Exhibit 10.17
INSWEB CORPORATION
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
dated March 31, 1999
TABLE OF CONTENTS
Page
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1. Authorization and Sale of Shares......................................1
1.1 Authorization..................................................1
1.2 Maintenance Rights.............................................1
1.2 Issuance and Sale of Shares....................................1
2. Closing Dates; Delivery...............................................2
2.1 Closings.......................................................2
2.2 First Closing..................................................2
2.3 Second Closing.................................................2
2.4 Delivery.......................................................2
3. Representations and Warranties of the Company.........................2
3.1 Organization and Standing......................................2
3.2 Capitalization.................................................3
3.3 Subsidiaries...................................................4
3.4 Issuance of Shares.............................................4
3.5 Authority for Agreement........................................4
3.6 Governmental Consent...........................................5
3.7 Litigation.....................................................5
3.8 Financial Statements...........................................5
3.9 Liabilities....................................................6
3.10 Changes........................................................6
3.11 Taxes..........................................................7
3.12 Properties and Assets..........................................8
3.13 Intellectual Property..........................................9
3.14 Insurance......................................................9
3.15 Material Contracts and Obligations............................10
3.16 Compliance....................................................10
3.17 Employees.....................................................10
3.18 Books and Records.............................................11
3.19 Registration Rights...........................................11
3.20 Interested Party Transactions.................................11
3.21 Offering Valid................................................11
3.22 Disclosures...................................................12
3.23 Operating Rights..............................................12
3.24 Brokers or Finders............................................12
3.25 Environmental Matters.........................................12
3.26 Section 83(b) Elections.......................................13
3.27 U.S. Real Property Holding Corporation........................13
3.28 Private Offering..............................................13
3.29 Use of Proceeds...............................................13
TABLE OF CONTENTS
(continued)
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3.30 Margin Securities.............................................13
3.31 Absence of Foreign or Enemy Status; Sensitive Payments........13
4. Representations of the Purchasers and Restrictions on Transfer.......14
4.1 Representations and Warranties of the Purchasers..............14
4.2 Legend........................................................15
5. Conditions to the Obligations of the Purchasers......................16
5.1 Accuracy of Representations and Warranties....................16
5.2 Performance...................................................16
5.3 Opinion of Counsel............................................16
5.4 Certificates and Documents....................................16
5.5 Amended Rights Agreement......................................17
5.6 Compliance Certificate........................................17
5.7 Third Party Consents..........................................17
5.8 No Adverse Changes............................................17
5.9 Maintenance Rights............................................17
5.10 Other Matters.................................................17
6. Conditions to Obligations of the Company.............................17
6.1 Accuracy of Representations and Warranties....................18
6.2 Amended Rights Agreement......................................18
6.3 Third Party Consents..........................................18
7. Covenants............................................................18
7.1 Commercially Reasonable Efforts...............................18
7.2 Notification; Updates to Disclosure Schedule..................18
7.3 Filings and Consents..........................................19
7.4 Further Assurances............................................19
8. Termination..........................................................20
8.1 Right of Termination..........................................20
8.2 Effects of Termination........................................20
9. Miscellaneous........................................................20
9.1 Survival of Representations and Warranties....................20
9.2 Notices.......................................................21
9.3 Expenses......................................................21
9.4 Entire Agreement..............................................21
9.5 Amendments and Waivers........................................21
9.6 Counterparts..................................................21
9.7 Section Headings..............................................21
ii
TABLE OF CONTENTS
(continued)
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9.8 Governing Law.................................................21
9.9 Press Releases and Public Announcement........................22
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SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (this "Agreement") dated
as of March 31, 1999 is entered into by and among InsWeb Corporation, a Delaware
corporation (the "Company"), and the entities listed on the Schedule of
Purchasers attached hereto as Exhibit A (individually, a "Purchaser" or,
collectively, the "Purchasers").
RECITAL
The Company desires to sell and the Purchasers desire to purchase shares
of the Company's Series E Preferred Stock, $0.001 par value per share (the
"Series E Preferred"), on the terms set forth below.
NOW, THEREFORE, in consideration of the mutual promises and covenants
contained in this Agreement, the parties hereto agree as follows:
1. Authorization and Sale of Shares.
1.1 Authorization. The Company has, or before the First Closing Date
(as defined in Section 2.2 hereof) will have, duly authorized the sale and
issuance, pursuant to the terms of this Agreement, of up to 185,775 shares of
Series E Preferred plus such additional number of shares of Series E Preferred
as shall be subscribed for by Purchasers pursuant to Section 1.2, hereof
(collectively, the "Shares") having the rights, restrictions, privileges and
preferences set forth in the form of Fifth Restated Certificate of Incorporation
attached hereto as Exhibit B (the "Fifth Restated Certificate"). The Company
has, or before the First Closing will have, adopted and filed with the Secretary
of State of the State of Delaware the Fifth Restated Certificate and will have
taken all necessary corporate action for the purpose of authorizing the sale and
issuance of the Shares pursuant hereto.
1.2 Maintenance Rights. The Company shall offer to each holder of
its outstanding Preferred Stock (a "Preferred Holder") the right to purchase
Shares as required by the provisions of Section 5.1 of the Second Amended and
Restated Investor Rights Agreement dated as of February 26, 1999 (the "Rights
Agreement"). Any Preferred Holder that properly exercises such right and
subscribes to purchase Shares shall execute this Agreement, shall become a
Purchaser hereunder and shall purchase such Shares at the Second Closing (as
defined in Section 2.3 hereof). The Schedule of Purchasers shall be amended as
appropriate to reflect the addition of any such Purchasers after the date
hereof. Prior to the Second Closing, the Company will adopt and file with the
Secretary of State of the State of Delaware an amendment to the Fifth Restated
Certificate for the purpose of authorizing any additional Shares to be sold
pursuant to this Section 1.2.
1.3 Issuance and Sale of Shares. Subject to the terms and conditions
of this Agreement, at the Closings (as defined in Section 2 hereof) the Company
will sell and issue to the Purchasers, and the Purchasers will severally buy
from the Company, the total number of Shares specified opposite the Purchasers'
respective names on the Schedule of Purchasers, at a
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purchase price of $188.40 per share, for the aggregate purchase price set forth
on the Schedule of Purchasers.
2. Closing Dates; Delivery.
2.1 Closings. The purchase and sale of the Shares hereunder shall
take place at two closings (individually, a "Closing" and, collectively, the
"Closings") at the offices of Xxxx Xxxx Xxxx & Freidenrich LLP ("GCW&F"), 000
Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000-0000 at 2:00 p.m., California time,
on the dates hereinafter specified.
2.2 First Closing. The Closing of the purchase and sale of the
Shares designated for issuance at the first Closing as set forth on the Schedule
of Purchasers (the "First Closing") shall be held on the later to occur of (i)
Xxxxx 00, 0000, (xx) the first business day following the date on which the last
to be fulfilled or waived of the conditions to the First Closing set forth in
Sections 5 and 6 hereof have been fulfilled or waived in accordance with this
Agreement, or (iii) such other date as is mutually agreed to by the Company and
SOFTBANK America, Inc. ("SOFTBANK"). The date of the First Closing is
hereinafter referred to as the "First Closing Date."
2.3 Second Closing. The Closing of the purchase and sale of the
Shares designated for issuance at the second Closing as set forth on the
Schedule of Purchasers (the "Second Closing") shall be held on the later to
occur of (i) the first business day following the date on which the last to be
fulfilled or waived of the conditions to the Second Closing set forth in
Sections 5 and 6 hereof have been fulfilled or waived in accordance with this
Agreement, or (ii) such other date as is mutually agreed to by the Company and
SOFTBANK. Should the Series E Preferred be converted automatically into shares
of Common Stock pursuant to the terms of the Fifth Restated Certificate prior to
the Second Closing, the Purchasers shall purchase, in lieu of the Shares
specified on the Schedule of Purchasers, the number of shares of Common Stock
into which such Shares would have been converted had they been issued and sold
immediately prior to such automatic conversion. The date of the Second Closing
is hereinafter referred to as the "Second Closing Date," and the First Closing
Date and the Second Closing Date are hereinafter collectively referred to as the
"Closing Dates."
