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Exhibit 4.8
STOCK PURCHASE AGREEMENT
AGREEMENT made as of the 11th day of August, 1988, by and between
TELEBASE SYSTEMS, INC., a Pennsylvania business corporation located at 000 Xxxx
Xxxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxxxx 00000 (the "Company"), and OTC
INTERNATIONAL LIMITED, an Australian corporation located at 000 Xxxxxxxxx
Xxxxxx, Xxxxxx X.X.X., Xxxxxxxxx (the "Purchaser").
BACKGROUND
The Purchaser desires to purchase equity securities of the
Company and the Company desires to issue and sell such securities to the
Purchaser, on the terms and conditions set forth herein.
NOW THEREFORE, in consideration of the mutual covenants and
premises contained herein, intending to be legacy bound, the parties hereby
agree as follows:
SECTION 1. Authorization of the Stock. Subject to the terms
and conditions hereof, the Company has authorized the issuance at the Closing
(as hereinafter defined) of 2,142,857 shares of Series C Preferred Stock (the
"Stock") having the powers, preferences and other rights as set forth in Exhibit
A attached hereto. In addition, the Company has authorized the issuance of
714,286 shares of Series C Preferred Stock to ITC (as defined in Section 6.04(a)
hereof) for the purposes of carrying out the provisions of Section 6.04 hereof.
SECTION 2. Agreement to Sell and Purchase the Stock. At the
Closing, the Company shall sell to the Purchaser, and the Purchaser shall
purchase from the Company, upon the terms and conditions hereinafter set forth,
the Stock. The purchase price for the Stock shall be $1.40 per share, for an
aggregate purchase price of $3,000,000.00.
SECTION 3. Closing; Delivery of Stock.
SECTION 3.01. Closing. The closing (the "Closing") hereunder
with respect to the purchase and sale of the Stock shall take place on August
15, 1988 (the "Closing Date"), or such other date as the parties shall mutually
agree, and at such time and place as the parties shall mutually agree.
SECTION 3.02. Conditions Precedent to Purchaser's Obligations.
The obligations of the Purchaser to close hereunder on the Closing Date are
subject to the fulfillment at or prior to the Closing of the following
conditions precedent:
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(a) Documents to be Delivered to the Purchaser. The Company
shall have delivered to the Purchaser, on or prior to the Closing Date, the
following:
(i) A certificate representing the Stock, duly executed by
the proper officers of the Company;
(ii) A certified (as of the Closing Date) copy of
resolutions of the Company's Board of Directors authorizing the execution,
delivery and performance of this Agreement;
(iii) A certified (as of the Closing Date) copy of the
Company's by- laws;
(iv) A copy, certified as of the most recent date
practicable, by the Secretary of State of Pennsylvania, of the Company's
Articles of Incorporation, together with a certificate (dated as of the Closing
Date) of the Company's corporate Secretary to the effect that such Articles of
Incorporation have not been amended since the date of the aforesaid
certification;
(v) A certificate, as of the most recent date practicable,
of the aforesaid Secretary of State, as to the good standing of the Company;
(vi) A written opinion of Messrs. Dilworth, Paxson, Xxxxxx &
Xxxxxxxx, the Company's counsel, dated the Closing Date and addressed to the
Purchaser, in substantially the form set forth in Exhibit B hereto;
(vii) A copy of definitive agreements executed and delivered
by Western Union Corporation and the Company, addressing such matters as are set
forth in a letter of intent dated June 6, 1988 from Western Union Corporation to
the Purchaser;
(viii) The Stockholders' Agreement (as hereinafter defined)
duly executed by the parties thereto; and
(ix) A Memorandum of Understanding by and between the
Company and the Purchaser, substantially in the form attached hereto as Exhibit
C.
(b) Representations and Warranties. The representations and
warranties of the Company shall be true and correct as of the Closing Date.
SECTION 3.03. Conditions Precedent to Company's Obligations.
The obligations of the Company to close hereunder on the Closing Date are
subject to the fulfillment at or prior to the Closing of the following
conditions precedent:
(a) Purchase Price. The Purchaser shall have delivered to the
Company by wire transfer in immediately available funds the amount of
$3,000,000.00.
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(b) Representations and Warranties. The representations and
warranties of the Purchaser shall be true and correct as of the Closing Date.
(c) Closing Certificate. The Purchaser shall have delivered to
the Company a certificate of an authorized officer of the Purchaser in the form
attached hereto as Exhibit D.
(d) Stockholders' Agreement. The Purchaser shall have
delivered to the Company a Joinder Agreement with respect to Company's
Stockholders' Agreement, in the form attached hereto as Exhibit E.
SECTION 4. Representations and Warranties of the Company. The
Company hereby represents and warrants to the Purchaser as follows:
SECTION 4.01. Organization; Good Standing, Qualification and
Power. The Company (i) is a corporation duly organized, validly existing and in
good standing under the laws of the Commonwealth of Pennsylvania, (ii) has all
requisite power and authority to own, lease and operate its properties and to
carry on its business as now being conducted and as proposed to be conducted
under the Company's Business Plan (as described in Section 4.22 hereof), and to
carry out the transactions contemplated hereby, and (iii) is duly qualified as a
foreign corporation and in good standing to do business in all such other
jurisdictions, if any, in which the conduct of its business or its ownership,
leasing or operation of property requires such qualification, except for those
jurisdictions in which failure to so qualify would not have a material adverse
effect on the business or assets of the Company.
SECTION 4.02. Subsidiaries. The Company does not own or
control, directly or indirectly, any other corporation, partnership, association
or business entity.
SECTION 4.03. Capitalization. The authorized capital stock of
the Company immediately upon consummation at the Closing of the transactions
contemplated hereby shall consist of 20,000,000 shares of Common Stock, no par
value (the "Common Stock"), and 5,000,000 shares of Preferred Stock, no par
value (the "Preferred Stock") of which:
(a) 4,802,140 shares of Common Stock shall have been validly
issued and be outstanding, fully paid and non-assessable, with no personal
liability attaching to the ownership thereof, and
(b) 2,078,000 shares of Common Stock shall have been reserved
for issuance upon exercise of outstanding options and warrants, and 137,000
additional shares shall be available for issuance pursuant to options available
for grant under the Company's incentive stock option plan, and
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(c) 500,000 shares of Preferred Stock shall have been
designated "Series A Preferred Stock", of which (i) 488,838 shares shall have
been validly issued, and (ii) 500,000 shares of Common Stock shall have been
duly reserved initially for issuance upon conversion of the Series A Preferred
Stock into Common Stock, and
(d) 625,000 shares of Preferred Stock shall have been
designated "Series B Preferred Stock", of which (i) 625,000 shares shall have
been validly issued, and (ii) 625,000 shares of Common Stock shall have been
duly reserved initially for issuance upon conversion of the Series B Preferred
Stock into Common Stock, and
(e) 2,857,143 shares of Preferred Stock shall have been
designated "Series C Preferred Stock", of which (i) 2,142,857 shall have been
validly issued to the Purchaser, and (ii) 2,857,143 shares of Common Stock shall
have been duly reserved initially for issuance upon conversion of the Series C
Preferred Stock into Common Stock (the "Reserved Shares").
