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IMPROVENET, INC.
SECOND SERIES E PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
DATED NOVEMBER 23, 1999
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INDEX OF EXHIBITS
Schedule of Purchasers . . . . . . . . . . . . . . . . . Exhibit A
Form of Warrant Agreement. . . . . . . . . . . . . . . . Exhibit B
Second Restated Certificate of Incorporation . . . . . . Exhibit C
Schedule of Exceptions . . . . . . . . . . . . . . . . . Exhibit D
Third Amended and Restated
Investor Rights Agreement . . . . . . . . . . . . . . Exhibit E
Third Amended and Restated Right
of First Refusal and Co-Sale Agreement. . . . . . . . Exhibit F
Third Amended and Restated Voting Agreement. . . . . . . Exhibit G
List of Stockholders, Optionholders
and Warrantholders. . . . . . . . . . . . . . . . . . Exhibit H
Financial Statements . . . . . . . . . . . . . . . . . . Exhibit I
Proprietary Information and Inventions Agreement . . . . Exhibit J
Form of Legal Opinion . . . . . . . . . . . . . . . . . Exhibit K
Press Release. . . . . . . . . . . . . . . . . . . . . . Exhibit L
i.
TABLE OF CONTENTS
PAGE
SECTION 1.AGREEMENT TO SELL AND PURCHASE ................................... 1
1.1 Authorization of Shares and Warrants ............................. 1
1.2 Sale and Purchase ................................................ 1
SECTION 2.CLOSING, DELIVERY AND PAYMENT .................................... 2
2.1 Closing .......................................................... 2
2.2 Delivery ......................................................... 2
2.3 Subsequent Sales of Shares ....................................... 2
SECTION 3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY .................... 2
3.1 Organization, Good Standing and Qualification .................... 2
3.2 Capitalization; Voting Rights .................................... 2
3.3 Authorization; Binding Obligations ............................... 3
3.4 Financial Statements ............................................. 4
3.5 Liabilities ...................................................... 4
3.6 Agreements; Action ............................................... 4
3.7 Obligations to Related Parties ................................... 5
3.8 Changes .......................................................... 5
3.9 Title to Properties and Assets; Liens, etc ....................... 6
3.10 Patents and Trademarks ........................................... 7
3.11 Compliance with Other Instruments ................................ 7
3.12 Litigation ....................................................... 8
3.13 Tax Returns and Payments ......................................... 8
3.14 Employees ........................................................ 9
3.15 Proprietary Information and Inventions Agreements ................ 9
3.16 Obligations of Management ........................................ 10
3.17 Registration Rights and Voting Agreements ........................ 10
3.18 Compliance with Laws; Permits .................................... 10
3.19 Environmental and Safety Laws .................................... 10
3.20 Offering Valid ................................................... 10
3.21 Full Disclosure .................................................. 11
3.22 Qualified Small Business ......................................... 11
i.
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.23 Minute Books ..................................................... 11
3.24 Insurance ........................................................ 11
3.25 Small Business Concern ........................................... 11
3.26 Year 2000 Compliance ............................................. 12
3.27 Foreign Corrupt Practices Act .................................... 12
3.28 Directors and Officers ........................................... 12
SECTION 4.REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS ................. 12
4.1 Requisite Power and Authority .................................... 12
4.2 Investment Representations ....................................... 13
4.3 Transfer Restrictions ............................................ 14
SECTION 5.CONDITIONS TO CLOSING ............................................ 14
5.1 Conditions to Purchasers' Obligations at the First Closing ....... 14
5.2 Conditions to Obligations of the Company ......................... 15
SECTION 6.MISCELLANEOUS .................................................... 16
6.1 Governing Law .................................................... 16
6.2 Survival ......................................................... 16
6.3 Successors and Assigns ........................................... 16
6.4 Entire Agreement ................................................. 16
6.5 Severability ..................................................... 17
6.6 Amendment and Waiver ............................................. 17
6.7 Delays or Omissions .............................................. 17
6.8 Waiver of Conflicts .............................................. 17
6.9 Notices .......................................................... 18
6.10 Transfer Taxes ................................................... 18
6.11 Expenses ......................................................... 18
6.12 Attorneys' Fees .................................................. 18
6.13 Titles and Subtitles ............................................. 18
6.14 Counterparts ..................................................... 18
ii.
TABLE OF CONTENTS
(CONTINUED)
PAGE
6.15 Broker's Fees .................................................... 18
6.16 Press Releases/Use of Parties' Name .............................. 19
6.17 Exculpation Among Purchasers ..................................... 19
6.18 Pronouns ......................................................... 19
iii.
IMPROVENET, INC.
SECOND SERIES E PREFERRED STOCK AND WARRANT
PURCHASE AGREEMENT
THIS SECOND SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT (the
"AGREEMENT") is entered into as of December 7, 1999, by and among IMPROVENET,
INC., a Delaware corporation (the "COMPANY") and each of those persons and
entities, severally and not jointly, whose names are set forth on the
Schedule of Purchasers attached hereto as EXHIBIT A (which persons and
entities are hereinafter collectively referred to as "PURCHASERS" and each
individually as a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of (i) two million two hundred fifty-nine thousand two hundred
fifty-nine (2,259,259) of its Series E Preferred Stock (the "SHARES") and
(ii) warrants in the form of EXHIBIT B to purchase up to ninety five (95,000)
shares of its Common Stock (the "Warrants");
WHEREAS, Purchasers desire to purchase the Shares and the Warrants on
the terms and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares and the
Warrants to the Purchasers on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES AND WARRANTS. On or prior to the First
Closing (as defined in Section 2 below), the Company shall have authorized
(a) the sale and issuance to Purchasers of the Shares and the Warrants, (b)
the issuance of shares of Common Stock to be issued pursuant to the exercise
of the Warrants (the "Warrant Shares") and (c) the issuance of such shares of
common stock to be issued upon conversion of the Shares (the "CONVERSION
SHARES") and the Warrant Shares. The Shares, the Warrant Shares and the
Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Third Amended and Restated Certificate of
Incorporation of the Company in the form attached hereto as EXHIBIT C (the
"RESTATED CERTIFICATE"). The warrants shall be in the form and have the
rights set forth in the form of Warrant attached hereto as EXHIBIT B.
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing the Company hereby agrees to issue and sell to each Purchaser,
severally and not jointly, and each Purchaser agrees to purchase from the
Company, severally and not jointly, the number of Shares and Warrants set
forth opposite such Purchaser's name on EXHIBIT A at an aggregate purchase
price for each Purchaser set forth opposite such Purchaser's name.
