SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
________________________
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
________________________
Date of Report (date of earliest event reported): January 14, 2000
________________________
I-STORM, INC.
(Formerly Digital Power Holding Company)
(Exact name of registrant as specified in its charter)
________________________
NEVADA 2-93477-D 87-0410127
(State or other jurisdiction (Commission File Number) (I.R.S. Employer
of incorporation) Identification No.)
2440 WEST EL CAMINO REAL, SUITE 520
MOUNTAIN VIEW, CALIFORNIA 94040
(Address of principal executive offices)
Registrant's telephone number, including area code: (650) 962-5420
________________________
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ITEM 5. OTHER EVENTS
I-STORM, INC. AND COMPUTER ASSOCIATES INTERNATIONAL, INC. ANNOUNCE STRATEGIC
ALLIANCE IN ENTERPRISE SYSTEM MANAGEMENT AND ONLINE STOREFRONT OPERATIONS
I-Storm, Inc. ("I-Storm" or the "Company") and Computer Associates
International, Inc. ("CA") have announced a strategic alliance designed to
leverage the strengths of I-Storm's e-commerce solution expertise and CA's
Global Professional Services Group to finance, build, and operate eBusiness
storefronts for major corporations and consumer brands.
Under the terms of the transaction, CA has made an equity investment in
I-Storm, and CA will also provide I-Storm with enterprise software development
and systems integration services. I-Storm and CA will assemble a joint business
development team focused on deploying eBusiness solutions in the
business-to-consumer and business-to-business spaces. CA will also acquire one
of five seats on I-Storm's Board of Directors.
In accordance with the I-Storm Series D Stock Purchase Agreement, CA
has initially purchased 40,817 newly issued shares of I-Storm Series D
Cumulative Convertible Preferred Stock ("Series D Preferred Stock") at a price
of $12.25 per share for a cash investment of $500,000. CA, an accredited
investor, made the purchase pursuant to the provisions of Regulation D of the
Securities and Exchange. The Series D Preferred Stock is subject to certain
demand and piggy-back registration rights as set forth in the I-Storm Series D
Preferred Stock Registration Rights Agreement.
The Series D Preferred Stock is entitled to receive a quarterly
dividend of $0.28 (9% per annum) on February 15, May 15, August 15 and November
15, of each year, payable in cash, or at the option of the Company, in Series D
Preferred Stock of the Company, when and as declared by the Board of Directors.
The right of the Series D Preferred Stock to payment of either cash or Series D
Preferred stock dividends is subordinate to the right to cash or stock dividend
payments of the Series A Preferred Stock, and then to the Series B Preferred
Stock; and is PARI PASSU with the right of the Series C Preferred Stock to cash
or stock dividend payments. The Series D Preferred Stock is convertible into
shares of the Company's Common Stock: (i) at the option of the holder, any time
after the purchase closing date, (ii) and by the Company four years after the
purchase closing date, into such number of shares of the Company's Common Stock
as shall equal $12.25 divided by the lower of (i) $3.50, or (ii) the closing bid
price for any five consecutive trading days during the period commencing eleven
months after the purchase closing and ending one month thereafter (the
"Conversion Price"), however, in no event shall the Conversion Price be reduced
below $2.80. The Conversion Price is also subject to further adjustment to
prevent dilution.
CA also has the option to make up to three additional purchases of
Series D Preferred Stock in $500,000 increments, upon I-Storm's and CA's mutual
approval of three e-commerce partnership agreements. CA's total proposed
investment in I-Storm is a maximum of 163,268 shares of Series D Preferred Stock
for an aggregate purchase price of $2,000,000.
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I-Storm and CA have also entered into a Professional Services Agreement
for CA to provide a minimum of $800,000 of professional services during the
period commencing August 1, 1999 through December 31, 2001, and a License
Agreement to provide CA software products during the same time period. CA has
also agreed to provide I-Storm with a business development fund to be used for
marketing expenditures for a joint partnership program by CA and I-Storm. Terms
of this fund are being negotiated.
I-Storm is filing herewith a press release issued by the Company
regarding the foregoing transaction as Exhibit 99.1 which is incorporated herein
by reference.
AMENDMENT OF CERTIFICATES OF DESIGNATION OF PREFERRED STOCK
On January 14, 2000, the Board of Directors, subject to any necessary
shareholder approval, approved by unanimous consent in lieu of a special
meeting, (i) the designation of a new class of Series D Preferred Stock in
connection with the I-Storm Series D Preferred Stock Purchase Agreement between
I-Storm and CA; (ii) the amendment of the Certificate of Designation of Series C
Preferred Stock to reflect that the Company may convert the Series C Preferred
Stock into Common Stock only after four years from the Series C purchase closing
instead of after one year from the purchase closing; and (iii) the amendment of
the Certificates of Designation of the I-Storm Series A, B and C Preferred
Stock, to clarify the favorable antidilution rights of each such class, in order
of preference, in the event of the declaration of cash dividends upon the
Company's Common Stock. Holders of Series A, B and C Preferred Stock would, upon
the declaration of a cash dividend to common stock holders, be entitled to
receive a prior cash dividend based upon the number of I-Storm Common Stock
shares each such holder would have received, if such holder had converted its
Preferred Stock into Common Stock prior to the declaration of such a cash
dividend. The amendment does not otherwise alter the dividend preference rights
of either the Series A, B, C or D Preferred Stock. In order of preference, the
Company's dividends shall be paid, only in accordance and in compliance with
relevant provisions of all of the Company's Certificates of Designation, first
to the Series A Preferred Stock, then to the Series B Preferred Stock, and then
to the Series C and Series D Preferred Stock on a PARI PASSU basis.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
---------------------------------
EXHIBIT NO. DESCRIPTION
- ----------- -----------
3.(i) I-STORM CERTIFICATE OF DESIGNATION OF SERIES D PREFERRED STOCK
10.1 FORM OF I-STORM SERIES D PREFERRED STOCK PURCHASE AGREEMENT
10.2 FORM OF I-STORM SERIES D PREFERRED STOCK REGISTRATION RIGHTS
AGREEMENT
10.3 FORM OF I-STORM-CA LICENSE AGREEMENT
10.4 FORM OF I-STORM-CA PROFESSIONAL SERVICE AGREEMENT
10.5 FORM OF I-STORM-CA PROFESSIONAL SERVICE AGREEMENT ADDENDUM
99.1 PRESS RELEASE
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SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
I-Storm has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
I-STORM, INC.
Date: January 19, 2000 By: /S/ Calbert Lai
--------------------------------
Calbert Lai,
President
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CERTIFICATE OF DESIGNATION, PREFERENCES AND RIGHTS
OF SERIES D CUMULATIVE CONVERTIBLE PREFERRED STOCK
OF
I-STORM, INC.
I-STORM, INC. (the "Company"), a corporation organized and existing
under the laws of the State of Nevada, does hereby certify that:
Pursuant to authority vested in the Board of Directors by Article V of
the Articles of Incorporation of the Company and the provisions of the Nevada
Revised Statutes, the Board of Directors has duly adopted the following recitals
and resolutions:
WHEREAS, the Board of Directors is authorized by the Articles of
Incorporation to issue and to determine and fix the rights, preferences,
privileges and restrictions of one or more series of Preferred Stock, and the
Board of Directors has determined to establish the number of shares constituting
such series and to designate such series;
WHEREAS, the Articles of Incorporation presently authorize the Company
to issue up to 4,000,000 shares of Preferred Stock in any class or series and
the Company has designated 600,000 of such shares of Preferred Stock to be
Series A Cumulative Convertible Preferred Stock ("Series A Preferred Stock"),
1,700,000 of such shares of Preferred Stock to be Series B Cumulative
Convertible Preferred Stock ("Series B Preferred Stock") and 1,225,000 of such
shares of Preferred Stock to be Series C Cumulative Convertible Preferred Stock
("Series C Preferred Stock"); and the Board of Directors now intends to
establish a new class of preferred stock;
NOW, THEREFORE, BE IT RESOLVED, that the Board of Directors hereby
amends Article V of the Articles of Incorporation and fixes and determines the
designation of the number of shares constituting, and the rights, preferences,
privileges and restrictions relating to a new series of preferred stock, as
follows:
1. DESIGNATION. The series of preferred stock provided for by this
resolution shall be designated "Series D Cumulative Convertible Preferred Stock"
(hereinafter referred to as the "Series D Preferred Stock").
2. AUTHORIZATION. The number of shares constituting the Series D
Preferred Stock shall be 500,000 shares having a par value of $0.01 per share.
3. DIVIDENDS. (a) The holders of the Series D Preferred Stock shall be
entitled to cumulative dividends at an annual rate of nine percent (9%) of the
offering price of $12.25 per share, when and as declared by the Board of
Directors, payable on a quarterly basis on November 15, February 15, May 15 and
August 15 (each a "Dividend Payment Date"), in cash, or at the option of the
Company, in additional shares of Series D Preferred Stock. Each such quarterly
dividend accrual shall be fully cumulative and shall accrue (whether or not
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declared) on a daily basis from the first day of the quarterly period in which
such dividend may be accruable as provided herein; provided, however, that with
respect to the first Dividend Payment Date following the issuance of shares of
Series D Preferred Stock, such dividend shall accrue from the issuance date.
(b) All dividends paid with respect to the Series D Preferred Stock
shall be paid pro rata to the holders entitled thereto. All dividends paid in
shares of Series D Preferred Stock shall be deemed issued on the applicable
Dividend Payment Date and will thereupon be duly authorized, validly issued
fully paid and nonassessable and free and clear of all liens and charges.
(c) Unpaid dividends will accumulate and be payable prior to the
payment of dividends on the Common Stock, but not before the payment of
dividends on Series A Preferred Stock and Series B Preferred Stock and will be
payable PARI PASSU with respect to the Series C Preferred Stock
4. CONVERSION RIGHTS.
(a) Subject to the antidilution provisions set forth in Section 5, each
share of Series D Preferred Stock may be converted, (a) at the option of the
holder at any time or (b) at the option of the Company at any time after four
years after the Closing (as defined in the Stock Purchase Agreement between the
Company and CA) relating to such Series D Preferred Stock, into such number of
shares of the Company's Common Stock as shall equal $12.25 divided by the lower
of (i) $3.50 and (ii) the closing bid price for the Company's Common Stock for
any five (5) consecutive trading days during the period commencing 11 months
after the Initial Closing (as defined in the Stock Purchase Agreement between
Computer Associates International, Inc. and the Company) and ending one month
thereafter (it being understood that the holder need not convert the Series D
Preferred Stock during such one month period) (the "Conversion Price");
provided, however, that in no event shall the Conversion Price be reduced below
$2.80; provided, further, that any unpaid dividends accumulated on the Series D
Preferred Stock, as set forth in Section 3, shall be paid to the holders of the
Series D Preferred Stock on the date of conversion, either in cash, or at the
option of the Company, in additional shares of Common Stock at the then
applicable Conversion Price.
(b) Promptly after the surrender of Series D Preferred Stock by the
converting Holder and receipt thereof by the Company, the Company shall issue
and deliver, or cause to be issued and delivered, to the holder a certificate or
certificates for the number of whole shares of Common Stock issuable upon the
conversion of such Series D Preferred Stock. The date of the issuance of such
Common Stock shall be the "Conversion Date." No fractional shares shall be
issued upon conversion of the Series D Preferred Stock into shares of Common
Stock; the number of shares of Common Stock issued upon conversion of the Series
D Preferred Stock shall be rounded to the nearest whole number of shares. To the
extent permitted by law, the conversion shall be deemed to have been effected as
of the close of business on the Conversion Date (or on the next preceding
business day if the Conversion Date is not a business day) and at that time the
rights of the holder of Series D Preferred Stock, as such holder, shall cease,
and the holder of the Series D Preferred Stock shall become the holder of record
of shares of Common Stock and shall solely be entitled to the rights and
preferences of the holders of shares of Common Stock.
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(c) Notwithstanding anything herein to the contrary, on any liquidation
of the Company, the right of conversion of the Series D Preferred Stock shall
terminate at the close of business on the last full business day before the date
fixed for payment of the amount distributable on the Series D Preferred Stock.
5. ANTIDILUTION RIGHTS. The Conversion Price and the number of shares
issuable upon conversion shall be subject to adjustment as follows:
(a) In case the Company shall (i) declare a dividend on its Common
Stock payable in shares of its Common Stock, (ii) subdivide its outstanding
shares of Common Stock, into a greater number of shares, (iii) combine its
outstanding shares of Common Stock into a smaller number of shares, or (iv)
issue any shares of its capital stock by reclassification of the Common Stock
(including any such reclassification in connection with a consolidation or
merger in which the Company is the continuing corporation), then, and in each
case, the Conversion Price in effect at the time of the record date for such
dividend or of the effective date of such subdivision, combination or
reclassification shall be proportionately adjusted so that the holder of any
shares of the Series D Preferred Stock surrendered for conversion after such
time shall be entitled to receive the kind and amount of shares such holder
would have owned or have been entitled to receive had such shares of the Series
D Preferred Stock been converted immediately prior to the time of such dividend,
subdivision, combination, or reclassification. Such adjustment shall be made
successively whenever any event listed above shall occur.
(b) In case of any capital reorganization or reclassification of the
capital stock of the Company, or a consolidation or merger of the Company with
or into any other corporation (other than a consolidation or merger in which the
Company is the surviving or continuing corporation), or in case of any sale or
transfer of all or substantially all of the assets of the Company, the holder of
each share of the Series D Preferred Stock, shall have after such
reorganization, reclassification, consolidation, merger, sale or transfer, the
right to convert such share of the Series D Preferred Stock solely into the kind
and amount of shares of stock and other securities and property (including cash)
which such holder would have been entitled to receive had such share of Series D
Preferred Stock been converted immediately prior to such consolidation, merger,
sale or transfer.
(c) In case the Company shall declare a cash dividend upon its Common
Stock payable otherwise then out of retained earnings or shall distribute to
holders of its Common Stock shares of its capital stock (other than Common
Stock), stock or other securities of other persons, evidences of indebtedness
issued by the corporation or other persons, assets (excluding cash dividends) or
options or rights (excluding options to purchase and rights to subscribe for
Common Stock or other securities of the corporation convertible into or
exchangeable for Common Stock), then, in each such case, the holders of the
Series D Preferred Stock shall, concurrent with the distributions of holders of
Common Stock, receive a like distribution based upon the number of shares of
Common Stock into which such Series D Preferred Stock is then convertible.
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(d) Whenever there is an adjustment in the Conversion Price and/or the
number or kind of securities issuable upon conversion of the Series D Preferred
Stock, as provided herein, the Company shall promptly file in the custody of its
Secretary, a certificate signed by an officer of the Company, showing in detail
the facts requiring such adjustment, the number and kind of securities issuable
upon conversion of Series D Preferred Stock upon such adjustment, and the
Conversion Price; and notice of such adjustment along with a duplicate officer's
certificate shall be sent by registered mail, postage paid, to the holder at its
address as it shall appear in the Company's Stock Register.
(e) The corporation will not through any reorganization,
recapitalization, transfer of assets, consolidation, merger, dissolution, issue
or sale of securities or any other voluntary action, avoid or modify or seek to
avoid or modify the observance or performance of any of the terms to be observed
or performed hereunder by the corporation, but will at all times in good faith
assist in the carrying out of all the provisions of this Agreement and in the
taking of all such action as may be necessary or appropriate in order to protect
the conversion rights of the holders of Series D Preferred Stock against
impairment.
6. SHARES RESERVED FOR ISSUANCE. The Company shall at all times reserve
and keep available and free of preemptive rights out of its authorized but
unissued Common Stock, solely for the purpose of effecting the conversion of the
Series D Preferred Shares, such number of shares of Common Stock (or such other
shares or securities as may be required) as shall from time to time be
sufficient to effect the conversion of all outstanding Series D Preferred
Shares, and if at any time the number of authorized but unissued shares of
Common Stock (or any such other shares or other securities) shall not be
sufficient to effect the conversion of all then outstanding Series D Preferred
Stock, the Company shall take such action as may be necessary to increase the
authorized but unissued shares of Common Stock (or other shares or other
securities) to such number of shares as shall be sufficient for such purposes.
7. NO VOTING RIGHTS.
(a) Except as otherwise required by law or as set forth in this Section
7, the holders of Series D Preferred Stock shall not have any voting rights.
