the Company's expense) all
copies other than permanent file copies then in the Purchaser's
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<PAGE>
possession, of the prospectus covering such Shares current prior to the
time of receipt of such notice.
5. Indemnification.
---------------
(a) The Company agrees to indemnify and hold harmless the
Purchasers against any losses, claims, damages, liabilities or expenses,
joint or several, to which the Purchasers may become subject, under the
Securities Act, the Exchange Act, or other federal or state statutory law
or regulations, or at common law or otherwise (including in settlement of
any litigation, if such settlement is effected with the written consent of
the Company), insofar as such losses, claims, damages, liabilities or
expenses (or actions in respect thereof as contemplated below) arise out of
or are based upon (i) any untrue statement or alleged untrue statement of
any material fact contained in any Registration Statement, any preliminary
prospectus, or any amendment or supplement thereto, or arise out of or are
based upon the omission or alleged omission to state in any of them a
material fact required to be stated therein or necessary to make the
statements in any of them not misleading, (ii) in whole or in part, any
inaccuracy in the representations and warranties of the Company contained
herein, or (iii) any failure of the Company to perform its obligations
hereunder or under law; and will reimburse the Purchasers for any legal and
other expenses as such expenses are reasonably incurred by the Purchasers
in connection with investigating, defending, settling, compromising or
paying any such loss, claim, damage, liability, expense or action;
provided, however, that the Company will not be liable in any such case to
the extent that any such loss, claim, damage, liability or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in any Registration Statement, any
preliminary prospectus, or any amendment or supplement thereto in reliance
upon and in conformity with information furnished to the Company by each of
the Purchasers expressly for the inclusion in any Registration Statement or
any preliminary prospectus. This indemnity agreement will be in addition
to any liability that the Company may otherwise have. The Company will
not, without the prior written consent of the Purchasers, settle or
compromise or consent to the entry of any judgment in any pending or
threatened action or claim or related cause of action or portion of such
cause of action in respect of which indemnification may be sought hereunder
(whether or not the Purchasers are parties to such action or claim), unless
such settlement, compromise or consent includes an unconditional release of
the Purchasers from all liability arising out of such action or claim (or
related cause of action or portion thereof).
(b) Each of the Purchasers, severally and not jointly, agrees to
indemnify and hold harmless each of the other Purchasers, the Company, each
of its directors, each of its officers who sign any Registration Statement,
and each person, if any, who controls the Company within the meaning of the
Securities Act, against any losses, claims, damages, liabilities or
expenses to which the Company, or any such director, officer, or
controlling person may become subject, under the Securities Act, the
Exchange Act, or other federal or state statutory law or regulation, or at
common law or
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<PAGE>
otherwise (including in settlement of any litigation, if such settlement is
effected with the written consent of the Purchasers), insofar as such
losses, claims, damages, liabilities or expenses (or actions in respect
thereof as contemplated below) arise out of or are based upon (i) any
untrue or alleged untrue statement of any material fact contained any
Registration Statement, any preliminary prospectus, or any amendment or
supplement thereto, or (ii) 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, in each case to the extent, but only
to the extent, that such untrue statement or alleged untrue statement or
omission or alleged omission was made in any Registration Statement, any
preliminary prospectus, or any amendment or supplement thereto, in reliance
upon and in conformity with information furnished to the Company by a
Purchaser expressly for the use in any Registration Statement or any
preliminary prospectus; and will reimburse the Company, or any such
director, officer, or controlling person for any legal and other expense
reasonably incurred by the Company, or any such director, officer, or
controlling person in connection with investigating, defending, settling,
compromising or paying any such loss, claim, damage, liability, expense or
action. As to each Purchaser, in no event shall any indemnity under this
subsection (b) exceed the net proceeds from sale of the number of Shares
sold by such Purchaser. This indemnity agreement will be in addition to any
liability which each Purchaser may otherwise have.
(c) Promptly after receipt by an indemnified party under this
Section 5 of notice of the commencement of any action, such indemnified
party will, if a claim in respect thereof is to be made against an
indemnifying party under this Section 5, notify the indemnifying party in
writing of the commencement thereof; but the omission so to notify the
indemnifying party will not relieve it from any liability that it may have
to any indemnified party for contribution or otherwise than under the
indemnity agreement contained in this Section 5 or to the extent it is not
prejudiced as a proximate result of such failure. In case any such action
is brought against any indemnified party and such indemnified party seeks
or intends to seek indemnity from an indemnifying party, the indemnifying
party will be entitled to participate in, and, to the extent that it may
wish, jointly with all other indemnifying parties similarly notified, to
assume the defense thereof with counsel reasonably satisfactory to such
indemnified party; provided, however, that if the defendants in any such
action include both the indemnified party and the indemnifying party and
the indemnified party shall have reasonably concluded that there may be a
conflict between the positions of the indemnifying party and the
indemnified parties which are different from or additional to those
available to the indemnifying party, the indemnified party or parties shall
have the right to select separate counsel to assume such legal defenses and
to otherwise participate in the defense of such action on behalf of such
indemnified party or parties. Upon receipt of notice from the indemnifying
party to such indemnified party of its election so to assume the defense of
such action and approval by the indemnified party of counsel, the
indemnifying party will not be liable to such indemnified party under this
Section 5 for any legal or other expenses subsequently incurred by such
indemnified party in connection with the defense thereof unless (i) the
indemnified party shall have employed such counsel in connection with the
assumption of legal defenses in accordance with the proviso to the
preceding
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<PAGE>
sentence (it being understood, however, that the indemnifying party shall
not be liable for the expenses of more than one separate counsel, approved
by the Purchasers in the case of paragraph (a), representing the
indemnified parties who are parties to such action) or (ii) the
indemnifying party shall not have employed counsel reasonably satisfactory
to the indemnified party to represent the indemnified party within a
reasonable time after notice of commencement of the action, in each of
which cases the fees and expenses of counsel shall be at the expense of the
indemnifying party.