1.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares and
Warrants under this Agreement (the "FIRST CLOSING") shall take place on the
date hereof at the offices of Xxxxxx Godward LLP, 0000 Xxxx Xxxx Xxxx,
Xxxxxxxx 0, Xxxxx 000, Xxxxx Xxxx, Xxxxxxxxxx or at such other time and place
as the Company and the Purchaser may mutually agree (such date is hereinafter
referred to as the "FIRST CLOSING DATE").
2.2 DELIVERY. At the First Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing
the number of Shares and warrant certificates or agreements representing the
Warrants to be purchased at the First Closing by each Purchaser, against
payment of the purchase price therefor by check, wire transfer made payable
to the order of the Company, cancellation of indebtedness or any combination
of the foregoing.
2.3 SUBSEQUENT SALES OF SHARES. At any time on or before the 90th day
following the First Closing, the Company may sell up to the balance of the
authorized shares of Series E Preferred Stock and Warrants not sold at the
First Closing to such persons as may be approved by the Board of Directors of
the Company. All such sales shall be made on the terms and conditions set
forth in this Agreement, including, without limitation, the representations
and warranties by such Purchasers as set forth in Section 4. Any Shares of
Series E Preferred Stock and Warrants sold pursuant to this Section 2.3 shall
be deemed to be "SHARES" and "WARRANTS", respectively, for all purposes under
this Agreement and any purchasers thereof shall be deemed to be "PURCHASERS"
for all purposes under this Agreement.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as specifically set forth under the corresponding section number
of the Schedule of Exceptions attached hereto as EXHIBIT D, the Company
hereby represents and warrants to each Purchaser as of the First Closing as
follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Investor Rights Agreement, the Co-Sale Agreement
and the Voting Agreement (collectively, the "RELATED AGREEMENTS"), to issue
and sell the Shares and the Warrants and to issue the Conversion Shares and
the Warrant Shares and to carry out the provisions of this Agreement, the
Related Agreements and the Restated Certificate and to carry on its business
as presently conducted and as presently proposed to be conducted. The
Company is duly qualified and is authorized to do business and is in good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary. The Company does not have any investment in,
control, either directly or indirectly, nor own any equity securities of any
other corporation, limited partnership or similar entity. The Company is not
a participant in any joint venture, partnership or similar arrangement. The
Company has delivered to the Purchasers true and complete copies of its
Bylaws and Restated Certificate as currently in effect.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company, immediately prior to the First Closing, will consist of (a) thirty
four million (34,000,000) shares of common stock, of which (i) one million
six hundred eighty one thousand three hundred nineteen (1,684,319) shares are
issued and outstanding, (ii) one hundred ninety nine thousand three hundred
fourteen (199,314) shares are reserved for future issuance to employees
pursuant to the Company's
2.
Amended and Restated 1996 Stock Option Plan, (iii) two million one hundred
ninety three thousand four hundred six (2,193,406) shares are subject to
outstanding options pursuant to the Amended and Restated 1996 Stock Option
Plan and (iv) ten thousand (10,000) shares are subject to outstanding
warrants to purchase common stock, and (b) twelve million four hundred
eighty-two thousand nine hundred thirty-five (12,482,935) authorized shares
of preferred stock, of which (i) one million three hundred one thousand four
hundred (1,301,400) are designated Series A Preferred Stock, one million two
hundred seven thousand (1,207,000) of which are issued and outstanding and
ninety-four thousand four hundred (94,400) of which are reserved for issuance
pursuant to outstanding warrants to purchase Series A Preferred Stock, (ii)
one million nine hundred eighty-one thousand five hundred thirty-five
(1,981,535) are designated Series B Preferred Stock, one million nine hundred
thirty-four thousand five hundred twenty-six (1,934,526) of which are issued
and outstanding and forty-seven thousand nine (47,009) of which are reserved
for issuance pursuant to outstanding warrants to purchase Series B Preferred
Stock, (iii) three million seven hundred thousand (3,700,000) are designated
Series C Preferred Stock, three million five hundred forty three thousand one
hundred ninety (3,543,190) of which are issued and outstanding and forty
seven thousand one hundred sixty seven (47,167) of which are reserved for
issuance pursuant to an outstanding warrant to purchase Series C Preferred
Stock, (iv) two million five hundred thousand (2,500,000) are designated
Series D Preferred Stock, two million one hundred thousand eight hundred
forty three (2,100,843) of which are issued and outstanding and three hundred
twenty six thousand (326,000) of which are reserved for issuance to
outstanding warrants to purchase Series D Preferred Stock and (v) three
million (3,000,000) are designated Series E Preferred Stock, none of which
are issued and outstanding as of the date hereof. All issued and outstanding
shares of the Company's common stock and preferred stock (I) have been duly
authorized and validly issued to the persons listed on EXHIBIT H hereto, (II)
are fully paid and nonassessable, and (III) were issued in compliance with
all applicable state and federal laws concerning the issuance of securities.
The rights, preferences, privileges and restrictions of the Shares are as
stated in the Restated Certificate. The Conversion Shares and the Warrant
Shares have been duly and validly reserved for issuance. Other than as set
forth on EXHIBIT H, and except as may be granted pursuant to the Related
Agreements, there are no outstanding options, warrants, rights (including
conversion or preemptive rights and rights of first refusal), proxy or
stockholder agreements, voting agreements or agreements of any kind for the
purchase or acquisition from the Company of any of its securities. EXHIBIT H
reflects a complete and accurate list of all the Company's outstanding
shares, warrants, convertible or exchangeable securities and options as of
the time immediately after the First Closing and EXHIBIT H reflects any
dilution and exercise of preemptive rights triggered by the transactions
contemplated hereby. When issued in compliance with the provisions of this
Agreement and the Restated Certificate, the Shares, the Warrants, the
Conversion Shares and the Warrant Shares will be validly issued, fully paid
and nonassessable, and will be free of any liens or encumbrances; PROVIDED,
HOWEVER, that the Shares, the Warrants, the Conversion Shares and the Warrant
Shares may be subject to restrictions on transfer under state and/or federal
securities laws as set forth herein or as otherwise required by such laws at
the time a transfer is proposed.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement and the Related Agreements, the
performance of all obligations of the Company hereunder and thereunder at the
First Closing and the authorization, sale, issuance and delivery of the
Shares, the Warrants and the Warrant Shares pursuant hereto and the
Conversion Shares pursuant to the Restated Certificate has been taken or will
be taken prior to the First Closing. The Agreement and the Related
Agreements, when executed and delivered, will be valid and binding
obligations of the Company enforceable in accordance with their terms, except
(a) as limited by applicable bankruptcy, insolvency, reorganization,
moratorium or other laws of general application affecting enforcement of
creditors' rights, (b) general principles of equity that restrict the
availability of equitable remedies and (c) to the extent that the
enforceability of the
3.
indemnification provisions in Section 3.9 of the Investor Rights Agreement
may be limited by applicable laws. The sale of the Shares, the Warrants, the
Warrant Shares and the subsequent conversion of the Shares and the Warrant
Shares into Conversion Shares are not and will not be subject to any
preemptive rights or rights of first refusal that have not been properly
waived or complied with.
