EXHIBIT 10.1
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CONVERTIBLE NOTE PURCHASE AGREEMENT
among
CRITICAL PATH, INC.,
PERMAL U.S. OPPORTUNITIES LIMITED,
ZAXIS EQUITY NEUTRAL, L.P.,
ZAXIS INSTITUTIONAL PARTNERS, L.P.,
ZAXIS OFFSHORE LIMITED,
ZAXIS PARTNERS, L.P.,
GUGGENHEIM PORTFOLIO COMPANY XIII,
CROSSLINK CROSSOVER FUND IV, L.P.,
SAGAMORE HILL HUB FUND, LTD.,
CRITERION CAPITAL PARTNERS, LTD.,
CRITERION CAPITAL PARTNERS, INSTITUTIONAL,
CRITERION CAPITAL PARTNERS, L.P. AND
CAPITAL VENTURES INTERNATIONAL
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Dated: March 9, 2004
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Table of Contents
Page
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ARTICLE I DEFINITIONS.................................................................2
1.1 Definitions..........................................................2
ARTICLE II PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE..........................11
2.1 Purchase and Sale of Notes..........................................11
2.2 Filings.............................................................11
2.3 Certificate of Determination........................................11
2.4 Closings; Deliveries................................................11
2.5 Issuances of Common Shares..........................................13
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................13
3.1 Corporate Existence and Power.......................................13
3.2 Authorization; No Contravention.....................................14
3.3 Governmental Authorization; Third Party Consents....................14
3.4 Binding Effect......................................................14
3.5 Litigation..........................................................15
3.6 Compliance with Laws................................................15
3.7 Capitalization......................................................15
3.8 No Default or Breach; Contractual Obligations.......................17
3.9 Title to Properties.................................................17
3.10 Reports; Financial Statements.......................................17
3.11 Taxes...............................................................18
3.12 No Material Adverse Change; Ordinary Course of Business.............18
3.13 Private Offering....................................................18
3.14 Labor Relations.....................................................19
3.15 Employee Benefit Plans..............................................19
3.16 Liabilities.........................................................20
3.17 Affiliate Transactions..............................................20
3.18 Intellectual Property...............................................21
3.19 Privacy of Customer Information.....................................22
3.20 Potential Conflicts of Interest.....................................22
3.21 Trade Relations.....................................................23
3.22 Outstanding Borrowing...............................................23
3.23 Broker's, Finder's or Similar Fees..................................23
3.24 Stockholder Approval................................................23
3.25 CCC Section.........................................................23
3.26 Disclosure..........................................................24
3.27 Investments.........................................................24
3.28 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Compliance...........................................24
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS.............................25
4.1 Existence and Power.................................................25
4.2 Authorization; No Contravention.....................................25
4.3 Governmental Authorization; Third Party Consents....................25
4.4 Binding Effect......................................................26
4.5 Purchase for Own Account............................................26
4.6 Restricted Securities...............................................27
4.7 Accredited Investor.................................................27
4.8 Experience..........................................................27
4.9 Access to Information...............................................27
4.10 General Solicitation................................................27
4.11 Reliance............................................................27
4.12 Qualified Institutional Buyer.......................................28
4.13 Affiliate Status....................................................28
4.14 Capital Stock Ownership.............................................28
ARTICLE V CONDITIONS TO INITIAL CLOSING..............................................29
5.1 Conditions to Lenders' Obligations..................................29
5.2 Conditions to Company's Obligations.................................29
ARTICLE VI CONDITIONS TO SUBSEQUENT CLOSING..........................................30
6.1 Conditions to Lenders' Obligations..................................30
6.2 Conditions to the Company's Obligations.............................30
ARTICLE VII INDEMNIFICATION..........................................................31
7.1 Indemnification.....................................................31
7.2 Notification........................................................31
7.3 Contribution........................................................32
ARTICLE VIII COVENANTS...............................................................33
8.1 Financial Statements and Other Information..........................33
8.2 FIRPTA Certificate..................................................33
8.3 Reservation of Common Stock.........................................34
8.4 Stockholder Approval................................................34
8.5 Financial Covenants.................................................34
8.6 Purchases and Sales.................................................34
8.7 Proxy Matters.......................................................35
ARTICLE IX TERMINATION...............................................................35
9.1 Termination.........................................................35
ARTICLE X MISCELLANEOUS..............................................................35
10.1 Survival of Representations and Warranties..........................35
10.2 Notices.............................................................36
10.3 Successors and Assigns; Third Party Beneficiaries...................38
10.4 Amendment and Waiver................................................38
10.5 Counterparts........................................................38
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10.6 Headings............................................................38
10.7 Governing Law.......................................................38
10.8 Severability........................................................38
10.9 Rules of Construction...............................................39
10.10 Entire Agreement....................................................39
10.11 Fees................................................................39
10.12 Publicity; Confidentiality..........................................39
10.13 Further Assurances..................................................40
10.14 Waiver..............................................................40
EXHIBITS
A Form of Note
B Form of Third Amended and Restated Registration Rights Agreement
C Form of Amended and Restated Series D Certificate of Determination
D Articles of Incorporation
E By-laws
F Form of Series E Certificate of Determination
G Form of Pillsbury Winthrop LLP Opinion
SCHEDULES
2.1 Purchased Notes
3.3 Government Authorizations; Consents
3.5 Litigation
3.7(a) Capitalization
3.10(a) Reports; Financial Statements
3.12 Material Adverse Change
3.17 Affiliate Transactions
3.20 Potential Conflicts of Interest
3.22 Outstanding Borrowing
3.27 Investments
4.14 Capital Stock Ownership
8.5 Financial Covenants
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CONVERTIBLE NOTE PURCHASE AGREEMENT
CONVERTIBLE NOTE PURCHASE AGREEMENT, dated March 9, 2004 (this
"Agreement"), among Permal U.S. Opportunities Limited, Zaxis Equity Neutral,
L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis
Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV,
L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion
Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital
Ventures International (collectively, the "Lenders") and Critical Path, Inc., a
California corporation (the "Company"),
WHEREAS, on November 18, 2003, the Company entered into the
Convertible Note Purchase and Exchange Agreement, as amended from time to time
(the "November Convertible Note Agreement") with the General Atlantic Entities,
GAP-W, LLC and the CK Purchasers pursuant to which (a) the Company issued $10
million in principal amount of 10% convertible secured notes to the General
Atlantic Entities, and agreed to convert the notes into approximately 7.3
million shares, par value $0.001 per share, of Series E Redeemable Convertible
Preferred Stock (the "Series E Preferred Stock"), and (b) the CK Purchasers
agreed to exchange approximately $32.8 million in face value of CK Sub Notes for
approximately 21.9 million shares of Series E Preferred Stock subject to
Stockholder Approval (as hereinafter defined); and
WHEREAS, on January 16, 2004, the Company entered into the
Convertible Note Purchase Agreement, as amended from time to time (the "January
Convertible Note Agreement") with Permal U.S. Opportunities Limited, Zaxis
Equity Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore
Limited, Zaxis Partners, L.P. and Passport Master Fund, L.P. (collectively, the
"January 2004 Investors"), pursuant to which the Company issued $15 million in
principal amount of 10% convertible secured notes to the January 2004 Investors,
and agreed to convert such notes into approximately 10 million shares of Series
E Preferred Stock subject to Stockholder Approval (as hereinafter defined); and
WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue and sell, at the Initial Closing,
convertible notes, substantially in the form attached hereto as Exhibit A (each
a "Note" and, collectively, the "Notes") having an aggregate principal amount of
eighteen million five hundred thousand dollars ($18,500,000), in the face amount
set forth opposite such Lender's (as hereinafter defined) name on Schedule 2.1
hereto, that subject to the terms and conditions set forth in this Agreement and
the Notes, are convertible either into Series E Preferred Stock or Common Stock,
as more fully set forth in the Agreement and the Notes:
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless the
context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Amended and Restated Registration Rights Agreement" means the
Third Amended and Restated Registration Rights Agreement, substantially in the
form attached hereto as Exhibit B.
"Amended and Restated Series D Certificate of Determination"
means the Amended and Restated Certificate of Determination of Preferences of
Series D Cumulative Redeemable Convertible Preferred Stock, substantially in the
form attached hereto as Exhibit C, with such changes or limitations to the
voting provisions thereof as may be necessary to comply with NASD Rule 4351
regarding the voting power of the Series D Preferred Stock, which shall be duly
filed with the Secretary of State of the State of California as soon as
practicable following Stockholder Approval.
"Amendment to Preferred Stock Rights Agreement" means an
amendment to the Company's Preferred Stock Rights Agreement to permit the
Lenders to purchase securities being offered by the Company hereunder without
causing such Lenders to become Acquiring Persons (as defined in the Preferred
Stock Rights Agreement).
"Articles of Incorporation" means the Amended and Restated
Articles of Incorporation of the Company in effect on the Initial Closing Date
and attached hereto as Exhibit D.
"Board of Directors" means the Board of Directors of the Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the
Initial Closing Date and attached hereto as Exhibit E.
"CK Purchasers" means Campina Enterprises Limited, Cenwell
Limited, Great Affluent Limited, Dragonfield Limited and Lion Cosmos Limited and
their transferees.
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"CK Sub Notes" means the 5 _% Convertible Subordinated Notes, due
April 1, 2005, issued by the Company pursuant to the Company's Indenture, dated
March 31, 2000, and purchased by the CK Purchasers.
"Claims" has the meaning set forth in Section 3.5 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act and Exchange Act.
"Common Stock" means the common stock of the Company, par value
$0.001 per share.
"Commonly Controlled Entity" means any entity which is under
common control with the Company within the meaning of Code Section 414(b), (c),
(m), (o) or (t).
"Common Shares" has the meaning set forth in Section 2.1(a).
"Common Shares Issuance Date" has the meaning set forth in
Section 2.5.
"Company" has the meaning set forth in the preamble to this
Agreement.
"Company Plans" has the meaning set forth in Section 3.15 of this
Agreement.
"Condition of the Company" means the assets, business,
properties, operations or condition (financial or otherwise) of the Company and
its Subsidiaries, taken as a whole.
"Contingent Obligation" means, as applied to any Person, any
direct or indirect liability of that Person with respect to any Indebtedness,
lease, dividend, guaranty, letter of credit or other obligation, contractual or
otherwise (the "primary obligation") of another Person (the "primary obligor"),
whether or not contingent, (a) to purchase, repurchase or otherwise acquire such
primary obligations or any property constituting direct or indirect security
therefor, (b) to advance or provide funds (i) for the payment or discharge of
any such primary obligation, or (ii) to maintain working capital or equity
capital of the primary obligor or otherwise to maintain the net worth or
solvency or any balance sheet item, level of income or financial condition of
the primary obligor, (c) to purchase property, securities or services primarily
for the purpose of assuring the owner of any such primary obligation of the
ability of the primary obligor to make payment of such primary obligation, or
(d) otherwise to assure or hold harmless the owner of any such primary
obligation against loss or failure or inability to perform in respect thereof.
The amount of any Contingent Obligation shall be deemed to be an amount equal to
the stated or determinable amount of the primary obligation in respect of
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which such Contingent Obligation is made or, if not stated or determinable, the
maximum reasonably anticipated liability in respect thereof.
"Contractual Obligations" means, as to any Person, any provision
of any security issued by such Person or of any agreement, undertaking,
contract, indenture, mortgage, deed of trust or other instrument to which such
Person is a party or by which it or any of its property is bound.
"Conversion" has the meaning set forth in Section 2.1(a).
"Conversion Notice" has the meaning set forth in Section 2.5 of
this Agreement.
"Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
"Environmental Laws" means federal, state, local and foreign
laws, principles of common laws, civil laws, regulations, and codes, as well as
orders, decrees, judgments or injunctions, issued, promulgated, approved or
entered thereunder relating to pollution, protection of the environment or
public health and safety.
"ERISA" means the Employee Retirement Income Security Act of
1974, as amended.
"Exchangeable Shares" shall mean the Class A Non-Voting
Preference Shares of Critical Path Messaging Co., an unlimited liability company
existing under the laws of Nova Scotia, and a subsidiary of the Company.
"Exchange Act" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"Existing Convertible Note Agreements" means the November
Convertible Note Agreement and the January Convertible Note Agreement.
"Financial Statements" has the meaning set forth in Section 3.10
of this Agreement.
"GAAP" means United States generally accepted accounting
principles in effect from time to time.
"General Atlantic Entities" means General Atlantic Partners 74,
L.P., a Delaware limited partnership, GAP Coinvestment Partners II, L.P., a
Delaware limited partnership, GapStar, LLC, a Delaware limited liability
company, and GAPCO GmbH & Co. KG, a German limited partnership.
"General Atlantic Notes" means the 10% convertible secured notes
issued to the General Atlantic Entities pursuant to the November Convertible
Note Agreement and held by the General Atlantic Entities or their permitted
transferees.
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"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (c) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Permitted Liens) on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person, and (g) any Contingent Obligation of such Person.
"Indemnified Party" has the meaning set forth in Section 7.1 of
this Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1 of
this Agreement.
"Initial Closing" has the meaning set forth in Section 2.4(a) of
this Agreement.
"Initial Closing Date" has the meaning set forth in Section
2.4(a) of this Agreement.
"Intellectual Property" has the meaning set forth in Section 3.18
of this Agreement.
"Intercreditor Agreement" shall mean the Intercreditor Agreement,
dated the date hereof, among the General Atlantic Entities, the January 2004
Investors and the Lenders.
"Internet Assets" means any Internet domain names and other
computer user identifiers and any rights in and to sites on the worldwide web,
including rights in and to any text, graphics, audio and video files and html or
other code incorporated in such sites.
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"Investment" means (i) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or otherwise) of
assets (other than equipment, inventory, supplies or other assets acquired in
the ordinary course of business of the Company), capital stock, bonds, notes,
debentures, partnership, joint venture or other ownership interests or other
securities of any Person, (ii) any deposit with, or advance, loan or other
extension of credit to, or on behalf of, any Person (other than deposits made in
connection with the purchase of equipment, inventory, services, leases, supplies
or other assets in the ordinary course of business of the Company), (iii) any
other capital contribution to or investment in such Person, including, without
limitation, any guaranty obligation incurred for the benefit of such Person. For
the sake of clarity, Investments shall include any transfer of property or
assets by the Company to any of its Subsidiaries or by any Subsidiary of the
Company to any other Subsidiary.
"IP Agreements" has the meaning set forth in Section 3.18(a)(iii)
of this Agreement.
"Issuable Shares" has the meaning set forth in Section 2.1(a) of
this Agreement.
"January Convertible Note Agreement" has the meaning set forth in
the recitals of this Agreement.
"January 2004 Investors" has the meaning set forth in the
recitals of this Agreement.
"January 2004 Notes" means the 10% convertible secured notes
issued to the January 2004 Investors pursuant to the January Convertible Note
Agreement and held by the January 2004 Investors or their permitted transferees.
"Knowledge" means the knowledge of the Company and ▇▇▇▇ ▇▇▇▇▇▇▇▇,
▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇. and ▇▇▇▇▇▇▇
▇. ▇▇▇▇▇▇▇▇ after due inquiry.
"Lenders" means Permal U.S. Opportunities Limited, Zaxis Equity
Neutral, L.P., Zaxis Institutional Partners, L.P., Zaxis Offshore Limited, Zaxis
Partners, L.P., Guggenheim Portfolio Company XIII, Crosslink Crossover Fund IV,
L.P., Sagamore Hill Hub Fund, Ltd., Criterion Capital Partners, Ltd., Criterion
Capital Partners, Institutional, Criterion Capital Partners, L.P. and Capital
Ventures International and any transferees to whom the Notes purchased by any of
the foregoing are transferred after the date hereof and in accordance with the
terms of such Notes.
"Liabilities" has the meaning set forth in Section 3.16 of this
Agreement.
"Lien" means any mortgage, deed of trust, pledge, hypothecation,
assignment, encumbrance, lien (statutory or other) or preference, priority,
right or other security interest or preferential arrangement of any kind or
nature whatsoever (excluding preferred stock and equity related preferences).
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"Losses" has the meaning set forth in Section 7.1 of this
Agreement.
"Material Contractual Obligations" has the meaning set forth in
Section 3.8 of this Agreement.
"Material Non-Public Information" has the meaning set forth in
Section 8.6 of this Agreement.
"NASD Rules" has the meaning set forth in Section 3.28(b).
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Notes" has the meaning set forth in the recitals to this
Agreement.
"November Convertible Note Agreement" has the meaning set forth
in the recitals of this Agreement.
"Orders" has the meaning set forth in Section 3.2 of this
Agreement.
"Patents" means any foreign or United States patents and patent
applications, including any divisions, continuations, continuations-in-part,
substitutions or reissues thereof, whether or not patents are issued on such
applications and whether or not such applications are modified, withdrawn or
resubmitted.
"Permitted Investments" means (i) Investments in cash or cash
equivalents, (ii) accounts receivable created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments existing on the Initial Closing Date, and listed
on Schedule 3.27 hereto, (iv) guaranty obligations permitted by Section 5.3 of
the Security Agreement, (v) loans to employees, directors or officers of the
Company in connection with the award of convertible bonds or capital stock under
a stock incentive plan, stock option plan or other equity-based compensation
plan or arrangement, (vi) other advances or loans to employees, directors,
officers or agents of the Company in the ordinary course of business not to
exceed $500,000 in the aggregate at any time outstanding; (vii) loans, advances
and Investments in or by foreign Subsidiaries; (viii) any acquisition for which
the prior written consent of the holders of a majority of the outstanding
principal amount of (a) the General Atlantic Notes and (b) the January 2004
Notes has been obtained, (ix) other loans, advances and investments of a nature
not contemplated by the foregoing sections in an amount not to exceed $500,000
in the aggregate at any time outstanding or (x) Investments by the Company in
the Guarantor (as defined in the Security Agreement).
"Permitted Liens" has the meaning set forth in the Note.
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
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"Plan" means any employee benefit plan, arrangement, policy,
program, agreement or commitment (whether or not an employee plan within the
meaning of Section 3(3) of ERISA), including, without limitation, any
employment, consulting or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
stock option, stock purchase or severance pay plan, any life, health, disability
or accident insurance plan, whether oral or written, whether or not subject to
ERISA, as to which the Company or any Commonly Controlled Entity has or in the
future could have any direct or indirect, actual or contingent liability.
"Proxy Statement" has the meaning set forth in Section 8.4 of
this Agreement.
"Record Date" shall mean a date determined by the Board of
Directors as the record date for determining the shareholders of the Company
entitled to receive Series E Purchase Rights.
"Requirements of Law" means, as to any Person, any law (including
Environmental Laws), statute, treaty, rule, regulation, right, privilege,
qualification, license or franchise or determination of an arbitrator or a court
or other Governmental Authority or stock exchange, in each case applicable or
binding upon such Person or any of its property or to which such Person or any
of its property is subject or pertaining to any or all of the transactions
contemplated or referred to herein.
"Retiree Welfare Plan" means any welfare plan (as defined in
Section 3(1) of ERISA) that provides benefits to current or former employees
beyond their retirement or other termination of service (other than coverage
mandated by Section 4980A of the Code, commonly referred to as "COBRA," the cost
of which is fully paid by the current or former employee or his or her
dependents).
"Rights Offering" shall mean a rights offering for an aggregate
amount of up to $21,000,000 of shares of Series E Preferred Stock pursuant to
which the Company will distribute transferable rights to the Company's holders
of Common Stock as of the Record Date.
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act" has the meaning set forth in Section 3.28(a)
of this Agreement.
"SEC Reports" has the meaning set forth in Section 3.10 of this
Agreement.
"Securities" has the meaning set forth in Section 4.8 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Security Agreement" has the meaning set forth in the Notes.
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"Series D Preferred Stock" means the Series D Redeemable
Convertible Participating Preferred Stock of the Company, par value $0.001 per
share.
"Series E Certificate of Determination" means the Certificate of
Determination of Preferences of Series E Redeemable Convertible Preferred Stock,
substantially in the form attached hereto as Exhibit F, with such changes or
limitations to the voting provisions thereof as may be necessary to comply with
NASD Rule 4351 regarding the voting power of the Series E Preferred Stock, which
certificate shall be duly filed with the Secretary of State of the State of
California as soon as practicable following Stockholder Approval.
"Series E Preferred Stock" has the meaning set forth in the
recitals to this Agreement.
"Series E Purchase Rights" means those rights to purchase Series
E Preferred Stock issued in the Rights Offering.
"Software" means any computer software programs, source code,
object code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.
"Stock Equivalents" means any security or obligation which is by
its terms convertible into or exchangeable or execrable for shares of common
stock or other capital stock of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock.
"Stock Option Plans" means the Company's stock option plans and
employee purchase plans pursuant to which shares of restricted stock and options
to purchase shares of Common Stock are reserved and available for grant to
officers, directors, employees and consultants of the Company.
"Stockholder Approval" has the meaning set forth in Section 3.24
of this Agreement.
"Subordination Agreement" has the meaning set forth in the Notes.
"Subsequent Closing" has the meaning set forth in Section 2.4(e)
of this Agreement.
"Subsequent Closing Date" has the meaning set forth in Section
2.4(e) of this Agreement.
"Subsidiaries" means, as of the relevant date of determination,
with respect to any Person, a corporation or other Person of which 50% or more
of the voting power of the outstanding voting equity securities or 50% or more
of the outstanding economic equity interest is held, directly or indirectly, by
such Person. Unless otherwise
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qualified, or the context otherwise requires, all references to a "Subsidiary"
or to "Subsidiaries" in this Agreement shall refer to a Subsidiary or
Subsidiaries of the Company.
"Taxes" means any federal, state, provincial, county, local,
foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
"Trade Secrets" means any trade secrets, research records,
processes, procedures, manufacturing formulae, technical know-how, technology,
blue prints, designs, plans, inventions (whether patentable and whether reduced
to practice), invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos,
corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
"Transaction Documents" means, collectively, this Agreement, the
Amended and Restated Registration Rights Agreement, the Notes, the Security
Agreement, the Subordination Agreement, the Intercreditor Agreement, the
Amendment to the Preferred Stock Rights Agreement and the Waivers.
"Waivers" means the waivers and consents, dated the date hereof,
executed by (i) the requisite holders of our Series D Preferred Stock, (ii) the
requisite General Atlantic Entities, CK Purchasers and Vectis CP Holdings, LLC,
and (iii) a majority of the outstanding principal amount of all of the January
2004 Notes, in each case to consent to and approve, to the extent necessary, the
transactions and agreements contemplated by the Transaction Documents and to
waive any rights they may have under that certain Stockholders Agreement dated
as of November 8, 2001.
"Warrant" or "Warrants," as the case may be, means those certain
warrants to purchase Common issued to General Atlantic Entities pursuant to that
certain Stock and Warrant Purchase and Exchange Agreement, dated as of November
8, 2001.
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ARTICLE II
PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE
2.1 Purchase and Sale of Notes.
(a) Subject to the terms and conditions of this Agreement, on the
Initial Closing Date, each of the Lenders, severally and not jointly, agrees to
purchase, and the Company agrees to sell and issue to each Lender, a Note, in
the principal amount set opposite such Lender's name on Schedule 2.1 hereto.
