(1)

Title of each class of securities to which transaction applies:   -------------------------------------------------------------------------------

(2)

Aggregate number of securities to which transaction applies: -------------------------------------------------------------------------------

(3)

Per unit price or other underlying value of transaction computed pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee is calculated and state how it was determined):   -------------------------------------------------------------------------------

(4)

Proposed maximum aggregate value of transaction: -------------------------------------------------------------------------------

(5)

Total fee paid: -------------------------------------------------------------------------------

 

	(6)	Amount Previously Paid:  -------------------------------------------------------------------------------
	(7)	Form, Schedule or Registration Statement No.:  -------------------------------------------------------------------------------
	(8)	Filing Party:  -------------------------------------------------------------------------------
	(9)	Date Filed: -------------------------------------------------------------------------------

 

 

 

 

 

1.

To consider and vote upon a proposal to adopt the Agreement and Plan of Merger, dated as of June 22, 2005, by and among ServiceMagic, Inc., Sunbelt Acquisition Corp., ImproveNet, Inc., and the principal stockholders of ImproveNet signatory thereto, providing for the acquisition of ImproveNet by ServiceMagic. A copy of the merger agreement is attached as Appendix A to the proxy statement accompanying this Notice. Pursuant to the terms of the merger agreement, Sunbelt, a wholly-owned subsidiary of ServiceMagic, will merge with and into ImproveNet, with ImproveNet continuing as the surviving corporation, and each issued and outstanding share of common stock of ImproveNet, other than those shares of ImproveNet common stock held by the stockholders, if any, who properly exercise their appraisal rights under Delaware law, will be converted into the right to receive, subject to certain adjustments, approximately $0.12 in cash, without interest and less any required withholding tax.

2.	To transact such other business as may properly come before the special meeting or any adjournments or postponements thereof.

 

 

 

 

 

 

 

 

 

APPENDIX A -	Agreement and Plan of Merger, dated as of June 22, 2005, among ServiceMagic, Inc., Sunbelt Acquisition Corp., ImproveNet, Inc., and the principal stockholders of ImproveNet, Inc. signatory thereto
APPENDIX B -	Opinion of Janney Montgomery Scott LLC, dated June 17, 2005
APPENDIX C -	Section 262 of the Delaware General Corporation Law (Appraisal Rights)

 

 

 

 

 

 

•

Stockholder Vote.    You are being asked to vote to adopt a merger agreement pursuant to which ImproveNet will be acquired by and become a wholly-owned subsidiary of ServiceMagic.

 

	•	Price for Your Stock.    In the proposed merger, you will receive, subject to certain adjustments, approximately $0.12 in cash, without interest and less any applicable withholding tax, for each of your shares of ImproveNet common stock. The merger consideration may be reduced by (i) excess D&O insurance policy premiums, and (ii) transaction fees incurred by ImproveNet in connection with the merger in excess of amounts specified in the merger agreement (the merger consideration per share, as reduced by the foregoing adjustments, will be referred to herein as the “per share merger consideration”). The merger consideration adjustments described above will be determined immediately prior to the consummation of the merger. See “The Merger Agreement - Consideration to be Received in the Merger.”
	•	Treatment of Options/Warrants.    In the proposed merger, each issued, outstanding, and vested option to purchase shares of ImproveNet common stock with a per share exercise price of less than the per share merger consideration will be canceled and converted into an amount of cash equal to the excess of the per share merger consideration over the exercise price of the option, without interest, and net of applicable withholding taxes. Each issued and outstanding warrant to purchase shares of ImproveNet common stock with a per share exercise price of less than the per share merger consideration will be canceled and converted into an amount of cash equal to the excess of the per share merger consideration over the exercise price of the warrant. Each issued and outstanding stock option and warrant with a per share exercise price equal to or in excess of the per share merger consideration will be canceled without payment. See “The Merger Agreement - Treatment of Stock Options and Warrants.”

