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Exhibit 4.10
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered
into as of the _____ day of May, 1996, by and among N2K Inc., a
Pennsylvania corporation with its principal place of business at 00
Xxxxx Xxxxxx, Xxx Xxxx, Xxx Xxxx 00000 (the "Company") and the persons
listed on the Schedule of Purchasers attached hereto ("Purchasers").
In consideration of the mutual representations, warranties, covenants
and conditions set forth in this Agreement, the parties agree as follows.
1. PURCHASE, SALE AND ISSUANCE OF PREFERRED SHARES.
(a) PURCHASE OF PREFERRED SHARES. Subject to the terms and conditions
of this Agreement, each Purchaser shall purchase at the Closing and the Company
shall sell and issue to each Purchaser, severally and not jointly, at the
Closing, the number of shares of the Company's Series E Convertible Preferred
Stock (the "Preferred Shares") as is set forth opposite such Purchaser's name on
the Schedule of Purchasers.
(b) PURCHASE PRICE. The purchase price shall be $.80 per Preferred
Share.
(c) CLOSING. The purchase and sale shall take place at the offices of
Xxxxx Xxxxxxxxxx, 0000 Xxxxxx xx xxx Xxxxxxxx, Xxx Xxxx, Xxx Xxxx 00000 on May
__, 1996, or at such other time, date or place as the Company and the
subscribers for at least eighty percent (80%) of the Preferred Shares to be
issued hereunder shall mutually agree (which time, date and place are referred
to in this Agreement as the "Closing"). At the Closing the Company shall deliver
to each Purchaser a stock certificate or certificates, registered in the name of
such Purchaser, representing the Preferred Shares that such Purchaser is
purchasing against delivery to the Company by such Purchaser of immediately
available funds.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company represents
and warrants to each Purchaser that the following are true in all material
respects:
(a) CORPORATE RECORDS. The Company has previously made available to
the Purchasers and their representatives, if
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any, the Company's complete corporate minute and stock books, including all
formal corporate actions of the Company's Board of Directors and shareholders,
whether by meeting or written consents in lieu of a meeting. Such records are
true and correct and remain in full force and effect except as provided therein
to the contrary.
(b) ORGANIZATION AND STANDING. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the nature of its activities
or the ownership of its properties makes such qualification necessary. True and
accurate copies of the Company's Articles of Incorporation as amended and
By-laws, as presently in effect, have been delivered to the Purchasers.
(c) CAPITALIZATION.
(i) AUTHORIZED CAPITAL. Following the filing of the
Statement with Respect to Shares (the "Statement"), designating an additional
131,000 shares of Preferred Stock, par value $.001 per share, as Series E
Preferred Stock, which is attached hereto as Exhibit A, and at the time of
Closing, the authorized capital stock of the Company will consist of:
(A) 500,000 shares of Series A Preferred Stock
of which 488,838 shares have been issued.
(B) 625,000 shares of Series B Preferred Stock,
all of which have been issued.
(C) 2,857,143 shares of Series C Preferred
Stock, of which 2,142,857 shares have been issued.
(D) 1,000,000 shares of Series D Convertible
Preferred Stock of which 800,000 shares have been issued.
(E) 6,013,060 shares of Series E Convertible
Preferred Stock of which 6,007,060 shares have been issued.
(F) 3,004,834 shares of undesignated Preferred
Stock.
(G) 100,000,000 shares of Common Stock, par
value $.001 per share (the "Common Stock") of which 11,659,644 shares shall be
validly issued and outstanding fully paid and nonassessable, 6,685,000 shares
are reserved for issuance upon exercise of options under the Company's Incentive
Stock Option Plan and 1996 Employee Stock Option
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Plan, 454,563 shares are reserved for issuance upon exercise of other options
and warrants, 685,032 shares are reserved for issuance upon conversion of the
Company's Series A Preferred Stock (which number will increase to 685,800 shares
by reason of the transaction contemplated hereby), 714,286 shares are reserved
for issuance upon conversion of the Company's Series B Preferred Stock,
2,400,000 shares are reserved for issuance upon conversion of the Company's
Series C Preferred Stock, 2,461,539 shares of Common Stock are reserved for
issuance upon conversion of the Company's Series D Convertible Preferred Stock
and 6,007,060 shares of Common Stock are reserved for issuance upon conversion
of the Company's Series E Preferred Stock.
The rights, privileges and preferences of the Preferred Shares will be
as stated in Section 4(G) of the Restated Articles of Incorporation (the
"Restated Articles") of the Company.
(i) RESERVATION OF SHARES. The Company has reserved
shares of Common Stock for issuance upon conversion of the Preferred Shares as
set forth in Section 2(c)(i)(H). There are no options, warrants, conversion
privileges, preemptive rights or other rights presently outstanding to purchase
or receive any of the capital stock of the Company, except as set forth in
Section 2(c)(i) or in the disclosure materials delivered to the Purchasers.
(ii) COMPLIANCE WITH SECURITIES LAWS. All shares
heretofore issued by the Company have been issued in compliance with all
applicable federal and state securities laws.
(d) SUBSIDIARIES. The Company owns 100% of the outstanding
capital stock of TSI Licensing, Inc. and has no other equity ownership interest
in any other entity.
(e) AUTHORIZATION. The Company has the requisite power and authority
to enter into and perform its obligations under this Agreement. All corporate
action on the part of the Company and its officers, directors and shareholders
necessary for the authorization, execution, delivery and performance of all
obligations of the Company under this Agreement, and for the authorization,
issuance and delivery of the Preferred Shares (and the Common Stock issuable
upon conversion of all Preferred Shares) has been taken prior to the Closing.
This Agreement is a valid and legally binding obligation of the Company,
enforceable in accordance with its terms.
(f) VALIDITY - STOCK. The Preferred Shares, when issued, sold and
delivered in accordance with the terms of this Agreement, shall be duly and
validly issued, fully paid
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and nonassessable. The Common Stock issuable upon conversion of the Preferred
Shares has been duly and validly reserved and, upon issuance in accordance with
the conversion provisions of the Preferred Shares shall be duly and validly
issued, fully paid and nonassessable.
(g) FINANCIAL STATEMENTS.
(i) STATEMENTS PROVIDED. The Company's audited
consolidated balance sheet as of December 31, 1995 (the "Year-end Balance
Sheet") and consolidated statements of operations for the fiscal year then ended
(collectively, the "Financial Statements") are attached hereto as Exhibit B. The
Financial Statements were prepared in accordance with generally accepted
accounting principles consistently applied, and fairly present the financial
position of the Company as of the dates and the results of its operations for
the periods, indicated.