Each of the Notes shall be due and payable upon the terms and conditions set
forth in the Notes and herein. Subject to Stockholder Approval and the terms and
conditions of this Agreement, on the Subsequent Closing Date, the Notes shall
convert into shares of Series E Preferred Stock in accordance with the terms
thereof, and the Company shall issue to each Lender that number of shares of
Series E Preferred Stock issuable upon such conversion, in exchange for the
surrender to the Company by each Lender of its Notes (the "Conversion") (all of
the shares of Series E Preferred Stock issuable upon conversion of the Notes
referred to herein as the "Issuable Shares"). If the Conversion has not occurred
on or before August 15, 2004, the Notes shall thereafter be convertible at the
option of each Lender only into shares of Common Stock in accordance with the
terms thereof (all the shares of Common Stock issuable directly upon conversion
of the Notes referred to herein as the "Common Shares").
(b) All payments by the Company under the Notes of principal and
interest shall be as set forth in the Notes.
2.2 Filings. As promptly as practicable following the Stockholder
Approval and upon the terms and conditions of this Agreement, on or before the
Subsequent Closing Date, the Company shall file with the Secretary of State of
the State of California: (a) an amendment to the Amended and Restated Articles
of Incorporation to increase the authorized common stock and preferred stock of
the Company; and (b) the Series E Certificate of Determination.
2.3 Certificate of Determination. The Issuable Shares shall have
the preferences and rights set forth in the Series E Certificate of
Determination, with such changes or limitations to the voting provisions thereof
as may be necessary to comply with NASD Rule 4351. The Common Shares shall have
the preferences and rights set forth in the Articles of Incorporation.
2.4 Closings; Deliveries.
(a) Initial Closing. The purchase and sale of the Notes under
this Agreement (the "Initial Closing") shall be held as soon as practicable
following the date of this Agreement (the "Initial Closing Date"), at the
offices of Pillsbury Winthrop LLP, ▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇,
or at such other time and place as the Company and the Lenders may mutually
agree. At the Initial Closing, signature pages transmitted by facsimile will be
acceptable, with originals to immediately follow.
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(b) Deliveries by the Company and the Lenders on the Date Hereof.
On the date hereof, (i) the Company shall execute and deliver to each Lender and
each Lender shall execute and deliver to the Company this Agreement.
(c) Deliveries by the Company at the Initial Closing. At the
Initial Closing, subject to the terms and conditions hereof, the Company shall
execute (except for the Waivers) and deliver to each Lender:
(i) the Amended and Restated Registration Rights
Agreement;
(ii) such other documentation required to be provided by
the Company pursuant to Section 5.1;
(iii) a Note, in the form attached hereto as Exhibit A, in
the principal amount set forth opposite such Lender's name on Schedule
2.1;
(iv) the Waivers;
(v) a copy of the Amendment to Preferred Stock Rights
Agreement; and
(vi) the Security Agreement and the related security
documents required or contemplated by the Security Agreement.
(d) Deliveries by each Lender at the Initial Closing. At the
Initial Closing, subject to the terms and conditions hereof, each Lender shall:
(i) execute and deliver to the Company the Amended and
Restated Registration Rights Agreement; and
(ii) loan to the Company, in the form of a check or wire
transfer, that amount set forth opposite such Lender's name on Schedule
2.1.
(e) Subsequent Closing. The consummation of the Conversion (the
"Subsequent Closing") shall take place concurrently with the Subsequent Closings
under the Existing Convertible Note Agreements as soon as practicable following
the satisfaction of the closing conditions set forth in Article VI of this
Agreement and Article VI of the Existing Convertible Note Agreements (the
"Subsequent Closing Date"), at the offices of Pillsbury Winthrop LLP, ▇▇ ▇▇▇▇▇▇▇
▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, or at such other time and place as the
Company, the Lenders, the General Atlantic Entities, the CK Purchasers and the
January 2004 Investors may mutually agree. At the Subsequent Closing, signature
pages transmitted by facsimile will be acceptable, with originals to immediately
follow.
(f) Deliveries by the Company at the Subsequent Closing. At the
Subsequent Closing, subject to the terms and conditions hereof, the Company
shall execute and deliver to:
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(i) each Lender, a certificate or certificates in
definitive form and registered in the name of each Lender, representing
such Lender's Issuable Shares; and
(ii) each Lender, such other documentation evidencing the
satisfaction of the conditions set forth in Section 6.1.
(g) Deliveries by each Lender at the Subsequent Closing. At the
Subsequent Closing, subject to the terms and conditions hereof, each Lender
shall execute and deliver to the Company its Notes together with duly executed
note powers for such Notes.
2.5 Issuances of Common Shares. If the Conversion has not
occurred on or before August 15, 2004, subject to and in accordance with the
provisions of the Notes, thereafter upon surrender by a Lender of a Note to the
Company, together with a notice with duly executed note powers (the "Conversion
Notice"), also specifying the portion of the Note to be converted, the Company
shall, or shall cause its transfer agent to issue and deliver to the address as
specified in the Conversion Notice (the date of each such delivery, a "Common
Shares Issuance Date"), a certificate or certificates in definitive form and in
such denominations as may be requested by such Lender in the Conversion Notice,
registered in the name of such Lender, for the number of Common Shares to which
such Lender shall be entitled upon such conversion. If a Note has been
surrendered only in part, the Company shall, at the time of delivery of the
stock certificate or certificates, deliver to such Lender a new Note evidencing
the remaining balance, which new Note shall in all other respects be identical
to the Note surrendered.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Lenders that,
except as disclosed or incorporated by reference in the SEC Reports or the
Disclosure Schedules:
3.1 Corporate Existence and Power. The Company and each of its
Subsidiaries (a) is a corporation duly organized, validly existing and in good
standing under the laws of the jurisdiction of its incorporation; (b) has all
requisite corporate power and authority to own and operate its property, to
lease the property it operates as lessee and to conduct the business in which it
is currently engaged; (c) is duly qualified as a foreign corporation, licensed
and in good standing under the laws of each jurisdiction in which its ownership,
lease or operation of property or the conduct of its business requires such
qualification, except where the failure to be so qualified could not reasonably
be expected to have a material adverse effect on the Condition of the Company
and (d) has the corporate power and authority to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction
Documents. No jurisdiction, other than those referred to in clause (c) above,
has claimed, in writing or otherwise, that the Company or any of its
Subsidiaries is required to qualify as a foreign corporation or other
13
entity therein, and the Company or any of its Subsidiaries does not file any
franchise, income or other tax returns in any other jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.
3.2 Authorization; No Contravention. The execution, delivery and
performance by the Company of this Agreement and each of the other Transaction
Documents and the transactions contemplated hereby and thereby (a) subject to
Stockholder Approval with respect to the matters set forth in Section 3.24, have
been duly authorized by all necessary corporate action of the Company; (b)
subject to Stockholder Approval with respect to the matters set forth in Section
3.24, do not contravene the terms of the Articles of Incorporation or the
By-laws; (c) do not violate, conflict with or result in any breach, default or
contravention of (or with due notice or lapse of time or both would result in
any breach, default or contravention of), or the creation of any Lien under, any
Contractual Obligation of the Company or any of its Subsidiaries or any
Requirement of Law applicable to the Company or any of its Subsidiaries except
such violations or conflicts that would not reasonably be expected to have a
material adverse effect on the Condition of the Company; and (d) do not violate
any judgment, injunction, writ, award, decree or order of any nature
(collectively, "Orders") of any Governmental Authority against, or binding upon,
the Company or any of its Subsidiaries.
3.3 Governmental Authorization; Third Party Consents. Except for
the Stockholder Approval and as set forth in Schedule 3.3, no approval, consent,
compliance, exemption, authorization or other action by, or notice to, or filing
with, any Governmental Authority or any other Person, and no lapse of a waiting
period under a Requirement of Law, is necessary or required in connection with
the execution, delivery or performance (including, without limitation, the sale,
issuance and delivery of the Issuable Shares or the Common Shares) by, or
enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby, other than (a)
the notification to The NASDAQ National Market for the listing of the shares of
Common Stock issuable upon conversion of the Series E Preferred Stock or the
Notes, as the case may be, and applicable blue-sky filings, (b) such as have
already been obtained or such exemptive filings as may be required under
applicable securities laws, and (c) such other filings as may be required
following the Initial Closing Date or the Subsequent Closing Date under the
Securities Act, the Exchange Act and corporate law.
3.4 Binding Effect. This Agreement and each of the other
Transaction Documents to which the Company is a party have been duly executed
and delivered by the Company, and this Agreement and each of the other
Transaction Documents to which the Company is a party constitute the legal,
valid and binding obligations of the Company, enforceable against the Company in
accordance with their terms, except as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of creditors'
rights generally and by general principles of equity relating to enforceability
(regardless of whether considered in a proceeding at law or in equity).
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3.5 Litigation. Except as set forth on Schedule 3.5, there are no
actions, suits, proceedings, claims, complaints, disputes, arbitrations or
investigations (collectively, "Claims") pending or, to the Knowledge of the
Company, threatened, at law, in equity, in arbitration or before any
Governmental Authority against the Company or any of its Subsidiaries that seeks
in excess of $50,000 in damages nor is the Company aware that there is any basis
for any of the foregoing. The foregoing includes, without limitation, Claims
pending or, to the Knowledge of the Company, threatened or any basis therefor
known by the Company involving the prior employment of any employee of the
Company or any of its Subsidiaries, their use in connection with the business of
the Company or any of its Subsidiaries of any information or techniques
allegedly proprietary to any of their former employers or their obligations
under any agreements with prior employers. No Order has been issued by any court
or other Governmental Authority against the Company or any of its Subsidiaries
purporting to enjoin or restrain the execution, delivery or performance of this
Agreement or any of the other Transaction Documents.
3.6 Compliance with Laws. The Company and each of its
Subsidiaries is in compliance in all material respects with all Requirements of
Law and all Orders issued by any court or Governmental Authority against the
Company in all respects. To the Company's Knowledge, there are no Requirements
of Law which could reasonably be expected to prohibit or restrict the Company or
any of its Subsidiaries from, or otherwise materially adversely effect the
Company or any of its Subsidiaries in, conducting its business in any
jurisdiction in which it now conducts its business.
3.7 Capitalization.
(a) (i) As of the Initial Closing, the authorized capital stock
of the Company consists of (A) 125,000,000 shares of Common Stock, of
which 21,171,399 shares are issued and outstanding, (B) one share of
Special Voting Stock, par value $0.001 per share, of the Company, which
is issued and outstanding, (C) 75,000 shares of Series C Preferred
Stock, par value $0.001 per share, of the Company, of which no shares
are issued and outstanding, (D) 4,188,587 shares of Series D Preferred
Stock, all of which are issued and outstanding, and (E) 736,412 shares
of undesignated "blank check" preferred stock. As of the date of this
Agreement, the aggregate number of shares of restricted stock and
options to purchase shares of Common Stock which may be issued under the
Stock Option Plans are 19,079,109, of which 12,449,551 have been
granted. The Company has reserved an adequate number of shares of Common
Stock for issuance upon conversion of the Issuable Shares. In addition,
as of the Initial Closing, there were 110,209 Exchangeable Shares issued
and outstanding, each of which is convertible into one share of Common
Stock.
