EXHIBIT 7
EVOLVE SOFTWARE, INC.
SERIES B
PREFERRED STOCK PURCHASE AGREEMENT
dated as of
August 20, 2002
TABLE OF CONTENTS
Page
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SECTION 1 Authorization and Sale of Preferred Stock...........................1
1.1 Authorization...............................................1
1.2 Sale of Series B Preferred Stock............................1
SECTION 2 Closing Date; Delivery..............................................1
2.1 Closing Date................................................1
2.2 Delivery....................................................2
SECTION 3 Representations and Warranties of the Company.......................2
3.1 Organization of the Company.................................2
3.2 Authority for Agreement.....................................2
3.3 Shares and Conversion Shares Issued.........................2
3.4 Governmental Authorization..................................3
3.5 Noncontravention............................................3
3.6 SEC Documents...............................................3
3.7 Financial Statements........................................3
3.8 No Material Adverse Change..................................4
3.9 Consent.....................................................5
3.10 Capitalization..............................................5
3.11 Subsidiaries................................................6
3.12 Intellectual Property.......................................7
3.13 Litigation, etc.............................................9
3.14 Compliance with Laws........................................9
3.15 Material Contracts..........................................9
3.16 Offering of Securities.....................................11
3.17 Environmental Compliance...................................11
3.18 Employment Matters; ERISA..................................11
3.19 Taxes......................................................12
3.20 Regulatory Matters.........................................13
3.21 Property...................................................13
3.22 Proxy Materials............................................13
3.23 State Takeover Statutes....................................13
3.24 Broker's and Finder's Fees.................................14
SECTION 4 Representations and Warranties of the Purchasers...................14
4.1 Investment for Own Account.................................14
4.2 Accredited Investor........................................14
4.3 Registration Exemption.....................................14
4.4 Disposition of Shares......................................14
4.5 Experience; Risks..........................................14
4.6 Transfer Restrictions......................................15
4.7 Rule 144...................................................15
4.8 Disclosure of Information..................................15
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TABLE OF CONTENTS
(Continued)
Page
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SECTION 5 Additional Agreements..............................................15
5.1 Public Announcements.......................................15
5.2 Nasdaq Listing.............................................16
5.3 Proxy Statement and Other Filings..........................16
5.4 Conduct of the Company.....................................17
5.5 No Solicitation............................................17
5.6 Reasonable Best Efforts; Further Assurances................19
SECTION 6 Conditions to the Closing of All Parties...........................19
6.1 Conditions to Obligations of Each Party to Effect
the Financing.............................................19
SECTION 7 Conditions to Closing of the Purchasers............................20
7.1 Representations and Warranties Correct.....................20
7.2 Opinion of Company Counsel.................................20
SECTION 8 Conditions to Closing of Company...................................20
8.1 Representations and Warranties Correct.....................21
8.2 Covenants..................................................21
SECTION 9 Miscellaneous......................................................21
9.1 Governing Law..............................................21
9.2 Survival...................................................21
9.3 Successors and Assigns.....................................21
9.4 Entire Agreement; Amendment................................21
9.5 Notices, etc...............................................21
9.6 Delays or Omissions........................................21
9.7 California Corporate Securities Law........................22
9.8 Waiver of Conflict.........................................22
9.9 Expenses...................................................22
9.10 Counterparts...............................................22
9.11 Severability...............................................22
9.12 Gender.....................................................23
9.13 Exculpation Among Purchasers...............................23
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EXHIBITS
A Certificate of Designation of Series B Preferred Stock
B Form of Amended and Restated Registration Rights Agreement
C Form of Amended and Restated Preemptive Rights Agreement
D Form of Opinion of Legal Counsel
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EVOLVE SOFTWARE, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") is
made as of August 20, 2002, by and among Evolve Software, Inc., a Delaware
corporation (the "Company"), with its principal office at 0000 00xx Xxxxxx,
Xxxxx 000, Xxxxxxxxxx, XX 00000, and the entities for which signatures appear
on the signature pages hereto (the "Purchasers," and each a "Purchaser").
SECTION 1
Authorization and Sale of Preferred Stock
1.1 Authorization. The Company has authorized the sale and issuance of up
to an aggregate of 700,000 shares of its Series B Preferred Stock ("Series B
Preferred Stock"), having the rights, restrictions, privileges and preferences
as set forth in the Company's Certificate of Designation of Series B Preferred
Stock attached to this Agreement as Exhibit A (the "Certificate of
Designation"), in accordance with the terms and conditions set forth herein.
1.2 Sale of Series B Preferred Stock. Subject to the terms and conditions
hereof, at the Closing (as defined below) the Company will issue and sell to
each Purchaser, and each Purchaser will buy from the Company, the number of
shares of Series B Preferred Stock set forth opposite such Purchaser's name on
the Schedule of Purchasers hereto, for a purchase price of $10.00 per share,
payable by check or wire transfer in the amount set forth opposite such
Purchaser's name in the Schedule of Purchasers (the "Financing"). The shares of
Series B Preferred Stock issued hereunder are hereafter referred to as the
"Shares." The Company's agreement with each Purchaser is a separate agreement,
and the sale to each Purchaser is a separate sale.
SECTION 2
Closing Date; Delivery
2.1 Closing Date. The closing of the purchase and sale of the Shares
hereunder (the "Closing") shall be held within two (2) business days of the
satisfaction or waiver of all of the conditions set forth in Sections 6, 7 and
8 hereof (other than those conditions which by their nature are to be satisfied
at the Closing, but subject to the satisfaction or waiver thereof) or on such
later date or dates as the Company and the Purchasers may mutually agree (the
date of such Closing being referred to as the "Closing Date"). The place of the
Closing shall be at the offices of Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, 000 Xxxx
Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, or such other place as the Purchasers
and the Company may mutually agree.
2.2 Delivery. At the Closing, the Company will deliver to each Purchaser a
certificate representing shares of the Series B Preferred Stock to be purchased
by such Purchaser at such Closing against payment of the consideration
therefor, specified in Section 1.2 hereof.
SECTION 3
Representations and Warranties of the Company
Except as set forth on the Company Disclosure Letter provided herewith
(the "Company Disclosure Letter"), the Company hereby represents and warrants
to the Purchasers as follows:
3.1 Organization of the Company. The Company is duly organized, validly
existing, and in good standing under the laws of the jurisdiction of its
incorporation and has all corporate power and all material governmental
licenses, authorizations, permits, consents and approvals required to carry on
its business as now conducted. The Company is duly qualified to do business as
a foreign corporation and is in good standing in each jurisdiction where such
qualification is necessary, except for those jurisdictions where failure to be
so qualified or in good standing would not have, individually or in the
aggregate, a Material Adverse Effect. For the purposes of this Agreement, a
"Material Adverse Effect" means, with respect to the Company, a current or
reasonably anticipated material adverse effect on the business, assets,
financial condition or results of operations of the Company and its
Subsidiaries taken as a whole. For the purposes of this Agreement, "Subsidiary"
means any entity of which securities or other ownership interests having
ordinary voting power to elect a majority of the board of directors or other
persons performing similar functions are at any time directly or indirectly
owned by the Company. The Company has heretofore made available to the
Purchasers or their counsel true and complete copies of the certificate of
incorporation, as amended, and bylaws, as amended, of the Company as currently
in effect.
3.2 Authority for Agreement. The Company has all requisite corporate power
and authority to enter into this Agreement, the Amended and Restated
Registration Rights Agreement in substantially the form as attached hereto as
Exhibit B (the "Amended and Restated Registration Rights Agreement"), and the
Series B Preemptive Rights Agreement in substantially the form as attached
hereto as Exhibit C (the "Series B Preemptive Rights Agreement", and together
with this Agreement and the Amended and Restated Registration Rights Agreement,
the "Agreements") and to consummate the transactions contemplated hereby and
thereby. The execution and delivery of the Agreements and the consummation of
the transactions contemplated hereby and thereby have been duly authorized by
all necessary corporate action on the part of the Company. The Agreements, when
duly executed and delivered by the Company, will constitute the valid and
binding obligations of the Company, enforceable in accordance with their
respective terms.