(ii) LIABILITIES. Except as fully provided for and
reflected in the Financial Statements, the Company has no liabilities, secured
or unsecured, absolute or contingent, except those arising in the normal course
of business since the date of the Year-end Balance Sheet, none of which are
unusual in type, scope or amount.
(iii) ENCUMBRANCES. The accounts and notes receivable
reflected on the Year-end Balance Sheet are free and clear of any claim,
security interest, pledge or lien or encumbrance of any kind or nature
whatsoever, and have been collected or are fully collectable in substantially
the amounts set forth in the Year-end Balance Sheet, without setoff, third party
collection efforts or suit (but net of reserves for doubtful accounts, if any,
set forth in the Year-end Balance Sheet), and the subsequently created accounts
and notes receivable of the Company from December 31, 1995 to the Closing Date
will be free and clear of any claim, pledge, security interest or lien or
encumbrance of any kind or nature whatsoever, and will be good and fully
collectible in the normal course of business in substantially the amounts
thereof without setoff, third party collection efforts or suit (but net of
reserves for doubtful accounts, if any, set forth in the Year-end Balance
Sheet).
(h) CHANGES. Since the date of the Year-end Balance Sheet,
there have not been any material changes in the Company's business, financial
condition or assets, except for the merger with N2K Inc. as described in the
Company's Proxy Statement dated March 19, 1996, attached hereto as Exhibit C.
(i) TITLE TO PROPERTY AND ASSETS, LIABILITIES. Except (a) as
reflected in its Financial Statements or in the
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notes thereto, (b) for liens for current taxes not yet delinquent, (c) for liens
imposed by law and incurred in the ordinary course of business for obligations
not yet due to carriers, warehousemen, laborers, materialmen and the like, or
(d) for liens in respect of pledges or deposits under workers' compensation laws
or similar legislation, the Company owns its property and other assets free and
clear of all mortgages, liens, loans, claims, charges and encumbrances of any
kind. With respect to the property and other assets it leases, the Company is in
compliance with such leases and holds a valid leasehold interest free of any
liens, claims, charges and encumbrances, subject to clauses (a)-(d) above.
(j) GOVERNMENTAL CONSENTS. All consents, approvals, orders or
authorizations of, or registrations, qualifications, designations, declarations
or filings with, any federal or state governmental authority on the part of the
Company required in connection with the consummation of the transactions
contemplated by this Agreement have been obtained, except any applicable notices
of sale required to be filed after Closing with the Securities and Exchange
Commission pursuant to Regulation D promulgated under the Securities Act of
1933, as amended (the "1933 Act").
(k) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any provisions of its Articles of Incorporation or By-laws as
amended and in effect on and as of the Closing or of any provision of any
mortgage, indenture, agreement, instrument or contract to which it is a party,
or of any provision of any federal or state judgment, writ, decree, order,
statute, rule or governmental regulation applicable to the Company. The
execution, delivery and performance of this Agreement will not result in any
such violation, or be in conflict with or constitute a default under any such
provision, or result in the creation or imposition of any lien pursuant to any
such provision.
(l) GOVERNMENTAL PERMITS. The Company has all federal, state,
municipal and foreign licenses and permits required in the conduct of its
business, and such licenses and permits are in full force and effect.
(m) ENVIRONMENTAL MATTERS. The Company does not discharge or handle,
nor is the Company aware of the storage or other presence on any of the property
currently or previously leased by the Company of, any hazardous substances (as
defined in the Comprehensive Environmental Response, Compensation and Liability
Act of 1980, as amended).
(n) MISLEADING STATEMENTS. No representation or warranty by the
Company in this Agreement or in any Schedule or Exhibit hereto, or in any
written statement or certificate furnished or to be furnished to Purchasers
pursuant to this
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Agreement or in connection with the actions contemplated by this Agreement
contains any untrue statement of a material fact, or omits to state a material
fact necessary to make the statements made not misleading. There is no fact
which the Company has not disclosed to the Purchasers in writing and of which
the Company is aware which materially and adversely affects or could materially
and adversely affect the business prospects, financial condition, operations,
property or affairs of the Company.
(o) LITIGATION. There is no action, proceeding or investigation
pending or, to the Company's knowledge, threatened against the Company or any of
its employees before any court or administrative agency (or any basis therefor
known to the Company) that might result, either individually or in the
aggregate, in any material adverse change in the business, condition, affairs,
operations, properties or assets of the Company, or in any material liability on
the part of the Company. The foregoing includes, without limiting its
generality, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees or
their use in connection with the Company's business of any information or
techniques allegedly proprietary to any of their former employers.
(p) INTELLECTUAL PROPERTY. Attached hereto as Schedule 2(p), and
made part hereof, is a true and correct schedule which describes all of the
patents, patent disclosures docketed, inventions, improvements, trademarks,
trademark applications, trade names, copyright registrations or applications
therefor and proprietary computer software or similar property owned by the
Company, and all licenses, franchises, permits, authorizations, agreements and
arrangements that concern any of the foregoing or that concern like items owned
by others and used by the Company. Except as indicated on such Schedule,
(i) All patents owned by the Company are free and clear
of all mortgages, liens, charges or encumbrances whatsoever. No licenses have
been granted with respect to such patents and the Company has not received
notice of any claims by a third party suggesting that its practice of the
inventions covered by such patents, or any other inventions practiced by the
Company would infringe the patent rights of any third party that might result,
individually or in the aggregate, in any material change in the business,
condition, affairs, operations, properties or assets of the Company.
(ii) All copyright registrations owned by the Company are
free and clear of all mortgages, liens, charges or encumbrances whatsoever.
Except for licenses granted to end users in accordance with the Company's
standard terms, no licenses, have been granted with respect to any of the
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Company's copyrighted material and the Company has not received notice of any
claims by a third party suggesting that any of its activities in the conduct of
its business as presently conducted infringe the copyrights of any third party.
The Company has affixed appropriate copyright notices to all computer programs
developed by it.
(iii) The trademark registrations owned by the Company (or
its Subsidiary) are owned free and clear of all mortgages, liens, charges or
encumbrances whatsoever. No licenses have been granted with respect to any of
the Company's trademarks and the Company has not received notice of any claims
by a third party suggesting that any of its activities in the conduct of its
business as presently conducted infringe the trademarks, trade names or trade
dress of any third party.
(iv) All technical information in possession of the
Company relating to the design or manufacture of products sold, and services
performed, by it, including without limitation methods of manufacture, lab
journals, manufacturing, engineering and other drawings, design and engineering
specifications and similar items recording or evidencing such information is
owned by the Company free and clear of all mortgages, liens, charges or
encumbrances whatsoever. The Company has no obligation to pay any royalty to any
third party with respect to such information. The Company has not granted any
license or other permission with respect to the use of such information and has
not received notice of any claims by a third party suggesting that the Company's
use of such information would infringe the rights of any third party. All
technical information developed by or belonging to the Company which has not
been patented but would be legally protectible if held in confidence has been
kept confidential.