2.4 Delivery. Subject to the terms and conditions of this Agreement,
at each Closing the Company shall deliver to each of the Purchasers a stock
certificate representing the Shares to be purchased by such Purchaser at such
Closing (which shall be issued in such Purchaser's name) against payment of the
purchase price therefor by check(s), payable to the order of the Company, or by
wire transfer(s) of immediately available funds to the bank account of the
Company designated by the Company.
3. Representations and Warranties of the Company. Subject to and except as
fully and fairly disclosed by the Company in the Schedule of Exceptions attached
hereto as Exhibit C, the Company hereby represents and warrants to the
Purchasers as follows:
3.1 Organization and Standing. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the State of
Delaware and has
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full corporate power and authority to own and operate its properties and to
conduct its business as presently conducted. The Company and each of its
Subsidiaries (as defined in Section 3.3 hereof) is duly qualified to do business
as a foreign corporation and is in good standing in each jurisdiction in which
the failure to so qualify would have a material adverse effect on the operations
or financial condition of the Company and its Subsidiaries, taken as a whole.
The Company has made available to the Purchasers true and complete copies of the
Certificate of Incorporation and Bylaws of the Company and each of its
Subsidiaries, each as amended to date and presently in effect.
3.2 Capitalization.
(a) The authorized capital stock of Company as of the First
Closing Date and immediately prior to the First Closing will consist of (i)
50,000,000 shares of the Company's Common Stock, $0.001 par value (the "Common
Stock"), of which 10,662,915 shares will be issued and outstanding, and (ii)
2,000,000 shares of the Company's Preferred Stock, $0.001 par value (the
"Preferred Stock"), (A) 176,471 shares of which have been designated Series A
Preferred Stock, all of which will be issued and outstanding and which are
convertible, in the aggregate, into 1,764,710 shares of Common Stock, (B) 27,864
shares of which have been designated Series A-1 Preferred Stock, all of which
will be issued and outstanding and which are convertible, in the aggregate, into
278,640 shares of Common Stock, (C) 176,471 shares of which have been designated
Series B Preferred Stock, all of which will be issued and outstanding and which
are convertible, in the aggregate, into 1,764,710 shares of Common Stock, (D)
61,920 shares of which have been designated Series C Preferred Stock, all of
which will be issued and outstanding and which are convertible, in the
aggregate, into 619,200 shares of Common Stock, (E) 190,621 shares of which have
been designated Series D Preferred Stock, all of which will be issued and
outstanding and which are convertible, in the aggregate, into 1,906,210 shares
of Common Stock and (F) 185,775 shares of which have been designated Series E
Preferred Stock, none of which will be issued or outstanding and which, when
outstanding, will be convertible, in the aggregate, into 1,857,750 shares of
Common Stock. All such outstanding shares have been duly authorized and validly
issued, are fully paid and nonassessable and free of liens and encumbrances
created by the Company, have been issued in accordance with all applicable state
and federal securities laws, and are subject to no pre-emptive rights, rights of
first refusal, proxies, voting agreements, shareholders agreements, registration
rights agreements, or other restrictions on the incidents of ownership or
transfer, created by statute, the charter documents of the Company or any
agreement to which the Company is a party or by which it is bound. The Company
will have reserved a sufficient number of shares of Common Stock for issuance
upon full conversion of the Shares. As of the date hereof, (A) an aggregate of
2,841,682 shares of Common Stock are reserved for issuance under the Company's
employee stock option plans (net of exercises prior to the date hereof),
1,594,904 of which are subject to outstanding options and (B) an aggregate of
8,164 shares of Common Stock are reserved for issuance upon the exercise of
outstanding warrants.
(b) The authorized capital stock of the Company as of the
Second Closing Date and immediately prior to the Second Closing shall be as set
forth in Section 3.2(a) hereof, subject, however, to (i) the prior sale and
issuance of the Shares to be issued and sold at
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the First Closing, (ii) the authorization of additional shares of Series E
Preferred Stock for sale at the Second Closing pursuant to subscriptions
received in accordance with Section 1.2 hereof, (iii) the grant of options to
purchase shares of Common Stock under the Company's employee stock option plans
and the exercise of options outstanding as of the date hereof and such
additional options, (iv) the sale and issuance of Common Stock by the Company in
an underwritten public offering pursuant to an effective registration under the
Securities Act of 1933, as amended, at an aggregate public offering price of at
least $20,000,000 and a per share price of at least $18.84 (appropriately
adjusted for stock splits, reverse stock splits and stock dividends from and
after the date hereof), and (iv) any other issuance of the Company's capital
stock, or securities convertible into such capital stock, as may be approved by
SOFTBANK.
(c) Except as set forth in this Section 3.2 or Exhibit C,
there are (i) no equity securities of any class of the Company, or any
securities exchangeable into or exercisable for such equity securities, issued,
reserved for issuance or outstanding or authorized and (ii) no authorized or
outstanding subscriptions, options, warrants, puts, calls, rights or other
commitments or agreements of any character to which the Company is a party or by
which it is bound obligating the Company to issue, deliver, sell, repurchase or
redeem or cause to be issued, delivered, sold, repurchased or redeemed any
equity securities of the Company or obligating the Company to grant, extend,
accelerate the vesting of, change the exercise price of or otherwise amend or
enter into any such option, warrant, call, right or other commitment or other
agreement of any character.
3.3 Subsidiaries. Except as set forth in Exhibit C, the Company has
no subsidiaries and does not own, or control, directly or indirectly, any shares
of capital stock of any other corporation or any interest in any partnership,
joint venture or other non-corporate entity or business enterprise. Each
subsidiary identified on Exhibit C (a "Subsidiary") is a wholly-owned
corporation duly organized, validly existing and in good standing under the laws
of the jurisdiction of its incorporation and has full corporate power and
authority to own and operate its properties and to conduct its business as
presently conducted.
3.4 Issuance of Shares. The issuance, sale and delivery of the
Shares in accordance with this Agreement, and the issuance and delivery of the
shares of Common Stock issuable upon conversion of the Shares, have been duly
authorized by all necessary corporate action on the part of the Company, and all
such shares have been duly reserved for issuance. The Shares, when so issued,
will have the rights, preferences, privileges, and restrictions described in the
Fifth Restated Certificate. The Shares when so issued, sold and delivered
against payment therefor in accordance with the provisions of this Agreement,
and the shares of Common Stock issuable upon conversion of the Shares, when
issued upon such conversion, will be duly and validly issued, fully paid and
non-assessable.
3.5 Authority for Agreement. The execution, delivery and performance
by the Company of this Agreement and the Third Amended and Restated Investor
Rights Agreement in the form attached hereto as Exhibit D (the "Amended Rights
Agreement"), and the consummation by the Company of the transactions
contemplated hereby and thereby, have been, or prior to the First Closing will
have been, duly authorized by all necessary corporate and
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stockholder action. This Agreement and the Amended Rights Agreement have been
duly executed and delivered by the Company and constitute valid and binding
obligations of the Company enforceable in accordance with their respective
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or other laws of general application
relating to or affecting enforcement of creditors' rights and rules or laws
concerning equitable remedies and except as the indemnification provisions set
forth in Section 3.6 of the Amended Rights Agreement may be limited by
principles of public policy. The execution and delivery of this Agreement and
the Amended Rights Agreement, the compliance by the Company with their
provisions and the issuance of the Shares and the Common Stock issuable upon
conversion of the Shares will not violate any provision of law, will not result
in the creation of any mortgage, pledge, lien, encumbrance, or charge upon any
of the properties or assets of the Company or any of its Subsidiaries, and will
not conflict with or result in any breach of any of the terms, conditions or
provisions of, or constitute a default under, or require a consent or waiver
under, the Certificate of Incorporation or Bylaws (each as amended to date) of
the Company or any of its Subsidiaries or any indenture, lease, agreement or
other instrument to which the Company or any of its Subsidiaries is a party or
by which it or any of its properties is bound, or any decree, judgment, order,
statute, rule or regulation applicable to the Company or any of its
Subsidiaries, except for such consents and waivers as shall have been duly
obtained prior to the First Closing.
