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IMPROVENET, INC.
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
DATED SEPTEMBER 10, 1999
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TABLE OF CONTENTS
PAGE
SECTION 1.AGREEMENT TO SELL AND PURCHASE..........................................................................1
1.1 Authorization of Shares.........................................................................1
1.2 Sale and Purchase...............................................................................1
SECTION 2.CLOSING, DELIVERY AND PAYMENT...........................................................................1
2.1 Closing.........................................................................................1
2.2 Delivery........................................................................................1
SECTION 3.REPRESENTATIONS AND WARRANTIES OF THE COMPANY...........................................................2
3.1 Organization, Good Standing and Qualification...................................................2
3.2 Capitalization; Voting Rights...................................................................2
3.3 Authorization; Binding Obligations..............................................................3
3.4 Financial Statements............................................................................3
3.5 Liabilities.....................................................................................3
3.6 Agreements; Action..............................................................................4
3.7 Obligations to Related Parties..................................................................4
3.8 Changes.........................................................................................5
3.9 Title to Properties and Assets; Liens, etc......................................................6
3.10 Patents and Trademarks..........................................................................6
3.11 Compliance with Other Instruments...............................................................7
3.12 Litigation......................................................................................7
3.13 Tax Returns and Payments........................................................................8
3.14 Employees.......................................................................................8
3.15 Proprietary Information and Inventions Agreements...............................................9
3.16 Obligations of Management.......................................................................9
3.17 Registration Rights and Voting Agreements.......................................................9
3.18 Compliance with Laws; Permits..................................................................10
3.19 Environmental and Safety Laws..................................................................10
3.20 Offering Valid.................................................................................10
3.21 Full Disclosure................................................................................10
3.22 Qualified Small Business.......................................................................11
3.23 Minute Books...................................................................................11
3.24 Insurance......................................................................................11
3.25 Small Business Concern.........................................................................11
TABLE OF CONTENTS
(CONTINUED)
PAGE
3.26 Year 2000 Compliance...........................................................................11
3.27 Foreign Corrupt Practices Act..................................................................11
3.28 Directors and Officers.........................................................................12
SECTION 4.REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.......................................................12
4.1 Requisite Power and Authority..................................................................12
4.2 Investment Representations.....................................................................12
4.3 Transfer Restrictions..........................................................................13
SECTION 5.CONDITIONS TO CLOSING..................................................................................13
5.1 Conditions to Purchasers' Obligations at the First Closing.....................................13
5.2 Conditions to Obligations of the Company.......................................................15
SECTION 6.MISCELLANEOUS..........................................................................................16
6.1 Governing Law..................................................................................16
6.2 Survival.......................................................................................16
6.3 Successors and Assigns.........................................................................16
6.4 Entire Agreement...............................................................................16
6.5 Severability...................................................................................16
6.6 Amendment and Waiver...........................................................................16
6.7 Delays or Omissions............................................................................17
6.8 Waiver of Conflicts............................................................................17
6.9 Notices........................................................................................17
6.10 Transfer Taxes.................................................................................18
6.11 Expenses.......................................................................................18
6.12 Attorneys' Fees................................................................................18
6.13 Titles and Subtitles...........................................................................18
6.14 Counterparts...................................................................................18
6.15 Broker's Fees..................................................................................18
6.16 Press Releases/Use of General Electric Name....................................................18
6.17 Exculpation Among Purchasers...................................................................18
6.18 Alternative Dispute Resolution.................................................................19
6.19 Pronouns.......................................................................................19
INDEX OF EXHIBITS
Schedule of Purchasers........................................................Exhibit A
Second Restated Certificate of Incorporation..................................Exhibit B
Schedule of Exceptions........................................................Exhibit C
Third Amended and Restated
Investor Rights Agreement..................................................Exhibit D
Third Amended and Restated Right
of First Refusal and Co-Sale Agreement.....................................Exhibit E
Third Amended and Restated Voting Agreement...................................Exhibit F
List of Stockholders, Optionholders
and Warrantholders.........................................................Exhibit G
Financial Statements..........................................................Exhibit H
Proprietary Information and Inventions Agreement..............................Exhibit I
Form of Legal Opinion ........................................................Exhibit J
Internet Development, Marketing and
Distribution Agreement.....................................................Exhibit K
Form of GE Warrant............................................................Exhibit L
IMPROVENET, INC.
SERIES D PREFERRED STOCK
PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "AGREEMENT")
is entered into as of September 10, 1999, by and among IMPROVENET, INC., a
Delaware corporation (the "COMPANY") and each of those persons and entities,
severally and not jointly, whose names are set forth on the Schedule of
Purchasers attached hereto as EXHIBIT A (which persons and entities are
hereinafter collectively referred to as "PURCHASERS" and each individually as
a "PURCHASER").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of an
aggregate of two million one hundred thousand eight hundred forty three
(2,100,843) of its Series D Preferred Stock (the "SHARES");
WHEREAS, Purchasers desire to purchase the Shares on the terms and
conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to the
Purchasers on the terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
SECTION 1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to the First Closing (as
defined in Section 2 below), the Company shall have authorized (a) the sale
and issuance to Purchasers of the Shares, (b) the issuance of such shares of
common stock to be issued upon conversion of the Shares (the "CONVERSION
SHARES"). The Shares and the Conversion Shares shall have the rights,
preferences, privileges and restrictions set forth in the Second Restated
Certificate of Incorporation of the Company in the form attached hereto as
EXHIBIT B (the "RESTATED CERTIFICATE").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at the Closing the Company hereby agrees to issue and sell to each Purchaser,
severally and not jointly, and each Purchaser agrees to purchase from the
Company, severally and not jointly, the number of Shares set forth opposite
such Purchaser's name on EXHIBIT A at an aggregate purchase price for each
Purchaser set forth opposite such Purchaser's name.
SECTION 2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. The closing of the sale and purchase of the Shares
under this Agreement (the "FIRST CLOSING") shall take place on the date
hereof (such date is hereinafter referred to as the "FIRST CLOSING Date").
2.2 DELIVERY. At the First Closing, subject to the terms and conditions
hereof, the Company will deliver to the Purchasers certificates representing the
number of Shares purchased at the First
1.
Closing by each Purchaser, against payment of the purchase price therefor by
check, wire transfer made payable to the order of the Company, cancellation
of indebtedness or any combination of the foregoing.
SECTION 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
Except as specifically set forth under the corresponding section
number of the Schedule of Exceptions attached hereto as EXHIBIT C, the
Company hereby represents and warrants to each Purchaser as of the First
Closing as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in good standing under the
laws of the State of Delaware. The Company has all requisite corporate power
and authority to own and operate its properties and assets, to execute and
deliver this Agreement, the Investor Rights Agreement, the Co-Sale Agreement
and the Voting Agreement (collectively, the "RELATED AGREEMENTS"), to issue
and sell the Shares and 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. The Company does
not have any investment in, control, either directly or indirectly, nor own
any equity securities of any other corporation, limited partnership or
similar entity. The Company is not a participant in any joint venture,
partnership or similar arrangement. The Company has delivered to the
Purchasers true and complete copies of the Bylaws and Charter as currently in
effect.
