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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, DC 20549
FORM 10-Q
(Mark One)
(X) QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the quarterly period ended September 30, 1999
OR
( ) TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
For the Transition Period from __________ to __________
Commission File Number: 001-13211
INFORMATION MANAGEMENT ASSOCIATES, INC.
(Exact name of registrant as specified in its charter)
Connecticut 06-1289928
(State or other (I.R.S. Employer
jurisdiction of Identification No.)
incorporation or
organization)
One Corporate Drive, Suite 400
Shelton, Connecticut 06484
(203) 925-6800
(Address and telephone number of principal executive offices) Indicate
by check mark whether the Registration (1) has filed all reports required to be
filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the
preceding 12 months (or for such shorter period that the Registrant was required
to file such reports), and (2) has been subject to such filing requirements for
the past 90 days.
X YES NO
--- ___
The number of shares of the Registrant's Common Stock, no par value, outstanding
on September 30, 1999 was 9,746,855.
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INFORMATION MANAGEMENT ASSOCIATES, INC.
FORM 10-Q
TABLE OF CONTENTS
<TABLE>
<S> <C>
PART I. FINANCIAL INFORMATION............................................ 3
Item 1: Condensed Consolidated Financial Statements
Condensed Consolidated Balance Sheets as of
September 30, 1999 and December 31, 1998 .................. 3
Condensed Consolidated Statements of Operations for the
Three and Nine Months Ended September 30, 1999 and 1998 ... 4
Condensed Consolidated Statements of Cash Flows for the
Nine Months Ended September 30, 1999 and 1998 ............. 5
Condensed Consolidated Statements of Shareholders' Equity
for the Nine Months Ended September 30, 1999 and the Year
Ended December 31, 1998.................................... 6
Notes to Condensed Consolidated Financial Statements....... 7
Item 2: Management's Discussion and Analysis of Financial Condition
and Results of Operations........................................ 13
Item 3: Quantitative and Qualitative Disclosures About Market Risk....... 31
PART II. OTHER INFORMATION................................................ 33
Item 1: Legal Proceedings................................................ 33
Item 2: Exhibits and Reports on Form 8-k................................. 33
SIGNATURES................................................................ 34
</TABLE>
2
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PART I. FINANCIAL INFORMATION
ITEM 1. FINANCIAL STATEMENTS
INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(In thousands)
<TABLE>
<CAPTION>
September 30, December 31,
1999 1998
------------- ------------
(unaudited)
<S> <C> <C>
ASSETS
Current assets:
Cash and short term investments......................... $ 3,932 $ 11,649
Restricted cash......................................... 8,934 -
Accounts receivable, net................................ 11,700 16,487
Other current assets.................................... 3,434 1,985
------------- ------------
Total current assets................................... 28,000 30,121
Equipment, net............................................ 4,341 3,134
Other assets, net......................................... 4,025 3,983
------------- ------------
$ 36,366 $ 37,238
============= ============
LIABILITIES AND SHAREHOLDERS' EQUITY
Current liabilities:
Convertible promissory note............................. $ 3,985 $ -
Current maturities of capital lease obligations......... 391 73
Accounts payable and accrued liabilities................ 10,145 11,412
Deferred revenues....................................... 4,522 4,341
------------- ------------
Total current liabilities.............................. 19,043 15,826
------------- ------------
Other long-term liabilities............................... 941 490
------------- ------------
Minority interest......................................... 8,131 -
------------- ------------
Shareholders' equity:
Common stock, no par value; 9,746,855 and 9,697,088
shares outstanding at September 30, 1999 and
December 31, 1998........................................ 58,507 54,691
Shares to be issued in connection with acquisition........ - 564
Cumulative translation adjustment......................... (60) (63)
Accumulated deficit....................................... (50,196) (34,270)
------------- ------------
8,251 20,922
------------- ------------
Total shareholders' equity............................. $ 36,366 $ 37,238
============= ============
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
3
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INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(In thousands, except per share amounts)
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
1999 1998 1999 1998
<S> <C> <C> <C> <C>
Revenues:
License fees............................... $ 2,440 $ 8,706 $ 10,861 $ 21,429
Service and maintenance.................... 5,608 7,098 19,340 17,615
------- ------- -------- --------
Total revenues............................ 8,048 15,804 30,201 39,044
------- ------- -------- --------
Cost of revenues:
Cost of license fees....................... 116 105 343 316
Cost of service and maintenance............ 3,158 4,303 12,244 10,682
------- ------- -------- --------
Total cost of revenues.................... 3,274 4,408 12,587 10,998
------- ------- -------- --------
Gross profit................................ 4,774 11,396 17,614 28,046
------- ------- -------- --------
Operating expenses:
Sales and marketing........................ 4,802 5,807 16,039 14,479
Product development........................ 2,677 2,167 9,077 5,879
General and administrative................. 2,523 1,400 5,571 3,821
Provision for doubtful accounts............ 887 1,816 2,617 2,778
Acquired product development costs......... - - - 7,658
One time settlement charge................. - 2,163 - 2,163
------- ------- -------- --------
Total operating expenses 10,889 13,353 33,304 36,778
------- ------- -------- --------
Operating loss.............................. (6,115) (1,957) (15,690) (8,732)
Other income (expense)...................... (401) 179 (336) 716
------- ------- -------- --------
Loss before provision for
income taxes and minority interest......... (6,516) (1,778) (16,026) (8,016)
Provision for income taxes.................. 48 119 228 273
------- ------- -------- --------
Net loss before minority interest........... (6,564) (1,897) (16,254) (8,289)
Minority interest........................... (292) - (328) -
------- ------- -------- --------
Net loss applicable to common
shareholders................................ $(6,272) $(1,897) $(15,926) $ (8,289)
======= ======= ======== ========
Basic and diluted net loss per share........ $ (.65) $ (.20) $ (1.64) $ (.87)
======= ======= ======== ========
Shares used in computing basic and diluted
net loss per share.......................... 9,718 9,676 9,704 9,558
======= ======= ======== ========
</TABLE>
The accompanying notes are an integral part of these
condensed consolidated financial statements
4
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INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(In thousands)
<TABLE>
<CAPTION>
Nine Months Ended
September 30,
1999 1998
--------- --------
<S> <C> <C>
Cash Flows from Operating Activities:
Net loss...................................................... $ (15,926) $ (8,289)
Adjustments to reconcile net loss to net cash used in
operating activities:
Minority interest............................................ (491) -
Depreciation and amortization................................ 1,860 1,235
Provision for doubtful accounts.............................. 2,617 2,345
Charge for acquired product development costs................ - 7,658
Amortization of debt discount................................ 263 -
Accretion of Series A........................................ 162 -
Non-cash compensation expense................................ 70 -
Changes in operating assets and liabilities, exclusive
of effects of acquisitions:
Accounts receivable........................................ 2,170 (8,036)
Other current assets....................................... (1,015) (1,499)
Other assets, net.......................................... (681) 1,093
Accounts payable and accrued liabilities................... (1,275) 432
Deferred revenues.......................................... 181 (968)
Other...................................................... 291 (56)
--------- --------
Net cash used in operations................................ (11,774) (6,085)
--------- --------
Cash Flows from Investing Activities:
Increase in restricted cash................................... (8,934) -
Acquisition of equipment...................................... (1,577) (1,752)
Proceeds from sale of assets.................................. 78 -
Cash paid in connection with acquisitions
and related deal costs...................................... - (1,632)
Minority equity investment.................................... - (1,715)
--------- --------
Net cash used in investing activities...................... (10,433) (5,099)
--------- --------
Cash Flows from Financing Activities:
Net proceeds from issuance of Series A........................ 8,460 -
Net proceeds from issuance of Convertible Note................ 3,300 -
Issuance of warrants.......................................... 2,770 -
Proceeds from exercise of stock options....................... 227 665
Repayment of capital lease obligations........................ (270) (148)
--------- --------
Net cash provided by financing activities.................. 14,487 517
--------- --------
Effect of exchange rate changes................................ 3 194
--------- --------
Net decrease in Cash and Cash Equivalents...................... (7,717) (10,473)
Cash and Cash Equivalents, beginning of period................. 11,649 24,271
--------- --------
Cash and Cash Equivalents, end of period....................... $ 3,932 $ 13,798
========= ========
Supplemental Disclosure of Non-cash Activities:
Issuance of common stock in connection with acquisitions...... $ - $ 3,383
Equipment acquired pursuant to capital lease obligations...... $ 1,043 $ -
</TABLE>
5
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CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
(in thousands)
<TABLE>
<CAPTION>
Cumulative
Common Stock Translation Accumulated
Shares Amount Adjustment Deficit Total
------------ ----------- ------------ ----------- --------
<S> <C> <C> <C> <C> <C>
For the year ended December 31, 1998:
Balance, December 31, 1997 9,236,035 $ 51,102 $ (101) $ (13,971) $ 37,030
Exercise of common stock options 185,295 665 - - 665
Employee stock purchase plan 20,917 105 - - 105
Issuance of Common Stock in
connection with acquisitions, 254,841 3,383 - - 3,383
including 42,508 shares valued
at $564 to be issued
Equity adjustment from foreign
currency translation - - 38 - 38
Net loss - - - (20,299) (20,299)
------------ ----------- ------------ ----------- --------
Balance, December 31, 1998 9,697,088 55,255 (63) (34,270) 20,922
For the nine months ended
September 30, 1999 (unaudited):
Exercise of common stock options 48,749 227 - - 227
Employee stock purchase plan 1,018 - - - -
Warrants issued in conjunction with
Convertible promissory note - 1,340 - - 1,340
Warrants issued in conjunction with
buyingedge.com formation - 1,430 - - 1,430
Common stock issued in conjunction with
buyingedge.com formation - 255 - - 255
Equity adjustment from foreign
currency translation - - 3 - 3
Net loss - - - (15,926) (15,926)
------------ ----------- ------------ ----------- --------
Balance, September 30, 1999 9,746,855 $ 58,507 $ (60) $ (50,196) $ 8,251
============ =========== ============ =========== ========
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
6
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INFORMATION MANAGEMENT ASSOCIATES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
1. Basis of Presentation
The accompanying condensed consolidated financial statements have been prepared
by Information Management Associates, Inc.("IMA") and its majority-owned
subsidiaries (together, the "Company"), without audit, pursuant to the rules and
regulations of the Securities and Exchange Commission. Certain information and
footnote disclosures normally included in financial statements prepared in
accordance with generally accepted accounting principles have been condensed or
omitted pursuant to such rules and regulations. However, the Company believes
that the disclosures are adequate to make the information presented not
misleading. These condensed consolidated financial statements and the notes
thereto should be read in conjunction with the consolidated financial statements
and notes thereto included in the Company's Form 10-K, as amended, for the year
ended December 31, 1998.