3.6 Governmental Consent. No consent, approval, order or
authorization of, or registration, qualification, designation, declaration or
filing with, any governmental authority is required on the part of the Company
or any of its Subsidiaries in connection with the execution and delivery of this
Agreement and the Amended Rights Agreement, the offer, issuance, sale and
delivery of the Shares, or the other transactions to be consummated at the
Closings, as contemplated by this Agreement, except pursuant to the
Xxxx-Xxxxx-Xxxxxx Antitrust Improvements Act of 1976, as amended, and the rules
promulgated thereunder (the "HSR Act"), and except such other filings as shall
have been made prior to and shall be effective as of the applicable Closing.
3.7 Litigation. There is no litigation, action, suit or proceeding,
or governmental inquiry or investigation, pending or, to the best of the
Company's knowledge, any threat thereof, against the Company or any of its
Subsidiaries, which questions the validity of this Agreement or the Amended
Rights Agreement or the right of the Company to enter into them, or to
consummate the transactions contemplated hereby or thereby, or which could
reasonably be expected to result, either individually or in the aggregate, in
any material adverse change in the business, prospects, assets or condition,
financial or otherwise, of the Company and its Subsidiaries, taken as a whole,
or a change in the current equity ownership of the Company, nor has the Company
or any of its Subsidiaries instituted any such litigation, action, suit,
proceeding or governmental inquiry or investigation. The Company is not a party
or subject to the provisions of any order, writ, injunction, judgment or decree
of any court or government agency or instrumentality.
3.8 Financial Statements. The Company has delivered to the
Purchasers copies of its audited consolidated financial statements as of, and
for the years ended,
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December 31, 1996, 1997 and 1998 (collectively, the "Company Financial
Statements"). The Company Financial Statements have been prepared in accordance
with United States generally accepted accounting principles ("GAAP") applied on
a consistent basis throughout the periods involved. The Company Financial
Statements present fairly in all material respects the consolidated financial
position of the Company and its Subsidiaries as of the respective dates and the
consolidated results of the Company's operations and cash flows for the periods
indicated. The Company maintains a standard system of accounting established and
administered in accordance with GAAP. All accounts receivable are bona fide and
arose out of transactions made in the ordinary course of business, are payable
in accordance with their terms and, to the best of the Company's knowledge, are
subject to no valid counterclaims or setoffs. Any reserve for bad debts stated
in the Company Financial Statements is adequate in the light of the previous
receivables collection history of the Company and its Subsidiaries.
3.9 Liabilities. The Company and its Subsidiaries do not have any
liabilities, either accrued or contingent (whether or not required to be
reflected in financial statements in accordance with GAAP), and whether due or
to become due, which individually or in the aggregate would be reasonably likely
to have a material adverse effect on the Company and its Subsidiaries, taken as
a whole, other than (i) liabilities reflected or provided for on the Company's
consolidated balance sheet as of December 31, 1998 (the "Company Balance
Sheet"), (ii) liabilities specifically described in this Agreement or in Exhibit
C, and (iii) normal or recurring liabilities incurred since December 31, 1998 in
the ordinary course of business consistent with past practices.
3.10 Changes. Since December 31, 1998, the Company and each of its
Subsidiaries has conducted its business in the ordinary course and in a manner
consistent with past practices and, since such date, except as disclosed in
Exhibit C, there has not been:
(a) any material change in the accounting methods or practices
it follows, whether for general financial or tax purposes, or any change in
depreciation or amortization policies or rates;
(b) any material commitment or transaction (including without
limitation any borrowing or capital expenditure) other than in the ordinary
course of business;
(c) any material liability or transaction, except in the
ordinary course of business and consistent with past practice;
(d) any change in the assets, liabilities, financial condition
or operating results of the Company and its Subsidiaries from that reflected in
the Company Financial Statements, except changes in the ordinary course of
business which have not been in the aggregate materially adverse;
(e) any declaration or making of any payment or distribution
of cash or other property to a stockholder with respect to its stock or
otherwise, except for normal salaries and expense reimbursement, or any purchase
or redemption of any shares of its capital stock;
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(f) any mortgage or pledge of any of its properties or assets
or any subjecting of them to any lien, security interest, charge, or other
encumbrance, except liens or current property taxes not yet due and payable;
(g) any sale, assignment, or transfer of any patents,
trademarks, service marks, trade names, copyrights, trade secrets, or other
intangible assets or, to the best of the Company's knowledge, unauthorized
disclosure of any proprietary confidential information;
(h) any damage, destruction, or loss, whether or not covered
by insurance, materially and adversely affecting the assets, properties,
financial condition, operating results, prospects, or business (as such business
is presently conducted and as it is proposed to be conducted);
(i) any waiver of any valuable right or of any material debt;
(j) any discharge or satisfaction of any lien, claim, or
encumbrance, or payment of any of its obligations, except in the ordinary course
of business and which is not material to its assets, properties, financial
condition, operating results, or business (as such business is presently
conducted and as it is proposed to be conducted);
(k) any change or amendment of or default under any material
contract or arrangement by which the Company or any of its Subsidiaries or any
of the assets or properties of the Company or any of its Subsidiaries are bound
or subject;
(l) any material change in any compensation arrangement or
agreement with any executive officer or key employee;
(m) any default under any material contract or agreement or
any indenture or debt;
(n) any loans or advances to, or guarantees for the benefit
of, any person; or
(o) to the best of the Company's knowledge, any other event or
condition of any character which could reasonably be expected to materially and
adversely affect the assets, properties, financial condition, operating results
or business of the Company and its Subsidiaries, taken as a whole (as such
business is presently conducted and as it is proposed to be conducted).
3.11 Taxes.
(a) The Company and each of its Subsidiaries has accurately
prepared and timely filed all returns, estimates, information statements and
reports required to be filed by it with any taxing authority ("Company Returns")
relating to any and all taxes concerning or attributable to the Company and each
of its Subsidiaries or its or their operations, and such Company Returns are
true and correct in all material respects and have been completed in all
7
material respects in accordance with applicable law. There are no audits pending
with respect to the Company or any of its Subsidiaries by any governmental
authority. The Company and each of its Subsidiaries has paid all taxes and other
assessments due on or before the date hereof, and such payments were made prior
to the time that penalties would accrue thereon. The Company knows of no new tax
assessments.
(b) There is no tax deficiency outstanding or assessed or, to
the best of the Company's knowledge, proposed against the Company or any of its
Subsidiaries that is not reflected as a liability on the Company Balance Sheet
nor has the Company or any Subsidiary executed any agreements or waivers
extending any statute of limitations on or extending the period for the
assessment or collection of any tax.
(c) Neither the Company nor any of its Subsidiaries has any
material liabilities for unpaid taxes that have not been accrued for or reserved
on the Company Balance Sheet, whether asserted or unasserted, contingent or
otherwise.
(d) The Company is not a party to any tax-sharing agreement or
similar arrangement with any other party, or any contractual obligation to pay
any tax obligations of, or with respect to any transaction relating to, any
other person or to indemnify any other person with respect to any tax.
(e) The Company has withheld or collected from each payment to
each of its employees the amount of all taxes (including, but not limited to,
federal income taxes and Federal Insurance Contribution Act taxes) required to
be withheld or collected therefrom, and has paid the same to the proper tax
receiving officers or authorized depositories.