Schedule 4.03 attached hereto contains a list (the "Stockholders List")
of (a) all holders of Common Stock who hold not less than one hundred thousand
(100,000) shares of such Common Stock, including the number of shares of each
class of Common Stock held by each such holder, and (b) all outstanding
warrants, options, agreements, convertible securities or other commitments
pursuant to which the Company is or may become obligated to issue any shares of
its capital stock or other securities of the Company, and names of all persons
entitled to receive such shares or other securities and the shares of capital
stock or other securities required to be issued thereunder. There are, and
immediately upon consummation of the transactions contemplated hereby there will
be, no preemptive or similar rights to purchase or otherwise acquire shares of
capital stock of the Company pursuant to any provision of law, the Articles of
Incorporation or By-Laws or any agreement to which the Company is a party, or
otherwise, except as contemplated by this Agreement and the Company's Amended
and Restated Stockholder's Agreement dated as of July 30, 1988, ("Stockholders'
Agreement") and as set forth on the Stockholders List.
SECTION 4.04. Authorization. The Company has all requisite
power and authority to execute, deliver and perform this Agreement. The
execution, delivery and performance by the Company of this Agreement and the
consummation of the transactions contemplated hereby have been duly and validly
authorized by all necessary corporate action. This Agreement has been duly and
validly executed and delivered by the Company and this Agreement constitutes the
valid and binding obligation of the Company, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting creditor's rights generally.
SECTION 4.05. Violations of Instruments. The execution,
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby will not (a) violate any provision of
law or statute or any order of any court or any order, rule or regulation of any
other agency of
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government or (b) conflict with or result in any breach of any of the terms,
conditions or provisions of, or constitute (with due notice or lapse of time or
both) a default (or give rise to any right of termination, cancellation or
acceleration) under, or result in the creation of any lien, security interest,
charge or encumbrance upon any of the properties, assets or outstanding capital
stock of the Company, under the Articles of Incorporation or By-laws of the
Company, in each case as amended and/or restated through the date hereof, or any
note, indenture, mortgage, lease, agreement or other instrument to which the
Company is a party or by which it or any of its properties or assets are or may
be bound or affected. Each permit, authorization, consent or approval of or by,
or any notification of or filing with, any person (governmental or private)
required for the valid authorization, execution, delivery and performance by the
Company of this Agreement, or for the valid authorization, issuance, sale and
delivery of the Stock has been obtained or made or will have been obtained or
made as of the date required.
SECTION 4.06. Financial Information. (a) The Company has
previously delivered to the Purchaser the following financial information:
(i) the balance sheet of the Company as of December 31,
1987, and the related statement of operations, shareholders' equity and changes
in financial position for the year then ended (in each case including the notes
thereto) audited by Xxxxxxxxx, Xxxxxx & Co., the independent certified public
accountants of the Company; and
(ii) the unaudited balance sheet of the Company as of March
31, 1988 (the "Interim Balance Sheet") and the related unaudited statements of
operations, shareholders' equity and changes in financial position for the
three-month period then ended, prepared by the Company (collectively, the
"Interim Financial Statements").
(b) The financial statements referred to in the foregoing
clause (a) of this Section 4.06 (i) are in accordance with the books and records
of the Company, (ii) fairly present the financial condition of the Company as of
the respective dates indicated and the results of operations, shareholders'
equity and changes in financial position of the Company for the respective
periods indicated and (iii) have been prepared in accordance with generally
accepted accounting principles consistently applied, subject, however, in the
case of financial statements described in Section 4.06(a)(ii), to year-end audit
adjustments.
SECTION 4.07. Absence of Undisclosed Liabilities. Except as
disclosed in the Interim Financial Statements, at March 31, 1988, (a) the
Company had no liability of any nature (matured or unmatured, fixed or
contingent) which was not provided for or reflected on the Interim Balance
Sheet, and (b) an liability reserves established by the Company and set forth on
the Interim Balance Sheet were adequate for the purposes indicated therein, and
(c) there were no loss contingencies (as such term is used in Statement of
Financial Accounting Standards No. 5 issued by the Financial Accounting
Standards Board in March 1975) which were not adequately provided for on the
Interim Balance Sheet.
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SECTION 4.08. Absence of Changes. Except as set forth on
Schedule 4.08 attached hereto, since March 31, 1988, there has not been (a) any
material adverse change in the financial condition, results of operations,
assets, liabilities, business or prospects of the Company, (b) any material
liability or obligation of any nature whatsoever (contingent or otherwise)
incurred by the Company, other than current liabilities or obligations incurred
in the ordinary course of business, (c) any asset or property of the Company
made subject to a material lien of any kind, (d) any waiver of any valuable
right of the Company, or the cancellation of any debt or claim held by the
Company, (e) any payment of dividends on, or other distributions with respect
to, or any direct or indirect redemption or acquisition of, any shares of the
capital stock of the Company, or any agreement or commitment therefor, (f) any
issuance of any stock, bonds or other securities of the Company or options,
warrants or rights or agreements or commitments to purchase or issue such
securities or grant such options, warrants or rights other than pursuant to or
in connection with the transactions contemplated by this Agreement, (g) any
mortgage, pledge, sale, assignment or transfer of any tangible or intangible
assets of the Company, except in the ordinary course of business, (h) any loan
by the Company to any officer, director, employee or shareholder of the Company,
or any agreement or commitment therefor, (i) any damage, destruction or loss
(whether or not covered by insurance) which is or may materially adversely
affect the assets, property or business of the Company, (j) any increase, direct
or indirect, in the compensation paid or payable to any officer, director,
employee or agent of the Company, (k) any change in the accounting methods or
practices followed by the Company or (l) any other event or condition of any
character which has materially adversely affected the Company's business or
prospects.
