EXHIBIT 10.1
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CONVERTIBLE NOTE PURCHASE AND EXCHANGE AGREEMENT
among
CRITICAL PATH, INC.,
GENERAL ATLANTIC PARTNERS 74, L.P.,
GAP COINVESTMENT PARTNERS II, L.P.,
GAPSTAR, LLC,
GAP-W, LLC,
GAPCO GMBH & CO. KG,
CAMPINA ENTERPRISES LIMITED,
CENWELL LIMITED,
GREAT AFFLUENT LIMITED,
DRAGONFIELD LIMITED
and
LION COSMOS LIMITED
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Dated: November 18, 2003
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Table of Contents
Page
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ARTICLE I DEFINITIONS........................................................... 2
1.1 Definitions......................................................... 2
ARTICLE II PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE..................... 11
2.1 Purchase and Sale of Notes.......................................... 11
2.2 Filings............................................................. 11
2.3 Exchange of CK Sub Notes............................................ 11
2.4 Certificates of Determination....................................... 11
2.5 Use of Proceeds..................................................... 11
2.6 Closings; Deliveries................................................ 12
2.7 Subsequent Sale of Shares of Series E Preferred Stock............... 14
ARTICLE III REPRESENTATIONS AND WARRANTIES OF THE COMPANY....................... 14
3.1 Corporate Existence and Power....................................... 14
3.2 Authorization; No Contravention..................................... 15
3.3 Governmental Authorization; Third Party Consents.................... 15
3.4 Binding Effect...................................................... 15
3.5 Litigation.......................................................... 15
3.6 Compliance with Laws................................................ 16
3.7 Capitalization...................................................... 16
3.8 No Default or Breach; Contractual Obligations....................... 17
3.9 Title to Properties................................................. 18
3.10 Reports; Financial Statements....................................... 18
3.11 Taxes............................................................... 19
3.12 No Material Adverse Change; Ordinary Course of Business............. 19
3.13 Private Offering.................................................... 19
3.14 Labor Relations..................................................... 20
3.15 Employee Benefit Plans.............................................. 20
3.16 Liabilities......................................................... 21
3.17 Affiliate Transactions.............................................. 21
3.18 Intellectual Property............................................... 22
3.19 Privacy of Customer Information..................................... 23
3.20 Potential Conflicts of Interest..................................... 23
3.21 Trade Relations..................................................... 24
3.22 Outstanding Borrowing............................................... 24
3.23 Broker's, Finder's or Similar Fees.................................. 24
3.24 Stockholder Approval................................................ 24
3.25 CCC Section......................................................... 24
3.26 Disclosure.......................................................... 25
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ARTICLE IV REPRESENTATIONS AND WARRANTIES OF THE LENDERS AND CK PURCHASERS...... 25
4.1 Existence and Power................................................. 25
4.2 Authorization; No Contravention..................................... 25
4.3 Governmental Authorization; Third Party Consents.................... 25
4.4 Binding Effect...................................................... 26
4.5 Purchase for Own Account............................................ 26
4.6 Restricted Securities............................................... 27
4.7 Accredited Investor................................................. 27
4.8 Experience.......................................................... 27
4.9 Access to Information............................................... 27
4.10 General Solicitation................................................ 27
4.11 Reliance............................................................ 27
ARTICLE V CONDITIONS TO INITIAL CLOSING......................................... 28
5.1 Conditions to Lenders' and CK Purchasers' Obligations............... 28
5.2 Conditions to Company's Obligations................................. 29
ARTICLE VI CONDITIONS TO SUBSEQUENT CLOSING..................................... 29
6.1 Conditions to CK Purchasers' Obligations............................ 29
6.2 Conditions to the Company's Obligations............................. 30
ARTICLE VII INDEMNIFICATION..................................................... 30
7.1 Indemnification..................................................... 30
7.2 Notification........................................................ 30
7.3 Contribution........................................................ 31
ARTICLE VIII COVENANTS.......................................................... 32
8.1 Financial Statements and Other Information.......................... 32
8.2 FIRPTA Certificate.................................................. 33
8.3 Reservation of Common Stock......................................... 33
8.4 Stockholder Approval................................................ 33
8.5 Financial Covenants................................................. 34
8.6 SVB Debt Matters.................................................... 34
ARTICLE IX TERMINATION OF AGREEMENT............................................. 36
9.1 Termination......................................................... 36
ARTICLE X MISCELLANEOUS......................................................... 36
10.1 Survival of Representations and Warranties.......................... 36
10.2 Notices............................................................. 37
10.3 Successors and Assigns; Third Party Beneficiaries................... 38
10.4 Amendment and Waiver................................................ 39
10.5 Counterparts........................................................ 39
10.6 Headings............................................................ 39
10.7 Governing Law....................................................... 39
10.8 Severability........................................................ 39
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10.9 Rules of Construction............................................... 39
10.10 Entire Agreement.................................................... 40
10.11 Fees................................................................ 40
10.12 Publicity; Confidentiality.......................................... 40
10.13 Further Assurances.................................................. 41
10.14 Legal Representation................................................ 41
EXHIBITS
A Form of Note
B Form of Amended and Restated Registration Rights Agreement
C Form of Amended and Restated Series D Certificate of Determination
D Form of Amended and Restated Stockholders Agreement
E Articles of Incorporation
F By-laws
G Form of Series E Certificate of Determination
H Form of Warrant Amendment
I Form of Pillsbury Winthrop LLP Opinion
SCHEDULES
2.1 Purchased Notes
2.3 CK Purchasers
3.3 Government Authorizations; Consents
3.5 Litigation
3.7(a) Capitalization
3.17 Affiliate Transactions
3.20 Potential Conflicts of Interest
3.22 Outstanding Borrowing
3.23 Fees
3.27 Investments
8.5 Financial Covenants
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CONVERTIBLE NOTE PURCHASE AND EXCHANGE AGREEMENT
CONVERTIBLE NOTE PURCHASE AND EXCHANGE AGREEMENT, dated
November 18, 2003 (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"), GAP-W, LLC, a Delaware limited liability company
("GAP-W"), GAPCO GmbH & Co. KG, a German limited partnership ("GmbH
Coinvestment") and Campina Enterprises Limited ("Campina"), Cenwell Limited
("Cenwell"), Great Affluent Limited ("GAL"), Dragonfield Limited ("Dragonfield")
and Lion Cosmos Limited ("Lion" and together with Campina, Cenwell, GAL and
Dragonfield, each a "CK Purchaser" and, collectively, the "CK Purchasers"),
WHEREAS, upon the terms and conditions set forth in this
Agreement, the Company proposes to issue and sell, at the Initial Closing,
convertible notes, substantially in the form attached hereto as Exhibit A (each
a "Note" and, collectively, the "Notes") having an aggregate principal amount of
ten million dollars ($10,000,000), in the face amount set forth opposite such
Lender's (as hereinafter defined) name on Schedule 2.1 hereto, that are, upon
requisite stockholder approval and upon the terms and conditions set forth in
this Agreement, convertible into shares, par value $0.001 per share, of Series E
Redeemable Convertible Preferred Stock of the Company (the "Series E Preferred
Stock"); and
WHEREAS, upon Stockholder Approval (as hereinafter defined)
and upon the terms and conditions set forth in this Agreement and the Notes, the
Lenders shall convert such Notes into that number of shares of Series E
Preferred Stock issuable upon the conversion thereof (in accordance with the
terms set forth therein), in exchange for the surrender to the Company by such
Lender of its Notes; and
WHEREAS, upon Stockholder Approval and upon the terms and
conditions set forth in this Agreement, the Company proposes to issue to each of
the CK Purchasers, on the Subsequent Closing Date, the aggregate number of
shares of Series E Preferred Stock set forth opposite such CK Purchaser's name
on Schedule 2.3 hereto in exchange for the surrender to the Company by such CK
Purchaser of its CK Sub Notes (as hereinafter defined);
WHEREAS, upon Stockholder Approval and upon the terms and
conditions set forth in this Agreement, the Company proposes to amend and
restate the terms of the Cumulative Redeemable Convertible Series D Preferred
Stock (the "Series D Preferred Stock"), substantially as set forth in the
Amended and Restated Series D Certificate of Determination; and
WHEREAS, upon Stockholder Approval, the Company may issue
additional shares of Series E Preferred Stock as permitted by Section 2.7 below
and the Company will initiate and consummate the Rights Offering (as hereinafter
defined):
NOW, THEREFORE, in consideration of the mutual covenants and
agreements set forth herein and for good and valuable consideration, the receipt
and adequacy of which are hereby acknowledged, the parties hereto agree as
follows:
ARTICLE I
DEFINITIONS
1.1 Definitions. As used in this Agreement, and unless
the context requires a different meaning, the following terms have the meanings
indicated:
"Affiliate" shall mean any Person who is an "affiliate" as
defined in Rule 12b-2 of the General Rules and Regulations under the Exchange
Act.
"Agreement" means this Agreement as the same may be amended,
supplemented or modified in accordance with the terms hereof.
"Amended and Restated Registration Rights Agreement" means the
Amended and Restated Registration Rights Agreement, substantially in the form
attached hereto as Exhibit B.
"Amended and Restated Series D Certificate of Determination"
means the Amended and Restated Certificate of Determination of Preferences of
Series D Cumulative Redeemable Convertible Preferred Stock, substantially in the
form attached hereto as Exhibit C, which shall be duly filed with the Secretary
of State of the State of California as soon as practicable following Stockholder
Approval.
"Amended and Restated Stockholders Agreement" means the
Amended and Restated Stockholders Agreement, substantially in the form attached
hereto as Exhibit D.
"Amendment to Preferred Stock Rights Agreement" means an
amendment to the Company's Preferred Stock Rights Agreement to permit the
Lenders and the CK Purchasers to purchase securities being offered by the
Company hereunder without causing such Lenders or CK Purchasers to become
Acquiring Persons (as defined in the Preferred Stock Rights Agreement).
"Articles of Incorporation" means the Amended and Restated
Articles of Incorporation of the Company in effect on the Initial Closing Date
and attached hereto as Exhibit E.
"Basic Subscription Privilege" has the meaning set forth in
Section 8.7(b) of this Agreement.
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"Board of Directors" means the Board of Directors of the
Company.
"Business Day" means any day other than a Saturday, Sunday or
other day on which commercial banks in the State of New York or the State of
California are authorized or required by law or executive order to close.
"By-laws" means the by-laws of the Company in effect on the
Initial Closing Date and attached hereto as Exhibit F.