 

 

 

§	the fact that the merger consideration would be all cash, which would provide certainty of value to our stockholders;

§	the fact that the purchase price of approximately $0.12 per share, subject to adjustment as provided in the merger agreement, constituted a significant premium to the recent trading range of ImproveNet’s common stock immediately prior to execution of the merger agreement;

§

the manner in which the consideration and negotiation of proposals was conducted and the fact the terms of the merger agreement were determined through extensive arm’s length negotiations between the board of directors and its advisors, on the one hand, and ServiceMagic and its advisors, on the other;

 

 

§	the ability of ImproveNet to terminate the merger agreement and accept a financially superior proposal under specified conditions, subject to payment to ServiceMagic of a termination fee of $300,000, and reimbursement of ServiceMagic’s transaction fees and expenses, not to exceed $200,000; and

§

the likelihood that the merger would be completed, our board of directors having concluded, particularly in light of the size and financial strength of ServiceMagic’s parent company, IAC/InterActiveCorp, that ServiceMagic had the financial ability to complete the merger and the other transactions contemplated by the merger agreement.

 

§	ImproveNet would no longer exist as an independent company and our stockholders would no longer participate in its potential growth;

§

at various times, both historically and during the one year period prior to the announcement of the merger agreement with ServiceMagic, ImproveNet’s common stock had traded in excess of $0.12 per share, although, in light of various industry developments, our board of directors felt it was unlikely that ImproveNet’s common stock would trade materially in excess of $0.12 in the near term if ImproveNet remained independent;

§	ImproveNet would be required to pay a termination fee of $300,000, and reimburse ServiceMagic’s transaction fees and expenses up to $200,000, if the merger agreement is terminated under specified circumstances, an obligation that might discourage competing acquisition proposals;

§	even if the merger is not completed, ImproveNet would be required to pay its own legal, accounting and investment banking fees, which it estimates will be approximately $150,000;

§	gains from an all-cash transaction would generally be taxable to our stockholders for U.S. federal income tax purposes. See “Certain U.S. Federal Income Tax Consequences”;

§	there is no assurance that all conditions to the parties’ obligations to complete the merger will be satisfied; and

§	failure to complete the merger could adversely affect ImproveNet due to potential disruptions in its operations and the obligation to pay the fees and expenses noted above.

 

 

 

 

 

 

 

 

•

Place, Date and Time.    The special meeting will be held at the company’s principal executive offices, 10799 North 90th Street, Scottsdale, Arizona 85260, at 9:00 a.m. local time, on August 9, 2005.

 

•

What Vote is Required for Adoption of the Merger Agreement.    Adoption of the merger agreement requires the approval of holders of a majority of the issued and outstanding shares of ImproveNet common stock entitled to vote thereon. The failure to vote, or an abstention from voting, has the same effect as a vote against adoption of the merger agreement. As such, your vote is important. Holders of 32.8% of ImproveNet’s common stock are parties to a voting agreement requiring them to vote in favor of the merger and against any competing proposal, except in the event that the merger agreement is terminated in accordance with its terms. Holders of 32.7% of ImproveNet’s common stock are parties to a voting agreement requiring them to vote against any competing proposal for a period of 18 months following the execution of the merger agreement, whether or not the merger agreement is terminated in accordance with its terms.

 

•

Who Can Vote at the Meeting.    At the special meeting, you can vote all of the shares of ImproveNet common stock that you owned of record as of July 15, 2005, which is the record date for the special meeting. If you own shares that are registered in someone else’s name, for example, a broker, you need to direct that person to vote those shares or obtain an authorization from that person and vote the shares yourself at the meeting. As of the record date, there were 54,665,153 shares of ImproveNet common stock issued and outstanding, which were held by approximately 420 stockholders of record.

 

•

Procedure for Voting.    You can vote your shares of ImproveNet common stock by:

 

•

completing, signing, dating, and mailing the enclosed proxy card; or

 

•

attending the special meeting and voting in person.

 

•

Procedure for Revoking your Proxy.    You may revoke your proxy at any time before the vote is taken at the special meeting. To revoke your proxy, you must either advise the Corporate Secretary of ImproveNet in writing, deliver a proxy dated after the date of the proxy you wish to revoke, or attend the special meeting and vote your shares in person. Merely attending the special meeting will not constitute revocation of your proxy. If you have instructed a broker, bank or other nominee to vote your shares of ImproveNet common stock, you must follow the directions received from the broker, bank or other nominee to change your instructions.