SECTION 4.09. Tax Matters. All Federal, state and local or
foreign tax returns and tax reports required to be filed by the Company have
been timely filed with the appropriate governmental agencies in all
jurisdictions in which such returns and reports are required to be filed
(except, with respect to tax returns and tax reports which may have been
required to be filed in respect of state or local sales, lease, occupation,
property and excise tax, where the failure to do so would not have a material
adverse effect, individually or in the aggregate, on the Company's business, and
except as set forth on Schedule 4.09 attached hereto) and all of the foregoing
are true, correct and complete. Except with respect to taxes required to have
been paid or accrued by the Company in respect of state or local sales, lease,
occupation, property and excise tax, where the failure to do so would not have a
material adverse effect, individually or in the aggregate, on the Company's
business, and except as set forth on Schedule 4.09 attached hereto, all Federal
state, local and foreign income, profits, franchise, sales, use, occupation,
property, excise, payroll, withholding and other taxes (including interest and
penalties) required to have been paid or accrued by the Company have been fully
paid or are adequately provided for on the Interim Balance Sheet, except for tax
liabilities arising in the ordinary course of business since March 31, 1988. No
issues have been raised (and are currently pending) by the Internal Revenue
Service or any other taxing authority in connection with any of the returns and
reports referred to above, and no waivers of statutes of limitations have been
given or requested with respect to the
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Company. All deficiencies asserted or assessments (including interest and
penalties) made as a result of any examination by the Internal Revenue Service
or by appropriate state or departmental tax authorities of the Federal, state or
local or foreign income tax, sales tax or franchise tax returns of or, with
respect to the Company, have been fully paid or are adequately provided for on
the Interim Balance Sheet and no proposed (but unassessed) additional taxes,
interest or penalties have been asserted. Except with respect to state or local
sales, lease, occupation, property and excise taxes which may have been required
to be paid or provided for, where the failure to do so would not have a material
adverse effect, individually or in the aggregate, on the Company's business, the
provisions for taxes on the Interim Balance Sheet are sufficient for the payment
of all accrued and unpaid Federal, state or local and foreign taxes as of such
date. The exceptions noted in this Section 4.09 will not, individually or in the
aggregate, have a material adverse impact on the Company's business or financial
condition.
SECTION 4.10. Intellectual Property. (a) Except as listed on
Schedule 4.10 attached hereto, the Company owns, possesses, has the right to use
or has the right to bring actions for the infringement of, all Intellectual
Property Rights (as hereinafter defined) necessary or required for the conduct
of its business as presently conducted.
(b) Except as listed on Schedule 4.10 attached hereto, no
royalties, honorariums or fees are payable by the Company to other persons by
reason of the ownership or use of the Intellectual Property Rights.
(c) To the best knowledge of the Company, no product
manufactured, marketed or sold by the Company violates or will violate, any
Intellectual Property Rights or assumed name of another; and there is no pending
or, to the best knowledge of the Company, threatened claim or litigation against
the Company contesting the validity or right to use of any of the foregoing, nor
has the Company received any notice that any of the Intellectual Property Rights
or the operation of the Company's business conflicts with the asserted rights of
others.
(d) The Company has taken reasonable security measures to
protect the secrecy of all of its Intellectual Property Rights.
As used herein, the term "Intellectual Property Rights" means all intellectual
property rights, including, without limitation, patents, patent applications,
patent rights, trademarks, trademark applications, trade names, service marks,
copyrights, computer programs, inventions, know-how, licenses, trade secrets,
proprietary processes and formulae.
SECTION 4.11. Litigation, Etc. There are no suits, actions,
claims or proceedings pending against the Company challenging the validity or
the propriety of the transactions contemplated by this Agreement. Purchaser is
not subject to any judgment, order, decree or administrative ruling specifically
directed against the Company which would interfere with the transactions
contemplated by this Agreement. Except as listed
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on Schedule 4.11 attached hereto, there are no (i) actions, suits, claims,
investigations or legal or administrative or arbitration proceedings pending or,
to the best knowledge of the Company, threatened against or affecting the
Company, whether at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, which, if adversely determined,
individually or in the aggregate, would have a material adverse effect on the
Company's business, prospects, condition (financial or otherwise), affairs or
operations or which could materially impair the Company's ability to perform its
obligations hereunder, or (ii) judgments, decrees, injunctions or orders of any
court, governmental department, commission, agency, instrumentality or
arbitrator against the Company which could have a material adverse effect on the
business, prospects, condition (financial or otherwise), affairs or operations
of the Company or which could materially impair the Company's ability to perform
its obligations hereunder.
SECTION 4.12. Compliance; Governmental Authorizations. The
Company has complied in all material respects with an Federal, state, local or
foreign laws, ordinances, regulations and orders applicable to its business. The
Company has all material Federal, state, local and foreign governmental licenses
and permits necessary in the conduct of its business, such licenses and permits
are in full force and effect, no material violations are occurring or have
occurred in respect of any thereof and no proceeding is pending or, to the best
knowledge of the Company, threatened to revoke or limit any thereof. None of the
aforesaid licenses and permits shall be affected in any material respect by this
Agreement.
SECTION 4.13. Related Transactions; Employment of Employees.
Except as set forth on Schedule 4.13 hereto or as otherwise contemplated by this
Agreement, there are no existing material arrangements or proposed material
transactions between the Company and any officer, director, or holder of more
than 5% of the capital stock of the Company, or any affiliate of any such person
(other than as an employee or a consultant) providing for the furnishing of
services by, or rental or purchase of real or personal property from, or
otherwise requiring cash payments to, any such person. No person or entity has
asserted, or to the best of the Company's knowledge may assert, any valid claim
against the Company or any employee with respect to the continued employment by
the Company of any employee under the terms of any employment contract, covenant
not to compete, patent disclosure agreement or otherwise. No litigation is
pending or threatened against any employee or the Company relating to any
employee's relationship with any former employer or person for whom any such
employee performed consulting or other services. To the Company's best
knowledge, no officer or key employee of the Company presently intends to
terminate his employment with the Company.
SECTION 4.14. Compliance With ERISA; Benefit Plans; Etc. The
Company does not (a) maintain and has never maintained any employee benefit plan
subject to the Employee Retirement Income Security Act of 1974, as amended
("ERISA")
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or (b) contrite ute to and has never contributed to any such employee benefit
plan maintained by any other person or entity.
SECTION 4.15. No Defaults. Except as set forth on Schedule
4.15 attached hereto, (a) the Company is not in default in any material respect,
individually or in the aggregate, (i) under its Articles of Incorporation or its
By-laws, in each case as amended to the date hereof, or any indenture, mortgage,
lease agreement, contract, purchase order or other instrument or agreement to
which the Company is a party or by which it or any of its property is bound or
affected or (ii) with respect to any order, writ, injunction or decree of any
court or any Federal, state, municipal or other governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign and
(b) there exists no condition, event or act which constitutes, or which after
notice, lapse of time or both could constitute, a default under any of the
foregoing. To the Company's best knowledge, any liability arising out of any
defaults listed on Schedule 4.15 will not, individually or in the aggregate,
have a material adverse effect on the Company's business, condition (financial
or otherwise) or prospects. Such defaults have not, as of the date hereof, had
an adverse effect of any material nature on the commercial relationship between
any such vendor and Telebase.