The unaudited information has been prepared on the same basis as the annual
financial statements and, in the opinion of the Company's management, reflects
all normal recurring adjustments necessary for a fair presentation of the
information for the periods presented. Operating results for any quarter are not
necessarily indicative of the results for any future periods.
The Company announced restated results for its second quarter ended June 30,
1999. The originally reported results for the second quarter of 1999 reflected
revenues of $13.1 million, and a net loss of $1.8 million, or $.19 per share.
The restated results for the second quarter of 1999 reflect revenues of $9.9
million and a net loss of $6.3 million or $.65 per share. The change from the
original reported net loss of $4.5 million reflects:
. A license fee revenue reduction of $3.3 million and associated sales and
marketing expense reduction of $135,000 in connection with an enterprise
wide software license ordered by a reseller. Based on a further review
of the circumstances surrounding the transaction, the Company deferred
its revenue recognition until collectibility is assured.
. One-time charges of $581,000 relating to the formation of IMA's
majority-owned Internet subsidiary, buyingedge.com and the issuance of
the subsidiary's common stock to its minority shareholder in the second
quarter.
. The capitalization of website development costs in accordance with SOP
98-1, Accounting for Costs of Computer Software Developed or Obtained
for Internal use, in the amount of $156,000, net of amortization. The
Company should have capitalized the website development costs incurred
in the quarter ended June 30, 1999.
. An increase in the provision for bad debts of $920,000. In connection
with the third quarter review of the reserve for doubtful accounts, the
Company determined that a portion of the identified additional reserves
were more appropriately reflected in the second quarter.
The Company has received and responded to a comment letter related to the
Company's Form 10-Q for the quarter ended June 30, 1999 from the Securities and
Exchange Commission regarding, among other things, the Company's accounts
receivable balances, the collectibility of such balances and the Company's
revenue recognition policies in light of such balances. Although the Company
believes that its accounting for accounts receivable and its revenue recognition
policy is proper, a different conclusion would require further restatement of
the Company's results in previously reported results.
In May 1999 IMA formed buyingedge.com, Inc. ("buyingedge.com") as a vehicle to
roll out its new internet marketing technology. IMA transferred certain
technology and other assets to buyingedge.com in exchange for 7,990,000 shares
of its common stock which, at the time of exchange, represented 94% of the
outstanding common stock
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of buyingedge.com.
The articles of incorporation for buyingedge.com provide for the issuance
of 20,000,000 shares of common stock and 5,500,000 shares of Series A Preferred
Stock (see Note 2). In connection with the transfer of technology noted above,
as well as the contribution of certain other technology from a third party,
buyingedge.com issued 8,500,000 shares of common stock. In addition,
buyingedge.com has reserved 4,816,183 shares of its common stock for issuance
under its 1999 Stock Option Plan, of which 1,555,000 options were issued through
to September 30,1999 at an exercise price of $.50 per share.
On August 12, 1999, buyingedge.com sold 5,319,149 shares of Series A Preferred
Stock for a total purchase price of $10,000,000 (See Note 2).
2. Sale of Subsidiary Preferred Stock and Issuance of Convertible Debt
On August 12, 1999, buyingedge.com issued 5,319,149 shares of Series A Preferred
Stock "Series A" for $1.88 per share for aggregate gross proceeds of
$10,000,000. The $10,000,000 is restricted to fund the activities of
buyingedge.com. As of September 30, 1999, there was approximately $8.9 million
of restricted cash, $8.6 million of which relates to buyingedge.com and the
balance relating to a collateral deposit for an IMA facility lease. In
connection with the issuance of the Series A, IMA issued to the holders of the
Series A warrants (valued at $1,430,000) to purchase 621,057 shares of IMA
common stock at an exercise price of $4.00 per share through August 12, 2002. In
addition, IMA issued to the holders of the Series A an option to purchase
1,612,903 shares of IMA common stock at a per share purchase price of $6.20
through August 12, 2002, provided that the holders of the Series A
simultaneously redeem the Series A to buyingedge.com. The carrying value of the
Series A is included within the minority interest balance in the accompanying
financial statements, and is being accreted to its August 2004 redemption value,
including accrued dividends with a corresponding charge to operations in
minority interest. The rights and privileges of the Series A are as follows:
Dividends - The Series A will accrue dividends at a rate of 9% per annum
compounded on an annual basis. The cumulative dividends shall be paid upon
a liquidation event, as defined, or upon redemption.
Redemption - If the Series A is not converted into common stock, the Series
A holder can demand that buyingedge.com redeem such holder's shares in
three annual equal installments commencing August 12, 2004. The redemption
price shall be at the $1.88 purchase price per share plus all accrued but
unpaid dividends.
Conversion - Holders of the Series A are entitled to convert each Series A
Share into one share of common stock of buyingedge.com subject to
adjustment, as defined. Each share of Series A shall automatically convert
upon an initial public offering with gross proceeds of not less than $20
million and a per share offering price of not less than $7.52.
Liquidation - In the case of a liquidation, dissolution or winding up of
buyingedge.com, the holders of the Series A shall be entitled to receive a
liquidation value of $1.88 per share plus all accrued but unpaid dividends.
Certain transactions resulting in a change of ownership of 50% or more are
treated as a liquidation.
Voting - Each holder of Series A shall be entitled to the number of votes
equal to the number of shares of common stock into which such shares are
convertible.
On August 12, 1999, IMA also issued a $5,000,000 Senior Subordinated
Convertible Promissory Note (the Convertible Note) which bears interest at 9%
8
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per annum. The Convertible Note is repayable at IMA's option any time prior to
April 30, 2000 at a value equal to the face value of the Note plus any accrued
but unpaid interest. If the Note is not redeemed by IMA prior to April 30, 2000,
or if IMA is in default under the Note and such default is not cured within 20
business days, it will automatically be converted into the number of shares IMA
Series C Preferred Stock (Series C) that would convert into 19.9% of IMA's
issued and outstanding common stock on August 12, 1999, and the balance of any
outstanding indebtedness under the Note which is not converted thereby shall be
converted into a Senior Subordinated Promissory Note due one year from the date
of conversion and bearing interest at 12% per annum. In connection with the
issuance of the Convertible Note, IMA also issued warrants (valued at
$1,340,000) to acquire 425,000 shares of IMA common stock at an exercise price
per share equal to the closing price of IMA's common stock of $3.625 on
August 12, 1999. The value of the warrants has been reflected as a debt discount
and is being amortized to interest expense over the life of the debt. The
exercise price of the warrants is subject to adjustment pursuant to certain
anti-dilution provisions. The warrants are exercisable through August 11, 2007.
In connection with the issuance of the Convertible Note, IMA amended its
Certificate of Incorporation to designate 5,000 shares of its preferred stock as
Series C Preferred Stock without par value and with a stated value of $1,000 per
share. The rights and privileges of the Series C are as follows:
Redemption - Upon the effective date of a change in control, as defined,
the holders of the Series C will convert such shares into shares of IMA
common stock at a conversion price calculated as the lower of the average
closing price of IMA for the 20 days following the issuance of the
Convertible Note, the average closing price of IMA for the 20 days
preceding the conversion date or $4.00, all of which conversion rates are
subject to adjustment pursuant to certain anti-dilution provisions (the
Conversion Price), or will elect to redeem such shares at their carrying
value.
Conversion - Holders of the Series C are entitled to convert such shares
into common stock of IMA at the Conversion Price.
Liquidation - In the case of a liquidation, dissolution or winding up
of IMA, the holders of the Series C shall be entitled to receive a
liquidation value of $1,000 per share.
Voting - Each holder of Series C shall be entitled to the number of votes
equal to the number of shares of common stock into which shares are
convertible. In addition, certain actions related to future equity
offerings or transactions which could involve a significant sale of assets
or change in control, as defined, would require a vote of at least 67% of
the Series C.
In August 1999, the Company received a commitment letter from a financial
institution for a revolving credit facility of up to $8 million. After further
discussions with the financial institution, the Company determined that the
proposed financing did not provide the Company with either the type or the
amount of the borrowing capacity which the Company desired. Accordingly, the
Company let the commitment expire. Costs associated with the proposed financing
of $80,000 were written off during the third quarter.
3. Business Acquisitions
On March 30, 1998, the Company acquired substantially all of the net assets
of Marketing Information Systems, Inc. ("MIS") and Telemar Software
International, LLC ("TSI") ("the Acquisitions"), each of which markets
proprietary call center software focused on the IBM AS/400 user market.
The aggregate purchase price was initially valued at $9.4 million,
consisting of $1.3 million of cash, 254,841 shares of common stock valued at
9
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$3.4 million, $4.1 million of net assumed liabilities and $600,000 of
transaction costs. The value of the common stock was determined based on the
average trading price of the Company's common stock for the two days prior to,
the day of, and the two days after, the date that the terms of the Acquisitions
were announced. The aggregate purchase price was subsequently adjusted to $8.7
million by the Company during its fiscal quarter ended September 30, 1998 to
reflect the as adjusted net assumed liabilities of $3.6 million and the as
adjusted transaction costs of $400,000.
The Acquisitions were accounted for under the purchase method of accounting
and the aggregate purchase price was originally allocated to the acquired assets
and assumed liabilities based on their estimated value. Of the original $9.4
million aggregate purchase price, $7.7 million was allocated to acquired product
development costs and charged to operations at the date of acquisition, $700,000
was allocated to purchased software to be amortized over three years and $1.0
million was allocated to goodwill to be amortized over seven years. The Company
subsequently adjusted its initial valuation of acquired product development
costs and reduced the amount allocated by approximately $700,000 to reflect
certain adjustments in the valuation methodology resulting from a reallocation
of a portion of future cash flows from the acquired product development to the
purchased software. The adjustment to increase the value of the purchased
software and to decrease the value of acquired product development costs were
recorded by the Company during its fiscal quarter ended December 31, 1998. As a
result of the purchase price and allocation adjustments noted above, of the
final adjusted aggregate purchase price of approximately $8.7 million, $7.0
million, was allocated to acquired product development costs and charged to
operations, $1.4 million was allocated to purchased software and $300,000 was
allocated to goodwill. Of the $7.0 million allocated to acquired product
development costs, approximately $5.2 million related to MIS technologies and
approximately $1.8 million related to TSI technologies.
