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EXHIBIT 4.9
STOCK PURCHASE AGREEMENT
This Stock Purchase Agreement is entered into as of the 30th
day of August, 1994, by and among Telebase Systems, Inc., a
Pennsylvania corporation with its principal place of business at 000
Xxxxx Xxxx Xxxxx, Xxxxx, XX 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, the Purchasers shall purchase at the Closing and
the Company shall sell and issue to each of the Purchasers, severally and not
jointly, at the Closing, an aggregate of 650,000 shares of the Company's Series
D Convertible Preferred Stock (the "Preferred Shares") in the amounts set forth
opposite such Purchaser's name on the Schedule of Purchasers.
(b) PURCHASE PRICE. The purchase price shall be $2.00 per
Preferred Share.
(c) CLOSING. The purchase and sale shall take place at the
Offices of Dilworth, Paxson, Xxxxxx & Xxxxxxxx, 3200 Xxxxxx Bank Center, 0000
Xxxxxx Xxxxxx, Xxxxxxxxxxxx, XX 00000 on August 30, 1994, or at such other time,
date or place as the Company and the subscribers for at least eighty percent
(80%) of the Preferred Shares to be issued hereunder shall mutually agree (which
time, date and place are referred to in this Agreement as the "Closing"). At the
Closing, the Company shall deliver to each of the Purchasers certificates
representing the Preferred Shares that the Purchaser is purchasing against
delivery to the Company by the Purchaser of immediately available funds.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The Company
represents and warrants to each Purchaser that:
(a) CORPORATE RECORDS. The Company has previously made
available to special counsel for the Purchasers the Company's complete corporate
minute and stock books, including all formal corporate actions of the Company's
Board of Directors and shareholders, whether by meeting or written consents in
lieu of a meeting. Such records are true and correct and remain in full force
and effect except as provided therein to the contrary.
(b) ORGANIZATION AND STANDING. The Company is a corporation
duly organized, validly existing and in good standing under the laws of the
Commonwealth of Pennsylvania, and has all requisite corporate power and
authority to carry on its business as now conducted and as proposed to be
conducted. The Company is qualified to do business as a foreign corporation and
is in good standing in each jurisdiction in which the nature of its activities
or the ownership of its properties makes such qualification necessary. True and
accurate copies of the Company's Articles of Incorporation as amended and
By-laws, as presently in effect, have been delivered to special counsel for the
Purchasers.
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(c) CAPITALIZATION.
(i) AUTHORIZED CAPITAL. Following filing of the
Statement contemplated by Section 7(a) below (the "Statement"), and at the time
of Closing, the authorized capital of the Company will consist of:
(A) 500,000 shares of Series A Preferred Stock of
which 488,838 shares have been issued.
(B) 625,000 shares of Series B Preferred Stock,
all of which have been issued.
(C) 2,857,143 shares of Series C Preferred Stock,
of which 2,142,857 shares have been issued.
(D) 1,000,000 shares of Series D Convertible
Preferred Stock, no par value, none of which have been issued.
(E) 20,000,000 shares of Common Stock, no par
value (the "Common Stock") of which 5,817,857 shares shall be validly issued and
outstanding, fully paid and non-assessable, 1,034,000 shares are reserved for
issuance upon exercise of options under the Company's Incentive Stock Option
Plan, 484,563 shares are reserved for issuance upon exercise of other options
and warrants, 488,838 shares are reserved for issuance upon conversion of the
Company's Series A Preferred Stock (which number will increase to 563,177 shares
by reason of the transaction contemplated hereby), 714,286 shares are reserved
for issuance upon conversion of the Company's Series B Preferred Stock and
2,400,000 shares are reserved for issuance upon conversion of the Company's
Series C Preferred Stock.
The rights, privileges and preferences of the Preferred Shares will be as stated
in the Statement.
(ii) RESERVATION OF SHARES. The Company has
reserved 2,000,000 shares of Common Stock for issuance upon conversion of the
Preferred Shares. 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),
and for such rights as may be created by this Agreement.
(iii) LIST OF SHAREHOLDERS. Exhibit A is a complete
and correct list of the record owners and beneficial owners of all of the
Company's outstanding capital stock holding more than 100,000 shares (including
the amount owned by each such owner) as of the date of this Agreement.
(iv) 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. Except as set forth in Exhibit B, the
Company does not presently own or control, nor has it ever owned or controlled,
directly or indirectly, any other corporation, association, joint venture,
partnership or other business entity or any capital stock or other securities of
any thereof.