(f) Neither the Company nor any of its stockholders has ever
filed (a) an election pursuant to Section 1362 of the Internal Revenue Code of
1986, as amended (the "Code"), that the Company be taxed as an S Corporation or
(b) a consent pursuant to Section 341(f) of the Code relating to collapsible
corporations.
3.12 Properties and Assets. The Company and each of its Subsidiaries
has good and marketable title to all of its material properties and assets, and
good title to its leasehold estates, and none of such properties or assets is
subject to any mortgage, pledge, lien, security interest, lease, charge or
encumbrance other than liens resulting from taxes which have not yet become
delinquent, liens and encumbrances which have arisen in the ordinary course of
business that do not in any case materially detract from the value of the
property subject thereto or materially impair the operations of the Company. The
tangible and intangible assets and properties owned or leased by the Company and
its Subsidiaries include all properties, assets, and rights necessary to conduct
the business of the Company and its Subsidiaries as currently conducted or as
presently proposed to be conducted. All tangible assets and properties owned or
leased by the Company and its Subsidiaries that are material or necessary to the
Company's business as currently conducted are in good condition and repair,
ordinary wear excepted.
3.13 Intellectual Property. Set forth on Exhibit C is a true and
complete list of all patents, patent applications, trademarks and service marks,
trademark and service xxxx
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applications, trade names, copyright registrations and applications and material
licenses of third party software (other than licenses of "off the shelf" or
standard software products) presently used by the Company or any of its
Subsidiaries. To the best of the Company's knowledge, the Company and its
Subsidiaries together own or possess sufficient legal rights to all patents,
trademarks, service marks, trade names, copyrights, trade secrets, information
and other proprietary rights and processes (collectively, "Intellectual Property
Rights") necessary for the Company's business as now conducted or as presently
proposed to be conducted without any known infringement of the rights of others.
There are no outstanding options, licenses or agreements of any kind relating to
the Intellectual Property Rights, nor is the Company or any of its Subsidiaries
bound by or a party to any options, licenses or agreements of any kind with
respect to the Intellectual Property Rights of any other person or entity other
than such licenses or agreements arising from the purchase of "off the shelf" or
standard products. Neither the Company nor any of its Subsidiaries has received
any notice that it is infringing upon, violating or otherwise acting adversely
to, or by conducting its business as proposed would infringe upon, violate or
otherwise act adversely to, and, to the best of the Company's knowledge, neither
the Company nor any of its Subsidiaries is violating the right or claimed right
of any person or entity under or with respect to any Intellectual Property
Rights. Except as disclosed in Exhibit C, to the best of its knowledge, neither
the Company nor any of its Subsidiaries is obligated or under any liability to
make payments by way of royalties, fees or otherwise to any owner, licensor of,
claimant to, or other party to any option, license or agreement of any kind with
respect to, any Intellectual Property Rights, or other intangible assets
material to the conduct of the Company's or any Subsidiary's business. The
Company is not aware that any of its or its Subsidiaries' employees is obligated
under any contract (including licenses, covenants or commitments of any nature)
or subject to any judgment, decree or order of any court or administrative
agency, that would interfere with their duties to the Company or any of its
Subsidiaries or that would conflict in any material respect with the business of
the Company or any of its Subsidiaries, as currently conducted or as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
conduct of the business of the Company or any of its Subsidiaries, as currently
conducted or as proposed to be conducted, will, to the best of the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any employee of the Company or any of its
Subsidiaries made prior to their employment by the Company or such Subsidiary,
except for inventions, trade secrets or proprietary information that have been
assigned to the Company or such Subsidiary.
3.14 The Company and each of its Subsidiaries maintains valid
policies of workers' compensation insurance and of insurance with respect to its
properties and business of the kinds and in the amounts not less than are
customarily obtained by corporations of established reputation engaged in the
same or similar business and similarly situated, including, without limitation,
insurance against loss, damage, fire, theft, public liability, products
liability and other risks. The Company has in full force and effect term life
insurance, payable to the Company, on the life of Hussein A. Enan in the amount
of $2,000,000. To the best knowledge of the Company, neither the Company nor any
of its Subsidiaries is in default with respect to its obligations under any
insurance policy maintained by it.
9
3.15 Material Contracts and Obligations. Exhibit C sets forth a list
of all material agreements or commitments of any nature to which the Company or
any of its Subsidiaries is a party or by which it is bound, including without
limitation (a) each agreement which requires future expenditures by the Company
in excess of $100,000 in the aggregate or which might result in payments to the
Company in excess of $100,000 in the aggregate, (b) all employment and
consulting agreements, employee benefit, bonus, pension, profit-sharing, stock
option, stock purchase and similar plans and arrangements, and distributor and
sales representative agreements, and (c) any agreement with any stockholder,
officer or director of the Company, or any "affiliate" or "associate" of such
persons (as such terms are defined in the rules and regulations promulgated
under the Securities Act of 1933, as amended (the "Securities Act")), including
without limitation any agreement or other arrangement providing for the
furnishing of services by, rental of real or personal property from, or
otherwise requiring payments to, any such person or entity. All the material
agreements or commitments of any nature to which the Company or any of its
Subsidiaries is a party or by which they are bound are valid, binding, and in
full force and effect in all material respects and enforceable by the Company or
such Subsidiary in accordance with their respective terms, subject to laws of
general application relating to bankruptcy, insolvency, and the relief of
debtors and the rules of law governing specific performance, injunctive relief,
or other equitable remedies.
3.16 Compliance. The Company and each of its Subsidiaries has, in
all material respects, complied with its Certificate of Incorporation and
Bylaws, as amended, and all laws, regulations and orders applicable to its
business. The Company and each of its Subsidiaries has complied with any term or
provision of any mortgage, indebtedness, indenture, contract, agreement, or
instrument to which it is a party where the failure to so comply would have a
material adverse effect on the business, prospects or results of operations of
the Company and its Subsidiaries, taken as a whole.
3.17 Employees. The Company is not aware that any officer or key
employee, or any group of key employees, intends to terminate their employment
with the Company or any of its Subsidiaries, nor does the Company have a present
intention to terminate the employment of any officer, key employee or group of
key employees of the Company or any of its Subsidiaries. None of the employees
of the Company or any of its Subsidiaries is represented by any labor union or
covered by any collective bargaining agreement, and there is no labor strike,
organizational drive or other labor trouble pending, or to the best of the
Company's knowledge threatened, with respect to the Company or any of its
Subsidiaries. To the best of the Company's knowledge, the Company and each of
its Subsidiaries has complied with all applicable state and federal equal
employment opportunity and other laws related to employment. To the best of the
Company's knowledge, no employee or consultant of the Company or any of its
Subsidiaries is in violation of any term of any employment contract, patent
disclosure agreement, or any other contract or agreement relating to the
relationship of any such person with the Company or any of its Subsidiaries or
any other party because of the nature of the business conducted or proposed to
be conducted by the Company and its Subsidiaries. All employees and consultants
of the Company and each of its Subsidiaries involved in the technical
development of the Company's or any Subsidiary's software have executed
proprietary information agreements, copies of which have been made available to
the Purchasers or their counsel. The Company does not anticipate
10
the necessity to acquire rights to any inventions of any employees, or people it
currently intends to hire, made prior to their employment by the Company or any
Subsidiary. Neither the Company nor any of its Subsidiaries is a party to or
bound by any currently effective employment contract, deferred compensation
agreement, bonus plan, incentive plan, profit sharing plan, retirement
agreement, or other employee compensation agreement, except as set forth on
Exhibit C. Subject to applicable law, the employment of each officer and
employee of the Company and of each of its Subsidiaries is terminable at will by
the Company or such Subsidiaries, except as set forth on Exhibit C.
3.18 Books and Records. The minute books of the Company contain
complete and accurate records of all meetings and other corporate actions of its
stockholders and its Board of Directors and committees thereof. The stock ledger
of the Company is complete and reflects all issuances, transfers, repurchases
and cancellations of shares of capital stock of the Company.