4. Earnings (Loss) Per Share
Statement of Financial Accounting Standards No. 128, Earnings Per Share
(SFAS 128) establishes standards for computing and presenting earnings per
share. Under SFAS 128, earnings per share is computed both under the basic and
dilutive methods. Basic earnings per share is computed by dividing income
available to common shareholders by the weighted average number of common shares
outstanding; dilutive earnings per share is computed by giving effect to all
dilutive potential common share equivalents that were outstanding during the
period. Dilutive common share equivalents include stock options, warrants and
convertible preferred stock. The calculation of basic and diluted earnings loss
per share are as follows (in thousands except per share amounts):
<TABLE>
<CAPTION>
Quarter Ended Nine Months Ended
September 30, September 30,
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Basic and diluted loss per share:
Net loss applicable to
common shareholders........................... $ (6,272) $ (1,897) $ (15,926) $ (8,289)
========= ========= ========= =========
Basic and diluted net loss per share.......... $ (.65) $ (.20) $ (1.64) $ (.87)
========= ========= ========= =========
Weighted basic and diluted average
shares outstanding............................ 9,718 9,676 9,704 9,558
========= ========= ========= =========
</TABLE>
10
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Weighted average warrants and options to purchase 191,586 and 1,829,513 shares
of common stock, respectively, were outstanding during the nine months ended
September 30, 1999, but were not included in the computation of diluted earnings
per share as their effect was anti-dilutive.
5. Revenue Recognition
As of January 1, 1998, the Company adopted Statement of Position 97-2,
Software Revenue Recognition, which was effective for transactions that the
Company entered into after December 31, 1997. The adoption of SOP 97-2 did not
have a material adverse affect on the revenues or earnings of the Company for
the nine months ended September 30, 1999 and 1998.
6. Comprehensive Income
As of January 1, 1998, the Company adopted Statement of Financial Accounting
Standards No. 130, Reporting Comprehensive Income (SFAS 130). SFAS 130
establishes new rules for the reporting and display of comprehensive income and
its components. Comprehensive income is a more inclusive financial reporting
methodology that includes disclosure of certain financial information that
historically has not been recognized in the calculation of net income. For the
nine months ended September 30, 1999, there was a cumulative translation
adjustment gain of $3,000, compared to a cumulative translation adjustment gain
of $194,000 during the nine months ended September 30, 1998. Accordingly, the
comprehensive loss for the nine months ended September 30, 1999 and 1998 is
$15.9 million and $8.1 million, respectively.
7. Business Segment Information
Effective for the year ended December 31, 1998, the Company adopted Statement of
Financial Accounting Standards No. 131, Disclosures about Segments of an
Enterprise and Related Information (SFAS 131) which requires disclosure of
financial and descriptive information about the Company's reportable operating
segments. The operating segments reported below are the segments for which
separate financial information is available and for which operating profit
(loss) amounts are evaluated regularly by senior management in deciding how to
allocate resources and in assessing performance.
The Company operates three reportable segments: enterprise call center software
solutions, professional services, including maintenance and buyingedge.com, inc.
The Company's reportable segments are strategic business units that offer
different products and services. They are managed separately, based on the
fundamental differences in their operations. The enterprise call center software
solution provides software licenses of the Company's software products. The
professional services provides the professional consulting services,
implementation, training and maintenance related to the Company's enterprise
call center software solutions. The buyingedge.com segment provides a centrally
hosted electronic marketplace where buyers will be able to reach a wide range of
sellers (vendors) in many different product segments. The accounting policies of
the segments are the same as those described in the summary of significant
accounting policies in the Company's Annual Report.
Expenses related to general corporate functions such as Information
Technology, Finance and Human Resources, and general and administrative costs
such as depreciation, rent and utilities are allocated to the reportable
segments based on relative headcount or relative usage. Income tax provision
(benefit) is allocated to the reportable segments in deriving segment profit
(loss) based on each segment's pro rata income or loss before income tax
provision (benefit). The Company has no intersegment sales and transfers, and
does not allocate assets to the operating segments.
8. Legal Proceedings
On May 19, 1999 the Company filed a Demand for Arbitration with the American
Arbitration Association in Peoria, Illinois asserting that Affina Corporation
f/k/a Ruppman Marketing Technologies, Inc. ("Ruppman") breached its written
software license agreement and consulting services agreements with the Company
by failing to make payment in the amounts of $893,150 in software license and
maintenance fees and $636,931.43 in consulting services fees (Information
Management Associates, Inc. v. Affina Corporation f/k/a Ruppman Marketing
Technologies, Inc., No. 51Y 117 00225399)(the "Demand"). On or about June 24,
1999, Ruppman filed its answer to the Demand denying all claims made by the
Company and filed a counterclaim alleging negligent misrepresentation, breach of
contract, breach of express warranties and violations of the Illinois Consumer
and Deceptive Practices Act (the "Counterclaim"). On or about July 23, 1999 the
Company responded to the Counterclaim denying all claims made therein and
raising several special defenses. On or about August 6, 1999, Ruppman amended
its counterclaim, dismissing its claims under the Illinois Consumer and
Deceptive Practices Act and adding a claim for violation of the Connecticut
Unfair Practices Act. The Company believes that it will prevail in its claims
set forth in the Demand. The Company believes that Ruppman's Counterclaim is
without merit and intends to vigorously oppose the Counterclaim. Nevertheless,
the final outcome of any legal proceeding is subject to a great many variables
and cannot be predicted with any degree of certainty. In the event that the
Counterclaim is ultimately decided in favor of Ruppman, damages and associated
costs could have a material adverse effect on results of the Company's
operations.
From time to time, the Company is involved in litigation in the normal course of
business relating to claims arising out of its operations. The Company is not
currently involved in any litigation except as discussed above which, in
management's opinion, would have a material adverse effect on its business,
operating results or financial condition.
11
<PAGE>
<TABLE>
<CAPTION>
For The Quarter Ended September 30, 1999
- ----------------------------------------
(in thousands)
Enterprise Call Professional buying-
Center Software Services edge.com Consolidated
-------------- ------------- -------- ------------
<S> <C> <C> <C> <C>
Revenues $ 2,440 $ 5,608 $ - $ 8,048
Cost of sales 116 3,158 - 3,274
Product development 2,087 - 590 2,677
Depreciation & amortization 403 221 44 668
Other income (expense), net (273) (164) 36 (401)
Minority interest - - (292) (292)
Segment loss $ (4,836) $ (126) $ (1,310) $ (6,272)
======== ======== ======== ========
For The Quarter Ended September 30, 1998
- ----------------------------------------
(in thousands)
Enterprise Call Professional buying-
Center Software Services edge.com Consolidated
-------------- ------------- -------- ------------
Revenues $ 8,706 $ 7,098 $ - $ 15,804
Cost of sales 105 4,303 - 4,408
Product development 2,167 - - 2,167
Depreciation & amortization 286 238 - 524
Other income, net 98 81 - 179
Minority interest - - - -
Segment loss $ (621) $ (1,276) $ - $ (1,897)
======== ======== ======== ========
For The Nine Months Ended September 30, 1999
- --------------------------------------------
(in thousands)
Enterprise Call Professional buying-
Center Software Services edge.com Consolidated
-------------- ------------ -------- ------------
Revenues $ 10,861 $ 19,340 $ - $ 30,201
Cost of Sales 343 12,244 - 12,587
Product Development 7,012 - 2,065 9,077
Depreciation & amortization 1,100 674 86 1,860
Other income (expense), net (236) (136) 36 (336)
Minority interest - - (328) (328)
Segment loss $(10,877) $ (1,843) $ (3,206) $(15,926)
======== ======== ======== ========
For The Nine Months Ended September 30, 1998
- --------------------------------------------
(in thousands)
Enterprise Call Professional buying-
Center Software Services edge.com Consolidated
-------------- ------------- -------- ------------
Revenues $ 21,429 $ 17,615 $ - $ 39,044
Cost of sales 316 10,682 - 10,998
Product development 5,879 - - 5,879
Depreciation & amortization 694 578 - 1,272
Other income 404 312 - 716
Minority interest - - - -
Acquired product development costs 7,658 - - 7,658
Segment loss $ (6,041) $ (2,248) $ - $ (8,289)
======== ======== ======== ========
</TABLE>
12
<PAGE>
ITEM 2: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS
The following Management's Discussion and Analysis of Financial Condition
and Results of Operations should be read in conjunction with the Consolidated
Financial Statements and the Notes thereto included elsewhere in this Form 10-Q.
The following discussion contains forward-looking statements and the Company's
actual results could differ materially from those anticipated in these
forward-looking statements as a result of certain factors, including those set
forth under "Factors That May Affect Future Results".
OVERVIEW
The Company develops, markets and supports customer interaction software
designed to increase the productivity and revenue generating capabilities of
mid-size and large- scale telephone call centers. Recently, the Company has
developed synchronized, multi-channel e-business solutions that enable
businesses to interact with their customers to improve sales or service
capabilities.
The Company generates revenues from licensing the rights to use its
software products directly to end users and indirectly through sublicense fees
from resellers. The Company also generates revenues from sales of software
maintenance contracts, and from consulting and training services performed for
customers who license its products. As of January 1, 1998, the Company adopted
Statement of Position 97-2, Software Revenue Recognition (SOP 97-2), which was
effective for transactions that the Company entered into after
December 31, 1997.
The Company has invested in the design and concepts of buyingedge.com (Notes 1
and 2), a centrally hosted electronic marketplace where buyers are able to reach
a wide range of sellers (vendors) in many different product segments. A
production web environment was launched in the second quarter of 1999 and the
system went live in the third quarter.
The Company markets its products in the United States through a direct
sales organization and certain resellers. In Europe, the Pacific Rim, Canada,
Mexico and Latin America the Company markets its products through remarketing
and distribution relationships which it supplements with a direct sales force in
certain regions. The Company maintains offices in the United Kingdom, France,
Germany and Australia to support its international sales and service activities.
For the nine months ended September 30, 1999, United States and international
revenues were approximately 70% and 30% of total revenues, respectively.