SECTION 4.16. Title to Property. Except as set forth on
Schedule 4.16 attached hereto, the Company has good and marketable title to all
property and assets, real, personal or mixed, tangible or intangible, reflected
as assets in the Interim Balance Sheet or acquired by the Company since March
31, 1988 (other than assets disposed of in the ordinary course of business since
March 31, 1988), subject to no mortgages, liens, security interests, pledges,
charges or other encumbrances of any kind, except as reflected in the Interim
Financial Statements. Except as set forth on Schedule 4.16 attached hereto, the
Company owns, or has a valid leasehold interest in, or valid license for, all
assets necessary for the conduct of its business as presently conducted or as
proposed to be conducted.
SECTION 4.17. Insurance. Listed on Schedule 4.17 attached
hereto are all policies of insurance maintained by the Company. Such policies
are in full force and effect and all premiums with respect to such policies are
currently paid. Except as listed on Schedule 4.17 attached hereto, the Company
has never been denied or had revoked or rescinded any policy of insurance.
SECTION 4.18. Investment Company Act. The Company is not an
"investment company" as that term is defined in, and is not otherwise subject to
regulation under, the Investment Company Act of 1940.
SECTION 4.19. Disclosure. Neither this Agreement, nor any
exhibit, schedule, certificate, statement or other document required to be
delivered by the Company hereunder contains any untrue statement of a material
fact or omits to state a material fact necessary in order to make the statements
contained therein or herein not misleading. There is no fact known to the
Company which materially adversely affects
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or in the future may materially adversely affect the business, operations,
affairs, prospects, condition, properties or assets of the Company which has not
been set forth in this Agreement or in the other documents, certificates,
instruments, or written statements furnished to the Purchaser by or on behalf of
the Company pursuant hereto (and listed herein).
SECTION 4.20. Brokers. Neither the Company, nor any of the
Company's officers, directors, employees or shareholders has employed any broker
or finder in connection with the transactions contemplated by this Agreement.
SECTION 4.21. Books and Records. The books and records of the
Company have been maintained in accordance with sound business practices and, as
of the date hereof, present fairly the respective assets, liabilities, financial
condition and results of operations of the Company.
SECTION 4.22. Business Plan. The Company has previously
presented and delivered to the Purchaser the Company's Business Plan 1987
through 1989, as supplemented and modified by an Executive Summary
(collectively, the "Business Plan"). Except as set forth on Schedule 4.22
attached hereto, and except as set forth in the Company's financial statements
referred to in Section 4.06 (a) hereof, the description of the business,
operations, properties and assets of the Company contained in the Business Plan,
as well as all other factual statements contained therein, are true and correct.
To the best knowledge of the Company, except as set forth on Schedule 4.22
attached hereto, the financial projections and other estimates contained in the
Business Plan are based on reasonable assumptions of the Company at the time
such projections and estimates were made. Except as set forth on Schedule 4.22
attached hereto, the Company has no reason to believe, and does not believe,
that any assumptions of fact or statements of opinion contained in the Business
Plan are unreasonable, untrue or false. However, no assurances can be given that
the actual results of operations or financial projections will conform to such
estimates contained in the Business Plan.
SECTION 4.23. Use of Proceeds. The proceeds of Purchaser's
investment shall be used by the Company for working capital and capital
expenditures for the purpose of sustaining or expanding the Company's market
share of business.
SECTION 4.24. Definition of Best Knowledge. As used herein,
the term "to the best knowledge" of the Company shall mean and include (i)
actual knowledge and (ii) that knowledge from which a person of reasonable
intelligence (including, in the case of the Company, the officers and directors
of the Company) (A) would infer that the fact in question exists, or (B) would
govern his conduct upon the assumption that such fact exists. In connection
therewith, the knowledge (both actual and constructive) of any director or
officer of the Company shall be imputed to be the knowledge of the Company.
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SECTION 5. Representations and Warranties of the Purchaser.
The Purchaser represents and warrants to the Company as follows:
SECTION 5.01. Authorization. Purchaser has all requisite power
and authority to execute, deliver and perform this Agreement. The execution,
delivery and performance by the Purchaser of this Agreement and the consummation
of the transactions contemplated hereby have been duly and validly authorized by
all necessary corporate action. This Agreement has been duly and validly
executed and delivered by the Purchaser and this Agreement constitutes the valid
and binding obligation of the Purchaser, enforceable in accordance with its
terms, except as such enforceability may be limited by bankruptcy, insolvency or
similar laws affecting creditor's rights generally.
SECTION 5.02. Legal Proceedings. There are no suits, actions,
claims, or proceedings pending against Purchaser challenging the validity or
propriety of the transactions contemplated by this Agreement. Purchaser is not
subject to any judgment, order, decree or administrative ruling specifically
directed against such Purchaser which would interfere with the transactions
contemplated by this Agreement.
SECTION 5.03. Disclosure. No representation or warranty in
this Agreement or in any other document required to be delivered by Purchaser to
the Company hereunder or in conjunction herewith contains any untrue statement
of material fact or omits to state a material fact necessary in order to make
the statements contained therein or herein not misleading.
SECTION 5.04. Securities Law Representations and Warranties.
(a) The Purchaser understands that the Stock has not been, and
the Reserved Shares will not be, registered under the Securities Act or under
any state securities acts by reason of their issuance by the Company to a
foreign purchaser; and that they may not be sold or transferred to any United
States citizen, corporation or other entity unless registered under the
Securities Act and any applicable state securities acts or are exempt from such
registration.
(b) All officers and directors of the Purchaser engaged in the
negotiation of this Agreement were outside the United States for substantially
all of the time that negotiations regarding this Agreement were conducted, and
the execution of this Agreement by Purchaser occurred outside the United States.
Payment of the purchase price will be initiated from outside the United States.
The Purchaser will accept delivery of the certificates representing the Stock
outside the United States. The resting place of the securities represented by
the Stock will be outside the United States. The domicile of the Purchaser, and
jurisdiction under which the Purchaser is incorporated, is outside the United
States. The Purchaser is a wholly-owned subsidiary of Overseas
Telecommunications Commission (Australia) (the "Parent"). The principal
executive and financial offices of the Purchaser and the Parent are outside the
United States. Substantially all of the Parent's business, assets, properties,
operations, employees,
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officers and personnel are outside the United States. As of the date hereof, all
of the Purchaser's business, assets, properties, operations, employees, offices
and personnel are outside the United States.
(c) The Purchaser, for itself, and on behalf of ITC (as
defined below), further represents, warrants and covenants to the Company that
it will not transfer the Stock or any of the Reserved Shares except in
compliance with Section 7 of this Agreement, the Company's Stockholders'
Agreement and applicable securities laws.
(d) The Purchaser confirms that it (a) is familiar with the
business of the Company, (b) has had the opportunity to ask questions of the
Company's officers and directors and to acquire such information about the
business and financial condition of the Company as requested and (c) has had the
opportunity to obtain such other information as the Purchaser has deemed
necessary, and the Purchaser has relied upon, among other things, its
independent investigation in making a decision to enter into this Agreement.
