ASK JEEVES, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
TABLE OF CONTENTS
PAGE
1. AGREEMENT TO SELL AND PURCHASE............................................1
1.1 Authorization of Shares..........................................1
1.2 Sale and Purchase................................................1
2. CLOSING, DELIVERY AND PAYMENT.............................................2
2.1 Closing..........................................................2
2.2 Delivery.........................................................2
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.............................2
3.1 Organization, Good Standing and Qualification....................2
3.2 Subsidiaries.....................................................3
3.3 Capitalization; Voting Rights....................................3
3.4 Authorization; Binding Obligations...............................3
3.5 Financial Statements.............................................4
3.6 Liabilities......................................................4
3.7 Agreements; Action...............................................4
3.8 Obligations to Related Parties...................................5
3.9 Changes..........................................................5
3.10 Title to Properties and Assets; Liens, etc.......................6
3.11 Patents and Trademarks...........................................6
3.12 Compliance with Other Instruments................................7
3.13 Litigation.......................................................7
3.14 Tax Returns and Payments.........................................8
3.15 Employees........................................................8
3.16 Proprietary Information and Inventions Agreements................8
3.17 Registration Rights..............................................8
3.18 Compliance with Laws; Permits....................................8
3.19 Offering Valid...................................................9
3.20 Accounting Controls..............................................9
3.21 Minute Books.....................................................9
3.22 Environmental and Safety Laws....................................9
i.
3.23 Insurance........................................................9
3.24 Full Disclosure..................................................9
3.25 Qualified Small Business........................................10
3.26 Real Property Holding Corporation...............................10
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.........................10
4.1 Requisite Power and Authority...................................10
4.2 Investment Representations......................................10
4.3 Transfer Restrictions...........................................11
5. CONDITIONS TO CLOSING....................................................12
5.1 Conditions to Purchasers' Obligations at the Closing............12
5.2 Conditions to Obligations of the Company........................13
6. MISCELLANEOUS............................................................14
6.1 Governing Law...................................................14
6.2 Survival........................................................14
6.3 Successors and Assigns..........................................14
6.4 Entire Agreement................................................14
6.5 Severability....................................................14
6.6 Amendment and Waiver............................................14
6.7 Delays or Omissions.............................................14
6.8 Notices.........................................................15
6.9 Expenses........................................................15
6.10 Attorneys' Fees.................................................15
6.11 Titles and Subtitles............................................15
6.12 Counterparts....................................................15
6.13 Broker's Fees...................................................15
6.14 Exculpation Among Purchasers....................................16
6.15 Pronouns........................................................16
6.16 California Corporate Securities Law.............................16
6.17 Additional Investors............................................16
ii.
ASK JEEVES, INC.
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES B PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of February 24, 1999, by and among ASK JEEVES, INC., a
California 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 eleven million five hundred fifty one thousand six hundred thirteen
(11,551,613) shares of its Series B Preferred Stock (the "Shares");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to 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:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the Closing (as defined
in Section 2 below), the Company shall have authorized (i) the sale and issuance
to Purchasers of the Shares and (ii) the issuance of such shares of Common Stock
to be issued upon conversion of the Shares (the "Conversion Shares"). The
Shares and the Conversion Shares shall have the rights, preferences, privileges
and restrictions set forth in the Restated Articles of Incorporation of the
Company, as amended, in the form attached hereto as EXHIBIT B (the "Restated
Charter").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof, at
the Closing (as hereinafter defined) 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 set
forth opposite such Purchaser's name on EXHIBIT A, at a purchase price of
$2.1642 per share.
