EXHIBIT 4
to SCHEDULE 13D
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STOCK AND WARRANT PURCHASE AND EXCHANGE AGREEMENT
among
CRITICAL PATH, INC.
GENERAL ATLANTIC PARTNERS 74, L.P.,
GAP COINVESTMENT PARTNERS II, L.P.,
GAPSTAR, LLC
and
THE OTHER PARTIES NAMED HEREIN
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Dated: November 8, 2001
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TABLE OF CONTENTS
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ARTICLE I DEFINITIONS..................................................2
1.1 Definitions..................................................2
ARTICLE II PURCHASE AND SALE OF SERIES D PREFERRED STOCK; EXCHANGE......9
2.1 Purchase and Sale of Series D Preferred Stock................9
2.2 Exchange of GAP Sub Notes....................................9
2.3 Purchase and Sale of Warrants................................9
2.4 Certificates of Designation.................................10
2.5 Use of Proceeds.............................................10
2.6 Closing.....................................................10
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY...............11
3.1 Corporate Existence and Power...............................11
3.2 Authorization; No Contravention.............................11
3.3 Governmental Authorization; Third Party Consents............12
3.4 Binding Effect..............................................12
3.5 Litigation..................................................12
3.6 Compliance with Laws........................................12
3.7 Capitalization..............................................13
3.8 No Default or Breach; Contractual Obligations...............14
3.9 Title to Properties.........................................14
3.10 Reports; Financial Statements...............................14
3.11 Taxes.......................................................15
3.12 No Material Adverse Change; Ordinary Course of Business.....15
3.13 Private Offering............................................16
3.14 Labor Relations.............................................16
3.15 Employee Benefit Plans......................................16
3.16 Liabilities.................................................17
3.17 Intellectual Property.......................................18
3.18 Privacy of Customer Information.............................19
3.19 Potential Conflicts of Interest.............................19
3.20 Trade Relations.............................................20
3.21 Outstanding Borrowing.......................................20
3.22 Broker's, Finder's or Similar Fees..........................20
3.23 CCC Section.................................................20
ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS...................20
4.1 Existence and Power.........................................20
4.2 Authorization; No Contravention.............................21
4.3 Governmental Authorization; Third Party Consents............21
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4.4 Binding Effect..............................................21
4.5 Purchase for Own Account....................................21
4.6 Restricted Securities.......................................22
4.7 Accredited Investor.........................................22
4.8 Experience..................................................22
4.9 Access to Information.......................................22
4.10 General Solicitation........................................23
4.11 Reliance....................................................23
ARTICLE V ACTIONS TO BE TAKEN BY THE COMPANY AT THE CLOSING...................23
5.1 Secretary's Certificate.....................................23
5.2 Subject Shares..............................................23
5.3 Warrants....................................................24
5.4 Opinion of Counsel..........................................24
5.5 MOU.........................................................24
5.6 Amendment to Shareholder Rights Plan........................24
ARTICLE VI DELIVERIES BY THE PURCHASERS.......................................24
6.1 Payment for Subject Shares and Warrants.....................24
ARTICLE VII INDEMNIFICATION...................................................24
7.1 Indemnification.............................................24
7.2 Notification................................................25
7.3 Contribution................................................26
ARTICLE VIII AFFIRMATIVE COVENANTS............................................26
8.1 Financial Statements and Other Information..................26
8.2 FIRPTA Certificate..........................................27
8.3 Reservation of Common Stock.................................27
8.4 Books and Records...........................................28
8.5 Inspection..................................................28
8.6 Vectis Agreement............................................28
8.7 NASDAQ Matters..............................................28
ARTICLE IX TERMINATION OF AGREEMENT...........................................29
9.1 Termination.................................................29
ARTICLE X MISCELLANEOUS.......................................................29
10.1 Survival of Representations and Warranties..................29
10.2 Notices.....................................................30
10.3 Successors and Assigns; Third Party Beneficiaries...........31
10.4 Amendment and Waiver........................................31
10.5 Counterparts................................................32
10.6 Headings....................................................32
10.7 GOVERNING LAW...............................................32
10.8 Severability................................................32
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10.9 Rules of Construction.......................................32
10.10 Entire Agreement............................................32
10.11 Fees........................................................33
10.12 Publicity; Confidentiality..................................33
10.13 Further Assurances..........................................33
10.14 Legal Representation........................................34
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EXHIBITS
A-1 Form of Escrow Agreement
A Form of Warrant
B Form of Articles of Incorporation
C Form of By-laws
D Form of Certificate of Designation
E Form of Registration Rights Agreement
F Form of Stockholders Agreement
G Form of Pillsbury Winthrop LLP Opinion
H Memorandum of Understanding
SCHEDULES
I Coinvestors
2.1 Purchased Shares and Purchase Price
2.2 Exchange Shares and Face Amount
2.3 Warrant Shares and Purchase Price
3.5 Litigation
3.19 Potential Conflicts of Interest
3.21 Outstanding Borrowing
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STOCK AND WARRANT PURCHASE AND EXCHANGE AGREEMENT
STOCK AND WARRANT PURCHASE AND EXCHANGE AGREEMENT, dated
November 8, 2001 (this "AGREEMENT"), among Critical Path, Inc., a California
corporation (the "COMPANY"), General Atlantic Partners 74, L.P., a Delaware
limited partnership ("GAP LP"), GAP Coinvestment Partners II, L.P., a Delaware
limited partnership ("GAP COINVESTMENT"), GapStar, LLC, a Delaware limited
liability company ("GAPSTAR" and, collectively with GAP LP and GAP Coinvestment,
the "GAP PURCHASERS"), and the Persons listed on SCHEDULE I hereto (the
"COINVESTORS" and, together with the GAP Purchasers, the "PURCHASERS").
WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue and sell to (i) each of the Purchasers,
the aggregate number of shares, par value $0.001 per share, of Series D
Cumulative Redeemable Convertible Participating Preferred Stock of the Company
(the "SERIES D PREFERRED STOCK") set forth opposite the name of such Purchaser
on SCHEDULE 2.1 hereto, for the aggregate purchase price set forth opposite such
Purchaser's name on SCHEDULE 2.1 hereto, and (ii) each GAP Purchaser, a warrant
to purchase, subject to the terms and conditions thereof, the aggregate number
of shares, par value $0.001 per share, of common stock of the Company (the
"COMMON STOCK") set forth opposite such GAP Purchaser's name on SCHEDULE 2.3
hereto (the "WARRANTS"), at an exercise price equal to $1.05, containing the
terms and conditions set forth in the form of warrant attached hereto as EXHIBIT
A, for the purchase price set forth opposite such GAP Purchaser's name on
SCHEDULE 2.3 hereto; and
WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue to each GAP Purchaser the aggregate
number of shares of Series D Preferred Stock set forth opposite the name of such
GAP Purchaser on SCHEDULE 2.2 hereto in exchange for the surrender to the
Company by such GAP Purchaser of its GAP Sub Notes (as hereinafter defined) in
the face amount set forth opposite such GAP Purchaser's name on SCHEDULE 2.2
hereto; and
WHEREAS, each share of Series D Preferred Stock is convertible
(subject to adjustment) into one share of Common Stock; and
WHEREAS, the Company and the Purchasers are simultaneously
with the execution and delivery of this Agreement at the Closing (as defined
below) entering into an Escrow Agreement, dated the date hereof, and attached as
EXHIBIT A-1 hereto (the "ESCROW AGREEMENT") among the Company, the Purchasers
and Pillsbury Winthrop LLP, as Escrow Agent (the "ESCROW AGENT"), pursuant to
which the parties thereto have agreed to and deposit in escrow all of the
executed Transaction Documents (as defined below), the GAP Sub Notes (as defined
below), the Warrants (as defined below), the Subject Shares (as defined below),
the aggregate cash purchase price payable by the Purchasers pursuant to Section
2.6 of this Agreement and certain ancillary documents in escrow with
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the Escrow Agent, to be held and released only in accordance with the Escrow
Agreement.
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
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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.
"ARTICLES OF INCORPORATION" means the Articles of
Incorporation of the Company in effect on the Closing Date and attached hereto
as EXHIBIT B.
"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
Closing Date and attached hereto as EXHIBIT C.
"CERTIFICATE OF DESIGNATION" means the Certificate of
Designation with respect to the Series D Preferred Stock adopted by the Board of
Directors and duly filed with the Secretary of State of the State of California
on or before the Closing Date substantially in the form attached hereto as
EXHIBIT D.
"CLAIMS" has the meaning set forth in Section 3.5 of this
Agreement.
"CLOSING" has the meaning set forth in Section 2.6(a) of this
Agreement.
"CLOSING DATE" has the meaning set forth in Section 2.6(a) of
this Agreement.
"CODE" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
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"COINVESTORS" has the meaning set forth in the preamble to
this Agreement.
"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" has the meaning set forth in the recitals to
this Agreement.
"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).
"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 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.
"COPYRIGHTS" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
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"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.
"ESCROW AGENT" has the meaning set forth in the recitals
hereto.
"ESCROW AGREEMENT" has the meaning set forth in the recitals
hereto.
"ESCROW RELEASE DATE" has the meaning set forth in the Escrow
Agreement.
"EXCHANGE" has the meaning set forth in Section 2.2 of this
Agreement.
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended, and the rules and regulations of the Commission thereunder.
"EXCHANGE SHARES" has the meaning set forth in Section 2.2 of
this 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.
"GAP COINVESTMENT" has the meaning set forth in the preamble
to this Agreement.
"GAP COINVESTMENT WARRANT" means the Warrant to be issued to
GAP Coinvestment.
"GAP LLC" means General Atlantic Partners, LLC, a Delaware
limited liability company and the general partner of GAP LP and the managing
member of GapStar, and any successor to such entity.
"GAP LP" has the meaning set forth in the preamble to this
Agreement.
"GAP LP WARRANT" means the warrant to be issued to GAP LP.
"GAP PURCHASERS" has the meaning set forth in the preamble to
this Agreement.
"GAPSTAR" has the meaning set forth in the preamble to this
Agreement.
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"GAPSTAR WARRANT" means the warrant to be issued to GapStar.
"GAP SUB NOTES" means the 5 3/4% Convertible Subordinated
Notes due April 1, 2005 issued by the Company pursuant to the Company's
Indenture, dated March 31, 2000, purchased by the GAP Purchasers for the
purchase price set forth on SCHEDULE 2.2 hereto and held by the GAP Purchasers
as of the Closing Date in the face amounts set forth on SCHEDULE 2.2 hereto.
"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 Liens in favor of lessors under
leases other than leases included in clause (e)) 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.
"INTELLECTUAL PROPERTY" has the meaning set forth in Section
3.17 of this Agreement.
"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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"KNOWLEDGE" means the knowledge of the Company and ▇▇▇▇▇ ▇.