3.2 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of the
Company, immediately prior to the First Closing, will consist of (a) thirty-one
million (31,000,000) shares of common stock, of which (i) one million five
hundred ninety three thousand five hundred eight (1,593,508) shares are issued
and outstanding, (ii) one hundred seventy thousand four hundred fifty two
(170,452) shares are reserved for future issuance to employees pursuant to the
Company's Amended and Restated 1996 Stock Option Plan, (iii) one million seven
hundred ten thousand seventy nine (1,710,079) shares are subject to outstanding
options pursuant to the Amended and Restated 1996 Stock Option Plan and (iv) ten
thousand (10,000) shares are subject to outstanding warrants to purchase common
stock, and (b) nine million four hundred eighty two thousand nine hundred thirty
five (9,482,935) authorized shares of preferred stock, of which (i) one million
three hundred one thousand four hundred (1,301,400) are designated Series A
Preferred Stock, one million two hundred seven thousand (1,207,000) of which are
issued and outstanding and ninety-four thousand four hundred (94,400) of which
are reserved for issuance pursuant to outstanding warrants to purchase Series A
Preferred Stock, (ii) one million nine hundred eighty-one thousand five hundred
thirty-five (1,981,535) are designated Series B Preferred Stock, one million
nine hundred thirty-four thousand five hundred twenty-six (1,934,526) of which
are issued and outstanding and forty-seven thousand and nine (47,009) of which
are reserved for issuance pursuant to outstanding warrants to purchase Series B
Preferred Stock, (iii) three million seven hundred thousand (3,700,000) are
designated Series C Preferred Stock, three million five hundred thirty-seven
thousand five hundred twenty-four (3,537,524) of which are issued and
outstanding and forty seven thousand one hundred sixty seven (47,167) of which
are reserved for issuance pursuant to an outstanding warrant to purchase Series
C Preferred Stock, (iv) two million five hundred thousand (2,500,000) are
designated Series D Preferred Stock, none of which are issued and outstanding as
of the date hereof. All issued and outstanding shares of the Company's common
stock and preferred stock (I) have been duly authorized and validly issued to
the persons listed on EXHIBIT G hereto, (II) are fully paid and nonassessable,
and (III) were issued in compliance with all applicable state and federal laws
concerning
2.
the issuance of securities. The rights, preferences, privileges and
restrictions of the Shares are as stated in the Restated Certificate. The
Conversion Shares have been duly and validly reserved for issuance. Other
than as set forth on EXHIBIT G, and except as may be granted pursuant to the
Related Agreements, there are no outstanding options, warrants, rights
(including conversion or preemptive rights and rights of first refusal),
proxy or stockholder agreements, voting agreements or agreements of any kind
for the purchase or acquisition from the Company of any of its securities.
EXHIBIT G reflects a complete and accurate list of all the Company's
outstanding shares, warrants, convertible or exchangeable securities and
options as of the time immediately after the First Closing and EXHIBIT G
reflects any dilution and exercise of preemptive rights triggered by the
transactions contemplated hereby. When issued in compliance with the
provisions of this Agreement and the Restated Certificate, the Shares 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.
3.3 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for
the authorization of this Agreement and the Related Agreements, the
performance of all obligations of the Company hereunder and thereunder at the
First Closing and the authorization, sale, issuance and delivery of the
Shares pursuant hereto and the Conversion Shares pursuant to the Restated
Certificate has been taken or will be taken prior to the First Closing. The
Agreement and the Related Agreements, when executed and delivered, will be
valid and binding obligations of the Company enforceable in accordance with
their terms, except (a) as limited by applicable bankruptcy, insolvency,
reorganization, moratorium or other laws of general application affecting
enforcement of creditors' rights, (b) general principles of equity that
restrict the availability of equitable remedies and (c) to the extent that
the enforceability of the indemnification provisions in Section 3.9 of the
Investor Rights Agreement may be limited by applicable laws. The sale of the
Shares and the subsequent conversion of the Shares into Conversion Shares are
not and will not be subject to any preemptive rights or rights of first
refusal that have not been properly waived or complied with.
3.4 FINANCIAL STATEMENTS. The Company has delivered to each
Purchaser (a) its audited balance sheet, an audited profit and loss
statement, statement of cash flows and statement of shareholders' equity for
the twelve (12) month period ending on December 31, 1998, (b) its unaudited
balance sheet, unaudited profit and loss statement, unaudited statement of
cash flows and statement of shareholders' equity for the seven (7) month
period ending on July 31, 1999 (collectively, the "FINANCIAL STATEMENTS"),
copies of which are attached hereto as EXHIBIT H. The Financial Statements,
together with the notes thereto, are complete and correct in all material
respects and present fairly the financial condition, results of operations,
cash flows and shareholders' equity and position of the Company as of July
31, 1999; PROVIDED, HOWEVER, that the unaudited financial statements are
subject to normal recurring year-end audit adjustments (which are not
expected to be material) and do not contain all footnotes required under
generally accepted accounting principles.
3.5 LIABILITIES. The Company has no material liabilities whether
accrued, absolute, contingent, known or unknown or due or to become due not
disclosed in the Financial Statements, except current liabilities incurred in
the ordinary course of business subsequent to December 31, 1998 which have
not been, either in any individual case or in the aggregate, materially
adverse and in any event, has no liabilities in the aggregate in excess of
$25,000.
3.
3.6 AGREEMENTS; ACTION.
(a) Except for agreements explicitly contemplated hereby
and agreements between the Company and its employees with respect to the sale
of the Company's common stock, there are no agreements, understandings or
proposed transactions between the Company and any of its officers, directors,
affiliates or any affiliate thereof.
(b) There are no agreements, understandings, instruments,
contracts, proposed transactions, judgments, orders, writs or decrees to
which the Company is a party or to its knowledge by which it is bound which
may involve (i) obligations (contingent or otherwise) of, or payments to, the
Company in excess of $25,000 in the aggregate (other than obligations of, or
payments to, the Company arising from purchase or sale agreements entered
into in the ordinary course of business), (ii) the license of any patent,
copyright, trade secret or other proprietary right to or from the Company
(other than licenses arising from the purchase of "off the shelf" or other
standard products or entered into in the ordinary course of business), (iii)
provisions restricting or affecting the development, manufacture or
distribution of the Company's products or services or the Company's ability
to solicit the Company's employees or otherwise restricting the Company's
ability to do business in any geographic area, or (iv) indemnification by the
Company with respect to infringements of proprietary rights (other than
indemnification obligations arising from purchase or sale agreements entered
into in the ordinary course of business).