3.4 FINANCIAL STATEMENTS. The Company has delivered to each Purchaser
(a) its audited balance sheet, an audited profit and loss statement,
statement of cash flows and statement of shareholders' equity for the twelve
(12) month period ending on December 31, 1998, (b) its unaudited balance
sheet, unaudited profit and loss statement, unaudited statement of cash flows
and statement of shareholders' equity for the nine (9) month period ending on
September 30, 1999 (collectively, the "FINANCIAL STATEMENTS"), copies of
which are attached hereto as EXHIBIT I. The Financial Statements, together
with the notes thereto, are complete and correct in all material respects and
present fairly the financial condition, results of operations, cash flows and
shareholders' equity and position of the Company as of September 30, 1999;
PROVIDED, HOWEVER, that the unaudited financial statements are subject to
normal recurring year-end audit adjustments (which are not expected to be
material) and do not contain all footnotes required under generally accepted
accounting principles.
3.5 LIABILITIES. The Company has no material liabilities whether
accrued, absolute, contingent, known or unknown or due or to become due not
disclosed in the Financial Statements, except current liabilities incurred in
the ordinary course of business subsequent to September 30, 1999 which have
not been, either in any individual case or in the aggregate, materially
adverse. In any event, the Company has no liabilities in the aggregate in
excess of $25,000.
3.6 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby and
agreements between the Company and its employees with respect to the sale of
the Company's common stock, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 in the aggregate (other than obligations of, or
payments to, the Company arising from purchase or sale agreements entered
into in the ordinary course of business), (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company
(other than licenses arising from the purchase of "off the shelf" or other
standard products or entered into in the ordinary course of business), (iii)
provisions restricting or affecting the development, manufacture or
distribution of the Company's products or services or the Company's ability
to solicit the Company's employees or otherwise restricting the Company's
ability to do business in any geographic area, or (iv) indemnification by the
Company with respect to infringements of proprietary rights (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends, or
authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in
the ordinary course of business) individually in excess of $25,000 or, in the
case of indebtedness and/or liabilities individually less than $25,000, in
4.
excess of $50,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company
other than (a) for payment of current salary for services rendered, (b)
reimbursement for reasonable expenses incurred on behalf of the Company and
(c) for other standard employee benefits made generally available to all
employees (including stock option agreements outstanding under any stock
option plan approved by the Board of Directors of the Company). None of the
officers, directors or stockholders of the Company, or any members of their
immediate families, are indebted to the Company or have any direct or
indirect ownership interest in any firm or corporation with which the Company
is affiliated or with which the Company has a business relationship, or any
firm or corporation which competes with the Company, except that officers,
directors and/or stockholders of the Company may own up to five percent (5%)
of the stock in publicly traded companies which may compete with the Company.
No officer, director or stockholder, or any member of their immediate
families, is, directly or indirectly, interested in any material contract
with the Company (other than such contracts as relate to any such person's
ownership of capital stock or other securities of the Company). The Company
is not a guarantor or indemnitor of any indebtedness of or does not otherwise
provide credit enhancement to any other person, firm or corporation.
3.8 CHANGES. Since September 30, 1999, there has not been to the
Company's knowledge:
(a) Any change in the assets, liabilities, financial condition or
operations of the Company, other than changes in the ordinary course of
business, none of which individually or in the aggregate has had or is
expected to have a material adverse effect on such assets, liabilities,
financial condition or operations of the Company;
(b) Any resignation or termination of any key officers of the
Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a material
debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
5.
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend by, or any other
distribution of any securities (other than in the ordinary course of
business) or the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, pledge, assignment or transfer of any material
tangible assets or patents, trademarks, copyrights, trade secrets or other
intangible assets of the Company;
(l) Any change in any material agreement to which the Company is a
party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects
of the Company, including, without limitation, compensation agreements with
the Company's employees;
(m) Any payment, discharge, satisfaction or settlement of any
material claim or obligation of the Company, except in the ordinary course of
business and consistent with past practice;
(n) Any write-down of the value of any asset of the Company or any
write-off as uncollectible of any accounts or notes receivable or any portion
thereof except in the ordinary course of business;
(o) Any expenditure or commitment or addition to property, plant
or equipment of the Company except in amounts less than $250,000 in the
singular or in the aggregate;
(p) Any change in the independent public accountants of the
Company or any material change in the accounting methods or accounting
practices followed by the Company or any material change in depreciation or
amortization policies or rates;
(q) Any receipt of notice that there has been a loss of, or
material order cancellation by, a major customer, advertiser or sponsor of
the Company;
(r) Any change in the Company's accounting methods, principles or
practices, any new elections with respect to Taxes (as defined herein) or any
changes in the current elections with respect to Taxes; or
(s) Any other event or condition of any character that, either
individually or cumulatively, has materially and adversely affected the
business, assets, liabilities, financial condition, operations or prospects
of the Company.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company does not
own fee title to any real property. The Company has good and marketable
title to its properties and assets, and good title to its leasehold estates,
in each case subject to no mortgage, pledge, lien, lease, encumbrance or
charge, other than (a) those resulting from taxes which have not yet become
delinquent, (b) minor liens and
6.
encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company, and (c)
those that have otherwise arisen in the ordinary course of business. All
facilities, machinery, equipment, fixtures, vehicles and other properties
owned, leased or used by the Company are in good operating condition and
repair and are reasonably fit and usable for the purposes for which they are
being used. The Company is in compliance with all material terms of each
lease to which it is a party or is otherwise bound.