(ii) As of the Subsequent Closing Date, the authorized
capital stock of the Company shall consist of (A) 200,000,000 shares of
Common Stock, (B) one share of Special Voting Stock, par value $0.001
per share, of the Company (C) 75,000 shares of Series C Preferred Stock,
par value $0.001 per share, of the Company, (D) 4,188,587 shares of
Series D Preferred Stock, (E) a
15
sufficient number of shares of Series E Preferred Stock to issue the
Issuable Shares, convert 69,149 shares of Series D Preferred Stock into
733,333 shares of Series E Preferred Stock held by MBCP Peerlogic LLC
and its affiliates issued in connection with the settlement of certain
claims and to consummate the transactions contemplated by the Existing
Convertible Note Agreements and the Rights Offering, and (F) a number of
shares of undesignated "blank check" preferred stock agreed upon by the
Company, the Lenders, the General Atlantic Entities and the CK
Purchasers.
(iii) Except as set forth on Schedule 3.7(a) and except
for the Warrants, there are no options, warrants, conversion privileges,
subscription or purchase rights or other rights presently outstanding to
purchase or otherwise acquire (A) any authorized but unissued,
unauthorized or treasury shares of the Company's capital stock, (B) any
Stock Equivalents or (C) any other securities of the Company and there
are no commitments, contracts, agreements, arrangements or
understandings to which the Company is a party to issue any shares of
the Company's capital stock or any Stock Equivalents or other securities
of the Company.
(b) Upon the Initial Closing Date, the Notes shall be duly
authorized, and assuming the accuracy of the representations and warranties of
the Lenders set forth in Article IV of this Agreement, will be issued in
compliance with the registration and qualification requirements of all
applicable federal, state and foreign securities laws and will be free and clear
of all other Liens.
(c) Upon the Subsequent Closing Date, the Issuable Shares shall
be duly authorized, and when issued and delivered to the Lenders and upon the
consummation of the Conversion on the Subsequent Closing Date, will be validly
issued, fully paid and non-assessable, and assuming the accuracy of the
representations and warranties of the Lenders set forth in Article IV of this
Agreement, will be issued in compliance with the registration and qualification
requirements of all applicable federal, state and foreign securities laws and
will be free and clear of all other Liens. Upon the Subsequent Closing Date, the
shares of Common Stock issuable upon conversion of the Issuable Shares shall
have been duly reserved for issuance and will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or similar rights that
have not been satisfied, will be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws
and will be free and clear of all other Liens. None of the issued and
outstanding shares of Common Stock were issued in violation of any preemptive
rights.
(d) Upon each Common Shares Issuance Date, the Common Shares then
issuable shall be duly authorized, and when issued and delivered to the Lenders
in accordance with the terms and conditions of the Notes, will be validly
issued, fully paid and non-assessable, and assuming the accuracy of the
representations and warranties of the Lenders set forth in Article IV of this
Agreement, will be issued in compliance with the registration and qualification
requirements of all applicable federal, state and foreign securities laws and
will be free and clear of all other Liens.
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3.8 No Default or Breach; Contractual Obligations. All of the
Contractual Obligations to which the Company or any of its Subsidiaries is a
party, whether written or oral, which are required by the Exchange Act to be
disclosed in the SEC Reports (collectively, "Material Contractual Obligations")
are valid, subsisting, in full force and effect and binding upon the Company or
its Subsidiary, as the case may be, and the other parties thereto, and the
Company or its Subsidiary, as the case may be, has paid in full or accrued all
amounts due thereunder and has satisfied in full or provided for all of its
liabilities and obligations thereunder, except for such amounts as are being
contested by the Company in good faith. Neither the Company nor any of its
Subsidiaries has received notice of a default and is not in default under, or
with respect to, any Material Contractual Obligation nor, to the Knowledge of
the Company, does any condition exist that with notice or lapse of time or both
would constitute a default thereunder. To the Knowledge of the Company, no other
party to any such Contractual Obligation is in default thereunder, nor does any
condition exist that with notice or lapse of time or both would constitute a
default by such other party thereunder.
3.9 Title to Properties. The Company and each of its Subsidiaries
has good, record and marketable title in fee simple to, or holds interests as
lessee under leases in full force and effect in, all real property used in
connection with its business or otherwise owned or leased by it. The Company and
each of its Subsidiaries owns and has good, valid and marketable title to all of
its properties and assets used in its business or reflected as owned on the
Financial Statements, in each case free and clear of all Liens, except for
Permitted Liens, or that would required to be described in the notes to the
Financial Statements.
3.10 Reports; Financial Statements.
(a) As of the respective dates of their filing with the
Commission, all reports, registration statements and other filings, together
with any amendments thereto, filed by the Company with the Commission since June
30, 2000 (the "SEC Reports"), complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations of the Commission promulgated thereunder, except as disclosed in
the SEC Reports. The SEC Reports did not at the time they were filed with the
Commission, or will not at the time they are filed with the Commission, contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary in order to make the statements
therein, in the light of the circumstances under which they are made, not
misleading. The Company has delivered or made available to the Lenders true and
complete copies of, or will make available at each Lender's request the SEC
Reports and any exhibits thereto. Except as set forth in Schedule 3.10(a), the
Company is not aware of any issues raised by the Commission with respect to any
of the SEC Reports, other than those disclosed in the SEC Reports.
(b) The consolidated financial statements (including, in each
case, any related schedules or notes thereto) contained in or incorporated by
reference in the SEC Reports and any such reports, registration statements and
other filings to be filed by the Company with the Commission prior to the
Initial Closing Date or the Subsequent
17
Closing Date, as the case may be (the "Financial Statements"), (i) have been or
will be prepared in accordance with the published rules and regulations of the
Commission and GAAP consistently applied during the periods involved (except as
may be indicated in the notes thereto) and (ii) fairly present or will fairly
present in all material respects the consolidated financial position of the
Company and its Subsidiaries as of the respective dates thereof and the
consolidated results of operations, statements of stockholders' equity and cash
flows for the periods indicated, except that any unaudited interim financial
statements were or will be subject to normal and recurring year-end adjustments
and may omit footnote disclosure as permitted by regulations of the Commission.
3.11 Taxes. (a) The Company and each of its Subsidiaries has paid
all Taxes which have come due and are required to be paid by it through the date
hereof, and all deficiencies or other additions to Tax, interest and penalties
owed by it in connection with any such Taxes, other than Taxes being disputed by
the Company in good faith for which adequate reserves have been made in
accordance with GAAP; (b) the Company and each of its Subsidiaries has timely
filed or caused to be filed all returns for Taxes that it is required to file on
and through the date hereof (including all applicable extensions), and all such
Tax returns are accurate and complete in all material respects; (c) with respect
to all Tax returns of the Company and each of its Subsidiaries, (i) there is no
unassessed Tax deficiency proposed or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries and (ii) no audit is
in progress with respect to any return for Taxes, no extension of time is in
force with respect to any date on which any return for Taxes was or is to be
filed and no waiver or agreement is in force for the extension of time for the
assessment or payment of any Tax; (d) all provisions for Tax liabilities of the
Company and each of its Subsidiaries have been disclosed in the Financial
Statements and made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company and each of its Subsidiaries attributable
to periods prior to or ending on the Initial Closing Date or the Subsequent
Closing Date, as the case may be, have been adequately disclosed in the
Financial Statements; and (e) there are no Liens for Taxes on the assets of the
Company or any of its Subsidiaries, other than Permitted Liens.
3.12 No Material Adverse Change; Ordinary Course of Business.
Except as set forth on Schedule 3.12, since December 31, 2002, (a) there has not
been any material adverse change in the Condition of the Company, (b) neither
the Company nor any of its Subsidiaries has participated in any transaction
material to the Condition of the Company, including, without limitation,
declaring or paying any dividend or declaring or making any distribution to its
stockholders except out of the earnings of the Company or its Subsidiary, as the
case may be, (c) neither the Company nor any of its subsidiaries has entered
into any Material Contractual Obligation, other than in the ordinary course of
business and (d) there has not occurred a material change in the accounting
principles or practice of the Company or any of its Subsidiaries except as
required by reason of a change in GAAP.
3.13 Private Offering. Neither the Company nor any authorized
Person acting on its behalf has, in connection with the offer, sale, exchange or
issuance of the Notes, the Issuable Shares or the Common Shares, engaged in (a)
any form of general
18
solicitation or general advertising (as those terms are used within the meaning
of Rule 502(c) under the Securities Act), (b) any action involving a public
offering within the meaning of Section 4(2) of the Securities Act, or (c) any
action that would require the registration under the Securities Act of the
offering, sale, exchange or issuance of the Notes and the Issuable Shares
pursuant to this Agreement or that would violate applicable state securities or
"blue sky" laws. As used herein, the terms "offer" and "sale" have the meanings
specified in Section 2(3) of the Securities Act.
3.14 Labor Relations. Except as could not reasonably be expected
to have a material adverse effect on the Condition of the Company: (a) neither
the Company nor any of its Subsidiaries is engaged in any unfair labor practice;
(b) there is no strike, labor dispute, slowdown or stoppage pending or, to the
Knowledge of the Company, threatened against the Company or any of its
Subsidiaries; (c) neither the Company nor any of its Subsidiaries is a party to
any collective bargaining agreement or contract; and (d) no union organizing
activities are taking place. To the Knowledge of the Company, no officer or key
employee, or any group of key employees, intends to terminate their employment
with the Company or any of its Subsidiaries. To the Knowledge of the Company,
each of the officers and key employees of the Company and each of its
Subsidiaries spends all, or substantially all, of his business time on the
business of the Company or its Subsidiary, as the case may be. To the Knowledge
of the Company, none of the employees of the Company or any of its Subsidiaries
is resident in the United States in violation of any Requirement of Law.
3.15 Employee Benefit Plans.
(a) The SEC Reports list or describe each Plan that the Company
or any of its Subsidiaries maintains or to which the Company or any of its
Subsidiaries contributes (the "Company Plans"). Neither the Company nor any of
its Subsidiaries has any liability under any Plans other than the Company Plans.
Except as described in or incorporated by reference in the SEC Reports, neither
the Company nor any Commonly Controlled Entity maintains or contributes to, or
has within the preceding six years maintained or contributed to, or may have any
liability with respect to any Plan subject to Title IV of ERISA or Section 412
of the Code or any "multiple employer plan" within the meaning of the Code or
ERISA. Each Company Plan (and related trust, insurance contract or fund) has
been established and administered in accordance with its terms, and complies in
form and in operation with the applicable requirements of ERISA and the Code and
other applicable Requirements of Law. All contributions (including all employer
contributions and employee salary reduction contributions) which are due have
been paid to each Company Plan.
(b) No Claim with respect to the administration or the investment
of the assets of any Company Plan (other than routine claims for benefits) is
pending.
(c) Except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company, each Company Plan that is
intended to be qualified under Section 401(a) of the Code is so qualified and
has been so qualified
19
during the period since its adoption; each trust created under any such Plan is
exempt from tax under Section 501(a) of the Code and has been so exempt since
its creation.
(d) No Company Plan is a Retiree Welfare Plan.
(e) Neither the consummation of the transactions contemplated by
this Agreement nor any termination of employment following such transactions
will accelerate the time of the payment or vesting of, or increase the amount
of, compensation due to any employee or former employee whether or not such
payment would constitute an "excess parachute payment" under Section 280G of the
Code.
(f) There are no unfunded obligations under any Company Plan
which are not fully reflected in the Financial Statements.
(g) Except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company, the Company has no liability,
whether absolute or contingent, including any obligations under any Company
Plan, with respect to any misclassification of any person as an independent
contractor rather than as an employee.
3.16 Liabilities. Neither the Company nor any of its Subsidiaries
has any direct or indirect obligation or liability (the "Liabilities") which are
not fully reflected or reserved against in the Financial Statements, other than
Liabilities not exceeding $1,000,000 in the aggregate incurred since December
31, 2003 in the ordinary course of business. The Company has no Knowledge of any
circumstance, condition, event or arrangement that could reasonably be expected
to give rise hereafter to any Liabilities of the Company or any of its
Subsidiaries that, individually or in the aggregate, could have a material
adverse effect on the Condition of the Company.