Expenses as a percentage of revenues increased due to lower than expected
revenue in the first nine months of 1999 and due to increased spending for the
development of buyingedge.com. The Company is reviewing its business to find
additional revenue growth opportunities and operating expense reductions.
Although the Company has experienced significant growth in revenues during 1998
and 1997, the Company does not believe prior growth is necessarily indicative of
future revenues. In addition, the Company expects increased competition and
intends to continue to invest in its business. There can be no assurance that
the Company will be profitable on a quarterly or annual basis. Future operating
results will depend on many factors, including demand for the Company's
products, the level of product competition, competitor pricing, the size and
timing of significant orders, changes in pricing policies by the Company or its
competitors, the ability of the Company to develop, introduce and market new
products on a timely basis and changes in levels of operating expenses.
13
<PAGE>
RESULTS OF OPERATIONS
The following table sets forth the percentage of total revenues for certain
items in the Company's Consolidated Statement of Operations for the three months
and nine months ended September 30, 1999 and 1998 (unaudited).
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------- --------- --------- ---------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
License fees........................ 30.3% 55.1% 36.0% 54.9%
Service and maintenance............. 69.7% 44.9% 64.0% 45.1%
--------- --------- --------- ---------
Total revenues.................... 100.0% 100.0% 100.0% 100.0%
--------- --------- --------- ---------
Cost of revenues:
License fees......................... 1.4% 0.7% 1.1% 0.8%
Service and maintenance.............. 39.3% 27.2% 40.6% 27.3%
--------- --------- --------- ---------
Total cost of revenues............. 40.7% 27.9% 41.7% 28.1%
--------- --------- --------- ---------
Gross profit........................... 59.3% 72.1% 58.3% 71.9%
--------- --------- --------- ---------
Operating expenses:
Sales and marketing................ 59.7% 36.8% 53.1% 37.1%
Product development................ 33.3% 13.7% 30.1% 15.1%
General and administrative......... 31.3% 8.8% 18.4% 9.8%
Provision for doubtful accounts.... 11.0% 11.5% 8.7% 7.1%
Acquired product development costs - - - 19.6%
One time settlement charge......... - 13.7% - 5.5%
--------- --------- --------- ---------
Total operating expenses........... 135.3% 84.5% 110.3% 94.2%
--------- --------- --------- ---------
Operating loss......................... (76.0)% (12.4)% (52.0)% (22.3)%
Other income (expense)................. (5.0)% 1.1% (1.1)% 1.8%
--------- --------- --------- ---------
Loss before provision for
Income taxes and minority interest..... (81.0)% (11.3)% (53.1)% (20.5)%
Provision for income taxes............. 0.6% 0.7% 0.7% 0.7%
--------- --------- --------- ---------
Net loss before minority interest...... (81.6)% (12.0)% (53.8)% (21.2)%
Minority interest...................... 3.6% - 1.1% -
--------- --------- --------- ---------
Net loss............................... (78.0)% (12.0)% (52.7)% (21.2)%
========= ========= ========= =========
</TABLE>
The following table sets forth the cost of each component of revenue expressed
as a percentage of such revenue for the periods indicated (unaudited):
<TABLE>
<CAPTION>
Three Months Ended Nine Months Ended
September 30, September 30,
--------- --------- --------- ---------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Cost of license fees................... 4.8% 1.2% 3.2% 1.5%
Cost of service and maintenance........ 56.3% 60.6% 63.3% 60.6%
</TABLE>
14
<PAGE>
Three Months Ended September 30, 1999 Compared to Three Months Ended
September 30, 1998
Revenues
License Fees - License fee revenues consist of revenues from initial licenses
for the Company's software products and license upgrades to existing customers
for additional users or modules. Total license fees decreased 72.0% from $8.7
million, or 55.1% of total revenues, in the quarter ended September 30, 1998 to
$2.4 million, or 30.3% of revenues, in the quarter ended September 30, 1999.
Domestic license revenue decreased 85.2% percent from $6.6 million in the
quarter ended September 30, 1998 to $979,000 in the quarter ended September 30,
1999. The decrease in domestic license revenue was primarily attributable to a
decrease in the number of orders recognized from 17 in the quarter ended
September 30, 1998 to 5 in the quarter ended September 30, 1999 and a 49.5%
decrease in the average order size. International license revenue decreased
approximately $645,000 or 30.6% from $2.1 million in the quarter ended September
30, 1998 to $1.5 million in the quarter ended September 30, 1999. The decrease
in international license revenue is primarily attributable to a decrease in the
number of software license orders recognized from 37 in the quarter ended
September 30, 1998 to 23 in the quarter ended September 30, 1999. License
revenue resulting from the MIS and TSI acquisitions decreased 81.4% from
$301,000 for the quarter ended September 30, 1998 to $56,000 in the quarter
ended September 30, 1999. Approximately 67% of domestic license revenue was from
one customer.
Service and Maintenance - Service and maintenance revenues are derived from
professional services associated with the implementation and deployment of the
Company's software products and maintenance fees for ongoing customer support.
Services and maintenance revenues decreased by 21% from $7.1 million, or 44.9%
of total revenues, in the quarter ended September 30, 1998 to $5.6 million, or
69.7% of total revenues, in the quarter ended September 30, 1999. The decrease
in service and maintenance revenues was primarily attributable to reduced
license sales.
Cost of Revenues
Cost of License Fees - Cost of license fees consists primarily of the costs
of media packaging, documentation, third party software and software production
personnel. Cost of license fees increased 10.5% from $105,000, or 1.2% of the
related license revenues, in the quarter ended September 30, 1998 to $116,000,
or 4.8% of the related license revenues, in the quarter ended September 30,
1999. The increase in the cost of license fees was primarily attributable to an
increase in the volume of third party products included in the Company's
product line and resold by the Company.
Cost of Service and Maintenance - Cost of service and maintenance consists
primarily of salaries and related personnel costs, third party consulting costs
and other costs related to the installation, implementation, training and
maintenance support of the Company's software products. The cost of service and
maintenance decreased 26.6% from $4.3 million, or 60.6% of service and
maintenance revenues, in the quarter ended September 30, 1998 to $3.2 million,
or 56.3% of service and maintenance revenues, in the quarter ended September 30,
1999. The percentage of cost to revenue decreased due to increased service
revenue and management's efforts to increase efficiency of current staff and
control costs, such as salary and travel expenditures. The decrease in cost of
services and maintenance in the quarter ended September 30, 1999 was primarily
attributable to a decrease in compensation, benefits, and travel related costs
of $800,000 and a $200,000 decrease in third party consulting costs. The Company
continues to evaluate the use of third party consultants and although
utilization of internal consulting staff is preferred, there are circumstances
that require the use of third party consultants based on
15
<PAGE>
expertise in a specific industry, technical knowledge or the availability of
internal consulting staff. Also, client services staff decreased by 39 people or
approximately 28.0% from September 30, 1998 to September 30, 1999.
Operating Expenses
Sales and Marketing - Sales and marketing expenses consist primarily of
commissions, salaries and related expenses for sales and marketing personnel, as
well as marketing, advertising and promotional expenses. Sales and marketing
expenses decreased 17.3% from $5.8 million, or 36.8% of revenues, in the quarter
ended September 30, 1998 to $4.8 million, or 59.7% of revenues, in the quarter
ended September 30, 1999. The decrease in sales and marketing expenses for the
quarter ended September 30, 1999, is primarily attributable to a decrease in
compensation, benefits, commissions and travel expenditures in the amount of
$1.1 million. Sales and marketing expenses also decreased due to reduced
consulting and training. The sales and marketing staff decreased by 26 people,
or approximately 25.2%, from September 30, 1998 to September 30, 1999. The
Company expects sales and marketing costs to decline as a percentage of revenue
in the future.
Product Development - Product development expenses consist primarily of
salaries and related personnel expenses, consulting fees, and amortization of
purchased software and development costs associated with buyingedge.com. Product
development expenses increased 23.5% from $2.2 million, or 13.7% of revenues, in
the quarter ended September 30, 1998 to $2.7 million, or 33.3% of revenues, in
the quarter ended September 30, 1999. The increase in product development
expenses was primarily due to an increase in compensation related to the hiring
of new software development staff, amortization of purchased software, overhead
and the continuing development of the Company's software products. The
continuing development includes spending on the Company's new ChannelEDGE and
buyingedge.com initiatives. Product development costs associated with
buyingedge.com were approximately $590,000 for the quarter ended September 30,
1999.
General and Administrative - General and administrative expenses represent the
costs of executive, finance and administrative support personnel, the portion of
occupancy expenses allocable to administration, and unallocated corporate
expenses such as fees for legal and accounting services. General and
administrative expenses increased 80.2% from $1.4 million, or 8.8% of revenues,
in the quarter ended September 30, 1998 to $2.5 million, or 31.3% of revenues,
in the quarter ended September 30, 1999. The increase in general and
administrative expenses in the quarter ended September 30, 1999 was due
primarily to compensation and benefits related to the addition of finance staff,
additional buyingedge.com executives, increased legal, accounting, rent and
training costs. Through improved cost control efforts, such as an improved
purchase order policy and a detailed review of actual versus budgeted expenses,
the Company expects general and administrative costs to decline as a percentage
of revenue in the future.
Provision for Doubtful Accounts - The provision for doubtful accounts decreased
from $1.8 million for the quarter ended September 30, 1998 to $887,000 for the
quarter ended September 30, 1999. The decrease is based on management's periodic
review and assessment of accounts receivable.
Other Income (Expense) - Other income (expense) consists of interest expense on
equipment financing and the Convertible Note less interest earned on cash
accounts. Other income decreased by $580,000 from $179,000 in the quarter ended
September 30, 1998 to ($401,000) in the quarter ended September 30, 1999.
Interest income decreased due to diminished income earned on investments while
interest expense increased due to interest and amortization of debt issue costs
and debt discount on the Convertible Note. Short-term investments decreased $6.6
million from September 30, 1998; there were no short-term investments at
September 30, 1999.
16
<PAGE>
Provision for Income Taxes - Provision for income taxes consists of foreign
and state income and withholding taxes. The provision for income taxes decreased
from $119,000 in the quarter ended September 30, 1998 to $48,000 in the quarter
ended September 30, 1999. At September 30, 1999, the Company had approximately
$25.0 million of U.S. Federal net operating loss carryforwards, of which
approximately $4.3 million resulted from the exercise of non-qualified stock
options, and approximately $14.0 million of state net operating loss
carryforwards which can be used, subject to certain limitations, to offset
future taxable income, if any. When realized, the tax benefits of the portion of
the net operating losses attributed to the exercise of stock options will be
credited directly to paid in capital. These U.S. Federal net operating loss
carryforwards expire through 2019 and the state net operating loss carryforwards
expire through 2004.