(c) The Company has not (i) declared or paid any dividends,
or authorized or made any distribution upon or with respect to any class or
series of its capital stock, (ii) incurred any indebtedness for money
borrowed or any other liabilities (other than with respect to dividend
obligations, distributions, indebtedness and other obligations incurred in
the ordinary course of business) individually in excess of $25,000 or, in the
case of indebtedness and/or liabilities individually less than $25,000, in
excess of $50,000 in the aggregate, (iii) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (iv) sold,
exchanged or otherwise disposed of any of its assets or rights, other than
the sale of its inventory in the ordinary course of business.
(d) For the purposes of subsections (b) and (c) above, all
indebtedness, liabilities, agreements, understandings, instruments, contracts
and proposed transactions involving the same person or entity (including
persons or entities the Company has reason to believe are affiliated
therewith) shall be aggregated for the purpose of meeting the individual
minimum dollar amounts of such subsections.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of current salary for services rendered, (b) reimbursement
for reasonable expenses incurred on behalf of the Company and (c) for other
standard employee benefits made generally available to all employees (including
stock option agreements outstanding under any stock option plan approved by the
Board of Directors of the Company). None of the officers, directors or
stockholders of the Company, or any members of their immediate families, are
indebted to the Company or have any direct or indirect ownership interest in any
firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation which competes
with the Company, except that officers, directors and/or stockholders of the
Company may own up to five percent (5%) of the stock in publicly traded
companies which may compete with the Company. No officer, director or
stockholder, or any member of their immediate families, is, directly or
indirectly, interested in any material contract with the Company (other than
such contracts as relate to any such person's ownership of capital stock or
other
4.
securities of the Company). The Company is not a guarantor or indemnitor of
any indebtedness of or otherwise provides credit enhancement to any other
person, firm or corporation.
3.8 CHANGES. Since December 31, 1998, there has not been to the
Company's knowledge:
(a) Any change in the assets, liabilities, financial
condition or operations of the Company, other than changes in the ordinary
course of business, none of which individually or in the aggregate has had or
is expected to have a material adverse effect on such assets, liabilities,
financial condition or operations of the Company;
(b) Any resignation or termination of any key officers of
the Company; and the Company, to the best of its knowledge, does not know of
the impending resignation or termination of employment of any such officer;
(c) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(d) Any damage, destruction or loss, whether or not covered
by insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(e) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(f) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than
advances made in the ordinary course of business;
(g) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(h) Any declaration or payment of any dividend, any other
distribution of any securities (other than in the ordinary course of
business) or the assets of the Company;
(i) Any labor organization activity;
(j) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for
current liabilities incurred in the ordinary course of business;
(k) Any sale, pledge, assignment or transfer of any
material tangible assets or patents, trademarks, copyrights, trade secrets or
other intangible assets of the Company;
(l) Any change in any material agreement to which the
Company is a party or by which it is bound which materially and adversely
affects the business, assets, liabilities, financial condition, operations or
prospects of the Company, including compensation agreements with the
Company's employees;
(m) Any payment, discharge, satisfaction or settlement of any
material claim or obligation of the Company, except in the ordinary course of
business and consistent with past practice;
5.
(n) Any write-down of the value of any asset of the Company
or any write-off as uncollecible of any accounts or notes receivable or any
portion thereof except in the ordinary course of business;
(o) Any expenditure or commitment or addition to property,
plant or equipment of the Company except in amounts less than $250,000 in the
singular or in the aggregate;
(p) Any change in the independent public accountants of the
Company or any material change in the accounting methods or accounting
practices followed by the Company or any material change in depreciation or
amortization policies or rates;
(q) Any receipt of notice that there has been a loss of, or
material order cancellation by, a major customer, advertiser or sponsor of
the Company;
(r) Any change in the Company's accounting methods,
principles or practices and the Company has not made any new elections with
respect to Taxes (as defined herein) or any changes in the current elections
with respect to Taxes; or
(s) Any other event or condition of any character that,
either individually or cumulatively, has materially and adversely affected
the business, assets, liabilities, financial condition, operations or
prospects of the Company.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company does not
own fee title to any real property. The Company has good and marketable title
to its properties and assets, and good title to its leasehold estates, in
each case subject to no mortgage, pledge, lien, lease, encumbrance or charge,
other than (a) those resulting from taxes which have not yet become
delinquent, (b) minor liens and encumbrances which do not materially detract
from the value of the property subject thereto or materially impair the
operations of the Company, and (c) those that have otherwise arisen in the
ordinary course of business. All facilities, machinery, equipment, fixtures,
vehicles and other properties owned, leased or used by the Company are in
good operating condition and repair and are reasonably fit and usable for the
purposes for which they are being used. The Company is in compliance with all
material terms of each lease to which it is a party or is otherwise bound.
3.10 PATENTS AND TRADEMARKS. To the best of its knowledge, the
Company owns or possesses sufficient legal rights to all patents, trademarks,
service marks, trade names, copyrights, trade secrets, uniform resource
locators, information and other proprietary rights and processes necessary
for the Company's business as now conducted and as proposed to be conducted
(the "INTELLECTUAL PROPERTY RIGHTS"), without any known infringement of the
rights of others. The Schedule of Exceptions contains a complete list of the
patents, pending patent applications, trademarks, services marks and the
uniform resource locators of the Company. There are no outstanding
assignments, options, licenses or agreements of any kind relating to the
foregoing nor is the Company bound by or a party to any assignments, options,
licenses or agreements of any kind with respect to the patents, trademarks,
service marks, trade names, copyrights, trade secrets, licenses, information
and other proprietary rights and processes of any other person or entity
other than such licenses or agreements arising from the purchase of "off the
shelf" or standard products. The Company has not received any communications
alleging that the Company has violated or, by conducting its business as
proposed, would violate any of the patents, trademarks, service marks, trade
names, copyrights or trade secrets or other proprietary rights of any other
person or entity. The Company is not aware that any of its employees is
obligated under any contract (including licenses, covenants or commitments of
any nature) or other agreement, or subject to
6.
any judgment, decree or order of any court or administrative agency, that
would interfere with their duties to the Company or that would conflict with
the Company's business as proposed to be conducted. Neither the execution nor
delivery of this Agreement or the Related Agreements nor the carrying on of
the Company's business by the employees of the Company nor the conduct of the
Company's business as proposed will, to the Company's knowledge, (i) conflict
with or result in a breach of the terms, conditions or provisions of or
constitute a default under any contract, covenant or instrument under which
any employee is now obligated or (ii) conflict with, alter or impair any of
the Intellectual Property Rights. The Company does not believe it is or will
be necessary to utilize any inventions, trade secrets or proprietary
information of any of its employees made prior to their employment by the
Company, except for inventions, trade secrets or proprietary information that
have been duly and validly assigned to the Company. The Company has utilized
commercially reasonable efforts to (i) protect and enforce all Intellectual
Property Rights, except for those rights that, individually or in the
aggregate, are not material to the Company, (ii) protect through
nondisclosure agreements and otherwise all trade secrets and confidential
information of the Company and (iii) otherwise to secure and protect for the
Company's benefit all Intellectual Property Rights. The Company uses
reasonable efforts, consistent with industry practices of comparable
companies, to identify any use of any Intellectual Property Rights by third
parties that has infringed or infringes any Intellectual Property Rights, and
Section 3.10 of the Schedule of Exceptions discloses all material instances
know to the Company of any infringing uses, all steps that the Company has
taken or is taking to end such infringement, and how any such instances of
infringement have been resolved. The Company believes it can obtain on
commercially reasonable terms any additional Intellectual Property Rights
necessary for its business as proposed to be conducted.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Restated Certificate or Bylaws. The
Company is not in violation or default of any provision of any mortgage,
indenture, contract, agreement, instrument or contract to which it is party
or by which it is bound or of any judgment, decree, order, writ or, to its
knowledge, any statute, rule or regulation applicable to the Company, its
business or operations or any of its assets or properties. The execution,
delivery and performance of and compliance with this Agreement, and the
Related Agreements, and the issuance and sale of the Shares 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.