3.10 PATENTS AND TRADEMARKS. To the best of its knowledge, the Company
owns or possesses sufficient legal rights to all patents, trademarks, service
marks, trade names, copyrights, trade secrets, uniform resource locators,
information and other proprietary rights and processes necessary for the
Company's business as now conducted and as proposed to be conducted (the
"INTELLECTUAL PROPERTY RIGHTS"), without any known infringement of the rights
of others. The Schedule of Exceptions contains a complete list of the
patents, pending patent applications, trademarks, services marks and the
uniform resource locators of the Company. There are no outstanding
assignments, options, licenses or agreements of any kind relating to the
foregoing nor is the Company bound by or a party to any assignments, options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and other proprietary rights and processes of any other person or entity
other than such licenses or agreements arising from the purchase of "off the
shelf" or standard products. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to any judgment, decree or order
of any court or administrative agency, that would interfere with their duties
to the Company or that would conflict with the Company's business as proposed
to be conducted. Neither the execution nor delivery of this Agreement or the
Related Agreements nor the carrying on of the Company's business by the
employees of the Company nor the conduct of the Company's business as
proposed will, to the Company's knowledge, (i) conflict with or result in a
breach of the terms, conditions or provisions of or constitute a default
under any contract, covenant or instrument under which any employee is now
obligated or (ii) conflict with, alter or impair any of the Intellectual
Property Rights. The Company does not believe it is or will be necessary to
utilize any inventions, trade secrets or proprietary information of any of
its employees made prior to their employment by the Company, except for
inventions, trade secrets or proprietary information that have been duly and
validly assigned to the Company. The Company has utilized commercially
reasonable efforts to (i) protect and enforce all Intellectual Property
Rights, except for those rights that, individually or in the aggregate, are
not material to the Company, (ii) protect through nondisclosure agreements
and otherwise all trade secrets and confidential information of the Company
and (iii) otherwise to secure and protect for the Company's benefit all
Intellectual Property Rights. The Company uses reasonable efforts, consistent
with industry practices of comparable companies, to identify any use of any
Intellectual Property Rights by third parties that has infringed or infringes
any Intellectual Property Rights, and Section 3.10 of the Schedule of
Exceptions discloses all material instances know to the Company of any
infringing uses, all steps that the Company has taken or is taking to end
such infringement, and how any such instances of infringement have been
resolved. The Company believes it can obtain on commercially reasonable
terms any additional Intellectual Property Rights necessary for its business
as proposed to be conducted.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in violation
or default of any term of its Restated Certificate or Bylaws. The Company is
not in violation or default of any provision of any mortgage, indenture,
contract, agreement, instrument or contract to which it is party or by which
it is bound or of any judgment, decree, order, writ or, to its knowledge, any
statute, rule or
7.
regulation applicable to the Company, its business or operations or any of
its assets or properties. The execution, delivery and performance of and
compliance with this Agreement, the Warrants and the Related Agreements, and
the issuance and sale of the Shares, the Conversion Shares and the Warrant
Shares pursuant to the Restated Certificate will not, with or without the
passage of time or giving of notice, result in any such material violation,
or be in conflict with or constitute a default under any such term, or result
in the creation of any mortgage, pledge, lien, encumbrance or charge upon any
of the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
3.12 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the
Company (i) that questions the validity of this Agreement, the Related
Agreements or the right of the Company to enter into any of such agreements,
or to consummate the transactions contemplated hereby or thereby, or (ii)
which might result, either individually or in the aggregate, in any material
adverse change in the assets, condition, affairs or prospects of the Company,
financially or otherwise, or any change in the current equity ownership of
the Company nor is the Company aware that there is any basis for the
foregoing. The foregoing includes, without limitation, actions pending or
threatened (or any basis therefor known to the Company) involving the prior
employment of any of the Company's employees, their use in connection with
the Company's business of any information or techniques allegedly proprietary
to any of their former employers, or their obligations under any agreements
with prior employers. Neither the Company nor any of its properties, assets
or businesses are subject to the provisions of any order, writ, injunction,
judgment or decree of any court or government agency or instrumentality.
There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS.
(a) The Company has timely filed all Tax Returns required to be
filed by it. These Tax Returns are true and correct in all material
respects. All Taxes shown to be due and payable on such Tax Returns, any
assessments imposed and all other taxes due and payable by the Company have
been timely paid or will be paid prior to the time they become delinquent.
All Taxes required to be withheld and paid over by the Company to any
relevant taxing authority in connection with payments to employees,
independent contractors, creditors, stockholders or to third parties have
been so withheld and paid over. The Company has not been advised (i) that
any of its returns, federal, state or other, have been or are being audited
as of the date hereof or (ii) of any deficiency in assessment or proposed
judgment to its federal, state or other taxes. The Company has no knowledge
of any liability of any tax to be imposed upon its properties or assets as of
the date of this Agreement that is not adequately provided for. The accruals
and reserves for Taxes (other than deferred Taxes) reflected on the unaudited
balance sheet as of September 30, 1999 are complete and adequate to cover any
liabilities for Taxes with respect to periods or portions of periods ending
on or before September 30, 1999. The accruals and reserves for Taxes (other
than deferred Taxes) established in the books and records of the Company are
complete and adequate to cover any liabilities for Taxes that are
attributable to the period beginning after September 30, 1999 and ending on
the First Closing Date. No Tax authority in a jurisdiction where the Company
does not file Tax Returns has made a claim, assertion or threat that the
Company is or may be subject to Tax in such jurisdiction. No audits or
examinations with respect to the Company are ongoing or have been threatened
or proposed by any taxing authority. No deficiencies for any Tax have been
threatened, proposed, asserted or assessed against the Company which have not
been satisfied. No waivers or extension of statutes of limitations with
respect to Taxes have been given by the Company. Complete copies of all Tax
Returns of the Company that have been filed by the Company since its
inception have
8.
been delivered to or made available to each of the Purchasers if requested by
a Purchaser. The Company is not party to or liable under any tax sharing
arrangement. The Company has not filed a combined, consolidated or unitary
Tax Return with respect to any affiliated group of which the Company is not
the common parent. The Company has not made an election under Section 341(f)
of the Internal Revenue Code of 1986 (the "CODE"), as amended.