3.19 Registration Rights. Except as provided in the Rights Agreement
and the Amended Rights Agreement, the Company is not under any obligation, and
has not granted any rights, to register (as defined in the Amended Rights
Agreement) any of the Company's presently outstanding securities or any of its
securities that may hereafter be issued.
3.20 Interested Party Transactions. To the best of the Company's
knowledge, no director, officer or stockholder of the Company, or any member of
his or her immediate family, has any interest in (i) any material equipment or
other property or asset, real or personal, tangible or intangible, including,
without limitation, any of the Intellectual Property Rights, used in connection
with or pertaining to the business of the Company, (ii) any creditor, supplier,
customer, manufacturer, agent, representative, or distributor of any of the
Company's products, (iii) any entity that competes with the Company or with
which the Company is affiliated or has a business relationship, or (iv) any
agreement, obligation or commitment, written or oral, to which the Company is a
party; provided, however, that no such person shall be deemed to have such an
interest solely by virtue of ownership of less than five percent of the
outstanding stock or debt securities of any publicly held company, the stock or
debt securities of which are traded on a recognized stock exchange or on the
Nasdaq National Market. Neither the Company nor any of its Subsidiaries is a
guarantor or indemnitor of any indebtedness of any other person or entity.
3.21 Offering Valid. Assuming the accuracy of the representations
and warranties of the Purchasers contained in Section 4 hereof, the offer, sale
and issuance of the Shares and the shares of Common Stock issuable upon
conversion of the Shares are and will be exempt from the registration
requirements of the Securities Act and exempt from registration and
qualification under the registration, permit or qualification requirements of
all applicable state securities laws. Neither the Company nor any agent on its
behalf has solicited or will solicit any offers to sell or has offered to sell
or will offer to sell all or any part of the Shares to any person or persons so
as to bring the sale of such Shares by the Company within the registration
provisions of the Securities Act or any state securities law.
3.22 Disclosures. Neither this Agreement nor the Amended Rights
Agreement nor any Exhibit hereto or thereto, nor any certificate or instrument
furnished to the Purchasers in
11
connection with the transactions contemplated by this Agreement, when read
together, contains or will contain any untrue statement of a material fact or
omits or will omit to state a material fact necessary in order to make the
statements contained herein or therein, in light of the circumstances under
which they were made, not misleading. The Company has fully provided the
Purchasers with all the information which the Purchasers have requested for
deciding whether to purchase the Shares, including true and complete copies of
all documentation affecting rights of any kind that exist or may have existed,
to which the Company is a party or of which it is aware, with respect to holders
of securities of the Company. All underlying documents incorporated or referred
to in any exhibit hereto or to the Amended Rights Agreement, or in documents
furnished to the Purchasers pursuant to this Agreement by the Company, are true
and correct copies thereof, as the same have been or shall be amended or
modified. All information relating to the Company and its Subsidiaries which, to
the best of the Company's knowledge, could reasonably be anticipated to have a
material adverse effect on the existing or expected financial condition,
indebtedness, operating results, customer relations, employee relations,
business or properties of the Company and its Subsidiaries, taken as a whole,
has been disclosed to the Purchasers.
3.23 Operating Rights. To the best of the Company's knowledge, the
Company and each of its Subsidiaries has all operating authority, licenses,
franchises, permits, certificates, consents, rights, and privileges
(collectively, the "Licenses") as are necessary to the operation of its
business, as now conducted or as presently proposed to be conducted, the absence
of which would have a material and adverse effect on the business of the Company
and its Subsidiaries, taken as a whole. Such Licenses are in full force and
effect, no material violations have been or are expected by the Company to have
been recorded in respect of any such Licenses, and no proceeding is pending or,
to the best knowledge of the Company, threatened that could result in the
revocation or limitation of any of such Licenses. The Company and each of its
Subsidiaries has conducted its business so as to comply in all material respects
with all such material Licenses. Neither the Company nor any of its Subsidiaries
has granted rights or licenses to develop, produce, assemble, license, market,
or sell its products to any person other than in the ordinary course of its
business, and is not bound by any other agreement that affects the Company's or
any Subsidiary's exclusive right to develop, produce, assemble, license, market,
or sell its products.
3.24 Brokers or Finders. Neither the Company nor any of its
Subsidiaries has incurred or will incur, directly or indirectly, as a result of
any action taken by the Company or any Subsidiary, any liability for brokerage
or finders' fees or agents' commissions or any similar charges in connection
with this Agreement.
3.25 Environmental Matters. The Company and each of its
Subsidiaries, and the uses made by each of its properties and assets, are in
compliance in all material respects with all environmental laws, regulations,
rules, orders and ordinances, and to the best of the Company's knowledge, the
Company and each of its Subsidiaries, holds all permits and licenses required to
conduct its business thereunder. To the best of the Company's knowledge, all
properties and assets leased or owned by the Company and each of its
Subsidiaries, including, without limitation, all structures, contents, soil,
sub-soil, and groundwater, do not contain
12
hazardous substances in quantities that could reasonably be expected to have a
material adverse effect on the Company and its Subsidiaries, taken as a whole.
To the best of the Company's knowledge, neither the Company nor any of its
Subsidiaries has any liability or obligation, whether to any governmental
authority or to any other person or entity, for damages, claims, penalties,
forfeitures, or otherwise, as a consequence of the generation, transportation,
or disposal of any such hazardous substance or any "hazardous waste," as defined
in 42 U.S.C. 6901, et seq.
3.26 Section 83(b) Elections. To the best of the Company's
knowledge, all individuals who have purchased shares of the Company's Common
Stock have timely filed elections under Section 83(b) of the Internal Revenue
Code of the United States and any analogous provisions of applicable state tax
laws.
3.27 U.S. Real Property Holding Corporation. Neither the Company nor
any of its Subsidiaries is now or has ever been a "United States Real Property
Holding Corporation," as defined in Section 897(c)(2) of the Code and Section
1.897-2(b) of the Treasury Regulations promulgated by the Internal Revenue
Service thereunder, and the Company and each of its Subsidiaries has filed with
its United States income tax returns any statements which are required under
Section 1.897-2(h) of such Regulations.
3.28 Private Offering. The Company has not offered any of the Shares
or any similar securities of the Company for sale to, or solicited offers to buy
any thereof from, or otherwise approached or negotiated with respect thereto
with, any prospective purchasers, other than the Purchasers, persons who qualify
as "accredited investors," as such term is defined in SEC Regulation D, and up
to 10 other prospective purchasers who are "qualified institutional buyers"
within the meaning of SEC Rule 144A.
3.29 Use of Proceeds. The Company intends to apply the net proceeds
from the sale of Shares for general corporate purposes.
3.30 Margin Securities. None of the transactions contemplated herein
and in the Shares (including, without limitation, the use of the proceeds from
the sale of the Shares) violates, will violate, or will result in a violation of
Section 7 of the Securities Exchange Act of 1934, as amended, or any regulations
issued pursuant thereto, including, without limitation, Regulation G, Regulation
T and Regulation X of the Board of Governors of the Federal Reserve System, 12
C.F.R., Chapter II. Neither the Company nor any of its Subsidiaries owns, or
with the proceeds of the sale of the Shares intends to own, carry or purchase,
or refinance borrowings that were used to own, carry or purchase, any margin
security, including margin securities originally issued by the Company. The
obligations of the Company under this Agreement and the Shares are not and will
not be secured by any margin sold on the basis of any such collateral.