3.3 Shares and Conversion Shares Issued. The Shares and the Conversion
Shares, when issued in accordance with the terms of this Agreement, will be
duly authorized, validly issued, fully paid and nonassessable. For purposes of
this Agreement, "Conversion Shares" shall mean the shares of common stock,
$0.001 par value per share, of the Company ("Common Stock") issuable upon
conversion of the Shares.
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3.4 Governmental Authorization. The execution, delivery and performance by
the Company of the Agreements and the consummation by the Company of the
transactions contemplated hereby and thereby require no consent, approval,
authorization or other action by or in respect of any governmental authority or
other party except with respect to (i) compliance with any applicable filing
requirements of the Securities Act of 1933, as amended (the "Securities Act"),
the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and state
securities laws and regulations, (ii) the filing of the Certificate of
Designation in accordance with the law of the State of Delaware, and (iii)
other filings, notifications and consents that are immaterial to the
consummation of the transactions contemplated hereby.
3.5 Noncontravention. Neither the execution and the delivery of the
Agreements, nor the consummation of the transactions contemplated hereby and
thereby, will (i) violate any provision of the certificate of incorporation, as
amended, or bylaws, as amended, of the Company or any Subsidiary, (ii) assuming
compliance with the matters referred to in Section 3.4, violate any applicable
law nor conflict with any judgment, order, decree, statute, law, ordinance,
rule or regulation applicable to the Company or its properties or assets, (iii)
conflict with, require any consent under or result in the loss of any right
under (a) any agreement, contract, lease, license, instrument, or other
arrangement to which the Company is a party or by which it is bound or to which
any of its assets is subject or (b) any judgment, order, decree, statute, law,
ordinance, rule or regulation applicable to the Company or its properties or
assets, except for such conflicts which would not, either individually or in
the aggregate, be material to the Company or interfere with the Company's
ability to consummate the transactions contemplated hereby, or (iv) result in
the creation or imposition of any lien on any material asset of the Company or
any Subsidiary.
3.6 SEC Documents. The Company has furnished or made available to the
Purchasers true and complete copies of the following filings with the
Securities and Exchange Commission (the "SEC"): (i) its annual report on Form
10-K, as amended, for the fiscal year ended June 30, 2001; (ii) its quarterly
reports on Form 10-Q for the fiscal quarters ended September 30, 2001, December
31, 2001, and March 31, 2002; and (iii) all current reports on Form 8-K filed
with the SEC since June 30, 2001 (collectively, the "SEC Documents"). As of
their respective filing dates, the SEC Documents complied in all material
respects with the requirements of the Securities Act and the Exchange Act, as
applicable, and none of the SEC Documents contained any untrue statement of a
material fact or omitted to state a material fact required to be stated therein
or necessary to make the statements made therein, in light of the circumstances
in which they were made, not misleading, except to the extent corrected by a
document subsequently filed with the SEC.
3.7 Financial Statements. The Company has delivered or made available to
the Purchasers its audited balance sheet, statement of operations and statement
of cash flows as of and for the years ended June 30, 2001 and June 30, 2000
(the "Year-End Financials") and the unaudited balance sheet, statement of
operations and statement of cash flows as of and for the fiscal quarters ended
September 30, 2001, December 31, 2001 and March 31, 2002 (the "Interim
Financials", which shall be referred to collectively with the Year-End
Financials as the "Financial Statements"). The Financial Statements are
complete and correct in all material respects and have been prepared in
accordance with United States generally accepted accounting principles
("GAAP"), except (i) as may be indicated in the notes thereto, (ii) in the case
of pro forma statements, if any, and (iii) in the case of the Interim
Financials, as permitted under Form 10-Q of the Exchange Act. The Financial
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Statements fairly present the financial condition and operating results of the
Company as of the dates, and during the periods, indicated therein, subject to,
in the case of the Interim Financials, normal year-end audit adjustments.
Except as set forth in the Financial Statements, the Company has no liabilities
of any kind, whether accrued, contingent absolute, determined or determinable,
and there is not existing any condition, situation or set of circumstances
which could reasonably be expected, individually or in the aggregate, to result
in such a liability, other than (i) liabilities incurred since March 31, 2002
in the ordinary course of business consistent with past practices and (ii)
obligations under contracts and commitments incurred in the ordinary course of
business and not required under GAAP to be reflected in the Financial
Statements, and which are not material to the financial condition or operating
results of the Company.
3.8 No Material Adverse Change. Since the date of the most recent balance
sheet included in the Financial Statements, the Company has conducted its
business in the ordinary course and, except for the execution and delivery of
the Agreements and the consummation of the transactions contemplated thereby,
there has not occurred:
(a) any event which has had or is reasonably expected to have a
Material Adverse Effect;
(b) any amendment or change in the certificate of incorporation, as
amended, or bylaws, as amended, of the Company;
(c) any declaration, setting aside or payment of any dividend or
other distribution with respect to any shares of capital stock of the Company
or its Subsidiaries, or any repurchase, redemption or other acquisition by the
Company or any Subsidiaries of any outstanding shares of capital stock or other
securities of, or other ownership interests in, the Company or its
Subsidiaries;
(d) any amendment of any material term of any outstanding security of
the Company or its Subsidiaries;
(e) any incurrence, assumption or guarantee by the Company or its
Subsidiaries of any indebtedness for borrowed money other than in the ordinary
course of business and in amounts and on terms consistent with past practices;
(f) any creation or other incurrence by the Company or its
Subsidiaries of any lien on any material asset other than in the ordinary
course of business consistent with past practices;
(g) any making of any material loan, advance or capital contribution
to or investment in any individual, corporation, partnership, limited liability
company, association, trust or other entity or organization, including a
government or political subdivision or an agency or intermediary thereof (a
"Person") other than loans, advances or capital contributions to or investments
in any of the Company's Subsidiaries in the ordinary course of business
consistent with past practices;
(h) any damage, destruction or other casualty loss (whether or not
covered by insurance) material to the business or assets of the Company or its
Subsidiaries;
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(i) any transaction or commitment made, or any contract or agreement
entered into, by the Company or its Subsidiaries relating to its assets or
business (including the acquisition or disposition of any assets) or any
relinquishment by the Company or its Subsidiaries of any contract or other
right, in either case, material to the Company and its Subsidiaries, taken as a
whole, other than transactions and commitments in the ordinary course of
business consistent with past practices;
(j) any change in any method of accounting, method of tax accounting
or accounting principles or practice by the Company or its Subsidiaries, except
for any such change required by reason of a concurrent change in GAAP or
Regulation S-X under the Exchange Act;
(k) any (i) grant of any severance or termination pay to (or
amendment to any existing arrangement with) any director, executive officer or
employee of the Company or its Subsidiaries, (ii) increase in benefits payable
under any existing severance or termination pay policies or employment
agreements, (iii) entering into any employment, deferred compensation or other
similar agreement (or any amendment to any such existing agreement) with any
director, executive officer or employee of the Company or its Subsidiaries,
(iv) establishment, adoption or amendment (except as required by applicable
law) of any collective bargaining, bonus, profit-sharing, thrift, pension,
retirement, deferred compensation, compensation, stock option, restricted stock
or other benefit plan or arrangement covering any director, executive officer
or employee of Company or any Subsidiary, (v) increase in compensation, bonus
or other benefits payable to any director, executive officer or employee of the
Company or its Subsidiaries, other than in the ordinary course of business
consistent with past practice or (vi) any termination, change of position or
hiring of any key employee or executive officer;
(l) any material tax election made or changed, any annual tax
accounting period changed, any method of tax accounting adopted or changed, any
material amended tax returns or claims for material tax refunds filed, any
material closing agreement entered into, any material tax claim, audit or
assessment settled, or any right to claim a material tax refund, offset or
other reduction in tax liability surrendered; or
(m) any revaluation by the Company or its Subsidiaries of any of its
assets, including, without limitation, writing down the value of capitalized
inventory or writing off notes or accounts receivable other than in the
ordinary course of business.
