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EXHIBIT 4.12
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement (this "Agreement") is entered
into as of the ___ day of May, 1997, 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 G 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 $3.00 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, as soon as
reasonably practicable after all of the conditions to the parties' obligations
under Section 5 and 6 hereof have been satisfied or waived or at such time, date
or place as the parties 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 any, the Company's complete corporate
minute and stock books,
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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 filing of the Statement with
Respect to Shares contemplated by Section 7(a) below (the "Statement") which is
attached hereto as Exhibit A, and immediately preceding the 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 shall have been issued.
(B) 625,000 shares of Series B Preferred Stock, all of which
shall have been issued.
(C) 2,857,143 shares of Series C Preferred Stock, of which
2,142,857 shares shall have been issued.
(D) 1,000,000 shares of Series D Convertible Preferred Stock of
which 800,000 shares shall have been issued.
(E) 6,013,060 shares of Series E Convertible Preferred Stock, of
which 6,007,060 shares shall have been issued.
(F) 6,000,000 shares of Series F Convertible Preferred Stock, of
which 5,333,333 shares shall have been issued.
(G) 15,000,000 shares of Series G Convertible Preferred Stock,
of which 2,463,329 shares shall have been issued.
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(H) 8,004,797 shares of Undesignated Preferred Stock.
(I) 100,000,000 shares of Common Stock, par value $.001 per
share (the "Common Stock") of which 11,872,139 shares shall have been validly
issued and outstanding fully paid and nonassessable, 8,431,000 shares reserved
for issuance upon exercise of options under the Company's Incentive Stock Option
Plan and 1996 Employee Stock Option Plan (of which 7,084,476 are reserved for
outstanding options), 865,732 shares reserved for issuance upon exercise of
other options and warrants, 685,107 shares reserved for issuance upon conversion
of the Company's Series A Preferred Stock, 714,286 shares reserved for issuance
upon conversion of the Company's Series B Preferred Stock, 2,400,000 shares
reserved for issuance upon conversion of the Company's Series C Preferred Stock,
2,461,539 shares reserved for issuance upon conversion of the Company's Series D
Convertible Preferred Stock, 6,007,060 shares reserved for issuance upon
conversion of the Company's Series E Convertible Preferred Stock, 5,333,333
shares reserved for issuance upon conversion of the company's Series F
Convertible Preferred Stock and up to 15,000,000 shares of Common Stock reserved
for issuance upon conversion of the Company's Series G Convertible Preferred
Stock.
The rights, privileges and preferences of the Preferred Shares will be as
stated in the Statement, which shall be included in Article 4 of the Company's
Articles of Incorporation.
(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)(I). There are no other 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 each of (i) TSI Licensing, Inc., a Delaware corporation, (ii) N2K Inc., a
Delaware corporation and (iii) N2K Japan Inc., a Japanese corporation
(collectively, the "Subsidiaries"), 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
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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 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 consolidated balance
sheet as of December 31, 1996 (the "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, except (in the case of unaudited statements) for the
absence of footnote disclosures, 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 Financial Statements, none of which are unusual in type,
scope or amount.
(iii) ENCUMBRANCES. The accounts and notes receivable reflected
on the 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 Balance
Sheet, without setoff, third party collection efforts or suit (but net of
reserves for doubtful accounts, if any, set forth in the Balance Sheet), and the
subsequently created accounts and notes receivable of the Company from January
1, 1997 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
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the amounts thereof without setoff, third party collection efforts or suit (but
net of reserves for doubtful accounts, if any, set forth in the Balance Sheet).
(h) CHANGES. Since the date of the Balance Sheet, there have not been any
material changes in the Company's business, financial condition or assets.
(i) TITLE TO PROPERTY AND ASSETS, LIABILITIES. Except (a) as reflected in
its Financial Statements or in the 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 (b)-(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.
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(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. Neither the draft Form S-1 Registration
Statement dated October 1996 (as of the date it was prepared), nor any
representation or warranty made by the Company in this Agreement or in any
Schedule or Exhibit hereto, any written statement or certificate furnished or to
be furnished to Purchasers pursuant to this 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. Other than as set forth on Schedule 2(o) hereto, 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 (or its
Subsidiaries), 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 Schedule 2(p),
(i) All patents owned by the Company (or its Subsidiaries) are
owned free and clear of all mortgages,
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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) The copyright registrations owned by the Company (or its
Subsidiaries) are owned 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 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
Subsidiaries) 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
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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 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) 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.