(v) The Company has not granted or assigned to any other
person or entity any license or right to manufacture, have manufactured, process
or have processed or sell the products or services, or proposed products or
services, of the Company, other than duly authorized Company representatives and
distributors. All subcontractors have assigned to the Company, in writing, all
right, title and interest in and to the work that they performed for the
Company.
(q) TAXES. The Company has accurately prepared and properly filed all
United States income tax returns and all state and municipal tax returns that
are required to be filed by it and has timely paid or made provision for the
payment of all taxes, penalties and interest that have become due pursuant to
such returns. To the best knowledge of the Company, all such returns are true,
correct and complete in
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all material respects. The United States income tax returns of the Company have
not been audited by the Internal Revenue Service. No state or municipal tax
return of the Company has been audited by such state or municipal authority. No
deficiency assessment or proposed adjustment of the Company's United States
income tax or state or municipal taxes is pending and the Company has no
knowledge of any proposed liability for any tax to be imposed upon its
properties or assets for which there is not an adequate reserve reflected in the
Financial Statements. The Company is not delinquent in the payment of any
federal, state or municipal taxes, and has not requested an extension of time
within which to file any tax return.
(r) EMPLOYMENT AGREEMENTS AND PLANS. Except as set forth on Schedule
2(r) attached hereto, the Company does not have any employment contracts with
any of its employees not terminable at will. The Company is not delinquent in
payments to any of its employees for wages, salaries, commissions, bonuses or
other direct or indirect compensation. Except as set forth on Schedule 2(r), the
Company is not now, nor has it been, a party to or obligated to contribute to
any employee benefit plan as defined in Section 3(3) of the Employee Retirement
Income Security Act of 1974, as amended ("ERISA") (an "Employee Benefit Plan"),
guaranteed annual income plan, fund or arrangement, or any incentive, bonus,
profit-sharing deferred compensation, stock option or purchase plan or agreement
or arrangement, or any employment or consulting agreement or any other
agreement, plan or arrangement similar to or in the nature of the foregoing.
(s) LABOR MATTERS. The Company is not a party to any collective
bargaining agreement, oral or written. Neither the Company nor any of its
agents, representatives or employees has committed any unfair labor practice as
defined in the National Labor Relations Act of 1947, as amended, or in any
applicable state labor relations act, and there is not now pending or threatened
any charge or complaint against the Company by the National Labor Relations
Board or any state labor relations board or commissioner or any representative
thereof.
(t) INDEPENDENT CONTRACTORS AND CONSULTANTS. The Company does not
have any agreements or arrangements with persons titled as independent
contractors or consultants, as a result of which, by virtue of the control
exercised by the Company, the type of work performed by the persons or any other
circumstances, such persons could reasonably be deemed to be employees of the
Company, except for certain individuals who are covered by an employee leasing
arrangement, and for whom taxes are being properly withheld by the lessor.
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(u) INSURANCE. The Company has fire and casualty insurance policies,
with extended coverage, sufficient in amount (subject to reasonable deductibles)
to allow it to replace any of its properties that might be damaged or destroyed,
and to cover all other risks of loss or liability customarily insured against
and in benefit amounts customarily obtained by companies similarly situated.
(v) REGISTRATION RIGHTS. Except as provided for in this Agreement,
that certain Registration Rights Agreement dated February 13, 1996, and for
registration rights of the outstanding Series A, Series B, Series C, Series D
and Series E Preferred Stock, the Company is not under any obligation to
register under the 1933 Act, any of its presently outstanding securities or any
securities into which such securities may be converted.
(w) PHYSICAL CONDITION OF OPERATING ASSETS. All of the owned and
leased real estate of the Company and the structures erected thereon and all of
the owned and leased tangible personal property of the Company are in good
repair and condition and are suitable and sufficient for the conduct of the
present business of the Company.
(x) PRODUCT AND SERVICE WARRANTIES. The Company is not aware of any
pending or threatened product or service warranty claims or any basis upon which
product or service warranty claims could be based. There are no known design or
other defects which could give rise to future product or service warranty
claims.
(y) CUSTOMERS. The Company has a good and ongoing relationship with
each of its customers, and has no reason to believe that there will be any
adverse change in any such relationship.
(z) RELATED PARTY TRANSACTIONS. No current or proposed director,
officer, stockholder or associate (as such term is defined in Rule 12b-2
promulgated under the Securities Exchange Act of 1934, as amended) of the
Company is currently or has during the three years prior to execution of this
Agreement, directly or indirectly through his or its affiliation with any other
person or entity, been a party to any transaction with the Company for the
providing of services by or to the Company, the rental of real or personal
property from or to the Company or otherwise requiring payments to be made by or
to the Company.
(aa) NONDISCLOSURE, NONCOMPETE AND INVENTION ASSIGNMENTS. The Company
has caused each officer, key employee and consultant of the Company to enter
into an agreement with the Company relating to the assignment of inventions and
nondisclosure of confidential information.
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(bb) NO RESTRICTIONS. The Company in not a party to or bound by any
exclusive sales or purchase agreements or arrangements, nor is it otherwise
restricted, contractually or otherwise, from conducting its operations in any
jurisdiction.
3. REPRESENTATIONS AND WARRANTIES OF PURCHASER. Each of the Purchasers,
severally and not jointly, represents and warrants as follows:
(a) BINDING EFFECT. This Agreement has been duly authorized and
executed and is a valid and legally binding obligation of such Purchaser
enforceable in accordance with its terms.
(b) PARTNERSHIP MATTERS. In the case of each Purchaser which is a
partnership:
(i) The investment contemplated hereby is an authorized
investment under such Purchaser's partnership agreement.
(ii) The individual executing this agreement on behalf of
such Purchaser is a general partner therein, authorized to bind the partnership
by his signature hereto.
4. FEDERAL AND OTHER SECURITIES LAWS. Each of the Purchasers, severally
and not jointly, represents and warrants as follows:
(a) KNOWLEDGE OF UNREGISTERED STATUS. He or it understands that the
Preferred Shares are not, and any shares of Common Stock issued on the
conversion thereof ("Conversion Shares") at the time of issuance may not be,
registered under the 1933 Act in reliance on an exemption from registration
under the 1933 Act pursuant to Section 4(2) thereof for the sale contemplated by
this Agreement and the issuance of securities hereunder, and that the Company's
reliance on such exemption is predicated, in part, on the Purchasers'
representations set forth herein.