3.9 Consent. No consent of any governmental entity or any third party is
required by or with respect to the Company in connection with the execution and
delivery of the Agreements or the consummation of the transactions contemplated
hereby and thereby other than any such consents the absence of which would not
cause a material adverse effect on the Company or on the Company's ability to
consummate the transactions contemplated hereby.
3.10 Capitalization. As of the date hereof, the authorized capital stock
of the Company consists of 200,000,000 shares of Common Stock, of which
46,381,006 shares were issued and outstanding as of July 31, 2002, and
10,000,000 shares of Preferred Stock, of which (i) 2,800,000 shares are
designated Series A Preferred Stock of which 1,875,000 shares are issued and
outstanding and (ii) 700,000 shares are designated Series B Preferred Stock of
which no shares were issued or outstanding prior to the date of this Agreement.
All such outstanding shares have been duly authorized and validly issued, and
are fully paid and nonassessable. Assuming the accuracy and
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completeness of representations made by the purchasers of such outstanding
shares in connection with the issuance of such securities, all such outstanding
shares were issued in material compliance with applicable U.S. federal and
state securities laws. The Company has reserved (i) sufficient shares of Common
Stock for issuance upon conversion of the Shares, (ii) sufficient shares of
Common Stock for issuance upon the conversion of the outstanding shares of
Series A Preferred Stock, including (A) the shares of Series A Preferred Stock
issuable upon the exercise of outstanding warrants to acquire shares of Series
A Preferred Stock and (B) the shares of Common Stock issuable upon the exercise
of warrants to purchase Common Stock issuable upon the exercise of warrants to
purchase Series A Preferred Stock, (iii) 31,774,712 shares of Common Stock for
issuance upon exercise of stock options pursuant to the Company's 1995 Stock
Option Plan, Amended and Restated 2000 Stock Plan, Amended and Restated 2000
Employee Stock Purchase Plan and Amended and Restated 2002 Nonstatutory Stock
Option Plan (collectively, the "Stock Plans"), and (iv) 4,167 shares of Common
Stock for issuance upon exercise of outstanding warrants to acquire shares of
Common Stock. Except as set forth above and except for (i) outstanding options
to purchase 19,384,401 shares of Common Stock as of July 31, 2002 granted to
employees and service providers under the Stock Plans, (ii) outstanding
warrants to acquire shares of Series A Preferred Stock and (iii) outstanding
warrants to acquire shares of Common Stock, there are no other options,
warrants, conversion privileges or other rights presently outstanding to
purchase or otherwise acquire any authorized but unissued shares of capital
stock or other securities of the Company. Except as set forth in the Preemptive
Rights Agreement dated as of October 9, 2001 by and among the Company and the
parties listed therein, there are no preemptive or other similar rights
available to the existing holders of the capital stock of the Company. There
are no voting trusts, stockholder agreements, material proxies or other
agreements or understandings to which the Company or any of its Subsidiaries is
a party with respect to the voting or transfer of registration of shares of
capital stock of the Company. Neither the offer nor the issuance or sale of the
Shares constitutes or will constitute (i) an event under any capital stock or
convertible security or any anti-dilution or similar provision of any agreement
or instrument to which the Company is a party or by which it is bound or
affected, which shall either increase the number of shares of capital stock
issuable upon conversion of any securities or upon exercise of any warrant or
right to subscribe to or purchase any stock or similar security, or decrease
the consideration per share of capital stock to be received by the Company upon
such conversion or exercise, or (ii) an event under the vesting provisions of
any outstanding option, warrant, restricted stock purchase agreement or other
employment-related agreement of the Company which would cause such vesting
provisions to accelerate. Assuming the accuracy of the Purchasers'
representations in Section 4 below, upon issuance, the Shares will have been
issued in compliance with all federal and state securities laws.
3.11 Subsidiaries.
(a) Each of the Subsidiaries is a corporation duly incorporated,
validly existing and in good standing under the laws of its jurisdiction of
incorporation and has all powers (corporate or otherwise) and all material
governmental licenses, authorizations, permits, consents and approvals required
to carry on its business as now conducted. Each such Subsidiary of the Company
is duly qualified to do business as a foreign corporation or limited liability
company and is in good standing in each jurisdiction where such qualification
is necessary, except for those jurisdictions where failure to be so qualified
or in good standing would not have, individually or in the aggregate, a
Material Adverse Effect.
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(b) All of the outstanding capital stock or other voting securities
or other equity interests of each Subsidiary is owned by the Company, directly
or indirectly, free and clear of any lien and free of any other limitation or
restriction (including any restriction on the right to vote, sell or otherwise
dispose of such capital stock or other voting securities or other equity
interests), other than any restrictions imposed by applicable securities laws.
There are not outstanding (i) securities of the Company or any Subsidiary
convertible into or exchangeable for shares of capital stock or voting
securities or other equity securities of any Subsidiary, or (ii) options or
other rights to acquire from the Company or any Subsidiary, or other obligation
of the Company or any Subsidiary to issue, any capital stock, voting
securities, other equity interests or securities convertible into or
exchangeable for capital stock or voting securities or other equity interests
of any Subsidiary (the items in clauses 3.11(b)(i) and 3.11(b)(ii) being
referred to collectively as the "Subsidiary Securities"). There are not
outstanding obligations of the Company or any Subsidiary to repurchase, redeem
or otherwise acquire any outstanding Subsidiary Securities.
3.12 Intellectual Property.
(a) Definitions. For the purposes of this Agreement, the following
terms have the following definitions:
"Intellectual Property" shall mean any or all of the following and all
rights in, arising, out of, or associated therewith: (i) all United States,
international and foreign patents and applications therefor and all reissues,
divisions, renewals, extensions, provisionals, continuations and
continuations-in-part thereof; (ii) all inventions (whether patentable or not),
invention disclosures, improvements, trade secrets, proprietary information,
know how, technology, technical data and customer lists, and all documentation
relating to any of the foregoing; (iii) all copyrights, copyrights
registrations and applications therefor, and all other rights corresponding
thereto throughout the world; (iv) all industrial designs and any registrations
and applications therefor throughout the world; (v) all trade names, logos,
common law trademarks and service marks, trademark and service xxxx
registrations and applications therefor throughout the world; (vi) all
databases and data collections and all rights therein throughout the world;
(vii) all moral and economic rights of authors and inventors, however
denominated, throughout the world, and (viii) any similar or equivalent rights
to any of the foregoing anywhere in the world.
"Company Intellectual Property" shall mean any Intellectual Property that
is owned by, or exclusively licensed to, the Company or its Subsidiaries.
"Registered Intellectual Property" means all United States, international
and foreign: (i) patents and patent applications (including provisional
applications); (ii) registered trademarks, applications to register trademarks,
intent-to-use applications, or other registrations or applications related to
trademarks; (iii) registered copyrights and applications for copyright
registration; and (iv) any other Intellectual Property that is the subject of
an application, certificate, filing, registration or other document issued,
filed with, or recorded by any state, government or other public legal
authority.
"Company Registered Intellectual Property" means all of the Registered
Intellectual Property owned by, or filed in the name of, the Company or its
Subsidiaries.
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(b) No Company Intellectual Property or product or service of the
Company or its Subsidiaries is subject to any proceeding or outstanding decree,
order or judgment restricting in any manner the use, transfer, or licensing
thereof by the Company or its Subsidiaries, or which may affect the validity,
use or enforceability of such Company Intellectual Property (nor, to the
Company's knowledge is there any basis therefor).
(c) The Company or its Subsidiaries own and have good and exclusive
title to, or have license to use (sufficient for the conduct of its business as
currently conducted and as proposed to be conducted), each item of Company
Intellectual Property or other Intellectual Property used by the Company or its
Subsidiaries free and clear of any lien or encumbrance (excluding licenses and
related restrictions); and the Company or its Subsidiaries are the exclusive
owners of or have a valid license to use all trademarks and trade names used in
connection with the operation or conduct of the business of the Company and its
Subsidiaries, including the sale of any products or the provision of any
services by the Company and its Subsidiaries.
(d) The Company or its Subsidiaries own exclusively, and have good
title to, all copyrighted works that are the Company's or its Subsidiaries'
products or which the Company or its Subsidiaries otherwise expressly purport
to own.
