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EXHIBIT 10.11.1
NETLIBRARY, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
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TABLE OF CONTENTS
PAGE
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1. AGREEMENT TO SELL AND PURCHASE...........................................1
1.1 Authorization of the Shares.....................................1
1.2 Sale and Purchase...............................................1
1.3 Use of Proceeds.................................................2
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....................................................2
3.3 Capitalization..................................................3
3.4 Authorization; Binding Obligations..............................4
3.5 Financial Statements............................................4
3.6 Liabilities.....................................................4
3.7 Agreements; Action..............................................5
3.8 Obligations to Related Parties..................................7
3.9 Changes.........................................................7
3.10 Title to Properties and Assets; Liens, etc. ....................9
3.11 Intellectual Property...........................................9
3.12 Compliance with Other Instruments..............................10
3.13 Litigation.....................................................11
3.14 Tax Returns and Payments.......................................11
3.15 Employees......................................................12
3.16 Proprietary Information and Inventions Agreements..............13
3.17 Obligations of Management......................................13
3.18 Registration Rights............................................13
3.19 Compliance with Laws; Permits..................................13
3.20 Offering Valid.................................................14
3.21 Full Disclosure................................................14
3.22 [Reserved] ....................................................14
3.23 Minute Books...................................................14
3.24 Real Property Holding Corporation..............................14
3.25 Insurance......................................................14
3.26 Brokerage......................................................15
3.27 ERISA..........................................................15
3.28 Environmental and Safety Laws..................................16
3.29 Year 2000 Compliance...........................................16
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4. REPRESENTATIONS AND WARRANTIES AND COVENANT
OF THE FOUNDERS.........................................................16
4.1 Obligations of Founders.........................................16
4.2 Title to Assets.................................................16
4.3 Conflicting Agreements..........................................17
4.4 Litigation......................................................17
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS........................17
5.1 Requisite Power and Authority..................................17
5.2 Investment Representations.....................................17
5.3 Transfer Restrictions..........................................19
6. CONDITIONS TO CLOSING...................................................19
6.1 Conditions to Purchasers' Obligations at the Closing...........19
6.2 Conditions to Obligations of the Company.......................20
7. MISCELLANEOUS...........................................................21
7.1 Governing Law..................................................21
7.2 Survival.......................................................21
7.3 Successors and Assigns.........................................21
7.4 Entire Agreement...............................................22
7.5 Severability...................................................22
7.6 Amendment and Waiver...........................................22
7.7 Remedies; Delays or Omissions..................................22
7.8 Notices........................................................23
7.9 Expenses.......................................................23
7.10 [Intentionally Omitted] .......................................23
7.11 Titles and Subtitles...........................................23
7.12 Counterparts...................................................23
7.13 Broker's Fees..................................................23
7.14 Exculpation among Purchasers...................................23
7.15 Pronouns.......................................................24
7.16 No Strict Construction.........................................24
EXHIBIT A - SCHEDULE OF PURCHASERS
EXHIBIT B - FOURTH AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT C - AMENDMENT TO SECOND AMENDED AND RESTATED INVESTORS' RIGHTS AGREEMENT
EXHIBIT D - AMENDMENT TO SECOND AMENDED AND RESTATED STOCKHOLDERS AGREEMENT
EXHIBIT E - LATEST BALANCE SHEET
EXHIBIT F - PROPRIETARY INFORMATION AND INVENTIONS AGREEMENT
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NETLIBRARY, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is entered
into as of January 18, 2000, by and among NETLIBRARY, INC., a Delaware
corporation (the "Company"), F. Xxxxx Xxxxx, Xxxxx Xxxxxxxx, and Xxxxxxx X.
Xxxxxxx (collectively, the "Founders" and each individually a "Founder") 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 one
million four hundred fourteen thousand four hundred fifty (1,414,450) shares,
$.001 par value per share, of its Series D Preferred Stock (the "Authorized
Shares");
WHEREAS, Purchasers desire to purchase a portion of the Authorized Shares (the
"Shares") from the Company 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 THE SHARES. On or prior to the Closing (as
defined in Section 2 below), the Company shall have authorized (a) the sale and
issuance to Purchasers of the Shares and (b) the issuance of such shares of the
Company's Common Stock, $.001 par value per share (the "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 Fourth Amended and Restated Certificate of
Incorporation of the Company, as amended, in the form attached hereto as Exhibit
B (the "Restated Certificate").
1.2. SALE AND PURCHASE. Subject to the terms and conditions hereof,
including without limitation the provisions of Section 2.1, 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 $17.675 per share.
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1.3 USE OF PROCEEDS. Proceeds from the sale of the Shares shall be used
as working capital to fund costs of various strategic initiatives to enhance
market use of and access to eBooks.
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 the offices of the Company on
the date as the Company and Purchasers may mutually agree. The date on which
Closing occurs is 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, registered in
such Purchaser's or its nominee's name, against payment of the purchase price
therefor by check, wire transfer made payable to the order of the Company,
cancellation of indebtedness or any combination of the foregoing.
