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 ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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("▇▇▇▇▇▇▇").
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WHEREAS, pursuant to a certain Employment Agreement dated the date hereof
between NCI and ▇▇▇▇▇▇▇ (the "Employment Agreement"), ▇▇▇▇▇▇▇ has become
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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 ▇▇▇▇▇▇▇'▇
continued dedication and to afford ▇▇▇▇▇▇▇ the opportunity to acquire stock
ownership in, or otherwise share in the appreciation of the stock of, NCI so
that ▇▇▇▇▇▇▇ 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
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forth herein, NCI hereby irrevocably grants to ▇▇▇▇▇▇▇, 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
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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
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qualify under ▇▇▇▇▇▇▇ ▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇ Internal Revenue Code of 1986, as
amended (the "Code"), as an incentive stock option.
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2. Vesting and Exercise of Options. The Options shall vest in four equal
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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. ▇▇▇▇▇▇▇ may exercise the Options by
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delivering to NCI (i) a written notice stating the number of shares of Common
Stock that ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇'▇ Employment Agreement is not
renewed by NCI after the expiration of the Term, ▇▇▇▇▇▇▇'▇ employment is
terminated without Cause or ▇▇▇▇▇▇▇ 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
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").
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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 ▇▇▇▇▇▇▇
for the number of excess shares of Common Stock.
4. Issuance of Common Stock and Payment of Cash upon Exercise of Options.
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As promptly as practicable after receipt of such written notification of
▇▇▇▇▇▇▇'▇ election to exercise the Options and full payment of such exercise
price and any applicable withholding taxes, NCI shall issue or transfer to
▇▇▇▇▇▇▇ the number of shares of Common Stock with respect to which the Options
have been so exercised and shall deliver to ▇▇▇▇▇▇▇ a certificate or
certificates therefor, registered in ▇▇▇▇▇▇▇'▇ name.
5. Death or Disability of ▇▇▇▇▇▇▇. If the employment of ▇▇▇▇▇▇▇ shall
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terminate prior to the Expiration Date as a result of the death of ▇▇▇▇▇▇▇ or by
reason of his Disability, ▇▇▇▇▇▇▇, the executor or administrator of the estate
or affairs of ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇
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shall be terminated by NCI (other than by reason of death, Disability or for
Cause) or by ▇▇▇▇▇▇▇ for Good Reason, ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇ shall be terminated (i) by NCI for Cause, (ii) by
▇▇▇▇▇▇▇ without Good Reason or (iii) upon the expiration of the Employment
Agreement, the Options, to the extent vested on the date of ▇▇▇▇▇▇▇'▇
termination (the "Termination Date"), shall be exercisable until the first
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anniversary of the Termination Date. Nothing in this Agreement shall confer
upon ▇▇▇▇▇▇▇ 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 ▇▇▇▇▇▇▇'▇
employment.
7. Change of Control. Notwithstanding anything in this Agreement to the
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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. ▇▇▇▇▇▇▇ acknowledges that the shares
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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
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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 ▇▇▇▇▇▇▇'▇ employment by NCI without Cause
or by ▇▇▇▇▇▇▇ for Good Reason or upon a Change of Control (as such terms are
defined in ▇▇▇▇▇▇▇'▇ 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. ▇▇▇▇▇▇▇. Whenever in any provision of this Agreement reference is made
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to ▇▇▇▇▇▇▇, 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 ▇▇▇▇▇▇▇ shall be deemed to include such person or
persons.
10. Non-Transferability. The Options are not transferable by ▇▇▇▇▇▇▇
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otherwise than by applicable laws of descent and distribution and, except as set
forth herein, are exercisable during ▇▇▇▇▇▇▇'▇ lifetime only by ▇▇▇▇▇▇▇. 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. ▇▇▇▇▇▇▇ shall have no rights as a stockholder
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with respect to any share of Common Stock covered by the Options until ▇▇▇▇▇▇▇
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 ▇▇▇▇▇▇▇ shall become the holder of record thereof.
12. Adjustment for Recapitalization, Merger, Etc. The aggregate number of
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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.
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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,
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except in connection with a Change of Control or the dissolution or liquidation
of NCI, ▇▇▇▇▇▇▇ hereby agrees that ▇▇▇▇▇▇▇ will not exercise the Options, and
that NCI will not be obligated to issue or transfer any shares of Common Stock
to ▇▇▇▇▇▇▇ hereunder, if the exercise hereof or the issuance or transfer of such
Common Stock shall constitute a violation by ▇▇▇▇▇▇▇ or NCI of any provisions of
any law or regulation of any governmental authority.
14. Notice. Every notice or other communication relating to this
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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 ▇▇▇▇▇▇▇ to NCI shall be mailed or delivered to NCI at its
executive offices currently located at ▇▇▇-▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇, or such other location as shall then be NCI's principal
corporate office, Attn: Chairman; with a copy to ▇▇▇▇ ▇. ▇▇▇▇▇▇▇, Esq., Piper &
Marbury, LLP, ▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇, and all notices
or communications by NCI to ▇▇▇▇▇▇▇ may be given to ▇▇▇▇▇▇▇ personally or may be
mailed to ▇▇▇▇▇▇▇ at ▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇. ▇▇▇▇▇, ▇▇ ▇▇▇▇▇, with a copy
to ▇▇▇▇▇▇▇ ▇▇▇▇▇, Esq., ▇▇▇▇▇ ▇▇▇▇ & ▇▇▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇,
▇▇ ▇▇▇▇▇.
15. Entire Agreement. This Agreement sets forth the complete
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understanding of NCI and ▇▇▇▇▇▇▇ 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
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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/ ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
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Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇, ▇▇.
Title: Chief Executive Officer
/s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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▇▇▇▇▇▇ ▇▇▇▇▇▇▇
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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
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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 ▇▇▇▇▇▇▇'▇ 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.
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