(b) So long as any shares of Series D Preferred Stock are outstanding,
in addition to any other vote or consent of shareholders required in the
Articles of Incorporation or the Bylaws of the Company, the consent of the
holders of at least sixty-six and two-thirds percent (66 2/3 %) of Series D
Preferred Stock at the time outstanding, such consent given in person or by
proxy, either in writing without a meeting, or by vote at any meeting called for
the purpose of obtaining such consent, shall be necessary for effecting or
validating:
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(i) Any amendment, alteration or repeal of any of the
provisions of the Articles of Incorporation, or of the Bylaws
of the Company, which affects adversely the voting powers,
rights or preferences of the holders of Series D Preferred
Stock; provided, however that the amendment of the provisions
of the Articles of Incorporation so as to authorize or create
or to increase the authorized amount of any junior stock shall
not be deemed to affect adversely the voting powers, rights or
preferences of the holders of Series D Preferred Stock;
(ii) The authorization of or creation of any stock of
any class or any security convertible into stock of any class,
ranking in parity with or prior to Series D Preferred Stock in
the distribution of assets on any liquidation, dissolution, or
winding up of the Company or in the payment of dividends;
(iii) The merger or consolidation of the Company with
or into any other corporation, unless after such merger or
consolidation, if the Company should be the surviving
corporation, there shall be no class of stock and no other
securities either authorized or outstanding, ranking prior to
the Series D Preferred Stock, except for the Series A
Preferred Stock and the Series B Preferred Stock, in the
distribution of assets on any liquidation, dissolution or
winding up of the Company, or in the payment of dividends.
(iv) The purchase or redemption of any shares of any
series of stock which ranks in parity with or junior to the
Series D Preferred Stock (whether pursuant to mandatory
redemption or sinking fund provisions, optional redemption
provisions or otherwise) unless the full dividend on all
shares of Series D Preferred Stock then outstanding shall have
been paid or declared, and a sum sufficient, or shares
sufficient, for the payment of such dividends shall have been
set apart by the Company.
8. REGISTRATION RIGHTS. The Series D Preferred Stock shall have
registration rights as set forth in the Registration Rights Agreement dated as
of January 7, 2000 between Computer Associates International, Inc. and the
Company.
9. RANKING. With respect to the payment of dividends and upon
liquidation, the shares of the Series D Preferred Stock shall rank senior to the
shares of Common Stock of the Company, on parity with the Series C Preferred
Stock and junior to the shares of Series A Preferred Stock and Series B
Preferred Stock.
10. REDEMPTION RIGHTS. Neither the Company nor the holders of Series D
Preferred Stock shall have any redemption rights with respect to the Series D
Preferred Stock.
11. LIQUIDATION, DISSOLUTION AND WINDING UP. (a) In the event of any
liquidation, dissolution or winding up of the Company, whether voluntary or
involuntary, each holder of Series D Preferred Stock shall have the right to a
distribution of assets of the Company equal to $12.25 per share from any of the
Company's assets then available for distribution (i) after the satisfaction of
the liquidation, dissolution and winding up preferences of the holders of Series
A Preferred Stock and Series B Preferred Stock, (ii) pari passu with the holders
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of the Series C Preferred Stock and (iii) before the satisfaction of the
liquidation, dissolution and winding up preferences of the holders of Common
Stock, all, in accordance with the Nevada Revised Statutes. If the assets of the
Company are not sufficient to pay in full the liquidation payments payable to
the holders of the Series D Preferred Stock and Series C Preferred Stock, then
the holders of such shares shall share ratably in such distribution of assets.
(b) Whenever the distribution provided for in this Section 11 shall be
payable in property other than cash, the value of such distribution shall be the
fair market value of such property as determined in good faith by not less than
a majority of the directors then serving on the Board of Directors of the
Company. A reorganization of the Company, or a consolidation or merger of the
Company with or into another corporation or entity or a sale of or other
disposition of all or substantially all of the assets of the Company, shall not
be treated as a liquidation, dissolution or winding up of the Company within the
meaning of this Section 11.
The foregoing amendment was duly adopted by the Board of Directors
without the requirement of shareholder action by meeting held on _______________
pursuant to the Articles of Incorporation and the provisions of the Nevada
Revised Statutes.
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IN WITNESS WHEREOF, I-Storm, Inc. has caused this Certificate of
Designation, Preferences and Rights of Series D Cumulative Convertible Preferred
Stock to be executed by its President and attested to by its Secretary this ____
day of ________________, 1999.
ATTEST: I-STORM, INC.
By: _________________________ By: ___________________________
Stephen Venuti, Secretary Calbert Lai, President
STATE OF ___________
: ss
COUNTY OF ___________
On this ___ day of ___________, 2000, personally appeared before me,
the undersigned, a notary public, Calbert Lai and Stephen Venuti, who being by
me first duly sworn, declared that they are the President and Secretary,
respectively, of the above-named corporation, acknowledged that they signed the
foregoing Certificate of Designation, and verified that the statements contained
therein are true.
WITNESS MY HAND AND OFFICIAL SEAL.
_____________________________
_____________, Notary Public
Residing in ___________County
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I-STORM, INC.
SERIES D PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES D PREFERRED STOCK PURCHASE AGREEMENT (the "Agreement") is
entered into as of January 12, 2000, by and between I-STORM, INC., a Nevada
corporation (the "Company") and Computer Associates International, Inc.
(hereinafter referred to as "CA").
RECITALS
WHEREAS, the Company has authorized the sale and issuance of up to
500,000 shares of its Series D Cumulative Convertible Preferred Stock (the
"Shares" or "Series D Preferred Stock");
WHEREAS, CA desires to purchase a portion of the Shares on the terms
and conditions set forth herein; and
WHEREAS, the Company desires to issue and sell the Shares to CA on the
terms and conditions set forth herein;
NOW, THEREFORE, in consideration of the foregoing recitals and the
mutual promises hereinafter set forth, the parties hereto agree as follows:
1. AGREEMENT TO SELL AND PURCHASE.
1.1 AUTHORIZATION OF SHARES. On or prior to each Closing (as defined
below), the Company shall have authorized (i) the sale and issuance to CA of the
Shares and (ii) the issuance of such shares of Common Stock to be issued upon
conversion of the Shares (the "Conversion Shares"). The Shares and the
Conversion Shares shall have the rights, preferences, privileges and
restrictions set forth in the Certificate of Designations of the Company in the
form attached hereto as EXHIBIT A (the "Certificate of Designations").
1.2 SALE AND PURCHASE. Subject to the terms and conditions hereof,
at each Closing the Company hereby agrees to issue and sell to CA and CA agrees
to purchase from the Company 40,817 Shares, at a purchase price of twelve
dollars and twenty-five cents ($12.25) per share for an aggregate purchase price
of $500,000, subject to adjustment as set forth herein. The total number of
shares to be purchased is 163,268 and the aggregate purchase price for all
Shares to be purchased under this Agreement is $2,000,000.
1.3 CA PURCHASES DEPENDENT UPON EXECUTION OF E-COMMERCE PARTNERSHIP
AGREEMENTS. Upon the execution of this agreement, CA agrees to purchase 40,817
Shares (the "Initial Closing"). After the Initial Closing, within five business
days of the execution and delivery by the Company of each of three qualifying
E-Commerce and Sales Marketing Agreements with a third party involved in
e-commerce (a "Qualifying Partnership Agreement"), CA agrees to purchase an
additional 40,817 Shares (each a "Subsequent Closing"). In order to qualify as a
Qualifying Partnership Agreement, not less than 10 days prior to the execution
of a proposed Qualifying Partnership Agreement, the Company shall provide CA
with the terms of the proposed Qualifying Partnership Agreement and CA shall,
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exercising reasonable business judgment, have the option to deem the agreement a
Qualifying Partnership Agreement no later than five days after the Company has
provided to CA the terms of such proposed Qualifying Partnership Agreement. Upon
the purchase of Shares after the third Qualifying Partnership Agreement at the
third Subsequent Closing, CA's obligation to purchase any more Shares and the
Company's obligation to sell any more Shares will cease.
1.4 PURCHASE PRICE PER SHARE; ADJUSTMENTS FOR CHANGE IN CAPITAL
STOCK. The purchase price for the Shares shall initially be $12.25 per Share
(the "Purchase Price"), PROVIDED; that if the Company (i) subdivides the Series
D Preferred Stock into a greater number of shares or (ii) combines its
outstanding shares of Series D Preferred Stock into a smaller number of shares,
then with respect to any Closing that has not yet taken place: (i) the Purchase
Price and (ii) the number of Shares to be purchased at such Closing (and each
Subsequent Closing after such Closing) shall be proportionately adjusted so that
CA will receive the aggregate number of Shares which it would have owned
immediately following such action if the Closing had taken place immediately
prior to such action. Such adjustment shall be made successively whenever any
event listed above shall occur and shall be independent and not in lieu of any
adjustment to the conversion rate described in the Certificate of Designations.
2. CLOSING, DELIVERY AND PAYMENT.
2.1 CLOSING. Each closing of the sale and purchase of the Shares
under this Agreement shall take place either at the Initial Closing or a
Subsequent Closing (each a "Closing") at the time specified in Section 1.3
above, or at such other time, and at such place, as the Company and CA may
mutually agree (each such date is hereinafter referred to as a "Closing Date").
2.2 DELIVERY. At each Closing, subject to the terms and conditions
hereof, the Company will deliver to CA certificates representing the number of
Shares to be purchased at the Closing by CA pursuant to the terms of this
Agreement, against payment of the purchase price therefor in immediately
available funds by check or wire transfer made payable to the order of the
Company, cancellation of indebtedness which the parties agree is owing to CA by
the Company, or any combination of the foregoing; provided, however that,
anything to the contrary herein notwithstanding, in the event that any Closing
shall occur hereunder after the date on which all of the Company's outstanding
Series D Preferred Stock has been converted into Common Stock in accordance with
the Certificate of Designations, then the "Shares" to be issued and delivered at
such Closing shall be that number of shares of Common Stock into which the
number of shares of Series D Preferred Stock otherwise deliverable at such
Closing would have been converted if they had been outstanding on such
conversion date.
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3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants to CA as of the date of
this Agreement as follows:
3.1 ORGANIZATION, GOOD STANDING AND QUALIFICATION. The Company is a
corporation duly organized, validly existing and in corporate and tax good
standing under the laws of the State of Nevada. The Company has all requisite
corporate power and authority to own, operate and lease its properties and
assets, to execute and deliver this Agreement and the Registration Rights
Agreement in the form attached hereto as EXHIBIT B (the "Registration Rights
Agreement") ((i) the Registration Rights Agreement, (ii) this Agreement, (iii)
the Certificate of Designations, (iv) the License Agreement and the Professional
Services Agreement dated the date hereof between the Company and CA, together
with all Order Forms and Addendum thereto (collectively the "Products and
Services Agreements") and (v) all exhibits, schedules and other agreements
entered into in connection with all of the foregoing are collectively the
"Transaction Documents"), to issue and sell the Shares and to carry out the
provisions of the Transaction Documents and to carry on its business as
presently conducted and as presently proposed to be conducted. The Company is
duly qualified and is authorized to do business and is in corporate and tax good
standing as a foreign corporation in all jurisdictions in which the nature of
its activities and of its properties (both owned and leased) makes such
qualification necessary, except for those jurisdictions in which failure to do
so would not have a material adverse effect on the business, liabilities,
properties, assets, prospects, operations, results of operations and/or
condition (financial or otherwise) of the Company and its subsidiaries taken as
a whole (a "Material Adverse Effect").
3.2 SUBSIDIARIES. The Company owns all outstanding shares in the
following wholly-owned subsidiaries (collectively the "Subsidiaries"): LVL
Communications Corporation, a California corporation. Other than the
Subsidiaries, the Company owns no equity securities of any other corporation,
limited partnership or similar entity, and is not a participant in any joint
venture, partnership or similar arrangement except those arrangements made
pursuant to e-commerce and sales and marketing agreements (whether or not such
agreements are deemed Qualifying Partnership Agreements).
3.3 CAPITALIZATION; VOTING RIGHTS. The authorized capital stock of
the Company, immediately prior to the first Closing, will consist of 25,000,000
shares of Common Stock, (par value $0.01) per share and 3,525,000 shares of
Preferred Stock, (par value $0.01), of which 600,000 are designated Series A
Cumulative Convertible Preferred Stock ("Series A Preferred Stock") ; 1,700,000
are designated Series B Cumulative Convertible Preferred Stock ("Series B
Preferred Stock"); and 1,225,000 are designated Series C Cumulative Convertible
Preferred Stock ("Series C Preferred Stock"). Immediately prior to the effective
date of this Agreement, 5,460,449 shares of Common Stock, 0 shares Series A
Preferred Stock (subscribed for 600,000 shares), 407,900 shares of Series B
Preferred Stock, 371,438 shares of Series C Preferred Stock and no shares of
Series D Preferred Stock will be issued and outstanding. Of the authorized
shares of Common Stock, (i) 1.4 million shares are reserved for issuance to
employees pursuant to the 1998-A Incentive Stock Option and Non-Statutory Option
Plan (the "1998 A-Plan") and 1.5 million shares are reserved for issuance to
employees pursuant to the Company's 1998-B Incentive Stock Option and
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Non-Statutory Plan (the "1998-B Plan"), (ii) 600,000 shares are reserved for
issuance upon the exercise of certain warrants, (iii) 600,000 shares are
reserved for issuance upon the conversion of the Series A Preferred Stock, (iv)
1,785,000 shares are reserved for issuance upon the conversion of the Series B
Preferred Stock, and (v) 1,650,000 shares are reserved for issuance upon
conversion of the Series C Preferred Stock. The Company intends to reserve
714,300 shares of its Common Stock for issuance upon conversion of the Series D
Preferred Stock. All issued and outstanding shares of the Company's Common Stock
(a) have been duly authorized and validly issued, (b) are fully paid and
nonassessable, and (c) were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. The rights, preferences,
privileges and restrictions of the Shares are as stated in the Certificate of
Designations. Each series of Preferred Stock is convertible into Common Stock on
the basis described in the Reports (as defined below), subject to adjustment as
provided in the respective certificate of designations. The Conversion Shares
have been duly and validly reserved for issuance. Other than as set forth in
this Section 3.3 or as disclosed in Schedule 3.3 hereto, there are no
outstanding options, warrants, rights (including conversion or preemptive rights
and rights of first refusal), proxy or shareholder agreements, or agreements of
any kind for the purchase or acquisition from the Company of any of its
securities. When issued in compliance with the provisions of this Agreement and
the Certificate of Designations, and upon payment of the Purchase Price the
Shares and the Conversion Shares will be validly issued, fully paid and
nonassessable, and will be free of any liens or encumbrances; PROVIDED, HOWEVER,
that the Shares and the Conversion Shares may be subject to restrictions on
transfer under state and/or federal securities laws as set forth herein or in
the Registration Rights Agreement or as otherwise required by such laws at the
time a transfer is proposed.
3.4 AUTHORIZATION; BINDING OBLIGATIONS. All corporate action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization of the Transaction Documents, the performance of all obligations
of the Company hereunder and thereunder and the authorization, sale, issuance
and delivery of the Shares pursuant hereto and pursuant to the Certificate of
Designations has been taken or will be taken prior to each Closing. The
Transaction Documents, when executed and delivered, will be legal, valid and
binding obligations of the Company enforceable in accordance with their terms,
except as may be limited by: (i) applicable principles limiting the availability
of specific performance, injunctive relief, and other equitable remedies; (ii)
bankruptcy, insolvency, reorganization, moratorium or other similar laws now or
hereafter in effect generally relating to or affecting creditors' rights,
provided, that the Bankruptcy (as defined below) shall not effect the
enforceability of the Transaction Documents and (iii) limitations on the
enforceability of the indemnification provisions of the Registration Rights
Agreement under federal and New York law. The sale of the Shares and the
subsequent conversion of the Shares into Conversion Shares are not and will not
be subject to any preemptive rights or rights of first refusal that have not
been properly waived or complied with.