3.17 Affiliate Transactions. Except as set forth on Schedule
3.17, in the twelve (12) months preceding the date hereof, neither the Company
nor any of its Subsidiaries has sold, leased or otherwise transferred any
property or assets to, or purchased, leased or otherwise acquired any property
or assets from, or otherwise engaged in any other transactions with, any of its
Affiliates, except in (a) transactions that are at prices and on terms and
conditions not less favorable to the Company or such Subsidiary than could be
obtained on an arm's length basis from unrelated third parties, (b) transactions
exclusively between the Company and one or more if its Subsidiaries, or between
two or more Subsidiaries of the Company, and which do not involve any other
Affiliate and (c) transactions under the agreements listed on Schedule 3.17
hereto.
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3.18 Intellectual Property.
(a) (i) The Company and each of its Subsidiaries is the owner of
all, or has the license or right to use, sell and license all of, the
Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software and
other proprietary rights (collectively, "Intellectual Property") that are used
in connection with its business as presently conducted, free and clear of all
Liens, other than Permitted Liens.
(ii) None of the Intellectual Property is subject to any
outstanding Order, and no action, suit, proceeding, hearing,
investigation, charge, complaint, claim or demand is pending or, to the
Knowledge of the Company, threatened, which challenges the validity,
enforceability, use or ownership of the item.
(iii) The Company and each of its Subsidiaries has
substantially performed all obligations imposed upon it under all
Intellectual Property licenses, sublicenses, distributor agreements and
other agreements under which the Company or any of its Subsidiaries is
either a licensor, licensee or distributor, except such licenses,
sublicenses and other agreements relating to off-the-shelf software
which is commercially available on a retail basis and used solely on the
computers of the Company or its Subsidiaries (collectively, the "IP
Agreements"). The Company and each of its Subsidiaries is not, nor to
the Knowledge of the Company is any other party thereto, in breach of or
default thereunder in any respect, nor is there any event which with
notice or lapse of time or both would constitute a default thereunder.
All of the IP Agreements are valid, enforceable and in full force and
effect, and will continue to be so on identical terms immediately
following the Initial Closing and the Subsequent Closing, as the case
may be, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity relating
to enforceability (regardless of whether considered in a proceeding at
law or in equity).
(iv) None of the Intellectual Property currently sold or
licensed by the Company or any of its Subsidiaries to any Person or used
by or licensed to the Company or any of its Subsidiaries by any Person
infringes upon or otherwise violates any Intellectual Property rights of
others, except as could not reasonably be expected to have a material
adverse effect on the Condition of the Company.
(b) No litigation is pending and no Claim has been made against
the Company or any of its Subsidiaries or, to the Knowledge of the Company, is
threatened, contesting the right of the Company or any of its Subsidiaries to
sell or license to any Person or use the Intellectual Property presently sold or
licensed to such Person or used by the Company or any of its Subsidiaries. To
the Knowledge of the Company, no Person is infringing upon or otherwise
violating the Intellectual Property rights of the Company or any of its
Subsidiaries.
21
(c) No former employer of any employee of the Company or any of
its Subsidiaries has made a claim against the Company or any of its Subsidiaries
or, to the Knowledge of the Company, against any other Person, that such
employee or such consultant is utilizing Intellectual Property of such former
employer.
(d) To the Knowledge of the Company, none of the Trade Secrets,
wherever located, the value of which is contingent upon maintenance of
confidentiality thereof, has been disclosed to any Person other than employees,
representatives and agents of the Company or any of its Subsidiaries, except as
required pursuant to the filing of a patent application by the Company or any of
its Subsidiaries.
(e) It is not necessary for the business of the Company or any of
its Subsidiaries to use any Intellectual Property owned by any director,
officer, employee or consultant of the Company or any of its Subsidiaries (or
persons the Company or any of its Subsidiaries presently intends to hire). To
the Company's Knowledge, at no time during the conception or reduction to
practice of any of the Intellectual Property of the Company or any of its
Subsidiaries was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any Governmental Authority
or subject to any employment agreement, invention assignment, nondisclosure
agreement or other Contractual Obligation with any Person that could materially
adversely affect the rights of the Company or any of its Subsidiaries to its
Intellectual Property.
3.19 Privacy of Customer Information. Neither the Company nor any
of its Subsidiaries use any of the customer information it receives through its
website or otherwise in an unlawful manner, or in a manner violative of the
privacy policy of the Company or its Subsidiary, as the case may be, or the
privacy rights of its customers. Neither the Company nor any of its Subsidiaries
has collected any customer information through its website in an unlawful manner
or in violation of its privacy policy. The Company and each of its Subsidiaries
has adequate security measures in place to protect the customer information it
receives through its website and which it stores in its computer systems from
illegal use by third parties or use by third parties in a manner violative of
the rights of privacy of its customers. The Company and each of its Subsidiaries
represents to its customers that it assures complete security as to the customer
information it receives through its website.
3.20 Potential Conflicts of Interest. Except as set forth on
Schedule 3.20, no officer, director or stockholder beneficially owning more than
five percent (5%) of the outstanding shares of Common Stock, to the Knowledge of
the Company, no spouse of any such officer, director or stockholder, and, to the
Knowledge of the Company, no Affiliate of any of the foregoing (a) owns,
directly or indirectly, any interest in (excepting less than one percent (1%)
stock holdings for investment purposes in securities of publicly held and traded
companies), or is an officer, director, employee or consultant of, any Person
which is, or is engaged in business as, a competitor, lessor, lessee, supplier,
distributor, or customer of, or lender to or borrower from, the Company or any
of its Subsidiaries; (b) owns, directly or indirectly, in whole or in part, any
tangible or intangible property that the Company or any of its Subsidiaries use,
in the conduct of business; or (c) has any cause of action or other claim
whatsoever against, or
22
owes or has advanced any amount to, the Company or any of its Subsidiaries,
except for claims in the ordinary course of business such as for accrued
vacation pay, accrued benefits under employee benefit plans, and similar matters
and agreements existing on the date hereof.
3.21 Trade Relations. There exists no actual or, to the Knowledge
of the Company, threatened termination, cancellation or limitation of, or any
material adverse modification or change in, the business relationship of the
Company or any of its Subsidiaries, or the business of the Company or any of its
Subsidiaries, with any customer or supplier or any group of customers or
suppliers whose purchases or inventories provided to the business of the Company
or any of its Subsidiaries are individually or in the aggregate material to the
Condition of the Company.
3.22 Outstanding Borrowing. Schedule 3.22 sets forth the amount
of all Indebtedness of the Company and each of its Subsidiaries as of the date
hereof, the Liens that relate to such Indebtedness and that encumber the Assets
and the name of each lender thereof. No Indebtedness is entitled to any voting
rights in any matters voted upon by the holders of the Common Stock.
3.23 Broker's, Finder's or Similar Fees. There are no brokerage
commissions, finder's fees or similar fees or commissions payable by the Company
or any of its Subsidiaries in connection with the transactions contemplated
hereby based on any agreement, arrangement or understanding with the Company or
any of its Subsidiaries or any action taken by any such Person.
3.24 Stockholder Approval. The approval on the first attempt of
(a) more than fifty percent (50%) of the outstanding shares of Common Stock and
the votes represented by the Special Voting Stock, voting together as a class,
and (b) more than fifty percent (50%) of the outstanding shares of Series D
Preferred Stock, voting separately as a class, such stockholders present in
person or proxy at a properly convened meeting of the Company's stockholders
("Stockholder Approval") are the stockholders' consents required for the (i)
filing of (A) the Amended and Restated Series D Certification of Determination
and (B) the Series E Certificate of Determination; (ii) the authorization and
the issuance of shares of Series E Preferred Stock authorized for issuance in
the Series E Certificate of Determination; (iii) the reservation and issuance of
shares of Common Stock upon conversion of the shares of Series D Preferred Stock
and the shares of Series E Preferred Stock and upon exercise of the Warrants;
(iv) an amendment to the Amended and Restated Articles of Incorporation to
increase the authorized shares of common stock and preferred stock, and (v) the
Warrant Amendment (as defined in the November Convertible Note Agreement).
3.25 CCC Section. The Board of Directors has taken all action
necessary to exempt from the provisions of Section 1203 of the California
Corporations Code, to the extent applicable, this Agreement, any acquisition by
the Lenders of Notes and the Issuable Shares or Common Shares pursuant to this
Agreement and the Series E Certificate of Determination, each as applicable, and
any conversion by the Lenders of Issuable Shares into shares of Common Stock.
23
3.26 Disclosure. This Agreement and the documents and
certificates furnished to the Lenders by the Company do not contain any untrue
statement of a material fact or omit to state a material fact necessary in order
to make the statements contained herein or therein, in the light of the
circumstances under which they were made, not misleading.
3.27 Investments. As of the date hereof, except as set forth on
Schedule 3.27 hereto, neither the Company nor any of its Subsidiaries has made
an Investment in any Person, other than a Permitted Investment.
3.28 ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Compliance.
(a) The financial statements of the Company, together with the
related schedules and notes, that are incorporated by reference in the
Registration Statement and the Prospectus filed with the Commission on December
24, 2003, as amended: (i) present fairly, in all material respects, the
financial position of the Company as of the dates indicated and the results of
operations and cash flows of the Company for the periods specified; (ii) have
been prepared in compliance with requirements of the Exchange Act and in
conformity with generally accepted accounting principles in the United States
applied on a consistent basis during the periods presented and the schedules
included in the Registration Statement present fairly, in all material respects,
the information required to be stated therein; and (iii) comply with the
antifraud provisions of the Federal securities laws. There are no financial
statements (historical or pro forma) that are required to be included in the
Registration Statement and the Prospectus that are not included as required by
the Securities Act. All non-GAAP financial measures included or incorporated by
reference in the Registration Statement or the Prospectus comply in all material
respects with the applicable requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act of 2002 (the
"▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act") and the rules and regulations promulgated by the
Commission thereunder.
(b) The Company's Board of Directors has validly appointed an
Audit Committee whose composition satisfies the requirements of Rule 4350A(d)(2)
of the Rules of the National Association of Securities Dealers, Inc. (the "NASD
Rules") and the Board of Directors and/or the Audit Committee has adopted a
charter that satisfies the requirements of Rule 4350A(d)(1) of the NASD Rules.
(c) The Company has established and maintains disclosure controls
and procedures (as such term is defined in Rule 13a-15 and 15d-15 under the
Exchange Act). Such disclosure controls and procedures are designed to ensure
that material information relating to the Company is made known to the Company's
principal executive officer and principal financial officer by others within the
Company. As of the end of the Company's last completed fiscal quarter, such
disclosure controls and procedures were effective to perform the functions for
which they were established, and the Company will use commercially reasonable
efforts to ensure that the Company's disclosure controls and procedures remain
effective to perform the functions for which they were established. The
Company's auditors and the Audit Committee of the Board of Directors have been
advised of: (i) any significant deficiencies and material weaknesses
24
in the design or operation of internal controls over financial reporting which
are reasonably likely to adversely affect the Company's ability to record,
process, summarize, and report financial information; and (ii) any fraud,
whether or not material, that involves management or other employees who have a
significant role in the Company's internal controls over financial reporting.