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(e) AUTHORIZATION. The Company has the requisite power and
authority to enter into and perform its obligations under this Agreement. All
corporate action on the part of the Company and its officers, directors and
shareholders necessary for the authorization, execution, delivery and
performance of all obligations of the Company under this Agreement, and for the
authorization, issuance and delivery of the Preferred Shares (and the Common
Stock issuable upon conversion of all Preferred Shares) has been taken prior to
the Closing. This Agreement is a valid and legally binding obligation of the
Company, enforceable in accordance with its terms.
(f) VALIDITY-STOCK. The Preferred Shares, when issued, sold
and delivered in accordance with the terms of this Agreement, shall be duly and
validly issued, fully paid 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 has furnished
the Purchasers with its audited balance sheet as of December 31, 1993 (the
"Year-end Balance Sheet") and statement of income for the fiscal year then
ended, together with its balance sheet as of July 31, 1994 (the "Interim Balance
Sheet") and income statement for the seven months then ended (collectively, the
"Financial Statements"). 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 Interim Balance Sheet, none of which are
unusual in type, scope or amount.
(iii) ENCUMBRANCES. The accounts and notes
receivable reflected on the Interim 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 Interim Balance Sheet, without setoff, third party
collection efforts or suit (but net of reserves for doubtful accounts, if any,
set forth in the Interim Balance Sheet), and the subsequently created accounts
and notes receivable of the Company from July 31, 1994 to the Closing Date will
be free and clear of any claim, pledge, security interest or lien or encumbrance
of any kind or nature whatsoever, and will be good and fully collectible in the
normal course of business in substantially the amounts thereof without setoff,
third-party collection efforts or suit (but net of reserves for doubtful
accounts, if any, set forth in the Interim Balance Sheet).
(h) CHANGES. Since the date of the Interim 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)
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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. A list of the real property owned or leased by the
Company is set forth on Exhibit C hereto.
(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 or any state securities law authority pursuant to
applicable blue sky laws.
(k) COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation of any provisions of its Articles of Incorporation or By-laws as
amended and in effect on and as of the Closing or of any provision of any
mortgage, indenture, agreement, instrument or contract to which it is a party,
or of any provision of any federal or state judgment, writ, decree, order,
statute, rule or governmental regulation applicable to the Company. The
execution, delivery and performance of this Agreement will not result in any
such violation, or be in conflict with or constitute a default under any such
provision, or result in the creation or imposition of any lien pursuant to any
such provision.
(l) GOVERNMENTAL PERMITS. The Company has all federal,
state, municipal and foreign licenses and permits required in the conduct of its
business, and such licenses and permits are in full force and effect.
(m) ENVIRONMENTAL MATTERS. The Company does not discharge or
handle, nor is the Company aware of the storage or other presence on any of the
property currently or previously leased by the Company of, any hazardous
substances (as defined in the Comprehensive Environmental Response, Compensation
and Liability Act of 1980, as amended).
(n) MISLEADING STATEMENTS. No representation or warranty by
the Company in this Agreement or in any Schedule or Exhibit hereto, or in any
written statement or certificate furnished or to be furnished to Purchasers
pursuant to this 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) PROJECTIONS. The Company's Financial Projections
attached hereto as Exhibit D are derived from reasonable assumptions at the time
such projections were made, and the Company believes that subject to the
qualifications set forth below, the Purchasers are justified in relying thereon.
The Purchasers acknowledge that the assumptions do not present the only, or even
necessarily the most likely, set of events that will occur over the period
covered
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by the projections, and the projections shall not be deemed a representation by
the Company that the assumed facts will, in fact occur. The Company does not
believe that any assumptions of fact on which the projections are based are
unreasonable or false or lack the disclosure of any material fact or assumption
necessary, to make such projections not misleading. As of the date hereof, no
facts have come to the attention of the Company which would require the Company
to revise or amplify the assumptions underlying the projections
(p) LITIGATION. There is no action, proceeding or
investigation pending or, to the Company's knowledge, threatened against the
Company or any of its employees before any court or administrative agency (or
any basis therefor known to the Company) that might result, either individually
or in the aggregate, in any material adverse change in the business, prospects,
condition, affairs, operation, 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. A brief description of each action, proceeding or investigation
pending or threatened against the Company or brought against the Company or any
officer or director thereof during the last three years is set forth on Exhibit
E hereto.