(e) The Purchaser has made such independent investigations of
the Company and of the business and financial condition of the Company, as the
Purchaser in the exercise of its sound business judgment, considers to be
appropriate under the circumstances.
(f) The Purchaser understands and acknowledges that the
Company has not made and cannot make any representation or warranty as to the
future operations or financial condition of the Company; that any estimates of
future operating results or financial forecasts of any kind with respect to the
Company which may be contained in any business plans or other document or
information furnished to the Purchaser may not be realized; that such estimates
or forecasts are based on assumptions which may or may not occur; and that no
assurances can be given that the actual results of operations or financial
condition of the Company will conform to such estimates or forecasts and that
therefore no reliance can be placed thereon. Such estimates or forecasts,
however, have been prepared in good faith and, to the best knowledge of the
Company, were based on reasonable assumptions at the time prepared.
(g) The Purchaser consents to the imprinting of the legend set
forth in Section 7.03 hereof on the Stock and Reserved Shares.
SECTION 5.05. Violations of Instruments. The execution,
delivery and performance of this Agreement by the Purchaser and the consummation
of the transactions contemplated hereby will not violate, conflict with or
result in any breach of any of the terms, conditions or provisions of, the
Articles of Incorporation or By-laws or other charter documents of the
Purchaser, in each case as amended and/or restated through the date hereof.
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SECTION 6. Covenants of the Company and Purchaser.
SECTION 6.01. Financial Statements. The Company will furnish
to Purchaser:
(i) As soon as available and in any event within forty-five
(45) days after the close of each monthly accounting period in each
fiscal year (a) an income statement of the Company for such monthly
period; and (b) a balance sheet of the Company as of the end of such
monthly period, subject to year-end audit adjustments; and
(ii) As soon as available and in any event within 120 days
after the close of each fiscal year, (a) a statement of stockholders'
equity and a statement of changes in financial position of the Company
for such fiscal year; (b) an income statement of the Company for such
fiscal year; and (c) a balance sheet of the Company as of the end of
the fiscal year; the consolidated statements and balance sheet to be
audited by an independent certified public accountant selected by the
Company and reasonably acceptable to the Purchaser, and certified by
such accountants to have been prepared in accordance with generally
accepted accounting principles consistently applied by the Company
except for any inconsistencies explained in such certificate.
SECTION 6.02. Access. So long as the Purchaser is not engaged
in, and does not hold any interest in, a business competitive with the Company,
and so long as the Purchaser maintains ownership of the Stock, the Company will
afford to the Purchaser free and full access, at all reasonable times, to all of
the books, records and properties of the Company and to all officers and
employees of the Company, for any reasonable purpose whatsoever, and, upon
reasonable request, will provide Purchaser with operational reports and such
other information as the Purchaser may reasonably request, including monthly
information on no-hit searches and number of searches per user license;
provided, however, that the access and information provided hereunder shall be
so provided only for so long as the provision of such access and information
will not, in the reasonable judgment of the Company, be determined to be
detrimental to the Company's relationship with existing and potential suppliers
and customers, or otherwise materially adversely affect the operations of the
Company.
SECTION 6.03. Preemptive Rights. (a) Except in the case of
Excluded Securities, the Company shall not issue, sell or exchange, agree to
issue, sell or exchange, or reserve or set aside for issuance, sale or exchange,
any (i) shares of Common Stock, Preferred Stock or any other equity security of
the Company, (ii) any debt security of the Company which is convertible into
equity, or (iii) any option, warrant or other right to subscribe for, purchase
or otherwise acquire any equity security or any such debt security of the
Company, unless in each case the Company shall have first offered to sell to the
Purchaser its Proportionate Percentage (as defined below) of such securities
(the "Offered Securities"), at a price and on such other terms as shall
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have been specified by the Company in writing delivered to the Purchaser (the
"Offer"), which Offer by its terms shall remain open and irrevocable for a
period of 15 days from the date it is delivered by the Company to the Purchaser.
Notwithstanding the foregoing, in the event that the Company intends to take any
action described above, it shall provide the Purchaser with written notice not
later than 45 days prior to the taking of such action of such intent (the
"Preliminary Notice"). The Preliminary Notice shall set forth, to the extent
then known, the size of the issuance, and the price and other terms upon which
the Company intends to issue the securities. The Preliminary Notice shall not
constitute an offer to sell any securities to the Purchaser. After the
Preliminary Notice is delivered to the Purchaser, but prior to the delivery of
the Offer to the Purchaser, the Company will use its best efforts to provide the
Purchaser with written notice of any material changes in the size of the
issuance, the price and other material terms upon which the Company intends to
issue the securities.
(b) Notice of the Purchaser's intention to accept, in whole or
in part, the Offer made pursuant to Section 6.03(a) shall be evidenced by a
writing signed by the Purchaser and delivered to the Company prior to the end of
the 15-day period of such Offer, setting forth such portion of the Offered
Securities as the Purchaser elects to purchase (the "Notice of Acceptance").
(c) In the event that a Notice of Acceptance is not given by
the Purchaser in respect of all its Proportionate Percentage of the Offered
Securities, the Company shall have 90 days from the expiration of the foregoing
15-day period to sell all or any part of such Offered Securities as to which a
Notice of Acceptance has not been given by the Purchaser (the "Refused
Securities"), but only in all respects upon terms and conditions no more
favorable than those contained in the Offer. Upon the closing, the Purchaser
shall purchase from the Company, and the Company shall sell to the Purchaser,
the Offered Securities in respect of which a Notice of Acceptance was delivered
to the Company by the Purchaser, at the terms specified in the Offer. The
purchase by the Purchaser of any Offered Securities is subject in all cases to
the terms and conditions set forth in the purchase agreement (if any) with the
third party initially proposing the Offer.
(d) In each case, any Offered Securities not purchased by the
Purchaser or the other person or persons in accordance with Section 6.03(c) may
not be sold or otherwise disposed of until they are again offered to the
Purchaser under the procedures specified in Sections 6.03(a), (b) and (c).