(b) INVESTMENT EXPERIENCE; RISK. He or it is able to fend for himself
or itself in the transactions contemplated by this Agreement, has such knowledge
and experience in financial and business matters as to be capable of evaluating
the merits and risks of the investment, and has the ability to bear the economic
risks of the investment indefinitely and could afford a complete loss of such
investment.
(c) LIMITS IMPOSED BY LAW UPON TRANSFER. He or it understands that
the Preferred Shares and Conversion Shares issued on conversion thereof may not
be sold, transferred or otherwise disposed of without registration under the
1933 Act
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or an exemption therefrom, and that in the absence of an effective registration
statement covering the Preferred Shares or Conversion Shares issued on
conversion thereof or an available exemption from registration under the 1933
Act, the Preferred Shares or Conversion Shares issued on conversion thereof must
be held indefinitely.
(d) ACCREDITED INVESTOR. He or it is an Accredited Investor, as
defined in Rule 501 of Regulation D promulgated under the 1933 Act.
(e) ACQUISITION FOR INVESTMENT. He or it is acquiring Preferred
Shares hereunder for investment for his or its own account, and not as a nominee
or agent, and not with a view to the resale or distribution of any part thereof,
and that it has no present intention of selling, granting any participation in,
or otherwise distributing the same.
(f) PROVISION OF INFORMATION. Xxxxx Xxxxx and Xxxxx Xxxxxxx, on
behalf of the Company, have afforded him or it and his or its professional
advisors and his or its Purchaser Representative (if any), full and complete
access to all information with respect to the Company, its management and/or the
Company's proposed operations that he or it and such advisors and/or Purchaser
Representative (if any) have deemed necessary and material for an evaluation of
the merits and risks for him of making an investment in the Preferred Shares. He
or it, such advisors and/or Purchaser Representative (if any), have had adequate
opportunity to ask questions of, and receive answers from, persons acting on
behalf of the Company regarding the terms and conditions of the Offering and to
obtain any additional information which the Company possesses or can acquire
without unreasonable effort or expense that is necessary to verify the accuracy
and completeness of the information provided to him or his advisors. All such
questions have been answered to the full satisfaction of the Purchasers and
their professional advisors and/or Purchaser Representatives (if any).
(g) INDIVIDUAL MATTERS. In the case of those Purchasers who are
individuals, each of the Purchasers, severally and not jointly, represents and
warrants as follows:
(i) The Preferred Shares being acquired by him pursuant
to this Agreement are being acquired by such party for investment purposes only,
for such party's own account and not with a view to the offer, sale or
distribution thereof.
(ii) He has such knowledge and experience in financial and
business matters and, in particular, concerning investments, as is necessary to
enable him, alone or together
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with his advisors and/or Purchaser Representative (as defined in Rule 501 of
Regulation D under the 1933 Act), if any, to evaluate the merits and risks of
making an investment in the Preferred Shares.
(iii) He and/or his Purchaser Representative, if any, has
received, has read and understands this Agreement, and the documents, Financial
Statements and other material relating to the Company provided herewith. He
and/or his Purchaser Representative, if any, is familiar with and understands
the business and operations of the Company.
(iv) In evaluating the merits and risks of making an
investment in the Preferred Shares hereunder, he has relied on the advice of his
own personal legal, financial, tax and accounting advisors and/or Purchaser
Representative (if any).
(v) The address set forth below in the Schedule of
Purchasers, is his true residence, and he has no present intention of becoming a
resident of any other state or jurisdiction.
(vi) He understands that there are substantial risks
pertaining to the making of an investment in the Preferred Shares hereunder,
including but not limited to risks resulting from the fact that the Company: is
a small company in an emerging technology market; does business in foreign
markets; and is thinly capitalized and has a history of operating losses. The
likelihood of the Company's success must be considered in light of the problems,
expenses, difficulties and delays frequently encountered in connection with the
development of new technology, marketing that technology and the above-mentioned
risk factors and the competitive environment in which the Company operates. It
is likely that the proceeds of the sale of Preferred Shares to the Purchasers
will not be sufficient for the Company's purposes. Furthermore, there can be no
assurance that the Company will become profitable. He is fully able to bear the
economic risk of an investment in the Preferred Shares for an indefinite period
of time and could afford a complete loss of such investment.
(vii) He is advised that there will be no public market for
the Preferred Shares or Common Stock. He has no need for liquidity in the
Preferred Shares and is able to bear the risk of making an investment in the
Preferred Shares for an indefinite period. His present financial condition is
such that he is under no present or contemplated future need to dispose of any
portion of the Preferred Shares to satisfy any existing or contemplated
undertaking, need or indebtedness. His overall commitment to investments which
are not readily marketable is not disproportionate to his net
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worth and the making of an investment in the Preferred Shares will not cause
such overall commitment to become excessive.
5. CONDITIONS TO PURCHASERS' OBLIGATIONS AT CLOSING. The several
obligations of the Purchasers under Section 1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the conditions contained in
this Section 5, any of which may be waived by the subscribers for at least
eighty percent (80%) of the Preferred Shares to be issued hereunder:
(a) REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. The
representations and warranties of the Company contained in Section 2 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing (except to the extent that they expressly relate to an
earlier date).
(b) PERFORMANCE. The Company shall have performed and complied with
all agreements, conditions and covenants contained in this Agreement required to
be performed or complied with by it on or before the Closing.
(c) QUALIFICATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Preferred Shares pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of the Closing.
(d) PROCEEDINGS AND DOCUMENTS. All corporate and other proceedings in
connection with the transactions contemplated hereby and all documents and
instruments incident to such transactions shall be in form and substance
satisfactory to Purchasers and their counsel and Purchasers shall have received
all such counterpart originals or certified or other copies of such documents as
they may reasonably request.
(e) FILING OF STATEMENT. The Statement shall have been filed with the
Secretary of State of the Commonwealth of Pennsylvania, and Purchasers shall
have received satisfactory evidence thereof.
(f) OPINION OF COUNSEL. Purchaser shall have received from counsel
to the Company an opinion dated as of the Closing, in the form attached as
Exhibit D.
6. CONDITIONS TO THE COMPANY'S OBLIGATIONS AT CLOSING. The obligations of
the Company to each Purchaser under Section 1 of this Agreement are subject to
the fulfillment on or before the Closing of each of the following conditions,
any of which may be waived by the Company:
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(a) REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. The
representations and warranties of such Purchasers contained in Sections 3 and 4
shall be true on and as of the Closing with the same force and effect as if they
had been made at the Closing.