(b) For purposes of this Agreement, "TAX" (including, with
correlative meaning, the terms "TAXES") shall mean all federal, state, local
and foreign income, profits, franchise, gross receipts, environmental,
customs, duty, capital stock, communications servicers, severance, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy, and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any interest
in respect to such penalties and additions, and includes any liability for
Taxes of another person by contract, as a transferee of successor, under
Treasury Regulation 1.1502-6 or analogous state, local or foreign law
provision or otherwise; and "TAX RETURN" shall mean all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
3.14 EMPLOYEES. The Company has no collective bargaining agreements with
any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. No
employee has any agreement or contract, written or verbal, regarding his
employment other than a Proprietary Information and Inventions Agreement.
The Company is not a party to or bound by any currently effective employment
contract, deferred compensation arrangement, bonus plan, incentive plan,
profit sharing plan, retirement agreement or other employee compensation plan
or agreement. To the Company's knowledge, no employee of the Company nor any
consultant with whom the Company has contracted is in violation of any term
of any employment contract, proprietary information agreement or any other
agreement relating to the right of any such individual to be employed by or
to contract with the Company, because of the nature of the business to be
conducted by the Company; and to the Company's knowledge the continued
employment by the Company of its present employees, and the performance of
the Company's contracts with its independent contractors, will not result in
any such violation. The Company has not received any notice alleging that
any such violation has occurred. No employee of the Company has been granted
the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The
Company is not aware that any officer, key employee or any group of key
employees intends to terminate their employment with the Company nor does the
Company have a present intention to terminate the employment of any officer,
key employee or group of key employees. The Company has complied with all
applicable laws relating to the employment of labor, including laws relating
to wages and hours, equal opportunity and payment of social security and
other taxes.
3.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. To the best of
the Company's knowledge, it has done nothing to compromise the secrecy,
confidentiality or value of any of its trade secrets, know-how, inventions,
prototypes, designs, processes or technical data required to conduct its
business as now conducted or proposed to be conducted. The Company has taken
in the past and will take in the future reasonable security measures to
protect the secrecy, confidentiality and value of all of its trade secrets,
know-how, inventions, prototypes, designs, processes and technical data
important to the conduct of its business. Each former and current employee,
officer and consultant of the Company has executed a Proprietary Information
and Inventions Agreement in the form of EXHIBIT J attached hereto. No
current employee, officer or consultant of the Company has excluded works or
inventions made prior to his or her employment with the Company from his or
her assignment of inventions
9.
pursuant to such employee's, officer's or consultant's Proprietary
Information and Inventions Agreement. The Company, after reasonable
investigation, is not aware that any of its employees, officers or
consultants is in violation of any item of the Proprietary Information and
Inventions Agreement that would have a materially adverse effect on the
Company, and the Company will use its best efforts to prevent any such
violation.
3.16 OBLIGATIONS OF MANAGEMENT. Each officer and key employee of the
Company is currently devoting one hundred percent (100%) of his business time
to the conduct of the business of the Company. The Company is not aware of
any officer or key employee of the Company planning to work less than full
time at the Company in the future.
3.17 REGISTRATION RIGHTS AND VOTING AGREEMENTS. Except as required
pursuant to the Investor Rights Agreement, the Company is presently not under
any obligation and has not granted any rights to register (as defined in
Section 2.1 of the Investor Rights Agreement) any of the Company's presently
outstanding securities or any of its securities that may hereafter be issued.
Except as required pursuant to the Voting Agreement, the Company has no
agreement, obligation or commitment with respect to the election of any
individual or individuals to the Board of Directors and, to the best of the
knowledge of the Company, there is no voting agreement or other agreement
among the stockholders with respect to the election of any individual or
individuals to the Board of Directors for any other purpose.
3.18 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation of
any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
orders, permissions, consents, approvals or authorizations from any
governmental entity or any other person are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement, the Warrants and the issuance of
the Shares, the Conversion Shares or the Warrant Shares, except such as has
been duly and validly obtained or filed, or with respect to any filings that
must be made after the First Closing, as will be filed in a timely manner.
The Company has and is in full compliance in all material respects with all
the terms and conditions of all franchises, permits, licenses and any similar
authority necessary for the conduct of its business as now being conducted by
it, the lack of which could materially and adversely affect the business,
properties, prospects or financial condition of the Company and believes it
can obtain, without undue burden or expense, any similar authority for the
conduct of its business as planned to be conducted. The Company is not in
default in any material respect under any of such franchises, permits,
licenses or other similar authority.
3.19 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is not
in violation of any applicable federal, state or local statute, law,
ordinance or regulation relating to the environment or occupational health
and safety, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 4.2 hereof, the offer, sale
and issuance of the Shares and the Warrants, the sale and issuance of the
Warrant Shares upon exercise of the Warrants and the issuance of the
Conversion Shares will be exempt from the registration requirements of the
Securities Act of 1933, as amended (the "SECURITIES ACT") and will have been
registered or qualified (or are exempt from registration and qualification)
under the registration, permit or qualification requirements of all
10.
applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to
sell or will offer to sell all or any part of the Shares to any person or
persons so as to bring the sale of such Shares, the Warrants or the Warrant
Shares by the Company within the registration provisions of the Securities
Act or any state securities laws.
3.21 FULL DISCLOSURE. The Private Placement Memorandum (the "PPM"),
this Agreement, the Exhibits hereto, the Related Agreements and all other
documents delivered by the Company to the Purchasers or their attorneys or
agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, do not contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. Notwithstanding the foregoing, the PPM provided to each of the
Purchasers was prepared by the management of the Company in a good faith
effort to describe the Company's proposed business and products and the
markets therefor. The forward-looking statements made in the PPM appeared
reasonable to management as of the date thereof; however, there is no
assurance that these forward-looking statements will prove to be valid or
that the objectives set forth in the PPM will be achieved. To the Company's
knowledge, there are no facts regarding the Company which (individually or in
the aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Company that have not
been set forth in the PPM, the Agreement, the Exhibits hereto, the Related
Agreements or in other documents delivered to Purchasers or their attorneys
or agents in connection herewith.
3.22 QUALIFIED SMALL BUSINESS. The Company represents and warrants to
the Purchasers that, to the best of its knowledge, the Shares should qualify
as "QUALIFIED SMALL BUSINESS STOCK" as defined in Section 1202(c) of the
Internal Revenue Code of 1986, as amended (the "CODE"), as of the date hereof.
3.23 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers or their counsel contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and correctly
reflect all issuances of stock or other equity rights in the Company.