"Campina" has the meaning set forth in the preamble to this
Agreement.
"Cenwell" has the meaning set forth in the preamble to this
Agreement.
"CK Purchasers" has the meaning set forth in the preamble to
this Agreement.
"CK 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, and purchased by the CK Purchasers and held by
the CK Purchasers as of the Subsequent Closing Date.
"Claims" has the meaning set forth in Section 3.5 of this
Agreement.
"Code" means the Internal Revenue Code of 1986, as amended, or
any successor statute thereto.
"Commission" means the United States Securities and Exchange
Commission or any similar agency then having jurisdiction to enforce the
Securities Act and Exchange Act.
"Common Stock" means the common stock of the Company, par
value $0.001 per share.
"Commonly Controlled Entity" means any entity which is under
common control with the Company within the meaning of Code Section 414(b), (c),
(m), (o) or (t).
"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
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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.
"Conversion" has the meaning set forth in Section 2.1(a).
"Copyrights" means any foreign or United States copyright
registrations and applications for registration thereof, and any non-registered
copyrights.
"Dragonfield" has the meaning set forth in the preamble to
this Agreement.
"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.
"Exchange" has the meaning set forth in Section 2.3 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 2.3 of
this Agreement.
"Financial Statements" has the meaning set forth in Section
3.10 of this Agreement.
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"GAAP" means United States generally accepted accounting
principles in effect from time to time.
"GAL" has the meaning set forth in the preamble to this
Agreement.
"GAP Coinvestment" has the meaning set forth in the preamble
to this Agreement.
"GAP LP" has the meaning set forth in the preamble to this
Agreement.
"GAP-W" has the meaning set forth in the preamble to this
Agreement.
"GapStar" has the meaning set forth in the preamble to this
Agreement.
"Governmental Authority" means the government of any nation,
state, city, locality or other political subdivision thereof, any entity
exercising executive, legislative, judicial, regulatory or administrative
functions of or pertaining to government, and any corporation or other entity
owned or controlled, through stock or capital ownership or otherwise, by any of
the foregoing.
"Indebtedness" means, as to any Person, (a) all obligations of
such Person for borrowed money (including, without limitation, reimbursement and
all other obligations with respect to surety bonds, letters of credit and
bankers' acceptances, whether or not matured), (b) all obligations of such
Person to pay the deferred purchase price of property or services, except trade
accounts payable and accrued commercial or trade liabilities arising in the
ordinary course of business, (c) all interest rate and currency swaps, caps,
collars and similar agreements or hedging devices under which payments are
obligated to be made by such Person, whether periodically or upon the happening
of a contingency, (d) all indebtedness created or arising under any conditional
sale or other title retention agreement with respect to property acquired by
such Person (even though the rights and remedies of the seller or lender under
such agreement in the event of default are limited to repossession or sale of
such property), (e) all obligations of such Person under leases which have been
or should be, in accordance with GAAP, recorded as capital leases, (f) all
indebtedness secured by any Lien (other than Permitted Liens) on any property or
asset owned or held by that Person regardless of whether the indebtedness
secured thereby shall have been assumed by that Person or is non-recourse to the
credit of that Person, and (g) any Contingent Obligation of such Person.
"Indemnified Party" has the meaning set forth in Section 7.1
of this Agreement.
"Indemnifying Party" has the meaning set forth in Section 7.1
of this Agreement.
"Initial Closing" has the meaning set forth in Section 2.6(a)
of this Agreement.
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"Initial Closing Date" has the meaning set forth in Section
2.6(a) of this Agreement.
"Intellectual Property" has the meaning set forth in Section
3.18 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.
"Investment" means (i) the acquisition (whether for cash,
property, services, assumption of Indebtedness, securities or otherwise) of
assets (other than equipment, inventory, supplies or other assets acquired in
the ordinary course of business of the Company), capital stock, bonds, notes,
debentures, partnership, joint venture or other ownership interests or other
securities of any Person, (ii) any deposit with, or advance, loan or other
extension of credit to, or on behalf of, any Person (other than deposits made in
connection with the purchase of equipment, inventory, services, leases, supplies
or other assets in the ordinary course of business of the Company), (iii) any
other capital contribution to or investment in such Person, including, without
limitation, any guaranty obligation incurred for the benefit of such Person. For
the sake of clarity, Investments shall include any transfer of property or
assets by the Company to any of its Subsidiaries or by any Subsidiary of the
Company to any other Subsidiary.
"IP Agreements" has the meaning set forth in Section
3.18(a)(iii) of this Agreement.
"Issuable Shares" has the meaning set forth in Section 2.1(a)
of this Agreement.
"Knowledge" means the knowledge of the Company and Paul
Bartlett, Tracy Currie, Matthew Hobart, William E. McGlashin, Jr. and Michael J.
Zukerman after due inquiry.
"Lenders" means GAP LP, GAP Coinvestment, GapStar, GAP-W and
GmbH Coinvestment and any transferees to whom the Notes purchased by any of the
foregoing are transferred after the date hereof and in accordance with the terms
of such Notes.
"Liabilities" has the meaning set forth in Section 3.16 of
this Agreement.
"Lien" means any mortgage, deed of trust, pledge,
hypothecation, assignment, encumbrance, lien (statutory or other) or preference,
priority, right or other security interest or preferential arrangement of any
kind or nature whatsoever (excluding preferred stock and equity related
preferences).
"Lion" has the meaning set forth in the preamble to this
Agreement.
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"Losses" has the meaning set forth in Section 7.1 of this
Agreement.
"Material Contractual Obligations" has the meaning set forth
in Section 3.8 of this Agreement.
"Nasdaq" means The Nasdaq Stock Market, Inc.
"Notes" has the meaning set forth in the recitals to this
Agreement.
"Orders" has the meaning set forth in Section 3.2 of this
Agreement.
"Patents" means any foreign or United States patents and
patent applications, including any divisions, continuations,
continuations-in-part, substitutions or reissues thereof, whether or not patents
are issued on such applications and whether or not such applications are
modified, withdrawn or resubmitted.
"Permitted Investments" means (i) Investments in cash or cash
equivalents, (ii) accounts receivable created, acquired or made in the ordinary
course of business and payable or dischargeable in accordance with customary
trade terms; (iii) Investments existing on the Initial Closing Date, and listed
on Schedule 3.27 hereto, (iv) guaranty obligations permitted by Section 5.3 of
the Security Agreement, (v) loans to employees, directors or officers of the
Company in connection with the award of convertible bonds or capital stock under
a stock incentive plan, stock option plan or other equity-based compensation
plan or arrangement, (vi) other advances or loans to employees, directors,
officers or agents of the Company in the ordinary course of business not to
exceed $500,000 in the aggregate at any time outstanding; (vii) loans, advances
and Investments in or by foreign Subsidiaries; (viii) any acquisition for which
the prior written consent of the Lenders holding a majority of the outstanding
principal amount of all of the Notes has been obtained, (ix) other loans,
advances and investments of a nature not contemplated by the foregoing sections
in an amount not to exceed $500,000 in the aggregate at any time outstanding or
(x) Investments by the Company in the Guarantor (as defined in the Security
Agreement).
"Permitted Liens" has the meaning set forth in the Note.
"Person" means any individual, firm, corporation, partnership,
trust, incorporated or unincorporated association, joint venture, joint stock
company, limited liability company, Governmental Authority or other entity of
any kind, and shall include any successor (by merger or otherwise) of such
entity.
"Plan" means any employee benefit plan, arrangement, policy,
program, agreement or commitment (whether or not an employee plan within the
meaning of Section 3(3) of ERISA), including, without limitation, any
employment, consulting or deferred compensation agreement, executive
compensation, bonus, incentive, pension, profit-sharing, savings, retirement,
stock option, stock purchase or severance pay plan, any life, health, disability
or accident insurance plan, whether oral or written, whether or
7
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.
"Proportionate Percentage" has the meaning set forth in
Section 8.7 of this Agreement.
"Proxy Statement" has the meaning set forth in Section 8.4 of
this Agreement.
"Purchaser Subscription Privilege" has the meaning set forth
in Section 8.7 of this Agreement.
"Record Date" shall mean the date of this Agreement.
"Requirements of Law" means, as to any Person, any law
(including Environmental Laws), statute, treaty, rule, regulation, right,
privilege, qualification, license or franchise or determination of an arbitrator
or a court or other Governmental Authority or stock exchange, in each case
applicable or binding upon such Person or any of its property or to which such
Person or any of its property is subject or pertaining to any or all of the
transactions contemplated or referred to herein.
"Retiree Welfare Plan" means any welfare plan (as defined in
Section 3(1) of ERISA) that provides benefits to current or former employees
beyond their retirement or other termination of service (other than coverage
mandated by Section 4980A of the Code, commonly referred to as "COBRA," the cost
of which is fully paid by the current or former employee or his or her
dependents).
"Rights Offering" shall mean a rights offering for an
aggregate amount of up to $21,000,000 of shares of Series E Preferred Stock
pursuant to which the Company will distribute transferable rights to the
Company's holders of Common Stock as of the Record Date.
"Rights Shares" means the shares of Series E Preferred Stock
issuable upon exercise of the Series E Purchase Rights and the shares of the
Common Stock issuable upon conversion of such shares of Series E Preferred
Stock.
"SEC Reports" has the meaning set forth in Section 3.10 of
this Agreement.
"Securities" has the meaning set forth in Section 4.8 of this
Agreement.
"Securities Act" means the Securities Act of 1933, as amended,
and the rules and regulations of the Commission thereunder.
"Security Agreement" has the meaning set forth in the Notes.
"Series D Preferred Stock" has the meaning set forth in the
recitals to this Agreement.
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"Series E Certificate of Determination" means the Certificate
of Determination of Preferences of Series E Redeemable Convertible Preferred
Stock, substantially in the form attached hereto as Exhibit G, which shall be
duly filed with the Secretary of State of the State of California as soon as
practicable following Stockholder Approval.
"Series E Preferred Stock" has the meaning set forth in the
recitals to this Agreement.
"Series E Price Per Share" means $1.50 per share of Series E
Preferred Stock (subject to anti-dilution adjustments for a subdivision,
consolidation or reclassification of Common Stock).
"Series E Purchase Rights" means those rights to purchase
Series E Preferred Stock issued in the Rights Offering.
"Subscription Price" means $1.50 (subject to anti-dilution
adjustments for a subdivision, consolidation or reclassification of Common
Stock).