Since the date of the most recent evaluation of such disclosure controls and
procedures, there have been no changes in internal controls over financial
reporting that have materially affected, or are reasonably likely to materially
affect, the Company's internal control over financial reporting. The principal
executive officer and the principal financial officers of the Company have made
all certifications required by the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act and any related rules and
regulations promulgated by the Commission thereunder, and the statements
contained in any such certification are complete and correct. The Company is in
compliance in all material respects with all provisions of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇
Act that are effective and applicable to the Company, except for the
requirements of the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act which are not yet required to be complied
with by the Company. The Company has established procedures to implement timely
additional rules and regulations applicable to the Company that may be
promulgated by the Commission pursuant to the ▇▇▇▇▇▇▇▇-▇▇▇▇▇ Act.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDERS
Each of the Lenders hereby represents and warrants, severally and
not jointly, to the Company as follows:
4.1 Existence and Power. Such Lender (a) is a limited
partnership, corporation, partnership or limited liability company duly
organized and validly existing under the laws of the jurisdiction of its
formation and (b) has the requisite partnership, corporate or limited liability
company, as the case may be, power and authority to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction Documents
to which it is a party.
4.2 Authorization; No Contravention. The execution, delivery and
performance by such Lender of this Agreement and each of the other Transaction
Documents to which it is a party and the transactions contemplated hereby and
thereby, (a) have been duly authorized by all necessary partnership, corporate
or limited liability company, as the case may be, action, (b) do not contravene
the terms of such Lender's organizational documents, or any amendment thereof,
(c) do not violate, conflict with or result in any breach or contravention of,
or the creation of any Lien under, any Contractual Obligation of such Lender or
any Requirement of Law applicable to such Lender, and (d) do not violate any
Orders of any Governmental Authority against, or binding upon, such Lender.
4.3 Governmental Authorization; Third Party Consents. Except for
the Stockholder Approval, no approval, consent, compliance, exemption,
authorization or other action by, or notice to, or filing with, any Governmental
Authority or any other Person, and no lapse of a waiting period under any
Requirement of Law, is necessary or
25
required in connection with the execution, delivery or performance by, or
enforcement against, such Lender of this Agreement and each of the other
Transaction Documents to which it is a party or the transactions contemplated
hereby and thereby.
4.4 Binding Effect. This Agreement and each of the other
Transaction Documents to which such Lender is a party, have been duly executed
and delivered by such Lender, and this Agreement and each of the other
Transaction Documents to which such Lender is a party, constitute the legal,
valid and binding obligations of such Lender, enforceable against it in
accordance with its terms, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or transfer,
moratorium or similar laws affecting the enforcement of creditors' rights
generally or by equitable principles relating to enforceability (regardless of
whether considered in a proceeding at law or in equity).
4.5 Purchase for Own Account. The Notes and the Issuable Shares
or Common Shares to be acquired by such Lender, respectively, are being or will
be acquired for its own account and with no intention of distributing or
reselling such Notes, Issuable Shares or Common Shares or any part thereof in
any transaction that would be in violation of the securities laws of the United
States of America, any state of the United States or any foreign jurisdiction,
without prejudice, however, to the rights of such Lender at all times to sell or
otherwise dispose of all or any part of such Notes, Issuable Shares or Common
Shares under an effective registration statement under the Securities Act, or
under an exemption from such registration available under the Securities Act,
and subject, nevertheless, to the disposition of such Lender's property being at
all times within its control. If such Lender should in the future decide to
dispose of any of such Notes, Issuable Shares or Common Shares, such Lender
understands and agrees that it may do so only in compliance with the Securities
Act and applicable state and foreign securities laws, as then in effect. Such
Lender agrees to the imprinting for so long as required by law, of a legend on
certificates representing all of its Notes, Issuable Shares or Common Shares and
shares of Common Stock issuable upon conversion of its Issuable Shares to the
following effect:
THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE
"ACT"), OR THE SECURITIES LAWS OF ANY STATE OF THE UNITED STATES
OR ANY FOREIGN JURISDICTION. THE SECURITIES MAY NOT BE
TRANSFERRED EXCEPT PURSUANT TO AN EFFECTIVE REGISTRATION
STATEMENT UNDER SUCH ACT AND APPLICABLE STATE AND FOREIGN
SECURITIES LAWS OR PURSUANT TO AN APPLICABLE EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF SUCH ACT AND SUCH LAWS.
26
4.6 Restricted Securities. Such Lender understands that the
Notes, the Issuable Shares and the Common Shares will not be registered at the
time of their issuance under the Securities Act for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4(2) of the
Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Lender's representations set forth herein.
4.7 Accredited Investor. Such Lender is an "Accredited Investor"
within the meaning of Rule 501 of Regulation D under the Securities Act, as
presently in effect.
4.8 Experience. Such Lender, either alone or together with its
representatives, has such knowledge, sophistication and experience in business
and financial matters so as to be capable of evaluating the merits and risks of
the prospective investment in its Notes, Issuable Shares or Common Shares (the
"Securities"), and has so evaluated the merits and risks of such investment.
Such Lender is able to bear the economic risk of an investment in the Securities
and, at the present time, is able to afford a complete loss of such investment.
4.9 Access to Information. Such Lender has reviewed the SEC
Reports and has been afforded: (a) the opportunity to ask such questions as it
has deemed necessary of, and to receive answers from, representatives of the
Company concerning the terms and conditions of the offering of the Securities
and the merits and risks of investing in the Securities; (b) access to publicly
available information about the Company and the Subsidiaries and the Condition
of the Company sufficient to enable it to evaluate its investment; and (c) the
opportunity to obtain such additional publicly available information that the
Company possesses or can acquire without unreasonable effort or expense that is
necessary to make an informed investment decision with respect to the
investment. Neither such inquiries nor any other investigation conducted by or
on behalf of such Lender or its representatives or counsel shall modify, amend
or affect such Lender's right to rely on the truth, accuracy and completeness of
the SEC Reports and the Company's representations and warranties contained in
the Transaction Documents.
4.10 General Solicitation. Such Lender is not purchasing the
Securities as a result of any advertisement, article, notice or other
communication regarding the Securities published in any newspaper, magazine or
similar media or broadcast over television or radio or presented at any seminar
or any other general solicitation or general advertisement.
4.11 Reliance. Such Lender understands and acknowledges that: (a)
the Securities are being offered and sold to it without registration under the
Securities Act in a private placement that is exempt from the registration
provisions of the Securities Act and (b) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Lender hereby consents to such
reliance.
27
4.12 Qualified Institutional Buyer. Such Lender is a "qualified
institutional buyer" as defined in Rule 144A(a)(1) of the Securities Act, as
presently in effect.
4.13 Affiliate Status. Such Lender is not an Affiliate of any
director, officer or substantial shareholder of the Company for purposes of Rule
4350(i)(1)(A) of the NASD, Inc. Marketplace Rules. In addition, except as
disclosed on Schedule 4.14, each Lender represents that it is not an Affiliate
of the other Lenders or the January 2004 Investors and that Lenders have not
entered into an agreement, arrangement or understanding with each other or any
other holder of the Company's securities for the purpose of holding, acquiring,
voting or disposing of any securities of the Company. Except as disclosed on
Schedule 4.14, the obligations of each Lender under any Transaction Document are
several and not joint with the obligations of any other Lender, and no Lender
shall be responsible in any way for the performance of the obligations of any
other Lender under any Transaction Document. Except as disclosed on Schedule
4.14, the decision of each Lender to purchase Securities pursuant to this
Agreement has been made by such Lender independently of any other Lender and
independently of any information, materials, statements or opinions as to the
business, affairs, operations, assets, properties, liabilities, results of
operations, condition (financial or otherwise) or prospects of the Company or of
any Subsidiary which may have been made or given by any other Lender or by any
agent or employee of any other Lender, and no Lender or any of its agents or
employees shall have any liability to any other Lender (or any other person)
relating to or arising from any such information, materials, statements or
opinions. Except as disclosed on Schedule 4.14, nothing contained herein or in
any Transaction Document, and no action taken by any Lender pursuant thereto,
shall be deemed to constitute the Lenders as a partnership, an association, a
joint venture or any other kind of entity, or create a presumption that the
Lenders are in any way acting in concert or as a group with respect to such
obligations or the transactions contemplated by the Transaction Document. Except
as disclosed on Schedule 4.14, each Lender acknowledges that no other Lender has
acted as agent for such Lender in connection with making its investment
hereunder and that no other Lender will be acting as agent of such Lender in
connection with monitoring its investment hereunder. Except as disclosed on
Schedule 4.14, each Lender shall be entitled to independently protect and
enforce its rights, including without limitation the rights arising out of this
Agreement or out of the other Transaction Documents, and it shall not be
necessary for any other Lender to be joined as an additional party in any
proceeding for such purpose. The Lenders acknowledge that the Company has
elected to provide all Lenders with the same terms and Transaction Documents for
the convenience of the Company and not because it was required or requested to
do so by the Lenders.
4.14 Capital Stock Ownership. Schedule 4.14 sets forth a complete
list of the capital stock, Common Stock Equivalents or other securities of the
Company (and any options, warrants, conversion privileges, subscription purchase
rights or other rights presently outstanding to purchase or otherwise acquire
any of the foregoing) beneficially owned (as defined in Rule 13d-3 under the
Exchange Act) by each Lender and its respective Affiliates as of the date
hereof.
28
ARTICLE V
CONDITIONS TO INITIAL CLOSING
5.1 Conditions to Lenders' Obligations. Each of the Lenders'
obligation to consummate the transactions contemplated by the Initial Closing
pursuant to this Agreement is subject to the fulfillment at or prior to the
Initial Closing of the following conditions, any of which may be waived in whole
or in part by such Lender:
(a) Representations and Warranties. The representations and
warranties made by the Company in Article III hereof shall be true and correct
on the Initial Closing Date.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Initial Closing Date shall have been performed or complied with.
(c) Compliance Certificate. The Company shall have delivered to
the Lenders a certificate of the Company, executed by the Chief Executive
Officer of the Company and dated as of the Initial Closing Date, certifying to
the fulfillment of the conditions specified in Section 5.1(a) and Section 5.1(b)
hereof.
(d) Secretary's Certificate. The Company shall have delivered to
the Lenders a certificate from the Company, in form and substance satisfactory
to the Lenders, dated as of the Initial Closing Date and signed by the Secretary
or an Assistant Secretary of the Company, certifying (i) that the Company is in
good standing with the Secretary of State of the State of California and (ii)
that the attached copies of the Articles of Incorporation, the By-laws, and
resolutions of the Board of Directors of the Company approving this Agreement
and each of the applicable Transaction Documents and the transactions
contemplated hereby and thereby, are all true, complete and correct and remain
unamended and in full force and effect.
(e) Satisfactory Release of Liens. The Company shall have
delivered to the Lenders satisfactory evidence of the release of all Liens,
except for Permitted Liens, on the assets of the Company and its Subsidiaries in
order to ensure the Lender's first priority security interests upon the filing
of applicable UCC-1's.
(f) Opinion of Counsel. The Company shall have caused the opinion
of Pillsbury Winthrop LLP, dated the Initial Closing Date, relating to the
transactions contemplated by the Initial Closing, substantially in the form
attached hereto as Exhibit G to be delivered to the Lenders.
(g) SVB Consent. The Company shall have delivered to the Lenders
the written consent of Silicon Valley Bank to the execution, delivery and
performance of the Transaction Documents and all of the transactions
contemplated therein.
5.2 Conditions to Company's Obligations. The Company's obligation
to consummate the transactions contemplated by the Initial Closing pursuant to
this
29
Agreement is subject to the fulfillment at or prior to the Initial Closing of
the following conditions, any of which may be waived in whole or in part by the
Company:
(a) Representations and Warranties. The representations and
warranties made by the Lenders in Article IV hereof shall be true and correct on
the Initial Closing Date.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Lenders on or prior to the
Initial Closing Date shall have been performed or complied with.