 

 

 

 

 

 

 

 

 

 

 

 

•

adoption of the merger agreement by the holders of at least a majority of the issued and outstanding shares of ImproveNet common stock;

 

•

approval of governmental and other authorities required for the merger; and

 

•

the absence of any legal restraint blocking the merger.

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

 

§	In August 2003, Mr. Rassas delivered an email to the Executive Vice President of Business Development of a major national home center retailer inquiring about a potential strategic alliance with, or an investment in, ImproveNet.

 

discussing that initiative with other members of ServiceMagic’s management team. At Mr. Rice’s request, a conference call was scheduled between Mr. Rice and Mr. Rassas to discuss possible business combinations between ImproveNet and ServiceMagic.

 

§	determining that the consideration to be paid to our stockholders in the merger is fair to, and in the best interests of, ImproveNet and its stockholders; and

 

 

Our purpose for engaging in the merger is to enable our stockholders to receive, subject to certain adjustments, approximately $0.12 in cash per share representing a 20% premium to the market price of our common stock before the announcement of the merger agreement. We also determined to undertake the merger at this time based on the conclusions, determinations and reasons of our board of directors described in detail above under “—Background of the Merger” and “—Recommendation of ImproveNet’s Board of Directors.”

 

 

§	a U.S. person;

 

§	a controlled foreign corporation for U.S. tax purposes;

 

 

 

§	a foreign partnership, if at any time during its tax year: (i) one or more of its partners are U.S. persons, who in the aggregate hold more than 50% of the income or capital interest in the partnership, or (ii) such foreign partnership is engaged in the conduct of a U.S. trade or business.

 

	•	corporate organization, existence, good standing, qualification, and corporate power and authority to own and lease and operate ImproveNet’s properties;
	•	subsidiaries;
	•	corporate power and authorization to enter into and carry out the obligations of the merger agreement and the enforceability of the merger agreement;
	•	capitalization;
	•	title to properties and assets;
	•	the absence of certain activities, changes or events since December 31, 2004;
	•	material contracts;
	•	the ability to enter into the merger agreement and consummate the merger without violation of, or conflict with, its organizational documents, contracts, or any laws;
	•	documents filed with the SEC and the accuracy of information contained in those documents;
	•	the accuracy of ImproveNet’s financial statements;
	•	the absence of undisclosed liabilities;
	•	tax matters;
	•	environmental matters;
	•	matters relating to ImproveNet’s employee benefit plans;
	•	compliance with laws;
	•	permits;
	•	governmental, regulatory and other approvals required to complete the merger;
	•	litigation matters;

 

 

	•	labor matters;
	•	intellectual property;
	•	transactions with affiliates;
	•	insurance;
	•	accounts receivable;
	•	compliance with anti-bribery regulations;
	•	brokers;
	•	books and records;
	•	bank accounts;
	•	power and authorization of ImproveNet’s principal stockholders to enter into and carry out the obligations of the merger agreement and the enforceability of the merger agreement;
	•	title of shares held by ImproveNet’s principal stockholders;
	•	proceedings regarding ImproveNet’s principal stockholders;
	•	the proxy statement filed by ImproveNet with respect to the merger;
	•	the absence of discussions regarding a takeover proposal;
	•	the opinions of Janney Montgomery Scott LLC;
	•	that no state anti-takeover statute is applicable to the merger;
	•	unaccrued litigation and consumer complaints;
	•	the absence of liabilities regarding eTechLogix; and
	•	ownership of eTechLogix software.

•

corporate organization, existence, good standing, qualification, and corporate power and authority to own and lease and operate ServiceMagic’s and Sunbelt’s properties;

	•	corporate power and authorization to enter into and carry out the obligations of the merger agreement and the enforceability of the merger agreement;

 

	•	the ability to enter into the merger agreement and consummate the merger without violation of, or conflict with, its organizational documents, contracts, or any laws; and
	•	governmental, regulatory and other approvals required to complete the merger.

