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EXHIBIT 4.19
Portions of this Exhibit have been omitted pursuant to a request for
confidential treatment. The omitted portions, marked by [****], have been
separately filed with the Commission.
N2K INC.
00 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
September 16, 1997
America Online, Inc.
00000 XXX Xxx
Xxxxxx, Xxxxxxxx 00000
Gentlemen:
You and we have entered into an Interactive Marketing Agreement dated as of
September 1, 1997 (the "Marketing Agreement") and have reached certain
understandings regarding your desire to participate in the equity of N2K Inc.
We, therefore, propose the following:
1. America Online, Inc. ("AOL") will commit to purchase $3,000,000 worth of N2K
Inc.'s ("N2K") Common Stock, par value $. 001 per share from the underwriters,
in a proposed initial public offering of N2K's shares of Common Stock that
satisfies the criteria set forth in the third sentence of this paragraph 1 (the
"IPO"), provided that such offering occurs no later than December 31, 1997. N2K
agrees to cause sufficient shares to be made available to the underwriters for
the purpose of fulfilling the requirements for the purchase of the N2K shares by
AOL as set forth in the first sentence of this paragraph 1 (the "N2K
Commitment"). The per share purchase price will be the same price as the per
share purchase price to the public in the offering (the "IPO Price"), but shall
not include any underwriting discounts or commissions on said sale, such that
all $3,000,000 shall apply to the purchase of shares. This commitment to
purchase shares will be contingent upon N2K entering into a firm commitment
underwriting agreement with one or more reputable underwriting firms (i.e. a
"bulge bracket" firm like PaineWebber or Xxxxxxx Xxxxx, a regional firm like
Xxxxxxxxx Xxxxxxxxx or Xxxxxxx Xxxxx or a known technology firm like Xxxxxxxxx &
Xxxxx or Xxxxxxxxx Xxxxxx) for an offering that will result in net proceeds to
N2K of at least $25 million (including the $3 million commitment from AOL
hereunder), a post-offering market capitalization of at least $100 million and a
listing on a national stock exchange or the NASDAQ National Market System. AOL
will agree to a lock-up on the shares purchased in the offering for a period not
to exceed 180 days (or such lesser period as may be requested by the
underwriters in the offering), provided that N2K uses it best efforts to cause
all holders of its shares to enter into a lock-up agreement on the terms
outlined above and the holders of at least 85% of the outstanding shares,
including all directors of N2K and its management so agree, and that only N2K's
shares are offered in the IPO, i.e. there are no selling shareholders in the
IPO.
2. Immediately following the purchase of the shares of N2K Common Stock on the
terms set forth in paragraph 1 hereof and the consummation of the IPO, N2K will
issue AOL a warrant
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exercisable for such number of shares as results from dividing $3,510,000 by the
per share IPO Price. For example, if the IPO Price is $15 per share, the warrant
will be exercisable for 234,000 shares. The exercise price for the warrant
shares shall be the IPO Price. The warrant will be exercisable as to one-half of
the total shares on the first anniversary of the issuance of the warrant and as
to the balance of the shares on the second anniversary of the issuance of the
warrant. The term of the warrant will be seven years from the date of issuance.
In the event of a change of control following the issuance of the warrants, the
warrant shall become immediately exercisable. For purposes of this paragraph, a
"change of control" shall mean one or more shareholders of N2K (other than
Messrs. Xxxxx Xxxxx, Xxx Xxxxxxx and Xxxx Xxxxxx) obtains the right to designate
a majority of the members on N2K's Board of Directors or acquires sufficient
voting stock of N2K necessary to elect a majority of the seats on N2K's Board of
Directors, N2K merges with another entity and the N2K shareholders prior to the
merger do not retain control of the combined entity, or N2K sells substantially
all of its assets or capital stock.