3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. Except as set forth on the
Schedule of Exceptions delivered by the Company to the Purchasers at the
Closing, 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 Delaware. The Company has all requisite corporate power and
authority to own and operate its properties and assets, to execute and deliver
this Agreement, the Amendment to the Second Amended and Restated Investors'
Rights Agreement in the form attached hereto as Exhibit C (the "Investors'
Rights Agreement"), the Amendment to the Second Amended and Restated
Stockholders Agreement in the form attached hereto as Exhibit D (the
"Stockholders Agreement") and any other agreements contemplated hereby or
thereby (the Investors' Rights Agreement and the Stockholders Agreement are
collectively referred to as the "Related Agreements"), to issue and sell the
Shares and to issue the Conversion Shares and to carry out the provisions of
this Agreement, the Related Agreements and the Restated Certificate and to carry
on its business as presently conducted and as presently proposed to be
conducted. The Company is duly qualified and is authorized to do business and is
in good standing as a foreign corporation in all jurisdictions in which the
nature of its activities and of its properties (both owned and leased) makes
such qualification necessary, except for those jurisdictions in which failure to
do so would not have a material adverse effect on the Company or its business.
3.2. SUBSIDIARIES. Except as set forth on Schedule 3.2, the Company
does not own or hold any rights to acquire any interest in any other
corporation, limited partnership, limited liability company or other entity. The
Company is not a participant in any joint venture, partnership or similar
arrangement.
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3.3. CAPITALIZATION. The authorized capital stock of the Company,
immediately prior to the Closing, will consist of (a) thirty-five million
(35,000,000) shares of Common Stock, par value $.001 per share, four million
four hundred seventeen thousand one hundred fifty-three (4,417,153) shares of
which are issued and outstanding and three million three hundred eighty-four
thousand five hundred thirteen (3,384,513) shares of which are reserved for
future issuance to employees pursuant to the Company's Stock Option Plan (in
each case subject to adjustment for options exercised after January 10, 2000),
(b) five million two hundred fifty thousand (5,250,000) shares of the Company's
Series A Preferred Stock, par value $.001 per share (the "Series A Stock"), five
million two hundred twenty-five thousand (5,225,000) of which are issued and
outstanding, (c) six million eight hundred twenty-eight thousand one hundred
seventy-six (6,828,176) shares of the Company's Series B Preferred Stock, par
value $.001 per share (the "Series B Stock"), six million eight hundred
twenty-eight thousand one hundred seventy-six (6,828,176) shares of which are
issued and outstanding, (d) five million seven hundred twenty-six thousand five
hundred seventy-four (5,726,574) shares of the Company's Series C Preferred
Stock, par value $.001 per share (the "Series C Stock"), five million seven
hundred twenty-six thousand five hundred seventy-four (5,726,574) of which are
issued and outstanding, and (e) one million four hundred fourteen thousand four
hundred fifty (1,414,450) shares of the Company's Series D Preferred Stock, par
value $.001 per share (the "Series D Stock"), none of which are issued and
outstanding. All issued and outstanding shares of the Company's Common Stock,
Series A Stock, Series B Stock and Series C 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 Certificate. Each of the Series A Stock, the
Series B Stock, the Series C Stock and the Series D Stock is convertible into
Common Stock initially on a one-for-one basis. The Conversion Shares have been
duly and validly reserved for issuance. Except as set forth on Schedule 3.3,
there are no outstanding options, warrants, rights (including conversion or
preemptive rights and rights of first refusal), proxy or stockholder agreements,
or agreements of any kind, written or oral, for the purchase or acquisition from
the Company of any of its securities. When issued in compliance with the
provisions of this Agreement and the Restated Certificate, the Shares and the
Conversion Shares will be validly issued, fully paid and nonassessable, and will
be free of any liens or encumbrances; 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. No stock plan, stock purchase, stock
option or other agreement or understanding between the Company and any holder of
any equity securities or rights to purchase equity securities provides for
acceleration or other changes in the vesting provisions or other terms of such
agreement or understanding solely as the result of any merger, consolidated sale
of stock or assets, change in control or other similar transaction by the
Company. As of the Closing, the Company shall not be subject to any obligation
(contingent or otherwise) to repurchase or otherwise acquire or retire any
shares of its capital stock or any warrants, options or other rights to acquire
its capital stock, except pursuant to the Restated Certificate.
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3.4. AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization and execution 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 Certificate
has been 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 Investors' 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 delivered to each Purchaser
the following financial statements:
(a) the audited balance sheet of the Company as of March 31, 1999
(the "Year-End Balance Sheet") and the related statements of income and cash
flows (or the equivalent) for the period then ended; and
(b) the unaudited balance sheet of the Company as of November 30,
1999 (the "Statement Date") (the "Latest Balance Sheet," and together with the
Year-End Balance Sheet, the "Financial Statements") and the related statements
of income and cash flows (or the equivalent) for the eight-month period then
ended, a copy of which is attached hereto as Exhibit E.
The Financial Statements, together with the notes thereto, if any, are complete
and correct in all material respects, are in accordance with the books and
records of the Company, 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 position of the Company as of the dates and for the periods set
forth therein.
3.6. LIABILITIES. Except as set forth in Schedule 3.6, the Company has
no material liabilities not disclosed in the Latest Balance Sheet, 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.
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3.7. AGREEMENTS; ACTION.
(a) Except for the transaction described in Section 4.2, and
except as set forth in Schedule 3.7(a), the agreements explicitly contemplated
hereby and agreements between the Company and its employees with respect to the
sale of the Company's Common Stock, there are no agreements or understandings,
written or oral, or proposed transactions between the Company and any of its
current or former officers, directors, employees, consultants or stockholders,
Affiliates of the Company or any Affiliate thereof, nor do any of such
individuals or entities have any material interest in any material property
owned or used by the Company. As used in this Agreement, the term "Affiliate"
means, as to any Person, a Person that directly or indirectly controls, is
controlled by, or is under common control with, such Person; and the term
"Person" means any natural person or any corporation, association, partnership,
limited partnership, limited liability company, firm or other entity.