▇▇▇▇▇▇, Executive Chairman, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇▇, ▇▇., President and Chief
Operating Officer, Pierre Van Beneden, President, ▇▇▇▇▇▇▇ ▇▇ ▇▇▇▇▇, Chief
Financial Officer, ▇▇▇▇ ▇▇▇▇▇▇▇▇, Chief Technology Officer, ▇▇▇ ▇▇▇▇▇▇▇▇▇,
Senior Vice President Product Marketing, ▇▇▇▇ ▇▇▇▇▇▇▇, Senior Vice President
United States Sales, ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Senior Vice President, General Counsel,
▇▇▇▇▇ ▇▇▇▇▇, Director, ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇, Director, ▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇, Director,
▇▇▇▇▇ ▇'▇▇▇▇▇, Vice President Hosted Business, ▇▇▇ ▇▇▇▇▇▇▇▇▇, Sales Executive
after due inquiry.
"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).
"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.
"MOU" means that certain Memorandum of Understanding dated the
date hereof in the form attached as EXHIBIT H hereto that memorializes the
agreement in principle of the parties therein to settle on the terms set forth
therein the litigations encaptioned IN RE CRITICAL PATH INC. SECURITIES
LITIGATION CASE (NO. C-01-0551 WHO).
"NASDAQ" means The Nasdaq Stock Market, Inc.
"NASDAQ ESCROW APPROVAL CONDITION" has the meaning set forth
in the Escrow 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.
"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.
"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,
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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 8.7(b).
"PURCHASED SHARES" has the meaning set forth in Section 2.1 of
this Agreement.
"PURCHASERS" has the meaning set forth in the preamble to this
Agreement.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights
Agreement substantially in the form attached hereto as EXHIBIT E.
"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).
"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.
"SERIES D PREFERRED STOCK" has the meaning set forth in the
recitals to this Agreement.
"SHAREHOLDER RIGHTS PLAN" means the Preferred Rights
Agreement, dated as of March 19, 2001, between the Company and Computershare
Trust Company, Inc., as Rights Agent.
"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.
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"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.
"STOCKHOLDERS AGREEMENT" means the Stockholders Agreement
substantially in the form attached hereto as EXHIBIT F.
"SUBJECT SHARES" has the meaning set forth in Section 2.2 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 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.
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"TRANSACTION DOCUMENTS" means, collectively, this Agreement,
the Escrow Agreement, the Stockholders Agreement, the Registration Rights
Agreement and the Warrants.
"WARRANT SHARES" has the meaning set forth in Section 2.3 of
this Agreement.
"WARRANTS" has the meaning set forth in the recitals to this
Agreement.
"VECTIS AGREEMENT" means the following agreements between the
Company and Vectis Group, LLC: (i) Advisory Services Letter Agreement, dated as
of May 30, 2001, (ii) Strategic Analysis Letter Agreement, dated March 29, 2001
and (iii) Finder and Advisory Letter Agreement, dated as of March 29, 2001.
ARTICLE II
PURCHASE AND SALE OF SERIES D PREFERRED STOCK; EXCHANGE
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2.1 PURCHASE AND SALE OF SERIES D PREFERRED STOCK. On the
Closing Date, the Company agrees to deposit with the Escrow Agent, to be held in
escrow in accordance with the terms of the Escrow Agreement and to be released
to the Purchasers on the Escrow Release Date, and each Purchaser, severally and
not jointly, agrees to purchase from the Company on the Escrow Release Date
subject only to the terms and provisions of the Escrow Agreement, the aggregate
number of shares of Series D Preferred Stock set forth opposite such Purchaser's
name on SCHEDULE 2.1 hereto, for the aggregate purchase price set forth opposite
such Purchaser's name on SCHEDULE 2.1 hereto which is being deposited by each
such Purchaser with the Escrow Agent not later than 5:00 p.m., New York City
time, on November 9, 2001, to be distributed in accordance with the terms of the
Escrow Agreement (all of the shares of Series D Preferred Stock being purchased
pursuant hereto being referred to herein as the "PURCHASED SHARES").
2.2 EXCHANGE OF GAP SUB NOTES. On the Closing Date, the
Company agrees to deposit with the Escrow Agent, to be held in escrow in
accordance with the terms of the Escrow Agreement, and to be released to the
Purchasers on the Escrow Release Date, the number of shares of Series D
Preferred Stock set forth opposite such GAP Purchaser's name on SCHEDULE 2.2
hereto, in exchange for the deposit with the Escrow Agent not later than 5:00
p.m. New York City time, on November 9, 2001, to be held in escrow in accordance
with the terms of the Escrow Agreement and to be released to the Company on the
Escrow Release Date, by such GAP Purchaser of its GAP Sub Notes in the face
amount set forth opposite such GAP Purchaser's name on SCHEDULE 2.2 hereto (the
"EXCHANGE") (all of the shares of Series D Preferred Stock being issued pursuant
to the Exchange, the "EXCHANGE SHARES" and, together with the Purchased Shares,
the "SUBJECT SHARES").