3.31 Absence of Foreign or Enemy Status; Sensitive Payments. Neither
the Company nor any of its Subsidiaries is in violation of and neither the issue
and sale of the Shares by the Company, nor its use of the proceeds thereof as
contemplated by this Agreement, will violate the Trading With the Enemy Act, as
amended, or any executive orders, proclamations, or regulations issued pursuant
thereto, including without limitation, regulations administered by the Office of
Foreign Asset Control of the Department of the Treasury (31 C.F.R., Subtitle B,
13
Chapter V). To the best knowledge of the Company, none of the Company or any
Subsidiary or any director, officer, agent, employee, or other person associated
with or acting on behalf of the Company or any Subsidiary has used any corporate
funds for unlawful contributions, gifts, entertainment, or other unlawful
expenses relating to political activity or otherwise; made any direct or
indirect unlawful payment to government officials or employees from corporate
funds, or has been reimbursed from corporate funds for any such payment
theretofore made; established or maintained any unlawful or any unrecorded fund
of corporate moneys or other asset; made any false or fictitious entries on the
books or records of the Company or any Subsidiary; made any bribe, rebate,
payoff, influence payment, kickback, or other unlawful payment; or made any
material favor or gift which is not deductible for federal income tax purposes.
4. Representations of the Purchasers and Restrictions on Transfer.
4.1 Representations and Warranties of the Purchasers. Each of the
Purchasers hereby severally represents and warrants to the Company as follows:
(a) The Shares, and the shares of Common Stock into which the
Shares may be converted (collectively, the "Securities") are being acquired for
such Purchaser's own account, for investment and not with a view to, or for
resale in connection with, any distribution or public offering thereof within
the meaning of the Securities Act or California law.
(b) Such Purchaser understands that the Securities have not
been registered under the Securities Act by reason of their issuance in a
transaction exempt from the registration and prospectus delivery requirements of
the Securities Act pursuant to Section 4(2) thereof, that the Company has no
present intention of registering the Securities, that the Securities must be
held by the Purchaser indefinitely, and that the Purchaser must therefore bear
the economic risk of such investment indefinitely, unless a subsequent
disposition thereof is registered under the Securities Act or is exempt from
registration. Such Purchaser further understands that the Securities have not
been qualified under California law by reason of their issuance in a transaction
exempt from the qualification requirements of California law pursuant to Section
25102(f) of the California Corporations Code, which exemption depends upon,
among other things, the bona fide nature of the Purchasers' investment intent
expressed above.
(c) During the negotiation of the transactions contemplated
herein, such Purchaser and its representatives and legal counsel have been
afforded full and free access to corporate books, financial statements, records,
contracts, documents and other information concerning the Company and to its
offices and facilities, have been afforded an opportunity to ask such questions
of the Company's officers, employees, agents, accountants and representatives
concerning the Company's business, operations, financial condition, assets,
liabilities and other relevant matters as they have deemed necessary or
desirable, and have been given all such information as has been requested in
order to evaluate the merits and risks of the prospective investments
contemplated herein. The foregoing does not limit or modify the right of each of
the Purchasers to rely on the representations and warranties of the Company set
forth in Section 3 hereof.
14
(d) Such Purchaser has such knowledge and experience in
financial and business matters that such Purchaser is capable of evaluating the
merits and risks of the purchase of the Securities pursuant to the terms of this
Agreement and of protecting such Purchaser's interest in connection therewith.
Such Purchaser and its representatives has been solely responsible for such
Purchaser's own "due diligence" investigation of the Company and its management
and business, for its own analysis of the merits and risks of this investment,
and for its own analysis of the fairness and desirability of the terms of the
investment. The foregoing does not limit or modify the right of each of the
Purchasers to rely on the representations and warranties of the Company set
forth in Section 3 hereof.
(e) Such Purchaser is an "Accredited Investor" as that term is
defined in Rule 501 of Regulation D promulgated under the Securities Act. Such
Purchaser is able to bear the economic risk of the purchase of the Securities
pursuant to the terms of this Agreement, including a complete loss of such
Purchaser's investment in the Securities.
(f) Such Purchaser has the full right, power and authority to
enter into and perform such Purchaser's obligations under this Agreement and the
Amended Rights Agreement. This Agreement and the Amended Rights Agreement
constitute the valid and binding obligations of such Purchaser, enforceable in
accordance with their respective terms except as limited by applicable
bankruptcy, insolvency, reorganization, moratorium or other laws of general
application relating to or affecting enforcement of creditors' rights and rules
or laws concerning equitable remedies and except as the indemnification
provisions set forth in Section 3.6 of the Amended Rights Agreement may be
limited by principles of public policy.
(g) No consent, approval, order or authorization of, or
designation, declaration or filing with, any governmental authority is required
on the part of such Purchaser in connection with the execution and delivery of
this Agreement and the Amended Rights Agreement, the purchase of the Shares, or
the other transactions to be consummated at the Closings, as contemplated by
this Agreement, except (with respect to SOFTBANK) pursuant to the HSR Act.
4.2 Legend. Each certificate representing the Shares, or the Common
Stock issuable upon conversion of the Shares, may be endorsed with legends in
substantially the following form:
(i) "THE SECURITIES EVIDENCED BY THIS CERTIFICATE HAVE NOT
BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED, AND MAY NOT
BE SOLD, TRANSFERRED, ASSIGNED OR HYPOTHECATED UNLESS THERE IS AN
EFFECTIVE REGISTRATION STATEMENT UNDER SUCH ACT COVERING SUCH SECURITIES,
THE TRANSFER IS MADE IN COMPLIANCE WITH RULE 144 PROMULGATED UNDER SUCH
ACT OR THE COMPANY RECEIVES AN OPINION OF COUNSEL FOR THE HOLDER OF THESE
SECURITIES REASONABLY SATISFACTORY TO THE COMPANY, STATING THAT SUCH SALE,
TRANSFER, ASSIGNMENT OR
15
HYPOTHECATION IS EXEMPT FROM THE REGISTRATION AND PROSPECTUS DELIVERY
REQUIREMENTS OF SUCH ACT."
(ii) Any other legends required by California law or other
applicable state securities laws.
The Company need not register a transfer of any such securities and may
also instruct its transfer agent not to register the transfer of any such
securities, unless the conditions specified in the foregoing legends are
satisfied.
5. Conditions to the Obligations of the Purchasers. The obligation of each
of the Purchasers to purchase the Shares at a Closing is subject to the
fulfillment, or the waiver by such Purchaser, of each of the following
conditions on or before such Closing:
5.1 Accuracy of Representations and Warranties. Each representation
and warranty of the Company contained in Section 3 hereof shall have been true
and correct when made, and shall be true and correct on and as of the applicable
Closing Date, with the same effect as though such representation and warranty
had been made on and as of such date, except to the extent that any such
representation and warranty speaks specifically as of an earlier date and except
for changes contemplated by this Agreement.
5.2 Performance. The Company shall have performed and complied with
all agreements and conditions contained in this Agreement required to be
performed or complied with by the Company prior to or at the applicable Closing.
5.3 Opinion of Counsel. The Purchasers shall have received an
opinion from GCW&F, dated the applicable Closing Date, addressed to each of the
Purchasers purchasing shares at such Closing, in substantially the form attached
hereto as Exhibit E.
5.4 Reservation of Conversion Stock. The shares of Common Stock
issuable upon conversion of the Shares shall have been duly authorized and
reserved for issuance upon such conversion.
5.5 Certificates and Documents. The Company shall have delivered to
the Purchasers purchasing Shares at such Closing:
(a) The Fifth Restated Certificate of the Company, as in
effect as of the applicable Closing Date, certified by and filed with the
Secretary of State of the State of Delaware;
(b) Certificates, as of the most recent practicable dates, as
to the corporate good standing of the Company issued by the Secretary of State
of the State of Delaware and the Secretary of State of the State of California;
(c) Bylaws of the Company, certified by its Secretary or
Assistant Secretary as of the applicable Closing Date; and
16
(d) Resolutions of the Board of Directors of the Company,
authorizing and approving all matters in connection with this Agreement and the
transactions contemplated hereby, certified by the Secretary or Assistant
Secretary of the Company as of the applicable Closing Date. 5.6 Amended Rights
Agreement. The Company and the requisite number of Investors (as defined in the
Rights Agreement), other than the Purchasers, shall have executed and delivered
the Amended Rights Agreement.