In addition, the Company has United Kingdom net operating loss carryforwards of
approximately $6.0 million which can be utilized to offset future taxable income
and which have no expiration.
Minority interest - Minority interest represents the portion of earnings of
buyingedge.com attributable to shareholders other than IMA including accrued
dividends and the accretion of the Series A.
Nine months Ended September 30, 1999 Compared to Nine Months Ended
September 30, 1998
Revenues
License Fees - Total license fees decreased 49.3% from $21.4 million, or
54.9% of total revenues, in the nine months ended September 30, 1998 to $10.9
million, or 36.0% of revenues, in the nine months ended September 30, 1999.
Domestic license revenue decreased 54.5% percent from $13.9 million in the nine
months ended September 30, 1998 to $6.3 million in the nine months ended
September 30, 1999. The decrease in domestic license revenue was primarily
attributable to a decrease in the number of orders recognized from 48 in the
nine months ended September 30, 1998 to 34 in the nine months ended September
30, 1999 and a 35.6% decrease in the average transaction order size.
International license revenue decreased approximately $3.0 million or 39.9% from
$7.6 million in the nine months ended September 30, 1998 to $4.5 million in the
nine months ended September 30, 1999. The decrease in international license
revenue is primarily attributable to a decrease in the average deal size of
38.7% and the number of orders, from 101 in the nine months ended September 30,
1998 to 98 in the nine months ended September 30, 1999. License revenue
resulting from the MIS and TSI acquisitions decreased 76% from $1.3 million for
the nine months ended September 30, 1998 to $308,000 in the nine months ended
September 30, 1999. Approximately 62% of domestic license fee revenues for the
nine months ended September 30, 1999 was derived from three customers.
Service and Maintenance - Service and maintenance revenues increased by
9.8% from $17.6 million, or 45.1% of total revenues, in the nine months ended
September 30, 1998 to $19.3 million, or 64.0% of total revenues, in the nine
months ended September 30, 1999. The increase in services and maintenance was
primarily attributable to the Company's expanded role at several existing
customers during the first nine months of 1999.
Cost of Revenues
Cost of License Fees - Cost of license fees increased 8.5% from $316,000, or
1.5% of the related license revenues, in the nine months ended September 30,
1998 to $343,000, or 3.2% of the related license revenues, in the nine months
ended
17
<PAGE>
September 30, 1999. The increase in the cost of license fees was primarily
attributable to an increase in the volume of third party products included in
the Company's product line and resold by the Company.
Cost of Services and Maintenance - The cost of services and maintenance
increased 14.6% from $10.7 million, or 60.6% of service and maintenance
revenues, in the nine months ended September 30, 1998 to $12.2 million, or 63.3%
of service and maintenance revenues, in the nine months ended September 30,
1999. The increase in cost of services and maintenance in the nine months ended
September 30, 1999 was primarily attributable to a $1.4 million increase in
third party consulting costs. The Company continues to evaluate the use of third
party consultants, and although utilization of internal consulting staff is
preferred, there are circumstances that require the use of third party
consultants based on expertise in a specific industry, technical knowledge or
the availability of internal consulting staff. Also, client services
staff decreased by approximately 39 people, or 28.0%, from December 31, 1998 to
September 30, 1999. The headcount reduction contributed to cost reduction in
travel and training expenses, which were offset by a 32.5% increase in the
allocation of overhead costs.
Operating Expenses
Sales and Marketing - Sales and marketing expenses increased 10.8% from $14.5
million, or 37.1% of revenues, in the nine months ended September 30, 1998 to
$16.0 million, or 53.1% of revenues, in the nine months ended September 30,
1999. The increase in sales and marketing expenditures for the nine months ended
September 30, 1999, is primarily attributable to compensation and benefit
expenditures, together with enhanced advertising, trade shows and promotions.
However, overall sales and marketing expenditure has declined from $17.5 million
in the nine months ended December 31, 1998 to $16.0 million in the nine months
ended September 30, 1999. This decrease was primarily the result of reduced
staff, improved cost control measures such as an improved purchase order policy,
detailed review of actual versus budgeted expenditures, and a strict control
over external marketing costs. The Company expects sales and marketing costs to
decline as a percentage of revenue in the future. Sales and marketing staff
decreased by 26 people, or approximately 25.2%, from December 31, 1998 to
September 30, 1999.
Product Development - Product development expenses increased 54.4% from $5.9
million, or 15.1% of revenues, in the nine months ended September 30, 1998 to
$9.1 million, or 30.1% of revenues, in the nine months ended September 30, 1999.
The increase in product development expenses was primarily due to an increase in
salaries and related personnel expenses in connection with the hiring of new
software development staff, amortization of purchased software, an increase in
third party consulting and overhead expenses. The continuing development of the
Company's software products have increased expenditures relating to the
Company's new ChannelEDGE and buyingedge.com initiatives. Product development
costs associated with buyingedge.com were approximately $2.0 million for the
nine months ended September 30, 1999. Both new hires and third party outside
consultants are working on new product development. This increase is primarily
the result of increased compensation, benefits and third party consultant and
amortization of software.
18
<PAGE>
General and Administrative - General and administrative expenses increased
45.8% from $3.8 million, or 9.8% of revenues, in the nine months ended September
30, 1998 to $5.6 million, or 18.4% of revenues, in the nine months ended
September 30, 1999. The increase in general and administrative expenses in the
nine months ended September 30, 1999 was due in part, to the addition of
accounting, administrative and executive personnel to buyingedge.com to support
the growth of the Company's buyingedge.com initiative and legal expenses related
to an arbitration that was concluded in the second quarter of 1999. A portion of
the legal fees associated with the arbitration was reimbursed by the Company's
insurance carrier. Additional increases were experienced in rent, facilities
common charges, and communication expenditures. Through improved cost control
efforts, such as an improved purchase order policy and a detailed review of
actual versus budgeted expenses, the Company expects general and administrative
costs to decline as a percentage of revenue in the future.
Provision for Doubtful Accounts - The provision for doubtful accounts
decreased from $2.8 million for the nine months ended September 30, 1998 to $2.6
million for the nine months ended September 30, 1999. The decrease is based on
management's periodic review and assessment of accounts receivable.
Other Income (Expense) - Other income (expense) consists of interest expense on
debt and equipment financing less interest earned on short term investments.
Other income decreased by $1.1 million from $716,000 in the nine months ended
September 30, 1998 to $(336,000) in the nine months ended September 30, 1999.
The increase in other expenses is primarily attributable to interest together
with the amortization of debt issue costs and debt discount on the Convertible
Note. Additionally, interest income decreased due to diminished income earned on
investments. Short-term investments decreased from $6.6 million at September 30,
1998; there were no short-term investments at September 30, 1999.
Provision for Income Taxes - Provision for income taxes consists of foreign
and state income and withholding taxes. The provision for income taxes decreased
16.5% from $273,000 for the nine months ended September 30, 1998 to $228,000 in
the nine months ended September 30, 1999.
Minority interest - Minority interest represents the portion of earnings of
buyingedge.com attributable to shareholders other than IMA including accrued
dividends and the accretion of the Series A.
Liquidity and Capital Resources
As of September 30, 1999, the Company had $3.9 million in cash, $8.9 million
in restricted cash and $11.7 million in net accounts receivable. For the nine
months ended September 30, 1999, the Company used $11.8 million of cash for
operating activities. The net cash use of $11.8 million from operations resulted
primarily from the loss of $15.9 million together with minority interest of $.5
million, offset by depreciation and amortization of $2.3 million, a provision
for doubtful accounts of $2.6 million and working capital changes of $300,000.
The fluctuations in operating assets and liabilities were primarily due to the
timing of operating activities, including the timing of orders, collections of
accounts receivable and the payment of accounts payable. The Company's practice
is to bill for the largest proportion of its annual maintenance support services
in the fourth quarter. These billings, estimated at approximately $8 to $9
million will result in the Company generating additional cash flows in the
fourth quarter of 1999 and the first quarter of 2000.
For the nine months ended September 30, 1999, the Company's primary investing
activities consisted of $1.5 million of purchases of computers, leasehold
improvements and office equipment to support the Company's newly leased
facilities in Chicago, Illinois and Irvine, California and Redwood Shores,
California where the buyingedge.com operations are located.
For the nine months ended September 30, 1999, the Company's primary financing
activity consisted of cash proceeds from the issuance of $10 million of
buyingedge.com Series A preferred stock and the Company's issuance of the $5
million Convertible Note (Notes 1 and 2).
19
<PAGE>
On August 12, 1999, the Company entered into a Senior Subordinated Convertible
Promissory Note and Warrant Purchase Agreement (the "Agreement") with Wand
Equity Portfolio Fund II L.P. and Wand Affiliates Fund L.P. (collectively
"Wand"). Pursuant to the terms of the Agreement, Wand purchased from the Company
a 9% Senior Subordinated Convertible Promissory Note (the "Note") in the
principal face amount of $5,000,000 due April 30, 2000 and warrants (See Note
2). The Convertible Note of $5 million has a maturity of April 30, 2000. The
Company has the option of either repaying the Convertible Note or issuing
additional common shares to the note holder.
In addition, on August 12, 1999, IMA's wholly-owned subsidiary, buyingedge.com
inc. entered into a Series A Preferred Stock Purchase Agreement ("buyingedge
Agreement") with CMG@Ventures III, LLC, @Ventures III, L.P., @Ventures
Investors, @Ventures Foreign Fund III, L.P., Wand Equity Portfolio Fund II L.P.
and Wand Affiliates Fund L.P. (collectively the "Investors"), to purchase
5,319,149 shares of buyingedge's Series A Preferred Stock and warrants and
options (See Note 2) for an aggregate purchase price of $10,000,000. Pursuant to
agreements with the Investors, the amount invested in buyingedge.com will not be
available to IMA except pursuant to certain services agreements between IMA and
buyingedge.com. See "Part I, Note 2" for a description of the $5,000,000 Note
financing and the buyingedge preferred stock financing.