3.12 LITIGATION. There is no action, suit, proceeding or investigation
pending or to the Company's knowledge currently threatened against the Company
(i) that questions the validity of this Agreement, the Related Agreements or the
right of the Company to enter into any of such agreements, or to consummate the
transactions contemplated hereby or thereby, or (ii) which might result, either
individually or in the aggregate, in any material adverse change in the assets,
condition, affairs or prospects of the Company, financially or otherwise, or any
change in the current equity ownership of the Company nor is the Company aware
that there is any basis for the foregoing. The foregoing includes, without
limitation, actions pending or threatened (or any basis therefor known to the
Company) involving the prior employment of any of the Company's employees, their
use in connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. Neither the Company nor any of its
properties, assets or businesses are subject to the provisions of any order,
writ, injunction,
7.
judgment or decree of any court or government agency or instrumentality.
There is no action, suit, proceeding or investigation by the Company
currently pending or which the Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS.
(a) The Company has timely filed all Tax Returns required
to be filed by it. These Tax Returns are true and correct in all material
respects. All Taxes shown to be due and payable on such Tax Returns, any
assessments imposed and all other taxes due and payable by the Company have
been timely paid or will be paid prior to the time they become delinquent.
All Taxes required to be withheld and paid over by the Company to any
relevant taxing authority in connection with payments to employees,
independent contractors, creditors, stockholders or to third parties have
been so withheld and paid over. The Company has not been advised (i) that any
of its returns, federal, state or other, have been or are being audited as of
the date hereof or (ii) of any deficiency in assessment or proposed judgment
to its federal, state or other taxes. The Company has no knowledge of any
liability of any tax to be imposed upon its properties or assets as of the
date of this Agreement that is not adequately provided for. The accruals and
reserves for Taxes (other than deferred Taxes) reflected on the unaudited
balance sheet as of July 31, 1999 are complete and adequate to cover any
liabilities for Taxes with respect to periods or portions of periods ending
on or before July 31, 1999. The accruals and reserves for Taxes (other than
deferred Taxes) established in the books and records of the Company are
complete and adequate to cover any liabilities for Taxes that are
attributable to the period beginning after July 31, 1999 and ending on the
First Closing Date. No Tax authority in a jurisdiction where the Company does
not file Tax Returns has made a claim, assertion or threat that the Company
is or may be subject to Tax in such jurisdiction. No audits or examinations
with respect to the Company are ongoing or have been threatened or proposed
by any taxing authority. No deficiencies for any Tax have been threatened,
proposed, asserted or assessed against the Company which have not been
satisfied. No waivers or extensions of statutes of limitations with respect
to Taxes have been given by the Company. Complete copies of all Tax Returns
of the Company that have been filed by the Company since its inception have
been delivered to or made available to each of the Purchasers if requested by
a Purchaser. The Company is not party to or liable under any tax sharing
arrangement. The Company has not filed a combined, consolidated or unitary
Tax Return with respect to any affiliated group of which the Company is not
the common parent. The Company has not made an election under Section 341(f)
of the Internal Revenue Code of 1986 (the "CODE"), as amended.
(b) For purposes of this Agreement, "TAX" (including, with
correlative meaning, the terms "TAXES") shall mean all federal, state, local
and foreign income, profits, franchise, gross receipts, environmental,
customs, duty, capital stock, communications servicers, severance, stamp,
payroll, sales, employment, unemployment, disability, use, property,
withholding, excise, production, value added, occupancy, and other taxes,
duties or assessments of any nature whatsoever, together with all interest,
penalties and additions imposed with respect to such amounts and any interest
in respect to such penalties and additions, and includes any liability for
Taxes of another person by contract, as a transferee of successor, under
Treasury Regulation 1.1502-6 or analogous state, local or foreign law
provision or otherwise; and "TAX RETURN" shall mean all returns and reports
(including elections, declarations, disclosures, schedules, estimates and
information returns) required to be supplied to a Tax authority relating to
Taxes.
3.14 EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. No
employee has any agreement or contract, written or verbal, regarding his
employment. The Company is not a party to or bound by any currently effective
8.
employment contract, deferred compensation arrangement, bonus plan, incentive
plan, profit sharing plan, retirement agreement or other employee
compensation plan or agreement. To the Company's knowledge, no employee of
the Company nor any consultant with whom the Company has contracted is in
violation of any term of any employment contract, proprietary information
agreement or any other agreement relating to the right of any such individual
to be employed by or to contract with the Company, because of the nature of
the business to be conducted by the Company; and to the Company's knowledge
the continued employment by the Company of its present employees, and the
performance of the Company's contracts with its independent contractors, will
not result in any such violation. The Company has not received any notice
alleging that any such violation has occurred. No employee of the Company has
been granted the right to continued employment by the Company or to any
material compensation following termination of employment with the Company.
The Company is not aware that any officer, key employee or any group of key
employees intends to terminate their employment with the Company nor does the
Company have a present intention to terminate the employment of any officer,
key employee or group of key employees. The Company has complied with all
applicable laws relating to the employment of labor, including laws relating
to wages and hours, equal opportunity and payment of social security and
other taxes.
3.15 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. To the best
of the Company's knowledge, it has done nothing to compromise the secrecy,
confidentiality or value of any of its trade secrets, know-how, inventions,
prototypes, designs, processes or technical data required to conduct its
business as now conducted or proposed to be conducted. The Company has taken
the past and will take in the future reasonable security measures to protect
the secrecy, confidentiality and value of all of its trade secrets, know-how,
inventions, prototypes, designs, processes and technical data important to
the conduct of its business. Each former and current employee, officer and
consultant of the Company has executed a Proprietary Information and
Inventions Agreement in the form of EXHIBIT I attached hereto. No current
employee, officer or consultant of the Company has excluded works or
inventions made prior to his or her employment with the Company from his or
her assignment of inventions pursuant to such employee's, officer's or
consultant's Proprietary Information and Inventions Agreement. The Company,
after reasonable investigation, is not aware that any of its employees,
officers or consultants is in violation of any item of the Proprietary
Information and Inventions Agreement that would have a materially adverse
effect on the Company, and the Company will use its best efforts to prevent
any such violation.
