Exhibit 15
EXECUTION COPY
THE COBALT GROUP, INC.
SUBSCRIPTION AGREEMENT
November 13, 2001
Warburg, Xxxxxx Equity Partners, X.X.
Xxxxxxx, Xxxxxx Netherlands Equity Partners I, X.X.
Xxxxxxx, Xxxxxx Netherlands Equity Partners II, X.X.
Xxxxxxx, Xxxxxx Netherlands Equity Partners III, C.V.
000 Xxxxxxxxx Xxxxxx
Xxx Xxxx, Xxx Xxxx 00000
Attention: Xxxxxx X. Xxxxx
Ladies and Gentlemen:
This letter is being written for the purpose of setting forth the basic
terms of the understandings between The Cobalt Group, Inc., a Washington
corporation (the "Company"), and you in connection with the purchase by you and
sale by the Company of shares of Series A Convertible Preferred Stock, par value
$0.01 per share (the "Series A Preferred Stock") as set forth below. you should
be aware that you may be required to bear the financial risks of this investment
for an indefinite period of time.
If you are in agreement with the terms and conditions set forth herein,
please sign the last page of one copy of this letter and return it to us,
whereupon this letter shall represent a legally binding agreement between us and
shall supersede any prior agreement between you and the Company as regards the
sale and purchase of stock of the Company. Please keep the other copy of this
letter for your files.
1. AUTHORIZATION OF CAPITAL STOCK. Under the Company's Articles of
Incorporation (the "Articles"), the Company is authorized to issue (i)
200,000,000 shares of Common Stock, par value $0.01 per share ("Common Stock"),
and (ii) 100,000,000 shares of preferred stock, par value $0.01 per share (the
"Preferred Stock"). Under the power conferred to the Company's board of
directors (the "Board") under the Articles, and as a condition to your entering
into this Agreement, the Company has agreed to create a series of Preferred
Stock, the Series A Preferred Stock, by causing a Statement of Rights and
Preferences (the "Statement of Rights and Preferences") to be filed with the
Secretary of State of the State of Washington. A copy of the Statement of Rights
and Preferences, in substantially the form in which it will be filed with the
Secretary of State of the State of Washington, is attached hereto as Exhibit A.
2. PURCHASE AND SALE OF SHARES.
(a) Subject to the terms and conditions hereof, on the Closing Date (as
defined herein), the Company shall issue to you and you shall purchase from the
Company, the number of shares of Series A Preferred Stock (the "Shares") equal
to the number of Shares (as defined in the Agreement and Plan of Merger (the
"Merger Agreement"), dated as of June 2, 2001, by and between the Company and
Cobalt Acquisition Corporation, a Washington corporation ("Merger Sub")). At its
option, Warburg may require the Company to issue that number of additional
shares of Series A Preferred Stock obtained by dividing the Total Estimated
Expenses by the Per Share Amount (as defined in the Merger Agreement). For
purposes hereof, the term "Total Estimated Expenses" shall mean the total
out-of-pocket expenses to be paid by the Company, Merger Sub or Warburg, Xxxxxx
Equity Partners, L.P., a Delaware limited partnership ("WP"), or the Company on
behalf of Merger Sub or WP, in connection with the negotiation and execution of
the Merger Agreement and the consummation of the transactions contemplated
hereby and thereby, including the reasonable fees and expenses of the Company's,
Merger Sub's, WP's and the Special Committee's counsel and accountants as well
as all reasonable fees and expenses payable to all investment banking firms and
other financial institutions, printing costs and filing fees. Total Estimated
Expenses shall be determined in good faith by the Company at least one business
days prior to the Closing Date. The total number of shares of Series A Preferred
Stock to be issued shall be allocated among each of you as set forth on Schedule
I hereto.
(b) Such issuance and purchase shall be effected by the Company executing
and delivering to you duly executed certificates evidencing the Shares, duly
registered in your name against delivery by you to the Company of the Purchase
Price. Such payment shall be made by wire transfer.