(q) INTELLECTUAL PROPERTY. Attached hereto, made part hereof
and marked as Exhibit F is a true and correct schedule which describes all of
the patents (including all reissues, divisions, continuations and extensions
thereof), applications for patents, patent disclosures docketed, inventions,
improvements, trademarks, trademark applications, trade names, copyright
registrations or applications therefor and proprietary computer software or
similar property owned by the Company, and all licenses, franchises, permits,
authorizations, agreements and arrangements that concern any of the foregoing or
that concern like items owned by others and used by the Company. Except as
indicated on such Exhibit,
(i) The patents shown on such Exhibit are owned by
the Company free and clear of all mortgages, liens, charges or encumbrances
whatsoever. No licenses have been granted with respect to such patterns 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.
(ii) The copyright registrations shown on such
schedule are owned by the Company 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 (copies of which have bun furnished
to Purchasers), 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 shown on such
schedule are owned by the Company 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
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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. Except as set forth in Exhibit F, the Company has no
obligation to pay any royalty to any third party with respect to such
information. The Company has not granted any license or other permission with
respect to the use of such information and has not received notice of any claims
by a third party suggesting that the Company's use of such information would
infringe the rights of any third party. All technical information developed by
or belonging to the Company which has not been patented but would be legally
protectible if held in confidence has been kept confidential.
(v) The Company has not granted or assigned to any
other person or entity any license or right to manufacture, have manufactured,
process or have processed or sell the products or services, or proposed products
or services, of the Company, other than duly authorized Company representatives
and distributors. All subcontractors have assigned to the Company, in writing,
all right, title and interest in and to the work that they performed for the
Company.
(R) 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.
(s) EMPLOYMENT AGREEMENTS AND PLANS. The Company does not
have any employment contracts with any of its employees not terminable at will
as that term is defined under the laws of Pennsylvania. The Company is not
delinquent in payments to any of its employees for wages, salaries, commissions,
bonuses or other direct or indirect compensation. True and complete copies of
any employment contract or arrangement or letter pertaining to the terms of
employment of any officer or employee of the Company have been supplied to
special counsel for Purchasers. Except as set forth in Exhibit G, the Company is
not now, nor has it been, a party to or obligated to contribute to any employee
benefit plan as defined in Section 3(3) of the Employee Retirement Income
Security Act of 1974 ("ERISA") (an "Employee Benefit Plan"), guaranteed annual
income plan, fund or arrangement, or any incentive, bonus, profit-sharing
deferred compensation, stock option or purchase plan or agreement or
arrangement,
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or any employment or consulting agreement or any other agreement, plan or
arrangement similar to or in the nature of the foregoing.
(t) 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 acts, 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.
(u) 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.
(v) INSURANCE. The Company has fire and casualty insurance
policies, with extended coverage, sufficient in amount (subject to reasonable
deductibles) to allow it to replace any of its properties that might be damaged
or destroyed, and to cover all other risks of loss or liability customarily
insured against and in benefit amounts customarily obtained by companies
similarly situated.
(w) REGISTRATION RIGHTS. Except as set forth in Exhibit H,
or as provided for in this Agreement, the Company is not under any obligation to
register under the Securities Act of 1933, as amended (the "1933 Act"), any of
its presently outstanding securities or any securities into which such
securities may be converted.
(x) 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.
(y) PRODUCT AND SERVICE WARRANTIES. Exhibit I sets forth
descriptions of all of the product and service warranty claims made against the
Company. The financial statements referred to in Section 2(g) include
appropriate accrual of the cost of satisfying such claims and the cost of
servicing products and making adjustments or providing replacements with respect
to returned products or non-conforming services. The Company is not aware of any
additional 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.
(z) 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. Exhibit J contains a
complete and accurate list of all customers whose purchases from the Company
exceeded 5% of the revenues of the Company for the fiscal year ended December
31, 1993 and for the seven-month period ended July 31, 1994.
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(aa) RELATED PARTY TRANSACTIONS. Except as set forth on
Exhibit K hereto, no current or proposed director, officer, stockholder or
associate (as such term is defined in Rule 12b-2 promulgated under the
Securities Exchange Act of 1934, as amended) of the Company is currently or has
during the three years prior to execution of this Agreement, directly or
indirectly through his or its affiliation with any other person or entity, 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.
(bb) 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 copies of such
assignments and agreements (or a representative sample thereof) have been
supplied to special counsel for the Purchasers. The Company does not have any
noncompetition agreements with its employees.
(cc) 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 PURCHASERS. Each of the
Purchasers, severally and not jointly, represents and warrants as follows.