3.16 OBLIGATIONS OF MANAGEMENT. Each officer of the Company is
currently devoting one hundred percent (100%) of his business time to the
conduct of the business of the Company. The Company is not aware of any
officer or key employee of the Company planning to work less than full time
at the Company in the future.
3.17 REGISTRATION RIGHTS AND VOTING AGREEMENTS. Except as required
pursuant to the Investor Rights Agreement, the Company is presently not under
any obligation and has not granted any rights to register (as defined in
Section 2.1 of the Investor Rights Agreement) any of the Company's presently
outstanding securities or any of its securities that may hereafter be issued.
Except as required pursuant to the Voting Agreement, the Company has no
agreement, obligation or commitment with respect to the election of any
individual or individuals to the Board of Directors and, to the best of the
knowledge of the Company, there is no voting agreement or other agreement
among the stockholders with respect to the election of any individual or
individuals to the Board of Directors for any other purpose.
9.
3.18 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation
of any applicable statute, rule, regulation, order or restriction of any
domestic or foreign government or any instrumentality or agency thereof in
respect of the conduct of its business or the ownership of its properties
which violation would materially and adversely affect the business, assets,
liabilities, financial condition, operations or prospects of the Company. No
orders, permissions, consents, approvals or authorizations from any
governmental entity or any other person are required to be obtained and no
registrations or declarations are required to be filed in connection with the
execution and delivery of this Agreement and the issuance of the Shares or
the Conversion Shares, except such as has been duly and validly obtained or
filed, or with respect to any filings that must be made after the First
Closing, as will be filed in a timely manner. The Company has and is in full
compliance in all material respects with all the terms and conditions of all
franchises, permits, licenses and any similar authority necessary for the
conduct of its business as now being conducted by it, the lack of which could
materially and adversely affect the business, properties, prospects or
financial condition of the Company and believes it can obtain, without undue
burden or expense, any similar authority for the conduct of its business as
planned to be conducted. The Company is not in default in any material
respect under any of such franchises, permits, licenses or other similar
authority.
3.19 ENVIRONMENTAL AND SAFETY LAWS. To its knowledge, the Company is
not in violation of any applicable federal, state or local statute, law,
ordinance or regulation relating to the environment or occupational health
and safety, and to its knowledge, no material expenditures are or will be
required in order to comply with any such existing statute, law or regulation.
3.20 OFFERING VALID. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4.2 hereof, the offer,
sale and issuance of the Shares and the issuance of the Conversion Shares
will be exempt from the registration requirements of the Securities Act of
1933, as amended (the "SECURITIES ACT") and will have been registered or
qualified (or are exempt from registration and qualification) under the
registration, permit or qualification requirements of all 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. The Private Placement Memorandum (the "PPM"),
this Agreement, the Exhibits hereto, the Related Agreements and all other
documents delivered by the Company to the Purchasers or their attorneys or
agents in connection herewith or therewith or with the transactions
contemplated hereby or thereby, do not contain any untrue statement of a
material fact nor, to the Company's knowledge, omit to state a material fact
necessary in order to make the statements contained herein or therein not
misleading. Notwithstanding the foregoing, the PPM provided to each of the
Purchasers was prepared by the management of the Company in a good faith
effort to describe the Company's proposed business and products and the
markets therefore. The forward-looking statements made in the PPM appeared
reasonable to management as of the date thereof; however, there is no
assurance that these forward-looking statements will prove to be valid or
that the objectives set forth in the PPM will be achieved. To the Company's
knowledge, there are no facts regarding the Company which (individually or in
the aggregate) materially adversely affect the business, assets, liabilities,
financial condition, prospects or operations of the Company that have not
been set forth in the PPM, the Agreement, the Exhibits hereto, the Related
Agreements or in other documents delivered to Purchasers or their attorneys
or agents in connection herewith.
10.
3.22 QUALIFIED SMALL BUSINESS. The Company represents and warrants
to the Purchasers that, to the best of its knowledge, the Shares should
qualify as "QUALIFIED SMALL BUSINESS STOCK" as defined in Section 1202(c) of
the Internal Revenue Code of 1986, as amended (the "CODE"), as of the date
hereof.
3.23 MINUTE BOOKS. The minute books of the Company provided to the
Purchasers or their counsel contain a complete summary of all meetings of
directors and stockholders since the time of incorporation and correctly
reflect all issuances of stock or other equity rights in the Company.
3.24 INSURANCE. The Schedule of Exceptions contains an accurate
summary of the insurance policies currently maintained by the Company. The
Company has or will obtain promptly following the First Closing from a
company that is financially sound and reputable fire and casualty insurance
policies with coverage customary for companies similarly situated to the
Company. There are currently no claims pending by the Company under any
insurance policy currently in effect and covering the property, business or
employees of the Company, and all premiums due and payable with respect to
the policies maintained by the Company have been paid to date. All insurance
policies are in the name of the Company and are outstanding and in full force
and effect. Such insurance policies are customary for companies engaged in
the type of business conducted by the Company and at the same stage of
development as the Company. The Company has not received notice of
cancellation of termination of any such policy, nor has any such policy been
denied, revoked or rescinded nor has the Company borrowed against any such
policies. There are no claims for which an insurance carrier has denied or
threatened to deny coverage. The Company carries, or is covered by, insurance
with companies that are financially sound and reputable in such amounts with
such deductibles and against such risks and losses as are reasonable for the
business and assets of the Company.
3.25 SMALL BUSINESS CONCERN. The Company together with its
"affiliates" (as that term is defined in Section 121.103 of Title 13 of the
Code of Federal Regulations (the "FEDERAL REGULATIONS")), is a "SMALL
BUSINESS CONCERN" within the meaning of the Small Business Investment Act of
1958, as amended (the "SMALL BUSINESS ACT"), and the regulations promulgated
thereunder, including Section 121.301 of Title 13 of the Federal Regulations
(a "SMALL BUSINESS CONCERN"). The information delivered to each Purchaser
that is a licensed Small Business Investment Company (an "SBIC PURCHASER") on
SBA Forms 480, 652 and 1031 delivered in connection herewith is true and
correct.
3.26 YEAR 2000 COMPLIANCE. All of the Company's products and
services (including any products or services currently under development as
of the date hereof) will record, store, process and calculate and present
calendar dates falling on and after January 1, 2000, and will calculate any
information dependent on or relating to such dates in the same manner and
with the same functionality, data integrity and performance as the products
record, store, process, calculate and present calendar dates on or before
December 31, 1999, or calculate any information dependent on or relating to
such dates (collectively "YEAR 2000 COMPLIANT"). None of the Company's
material products will lose material functionality with respect to the
introduction of records containing dates falling on or after January 1, 2000.