The Company intends to seek additional capital through a private equity or debt
financing over the next several months which may include an additional $30 to
$40 million for buyingedge.com and up to $5 to $10 million for the Company.
There can be no assurance that equity or debt financing will be available to the
Company on favorable terms or at all. The Company anticipates that its current
cash and cash equivalents, together with cash provided by operations and future
capital infusions will be sufficient to meet the Company's projected working
capital and other cash requirements through December 31, 2000, but there can be
no assurance that the Company will be able to generate sufficient cash to meet
its requirements from those sources. In the event that the Company were unable
to obtain the equity or debt financing described above, the Company would need
to reduce its operating expenses and capital expenditures.
The Company's future operating and capital requirements will depend on numerous
factors including the collection of accounts receivable, the internal research
and development programs, advances in technology, and the strategic alliances or
investments that the Company may consider.
Year 2000 Compliance
The following Year 2000 discussion contains various forward-looking
statements which represent the Company's beliefs or expectations regarding
future events. When used in the Year 2000 discussion, the words "believe",
"expects", "estimates" and other similar expressions are intended to identify
forward-looking statements. Forward-looking statements include, without
limitation, the Company's expectations as to when it and its significant
distributors, customers and suppliers will complete the implementation and
compliance phases of the Year 2000 Plan, as well as its Year 2000 contingency
plans; its estimated costs related to the Year 2000 Plan; and the Company's
belief that its internal systems and equipment will be Year 2000 compliant in a
timely manner. All forward-looking statements involve a number of risks and
uncertainties that could cause the actual results to differ materially from the
projected results. Factors that may cause these differences include, but are not
limited to, the availability of qualified personnel and other information
20
<PAGE>
technology resources; the ability to identify and remediate all date sensitive
lines of code or to replace embedded chips in affected systems or equipment;
unanticipated delays or expenses related to remediation; and the actions of
independent third-parties with respect to Year 2000 problems.
The statements in the following section include "Year 2000 Readiness
Disclosure" within the meaning of the Year 2000 Information and Readiness
Disclosure Act of 1998.
The Year 2000 problem refers to the inability of software to process date
information later than December 31, 1999. Date codes in many software programs
are abbreviated to allow only two digits for the year. Software with date-
sensitive functions that is not Year 2000 compliant may not be able to
distinguish whether "00" means 1900 or 2000. When that happens, some software
will not work at all and other software will suffer critical calculation and
other processing errors. Hardware and other products with embedded chips may
also experience problems.
The Company believes that its current version of EDGE, TELEMAR and MSM
products are Year 2000 compliant. In addition, the Company tracks the version of
its products that each of its customers uses. The Company has sent a letter to
all customers advising them of the availability of its Year 2000 compliant
products.
The Company believes that all current versions of its products will meet basic
functionality requirements, however, because all specific customer situations
and uses cannot be anticipated, IMA may be faced with warranty and other claims
as a result of the Year 2000 transition. The impact of such customer claims
could have a material adverse impact on the Company's results of operations and
financial condition.
Some customers may have written applications using the Company's products. The
Company, in its consulting capacity, also has written such applications. The
Company believes that most applications written by it are Year 2000 compliant.
The Company does not know, and has no meaningful way of determining, whether the
applications written by customers are Year 2000 compliant.
The Company has completed a comprehensive evaluation of its internal systems and
equipment that addresses both information technology systems ("IT") (i.e.
business systems and the software development environment) and non-IT systems,
(i.e. elevators, building security and HVAC systems)including hardware, software
and firmware. The Company is upgrading certain critical systems to meet with
Year 2000 requirements. The Company plans to have all critical system upgrades
completed by December 31, 1999. The Company's inability to remediate non-
compliant systems in its infrastructure could have a material adverse affect on
the Company's results of operations and financial condition.
While the Company expects to incur expenses to complete these upgrades, it does
not believe the implementation of the Year 2000 programs will have a material
adverse impact on the Company's financial condition or results of operations.
The Company believes that it has sufficient funds to satisfy costs incurred to
date and future Year 2000 compliance costs.
The Company has initiated the development of a comprehensive Year 2000
contingency plan to address situations that may result if the Company is unable
to achieve Year 2000 readiness of its critical systems. The contingency plan is
expected to be completed by the end of November 1999.
The Company also is conducting a review of its critical suppliers to determine
that the suppliers' operations and the products and services they provide are
Year 2000
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compliant or that an alternative source for this critical product or service is
available. The Company has no practical means to verify the information provided
by these independent third parties and is still pursuing those key distributors
and vendors who may not yet have responded. Based upon this assessment and where
practicable, the Company will attempt to mitigate its risks with respect to any
suppliers that may not meet the requirements, including seeking alternative
suppliers. However, there can be no assurance that the Company will not
experience disruptions in its ability to conduct business because of Year 2000
problems experienced by the Company's distributors or vendors, such problems
remain a possibility and could have an adverse impact on the Company's results
of operations and financial condition.
Some commentators have predicted significant litigation regarding Year 2000
Compliance issues, and the Company is aware of such lawsuits against other
software vendors. Because of the unprecedented nature of such litigation, it is
uncertain whether, or to what extent, the Company may be affected. However, at
this time the Company believes that the existence of earlier versions of its
products that are not Year 2000 compliant is not likely to have a material
adverse effect on the Company or its operations. To the extent that its key
distributors or vendors experience problems relative to achieving Year 2000
compliance, the Company could suffer unanticipated revenue losses.
In addition, the Company does not currently have meaningful information
Concerning the Year 2000 compliance status of its customers. As is the case with
other software companies, if significant numbers of the Company's current or
future customers fail to achieve Year 2000 compliance it could have a material
adverse effect on the Company.
Factors That May Affect Future Results
References in this section to the "Company," "Information Management Associates,
Inc.," "IMA," "we," "us," and "our" refer to Information Management Associates,
Inc.
Statements in this Form 10-Q which express "belief", "anticipation" or
"expectation", as well as other statements which are not historical fact, and
statements as to product compatibility, design, features, functionality and
performance insofar as they may apply prospectively, are forward-looking
statements within the meaning of the Private Securities Litigation Reform Act of
1995 and the Company's actual results could differ materially from those
expressed in these forward-looking statements as a result of numerous factors,
including those set forth below, and elsewhere in this Form 10-Q.
History of Operating Losses; Uncertainty of Future Operating Results - The
Company incurred significant net operating losses in each of 1992, 1993, 1994,
1995 and 1998 and the first nine months of 1999. As of September 30, 1999, we
had an accumulated deficit of $50.2 million. Given our operating history, we
cannot predict our future operating results with any certainty. We cannot assure
you that our business strategies will be successful, nor can we assure you that
we will achieve or sustain revenue growth or profitability on a quarterly or
annual basis.
Fluctuations in Quarterly Performance -
Our quarterly operating results have varied significantly in the past and may
continue to do so depending on several factors, many of which are beyond our
control. These factors include, among others:
. our ability to develop, introduce and market new and enhanced versions
of our products on a timely basis;
. demand for our products;
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. the lengthy sales cycle for full implementation of our products;
. the size, timing and contractual terms of significant orders;
. the timing and significance of product enhancements and new product
announcements by us or our competitors;
. changes in our business strategies;
. the budgeting cycles of our potential customers;
. customer order deferrals in anticipation of enhancements or new
products;
. changes in the mix of products and services we sell;
. changes in the amount of our revenue attributable to domestic and
international sales;
. changes in foreign currency exchange rates;
. product and price competition;
. cancellations or non-renewals of licenses or maintenance agreements;
. investments to develop marketing and distribution channels; and
. changes in the level of our operating expenses.
To achieve our quarterly revenue objectives, we depend upon obtaining
orders in that quarter for delivery in that quarter. The timing of our revenue
recognition is affected by the amount of contracts executed and delivered,
whether the contract contains post delivery obligations, the determination of
probability of collections, and when our customers accept the product. We derive
a significant portion of our revenues in any quarter from non-recurring, large
license fees paid to us by a relatively small number of customers. We expect
this trend to continue for the foreseeable future. Therefore, if a customer
defers, cancels or fails to honor its contractual obligations, our operating
results could be materially adversely affected in a given quarter. On the other
hand, significant sales occurring earlier than expected may adversely affect
subsequent quarters. In addition, we have experienced and expect to continue to
experience stronger demand during the quarters ending in June and December than
during the quarters ending in March and September. We receive a substantial
portion of our orders in the last months or weeks of any given quarter.
Because of the factors stated above, we are not able to predict our quarterly
revenues and operating results with any significant degree of accuracy. If
revenue levels fall below expectations, the shortfall would likely materially
adversely affect our business, operating results and financial condition. As a
result, we believe that you should not rely on period-to-period comparisons of
our results of operations as meaningful indicators of future performance. We
cannot assure you that we will be able to achieve or sustain profitability on a
quarterly or annual basis. We expect that in some future quarter or quarters our
total revenues or operating results will not meet the expectations of public
market analysts and investors. Our failure to meet expectations or adverse
conditions prevailing or appearing to prevail generally or with respect to our
business will likely materially adversely affect our Common Stock price.
Ability to Integrate Acquisitions
We completed the acquisitions of substantially all of the assets of Marketing
Information Systems, Inc. ("MIS") and Telemar Software International, LLC
("TSI") on March 30, 1998 for an aggregate purchase price of $8.7 million. Each
has product lines that focused on the IBM AS/400 market, a platform to which
IMA's flagship product EDGE has only recently been introduced. Failure to
successfully integrate the acquired product lines, and the employees,
distributors, and customers of the acquired businesses could have a material
adverse effect on our business, operating results and financial condition.
Product Concentration
Although we now receive some revenues from MIS and TSI products, licensing of
EDGE and the provision of professional consulting, technical support and
maintenance
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services relating to EDGE, account for substantially all of our revenues. We do
not expect this to change in the foreseeable future. Accordingly, factors
adversely affecting the pricing of, or demand for EDGE products and services,
such as competition or technological changes, could have a material adverse
effect on our business, operating results and financial condition. Our future
financial performance will depend, in significant part, on the continued market
acceptance of our EDGE products including its new and enhanced versions. We
cannot assure you that we will continue to successfully develop and market EDGE.
Lengthy Sales and Implementation Cycles; Post-Delivery Obligations -
The following factors over which we may have little or no control may
significantly delay our sales cycle:
. significant commitment of customer resources for licensing and
implementing our products;
. significant level of education required by prospective customers
regarding the use of our products;
. lengthy customer approval process typically associated with
significant capital expenditures; and
. implementation of our products generally extends for several months
and for larger, more complex implementations, multiple quarters.