(b) Except as expressly contemplated by this Agreement or as
set forth on Schedule 3.7(b), Schedule 3.15 or Schedule 3.27, the Company is not
a party to or bound by any written or oral:
(1) pension, profit sharing, stock option,
employee stock purchase or other plan or arrangement providing
for deferred or other compensation to employees or any other
employee benefit plan or arrangement, or any collective
bargaining agreement or any other contract with any labor
union, or severance agreements, programs, policies or
arrangements;
(2) contract under which the Company has
advanced or loaned any other Person amounts in the aggregate
exceeding $50,000;
(3) agreement or indenture relating to
borrowed money or other indebtedness or the mortgaging,
pledging or otherwise placing a lien, encumbrance or charge of
any kind on any material asset or material group of assets of
the Company;
(4) guarantee or suretyship of, or similar
arrangement with respect to, of any obligation;
(5) lease or agreement under which the
Company is lessee of or holds or operates any property, real
or personal, owned by any other party;
(6) lease or agreement under which the
Company is lessor of or permits any third party to hold or
operate any property, real or personal, owned or controlled by
the Company;
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(7) contract or group of related contracts
with the same party or group of affiliated parties the
performance of which involves consideration in excess of
$50,000, other than contracts entered into in the ordinary
course of business;
(8) assignment, license, indemnification or
agreement with respect to any intangible property (including,
without limitation, any Intellectual Property) (as defined in
Section 3.11);
(9) warranty agreement with respect to its
services rendered or its products sold or leased except for
agreements entered into in the ordinary course of business;
(10) sales, distribution or franchise
agreement except for agreements entered into in the ordinary
course of business;
(11) agreement with a term of more than six
(6) months which is not terminable by the Company upon less
than thirty (30) days notice without penalty, other than
contracts entered into in the ordinary course of business;
(12) contract or agreement prohibiting or
restricting it from freely engaging in any business or
competing anywhere in the world;
(13) contract for the acquisition, whether
by purchase, exchange, merger, reorganization, consolidation
or otherwise, for the acquisition of all or substantially all
of the assets of any other Person, or for the acquisition by
any other person of all or any substantial portion of the
assets of the Company; or;
(14) any other agreement which is material
to its operations and business prospects.
(c) All of the contracts, agreements and instruments set
forth on Schedule 3.7(b), Schedule 3.15 or Schedule 3.27 are valid, binding and
enforceable in accordance with their respective terms, and the Company has
delivered true and complete copies of each such contract, agreement or
instrument to each Purchaser who has requested a copy in writing. The Company
has performed all material obligations required to be performed by it and is not
in material default under or in material breach of or in receipt of any claim of
material default or material breach under any contract, agreement or instrument
to which the Company is subject; no event has occurred which with the passage of
time or the giving of notice or both would result in a material default,
material breach or event of material noncompliance by the Company under any
contract, agreement or instrument to which the Company is subject; the Company
has no present expectation or intention of not fully performing all such
obligations; the Company has no knowledge of any material breach or anticipated
material breach by any other party to
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any contract, agreement, instrument or commitment to which it is a party; and
the Company is not a party to any materially adverse contract or commitment.
(d) Except as set forth in Schedule 3.7(d), the Company has
not (1) declared or paid any dividends, or authorized or made any distribution
upon or with respect to any class or series of its capital stock, (2) incurred
any indebtedness for money borrowed or any other liabilities (other than
obligations incurred in the ordinary course of business or as disclosed in the
Latest Balance Sheet, individually in excess of $25,000 or, in the case of
indebtedness and/or liabilities individually less than $25,000, in excess of
$200,000 in the aggregate), (3) made any loans or advances to any Person in
excess of $10,000, other than ordinary advances for travel expenses, or (4)
sold, exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(e) For the purposes of subsections (b) and (d) 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. Except as set forth in Schedule
3.8, there are no obligations of the Company to current or former officers,
directors, stockholders, employees or consultants of the Company other than (a)
for payment of salary for services rendered, (b) reimbursement for reasonable
expenses incurred on behalf of the Company and (c) for other standard employee
benefits made generally available to all employees (including stock option
agreements outstanding under the Company's 1998 Stock Option Plan, as amended,
approved by the Board of Directors of the Company (the "Board")). No officer,
director or stockholder, or any member of their immediate families, is, directly
or indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such Person's employment by or ownership of
capital stock or other securities of the Company). The Company is not a
guarantor or indemnitor of any indebtedness of any other Person.
3.9. CHANGES. Except as set forth in Schedule 3.9, since the Statement
Date, there has not been:
(a) Any change in the assets, liabilities, financial
condition, operations, business prospects, employee relations or customer or
supplier relations of the Company from that reflected in the Latest Balance
Sheet, other than changes in the ordinary course of business, none of which
individually or in the aggregate has had or is expected to have a material
adverse effect on such assets, liabilities, financial condition, operations,
business prospects, employee relations or customer or supplier relations of the
Company;
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(b) Any resignation or termination of any key officers of
the Company; and the Company, to the best of its knowledge, does not know of the
impending resignation or termination of employment of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt or other obligation owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than advances
made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any redemption, repurchase, declaration or payment of
any dividend or other distribution of the assets of the Company other than
pursuant to agreements which have been approved by the Board and which permit
the Company to repurchase shares of capital stock of the Company upon
termination of services to the Company or in exercise of the Company's right of
first refusal upon a proposed transfer;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(k) Any sale, assignment or transfer of any patents,
trademarks, copyrights, trade secrets or other intangible assets or any material
tangible assets;
(l) Any change in any material agreement to which the
Company is a party or by which it is bound which materially and adversely
affects the business, assets, liabilities, financial condition, operations or
prospects of the Company; or
(m) Any other event or condition of any character that,
either individually or cumulatively, has materially and adversely affected or
reasonably could be expected to materially and adversely affect the business,
assets, liabilities, financial condition, operations or prospects of the
Company. For purposes of this subsection (m),
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a material and adverse effect shall only be deemed to occur if its monetary
impact exceeds, or with the passage of time, will exceed $100,000.