"Software" means any computer software programs, source code,
object code, data and documentation, including, without limitation, any computer
software programs that incorporate and run the Company's pricing models,
formulae and algorithms.
"Stock Equivalents" means any security or obligation which is
by its terms convertible into or exchangeable or execrable for shares of common
stock or other capital stock of the Company, and any option, warrant or other
subscription or purchase right with respect to common stock or such other
capital stock.
"Stock Option Plans" means the Company's stock option plans
and employee purchase plans pursuant to which shares of restricted stock and
options to purchase shares of Common Stock are reserved and available for grant
to officers, directors, employees and consultants of the Company.
"Stockholder Approval" has the meaning set forth in Section
3.24 of this Agreement.
"Subject Shares" has the meaning set forth in Section 2.3 of
this Agreement.
"Subsequent Closing" has the meaning set forth in Section
2.6(f) of this Agreement.
"Subsequent Closing Date" has the meaning set forth in Section
2.6(f) 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
9
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.
"SVB Debt" has the meaning set forth in Section 2.5 of this
Agreement.
"Taxes" means any federal, state, provincial, county, local,
foreign and other taxes (including, without limitation, income, profits,
windfall profits, alternative, minimum, accumulated earnings, personal holding
company, capital stock, premium, estimated, excise, sales, use, occupancy, gross
receipts, franchise, ad valorem, severance, capital levy, production, transfer,
withholding, employment, unemployment compensation, payroll and property taxes,
import duties and other governmental charges and assessments), whether or not
measured in whole or in part by net income, and including deficiencies,
interest, additions to tax or interest, and penalties with respect thereto, and
including expenses associated with contesting any proposed adjustments related
to any of the foregoing.
"Trade Secrets" means any trade secrets, research records,
processes, procedures, manufacturing formulae, technical know-how, technology,
blue prints, designs, plans, inventions (whether patentable and whether reduced
to practice), invention disclosures and improvements thereto.
"Trademarks" means any foreign or United States trademarks,
service marks, trade dress, trade names, brand names, designs and logos,
corporate names, product or service identifiers, whether registered or
unregistered, and all registrations and applications for registration thereof.
"Transaction Documents" means, collectively, this Agreement,
the Amended and Restated Stockholders Agreement, the Amended and Restated
Registration Rights Agreement, the Notes, the Security Agreement, the Warrant
Amendments, the Waiver and the Amendment to the Preferred Stock Rights
Agreement.
"Waiver" means the Waiver of the Preemptive Rights and
Standstill, dated the date hereof, pursuant to which the Company and each of the
other parties thereto shall have waived the provisions set forth in Section 2
and Section 4, as applicable, of that certain Stockholders Agreement, dated as
of November 8, 2001, among the Company and each of the other parties thereto.
"Warrant" or "Warrants," as the case may be, means those
certain warrants to purchase Common Stock issued to the Lenders by the Company
pursuant to that certain Stock and Warrant Purchase and Exchange Agreement,
dated as of November 8, 2001.
"Warrant Amendment" or "Warrant Amendments," as the case may
be, has the meaning set forth in Section 2.6(g)(i) of this Agreement.
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ARTICLE II
PURCHASE AND SALE OF NOTES; CONVERSION; EXCHANGE
2.1 Purchase and Sale of Notes.
(a) Subject to the terms and conditions of this
Agreement, on the Initial Closing Date, each of the Lenders, severally and not
jointly, agrees to purchase, and the Company agrees to sell and issue to each
Lender, a Note, in the principal amount set opposite such Lender's name on
Schedule 2.1 hereto. Each of the Notes shall be due and payable upon the terms
and conditions set forth in the Notes and herein. Subject to Stockholder
Approval and the terms and conditions of this Agreement, on the Subsequent
Closing Date, the Notes shall convert into shares of Series E Preferred Stock in
accordance with the terms thereof, and the Company shall issue to each Lender
that number of shares of Series E Preferred Stock issuable upon such conversion,
in exchange for the surrender to the Company by each Lender of its Notes (the
"Conversion") (all of the shares of Series E Preferred Stock issuable upon
conversion of the Notes referred to herein as the "Issuable Shares").
(b) All payments by the Company under the Notes of
principal and interest shall be as set forth in the Notes.
2.2 Filings. As promptly as practicable following the
Stockholder Approval and upon the terms and conditions of this Agreement, on or
before the Subsequent Closing Date, the Company shall file with the Secretary of
State of the State of California: (a) an amendment to the Amended and Restated
Articles of Incorporation to increase the authorized common stock and preferred
stock of the Company; (b) the Amended and Restated Series D Certificate of
Determination; and (c) the Series E Certificate of Determination.
2.3 Exchange of CK Sub Notes. Subject to Stockholder
Approval and the terms and conditions of this Agreement, on the Subsequent
Closing Date, the Company shall issue to each CK Purchaser that number of shares
of Series E Preferred Stock set forth opposite such CK Purchaser's name on
Schedule 2.3 hereto, in exchange for the surrender to the Company by such CK
Purchaser of its CK Sub Notes in the principal face amount set forth opposite
such CK Purchaser's name on Schedule 2.3 hereto (the "Exchange") (all of the
shares of Series E Preferred Stock being issued pursuant to the Exchange, the
"Exchange Shares" and, together with the Issuable Shares, the "Subject Shares").
2.4 Certificates of Determination. The Subject Shares
shall have the preferences and rights set forth in the Series E Certificate of
Determination. The shares of Series D Preferred Stock shall have the preferences
and rights set forth in the Amended and Restated Series D Certificate of
Determination.
2.5 Use of Proceeds. The Company shall use the proceeds
from the sale of the Notes to the Lenders to first (a) repay four million nine
hundred thousand
11
dollars ($4,900,000) of the indebtedness owed by the Company to Silicon Valley
Bank (the "SVB Debt") (immediately after which only a two million five hundred
thousand dollar ($2,500,000) letter of credit shall be outstanding under the SVB
Debt) and then (b) fund the Company's working capital.
2.6 Closings; Deliveries.
(a) Initial Closing. The purchase and sale of the Notes
under this Agreement (the "Initial Closing") shall be held as soon as
practicable following the date of this Agreement, but in any event not earlier
than November 26, 2003 (the "Initial Closing Date"), at the offices of Pillsbury
Winthrop LLP, 50 Fremont Street, San Francisco, California, or at such other
time and place as the Company and the Lenders may mutually agree. At the Initial
Closing, signature pages transmitted by facsimile will be acceptable, with
originals to immediately follow.
(b) Deliveries by the Company, the Lenders and the CK
Purchasers on the Date Hereof. On the date hereof, (i) the Company shall execute
and deliver to each Lender and each CK Purchaser this Agreement and the Waiver
and (ii) each Lender and each CK Purchaser shall execute and deliver to the
Company this Agreement and the Waiver. Signature pages transmitted by facsimile
will be acceptable, with originals to immediately follow.
(c) Deliveries by the Company at the Initial Closing. At
the Initial Closing, subject to the terms and conditions hereof, the Company
shall execute and deliver:
(i) to each Lender and CK Purchaser:
(B) the Amended and Restated
Registration Rights Agreement;
(C) the Amended and Restated
Stockholders Agreement; and
(D) such other documentation required
to be provided by the Company
pursuant to Section 5.1.
(ii) to each Lender:
(A) a Note, in the form attached hereto
as Exhibit A, in the principal
amount set forth opposite such
Lender's name on Schedule 2.1; and
(B) the Security Agreement and the
related security documents required
or contemplated by the Security
Agreement.
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(d) Deliveries by each Lender at the Initial Closing. At
the Initial Closing, subject to the terms and conditions hereof, each Lender
shall:
(i) execute and deliver to the Company and each
CK Purchaser the Amended and Restated Registration Rights Agreement;
(ii) execute and deliver to the Company and each
CK Purchaser the Amended and Restated Stockholders Agreement; and
(iii) loan to the Company, in the form of a check
or wire transfer, that amount set forth opposite such Lender's name on
Schedule 2.1.
(e) Deliveries by each CK Purchaser at the Initial
Closing. At the Initial Closing, subject to the terms and conditions hereof,
each CK Purchaser shall execute and deliver to the Company and each Lender:
(i) the Amended and Restated Registration Rights
Agreement; and
(ii) the Amended and Restated Stockholders
Agreement.
(f) Subsequent Closing. The consummation of the Exchange
and the Conversion (the "Subsequent Closing") shall take place as soon as
practicable following the satisfaction of the closing conditions set forth in
Article VI (the "Subsequent Closing Date"), at the offices of Pillsbury Winthrop
LLP, 50 Fremont Street, San Francisco, California, or at such other time and
place as the Company, the Lenders and the CK Purchasers may mutually agree. At
the Subsequent Closing, signature pages transmitted by facsimile will be
acceptable, with originals to immediately follow.
(g) Deliveries by the Company at the Subsequent Closing.
At the Subsequent Closing, subject to the terms and conditions hereof, the
Company shall execute and deliver to:
(i) each Lender, an amendment to such Lender's
Warrant, in substantially the form attached hereto as Exhibit H, such
that the exercise price of such Warrant shall be reduced to an amount
equal to the Series E Price Per Share (each a "Warrant Amendment" and,
collectively, the "Warrant Amendments");
(ii) each Lender, a certificate or certificates
in definitive form and registered in the name of each Lender,
representing such Lender's Issuable Shares;
(iii) each CK Purchaser, a certificate or
certificates in definitive form and registered in the name of each CK
Purchaser, representing such CK Purchaser's Exchange Shares;
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(iv) each Lender and CK Purchaser, an executed
copy of the Amendment to Preferred Stock Rights Agreement, in form
satisfactory to such Lender and CK Purchaser; and
(v) each Lender and CK Purchaser, such other
documentation evidencing the satisfaction of the conditions set forth
in Section 6.1.
(h) Deliveries by each Lender at the Subsequent Closing.
At the Subsequent Closing, subject to the terms and conditions hereof, each
Lender shall execute and deliver to the Company (i) its Warrant Amendment and
(ii) its Notes together with duly executed note powers for such Notes.
(i) Deliveries by each CK Purchaser at the Subsequent
Closing. At the Subsequent Closing, subject to the terms and conditions hereof,
each CK Purchaser shall deliver to the Company its CK Sub Notes together with
duly executed note powers for such CK Sub Notes.
