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
Xxxxxx Xxxxxxx Expressway, Xxxxx Xxxxxxx, Xxx Xxxx 00000, XXXXX XXXXXXXXXXX, THE
XXXXXXXXXXX FOUNDATION, INC. and XXXXXXX XXXXXXXXXXX (collectively, the
"Xxxxxxxxxxx Group"), each having an address at the Carlyle Hotel, 00 Xxxx 00xx
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Xxxxxx, Xxx Xxxx, XX 00000; XXXXXX X. XXXX, XX. ("Xxxx"), having an address at
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0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, XX 00000; XXXXXX X. XXXXX and M&B XXXXX
FAMILY PARTNERSHIP (the "Xxxxx Group"), having an address c/o Xxxxxxx Xxxxx
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Xxxxxxx Xxxxx & Lerach LLP, Xxx Xxxxxxxxxxxx Xxxxx, Xxx Xxxx, XX 00000; J.
XXXXXX XXXXX, X.X. XXXXX INVESTMENT BANKING CORP., RIVKALEX CORPORATION and
XXXXXXXX XXXXXXXXXX (collectively, the "Xxxxx Group"), having an address c/o
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X.X. Xxxxx Investment Banking Corp., 00 Xxxx Xxxxxx, Xxx Xxxx, XX 00000, and
XXXXXX XXXXXXX ("Xxxxxxx"), residing at Xxx Xxxxx Xxxxxx Xxxxxxx, Xx. Xxxxx, Xxx
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Xxxx 00000 (each member of the Xxxxxxxxxxx Group, Xxxx, the Xxxxx Group and the
Xxxxx Group and Xxxxxxx, individually, a "Stockholder" and collectively the
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"Stockholders").
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WHEREAS, Xxxxxxx and NCI are parties to (i) an Employment Agreement dated
the date hereof (the "Employment Agreement") pursuant to which Xxxxxxx has
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agreed to become President and Chief Executive Officer of NCI and (ii) a
Restricted Stock Agreement (the "Restricted Stock Agreement") dated the date
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hereof pursuant to which Xxxxxxx received 250,000 shares of NCI common stock
(the "Common Stock") and (iii) a Stock Option Agreement dated the date hereof
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pursuant to which NCI has granted to Xxxxxxx 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
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opposite his name on Exhibit A hereto (collectively, the "Shares"); and
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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
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otherwise defined herein shall have the meaning set forth in the Employment
Agreement.
2. Representations of the Stockholders and NCI.
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(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.
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(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
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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 Xxxxxxx 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) Xxxxxxxxxxx; (ii) two
persons designated by Xxxx, one of whom shall initially be Xxxx and the other of
whom shall initially be Xxxxxx Xxxxxxxxxxx; (iii) three persons designated by
Xxxxxxx, one of whom shall be Xxxxxxx, one of whom shall initially be Xxxxxx
Xxxxx and one of whom shall initially be Xxxxxxx Xxxxxxxxx (in the future, one
of Xxxxxxx'x 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 Xxxxx Group who shall initially
be Xxxx Xxxxx; (v) one person to be designated by the Xxxxx Group who shall
initially be Xxxxxx X. Xxxx; and (vi) one person to be designated by the Xxxxx
Group, the Xxxxx Group and the Xxxxxxxxxxx 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
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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
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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 Xxxx, 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.
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(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
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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:
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(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");
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(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
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(a) If at any time any of the Stockholders, other than Xxxxxxx,
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
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(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,
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prior to agreeing to such Disposition, provide Xxxxxxx with written notice (a
"Disposition Notice") of his or its intention to make the Disposition and
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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) Xxxxxxx 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
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at the same price and subject to the same material terms and conditions as
described in the Disposition Notice. Xxxxxxx 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 Xxxxxxx 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, Xxxxxxx 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.
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(d) If Xxxxxxx fails to notify the Stockholder (or group of
Stockholders) during the Exclusive Period, then Xxxxxxx shall be deemed to have
waived his Right of First Refusal.
