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EXHIBIT 4.16
SENIOR NOTE
$__________ _____________, 1997
FOR VALUE RECEIVED, N2K Inc. ("Maker"), a Pennsylvania
corporation, hereby promises to pay to the order of
_______________________________________________ (together with his successors
and assigns, the "Holder"), the principal sum of ________________ Dollars
($______________), in legal and lawful money of the United States of America,
together with accrued interest thereon as set forth in Section 1 hereof, which
interest shall accrue on the outstanding unpaid principal from and including the
date hereof, but excluding the date on which the principal and all accrued
interest are paid in full or the Note is converted pursuant to Section 3 hereof.
The principal of this Note, together with all accrued interest thereon, shall be
due and payable (unless the Note has been converted pursuant to Section hereof)
on the date (the "Maturity Date") on which the first of the following events
occurs: (i) Change in Control (as hereinafter defined), or (ii) March 31, 1998.
For purposes hereof "Change in Control" means (a) a merger or consolidation of
Maker in which holders of the common stock of Maker receive cash, securities or
other property from one or more third parties or (b) a sale by Maker of all or
substantially all of the assets of Maker. This Note is issued to fund critical
working capital needs of N2K Inc.
Section 1. Interest. This Note shall accrue interest on the
unpaid principal amount hereof at the rate of 14% per annum, compounded
quarterly. Interest shall be computed on the basis of a 360-day year of 12
thirty-day months and shall be payable on the Maturity Date.
Section 2. Prepayments. Maker may, at its option, prepay the
principal amount of this Note, and all accrued interest thereon, at any time and
from time to time, in whole or in part and without penalty.
Section 3. Automatic Conversion of Note. Upon consummation of
an initial public offering of shares of common stock of the Maker registered
pursuant to the Securities Act of 1933, as amended ("IPO"), the principal amount
of this Note plus all accrued but unpaid interest thereon (the "Conversion
Amount") shall, without any action on the part of the Holder, be deemed
automatically converted into such whole number of fully paid and non-assessable
shares of Common Stock as are obtained by dividing the Conversion Amount by the
per share initial offering price of the Maker's Common Stock in the IPO. Any
fractional shares that result from such calculation will be paid in cash rather
than fractional shares.
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Section 4. Events of Default and Remedies. Any of the
following events shall be an "Event of Default":
(a) Maker shall fail to pay the amount due under this Note on
or preceding the Maturity Date;
(b) Maker shall fail to perform, observe and comply with any
covenant, agreement, or condition (other than the covenant to pay amounts of
principal or interest thereon due under this Note) contained in this Note and
such failure continues for a period of ten (10) days following written notice to
Maker from Holder of the continuation of such failure; or
(c) Maker (i) shall generally not, or be unable to, or shall
admit in writing its inability to, pay its debts as such debts become due; (ii)
shall make an assignment for the benefit of creditors, petition or apply to any
tribunal for the appointment of a custodian, receiver or trustee for itself or a
substantial part of its assets; (iii) shall commence any proceeding under any
bankruptcy, reorganization, arrangement or readjustment of debt law or statute
of any jurisdiction, whether now or hereafter in effect; (iv) shall have had any
such petition or application filed or any such proceeding shall have been
commenced, against it, in which an adjudication or appointment is made or order
for relief is entered, or which petition, application or proceeding remains
undismissed or unstayed for a period of thirty (30) days or more; (v) or shall
be the subject of any proceeding under which its assets may be subject to
seizure, forfeiture or divestiture; (vi) by any act or omission shall indicate
its consent to, approval of or acquiescence in any such petition, application or
proceeding or order for relief or the appointment of a custodian, receiver or
trustee for all or any substantial part of its property; or (vii) shall suffer
any such custodianship, receivership or trusteeship to continue undischarged for
a period of thirty (30) days or more.
(d) Any warranty, representation or other statement by or on
behalf of Maker contained in any instrument furnished in compliance with or in
reference thereto shall have been false or misleading in any material respect
when made.
(e) Maker shall have defaulted with respect to any payment
obligation in respect of any indebtedness of Maker (other than trade payables)
or under any agreement securing or relating to such indebtedness, or any event
shall occur and be continuing or any condition shall exist in respect of any
indebtedness (other than trade payables), or under any agreement securing or
relating to such indebtedness, that causes such indebtedness, or a portion
thereof, to become due prior to its stated maturity or prior to its regularly
scheduled date or dates of payment (and the holder of such indebtedness has
caused such to become due).