2.7 Subsequent Sales. For a period of twelve (12) months
following the Subsequent Closing Date, the Company may sell up to 10,000,000
shares of Series E Preferred Stock to such Persons as the Company may determine
at a price equal to the Series E Price Per Share, such amount in addition to and
not including (a) the Subject Shares, (b) shares of Series E Preferred Stock
issued upon exercise of the Series E Purchase Rights or (c) shares of Series E
Preferred Stock issued in connection with the settlement of Claims. The other
terms of any such sale of shares of Series E Preferred Stock shall be the same
as those contained in the Series E Certificate of Determination and not more
favorable than the terms and conditions set forth in this Agreement.
ARTICLE III
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to each of the Lenders and
the CK 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
14
entity therein, and the Company or any of its Subsidiaries does not file any
franchise, income or other tax returns in any other jurisdiction based upon the
ownership or use of property therein or the derivation of income therefrom.
3.2 Authorization; No Contravention. The execution,
delivery and performance by the Company of this Agreement and each of the other
Transaction Documents and the transactions contemplated hereby and thereby (a)
subject to Stockholder Approval with respect to the matters set forth in Section
3.24, have been duly authorized by all necessary corporate action of the
Company; (b) subject to Stockholder Approval with respect to the matters set
forth in Section 3.24, do not contravene the terms of the Articles of
Incorporation or the By-laws; (c) do not violate, conflict with or result in any
breach, default or contravention of (or with due notice or lapse of time or both
would result in any breach, default or contravention of), or the creation of any
Lien under, any Contractual Obligation of the Company or any of its Subsidiaries
or any Requirement of Law applicable to the Company or any of its Subsidiaries
except such violations or conflicts that would not reasonably be expected to
have a material adverse effect on the Condition of the Company; and (d) do not
violate any judgment, injunction, writ, award, decree or order of any nature
(collectively, "Orders") of any Governmental Authority against, or binding upon,
the Company or any of its Subsidiaries.
3.3 Governmental Authorization; Third Party Consents.
Except for the Stockholder Approval and as set forth in Schedule 3.3, no
approval, consent, compliance, exemption, authorization or other action by, or
notice to, or filing with, any Governmental Authority or any other Person, and
no lapse of a waiting period under a Requirement of Law, is necessary or
required in connection with the execution, delivery or performance (including,
without limitation, the sale, issuance and delivery of the 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 and each of the other
Transaction Documents (other than the Warrant Amendments and the Amendment to
the Preferred Stock Rights Agreement) have been, and as of the Subsequent
Closing Date, each of the Warrant Amendments and Amendment to the Preferred
Stock Rights Agreement, will have been, duly executed and delivered by the
Company, and this Agreement and each of the other Transaction Documents (other
than the Warrant Amendments and the Amendment to the Preferred Stock Rights
Agreement) constitute, and as of the Subsequent Closing Date, each of the
Warrant Amendments and Amendment to the Preferred Stock Rights Agreement 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,
15
arbitrations or investigations (collectively, "Claims") pending or, to the
Knowledge of the Company, threatened, at law, in equity, in arbitration or
before any Governmental Authority against the Company or any of its Subsidiaries
that seeks in excess of $50,000 in damages nor is the Company aware that there
is any basis for any of the foregoing. The foregoing includes, without
limitation, Claims pending or, to the Knowledge of the Company, threatened or
any basis therefor known by the Company involving the prior employment of any
employee of the Company or any of its Subsidiaries, their use in connection with
the business of the Company or any of its Subsidiaries of any information or
techniques allegedly proprietary to any of their former employers or their
obligations under any agreements with prior employers. No Order has been issued
by any court or other Governmental Authority against the Company or any of its
Subsidiaries purporting to enjoin or restrain the execution, delivery or
performance of this Agreement or any of the other Transaction Documents.
3.6 Compliance with Laws. The Company and each of its
Subsidiaries is in compliance in all material respects with all Requirements of
Law and all Orders issued by any court or Governmental Authority against the
Company in all respects. To the Company's Knowledge, there are no Requirements
of Law which could reasonably be expected to prohibit or restrict the Company or
any of its Subsidiaries from, or otherwise materially adversely effect the
Company or any of its Subsidiaries in, conducting its business in any
jurisdiction in which it now conducts its business.
3.7 Capitalization.
(a) (i) As of the date of this Agreement, the
authorized capital stock of the Company consists of (A) 125,000,000
shares of Common Stock, of which 20,538,794 shares are issued and
outstanding, (B) one share of Special Voting Stock, par value $0.001
per share, of the Company, which is issued and outstanding, (C) 75,000
shares of Series C Preferred Stock, par value $0.001 per share, of the
Company, of which no shares are issued and outstanding, (D) 4,000,000
shares of Series D Preferred Stock, all of which are issued and
outstanding, and (E) 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 19,842,011,
of which 12,615,017 have been granted. The Company has reserved an
aggregate of 29,263,333 shares of Common Stock for issuance upon
conversion of the Subject Shares and 2,024,350 shares of Common Stock
for issuance upon exercise of the Warrants.
(ii) As of the Subsequent Closing Date, the
authorized capital stock of the Company shall consist of (A) 21,092,708
shares of Common Stock, (B) one share of Special Voting Stock, par
value $0.001 per share, of the Company (C) 75,000 shares of Series C
Preferred Stock, par value $0.001 per share, of the Company, (D)
4,188,587 shares of Series D Preferred Stock, (E) a sufficient number
of shares of Series E Preferred Stock to settle certain claims and to
consummate the Conversion, the Exchange, the Rights Offering and the
transactions contemplated by Section 2.7 of this Agreement, and (F) a
number of
16
shares of undesignated "blank check" preferred stock agreed upon by the
Company, the Lenders and the CK Purchasers.
(iii) Except as set forth on Schedule 3.7(a) and
except for the Warrants, there are no options, warrants, conversion
privileges, subscription or purchase rights or other rights presently
outstanding to purchase or otherwise acquire (A) any authorized but
unissued, unauthorized or treasury shares of the Company's capital
stock, (B) any Stock Equivalents or (C) any other securities of the
Company and there are no commitments, contracts, agreements,
arrangements or understandings to which the Company is a party to issue
any shares of the Company's capital stock or any Stock Equivalents or
other securities of the Company.
(b) Upon the Initial Closing Date, the Notes shall be
duly authorized, and assuming the accuracy of the representations and warranties
of the Lenders set forth in Article IV of this Agreement, will be issued in
compliance with the registration and qualification requirements of all
applicable federal, state and foreign securities laws and will be free and clear
of all other Liens.
(c) Upon the Subsequent Closing Date, the Subject Shares
shall be duly authorized, and when issued and delivered to the Lenders and the
CK Purchasers and upon the consummation of the Conversion and the Exchange on
the Subsequent Closing Date, will be validly issued, fully paid and
non-assessable, and assuming the accuracy of the representations and warranties
of the Lenders and the CK 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. Upon the Subsequent Closing Date, the
shares of Common Stock issuable upon conversion of the Subject Shares and the
shares of Series D Preferred Stock and upon exercise of the Warrants, shall have
been duly reserved for issuance and will be validly issued, fully paid and
non-assessable and not subject to any preemptive rights or similar rights that
have not been satisfied, will be issued in compliance with the registration and
qualification requirements of all applicable federal and state securities laws
and will be free and clear of all other Liens. None of the issued and
outstanding shares of Common Stock were issued in violation of any preemptive
rights.
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
17
condition exist that with notice or lapse of time or both would constitute a
default thereunder. To the Knowledge of the Company, no other party to any such
Contractual Obligation is in default thereunder, nor does any condition exist
that with notice or lapse of time or both would constitute a default by such
other party thereunder.
3.9 Title to Properties. The Company and each of its
Subsidiaries has good, record and marketable title in fee simple to, or holds
interests as lessee under leases in full force and effect in, all real property
used in connection with its business or otherwise owned or leased by it. The
Company and each of its Subsidiaries owns and has good, valid and marketable
title to all of its properties and assets used in its business or reflected as
owned on the Financial Statements, in each case free and clear of all Liens,
except for Permitted Liens, or that would required to be described in the notes
to the Financial Statements.
3.10 Reports; Financial Statements.
(a) As of the respective dates of their filing with the
Commission, all reports, registration statements and other filings, together
with any amendments thereto, filed by the Company with the Commission since June
30, 2000 (the "SEC Reports"), complied in all material respects with the
applicable requirements of the Securities Act, the Exchange Act, and the rules
and regulations of the Commission promulgated thereunder, except as disclosed in
the SEC Reports. 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
Lenders and CK Purchasers true and complete copies of, or will make available at
each Lender's or CK 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, 2003 (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, 2003, relating to 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 Lenders and the CK 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, 2003. 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
18
Initial Closing Date or the Subsequent Closing Date, as the case may be (the
"Financial Statements"), (i) have been or will be prepared in accordance with
the published rules and regulations of the Commission and GAAP consistently
applied during the periods involved (except as may be indicated in the notes
thereto) and (ii) fairly present or will fairly present in all material respects
the consolidated financial position of the Company and its Subsidiaries as of
the respective dates thereof and the consolidated results of operations,
statements of stockholders' equity and cash flows for the periods indicated,
except that any unaudited interim financial statements were or will be subject
to normal and recurring year-end adjustments and may omit footnote disclosure as
permitted by regulations of the Commission.
3.11 Taxes. (a) The Company and each of its Subsidiaries
has paid all Taxes which have come due and are required to be paid by it through
the date hereof, and all deficiencies or other additions to Tax, interest and
penalties owed by it in connection with any such Taxes, other than Taxes being
disputed by the Company in good faith for which adequate reserves have been made
in accordance with GAAP; (b) the Company and each of its Subsidiaries has timely
filed or caused to be filed all returns for Taxes that it is required to file on
and through the date hereof (including all applicable extensions), and all such
Tax returns are accurate and complete in all material respects; (c) with respect
to all Tax returns of the Company and each of its Subsidiaries, (i) there is no
unassessed Tax deficiency proposed or, to the Knowledge of the Company,
threatened against the Company or any of its Subsidiaries and (ii) no audit is
in progress with respect to any return for Taxes, no extension of time is in
force with respect to any date on which any return for Taxes was or is to be
filed and no waiver or agreement is in force for the extension of time for the
assessment or payment of any Tax; (d) all provisions for Tax liabilities of the
Company and each of its Subsidiaries have been disclosed in the Financial
Statements and made in accordance with GAAP consistently applied, and all
liabilities for Taxes of the Company and each of its Subsidiaries attributable
to periods prior to or ending on the Initial Closing Date or the Subsequent
Closing Date, as the case may be, have been adequately disclosed in the
Financial Statements; and (e) there are no Liens for Taxes on the assets of the
Company or any of its Subsidiaries, other than Permitted Liens.