3.5 SEC AND OTHER DOCUMENTS; UNDISCLOSED LIABILITIES. (a) The
Company has filed, and has provided to CA, (i) all required registration
statements, prospectuses, reports, schedules, forms, statements and other
documents (including exhibits and all other information incorporated therein)
with the Securities and Exchange Commission (the "SEC") since July 17, 1998 and
(ii) all offering documents relating to the issuance of any securities of the
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Company since December 11, 1998, together with all supplements and exhibits and
schedules thereto (collectively, the "Reports"). As of their respective dates,
the Reports complied in all material respects with the requirements of the
Securities Act of 1933, as amended (the "Securities Act") or the Securities
Exchange Act of 1934, as amended (the "Exchange Act"), as the case may be (if
applicable), and the rules and regulations of the SEC promulgated thereunder
applicable to such Reports, except with respect to the late filing of certain
Reports as described in Schedule 3.5 hereto, and none of the Reports when filed
or distributed contained any untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary in order to
make the statements therein, in light of the circumstances under which they were
made, not misleading. The financial statements of the Company included in the
Reports comply as to form, as of their respective dates of filing with the SEC,
in all material respects with applicable accounting requirements and the
published rules and regulations of the SEC with respect thereto, have been
prepared in accordance with GAAP (except, in the case of unaudited statements,
as permitted by Form 10-Q) applied on a consistent basis during the periods
involved (except as may be indicated in the notes thereto), are complete and
correct and fairly present in all material respects the consolidated financial
position of the Company and its consolidated subsidiaries as of the dates
thereof and the consolidated results of their operations and cash flows for the
periods then ended (subject, (i) in the case of unaudited statements, to normal
year-end audit adjustments and (ii) to any comments of the SEC which have been
previously furnished to CA).
(b) The Company has no liabilities other than (i) liabilities
disclosed in the Reports and (ii) current liabilities incurred in the ordinary
course of business which would not have, either in any individual case or in the
aggregate, a Material Adverse Effect.
3.6 AGREEMENTS; ACTION.
(a) Except as set forth in Schedule 3.6 hereto, there are no
agreements, understandings, instruments, contracts, proposed transactions,
judgments, orders, writs or decrees to which the Company is a party or by which
it is bound which may involve (i) obligations (contingent or otherwise) of, or
payments to, the Company in excess of $25,000, or (ii) the license of any
patent, copyright, trade secret or other proprietary right to or from the
Company (other than licenses arising from the purchase of "off the shelf" or
other standard products), or (iii) indemnification by the Company with respect
to infringements of proprietary rights.
(b) The Company has not (i) made any loans or advances to any
person, other than ordinary advances for travel expenses, or (ii) sold,
exchanged or otherwise disposed of any of its assets or rights, other than the
sale of its inventory in the ordinary course of business.
3.7 OBLIGATIONS TO RELATED PARTIES. There are no obligations of the
Company to officers, directors, stockholders, or employees of the Company other
than (a) for payment of salaries or directors or consultants fees, which are
described in Schedule 3.7, (b) reimbursement for reasonable expenses incurred on
behalf of the Company and (c) for other standard employee benefits made
generally available to all employees. The Company is not a guarantor or
indemnitor of any indebtedness of any other person, firm or corporation.
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3.8 CHANGES. Except as set forth on Schedule 3.8 or as disclosed in
the Company's Form 10-KSB/A for the fiscal year ended December 31, 1998, as
filed on December 16, 1999, there has not been since December 31, 1998:
(a) a Material Adverse Effect or any event relating to the
operation of the Company which could reasonably be expected to have a Material
Adverse Effect;
(b) Any material change, except in the ordinary course of
business, in the contingent obligations of the Company by way of guaranty,
endorsement, indemnity, warranty or otherwise;
(c) Any damage, destruction or loss, whether or not covered by
insurance, materially and adversely affecting the properties, business or
prospects or financial condition of the Company;
(d) Any waiver by the Company of a valuable right or of a
material debt owed to it;
(e) Any direct or indirect loans made by the Company to any
stockholder, employee, officer or director of the Company, other than employee
advances made in the ordinary course of business;
(f) Any material change in any compensation arrangement or
agreement with any employee, officer, director or stockholder;
(g) Any declaration or payment of any dividend or other
distribution of the assets of the Company;
(h) Any debt, obligation or liability incurred, assumed or
guaranteed by the Company, except those for immaterial amounts and for current
liabilities incurred in the ordinary course of business;
(i) Any sale, assignment or transfer of any patents, trademarks,
copyrights, trade secrets or other intangible assets or any sale, assignment or
transfer of any other assets except in the ordinary course of business;
(j) Any change in any material agreement to which the Company is
a party or by which it is bound which materially and adversely affects the
business, assets, liabilities, financial condition, operations or prospects of
the Company;
(k) Any change in any accounting method used by the Company
other than as disclosed in the Reports.
3.9 TITLE TO PROPERTIES AND ASSETS; LIENS, ETC. The Company has good
and marketable title to its properties and assets, including the properties and
assets reflected in the most recent balance sheet included in the Reports, and
good title to its leasehold estates, in each case subject to no mortgage,
pledge, lien, lease, encumbrance or charge, other than (a) those resulting from
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taxes which have not yet become delinquent, (b) minor liens and encumbrances
which do not materially detract from the value of the property subject thereto
or materially impair the operations of the Company, and (c) those that have
otherwise arisen in the ordinary course of business, none of which are material
in amount. All facilities, machinery, equipment, fixtures, vehicles and other
properties owned, leased or used by the Company are in good operating condition
and repair and are reasonably fit and usable for the purposes for which they are
being used. The Company is in compliance with all material terms of each lease
to which it is a party or is otherwise bound.
3.10 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all trademarks, service marks, trade names,
copyrights, trade secrets, licenses, information and other proprietary rights
and processes and, to the best of its knowledge, all patents necessary for its
business as now conducted and as presently proposed to be conducted, without any
known infringement of the rights of others. There are no outstanding options,
licenses or agreements of any kind relating to the foregoing, nor is the Company
bound by or a party to any options, licenses or agreements of any kind with
respect to the patents, trademarks, service marks, trade names, copyrights,
trade secrets, licenses, information and other proprietary rights and processes
of any other person or entity other than such licenses or agreements arising
from the purchase of "off the shelf" or standard products. No person has made
or, to the knowledge of the Company, threatened to make any claim alleging that
the Company has violated or, by conducting its business as presently proposed,
would violate any of the patents, trademarks, service marks, trade names,
copyrights or trade secrets or other proprietary rights of any other person or
entity. The Company is not aware that any of its employees is obligated under
any contract (including licenses, covenants or commitments of any nature) or
other agreement, or subject to any judgment, decree or order of any court or
administrative agency, that would interfere with their duties to the Company or
that would conflict with the Company's business as presently proposed to be
conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as presently proposed, will, to the Company's
knowledge, conflict with or result in a breach of the terms, conditions or
provisions of, or constitute a default under, any contract, covenant or
instrument under which any employee is now obligated. The Company does not
believe it is or will be necessary to utilize any inventions, trade secrets or
proprietary information of any of its employees made prior to their employment
by the Company, except for inventions, trade secrets or proprietary information
that have been assigned to the Company.
3.11 COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not in
violation or default of any term of its Certificate of Incorporation or Bylaws,
or of any provision of any mortgage, indenture, contract, agreement, instrument
or contract to which it is party or by which it is bound or of any judgment,
decree, order, writ or, any statute, rule or regulation applicable to the
Company which would have a Material Adverse Effect. The execution, delivery, and
performance of and compliance with this Agreement, and the other Transaction
Documents and the issuance and sale of the Shares pursuant hereto and of the
Conversion Shares pursuant to the Certificate of Designations, will not, with or
without the passage of time or giving of notice, result in any such violation,
or be in conflict with or constitute a default under any such term, or result in
the creation of any mortgage, pledge, lien, encumbrance or charge upon any of
the properties or assets of the Company or the suspension, revocation,
impairment, forfeiture or nonrenewal of any permit license, authorization or
approval applicable to the Company, its business or operations or any of its
assets or properties.
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3.12 LITIGATION. There is no action, suit, proceeding or
investigation pending or to the Company's knowledge currently threatened against
the Company that questions the validity of this Agreement, or the other
Transaction Documents or the right of the Company to enter into any of such
agreements, or to consummate the transactions contemplated hereby or thereby, or
which might result, either individually or in the aggregate, in a Material
Adverse Effect, or any change in the current equity ownership of the Company,
nor is the Company aware that there is any basis for the foregoing. Each action,
suit, proceeding or investigation that is pending or, to the Company's
knowledge, threatened against the Company is set forth on Schedule 3.12 hereto,
together with a description thereof. The foregoing includes, without limitation,
actions pending or threatened (or any basis therefor known to the Company)
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, or their obligations
under any agreements with prior employers. The Company is not a party or subject
to the provisions of any order, writ, injunction, judgment or decree of any
court or government agency or instrumentality. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company intends to initiate.
3.13 TAX RETURNS AND PAYMENTS. The Company has filed all tax returns
(federal, state and local) required to be filed by it. All taxes shown to be due
and payable on such returns, any assessments imposed, and all other taxes due
and payable by the Company on or before each Closing as it occurs have been paid
or will be paid prior to the time they become delinquent. The Company has no
knowledge of any liability of any tax to be imposed upon its properties or
assets as of the date of this Agreement that is not adequately provided for.
3.14 EMPLOYEES. The Company has no collective bargaining agreements
with any of its employees. There is no labor union organizing activity pending
or, to the Company's knowledge, threatened with respect to the Company. To the
Company's knowledge, no employee of the Company, nor any consultant with whom
the Company has contracted, is in violation of any term of any employment
contract, proprietary information agreement or any other agreement with the
Company; and to the Company's knowledge the continued employment by the Company
of its present employees, and the performance of the Company's contracts with
its independent contractors, will not result in any such violation. The Company
has not received any notice alleging that any such violation has occurred.
Except as set forth in Schedule 3.14, no employee of the Company has been
granted the right to continued employment by the Company or to any material
compensation following termination of employment with the Company. The Company
is not aware that any officer or key employee, or that any group of key
employees, intends to terminate their employment with the Company, nor does the
Company have a present intention to terminate the employment of any officer, key
employee or group of key employees.
3.15 REGISTRATION RIGHTS. Except as required pursuant to the
Registration Rights Agreement or as listed in Schedule 3.15, the Company is
presently not under any obligation, and has not granted any rights, to register
(as defined in the Registration Rights Agreement) any of the Company's presently
outstanding securities or any of its securities that may hereafter be issued.
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3.16 COMPLIANCE WITH LAWS; PERMITS. The Company is not in violation
of any applicable statute, rule, regulation, order or restriction of any
domestic or, to the knowledge of the Company, any foreign government or any
instrumentality or agency thereof in respect of the conduct of its business or
the ownership of its properties which violation would have a Material Adverse
Effect. No governmental orders, permissions, consents, approvals or
authorizations are required to be obtained and no registrations or declarations
are required to be filed in connection with the execution and delivery of this
Agreement and the issuance of the Shares or the Conversion Shares, except such
as has been duly and validly obtained or filed, or with respect to any filings
that must be made after each Closing, as will be filed in a timely manner. The
Company has all franchises, permits, licenses and any similar authority
necessary for the conduct of its business as now being conducted by it, the lack
of which could have a Material Adverse Effect and believes it can obtain,
without undue burden or expense, any similar authority for the conduct of its
business as planned to be conducted.
3.17 OFFERING VALID. Assuming the accuracy of the representations
and warranties of CA contained in Section 4.2 hereof, the offer, sale and
issuance of the Shares and the Conversion Shares will be exempt from the
registration requirements of the Securities Act of 1933, as amended (the
"Securities Act") and will have been registered or qualified (or are exempt from
registration and qualification) under the registration, permit or qualification
requirements of all applicable state securities laws. Neither the Company nor
any agent on its behalf has solicited or will solicit any offers to sell or has
offered to sell or will offer to sell all or any part of the Shares and
Conversion Shares to any person or persons so as to bring the sale of such
Shares or Conversion Shares by the Company within the registration provisions of
the Securities Act or any state securities laws.
3.18 INSURANCE. The Company has in effect the insurance policies
listed on Schedule 3.18.
3.19 CONTRACTS.
(a) Except as set forth in the Schedule 3.19 hereto, as of the
Initial Closing Date, the Company is not a party to any written or oral: (i)
pension, profit sharing, stock option, employee stock purchase or other plan
providing for deferred or other compensation to employees or any other employee
benefit plan or any contract with any labor union; (ii) contract relating to the
borrowing of money or the mortgaging, pledging or otherwise placing a lien on
any asset of the Company, (iii) contract pursuant to which the Company is lessor
of or permits any third party to hold or operate any property, real or personal,
owned or controlled by the Company; (iv) warranty contract (other than its
standard form of warranty contract or otherwise delivered to counsel to CA) with
respect to its services rendered or its products sold or leased; (v) contract or
non-competition provision in any contract prohibiting it from freely engaging in
any business or competing anywhere in the world; (vi) employment, consulting,
sales, commissions, advertising or marketing contracts (other than its standard
form of such agreements or otherwise delivered to counsel to CA); (vii)
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contracts providing for "take or pay" or similar unconditional purchase or
payment obligations; or (viii) contract that requires the consent of any party
in connection with the execution, delivery or performance of the Transaction
Documents.
(b) The Company's subsidiary, LVL Communications Corporation,
reorganized pursuant to Chapter Eleven of the Bankruptcy Code following the
approval of a Plan of Reorganization, without creditor objection, on April 16,
1998, by the United States Bankruptcy Court for the Northern District of
California (such reorganization, together with all proceedings in connection
therewith, the "Bankruptcy"). Since July 17, 1998, the date upon which LVL
became a wholly owned subsidiary of the Company, the Company has not been, and
currently is not in default in any respect under or in breach of nor in receipt
of any claim of default or breach under any material contract to which the
Company is subject (including without limitation all performance bonds, warranty
obligations or otherwise); no event has occurred which with the passage of time
or the giving of notice or both would result in a default, breach or event of
non-compliance under any material contract to which the Company is subject
(including without limitation all performance bonds, warranty obligations or
otherwise); the Company does not have any present expectation or intention of
not fully performing all such obligations; the Company does not have any
knowledge of any breach or anticipated breach by the other parties to any such
contract to which it is a party.
3.20 YEAR 2000 COMPLIANCE. To the Company's knowledge, as of the
Closing Date, all Date-Sensitive Systems are Year 2000 Compliant except as such
noncompliance would not have a Material Adverse Effect. "Date Data" means any
data of any type that includes date information or which is otherwise derived
from, dependent on or related to date information. "Date-Sensitive System" means
any software that processes any Date Data and that the Company has itself
developed for its internal use, or that the Company sells, leases, licenses,
assigns or otherwise provides, or the provision or operation of which the
Company provides the benefit, to its customers. "Year 2000 Compliant" means that
each such system accurately processes all Date Data, including for the twentieth
and twenty-first centuries, without loss or any functionality or performance,
including but not limited to calculating, comparing, sequencing storing and
displaying such Date Data (including all leap year considerations), when used as
a stand-alone system or in combination with other software or hardware.
3.21 SOFTWARE. The current software applications used by the Company
in the operation of its business, as set forth and described on Schedule 3.22
hereto (the "Software"), to the extent it has been designed or developed by the
Company's management information or development staff or by consultants on the
Company's behalf, is original and capable of copyright protection in the United
States, and the Company has complete rights to and ownership of such software.
To the Company's knowledge, no part of any such software is an imitation or copy
of, or infringes upon, the software of any other Person or violates or infringes
upon any common law or statutory rights of any other person, including, without
limitation, rights relating to defamation, contractual rights, copyrights, trade
secrets, and rights of privacy or publicity. The Company has not sold, assigned,
licensed, distributed, or in any other way disposed of or encumbered the
Software. The Software, to the extent it is licensed from any third party
licensor or constitutes "off-the-shelf" software, is held by the Company
legitimately. All of the Company's computer hardware has legitimately-licensed
software installed therein. To the Company's knowledge, the Software is free
from any software defect or programming or documentation error which might have
a materially adverse effect on the Company.
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3.22 CUSTOMER WARRANTIES. There are no pending, nor to the knowledge
of the Company, threatened, claims under or pursuant to any warranty, whether
expressed or implied, on products or services sold prior to the Closing Date by
the Company that are not disclosed or referred to in the financial statements to
the Reports and that are not fully reserved against. There is no reason to
expect an increase in warranty claims in the future.
3.23 DEALINGS WITH AFFILIATES. Schedule 3.23 sets forth a complete
and accurate list, including the parties, of all oral or written contracts to
which the Company is, will be or has been a party, at any time since July 17,
1998 to the Closing Date, and to which any one or more affiliates of the Company
(including any employee, officer, director or shareholder holding in excess of
5% of any class of equity security of the Company on a fully-diluted basis) is
also a party. Since July 17, 1998, the Company has not made any payments, loaned
any funds or property or made any credit arrangement with any affiliate
(including any employee, officer, director or shareholder holding in excess of
5% of any class equity security of the Company on a fully-diluted basis) except
for the payment of employee salaries and director compensation in the ordinary
course of business.