(b) QUALIFICATIONS. All authorizations, approvals or permits, if any,
of any governmental authority or regulatory body of the United States or of any
state that are required in connection with the lawful issuance and sale of the
Preferred Shares pursuant to this Agreement shall have been duly obtained and
shall be effective on and as of the Closing.
(c) PAYMENT FOR PREFERRED SHARES. The Company shall have received
payment for the Preferred Shares to be purchased hereunder.
7. COVENANTS OF THE COMPANY.
(a) DESIGNATION OF PREFERRED SHARES. The Company has adopted, filed
and shall keep in force with the Secretary of State of the Commonwealth of
Pennsylvania, Section 4(G) of the Restated Articles relating to the Preferred
Shares.
(b) ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. The Company shall
maintain a standard system of accounting in accordance with generally accepted
accounting principles applied on a consistent basis and shall make and keep
books, records and accounts which, in reasonable detail, accurately and fairly
reflect its transactions. Until such time as the Company is required to file
reports under Sections 13 and 14 of the Securities Exchange Act of 1934, as
amended (the "1934 Act"), the Company shall deliver to Purchasers:
(i) ANNUAL AUDITED FINANCIAL STATEMENTS. As soon as
available, and in any event within ninety (90) days after the end of each fiscal
year of the Company, a profit or loss statement for such fiscal year, a balance
sheet of the Company as of the end of such year, and a statement of cash flows
for such year, certified, without qualification as to scope of the examination,
by independent public accountants of recognized national standing selected by
the Company; and
(ii) QUARTERLY FINANCIAL STATEMENTS. Within forty-five
(45) days after the end of each of the first three (3) quarters of the fiscal
year an unaudited statement of income for such fiscal quarter and an unaudited
balance sheet as of the end of such fiscal quarter, setting forth in comparative
form the figures for the corresponding periods of the previous fiscal year.
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(c) BUSINESS PLAN AND PROJECTIONS. As soon as available, but in any
event within forty-five (45) days after commencement of each new fiscal year, a
business plan and projected financial statements for such fiscal year.
(d) ADDITIONAL INFORMATION.
(i) Upon the written request of any Purchaser, the
Company shall also furnish to a representative designated by a majority of the
Purchasers, with reasonable promptness, such other information relating to the
financial affairs of the Company as is furnished or made available (or not so
furnished or made available but required by law to be furnished or made
available) to directors of the Company.
(ii) The representative so designated shall have the same
obligations with respect to protection and nondisclosure (other than to the
Purchaser) of any information so furnished as a director of the Company would
have with respect to such information.
(e) NONDISCLOSURE AND INVENTION ASSIGNMENTS. The Company will
continue to cause each officer, key employee and consultant of the Company to
enter into an agreement with the Company relating to the assignment of
inventions and nondisclosure of confidential information, in substantially the
form previously utilized by the Company.
(f) USE OF PROCEEDS. The proceeds from the sale of Preferred Shares
shall be used for working capital and capital expenditures.
(g) TAXES. The Company will promptly pay and discharge or cause to be
paid and discharged, when due and payable, all lawful taxes, assessments, and
governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto; and provided
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor. The Company will promptly pay or cause
to be paid when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of the Company.
(h) MAINTENANCE OF PROPERTIES. The Company will keep its properties
in good repair, working order and condition, reasonable wear and tear excepted,
and from time to time make all needful and proper repairs, renewals,
replacements,
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additions and improvements thereto; the Company will at all times comply with
the provisions of all material leases to which it is a party or under which it
occupies property so as to prevent any loss or forfeiture thereof or thereunder.
(i) INSURANCE. The Company will keep its assets that are of an
insurable character insured by financially sound and reputable insurers against
loss or damage by fire, extended coverage and explosion insurance in amounts
customary for companies in similar businesses similarly situated; and the
Company will maintain, with financially sound and reputable insurers, insurance
against other hazards, risks and liabilities to persons and property to the
extent and in the manner customary for companies in similar businesses similarly
situated.
(j) GOVERNMENTAL REQUIREMENTS. The Company will duly observe and
conform to all valid requirements of governmental authorities relating to the
conduct of its businesses or to its property or assets.
(k) CORPORATE EXISTENCE, LICENSES, ETC. The Company shall maintain in
full force and effect its corporate existence, rights and franchises and all
licenses and other rights to use patents, processes, licenses, trademarks, trade
names or copyrights owned by it and deemed by the Company to be significant to
the conduct of its business.
(l) REQUIRED FILINGS. The Company will cooperate in filing any
notices of sale required to be filed with the Securities and Exchange Commission
pursuant to Regulation D promulgated under the 1933 Act or any state securities
law authority pursuant to applicable blue sky laws.
(m) TERMINATION OF COVENANTS. The covenants set forth in this Section
7 shall terminate and be of no further force or effect after the date of the
closing of the Company's first public offering of its securities amounting to
not less than $5,000,000 at a price per share to the public equal to at least
two times the conversion price of the Preferred Shares then in effect.
8. REGISTRATION RIGHTS.
(a) DEFINITIONS. As used in this Section 8, the following terms
shall have the following respective meanings:
(i) "Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the Securities
Act.
(ii) "Person" shall mean and include an individual, a
corporation, a partnership, a trust, an
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unincorporated organization and a government or any department, agency or
political subdivision thereof.
(iii) "Restricted Securities" shall mean the Preferred
Shares, the Common Stock issuable upon conversion thereof and any shares of
capital stock received in respect of any thereof, evidenced by certificates
bearing the restrictive legend set forth in Section 8(b).
(iv) "Restricted Shares" shall mean the Common Stock
constituting Restricted Securities.
(v) "Securities Act" shall mean the Securities Act of
1933, as amended, or any similar Federal statute, and the rules and regulations
of the Commission thereunder, all as the same shall be in effect at the time.
(vi) "Transfer" shall include any disposition of any
shares of Restricted Securities or of any interest therein which would
constitute a sale thereof within the meaning of the Securities Act.
(b) RESTRICTIVE LEGENDS. Each certificate for the Restricted
Securities and any shares of capital stock received in respect thereof, whether
by reason of a stock split or share reclassification thereof, a stock dividend
thereon or otherwise, and each certificate for any such securities issued to
subsequent transferees of any such certificate shall (unless otherwise permitted
by the provisions of this Agreement) be stamped or otherwise imprinted with
legends in substantially the following form:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE BEEN ACQUIRED FOR
INVESTMENT AND HAVE NOT BEEN REGISTERED UNDER THE UNITED STATES
SECURITIES ACT OF 1933, AS AMENDED OR THE SECURITIES ACTS OF ANY STATE
HEREOF. THESE SECURITIES MAY NOT BE SOLD OR TRANSFERRED IN THE UNITED
STATES OR TO A UNITED STATES CITIZEN IN THE ABSENCE OF SUCH
REGISTRATION OR AN OPINION OF COUNSEL ACCEPTABLE TO N2K INC. AND IN
ACCEPTABLE FORM AND SUBSTANCE THAT AN EXEMPTION THEREFROM IS AVAILABLE
UNDER SAID ACTS.