We recognize licensing fees upon delivery of the product only if:
. we have no significant post-delivery obligations;
. our customer has no acceptance conditions; and
we believe that we can collect the resulting receivable.
If any of the above conditions do not exist, we defer the revenue until all of
the conditions are satisfied.
Previously, when we have provided consulting services to implement certain
larger projects, some customers have not honored their obligations by delaying
payments of a portion of license fees until we completed implementation or
disputing the consulting fees charged for implementation. We may experience
delays, cancellations or disputes in the future. If these occur, they could have
a material adverse effect on our business, operating results and financial
condition. They could also cause our quarterly operating results to vary
significantly.
Dependence on Proprietary Technology -
Our success and ability to compete depends in part upon proprietary technology.
We rely primarily on a combination of copyright and trademark laws, trade
secrets, nondisclosure agreements and technical measures to protect our
proprietary rights. We typically enter into confidentiality or license
agreements with our employees, distributors, clients and potential clients and
limit access to and distribution of our software, documentation and other
proprietary information. We cannot assure you that these steps will adequately
deter misappropriation or independent third-party development of our technology.
Also, the laws of some foreign countries do not protect proprietary rights to
the same extent as the laws of the United States.
We have placed, and may continue to place, our source code in escrow for the
benefit of a small number of our customers. The escrow agreements permit these
customers to use the source code on a limited, non-exclusive basis if: (i) we
initiate bankruptcy proceedings or bankruptcy proceedings are initiated against
us; (ii) we cease to do business; or (iii) we fail to meet our support
obligations. In addition, we use third-party contractors for selected product
development projects. The escrow of source code and the use of a third-party
contractor may increase the possibility of misappropriation by third parties.
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As the number of products and competitors in our industry segment grows and
the functionality of products in different segments overlaps, we expect that
software product developers increasingly will be subject to infringement claims.
The use of patents to protect software has increased. We believe that our
products and technology do not infringe on any existing proprietary rights.
Nevertheless, we cannot assure you that third parties will not assert successful
infringement claims. The following could have a material adverse effect upon our
business, operating results and financial condition:
. any infringement claim against us, even if unfounded, resulting in
diversion of our time and resources, costly litigation and product
shipment delays;
. any infringement claim that results in the necessity that we enter
into a royalty or licensing agreements which may not be available on
terms favorable to us;
. any infringement claim resolved against us;
. litigation to protect our trade secrets or other intellectual property
rights or to determine the validity and scope of the proprietary
rights of others resulting in substantial costs and diversion of
resources.
Dependence on Indirect Marketing and Distribution Channels; Potential
Conflicts -
In addition to our own marketing efforts, we maintain relationships
with consulting and systems integration companies to increase our domestic and
international visibility. In addition to our direct sales force, we distribute
our products domestically and internationally through remarketers and
distributors. We do not maintain exclusive relationships with any of the
consultants, systems integration companies, remarketers or distributors. They
are not under our direct control. They have no minimum purchase obligations and
they may terminate their relationship with us at any time without cause. In
addition, they are free to co-market and distribute potentially competitive
products. Accordingly, we must compete for the focus and sales efforts of these
third party entities. Also, selling through indirect channels may limit our
contacts with our customers, hindering our ability to accurately forecast sales
and revenue, determine contract terms, evaluate customer credit, evaluate
customer satisfaction and recognize emerging customer needs. We cannot assure
you that co-marketers, remarketers and distributors will continue successfully
to distribute or recommend the Company's products. We may not continue to
succeed in increasing the use of these indirect channels profitably. Also, one
or more of these companies may begin to market products in competition with us,
which may adversely affect our business, operating results and financial
condition.
Our strategy of marketing our products directly to end-users and indirectly
through remarketers and distributors may result in conflicts between our direct
sales efforts and third party indirect sales efforts; and conflicts between and
among some of our resellers targeting the same customers. These conflicts could
materially adversely affect our relationships with existing remarketers and
distributors and may adversely affect our ability to attract new remarketers and
distributors.
Need to Expand Marketing and Distribution Channels -
As part of our international strategy, we intend to increase our use of
remarketers and distributors and to expand our existing co-marketing
relationships and establish new relationships with other consulting and systems
integration companies. Also, we seek to expand our international direct sales
force to take advantage of international growth opportunities. Our ability to
achieve revenue growth depends on successful implementation of this strategy. We
have experienced, and continue to experience, difficulty in recruiting and
retaining qualified personnel. We cannot assure you that we will successfully
expand our direct or indirect sales force. Even
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if we are successful, we cannot assure you that such sales force expansion will
result in increased revenues. Failure to expand our sales force could materially
and adversely affect our business, operating results and financial condition.
Emerging Markets for Call Center Customer Interaction Software; Dependence
on Increased Use of Products by Existing Customers -
The market for call center customer interaction software is relatively new. It
is characterized by:
. ongoing technological developments;
. frequent new product announcements and introductions;
. evolving industry standards; and
. changing customer requirements.
Our future financial performance depends in large part on continued growth
in the number of organizations adopting call center customer interaction
software products on an enterprise-wide basis and on the number of applications
and software components developed for such use. We cannot assure you that the
call center customer interaction software market will continue to grow. Failure
of this market to grow, or market growth slower than our current expectations
could materially adversely affect our business, operating results and financial
condition.
Also, some of our larger customers have licensed our software on an
incremental basis and we cannot assure you that these customers will expand
their use of our software on an enterprise-wide basis or license new or enhanced
software products as we introduce them to the market. If our customers do not
deploy our software on an enterprise-wide basis because the software has not met
their expectations or for other reasons, our business, operating results and
financial condition could be materially and adversely affected.
Rapid Technological Change -
Any of the following factors which are present in the call center customer
interaction software market could render our existing products obsolete and
unmarketable:
. rapid technological change;
. frequent introductions of new products;
. changes in customer demands; and
. evolving industry standards.
These factors could rapidly diminish our position in existing and future
markets. We expect to make substantial investments from time to time in our
product development and testing although we cannot assure you that we will have
sufficient resources to make the necessary investments.
Our customers have adopted a wide variety of hardware, software, database
and networking platforms. To gain broad market acceptance, we must continue to
support and maintain our products on a variety of such platforms and develop and
introduce enhancements to our existing products and new products on pace with
technological developments, changing customer requirements and evolving industry
standards. Our future success depends on our ability to address the increasingly
sophisticated needs of our customers. Our success may also depend, in part, on
our ability to introduce products that are compatible with the Internet, and on
the broad acceptance of the Internet as a viable customer interaction channel.
We cannot assure you that the Internet will become a viable customer interaction
channel or that the demand for Internet-related products and services will
increase in the future.
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We also cannot assure you that we will be successful in developing and marketing
enhancements to our products that respond to technological developments,
changing customer requirements or evolving industry standards. We may experience
difficulties that could delay or prevent the successful development,
introduction and sale of such enhancements. Our enhancements may not adequately
meet the requirements of the marketplace and achieve any significant degree of
market acceptance. Product enhancement and new product delays or failure to
achieve market acceptance when released could materially and adversely affect
our business, operating results or financial condition. In addition, the
introduction or announcement of new product offerings or enhancements by us, our
competitors or major hardware, systems or software vendors may cause customers
to defer or forego licensing of our products, which could have a material
adverse effect on our business, operating results and financial condition.
We also cannot assure you that we will be successful in the development and
implementation of any of our new software products, specifically our
buyingedge.com product for purchasing goods and services over the Internet. Our
strategy regarding the buyingedge.com system will rely on several sources of
revenue. We can not assure you that the buyingedge.com product will achieve any
degree of market acceptance among consumers or manufacturers and service
providers. Internet purchasing is a rapidly evolving area of commerce with rapid
technological changes and the frequent introduction of new products and
services. These technological changes and increased competition in the Internet
commerce area could render the buyingedge.com product obsolete and rapidly
diminish the Company's ability to establish a position in existing or future
markets. We can not assure you that competitors will not develop products
comparable or superior to ours or adapt more quickly than we do to new
technologies, evolving industry trends or the changing needs of consumers.
Though the Company intends to make substantial investments from time to time in
the development and testing of buyingedge.com, we cannot assure you that we will
have sufficient resources to make the necessary investments. We may experience
difficulties that could delay or prevent the successful development,
introduction, and sale of the buyingedge.com product. We can not assure you that
buyingedge.com will adequately meet the requirements of the marketplace and
achieve any degree of market acceptance. buyingedge.com product delays or the
failure of buyingedge.com to achieve market acceptance could materially and
adversely affect our business, operating results or financial condition.
We depend upon the products of other software vendors, including certain
system software vendors, such as Microsoft Corporation, and relational database
software vendors to remain competitive and respond to technological change.
Design defects in such products or unexpected delays in their introduction,
could materially and adversely affect our business, operating results and
financial condition.
Management of Growth -
We recently have experienced rapid growth. This growth could place a significant
strain on our management and other resources. We anticipate that the growth of
our company, if any, will require us to recruit, hire, train and retain a
substantial number of new and highly skilled product development, managerial,
finance, sales and marketing and support personnel. The market for such
personnel is intensely competitive and we expect that such competition will
continue for the foreseeable future. We cannot assure you that we will be able
to hire or retain such personnel.
Our ability to compete effectively and to manage future growth, if any, depends
on our ability to continue to implement and improve operational, financial and
management information systems on a timely basis and to expand, train, motivate
and manage our work force. We cannot assure you of the future adequacy of our
personnel, systems, procedures and controls. Inability to effectively manage
growth and the
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quality of our products could materially and adversely affect our business,
operating results and financial condition.
Competition -
The market for telemarketing, telesales and customer service software is:
. intensely competitive;
. rapidly evolving; and
. highly sensitive to new product introductions or enhancements and
marketing efforts by industry participants.
Our competitors range from internal information systems departments to
packaged software application vendors. We believe that as the United States and
international software markets continue to grow, a number of new vendors will
enter the market and existing competitors and new market entrants will attempt
to develop applications targeting additional markets. Our segment of the
software industry has experienced consolidation as certain of our larger
competitors have recently acquired other smaller competitors. In addition,
competitors have established and may in the future establish cooperative
relationships or alliances that may increase their ability to provide superior
software solutions or services.