1.3 SUBSEQUENT SALES OF SHARE. At any time on or before the 45th day
following the Closing, the Company may sell up to the balance of the authorized
shares of Series B Preferred Stock not sold at the Closing to such persons as
may be approved by the Board of Directors of the Company and the holders of a
majority of the outstanding Series B
1
Preferred Stock. 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 B
Preferred Stock sold pursuant to this Section 1.3 shall be deemed to be "SHARES"
for all purposes under this Agreement and any purchasers thereof shall be deemed
to be "PURCHASERS" for all purposes under this Agreement. If the Company does
not sell all the Shares by the 45th day following the Closing, the Purchasers
hereunder shall have the right to purchase such remaining Shares on a pro rata
basis. The Company may not sell any additional shares of Series B Preferred
Stock except pursuant to this section without the consent of the Purchasers of a
majority in interest of the Shares.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares under
this Agreement (the "Closing") shall take place at 10:00 a.m. on the date
hereof, at the offices of Xxxxxx Godward LLP, Five Palo Alto Square, 0000
Xx Xxxxxx Xxxx, Xxxx Xxxx, Xxxxxxxxxx 00000 or at such other time or place as
the Company and Purchasers may mutually agree (such date is hereinafter referred
to as the "Closing Date").
2.2 DELIVERY. At the Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares to be purchased at the Closing by each Purchaser, against
payment of the purchase price therefor by check, wire transfer made payable to
the order of the Company or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as set forth on a Schedule of Exceptions delivered by the Company to
the Purchasers prior to the execution and delivery hereof, the Company hereby
represents and warrants to each Purchaser as of the date of this Agreement 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 California. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amended and Restated Investor Rights Agreement substantially
in the form attached hereto as EXHIBIT C (the "Investor Rights Agreement"), the
Amended and Restated Voting Agreement substantially in the form attached hereto
as Exhibit D (the "Voting Agreement"), and the Co-Sale Agreement substantially
in the form attached hereto as Exhibit E (the "Co-Sale Agreement")
(collectively, the "Related Agreements"), to issue and sell the Shares and the
Conversion Shares and to carry out the provisions of this Agreement, the Related
Agreements and the Restated Charter 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,
except for those jurisdictions in which failure to do so would not have a
material adverse effect on the Company or its business.
2
3.2 SUBSIDIARIES. The Company owns no equity securities of any other
corporation, limited liability company or general partnership or similar entity.
The Company is not a participant in any joint venture, partnership or similar
arrangement.
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the Closing, will consist of eighty million
(80,000,000) shares of Common Stock, twenty-two million seven hundred sixteen
thousand one hundred fifty-four (22,716,154) shares of which are issued and
outstanding, eleven million nine hundred forty six thousand seven hundred forty
five (11,946,745) shares of which are reserved for issuance to employees
pursuant to the Company's 1996 Equity Incentive Plan of which five hundred
seventy four thousand seven hundred thirty three (574,733) shares have been
exercised pursuant to options (and are reflected in the outstanding Common Stock
referenced above) eight million fifty six thousand two hundred twenty seven
(8,056,227) shares are reserved for outstanding options and three million three
hundred fifteen thousand seven hundred eighty five (3,315,785) shares are
reserved for future issuance of options, seventy eight thousand (78,000) shares
of which are reserved for the exercise of certain warrants to purchase Common
Stock of the Company and seven million four hundred nineteen thousand seven
hundred sixty nine (7,419,769) shares of which are reserved for issuance upon
conversion of the Series A Preferred Stock, and twenty million (20,000,000)
shares of Preferred Stock, seven million five hundred thousand (7,500,000) of
which are designated Series A Preferred Stock, seven million four hundred
nineteen thousand seven hundred sixty nine (7,419,769) shares of which are
issued and outstanding, and twelve million five hundred thousand (12,500,000) of
which are designated Series B Preferred Stock, none of which are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock
and Series A Preferred Stock (a) have been duly authorized and validly issued
(b) are fully paid and nonassessable, and (c) 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 Charter. Subject to adjustment as set forth in the Restated
Charter, each series of Preferred Stock is convertible into Common Stock on a
one-for-one basis. The Conversion Shares have been duly and validly reserved
for issuance. Other than the shares reserved for issuance under the Company's
1996 Equity Incentive Plan, 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
shareholder agreements, or agreements of any kind for the issuance by the
Company or purchase or acquisition from the Company of any of its securities.