3.24 DISCLOSURE. Neither this Agreement nor any of the Exhibits and
Schedules hereto, nor any written materials supplied to CA by the Company, nor
the Reports as of the date they were filed with the SEC, or if not filed with
the SEC, as of the date of such Report, contains any untrue statement of a
material fact or omits a material fact known to the Company necessary to make
each statement contained herein or therein not misleading. The reports have not
been updated except as required under the Exchange Act to the extent applicable
to the Reports. There is no fact which the Company has not disclosed to CA
herein and of which the Company, or any of its officers, directors or executive
employees is aware and which could reasonably be anticipated to have a Material
Adverse Effect.
3.25 NO BROKERS. No agent, broker, person or firm acting on behalf
of the Company is or will be entitled, as a result of any action or agreement by
the Company, to any commission or broker's or finder's fees from CA in
connection with any of the transactions contemplated herein.
4. REPRESENTATIONS AND WARRANTIES OF CA.
CA hereby represents and warrants to the Company as follows (such
representations and warranties do not lessen or obviate the representations and
warranties of the Company set forth in this Agreement):
4.1 REQUISITE POWER AND AUTHORITY. CA has all necessary power and
authority under all applicable provisions of law to execute and deliver this
Agreement and the Registration Rights Agreement and to perform the obligations
of CA hereunder and thereunder. All action on CA's part required for the lawful
execution and delivery of this Agreement and the Registration Rights Agreement
have been or will be effectively taken prior to each Closing. Upon their
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execution and delivery, this Agreement and the Registration Rights Agreement
will be valid and binding obligations of CA, enforceable in accordance with
their terms, except as may be limited by: (i) applicable principles limiting the
availability of specific performance, injunctive relief, and other equitable
remedies; (ii) bankruptcy, insolvency, reorganization, moratorium or other
similar laws now or hereafter in effect generally relating to or affecting
creditors' rights, and (iii) limitations on the enforceability of the
indemnification provisions of the Registration Rights Agreement under federal
and New York law
4.2 INVESTMENT REPRESENTATIONS. CA understands that none of the
Shares and the Conversion Shares has been registered under the Securities Act.
CA also understands that the Shares are being offered and sold pursuant to an
exemption from registration contained in the Securities Act and the Rules and
Regulations thereunder based in part upon CA's representations contained in this
Agreement and the Registration Rights Agreement. CA hereby represents and
warrants as follows:
(a) CA BEARS ECONOMIC RISK. CA has experience in evaluating and
investing in private placement transactions of securities in companies similar
to the Company so that it is capable of evaluating the merits and risks of its
investment in the Company and has the capacity to protect its own interests. CA
must bear the economic risk of this investment indefinitely unless the Shares
(or the Conversion Shares) are registered pursuant to the Securities Act, or an
exemption from registration is available. CA understands that the Company has no
present intention of registering the Shares or any shares of its Common Stock
(except as contemplated by the Registration Rights Agreement). CA also
understands that there is no assurance that any exemption from registration
under the Securities Act will be available and that, even if available, such
exemption may not allow CA to transfer all or any portion of the Shares or the
Conversion Shares under the circumstances, in the amounts or at the times CA
might propose.
(b) ACQUISITION FOR OWN ACCOUNT. CA is acquiring the Securities
for CA's own account for investment only, and not with a view towards their
resale or distribution.
(c) CA CAN PROTECT ITS INTEREST. CA represents that by reason of
its, or of its management's, business or financial experience, CA has the
capacity to protect its own interests in connection with the transactions
contemplated in this Agreement and the Registration Rights Agreement. Further,
CA is aware of no publication of any advertisement in connection with the
transactions contemplated in the Agreement.
(d) ACCREDITED INVESTOR. CA represents that it is an accredited
investor within the meaning of Regulation D under the Securities Act.
(e) COMPANY INFORMATION. CA has adequately and to its own
satisfaction conducted its independent due diligence and investigation of the
Company. CA has received and read the Reports and has had an opportunity to
discuss the Company's business, management and financial affairs with directors,
officers and management of the Company and has had the opportunity to review the
Company's operations and facilities. CA has also had the opportunity to ask
questions of and receive answers from, the Company and its management regarding
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the terms and conditions of this investment and to obtain any additional
information which the Company possesses or can acquire without unreasonable
effort and expense necessary to verify the accuracy of any information furnished
by the Company. CA has received satisfactory answers to any questions asked and
all information that it has requested.
(f) RULE 144. CA acknowledges and agrees that the Shares and the
Conversion Shares must be held indefinitely unless they are subsequently
registered under the Securities Act or an exemption from such registration is
available. CA has been advised or is aware of the provisions of Rule 144
promulgated under the Securities Act as in effect from time to time, which
permits limited resale of shares purchased in a private placement subject to the
satisfaction of certain conditions, including, among other things: the
availability of certain current public information about the Company, the resale
occurring following the required holding period under Rule 144, the sale being
effected through a "broker's transaction" or in a transaction directly with a
"market maker" (as provided by Rule 144(f)) and the number of shares being sold
during any three-month period not exceeding specified limitations.
(g) RESIDENCE. The office or offices of CA in which its
investment decision was made is located at Islandia, New York.
4.3 TRANSFER RESTRICTIONS. CA acknowledges and agrees that the
Shares and, if issued upon conversion of the Shares, the Conversion Shares, are
subject to restrictions on transfer under applicable securities laws and as set
forth in the Registration Rights Agreement and herein. CA understands and agrees
that the Share and Conversion Share certificates may bear a legend or legends
setting forth applicable restrictions on transferability under applicable
securities law and this Agreement and the registration Rights Agreement and that
it will not transfer any Shares in violation of any such restrictions.
5. CONDITIONS TO CLOSING.
5.1 CONDITIONS TO CA'S OBLIGATIONS AT EACH CLOSING. CA's obligations
to purchase the Shares at each Closing are subject to the satisfaction, at or
prior to each such Closing Date, of the following conditions (any of which may
be waived by CA):
(a) REPRESENTATIONS AND WARRANTIES TRUE; PERFORMANCE OF
OBLIGATIONS. The representations and warranties of the Company contained in
Article 3 which are qualified as to materiality or Material Adverse Effect shall
be true and correct, subject to such qualification, at and as of each Closing
Date as if made at and as of such date, all other representations and warranties
of the Company shall be true and correct as of each Closing Date as if made at
and as of such date except where the failure of such representation or warranty
to be true and correct would not have a Material Adverse Effect. The Company
shall have performed and complied with all material agreements and conditions
herein required to be performed or complied with by it on or before such
Closing.
(b) LEGAL INVESTMENT. On such Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which CA and the Company are
subject.
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(c) CONSENTS, PERMITS, AND WAIVERS. The Company shall have
obtained any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by the Transaction Documents.
(d) CORPORATE DOCUMENTS. The Company shall have delivered to CA
or its counsel, copies of all corporate documents of the Company as CA shall
reasonably request.
(e) RESERVATION OF CONVERSION SHARES. The Conversion Shares
shall have been duly authorized and reserved for issuance upon such conversion
or exercise.
(f) COMPLIANCE CERTIFICATE. The Company shall have delivered to
CA a Compliance Certificate, executed by the President of the Company, dated
such Closing Date, to the effect that the conditions specified in subsections
(a), (c) and (e) of this Section 5.1 have been satisfied.
(g) TRANSACTION DOCUMENTS. The Company shall have executed this
Agreement and the Registration Rights Agreement, and shall have filed the
Certificate of Designations with the Nevada Secretary of State, or other
appropriate authority.
(h) LEGAL OPINION. CA shall have received from DeMartino,
Finkelstein, Rosen & Virga an opinion addressed to it, dated as of such Closing
Date, in substantially the form attached hereto as EXHIBIT C.
(i) PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing
hereby and all documents and instruments incident to such transactions shall be
reasonably satisfactory in substance and form to the CA and its counsel, and CA
and its counsel shall have received all such counterpart originals or certified
or other copies of such documents as they may reasonably request.
(j) COMPLIANCE WITH SECURITIES LAWS; CONTINUED LISTING. The
Company shall have complied with applicable securities laws and its common stock
shall be quoted on the NASD OTC Electronic Bulletin Board ("OTCBB").
(k) QUALIFYING PARTNERSHIP AGREEMENTS. The Company shall have
entered into a Qualifying Partnership Agreement relating to such Closing and
such Qualifying Partnership Agreement shall be in full force and effect and the
Company shall not be in breach thereof. CA agrees that the Company has executed
and delivered a Qualifying Partnership Agreement acceptable to CA relating to
the Initial Closing.
(l) PRODUCTS AND SERVICES AGREEMENTS. The Products and Services
Agreements between the Company and CA, dated as of the date hereof, together
with any Order Forms and Addendum thereto, shall be executed simultaneously with
the Initial Closing and at each Subsequent Closing such documents shall be in
full force and effect and neither the Company nor CA shall be in breach thereof.
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5.2 CONDITIONS TO OBLIGATIONS OF THE COMPANY. The Company's
obligation to issue and sell the Shares at each Closing is subject to the
satisfaction, on or prior to such Closing, of the following conditions (any of
which may be waived by the Company):
(a) REPRESENTATIONS AND WARRANTIES TRUE. The representations and
warranties of CA contained in Article 5 which are qualified as to materiality or
Material Adverse Effect shall be true and correct at and as of each Closing Date
as if made at and as of such date, all other representations and warranties of
CA shall be shall be true and correct as of each Closing Date as if made at and
as of such date except where the failure of such representation or warranty to
be true and correct would not have a Material Adverse Effect.
(b) PERFORMANCE OF OBLIGATIONS. CA shall have performed and
complied with all material agreements and conditions herein required to be
performed or complied with by CA on or before such Closing.
(c) REGISTRATION RIGHTS AGREEMENT. The Registration Rights
Agreement shall have been executed and delivered by CA.
(d) LEGAL INVESTMENT. On such Closing Date, the sale and
issuance of the Shares and the proposed issuance of the Conversion Shares shall
be legally permitted by all laws and regulations to which CA and the Company are
subject.
6. COVENANTS.
6.1 COMPLIANCE WITH TRANSACTION DOCUMENTS. Each of the parties shall
observe or comply with each of its respective covenants set forth in each of the
Transaction Documents.
6.2 FURTHER ASSURANCES. Each of the parties hereto agrees to use all
commercially reasonable efforts to take, or cause to be taken, all actions, and
to do, or cause to be done, all things necessary, proper or advisable under
applicable laws and regulations, to consummate and make effective the
transactions contemplated by this Agreement and the Transaction Documents as
expeditiously as practicable and to ensure that the conditions set forth in
Articles 4 and 5 are satisfied. In case at any time after any Closing Date any
further action is necessary or desirable to carry out the purposes of this
Agreement or any of the other Transaction Documents, each of the parties to this
Agreement shall take or cause to be taken all such necessary action, including
the execution and delivery of such further instruments and documents, including
but not limited to the issuance of securities to CA, as may be reasonably
requested by either party for such purposes or otherwise to complete or perfect
the contemplated transactions.
6.3 ACCESS AND INFORMATION. During the term of this Agreement, the
Company shall permit CA and its representatives and agents to have access to the
Company's and its Subsidiaries' offices and the Company's officers, counsel,
auditors, books and records, and the opportunity to investigate the Company's
and its Subsidiaries' title to property and the condition and nature of its
assets, business and liabilities, in each case upon reasonable notice and during
normal business hours; subject to agreement by CA to treat as confidential all
proprietary, confidential and trade secret information of the Company.
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6.4 BOARD MEMBERS. The Company agrees that immediately after the
Initial Closing Date, it will use its best efforts to cause at least one
individual designated by CA to be elected to the Company's Board of Directors as
soon as possible thereafter (the "CA Designee"). Thereafter the Company shall
use its best efforts to cause the CA Designee to be reelected to the Board of
Directors. Neither the right to enforce the Company's obligation nor the right
to designate a member of the Board is assignable, whether on a sale or transfer
of the Shares or Conversion Shares or otherwise.
6.5 SERIES A PREFERRED STOCK. The Company shall use its best efforts
to obtain the consent of the requisite number of holders and shares of Series A
Cumulative Convertible Preferred Stock to (i) the issuance of the Series D
Preferred Stock upon the terms described in the Certificate of Designations (ii)
the payment of all dividends in connection therewith and (iii) such other
matters as CA may reasonably request (the "Series A Consent"). The Company shall
provide CA with a draft of any form proposed to be used in connection with such
consent and to incorporate any comments CA may reasonably have to such form.
7. TERMINATION.
TERMINATION. This Agreement may be terminated at any time (a) by mutual consent
of the Company and CA, (b) by the Company (i) upon the failure of CA to perform
or comply in all material respects with any of its covenants or agreements
contained herein or in the Transaction Documents (ii) if any representation or
warranty of CA shall not have been true and correct in any material respect as
of the time at which it was made, (c) by CA (i) upon the failure of the Company
to perform or comply in all material respects with any of its covenants or
agreements contained herein or in the Transaction Documents, (ii) if any
representation or warranty of the Company shall not have been true and correct
in any material respect as of the time at which it was made, (iii) if the
Company shall commence (by petition, application, or otherwise) a voluntary case
or other proceeding under the laws of any jurisdiction or an involuntary case or
other proceeding shall be commenced under the laws of any jurisdiction against
the Company seeking liquidation, reorganization, or other relief with respect to
itself or its debts under any bankruptcy, insolvency, or other similar law now
or hereafter in effect, or seeking the appointment of a trustee,
self-trusteeship, receiver, custodian, or other similar official of it or any
substantial part of its property, or shall consent (by answer or failure to
answer or otherwise) to any such relief or to the appointment of or taking
possession by any such official in an involuntary case or other proceeding
commenced against it, or shall make an assignment for the benefit of creditors,
or shall generally not pay its debts as they become due, or shall take any
action to authorize any of the foregoing, (iv) if the third Subsequent Closing
does not occur prior to December 31, 2000 or (v) if the Series A Consent is not
obtained before March 1, 2000; PROVIDED, however, that no party may terminate
this Agreement if such party has failed to comply with its material obligations
under this Agreement; PROVIDED, FURTHER, that this Agreement shall automatically
terminate without any further action on the part of CA if any of the events in
Section 7.1(c)(iii) occur.
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Termination by any party shall not be deemed to be a waiver of any claim such
party may have against the other party hereunder or under the other Transaction
Documents. If this Agreement is terminated pursuant to Section 7.1, all further
obligations of the parties under this Agreement will terminate, except that the
obligations under sections 6.3, 6.5, 8.1, 8.2, 8.3, 8.8, 8.9 and 8.10 will
survive the termination of this Agreement. Nothing in this Section shall relieve
any party of any liability for a breach of this Agreement prior to its
termination.
8. MISCELLANEOUS.
8.1 GOVERNING LAW; CONSENT TO JURISDICTION. (a) This Agreement shall
be governed in all respects by the laws of the State of New York without regards
to conflicts of laws; provided that, with respect to matters of corporate law,
the laws of the state in which the Company is incorporated shall govern.
(b) The Company hereby irrevocably and unconditionally submits, for
itself and its property, to the nonexclusive jurisdiction of any New York State
court or Federal court of the United States of America sitting in New York City,
any appellate court from any thereof, in any action or proceeding arising out of
or relating to this Agreement or the other Transaction Documents, and the
Company hereby waives to the fullest extent permitted by law any objection which
it may have to the laying of venue of any such proceeding and any claim that any
such proceeding has been brought in an inconvenient forum.
8.2 SURVIVAL; INDEMNIFICATION. (a) The representations, warranties,
covenants and agreements made herein, unless otherwise indicated by their terms
shall survive any investigation made by CA and the closing of the transactions
contemplated hereby for a period of three (3) years from the date hereof;
PROVIDED, that Sections 3.4, 3.5, 3.17 and 4.1 shall survive indefinitely;
PROVIDED, FURTHER that any claims made for indemnification made prior to the
expiration of such period shall survive and not be extinguished by the
expiration of such period. All statements as to factual matters contained in any
certificate or other instrument delivered by or on behalf of the Company
pursuant hereto in connection with the transactions contemplated hereby or by
the other Transaction Documents shall be deemed to be representations and
warranties by the Company hereunder.