ARTICLE VI
CONDITIONS TO SUBSEQUENT CLOSING
6.1 Conditions to Lenders' Obligations. Each of the Lenders'
obligation to consummate the Conversion at the Subsequent Closing pursuant to
this Agreement is subject to the fulfillment at or prior to the Subsequent
Closing of the following conditions:
(a) Compliance with Laws. The issuance of the Issuable Shares by
the Company hereunder shall be legally permitted by all laws and regulations to
which the Company is subject.
(b) Stockholder Approval. The Company shall have delivered to the
Lenders satisfactory evidence of the Stockholder Approval.
(c) Amendment to the Amended and Restated Articles of
Incorporation. The Company shall have duly filed with the Secretary of State of
the State of California and caused to become effective an amendment to the
Amended and Restated Articles of Incorporation to increase the authorized common
stock and preferred stock of the Company.
(d) Certificate of Determination. The Company shall have duly
filed with the Secretary of State of the State of California the Series E
Certificate of Determination.
6.2 Conditions to the Company's Obligations. The Company's
obligation to consummate the Conversion at the Subsequent Closing pursuant to
this Agreement is subject to the fulfillment at or prior to the Subsequent
Closing of the following condition:
(a) Stockholder Approval. The Company shall have received
satisfactory evidence of the Stockholder Approval.
30
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. Except as otherwise provided in this Article
VII, the Company (the "Indemnifying Party") agrees to indemnify, defend and hold
harmless each of the Lenders and their Affiliates and their respective officers,
directors, agents, employees, subsidiaries, partners, members and controlling
persons (each, an "Indemnified Party") to the fullest extent permitted by law
from and against any and all losses, Claims, or written threats thereof
(including, without limitation, any Claim by a third party), damages, expenses
(including reasonable fees, disbursements and other charges of counsel incurred
by the Indemnified Party in any action between the Indemnifying Party and the
Indemnified Party or between the Indemnified Party and any third party or
otherwise) or other liabilities (collectively, "Losses") resulting from or
arising out of any breach of any representation or warranty, covenant or
agreement by the Company in this Agreement, the Amended and Restated
Registration Rights Agreement, the Notes or the Security Agreement. The amount
of any payment to any Indemnified Party herewith in respect of any Loss shall be
of sufficient amount to make such Indemnified Party whole for any diminution in
value of the Issuable Shares or Common Shares, as applicable, directly caused by
such breach. In connection with the obligation of the Indemnifying Party to
indemnify for expenses as set forth above, the Indemnifying Party shall, upon
presentation of appropriate invoices containing reasonable detail, reimburse
each Indemnified Party for all such expenses (including reasonable fees,
disbursements and other charges of counsel incurred by the Indemnified Party in
any action between the Indemnifying Party and the Indemnified Party or between
the Indemnified Party and any third party) as they are incurred by such
Indemnified Party; provided, however, that if an Indemnified Party is reimbursed
under this Article VII for any expenses, such reimbursement of expenses shall be
refunded to the extent it is finally judicially determined that the Losses in
question resulted primarily from the willful misconduct or gross negligence of
such Indemnified Party.
7.2 Notification. Each Indemnified Party under this Article VII
shall, promptly after the receipt of notice of the commencement of any Claim
against such Indemnified Party in respect of which indemnity may be sought from
the Indemnifying Party under this Article VII, notify the Indemnifying Party in
writing of the commencement thereof. The omission of any Indemnified Party to so
notify the Indemnifying Party of any such action shall not relieve the
Indemnifying Party from any liability which it may have to such Indemnified
Party (a) other than pursuant to this Article VII or (b) under this Article VII
unless, and only to the extent that, such omission results in the Indemnifying
Party's forfeiture of substantive rights or defenses. In case any such Claim
shall be brought against any Indemnified Party, and it shall notify the
Indemnifying Party of the commencement thereof, the Indemnifying Party shall be
entitled to assume the defense thereof at its own expense, with counsel
satisfactory to such Indemnified Party in its reasonable judgment; provided,
however, that any Indemnified Party may, at its own expense, retain separate
counsel to participate in such defense at its own expense. Notwithstanding the
foregoing, in any Claim in which both the Indemnifying Party, on the one hand,
and an Indemnified Party, on the other hand,
31
are, or are reasonably likely to become, a party, such Indemnified Party shall
have the right to employ separate counsel and to control its own defense of such
Claim if, in the reasonable opinion of counsel to such Indemnified Party, either
(x) one or more defenses are available to the Indemnified Party that are not
available to the Indemnifying Party or (y) a conflict or potential conflict
exists between the Indemnifying Party, on the one hand, and such Indemnified
Party, on the other hand, that would make such separate representation
advisable; provided, however, that the Indemnifying Party (i) shall not be
liable for the fees and expenses of more than one counsel to all Indemnified
Parties and (ii) shall reimburse the Indemnified Parties for all of such fees
and expenses of such counsel incurred in any action between the Indemnifying
Party and the Indemnified Parties or between the Indemnified Parties and any
third party, as such expenses are incurred; provided, however, that if an
Indemnified Party is reimbursed under this Article VII for any expenses, such
reimbursement of expenses shall be refunded to the extent it is finally
judicially determined that the Losses in question resulted primarily from the
willful misconduct or gross negligence of such Indemnified Party. The
Indemnifying Party agrees that it will not, without the prior written consent of
the Indemnified Party, settle, compromise or consent to the entry of any
judgment in any pending or threatened Claim relating to the matters contemplated
hereby (if any Indemnified Party is a party thereto or has been actually
threatened to be made a party thereto) unless such settlement, compromise or
consent includes an unconditional release of each Indemnified Party from all
liability arising or that may arise out of such Claim. The Indemnifying Party
shall not be liable for any settlement of any Claim effected against an
Indemnified Party without the Indemnifying Party's written consent, which
consent shall not be unreasonably withheld. The rights accorded to an
Indemnified Party hereunder shall be in addition to any rights that any
Indemnified Party may have at common law, by separate agreement or otherwise;
provided, however, that notwithstanding the foregoing or anything to the
contrary contained in this Agreement, nothing in this Article VII shall restrict
or limit any rights that any Indemnified Party may have to seek equitable
relief.
7.3 Contribution. If the indemnification provided for in this
Article VII from the Indemnifying Party is unavailable to an Indemnified Party
hereunder in respect of any Losses referred to herein, then the Indemnifying
Party, in lieu of indemnifying such Indemnified Party, shall contribute to the
amount paid or payable by such Indemnified Party as a result of such Losses in
such proportion as is appropriate to reflect the relative fault of the
Indemnifying Party and Indemnified Party in connection with the actions which
resulted in such Losses, as well as any other relevant equitable considerations.
The relative faults of such Indemnifying Party and Indemnified Party shall be
determined by reference to, among other things, whether any action in question,
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7.1 and Section 7.2, any reasonable legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
32
ARTICLE VIII
COVENANTS
The Company hereby covenants and agrees with the Lenders as
follows:
8.1 Financial Statements and Other Information. If any time the
Company is not subject to the periodic disclosure obligations of the Exchange
Act, the Company shall deliver to each Lender, in form and substance
satisfactory to such Lender:
(a) as soon as available, but not later than ninety (90) days
after the end of each fiscal year of the Company, a copy of the audited
consolidated balance sheet of the Company and its Subsidiaries as of the end of
such fiscal year and the related statements of operations and cash flows for
such fiscal year, setting forth in each case in comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company for such fiscal year and
by the opinion of a nationally recognized independent certified public
accounting firm which report shall state without qualification that such
financial statements present fairly the financial condition as of such date and
results of operations and cash flows for the periods indicated in conformity
with GAAP applied on a consistent basis;
(b) as soon as available, but in any event not later than
forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited consolidated balance sheet of the Company and
its Subsidiaries, and the related statements of operations and cash flows for
such quarter and for the period commencing on the first day of the fiscal year
and ending on the last day of such quarter, all certified by an appropriate
officer of the Company as presenting fairly the consolidated financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP; and
(c) as soon as available, but in any event not later than ten
(10) days after the end of each month of each fiscal year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
statements of operations and cash flows for such month and for the period
commencing on the first day of the fiscal year and ending on the last day of
such month, all certified by an appropriate officer of the Company as presenting
fairly the consolidated financial condition as of such date and results of
operations and cash flows for the periods indicated in conformity with GAAP
applied on a consistent basis, subject to normal year-end adjustments and the
absence of footnotes required by GAAP.
8.2 FIRPTA Certificate. If requested by any of the Lenders, as
promptly as practicable, but not later than five (5) days after the end of each
fiscal year of the Company, the Company shall deliver to such Lender, in form
and substance satisfactory to such Lender, a certificate signed by the Chief
Executive Officer of the
33
Company in customary form certifying that the Company is not a "foreign person"
within the meaning of Section 1445 of the Code.
8.3 Reservation of Common Stock. The Company shall at all times
reserve and keep available out of its authorized shares of Common Stock, solely
for the purpose of issue or delivery upon conversion of the Issuable Shares, as
provided in the Series E Certificate of Determination, or upon conversion of the
Notes, as provided for in the Notes, the maximum number of shares of Common
Stock that may be issuable or deliverable upon such conversion or exercise. Such
shares of Common Stock are duly authorized and, when issued or delivered in
accordance with the Series E Certificate of Determination, or in accordance with
the Notes, as the case may be, shall be validly issued, fully paid and
non-assessable. The Company shall issue such shares of Common Stock, in
accordance with the terms of the Series E Certificate of Determination or the
terms of the Notes, as the case may be, and otherwise comply with the terms
hereof and thereof.
8.4 Stockholder Approval. The Company will use all reasonable
commercial efforts to cause the proxy statement filed with the Commission on
December 24, 2003 to be distributed to the Company's stockholders in connection
with the solicitation of votes in favor of the matters set forth in Section 3.24
that require Stockholder Approval, including any amendments or supplements
thereto (the "Proxy Statement") to be cleared by the Commission as promptly as
practicable. The Company agrees to provide the Lenders and their respective
counsel with any written comments the Company or its counsel may receive from
the Commission with respect to the Proxy Statement promptly after the receipt of
such comments. The Company will use all reasonable commercial efforts to cause
the Proxy Statement (a) not to contain any untrue statement of a material fact
or omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading and (b) to comply as to form in all material
respects with the applicable provisions of the Exchange Act and the rules and
regulations thereunder. Following clearance by the Commission of the Proxy
Statement, the Company shall promptly distribute the Proxy Statement to its
stockholders and call and arrange for a special meeting of stockholders and take
such other actions as are required or necessary in order to obtain the
Stockholder Approval as promptly as practicable. The Company will use all
reasonable commercial efforts to hold the special meeting and obtain a vote of
the stockholders on or prior to August 15, 2004. The Board of Directors shall
recommend that the Company's stockholders vote in favor of the Stockholder
Approval.
8.5 Financial Covenants. The Company hereby covenants and agrees
that on and after the Initial Closing and until all of the obligations under the
Notes, including, without limitation, the repayment or conversion of the
principal amount and all accrued interest outstanding thereunder, have been
satisfied in full, the Company shall at all times comply with the financial and
other covenants set forth on Schedule 8.5.
8.6 Purchases and Sales. In the event any Lender has become aware
of or becomes aware of any material non-public information about the Company
(which the
34
parties hereby agree will include (but not be limited to) any information
labeled by the Company to be material non-public information) ("Material
Non-Public Information"), such Lender shall not purchase or sell any shares of
the Company's capital stock (or securities exercisable or convertible for shares
of the Company's capital stock) until the earlier of (a) such time as the
information is no longer material as a matter of law (which the parties agree
shall be a period of at least three months after becoming aware of such material
non-public information), and (b) the time at which such information has been
disseminated publicly by the Company, and in any event not in violation of the
federal securities laws. Except as set forth in this Agreement, the Company
covenants and agrees that neither it nor any other Person acting on its behalf
will provide any Lender or its agents or counsel with any information that the
Company believes constitutes Material Non-Public Information, unless prior
thereto such Lender shall have executed a written agreement regarding the
confidentiality and use of such information. The Company understands and
confirms that each Lender shall be relying on the foregoing representations in
effecting transactions in securities of the Company.