(s) 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.
(t) INSURANCE. The Company has fire and casualty insurance policies, with
extended coverage, sufficient in amount (subject to reasonable deductibles) to
allow it to
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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.
(u) 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,
Series E and Series F Preferred Stock, and certain warrants 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.
(v) 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.
(w) 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.
(x) 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.
(y) 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 (the "1934 Act")) 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, other than in the case of Xxxxxx Xxxxxx (with respect to the
provision of music production services) and Xxxxxx X. Xxxxxx, Xx. (with respect
to the provision of investment banking services).
(z) 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, and
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copies of such assignments and agreements (or a representative sample thereof)
have been supplied to any counsel for any of the Purchasers requesting same.
(aa) NO RESTRICTIONS. The Company is 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 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.
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(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 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
except in a manner consistent with applicable securities laws, and that it has
no present intention of selling, granting any participation in, or otherwise
distributing the same except at such time or in such manner as is in compliance
with applicable securities laws.
(f) PROVISION OF INFORMATION. The Company has 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) PRIVATE PLACEMENT. He or it understands the following:
(i) The offering and sale of the Preferred Shares being acquired hereunder
have been conducted as an unregistered private placement.
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(ii) The draft Form S-1 Registration Statement dated October 1996 (the
"Offering Memorandum") which was provided for informational purposes is
neither a statutory prospectus nor part of an effective registration
statement under the 1933 Act.
(iii) The information provided in the Offering Memorandum is only current
as of the date of the Offering Memorandum, except (A) where an earlier date
is indicated therein and (B) as amended by the revised section thereof
entitled "Business" which is attached hereto as Exhibit C.
(iv) 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 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
seventy-five percent (75%) 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.
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(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 respective 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, substantially in the form attached
hereto 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:
(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. As soon as practicable after the
execution of this Agreement, the Company shall adopt and file and keep in force
with the Secretary of State of the Commonwealth of Pennsylvania the Statement,
attached to this Agreement as Exhibit A, designating the Preferred Shares.
(b) CONTINGENT PRICE ADJUSTMENT. Subject to market conditions, the Company
intends to engage one or more
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underwriters to assist it in an initial public offering ("IPO") of its shares in
1997. If said IPO is successfully accomplished (whether in 1997 or thereafter)
at a price per share (the "IPO Price") that is less than $14.00 (assuming a
1-for-4 reverse stock split), the following price adjustments (each, a "Price
Adjustment") will apply to the Preferred Shares:
(i) If the IPO Price is less than $10.00, then the Price
Adjustment per share shall equal $4.00 per share.
(ii) If the IPO Price is equal to or greater than $10.00 but less
than $14.00 per share, then the Price Adjustment per share shall equal the
difference between $14.00 and the IPO Price.
(iii) If the IPO Price is $14.00 or more per share, no Price
Adjustment will be made.
If a Price Adjustment is to be made pursuant to the terms of this Section 7(b),
the Company shall pay to the undersigned, in cash or in additional shares of
Common Stock of the Company at the IPO Price, at the Company's option, an amount
equal to the Price Adjustment multiplied by that number of Preferred Shares
purchased by the undersigned pursuant to this Agreement.
(c) 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 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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(d) 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.
(e) 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.
(f) 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.
(g) USE OF PROCEEDS. The proceeds from the sale of Preferred Shares shall
be used for working capital and capital expenditures.
(h) 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.
(i) 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.
(j) 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.
(k) 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.
(l) 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.
(m) 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.
(n) 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 resulting in
proceeds to the Company of not less than $5,000,000.
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 unincorporated organization and a
government or any department, agency or political subdivision thereof.
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(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); provided, however, any securities
shall cease to be considered Restricted Securities for the purposes of this
Section 8 at such time that the holder thereof may sell or dispose of all such
securities held by such holder without limitation, without the need for
registration under the Securities Act.