(e) The rights of the Purchaser under this Section 6.03 shall
not apply to the following securities ("Excluded Securities"):
(i) Common Stock, or options to purchase or rights to
subscribe for such Common Stock, or securities by their terms convertible into
or exchangeable for such Common Stock, or options to purchase or rights to
subscribe for such convertible or exchangeable securities, issued to officers,
employees or directors of, or consultants
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to, the Company and in each case approved by the Board of Directors of the
Company; provided, however, that the maximum number of shares of Common Stock
hereafter issued or issuable to officers, employees or directors of, or
consultants to, the Company to which this clause (i) shad apply shall not exceed
the sum of (A) up to 800,000 shares pursuant to the Company's qualified
incentive stock plan (including any Common Stock issued pursuant to the exercise
of any such options) and (B) the greater of five and one-half percent (5 1/2%)
of all shares of Common Stock then outstanding or 700,000 shares of Common Stock
(the shares described in this clause (B) being issued pursuant to any
arrangements other than the incentive stock option plan);
(ii) Common Stock issued as a stock dividend or upon any
subdivision or combination of shares of Common Stock;
(iii) the Reserved Shares;
(iv) any Common Stock issued pursuant to the exercise of
options, warrants and rights outstanding as of the date hereof and listed on
Schedule 4.03 attached hereto (including any replacements or options, warrants
or rights issued in like amount upon the expiration of any such options,
warrants or rights);
(v) up to 714,286 shares of Common Stock, or securities by
their terms convertible into or exchangeable for such Common Stock, issued to
ITC pursuant to the provisions of Section 6.04 hereof, or, in the event that
such shares are not issued to ITC prior to 120 days from the date hereof, up to
714,286 shares of Common Stock or securities by their terms convertible into or
exchangeable for such Common Stock, issued upon terms and conditions no more
favorable, in the aggregate, than the terms and conditions of this Agreement; or
(vi) up to 357,143 shares of Common Stock, or securities by
their terms convertible into or exchangeable for such Common Stock, issued to
Polyventures or any venture capital fund or firm of which Xxxxxx Xxxxxxx is an
officer, director or principal, provided that such issuance is upon terms and
conditions no more favorable, in the aggregate, than the terms and conditions of
this Agreement.
(f) "Proportionate Percentage" shall mean that percentage
figure which expresses the ratio which (x) the number of shares of Common Stock
then owned by the Purchaser bears to (y) the aggregate number of shares of
Common Stock then issued and outstanding (or deemed to be issued and
outstanding) to all holders of Common Stock of the Company. For purposes solely
of the computation required under clauses (x) and (y) above, the Stock and any
other then issued and outstanding securities convertible into or exercisable or
exchangeable for shares of Common Stock shall be treated as having been
converted into or exercised or exchanged for shares of Common Stock at the rate
at which such securities are convertible into or exercisable or exchangeable for
shares of Common Stock in effect at the time of delivery by the Company of the
Offer as contemplated by Section 6.03(a) hereof.
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(g) The Company shall not grant licenses, franchises or
similar rights ("Rights") with respect to the services or property of the
Company in connection with the issuance of securities of the Company, without
consideration or for a consideration less than the reasonable value of such
Rights, unless such Rights are appraised and the resulting valuation is used in
discounting the consideration being offered by the proposed purchaser of such
securities or alternatively that the preemptive rights of the Purchaser to
purchase such securities include the right to purchase the Rights as well.
SECTION 6.04. Option Regarding Additional Investment.
(a) The Company agrees with the Purchaser that ItalCable
S.P.A., or any affiliate of ItalCable S.P.A. ("ITC"), shall have the right and
option to purchase, upon the terms and subject to the conditions set forth
herein (including all rights, duties, representations and warranties set forth
herein), 714,286 shares of Series C Preferred Stock (the "ITC Stock") at a price
of $1.40 per share at any time prior to 120 days from the date hereof. The
consummation of such purchase shall be subject to ITC's agreement to be bound by
and comply with all applicable provisions of the Company's Stockholders'
Agreement, and to be deemed a Stockholder thereunder.
(b) In the event that the Purchaser and ITC reasonably
determine (to the reasonable satisfaction of the Company) that it is necessary
that the ITC Stock be purchased by ITC from and through the Purchaser, the
Purchaser shall have the right to purchase the ITC Stock upon the terms and
subject to the conditions set forth in Section 6.04(a) above; provided, however,
the Purchaser must transfer the ITC Stock to ITC within sixty (60) days of its
purchase of the ITC Stock from the Company. In the event that the Purchaser
fails to transfer the ITC Stock to ITC within such 60-day period, the Company
shall have the right, but not the obligation, to rescind the purchase of the ITC
Stock by the Purchaser at any time after the expiration of such 60-day period,
and cancel the ITC Stock.
(c) Except with the prior approval of the Company, the ITC
Stock may be purchased in whole only. If the ITC Stock is issued to the
Purchaser pursuant to the provisions of Section 6.04(b) above, certificate(s)
representing the ITC Stock shall bear a legend (in addition to any other legends
required hereunder or by law) in form and substance satisfactory to the Company
and addressing the matters covered in Section 6.04(b) above. The provisions of
this Section 6.04 are for the Purchaser's benefit only, and no other person,
including, without limitation, ITC, shall gain any rights hereunder.
(d) For purposes of carrying out the provisions of this
Section 6.04, the Company has authorized the issuance of 714,286 shares of
Series C Preferred Stock to ITC, subject to the terms and conditions of this
Agreement.
(e) In addition to the rights granted to the Purchaser
pursuant to paragraphs (a) through (c) above, the Purchaser may transfer up to
714,285 shares of the Stock to, but only to, ITC on or before one hundred twenty
(120) days from the date
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hereof, subject to the terms and conditions of Section 2(d) of the Corporation's
Stockholders' Agreement, which permits such transfer, provided that ITC agrees
in writing, in the manner therein described, to be bound by and comply with all
applicable provisions of the Company's Stockholders' Agreement and to be deemed
a Stockholder thereunder.
SECTION 6.05. Purchase of Additional Securities by Purchaser.
Except with the prior approval of the majority of the disinterested members of
the Board of Directors of the Company, the Purchaser, from and after the date
hereof, shall not acquire, purchase, agree to acquire or purchase, (i) any
shares of Common Stock, Preferred Stock or any other equity security of the
Company, (ii) any debt security of the Company which is convertible into equity,
or (iii) any option, warrant or other right to subscribe for, purchase or
otherwise acquire any equity security or any such debt security of the Company
(the aforementioned being hereinafter referred to as an "Acquisition of
Securities"), from any person, firm, corporation or other entity; and any
purported Acquisition of Securities in violation of the provisions of this
Section 6.05 shall be null and void, and for purposes of the transfer of
securities on the Company's books, any such Acquisition of Securities shall not
be recognized or recorded; provided, however, that nothing in this Section 6.05
shall be deemed to affect the rights of the Purchaser (i) under the Company's
Stockholders' Agreement, (ii) pursuant to the provisions of Section 6.03 hereof,
or (iii) pursuant to the provisions of Section 6.04(b) hereof.
SECTION 6.06. Termination of Covenant. Notwithstanding
anything herein to the contrary, and except with respect to the provisions of
Section 6.04 above, which shall terminate one hundred twenty (120) days from the
date hereof, the provisions of Section 6 hereof shall terminate and shall cease
to be effective upon the consummation of a public offering of Common Stock
registered under the Securities Act; provided, however, that the provisions of
Sections 6.01 and 6.02 shall remain effective to the extent that the Company's
counsel advises is not in violation of any applicable securities laws.
SECTION 7. Transfer of Securities; Registration Rights.