(a) BINDING EFFECT. This Agreement 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. It understands that
the Preferred Shares are not, and any Common Stock acquired on the conversion
thereof 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 Purchasers' representations set forth
herein.
(b) INVESTMENT EXPERIENCE. 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 their investment, and has the ability to bear the economic
risks of its investment.
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(c) LIMITS IMPOSED BY LAW UPON TRANSFER. It understands that
the Preferred Shares and any Common Stock 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 Common Stock issued on
conversion thereof or an available exemption from registration under the 1933
Act, the Preferred Shares or Common Stock issued on conversion thereof must be
held indefinitely.
(d) ACCREDITED INVESTOR. It is an Accredited Investor, as
defined in Regulation D promulgated under the 1933 Act.
(e) NOT DISTRIBUTING. The Preferred Shares it is purchasing
hereunder are acquired for investment for its own account, not as a nominee or
agent, and not with a view to the resale or distribution of any part thereof,
and that it has no present intention of selling, granting any participation in,
or otherwise distributing the same.
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 conditions contained in this
Section 5, any of which may be waived by the subscribers for at least eighty
percent (80%) of the Preferred Shares to be issued hereunder:
(a) REPRESENTATIONS AND WARRANTIES TRUE ON CLOSING. The
representations and warranties of the Company contained in Section 2 shall be
true on and as of the Closing with the same force and effect as if they had been
made at the Closing (except to the extent that they expressly relate to an
earlier date).
(b) PERFORMANCE. The Company shall have performed and
complied with all agreements, conditions and covenants contained in this
Agreement required to be performed or complied with by it on or before the
Closing.
(c) QUALIFICATIONS. All authorizations, approvals or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required in connection with lawful issuance and
sale of the Preferred Shares pursuant to this Agreement shall have been duly
obtained and shall be effective on and as of the Closing.
(d) COMPLIANCE CERTIFICATE. There shall have been delivered
to each of Purchasers a certificate, dated as of the Closing, signed by the
Company's President or a Vice President, certifying that the conditions
specified in this Section 5 as to the Closing have been fulfilled.
(e) OPINION OF COUNSEL. Purchasers shall have received from
counsel for the Company an opinion dated as of the Closing, in the form annexed
as Exhibit N.
(f) 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 special counsel and Purchasers
shall have received all such counterpart originals or certified or other copies
of such documents as they may reasonably request.
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(g) 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.
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 following
conditions:
(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) SHAREHOLDERS' AGREEMENT. The Purchasers other than Poly
Ventures II, L.P. (which is already a party) shall have been executed and
delivered a Joinder Agreement pursuant to which it becomes a party to the
Corporation's Amended and Restated Shareholders' Agreement dated as of June 30,
1988.
(d) PAYMENT FOR PREFERRED SHARES. The Company shall have
received payment for the Preferred Shares to be purchased hereunder.
(e) COMPLIANCE CERTIFICATE. There shall have been delivered
to the Company a certificate, dated as of the Closing, signed by an authorized
representative of each Purchaser, certifying that the conditions specified in
paragraphs (a) and (b) of this Section 6 as to the Closing have been fulfilled.
7. COVENANTS OF THE COMPANY.
(a) DESIGNATION OF PREFERRED SHARES. As soon as practicable
after execution of this Agreement, the Company shall adopt and file and keep in
force with the Secretary of State of the Commonwealth of Pennsylvania a
Statement Affecting Class or Series of Stock attached to this Agreement as
Exhibit L designating the Preferred Shares.
(b) ANNUAL AND QUARTERLY FINANCIAL STATEMENTS. The Company
shall maintain a standard system of accounting in accordance with generally
accepted accounting principles applied on a consistent basis and shall make and
keep books, records and accounts which, in reasonable detail, accurately and
fairly reflect its transactions. Until such time as the Company is required to
file reports under Sections 13 and 14 of the 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 flow
for such year, certified, without qualification as to scope of the
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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 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.
(c) BUSINESS PLAN AND PROJECTIONS. As soon as available,
but in any event within forty-five (45) days after commencement of each new
fiscal year, a business plan and projected financial statements for such fiscal
year.
(d) ADDITIONAL INFORMATION. If at the time of reference
a director designated by the holders of the Preferred Shares shall not be in
office, the following provisions shall apply.
(i) Upon the written request of any Purchaser, the
Company shall also furnish to a representative designated by a majority of the
Purchasers, with reasonable promptness, such other information relating to the
financial affairs of the Company as is furnished or made available (or not so
furnished or made available but required by law to be furnished or made
available) to directors of the Company.