The Company has taken all reasonable actions to ensure that all of the
Company's internal computer systems, including without limitation, its
accounting systems, are Year 2000 Compliant. To the knowledge of the Company,
all vendors of products and services to the Company, and their respective
products, services and operations, will be in all material respects Year 2000
Compliant.
3.27 FOREIGN CORRUPT PRACTICES ACT. The Company and, to the
knowledge of the Company after due inquiry, its employees are in compliance
in all material respects with the U.S. Foreign Corrupt Practices Act, as
amended, including without limitation the books and records provisions
thereof.
11.
3.28 DIRECTORS AND OFFICERS. To the knowledge of the Company, since
the formation of the Company, no director or officer of the Company has (a)
been arrested or convicted of any crime material to an evaluation of such
person's ability or integrity, including, without limitation, any violation
of any federal or state law which currently or has previously regulated the
types of business in which the Company is currently or has previously been
engaged, (b) filed a petition under federal bankruptcy or state insolvency
laws or (c) been a director or officer of a business entity which has filed a
petition under federal bankruptcy or state insolvency laws, or had a receiver
or similar officer appointed by a court to administer the business or
property of such entity.
SECTION 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS.
Each Purchaser hereby represents and warrants to the Company as
follows (it being agreed that such representations and warranties do not in
any way limit or effect the Purchasers' right to rely upon and enforce any
breach of the representations and warranties of the Company set forth in this
Agreement):
4.1 REQUISITE POWER AND AUTHORITY. Purchaser has all necessary power
and authority under all applicable provisions of law to execute and deliver
this Agreement and the Related Agreements and to carry out their provisions.
All action on Purchaser's part required for the lawful execution and delivery
of this Agreement and the Related Agreements has been or will be effectively
taken prior to the First Closing. Upon their execution and delivery, this
Agreement and the Related Agreements will be valid and binding obligations of
Purchaser, enforceable in accordance with their terms, except (a) as limited
by applicable bankruptcy, insolvency, reorganization, moratorium or other
laws of general application affecting enforcement of creditors' rights, (b)
general principles of equity that restrict the availability of equitable
remedies, and (c) to the extent that the enforceability of the
indemnification provisions of Section 3.9 of the Investor Rights Agreement
may be limited by applicable laws.
4.2 INVESTMENT REPRESENTATIONS. Purchaser understands that neither
the Shares nor the Conversion Shares have been registered under the
Securities Act. Purchaser also understands that the Shares are being offered
and sold pursuant to an exemption from registration contained in the
Securities Act based in part upon Purchaser's representations contained in
the Agreement. Purchaser hereby represents and warrants as follows:
(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.
12.
(c) PURCHASER CAN PROTECT ITS INTEREST. Purchaser
represents that by reason of its, or of its management's, business or
financial experience, Purchaser has the capacity to protect its own interests
in connection with the transactions contemplated in this Agreement and the
Related Agreements. Further, Purchaser is aware of no publication of any
advertisement in connection with the transactions contemplated in the
Agreement.
(d) ACCREDITED INVESTOR. Purchaser represents that it is an
accredited investor within the meaning of Regulation D under the Securities
Act.
(e) COMPANY INFORMATION. Purchaser has received and read
the Financial Statements and the PPM and has had an opportunity to discuss
the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review
the Company's operations and facilities. Purchaser has also had the
opportunity to ask questions of and receive answers from, the Company and its
management regarding the terms and conditions of this investment.
(f) RULE 144. Purchaser acknowledges and agrees that the
Shares 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, which
permits limited resale of shares purchased in a private placement subject to
the satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the
resale occurring not less than one year after a party has purchased and paid
for the security to be sold, the sale being through an unsolicited "broker's
transaction" or in transactions directly with a market maker (as said term is
defined under the Securities Exchange Act of 1934, as amended) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
(g) RESIDENCE. If the Purchaser is an individual, then the
Purchaser resides in the state or province identified in the address of the
Purchaser set forth on EXHIBIT A hereto; if the Purchaser is a partnership,
corporation, limited liability company or other entity, then the office or
offices of the Purchaser in which its investment decision was made is located
at the address or addresses of the Purchaser set forth on EXHIBIT A hereto.
4.3 TRANSFER RESTRICTIONS. Each Purchaser acknowledges and agrees
that the Shares and, if issued, the Conversion Shares are subject to
restrictions on transfer as set forth in the Investor Rights Agreement.
SECTION 5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO PURCHASERS' OBLIGATIONS AT THE FIRST CLOSING.
Purchasers' obligations to purchase the Shares at the First Closing are
subject to the satisfaction, at or prior to the First Closing, of the
following conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties made by the Company in
Section 3 hereof shall be true and correct in all material respects as of the
First Closing Date with the same force and effect as if they had been made as
of the First Closing Date, and the Company shall have performed all
obligations and conditions herein required to be performed or observed by it
on or prior to the First Closing.
13.
(b) PERFORMANCE OF OBLIGATIONS. The Company shall have
performed and complied with all agreements, obligations and conditions
contained in this Agreement that are required to be performed or complied
with by it on or before the First Closing.
(c) LEGAL INVESTMENT. On the First Closing Date, the sale
and issuance of the Shares and the proposed issuance of the Conversion Shares
shall be legally permitted by all laws and regulations to which Purchasers
and the Company are subject.
(d) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the First Closing).
(e) FILING OF RESTATED CERTIFICATE. The Restated
Certificate shall have been filed with the Secretary of State of the State of
Delaware.
(f) CORPORATE DOCUMENTS. The Company shall have delivered
to Purchasers or their counsel, copies of all corporate documents of the
Company as Purchasers shall reasonably request.
(g) RESERVATION OF CONVERSION SHARES. The Conversion Shares
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
(h) COMPLIANCE CERTIFICATE. The Company shall have
delivered to Purchasers a Compliance Certificate, executed by the President
of the Company, dated the date of the First Closing, to the effect that the
conditions specified in subsections (a), (b), (d), (e) and (g) of this
Section 5.1 have been satisfied.
(i) INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been
executed and delivered by the parties thereto.
(j) CO-SALE AGREEMENT. The Co-Sale Agreement substantially
in the form attached hereto as EXHIBIT E shall have been executed and
delivered by the parties thereto.
(k) VOTING AGREEMENT. The Voting Agreement substantially in
the form attached hereto as EXHIBIT F shall have been executed and delivered
by the parties thereto.
(l) BOARD OF DIRECTORS. Upon the First Closing, the
authorized size of the Board of Directors of the Company shall initially be
seven (7) members and the Board shall consist of ▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇▇ ▇▇▇▇▇▇ and ▇▇▇▇▇
▇▇▇▇▇.
(m) LEGAL OPINION. The Purchasers shall have received from
legal counsel to the Company an opinion addressed to them, dated as of the
First Closing Date, in substantially the form attached hereto as EXHIBIT J.
(n) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the First
Closing hereby and all documents and instruments incident to such
transactions shall be reasonably satisfactory in substance and form to the
14.