(c) NOTICE OF TRANSFER. The holder of any Restricted Securities, by
acceptance thereof, agrees, prior to any transfer of any Restricted Securities,
to give written notice to the Company of such holder's intention to effect such
transfer and to comply in all other respects with the provisions of this Section
8(c). Each such notice shall describe the manner and circumstances of the
proposed transfer and shall be accompanied by (a) the written opinion, addressed
to the Company, of counsel reasonably acceptable to the Company for the holder
of Restricted Securities, as to
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whether in the opinion of such counsel such proposed transfer involves a
transaction requiring registration of such Restricted Securities under the
Securities Act and state securities acts and, if not, a description of the
exemptions available, and (b) in the case of Restricted Shares, if in the
opinion of such counsel such registration is required, a written request
addressed to the Company by the holder of Restricted Securities, describing in
detail the proposed method of disposition and requesting the Company to effect
the registration of such Restricted Shares pursuant to the terms and provisions
of Section 8(d), 8(e) or 8(f) hereof, as the case may be. If in the opinion of
such counsel the proposed transfer of Restricted Securities may be effected
without registration under the Securities Act and state securities acts, the
holder of Restricted Securities shall thereupon be entitled to transfer
Restricted Securities in accordance with the terms of the notice delivered by it
to the Company. Each certificate or other instrument evidencing the securities
issued upon the transfer of any Restricted Securities (and each certificate or
other instrument evidencing any untransferred balance of such securities) shall
bear the legends set forth in Section 8(b) unless (a) in the opinion of such
counsel registration of future transfer is not required by the applicable
provisions of the Securities Act and state securities acts or (b) the Company
shall have waived the requirement of such legends. Except as provided above, the
holder of Restricted Securities shall not transfer such Restricted Securities
until such opinion of counsel has been given to the Company (unless waived by
the Company) or until registration of the Restricted Shares involved in the
above-mentioned request has become effective under the Securities Act.
(d) INCIDENTAL REGISTRATION. If the Company proposes for any reason
to register any of its securities under the Securities Act (other than pursuant
to a registration statement on Forms S-8 or S-4 or similar or successor forms),
it shall each such time promptly give written notice to all holders of
outstanding Restricted Securities of its intention to do so, and, upon the
written request, given within 30 days after receipt of any such notice of the
holder of any such Restricted Securities to register any Restricted Shares
(which request shall specify the Restricted Shares intended to be sold or
disposed of by such holders), the Company shall use its best efforts to cause
all such Restricted Shares to be included in such registration under the
Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the Company's intended methods thereof, as
aforesaid) by the prospective seller or sellers of the Restricted Shares so
registered. In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
if the managing underwriter determines and advises
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in writing that the inclusion of all Restricted Shares proposed to be included
in the underwritten public offering and other issued and outstanding shares of
Common Stock proposed to be included therein by persons other than the holders
of Restricted Securities (the "Other Shares") would interfere with the
successful marketing of such securities, then (i) the number of Restricted
Shares and Other Shares shall be reduced, pro rata among the holders of Other
Shares and the holders of Restricted Shares (based upon the number of shares of
Common Stock requested by the holders thereof to be registered in such
underwritten public offering), and (ii) in each case those shares of Common
Stock which are excluded from the underwritten public offering shall be withheld
from the market by the holders thereof for a period, not to exceed 90 days,
which the managing underwriter reasonably determines as necessary in order to
effect the underwritten public offering.
(e) REGISTRATIONS ON FORM S-2 OR S-3. At such time as the Company
shall have qualified for the use of Form S-2 or S-3 (or any similar form or
forms promulgated by the Commission), the holders of Restricted Securities shall
have the right to request an unlimited number of registrations on Form S-2 or
S-3 (which request or requests shall be in writing, shall specify the Restricted
Shares intended to be sold or disposed of by the holders thereof, shall state
the intended method of disposition of such Restricted Shares by the holder(s)
requesting such registration and shall relate to Restricted Shares having a
proposed aggregate gross offering price (before deduction of underwriting
discounts and expenses of sale) of at least $500,000), and the Company shall be
obligated to effect such registration or registrations on Form S-2 or S-3 (as
the case may be); provided, however, that the Company shall in no event be
obligated to cause the effectiveness of more than one such registration
statement in any calendar year. The Company shall not register securities for
sale for its own account in any registration requested pursuant to this Section
8(e) unless requested to do so by the holders of Restricted Securities who hold
at least 51% of the stock as to which registration has been requested. The
Company may not cause any other registration of securities for sale for its own
account (other than a registration effected solely to implement an employee
benefit plan or to acquire another company) to become effective less than 90
days after the effective date of any registration requested pursuant to this
Section 8(e).
(f) DEMAND REGISTRATION. At any time after 180 days from the
effective date of the Company's registration statement covering its initial
public offering, but prior to the time that the Company shall have qualified for
the use of Form S-2 or S-3 (or any similar form or forms promulgated by
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the Commission) the holders of shares of Common Stock into which Preferred
Shares shall have been converted shall have the right to request the Company to
file one registration statement on any form which the Company is then entitled
to use. Such request shall be in writing, shall specify the shares of Common
Stock (into which the Preferred Stock shall have been converted) intended to be
sold or disposed of by the holders thereof, shall state the intended method of
disposition by the holder(s) requesting such registration and shall relate to
Common Stock having a proposed aggregate gross offering price (before deduction
of underwriting discounts and expenses of sale) of at least $500,000, and the
Company shall be obligated to effect such registration, subject in any event to
all applicable securities laws and all requirements of the Company's investment
banker.
(g) DESIGNATION OF UNDERWRITER.
(i) In the case of any registration effected pursuant to
Section 8(e) or 8(f), a majority in interest of the requesting holders of
Restricted Securities or Restricted Shares (in the case of a registration
effected pursuant to Section 8(f)) shall have the right to designate the
managing underwriter (if any) in any such underwritten offering, subject in any
event to the proviso set forth in Section 8(j) hereof.
(ii) In the case of any registration initiated by the
Company, the Company shall have the right to designate the managing underwriter
in any underwritten offering.
(h) GRANTING OF REGISTRATION RIGHTS. The Company shall not grant any
rights to any persons to register any shares of capital stock or other
securities of the Company if such rights would be superior to the rights of the
holders of Restricted Securities or Restricted Shares granted pursuant to this
Agreement, unless the Purchaser is given the same or comparable rights.