 

§	modify, amend or terminate any benefit plan or increase the benefits provided under any benefit plan except as required by applicable law;

 

 

 

 

 

 

•

any governmental or regulatory notices or approvals required under any law or regulations to carry out the transactions contemplated by the merger agreement have been obtained and the parties have complied with all law and regulations applicable to thereto; and

 

•

approval of ImproveNet stockholders has been obtained.

 

	•	Each of (i) the representations and warranties of ImproveNet and/or its principal stockholders (Farsi Family Trust, Ahmad Family Trust, Hayjour Family Limited Partnership, and Kinderhook Partners, LP) contained in the merger agreement that are qualified by a material adverse effect (as such term is defined in the merger agreement) are true and correct in all respects as of the effective time of the merger as though made on and as of the effective time (except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), and (ii) the representations and warranties of ImproveNet and/or its principal stockholders contained in the merger agreement that are not so qualified (including, without limitation, those which are qualified by the phrase “material”) are true and correct as of the effective time of the merger as though made on and as of the effective time (except that those representations and warranties which address matters only as of a particular date need only be true and correct as of such date), except to the extent that the failure of any such representation or warranty to be true and correct has not had, and could not reasonably be expected to have, a material adverse effect on ImproveNet and its subsidiaries;
	•	ImproveNet and/or its principal stockholders shall have tendered for delivery the documents and other items to be delivered by such parties pursuant to the terms of the merger agreement;
	•	ImproveNet has received all governmental permits and consents that are required for the consummation of the transactions contemplated by the merger agreement and the third party consents identified in the merger agreement;

 

	(i)	any misrepresentation or breach of any warranty on the part of ImproveNet or any principal stockholder contained in the merger agreement or in any agreement, certificate or other instrument delivered by ImproveNet or any principal stockholder pursuant to the merger agreement;
	(ii)	any breach or non-performance by ImproveNet or any principal stockholder of any of their respective covenants or agreements contained in the merger agreement or in any agreement, certificate or other instrument delivered by ImproveNet or such principal stockholder pursuant to the merger agreement;
	(iii)	any fees and expenses of ImproveNet incident to the merger agreement and the transactions contemplated thereby (including legal and accounting fees, investment banking fees, fees and points to any lender, fees and expenses related to the procurement of a fairness opinion, consulting fees and related disbursements in connection with any of the foregoing) and, to the extent agreed or required to be paid by ImproveNet, the stockholders of ImproveNet, in excess of $150,000;
	(iv)	notwithstanding the disclosure of any such matter on the disclosure schedules to the merger agreement, any unaccrued litigation matters and consumer complaints (it being understood that any payments made by ImproveNet or eTechLogix on or after April 1, 2005 in respect of unaccrued litigation matters and consumer complaints will be deemed to be “Damages” suffered by ServiceMagic for purposes of the indemnification provided pursuant to the merger agreement);

 

 

(v)

by ImproveNet’s board of directors;

 

(a)   to accept a Superior Proposal, but only if (1) ImproveNet promptly notifies ServiceMagic in writing of its intention to do so (which notice shall contain all material terms and conditions of such Superior Proposal) and causes its legal counsel and its financial advisor to afford ServiceMagic the opportunity to match the terms of the Superior Proposal and to negotiate with ServiceMagic to make other adjustments in the terms and conditions of the merger agreement that would permit ImproveNet’s board of directors to recommend the merger agreement, as

 

 

revised, (2) ImproveNet has not received from ServiceMagic, within three business days of ServiceMagic’s receipt of the notice referred to in clause (1) above, an offer that ImproveNet’s board of directors determines, in good faith, after consultation with and taking into account the advice of its outside legal counsel and outside financial advisors of nationally recognized reputation, matches or exceeds such Superior Proposal or is otherwise sufficient to permit the board of directors to continue to recommend the merger agreement, as amended by such offer from ServiceMagic, and the merger, rather than the Superior Proposal, which right to match any Superior Proposal will apply equally with respect to any subsequent increase or other revision of the terms of any Superior Proposal, and (3) ImproveNet pays to ServiceMagic the applicable termination fee described below under the heading “—Termination Fee;” or