When issued in compliance with the provisions of this Agreement and the Restated
Charter, the Shares and the Conversion Shares will be validly issued, fully paid
and nonassessable, and will be free of any liens, encumbrances or pre-emptive
rights; provided, however, that the Shares and the Conversion 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.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and shareholders necessary for the
authorization of this Agreement and the Related Agreements, the performance of
all obligations of the Company hereunder and thereunder at the Closing and the
authorization, sale, issuance and delivery of the Shares pursuant hereto and the
Conversion Shares pursuant to the Restated Charter has been
3
taken or will be taken prior to the 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 indemnification provisions in
Section 2.9 of the Investor Rights Agreement may be limited by applicable laws.
The sale of the Shares and the subsequent conversion of the 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.
3.5 FINANCIAL STATEMENTS. The Company has been made available to
each Purchaser (a) its audited balance sheet as at December 31, 1997 and audited
statement of income and cash flows for the twelve months ending December 31,
1997 and (b) its unaudited balance sheet as at December 31, 1998 (the "Statement
Date") and unaudited consolidated statement of income and cash flows for the
twelve month period ending on the Statement Date (collectively, the "Financial
Statements"). The Financial Statements, together with the notes thereto, are
complete and correct in all material respects, have been prepared in accordance
with generally accepted accounting principles applied on a consistent basis
throughout the periods indicated, except as disclosed therein, and present
fairly the financial condition and results of operations of the Company as of
December 31, 1997 and the Statement Date; 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.
3.6 LIABILITIES. The Company has no material liabilities and, to the
best of its knowledge, knows of no material contingent liabilities not disclosed
in the Financial Statements, except current liabilities incurred in the ordinary
course of business subsequent to the Statement Date which have not been, either
in any individual case or in the aggregate, materially adverse.
3.7 AGREEMENTS; ACTION.
(a) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to which
the Company is a party or by which it is bound which may involve (i) obligations
(contingent or otherwise) of, or payments to, the Company in excess of $50,000
(other than obligations of, or payments to, the Company arising from purchase or
sale agreements entered into in the ordinary course of business), or (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 (iii) provisions restricting or affecting
the development, manufacture or distribution of the Company's products or
services, or (iv) indemnification by the Company with respect to infringements
of proprietary rights.
(b) 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,
4
(ii) incurred any indebtedness for money borrowed or any other liabilities
(other than with respect to indebtedness and other obligations incurred in the
ordinary course of business and as disclosed in the Financial Statements)
individually in excess of $50,000 or, in the case of indebtedness and/or
liabilities individually less than $50,000, in excess of $100,000 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.
(c) 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.
3.8 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, shareholders, or employees of the Company other
than (a) for payment of salary for services rendered on a basis consistent with
past practice, (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).
Except as may be disclosed in the Financial Statements, the Company is not a
guarantor or indemnitor of any indebtedness of any other person, firm or
corporation.
3.9 CHANGES. Since the Statement Date, there has not been:
(a) Any change in the assets, liabilities, financial condition
or operations of the Company from that reflected in the Financial Statements,
other than changes in the ordinary course of business, none of which
individually or in the aggregate has or is expected to materially adversely
affect such assets, liabilities, financial condition or operations of the
Company;
(b) Any resignation or termination of any key officers of the
Company;
(c) To the best of its knowledge, 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;
5
(f) Any direct or indirect loans made by the Company to any
shareholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or shareholder;
(h) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(i) 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;
(j) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets;
(k) Any change in any material agreement to which the Company is
a party or by which it is bound which is material and adverse to the Company or
materially and adversely affects the business, assets, liabilities, financial
condition, operations or prospects of the Company; or
(l) Any other event or condition of any character that, either
individually or cumulatively, has or, to the best of its knowledge, may
materially and adversely affect the business, assets, liabilities, financial
condition, operations or prospects of the Company.
3.10 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Financial
Statements, 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, and (b) minor liens
and encumbrances which do not materially detract from the value of the property
subject thereto or materially impair the operations of the Company. 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.
3.11 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, Internet domain names, trade secrets,
licenses, information and other proprietary rights and processes necessary for
its business as now conducted and as presently proposed to be conducted, without
any known or asserted infringement of the rights of others. There are no
outstanding options, licenses or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to
6
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 presently 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 presently proposed to be conducted. Neither the execution nor delivery of
this Agreement, nor the carrying on of the Company's business by the employees
of the Company, nor the conduct of the Company's business as presently proposed
will, to the Company's knowledge, 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. 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 assigned to the Company.