(ii) The representative so designated shall have
the same obligations with respect to protection and nondisclosure (other than to
the Purchaser) of any information so furnished as a director of the Company
would have with respect to such information.
(e) NONDISCLOSURE AND INVENTION ASSIGNMENTS. The Company
will continue to cause each officer, key employee and consultant of the Company
to enter into an agreement with the Company relating to the assignment of
inventions and nondisclosure of confidential information, in substantially the
form supplied to special counsel for Purchasers.
(f) USE OF PROCEEDS, The proceeds from the sale of Preferred
Shares shall be used for working capital and marketing, and expenses of closing,
payment of existing liabilities and other routine expenses including salaries
and accounts payable heretofore accrued in the ordinary course of the Company's
business, approximately in the amounts set forth on Exhibit M.
(g) TAXES. The Company will promptly pay and discharge or
cause to be paid and discharged, when due and payable, all lawful assessments,
and governmental charges or levies imposed upon the income, profits, property or
business of the Company; provided, however, that any such tax, assessment,
charge or levy need not be paid if the validity thereof shall currently be
contested in good faith by appropriate proceedings and if the Company shall have
set aside on its books adequate reserves with respect thereto, and provided
further, that the Company will pay all such taxes, assessments, charges or
levies forthwith upon the commencement of proceedings to foreclose any lien that
may have attached as security therefor. The Company will promptly pay or cause
to be paid when due, or in conformance with customary trade terms, all other
indebtedness incident to the operations of the Company.
(h) MAINTENANCE OF PROPERTIES. The Company will keep its
properties in good repair, working order and condition, reasonable wear and tear
excepted, and from time to
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time make all needful and proper repairs, renewals, replacements, additions and
improvements thereto; the Company will at all times comply with the provisions
of all material leases to which it is a party or under which it occupies
property so as to prevent any loss or forfeiture thereof or thereunder.
(i) INSURANCE. The Company will keep its assets that are of
an insurable character insured by financially sound and reputable insurers
against loss or damage by fire, extended coverage and explosion insurance in
amounts customary for companies in similar businesses similarly situated; and
the Company will maintain, with financially sound and reputable insurers,
insurance against other hazards, risks and liabilities to persons and property
to the extent and in the manner customary for companies in similar businesses
similarly situated.
(j) GOVERNMENTAL REQUIREMENTS. The Company will duly
observe and conform to all valid requirements of governmental authorities
relating to the conduct of its businesses or to its property or assets.
(k) CORPORATE EXISTENCE, LICENSES, ETC. The Company shall
maintain in full force and effect its corporate existence, rights and franchises
and all licenses and other rights to use patents, processes, licenses,
trademarks, trade names or copyrights owned or by it and deemed by the Company
to be significant to the conduct of its business.
(l) REQUIRED FILINGS. The Company will cooperate in filing
any notices of sale required to be filed with the Securities and Exchange
Commission pursuant to Regulation D promulgated under the Securities Act of 1933
or any state securities law authority pursuant to applicable blue sky laws.
(m) INCENTIVE STOCK OPTIONS. Promptly following the Closing,
the Company shall increase the number of shares available for issuance under its
Incentive Stock Option Plan to 3,000,000, and shall issue an additional 500,000
incentive stock options under that plan at an exercise price of $0.65 per share
to such members of management, and in such proportions, as the Compensation
Committee of the Board of Directors may determine.
(n) DIRECTORS. At the next meeting of shareholders, which
shall be held not later than September 30, 1994, the Company will take such
steps as may be necessary so that a designee of holders of a majority of the
Preferred Shares shall be duly elected to serve as a director on the Board of
Directors of the Company.
(o) TERMINATION OF COVENANTS. The covenants set forth in
this Section 7 shall terminate and be of no further force or effect after the
date of the closing of the Company's first public offering of its securities
amounting to not less than $5,000,000 at a price per share to the public equal
to at least two times the conversion price of the Preferred Shares then in
effect.
8. REGISTRATION RIGHTS.
(a) DEFINITIONS. As used in this Section 8, the following
terms shall have the following, respective meanings:
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(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.
(iii) "Restricted Securities" shall mean the
Preferred Shares, the Common Stock issuable upon conversion thereof and any
shares of capital stock received in respect of any thereof, evidenced by
certificates bearing the restrictive legend set forth in Section 8(b).