5.7 Compliance Certificate. The Company shall have delivered to the
Purchasers a certificate, executed by the President or Chief Executive Officer
of the Company, dated the applicable Closing Date, certifying to the fulfillment
of the conditions specified in Sections 5.1 and 5.2 hereof.
5.8 Third Party Consents. The Company shall have obtained all
consents, approvals, permits and waivers necessary for the consummation of the
transactions contemplated by this Agreement which are required to be obtained
prior to the applicable Closing Date, including, with respect to the sale of
Shares to SOFTBANK at the Second Closing, all required filings, and the
expiration or early termination of all applicable waiting periods, under the HSR
Act.
5.9 No Adverse Changes. During the period from the date hereof to
the applicable Closing Date, (i) the business of the Company and its
Subsidiaries shall have been conducted only in, and the Company and its
Subsidiaries shall not have taken any action except in, the ordinary course of
business and in a manner consistent with past practice, (ii) there shall have
been no material adverse change in the operations or the business of the Company
and its Subsidiaries and no material deterioration of or damage to the assets of
the Company and its Subsidiaries, taken as a whole, and (iii) there shall have
been no injunction, writ, preliminary restraining order or other order in effect
of any nature issued by a court or governmental agency of competent jurisdiction
prohibiting the consummation of the transactions contemplated by this Agreement
or otherwise directing that the transactions contemplated by this Agreement not
be consummated in the manner provided for in this Agreement.
5.10 Maintenance Rights. The Company shall have complied with the
provisions of Section 5.1 of the Rights Agreement, as specified in Section 1.2
hereof, to the extent applicable.
5.11 Other Matters. All corporate and other proceedings in
connection with the transactions contemplated by this Agreement and all
documents and instruments incident to such transactions shall be reasonably
satisfactory in substance and form to each of the Purchasers, and each of the
Purchasers shall have received all such counterpart originals or certified or
other copies of such documents as they may reasonably request.
6. Conditions to Obligations of the Company. The obligation of the Company
under Section 1.3 hereof to issue and sell Shares at each Closing is subject to
the fulfillment, or the waiver by the Company, of each of the following
conditions on or before such Closing:
17
6.1 Accuracy of Representations and Warranties. Each representation
and warranty of the Purchasers contained in Section 4 hereof shall be true and
correct when made, and shall be true and correct on and as of the applicable
Closing Date, with the same effect as though such representation and warranty
had been made on and as of such date.
6.2 Amended Rights Agreement. The Purchasers and the requisite
number of Investors under the Rights Agreement shall have executed and delivered
the Amended Rights Agreement.
6.3 Third Party Consents. The Purchasers shall have obtained all
consents, approvals, permits and waivers necessary for the consummation of the
transactions contemplated by this Agreement which are required to be obtained
prior to the applicable Closing Date, including, with respect to the sale of
Shares to SOFTBANK at the Second Closing, all required filings, and the
expiration or early termination of all applicable waiting periods, under the HSR
Act.
7. Covenants.
7.1 Reservation of Common Stock. The Company will at all times
reserve and keep available, solely for issuance and delivery upon the conversion
of the Shares, a sufficient number of shares of Common Stock to be isueable from
time to time upon such conversion.
7.2 Commercially Reasonable Efforts. Subject to the terms and
conditions of this Agreement, each party agrees to use all commercially
reasonable efforts to ensure that the conditions to any of the other parties'
obligations under Section 5 and 6, insofar as such matters are within the
control of such party, are satisfied as promptly as practicable, and shall not
take any action which would reasonably be expected to result in any of the
representations and warranties of such party becoming untrue or in any of the
conditions to Closing set forth in Sections 5 and 6 not being satisfied. Subject
to the terms and conditions of this Agreement, each party will use all
commercially reasonable efforts to take, or cause to be taken, all actions and
to do, or cause to be done, all things necessary or desirable under applicable
laws and regulations to consummate the transactions contemplated by this
Agreement. Notwithstanding anything herein to the contrary, the Purchasers shall
in no event be required to take any action with respect to obtaining the
execution and delivery of any documents by the Company or its stockholders.
7.3 Notification; Updates to Disclosure Schedule.
(a) During the period prior to each Closing, the Company, on
the one hand, and each of the Purchasers, on the other hand, shall promptly
notify the other parties in writing of:
(i) the discovery by any of them of any event,
condition, fact or circumstance that occurred or existed on or prior to the date
of this Agreement and that caused or constitutes a breach of any representation
or warranty made by them in this Agreement;
18
(ii) any event, condition, fact or circumstance that
occurs, arises or exists after the date of this Agreement and that would cause
or constitute a breach of any representation or warranty made by any of them in
this Agreement if such event, condition, fact or circumstance had occurred,
arisen or existed on or prior to the date of this Agreement;
(iii) any breach of any covenant or obligation of any of
them; or
(iv) any event, condition, fact or circumstance that may
make the timely satisfaction of any of the conditions set forth in Section 5 or
Section 6 impossible or unlikely.
(b) The Company may, no later than five business days prior to
a Closing, deliver to the Purchasers a written update to the Schedule of
Exceptions attached hereto as Exhibit C specifying a change to such Schedule of
Exceptions arising as a result of developments occurring after the date of this
Agreement. No later than one business day prior to the applicable Closing, the
Purchasers shall provide written notice to the Company, which written notice
shall specify whether the Purchasers have, in their sole discretion, accepted or
rejected such update. In the event such update is accepted, such update shall be
deemed to supplement and amend the Schedule of Exceptions attached hereto as
Exhibit C. Notwithstanding anything therein to the contrary, no such update that
is not otherwise accepted by the Purchasers in the manner described above shall
be deemed to supplement or amend the Schedule of Exceptions attached hereto as
Exhibit C for the purpose of (A) determining the accuracy of any of the
representations and warranties made by the Company in this Agreement, or (B)
determining whether any of the conditions set forth in Section 5 hereof have
been satisfied unless the parties agree to proceed with the Closing, in which
case the update shall be deemed to supplement or amend the Schedule of
Exceptions attached hereto.
7.4 Filings and Consents. To the extent applicable, the Company and
SOFTBANK shall make all filings required under the HSR Act relating to the
transactions contemplated by this Agreement (and shall use their best efforts to
cause their parent companies to make any such required filings) and shall each
use commercially reasonable efforts to cause any such required filings to be
made as promptly as practicable after the date hereof. If a filing is required
under the HSR Act, the Company and SOFTBANK will each use commercially
reasonable efforts to promptly furnish (and to cause their parent companies, as
applicable, to promptly furnish) any information that may be required by the
Federal Trade Commission (the "FTC") or the Department of Justice (the "DOJ")
under the HSR Act in order for the requisite approvals for the purchase and sale
of the Shares at the Second Closing, and the consummation of the related
transactions contemplated by this Agreement, to be obtained or any applicable
waiting periods to be terminated or expire; provided, however, that in the event
the FTC or the DOJ issues a "second request" in connection with any such filing,
the Company and SOFTBANK will consult with each other in good faith regarding
appropriate further action, which shall be taken only to the extent agreed upon
by the parties. Each party hereto will cooperate with each other with respect to
obtaining, as promptly as practicable, all necessary consents, approvals,
authorizations and agreements of, and the giving of all notices and making of
all other filings with, any third parties, including governmental authorities,
necessary to
19
authorize, approve or permit the consummation of the transactions contemplated
by this Agreement.
7.5 Further Assurances. Each party shall execute and deliver such
additional instruments, documents or other writings as may be reasonably
requested by any other party, before or after a Closing, in order to confirm and
carry out and to effectuate fully the intent and purposes of this Agreement and
the other transactions contemplated by this Agreement. Without limitation of the
foregoing, the parties hereto hereby agree to use all reasonable efforts to
prevent any order or other action described in clause (iii) of Section 5.8
hereof from becoming final and unappealable.