(e) To the extent that any Intellectual Property has been developed
or created by a third party for the Company or its Subsidiaries, the Company or
its Subsidiaries have a written agreement with such third party with respect
thereto and the Company or its Subsidiaries thereby either have obtained
ownership of and are the exclusive owners of, or have obtained a license
(sufficient for the conduct of its business as currently conducted and as
proposed to be conducted) to, all such third party's Intellectual Property in
such work, material or invention by operation of law or by valid assignment.
(f) Neither the Company nor any of its Subsidiaries has transferred
ownership of, or granted any exclusive license with respect to, any
Intellectual Property that is or was material Company Intellectual Property, to
any third party.
(g) The operation of the business of the Company and its Subsidiaries
as such business currently is conducted, including the Company's and its
Subsidiaries' design, development, manufacture, marketing and sale of the
products or services of the Company and its Subsidiaries (including products
currently under development), to the knowledge of the Company, has not and will
not infringe or misappropriate the Intellectual Property of any third party or,
to its knowledge, constitute unfair competition or trade practices under the
laws of any jurisdiction.
(h) Neither the Company nor any of its Subsidiaries has received
notice from any third party that the operation of the business of the Company
or its Subsidiaries or any act, product or service of the Company or its
Subsidiaries, may infringe or misappropriate the Intellectual Property of any
third party or constitutes unfair competition or trade practices under the laws
of any jurisdiction.
(i) To the knowledge of the Company, no person has or is materially
infringing or misappropriating any Company Intellectual Property.
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(j) The Company and its Subsidiaries have taken reasonable steps to
protect the Company's and its Subsidiaries' rights in the Company's
confidential information and trade secrets that it wishes to protect or any
trade secrets or confidential information of third parties provided to the
Company or its Subsidiaries.
3.13 Litigation, etc. There are no actions, suits, proceedings or
investigations pending or, to the Company's knowledge, currently threatened
against the Company or the Subsidiaries or their respective properties before
any court, arbitrator or governmental agency (nor, to the Company's knowledge,
is there any written threat thereof or any reasonable basis therefor), that if
decided adversely to the Company would result in a Material Adverse Effect to
the Company, or that in any manner challenge or seek to prevent, enjoin, alter
or materially delay the transactions contemplated by the Agreements. The
foregoing includes, without limitation, actions, suits, proceedings or
investigations pending or threatened against the Company (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 proprietary to any of their former employers, or
their obligations under any agreements with prior employers. The Company is not
a party or 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
that the Company intends to initiate.
3.14 Compliance with Laws. Neither the Company nor any Subsidiary is in
violation of, nor has violated or been threatened to be charged with or given
notice of any violation of, nor to the knowledge of the Company, is under
investigation with respect to any applicable law, in each case other than such
violations that could not reasonably be expected to be material to the Company.
3.15 Material Contracts. Except as disclosed in the SEC Documents, neither
the Company nor any Subsidiary is a party to or is bound by:
(a) any employment or consulting agreement, contract or commitment
with any officer or director or higher level employee or member of the
Company's Board of Directors, other than those that are terminable by the
Company or any Subsidiary on no more than thirty (30) days' notice without
liability or financial obligation to the Company;
(b) any agreement or plan, including, without limitation, any stock
option plan, stock appreciation right plan or stock purchase plan, any of the
benefits of which will be increased, or the vesting of benefits of which will
be accelerated, by the occurrence of any of the transactions contemplated by
the Agreements or by a Change of Control Transaction (as defined in the
Certificate of Designation) or the value of any of the benefits of which will
be altered on the basis of any of the transactions contemplated by the
Agreements or by a Change of Control Transaction;
(c) any material agreement of indemnification or any guaranty other
than (i) any agreement of indemnification entered into in connection with the
sale or license of software products or services in the ordinary course of
business, or (ii) any indemnification obligation of the Company or any
Subsidiary to its officers or directors;
-9-
(d) any agreement, contract or commitment containing any covenant
limiting in any material respect the right of the Company or any Subsidiary to
engage in any line of business or to compete with any person or granting any
exclusive distribution rights;
(e) any agreement, contract or commitment currently in force relating
to the disposition or acquisition by the Company or any Subsidiary after the
date of this Agreement of a material amount of assets not in the ordinary
course of business or pursuant to which the Company has any material ownership
interest in any corporation, partnership, joint venture or other business
enterprise other than the Company's Subsidiaries;
(f) any dealer, distributor, joint marketing, original equipment
manufacturer, reseller or development agreement currently in force under which
the Company or any Subsidiary has continuing material obligations to jointly
market any product, technology or service and which may not be canceled without
penalty upon notice of ninety (90) days or less and, in the case of dealer,
distributor or joint marketing agreements, which involve payments by or to the
Company of $500,000 or more, or any material agreement pursuant to which the
Company or any Subsidiary has continuing material obligations to jointly
develop any intellectual property that will not be owned, in whole or in part,
by the Company or its Subsidiaries;
(g) any agreement, contract or commitment currently in force to
provide source code to or to license or acquire source code from any third
party for any product or technology other than source code escrow agreements or
other similar arrangements entered into in the normal course of business;
(h) any agreement, contract or commitment currently in force to
engage any third party to manufacture or reproduce any Company product, service
or technology or any agreement, contract or commitment currently in force to
sell or distribute any Company products, including any parts or components
thereof, service or technology except agreements with distributors or sales
representative in the normal course of business cancelable without penalty upon
notice of ninety (90) days or less;
(i) any material mortgages, indentures, guarantees, loans or credit
agreements or other agreements or instruments relating to the borrowing of
money or extension of credit;
(j) any settlement agreement entered into prior to the date of this
Agreement; or
(k) any other agreement, contract or commitment that includes
receipts or expenditures of $500,000 or more individually.
Except to the extent fully performed or terminated pursuant to its terms,
each of the agreements, contracts, leases and commitments required to be
disclosed pursuant to this section is a legal, valid and binding agreement of
the Company or a Subsidiary, as the case may be, and is in full force and
effect, and none of the Company, such Subsidiary or, to the knowledge of the
Company, any other party thereto is in default or breach, in each case except
for any such default or breach that could not reasonably be expected to be
material to the Company, and, to the knowledge of the Company, no event or
circumstance has occurred that, with the giving of notice or lapse of time or
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both, would constitute any event of default thereunder, except for an event of
default that could not reasonably be expected to be material to the Company.
3.16 Offering of Securities. Neither the Company nor any Person acting on
the Company's behalf has taken or will take any action (including, without
limitation, any offering of any securities of the Company under circumstances
which would require, under the Securities Act, the integration of such offering
with the offering and sale of the Shares and the Conversion Shares) which might
subject the offering, issuance or sale of the Shares to the registration
requirements of Section 5 of the Securities Act.
3.17 Environmental Compliance.
(a) The Company does not own any real property. No notice,
notification, demand, request for information, citation, summons, complaint or
order has been issued, no complaint has been filed, no penalty has been
assessed and no investigation or review is pending, or to the Company's
knowledge, threatened by any governmental or other entity (i) with respect to
any alleged violation by the Company or any of its Subsidiaries of any
environmental law, (ii) with respect to any alleged failure by the Company or
any of its Subsidiaries to have any material permit, certificate, license,
approval, registration or authorization required under any environmental law in
connection with the conduct of their businesses or (iii) with respect to any
release, as defined in 42 U.S.C. 9601(22), of any hazardous substance that
could reasonably be expected to be material to the Company.
(b) No release, as defined in 42 U.S.C. 9601(22), of any hazardous
substance has occurred at or on any property now or previously owned or leased
by the Company or any of its Subsidiaries.
(c) To the knowledge of the Company, there are no environmental
liabilities that could reasonably be material to the Company.