3.12 No Material Adverse Change; Ordinary Course of
Business. Since December 31, 2002, except as disclosed in or incorporated by
reference in the SEC Reports, (a) there has not been any material adverse change
in the Condition of the Company, (b) neither the Company nor any of its
Subsidiaries has participated in any transaction material to the Condition of
the Company, including, without limitation, declaring or paying any dividend or
declaring or making any distribution to its stockholders except out of the
earnings of the Company or its Subsidiary, as the case may be, (c) neither the
Company nor any of its subsidiaries has entered into any Material Contractual
Obligation, other than in the ordinary course of business and (d) there has not
occurred a material change in the accounting principles or practice of the
Company or any of its Subsidiaries except as required by reason of a change in
GAAP.
3.13 Private Offering. Neither the Company nor any
authorized Person acting on its behalf has, in connection with the offer, sale,
exchange or issuance of the
19
Notes or the Subject Shares, engaged in (a) any form of general solicitation or
general advertising (as those terms are used within the meaning of Rule 502(c)
under the Securities Act), (b) any action involving a public offering within the
meaning of Section 4(2) of the Securities Act, or (c) any action that would
require the registration under the Securities Act of the offering, sale,
exchange or issuance of the Notes and the Subject Shares 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 Initial Closing Date or the
Subsequent Closing Date, as the case may be, make, directly or indirectly, any
offer or sale of the Notes or the Subject Shares or of securities of the same or
similar class as the Notes or the Subject Shares 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 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.
20
(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, 2003 in the ordinary course of business.
The Company has no Knowledge of any circumstance, condition, event or
arrangement that could reasonably be expected to give rise hereafter to any
Liabilities of the Company or any of its Subsidiaries that, individually or in
the aggregate, could have a material adverse effect on the Condition of the
Company.
3.17 Affiliate Transactions. In the twelve (12) months
preceding the date hereof, neither the Company nor any of its Subsidiaries has
sold, leased or otherwise transferred any property or assets to, or purchased,
leased or otherwise acquired any property or assets from, or otherwise engaged
in any other transactions with, any of its Affiliates, except in (a)
transactions that are at prices and on terms and conditions not less favorable
to the Company or such Subsidiary than could be obtained on an arm's length
basis from unrelated third parties, (b) transactions exclusively between the
Company and one or more if its Subsidiaries, or between two or more Subsidiaries
of the Company, and which do not involve any other Affiliate and (c)
transactions under the agreements listed on Schedule 3.17 hereto.
21
3.18 Intellectual Property.
(a) (i) The Company and each of its Subsidiaries is
the owner of all, or has the license or right to use, sell and license all of,
the Copyrights, Patents, Trade Secrets, Trademarks, Internet Assets, Software
and other proprietary rights (collectively, "Intellectual Property") that are
used in connection with its business as presently conducted, free and clear of
all Liens, other than Permitted Liens.
(i) 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.
(ii) The Company and each of its Subsidiaries has
substantially performed all obligations imposed upon it under all
Intellectual Property licenses, sublicenses, distributor agreements and
other agreements under which the Company or any of its Subsidiaries is
either a licensor, licensee or distributor, except such licenses,
sublicenses and other agreements relating to off-the-shelf software
which is commercially available on a retail basis and used solely on
the computers of the Company or its Subsidiaries (collectively, the "IP
Agreements"). The Company and each of its Subsidiaries is not, nor to
the Knowledge of the Company is any other party thereto, in breach of
or default thereunder in any respect, nor is there any event which with
notice or lapse of time or both would constitute a default thereunder.
All of the IP Agreements are valid, enforceable and in full force and
effect, and will continue to be so on identical terms immediately
following the Initial Closing and the Subsequent Closing, as the case
may be, except as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, fraudulent conveyance or
transfer, moratorium or similar laws affecting the enforcement of
creditors' rights generally and by general principles of equity
relating to enforceability (regardless of whether considered in a
proceeding at law or in equity).
(iii) 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.
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(c) No former employer of any employee of the Company or
any of its Subsidiaries has made a claim against the Company or any of its
Subsidiaries or, to the Knowledge of the Company, against any other Person, that
such employee or such consultant is utilizing Intellectual Property of such
former employer.
(d) To the Knowledge of the Company, none of the Trade
Secrets, wherever located, the value of which is contingent upon maintenance of
confidentiality thereof, has been disclosed to any Person other than employees,
representatives and agents of the Company or any of its Subsidiaries, except as
required pursuant to the filing of a patent application by the Company or any of
its Subsidiaries.
(e) It is not necessary for the business of the Company
or any of its Subsidiaries to use any Intellectual Property owned by any
director, officer, employee or consultant of the Company or any of its
Subsidiaries (or persons the Company or any of its Subsidiaries presently
intends to hire). To the Company's Knowledge, at no time during the conception
or reduction to practice of any of the Intellectual Property of the Company or
any of its Subsidiaries was any developer, inventor or other contributor to such
Intellectual Property operating under any grants from any Governmental Authority
or subject to any employment agreement, invention assignment, nondisclosure
agreement or other Contractual Obligation with any Person that could materially
adversely affect the rights of the Company or any of its Subsidiaries to its
Intellectual Property.
3.19 Privacy of Customer Information. Neither the Company
nor any of its Subsidiaries use any of the customer information it receives
through its website or otherwise in an unlawful manner, or in a manner violative
of the privacy policy of the Company or its Subsidiary, as the case may be, or
the privacy rights of its customers. Neither the Company nor any of its
Subsidiaries has collected any customer information through its website in an
unlawful manner or in violation of its privacy policy. The Company and each of
its Subsidiaries has adequate security measures in place to protect the customer
information it receives through its website and which it stores in its computer
systems from illegal use by third parties or use by third parties in a manner
violative of the rights of privacy of its customers. The Company and each of its
Subsidiaries represents to its customers that it assures complete security as to
the customer information it receives through its website.
3.20 Potential Conflicts of Interest. Except as set forth
on Schedule 3.20 no officer, director or stockholder beneficially owning more
than five percent (5%) of the outstanding shares of Common Stock, to the
Knowledge of the Company, no spouse of any such officer, director or
stockholder, and, to the Knowledge of the Company, no Affiliate of any of the
foregoing (a) owns, directly or indirectly, any interest in (excepting less than
one percent (1%) stock holdings for investment purposes in securities of
publicly held and traded companies), or is an officer, director, employee or
consultant of, any Person which is, or is engaged in business as, a competitor,
lessor, lessee, supplier, distributor, or customer of, or lender to or borrower
from, the Company or any of its Subsidiaries; (b) owns, directly or indirectly,
in whole or in part, any tangible or intangible property that the Company or any
of its Subsidiaries use, in the conduct of business; or (c) has any cause of
action or other claim whatsoever against, or
23
owes or has advanced any amount to, the Company or any of its Subsidiaries,
except for claims in the ordinary course of business such as for accrued
vacation pay, accrued benefits under employee benefit plans, and similar matters
and agreements existing on the date hereof.
3.21 Trade Relations. There exists no actual or, to the
Knowledge of the Company, threatened termination, cancellation or limitation of,
or any material adverse modification or change in, the business relationship of
the Company or any of its Subsidiaries, or the business of the Company or any of
its Subsidiaries, with any customer or supplier or any group of customers or
suppliers whose purchases or inventories provided to the business of the Company
or any of its Subsidiaries are individually or in the aggregate material to the
Condition of the Company.
3.22 Outstanding Borrowing. Schedule 3.22 sets forth the
amount of all Indebtedness of the Company and each of its Subsidiaries as of the
date hereof, the Liens that relate to such Indebtedness and that encumber the
Assets and the name of each lender thereof. No Indebtedness is entitled to any
voting rights in any matters voted upon by the holders of the Common Stock.
3.23 Broker's, Finder's or Similar Fees. Except as set
forth on Schedule 3.23, there are no brokerage commissions, finder's fees or
similar fees or commissions payable by the Company or any of its Subsidiaries in
connection with the transactions contemplated hereby based on any agreement,
arrangement or understanding with the Company or any of its Subsidiaries or any
action taken by any such Person.
3.24 Stockholder Approval. The approval on the first
attempt of (a) more than fifty percent (50%) of the outstanding shares of Common
Stock and the votes represented by the Special Voting Stock, voting together as
a class, and (b) more than fifty percent (50%) of the outstanding shares of
Series D Preferred Stock, voting separately as a class, such stockholders
present in person or proxy at a properly convened meeting of the Company's
stockholders ("Stockholder Approval") are the stockholders' consents required
for the (i) filing of (A) the Amended and Restated Series D Certificate of
Determination and (B) the Series E Certificate of Determination; (ii) the
issuance of shares of Series E Preferred Stock authorized for issuance in the
Series E Certificate of Determination; (iii) the reservation and issuance of
shares of Common Stock upon conversion of the shares of Series D Preferred Stock
and the shares of Series E Preferred Stock and upon exercise of the Warrants;
(iv) an amendment to the Amended and Restated Articles of Incorporation to
increase the authorized shares of common stock and preferred stock; and (v) the
Warrant Amendment.
3.25 CCC Section. The Board of Directors has received the
opinion of Duff & Phelps, LLC, financial advisor to the Company, that the
transactions contemplated by this Agreement are fair from a financial point of
view and has taken all action necessary to exempt from the provisions of Section
1203 of the California Corporations Code, to the extent applicable, this
Agreement, any acquisition by the Lenders and the CK Purchasers of Notes and
Subject Shares pursuant to this Agreement
24
and the Series E Certificate of Determination and any conversion by the Lenders
and the CK Purchasers of Subject Shares into shares of Common Stock.
3.26 Disclosure. This Agreement and the documents and
certificates furnished to the Lenders and the CK 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.
3.27 Investments. As of the date hereof, except as set
forth on Schedule 3.27 hereto, neither the Company nor any of its Subsidiaries
has made an Investment in any Person, other than a Permitted Investment.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF THE LENDERS
AND CK PURCHASERS
Each of the Lenders and CK Purchasers, as the case may be,
hereby represents and warrants, severally and not jointly, to the Company as
follows:
4.1 Existence and Power. Such Lender or CK 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, corporate or limited liability
company, as the case may be, power and authority to execute, deliver and perform
its obligations under this Agreement and each of the other Transaction Documents
to which it is a party.