6. Tag-Along Rights.
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(a) To the extent Xxxxxxx does not exercise his right of first refusal
as to the Disposition of the Offered Shares pursuant to Section 5, then Xxxxxxx
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 Xxxxxxx may not
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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 Xxxxxxx 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, Xxxxxxx shall have the right to sell to the purchaser up to that
number of Shares of Common Stock owned by Xxxxxxx 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, Xxxxxxx shall have the right to sell to the purchaser up to
that number of Shares of Common Stock owned by Xxxxxxx 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 Xxxxxxx gives notice during the Exclusive Period of his
election to participate in the Disposition, then Xxxxxxx 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 Xxxxxxx shall not be
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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 Xxxxxxx shall not be
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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.
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(e) If Xxxxxxx fails to notify the Stockholder (or group of
Stockholders) during the Exclusive Period, then Xxxxxxx shall be deemed to have
waived his Tag-Along Right.
7. Drag-Along Rights.
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(a) If at any time the Stockholders, other than Xxxxxxx, 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 Xxxxxxx 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
Xxxxxxx stating that Xxxxxxx 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
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Xxxxxxx 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
Xxxxxxx must participate in the Disposition, Xxxxxxx 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 Xxxxxxx shall not be required to incur
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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 Xxxxxxx shall not be required to
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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, Xxxxxxx shall be required to sell to the purchaser up to that
number of Shares of Common Stock owned by Xxxxxxx 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, Xxxxxxx shall be required to sell to the purchaser up to
that number of Shares of Common Stock owned by Xxxxxxx 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
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owned by the Stockholder (or group of Stockholders) is convertible at the time
of such Disposition.
(d) The obligation of Xxxxxxx to participate in the Disposition is
also subject to the satisfaction of the following conditions: (i) upon the
consummation of the Disposition, Xxxxxxx 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, Xxxxxxx 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
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Preferred Stock, Xxxxxxx 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
Xxxxxxx 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.
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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.
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(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
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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 Xxxxxxx 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.
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IN WITNESS WHEREOF, the parties hereto have duly executed this Agreement as
of the date first above written.
NEWS COMMUNICATIONS, INC.
By: /s/ Xxxxxx X. Xxxx, Xx.
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Xxxxxx X. Xxxx, Xx.
Chief Executive Officer
/s/ Xxxxxx Xxxxxxx
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Xxxxxx Xxxxxxx
/s/ Xxxxx Xxxxxxxxxxx
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Xxxxx Xxxxxxxxxxx
THE XXXXXXXXXXX FOUNDATION, INC.
By:/s/ Jerrry Xxxxxxxxxxx
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Xxxxx Xxxxxxxxxxx
President
/s/ Xxxxxxx Xxxxxxxxxxx
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Xxxxxxx Xxxxxxxxxxx
/s/ Xxxxxx X. Xxxx, Xx.
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Xxxxxx X. Xxxx, Xx.
/s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
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M&B XXXXX FAMILY PARTNERSHIP
By:/s/ Xxxxxx X. Xxxxx
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Name: Xxxxxx X. Xxxxx
General Partner
X.X. XXXXX INVESTEMENT BANKING CORP.
By:/s/ J. Xxxxxx Xxxxx
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J. Xxxxxx Xxxxx
RIVKALEX CORPORATION
By:/s/ Xxxxxxxx Xxxxxxxxxx
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Xxxxxxxx Xxxxxxxxxx
President
/s/ J. Xxxxxx Xxxxx
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J. Xxxxxx Xxxxx
/s/ Xxxxxxxx Xxxxxxxxxx
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Xxxxxxxx Xxxxxxxxxx
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EXHIBIT A
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Stockholder No. of Shares
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The Xxxxxxxxxxx Group 264,001
Xxxxxx X. Xxxx, Xx. 369,768
The Xxxxx Group 1,112,857
The Xxxxx Group 2,439,003
Xxxxxx Xxxxxxx 250,000
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