3.10. TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. Except as set forth
in Schedule 3.10 and subject to Schedule 3.11, the Company has good and
marketable title to its properties and assets, including without limitation, the
properties and assets reflected in the Latest Balance Sheet, and good title to
its leasehold estates, in each case subject to no mortgage, pledge, lien, lease,
encumbrance or charge, other than (a) those resulting from taxes which have not
yet become delinquent, (b) minor liens and encumbrances which do not materially
detract from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those attributable to purchase money security
interests or equipment leases and similar financings disclosed on the Schedule
of Exceptions. All facilities, equipment, fixtures 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. INTELLECTUAL PROPERTY.
(a) The attached Schedule 3.11 contains a complete and
accurate list of all (a) material patented or registered Intellectual Property
(as hereinafter defined) owned or used by the Company, (b) material pending
patent applications and applications for registrations of other Intellectual
Property filed by the Company, (c) material unregistered trade names and
corporate names owned or used by the Company and (d) material unregistered
trademarks, service marks, copyrights, and proprietary computer software owned
or used by the Company, in each case which are material to the financial
condition, operating results, assets, operations or business prospects of the
Company. Schedule 3.11 also contains a complete and accurate list of all
licenses and other rights granted by the Company to any third party with respect
to any material Intellectual Property and all licenses and other rights granted
by any third party to the Company with respect to any material Intellectual
Property in each case (excluding grants of rights to library and membership
customers and grants of rights to create and distribute electronic versions of
books, other publications and other works, and excluding "off-the-shelf"
programs or products or other software licensed in the ordinary course of
business) identifying the subject Intellectual Property. To the best of the
Company's knowledge, there is no threatened or reasonably foreseeable loss or
expiration of any Intellectual Property or related group of Intellectual
Property owned or used by the Company that would have a material adverse effect
on the Company. The Company has taken such commercially reasonably necessary,
appropriate and desirable actions as it believes appropriate to maintain and
protect the Intellectual Property which it owns. "Intellectual Property" means
all (i) patents, patent applications, patent disclosures and inventions, (ii)
trademarks, service marks, trade dress, trade names, logos and corporate names
and registrations and applications for registration thereof together with all of
the goodwill associated therewith, (iii) copyrights (registered or unregistered)
and copyrightable works and registrations and applications for registration
thereof, (iv)
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computer software, data, data bases and documentation thereof, (v) trade secrets
and other confidential information (including, without limitation, ideas,
formulas, compositions, inventions (whether patentable or unpatentable and
whether or not reduced to practice), know-how, manufacturing and production
processes and techniques, research and development information, drawings,
specifications, designs, plans, proposals, technical data, copyrightable works,
financial and marketing plans and customer and supplier lists and information),
and (vi) domain name registrations owned by the Company.
(b) Except as set forth in Schedule 3.11, the Company owns
or possesses sufficient legal rights to all Intellectual Property necessary for
its business as now conducted and as presently proposed to be conducted, without
any known infringement of the rights of others. Except as set forth on Schedule
3.11, there are no outstanding options, licenses or agreements of any kind
relating to the Company's Intellectual Property, nor is the Company bound by or
a party to any options, licenses or agreements of any kind with respect to the
patents, trademarks, service marks, trade names, copyrights, trade secrets,
licenses, information and other proprietary rights and processes of any other
person or entity, other than licenses or agreements arising from the purchase of
"off the shelf" or standard programs or products. Except as set forth on
Schedule 3.11, the Company has not received any communications alleging that the
Company has violated or, by conducting its business as presently proposed to be
conducted, 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, and the Company has no knowledge of any material violation by
any third parties of any of the Company's Intellectual Property Rights. The
Company has no knowledge that it is infringing upon the Intellectual Property
rights of any third party. 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 to be conducted,
will 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 officer of the Company having a title of at least Executive Vice
President 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 or its
predecessor, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
3.12. COMPLIANCE WITH OTHER INSTRUMENTS. Except as set forth in
Schedule 3.12, (i) the Company is not in violation or default of any term of its
Restated Certificate or Bylaws, and (ii) the Company is not in violation 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
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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
Certificate, will not, with or without the passage of time or giving of notice,
result in any such material violation, or be in conflict with or constitute a
default under any such term, or result in the creation of any mortgage, pledge,
lien, encumbrance or charge upon any of the properties or assets of the Company
or the suspension, revocation, impairment, forfeiture or nonrenewal of any
permit, license, authorization or approval applicable to the Company, its
business or operations or any of its assets or properties.
3.13. LITIGATION. Except as set forth in Schedule 3.13, there is no
action, suit, proceeding or investigation pending or to the Company's knowledge
currently threatened against the Company or with respect to its businesses or
proposed business activities or that questions 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, nor is the Company aware that there is any basis for the foregoing. 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 to any of their
former employers or any other Person or entity, or their obligations under any
agreements with any prior employer or any other Person or entity. The Company is
not a party or subject to 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.