Upon the occurrence of an Event of Default described in
paragraph (c) of Section 4 hereof, the outstanding principal amount of this Note
shall automatically become immediately due and payable. Upon the existence of an
Event of Default (other than pursuant to paragraph (c) of Section 4 hereof),
Holder may declare the outstanding principal amount of the Note, to be forthwith
due and payable. Upon the outstanding principal amount of this Note becoming due
and payable under this Section 4, whether automatically or by declaration, the
outstanding
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principal amount of the Note, all interest thereon, and all other amounts due
under this Note shall become and be forthwith due and payable, without
presentment, demand, protest, or further notice of any kind, all of which are
hereby expressly waived by Maker; and in addition thereto, Holder may exercise
any rights and remedies provided by law.
Section 5. Covenants of Maker. At all times prior to the
Maturity Date and so long as any amount remains outstanding under this Note:
(a) Financial Reporting: Business Information. Maker shall
deliver to Holder:
(i) Monthly Financial Statements -- prior to the date (the
"IPO Date") Maker first offers for sale its common stock pursuant to an
effective registration statement filed under the Securities Act of
1933, as amended, as soon as practicable after the end of each monthly
fiscal period in each fiscal year of Maker, and in any event within 30
days thereafter:
(A) a consolidated balance sheet as at the
end of such month;
(B) a consolidated income statement for such
month and for the portion of such fiscal year ending with such month;
and
(C) consolidated statements of changes in
stockholders' equity and cash flows for such months and for the portion
of such fiscal year ending with such month;
for Maker, setting forth in each case in comparative form the figures
for the corresponding month in the previous fiscal year of Maker, all
in reasonable detail, and certified by a senior financial officer of
Maker as fairly presenting, in all material respects, the financial
position of Maker and its results of operations and cash flows (subject
to changes resulting from year-end adjustments);
(ii) Post Initial Public Offering Information --
from and after the IPO Date, promptly upon their becoming available, a
copy of each financial statement, report, notice or proxy statement
sent by Maker to stockholders generally, and of each regular or
periodic report (including, without limitation, each Form 10-Q and Form
10-K) and any registration statement, prospectus or written
communication (other than transmittal letters), and each amendment
thereto, in respect thereof filed by Maker with, or received by Maker
in connection therewith from, the National Association of Securities
Dealers, any securities exchange or the Securities and Exchange
Commission or any successor agency; and
(iii) Annual Financial Statements -- in the event that the IPO
Date does not occur before March 31, 1998, as soon as practicable after
the end of each fiscal year of the Maker, and in any event within one
hundred twenty (120) days thereafter,
(i) consolidated balance sheets as at the
end of such year, and
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(ii) consolidated statements of
income, changes in shareholders' equity and cash flows for
such year, for the Maker and its consolidated subsidiaries,
setting forth in comparative form the financial statements for
the previous fiscal year, all in reasonable detail and
accompanied by an audit report thereon of independent
certified public accountants of recognized national standing,
which report shall state without qualification (including,
without limitation, qualifications related to the scope of the
audit, the compliance of the audit with generally accepted
auditing standards, or the ability of the Maker or a material
subsidiary thereof to continue as a going concern), that such
financial statements have been prepared and are in conformity
with GAAP.
(iv) Requested Information -- with reasonable
promptness, such other data and information as from time to time may be
reasonably requested by Xxxxxx;
(b) Inspection. Maker will permit officers and designated
representatives of Holder, at the expense of Maker at any time when an Event of
Default exists, and otherwise at the expense of Holder, to visit and inspect any
of its properties, and to examine its books of account and to make copies and
extracts therefrom, and discuss its affairs, finances and accounts with, and be
advised as to the same by, its officers and its independent accountants (and by
this provision Maker authorized said accountants to discuss the finances and
affairs of Maker), all upon reasonable notice and at such reasonable times and
intervals and to such reasonable extent as Holder may reasonably request.
(c) Negative Pledge. Maker will not grant in the future (upon
the happening of a contingency or otherwise), any of its property, whether now
owned or hereafter acquired, at any time to be subject to a lien securing
indebtedness of Maker except for renewals or extensions of a loan agreement with
CoreStates Bank in an amount up to $2 million.