Purchasers and their special counsel, and the Purchasers and their special
counsel shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
(o) INTERNET DEVELOPMENT, MARKETING AND DISTRIBUTION
AGREEMENT. The Internet Development, Marketing and Distribution Agreement
substantially in the form attached hereto as EXHIBIT K shall have been
executed and delivered by the parties thereto and in connection therewith the
Company shall issue GE Capital Equity Investments, Inc. a warrant to purchase
209,000 shares of Series D Preferred Stock upon the execution of such
aforementioned agreement. In addition, GE Capital Equity Investments, Inc.
shall be issued a warrant to purchase 117,000 shares of Series D Preferred
Stock.
(p) PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS. All
key employees shall have executed a Proprietary Information and Inventions
Agreement that is reasonably acceptable to Investors' counsel.
(q) DUE DILIGENCE. All matters investigated by the
Purchasers in the course of their due diligence shall be satisfactory to each
of the Purchasers, their special counsels and their accountants.
5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at the First Closing is subject to
the satisfaction, on or prior to the First Closing, of the following
conditions:
(a) REPRESENTATIONS AND WARRANTIES TRUE. The
representations and warranties made by those Purchasers acquiring Shares in
Section 4 hereof shall be true and correct in all material respects at the
date of the First Closing, with the same force and effect as if they had been
made on and as of said date.
(b) PERFORMANCE OF OBLIGATIONS. Such Purchasers shall have
performed and complied in all material respects with all agreements and
conditions herein required to be performed or complied with by such
Purchasers on or before the First Closing.
(c) INVESTOR RIGHTS AGREEMENT. An Investor Rights Agreement
substantially in the form attached hereto as EXHIBIT D shall have been
executed and delivered by the Purchasers.
(d) CO-SALE AGREEMENT. The Co-Sale Agreement substantially
in the form attached hereto as EXHIBIT E shall have been executed and
delivered by the parties thereto.
(e) VOTING AGREEMENT. The Voting Agreement substantially in
the form attached hereto as EXHIBIT F shall have been executed and delivered
by the parties thereto.
(f) INTERNET DEVELOPMENT, MARKETING AND DISTRIBUTION
AGREEMENT. The Internet Development, Marketing and Distribution Agreement
substantially in the form attached hereto as EXHIBIT K shall have been
executed and delivered by the parties thereto.
(g) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate
for consummation of the transactions contemplated by the Agreement and the
Related Agreements (except for such as may be properly obtained subsequent to
the First Closing).
15.
SECTION 6. MISCELLANEOUS.
6.1 GOVERNING LAW. This Agreement shall be governed in all respects
by the laws of the State of New York as such laws are applied to agreements
between New York residents entered into and performed entirely in New York.
Each party hereto hereby irrevocably and unconditionally submits to the
exclusive jurisdiction of the state and federal courts located in the State
of New York for any actions, suits or proceedings arising out of or relating
to this Agreement or any of the Related Agreements (as defined in the
Purchase Agreement) and the transactions contemplated hereby or thereby. Each
party hereto agrees not to commence any action, suit or proceeding relating
thereto except in such courts. The parties hereto irrevocably and
unconditionally waive any objection to the laying of venue in any action,
suit or proceeding arising out of this Agreement or any of the Related
Agreements or the transactions contemplated hereby or thereby, in such state
or federal courts aforesaid and hereby further irrevocably and
unconditionally waive and agree not to plead or claim in any such court that
any such action, suit or proceeding brought in any such court has been
brought in an inconvenient forum.
THE PARTIES HEREBY WAIVE TRIAL BY JURY IN ANY JUDICIAL PROCEEDING TO
WHICH THEY ARE PARTIES INVOLVING, DIRECTLY OR INDIRECTLY, ANY MATTER IN ANY
WAY ARISING OUT OF, RELATED TO OR CONNECTED WITH THIS AGREEMENT OR ANY OF THE
RELATED AGREEMENTS.
6.2 SURVIVAL. The representations, warranties, covenants and
agreements made herein shall survive any investigation made by any Purchaser
and the First Closing of the transactions contemplated hereby. All statements
as to factual matters contained in any certificate or other instrument
delivered by or on behalf of the Company pursuant hereto in connection with
the transactions contemplated hereby shall be deemed to be representations
and warranties by the Company hereunder solely as of the date of such
certificate or instrument.
6.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares and the Conversion Shares from
time to time.
6.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Related Agreements and the PPM and the other documents delivered
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and no party shall be
liable or bound to any other in any manner by any representations,
warranties, covenants and agreements except as specifically set forth herein
and therein.
6.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
6.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the Shares
(treated as if converted and including any Conversion Shares into which the
Shares have been converted that have not been sold to the public).
16.
(b) The obligations of the Company and the rights of the
holders of the Shares and the Conversion Shares under the Agreement may be
waived only with the written consent of the holders of at least a majority of
the Shares (treated as if converted and including any Conversion Shares into
which the Shares have been converted that have not been sold to the public).
(c) Any amendment, modification or waiver effected in
accordance with Section 6.6(a) or Section 6.6(b) with the consent of the
requisite parties shall be binding upon each holder of any securities
purchased under this Agreement at the time outstanding (including securities
into which such securities are convertible), each future holder and the
Company (even if such holder did not consent to such amendment, modification
or waiver).
6.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under this Agreement, the Related
Agreements or the Restated Certificate, shall impair any such right, power or
remedy, nor shall it be construed to be a waiver of any such breach, default
or noncompliance, or any acquiescence therein, or of or in any similar
breach, default or noncompliance thereafter occurring. It is further agreed
that any waiver, permit, consent or approval of any kind or character on any
Purchaser's part of any breach, default or noncompliance under this
Agreement, the Related Agreements or under the Restated Certificate or any
waiver on such party's part of any provisions or conditions of the Agreement,
the Related Agreements, or the Restated Certificate must be in writing and
shall be effective only to the extent specifically set forth in such writing.
All remedies, either under this Agreement, the Related Agreements, the
Restated Certificate, by law, or otherwise afforded to any party, shall be
cumulative and not alternative.
6.8 WAIVER OF CONFLICTS. Each party to this Agreement (except for GE
Capital Equity Investments, Inc.) acknowledges that legal counsel for the
Company, ▇▇▇▇▇▇ Godward LLP ("▇▇▇▇▇▇ GODWARD"), has in the past and may
continue in the future to perform legal services for one or more of the
Purchasers or their affiliates in matters unrelated to the transactions
contemplated by this Agreement, including, but not limited to, the
representation of the Purchasers in matters of a similar nature to the
transactions contemplated herein. Each party to this Agreement hereby (a)
acknowledges that they have had an opportunity to ask for and have obtained
information relevant to such representation, including disclosure of the
reasonably foreseeable adverse consequences of such representation, (b)
acknowledges that with respect to the transactions contemplated herein,
Cooley Godward has represented the Company and not any individual Purchaser
or any individual stockholder, director or employee of the Company and (c)
gives its informed consent to ▇▇▇▇▇▇ Godward's representation of the Company
in the transactions contemplated by this Agreement and Cooley Godward's
representation of one or more of the Purchasers or their affiliates in
matters unrelated to such transactions.