2.3 PURCHASE AND SALE OF WARRANTS. On the Closing Date,
the Company agrees to deposit with the Escrow Agent, to be held in escrow in
accordance with the terms of the Escrow Agreement and to be released to the
Purchasers on the
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Escrow Release Date, and each GAP Purchaser, severally and not jointly, agrees
to purchase from the Company on the Escrow Release Date subject only to the
terms and provisions of the Escrow Agreement, the Warrant to purchase the
aggregate number of shares of Common Stock set forth opposite such GAP
Purchaser's name on SCHEDULE 2.3 hereto, for the aggregate purchase price set
forth opposite such GAP Purchaser's name on SCHEDULE 2.3 hereto which is being
deposited by each such Purchaser with the Escrow Agent not later than 5:00 p.m.,
New York City time, on November 9, 2001, to be distributed in accordance with
the terms of the Escrow Agreement (all of the shares of Common Stock issuable
upon the exercise of the Warrants being purchased pursuant hereto being referred
to herein as the "WARRANT SHARES").
2.4 CERTIFICATES OF DESIGNATION. The Subject Shares shall
have the preferences and rights set forth in the Certificate of Designation.
2.5 USE OF PROCEEDS. The Company shall use the proceeds
from the sale of the Purchased Shares and the Warrants to the Purchasers to fund
the Company's working capital.
2.6 CLOSING.
(a) The closing (the "CLOSING") of the transactions
referred to in Sections 2.1, 2.2 and 2.3 shall take place at the offices of
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇, at 10:00 a.m., local time, on the date
hereof (the "Closing Date").
(b) Not later than 5:00 p.m., New York City time, on
November 9, 2001, the Company shall deliver to the Escrow Agent, to be held in
escrow and released only in accordance with the terms of the Escrow Agreement,
an undated certificate or certificates in definitive form and registered in the
name of each Purchaser, representing such Purchaser's Purchased Shares.
(c) Not later than 5:00 p.m., New York City time, on
November 9, 2001, each Purchaser shall deliver to the Escrow Agent, to be held
in escrow and released only in accordance with the terms of the Escrow
Agreement, of the aggregate purchase price for such Purchaser's Purchased Shares
by wire transfer of immediately available funds.
(d) Not later than 5:00 p.m., New York City time, on
November 9, 2001, the Company shall deliver to the Escrow Agent to be held in
escrow and released only in accordance with the terms of the Escrow Agreement an
undated certificate or certificates in definitive form and registered in the
name of each GAP Purchaser, representing its Exchange Shares.
(e) Not later than 5:00 p.m., New York City time, on
November 9, 2001, each GAP Purchaser shall deliver to the Escrow Agent to be
held in escrow and released only in accordance with the terms of the Escrow
Agreement its GAP Sub Notes together with duly executed and undated Note Powers
for such GAP Sub Notes.
11
(f) Not later than 5:00 p.m., New York City time, on
November 9, 2001, the Company shall deliver the Warrants to the Escrow Agent, to
be held in escrow and released only in accordance with the terms of the Escrow
Agreement.
(g) Not later than 5:00 p.m., New York City time, on
November 9, 2001, each GAP Purchaser shall deliver to the Escrow Agent, to be
held in escrow and released only in accordance with the terms of the Escrow
Agreement, the aggregate purchase price for its Warrants by wire transfer of
immediately available funds.
(h) In addition, at the Closing, (i) the Company shall
execute and deliver to the Purchasers executed copies of each of this Agreement,
the Escrow Agreement, the Stockholders Agreement and the Registration Rights
Agreement, together with an executed copy of the certificate referred to in
Section 5.1 of this Agreement, an executed copy of the Certificate of
Designations and the executed Opinion referred to in Section 5.4 of this
Agreement and (ii) each Purchaser shall execute and deliver to the Company,
executed copies of each of this Agreement, the Escrow Agreement, the
Stockholders Agreement and the Registration Rights Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
---------------------------------------------
The Company represents and warrants to each of the Purchasers
as follows:
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 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)
have been duly authorized by all necessary corporate action of the Company; (b)
do not contravene the terms of the Articles of Incorporation or the By-laws; (c)
do not violate, conflict with or
12
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. 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 Subject Shares) by,
or enforcement against, the Company of this Agreement and the other Transaction
Documents or the transactions contemplated hereby and thereby.
3.4 BINDING EFFECT. This Agreement has been, and as of
the Closing Date each of the other Transaction Documents will have been, duly
executed and delivered by the Company, and this Agreement constitutes, and as of
the Closing Date each of the other Transaction Documents will 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).
3.5 LITIGATION. Except as set forth on SCHEDULE 3.5 or as
disclosed in the SEC Reports, 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
13
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) As of the date hereof, the authorized capital stock
of the Company consists of (x) 500,000,000 shares of Common Stock of which (i)
75,515,871 shares are issued and outstanding and (ii) 49,775,020 shares are
reserved for issuance upon exercise of stock options granted to directors,
officers and other employees of the Company pursuant to the Stock Option Plans;
and (y) 5,000,000 shares of preferred stock, none of which is outstanding.
(b) On the Closing Date, after giving effect to the
transactions contemplated by this Agreement, the authorized capital stock of the
Company shall consist of (i) 500,000,000 shares of Common Stock, of which
75,515,871 shares are issued and outstanding, (ii) 75,000 shares of Series C
Preferred Stock, par value $.001 per share, of the Company, of which no shares
are issued and outstanding, (iii) assuming the Escrow Release Date has occurred,
4,000,000 shares of Series D Preferred Stock, of which 4,000,000 shares are
issued and outstanding, and (iv) 925,000 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 49,775,020, of which 31,690,094
have been granted. The Company has reserved an aggregate of 52,380,952 shares of
Common Stock for issuance upon conversion of the Subject Shares and 2,500,000
shares of Common Stock for issuance upon exercise of the Warrants. 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 (i) any authorized but
unissued, unauthorized or treasury shares of the Company's capital stock, (ii)
any Stock Equivalents or (iii) 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.