3.12 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Charter or Bylaws, or 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, any statute, rule or regulation applicable to the
Company which would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. The
execution, delivery, and performance of and compliance with this Agreement, and
the Related Agreements, and the issuance and sale of the Shares pursuant hereto
and of the Conversion Shares pursuant to the Restated Charter, 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.
3.13 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently and overtly threatened against
the Company nor is the Company aware of any basis for any such action, suit,
proceeding or investigation that would question the validity of this Agreement,
or 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
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. The foregoing includes, without limitation, actions pending or
threatened in writing (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
7
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 which the Company intends to initiate.
3.14 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
(federal, state and local) required to be filed by it. To the best of the
Company's knowledge all taxes due and payable by the Company on or before the
Closing have been paid or will be paid prior to the time they become delinquent.
The Company has not been advised (a) that any of its returns, federal, state or
other, have been or are being audited as of the date hereof, or (b) 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.
3.15 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, including without limitation any agreement or understanding
concerning employee benefit plans or health insurance. 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 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.
3.16 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. Each current
employee and officer of the Company has executed a Proprietary Information and
Inventions Agreement in the form of EXHIBIT F attached hereto. To the Company's
knowledge, no officer or employee of the Company is in violation of the terms of
any such agreement. No current employee or officer 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 pursuant to such employee or officer
Proprietary Information and Inventions Agreement.
3.17 REGISTRATION RIGHTS. Except as required pursuant to the Investor
Rights Agreement, the Company is presently not under any obligation, and has not
granted any rights, to
8
register (as defined in Section 1.1 of the Investor Rights Agreement) any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued.
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 governmental orders,
permissions, consents, approvals or authorizations 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 and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the Closing, as
will be filed in a timely manner. The Company has 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.
3.19 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 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 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 or other
securities of the Company to any person or persons so as to bring the sale of
such Shares by the Company within the registration provisions of the Securities
Act or any state securities laws.
3.20 ACCOUNTING CONTROLS. The Company maintains a system of internal
accounting controls sufficient to provide assurance that: (1) transactions are
executed in accordance with management's general or specific authorizations; (2)
transactions are recorded as necessary to permit preparation of financial
statements materially in conformity with generally accepted accounting
principles and to maintain accountability for assets; (3) access to assets is
permitted only in accordance with management's general or specific
authorization; and (4) the recorded accountability for assets is compared with
the existing assets at reasonable intervals and appropriate action is taken with
respect to any differences.
3.21 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers contain a complete summary of all meetings of directors and
shareholders since the time of incorporation.
3.22 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable statue, law or regulation relating to the
environment or
9
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.
3.23 INSURANCE. The Company has fire and casualty insurance policies
with coverage customary for companies similarly situated to the Company.
3.24 FULL DISCLOSURE. To the Company's knowledge, neither this
Agreement, the Exhibits hereto, the Related Agreements nor any other document
delivered by the Company to Purchasers or their attorneys or agents in
connection herewith or therewith or with the transactions contemplated hereby or
thereby, 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.
3.25 QUALIFIED SMALL BUSINESS. The Company represents and warrants to
the Purchasers that, to the best of its knowledge, the Company is a "qualified
small business" within the meaning of Section 1202(d) of the Internal Revenue
Code of 1986, as amended (the "Code"), as of the date hereof and the Shares
should qualify as "qualified small business stock" as defined in Section 1202(c)
of the Code as of the date hereof.
3.26 REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Code Section 897(c)(2) and
any regulations promulgated thereunder.
4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser severally and not jointly hereby represents and warrants to
the Company with respect to itself as follows (such representations and
warranties do not lessen or obviate the representations and warranties of the
Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary
corporate or partnership power and authority 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 have been or will be effectively taken
prior to the 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 2.9
of the Investor Rights Agreement may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the Securities
Act. Purchaser also understands that the Shares 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:
10
(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 (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 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 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 and the Conversion Shares for Purchaser's own account for investment
only, and not with a view towards their distribution.