4.2 Authorization; No Contravention. The execution,
delivery and performance by such Lender or CK 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 Lender's or CK
Purchaser's organizational documents, or any amendment thereof, (c) do not
violate, conflict with or result in any breach or contravention of, or the
creation of any Lien under, any Contractual Obligation of such Lender or CK
Purchaser or any Requirement of Law applicable to such Lender or CK Purchaser,
and (d) do not violate any Orders of any Governmental Authority against, or
binding upon, such Lender or CK Purchaser.
4.3 Governmental Authorization; Third Party Consents.
Except for the Stockholder Approval, no approval, consent, compliance,
exemption, authorization or other action by, or notice to, or filing with, any
Governmental Authority or any other Person, and no lapse of a waiting period
under any Requirement of Law, is necessary or required in connection with the
execution, delivery or performance by, or enforcement against, such Lender or CK
Purchaser of this Agreement and each of the other
25
Transaction Documents to which it is a party or the transactions contemplated
hereby and thereby.
4.4 Binding Effect. This Agreement and each of the other
Transaction Documents (other than the Warrant Amendments) to which such Lender
or CK Purchaser, as the case may be, is a party, have been, and as of the
Subsequent Closing Date, each of the Warrant Amendments to which such Lender is
a party will have been, duly executed and delivered by such Lender or CK
Purchaser, as the case may be, and this Agreement and each of the other
Transaction Documents (other than the Warrant Amendments) to which such Lender
or CK Purchaser, as the case may be, is a party, constitute and, as of the
Subsequent Closing Date, each of the Warrant Amendments to which such Lender is
a party will constitute, the legal, valid and binding obligations of such Lender
or CK 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 Notes and the Subject
Shares to be acquired by such Lender or CK Purchaser, respectively, are being or
will be acquired for its own account and with no intention of distributing or
reselling such Notes or Subject Shares or any part thereof in any transaction
that would be in violation of the securities laws of the United States of
America, any state of the United States or any foreign jurisdiction, without
prejudice, however, to the rights of such Lender or CK Purchaser at all times to
sell or otherwise dispose of all or any part of such Notes or Subject Shares
under an effective registration statement under the Securities Act, or under an
exemption from such registration available under the Securities Act, and
subject, nevertheless, to the disposition of such Lender's or CK Purchaser's
property being at all times within its control. If such Lender or CK Purchaser
should in the future decide to dispose of any of such Notes or Subject Shares,
such Lender or CK 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 Lender or CK Purchaser agrees to the imprinting at
the Initial Closing and the Subsequent Closing, as the case may be, and for so
long as required by law, of a legend on certificates representing all of its
Notes, Subject Shares and shares of Common Stock issuable upon conversion of its
Subject 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
26
APPLICABLE EXEMPTION FROM THE REGISTRATION REQUIREMENTS OF
SUCH ACT AND SUCH LAWS.
4.6 Restricted Securities. Such Lender or CK Purchaser
understands that the Notes and the Subject Shares will not be registered at the
time of their issuance under the Securities Act for the reason that the sale
provided for in this Agreement is exempt pursuant to Section 4(2) of the
Securities Act and that the reliance of the Company on such exemption is
predicated in part on such Lender's or CK Purchaser's representations set forth
herein.
4.7 Accredited Investor. Such Lender or CK 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 Lender or CK 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 Notes and Subject
Shares (the "Securities"), and has so evaluated the merits and risks of such
investment. Such Lender or CK 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 Lender or CK Purchaser
acknowledges that it has received the SEC Reports and has been afforded: (a) the
opportunity to ask such questions as it has deemed necessary of, and to receive
answers from, representatives of the Company concerning the terms and conditions
of the offering of the Securities and the merits and risks of investing in the
Securities; (b) access to publicly available information about the Company and
the Subsidiaries and the Condition of the Company sufficient to enable it to
evaluate its investment; and (c) the opportunity to obtain such additional
publicly available information that the Company possesses or can acquire without
unreasonable effort or expense that is necessary to make an informed investment
decision with respect to the investment. Neither such inquiries nor any other
investigation conducted by or on behalf of such Lender or CK Purchaser or its
representatives or counsel shall modify, amend or affect such Lender's or CK
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 Lender or CK 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 Lender or CK Purchaser understands and
acknowledges that: (a) the Securities are being offered and sold to it without
registration under the Securities Act in a private placement that is exempt from
the registration
27
provisions of the Securities Act and (b) the availability of such exemption
depends in part on, and the Company will rely upon the accuracy and truthfulness
of, the foregoing representations and such Lender or CK Purchaser hereby
consents to such reliance.
ARTICLE V
CONDITIONS TO INITIAL CLOSING
5.1 Conditions to Lenders' and CK Purchasers'
Obligations. Each of the Lenders' and CK Purchasers' obligation to consummate
the transactions contemplated by the Initial Closing pursuant to this Agreement
is subject to the fulfillment at or prior to the Initial Closing of the
following conditions, any of which may be waived in whole or in part by such
Lender or CK Purchaser:
(a) Representations and Warranties. The representations
and warranties made by the Company in Article III hereof shall be true and
correct on the Initial Closing Date.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Company on or prior to the
Initial Closing Date shall have been performed or complied with.
(c) Compliance Certificate. The Company shall have
delivered to the Lenders and CK Purchasers a certificate of the Company,
executed by the Chief Executive Officer of the Company and dated as of the
Initial Closing Date, certifying to the fulfillment of the conditions specified
in Section 5.1(a) and Section 5.1(b) hereof.
(d) Secretary's Certificate. The Company shall have
delivered to the Lenders and CK Purchasers a certificate from the Company, in
form and substance satisfactory to the Lenders and CK Purchasers, dated as of
the Initial Closing Date and signed by the Secretary or an Assistant Secretary
of the Company, certifying (i) that the Company is in good standing with the
Secretary of State of the State of California and (ii) that the attached copies
of the Articles of Incorporation, the By-laws, and resolutions of the Board of
Directors of the Company approving this Agreement and each of the applicable
Transaction Documents and the transactions contemplated hereby and thereby, are
all true, complete and correct and remain unamended and in full force and
effect.
(e) Satisfactory Release of Liens. The Company shall have
delivered to the Lenders satisfactory evidence of the release of all Liens,
except for Permitted Liens, on the assets of the Company and its Subsidiaries in
order to ensure the Lender's first priority security interests upon the filing
of applicable UCC-1's.
(f) Opinion of Counsel. The Company shall have caused the
opinion of Pillsbury Winthrop LLP, dated the Initial Closing Date, relating to
the transactions contemplated by the Initial Closing, substantially in the form
attached hereto as Exhibit I to be delivered to the Lenders and CK Purchasers.
28
(g) SVB Consent. The Company shall have delivered to the
Lenders and the CK Purchasers the written consent of Silicon Valley Bank to the
execution, delivery and performance of the Transaction Documents and all of the
transactions contemplated therein.
5.2 Conditions to Company's Obligations. The Company's
obligation to consummate the transactions contemplated by the Initial Closing
pursuant to this Agreement is subject to the fulfillment at or prior to the
Initial Closing of the following conditions, any of which may be waived in whole
or in part by the Company:
(a) Representations and Warranties. The representations
and warranties made by the Lenders and CK Purchasers in Article IV hereof shall
be true and correct on the Initial Closing Date.
(b) Performance. All covenants, agreements and conditions
contained in this Agreement to be performed by the Lenders and CK Purchasers on
or prior to the Initial Closing Date shall have been performed or complied with.
ARTICLE VI
CONDITIONS TO SUBSEQUENT CLOSING
6.1 Conditions to Lenders' and CK Purchasers'
Obligations. Each of the Lenders' the CK Purchasers' obligation to consummate
the Conversion and the Exchange at the Subsequent Closing pursuant to this
Agreement is subject to the fulfillment at or prior to the Subsequent Closing of
the following conditions:
(a) Compliance with Laws. The issuance of the Subject
Shares by the Company hereunder shall be legally permitted by all laws and
regulations to which the Company is subject.
(b) Stockholder Approval. The Company shall have
delivered to the Lenders and CK Purchasers satisfactory evidence of the
Stockholder Approval.
(c) Amendment to the Amended and Restated Articles of
Incorporation. The Company shall have duly filed with the Secretary of State of
the State of California an amendment to the Amended and Restated Articles of
Incorporation to increase the authorized common stock and preferred stock of the
Company.
(d) Certificates of Determination. The Company shall have
duly filed with the Secretary of State of the State of California the Amended
and Restated Series D Certificate of Determination and the Series E Certificate
of Determination.
(e) SVB Debt Matters. The Company shall used the proceeds
from the Initial Closing to repay four million nine hundred thousand dollars
($4,900,000) of the SVB Debt.
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6.2 Conditions to the Company's Obligations. The
Company's obligation to consummate the Conversion and the Exchange at the
Subsequent Closing pursuant to this Agreement is subject to the fulfillment at
or prior to the Subsequent Closing of the following condition:
(a) Stockholder Approval. The Company shall have received
satisfactory evidence of the Stockholder Approval.
ARTICLE VII
INDEMNIFICATION
7.1 Indemnification. Except as otherwise provided in this
Article VII, the Company (the "Indemnifying Party") agrees to indemnify, defend
and hold harmless each of the Lenders and the CK Purchasers and their Affiliates
and their respective officers, directors, agents, employees, subsidiaries,
partners, members and controlling persons (each, an "Indemnified Party") to the
fullest extent permitted by law from and against any and all losses, Claims, or
written threats thereof (including, without limitation, any Claim by a third
party), damages, expenses (including reasonable fees, disbursements and other
charges of counsel incurred by the Indemnified Party in any action between the
Indemnifying Party and the Indemnified Party or between the Indemnified Party
and any third party or otherwise) or other liabilities (collectively, "Losses")
resulting from or arising out of any breach of any representation or warranty,
covenant or agreement by the Company in this Agreement, the Notes, the Security
Agreement or the Amended and Restated Stockholders Agreement. The amount of any
payment to any Indemnified Party herewith in respect of any Loss shall be of
sufficient amount to make such Indemnified Party whole for any diminution in
value of the 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
30
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, 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,
31
including any untrue or alleged untrue statement of a material fact or omission
or alleged omission to state a material fact, has been made by, or relates to
information supplied by, such Indemnifying Party or Indemnified Party, and the
parties' relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the Losses referred to above shall be deemed to include, subject to
the limitations set forth in Section 7.1 and Section 7.2, any reasonable legal
or other fees, charges or expenses reasonably incurred by such party in
connection with any investigation or proceeding.