(a) Except as set forth on Schedule 3.14, the Company has
filed all Tax Returns which it is required to file under applicable laws and
regulations; all such Tax Returns are complete and correct in all material
respects and have been prepared in compliance with all applicable laws and
regulations in all material respects; the Company in all material respects has
paid all Taxes due and owing by it (whether or not such Taxes are required to be
shown on a Tax Return) and has withheld and paid over to the appropriate taxing
authority all Taxes which it is required to withhold from amounts paid or owing
to any employee, stockholder, creditor or other third party; the Company has not
waived any statute of limitations with respect to any material Taxes or agreed
to any extension of time with respect to any material Tax assessment or
deficiency; the accrual for Taxes on the Latest Balance Sheet would be adequate
to pay all Tax liabilities of the Company if its current tax year was treated as
ending on the date
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of the Latest Balance Sheet (excluding any amount recorded which is attributable
solely to timing differences between book and Tax income); since the date of the
Latest Balance Sheet, the Company has not incurred any material liability for
Taxes other than in the ordinary course of business; the assessment of any
additional Taxes for periods for which Tax Returns have been filed by the
Company is not expected to exceed the recorded liability therefor on the Latest
Balance Sheet (excluding any amount recorded which is attributable solely to
timing differences between book and Tax income); no foreign, federal, state or
local tax audits or administrative or judicial proceedings are pending or being
conducted, or to the Company's knowledge, threatened, with respect to the
Company, no information related to Tax matters has been requested by any
foreign, federal, state or local taxing authority and no written notice
indicating an intent to open an audit or other review has been received by the
Company from any foreign, federal, state or local taxing authority; and there
are no material unresolved questions or claims concerning the Company's Tax
liability.
(b) The Company has not made an election under Section
341(f) of the Internal Revenue Code of 1986, as amended (the "IRC"). The Company
is not a party to any tax sharing or similar agreement. The Company has
disclosed on its federal income Tax Returns any position taken for which
substantial authority (within the meaning of IRC Section 6662(d)(2)(B)(i)) did
not exist at the time the return was filed. The Company has not made any
payments, is not obligated to make payments, and is not a party to any agreement
that could obligate it to make any payments that would not be deductible under
IRC Section 280G.
(c) "Tax" or "Taxes" means federal, state, county, local,
foreign or other income, gross receipts, ad valorem, franchise, profits, sales
or use, transfer, registration, excise, utility, environmental, communications,
real or personal property, capital stock, license, payroll, wage or other
withholding, employment, social security, severance, stamp, occupation,
alternative or add-on minimum, estimated and other taxes of any kind whatsoever
(including, without limitation, deficiencies, penalties, additions to tax, and
interest attributable thereto) whether disputed or not. "Tax Return" means any
return, information report or filing with respect to Taxes, including any
schedules attached thereto and including any amendment thereof.
3.15. EMPLOYEES. Except as set forth in Schedule 3.15 and except for
the Company's Stock Option Plan described on Schedule 3.3, the Company is not a
party to or bound by any currently effective employment contract, deferred
compensation arrangement, bonus plan, incentive plan, profit sharing plan,
retirement agreement or other employee or consultant compensation plan or
agreement. To the Company's knowledge, no employee of the Company, nor any
consultant with whom the Company has contracted, is in violation of any term of
any 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
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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 key employee, or that 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 former
and current employee, officer and consultant of the Company and each former and
current employee of the predecessors to the Company who has participated in the
development of the Company's technology has executed a Proprietary Information
and Inventions Agreement substantially in the form(s) of Exhibit F attached
hereto. No current employee, officer or consultant of the Company has excluded
works or inventions that are material to the business of the Company and that
were made prior to his or her employment with the Company from his or her
assignment of inventions pursuant to such employee, officer or consultant's
Proprietary Information and Inventions Agreement.
3.17. OBLIGATIONS OF MANAGEMENT. Except as set forth in Schedule 3.17,
each officer of the Company is currently devoting substantially all of his or
her business time to the conduct of the business of the Company. The Company is
not aware of any officer or key employee of the Company planning to work less
than full time at the Company in the future.
3.18. REGISTRATION RIGHTS. Except as required pursuant to the
Investors' Rights Agreement or as set forth in Schedule 3.18, the Company is
presently not under any obligation, and has not granted any rights, to register
(as defined in Section 1.1 of the Investors' Rights Agreement) any of the
Company's presently outstanding securities or any of its securities that may
hereafter be issued.
3.19. COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation in
any material respect of any applicable statute, rule, regulation, order,
judgment, ordinance 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. Except as set forth on Schedule 3.19, 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, the
Related Agreements and the issuance of the Shares or the Conversion Shares. 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.
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3.20. OFFERING VALID. Assuming the accuracy of the representations and
warranties of the Purchasers contained in Section 5.2 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 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.
3.21. FULL DISCLOSURE. This Agreement, the Exhibits hereto, the Related
Agreements and all other documents delivered by the Company to Purchasers or
their attorneys or agents in connection herewith or therewith or with the
transactions contemplated hereby or thereby do not contain any untrue statement
of a material fact nor, to the Company's knowledge, omit to state a material
fact necessary in order to make the statements contained herein or therein not
misleading. Notwithstanding the foregoing, the projected budget dated December
1999 (a copy of which has been given to all Purchasers who have requested a
copy), as it may be amended or updated and approved by the Board from time to
time (the "Business Plan") was prepared by the management of the Company in good
faith based on the Company's presently proposed business and products and the
markets therefor. The assumptions applied in preparing the Business Plan
appeared reasonable to management as of the date thereof and the Company is not
aware of any facts or circumstances that, in the aggregate, materially affect
the Company's ability to conduct its business in accordance with the Business
Plan; however, there is no assurance that these assumptions will prove to be
valid or that the objectives set forth in the Business Plan will be achieved. To
the Company's knowledge, there are no facts which (individually or in the
aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Company that have not been
set forth in this Agreement, the Exhibits hereto, the Related Agreements or in
other documents delivered to any of the Purchasers or their attorneys or agents
who have requested such documents in connection herewith.