(iv) "Restricted Shares" shall mean the Preferred Shares
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
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to the Company, of counsel reasonably acceptable to the Company for the holder
of Restricted Securities, as to 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, including pursuant to Section 8(e) or 8(f) hereof, any of its
securities under the Securities Act (other than in an initial public offering or
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
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registered. In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities by the Company,
if the managing underwriter determines and advises 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
by the Company, 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 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 the
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Commission) the holders of a majority in interest of the then outstanding
Restricted Securities shall have the one-time right to request the Company to
file a 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 Shares 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 as promptly as practical,
subject in any event to all applicable securities laws and, if such registration
relates to an underwriting, all requirements of the Company's investment banker;
provided, however, that the Company shall not be required to file such
registration statement prior to the expiration of 180 days from the effective
date of the Company's registration statement covering its initial public
offering.
(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 Common Stock (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 granted pursuant to this Agreement, unless the
Purchaser is given the same or comparable rights.
(i) PREPARATION AND FILING. (A) 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;
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(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 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
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independent public accountants who have certified the Company's financial
statements included in the registration statement, covering substantially the
same matters with 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.
(B) The Company shall maintain the effectiveness of any registration
statement filed pursuant to Section 8(e) or 8(f) until such time that all
Restricted Securities included therein are sold or no longer constitute
Restricted Securities as defined in Section 8(a)(iii).
(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, as well as the fees and disbursements
of counsel designated for the sellers of Restricted Securities, and expenses of
any required audits; provided, however, that (a) the Company shall not be
obligated for payment of the fees and disbursements of more than one 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
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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 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; provided, however, that
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the amount of each such seller's indemnification obligation shall be limited to
the net proceeds received by such seller from the sale of such seller's
Restricted Shares pursuant to the registration statement.
(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 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.
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(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 a partnership, each of its partners) is subject, 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 other party or parties from whom contribution may be sought, but the
omission to so notify such other party or parties shall not relieve the party or
parties from whom contribution may be sought from any other contribution
obligation it or they may have under this paragraph or otherwise.
(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:
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(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 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 a
Purchaser 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
such Purchaser, or to a partner, family member or affiliate of such 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.
(o) LIMITATION ON SALES AND EXERCISE OF REGISTRATION RIGHTS.
Notwithstanding any of the terms and provisions of this Section 8, the
Purchasers and their transferees hereby agree that, to the extent requested by
the representatives of the underwriters in the Company's initial public
offering, (i) they will not sell, transfer, assign, pledge or hypothecate any
shares of the Company's stock (except for transfers to partners, family members
or affiliates) or agree to take any of the above actions following the date of
an effective registration statement for an initial public offering of the
Company's shares (the "Commencement Date") and continuing for a period of up to
180 days thereafter without the consent of the representatives of the
underwriters in the offering and (ii) they would agree to defer the earliest
date on which a registration statement filed pursuant to Section
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8(e) or 8(f) of this Agreement is permitted to become effective until 270 days
following the Commencement Date, unless an earlier date is consented to by the
representative of the underwriters in the offering; provided, however, that such
limitations and restrictions shall be binding on the Purchasers and their
transferees only if (a) similar restrictions are in place or agreed to by all of
the Company's officers, directors and 5% or greater stockholders and by holders
representing at least 80% of the shares of all series of preferred stock other
than the Preferred Shares purchased pursuant to this Agreement and (b) with
respect to the limitation of clause (ii) above, all of the Company's officers
and directors and all holders of the Company's Series E Preferred Stock agree
not to sell or transfer any shares of the Company's stock held on the
Commencement Date until such time that the holders of the Preferred Shares are
generally free to sell their shares pursuant to an effective registration
statement or Rule 144 or any comparable exemption from the registration
requirements of the Securities Act.
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 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
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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.
(h) AMENDMENT. Except as otherwise provided herein, this Agreement may be
modified or amended only by a writing signed by the Company and by the holders
of at least sixty-six and two-thirds percent (66-2/3%) of the Preferred Shares
outstanding.
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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:
By: _____________________________
Name:
Title:
Address:
_____________________________
_____________________________
_____________________________
_____________________________