 

 

(3)

Includes 6,460,000 shares of common stock subject to warrants exercisable on or before September 13, 2005, none of which have exercise prices less than the per share merger consideration. The General Partner of Kinderhook Partners, LP is Kinderhook GP, LLC. Stephen J. Clearman is the managing member of Kinderhook GP, LLC. Kinderhook GP, LLC and Stephen J. Clearman each disclaim beneficial ownership of the shares except to the extent of their pecuniary interest therein.

 

(4)	Includes (i) 8,952,580 shares of common stock owned by the Hayjour Family Limited Partnership, of which Mr. Rassas is a general partner, and (ii) 50,000 shares owned by a minor child that shares Mr. Rassas’ household.

 

 

 

If the merger is completed, there will be no public participation in any future meetings of stockholders of ImproveNet. If the merger is not completed, however, ImproveNet stockholders will continue to be entitled to attend and participate in ImproveNet stockholders’ meetings. If the merger is not completed, ImproveNet will inform its stockholders, by press release or other means determined reasonable by ImproveNet, of the date by which stockholders proposals must be received by ImproveNet for inclusion in the proxy materials relating to the annual meeting, which proposals must comply with the rules and regulations of the U.S. Securities and Exchange Commission then in effect.

APPENDIX A

 

EXECUTION COPY

 

 

 

 

AGREEMENT AND PLAN OF MERGER

 

by and among

 

SERVICEMAGIC, INC.,

 

SUNBELT ACQUISITION CORP.,

 

IMPROVENET, INC.,

 

and

 

THE PRINCIPAL STOCKHOLDERS OF IMPROVENET, INC.

 

SIGNATORY HERETO

 

JUNE 22, 2005

 

 

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TABLE OF CONTENTS

ARTICLE I.    DEFINITIONS		A-1
1.1.	Defined Terms	A-1
1.2.	Terms Defined Elsewhere	A-6
ARTICLE II.    THE MERGER		A-7
2.1.	The Merger	A-7
2.2.	Effective Time	A-7
2.3.	Closing of the Merger	A-8
2.4.	Effects of the Merger	A-8
2.5.	Certificate of Incorporation and Bylaws	A-8
2.6.	Directors	A-8
2.7.	Officers	A-8
2.8.	Conversion of Shares; Treatment of Company Options and Warrants	A-8
2.9.	Escrow Amount	A-9
2.10.	Distribution of the Closing Amount	A-10
2.11.	Dissenting Shares	A-11
2.12.	Withholding Rights	A-11
2.13.	Principal Stockholder Representative	A-12
2.14.	Transaction Fees	A-12
ARTICLE III.    CLOSING DELIVERIES		A-12
3.1.	Deliveries by the Company and the Principal Stockholders at the Closing	A-12
3.2.	Deliveries by Parent and Merger Sub at the Closing	A-13
ARTICLE IV.    REPRESENTATIONS AND WARRANTIES OF THE COMPANY AND THE PRINCIPAL STOCKHOLDERS		A-14
4.1.	Organization of the Company	A-14
4.2.	Subsidiaries	A-14
4.3.	Authorization	A-14
4.4.	Capitalization	A-15
4.5.	Title to Properties and Assets	A-15
4.6.	Absence of Certain Activities	A-16
4.7.	Certain Actions	A-16
4.8.	Material Contracts	A-17
4.9.	Compliance with Other Instruments	A-18
4.10.	SEC Reports and Financial Statements	A-18
4.11.	Liabilities	A-19
4.12.	Taxes	A-19
4.13.	Environmental Matters	A-21
4.14.	Employee Benefits	A-22
4.15.	Compliance with Law	A-23
4.16.	Permits	A-24
4.17.	Consents and Approvals	A-24
4.18.	Litigation	A-24
4.19.	Labor Matters	A-24
4.20.	Intellectual Property; Software	A-25
4.21.	Transactions with Certain Persons	A-30
4.22.	Insurance	A-30