(c) The Subject Shares and the Warrants are duly
authorized, and when issued and delivered to the Purchasers after payment
therefor and the consummation of the Exchange on the Escrow Release Date, will
be validly issued, fully paid and non-assessable, and assuming the accuracy of
the representations and warranties of the Purchasers 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. The shares of
Common Stock issuable upon conversion of the Subject Shares and exercise of the
Warrants have been duly reserved for issuance and, when issued in compliance
with the provisions of the Certificate of Designation and the Warrants (in the
case of the Warrant Shares), will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or similar rights that
have not been satisfied and will be free and clear
14
of all other Liens. None of the issued and outstanding shares of Common Stock
were issued in violation of any preemptive rights.
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 Liens 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. 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 (i) delivered to the
Purchasers true and complete copies of, or will make available at the
Purchaser's request, (x) all correspondence relating to the Company between the
Commission, Nasdaq and the United States Attorneys Office and the Company or its
legal counsel and, to the Company's Knowledge, accountants since January 1, 2001
(other than routine Commission filing package cover letters) and (y) all
correspondence between the Company or its counsel and the Company's auditors
since January 1, 2001, relating to
15
any audit, financial review or preparation of financial statements of the
Company (other than correspondence which the Company reasonably believes is
subject to a privilege), and (ii) disclosed to the Purchasers the content of all
material discussions between the Commission, Nasdaq and the United States
Attorneys Office on the one hand and the Company or its legal counsel, on the
other hand, and, to the Company's Knowledge, accountants concerning the adequacy
or form of any SEC Report filed with the Commission since January 1, 2001. 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) Except as disclosed in the SEC Reports, 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 Closing Date (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 Closing Date 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.
3.12 NO MATERIAL ADVERSE CHANGE; ORDINARY COURSE OF
BUSINESS. Since December 31, 2000, except as disclosed in or incorporated by
reference in the ▇▇▇
▇▇
▇▇▇▇▇▇▇, (▇) 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 Subject Shares or the Warrants, engaged in (i) any
form of general solicitation or general advertising (as those terms are used
within the meaning of Rule 502(c) under the Securities Act), (ii) any action
involving a public offering within the meaning of Section 4(2) of the Securities
Act, or (iii) any action that would require the registration under the
Securities Act of the offering, sale, exchange or issuance of the Subject Shares
and the Warrants pursuant to this Agreement or that would violate applicable
state securities or "BLUE SKY" laws. The Company has not made and will not prior
to the Closing Date make, directly or indirectly, any offer or sale of the
Subject Shares or Warrants or of securities of the same or similar class as the
Subject Shares or Warrants if, as a result, the offer and sale contemplated
hereby would fail to be entitled to exemption from the registration requirements
of the Securities Act. 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
17
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 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 September 30, 2001 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.
18
3.17 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.
(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 Closing 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.
(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
19
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.
3.18 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.
3.19 POTENTIAL CONFLICTS OF INTEREST. Except as set forth
on SCHEDULE 3.19 and except for Vectis employees at the Company, no officer,
director or stockholder beneficially owning more than 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
owes or has advanced any amount to, the Company or any of its Subsidiaries,
except for claims in the ordinary course of business
20
such as for accrued vacation pay, accrued benefits under employee benefit plans,
and similar matters and agreements existing on the date hereof.
3.20 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.
3.21 OUTSTANDING BORROWING. SCHEDULE 3.21 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.
3.22 BROKER'S, FINDER'S OR SIMILAR FEES. Except for fees
payable to Vectis, 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.
3.23 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 Purchasers of Subject Shares and Warrants pursuant to this Agreement and the
Certificate of Designation and any conversion by the Purchasers of Subject
Shares into shares of Common Stock and any exercise by the GAP Purchasers of the
Warrants for the Warrant Shares.
3.24 DISCLOSURE. This Agreement and the documents and
certificates furnished to the Purchasers 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.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
------------------------------------------------
Each of the Purchasers hereby represents and warrants,
severally and not jointly, to the Company as follows:
4.1 EXISTENCE AND POWER. Such Purchaser (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,
21
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 Purchaser 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 Purchaser's organizational documents, or
any amendment thereof, and (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 Purchaser or any Requirement of Law applicable to such
Purchaser, and (d) do not violate any Orders of any Governmental Authority
against, or binding upon, such Purchaser.
4.3 GOVERNMENTAL AUTHORIZATION; THIRD PARTY CONSENTS. 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
required in connection with the execution, delivery or performance by, or
enforcement against, such Purchaser 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 has been, and as of
the Closing Date each of the other Transaction Documents will have been, duly
executed and delivered by such Purchaser and this Agreement constitutes and, as
of the Closing Date each of the other Transaction Documents will constitute, the
legal, valid and binding obligations of such Purchaser, 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 Subject Shares and the
Warrants to be acquired by such Purchaser pursuant to this Agreement are being
or will be acquired for its own account and with no intention of distributing or
reselling such Subject Shares or Warrants 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 Purchaser at all times to sell or
otherwise dispose of all or any part of such Subject Shares or Warrants 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 Purchaser's property being at all times
within its control. If such Purchaser should in the future decide to dispose of
any of such Subject Shares, such Purchaser 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 Purchaser agrees to the imprinting at
Closing and for so long as required by law, of a
22
legend on certificates representing all of its Subject Shares, shares of Common
Stock issuable upon conversion of its Subject Shares and the Warrant 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.