SECTION 7.01. Restriction on Transfer. The Restricted
Securities (as hereinafter defined), 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, shall not be transferable except
upon the conditions specified in this Section 7.
SECTION 7.02. Definitions. As used in this Section 7, the
following terms shall have the following respective meanings:
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"Commission" shall mean the Securities and Exchange
Commission, or any other Federal agency at the time administering the
Securities Act.
"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.
"Restricted Securities" shall mean the Stock, the Reserved
Shares and any shares of capital stock received in respect of any
thereof, evidenced by certificates bearing the restrictive legend set
forth in Section 7.03.
"Restricted Shares" shall mean the shares of Common Stock
constituting Restricted Securities.
"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.
"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.
SECTION 7.03. 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 THEREOF. 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 TELEBASE SYSTEMS, INC. AND IN
ACCEPTABLE FORM AND SUBSTANCE THAT AN EXEMPTION THEREFROM IS
AVAILABLE UNDER SAID ACTS. THE SALE, TRANSFER, ASSIGNMENT,
PLEDGE, OR ENCUMBRANCE OF THE SECURITIES REPRESENTED BY THIS
CERTIFICATE AND
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THE RIGHTS OF THE HOLDER OF SUCH SECURITIES IN RESPECT OF THE
ELECTION OF DIRECTORS ARE SUBJECT TO (A) THE TERMS AND
CONDITIONS OF AN AMENDED AND RESTATED STOCKHOLDERS' AGREEMENT
DATED JULY 30, 1988 AMONG TELEBASE SYSTEMS, INC. AND OTHER
SIGNATORIES THERETO (AND NO TRANSFER OF THESE SECURITIES SHALL
BE VALID OR EFFECTIVE UNLESS SUCH TRANSFER IS IN ACCORD
THEREWITH) AND (B) THE CONDITIONS SPECIFIED IN SECTION 7 OF
THE STOCK PURCHASE AGREEMENT DATED AS OF AUGUST __, 1988,
BETWEEN TELEBASE SYSTEMS, INC. AND OTC INTERNATIONAL LIMITED
(AND NO TRANSFER OF THESE SECURITIES SHALL BE VALID OR
EFFECTIVE UNTIL SUCH CONDITIONS HAVE BEEN FULFILLED). COPIES
OF SUCH AGREEMENTS MAY BE OBTAINED AT NO COST BY WRITTEN
REQUEST MADE BY THE HOLDER OF RECORD OF THIS CERTIFICATE TO
THE SECRETARY OF TELEBASE SYSTEMS, INC."
Each certificate representing shares of Series A and Series B Preferred Stock is
or shall be imprinted with a substantially similar legend.
SECTION 7.04. 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 7.04. Each such notice shall describe the manner and
circumstances of the proposed transfer and, except in the case of a transfer of
Restricted Securities to ITC pursuant to the provisions of Section 6.04(e)
hereof, 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 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 Sections 7.05, 7.06 or 7.07 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
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any untransferred balance of such securities) shad bear the legends set forth in
Section 7.03 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.
SECTION 7.05. 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 shad 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 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.
SECTION 7.06. 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
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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 7.06 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 Section 7.06.
SECTION 7.07. Demand Registration. At any time after one year
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 of forms
promulgated by the Commission) the holders of shares of Common Stock into which
Preferred Stock 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.
SECTION 7.08. Designation of Underwriter.
(a) In the case of any registration effected pursuant to
Section 7.06 or 7.07, a majority in interest of the requesting holders of
Restricted Securities or Common Stock (in the case of a registration effected
pursuant to Section 7.07) 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 7.11 hereof.
(b) In the ease of any registration initiated by the Company,
the Company shall have the right to designate the managing underwriter in any
underwritten offering.
SECTION 7.09. 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.
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SECTION 7.10. Preparation and Filing. If and whenever the
Company is under an obligation pursuant to the provisions of this Section 7 to
effect the registration of any Restricted Shares, the Company shall, as
expeditiously as practicable:
(a) 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;
(b) 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;
(c) 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;
(d) 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; and
(e) 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 (b) of this Section 7.10,
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 the 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
the light of the circumstances then existing.
(f) furnish, upon request, to each requesting seller a signed
counterpart, addressed to the requesting seller or sellers, of (i) an opinion of
counsel for
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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 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.
SECTION 7.11. Expenses. All expenses incurred by the Company
in complying with Section 7.10 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 7.05, 7.06
or 7.07 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 Sections 7.05, 7.06 and 7.07 hereof shall be
borne by the seller or sellers thereof, in proportion to the number of
Restricted Shares sold by such seller or sellers.
SECTION 7.12. Indemnification. (a) In the event of any
registration of any Restricted Shares under the Securities Act pursuant to this
Section 7 or registration or qualification of any Restricted Shares pursuant to
Section 7.10(d), 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 7.10(d), 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
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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 7.10(d) 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.
(b) Before Restricted Shares held by any prospective seller
shall be included in any registration pursuant to Section 7, 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 7.12 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.
(c) 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 7.12, 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 7.12, 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
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counsel retained by the indemnified party which are reasonably related to the
matters covered by the indemnity agreement provided in this Section 7.12.
(d) 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 7.
(e) 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.
SECTION 8. Expenses. Each party will be responsible for
expenses incurred by it in connection with the negotiation of this Agreement and
consummation of the transactions contemplated hereby. The Company agrees that it
will pay, and will save the Purchaser harmless from, any and all liability with
respect to any stamp or similar taxes which may be determined to be payable in
connection with the execution and delivery of this Agreement or any
modification, amendment or alteration of the terms or provisions of this
Agreement, and that it will similarly pay and hold the Purchaser harmless from
all issue taxes, if any, in respect of the issuance of the Stock and the
Reserved Shares to the Purchaser.
SECTION 9. Exchanges; Lost, Stolen or Mutilated Certificates.
Upon surrender by the Purchaser to the Company of certificates for securities
purchased or acquired by the Purchaser hereunder, the Company at its expense
will issue in exchange therefor, and deliver to the Purchaser, a new certificate
or certificates representing such securities, in such denomination or
denominations as may be requested by the Purchaser. Upon receipt of evidence
satisfactory to the Company of the loss, theft, destruction or mutilation of any
certificate representing any securities purchased or acquired by the Purchaser
hereunder, and in case of any such loss, theft or destruction, upon delivery of
any indemnity agreement satisfactory to the Company, or in case of any such
mutilation, upon surrender and cancellation of such certificate, the Company at
its expense will issue and deliver to the Purchaser a new certificate for such
securities of like tenor, in lieu of such lost, stolen or mutilated certificate.