8.7 Proxy Matters. Notwithstanding anything herein to the
contrary, but subject to the provisions of Section 9.1 of this Agreement, if the
Registration Statement (as defined in the November Convertible Note Agreement)
has not been declared effective by the Commission on or prior to May 15, 2004,
subject to approval by the Board of Directors, the Company will promptly take
all such actions as may be necessary to withdraw the Registration Statement, and
the Company shall continue to have an obligation under Section 8.4 of this
Agreement to seek Stockholder Approval. If the Company withdraws the
Registration Statement pursuant to this Section 8.7 and receives Stockholder
Approval, the Company may, subject to approval by the Board of Directors, file a
subsequent registration statement with the Commission and provide the Company's
shareholders the opportunity to participate in a subsequent rights offering.
ARTICLE IX
TERMINATION
9.1 Termination. The Lenders' obligation to consummate the
Conversion under this Agreement including, but not limited to, Sections 2.4(e),
2.4(f) and 2.4(g) and Article VI of this Agreement, shall terminate in the event
that the Company is unable to obtain Stockholder Approval pursuant to Section
8.4 on the first attempt, but in any event on August 15, 2004, if Stockholder
Approval is not obtained by such date. None of the Company or the Lenders shall
have any liability arising out of such termination.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. All of the
representations and warranties made herein shall survive the execution and
delivery of this Agreement until the date that is ninety (90) days after the
receipt by the Lenders of
35
audited financial statements of the Company for the fiscal year ending December
31, 2004 (or, if such fiscal year changes and no such audited consolidated
financial statements are available, then the successor fiscal year), except for
(a) Sections 3.1, 3.2, 3.4, 3.7, 3.13 and 3.23, which representations and
warranties shall survive until the third anniversary of the Initial Closing
Date, and (b) Section 3.11, which shall survive until the later to occur of (i)
the lapse of the statute of limitations with respect to the assessment of any
Tax to which such representation and warranty relates (including any extensions
or waivers thereof) and (ii) sixty (60) days after the final administrative or
judicial determination of the Taxes to which such representation and warranty
relates, and no claim with respect to Section 3.11 may be asserted thereafter
with the exception of claims arising out of any fact, circumstance, action or
proceeding to which the party asserting such claim shall have given notice to
the other parties to this Agreement prior to the termination of such period of
reasonable belief that a tax liability will subsequently arise therefrom.
10.2 Notices. All notices, demands and other communications
provided for or permitted hereunder shall be made in writing and shall be by
registered or certified first-class mail, return receipt requested, telecopier,
courier service or personal delivery:
if to the Company:
Critical Path, Inc.
▇▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: Chief Financial Officer
with a copy to, which shall not constitute notice to the Company:
Pillsbury Winthrop LLP
▇▇ ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇, Esq.
if to the Lenders:
Apex Capital, LLC
▇▇ ▇▇▇▇▇▇ ▇▇▇, ▇▇▇▇▇ ▇▇▇
▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇ ▇▇▇▇▇, General Counsel
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
with a copy to, which shall not constitute notice:
▇▇
▇▇▇▇▇▇, ▇▇▇▇, ▇▇▇▇▇▇▇▇▇▇, ▇▇▇▇▇▇, ▇▇▇▇ & ▇▇▇▇▇▇
Three ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇▇
and to:
Crosslink Capital
▇▇▇ ▇▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Sagamore Hill Hub Fund, Ltd.
c/o Sagamore Hill Capital Management
▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: Legal Department
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
and to:
Criterion Capital Management
▇▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Telephone:
Telecopy:
and to:
Capital Ventures International
c/o Heights Capital Management, Inc.
▇▇▇ ▇▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇, ▇▇▇▇▇ ▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Attention: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Telephone: (▇▇▇) ▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
All such notices, demands and other communications shall be
deemed to have been duly given when delivered by hand, if personally delivered;
when delivered by courier, if delivered by commercial courier service; five (5)
Business Days after being
37
deposited in the mail, postage prepaid, if mailed; and when receipt is
mechanically acknowledged, if telecopied. Any party may by notice given in
accordance with this Section 10.2 designate another address or Person for
receipt of notices hereunder.
10.3 Successors and Assigns; Third Party Beneficiaries. This
Agreement shall inure to the benefit of and be binding upon the successors and
permitted assigns of the parties hereto. Subject to applicable securities laws
and the terms and conditions thereof, the Lenders may assign any of their rights
under this Agreement or the other Transaction Documents to any of their
respective Affiliates. The Company may not assign any of its rights under this
Agreement without the written consent of the Lenders. Except as provided in
Article VII, no Person other than the parties hereto and their successors and
permitted assigns is intended to be a beneficiary of this Agreement.
10.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company or the Lenders
in exercising any right, power or remedy hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise of any such right, power or
remedy preclude any other or further exercise thereof or the exercise of any
other right, power or remedy. The remedies provided for herein are cumulative
and are not exclusive of any remedies that may be available to the Company or
the Lenders at law, in equity or otherwise.
(b) Any amendment, supplement or modification of or to any
provision of this Agreement, any waiver of any provision of this Agreement, and
any consent to any departure by the Company or the Lenders from the terms of any
provision of this Agreement, shall be effective (i) only if it is made or given
in writing and signed by the Company and the Lenders, and (ii) only in the
specific instance and for the specific purpose for which made or given. Except
where notice is specifically required by this Agreement, no notice to or demand
on the Company in any case shall entitle the Company to any other or further
notice or demand in similar or other circumstances.
10.5 Counterparts. This Agreement may be executed in any number
of counterparts and by the parties hereto in separate counterparts, each of
which when so executed shall be deemed to be an original and all of which taken
together shall constitute one and the same agreement.
10.6 Headings. The headings in this Agreement are for convenience
of reference only and shall not limit or otherwise affect the meaning hereof.
10.7 Governing Law. This Agreement shall be governed by and
construed in accordance with the laws of the State of California, without regard
to the principles of conflicts of law thereof.
10.8 Severability. If any one or more of the provisions contained
herein, or the application thereof in any circumstance, is held invalid, illegal
or unenforceable in any respect for any reason, the validity, legality and
enforceability of any such provision in every other respect and of the remaining
provisions hereof shall not
38
be in any way impaired, unless the provisions held invalid, illegal or
unenforceable shall substantially impair the benefits of the remaining
provisions hereof.
10.9 Rules of Construction. Unless the context otherwise
requires, references to sections or subsections refer to sections or subsections
of this Agreement.
10.10 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, and the other Transaction Documents are intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.
10.11 Fees. The Company shall reimburse the Lenders for their
fees, disbursements and other charges of counsel incurred in connection with the
transactions contemplated by this Agreement (including, but without limitation,
to advise on reporting obligations of the Lenders and filings with Commission);
provided, that the aggregate amount of all such reimbursements in respect of the
Lenders shall not exceed $20,000.
10.12 Publicity; Confidentiality. Except as may be required by
applicable Requirements of Law, none of the parties hereto shall issue a
publicity release or public announcement or otherwise make any disclosure
concerning this Agreement, the transactions contemplated hereby, the Lenders or
the business, technology and financial affairs of the Company, without prior
approval by the other parties hereto; provided, however, that nothing in this
Agreement shall restrict any of the Lenders from disclosing information (a) that
is already publicly available, (b) that was known to such Lender on a
non-confidential basis prior to its disclosure by the Company, (c) that may be
required or appropriate in response to any summons or subpoena or in connection
with any litigation, provided that such Lender will use reasonable efforts to
notify the Company in advance of such disclosure so as to permit the Company to
seek a protective order or otherwise contest such disclosure, and such Lender
will use reasonable efforts to cooperate, at the expense of the Company, with
the Company in pursuing any such protective order, (d) to the extent that such
Lender reasonably believes it appropriate in order to comply with any
Requirement of Law, (e) to such Lender's or the Company's officers, directors,
shareholders, advisors, employees, members, partners, controlling persons,
auditors or counsel or (f) to Persons from whom releases, consents or approvals
are required, or to whom notice is required to be provided, pursuant to the
transactions contemplated by the Transaction Documents. If any announcement is
required by any Requirement of Law to be made by any party hereto, prior to
making such announcement such party will deliver a draft of such announcement to
the other parties and shall give the other parties reasonable opportunity to
comment thereon. Each of the Lenders acknowledge that if such Lender becomes
aware of Material Non-Public Information, such Lender's ability to trade in the
Company's securities and to participate, to the extent otherwise eligible, in
the Rights Offering would be restricted.
39
10.13 Further Assurances. Each of the parties shall execute such
documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
10.14 Waiver. The Company hereby waives the provisions set forth
in Section 8.6 of the January Convertible Note Agreement with respect to the
purchase by certain of the January 2004 Investors of Notes (and any shares of
capital stock of the Company issuable upon their conversion) pursuant to this
Agreement.
[the remainder of this page intentionally left blank]
40
IN WITNESS WHEREOF, the undersigned have executed, or have caused
to be executed, this Convertible Note Purchase Agreement on the date first
written above.
CRITICAL PATH, INC.,
a California corporation
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
-----------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇.
Title: Chairman, Chief Executive Officer
SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
PERMAL U.S. OPPORTUNITIES LIMITED
By: Apex Capital, LLC, its Authorized Investment
Advisor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
ZAXIS PARTNERS, L.P.
By: Apex Capital, LLC, its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
ZAXIS EQUITY NEUTRAL, L.P.
By: Apex Capital, LLC, its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
ZAXIS OFFSHORE LIMITED
By: Apex Capital, LLC, its Authorized Investment
Advisor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
ZAXIS INSTITUTIONAL PARTNERS, L.P.
By: Apex Capital, LLC, its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
GUGGENHEIM PORTFOLIO COMPANY XIII
By: Apex Capital, LLC, its Authorized Investment
Advisor
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
--------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Manager and Principal
SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
CROSSLINK CROSSOVER FUND IV, L.P.
By: Crossover Fund IV Management, L.L.C.,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
-------------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: Managing Member
SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
SAGAMORE HILL HUB FUND, LTD.
By: Sagamore Hill Capital Management, L.P.,
Investment Manager
By: /s/ ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
----------------------------------------------
Name: ▇▇▇▇▇▇ ▇. ▇▇▇▇▇
Title: President
SIGNATURE PAGE TO CONVERTIBLE NOTE PURCHASE AGREEMENT
CAPITAL VENTURES INTERNATIONAL
By: Heights Capital Management, Inc., an authorized
signatory
By: /s/ ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
-----------------------------------------------
Name: ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇
Title: Investment Manager
CRITERION CAPITAL PARTNERS, LTD.
By: Derivatives Portfolio Management, an authorized
signatory
By: /s/ ▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇▇
------------------------------------------------
Name: ▇▇▇ ▇. Castranova
Title: Chief Operating Officer
CRITERION CAPITAL PARTNERS, INSTITUTIONAL
By: Criterion Capital Partners, LLC, an authorized
signatory
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
-------------------------------------------
Name: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer
CRITERION CAPITAL PARTNERS, L.P.
By: Criterion Capital Partners, LLC, an authorized
signatory
By: /s/ R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
------------------------------------------------
Name: R. ▇▇▇▇▇▇ ▇▇▇▇▇▇▇
Title: Chief Operating Officer