(b) The Company shall indemnify and hold CA and its directors,
officers, shareholders, employees, agents and each other person which controls
(within the meaning of the Securities Act) CA, harmless against all liability,
loss or damage, together with all reasonable costs and expenses related thereto
(including legal and accounting fees and expenses) (collectively "Damages"),
arising from any breach of or any inaccuracy in, any representations,
warranties, covenants or agreements contained herein or in any of the
Transaction Documents or in any schedule, certificate or exhibit to any of the
Transaction Documents, PROVIDED, that such indemnification shall not include any
consequential damages; PROVIDED, FURTHER, that notwithstanding anything to the
contrary in this Agreement or any Schedule hereto or CA's knowledge with respect
thereto, the Company's liability shall include but not be limited to
consequential damages with respect to any failure to obtain the Series A Consent
or any damages incurred by CA in connection with any action by the holders of
Series A Cumulative Convertible Preferred Stock with respect to the Series D
Preferred Stock.
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(c) CA shall indemnify and hold the Company and its directors,
officers, shareholders, employees, agents and each other person which controls
(within the meaning of the Securities Act) the Company harmless against all
Damages, arising from any breach of or any inaccuracy in, any representations,
warranties, covenants or agreements contained herein or in any of the
Transaction Documents or in any schedule, certificate or exhibit to any of the
Transaction Documents; PROVIDED, that such indemnification shall not include any
consequential damages.
8.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of the Shares or the Conversion Shares from time to
time.
8.4 ENTIRE AGREEMENT. This Agreement, the Exhibits and Schedules
hereto, the Registration Rights Agreement and the other Transaction Documents
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof and no party shall be liable or
bound to any other in any manner by any representations, warranties, covenants
and agreements except as specifically set forth herein and therein.
8.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal or unenforceable, the validity, legality and enforceability of
the remaining provisions shall not in any way be affected or impaired thereby,
to the extent permitted by applicable law.
8.6 AMENDMENT AND WAIVER.
(a) This Agreement may be amended or modified only upon the
written consent of the Company and holders of at least a majority of the
outstanding Shares (treated as if converted and including any Conversion Shares
issued upon conversion of the Shares that have not been sold to the public).
(b) The obligations of the Company and the rights of the holders
of the Shares and the Conversion Shares under the Agreement may be waived only
with the written consent of the holders of at least a majority of the
outstanding Shares (treated as if converted and including any Conversion Shares
issued upon conversion of the Shares that have not been sold to the public).
8.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power or remedy accruing to any party, upon any breach,
default or noncompliance by another party under the Transaction Documents, shall
impair any such right, power or remedy, nor shall it be construed to be a waiver
of any such breach, default or noncompliance, or any acquiescence therein, or in
any similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent or approval of any kind or character on
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any CA's part of any breach, default or noncompliance under the Transaction
Documents or any waiver on such party's part of any provisions or conditions of
the Transaction Documents, or the Certificate of Designations must be in writing
and shall be effective only to the extent specifically set forth in such
writing. All remedies, either under the Transaction Documents, the Certificate
of Designations, by law, or otherwise afforded to any party, shall be cumulative
and not alternative.
8.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified; (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient, if not, then on the next business
day; (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid; or (d) the first business day after
deposit with a nationally recognized overnight courier, specifying next day
delivery, with written verification of receipt. All communications shall be sent
to the Company or CA at its respective address set forth as follows or at such
other address as the Company or CA respectively may designate by written notice
to the other party hereto:
If to the Company to:
I-Storm Inc.
2440 W. El camino Real. #520
Mountain View, CA 94040-1400
Facsimilie: (650) 962-5430
Attn: Calbert Lai
With a copy to:
David Mishel, Esq.
Thelen Reid & Priest LLP
101 Second Street
San Fransisco, CA 94105-3601
Facsilimie: (415) 371-1211
If to CA to:
Computer Associates International, Inc
One Computer Associates Plaza
Islandia, NY 11749
Facsimilie: (516) 342-4866
Attn: Steve Woghin, Esq.
8.9 EXPENSES; ATTORNEYS' FEES. Each party shall pay all costs and
expenses incurred by it in connection with the negotiation, execution and
delivery of the Transaction Documents. In the event that any dispute between the
parties to this Agreement should result in litigation, the prevailing party in
such dispute shall be entitled to recover from the losing party all fees, costs
and expenses of enforcing any right of such prevailing party under or with
respect to this Agreement, including without limitation, such reasonable fees
and expenses of attorneys and accountants, which shall include, without
limitation, all fees, costs and expenses of appeals.
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8.10 PUBLIC ANNOUNCEMENT. Until the termination of this Agreement
and the Transaction Documents, neither the Company nor CA shall issue or cause
the publication of any press release or other public announcement with respect
to the transactions contemplated by the Transaction Documents without the
consent of the other party which consent shall not be unreasonably withheld,
provided that each party shall give the other parties a reasonable opportunity
to review and comment thereon.
8.11 TITLES AND SUBTITLES. The titles of the articles sections and
subsections of the Agreement are for convenience of reference only and are not
to be considered in construing this Agreement.
8.12 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
8.13 PRONOUNS. All pronouns contained herein, and any variations
thereof, shall be deemed to refer to the masculine, feminine or neutral,
singular or plural, as to the identity of the parties hereto may require.
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IN WITNESS WHEREOF, the parties hereto have executed this SERIES D PREFERRED
STOCK PURCHASE AGREEMENT as of the date set forth in the first paragraph hereof.
I-STORM, INC. COMPUTER ASSOCIATES INTERNATIONAL, INC.
By:___________________________________ By:____________________________________
Name:_________________________________ Name:__________________________________
Title:________________________________ Title:_________________________________
21
I-STORM, INC.
REGISTRATION RIGHTS AGREEMENT
THIS REGISTRATION RIGHTS AGREEMENT (the "Agreement") dated as of
January 12, 2000 between COMPUTER ASSOCIATES INTERNATIONAL, INC., a Delaware
corporation ("CA") and I-STORM, INC., a Nevada corporation (the "Company").
RECITALS
WHEREAS, the Company proposes to sell and issue up to 163,268 shares of
its Series D Cumulative Convertible Preferred Stock (the "Series D Preferred
Stock") pursuant to that certain Series D Preferred Stock Purchase Agreement of
even date herewith (the "Purchase Agreement"); and
WHEREAS, as a condition of entering into the Purchase Agreement, CA, as
the sole purchaser of the Series D Cumulative Convertible Preferred Stock has
required that the Company extend to them registration rights, information rights
and other rights as set forth below; and
WHEREAS, the Company desires to extend the same rights to all Holders
(as defined below).
NOW, THEREFORE, in consideration of the mutual promises,
representations, warranties, covenants and conditions set forth in this
Agreement and in the Purchase Agreement, the parties mutually agree as follows:
SECTION 1. GENERAL
1.1 DEFINITIONS. As used in this Agreement the following terms shall
have the following respective meanings:
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as
amended.
"HOLDER" means CA and any of its permissible transferees or any
person owning of record Registrable Securities that have not been sold to the
public or any assignee of record of such Registrable Securities who satisfies
the requirements of Section 2.7 hereof.
"REGISTER," "REGISTERED," and "REGISTRATION" refer to a
registration effected by preparing and filing a registration statement in
compliance with the Securities Act, and the declaration or ordering of
effectiveness of such registration statement or document.
"REGISTRABLE SECURITIES" means (i) any share of Series D Preferred
Stock; (ii) the Common Stock issued or issuable upon conversion of any share of
Series D Preferred Stock; and (iii) any Common Stock or other securities of the
Company issued or issuable upon the conversion of any other security which is
issued as a dividend, or other distribution with respect to, or in exchange for,
any share of Series D Preferred Stock, excluding in all cases, however, any
Registrable Securities sold to the public pursuant to a registration under the
Securities Act or an applicable exemption therefrom.
<PAGE>
"THEN OUTSTANDING" OR "REGISTRABLE SECURITIES THEN OUTSTANDING"
shall be the number of shares determined by calculating the total number of
shares of the Company's Common Stock that are Registrable Securities and either
(a) are then issued and outstanding or (b) are issuable pursuant to then
exercisable or convertible securities.
"REGISTRATION EXPENSES" shall mean all expenses incurred by the
Company in complying with Sections 2.1, 2.2 and 2.3 hereof, including, without
limitation, all registration and filing fees, printing expenses, fees and
disbursements of counsel for the Company, reasonable fees and disbursements of a
single special counsel for the Holders, blue sky fees and expenses and the
expense of any special audits incident to or required by any such registration
(but excluding the compensation of regular employees of the Company which shall
be paid in any event by the Company).
"SEC" or "COMMISSION" means the Securities and Exchange Commission.
"SECURITIES ACT" shall mean the Securities Act of 1933, as amended.
"SELLING EXPENSES" shall mean all underwriting discounts, selling
commissions and stock transfer taxes applicable to the sale.
SECTION 2. REGISTRATION; RESTRICTIONS ON TRANSFER
2.1 DEMAND REGISTRATION.
(a) Subject to the conditions of this Section 2.1, if the Company
shall receive a written request from the Holders of a majority of the Series D
Preferred Stock (including holders of a majority of Common Stock issued upon
conversion of the Series D Preferred Stock) Then Outstanding (the "Initiating
Holders") that the Company file a registration statement under the Securities
Act covering the registration of all or a portion of the Registrable Securities
at any time after six months following the date hereof, then the Company shall,
within thirty (30) days of the receipt thereof, give written notice of such
request to all Holders, and subject to the limitations of this Section 2.1, use
its best efforts to effect, as soon as practicable, the registration under the
Securities Act of all Registrable Securities that the Holders request to be
registered.
(b) If the Initiating Holders intend to distribute the Registrable
Securities covered by their request by means of an underwriting, they shall so
advise the Company as a part of their request made pursuant to this Section 2.1
and the Company shall include such information in the written notice referred to
in Section 2.1(a). In such event, the right of any Holder to include its
Registrable Securities in such registration shall be conditioned upon such
Holder's participation in such underwriting and the inclusion of such Holder's
Registrable Securities in the underwriting to the extent provided herein. All
Holders proposing to distribute their securities through such underwriting shall
2.
<PAGE>
enter into an underwriting agreement in customary form with the underwriter or
underwriters selected for such underwriting by a majority in interest of the
Initiating Holders (which underwriter or underwriters shall be reasonably
acceptable to the Company). Notwithstanding any other provision of this Section
2.1 if the underwriter advises the Company that marketing factors require a
limitation of the number of securities to be underwritten (including Registrable
Securities) then the Company shall so advise all Holders of Registrable
Securities which would otherwise be underwritten pursuant hereto, and the number
of shares that may be included in the underwriting shall be allocated to the
Holders of such Registrable Securities on a PRO RATA basis based on the number
of Registrable Securities held by all such Holders (including the Initiating
Holders); PROVIDED, HOWEVER, that the number of shares of Registrable Securities
to be included in such underwriting and registration shall not be reduced unless
all other securities of the Company are first entirely excluded from the
underwriting and registration.
(c) The Holders shall have no more than two demand registrations
under this Section 2.1.
2.2 PIGGYBACK REGISTRATIONS. The Company shall notify all Holders of
Registrable Securities in writing at least fifteen (15) days prior to the filing
of any registration statement under the Securities Act for purposes of a public
offering of securities of the Company (including, but not limited to,
registration statements effected by the Company for securityholders other than
the Holder, but excluding registration statements on Form S-4 or S-8) and will
afford each such Holder an opportunity to include in such registration statement
all or part of such Registrable Securities held by such Holder. Each Holder
desiring to include in any such registration statement all or any part of the
Registrable Securities held by it shall, within fifteen (15) days after the
above-described notice from the Company, so notify the Company in writing. Such
notice shall state the intended method of disposition of the Registrable
Securities by such Holder. If a Holder decides not to include all of its
Registrable Securities in any registration statement thereafter filed by the
Company, such Holder shall nevertheless continue to have the right to include
any Registrable Securities in any subsequent registration statement or
registration statements as may be filed by the Company with respect to offerings
of its securities, all upon the terms and conditions set forth herein.
(a) UNDERWRITING. If the registration statement under which the
Company gives notice under this Section 2.2 is for an underwritten offering, the
Company shall so advise the Holders of Registrable Securities. In such event,
the right of any such Holder to be included in a registration pursuant to this
Section 2.2 shall be conditioned upon such Holder's participation in such
underwriting and the inclusion of such Holder's Registrable Securities in the
underwriting to the extent provided herein. All Holders proposing to distribute
their Registrable Securities through such underwriting shall enter into an
underwriting agreement in customary form with the underwriter or underwriters
selected for such underwriting by the Company. Notwithstanding any other
provision of the Agreement, if the underwriter determines in good faith that
marketing factors require a limitation of the number of shares to be
underwritten, the number of shares that may be included in the underwriting
shall be allocated, first, to the Company, second to the Series A Preferred
3.
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Stockholders and third to the Series B, C and D Preferred Stockholders on a PRO
RATA basis based on the total number of securities requested to be included by
the holders of such securities. Any Registrable Securities excluded from such
underwriting shall be excluded from the registration. For any holder of Series
A, B, C or D Preferred Stock which is a partnership or corporation, the
partners, retired partners and shareholders of such holder, or the estates and
family members of any such partners and retired partners and any trusts for the
benefit of any of the foregoing person shall be deemed to be a single "holder",
and any PRO RATA reduction with respect to such "holder" shall be based upon the
aggregate amount of shares carrying registration rights owned by all entities
and individuals included in such "holder," as defined in this sentence.
(b) RIGHT TO TERMINATE REGISTRATION. The Company shall have the
right to terminate or withdraw any registration initiated by it under this
Section 2.2 prior to the effectiveness of such registration whether or not any
Holder has elected to include securities in such registration. No such
termination by the Company shall affect the rights of the Holders hereunder to
demand registration up to the number of times permitted by Section 2.1 hereof.
The Registration Expenses of such withdrawn registration shall be borne by the
Company in accordance with Section 2.3 hereof.
2.3 EXPENSES OF REGISTRATION. Except as specifically provided herein,
all Registration Expenses incurred in connection with any registration,
qualification or compliance pursuant to Section 2.1 or 2.2 herein shall be borne
by the Company; PROVIDED that the Company shall only be required to pay
Registration Expenses in connection with one registration pursuant to Section
2.1. All Selling Expenses incurred in connection with any registrations
hereunder shall be borne by the holders of the securities so registered PRO RATA
on the basis of the number of shares so registered. The Company shall not,
however, be required to pay for expenses of any registration proceeding begun
pursuant to Section 2.1 or 2.2, the request of which has been subsequently
withdrawn by the Initiating Holders unless the withdrawal is based upon material
adverse information concerning the Company of which the Initiating Holders were
not aware at the time of such request). If the Holders are required to pay the
Registration Expenses, such expenses shall be borne by the holders of securities
(including Registrable Securities) requesting such registration in proportion to
the number of shares for which registration was requested. If the Company is
required to pay the Registration Expenses of a withdrawn offering pursuant to
clause (a) above, then the Holders shall not forfeit their rights pursuant to
Section 2.1 to any of its demand registrations.
2.4 OBLIGATIONS OF THE COMPANY. Whenever required to effect the
registration of any Registrable Securities, the Company shall, as expeditiously
as reasonably possible:
(a) prepare and file with the SEC a registration statement with
respect to such Registrable Securities and use all reasonable efforts to cause
such registration statement to become effective (provided that before filing a
registration statement or prospectus or any amendments or supplements thereto,
the Company shall furnish to the counsel selected by the Holders covered by such
4.
<PAGE>
registration statement copies of all such documents proposed to be filed) and,
upon the request of the Holders of a majority of the Registrable Securities
registered thereunder, keep such registration statement effective for up to one
hundred eighty (180) days or, if earlier, until the Holder or Holders have
completed the distribution related thereto.
(b) prepare and file with the SEC such amendments and supplements
to such registration statement and the prospectus used in connection with such
registration statement as may be necessary to comply with the provisions of the
Securities Act with respect to the disposition of all securities covered by such
registration statement for the period set forth in paragraph (a) above.
(c) furnish to the Holders such number of copies of a prospectus,
including a preliminary prospectus, in conformity with the requirements of the
Securities Act, and such other documents as they may reasonably request in order
to facilitate the disposition of Registrable Securities owned by them.
(d) use its reasonable best efforts to register and qualify the
securities covered by such registration statement under such other securities or
Blue Sky laws of such jurisdictions as shall be reasonably requested by the
Holders; PROVIDED that the Company shall not be required in connection therewith
or as a condition thereto to qualify to do business or to file a general consent
to service of process in any such states or jurisdictions.
(e) in the event of any underwritten public offering, enter into
and perform its obligations under an underwriting agreement, in usual and
customary form, with the managing underwriter(s) of such offering. Each Holder
participating in such underwriting shall also enter into and perform its
obligations under such an agreement.