8. Termination.
8.1 Right of Termination. This Agreement may be terminated prior to
the First Closing, and, as to the obligations of the parties at the Second
Closing, prior to the Second Closing, in each case as follows:
(a) by the written agreement of the Company and SOFTBANK;
(b) by the Company, as to any Purchaser, if such Purchaser
breaches any material term or condition of this Agreement and there is no
reasonable possibility of cure prior to the First Closing or the Second Closing,
as applicable;
(c) by any Purchaser, as to such Purchaser, if the Company
breaches any material term or condition of this Agreement and there is no
reasonable possibility of cure prior to the First Closing or the Second Closing,
as applicable;
(d) by the Company if both Closings have not taken place on or
before May 5, 1999 (other than as a result of any failure on the part of the
Company to comply with or perform its covenants and obligations under this
Agreement);
(e) by any Purchaser, as to such Purchaser, if both Closings
have not taken place on or before May 5, 1999 (other than as a result of any
failure on the part of such Purchaser to comply with or perform its covenants
and obligations under this Agreement); or
(f) by the Company or any of the Purchasers (as to such
Purchaser) in the event any court or governmental authority of competent
jurisdiction shall have issued any order or taken any other action restricting,
enjoining or otherwise prohibiting the transactions contemplated by this
Agreement, and such order or other action shall have become final and
unappealable.
8.2 Effects of Termination. If this Agreement shall be terminated
pursuant to Section 8.1 hereof, all obligations of the parties hereto under this
Agreement that relate to any Closing (or the transactions contemplated thereby
or in connection therewith) that have not been consummated shall terminate;
provided that nothing in this Section 8.2 shall relieve any party of liability
for breach of any representation, warranty, covenant or agreement herein.
20
9. Miscellaneous.
9.1 Survival of Representations and Warranties. All covenants,
agreements, representations and warranties contained herein shall survive the
execution and delivery of this Agreement and the closing of the transactions
contemplated hereby, regardless of any investigation made by any party.
9.2 Successors and Assigns. Except as expressly provided herein, the
rights and obligations hereunder may not be assigned or delegated by a Purchaser
or the Company without the prior written consent of the other; provided,
however, that SOFTBANK may assign, in whole or in part, its rights and delegate
its obligations hereunder, including, without limitation, the right to purchase
any or all of the Shares and the obligation to pay all or any portion of the
purchase price hereunder to any affiliate or affiliates of SOFTBANK or SOFTBANK
Corp., a Japanese corporation, including, without limitation, any partnership or
other entity of which any direct or indirect subsidiary of SOFTBANK Corp. is a
general partner or has investment discretion (a "Permitted Assignee"); provided,
further, that any such Permitted Assignee that acquires any Shares hereunder
shall, as a condition to acquiring such Shares, agree to be bound by the
provisions of this Agreement (subject to appropriate modifications in the case
of the representations and warranties contained in Section 4 hereof) and the
Amended Rights Agreement applicable to SOFTBANK. The provisions hereof shall
inure to the benefit of, and be binding upon, the successors and permitted
assigns of the parties hereto.
9.3 Notices. All notices and other communications hereunder shall be
in writing and shall be deemed given if delivered personally or by commercial
delivery service, or mailed by registered or certified mail (return receipt
requested) or sent via facsimile (with confirmation of receipt), addressed (a)
if to a Purchaser, at the address or addresses set forth on Exhibit A attached
hereto, or at such other address as such Purchaser shall have furnished the
Company in writing, or (b) if to the Company, at the address of its principal
place of business, Attn.: General Counsel, or at such other address as the
Company shall have furnished to the Purchaser in writing, with a copy to Xxxx
Xxxx Xxxx & Freidenrich LLP, 000 Xxxxxxxx Xxxxxx, Xxxx Xxxx, Xxxxxxxxxx 00000,
Fax 000-000-0000, Attn.: Xxxxxx X. Xxxxxxxx, Esq.
9.4 Expenses. The Company and the Purchasers each shall pay all
costs and expenses that it incurs with respect to the negotiation, execution,
delivery and performance of this Agreement and the transactions contemplated
hereby. In the event of an action to resolve a dispute regarding interpretation
of this Agreement, the expenses of the prevailing party shall be paid by the
party which does not prevail.
9.5 Entire Agreement. This Agreement, the exhibits to the Agreement
and other documents delivered pursuant hereto embody the entire agreement and
understanding between the parties hereto with respect to the subject matter
hereof and supersede all prior agreements and understandings relating to such
subject matter.
9.6 Amendments and Waivers. Except as otherwise expressly set forth
in this Agreement, any term of this Agreement may be amended and the observance
of any term of this Agreement may be waived (either generally or in a particular
instance and either retroactively or
21
prospectively), with the written consent of the Company and the holders of more
than a majority of the Shares, and the shares of Common Stock issued upon
conversion of any Shares. Any amendment or waiver effected in accordance with
this Section 9.5 shall be binding upon each holder of any Shares (including
shares of Common Stock into which such Shares have been converted), each future
holder of all such securities and the Company. No waivers of or exceptions to
any term, condition or provision of this Agreement, in any one or more
instances, shall be deemed to be, or construed as, a further or continuing
waiver of any such term, condition or provision.
9.7 Counterparts. This Agreement may be executed in one or more
counterparts, each of which shall be deemed to be an original, but all of which
shall be one and the same document.
9.8 Section Headings. The Section headings in this Agreement are for
the convenience of the parties and in no way alter, modify, amend, limit, or
restrict the contractual obligations of the parties.
9.9 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of California, U.S.A., as such laws are
applied to agreements between California residents entered into and to be
performed entirely within California.
9.10 Press Releases and Public Announcement. No party shall issue
any press release or public announcement relating to the subject matter of this
Agreement without the prior written approval of the other parties hereto;
provided, however, that any party may make any public disclosure it believes in
good faith is required by applicable law or any listing or trading agreement
concerning its publicly-traded securities (in which case, the disclosing party
will use its best efforts to advise the other parties prior to making the
disclosure).
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COUNTERPART SIGNATURE PAGE TO INSWEB SERIES E PREFERRED STOCK
PURCHASE AGREEMENT
COMPANY: INSWEB CORPORATION
By: /s/ Hussein A. Enan
-----------------------------------------
Printed: Hussein A. Enan
-------------------------------------
Title: Executive Chairman & CEO
---------------------------------------
PURCHASERS: SOFTBANK AMERICA INC.
By: /s/ Xxxxxx X. Xxxxxx
-----------------------------------------
Printed: Xxxxxx X. Xxxxxx
-------------------------------------
Title: Vice Chairman
---------------------------------------
23
EXHIBIT A
SCHEDULE OF PURCHASERS
First Closing Second Closing Total
------------------------ ------------------------- ---------------------------
Shares Purchase Shares Purchase Shares Purchase
Name and Address Purchased Price Purchased Price Purchased Price
---------------- --------- -------- --------- -------- --------- --------
SOFTBANK America Inc. 36,639 $6,902,787.60 149,136 $28,097,222.40 185,775 $35,000,010.00
000 Xxxxxxxx Xxxxxx
Xxxxx 000
Xxxxxxxxxx, XX 00000
Attention:
Xxxxxx X.
Xxxxxx,
Xxxxxxx Xxxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
with a copy to:
Xxxxxxxx & Xxxxxxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
Attention: Xxxxxxx Xxxxx
Fax: (000) 000-0000
Tel: (000) 000-0000
EXHIBIT B
FIFTH RESTATED CERTIFICATE OF INCORPORATION
EXHIBIT C
SCHEDULE OF EXCEPTIONS
EXHIBIT D
THIRD AMENDED AND RESTATED INVESTOR RIGHTS AGREEMENT
EXHIBIT E
XXXX XXXX XXXX & FREIDENRICH LLP LEGAL OPINION