(i) PREPARATION AND FILING. If and whenever the Company is under an
obligation pursuant to the provisions of this Section 8 to effect the
registration of any Restricted Shares, the Company shall, as expeditiously as
practicable:
(i) prepare and file with the Commission a registration
statement with respect to such securities and use its best efforts to cause such
registration statement to become and remain effective;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statements and the prospectus used in
connection therewith as may be necessary to keep such registration statement
effective and
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current for at least nine months and to comply with the provisions of the
Securities Act with respect to the sale or other disposition of all Restricted
Shares covered by such registration statement;
(iii) furnish to each selling shareholder such number of
copies of a summary prospectus or other prospectus, including a preliminary
prospectus, in conformity with the requirements of the Securities Act, and such
other documents as such seller may reasonably request in order to facilitate the
public sale or other disposition of such Restricted Shares;
(iv) use its best efforts to register or qualify the
Restricted Shares covered by such registration statement under the securities or
blue sky laws of such jurisdictions as each such seller shall reasonably request
(provided, however, the Company shall not be required to consent to general
service of process for all purposes in any jurisdiction where it is not then
qualified) and do any and all other acts or things which may be necessary or
advisable to enable such seller to consummate the public sale or other
disposition in such jurisdictions of such securities;
(v) notify each seller of Restricted Shares covered by
such registration statement, at any time when a prospectus relating thereto
covered by such registration statement is required to be delivered under the
Securities Act within the appropriate period mentioned in clause (ii) of this
Section 8(i), 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 necessary to make the statements therein not misleading in
light of the circumstances then existing and at the request of such seller,
prepare and furnish to such seller 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; and
(vi) furnish, upon request, to each requesting seller a
signed counterpart, addressed to the requesting seller or sellers, of (i) an
opinion of counsel for the Company, dated the effective date of the registration
statement, and (ii) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included in
the registration statement, covering substantially the same matters with
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respect to the registration statement (and the prospectus included therein) and
(in the case of the "comfort" letter) with respect to events subsequent to the
date of the financial statements, as are customarily covered (at the time of
such registration) in opinions of issuer's counsel and in "comfort" letters
delivered to the underwriters in underwritten public offerings of securities.
(j) EXPENSES. All expenses incurred by the Company in complying with
Section 8(i) shall be paid by the Company, including, without limitation, all
registration and filing fees, printing expenses, blue sky filing fees, fees and
disbursements of counsel for the Company and expenses of any required audits;
provided, however, that (a) the Company shall not be obligated for payment of
the fees and disbursements of counsel for the holders of Restricted Securities
in connection with registration under Section 8(d), 8(e) or 8(f) hereof and (b)
all underwriting discounts and selling commissions and other similar fees and
costs applicable to the Restricted Shares covered by registrations effected
pursuant to Section 8(d), 8(e) or 8(f) hereof shall be borne by the seller or
sellers thereof, in proportion to the number of Restricted Shares sold by such
seller or sellers.
(k) INDEMNIFICATION.
(i) In the event of any registration of any Restricted
Shares under the Securities Act pursuant to this Section 8 or registration or
qualification of any Restricted Shares pursuant to Section 8(i)(iv), the Company
shall indemnify and hold harmless the seller of such shares, or any other person
acting on behalf of such seller and each other person, if any, who controls any
of the foregoing persons, within the meaning of the Securities Act, against any
losses, claims, damages or liabilities, joint or several, to which any of the
foregoing persons may become subject under the Securities Act or otherwise,
insofar as such losses, claims, damages or liabilities (or actions in respect
thereof) arise out of or are based upon an untrue statement or alleged untrue
statement of a material fact contained in any registration statement under which
such Restricted Shares were registered under the Securities Act, any preliminary
prospectus or final prospectus contained therein, or any amendment or supplement
thereto, or any document prepared and/or furnished by the Company incident to
the registration or qualification of any Restricted Shares pursuant to Section
8(i)(iv), or arise out of or are based upon the omission or alleged omission to
state therein a material fact required to be stated therein or necessary to make
the statements therein not misleading or, with respect to any prospectus,
necessary to make the statements therein in light of the circumstances under
which they were made, not misleading, or any violation
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by the Company of the Securities Act or state securities or blue sky laws
applicable to the Company and relating to action or inaction required of the
Company in connection with such registration or qualification under such state
securities or blue sky laws, and shall reimburse such seller, underwriter or
other person acting on behalf of such seller and each such controlling person
for any legal or any other expenses reasonably incurred by any of them in
connection with investigating or defending any such loss, claim, damage,
liability or action; provided, however, that the Company shall not be liable in
any such case to the extent that any such loss, claim, damage or liability
arises out of or is based upon an untrue statement or alleged untrue statement
or omission or alleged omission made in said registration statement, said
preliminary prospectus or said prospectus or said amendment or supplement or any
document incident to the registration or qualification of any Restricted Shares
pursuant to Section 8(i)(iv), in reliance upon and in conformity with written
information furnished to the Company by such seller or such seller's agent or
representative specifically for use in the preparation thereof.
(ii) Before Restricted Shares held by any prospective
seller shall be included in any registration pursuant to Section 8, such
prospective seller and any underwriter acting on its behalf shall have agreed to
indemnify and hold harmless (in the same manner and to the same extent as set
forth in the preceding paragraph of this Section 8(k) or, if different, in the
manner and to the extent as is in accordance with standard industry practice at
the time of the proposed sale) the Company, each director of the Company, each
officer of the Company who shall sign such registration statement, and any
person who controls the Company within the meaning of the Securities Act, with
respect to any untrue statement or omission from such registration statement,
any preliminary prospectus or final prospectus contained therein, or any
amendment or supplement thereto, if such untrue statement or omission was made
in reliance upon and in conformity with written information furnished to the
Company by such seller or such seller's agent or representative specifically for
use in the preparation of such registration statement, preliminary prospectus,
final prospectus or amendment or supplement.
(iii) Promptly after receipt by an indemnified party of
notice of the commencement of any action involving a claim referred to in the
preceding paragraphs of this Section 8(k), such indemnified party will, if a
claim in respect thereof is made against an indemnifying party, give written
notice to the latter of the commencement of such action. In case any such action
is brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly
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with any other indemnifying party similarly notified to the extent that it may
wish, with counsel reasonably satisfactory to such indemnified party, and after
notice from the indemnifying party to such indemnified party of its election so
to assume the defense thereof, the indemnifying party shall not be responsible
for any legal or other expenses subsequently incurred by the indemnified party
in connection with the defense thereof; provided, however, that if any
indemnified party shall have reasonably concluded that there may be one or more
legal defenses available to such indemnified party which are different from or
additional to those available to the indemnifying party, or that such claim or
litigation involves or could have an effect upon matters beyond the scope of the
indemnity agreement provided in this Section 8(k), the indemnifying party shall
not have the right to assume the defense of such action on behalf of such
indemnified party and such indemnifying party shall reimburse such indemnified
party and any person controlling such indemnified party for that portion of the
fees and expenses of any counsel retained by the indemnified party which are
reasonably related to the matters covered by the indemnity agreement provided in
this Section 8(k).