4.6 RESTRICTED SECURITIES. Such Purchaser understands
that the Subject Shares and the Warrants 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 Purchaser's representations set forth herein.
4.7 ACCREDITED INVESTOR. Such Purchaser 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 Purchaser, 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 Subject Shares and Warrants (the
"SECURITIES"), and has so evaluated the merits and risks of such investment.
Such Purchaser 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 Purchaser acknowledges
that it has reviewed the SEC Reports and has been afforded: (i) 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; (ii) 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 (iii) 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 Purchaser or its representatives
or
23
counsel shall modify, amend or affect such Purchaser'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 Purchaser 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 Purchaser understands and acknowledges
that: (i) 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 (ii) 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 Purchaser hereby
consents to such reliance.
ARTICLE V
ACTIONS TO BE TAKEN BY THE
--------------------------
COMPANY AT THE CLOSING
----------------------
At the Closing, the Company shall take the actions and deliver
the documents described in Sections 5.1, 5.4, 5.5 and 5.6 and not later than
5:00 p.m., New York City time, on November 9, 2001, the Company shall take the
actions and deliver the documents described in Sections 5.2 and 5.3.
5.1 SECRETARY'S CERTIFICATE. The Company shall have
delivered to the Purchasers a certificate from the Company, in form and
substance satisfactory to the Purchasers, dated as of the Closing Date and
signed by the Secretary or an Assistant Secretary of the Company, certifying (a)
that the Company is in good standing with the Secretary of State of the State of
California, (b) 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 other Transaction Documents and the transactions
contemplated hereby and thereby, are all true, complete and correct and remain
unamended and in full force and effect and (c) that the attached copies of the
resolutions of the Board of Directors electing, subject only to the satisfaction
of the Escrow Release Condition (as defined in the Escrow Agreement), the one
director designated by the holders of a majority of the shares of Series D
Preferred Stock are true, complete and correct and remain unamended and in full
force and effect.
5.2 SUBJECT SHARES. The Company shall have delivered to
the Escrow Agent certificates in definitive form representing the number of
Purchased Shares set forth opposite such Purchaser's name on SCHEDULE 2.1 hereto
and, with respect to the GAP Purchasers, the number of Exchange Shares set forth
opposite such GAP Purchaser's name on SCHEDULE 2.2 hereto, registered in the
name of such Purchaser.
24
5.3 WARRANTS. The Company shall have duly executed and
delivered to the Escrow Agent, in substantially the form attached hereto as
EXHIBIT A, and registered in the name of GAP LP, GAP Coinvestment and GapStar,
respectively.
5.4 OPINION OF COUNSEL. The Company shall have caused the
opinion of Pillsbury Winthrop LLP, dated November 8, 2001, relating to the
transactions contemplated by or referred to herein, substantially in the form
attached hereto as EXHIBIT G to be delivered to the Purchasers.
5.5 MOU. The Company shall have delivered to the
Purchasers the fully executed MOU.
5.6 AMENDMENT TO SHAREHOLDER RIGHTS PLAN. The Company
shall have delivered to the Purchasers evidence that the Shareholder Rights Plan
has been amended, in form and substance satisfactory to the Purchasers, to
permit each Purchaser and its Affiliates to consummate the transactions
contemplated by this Agreement and each of the other Transaction Documents.
ARTICLE VI
DELIVERIES BY THE PURCHASERS
----------------------------
Not later than 5:00 p.m., New York City time, on November 9,
2001, the Purchasers shall take the following actions and deliver the following.
6.1 PAYMENT FOR SUBJECT SHARES AND WARRANTS. Each
Purchaser shall have deposited with the Escrow Agent the aggregate purchase
price for the Purchased Shares to be purchased by such Purchaser and each GAP
Purchaser shall have deposited with the Escrow Agent (i) its GAP Sub Notes, with
duly executed undated Note Powers attached and (ii) the aggregate purchase price
for the Warrants to be purchased by such Purchaser.
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 Purchasers and its 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
25
Company in this Agreement, the Stockholders Agreement, the Escrow Agreement or
the Warrants. 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 Subject Shares 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, 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,
26
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 Sections 7.1 and 7.2,
any reasonable legal or other fees, charges or expenses reasonably incurred by
such party in connection with any investigation or proceeding.
ARTICLE VIII
AFFIRMATIVE COVENANTS
---------------------
The Company hereby covenants and agrees with the Purchasers 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 such Purchasers, in form and
substance satisfactory to such Purchaser:
(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
27
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;
(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; and
8.2 FIRPTA CERTIFICATE. If requested by any of the
Purchasers, 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 each
Purchaser, in form and substance satisfactory to such Purchaser, a certificate
signed by the Chief Executive Officer of the Company in customary form
certifying that the Company is not a "FOREIGN PERSON" within the meaning of
Section 1445 of the Code; and
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 Subject
Shares and exercise of the Warrants, as provided in the Certificate of
Designation and Warrants respectively, 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 Certificate of Designation and Warrants, 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 Certificate of Designation and
Warrants, and otherwise comply with the terms hereof and thereof.
28
8.4 BOOKS AND RECORDS. The Company shall keep proper
books of record and account, in which full and correct entries shall be made of
all financial transactions and the assets and business of the Company in
accordance with GAAP consistently applied.
8.5 INSPECTION. The Company shall permit representatives
of the Purchasers to visit and inspect any of its properties, to examine its
corporate, financial and operating records and make copies thereof or abstracts
therefrom, and to discuss its affairs, finances and accounts with their
respective directors, officers and independent public accountants, all at such
reasonable times during normal business hours and as often as may be reasonably
requested upon reasonable advance notice to the Company.