(f) notify each Holder of Registrable Securities covered by such
registration statement at any time when a prospectus relating thereto is
required to be delivered under the Securities Act of the happening of any event
as a result of which the prospectus included in such registration statement, as
then in effect, includes an untrue statement of a material fact or omits to
state a material fact required to be stated therein or necessary to make the
statements therein not misleading in the light of the circumstances then
existing.
(g) use its best efforts to furnish, on the date that such
Registrable Securities are delivered to the underwriters for sale, if such
securities are being sold through underwriters, (i) an opinion, dated as of such
date, of the counsel representing the Company for the purposes of such
registration, in form and substance as is customarily given to underwriters in
an underwritten public offering, addressed to the underwriters, if any, and (ii)
a letter dated as of such date, from the independent certified public
accountants of the Company, in form and substance as is customarily given by
independent certified public accountants to underwriters in an underwritten
public offering addressed to the underwriters.
5.
<PAGE>
(h) cause all such securities to be listed on each securities
exchange on which similar securities issued by the Company are then listed and,
if not so listed, to be listed on the NASD automated quotation system and, if
listed on the NASD automated quotation system, use its best efforts to secure
designation of all such securities covered by such registration statement as a
NASDAQ national market security within the meaning of Rule 11Aa2-1 of the
Securities and Exchange Commission or, failing that, to secure NASDAQ
authorization for such securities and, without limiting the generality of the
foregoing, to arrange for at least two market makers to register as such with
respect to such securities with the NASD;
(i) provide a transfer agent and registrar for all such securities
not later than the effective date of such registration statement;
(j) make available for inspection by any seller of securities, any
underwriter participating in any disposition pursuant to such registration
statement and any attorney, accountant or other agent retained by any such
seller or underwriter, all financial and other records, pertinent corporate
documents and properties of the Company, and cause the Company's officers,
directors, employees and independent accountants to supply all information
reasonably requested by any such seller, underwriter, attorney, accountant or
agent in connection with such registration statement;
(k) otherwise use its best efforts to comply with all applicable
rules and regulations of the Securities and Exchange Commission, and make
available to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months beginning with
the first day of the Company's first full calendar quarter after the effective
date of the registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158 thereunder;
(l) permit the Holders which, in its sole and exclusive judgment,
might be deemed to be an underwriter or a controlling person of the Company, to
participate in the preparation of such registration or comparable statement and
to require the insertion therein of material, furnished to the Company in
writing, which in the reasonable judgment of the Holders and its counsel should
be included;
(m) in the event of the issuance of any stop order suspending the
effectiveness of a registration statement, or of any order suspending or
preventing the use of any related prospectus or suspending the qualification of
any Common Stock included in such registration statement for sale in any
jurisdiction, the Company shall use its best efforts promptly to obtain the
withdrawal of such order.
2.5 DELAY OF REGISTRATION; FURNISHING INFORMATION.
It shall be a condition precedent to the obligations of the Company to
take any action pursuant to Section 2.1 or 2.2 that the selling Holders shall
furnish to the Company such information regarding themselves, the Registrable
Securities held by them and the intended method of disposition of such
securities as shall be required to effect the registration of their Registrable
Securities.
6.
<PAGE>
2.6 INDEMNIFICATION. In the event any Registrable Securities are
included in a registration statement under Sections 2.1 or 2.2:
(a) To the extent permitted by law, the Company will indemnify and
hold harmless each Holder, the partners, officers and directors of each Holder,
any underwriter (as defined in the Securities Act) for such Holder and each
person, if any, who controls such Holder or underwriter within the meaning of
the Securities Act or the Exchange Act, against any losses, claims, damages, or
liabilities (joint or several) to which they may become subject under the
Securities Act, the Exchange Act or other federal or state law, insofar as such
losses, claims, damages or liabilities (or actions in respect thereof) arise out
of or are based upon any of the following statements, omissions or violations
(collectively a "Violation") by the Company: (i) any untrue statement or alleged
untrue statement of a material fact contained in such registration statement,
including any preliminary prospectus or final prospectus contained therein or
any amendments or supplements thereto, (ii) the omission or alleged omission to
state therein a material fact required to be stated therein, or necessary to
make the statements therein not misleading, or (iii) any violation or alleged
violation by the Company of the Securities Act, the Exchange Act, any state
securities law or any rule or regulation promulgated under the Securities Act,
the Exchange Act or any state securities law in connection with the offering
covered by such registration statement; and the Company will pay as incurred to
each such Holder, partner, officer, director, underwriter or controlling person
for any legal or other expenses reasonably incurred by them in connection with
investigating or defending any such loss, claim, damage, liability or action;
PROVIDED HOWEVER, that the indemnity agreement contained in this Section 2.6(a)
shall not apply to amounts paid in settlement of any such loss, claim, damage,
liability or action if such settlement is effected without the consent of the
Company, which consent shall not be unreasonably withheld, nor shall the Company
be liable in any such case for any such loss, claim, damage, liability or action
to the extent that it arises out of or is based upon a Violation which occurs in
reliance upon and in conformity with written information furnished expressly for
use in connection with such registration by such Holder, partner, officer,
director, underwriter or controlling person of such Holder.
(b) To the extent permitted by law, each Holder will, if
Registrable Securities held by such Holder are included in the securities as to
which such registration qualifications or compliance is being effected,
indemnify and hold harmless the Company, each of its directors, its officers and
each person, if any, who controls the Company within the meaning of the
Securities Act, any underwriter and any other Holder selling securities under
such registration statement or any of such other Holder's partners, directors or
officers or any person who controls such Holder, against any losses, claims,
damages or liabilities (joint or several) to which the Company or any such
director, officer, controlling person, underwriter or other such Holder, or
partner, director, officer or controlling person of such other Holder may become
subject under the Securities Act, the Exchange Act or other federal or state
law, insofar as such losses, claims, damages or liabilities (or actions in
respect thereto) arise out of or are based upon any Violation, in each case to
the extent (and only to the extent) that such Violation occurs in reliance upon
and in conformity with written information furnished by such Holder under an
7.
<PAGE>
instrument duly executed by such Holder and stated to be specifically for use in
connection with such registration and which remained in the final prospectus
delivered to the purchaser of such securities; and each such Holder will pay as
incurred any legal or other expenses reasonably incurred by the Company or any
such director, officer, controlling person, underwriter or other Holder, or
partner, officer, director or controlling person of such other Holder in
connection with investigating or defending any such loss, claim, damage,
liability or action; PROVIDED, HOWEVER, that the indemnity agreement contained
in this Section 2.6(b) shall not apply to amounts paid in settlement of any such
loss, claim, damage, liability or action if such settlement is effected without
the consent of the Holder, which consent shall not be unreasonably withheld;
PROVIDED FURTHER, that in no event shall any indemnity under this Section 2.6
exceed the net proceeds from the offering received by such Holder, unless such
liability arises out of or is based upon the intentional misconduct of such
Holder.
(c) Promptly after receipt by an indemnified party under this
Section 2.6 of notice of the commencement of any action (including any
governmental action), such indemnified party will, if a claim in respect thereof
is to be made against any indemnifying party under this Section 2.9, deliver to
the indemnifying party a written notice of the commencement thereof and the
indemnifying party shall have the right to participate in, and, to the extent
the indemnifying party so desires, jointly with any other indemnifying party
similarly noticed, to assume the defense thereof with counsel mutually
satisfactory to the parties; PROVIDED, HOWEVER, that an indemnified party,
together with all other indemnified parties which may be represented without
conflict by one counsel shall have the right to retain its own counsel, with the
fees and expenses to be paid by the indemnifying party, if representation of
such indemnified party by the counsel retained by the indemnifying party would
be inappropriate due to actual or potential differing interests between such
indemnified party and any other party represented by such counsel in such
proceeding. If such defense is assumed, the indemnifying party shall not be
subject to any liability for settlement made by the indemnified party without
its consent (which consent shall not be unreasonably withheld). The failure to
deliver written notice to the indemnifying party within a reasonable time of the
commencement of any such action, if materially prejudicial to its ability to
defend such action, shall relieve such indemnifying party of any liability to
the indemnified party under this Section 2.6, but the omission so to deliver
written notice to the indemnifying party will not relieve it of any liability
that it may have to any indemnified party otherwise than under this Section 2.6.
(d) If the indemnification provided for in this Section 2.6 is held
by a court of competent jurisdiction to be unavailable to an indemnified party
with respect to any losses, claims, damages or liabilities referred to herein,
the indemnifying party, in lieu of indemnifying such indemnified party
thereunder, shall to the extent permitted by applicable law contribute to the
amount paid or payable by such indemnified party as a result of such loss,
claim, damage or liability in such proportion as is appropriate to reflect the
relative fault of the indemnifying party on the one hand and of the indemnified
party on the other in connection with the Violation(s) that resulted in such
loss, claim, damage or liability, as well as any other relevant equitable
considerations. The relative fault of the indemnifying party and of the
indemnified party shall be determined by a court of law by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
8.
<PAGE>
or the omission to state a material fact relates to information supplied by the
indemnifying party or by the indemnified party and the parties' relative intent,
knowledge, access to information and opportunity to correct or prevent such
statement or omission; PROVIDED, that in no event shall any contribution by a
Holder hereunder exceed the proceeds from the offering received by such Holder.
(e) The obligations of the Company and Holders under this Section
2.6 shall survive completion of any offering of Registrable Securities in a
registration statement and the termination of this agreement. No Indemnifying
Party, in the defense of any such claim or litigation, shall, except with the
consent of each Indemnified Party, consent to entry of any judgment or enter
into any settlement which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such Indemnified Party of a release from
all liability in respect to such claim or litigation.
2.7 ASSIGNMENT OF REGISTRATION RIGHTS. The rights to cause the Company
to register Registrable Securities pursuant to this Section 2 may be assigned by
a Holder to a permissible transferee or assignee of Registrable Securities, as
provided in Section 3.3; PROVIDED, HOWEVER, (i) the transferor shall, within ten
(10) days after such transfer, furnish to the Company written notice of the name
and address of such transferee or assignee and the securities with respect to
which such registration rights are being assigned and (ii) such transferee shall
become a signatory to this Agreement. Unless registered pursuant to the
provisions of this Agreement, the certificate or certificates evidencing the
Registrable Securities shall bear the following legend:
THESE PREFERRED SHARES AND THE COMMON STOCK UNDERLYING THE CONVERSION
OF THESE PREFERRED SHARES, HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED AND MAY NOT BE SOLD, TRANSFERRED,
ASSIGNED, PLEDGED, HYPOTHECATED OR OTHERWISE DISPOSED OF UNTIL A
REGISTRATION STATEMENT WITH RESPECT THERETO IS DECLARED AND REMAINS
EFFECTIVE UNDER SUCH ACT, OR THE COMPANY RECEIVES AN OPINION OF COUNSEL
FOR THE COMPANY THAT AN EXEMPTION FROM REGISTRATION REQUIREMENTS OF
SUCH ACT IS AVAILABLE.
2.8 AMENDMENT OF REGISTRATION RIGHTS. Any provision of this Section 2
may be amended and the observance thereof may be waived (either generally or in
a particular instance and either retroactively or prospectively), only with the
written consent of the Company and the Holders of at least a majority of the
Registrable Securities Then Outstanding. Any amendment or waiver effected in
accordance with this Section 2.8 shall be binding upon each Holder and the
Company. By acceptance of any benefits under this Section 2, Holders of
Registrable Securities hereby agree to be bound by the provisions hereunder.
2.9 LIMITATION ON SUBSEQUENT REGISTRATION RIGHTS. After the date of
this Agreement, the Company shall not, without the prior written consent of the
Holders of a majority of the Registrable Securities Then Outstanding, enter into
any agreement with any holder of any securities of the Company authorized on the
date hereof that would grant such holder registration rights senior to those
9.
<PAGE>
granted to the Holders hereunder; provided that the Company, without requiring
any consent hereunder, may grant registration rights PARI PASSU with (but not
senior to) the Holders hereunder to independent third party holders of any newly
authorized class of security.
2.10 "MARKET STAND-OFF" AGREEMENT; AGREEMENT TO FURNISH INFORMATION.
Each Holder hereby agrees that such Holder shall not sell or otherwise transfer
or dispose of any Common Stock (or other securities) of the Company held by such
Holder (other than those included in the registration) for a period specified by
the representative of the underwriters of Common Stock (or other securities) of
the Company not to exceed one hundred eighty (180) days following the effective
date of a registration statement of the Company filed under the Securities Act;
PROVIDED that all officers and directors of the Company and holders of at least
two percent (2%) of the Company's voting securities enter into similar
agreements.
Each Holder agrees to execute and deliver such other agreements as may
be reasonably requested by the Company or the underwriter which are consistent
with the foregoing or which are necessary to give further effect thereto. In
addition, if requested by the Company or the representative of the underwriters
of Common Stock (or other securities) of the Company, each Holder shall provide,
within ten (10) days of such request, such information as may be required by the
Company or such representative in connection with the completion of any public
offering of the Company's securities pursuant to a registration statement filed
under the Securities Act. The obligations described in this Section 2.10 shall
not apply to a registration relating solely to employee benefit plans on Form
S-8 or similar forms that may be promulgated in the future, or a registration
relating solely to a Commission Rule 145 transaction on Form S-4 or similar
forms that may be promulgated in the future. The Company may impose
stop-transfer instructions with respect to the shares of Common Stock (or other
securities) subject to the foregoing restriction until the end of said one
hundred eighty (180) day period.
2.11 RULE 144 REPORTING. With a view to making available to the Holders
the benefits of certain rules and regulations of the SEC which may permit the
sale of the Registrable Securities to the public without registration, the
Company agrees to use its best efforts to:
(a) Make and keep public information available, as those terms are
understood and defined in SEC Rule 144 or any similar or analogous rule
promulgated under the Securities Act;
(b) File with the SEC, in a timely manner, all reports and other
documents required of the Company under the Exchange Act; and
(c) So long as a Holder owns any Registrable Securities, furnish to
such Holder forthwith upon request: a written statement by the Company
as to its compliance with the reporting requirements of said Rule 144
of the Securities Act, and of the Exchange Act; a copy of the most
recent annual or quarterly report of the Company; and such other
reports and documents as a Holder may reasonably request in availing
itself of any rule or regulation of the SEC allowing it to sell any
such securities without registration.
10.
<PAGE>
SECTION 1. MISCELLANEOUS
3.1 GOVERNING LAW. This Agreement shall be governed by and construed
under the laws of the State of New York without regard to conflicts of law
principles.
3.2 SURVIVAL. The representations, warranties, covenants, and
agreements made herein shall survive any investigation made by any Holder and
the closing of the transactions contemplated hereby. All statements as to
factual matters contained in any certificate or other instrument delivered by or
on behalf of the Company pursuant hereto in connection with the transactions
contemplated hereby shall be deemed to be representations and warranties by the
Company hereunder solely as of the date of such certificate or instrument.
3.3 SUCCESSORS AND ASSIGNS. Except as otherwise expressly provided
herein, the provisions hereof shall inure to the benefit of, and be binding
upon, the successors, assigns, heirs, executors, and administrators of the
parties hereto and shall inure to the benefit of and be enforceable by each
person who shall be a holder of Registrable Securities or from time to time;
PROVIDED, HOWEVER, that for six months following the initial of the sale of any
shares of Series D Preferred Stock, a Holder shall request consent from the
Company to assign any such Registrable Securities, and such consent shall not be
unreasonably withheld; and upon such consent and subsequent written notice of
the transfer of any Registrable Securities specifying the full name and address
of the transferee, the Company may deem and treat the person listed as the
holder of such shares in its records as the absolute owner and holder of such
shares for all purposes, including the payment of dividends or any redemption
price.
3.4 ENTIRE AGREEMENT. This Agreement, the Purchase Agreement and the
other Transaction Documents (as defined in the Purchase Agreement) constitute
the full and entire understanding and agreement between the parties with regard
to the subjects hereof and no party shall be liable or bound to any other in any
manner by any representations, warranties, covenants and agreements except as
specifically set forth herein and in the Purchase Agreement.
3.5 SEVERABILITY. In case any provision of the Agreement shall be
invalid, illegal, or unenforceable, the validity, legality, and enforceability
of the remaining provisions shall not in any way be affected or impaired
thereby.
3.6 AMENDMENT AND WAIVER.
(a) Except as otherwise expressly provided, this Agreement may be
amended or modified only upon the written consent of the Company and the holders
of at least a majority of the Registrable Securities.