SECTION 10. Survival of Representations, Warranties and
Agreements; Etc. All representations and warranties made by the Company and the
Purchaser hereunder shall survive the Closing for a period of 3 years following
the Closing (except for the representations and warranties set forth in Sections
4.03, 4.04, 4.09, 4.10, 4.15 and 4.16 hereof which shall survive indefinitely
and except for the representations and warranties set forth in Section 4.19
hereof, which shall survive until the expiration of the applicable statute of
limitations under Pennsylvania or Federal law) and all covenants and agreements
made by the Company hereunder shall survive in accordance with their terms
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(or, if not specified by such terms, indefinitely). All statements contained in
any certificate or other instrument delivered by the Company pursuant to this
Agreement shall constitute representations and warranties by the Company under
this Agreement.
SECTION 11. Indemnification. Each party shall, with respect to
the representations, warranties and agreements made by such party herein,
indemnify, defend and hold the other harmless against all liability, loss or
damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses), arising from the untruth,
inaccuracy or breach of any such representations, warranties or agreements of
such party; provided, however, that the Company shall not be liable for any
liability, loss or damage with respect to representations and warranties of the
Company (other than as set forth in Section 4.04 or 4.05 hereof) unless and
until the aggregate of the liability, loss or damage suffered equals or exceeds
$50,000 at which time the Company shall be liable hereunder for all such
liabilities, losses or damages; and, provided further, the Company shall, in any
event, have no liability to the Purchaser hereunder for consequential, exemplary
or incidental damages.
SECTION 12. Remedies. In case any one or more of the covenants
and/or agreements set forth in this Agreement shall have been breached by the
Company, the Purchaser may proceed to protect and enforce its rights either by
suit in equity and/or by action at law, including, but not limited to, an action
for damages as a result of any such breach and/or an action for specific
performance of any such covenant or agreement contained in this Agreement,
provided that the foregoing shall not change the time period during which a
claim for indemnification pursuant to Section 10 or 11 hereof shall be made.
SECTION 13. Miscellaneous.
SECTION 13.01. Notices. All notices, requests, consents and
other communications hereunder to any party shall be deemed to be sufficient if
contained in a written instrument delivered in person or duly sent by first
class registered or certified mail, postage prepaid, addressed to such party at
the address set forth below or such other address as may hereafter be designated
in writing by the addressee to the addressor listing all parties:
(i) If to the Company, to:
Telebase Systems, Inc.
000 Xxxx Xxxxxxxxx Xxxxxx
Xxxx Xxxx, XX 00000
Attention: Xxxxx X. Xxxxx, President
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with a copy to:
Dilworth, Paxson, Xxxxxx & Xxxxxxxx
0000 Xxx Xxxxxxxx Xxxxxxxx
Xxxxxxxxxxxx, XX 00000-0000
Attention: Xxxxxxx X. Xxxxxxxx, Esq.
(ii) If to the Purchaser, to:
OTC International Limited
000 Xxxxxxxxx Xxxxxx
Xxxxxx X.X.X.
Xxxxxxxxx
Attention: Xxxxxxx Xxxxx Shore, Executive Director
with a copy to:
Nixon, Hargrave, Devans and Xxxxx
Xxx Xxxxxx Xxxxxx, X.X.
Xxxxx 000
Xxxxxxxxxx, X.X. 00000
Attention: Xxxxxx X. Xxxxxxxx, Esq.
All notices and other communications given to any party hereto in accordance
with the provisions of this Agreement shall be deemed to have been given on the
date of delivery if personally delivered, on the business day after the date
when sent if sent by air courier, and on the earlier of receipt by the sender of
an official postal acknowledgement therefor or of telephonic confirmation of
receipt by the addressee, if sent by mail, in each case addressed to such party
as provided in this Section 13.01 or in accordance with the latest unrevoked
direction from such party.
SECTION 13.02. No Waivers. No failure or delay of the
Purchaser in exercising any power or right hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right or power, or
any abandonment or discontinuance of steps to enforce such a right or power,
preclude any other or further exercise thereof or the exercise of any other
right or power. The rights and remedies of the Purchaser hereunder are
cumulative and not exclusive of any rights or remedies which they would
otherwise have. No notice or demand on the Company in any case shall entitle the
Company to any other or further notice or demand in similar or other
circumstances.
SECTION 13.03. Governing Law. This Agreement shall be
construed in accordance with and governed by the laws of the Commonwealth of
Pennsylvania, without reference to principles of choice of laws.
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SECTION 13.04. Changes, Waivers, Etc. Neither this Agreement
nor any provision hereof may be changed, waived, discharged or terminated
orally, but only by a statement in writing signed by the party against which
enforcement of the change, waiver, discharge or termination is sought.
SECTION 13.05. Successors and Assigns. This Agreement shall be
binding upon and inure to the benefit of the Company, the Purchaser and each of
their respective successors and assigns. The Company may not assign or transfer
any of its rights or obligations hereunder without the written consent of the
Purchaser. The Purchaser shall have the right to assign its rights and
obligations hereunder only (i) to the Parent, or to a subsidiary or affiliate
which is controlled by the Purchaser or the Parent or (ii) as provided for by
Section 6.04 hereof, to ITC.
SECTION 13.06. Severability. In case any one or more of the
provisions contained in this Agreement or the Stock should be invalid, illegal
or unenforceable in any respect, the validity, legality and enforceability of
the remaining provisions contained herein and therein shall not in any way be
affected or impaired thereby. The parties shall endeavor in good faith
negotiations to replace the invalid, illegal or unenforceable provisions with
valid provisions the economic effect of which comes as close as possible to that
of the invalid, illegal or unenforceable provisions.
SECTION 13.07. Section Headings. The section headings used
herein are for convenience of reference only, are not part of this Agreement and
are not to affect the construction of or be taken into consideration in
interpreting this Agreement.
SECTION 13.08. Jurisdiction. The parties hereto agree that any
suit, action or proceeding instituted against one or more of them with respect
to this Agreement (including any Exhibits or Schedules attached hereto) may be
brought in any Federal or state court located in the Eastern District of the
Commonwealth of Pennsylvania. The parties hereto, by the execution and delivery
of this Agreement, irrevocably waive any obligation or any right of immunity on
the ground of venue, the convenience of the forum or the jurisdiction of such
courts, or from the execution of judgments resulting therefrom, and the parties
hereto hereby irrevocably accept and submit to the jurisdiction of the aforesaid
courts in any suit, action or proceeding and consent to service of process by
certified mail at the address set forth in Section 13.01 hereof.
SECTION 13.09. Counterparts. This Agreement may be signed in
any number of counterparts with the same effect as if the signatures thereto and
hereto were upon the same instrument.
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed on their behalf as of the day and year first above
written.
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[SEAL] TELEBASE SYSTEMS, INC.
Attest:_____________________________ By:___________________________________
Xxxxx X. Xxxx, Secretary Xxxxx X. Xxxxx, President
OTC INTERNATIONAL LIMITED
By:___________________________________
Xxxxxxx Xxxxx Shore, Executive Director
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