3.18 Employment Matters; ERISA.
(a) The Company has made available to the Purchasers copies of any
employee benefit plan within the meaning of Section 3(3) of ERISA or any other
material employment or employee arrangement, severance arrangement or
employment agreement, which is maintained or otherwise contributed to by any
member of the ERISA Group and covers any current or former employee of Company
(collectively the "Benefit Arrangements") and, if applicable, related trust
agreements and all amendments thereto and written interpretations thereof
together with the most recent annual report (Form 5500 including, if
applicable, schedule B thereto). Each material Benefit Arrangement that is
intended to be qualified under Section 401(a) of the Code has been determined
by the Internal Revenue Service to be so qualified if so required and, to the
knowledge of the Company, there has been no event since the date of such
determination which would reasonably be expected to adversely affect such
qualification. Each material Benefit Arrangement has been maintained in
substantial compliance with its terms and with the requirements prescribed by
and all applicable statutes, orders, rules and regulations, including but not
limited to ERISA and the Code, except to the extent that it would not have a
Material Adverse Effect.
-11-
(b) Neither the Company nor any member of the ERISA Group maintains
or contributes to or has maintained or contributed to any plan subject to Title
IV of ERISA or any multiemployer plan within the meaning of Section 4001(a)(3)
of ERISA.
(c) The Company has no current or projected liability in respect of
post-employment or post-retirement health or medical or life insurance benefits
for its former or current employees, except for benefit coverage mandated by
applicable law or as required to avoid excise tax under Section 4980B of the
Code.
(d) No employee of the Company shall become entitled to any payments
or accelerated vesting of any awards merely as a result of this transaction.
(e) Other than as described in the SEC Documents and standard form
employment offer letters and employment, confidential information and invention
assignment agreements ("Employment Agreements") in the forms provided to
counsel to the Purchasers, there are no employment or employment related
agreements between the Company and any of its employees. All present and past
employees of the Company and its Subsidiaries have entered into Employment
Agreements with the Company, and none have taken any material exception to the
provision or assignment of inventions. Other than as described in the SEC
Documents, there are no severance arrangements of any kind in effect for any of
the Company's current employees, nor are there any arrangements in effect
relating to the increase or acceleration of any salary or benefits of any
employee in the event of any sale of the Company or substantially all of its
assets.
3.19 Taxes. (a) The Company and each of its Subsidiaries has filed in
accordance with applicable law, all material tax returns, statements, reports
and forms (collectively, "Returns") required to be filed with any taxing
authority when due (taking into account any extension of a required filing
date); (b) at the time filed, such returns were true, correct and complete in
all material respects; (c) the Company and each of its Subsidiaries has timely
paid all taxes shown as due and payable on the returns that have been filed;
(d) the charges, accruals and reserves for taxes reflected in the most recent
balance sheet (excluding any provision for deferred income taxes) are adequate
under GAAP, consistently applied, to cover the tax liabilities accruing through
the date thereof; (e) since the date of the most recent balance sheet included
in the Financial Statements, neither the Company nor any of its Subsidiaries
has engaged in any transaction, or taken any other action, other than in the
ordinary course of business, which would reasonably be expected to result in a
material tax on the Company or any of its Subsidiaries; (f) there is no action,
suit, proceeding, investigation, audit or claim pending, or, to the knowledge
of the Company threatened against or with respect to it or any of its
Subsidiaries in respect of any tax; (g) neither the Company nor any of its
Subsidiaries has any obligation under any tax sharing agreement, tax allocation
agreement or tax indemnity agreement or any other agreement or arrangement in
respect of any tax with any Person other than the Company or its Subsidiaries;
(h) neither the Company nor any of its Subsidiaries has been a member of an
affiliated, consolidated, combined or unitary group other than one of which the
Company was the common parent; (i) proper and adequate amounts have been
withheld by the Company and its Subsidiaries from their respective employees
and other Persons for all periods in compliance in all material respects with
the tax, social security and unemployment, excise and other withholding
provisions of all federal, state, local and foreign laws; (j) there is no lien
in respect of any material tax outstanding against the assets, properties or
business of the Company or any of its Subsidiaries; and (k) the Company is not
now, has never been and does not contemplate becoming a
-12-
"United States Real Property Holding Corporation" as defined in Section
897(c)(2) of the Code and Section 1.897-2(b) of the Treasury regulations
thereunder.
3.20 Regulatory Matters. The Company has all necessary franchises,
approvals, authorizations, permits, licenses, registrations, qualifications and
similar rights obtained from any federal, state or local regulatory authority
("Authorizations") to conduct and operate the businesses of the Company, except
any such Authorizations which are not material to the Company. The
Authorizations are currently in full force and effect, are not in default, and
are valid under all applicable rules and regulations according to their terms,
except as are not material to the Company. The Company is in material
compliance with the terms and conditions of the Authorizations, including
requirements for notifications, filing, reporting, posting and maintenance of
logs and records.
3.21 Property. The material properties held by the Company and its
Subsidiaries conform to the description thereof in the Company's SEC Documents.
The Company and its Subsidiaries have good and marketable title in fee simple
to any real property and good and marketable title to all personal property
owned by them which is material to the business of the Company and its
Subsidiaries, taken as a whole, in each case free and clear of all liens,
encumbrances and defects except such as are disclosed in the Company's SEC
Documents; and all material real property and buildings held under lease by the
Company and its Subsidiaries are held by them under valid, subsisting and
enforceable leases with such exceptions as are not material and do not
interfere with the use made and proposed to be made of such property and
buildings by the Company and its Subsidiaries.
3.22 Proxy Materials. If the Company seeks the approval of the Company's
stockholders in connection with the issuance of securities contemplated hereby,
the proxy or information statement of the Company to be filed with the
Commission in connection with the related stockholders meeting (the "Proxy
Statement") and any amendments or supplements thereto will, when filed, comply
as to form in all material respects with the applicable requirements of the
Exchange Act. At the time the Proxy Statement or any amendment or supplement
thereto is first mailed to stockholders of the Company, and at the time such
stockholders vote on approval of the issuance of securities hereunder, the
Proxy Statement, as supplemented or amended, if applicable, will not contain
any untrue statement of a material fact or omit to state any material fact
necessary in order to make the statements made therein, in the light of the
circumstances under which they were made, not misleading. The representations
and warranties contained in this Section 3.22 will not apply to statements or
omissions included in the Proxy Statement based upon information furnished in
writing to the Company by any Purchaser or any affiliate thereof specifically
for use therein.
3.23 State Takeover Statutes. The Board of Directors of the Company, at a
meeting duly called (or for which notice was duly waived by all directors of
the Company) and held on August 20, 2002, has approved the terms of this
Agreement, the Certificate of Designation, the Amended and Restated
Registration Rights Agreement, the Series B Preemptive Rights Agreement and the
other documents contemplated by this Agreement, and the consummation of the
transactions contemplated hereby and thereby (including without limitation the
sale and issuance to the Purchasers of the Shares and Conversion Shares
pursuant to this Agreement and such approval constitutes approval of such
transactions by the Board of Directors of the Company under the provisions of
Section 203 of the Delaware General Corporation Law (the "DGCL"), and
constitutes all actions necessary to
-13-
ensure that the restrictions contained in Section 203 of the DGCL will not
apply to the Purchasers in connection with or as a result of such transactions.
To the Company's knowledge, no other state takeover statute is applicable to
the transactions contemplated by this Agreement and the other documents
contemplated hereby.
3.24 Broker's and Finder's Fees. The Company has not incurred, nor will it
incur, directly or indirectly, nor will the Purchasers incur, directly or
indirectly as a result of any action of the Company, any liability for
brokerage or finder's fees or agent's commissions or any similar charges in
connection with the Agreement or any transaction contemplated thereby.
SECTION 4
Representations and Warranties of the Purchasers
Each Purchaser hereby represents and warrants, severally and not jointly,
to the Company with respect to its purchase of the Shares as follows:
4.1 Investment for Own Account. This Agreement is made by the Company with
the Purchaser in reliance upon such Purchaser's representations and covenants
made in this Section 4, which by its execution of this Agreement the Purchaser
hereby confirms. The Purchaser represents that the Shares and the Conversion
Shares to be received will be acquired for investment for its own account, not
as a nominee or agent, and not with a view to the sale or distribution of any
part thereof, and that it has no present intention of selling, granting any
participation in or otherwise distributing the same. The Purchaser further
represents that it does not have any contract, undertaking, agreement or
arrangement with any person to sell, transfer or grant participation to such
person or to any third person, with respect to any of the Shares or the
Conversion Shares.