3.22. [RESERVED]
3.23. MINUTE BOOKS. The copy of the minute books of the Company
provided to the Purchasers requesting them contains a complete summary of all
meetings of directors and stockholders since the time of the Company's
incorporation, except for the December 1999 meetings for which final minutes
have not yet been prepared.
3.24. REAL PROPERTY HOLDING CORPORATION. The Company is not a real
property holding corporation within the meaning of Internal Revenue Code Section
897(c)(2) and any regulations promulgated thereunder.
3.25. INSURANCE. The attached Schedule 3.25 contains a description of
each insurance policy maintained by the Company with respect to its properties,
assets
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and businesses, and each such policy is in full force and effect as of
the Closing. The Company is not in default with respect to its obligations under
any insurance policy maintained by it, and the Company has not been denied
insurance coverage. The insurance coverage of the Company is customary for
corporations of similar size engaged in similar lines of business. The Company
does not have any self-insurance or co-insurance programs.
3.26. BROKERAGE. There are no claims for brokerage commissions,
finders' fees or similar compensation in connection with the transactions
contemplated by this Agreement based on any arrangement or agreement entered
into by or binding upon the Company. The Company shall pay, and hold each
Purchaser harmless against, any liability, loss or expense (including, without
limitation, reasonable attorneys' fees and out-of-pocket expenses) arising in
connection with any such claim.
3.27. ERISA.
(a) The Company does not have any obligation to contribute
to (or any other liability, including current or potential withdrawal liability,
with respect to) any "multi-employer plan" (as defined in Section 3(37) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")).
(b) The Company does not maintain or have any obligation to
contribute to (or any other liability with respect to) any plan or arrangement
whether or not terminated, which provides medical, health, life insurance or
other welfare-type benefits for current, retired, terminated or future retired
or terminated employees (except for limited continued medical benefit coverage
required to be provided under Section 4980B of the IRC or as required under
applicable state law).
(c) The Company does not maintain, contribute to or have any
liability under (or with respect to) any employee plan which is a tax-qualified
"defined benefit plan" (as defined in Section 3(35) of ERISA), whether or not
terminated.
(d) Except as set forth on Schedule 3.27, the Company does
not maintain, contribute to or have any liability under (or with respect to) any
employee plan which is a tax-qualified "defined contribution plan" (as defined
in Section 3(34) of ERISA), whether or not terminated.
(e) Except as set forth on Schedule 3.27, the Company does
not maintain, contribute to or have any liability under (or with respect to) any
plan or arrangement providing benefits to current or former employees, including
any bonus plan, plan for deferred compensation, employee health or other welfare
benefit plan or other arrangement, whether or not terminated.
(f) For purposes of this Section 3.27, the term "Company"
includes all organizations under common control with the Company pursuant to
Section 414(b) or (c) of the IRC.
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3.28. ENVIRONMENTAL AND SAFETY LAWS. The Company is not in material
violation of any applicable statute, law or regulation relating to the
environment or occupational health and safety, and no material expenditures are
or will be required in order to comply with any such existing statute, law or
regulation. The operations of the Company do not involve any asbestos,
urea-formaldehyde foamed-in-place insulation, polychlorinated biphenyls ("PCBs")
or any other hazardous substances or materials including, but not limited to,
hazardous substances or materials under the Comprehensive Environmental
Response, Compensation and Liability Act, as amended by the Superfund Amendments
and Reauthorization Act, the Resource Conservation and Recovery Act or any other
federal, state or local statute, regulation, code or ordinance.
3.29. YEAR 2000 COMPLIANCE. None of the computer software, computer
firmware, computer hardware (whether general or special purposes) or other
similar or related items of automated, computerized or software systems that are
owned and used or relied on directly by the Company in the conduct of its
business will malfunction, will cease to function, will generate incorrect data
or will produce incorrect results when processing, providing or receiving (a)
date-related data from, into and between the twentieth and twenty-first
centuries ("Year 2000 Compliance"), in each instance in such a manner as to
cause material adverse harm to the Company and the Company will not be required
to incur any further material expense in order to become Year 2000 Compliant.
The Company will not be subject to any material liability or claims by its
customers or employees due to its failure to be Year 2000 Compliant. The Company
has developed reasonable contingency plans to deal with the possibility that
some of its customers and suppliers may not be Year 2000 Compliant.
4. REPRESENTATIONS AND WARRANTIES AND COVENANT OF THE FOUNDERS.
Each Founder hereby represents and warrants to the Company and to the Purchasers
as follows (such representations and warranties do not lessen or obviate the
representations and warranties of the Company and the Purchasers set forth in
this Agreement):
4.1. OBLIGATIONS OF FOUNDERS. Each Founder is currently devoting
substantially all of his business time to the Company. Each Founder hereby
covenants and agrees that he will continue to devote substantially all of his
business time to the Company for so long as he is employed by the Company.