(iv) "Restricted Shares" shall mean the 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 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 OBLIGATIONS OF THE HOLDER OF
SUCH SECURITIES IN RESPECT OF THE ELECTION OF DIRECTORS ARE
SUBJECT TO THE TERMS AND CONDITIONS OF AN AMENDED AND RESTATED
STOCKHOLDERS' AGREEMENT DATED JULY 30, 1988 AMONG TELEBASE
SYSTEMS, INC. AND OTHER SIGNATORIES THERETO. XXXXX OF SUCH
AGREEMENT MAY BE OBTAINED AT NO COST BY WRITTEN REQUEST MADE
BY THE HOLDER OF RECORD OF THIS
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CERTIFICATE TO THE SECRETARY OF TELEBASE SYSTEMS,
INC.
This legend shall be in lieu of the legend otherwise required by the
Stockholders' Agreement referred to above. Each certificate representing shares
of Series A, Series B and Series C Preferred Stock is or shall be imprinted with
a substantially similar legend.
(c) NOTICE OF TRANSFER. The holder of any Restricted
Securities, by acceptance thereof, agrees, prior to any transfer of any
Restricted Securities, to give written notice to the Company of such holder's
intention to effect such transfer and to comply in all other respects with the
provisions of this Section 8(c). Each such notice shall describe the manner and
circumstances of the proposed transfer and shall be accompanied by (a) the
written-opinion, addressed to the Company, of counsel reasonably acceptable to
the Company for the holder of Restricted Securities, as to 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 ease 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 8(d), 8(e) or
8(f) hereof, as the case may be. If in the opinion of such counsel the proposed
transfer of Restricted Securities may be effected without registration under the
Securities Act and state securities acts, the holder of Restricted Securities
shall thereupon be entitled to transfer Restricted Securities in accordance with
the terms of the notice delivered by it to the Company. Each certificate or
other instrument evidencing the securities issued upon the transfer of any
Restricted Securities (and each certificate or other instrument evidencing any
untransferred balance of such securities) shall bear the legends set forth in
Section 8(b) unless (a) in the opinion of such counsel registration of future
transfer is not required by the applicable provisions of the Securities Act and
state securities acts or (b) the Company shall have waived the requirement of
such legends. Except as provided above, the holder of Restricted Securities
shall not transfer such Restricted Securities until such opinion of counsel has
been given to the Company (unless waived by the Company) or until registration
of the Restricted Shares involved in the above-mentioned request has become
effective under the Securities Act.
(d) INCIDENTAL REGISTRATION. If the Company proposes for any
reason to register any of its securities under the Securities Act (other than
pursuant to a registration statement on Forms S-8 or S-4 or similar or successor
forms), it shall each such time promptly give written notice to all holders of
outstanding Restricted Securities of its intention to do so, and, upon the
written request, given within 30 days after receipt of any such notice of the
holder of any such Restricted Securities to register any Restricted Shares
(which request shall specify the Restricted Shares intended to be sold or
disposed of by such holders), the Company shall use its best efforts to cause
all such Restricted Shares to be included in such registration under the
Securities Act, all to the extent requisite to permit the sale or other
disposition (in accordance with the Company's intended methods thereof, as
aforesaid) by the prospective seller or sellers of the Restricted Shares so
registered. In the event that the proposed registration by the Company is, in
whole or in part, an underwritten public offering of securities of the Company,
if the managing underwriter determines and advises 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
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Restricted Securities (the "Other Shares") would interfere with the successful
marketing of such securities, then (i) the number of Restricted Shares and Other
Shares shall be reduced, pro rata among the holders of Other Shares and the
holders of Restricted Shares (based upon the number of shares of Common Stock
requested by the holders thereof to be registered in such underwritten public
offering), and (ii) in each case those shares of Common Stock which are excluded
from the underwritten public offering shall be withheld from the market by the
holders thereof for a period, not to exceed 90 days, which the managing
underwriter reasonably determines as necessary in order to effect the
underwritten public offering.
(e) REGISTRATIONS ON FORM S-2 OR S-3. At such time as the
Company shall have qualified for the use of Form S-2 or S-3 (or any similar form
or forms promulgated by the Commission), the holders of Restricted Securities
shall have the right to request an unlimited number of registrations on Form S-2
or S-3 (which request or requests shall be in writing, shall specify the
Restricted Shares intended to be sold or disposed of by 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 Section
8(e).