(iv) The failure to notify an indemnifying party promptly
of the commencement of any such action, if materially prejudicial to the ability
of the indemnifying party to defend such action, shall relieve such indemnifying
party of any liability to the indemnified party under this paragraph, but the
omission so to notify the indemnifying party will not relieve the indemnifying
party of any liability that it may have to any indemnified party otherwise than
under this Section 8.
(v) The indemnifying party shall not make any settlement
of any claims indemnified against hereunder without the written consent of the
indemnified party or parties, which consent shall not be unreasonably withheld.
(l) CONTRIBUTION. In order to provide for just and equitable
contribution in circumstances in which the indemnification provided for in this
Section 8 is due in accordance with its terms but is for any reason held by a
court to be unavailable from the Company or a seller on grounds of public policy
or otherwise, the Company and each seller shall contribute to the aggregate
losses, claims, damages and liabilities (including legal or other expenses
reasonably incurred in connection with investigating or defending the same) to
which the Company and each seller or underwriter (and any person who controls
any of the foregoing persons, and any person acting on behalf of any of the
foregoing persons in connection with such registration), including, without
limitation, any officer, director, broker, employee, agent, attorney and
accountant, and in the case of
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a partnership, each of its partners), as the case may be, in such proportion as
is appropriate to reflect the relative fault of the Company and such seller or
underwriter (and any person who controls any of the foregoing persons, and any
person acting on behalf of any of the foregoing in connection with such
registration, including, without limitation, any officer, director, broker,
employee, agent, attorney or accountant, and in the case of a partnership, each
of its partners), as the case may be, in connection with the statements or
omissions which resulted in such losses, claims, damages or liabilities, as well
as all other relevant equitable considerations; provided, however, that 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; and provided further,
that in the case of each seller, the maximum amount of such contribution shall
be limited to an amount equal to the net proceeds actually received by such
seller from the sale of Restricted Shares effected pursuant to such
registration. Any party entitled to contribution under this paragraph shall,
promptly after receipt of notice of commencement of any action, suit or
proceeding against such party in respect of which a claim for contribution may
be made against another party or parties under this paragraph, notify such party
or parties from whom contribution may be sought, but the omission to so notify
such party or parties shall not relieve the party or parties from whom
contribution may be sought from any other obligation it or they may have
hereunder or otherwise than under this paragraph.
(m) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a view to
making available to the holders of the Restricted Securities the benefits of
Rule 144 promulgated under the 1933 Act and any other rule or regulation of the
Commission that may at any time permit a holder to sell securities of the
Company to the public without registration, the Company agrees to use its best
efforts to:
(i) make and keep public information available, as those
terms are understood and defined in Rule 144, at all times subsequent to ninety
(90) days after the effective date of the first registration statement covering
an underwritten public offering filed by the Company;
(ii) file with the Commission in a timely manner all
reports and other documents required of the Company under the 1934 Act; and
(iii) furnish to any holder of Restricted Securities so
long as such holder owns any of the Restricted Securities forthwith upon request
a written statement by the Company that it has complied with the reporting
requirements
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of Rule 144 (at any time after ninety (90) days after the effective date of said
first registration statement filed by the Company), and of the 1933 Act and the
1934 Act (at any time after it has become subject to such reporting
requirements), a copy of the most recent annual or quarterly report of the
Company, and such other reports and documents so filed by the Company as may be
reasonably requested in availing such holder of any rule or regulation of the
Commission permitting the selling of any such securities without registration.
(n) TRANSFER OF REGISTRATION RIGHTS. The registration rights of
Purchasers under Sections 8(d), 8(e) and 8(f) may be transferred to a transferee
who acquires at least 20% of the Registrable Securities originally issued to
Purchasers, or to a partner or affiliated partnership of a Purchaser without
restriction as to minimum transfer amount. The Company shall be given written
notice by the holder at the time of such transfer stating the name and address
of the transferee and identifying the securities with respect to which the
rights under this Section 8 are being assigned. Such registration right shall
not be otherwise transferable without the consent of the Company.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the documents referred to
herein constitute the entire agreement among the parties and no party shall be
liable or bound to any other party in any manner by any warranties,
representations or covenants except as specifically set forth herein or therein.
The terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective heirs, personal representatives, successors and
assigns of the parties, except to the extent assignability is limited herein.
(b) GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York.
(c) COUNTERPARTS. 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.
(d) TITLES AND SUBTITLES. The titles and subtitles used in this
Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
(e) NOTICES. Any notice required or permitted under this Agreement
shall be given in writing and shall be deemed effectively given upon personal
delivery or upon deposit with the United States Postal Service, by registered or
certified
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mail, postage prepaid, addressed to the party as shown in the caption to this
Agreement or on the appropriate Schedule attached hereto or at such other
address as any party may designate by ten days' advance written notice to the
other party.
(f) FINDERS' FEES. Each Purchaser represents that it neither is, nor
will be, obligated for any finders' fee or commission in connection with this
transaction. Each Purchaser agrees to indemnify and to hold harmless the Company
from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Purchasers or any of its partners, employees
or representatives is responsible. The Company agrees to indemnify and hold
harmless Purchasers from any liability for any commission or compensation in the
nature of a finder's fee (and the costs and expenses of defending against such
liability or asserted liability) for which the Company or any of its officers,
employees or representatives is responsible.
(g) RIGHTS OF PURCHASERS. Except as provided in another written
document executed by such holder, each holder of Preferred Shares (or Common
Stock issued upon conversion thereof) shall have the absolute right to exercise
or refrain from exercising any right or rights that such holder may have by
reason of this Agreement or ownership of any Preferred Shares, including without
limitation the right to consent to the waiver of any obligation of the Company
under this Agreement and to enter into an agreement with the Company for the
purpose of modifying this Agreement or any agreement effecting any such
modification, and such holder shall not incur any liability to any other holder
or holders of Preferred Shares with respect to exercising or refraining from
exercising any such right or rights.
27
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IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
N2K INC.
By:
---------------------------------
Xxxxx Xxxxxxx, Secretary and
Vice President
PURCHASER:
------------------------------------
Name:
Address:
28