11.
<PAGE>
(b) Except as otherwise expressly provided, the obligations of the
Company and the rights of the Holders under this Agreement may be waived only
with the written consent of the holders of at least a majority of the
Registrable Securities.
3.7 DELAYS OR OMISSIONS. It is agreed that no delay or omission to
exercise any right, power, or remedy accruing to any Holder, upon any breach,
default or noncompliance of the Company under this Agreement shall impair any
such right, power, or remedy, nor shall it be construed to be a waiver of any
such breach, default or noncompliance, or any acquiescence therein, or of any
similar breach, default or noncompliance thereafter occurring. It is further
agreed that any waiver, permit, consent, or approval of any kind or character on
any Holder's part of any breach, default or noncompliance under the Agreement or
any waiver on such Holder's part of any provisions or conditions of this
Agreement must be in writing and shall be effective only to the extent
specifically set forth in such writing. All remedies, either under this
Agreement, by law, or otherwise afforded to Holders, shall be cumulative and not
alternative.
3.8 NOTICES. All notices required or permitted hereunder shall be in
writing and shall be deemed effectively given: (a) upon personal delivery to the
party to be notified, (b) when sent by confirmed telex or facsimile if sent
during normal business hours of the recipient; if not, then on the next business
day, (c) five (5) days after having been sent by registered or certified mail,
return receipt requested, postage prepaid, or (d) one (1) day after deposit with
a nationally recognized overnight courier, specifying next day delivery, with
written verification of receipt. All communications shall be sent to the party
to be notified at the address as set forth in the Purchase Agreement or at such
other address as such party may designate by ten (10) days advance written
notice to the other party hereto.
3.9 ATTORNEYS' FEES. In the event that any dispute among the parties to
this Agreement should result in litigation, the prevailing party in such dispute
shall be entitled to recover from the losing party all fees, costs and expenses
of enforcing any right of such prevailing party under or with respect to this
Agreement, including without limitation, such reasonable fees and expenses of
attorneys and accountants, which shall include, without limitation, all fees,
costs and expenses of appeals.
3.10 TITLES AND SUBTITLES. The titles of the sections and subsections
of this Agreement are for convenience of reference only and are not to be
considered in construing this Agreement.
3.11 COUNTERPARTS. This Agreement may be executed in any number of
counterparts, each of which shall be an original, but all of which together
shall constitute one instrument.
IN WITNESS WHEREOF, the parties hereto have executed this REGISTRATION
RIGHTS AGREEMENT as of the date set forth in the first paragraph hereof.
I-STORM, INC. COMPUTER ASSOCIATES INTERNATIONAL, INC.
By:___________________________________ By:____________________________________
Name:_________________________________ Name:__________________________________
Title:________________________________ Title:_________________________________
12.
COMPUTER(R) LICENSE AGREEMENT
ASSOCIATES
Software superior by design.
- --------------------------------------------------------------------------------
COMPUTER ASSOCIATES INTERNATIONAL, INC. ONE COMPUTER ASSOCIATES PLAZA ISLANDIA,
NY 11788-7000 (516)342-5224 FAX (516) 342-5329
This License Agreement between I-STORM, INC. ("Licensee") located at 2440
W EL CAMINO REAL, MOUNTAIN VIEW, CA 94040 and Computer Associates International
Inc. ("CA") covers Program Products to be licensed by Licensee pursuant to Order
Forms which may be submitted and accepted from time to time.
When CA accepts an Order Form, Licensee will have, subject to the terms
and conditions of this Agreement, a nontransferable and nonexclusive license to
use the Program Product(s), optional features, if any, and related materials
(collectively the "Licensed Program") described in the Order Form(s) referencing
this Agreement. This Agreement applies to all program code, documentation,
training materials, and enhancements embodying or related to the Licensed
Program and any subsequent versions or releases of the Licensed Program which
may be delivered to Licensee and the definition of Licensed Program includes all
such code, documentation, materials and enhancements.
USE OF LICENSED PROGRAM
This Agreement authorizes Licensee to use the Licensed Program(s), covered
by Order Form(s) accepted by CA, only with the Designated CPU(s) of Licensee at
the installation site of Licensee identified on the Order Form and only for the
internal operations of Licensee and for the processing of its own data.
TITLE, CONFIDENTIALITY AND RESTRICTIONS
Title to the Licensed Program remains with CA, and the Licensed Program is
a trade secret and the proprietary property of CA. Licensee and its employees
will keep the Licensed Program strictly confidential, and Licensee will not
disclose or otherwise distribute the Licensed Program to anyone other than
Licensee's authorized employees. Licensee will not remove or destroy any
proprietary markings of CA. Licensee will not permit anyone except its
authorized employees to have access to the Licensed Program. Except for archive
purposes, Licensee will not make or permit others to make copies of or reproduce
any part of the Licensed Program in any form without the prior written consent
of CA. In no event will Licensee decompile, disassemble or otherwise reverse
engineer any Licensed Program.
If Licensee moves its computer installation, the Licensed Program can be
transferred to the new location for use on the Designated CPU(s) without a
relocation charge to Licensee, but Licensee must give prior written notice to CA
of such move and confirm to CA that the old computer installation has been
closed. If Licensee desires, subject to obtaining CA's prior written consent, to
operate the Licensed Program subsequent to a change of control of Licensee or
other than with the Designated CPU(s) or other than at Licensee's installation
site identified on the Order Form, Licensee will be required to pay to CA the
then applicable upgrade, supplemental, transfer or replacement fees of CA. In no
event can the Licensed Program be transferred outside of country boundaries.
If this Agreement should terminate for any reason, Licensee shall certify
in writing to CA that all copies or partial copies of the Licensed Program have
been either returned to CA or otherwise destroyed and deleted from any computer
libraries or storage devices and are no longer in use by Licensee.
ENTIRE AGREEMENT AND MODIFICATIONS
This Agreement, including the reverse side of this Agreement, the Order
Form(s) and any other exhibits attached to this Agreement, represents the entire
agreement between CA and Licensee with respect to the Licensed Program, and CA
and Licensee agree that all other agreements, proposals, purchase orders,
representations and other understandings concerning the Licensed Program,
whether oral or written, between the parties are superseded in their entirety by
this Agreement. No alteration or modifications of this Agreement will be valid
unless made in writing and signed by the parties. No attachment, supplement or
exhibit to this Agreement shall be valid unless initialed by an authorized
signatory of CA.
(SEE NEXT PAGE FOR ADDITIONAL IMPORTANT PROVISIONS)
COMPUTER ASSOCIATES INTERNATIONAL, INC. LICENSEE I-STORM, INC.
By:_________________________________ By:____________________________________
(Authorized Signature) (Authorized Signature)
__________________________________ ______________________________________
Name of Person Signing Type or Print Name of Person Signing
__________________________________ ______________________________________
Date Title
__________________________________ ______________________________________
License Agreement No. Date
<PAGE>
LIMITED WARRANTY
CA warrants that it can grant the license described in this Agreement and
the Order Form(s) and CA will defend or, at its option, settle any action at law
against Licensee based upon a claim that Licensee's use of the Licensed Program
in accordance with this Agreement Infringes any patent, copyright or other
intellectual property right of any third party. CA also represents that the
Licensed Program will operate according to the specifications published by CA
for the Licensed Program. If it is determined that the Licensed Program does not
operate according to such specifications, CA's only responsibility will be to
use its best efforts, consistent with industry standards, to cure the defect.
Any warranties made by CA (other than that of noninfringement) will extend
and be in effect only for the period that Licensee Is entitled to use the
Licensed Program and for which Licensee shall have paid the Usage and
Maintenance Fee, if applicable. With respect to hardware equipment supplied by
CA, CA will, upon request, assign to Licensee any warranties which may be made
by the original manufacturer of such hardware equipment.
In the event that Licensee makes any changes or modifications to the
Licensed Program, Licensee agrees that such changes and modifications shall be
the properly of CA, unless CA shall have given its prior written consent to the
contrary. Furthermore, any such charges or modifications made by Licensee to a
Licensed Program will mean that the foregoing limited warranty of CA with
respect to such Licensed Program shall no longer apply, and CA shall have the
right to charge Licensee for additional support services at CA's then prevailing
service rate, but CA shall have no obligation to provide such services.
WARRANTY AND LIABILITY LIMITATIONS
EXCEPT AS SET FORTH ABOVE, NO OTHER WARRANTIES, WHETHER EXPRESS OR IMPLIED,
INCLUDING, WITHOUT LIMITATION, THE IMPLLIED WARRANTIES OF MERCHANTABILITY AND
FITNESS FOR A PARTICULAR PURPOSE, ARE MADE BY CA AND CA MAKES NO WARRANTIES WITH
RESPECT TO ANY HARDWARE EQUIPMENT WHICH CA MAY SUPPLY TOGETHER WITH THE LICENSED
PROGRAM OR FOR THE IMPLEMENTATION THEREOF. IN NO EVENT WILL CA BE LIABLE TO
LICENSEE OR ANY OTHER PARTY FOR ANY LOSS, INCLUDING TIME, MONEY, GOODWILL AND
CONSEQUENTIAL DAMAGES, WHICH MAY ARISE FROM THE USE, OPERATION OR MODIFICATION
OF THE LICENSED PROGRAM.
DISASTER RECOVERY
In the event that Licensee certifies in writing to CA that it has a bona
fide disaster recovery plan with respect to the computer software programs used
in its operations, Licensee may make one copy of the Licensed Program for
archival purposes and use such archival copy on a CPU other than the Designated
CPU or at an installation site other than that identified on the Order Form,
such other CPU or installation site to be owned or controlled by Licensee. The
use of such archival copy shall be limited (a) for the purpose of conducting
limited testing of the disaster recovery plan's procedures and effectiveness
(which testing shall not exceed one week in any' three month period) and (b)
during any period subsequent to the occurrence of an actual disaster during
which the Licensee cannot operate the licensed Program on the Designated CPU or
at the installation site identified on the Order Form. Licensee agrees to
furnish such further documentation with respect to its disaster recovery plan
and procedures as CA may request from time to time.
ASSIGNMENT
Licensee may not assign this Agreement, the use of any Licensed Program or
its rights and obligations liner this Agreement without the prior written
consent of CA. CA, however, may assign this Agreement to any third party,
provided that such party assumes the obligations of CA under this Agreement. CA
may also assign its right to payment under this Agreement or grant a security
interest in this Agreement or such payment right to any third party without
requiring that such third party be liable for the obligations of CA under this
Agreement.
ESCROW OF SOURCE CODE
CA has deposited a copy of the source code of the Licensed Program with
Mendelsohn, Kary, Bell & Natoli, 1633 Broadway, New York, NY 10019. Such source
code will be updated with each new release of the Licensed Program which will
also be deposited with the escrow agent Such copies of the source code will be
held in escrow and in the event of a final adjudication of CA as bankrupt,
Licensee will, upon payment of the duplication cost and other handling charges
of the escrow agent, be entitled to obtain a copy of such source code from the
escrow agent. Licensee will, however, only use such copy of the source code
internally to support the Licensed Program. The escrow agent's only
responsibility will be to use its good faith efforts to cause a copy of the
source code, in the form as delivered by CA, to be delivered to Licensee at the
appropriate time.
TAXES AND DUTIES
The amounts set forth on any Order Form are exclusive of any tariffs, duties
or taxes imposed or levied by any government or governmental agency including,
without limitation, federal, state and local sales, use, value added and
personal property taxes, Licensee agrees to pay any such tariffs, duties or
taxes (other than franchise and income taxes for which CA is responsible) upon
presentation of invoices by CA. Any claimed exemption from such tariffs, duties
or taxes must be supported by proper documentary evidence delivered to CA.
BREACH AND TERMINATION
If Licensee breaches any term of this Agreement or any Order Form or fails
to pay when due any valid invoice rendered by CA, or it the Licensee becomes
insolvent or if bankruptcy or receivership proceedings are initiated by or
against Licensee, CA shall have the right to terminate this Agreement
immediately and, in addition to all other rights of CA, all amounts which would
have become due and payable under this Agreement and any Order Form will become
due and payable to CA. Any invoice which is unpaid by Licensee when due shall be
subject to an interest charge of 2% per month or part thereof plus such late
payment charge as CA may reasonably require to cover its additional costs of
administration and collection.
PROFESSIONAL SERVICES AGREEMENT
This Professional Services Agreement between I - STORM, INC. ("Client")
located at 2440 W EL CAMINO REAL, MOUNTAIN VIEW, CA 84040 and Computer
Associates International, Inc. ("CA") sets forth the terms and conditions
pursuant to which CA shall provide certain professional services and other
materials for the benefit of Client.
SCOPE OF SERVICES
CA shall provide certain consulting services to Client as set forth in
the accompanying exhibit accepted in writing by the parties ("Statement of
Work"). All software code, documentation, materials, and other proprietary
information which may be developed in the course of performing or arising from
the Statement of Work or otherwise provided by CA in connection with CA's
performance under a Statement of Work (the "Work Product") shall be governed by
the terms of this Agreement and any corresponding Statements of Work. Each
Statement of Work shall be deemed to constitute a separate work project under
this Agreement. No modification may be made to any Statement of Work without the
written consent of the parities. To permit the services to be performed in
accordance with the Statement of Work, Client and CA shall each timely perform
all of its respective obligations set forth herein and in the Statement of Work
Client's obligations including, but are not limited to, providing CA with access
to all hardware, software, Client employees and facilities, and making
reasonable efforts to facilitate completion of the Statement of Work.
USE OF WORK PRODUCT
When the Work Product is related to CA software products, upon completion of the
Statement of Work, unless otherwise set forth in such applicable Statement of
Work, Client shall be entitled to use such Work Product ("CA-related Work
Product) only for the internal operations of Client and for the processing of
its own data at the installation site set forth in the Statement of Work and
subject to the terms and conditions of this Agreement.
When the Work Product is not related to CA software products, Client shall be
entitled to use the Software code and related documentation and materials
developed solely for Client at Client's sole cost and expense pursuant to a
Statement of Work (the " Client based Work Product") except as may be set forth
in the Statement of Work. All ownership of copyrights and other intellectual
property rights in the Work Product (including source and object code and
related documentation, if applicable) all copyrights to any Client based Work
Product developed by CA for Client under this Statement of Work including all
copyrights in anything produced by either party relating to any of Client's:
business plans, product plans, marketing plans, business strategy, client
information, partner information, E-Commerce Marketing and Sales Agreements and
business models, developed by CA under a Statement of Work shall, upon payment
of all amounts due CA, be solely the property of Client, without any usage
restriction or other limitation.
. Client shall have the right to obtain and hold in its name all patents and
copyright registrations and other evidence of intellectual property rights that
may be available for Client based Work Product. CA shall assign ownership of all
patents and copyrights in such Client based Work Product to Client.
Anything to the contrary in the Statement of Work notwithstanding, CA shall at
all times and for all purposes have all right, title and interest in, retain
sole and exclusive ownership and control of, and be entitled to continue to use
in its business and in all other engagements without limitation, all concepts,
ideas, techniques, processes tools, utilities and methodologies however
structured or conceived relating to the services set forth in the Statement of
Work, as well as all software programs, information technology and processing
related thereto, whether initially developed by CA prior to the Statement of
Work or developed in the course of delivering or performing the Work Product
under the Statement of Work ("CA' s Proprietary Methodologies"). CA's
Proprietary Methodologies shall not constitute "work made for hire" as that term
is defined in Section 101 of the Copyright Act. In addition, Client and its
employees will keep the CA's Proprietary Methodologies strictly confidential,
and will have no right to retain or use, nor market, copy, disclose or otherwise
distribute CA's Proprietary Methodologies. The provisions set forth in this
section shall survive the termination of this Agreement for any reason. To the
extent CA Proprietary Methodologies are incorporated in any Work Product, CA
grants to Client a non-exclusive, non-transferable, royalty-free, perpetual
internal use license, and license, to use, the CA Proprietary Methodologies that
are incorporated into the Work Product.
<PAGE>
Anything to the contrary in the Statement of Work notwithstanding, Client shall
at all times and for all purposes have all right, title and interest in, retain
sole and exclusive ownership and control of, and be entitled to continue to use
in its business and in all other engagements without limitation, all concepts,
ideas, techniques, processes tools, utilities and methodologies however
structured or conceived, and all software programs, information technology and
processing related thereto, relating to the Client's creative intellectual
property.