ARTICLE VIII
COVENANTS
The Company hereby covenants and agrees with the Lenders and
CK 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 each Lender and CK Purchaser, in form
and substance satisfactory to such Lender and CK 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 comparative form the figures for
the previous year, all in reasonable detail and accompanied by a management
summary and analysis of the operations of the Company for such fiscal year and
by the opinion of a nationally recognized independent certified public
accounting firm which report shall state without qualification that such
financial statements present fairly the financial condition as of such date and
results of operations and cash flows for the periods indicated in conformity
with GAAP applied on a consistent basis;
(b) as soon as available, but in any event not later than
forty-five (45) days after the end of each of the first three fiscal quarters of
each fiscal year, the unaudited consolidated balance sheet of the Company and
its Subsidiaries, and the related statements of operations and cash flows for
such quarter and for the period commencing on the first day of the fiscal year
and ending on the last day of such quarter, all certified by an appropriate
officer of the Company as presenting fairly the consolidated financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP; and
(c) as soon as available, but in any event not later than
ten (10) days after the end of each month of each fiscal year, the unaudited
consolidated balance sheet of the Company and its Subsidiaries, and the related
statements of operations and cash flows for such month and for the period
commencing on the first day of the fiscal year
32
and ending on the last day of such month, all certified by an appropriate
officer of the Company as presenting fairly the consolidated financial condition
as of such date and results of operations and cash flows for the periods
indicated in conformity with GAAP applied on a consistent basis, subject to
normal year-end adjustments and the absence of footnotes required by GAAP.
8.2 FIRPTA Certificate. If requested by any of the
Lenders or CK 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 such Lender or CK Purchaser, in form and substance satisfactory to
such Lender or CK 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.
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 the shares of Series D Preferred Stock and upon exercise of the
Warrants, as provided in the Series E Certificate of Determination, the Amended
and Restated Series D Certificate of Determination and the 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 Amended and
Restated Series D Certificate of Determination, the Series E Certificate of
Determination and the 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 Amended and Restated Series D Certificate of
Determination, the Series E Certificate of Determination and the Warrants, and
otherwise comply with the terms hereof and thereof.
8.4 Stockholder Approval. As soon as practicable
following the Initial Closing Date, 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 matters set forth in
Section 3.24 that require 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 Lenders
and the CK 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 (a) not to contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not misleading
and (b) to comply as to form in all material respects with the applicable
provisions of the Exchange Act and the rules and regulations thereunder.
Following clearance by the Commission of the Proxy Statement, the Company shall
promptly distribute the Proxy Statement to its stockholders and call and arrange
for a special meeting of stockholders and take such other actions as are
required
33
or necessary in order to obtain the Stockholder Approval as promptly as
practicable. The Board of Directors shall recommend that the Company's
stockholders vote in favor of the Stockholder Approval.
8.5 Financial Covenants. The Company hereby covenants and
agrees that on and after the Initial Closing and until all of the obligations
under the Notes, including, without limitation, the repayment or conversion of
the principal amount and all accrued interest outstanding thereunder, have been
satisfied in full, the Company shall at all times comply with the financial and
other covenants set forth on Schedule 8.5.
8.6 SVB Debt Matters. Following the Initial Closing, the
Company shall use reasonable commercial efforts to renegotiate the terms of the
SVB Debt on terms satisfactory to the Lenders and the CK Purchasers, which terms
are anticipated to include reducing the line of credit to a five million dollar
($5,000,000) line (such amount comprising approximately two million eight
hundred thousand dollars ($2,800,000) in letters of credit and a two million two
hundred thousand dollar ($2,200,000) line of credit). In the event that such
renegotiated terms of the SVB Debt are not satisfactory to the Lenders or the CK
Purchasers, the Lenders or the CK Purchasers may demand that the Company
terminate and pay off all agreements and letters of credit with Silicon Valley
Bank and upon such demand, the Company shall effect such termination and pay
off. Upon the Subsequent Closing, the CK Purchasers shall be entitled to the
rights set forth in Section 3.5 of the Amended and Restated Stockholders
Agreement.
8.7 Rights Offering.
(a) As promptly as practicable after the date hereof, the
Company will prepare and file with the Commission a registration statement on
Form S-3 as adopted pursuant to the Securities Act (or, if Form S-3 is not then
available to the Company, on Form S-1 as adopted pursuant to the Securities Act)
(together with the Prospectus included in such registration statement, the
"Registration Statement") covering the issuance of the Series E Purchase Rights
and the Rights Shares. The consummation of the Rights Offering shall be subject
to the Company obtaining Stockholder Approval. The Lenders, the CK Purchasers
and their respective counsel will be given the opportunity to participate in all
drafting sessions and other discussions with respect to such Registration
Statement, and the Company will provide the Lenders, the CK Purchasers and their
respective counsel with any written comments or other written communications
that the Company or its counsel receives from time to time from the Commission
or its staff with respect to the Registration Statement promptly after such
communications are received by the Company. The Registration Statement will (i)
not contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading and (ii) comply in all material respects with the provisions of
applicable federal securities laws. The Company promptly will correct any
information provided by it for use in the Registration Statement if and to the
extent that such information becomes false or misleading in any material respect
or omits to state any material fact, and the Company will take all steps
necessary to cause the Registration Statement, as so corrected, to be filed with
the Commission and
34
to be disseminated to the distributees of the Series E Purchase Rights, in each
case as and to the extent required by applicable federal securities Laws. The
Company will use its reasonable commercial efforts to cause the Registration
Statement to be filed pursuant to this Section 8.7(a) to be declared effective
by the Commission as soon as possible after the Registration Statement is filed
with the Commission.
(b) Promptly following the effective date of the
Registration Statement, the Company will commence the Rights Offering (the date
the Rights Offering is commenced is referred to herein as the "Commencement
Date"). In the Rights Offering, the Company will distribute to each holder of
Common Stock as of the Record Date, at no cost to such holder, one Series E
Purchase Right for each share of Common Stock held as of the Record Date. Each
Series E Purchase Right will entitle the holder thereof, in such holder's sole
discretion (the "Basic Subscription Privilege"), to purchase, at the
Subscription Price, such holder's pro rata portion of the number of shares of
Series E Preferred Stock equal to up to $21,000,000 divided by the Subscription
Price. The Company shall not, without the express prior written consent of the
Lenders and the CK Purchasers, sell shares of Series E Preferred Stock in the
Rights Offering at any price other than the Subscription Price. If any Person
who holds a Series E Purchase Right exercises more than one Series E Purchase
Right in connection with the Rights Offering, such Person shall receive the
number of shares of Series E Preferred Stock resulting from aggregating all such
exercises, rounded down to the nearest whole share. The Rights Offering will
remain open until the 20th Business Day following the Commencement Date (the
"Expiration Date"), and the Series E Purchase Rights will expire at 5:00 p.m.,
New York, New York local time on the Expiration Date, except as otherwise
required by applicable law.
(c) Each of the Lenders severally, and not jointly, and
each of the CK Purchasers severally, and not jointly, will have the right and
option to subscribe for (but will not be obligated to subscribe for) their
Proportionate Percentage (as hereinafter defined) of those Rights Shares that
are not subscribed for through the Basic Subscription Privilege at the
Subscription Price (the "Purchaser Subscription Privilege"). "Proportionate
Percentage" means (i) in the case of the Lenders, 55% and (ii) in the case of
the CK Purchasers, 45%. If (x) the Lenders subscribe in full for their
Proportionate Percentage of the Purchaser Subscription Privilege and the CK
Purchasers do not subscribe in full for their Proportionate Percentage of the
Purchaser Subscription Privilege, then the Lenders will have the right and
option to subscribe for (but will not be obligated to subscribe for) that
portion of the CK Purchasers' Proportionate Percentage of the Purchaser
Subscription Privilege not subscribed for by the CK Purchasers and (y) the CK
Purchasers subscribe in full for their Proportionate Percentage of the Purchaser
Subscription Privilege and the Lenders do not subscribe in full for their
Proportionate Percentage of the Purchaser Subscription Privilege, then the CK
Purchasers will have the right and option to subscribe for (but will not be
obligated to subscribe for) that portion of the Lenders' Purchasers'
Proportionate Percentage of the Purchaser Subscription Privilege not subscribed
for by the Lenders. The Lenders' Proportionate Percentage shall be allocated
among the Lenders as determined by the Lenders in their sole discretion. The CK
Purchasers' Proportionate Percentage shall be allocated among the CK Purchasers
as determined by the CK Purchasers in their sole discretion.
35
(d) The Company will notify in writing the Lenders and
the CK Purchasers immediately following the Expiration Date (by no later than
9:00 am, New York, New York local time on the next succeeding Business Day
following the Expiration Date) of the amount of Rights Shares not subscribed for
in the Basic Subscription Privilege and the Lenders and the CK Purchasers shall
notify the Company by 5:00 p.m., New York, New York local time on the second
Business Day following the date such notice is delivered by the Company to the
Lenders and the CK Purchasers, of the amount of Rights Shares the Lenders and
the CK Purchasers elect to purchase pursuant to the Purchaser Subscription
Privilege. The closing of the exercise of the Purchaser Subscription Privilege
will occur on or before the 15th Business Day following the Expiration Date. At
such closing, the Lenders and the CK Purchasers shall deliver by wire transfer
the purchase price for the Rights Shares being purchased and the Company shall
deliver certificates representing the shares of Series E Preferred Stock being
acquired pursuant to the Purchaser Subscription Privilege. The Company
represents and warrants that the Purchaser Subscription Privilege complies with,
and the Company agrees to take all actions reasonably required to ensure that
the Purchaser Subscription Privilege will continue to comply with, applicable
federal securities laws. The Lenders may assign their rights under this Section
8.7 to any of their Affiliated investment entities and the CK Purchasers may
assign their assign their rights under this Section 8.7 to any of their
Affiliated investment entities.
(e) The Company will pay all expenses associated with the
Registration Statement and the Rights Offering and registration of the Rights
Shares and the Series E Purchase Rights, including, without limitation, filing
and printing fees, fees and expenses of the subscription agent, counsel and
accounting fees and expenses, costs associated with clearing the Rights Shares
and the Series E Purchase Rights for sale under applicable federal and state
securities laws, listing fees.