4.2 Accredited Investor. The Purchaser represents that it is an
"Accredited Investor" within the meaning of Rule 501(a) of Regulation D,
pursuant to the Securities Act.
4.3 Registration Exemption. The Purchaser understands and acknowledges
that the offering of the Shares and the Conversion Shares pursuant to this
Agreement will not be registered under the Securities Act on the ground that
the sale provided for in this Agreement and the issuance of securities
hereunder is exempt pursuant to Section 4(2) of the Securities Act or
Regulation D thereunder, and that the Company's reliance on such exemption is
predicated on the Purchasers' representations set forth herein.
4.4 Disposition of Shares. The Purchaser covenants that in no event will
it make any disposition of any of the Shares or the Conversion Shares except in
accordance with the provisions hereof and the provisions of the Registration
Rights Agreement.
4.5 Experience; Risks. The Purchaser represents that it is experienced in
evaluating investments in emerging high technology companies such as the
Company, is able to fend for itself in transactions such as the one
contemplated by this Agreement, has such knowledge and experience in financial
and business matters that it is capable of evaluating the merits and risks of
its
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prospective investment in the Company, and has the ability to bear the economic
risks of the investment.
4.6 Transfer Restrictions. The Purchaser acknowledges and understands that
the Shares and the Conversion Shares must be held indefinitely unless they are
subsequently registered under the Securities Act or an exemption from such
registration is available, and that, except as otherwise provided in the
Amended and Restated Registration Rights Agreement, the Company is under no
obligation to register the Shares or the Conversion Shares.
4.7 Rule 144. The Purchaser acknowledges that it is familiar with the
terms of Rule 144 promulgated under the Act, which permits limited public
resales of securities acquired in a non-public offering, subject to the
satisfaction of certain conditions. The Purchaser understands that before the
Shares, or any Common Stock issued upon conversion thereof, may be sold under
Rule 144, the following conditions must be fulfilled, except as otherwise
described below: (i) certain public information about the Company must be
available, (ii) the sale must occur at least one year after the later of the
date the Shares were sold by the Company or the date they were sold by an
affiliate of the Company, (iii) the sale must be made in a broker's transaction
and (iv) the number of Shares sold must not exceed certain volume limitations.
If, however, the sale occurs at least two years after the Shares were sold by
the Company or the date they were sold by an affiliate of the Company, and if
the Purchaser is not an affiliate of the Company, the foregoing conditions will
not apply. The Purchaser acknowledges that in the event the applicable
requirements of Rule 144 are not met, registration under the Securities Act or
compliance with another exemption from registration will be required for any
disposition of its stock. The Purchaser understands that although Rule 144 is
not exclusive, the SEC has expressed its opinion that persons proposing to sell
restricted securities received in a private offering other than in a registered
offering or pursuant to Rule 144 will have a substantial burden of proof in
establishing that an exemption from registration is available for such offers
or sales and that such persons and the brokers who participate in the
transactions do so at their own risk.
4.8 Disclosure of Information. The Purchaser believes it has received all
the information it considers necessary or appropriate for deciding whether to
purchase the Shares. The Purchaser further represents that it has had an
opportunity to ask questions and receive answers from the Company regarding the
terms and conditions of the offering of the Shares and the business,
properties, prospects and financial condition of the Company. The foregoing,
however, does not limit or modify the representations and warranties of the
Company in Section 3 of this Agreement or the right of the Purchaser to rely
thereon.
SECTION 5
Additional Agreements
5.1 Public Announcements.
(a) The Company and the Purchasers shall each receive the prior
written consent from the Company and Warburg Pincus Private Equity VIII, L.P.
("Warburg") before issuing any press release or making any public statement
with respect to this Agreement, the transactions
-15-
contemplated hereby or an Alternative Proposal (as defined below) and, except
as may be required by applicable law or any stock exchange or Nasdaq Stock
Market rule, will not issue any such press release or make any such public
statement prior to obtaining such written consent.
(b) The parties will prepare a joint announcement for release upon
announcement of the transactions contemplated hereby.
5.2 Nasdaq Listing. The Company agrees to use its commercially reasonable
efforts to (i) cause the Conversion Shares to be authorized for listing on the
Nasdaq Stock Market upon official notice of issuance and (ii) maintain the
listing of its Common Stock on the Nasdaq SmallCap Market or the Nasdaq
National Market, unless otherwise approved by the a majority of the Board of
Directors of the Company, which majority must include a majority of the
directors elected by the holders of the Series A Preferred Stock pursuant to
Section (4)(b) of Article IV of the Certificate of Incorporation and the Series
B Preferred Stock pursuant to Section 4(b) of the Certificate of Designation.
5.3 Proxy Statement and Other Filings. The Company will include, in the
definitive proxy statement (the "Proxy Statement") relating to its 2002 annual
meeting of stockholders currently scheduled for November 2002 (the "Annual
Meeting"), proposals to (i) approve the anti-dilution provisions with respect
to the Series B Preferred Stock and (ii) amend the certificate of
incorporation, as amended, of the Company to make such changes as are necessary
or desirable to effect a reverse stock split of the Company's Common Stock for
purposes of attempting to maintain the listing of the Company's Common Stock on
the Nasdaq SmallCap Market (the "Proposals"). The Company will respond to any
comments of the SEC and will cause the Proxy Statement to be mailed to its
stockholders at the earliest practicable time. As promptly as practicable after
the date of this Agreement, the Company will prepare and file a current report
on Form 8-K including a pro forma balance sheet for purposes of maintaining the
listing of the Company's Common Stock on the Nasdaq SmallCap Market and any
other filings required under the Exchange Act, the Securities Act or any other
federal or state laws relating to the Financing and the transactions
contemplated by this Agreement (the "Other Filings"). The Company will notify
the Purchasers promptly upon the receipt of any comments from the SEC or its
staff and of any request by the SEC or its staff or any other government
officials for amendments or supplements to the Proxy Statement or any Other
Filing or for additional information and will supply the Purchasers with copies
of all correspondence between the Company or any of its representatives, on the
one hand, and the SEC, or its staff or any other government officials, on the
other hand, with respect to the Proxy Statement or any Other Filing. The Proxy
Statement and any Other Filings will comply in all material respects with all
applicable requirements of law and the rules and regulations promulgated
thereunder. Whenever any event occurs which is required to be set forth in an
amendment or supplement to the Proxy Statement or any Other Filing, the Company
will promptly inform the Purchasers of such occurrence and cooperate in filing
with the SEC or its staff or any other government officials, and/or mailing to
stockholders of the Company such amendment or supplement. The Board of
Directors of the Company shall recommend approval of the Proposals and the
Company shall use its reasonable best efforts to obtain approval of the
Proposals by the stockholders. In the event that the Company's stockholders do
not approve the Proposals, upon request of Warburg, the Company will call and
hold an additional meeting or meetings of stockholders in accordance with the
provisions of this Section for purposes of obtaining such approvals, provided
that the Company shall not be obligated
-16-
to hold more than one (1) such meeting in any three (3) month period for the
Company to satisfy its obligations.
5.4 Conduct of the Company. From the date hereof until the Closing, except
with the prior written consent of Warburg, the Company and its Subsidiaries
shall conduct their businesses in the ordinary course consistent with past
practice and shall use their commercially reasonable efforts to preserve intact
their business organizations and relationships with third parties and to keep
available the services of their present officers and employees. The Company
will use all reasonable efforts in the ordinary conduct of its business to
cause its representations and warranties under Section 3 hereof which are
qualified as to materiality to continue to be true (as so qualified) as of the
Closing Date and to cause such representations and warranties under Section 3
hereof which are not so qualified to continue to be true in all material
respects as of the Closing Date (except for such representations and warranties
which speak as of a specified date). Without limiting the generality of the
foregoing, from the date hereof until the Closing without written consent of
Warburg:
(a) the Company will not permit, adopt or propose any change to its
certificate of incorporation, as amended, or bylaws, as amended, except as
contemplated by this Agreement;
(b) the Company will not, and will not permit any of its Subsidiaries
to, merge or consolidate with any other Person or acquire a material amount of
stock or assets of any other Person;
(c) the Company will not, and will not permit any of its Subsidiaries
to, sell, lease, license, transfer or otherwise dispose of any material
subsidiary or any material amount of assets, securities or property, tangible
or intangible, except (i) pursuant to existing contracts or commitments and
(ii) in the ordinary course consistent with past practice; and
(d) the Company will not, and will not permit any of its Subsidiaries
to, agree or commit to do any of the foregoing items (a) through (c).