3.24 INSURANCE. The Schedule of Exceptions contains an accurate summary
of the insurance policies currently maintained by the Company. The Company
has obtained from a company that is financially sound and reputable fire and
casualty insurance policies with coverage customary for companies similarly
situated to the Company. There are currently no claims pending by the
Company under any insurance policy currently in effect and covering the
property, business or employees of the Company, and all premiums due and
payable with respect to the policies maintained by the Company have been paid
to date. All insurance policies are in the name of the Company and are
outstanding and in full force and effect. Such insurance policies are
customary for companies engaged in the type of business conducted by the
Company and at the same stage of development as the Company. The Company has
not received notice of cancellation of termination of any such policy, nor
has any such policy been denied, revoked or rescinded nor has the Company
borrowed against any such policies. There are no claims for which an
insurance carrier has denied or threatened to deny coverage. The Company
carries, or is covered by, insurance with companies that are financially
sound and reputable in such amounts with such deductibles and against such
risks and losses as are reasonable for the business and assets of the Company.
3.25 SMALL BUSINESS CONCERN. The Company together with its "affiliates"
(as that term is defined in Section 121.103 of Title 13 of the Code of
Federal Regulations (the "FEDERAL REGULATIONS")), is a "SMALL BUSINESS
CONCERN" within the meaning of the Small Business Investment Act of 1958, as
amended (the "SMALL BUSINESS ACT"), and the regulations promulgated
thereunder, including Section
11.
121.301 of Title 13 of the Federal Regulations (a "SMALL BUSINESS CONCERN").
The information delivered to each Purchaser that is a licensed Small Business
Investment Company (an "SBIC PURCHASER") on SBA Forms 480, 652 and 1031
delivered in connection herewith is true and correct.
3.26 YEAR 2000 COMPLIANCE. All of the Company's products and services
(including any products or services currently under development as of the
date hereof) will record, store, process and calculate and present calendar
dates falling on and after January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner and
with the same functionality, data integrity and performance as the products
record, store, process, calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to
such dates (collectively "YEAR 2000 COMPLIANT"). None of the Company's
material products will lose material functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
The Company has taken all reasonable actions to ensure that all of the
Company's internal computer systems, including without limitation, its
accounting systems, are Year 2000 Compliant. To the knowledge of the
Company, all vendors of products and services to the Company, and their
respective products, services and operations, will be in all material
respects Year 2000 Compliant.
3.27 FOREIGN CORRUPT PRACTICES ACT. The Company and, to the knowledge
of the Company after due inquiry, its employees are in compliance in all
material respects with the U.S. Foreign Corrupt Practices Act, as amended,
including without limitation the books and records provisions thereof.
3.28 DIRECTORS AND OFFICERS. To the knowledge of the Company, since
the formation of the Company, no director or officer of the Company has (a)
been arrested or convicted of any crime material to an evaluation of such
person's ability or integrity, including, without limitation, any violation
of any federal or state law which currently or has previously regulated the
types of business in which the Company is currently or has previously been
engaged, (b) filed a petition under federal bankruptcy or state insolvency
laws or (c) been a director or officer of a business entity which has filed a
petition under federal bankruptcy or state insolvency laws, or had a receiver
or similar officer appointed by a court to administer the business or
property of such entity.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as follows
(it being agreed that such representations and warranties do not in any way
limit or effect the Purchasers' right to rely upon and enforce any breach of
the representations and warranties of the Company set forth in this
Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver
this Agreement and the Related Agreements and to carry out their provisions.
All action on Purchaser's part required for the lawful execution and delivery
of this Agreement and the Related Agreements has been or will be effectively
taken prior to the First Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights, (b)
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the
indemnification provisions of Section 3.9 of the Investor Rights Agreement
may be limited by applicable laws.
12.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither the
Shares, the Warrants, the Warrant Shares nor the Conversion Shares have been
registered under the Securities Act. Purchaser also understands that the
Shares and the Warrants are being offered and sold pursuant to an exemption
from registration contained in the Securities Act based in part upon
Purchaser's representations contained in the Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk
of this investment indefinitely unless the Shares, the Warrants, the Warrant
Shares or the Conversion Shares are registered pursuant to the Securities Act
or an exemption from registration is available. Purchaser understands that
the Company has no present intention of registering the Shares, the Warrants,
the Warrants Shares, the Conversion Shares or any shares of its common stock.
Purchaser also understands that there is no assurance that any exemption from
registration under the Securities Act will be available and that, even if
available, such exemption may not allow Purchaser to transfer all or any
portion of the Shares, the Warrants, the Warrant Shares or the Conversion
Shares under the circumstances in the amounts or at the times Purchaser might
propose.
(b) ACQUISITION FOR OWN ACCOUNT. Purchaser is acquiring the
Shares, the Warrants, the Warrant Shares and the Conversion Shares for
Purchaser's own account for investment only and not with a view towards their
distribution.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents that
by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with
the transactions contemplated in this Agreement and the Related Agreements.
Further, Purchaser is aware of no publication of any advertisement in
connection with the transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
(e) COMPANY INFORMATION. Purchaser has received and read the
Financial Statements and the PPM and has had an opportunity to discuss the
Company's business, management and financial affairs with directors, officers
and management of the Company and has had the opportunity to review the
Company's operations and facilities. Purchaser has also had the opportunity
to ask questions of and receive answers from, the Company and its management
regarding the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the Shares,
the Warrants and, if issued, the Conversion Shares and the Warrant Shares
must be held indefinitely unless they are subsequently registered under the
Securities Act or an exemption from such registration is available.
Purchaser has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act, which permits limited resale of shares
purchased in a private placement subject to the satisfaction of certain
conditions, including, among other things: the availability of certain
current public information about the Company, the resale occurring not less
than one year after a party has purchased and paid for the security to be
sold, the sale being through an unsolicited "broker's transaction" or in
transactions directly with a market maker (as said term is defined under the
Securities Exchange Act of 1934, as
13.
amended) and the number of shares being sold during any three-month period
not exceeding specified limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on EXHIBIT A hereto; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on EXHIBIT A hereto.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees that
the Shares and the Warrants and, if issued, the Conversion Shares and the
Warrant Shares are subject to restrictions on transfer as set forth in the
Investor Rights Agreement.
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE FIRST CLOSING.
Purchasers' obligations to purchase the Shares and the Warrants at the First
Closing are subject to the satisfaction, at or prior to the First Closing, of
the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
First Closing Date with the same force and effect as if they had been made as
of the First Closing Date, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it
on or prior to the First Closing.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have performed
and complied with all agreements, obligations and conditions contained in
this Agreement that are required to be performed or complied with by it on or
before the First Closing.