4.2. TITLE TO ASSETS. The Founders, together with InfoMaster and
InfoMaster CD-ROM, LLC ("InfoMaster LLC"), have directly or indirectly conveyed
to the Company each of their entire interests in all of the assets, rights,
agreements and other proprietary rights, whether tangible or intangible,
including without limitation interests in technology and other intellectual
property rights, that are necessary to conduct the Company's business as
proposed to be conducted in the Business Plan, other than the rights described
in the Preincorporation Agreement and Contribution Agreement, dated
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as of August 1, 1998 (the "Contribution Agreement") and other than a license to
the Folio search engine, which has been retained by InfoMaster.
4.3 CONFLICTING AGREEMENTS. Such Founder is not, as a result of the
nature of the business conducted or proposed to be conducted by the Company or
for any other reason, in violation of (i) any fiduciary or confidential
relationship, (ii) any term of any contract or covenant (either with the Company
or with another Person) relating to employment, patents, assignment of
inventions, proprietary information disclosure, non-competition or
non-solicitation, or (iii) any other contract or agreement, or any judgment,
decree or order of any court or administrative agency relating to or affecting
the right of such Founder to be employed by the Company. No such relationship,
term, contract, agreement, judgment, decree or order conflicts with such
Founder's obligations to promote the interests of the Company nor does the
execution and delivery of this Agreement, nor the carrying on by such Founder of
the Company's business as an officer or key employee of the Company, conflict
with any such relationship, term, contract, agreement, judgment, decree or
order.
4.4 LITIGATION. Except as set forth in Schedule 3.13, there is no
action, suit or proceeding, or governmental inquiry or investigation, pending
or, to the best of such Founder's knowledge, threatened against such Founder and
relating to the business of the Company.
5. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser, severally and not jointly, hereby represents and warrants to the
Company as follows (such representations and warranties do not lessen or obviate
the representations and warranties of the Company or the Founders set forth in
this Agreement):
5.1. REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver this
Agreement and the Related Agreements to which Purchaser is a signatory and to
carry out their provisions. All corporate or partnership actions 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 against
Purchaser 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 Investors' Rights Agreement may be limited by applicable laws.
5.2. 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
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exemption from registration contained in the Securities Act based in part
upon Purchaser's representations contained in this Agreement. Purchaser hereby
represents and warrants as follows:
(a) PURCHASER BEARS ECONOMIC RISK. Purchaser has substantial
experience in evaluating and investing in private placement transactions of
securities in companies similar to the Company so that it is capable of
evaluating the merits and risks of its investment in the Company and has the
capacity to protect its own interests. Purchaser must bear the economic risk of
this investment indefinitely unless the Shares (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) PURCHASER CAN PROTECT ITS INTEREST. Purchaser represents
that by reason of its, or of its management's, business or financial experience,
Purchaser has the capacity to protect its own interests in connection with the
transactions contemplated in this Agreement and the Related Agreements. Further,
Purchaser is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. Purchaser has 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
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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 Purchaser is an individual, then Purchaser
resides in the state or province identified in the address of Purchaser set
forth on Exhibit A; if Purchaser is a partnership, corporation, limited
liability company or other entity, then the office or offices of Purchaser in
which its investment decision was made is located at the address or addresses of
Purchaser set forth on Exhibit A.
5.3. 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 Investors' Rights Agreement.
6. CONDITIONS TO CLOSING.
6.1. CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE CLOSING. The
obligations of each Purchaser to purchase the Shares at the Closing is 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
and made by the Founders in Section 4 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 and the Founders
shall have performed all obligations and conditions herein required to be
performed or observed by it on or prior to the Closing; provided that, for
purposes of this Section 6.1(a), those representations and warranties that are
qualified by references to "material" or "material adverse change" or "material
adverse effect" shall retain those qualifications but otherwise shall be true
and correct in all respects.
(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 Purchaser 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 as agreed upon by Purchaser in writing).
(d) RESTATED CERTIFICATE. The Restated Certificate shall be
in full force and effect as of the Closing Date.
(e) CORPORATE DOCUMENTS. The Company shall have delivered to
Purchaser or its counsel if requested by Purchaser, copies of the current Bylaws
of the
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Company, as amended, the resolutions of the Company's Board of Directors
authorizing the issuance and sale of the Shares, a certificate of good standing
of the Company, and such other corporate documents of the Company as Purchaser
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 Purchaser a Compliance Certificate, executed by the President of the Company,
dated as of the Closing Date, to the effect that the conditions specified in
subsections (a), (c), (d), (e), (f) and (j) of this Section 6.1 have been
satisfied.
(h) INVESTORS' RIGHTS AGREEMENT. An Amendment to the Second
Amended and Restated Investors' Rights Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
parties thereto.
(i) STOCKHOLDERS AGREEMENT. An Amendment to the Second
Amended and Restated Stockholders Agreement substantially in the form attached
hereto as Exhibit D shall have been executed and delivered by the parties
thereto.
(j) BOARD OF DIRECTORS. The authorized size of the Board
shall consist of seven (7) members, and such Board shall initially consist of
Xxxx Xxxxxx (outside director designated by the holders of Common Stock), Xxxxx
Xxxxxxxx (outside director designated by the holders of the Series C Stock), Xxx
Washing (designee of Sequel Limited Partnership), Xxxxx Xxxxxxxxx (designee of
Anschutz Family Investment Company), Xxxxxx Xxxxx (designee of DLJ Capital
Corp., DLJ ESC II, L.P., Sprout Capital VIII, L.P. and Sprout Venture Capital,
L.P. (collectively, "The Sprout Group")), Xxx Xxxxxxx (designee of The Sprout
Group approved by the Board) and Xxx Xxxxxxx (Chief Executive Officer).