(c) GENERAL SOLICITATION. 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 Business Plan 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, and, if issued, the Conversion 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 as in effect from
time to time, 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 following the required holding period under Rule
144 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; 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.
11
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. Purchasers'
obligations to purchase the Shares at the Closing are subject to the
satisfaction, at or prior to the Closing Date, 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 Closing
Date with the same force and effect as if they had been made as of the 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 Closing.
(b) LEGAL INVESTMENT. On the Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which Purchasers and the
Company are subject.
(c) 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
Closing).
(d) FILING OF RESTATED CHARTER. The Restated Charter shall have
been filed with the Secretary of State of the State of California.
(e) 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.
(f) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(g) COMPLIANCE CERTIFICATE. The Company shall have delivered to
Purchasers a Compliance Certificate, executed by the President of the Company,
dated the Closing Date, to the effect that the conditions specified in
subsections (a), (c) and (f) of this Section 5.1 have been satisfied.
(h) INVESTOR RIGHTS AGREEMENT. The Investor Rights Agreement
shall have been executed and delivered by the parties thereto.
12
(i) VOTING AGREEMENT. The Voting Agreement shall have been
executed and delivered by the parties thereto.
(j) CO-SALE AGREEMENT. The Co-Sale Agreement shall have been
executed and delivered by the parties thereto.
(k) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in substantially the form attached hereto as EXHIBIT G.
(l) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the 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.
(m) CERTIFICATE AS TO DISQUALIFIED PERSONS. The Company shall
have executed and delivered to Highland Capital Partners a Certificate as to
Disqualified Persons, dated as of the Closing Date, in form and substance
satisfactory to Highland Capital Partners.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made by those Purchasers acquiring Shares in Section 4 hereof
shall be true and correct in all material respects at the date of the 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 with all agreements and conditions herein required to be
performed or complied with by such Purchasers on or before the Closing.
(c) FILING OF RESTATED CHARTER. The Restated Charter shall have
been filed with the Secretary of State of the State of California.
(d) INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
shall have been executed and delivered by the Purchasers.
(e) VOTING AGREEMENT. The Voting Agreement shall have been
executed and delivered by the parties thereto.
(f) CO-SALE AGREEMENT. The Co-Sale Agreement shall have been
executed and delivered by the parties thereto.
13
(g) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all governmental consents, permits and waivers necessary for
consummation of the transactions contemplated by the Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of California as such laws are applied to agreements
between California residents entered into and performed entirely in California.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser and
the 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 from time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Related 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 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 through any
subsequent sales provided by Section 2.3 of this Agreement only upon the written
consent of the Company and holders of at least sixty-six and two-thirds percent
(662/3%) 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).
(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 sixty-six and two-thirds
percent (662/3%) 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).
14
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 Charter, 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 Charter or any waiver on such party's part of
any provisions or conditions of the Agreement, the Related Agreements, or the
Restated Charter 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 Charter, by law, or otherwise
afforded to any party, shall be cumulative and not alternative.
6.8 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 (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) one (1) 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's principal offices at 000 Xxxxxx Xxxxxx, Xxxxxxxx, XX and to Purchaser
at the address set forth on the signature page hereof or at such other address
as the Company or Purchaser may designate by ten (10) days advance written
notice to the other parties hereto.
6.9 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 reimburse the reasonable fees of and expenses
of one special counsel for the Purchasers, not to exceed $15,000, incurred in
connection with the negotiation, execution, delivery and performance of this
Agreement.
6.10 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.
6.11 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.
6.12 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.
15
6.13 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 6.13 being untrue.
6.14 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.
6.15 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.
6.16 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 OR IN THE ABSENCE OF AN EXEMPTION FROM SUCH
QUALIFICATION IS UNLAWFUL. PRIOR TO ACCEPTANCE OF SUCH CONSIDERATION BY THE
COMPANY, THE RIGHTS OF ALL PARTIES TO THIS AGREEMENT ARE EXPRESSLY CONDITIONED
UPON SUCH QUALIFICATION BEING OBTAINED OR AN EXEMPTION FROM SUCH QUALIFICATION
BEING AVAILABLE.