(c) LEGAL INVESTMENT. On the First Closing Date, the sale and
issuance of the Shares and the Warrants and the proposed issuance of the
Conversion Shares and the Warrant Shares shall be legally permitted by all
laws and regulations to which Purchasers and the Company are subject.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the First Closing).
(e) FILING OF RESTATED CERTIFICATE. The Restated Certificate
shall have been filed with the Secretary of State of the State of Delaware.
(f) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchasers or their counsel, copies of all corporate documents of the Company
as Purchasers shall reasonably request.
(g) RESERVATION OF CONVERSION SHARES AND WARRANT SHARES. The
Conversion Shares issuable upon conversion of the Shares and the Warrants
Shares is issuable upon exercise of the Warrants shall have been duly
authorized and reserved for issuance upon such conversion.
14.
(h) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the
Company, dated the date of the First Closing, to the effect that the
conditions specified in subsections (a), (b), (d), (e) and (g) of this
Section 5.1 have been satisfied.
(i) INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT E shall have been
executed and delivered by the parties thereto.
(j) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the
form attached hereto as EXHIBIT F shall have been executed and delivered by
the parties thereto.
(k) VOTING AGREEMENT. The Voting Agreement substantially in the
form attached hereto as EXHIBIT G shall have been executed and delivered by
the parties thereto.
(l) BOARD OF DIRECTORS. Upon the First Closing, the authorized
size of the Board of Directors of the Company shall initially be eight (8)
members and the Board shall consist of Xxxxxx X. Xxxxxxx, Xxxxxxx Xxxxxxx,
Xxxxxx Xxxxxx, Xxxx Xxxxxx, Xxxxxx Xxxxx, Xxxxxx Xxxxxx, Xxxxx Xxxxx and a
designee of Xxxxx Corning.
(m) LEGAL OPINION. The Purchasers shall have received from legal
counsel to the Company an opinion addressed to them, dated as of the First
Closing Date, in substantially the form attached hereto as EXHIBIT K.
(n) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
Purchasers and their special counsel, and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(o) PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. All key
employees shall have executed a Proprietary Information and Inventions
Agreement that is reasonably acceptable to Investors' counsel.
(p) DUE DILIGENCE. All matters investigated by the Purchasers in
the course of their due diligence shall be satisfactory to each of the
Purchasers, their special counsels and their accountants.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares and the Warrants at the First Closing is subject
to the satisfaction, on or prior to the First Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties made by those Purchasers acquiring Shares and Warrants in Section
4 hereof shall be true and correct in all material respects at the date of
the First Closing, with the same force and effect as if they had been made on
and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied in all material respects with all agreements and
conditions herein required to be performed or complied with by such
Purchasers on or before the First Closing.
15.
(c) INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT E shall have been
executed and delivered by the Purchasers.
(d) CO-SALE AGREEMENT. The Co-Sale Agreement substantially in the
form attached hereto as EXHIBIT F shall have been executed and delivered by
the parties thereto.
(e) VOTING AGREEMENT. The Voting Agreement substantially in the
form attached hereto as EXHIBIT G shall have been executed and delivered by
the parties thereto.
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the First Closing).
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of New York as such laws are applied to agreements
between New York residents entered into and performed entirely in New York.
Each party hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of the state and federal courts located in the State
of New York for any actions, suits or proceedings arising out of or relating
to this Agreement or any of the Related Agreements (as defined in the
Purchase Agreement) and the transactions contemplated hereby or thereby.
Each party hereto agrees not to commence any action, suit or proceeding
relating thereto except in such courts. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue in any action,
suit or proceeding arising out of this Agreement or any of the Related
Agreements or the transactions contemplated hereby or thereby, in such state
or federal courts aforesaid and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY OF THE
RELATED AGREEMENTS.
6.2 SURVIVAL. The representations, warranties, covenants and agreements
made herein shall survive any investigation made by any Purchaser and the
First Closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by
or on behalf of the Company pursuant hereto in connection with the
transactions contemplated hereby shall be deemed to be representations and
warranties by the Company hereunder solely as of the date of such certificate
or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares, the Warrants, the Warrant Shares
and the Conversion Shares from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the PPM and the other documents delivered
pursuant hereto constitute the full and entire
16.
understanding and agreement between the parties with regard to the subjects
hereof and no party shall be liable or bound to any other in any manner by
any representations, warranties, covenants and agreements except as
specifically set forth herein and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the
Shares and Warrants (treated as if converted and including any Conversion
Shares and Warrant Shares into which the Shares and Warrants have been
converted or exercised that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived
only with the written consent of the holders of at least a majority of the
Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).
(c) Any amendment, modification or waiver effected in accordance
with Section 6.6(a) or Section 6.6(b) with the consent of the requisite
parties shall be binding upon each holder of any securities purchased under
this Agreement at the time outstanding (including securities into which such
securities are convertible), each future holder and the Company (even if such
holder did not consent to such amendment, modification or waiver).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Certificate, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default
or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring. It is further agreed
that any waiver, permit, consent or approval of any kind or character on any
Purchaser's part of any breach, default or noncompliance under this
Agreement, the Related Agreements or under the Restated Certificate or any
waiver on such party's part of any provisions or conditions of the Agreement,
the Related Agreements, or the Restated Certificate must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement, the Related Agreements, the
Restated Certificate, by law, or otherwise afforded to any party, shall be
cumulative and not alternative.
6.8 WAIVER OF CONFLICTS. Each party to this Agreement acknowledges that
legal counsel for the Company, Xxxxxx Godward LLP ("XXXXXX GODWARD"), has in
the past and may continue in the future to perform legal services for one or
more of the Purchasers or their affiliates in matters unrelated to the
transactions contemplated by this Agreement, including, but not limited to,
the representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby (a)
acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation, (b)
acknowledges that with respect to the transactions contemplated herein,
Cooley Godward has represented the Company and not any individual Purchaser
or any individual stockholder, director or employee of the Company and (c)
gives its informed consent to
17.
Xxxxxx Godward's representation of the Company in the transactions
contemplated by this Agreement and Xxxxxx Godward's representation of one or
more of the Purchasers or their affiliates in matters unrelated to such
transactions.