8.6 VECTIS AGREEMENT. The Company shall as soon as
practicable after the date hereof, but not later than the date the Escrow
Release Condition is satisfied, terminate the Vectis Agreement.
8.7 NASDAQ MATTERS.
(a) The Company shall take all action required and shall
make all submissions that are reasonably necessary to obtain written
confirmation reasonably satisfactory to the GAP Purchasers from the Nasdaq that
the approval of a majority of the Company's stockholders, present in person or
proxy at a properly convened meeting of the Company's stockholders ("STOCKHOLDER
APPROVAL") to the issuance of the shares of Series D Preferred Stock to the GAP
Purchasers is not required under the applicable Nasdaq rules and regulations in
order to satisfy the Nasdaq Escrow Approval Condition. If the Company cannot
obtain such written confirmation by January 31, 2001, it shall take all action
required by the Nasdaq and applicable California law (including the actions
referred to in Section 8.7(b)) to obtain Stockholder Approval for the issuance
to the GAP Purchasers of the portion of the shares of Series D Preferred Stock
that constitute the amount of shares of Series D Preferred Stock (determined
assuming conversion of all of the shares of Series D Preferred Stock) in excess
of 19.9% of the outstanding shares of the Common Stock on the date hereof (the
"APPLICABLE STOCKHOLDER APPROVAL"). The Board of Directors shall recommend that
the Company's stockholders vote in favor of the Applicable Stockholder Approval.
(b) If required pursuant to Section 8.7(a) of this
Agreement, promptly after November 30, 2001, the Company will prepare and file
with the Commission a proxy statement to be distributed to the Company's
stockholders in connection with the solicitation of votes in favor of the
Applicable Stockholder Approval, including any amendments or supplements thereto
(the "PROXY STATEMENT"). The Company will use all reasonable commercial efforts
to have or cause the Proxy Statement to be cleared by the Commission as promptly
as practicable. The Company agrees to provide the Purchasers 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 (i) 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
29
the statements therein, in light of the circumstances under which they are made,
not misleading and (ii) 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 Applicable
Stockholder Approval as promptly as practicable.
ARTICLE IX
TERMINATION OF AGREEMENT
------------------------
9.1 TERMINATION. This Agreement shall be terminated and
be of no further force or effect on the Escrow Termination Date (as defined in
the Escrow Agreement).
If this Agreement so terminates, it shall become null and void
and have no further force or effect.
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 Purchasers of audited financial statements of the Company for the
fiscal year ending December 31, 2002 (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 3.22, which
representations and warranties shall survive until the third anniversary of the
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.
30
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 GAP LP, GAP Coinvestment or GapStar:
c/o General Atlantic Service Corporation
▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
with a copy to, which shall not constitute notice:
▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇▇▇ ▇▇ ▇▇▇ ▇▇▇▇▇▇▇▇
▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇, Esq.
if to Vectis CP Holdings, LLC:
c/o Vectis Group
▇▇▇ ▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇▇
▇▇▇ ▇▇▇▇▇▇▇▇▇, ▇▇ ▇▇▇▇▇
Telecopy: ▇▇▇-▇▇▇-▇▇▇▇
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇
31
with a copy to:
▇▇▇▇▇▇▇▇ & ▇▇▇▇▇
▇▇▇ ▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇ ▇▇▇ ▇▇▇▇, ▇▇ ▇▇▇▇▇-▇▇▇▇
Telecopy: 212-446-4900
Attention: ▇▇▇▇▇▇▇ ▇▇▇▇▇▇▇▇▇, Esq.
if to Cenwell Limited:
▇/▇ ▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇ ▇▇▇▇ ▇▇▇▇▇▇
▇ ▇▇▇▇▇'▇ ▇▇▇▇ ▇▇▇▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: ▇▇. ▇▇▇▇▇▇ lp.
if to Campina Enterprises Limited
▇/▇ ▇▇▇▇ ▇▇▇▇▇
▇▇▇▇▇▇▇▇▇ ▇▇▇▇▇
▇▇ ▇▇▇▇▇▇▇▇ ▇▇▇▇
▇▇▇▇ ▇▇▇▇
Telecopy: (▇▇▇) ▇▇▇▇-▇▇▇▇
Attention: Company Secretary
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 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 Purchasers 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 GAP Purchasers. 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
Purchasers in exercising any right, power or remedy hereunder shall operate as a
waiver thereof, nor
32
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 Purchasers 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 Purchasers 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 Purchasers acquiring a
majority of the Subject Shares, and (ii) only in the specific instance and for
the specific purpose for which made or given; PROVIDED; however, that to the
extent any amendment or waiver adversely affects any of the Purchasers, such
amendment or waiver shall require the prior written consent of each Purchaser so
adversely affected. 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 NEW YORK, 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 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.
33
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. Upon the Closing, the Company shall reimburse
each of the Purchasers for their fees, disbursements and other charges of
counsel incurred in connection with the transactions contemplated by this
Agreement, provided that the aggregate amount of all such reimbursements shall
not exceed $75,000 and, provided, further, that each of the Coinvestors hereby
acknowledge and agree that the fees and expenses of the GAP Purchasers shall be
reimbursed first and that the cap of $75,000 applies to the fees and expenses of
all of the Purchasers. If this Agreement terminates pursuant to Article IX, each
of the Company and the Purchasers shall bear its own fees, disbursements and
other charges of counsel incurred in connection with the transactions
contemplated by this Agreement.