(c) The closing of the sale shall take place no later than one business day
following the later to occur of (i) the consummation of the Merger (as defined
in the Merger Agreement), and (ii) the filing of the Statement of Rights and
Preferences with the Secretary of State of the State of Washington. The date on
which the closing of the sale of the Shares takes place is herein referred to as
the "Closing Date".
3. RESTRICTIONS ON STOCK. None of the Shares (including any shares received
as a result of dividends, splits or any other forms of recapitalization in
respect of such Shares) shall be Transferred (as hereinafter defined), either
voluntarily or involuntarily, directly or indirectly, except pursuant to an
effective registration under the Securities Act (as hereinafter defined), or in
a transaction which, in the opinion of counsel reasonably satisfactory to the
Company, qualifies as an exempt transaction under the Securities Act and the
rules and regulations promulgated thereunder.
4. WARRANTIES AND REPRESENTATIONS OF THE COMPANY
The Company represents and warrants that:
(a) The Company is a corporation duly organized, validly existing and in
good standing under the laws of the State of Washington.
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(b) The Board has authorized or will, prior to the Closing Date authorize
the execution, delivery, and performance of this Agreement and the transactions
contemplated hereby and thereby. No other corporate action is necessary to
authorize such execution, delivery and performance, and upon such execution and
delivery, this Agreement shall constitute a valid and binding obligation of the
Company, enforceable against the Company in accordance with its terms. The Board
has authorized or will, prior to the Closing Date, authorize the issuance and
delivery of the Shares in accordance with this Agreement.
(c) The Shares to be issued and sold by the Company pursuant to this
Agreement, when issued in accordance with the provisions hereof, will be validly
issued by the Company, fully paid and nonassessable shares of the Company, and
no shareholder of the Company has any preemptive rights to subscribe for any
such Shares. The shares of Common Stock issuable upon conversion of the Shares
when issued in accordance with the Statement of Rights and Preferences, will be
validly issued by the Company, fully paid and nonassessable shares of the
Company.
(d) Except with respect to filings made in connection with exemptions from
registration under state or federal securities laws, the creation,
authorization, issuance, offer and sale of the Shares do not require any
consent, approval or authorization of, or filing, registration or qualification
with, any governmental authority on the part of the Company or the vote, consent
or approval in any manner of the holders of any security of the Company as a
condition to the execution and delivery of this Agreement or the creation,
authorization, issuance, offer and sale of the Shares. The execution and
delivery by the Company of this Agreement and the performance by the Company of
its obligations hereunder will not violate (i) the terms and conditions of the
Articles or the Bylaws of the Company, or any agreement or instrument to which
the Company is a party or by which it is bound or (ii) subject to the accuracy
of your representations and warranties contained in Section 5 hereof, any
federal or state law.
5. INVESTOR REPRESENTATIONS
Each of you represents and warrants that:
(a) Offering Exemption. You understand that the Shares have not been
registered under the Securities Act, nor registered or qualified under any state
securities laws, and that they are being offered and sold pursuant to an
exemption from such registration and qualification based in part upon your
representations contained herein.
(b) Knowledge of Offer. You are familiar with the business and operations
of the Company and have been given the opportunity to obtain from the Company
all information that you have requested regarding its business plans and
prospects.
(c) Knowledge and Experience; Ability to Bear Economic Risks. You have such
knowledge and experience in financial and business matters that you are capable
of evaluating the merits and risks of the investment contemplated by this
Agreement; and you are able to bear the economic risk of this investment in the
Company (including a complete loss of this investment).
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(d) Limitations on Disposition. You recognize that no public market exists
for the Shares, and none may exist in the future (other than as set forth in the
Registration Rights Agreement dated as of the date hereof by and between the
Company and the shareholders named therein (the "Registration Rights
Agreement")). You understand that you must bear the economic risk of this
investment indefinitely unless your Shares are registered pursuant to the
Securities Act or an exemption from such registration is available, and unless
the disposition of such Shares is qualified or registered under applicable state
securities laws or an exemption from such qualification or registration is
available, and that the Company has no present intention of so registering the
Shares. You further understand that there is no assurance that any exemption
from the Securities Act will be available, or, if available, that such exemption
will allow you to Transfer any or all the Shares, in the amounts, or at the
times you might propose. You understand that at the present time Rule 144
promulgated under the Securities Act by the Securities and Exchange Commission
("Rule 144") is not applicable to sales of the Shares because they are not
registered under Section 12 of the Exchange Act (as hereinafter defined) and
there is not publicly available the information concerning the Company specified
in Rule 144. You further acknowledge that the Company is not presently under any
obligation to register under Section 12 of the Exchange Act or to make publicly
available the information specified in Rule 144 and that it may never be
required to do so.