5.5 No Solicitation.
(a) Neither the Company nor any of its Subsidiaries shall, nor shall
the Company or any Subsidiary authorize or permit any of its or their officers,
directors, employees, investment bankers, attorneys, accountants, consultants
or other agents or advisors to, directly or indirectly, (i) solicit, initiate
or take any action to encourage the submission of any Alternative Proposal,
(ii) enter into or participate in any discussions or negotiations with, furnish
any non-public information relating to the Company or any Subsidiaries or
afford access to the business, properties, assets, books or records of the
Company or the Subsidiaries to, otherwise cooperate in any way with, or
knowingly assist, participate in, or encourage any effort by any party that is
seeking to make, or has made, an Alternative Proposal or (iii) grant any waiver
or release under any standstill or similar agreement with respect to any class
of equity securities of the Company or any Subsidiary.
(b) Notwithstanding the foregoing, the Board of Directors of the
Company, directly or indirectly through advisors, agents or other
intermediaries, may (i) engage in negotiations or discussions with any party
that, subject to the Company's compliance with Section 5.5(a), has made a
Superior
-17-
Proposal (as defined below) or, (ii) furnish to such party that has made a
Superior Proposal nonpublic information relating to the Company or its
Subsidiaries pursuant to a confidentiality agreement with terms no less
favorable to Company than those contained in the Confidentiality Agreement
dated as of August 13, 2001 between the Company and Warburg, (iii) following
receipt of such Superior Proposal, take and disclose to its stockholders a
position contemplated by Rule 14e-2(a) under the Exchange Act or otherwise
recommend the Superior Proposal and make disclosure to them, and/or (iv) take
any non-appealable, final action ordered to be taken by the Company by any
court of competent jurisdiction, but in each case referred to in the foregoing
clauses (i) through (iii) only if the Board of Directors of the Company
determines in good faith by a majority vote after consultation with outside
legal counsel to the Company, that it must take such action to comply with its
fiduciary duties under applicable law.
(c) The Board of Directors of the Company shall not take any of the
actions referred to in clauses (i) through (iii) of the preceding subsection
unless the Company shall have delivered to Warburg a prior written notice
advising Warburg that it intends to take such action, and the Company shall
continue to advise Warburg after taking such action. In addition, the Company
shall notify Warburg promptly (but in no event later than 24 hours) after
receipt by the Company (or any of its advisors) of any unsolicited inquiry or
Alternative Proposal, of any indication that a third party is considering
making an Alternative Proposal or of any request for information relating to
the Company or its Subsidiaries or for access to the business, properties,
assets, books or records of the Company or its Subsidiaries by any party that
may be considering making, or has made, an Alternative Proposal. The Company
shall provide such notice orally and in writing and shall identify the party
making, and the terms and conditions of, any such Alternative Proposal,
indication or request. The Company shall keep Warburg fully informed, on a
current basis, of the status and material details of any such Alternative
Proposal, indication or request. In addition to the foregoing, the Company
shall (i) provide Warburg with at least 48 hours prior notice (or such lesser
notice as provided to the members of the Company's Board of Directors but in no
event less than eight hours) of any meeting of the Company's Board of Directors
at which the Company's Board of Directors is reasonably expected to consider a
Superior Proposal and (ii) provide Warburg with at least three business days
prior written notice of a meeting of the Company's Board of Directors at which
the Company's Board of Directors is reasonably expected to recommend a Superior
Proposal to its stockholders and together with such notice a description of the
terms and conditions relating to such Superior Proposal. The Company shall, and
shall cause its Subsidiaries and the advisors, employees and other agents of
the Company and any of its Subsidiaries to, cease immediately and cause to be
terminated any and all existing activities, discussions or negotiations, if
any, with any party conducted prior to the date hereof with respect to any
Alternative Proposal and shall use its best efforts, consistent with its rights
under confidentiality agreements with such parties, to cause any such party (or
its agents or advisors) in possession of confidential information about the
Company that was furnished by or on behalf of the Company to return or destroy
all such information.
"Alternative Proposal" means, other than the transactions contemplated by
this Agreement, any offer or proposal for, any indication of interest in, or
any submission of inquiries from any party relating to (A) any acquisition or
purchase, direct or indirect, of 10% or more of the consolidated assets of the
Company and its Subsidiaries or over 10% of any class of equity or voting
securities of the Company or any of its Subsidiaries, (B) any tender offer
(including a self-tender offer) or exchange offer that, if consummated, would
result in such party's beneficially owning 10% or more of any class of equity
or voting securities of the Company or any of its Subsidiaries, or (C) a
merger,
-18-
consolidation, share exchange, business combination, sale of substantially all
the assets, reorganization, recapitalization, liquidation, dissolution or other
similar transaction involving the Company or any of its Subsidiaries.
"Superior Proposal" means any bona fide, unsolicited written Alternative
Proposal for any of the following transactions (i) a merger, consolidation,
business combination, recapitalization, liquidation, dissolution or similar
transactions involving Company pursuant to which the stockholders of Company
immediately preceding such transaction hold less than 51% of the equity
interest in the surviving or resulting entity of such transaction; (ii) a sale
or other disposition by Company of assets representing in excess of 25% of the
fair market value of Company's business immediately prior to such sale; or
(iii) the acquisition by any person or group, directly or indirectly, of
beneficial ownership or right to acquire beneficial ownership of shares
representing in excess of 25% of the voting power of the then outstanding
shares of capital stock of Company, in each case on terms that the Board of
Directors of the Company determines in good faith by a majority vote, on the
basis of the advice of a financial advisor of nationally recognized reputation
and taking into account all the terms and conditions of the Alternative
Proposal, including any break-up fees, expense reimbursement provisions and
timing and conditions to consummation, are more favorable and provide greater
value to Company's stockholders than as provided hereunder and for which
financing, to the extent required, is then fully committed or reasonably
determined to be available by the Board of Directors of the Company.
5.6 Reasonable Best Efforts; Further Assurances. Subject to the terms and
conditions of this Agreement, the Company and the Purchasers will use their
reasonable best efforts to take, or cause to be taken, all actions and to do,
or cause to be done, all things necessary or desirable under applicable laws
and regulations to consummate the transactions contemplated by this Agreement.
The Company and the Purchasers agree to execute and deliver such other
documents, certificates, agreements and other writings and to take such other
actions as may be necessary or desirable in order to consummate or implement
expeditiously the transactions contemplated by this Agreement.
SECTION 6
Conditions to the Closing of All Parties
6.1 Conditions to Obligations of Each Party to Effect the Financing. The
respective obligations of each party to this Agreement to effect the Financing
shall be subject to the satisfaction at or prior to the Closing Date of:
(a) Compliance with Laws and Court Orders. No provision of any
applicable law or regulation and no judgment, injunction, order or decree shall
prohibit the consummation of the transactions contemplated hereby.
(b) Litigation. There shall not have been instituted or pending any
action or proceeding (or any investigation or other inquiry that might result
in such action or proceeding) by any government or governmental authority or
agency, domestic, foreign or supranational, before any court or governmental
authority or agency, domestic, foreign or supranational, challenging or seeking
to make illegal, to delay materially or otherwise directly or indirectly to
restrain or prohibit
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the consummation of the transactions contemplated hereby, seeking to obtain
material damages or otherwise directly or indirectly relating to the
transactions contemplated hereby.
(c) Certificate of Designation. The Certificate of Designation shall
have been filed with the Secretary of State of the State of Delaware.