6.9 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to
the party to be notified; (b) when sent by confirmed telex or facsimile if
sent during normal business hours of the recipient, if not, then on the next
business day; (c) five days after having been sent by registered or certified
mail, return receipt requested, postage prepaid; or (d) one day after deposit
with a nationally recognized overnight courier, specifying next day delivery,
with written verification of receipt. All communications shall be sent to the
Company at the address as set forth on the signature page hereof and to
Purchaser at the address set forth on EXHIBIT A attached hereto or at such
other address as the Company or Purchaser may designate by ten days advance
written notice to the other parties hereto.
17.
6.10 TRANSFER TAXES. All transfer, transfer gains, documentary,
sales, use, stamp, registration and other similar Taxes and fees (including
costs and expenses relating to such Taxes) (collectively, "TRANSFER TAXES")
incurred in connection with the consummation of the transactions contemplated
by this Agreement, shall be borne by the Company. The Company shall, at its
own expense, prepare and timely file, in accordance with all applicable laws
and regulations, all necessary Tax Returns and other documentation with
respect to such Transfer Taxes. The Purchasers shall reasonably cooperate
with the Company in the preparation and filing of any such Tax Returns and
other documentation.
6.11 EXPENSES. The Company shall pay all costs and expenses that it
incurs with respect to the negotiation, execution, delivery and performance
of this Agreement. The Company shall, at the First Closing, reimburse the
reasonable fees of and expenses of Fried, Frank, Harris, ▇▇▇▇▇▇▇ and
▇▇▇▇▇▇▇▇, special counsel for GE Capital Equity Investments, Inc. not to
exceed $20,000.
6.12 ATTORNEYS' FEES. In the event that any dispute among the
parties to this Agreement should result in litigation, the prevailing party
in such dispute shall be entitled to recover from the losing party all fees,
costs and expenses of enforcing any right of such prevailing party under or
with respect to this Agreement, including without limitation, such reasonable
fees and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
6.13 TITLES AND SUBTITLES. The titles of the sections and
subsections of the Agreement are for convenience of reference only and are
not to be considered in construing this Agreement.
6.14 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
6.15 BROKER'S FEES. Each party hereto represents and warrants that
no agent, broker, investment banker, person or firm acting on behalf of or
under the authority of such party hereto is or will be entitled to any
broker's or finder's fee or any other commission directly or indirectly in
connection with the transactions contemplated herein. Each party hereto
further agrees to indemnify each other party for any claims, losses or
expenses incurred by such other party as a result of the representation in
this Section 6.15 being untrue.
6.16 PRESS RELEASES/USE OF GENERAL ELECTRIC NAME. The Company shall
not issue any press release or make any disclosure or public announcement
relating primarily to the subject matter of this Agreement or any of the
Related Agreements or the Internet Development, Marketing and Distribution
Agreement without the prior written approval of GE Capital Equity Investment,
Inc. Without limiting the generality of the foregoing, the Company shall not
in any manner publicly use or refer to the name of GE Appliances, GE Capital
Equity Investments, Inc., General Electric Company, General Electric Capital
Corporation or any other their affiliates in any press release, disclosure or
public announcement without the prior written approval of the party so named.
Notwithstanding the foregoing, the Company shall be permitted to disclose
this Agreement, any of the Related Agreements or the Internet Development,
Marketing and Distribution Agreement to the extent required in any filing
required by the Company pursuant to the Securities Act of 1933, as amended,
the Securities and Exchange Act of 1934, as amended, or any other state or
federal statute.
6.17 EXCULPATION AMONG PURCHASERS. Each Purchaser acknowledges that it
is not relying upon any person, firm, or corporation, other than the Company and
its officers and directors, in making its investment or decision to invest in
the Company. Each Purchaser agrees that no Purchaser nor the
18.
respective controlling persons, officers, directors, partners, agents, or
employees of any Purchaser shall be liable for any action heretofore or
hereafter taken or omitted to be taken by any of them in connection with the
Shares and Conversion Shares.
6.18 ALTERNATIVE DISPUTE RESOLUTION. Notwithstanding anything to the
contrary herein, GE Capital Equity Investments, Inc. shall have the option to
invoke and apply the provisions of Article XIII "Dispute Resolution" under
the Internet Development, Marketing and Distribution Agreement should any
dispute, controversy, claim or disagreement arise from or relating to or in
connection with this Agreement or any other Related Agreement.
6.19 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
[THIS SPACE INTENTIONALLY LEFT BLANK]
19.
IN WITNESS WHEREOF, the parties hereto have executed the SERIES D
PREFERRED STOCK PURCHASE AGREEMENT as of the date set forth in the first
paragraph hereof.
COMPANY: PURCHASERS:
IMPROVENET, INC. ___________________________
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇ (PRINT NAME OF PURCHASER)
▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
By: /s/ ▇▇▇ ▇▇▇▇▇▇ By: /s/ All Series D Investors
-------------------------------------------- --------------------------
▇▇▇▇▇▇ ▇▇▇▇▇▇, President and Chief Executive
Officer Title:
---------------------
GE CAPITAL EQUITY INVESTMENTS,
INC.
By:
-------------------------
Title:
----------------------
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
SIGNATURE PAGE
EXHIBIT A
SCHEDULE OF PURCHASERS
SHARES OF SERIES D AGGREGATE
NAME AND ADDRESS PREFERRED PURCHASE PRICE
---------------------------------------------------------- ----------------------------- --------------------------
GE Capital Equity Investments, Inc. 1,298,701 $9,999,997.70
▇▇▇ ▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Access Technology Partners 22,642 $174,343.40
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Access Technology Partners Brokers Fund, L.P. 453 $3,488.10
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Alta California Partners, L.P. 253,938 $1,955,322.60
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Alta Embarcadero Partners, LLC 5,802 $44,675.40
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
ARCH Venture Fund III, L.P. 215,192 $1,656,978.40
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
August Capital II, L.P. 205,137 $1,579,554.90
▇▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇
H&Q ImproveNet Investors, LLC 2,376 $18,295.20
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ California 1,416 $10,903.20
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇ Employee Venture Fund, ▇.▇. ▇▇ 1,416 $10,903.20
▇/▇ ▇▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
EXHIBIT A-1
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
▇▇▇▇▇▇▇ Partners, L.P. 13,334 $102,671.80
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Clear Fir Partners 1,482 $11,411.40
▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇.▇.
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Blackshirts Joint Venture 7,978 $61,430.60
▇▇▇▇ ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ 2,597 $19,996.90
▇▇▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
MGN Opportunity LLC 22,793 $175,506.10
▇▇▇ ▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Zero Stage Capital VI Limited Partnership 45,586 $351,012.20
▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
TOTAL 2,100,843 $16,176,491.10
============================= ===========================
EXHIBIT A-2
SERIES D PREFERRED STOCK PURCHASE AGREEMENT