(f) DEMAND REGISTRATION. At any time after 180 days from the
effective date of the Company's registration statement covering its initial
public offering, but prior to the time that the Company shall have qualified for
the use of Form S-2 or S-3 (or any similar form of forms promulgated by the
Commission) the holders of shares of Common Stock into which Preferred Shares
shall have been converted shall have the right to request the Company to file
one registration statement on any form which the Company is then entitled to
use. Such request shall be in writing, shall specify the shares of Common Stock
(into which the Preferred Stock shall have been converted) intended to be sold
or disposed of by the holders thereof, shall state the intended method of
disposition by the holder(s) requesting such registration and shall relate to
Common Stock having a proposed aggregate gross offering price (before deduction
of underwriting discounts and expenses of sale) of at least $500,000, and the
Company shall be obligated to effect such registration, subject in any event to
all applicable securities laws and all requirements of the Company's investment
banker.
(g) DESIGNATION OF UNDERWRITER.
(i) In the case of any registration effected pursuant
to Section 8(e) or 8(f), a majority in interest of the requesting holders of
Restricted Securities or 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.
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(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. If and whenever the Company is
under an obligation pursuant to the provisions of this Section 8 to effect the
registration of any Restricted Shares, the Company shall, as expeditiously as
practicable:
(i) prepare and file with the Commission a
registration statement with respect to such securities and use its best efforts
to cause such registration statement to become and remain effective;
(ii) prepare and file with the Commission such
amendments and supplements to such registration statements and the prospectus
used in connection therewith as may be necessary to keep such registration
statement effective and 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; and
(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 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.
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(vi) furnish, upon request, to each requesting seller
a signed counterpart, addressed to the requesting seller or sellers, of (i) an
opinion of counsel for the Company, dated the effective date of the registration
statement, and (ii) a "comfort" letter signed by the independent public
accountants who have certified the Company's financial statements included in
the registration statement, covering substantially the same matters with respect
to the registration statement (and the prospectus included therein) and (in the
case of the "comfort" letter) with respect to events subsequent to the date of
the financial statements, as are customarily covered (at the time of such
registration) in opinions of issuer's counsel and in "comfort" letters delivered
to the underwriters in underwritten public offerings of securities.
(j) EXPENSES. All expenses incurred by the Company in
complying with Section 8(i) shall be paid by the Company, including, without
limitation, all registration and filing fees, printing expenses, blue sky filing
fees, fees and disbursements of counsel for the Company and expenses of any
required audits; provided, however, that (a) the Company shall not be obligated
for payment of the fees and disbursements of counsel for the holders of
Restricted Securities in connection with registration under Section 8(d), 8(e)
or 8(f) hereof and (b) all underwriting discounts and selling commissions and
other similar fees and costs applicable to the Restricted Shares covered by
registrations effected pursuant to Sections 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
persons, if any, who controls any of the foregoing persons, within the meaning
of the Securities Act, against any losses, claims, damages or liabilities, joint
or several, to which any of the foregoing persons may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages or
liabilities (or actions in respect thereof) arise out of or are based upon an
untrue statement or alleged untrue statement of a material fact contained in any
registration statement under which such Restricted Shares were registered under
the Securities Act, any preliminary prospectus or final prospectus contained
therein, or any amendment or supplement thereto, or any document prepared and/or
furnished by the Company incident to the registration or qualification of any
Restricted Shares pursuant to Section 8(i)(iv), or arise out of or are based
upon the omission or alleged omission to state therein a material fact required
to be stated therein or necessary to make the statements therein not misleading
or, with respect to any prospectus, necessary to make the statements therein in
light of the circumstances under which they were made, not misleading, or any
violation 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
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or qualification of any Restricted Shares pursuant to Section 8(i)(iv), in
reliance upon and in conformity with written information furnished to the
Company by such seller or such seller's agent or representative specifically for
use in the preparation thereof.
(ii) Before Restricted Shares held by any
prospective seller shall be included in any registration pursuant to Section 8,
such prospective seller and any underwriter acting on its behalf shall have
agreed to indemnify and hold harmless (in the same manner and to the same extent
as set forth in the preceding paragraph of this Section 8(k) or, if different,
in the manner and to the extent as is in accordance with standard industry
practice at the time of the proposed sale) the Company, each director of the
Company, each officer of the Company who shall sign such registration statement,
and any person who controls the Company within the meaning of the Securities
Act, with respect to any untrue statement or omission from such registration
statement, any preliminary prospectus or final prospectus contained therein, or
any amendment or supplement thereto, if such untrue statement or omission was
made in reliance upon and in conformity with written information furnished to
the Company by such seller or such seller's agent or representative specifically
for use in the preparation of such registration statement, preliminary
prospectus, final prospectus or amendment or supplement.