4.23.	Accounts Receivable	A-30
4.24.	Certain Business Practices	A-30
4.25.	No Brokers	A-31
4.26.	Books and Records	A-31
4.27.	Bank Accounts	A-31
4.28.	Authorization by Principal Stockholders	A-31
4.29.	Title to Shares	A-31
4.30.	Proceedings Regarding Principal Stockholders	A-31
4.31.	Company Information	A-31

 

i

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4.32.	No Existing Discussions	A-32
4.33.	Fairness Opinion	A-32
4.34.	State Takeover Laws	A-32
4.35.	eTechLogix	A-32
4.36.	Certain Payments	A-32
4.37.	EtechLogix Software	A-32
ARTICLE V.    REPRESENTATIONS AND WARRANTIES OF PARENT AND MERGER SUB		A-32
5.1.	Organization of Parent and Merger Sub	A-32
5.2.	Authorization	A-32
5.3.	Compliance with Other Instruments	A-33
5.4.	Consents and Approvals	A-33
ARTICLE VI.    COVENANTS OF ALL PARTIES		A-33
6.1.	Conduct of Business	A-33
6.2.	Investigation by Parent	A-35
6.3.	Regulatory Matters	A-35
6.4.	Notification of Certain Matters	A-36
6.5.	Public Announcements	A-37
6.6.	No Solicitation	A-37
6.7.	Merger Consideration Adjustment	A-38
6.8.	Confidentiality	A-38
6.9.	Preparation of the Proxy Statement; Stockholder Approval	A-38
6.10.	Company SEC Documents	A-39
6.11.	Matters Pertaining to Company Options and Warrants	A-39
6.12.	Indemnification of Officers and Directors	A-39
6.13.	Transition of the Company's Business Pending Closing	A-40
6.14.	Certain eTechLogix Obligations	A-40
ARTICLE VII.    CONDITIONS TO OBLIGATIONS		A-40
7.1.	Conditions to Each Party's Obligations to Effect the Merger	A-40
7.2.	Conditions to the Company's Obligations to Effect the Merger	A-41
7.3.	Conditions to the Obligations of Parent and Merger Sub to Effect the Merger	A-41
ARTICLE VIII.    TERMINATION		A-42
8.1.	Termination	A-42
8.2.	Effect of Termination	A-44
ARTICLE IX.    INDEMNIFICATION		A-44
9.1.	Survival of Representations	A-44

9.2.	Indemnification	A-45
9.3.	Notice of Claims	A-45
9.4.	Third Person Claims	A-45
9.5.	Limitation on Indemnity; Payments Out of Escrow Account	A-46
9.6.	Remedies	A-42
ARTICLE X.    MISCELLANEOUS		A-47
10.1.	Binding Effect; Assignment	A-47
10.2.	Notices	A-47
10.3.	Choice of Law	A-48
10.4.	Entire Agreement; Amendments and Waivers	A-48
10.5.	Counterparts	A-49
10.6.	Severability	A-49
10.7.	Headings	A-49
10.8.	Schedules	A-49
10.9.	No Third Party Beneficiaries	A-49
10.10.	Specific Performance	A-49
10.11.	No Strict Construction	A-49
10.12.	Expenses	A-49
10.13.	Submission to Jurisdiction; Waivers; Consent to Service of Process	A-49
10.14.	Waiver of Jury Trial	A-50

 

ii

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LIST OF EXHIBITS

 

Exhibit A	Form of Escrow Agreement
Exhibit B	Form of Non-Competition Agreement
Exhibit C	Certificate of Incorporation of Surviving Corporation
Exhibit D	Bylaws of Surviving Corporation
Exhibit E	Form of Letter of Transmittal
Exhibit F	Form of Opinion of Counsel to the Company
Exhibit G	Form of Opinion of Counsel to the Principal Stockholders
Exhibit H	Form of Consulting Agreement
Exhibit I	Form of Opinion of the General Counsel of the Company
Exhibit J	Litigation Accruals

 

LIST OF SCHEDULES

 