(e) Investment Purpose. You are acquiring the Shares solely for your own
account for investment and not with a view toward the resale, Transfer, or
distribution thereof, nor with any present intention of distributing the Shares.
No other Person (as hereinafter defined) has any right with respect to or
interest in the Shares to be purchased by you, nor have you agreed to give any
Person any such interest or right in the future.
(f) Capacity. You have full power, authority and legal right to execute and
deliver this Agreement and to perform your obligations hereunder.
(g) No Conflict. The execution and delivery by you of this Agreement and
the performance of your obligations hereunder will not violate (1) the terms and
conditions of your partnership agreement or similar analogous organizational
documents or any agreement or instrument to which you are a party or by which
you are bound or (2) any federal or state law.
(h) Information. You confirm that neither the Company, nor any of its
directors, executive officers, employees, affiliates or agents has made any
representations or warranties concerning your investment in the Company
including, without limitation, any representations or warranties concerning the
return you may receive on your investment in the Company or tax consequences
that may arise in connection with your investment in the Company other than such
representations and warranties contained herein and contained in the Transaction
Documents (as hereinafter defined). In making your decision to invest in the
Company, you have relied upon independent investigations made by you and by your
professional advisors. You and your advisors have been furnished any and all
nonproprietary materials available to the Company and have been afforded the
opportunity to ask questions concerning the Company, its business and any other
matters relating to the Company, the transactions contemplated by the Merger
Agreement and the offer and sale of the Shares.
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(i) Accredited Investor. You hereby represent and warrant that you are an
"accredited investor" as such term is defined in Rule 501(a) promulgated under
the Securities Act.
(j) Financial Capacity. You have the funds on hand or available to you to
pay the Purchase Price on the terms set forth herein.
6. SECURITIES ACT RESTRICTIONS. The certificates evidencing the Shares (and
shares of Common Stock issuable upon conversion of the Shares) will bear the
following legend or similar legend reflecting the restrictions on the transfer
of such securities contained in this Agreement:
"The securities evidenced hereby have not been registered under the
Securities Act of 1933, as amended (the "Act"), or any state securities
laws and may not be transferred except pursuant to an effective
registration under the Act or such laws or in a transaction which, in the
opinion of counsel reasonably satisfactory to the Company, qualifies as an
exempt transaction under the Act and such laws and the rules and
regulations promulgated thereunder."
7. INTERPRETATION OF THIS AGREEMENT
(a) Terms Defined. As used in this Agreement, the following terms have the
respective meaning set forth below:
Exchange Act: the Securities Exchange Act of 1934, as amended.
Person: an individual, partnership, joint-stock company, corporation,
limited liability company, trust or unincorporated organization, and a
government or agency or political subdivision thereof.
Securities Act: the Securities Act of 1933, as amended.
Transfer: any sale, assignment, pledge, hypothecation, or other disposition
or encumbrance.
(b) Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of New York applicable to contracts made
and to be performed entirely within such State.
(c) Section Headings. The headings of the sections and subsections of this
Agreement are inserted for convenience only and shall not be deemed to
constitute a part thereof.
8. MISCELLANEOUS
(a) Notices. All communications under this Agreement shall be in writing
and shall be delivered by hand or facsimile or mailed by overnight courier or by
registered mail or certified mail, postage prepaid:
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(i) if to you, at c/o Warburg, Xxxxxx & Co., 000 Xxxxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (facsimile: (000) 000-0000), Attention: Xxxxxx X.