ARTICLE IX
TERMINATION
9.1 Termination. The Lenders' obligation to consummate
the Conversion and the CK Purchasers' obligations to consummate the Exchange
under this Agreement including, but not limited to, Sections 2.6(f), 2.6(g),
2.6(h) and 2.6(i) and Article VI of this Agreement, shall terminate in the event
that the Company is unable to obtain Stockholder Approval pursuant to Section
8.4 on the first attempt, but in any event on April 30, 2004, if Stockholder
Approval is not obtained by such date. None of the Company, the CK Purchasers or
the Lenders shall have any liability arising out of such termination.
ARTICLE X
MISCELLANEOUS
10.1 Survival of Representations and Warranties. All of
the representations and warranties made herein shall survive the execution and
delivery of
36
this Agreement until the date that is ninety (90) days after the receipt by the
Lenders and the CK Purchasers of audited financial statements of the Company for
the fiscal year ending December 31, 2004 (or, if such fiscal year changes and no
such audited consolidated financial statements are available, then the successor
fiscal year), except for (a) Sections 3.1, 3.2, 3.4, 3.7, 3.13 and 3.23, which
representations and warranties shall survive until the third anniversary of the
Initial Closing Date, and (b) Section 3.11, which shall survive until the later
to occur of (i) the lapse of the statute of limitations with respect to the
assessment of any Tax to which such representation and warranty relates
(including any extensions or waivers thereof) and (ii) sixty (60) days after the
final administrative or judicial determination of the Taxes to which such
representation and warranty relates, and no claim with respect to Section 3.11
may be asserted thereafter with the exception of claims arising out of any fact,
circumstance, action or proceeding to which the party asserting such claim shall
have given notice to the other parties to this Agreement prior to the
termination of such period of reasonable belief that a tax liability will
subsequently arise therefrom.
10.2 Notices. All notices, demands and other
communications provided for or permitted hereunder shall be made in writing and
shall be by registered or certified first-class mail, return receipt requested,
telecopier, courier service or personal delivery:
if to the Company:
Critical Path, Inc.
532 Folsom Street
San Francisco, CA 94105
Telecopy: (415) 808-8898
Attention: Chief Financial Officer
with a copy to, which shall not constitute notice to the
Company:
Pillsbury Winthrop LLP
50 Fremont Street
San Francisco, CA 94105
Telecopy: (415) 983-1200
Attention: Gregg Vignos, Esq.
if to the Lenders:
c/o General Atlantic Service Corporation
3 Pickwick Plaza
Greenwich, CT 06830
Telecopy: (203) 618-9207
Attention: Matthew Nimetz
Thomas J. Murphy
37
with a copy to, which shall not constitute notice:
Paul, Weiss, Rifkind, Wharton & Garrison LLP
1285 Avenue of the Americas
New York, New York 10019-6064
Telecopy: (212) 757-3990
Attention: Douglas A. Cifu, Esq.
if to the CK Purchasers:
c/o Campina Enterprises Limited
Great Affluent Limited
Dragonfield Limited
Lion Cosmos Limited
7th Floor
Cheung Kong Center
2 Queen's Road Central
Hong Kong
Telecopy: (852) 2845-2057
Attention: Mr. Edmond Ip
and
c/o Cenwell Limited
22nd Floor
Hutchison House
10 Harcourt Road
Hong Kong
(852) 2128-1778
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 Lenders and the CK 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 Lenders.
Except as provided in Article VII, no Person other than the parties hereto and
their successors and permitted assigns is intended to be a beneficiary of this
Agreement.
38
10.4 Amendment and Waiver.
(a) No failure or delay on the part of the Company, the
CK Purchasers or the Lenders in exercising any right, power or remedy hereunder
shall operate as a waiver thereof, nor shall any single or partial exercise of
any such right, power or remedy preclude any other or further exercise thereof
or the exercise of any other right, power or remedy. The remedies provided for
herein are cumulative and are not exclusive of any remedies that may be
available to the Company, the CK Purchasers or the Lenders at law, in equity or
otherwise.
(b) Any amendment, supplement or modification of or to
any provision of this Agreement, any waiver of any provision of this Agreement,
and any consent to any departure by the Company, the CK Purchasers or the
Lenders from the terms of any provision of this Agreement, shall be effective
(i) only if it is made or given in writing and signed by the Company, the CK
Purchasers and the Lenders, 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 Lenders or the CK
Purchasers, such amendment or waiver shall require the prior written consent of
each Lender or CK 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 California, without
regard to the principles of conflicts of law thereof.
10.8 Severability. If any one or more of the provisions
contained herein, or the application thereof in any circumstance, is held
invalid, illegal or unenforceable in any respect for any reason, the validity,
legality and enforceability of any such provision in every other respect and of
the remaining provisions hereof shall not 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.
39
10.10 Entire Agreement. This Agreement, together with the
exhibits and schedules hereto, and the other Transaction Documents are intended
by the parties as a final expression of their agreement and intended to be a
complete and exclusive statement of the agreement and understanding of the
parties hereto in respect of the subject matter contained herein and therein.
There are no restrictions, promises, representations, warranties or
undertakings, other than those set forth or referred to herein or therein. This
Agreement, together with the exhibits and schedules hereto, and the other
Transaction Documents supersede all prior agreements and understandings between
the parties with respect to such subject matter.
10.11 Fees. The Company shall reimburse each of the Lenders
and the CK Purchasers for their fees, disbursements and other charges of counsel
incurred in connection with the transactions contemplated by this Agreement
(including, but without limitation, to advise on reporting obligations of the
Lenders and/or the CK Purchasers and filings with Commission); provided, that
the aggregate amount of all such reimbursements in respect of each of the
Lenders and the CK Purchasers shall not exceed $12,500.
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, or the Lenders
or CK 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 Lenders or CK
Purchasers from disclosing information (a) that is already publicly available,
(b) that was known to such Lender or CK 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 Lender or CK 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 Lender or CK
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 Lender or CK Purchaser reasonably believes it appropriate in
order to comply with any Requirement of Law, (e) to such Lender's or CK
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 Initial Closing
and the Subsequent Closing, as the case may be, GAP LLC may disclose on its
worldwide web page, www.gapartners.com, 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 Lenders'
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.
40
10.13 Further Assurances. Each of the parties shall execute
such documents and perform such further acts (including, without limitation,
obtaining any consents, exemptions, authorizations or other actions by, or
giving any notices to, or making any filings with, any Governmental Authority or
any other Person) as may be reasonably required or desirable to carry out or to
perform the provisions of this Agreement.
10.14 Legal Representation. It is acknowledged by each of
the CK Purchasers that the Lenders have retained Paul, Weiss, Rifkind, Wharton &
Garrison LLP to act as their counsel in connection with the transactions
contemplated by the Transaction Documents and that Paul, Weiss, Rifkind, Wharton
& Garrison LLP has not acted as counsel for any of the CK Purchasers in
connection with the transaction contemplated by the Transaction Documents and
that none of the CK Purchasers has the status of a client of Paul, Weiss,
Rifkind, Wharton & Garrison LLP for conflict of interest or any other purposes
as a result thereof.
10.15 Voting. At any meeting of the stockholders of the
Company at which, or for any written stockholder consent in which, the Company
is seeking stockholder approval for any of the matters encompassed in the
Stockholder Approval, each of the Lenders and each of the CK Purchasers shall,
and shall cause its Affiliates to, vote all of the shares held by such Lender,
CK Purchaser or Affiliate, as the case may be, in favor of such matters if it is
permitted by the Requirements of Law, regulations or rules.
10.16 Waiver. The Lenders and the CK Purchasers hereby
unconditionally waive any rights to an adjustment of shares of Series D
Preferred Stock and shares of Series E Preferred Stock with respect to the
Rights Offering, the issuance of Series E Purchase Rights and the issuance of
the Rights Shares issuable upon exercise of the Rights Shares that such Lenders
or CK Purchasers, as the case may be, may otherwise be entitled to pursuant to
Section 7(c) of the Amended and Restated Series D Certificate of Determination
or Section 7(c) the Series E Certificate of Determination, respectively.
[the remainder of this page intentionally left blank]
41
IN WITNESS WHEREOF, the undersigned have executed, or have
caused to be executed, this Convertible Note Purchase and Exchange Agreement on
the date first written above.
CRITICAL PATH, INC.,
a California corporation
By: /s/ Michael J. Zukerman
----------------------------------------
Name: Michael J. Zukerman
Title: Senior Vice President
GENERAL ATLANTIC PARTNERS 74, L.P.
By: GENERAL ATLANTIC PARTNERS, LLC,
its General Partner
By: /s/ Matthew Nimetz
----------------------------------------
Name: Matthew Nimetz
Title: A Managing Member
GAP COINVESTMENT PARTNERS II, L.P.
By: /s/ Matthew Nimetz
----------------------------------------
Name: Matthew Nimetz
Title: A General Partner
GAPSTAR, LLC
By: GENERAL ATLANTIC PARTNERS, LLC,
its Managing Member
By: /s/ Matthew Nimetz
----------------------------------------
Name: Matthew Nimetz
Title: A Managing Member
GAP-W, LLC
By: GENERAL ATLANTIC PARTNERS, LLC,
its Manager
By: /s/ Matthew Nimetz
----------------------------------------
Name: Matthew Nimetz
Title: A Managing Member
GAPCO GMBH & CO. KG
By: GAPCO MANAGEMENT GMBH,
its General Partner
By: /s/ Matthew Nimetz
----------------------------------------
Name: Matthew Nimetz
Title: Managing Director
CENWELL LIMITED
By: /s/ Edmond Ip Tak Chuen
----------------------------------------
Name: Mr. Edmond Ip Tak Chuen
Title: Authorized Signatory
CAMPINA ENTERPRISES LIMITED
By: /s/ Edmond Ip Tak Chuen
----------------------------------------
Name: Mr. Edmond Ip Tak Chuen
Title: Director
GREAT AFFLUENT LIMITED
By: /s/ Edmond Ip Tak Chuen
----------------------------------------
Name: Mr. Edmond Ip Tak Chuen
Title: Director
DRAGONFIELD LIMITED
By: /s/ Ezra Pau Yee Wan
----------------------------------------
Name: Ezra Pau Yee Wan
Title: Authorized Signatory
LION COSMOS LIMITED
By: /s/ Ezra Pau Yee Wan
----------------------------------------
Name: Ezra Pau Yee Wan
Title: Director