Schedule 1.1(a)	Excluded EtechLogix Assets
Schedule 1.1(b)	Transferred Company Assets
Schedule 3.1(g)	Amendments to Material Contracts
Schedule 4.2	Subsidiaries
Schedule 4.4(b)	Agreements re: Capitalization
Schedule 4.4(d)	Company Options
Schedule 4.4(e)	Capitalization of Subsidiaries
Schedule 4.5(a)	Assets and Property
Schedule 4.5(c)	Real Property
Schedule 4.6	Absence of Certain Activities
Schedule 4.7	Certain Actions
Schedule 4.7(e)	Changes in GAAP
Schedule 4.8	Contracts
Schedule 4.12(d)	Tax Claims; Extensions
Schedule 4.12(e)	Tax Years
Schedule 4.12(f)	Unpaid Assessments
Schedule 4.12(j)	Tax Group
Schedule 4.12(m)	Foreign Tax Jurisdictions
Schedule 4.14(a)	Benefit Plans
Schedule 4.14(f)	Employment Agreements; Consultant Agreements; Severance Agreements; and Other Arrangements
Schedule 4.16	Permits
Schedule 4.17	Consents and Approvals
Schedule 4.18	Litigation
Schedule 4.19(d)	Labor Matters
Schedule 4.20(b)	Marks
Schedule 4.20(c)	Patents
Schedule 4.20(d)	Copyrights
Schedule 4.20(e)	Actions to Protect Intellectual Property

Schedule 4.20(f)	Ownership of Intellectual Property
Schedule 4.20(h)	Status and Maintenance of Company Registered Intellectual Property
Schedule 4.20(i)	License Agreements
Schedule 4.20(i)(1)	Future License Payments
Schedule 4.20(i)(2)	Licensor Rights under Inbound License Agreements
Schedule 4.20(i)(3)	Outbound License Agreements
Schedule 4.20(l)	Software
Schedule 4.21(a)	Transactions with Certain Company Persons
Schedule 4.21(b)	Transactions with Principal Stockholders

 

iii

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Schedule 4.22	Insurance
Schedule 4.23	Accounts Receivable
Schedule 4.25	Brokers
Schedule 4.27	Bank Accounts
Schedule 4.36	Certain Payments
Schedule 6.12	D&O Policy
Schedule 7.3(c)	Required Consents

 

iv

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AGREEMENT AND PLAN OF MERGER

 

This AGREEMENT AND PLAN OF MERGER (the “Agreement”), dated as of June 22, 2005, is entered into by and among ServiceMagic, Inc., a Delaware corporation (“Parent”), Sunbelt Acquisition Corp., a Delaware corporation and wholly-owned subsidiary of Parent (“Merger Sub”), ImproveNet, Inc., a Delaware corporation (the “Company”), and the Principal Stockholders of the Company signatory hereto (each a “Principal Stockholder” and collectively, the “Principal Stockholders”).

 

RECITALS

 

WHEREAS, Parent has formed Merger Sub for the purpose of merging it with and into the Company and acquiring the Company as a wholly-owned subsidiary of Parent.

 

WHEREAS, the Boards of Directors of each of the Company and Merger Sub have each (i) determined that the Merger (as defined below) is advisable and fair and in the best interests of their respective stockholders and (ii) approved this Agreement and the transactions contemplated hereby, including the Merger upon the terms and subject to the conditions set forth in this Agreement.

 

WHEREAS, as a condition to the willingness of Parent to enter into this Agreement, Parent has required, among other things, that certain of the Principal Stockholders agree to give Parent an irrevocable proxy to vote their shares in favor of the Merger (as defined below) and, in order to induce Parent to enter into this Agreement, certain of the Principal Stockholders have so agreed with Parent in separate written agreements entered into on the date hereof (the “Voting Agreement”).

 

AGREEMENT

 

NOW THEREFORE, in consideration of the respective covenants and promises contained herein and for other good and valuable consideration, the receipt and adequacy of which is hereby acknowledged, the parties hereto agree as follows:

 

ARTICLE I.

 

DEFINITIONS