6.17 ADDITIONAL INVESTORS. Notwithstanding anything to the contrary
contained herein, if the Company shall issue additional shares of its Series B
Preferred Stock pursuant to this Agreement, any purchaser of such shares of
Series B Preferred Stock may become a party to this Agreement by executing and
delivering an additional counterpart signature page to this Agreement and shall
be deemed a "PURCHASER" hereunder.
16
IN WITNESS WHEREOF, the parties hereto have executed the SERIES B PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY: PURCHASER:
ASK JEEVES, INC. INVESTOR
By: /s/ Xxxxxx X. Xxxxxx By: /s/ Investors Listed on Exhibit A
-------------------------------- -------------------------------------
President
Name:
----------------------------------
Title:
---------------------------------
Address:
-------------------------------
----------------------------------------
----------------------------------------
Phone Number: ( )
--------------------
Facsimile: ( )
-----------------------
SIGNATURE PAGE
Schedule of Purchasers Exhibit A
Restated Articles of Incorporation Exhibit B
Investor Rights Agreement Exhibit C
Amended and Restated Voting Agreement Exhibit D
Co-Sale Agreement Exhibit E
Proprietary Information and Exhibit F
Inventions Agreement
Form of Legal Opinion Exhibit G
SERIES B PREFERRED STOCK PURCHASE AGREEMENT
EXHIBIT A
SCHEDULE OF PURCHASERS
AGGREGATE
NAME SHARES PURCHASE PRICE
--------------------------------------------------------------------------------
Highland Capital Partners IV Limited 4,435,819 $ 9,599,999.48
Partnership
Highland Entrepreneurs' Fund IV 184,826 $ 400,000.43
Limited Partnership
CPQ Holdings, Inc. 688,183 $ 1,489,365.65
Institutional Venture Partners VIII, 2,730,801 $ 5,909,999.52
L.P.
IVM Investment Fund VIII, LLC 41,586 $ 90,000.42
Xxx Xxxxxx 17,040 $ 36,877.97
Roda Group Investment Fund I, L.L.C 1,713,464 $ 3,708,278.89
Xxxxxxx Xxxxxxx 115,516 $ 249,999.73
Xxxxxxxx X. Xxxxx 345,552 $ 747,843.64
Xxxxxxx Family Trust U/T/D April 20, 256,272 $ 554,623.86
1989
Angel Investors, L.P. 26,894 $ 58,203.99
XX Xxxxx 123,513 $ 267,306.83
Xxxxxx & Xxxxx Xxxxxx as Trustees of 54,381 $ 117,691.36
the Xxxxxx Family Trust dated 9/25/96
Xxxxxx Xxxx Xxxxxx 55,036 $ 119,108.91
AGGREGATE
NAME SHARES PURCHASE PRICE
--------------------------------------------------------------------------------
Xxxxx Xxxxx Xxxxxxx and Xxxx X. Xxxxxx 55,036 $ 119,108.91
Living Trust dated 12/15/95
Xxxxx X. Xxxxx and Xxxxxxx X. Xxxxx 55,036 $ 119,108.91
Revocable Trust, dated 7/29/94
Xxxxxx X. Still, Jr 3,362 $ 7,276.04
Xxxxxxx Xxxxxxxxx, Trustee for the 47,246 $ 102,249.79
Xxxxxxxxx Revocable Trust U/T/D
6/12/83
P. Xxxx Xxxxx 27,604 $ 59,740.58
A. Xxxxxx Xxxxxx 26,916 $ 58,251.61
M. Xxxxx Xxxxx 1994 Trust 17,291 $ 37,421.18
J. Xxxxxx Xxxxxxx 16,598 $ 35,921.39
Xxxxxxxx X. Xxxxxx 15,904 $ 34,419.44
Xxxxxx X. and Xxxx Xxx Revocable Trust 14,475 $ 31,326.80
dated 8/14/89
Xxxxxxx Xxxxxx 14,475 $ 31,326.80
GC&H Investments 6,723 $ 14,549.92
Xxxxxx X. Xxxxxxx III 462,064 $ 999,998.91
TOTAL: 11,551,613 $ 25,000,000.86
---------- -----------------
---------- -----------------