(k) LEGAL OPINION. The Purchaser shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
Closing Date, in a form reasonably acceptable to Purchasers.
(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 Purchaser and its special
counsel, and Purchaser and its special counsel shall have received all such
counterpart originals or certified or other copies of such documents as they may
reasonably request.
6.2. CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's obligation
to issue and sell the Shares at the Closing is subject to the satisfaction, on
or prior to such Closing, of the following conditions:
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(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations
and warranties made in Section 5 hereof by Purchasers 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. Each Purchaser shall have
performed and complied with all agreements and conditions herein required to be
performed or complied with by such Purchaser on or before the Closing.
(c) RESTATED CERTIFICATE. The Restated Certificate shall be
in full force and effect as of the Closing.
(d) INVESTORS' RIGHTS AGREEMENT. An amendment to the Second
Amended and Restated Investors' Rights Agreement substantially in the form
attached hereto as Exhibit C shall have been executed and delivered by the
Purchasers.
(e) STOCKHOLDERS AGREEMENT. An amendment to the Second
Amended and Restated Stockholders Agreement substantially in the form attached
hereto as Exhibit D shall have been executed and delivered by the parties
thereto.
(f) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or required 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 as agreed upon by Purchasers).
7. MISCELLANEOUS.
7.1. GOVERNING LAW. This Agreement shall be governed in all respects by
the laws of the State of Colorado as such laws are applied to agreements between
Colorado residents entered into and performed entirely in Colorado, without
giving effect to any choice of law or conflict of law rules or provisions
(whether of the State of Colorado or any other jurisdiction), that would cause
the application of the laws of any jurisdiction other than the State of
Colorado.
7.2. 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.
7.3. SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the
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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.
7.4. 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.
7.5. 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.
7.6. AMENDMENT AND WAIVER.
(a) Following the Closing, this Agreement may be amended or
modified only upon the written consent of the Company and holders of at least
two-thirds (2/3) 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) Following the Closing, 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
two-thirds (2/3) 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).
7.7. REMEDIES; DELAYS OR OMISSIONS.
(a) All remedies, either under this Agreement, the Related
Agreements, the Restated Certificate, by law, or otherwise afforded to any
party, shall be cumulative and not alternative. Any Person having any rights
under any provision of this Agreement shall be entitled to enforce such rights
specifically (without posting a bond or other security), to recover damages by
reason of any breach of any provision of this Agreement and to exercise all
other rights granted by law or equity.
(b) It is agreed that no delay or omission to exercise any
right, power or remedy accruing to any party, upon any breach, default or
noncompliance by another party under this Agreement, the Related Agreements or
the Restated Certificate, shall impair any such right, power or remedy, nor
shall it be construed to be a waiver of any such breach, default or
noncompliance, or any acquiescence therein, or of or in any similar breach,
default or noncompliance thereafter occurring. It is further agreed that any
waiver, permit, consent or approval of any kind or character on any Purchaser's
part of any breach, default or noncompliance under this Agreement, the Related
Agreements or under the Restated Certificate or any waiver on such party's part
of any provisions
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or conditions of the Agreement, the Related Agreements, or the Restated
Certificate must be in writing and shall be effective only to the extent
specifically set forth in such writing.
7.8. 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
at the address as set forth on the signature page hereof and to each Purchaser
at the address set forth on Exhibit A attached hereto or at such other address
as the Company or Purchaser may designate by ten (10) days advance written
notice to the other parties hereto.
7.9. EXPENSES. Each party shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance of
this Agreement.
7.10 [INTENTIONALLY OMITTED].
7.11 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.
7.12 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.
7.13 BROKER'S FEES. Except for obligations set forth in Schedule 7.13,
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 7.13 being untrue.
7.14 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any Person other than the Company and its officers and
directors and the Founders, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no other Purchaser nor the respective
controlling persons, officers, directors, partners, agents, or employees of any
other Purchaser shall be liable to such Purchaser for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with this
Agreement or the Related Agreements or the transactions contemplated hereby or
thereby.
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7.15 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.
7.16 NO STRICT CONSTRUCTION. The parties hereto have participated
jointly in the negotiation and drafting of this Agreement. In the event an
ambiguity or question of intent or interpretation arises, this Agreement shall
be construed as if drafted jointly by the parties hereto, and no presumption or
burden of proof shall arise favoring or disfavoring any party by virtue of the
authorship of any of the provisions of this Agreement.
[THIS SPACE INTENTIONALLY LEFT BLANK]
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IN WITNESS WHEREOF, the parties hereto have executed this SERIES D PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
COMPANY:
NETLIBRARY, INC.
0000 Xxxxxx Xxxxx Xxxxx
Xxxxxxx, XX 00000
By: /s/ XXXXXXX X. XXXXXXX
------------------------
Name: Xxxxxxx X. Xxxxxxx
----------------------
Title: President & CEO
---------------------
FOUNDERS:
/s/ F. XXXXX XXXXX
---------------------------
F. Xxxxx Xxxxx
/s/ XXXXX XXXXXXXX
---------------------------
Xxxxx Xxxxxxxx
/s/ XXXXXXX X. XXXXXXX
---------------------------
Xxxxxxx X. Xxxxxxx
PURCHASER:
/s/ XXXXX XXXXXXXX
---------------------------
Xxxxx Xxxxxxxx