(d) If the indemnification provided for in this Section 5 is
required but is for any reason held to be unavailable to or otherwise
insufficient to hold harmless an indemnified party under subsections (a),
(b) or (c) in respect of any losses, claims, damages, liabilities or
expenses referred to herein, then each applicable indemnifying party shall
contribute to the amount paid or payable by such indemnified party as a
result of any losses, claims, damages, liabilities or expenses referred to
herein (including any investigative, legal and other expenses reasonably
incurred in connection with, and any amount paid in settlement of, any
action, suit or proceeding or any claim asserted, but after deducting any
contribution received by the Company and the Purchasers from any other
persons, such as persons who control the Company within the meaning of the
Act, officers of the Company who signed the Registration Statement and
directors of the Company who also may be liable for contribution) (i) in
such proportion as is appropriate to reflect the relative benefits received
by the Company and the Purchasers from the offering of the Shares or any
public offering of the Shares, as the case may be or (ii) if the allocation
provided by clause (i) above is not permitted by applicable law, in such
proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company
and the Purchasers in connection with the statements or omissions or
inaccuracies in the representations and warranties herein which resulted in
such losses, claims, damages, liabilities or expenses, as well as any other
relevant equitable considerations. The relative benefits received by the
Company, on the one hand, and the Purchasers, on the other, shall be deemed
to be in the same proportion as the total net proceeds from the sale of the
Shares (before deducting expenses) received by the Company bear to the
total compensation received by the Purchasers hereunder. The relative
fault of the Company and the Purchasers shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or the omission or alleged omission to state a material fact
or the inaccurate or the alleged inaccurate representation and/or warranty
relates to information supplied by the Company or the Purchasers and the
parties' relative intent, knowledge, access to information and opportunity
to correct or prevent such statement or omission. The amount paid or
payable by a party as a result of the losses, claims, damages, liabilities
and expenses referred to above shall be deemed to include, subject to the
limitations set forth in subsection (c) of this Section 5, any legal or
other fees or expenses reasonably incurred by such party in connection with
investigating or defending any action or claim. The provisions set forth
in subsection (c) of this Section 5 with respect to notice of commencement
of any actions shall apply if a claim for contribution is to be made under
this subsection (d); provided, however, that no additional notice shall be
required with respect to any action for which notice has been given under
subsection
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<PAGE>
(c) for purposes of indemnification. The Company and the Purchasers agree
that it would not be just and equitable if contribution pursuant to this
Section 5 were determined solely by pro rata allocation or by any other
method of allocation that does not take account of the equitable
considerations referred to in this Section 5. Notwithstanding the
provisions of this Section 5, the Purchasers shall not be required to
contribute any amount in excess of the amount of compensation received by
each of them. No person guilty of fraudulent misrepresentation (within the
meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation.
6. Miscellaneous.
-------------
(a) This Agreement shall survive the death or disability of the
undersigned and shall be binding upon the undersigned's heirs, executors,
administrators, successors and permitted assigns.
(b) This Agreement and the documents referred to herein
constitute the entire agreement between the parties hereto with respect to
the subject matter hereof and together supersede all prior discussions or
agreements in respect thereof.
(c) This Agreement may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all of which shall
constitute a single document.
(d) This Agreement shall be governed by and construed in
accordance with the laws of the State of New York. Any dispute arising out
of or in connection with this Agreement shall be settled by arbitration in
accordance with the rules of the American Arbitration Association then in
effect. The location of any hearing shall be New York, New York.
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<PAGE>
IN WITNESS WHEREOF, the undersigned have executed this Agreement this 28th
day of July, 1999.
Number of Shares Purchased: 129,400 /s/ Wilbur L. Ross, Jr.
---------------- -----------------------
Wilbur L. Ross, Jr.
Total Purchase Price: $226,450
---------------
Number of Shares Purchased: 853,500 /s/ J. Morton Davis
---------------- -------------------
J. Morton Davis
Total Purchase Price: $1,493,625
---------------
Number of Shares Purchased: 445,671 /s/ Melvyn I. Weiss
--------------- -------------------
Melvyn I. Weiss
Total Purchase Price: $779,924
--------------
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