3. If an IPO of N2K has occurred by December 31, 1997 then the terms of this
paragraph 3 shall not apply. If an IPO of N2K has not previously occurred, then
on the earlier to occur of: (a) the date N2K withdraws its S-1 Registration
Statement currently on file with the Securities and Exchange Commission and (b)
December 31, 1997, N2K will issue to AOL a warrant to purchase such number of
shares as would equal [****] of the outstanding shares of N2K's Common Stock on
a fully-diluted basis (i.e. assuming the exercise of all outstanding options and
warrants and the conversion or exchange of any securities convertible or
exchangeable into N2K Common Stock). The warrant will be exercisable into shares
of N2K Series G Preferred Stock, if N2K shareholders approve the designation and
issuance of additional shares of that series and N2K agrees to uses its diligent
and reasonable best efforts to cause this approval to be obtained. In the event
that such approval is not obtained, then the warrant will be exercisable into
shares of N2K Common Stock. The exercise price for the warrant shares will be
[****] per share, i.e the purchase price of the Series F and Series G Preferred
Stock of N2K (subject to appropriate adjustment in the event of stock splits,
stock dividends and recapitalizations) and the terms of the warrant will permit
either a cash or "cashless" exercise thereof. The term of the warrant will be
[****] years from the date of issuance and will be exercisable as to [****] of
the shares on the date of issuance. The warrant will not be exercisable as to
the balance of the shares issuable pursuant to the warrant until N2K has earned
[****] (as that term is defined in the Marketing Agreement). In the event of a
"change of control" as defined in paragraph 2 hereof (other than a change of
control that results in a termination of the Marketing Agreement), the warrant
shall become immediately exercisable. The terms of this warrant will provide
anti-dilution protection to AOL in the form of additional shares being made
subject to the warrant such that AOL will be able to exercise into [****] of the
outstanding shares of N2K Common Stock on a fully diluted basis. This
anti-dilution protection shall apply during the Initial Term of the Marketing
Agreement. Thereafter, no such adjustment shall be made to the number of shares
subject to the warrant. If, however, the warrant is exercisable into shares of
Common Stock rather than Series G Preferred, then the warrantholders will be
entitled, after the Initial Term of the Marketing Agreement, to the weighted
average anti-dilution protection provided in the terms of the Series G Preferred
Stock.
4. If an IPO of N2K occurs after December 31, 1997 but on or before September
30, 1998, then AOL shall, in its sole and absolute discretion, have the right to
elect to be subject to the terms of paragraphs 1 and 2 hereof, i.e. it can elect
to be obligated, subject to the N2K Commitment, to
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make the purchase commitment specified in paragraph 1 hereof on the terms
specified therein notwithstanding the December 31, 1997 date set forth in
paragraph 1 and, if it does so, be entitled to obtain the warrants set forth in
paragraph 2 hereof on the terms specified therein. Regardless of whether or not
AOL exercises the option set forth in this paragraph 4, it shall, upon
consummation of the IPO (unless N2K has in the interim merged with another
entity and the N2K shareholders prior to the merger do not retain control of the
combined entity, or N2K has sold substantially all of its assets or capital
stock), forfeit any and all rights under the warrant issued under paragraph 3
hereof and shall surrender same to N2K without any cost to or payment by N2K,
and shall, at N2K's option, resell to N2K any shares acquired pursuant to an
exercise of the warrant at their original purchase price. The warrant and any
shares obtained by N2K pursuant to the terms of this paragraph shall be
cancelled by N2K.
5. If the warrant contemplated by paragraphs 2 or 3 is issued, N2K will provide
registration rights to AOL for the underlying Common Stock into which the
warrant is exercisable or if the warrant is exercisable into Series G Preferred
Stock, the shares of Common Stock into which they are convertible, on terms no
less favorable than those provided to its Series G Preferred Stockholders, which
include a demand right and unlimited "piggyback" rights, subject to pro rata
cut-back, if required by underwriters, which rights are embodied in Section 8 of
the Stock Purchase Agreement for the Series G Preferred Stock, dated as of 25
April, 1997 (the "Series G Stock Purchase Agreement").
6. In connection with the issuance of any warrants under either paragraphs 2 or
3 above, you hereby agree to provide customary representations regarding your
status as an "accredited investor" and investment intent, and N2K agrees to (a)
provide representations and warranties as are customary in transactions of this
type, including but not limited to the authority to issue the warrants, (b)
reserve and issue the appropriate number of shares of Common Stock or Series G
Preferred Stock and Common Stock to permit full exercise of the warrant and
conversion of any underlying convertible securities, and (c) grant to AOL,
provided it continues to hold any N2K shares or warrants, the benefits of the
same rights and the same covenants, on the same terms and conditions as are
provided to the holders of the Series G shares as set forth in Section 7 of the
Series G Stock Purchase Agreement.
7. AOL shall have the right to review any references to AOL that appear in any
registration statements filed with the Securities and Exchange Commission by
N2K, provided, that AOL shall not unreasonably object to such references and,
provided further, that this review right shall not impede N2K in meeting its
disclosure obligations under applicable securities laws, as reasonably
interpreted by its counsel.
8. The forms of the warrants and the terms of the registration rights specified
herein shall be substantially in the form of the warrants issued by N2K to
certain institutional investors in August 1997 and the form of the registration
rights granted to the Series G Preferred Stock in Section 8 of the Series G
Stock Purchase Agreement, each as modified by the express terms of this
agreement.