(iii) Promptly after receipt by an indemnified party
of notice of the commencement of any action involving a claim referred to in the
preceding paragraphs of this Section 8(k), such indemnified party will, if a
claim in respect thereof is made against an indemnifying party, give written
notice to the latter of the commencement of such action. In case any such action
is brought against an indemnified party, the indemnifying party will be entitled
to participate in and to assume the defense thereof, jointly 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), as the case
may be, in such proportion as is appropriate to reflect the relative fault of
the Company and such seller or underwriter (and any person who controls any of
the foregoing persons, and any person acting on behalf of any of the foregoing
in connection with such registration, including, without limitation, any
officer, director, broker, employee, agent, attorney or accountant, and in the
case of a partnership, each of its partners), as the case may be, in connection
with the statements or omissions which resulted in such losses, claims, damages
or liabilities, as well as all other relevant equitable considerations;
provided, however, that no person guilty of fraudulent misrepresentation (within
the meaning of Section 11(f) of the Securities Act) shall be entitled to
contribution from any person who was not guilty of such fraudulent
misrepresentation and provided, further, that in the case of each seller, the
maximum amount of such contribution shall be limited to an amount equal to the
net proceeds actually received by such seller from the sale of Restricted Shares
effected pursuant to such registration. Any party entitled to contribution under
this paragraph shall, promptly after receipt of notice of commencement of any
action, suit or proceeding against such party in respect of which a claim for
contribution may be made against another party or parties under this paragraph,
notify such party or parties from whom contribution may be sought, but the
omission to so notify such party or parties shall not relieve the party or
parties from whom contribution may be sought from any other obligation it or
they may have hereunder or otherwise than under this paragraph.
(m) REPORTS UNDER SECURITIES EXCHANGE ACT OF 1934. With a
view to making available to the holders of the Restricted Securities the
benefits of Rule 144 promulgated under the Act and any other rule or regulation
of the SEC that may at any time permit a holder to sell securities of the
Company to the public without registration, the Company agrees to use its best
efforts to:
(i) make and keep public information available, as
those terms are understood and defined in Rule 144, at all times subsequent to
ninety (90) days after the effective date of the first registration statement
covering an underwritten public offering filed by the Company;
(ii) file with the SEC 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 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
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any rule or regulation of the SEC permitting the selling of any such securities
without registration.
(n) TRANSFER OF REGISTRATION RIGHTS. The registration rights
of Purchasers under Sections 8(d) 8(e) and 8(f) may be transferred to a
transferee who acquires at least 20% of the Registrable Securities originally
issued to Purchasers, or to a partner or affiliated partnership of a Purchaser
without restriction as to minimum transfer amount. The Company shall be given
written notice by the Holder at the time of such transfer stating the name and
address of the transferee and identifying the securities with respect to which
the rights under this Section 8 are being assigned. Such registration right
shall not be otherwise transferable without the consent of the Company.
9. MISCELLANEOUS.
(a) ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations or covenants except as specifically set forth herein
or therein. The terms and conditions of this Agreement shall inure to the
benefit of and be binding upon the respective heirs, personal representatives,
successors and assigns of the parties, except to the extent assignability is
limited herein.
(b) GOVERNING LAW. This Agreement shall be governed by and
construed under the laws of the Commonwealth of Pennsylvania.
(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 designate by ten days' advance written
notice to the other party.
(f) FINDERS' FEES. Each party represents that it neither is,
nor will be, obligated for any finders' fee or commission in connection with
this transaction. Each Purchasers 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 finders' 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.
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(g) EXPENSES. The Company shall pay all out of pocket
expenses of the Purchasers (not to exceed $5,000), plus reasonable fees,
expenses and disbursements of one special counsel for Purchasers (not to exceed
$10,000), incurred in connection with the negotiation, execution, delivery and
performance of this Agreement.
(h) 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.
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IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
TELEBASE SYSTEMS, INC.
By:
----------------------------------
UNTERBERG HARRIS INTERACTIVE
MEDIA LIMITED PARTNERSHIP C.V.
By:
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POLY VENTURES II, L.P.
By:
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Exhibit A List of Record Owners
Exhibit B Subsidiaries
Exhibit C List of Real Property
Exhibit D Financial Projections
Exhibit E Schedule of Litigation
Exhibit F Intellectual Property
Exhibit G Employee Plans, etc.
Exhibit H Registration Rights Previously Granted
Exhibit I Description of Warranty Claims
Exhibit J Principal Customers
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