TITLE AND CONFIDENTIALITY
Except as specifically provided in a Statement of Work, CA retains all
right, title and interest in and to the CA based Work Product and CA
Methodologies and any derivative thereof shall not constitute "work made for
hire" as that term is defined in Section 101 of the Copyright Act. Client and
its employees will keep the CA based Work Product and CA Methodologies and any
derivatives thereof strictly confidential, and will neither use the CA Works and
any derivative thereof for other than its internal operations, nor market, copy,
disclose or otherwise distribute the CA based Work Product and CA Methodologies
to anyone other than its authorized employees, without the express permission of
CA. Client will not remove or destroy any proprietary markings of CA. In the
event that Client makes any changes or modifications to the CA based Work
Product and CA Methodologies, Client agrees that such changes and modifications
shall be the property of CA, unless CA shall have given its prior written
consent to the contrary.
CA and its employees will keep the Client based Work Product and any
other Client information, including business plans, product plans, marketing
plans, business strategy, client information, partner information, E-Commerce
Marketing and Sales Agreements and business models (collectively, "Client
Confidential Information") strictly confidential and will neither use the CA
based Work Product or the Client Confidential Information other than in
connection with the performance of the Statement of Work., nor market, copy
,disclose or otherwise distribute the CA based Work Product or Client
Confidential Information.
The provisions set forth in this section shall survive the termination
of this Agreement for any reason.
LIMITED WARRANTY
CA warrants that it will utilize its best efforts to perform the
services set forth in the Statement of Work with employees who possess the
appropriate skills to perform in accordance with the Statement of Work. CA
further warrants that CA will defend or, at its option, settle any action at law
against Client based upon a claim that Client's use of the Work Product in
accordance with this Agreement infringes any patent, copyright or other
intellectual property right of any third party, if notified promptly in writing
of such claim and given authority, information and assistance (at Client's
expense) to defend or settle any suit or proceeding. In case any portion of the
Work Product is held in such suit or proceeding to constitute an infringement
and its use is enjoined, CA shall, at its own expense and at its option, either
(a) procure for Client the right to continue use, (b) replace the Work Product
with a non-infringing version of comparable functionality, or (c) issue a pro
rata refund based upon the usage of the Work Product by Client. This section
sets forth CA's entire liability for infringement of any third party's
intellectual property rights. CA further warrants that the Work Product will
comply with the specifications set forth in the applicable Statement of Work
during the limited period provided in the Statement of Work, or for 90 days
following delivery of the Work Product. CA will use it best efforts, consistent
with industry standards, to cure any defect or nonconformity with such
specifications during such period.
WARRANTY AND LIABILITY LIMITATIONS
EXCEPT AS SET FORTH ABOVE, NO OTHER WARRANTIES, WHETHER EXPRESS OR
IMPLIED,INCLUDING WITHOUT LIMITATION, THE IMPLIED WARRANTIES OF MERCHANTABILITY
AND FITNESS FOR A PARTICULAR PURPOSE ARE MADE BY CA. IN NO EVENT WILL CA BE
LIABLE TO CLIENT OR ANY OTHER PARTY FOR ANY CONSEQUENTIAL DAMAGES INCLUDING
TIME, MONEY, GOODWILL, LOST PROFITS BASED ON CONTRACT, TORT OR OTHER LEGAL
THEORY, WHICH MAY ARISE HEREUNDER OR FROM THE USE, OPERATION OR MODIFICATION OF
THE WORK PRODUCT. THE MAXIMUM LIABILITY OF CA HEREUNDER SHALL NOT EXCEED THE
AMOUNT ACTUALLY PAID BY CLIENT UNDER THE APPLICABLE TASK CONTAINED IN THE
STATEMENT OF WORK.
PAYMENT
Client agrees to pay to CA the fees and charges set forth in the
Statement of Work, in addition to any associated tariffs, duties or taxes (other
than income taxes) imposed or levied by any government agency. Client agrees
that it shall be responsible to reimburse CA for all travel and out-of-pocket
expenses incurred by CA in providing the services, unless otherwise provided in
the Statement of Work.
2
<PAGE>
BREACH AND TERMINATION
If Client materially breaches any term of this Agreement or of any
Statement of Work, or fails to pay any valid invoice rendered by CA, CA shall
have the right to terminate this Agreement immediately as well as all Statements
of Work then in process and, in addition to all other rights of CA, all amounts
which would have become due and payable under this Agreement including any
Statement of Work will immediately become due and payable to CA. Any invoice
which is unpaid by Client when due shall be subject to an interest charge of 2%
per month or part thereof plus such late payment charge as CA may reasonably
require to cover its additional costs of administration and collection. Client
shall be entitled to terminate any portion of any Statement of Work by giving CA
thirty (30) days prior written notice and by paying to CA all invoices
representing services performed through the proposed date of termination.
ASSIGNMENT
Client may not assign, transfer, sell, or encumber this Agreement, the
use of, or information contained in, any CA Work, or its rights and obligations
under this Agreement without the prior written consent of CA. CA, however, may
assign this Agreement or the obligations contained herein to any third party,
with the prior consent of Client, not to be unreasonably withheld, provided that
such third party assumes the obligations of CA under this Agreement, except that
no Client consent will be required in the case of an assignment resulting from a
sale, merger or acquisition relating to the business unit performing the
services hereunder.
INDEPENDENT CONTRACTOR
CA shall perform the services set forth in the Statement of Work as an
independent contractor and neither CA nor its employees shall be deemed to be
employees of Client. CA shall determine in its sole discretion which of its
employees or subcontractors shall be assigned to perform any consulting services
for Client and may reassign any employee or subcontractor at any time. Nothing
in this Agreement is intended to establish a partnership, joint venture or
agency relationship between the parties.
NON-SOLICITATION OF CA EMPLOYEES
Client agrees that it will not, without the prior written consent of
CA, solicit or hire any CA employee, or induce such employee to leave CA's
employment, directly or indirectly, for a period of twelve (12) months after the
most recent time such employee has performed any services for Client.
NOTICES
All notices pursuant to this Agreement shall be sent by certified mail,
postage prepaid, and shall not be deemed to have been given until received by
the other party.
ENTIRE AGREEMENT
This Agreement, together with the applicable Statement of Work,
represents the entire agreement between CA and Client with respect to the Work
Product and the services, obligations and responsibilities to be performed by
the parties hereunder. CA and Client agree that all other agreements, proposals,
purchase orders, representations and other understandings concerning the subject
matter of this Agreement, whether oral or written, between the parties are
superseded in their entirety by this Agreement. No alterations or modifications
of this Agreement will be valid unless made in writing and signed by the
parties. No attachment, supplement or exhibit to this Agreement shall be valid
unless initialed by an authorized signatory of CA and Client.
COMPUTER ASSOCIATES INTERNATIONAL, INC. CLIENT: I - STORM, INC.
By:____________________________________ By:______________________________
(Authorized Signature) (Authorized Signature)
_______________________________________ _________________________________
Name Name
_______________________________________ _________________________________
Title Title
DECEMBER 30, 1999
- --------------------------------------- ---------------------------------
Professional Services Agreement No. Date
3
[Computer(R)
Associates
Global Professional
Services Logo Here] CA GLOBAL PROFESSIONAL SERVICES
- --------------------------------------------------------------------------------
Date: January 18, 2000
ADDENDUM TO PROFESSIONAL SERVICE AGREEMENT
I-STORM, INC.
INTRODUCTION
This Addendum, in conjunction with the signed Professional Services Agreement
comprises the total agreement for the described level of effort. Upon execution
of this Addendum, Computer Associates International, Inc. (CA), will provide the
technical services in the time frame described in the Period of Performance.
If there are any unforeseen delays in the execution of these documents, the
Scope, this Addendum, and/or Period of Performance may be adjusted based on
mutually agreed upon terms between CA and I-Storm.
Until executed by I-Storm and received by CA, this addendum shall act as a
quotation for services whose term will expire thirty (30) days from the date
provided above. Any extensions to this term must be made in writing by CA.
DESCRIPTION OF SERVICES
o Provide Consultants, Architects, and Managing Consultants on a mutually
agreed upon schedule for design, implementation and maintenance services.
RESOURCE MANAGEMENT
Resource management will be provided by Computer Associates throughout the
execution of the engagement listed above.
ACTIVITY SCHEDULE AND LOCATION
These services are to be provided by CA personnel. These services will begin on
a mutually agreed upon schedule. Computer Associates personnel will normally
work during normal business hours, Monday through Friday, excluding holidays,
vacations, or training unless mutually agreed upon.
PERIOD OF PERFORMANCE
THESE SERVICES WILL BE PERFORMED BETWEEN AUGUST 1, 1999 AND COMPLETED BEFORE
DECEMBER 31, 2001. CLIENT AGREES TO PAY CA A MINIMUM PAYMENT OF EIGHT HUNDRED
THOUSAND DOLLARS ($800,000) FOR SERVICES PERFORMED DURING THE PERIOD ENDING ON
DECEMBER 31, 2000. SERVICES TO BE PERFORMED WILL BE DESCRIBED IN STATEMENTS OF
WORK. FEES WILL BE CHARGED IN ACCORDANCE WITH THE LABOR CATEGORIES AND RATES
SPECIFIED WITH THE SECTION LABELED "SERVICE UNITS RATES." RATES ARE NOT
INCLUSIVE OF TRAVEL AND LIVING EXPENSES, WHICH ARE TO BE INVOICED SEPARATELY AS
INCURRED. CA AND CLIENT ANTICIPATE THE PROVISION OF SERVICES TO CLIENT IN THE
AMOUNT OF THREE MILLION DOLLARS ($3,000,000) DURING THE PERIOD OF PERFORMANCE.
I-STORM PAGE 1 OF 2
<PAGE>
[Computer(R)
Associates
Global Professional
Services Logo Here] CA GLOBAL PROFESSIONAL SERVICES
- --------------------------------------------------------------------------------
Date: January 18, 2000
CLIENT RESPONSIBILITIES
I-Storm will provide the following at no cost to Computer Associates:
1. All necessary supporting hardware and software must be
accessible by our consultant upon initiation of this
engagement during the normal business hours.
2. Availability of information concerning systems and
applications that accurately reflects the status or conditions
currently in effect.
3. Availability of and access to all project required computer
systems, as well as root and administrator login and password
with sufficient authority to accomplish the tasks described.
4. Availability of any office services relevant to the delivery
of these services (e.g. telephone, office supplies, copying
capabilities, etc.).
SERVICES UNIT RATES
These consulting services are being provided on a time and materials basis at
the following hourly service unit schedules:
-------------------------------------- --------------------------------
LABOR CATEGORY HOURLY SERVICE UNIT RATE
-------------------------------------- --------------------------------
MANAGING CONSULTANT $165 PER HR.
-------------------------------------- --------------------------------
ARCHITECT $156 PER HR.
-------------------------------------- --------------------------------
SENIOR CONSULTANT $135 PER HR.
-------------------------------------- --------------------------------
NOTE: THE ABOVE RATE REFLECTS APPROXIMATELY 20% DISCOUNT TO LIST RATES.
ACCEPTED BY: ACCEPTED BY:
COMPUTER ASSOCIATES INTERNATIONAL, INC. I-STORM, INC.
_____________________________________ _______________________________
SIGNATURE SIGNATURE
_____________________________________ _______________________________
NAME (PLEASE PRINT) NAME (PLEASE PRINT)
_____________________________________ _______________________________
TITLE TITLE
DECEMBER 30, 1999
- -------------------------------------------- -------------------------------
DATE DATE
I-STORM PAGE 2 OF 2
Computer Associates Global Professional Services
Makes Strategic Investment in I-Storm
Agreement Brings Together Leaders In eBusiness IT Infrastructure
and Online Storefront Operation
ISLANDIA, N.Y. and MOUNTAIN VIEW, CA, January 19, 2000 - Computer Associates
International, Inc. (CA) and I-Storm, Inc. (ISTM) today announced a strategic
alliance which will leverage the strengths of CA's Global Professional Services
group's eBusiness infrastructure experience and I-Storm's e-commerce experience
to finance, build, and operate world-class e-commerce storefronts with the
critical back-end systems required by today's major corporations and retailers.
Through this alliance, CA and I-Storm will take advantage of their combined
expertise to create powerful eBusiness solutions for "brick and mortar"
companies who want to quickly and effectively transition to "click and mortar"-
and who are willing to share equity. Together, CA and I-Storm can deliver
innovative eBusiness storefront solutions offering seamless back-end
integration, full scalability, and unparalleled reliability to companies
challenged by critical eBusiness initiatives.
Under the terms of the agreement, CA will acquire an equity interest in I-Storm,
provide enterprise software as well as software development and systems
integration services, and assemble a joint business development team focused on
deploying robust, eBusiness solutions in the business-to-consumer and
business-to-business spaces. CA will also acquire a seat on I-Storm's
five-member Board of Directors.
"This alliance creates a major new force in the e-commerce world," said I-Storm
President and CEO Cal Lai. "By combining I-Storm's expertise in
e-commerce storefront development and operations with CA's unmatched prowess in
eBusiness infrastructure services, we are now in a unique position to offer
powerful 'click-and-mortar' solutions for Fortune 1000 companies struggling with
their online programs. It's truly a 'win-win-win'
arrangement for our eBusiness partners."
I-Storm's business model focuses on the co-development of new online channels
for established brands using e-commerce knowledge and operational expertise to
create robust eBusinesses. The combination of I-Storm's capabilities with CA
Global Professional Services' vast experience implementing enterprise management
technology offers the online marketplace a unique value.
"Our organizations truly have complementary strengths," said Chris Wagner,
Executive Vice President and General Manager of CA Global Professional Services.
"I-Storm has a deep understanding of eBusiness strategy, particularly as it
<PAGE>
relates to the online retail experience. Their e-merchandising expertise is
outstanding. One of the key strengths of CA Global Professional Services is the
ability to provide the end-to-end IT infrastructure powered by Unicenter TNG to
enable eBusiness. Unquestionably, bringing together the strengths of both
organizations creates a compelling value proposition for eBusiness clients."
The alliance also addresses the growing market revelation that deploying
reliable systems and application management platforms is only a part of today's
eBusiness requirements. Together with I-Storm, CA is delivering innovative
Neugents and visualization technology that enables online retailers to quickly
spot usage and buying patterns. The application of such advanced technology also
enables clients to instrument and monitor Web applications, providing valuable
insight into all facets of their eBusiness.
The alliance enhances the complete line of world-class eBusiness service
offerings available from CA Global Professional Services. These offerings range
from strategic "eBusiness transformation" planning and design to application
development and fully supported Web and eBusiness solution hosting. With these
offerings and the ability to tap into I-Storm's breadth of online retail
experience, CA Global Professional Services offers clients a single, end-to-end
vendor with which to partner for advanced eBusiness initiatives.
Computer Associates International, Inc. (NYSE: CA), the world's leading
business software company, delivers the end-to-end infrastructure to enable
eBusiness through innovative technology, education and support services. CA
has 17,500 employees worldwide and had revenue of $5.3 billion in fiscal
year 1999. For more information, visit www.cai.com.
Computer Associates Global Professional Services has over 4,000 consultants in
44 countries around the world delivering technology solutions for clients in the
areas of enterprise systems management, application development and integration,
knowledge management, eBusiness infrastructure, security, and visualization.
Specific services include business assessment and consulting, implementation,
education and outsourcing. For more information on Global Professional Services,
please visit www.cai.com/gps/
I-Storm, Inc. (OTC BB: ISTM) partners with successful brands to co-develop,
co-fund, and co-manage aggressive e-commerce ventures. I-Storm's expertise in
e-business strategy, site development, and retail operations, coupled with its
willingness to invest in the opportunities it identifies, affords Fortune 1000
companies a unique opportunity to quickly get to market with highly competitive
e-commerce systems. Combining the roles of an outsource service provider and an
e-business incubator, I-Storm builds and operates world-class online selling
systems, harnessing best-of-breed technologies and innovative business practices
drawn from its experience as a Silicon Valley pioneer in e-commerce and
interactive marketing. By leveraging the existing brand, fulfillment, and
support infrastructures of its partners, I-Storm is able to focus entirely on
site development and growth, sharing in the risks and rewards of the new
channel. For more information please visit I-Storm at www.i-storm.com/
# # #
All referenced product names are trademarks of their respective companies.
The statements made in this release that are not historical facts contain
forward-looking information that involves risks and uncertainties. Important
factors that may cause actual results to differ include, but are not limited to,
the impact of competitive products and services, each company's ability to
manage growth and to develop e-business, the effect of economic and business
conditions, changes in technology and other risks detailed from time to time in
the company's filings with the Securities and Exchange Commission.