9. EXCEPT AS EXPRESSLY SET FORTH IN THIS AGREEMENT OR AS CONTEMPLATED BY
PARAGRAPH 6 HEREOF, NEITHER PARTY MAKES ANY, AND EACH PARTY HEREBY SPECIFICALLY
DISCLAIMS ANY REPRESENTATIONS OR WARRANTIES,
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EXPRESS OR IMPLIED, WITH RESPECT TO THIS AGREEMENT OR THE TRANSACTIONS
CONTEMPLATED HEREBY.
10. The parties to this agreement are independent contractors. Neither party is
an agent, representative or partner of the other party. Neither party shall have
any right, power or authority to enter into any agreement for or on behalf of,
or incur any obligation or liability of, or to otherwise bind, the other party.
This agreement shall not be interpreted or construed to create an association,
agency, joint venture or partnership between the parties or to impose any
liability attributable to such relationship upon either party.
11. Any notice, approval, request, authorization, direction or other
communication under this agreement shall be given in writing and shall be deemed
to have been delivered and given for all purposes (i) on the delivery date if
delivered by electronic mail; (ii) on the delivery date if delivered personally
to the party to whom the same is directed; (iii) one business day after deposit
with a commercial overnight carrier, with written verification of receipt, or
(iv) five business days after the mailing date, whether or nor actually
received, if sent by U.S. mail, return receipt requested, postage and charges
prepaid, or any other means of rapid mail delivery for which a receipt is
available to the person(s) specified in writing from time to time by the
parties.
12. The failure of either party to insist upon or enforce strict performance by
the other party of any provision of this agreement or to exercise any right
under this agreement shall not be construed as a waiver or relinquishment to any
extent of such party's right to assert or rely upon any such provision or right
in that or any other instance; rather, the same shall be and remain in full
force and effect.
13. The agreement and all other writings referred to herein sets forth the
entire agreement and supersedes any and all prior agreements of the parties with
respect to the transactions set forth herein. Neither party shall be bound by,
and each party specifically objects to, any term, condition or other provision
which is different from or in addition to the provisions of this agreement
(whether or nor it would materially alter this agreement) and which is proffered
by the other party in any correspondence or other document, unless the party to
be bound thereby specifically agrees to such provision in writing.
14. No change, amendment or modification of any provision of this agreement
shall be valid unless set forth in a written instrument signed by the party
subject to enforcement of such amendment.
15. Each party shall take such action (including, but not limited to, the
execution, acknowledgment and delivery of documents) as may reasonably be
requested by any other party for the implementation or continuing performance of
this agreement.
16. This agreement shall be fully binding upon, inure to the benefit of and be
enforceable by the parties hereto and their respective successors and assigns.
17. In the event that any provision of this agreement conflicts with the law
under which this agreement is to be construed or if any such provision is held
invalid by a court with jurisdiction over the parties to this agreement, (i)
such provision shall be deemed to be restated to reflect as
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nearly as possible the original intentions of the parties in accordance with
applicable law, and (ii) the remaining terms, provisions, covenants and
restrictions of this agreement shall remain in full force and affect.
18. Except where otherwise specified, the rights and remedies granted to a party
under this agreement are the rights or remedies which the party may possess at
law or equity.
19. This agreement shall be interpreted, construed and enforced in all respects
in accordance with the laws of the Commonwealth of Virginia, except for its
conflicts of laws principles. Each party irrevocably consents to the exclusive
jurisdiction of the courts of the Commonwealth of Virginia and the federal
courts situated in the Commonwealth of Virginia, in connection with any action
to enforce the provisions of this Agreement, to recover damages or other relief
for breach or default under this agreement, or otherwise arising under or by
reason of this agreement.
20. The captions and headings used in this agreement are inserted for
convenience only and shall not affect the meaning or interpretation of this
agreement.
22. Without the consent of the other party, except as may be required to be
disclosed by applicable law, governmental authorities or judicial and
administrative proceedings, the parties shall seek to keep the terms of this
agreement confidential.
23. This agreement may be executed in counterparts, each of which shall be
deemed an original and all of which together shall constitute one and the same
document.
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If the foregoing conforms to your understanding of our agreement, please sign
one copy of this letter agreement and return it to us. Thereupon, this letter
shall constitute a binding agreement between us.
Very truly yours,
N2K INC.
By: /s/ Xxxxxxxx X. Xxxxxxx
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Name: Xxxxxxxx X. Xxxxxxx
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Title: VICE CHAIRMAN
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ACCEPTED AND AGREED TO:
AMERICA ONLINE, INC.
By: /s/ Xxxxx X. Xxxxxxx
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Name: Xxxxx X. Xxxxxxx
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Title: SVP
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