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 Purchasers
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 Purchasers from disclosing information (a)
that is already publicly available, (b) that was known to such Purchaser 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 Purchaser 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 Purchaser
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
Purchaser reasonably believes it appropriate in order to comply with any
Requirement of Law, (e) to such Purchaser'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; and provided
further, that after the Closing, GAP LLC may disclose on its worldwide web page,
▇▇▇.▇▇▇▇▇▇▇▇▇▇.▇▇▇, the name of the Company, the name of the Chief Executive
Officer of the Company, a brief description of the business of the Company, the
Company's logo and the aggregate amount of the Purchasers' investment in the
Company. 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.
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
34
reasonably required or desirable to carry out or to perform the provisions of
this Agreement.
10.14 LEGAL REPRESENTATION. It is acknowledged by each of
the Coinvestors that the GAP Purchasers have retained ▇▇▇▇, Weiss, Rifkind,
▇▇▇▇▇▇▇ & ▇▇▇▇▇▇▇▇ to act as their counsel in connection with the transactions
contemplated by the Transaction Documents and that ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇
& ▇▇▇▇▇▇▇▇ has not acted as counsel for any of the Coinvestors in connection
with the transaction contemplated by the Transaction Documents and that none of
the Coinvestors has the status of a client of ▇▇▇▇, Weiss, Rifkind, ▇▇▇▇▇▇▇ &
▇▇▇▇▇▇▇▇ for conflict of interest or any other purposes as a result thereof.
[Remainder of page intentionally left blank]
IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Stock and Warrant Purchase and Exchange Agreement on
the date first written above.
CRITICAL PATH, INC.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇▇▇
Title: Senior Vice President
GENERAL ATLANTIC PARTNERS 74, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: A General Partner
GAPSTAR, LLC
By: GENERAL ATLANTIC PARTNERS, LLC,
its Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇
Title: A Managing Member
Signature Page to Stock and Warrant Purchase and Exchange Agreement
VECTIS CP HOLDINGS, LLC
a Delaware limited liability company
By: VECTIS GROUP, LLC,
its Managing Member
By: /s/ ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
---------------------------------------
Name: ▇▇▇▇▇▇▇ ▇. ▇▇▇▇▇▇
Title: Chief Financial Officer
Signature Page to Stock and Warrant Purchase and Exchange Agreement
CENWELL LIMITED
By: /s/ ▇▇▇▇▇▇ Ip Tak Chuen
---------------------------------------
Name: ▇▇. ▇▇▇▇▇▇ Ip ▇▇▇ ▇▇▇▇▇
Title: Authorized Signatory
CAMPINA ENTERPRISES LIMITED
By: /s/ ▇▇▇▇▇▇ Ip Tak Chuen
---------------------------------------
Name: ▇▇. ▇▇▇▇▇▇ Ip ▇▇▇ ▇▇▇▇▇
Title: Director
Signature Page to Stock and Warrant Purchase and Exchange Agreement
SCHEDULE I
----------
COINVESTORS
-----------
Vectis CP Holdings, LLC
Cenwell Limited
Campina Enterprises Limited
SCHEDULE 2.1
------------
PURCHASED SHARES AND PURCHASE PRICE
-----------------------------------
--------------------------------------------------------------------------------
PURCHASER PURCHASED SHARES PURCHASE PRICE
--------------------------------------------------------------------------------
GAP LP 581,688 $7,998,210.00
--------------------------------------------------------------------------------
GAP Coinvestment 82,097 $1,128,833.75
--------------------------------------------------------------------------------
GapStar 44,252 $608,465.00
--------------------------------------------------------------------------------
Vectis CP Holdings, LLC 581,818 $7,999,997.50
--------------------------------------------------------------------------------
Cenwell Limited 436,364 $5,999,998.13
--------------------------------------------------------------------------------
Campina Enterprises Limited 436,363 $5,999,998.12
--------------------------------------------------------------------------------
Total: 2,162,582 $29,735,502.50
--------------------------------------------------------------------------------
SCHEDULE 2.2
------------
EXCHANGE SHARES, PURCHASE PRICE OF GAP SUBNOTES AND FACE AMOUNT
---------------------------------------------------------------
--------------------------------------------------------------------------------
PURCHASE PRICE OF GAP FACE AMOUNT OF
GAP PURCHASER EXCHANGE SHARES SUB NOTES GAP SUB NOTES
------------- --------------- --------- -------------
--------------------------------------------------------------------------------
GAP LP 1,509,530 $20,756,133.52 $53,097,000.00
--------------------------------------------------------------------------------
GAP Coinvestment 213,049 $2,929,477.46 $7,494,000.00
--------------------------------------------------------------------------------
GapStar 114,839 $1,578,884.37 $4,039,000.00
--------------------------------------------------------------------------------
Total: 1,837,418 $25,264,495.35 $64,630,000.00
--------------------------------------------------------------------------------
SCHEDULE 2.3
------------
WARRANT SHARES AND PURCHASE PRICE
---------------------------------
--------------------------------------------------------------------------------
GAP PURCHASER WARRANT SHARES PURCHASE PRICE
------------- -------------- --------------
--------------------------------------------------------------------------------
GAP LP 2,053,874 $821.55
--------------------------------------------------------------------------------
GAP Coinvestment 289,876 $115.95
--------------------------------------------------------------------------------
GapStar 156,250 $62.50
--------------------------------------------------------------------------------
Total: 2,500,000 $1,000.00
--------------------------------------------------------------------------------