6.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to
the Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on EXHIBIT A attached hereto or at such
other address as the Company or Purchaser may designate by ten days advance
written notice to the other parties hereto.
6.10 TRANSFER TAXES. All transfer, transfer gains, documentary, sales,
use, stamp, registration and other similar Taxes and fees (including costs
and expenses relating to such Taxes) (collectively, "TRANSFER TAXES")
incurred in connection with the consummation of the transactions contemplated
by this Agreement, shall be borne by the Company. The Company shall, at its
own expense, prepare and timely file, in accordance with all applicable laws
and regulations, all necessary Tax Returns and other documentation with
respect to such Transfer Taxes. The Purchasers shall reasonably cooperate
with the Company in the preparation and filing of any such Tax Returns and
other documentation.
6.11 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of this Agreement. The Company shall, at the First Closing, reimburse the
reasonable fees of and expenses of special counsel to the Purchasers not to
exceed $30,000 pro rata in proportion to amounts set forth opposite such
Purchaser's name on EXHIBIT A attached hereto including the Purchasers on
Exhibit A of that certain First Series E Preferred Stock Purchase Agreement
dated as of November 5, 1999; PROVIDED, HOWEVER, that in the case of Xxxxx
Corning, such reimbursement shall not be less than $10,000.
6.12 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such
dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.13 TITLES AND SUBTITLES. The titles of the sections and subsections of
the Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
6.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.15 BROKER'S FEES. Each party hereto represents and warrants that no
agent, broker, investment banker, person or firm acting on behalf of or under
the authority of such party hereto is or will be entitled to any broker's or
finder's fee or any other commission directly or indirectly in connection
with the transactions contemplated herein. Each party hereto further agrees
to indemnify each other party for any claims, losses or expenses incurred by
such other party as a result of the representation in this Section 6.15 being
untrue.
18.
6.16 PRESS RELEASES/USE OF PARTIES' NAME. The Company shall not issue
any press release or make any disclosure or public announcement relating to
the subject matter of this Agreement or any of the Related Agreements without
the prior written approval of each of The Dow Chemical Company, DuPont Corian
GE Capital Equity Investments, Inc. or Xxxxxxxxx World Industries; PROVIDED,
HOWEVER, that no such consent shall be necessary in the case of any
disclosure or public announcement substantially in the form of Exhibit L
attached hereto. Without limiting the generality of the foregoing, the
Company shall not in any manner publicly use or refer to the name of The Dow
Chemical Company, DuPont Corian, or Xxxxxxxxx World Industries or any their
affiliates in any press release, disclosure or public announcement without
the prior written approval of the party so named. Notwithstanding the
foregoing, the Company shall be permitted to disclose this Agreement or any
of the Related Agreements to the extent required in any filing required by
the Company pursuant to the Securities Act of 1933, as amended, the
Securities and Exchange Act of 1934, as amended, or any other state or
federal statute.
6.17 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company
and its officers and directors, in making its investment or decision to
invest in the Company. Each Purchaser agrees that no Purchaser nor the
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.18 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
IN WITNESS WHEREOF, the parties hereto have executed the SECOND SERIES E
PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT as of the date set forth in
the first paragraph hereof.
COMPANY: PURCHASER:
------------------------------------
IMPROVENET, INC.
000 XXX XXXX, XXXXX 000
XXXXXXX XXXX, XX 00000
By: /s/ Xxx Xxxxxx By: /s/ All Second Series E Investors
--------------------------- ---------------------------------
Xxxxxx Xxxxxx, President and
Chief Executive Officer Title:
-----------------------------
SECOND SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SIGNATURE PAGE
EXHIBIT A
SCHEDULE OF PURCHASERS
SHARES OF WARRANTS TO PURCHASE SHARES AGGREGATE
NAME AND ADDRESS SERIES E PREFERRED OF COMMON STOCK PURCHASE PRICE
--------------------------------------------- --------------------------- ------------------------------- ------------------------
The Dow Chemical Company 222,222 35,000 $2,999,997.00
0000 Xxx Xxxxxx
Xxxxxxx, XX 00000
Attn.: Xxxxxx Xxxxxx
E.I. du Pont de Nemours and Company 222,222 35,000 $2,999,997.00
0000 Xxxxxx Xxxxxx
Xxxxxxxxxx, XX 00000
Attn: Global Financial Manager
Xxxxxxxxx.xxx Holding Co. 222,222 25,000 $2,999,997.00
0000 Xxxxxxxx Xxxxxx
Xxxxxxxxx, XX 00000
Attn: Xxxxx Xxxxxxx
ARCH Venture Fund III, L.P. 74,074 0 $999,999.00
0000 Xxxxxxx Xxxx
Xxxxx 000
Xxxxxxx, XX 00000
Clear Fir Partners, L.P. 3,704 0 $50,004.00
0000 00xx Xxxxxx, X.X.
Xxxxxxx, XX 00000
Xxxx Xxxxxx 370 0 $4,995.00
000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxxxxx Partners, L.P. 32,963 0 $445,000.50
000 Xxxxxxxx Xxxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Xxxx Xxxxxx 1,850 0 $24,975.00
0000 Xxxxxxx Xxxxxx Xxxx
Xxxxxxx, XX 00000
EXHIBIT A
SECOND SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
SHARES OF WARRANTS TO PURCHASE SHARES AGGREGATE
NAME AND ADDRESS SERIES E PREFERRED OF COMMON STOCK PURCHASE PRICE
--------------------------------------------- --------------------------- ------------------------------- ------------------------
Staenberg Private Capital, LLC 6,700 0 $90,450.00
0000 Xxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Attn.: Xxxx Xxxxxxxxx
MGN Opportunity Group LLC 21,919 0 $295,906.50
000 Xxxxxx Xxxxxx
00xx Xxxxx
Xxxxxxx, XX 00000
Zero Stage Capital VI, L.P. 48,148 0 $649,998.00
000 Xxxx Xxxxxx
00xx Xxxxx
Xxxxxxxxx, XX 00000
xxxxxxxxx.xxx
Attn.: Xxxxxxx Xxxxxxx
QBB Mgmt I, L.L.C. 74,074 0 $999,999.00
00 Xxxxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attn: Xxxx Xxxxxxx
TOTAL 930,468 95,000 $12,561,318.00
--------------------------- ------------------------------- ------------------------
--------------------------- ------------------------------- ------------------------
EXHIBIT A-2
SECOND SERIES E PREFERRED STOCK AND WARRANT PURCHASE AGREEMENT