Xxxxx, with a copy to Xxxxxxx Xxxx & Xxxxxxxxx, 000 Xxxxxxx Xxxxxx, Xxx
Xxxx, Xxx Xxxx 00000 (facsimile: (000) 000-0000), Attention: Xxxxxx X.
Xxxxxxx, Esq.; and
(ii) if to the Company, 0000 Xxxxx Xxxxxx Xxxxx, Xxxxxxx, Xxxxxxxxxx
00000 (facsimile: (000) 000-0000), Attention: Xxxx X.X. Xxxx.
or at such other address or facsimile number as the party giving notice may have
furnished the other parties hereto in writing.
(b) Any notice so addressed shall be deemed to be given: if delivered by
hand or facsimile, on the date of such delivery, if a business day, otherwise
the first business day thereafter; if mailed by courier, on the first business
day following the date of such mailing; and if mailed by registered or certified
mail, on the third business day after the date of such mailing.
(c) Survival. All warranties, representations, and covenants made by you
and the Company herein or in any certificate or other instrument delivered by
you or the Company as specifically required under this Agreement shall be
considered to have been relied upon by the Company or you, as the case may be,
and shall survive all deliveries to you of the Shares, or payment to the Company
for such Shares, regardless of any investigation made by the Company or you, as
the case may be, or on the Company's or your behalf. All statements in any such
certificate or other instrument shall constitute warranties and representations
by the Company hereunder.
(d) Successors and Assigns; No Third Party Beneficiaries. This Agreement
shall inure to the benefit of and be binding upon the successors and assigns of
each of the parties. It is understood that you may assign your rights hereunder
to any affiliate or to any third party account managed by you. Nothing in this
Agreement shall confer upon any Person not a party to this Agreement any rights
or remedies of any nature or kind whatsoever under or by reason of this
Agreement.
(e) Entire Agreement; Amendment and Waiver. This Agreement, the Statement
of Rights and Preferences and the Registration Rights Agreement constitute the
entire understandings of the parties hereto and supersede all prior agreements
or understandings with respect to the subject matter hereof among such parties.
This Agreement may be amended, and the observance of any term of this Agreement
may be waived, with (and only with) the written consent of the Company and you.
(f) Severability. In the event that any part or parts of this Agreement
shall be held illegal or unenforceable by any court or administrative body of
competent jurisdiction, such determination shall not effect the remaining
provisions of this Agreement which shall remain in full force and effect.
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(g) Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed an original and all of which
together shall be considered one and the same agreement.
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Please indicate your acceptance and approval of the foregoing in the space
provided below.
THE COBALT GROUP, INC.
By: /s/ Xxxx X.X. Xxxx
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Name: Xxxx X.X. Xxxx
Title: President and Chief Executive
Officer
Approved and Accepted
as of the 13th Day of
November 2001
WARBURG, XXXXXX EQUITY PARTNERS, L.P.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ Xxxxxxx Back
------------------------------
Name: Xxxxxxx Back
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS I, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ Xxxxxxx Back
------------------------------
Name: Xxxxxxx Back
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS II, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ Xxxxxxx Back
------------------------------
Name: Xxxxxxx Back
Title: Partner
WARBURG, XXXXXX NETHERLANDS EQUITY PARTNERS III, C.V.
By: Warburg, Xxxxxx & Co., its General Partner
By: /s/ Xxxxxxx Back
------------------------------
Name: Xxxxxxx Back
Title: Partner
Schedule I
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Number of Shares of Purchase Aggregate
Series A Convertible Price Per Purchase
Name of Investor Preferred Stock Share Price
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Warburg, Xxxxxx Equity Partners,
L.P. 9,246,187 $3.50 $32,361,654.50
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Warburg, Xxxxxx Netherlands
Equity Partners I, C.V. 293,530 $3.50 $ 1,027,355.00
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Warburg, Xxxxxx Netherlands
Equity Partners II, C.V. 95,687 $3.50 $ 684,905.50
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Warburg, Xxxxxx Netherlands
Equity Partners III, C.V. 8,921 $3.50 $ 171,223.50
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Total: 9,784,325 $3.50 $34,245,138.50
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