(d) Blue Sky. The Company shall have obtained all necessary state
securities law permits and qualifications, or secured an exemption therefrom,
required prior to offering and selling the Shares and the Conversion Shares by
any state.
(e) Registration Rights Agreement. The Company and the Purchasers
shall have executed and delivered the Amended and Restated Registration Rights
Agreement.
(f) Preemptive Rights Agreement. The Company shall have executed and
delivered the Series B Preemptive Rights Agreement.
SECTION 7
Conditions to Closing of the Purchasers
Each Purchaser's obligation to purchase Shares at the Closing is, at the
option of such Purchaser, subject to the fulfillment on or prior to the Closing
Date of the following conditions:
7.1 Representations and Warranties Correct. (i) The Company shall have
performed in all material respects all of its obligations hereunder required to
be performed by it at or prior to the Closing ; (ii) the representations and
warranties of the Company contained in this Agreement and in any certificate or
other writing delivered by the Company pursuant hereto shall be true
(disregarding each exception therein for materiality and Material Adverse
Effect) at and as of the date hereof except for (A) those representations and
warranties, that address matters only as of a particular date (which shall
remain true only as of such date) and (B) such exceptions as would not
individually or in the aggregate have a Material Adverse Effect on the Company;
and (iii) such Purchaser shall have received a certificate signed by the Chief
Executive Officer and Chief Financial Officer of Company to the foregoing
effect.
7.2 Opinion of Company Counsel. Such Purchaser shall have received from
Xxxxxx Xxxxxxx Xxxxxxxx & Xxxxxx, Professional Corporation, legal counsel to
the Company, an opinion addressed to it, dated the Closing Date, in
substantially the form of Exhibit D.
SECTION 8
Conditions to Closing of Company
The Company's obligation to sell and issue the Shares issuable hereunder
at the Closing is, at the option of the Company, subject to the fulfillment of
the following conditions:
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8.1 Representations and Warranties Correct. The representations made by
the Purchasers in Section 5 hereof shall be true and correct in all material
respects when made, and shall be true and correct in all material respects on
the Closing Date.
8.2 Covenants. All covenants, agreements and conditions contained in this
Agreement to be performed by the Purchasers on or prior to the Closing Date
shall have been performed or complied with.
SECTION 9
Miscellaneous
9.1 Governing Law. This Agreement shall be governed in all respects by the
laws of the State of Delaware, without giving effect to the conflicts of laws
principals thereof.
9.2 Survival. The representations, warranties, covenants, and agreements
made herein shall survive any investigation made by the Purchasers and the
closing of the transactions contemplated hereby.
9.3 Successors and Assigns. Except as otherwise 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; provided, however, that the rights of the Purchasers to purchase Shares
shall not be assignable without the written consent of the Company.
9.4 Entire Agreement; Amendment. The Agreements and the other documents
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof.
Neither this Agreement nor any term hereof may be amended, waived, discharged,
or terminated other than by a written instrument signed by the party against
whom enforcement of any such amendment, waiver, discharge, or termination is
sought.
9.5 Notices, etc. All notices and other communications required or
permitted hereunder shall be in writing and shall be deemed effectively given
upon delivery to the party to be notified in person or by courier service or
five days after deposit with the United States mail, by registered or certified
mail, postage prepaid, addressed (a) if to a Purchasers, at such Purchasers'
address set forth on the Schedule of Purchasers, or at such other address as
such Purchasers shall have furnished to the Company in writing, or (b) if to
the Company, to its address set forth on the first page of this Agreement and
addressed to the attention of Xxxxxxxxxxx Xxxx, Esq., General Counsel, or at
such other address as the Company shall have furnished to the Purchasers, with
a copy to Wilson, Sonsini, Xxxxxxxx & Xxxxxx, Professional Corporation, 000
Xxxx Xxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000, Attn: Xxxxxxxxx X. Xxxxxx, Esq.,
or if by facsimile, upon receipt of appropriate confirmation of receipt.
9.6 Delays or Omissions. No delay or omission to exercise any right, power
or remedy accruing to any holder of any Shares, upon any breach or default of
the Company under this Agreement, shall impair any such right, power or remedy
of such holder nor shall it be construed to be a waiver of any such breach or
default, or an acquiescence therein, or of or in any similar breach
-21-
or default thereafter occurring; nor shall any waiver of any single breach or
default be deemed a waiver of any other breach or default theretofore or
thereafter occurring. Any waiver, permit, consent or approval of any kind or
character on the part of any holder of any breach or default under this
Agreement, or any waiver on the part of any holder of any provisions or
conditions of this Agreement, must be in writing and shall be effective only to
the extent specifically set forth in such writing. All remedies, either under
this Agreement or by law or otherwise afforded to any holder, shall be
cumulative and not alternative.
9.7 California Corporate Securities Law. THE SALE OF THE SECURITIES WHICH
ARE THE SUBJECT OF THIS AGREEMENT HAS NOT BEEN QUALIFIED WITH THE COMMISSIONER
OF CORPORATIONS OF THE STATE OF CALIFORNIA AND THE ISSUANCE OF SUCH SECURITIES
OR THE PAYMENT OR RECEIPT OF ANY PART OF THE CONSIDERATION THEREFOR PRIOR TO
SUCH QUALIFICATION IS UNLAWFUL UNLESS AN EXEMPTION FROM SUCH QUALIFICATION IS
AVAILABLE. THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY
CONDITIONED UPON SUCH QUALIFICATION BEING OBTAINED, OR SUCH EXEMPTION BEING
AVAILABLE.
9.8 Waiver of Conflict. Each party to this Agreement that has been or
continues to be represented by Wilson, Sonsini, Xxxxxxxx & Xxxxxx, Professional
Corporation, counsel to the Company, hereby acknowledges that Rule 3-310 of the
Rules of Professional Conduct promulgated by the State Bar of California
requires an attorney to avoid representations in which the attorney has or had
a relationship with another party interested in the representation without the
informed written consent of all parties affected. By executing this Agreement,
each such party gives his or its informed written consent to the representation
of the Company by Wilson, Sonsini, Xxxxxxxx & Xxxxxx, Professional Corporation,
in connection with this Agreement and the transactions contemplated hereby.
9.9 Expenses. If the Financing and transactions contemplated by this
Agreement are consummated, upon the request of Warburg, the Company shall pay,
within five (5) business days of such request, all reasonable out-of-pocket
fees and expenses of Warburg and its advisors incurred in connection with this
Agreement and the transactions contemplated hereby incurred through the Closing
Date; provided, however, in the event that the aggregate of all legal fees and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby incurred through the Closing Date exceed $20,000, the
Company shall not be required to pay Warburg for the amount by which such legal
fees and expenses exceed $20,000. If the Financing and transactions
contemplated by this Agreement are not consummated, the parties will each pay
their own fees and expenses.
9.10 Counterparts. This Agreement may be executed in any number of
counterparts, each of which may be executed by less than all of the Purchasers,
each of which shall be enforceable against the parties actually executing such
counterparts, and all of which together shall constitute one instrument.
9.11 Severability. In the event that any provision of this Agreement
becomes or is declared by a court of competent jurisdiction to be illegal,
unenforceable or void, this Agreement shall continue in full force and effect
without said provision; provided that no such severability shall be effective
if it materially changes the economic benefit of this Agreement to any party.
-22-
9.12 Gender. The use of the neuter gender herein shall be deemed to
include the masculine and the feminine gender, if the context so requires.
9.13 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 person, officers, directors, partners, agents or employees of any
Purchaser shall be liable to any other Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
purchase of the Shares or the execution of or performance under any of the
related documents.
[Remainder of Page Intentionally Left Blank]
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The foregoing Agreement is hereby executed as of the date first above
written.
"COMPANY" EVOLVE SOFTWARE, INC.
a Delaware corporation
By:
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Name:
----------------------------------------
Title:
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"PURCHASER" Warburg Pincus Private Equity VIII, L.P.
By Warburg Pincus & Co., as General Partner
By:
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Name:
----------------------------------------
Title:
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Series B Shares Purchased:
--------------------------------
Total Purchase Price:
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SIGNATURE PAGE TO STOCK PURCHASE AGREEMENT