(d) Distributions. Maker will not:
(i) make or declare, or incur any liability to
make or declare, any dividends or other distributions on the capital stock of
Maker; and
(ii) make any optional or mandatory redemption,
retirement, purchase or other acquisition, direct or indirect, of any shares of
capital stock of Maker, or of any warrants, rights, or options to acquire any
shares of such capital stock of Maker other than the "put" of Rocktropolis, LLC
as described in Maker's S-1 Registration Statement.
(e) Line of Business. Maker will not engage, directly or
indirectly, in any line of business other than the music entertainment business.
Section 6. Costs and Expenses. Maker shall pay when billed the
reasonable out-
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of-pocket costs and expenses (including reasonable attorney's fees) incurred by
Holder in connection with the consideration, negotiation, preparation or
execution of any amendments, waivers, consents, standstill agreements or other
similar agreements with respect to this Note (whether or not any such
amendments, waivers, consents, standstill agreements or other similar agreements
are executed). At any time when Maker and Holder are conducting restructuring or
workout negotiations in respect hereof, or an Event of Default exists, Maker
shall pay when billed the reasonable out-of-pocket costs and expenses (including
reasonable attorneys' fees and the fees of professional advisors) incurred by
Holder in connection with the assessment, analysis or enforcement of any rights
or remedies that are or may be available to Holder and in connection with
inspections made pursuant to Section 5(b) (provided that at all other times
inspections will be at the expense of Holder). If Maker shall fail to pay when
due any principal of, or interest on, this Note, Maker shall pay to Holder, to
the extent permitted by law, such amounts as shall be sufficient to cover the
out-of-pocket costs and expenses, including but not limited to reasonable
attorneys' fees, incurred by Holder in collecting any sums due on this Note.
Section 7. Payments on this Note. Maker shall pay all amounts
payable with respect to this Note (without any presentment of this Note and
without any notation of such payment being made thereon) by crediting, by
federal funds bank wire transfer, the account Holder may hereafter direct in
writing. Any payment to be made to the Holder hereunder shall be deemed to have
been made on the business day such payment actually becomes available at the
Holder's bank prior to the close of business of such bank, provided that
interest for one day shall be due on the amount of any such payment that
actually becomes available to such bank after 1:00 p.m. (local time of such
bank).
SECTION 8. GOVERNING LAW. THIS NOTE SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK (WITHOUT GIVING
EFFECT TO ITS CONFLICT OF LAW PRINCIPLES).
Section 9. Waiver and Amendment. Maker hereby waives
presentment, demand for payments, notice of dishonor, protest and notice of
protest and any and all other notices or demands in connection with this Note.
No delay or omission on the part of Holder in exercising any right hereunder
shall operate as a waiver of such right or of any other right under this Note. A
waiver on one occasion shall not be construed as a bar to or waiver of any such
right and/or remedy on any future occasion. Any provision of this Note may be
amended upon the express written agreement thereto of Maker, Xxxxxx and the
holder of the Note at the time of such amendment.
Section 10 Headings; Construction. The headings of the
sections of this Note are inserted for convenience only and shall not be deemed
to constitute a part hereof; words used herein of any gender shall be construed
to include any other gender where appropriate, and words used herein that are
either singular or plural shall be construed to include the other where
appropriate.
Section 11. Lost Note. Upon receipt by Maker of evidence
satisfactory to it of the loss, theft, destruction or mutilation of this Note,
and (in case of loss, theft or destruction) of indemnity satisfactory to it
(provided that if Holder is an institutional investor or a nominee of an
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institutional investor, such institutional investor's own unsecured agreement of
indemnity shall be deemed to be satisfactory for such purpose), and upon
reimbursement to Maker of all reasonable expenses incidental thereto, and upon
surrender and cancellation of such Note, if mutilated, Maker will deliver in
lieu of such Note a new note for the unpaid principal amount thereof and
carrying the same rights to interest on the unpaid principal.
IN WITNESS WHEREOF, the undersigned has executed this Note on
the date first above written.
N2K Inc.
By: ____________________________
Xxxxx Xxxxxxx
Vice President, Secretary and Treasurer
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