Increased competition resulting from new entrants, consolidation of the
call center customer interaction software industry, cooperative relationships or
alliances could result in new or stronger competitors, price reductions, reduced
operating income or loss of market share, any of which could materially
adversely affect our business, operating results or financial condition. Many of
our current and potential competitors have significantly greater financial,
technical, marketing, service, support and other resources. They generate higher
revenues and have greater name recognition. We cannot assure you that our
competitors will not develop products comparable or superior to ours or adapt
more quickly than we do to new technologies, evolving industry trends or
changing client requirements. We cannot assure you that we will compete
effectively against competitors or that competitive pressures will not
materially and adversely affect our business, operating results or financial
condition.
Dependence on Key Personnel -
Our business involves the development, marketing and installation of complex
software products and the delivery of professional services. Our success will
depend in large part upon our ability to attract, retain and motivate highly
skilled employees. The market for such employees is intense and we expect that
such competition will continue for the foreseeable future. We cannot assure you
that we will hire or retain such personnel. Failure to hire and retain
sufficient numbers of highly skilled employees could materially and adversely
affect our business, operating results and financial condition. In addition, the
loss of Albert R. Subbloie, Jr., the President and Chief Executive Officer, or
Gary R. Martino, Chairman of the Board or some of our other key personnel could
have a material adverse effect on our business, operating results or financial
condition, including our ability to attract employees and secure and complete
engagements.
Risk of Product Defects -
Software products, particularly new versions, frequently contain errors,
especially when first introduced. We conduct extensive product testing during
product development. Nevertheless, we have at times delayed commercial release
of software until we corrected problems. In some cases, we have provided
enhancements to correct errors in released software. We could, in the future,
lose revenues as a result of
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software errors or defects. Despite testing by us and by current and potential
customers, future software or releases after commencement of commercial
shipments may include errors, resulting in
. loss or delay of revenue;
. delay in market acceptance;
. diversion of development resources;
. damage to our reputation; or
. increased service and warranty costs.
Any of these results could materially and adversely affect our business,
operating results and financial condition.
Risks Associated with International Operations -
International operations account for a significant portion of our total revenues
and we intend to continue and expand our international sales activity.
Continuation and expansion of international operations will require significant
management attention and financial resources and will require us to establish
additional foreign operations and hire additional personnel. We may not be able
to maintain or increase international market demand for our products and failure
to do so could materially and adversely affect our business, operating results
or financial condition.
International Currency Risks -
We currently denominate our international sales in U.S. dollars with respect to
sales outside of the United Kingdom, Europe and Australia, and generally in
pounds sterling with respect to sales in the United Kingdom and Europe. An
increase in the value of the U.S. dollar or pound sterling relative to other
currencies could make our products more expensive and, therefore, potentially
less competitive in foreign markets. Currently, we have not employed currency
hedging strategies to reduce this risk although we may consider employing
hedging strategies in the future based on our assessment of exposure to
fluctuations in foreign currency exchange rates. We cannot assure you that our
assessments of exposure to fluctuations in foreign currency exchange rates will
be accurate or that any hedging strategies we may use in the future will be
effective.
International Operation and Collection Risks -
The following risk factors associated with our international business may have a
material adverse effect on our future international sales and, consequently, on
our business, operating results or financial condition:
. potentially longer payment cycles;
. difficulties in collecting international accounts receivable;
. difficulties in enforcement of contractual obligations and
intellectual property rights;
. potentially adverse tax consequences;
. increased costs associated with maintaining international marketing
efforts;
. increased costs of localizing products for foreign markets;
. tariffs, duties and other trade barriers;
. adverse changes in regulatory requirements;
. possible recessionary economies outside of the United States; and
. political and economic instability.
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Dependence on Licensed Technology -
We license, and expect to license in the future, technology from other companies
for use in and with our products. Our inability to license these products or
other necessary products for use in or with our products could have a material
adverse effect on our business, operating results or financial condition. In
addition, the effective implementation of our products may depend in the future
upon the successful operation of licensed products as an integrated part of, or
in conjunction with, our products. Any undetected errors in such licensed
products could impair the functionality of our products or otherwise delay or
prevent the implementation of an installation or the introduction of new
products, and injure our reputation, which could have a material adverse effect
on our business, operating results or financial condition.
Increased Use of Third-Party Development Tools -
Our EDGE products include application development tools produced by third
parties used to build and modify our applications. Third-party application
development tools may become more widely used as a result of technological
advances or customer requirements. Wider use of third-party applications could
require us to make greater use of third-party tools in the future. This
increased use would require us to enter into license arrangements with such
third parties resulting in higher royalty payments, a loss of product
differentiation and delays. Such effects or our inability to enter into
commercially reasonable licenses could have a material adverse effect on our
business, operating results or financial condition.
Dependence on Growth of Client/Server Computing Environment -
We market our products to customers:
. committed or committing their call center systems to client/server
computing environments; or
. converting legacy systems, in part or in whole, to a client/server
computing environment.
Our success will depend on further growth in the number of organizations
adopting client/server computing environments. We cannot assure you that the
anticipated client/server computing trends will occur or that we will respond
effectively to the evolving requirements of this market. Failure of the
client/server market to grow, or growth at a rate slower than experienced in the
past, could materially and adversely affect our business, operating results or
financial condition.
Industry Concentration -
We derive a substantial portion of our revenues from customers in the
teleservices outsourcing, telecommunications and financial services industries.
We intend to further develop our knowledge of the business processes and
requirements of other industries in order to establish additional market
opportunities. We may not successfully do so. Our failure to increase our
customers among a broader base of varied industries, or a downturn in one or
more of the teleservices outsourcing, telecommunications or financial services
industries could have a material adverse effect on our revenues from that
industry or the collectibility of customer obligations from that industry or
other aspects of our business, operating results or financial condition.
Product Liability -
The risk of product liability claims is inherent in the sale and support of
products. Our license agreements with our customers typically contain provisions
designed to limit our exposure to potential product liability claims. The laws
of
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certain jurisdictions, however, may not enforce the limitation of liability
provisions contained in our license agreements. A party could bring a successful
product liability claim against us, which could result in a material adverse
effect on our business, operating results and financial condition.
Regulatory Environment -
Federal, state and foreign law regulates certain uses of outbound call
processing systems. Our systems can be programmed to operate in compliance with
these laws through the use of appropriate calling lists and calling campaign
time parameters. Compliance with these laws, however, may limit the potential
use of our products. In addition, future legislation further restricting
telephone solicitation practices, if enacted, could adversely affect us.
Year 2000 Risks -
Many computer systems and software products are coded to accept only two digit
entries in the date code field. These date code fields will need to accept four
digit entries to distinguish 21st century dates from 20th century dates. As a
result, many companies' software and computer systems may need to be upgraded or
replaced in order to comply with such Year 2000 requirements. Our failure or
inability to identify and correct Year 2000 problems in our products, internal
information or other systems, software, hardware or firmware could have a
material, adverse effect on our business, operating results, and financial
condition. We are still reviewing the impact the Year 2000 issue will have on
our internal information systems. We plan to take necessary actions based on the
results of such analyses. If costs related to Year 2000 are material, our
business, operating results, and financial condition could be materially
adversely affected.
In certain cases, we have warranted that the use or occurrence of dates on or
after January 1, 2000 will not adversely affect the performance of our products
with respect to four digit date dependent data or the ability to create, store,
process, and output information related to such data. If any of our licenses
experience Year 2000 problems, those licensees could assert claims for damages.
Such claims, whether or not successful, could materially and adversely affect
our business, operating results and financial condition.
In addition, the purchasing patterns of our customers and potential customers
may be affected by Year 2000 issues. Many companies are expanding significant
resources to correct their current software systems for Year 2000 compliance.
These expenditures may result in reduced funds available to purchase software
products such as those offered by us. This may adversely affect on our business,
operating results, and financial condition.
In addition to the "Factors That May Affect Future Results" mentioned above, the
Company's business entails a variety of additional risks, which are set forth in
the Company's filings with the Securities and Exchange Commission.
ITEM 3. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Foreign currency risk -
The Company's exposure to foreign currency risks is relatively low because of
the way the Company conducts its international business and this risk is not
deemed to be material. The primary reason for the low level of exposure to
foreign currency fluctuations is that the Company generally requires payment
from its international customers outside the United Kingdom, Europe and
Australia in U.S. dollars. In the United Kingdom and Europe, the Company
generally requires payment from its
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international customers in pounds sterling. The Company's financial instruments
that are exposed to foreign currency risks are primarily accounts receivable and
accounts payable of the United Kingdom Subsidiary. The carrying amounts of these
financial instruments approximate fair value. In addition, the Company has no
debt denominated in any foreign currency. The impact of increases or decreases
in foreign currency exchange rates on the Company's revenues is offset in part
by the corresponding impact on the Company's expenses payable in such
currencies. For the nine months ended September 30, 1999, the Company had a
cumulative translation adjustment loss of $60,000.
Because of the historically low level of currency risks, the Company has not
previously engaged in foreign currency hedging programs. However, as revenues
from international operations have grown, the Company has been monitoring its
exchange rates. As part of our monitoring of currency risks, the Company will
consider using foreign currency option contracts and forward contracts in the
future to hedge a portion of our exposure on anticipated transactions and firm
commitment transactions if we determine that such actions are appropriate and
cost-effective. There can be no assurance that the Company's monitoring of
foreign currency exposures or future hedging activities, if any, will
substantially reduce the impact of fluctuations in currency exchange rates on
its results of operations and financial position.
On January 1, 1999, certain member states of the European Economic Community
fixed their respective currencies to a new currency, the Single European
Currency ("Euro"). On that day the Euro became a functional legal currency
within these countries. During the three years beginning on January 1, 1999,
business in these countries will be conducted both in the existing national
currency, such as the French Fanc or the Deutsche Mark, as well as the Euro.
Although we will continue to evaluate the impact of the Euro introduction over
time, based on presently available information we do not presently expect that
introduction and use of the Euro will materially increase our exposure to
foreign currency risks.
Interest Rates -
The Company invests its cash in a variety of financial instruments, including
bank time deposits and taxable fixed rate obligations of corporations. These
investments are denominated in U.S. dollars. Cash balances in foreign
currencies overseas are operating balances and are invested in short-term time
deposits of the local operating bank.
Interest income on the Company's investments is carried in "Other income
(expense)." The Company accounts for its investment instruments in accordance
with Statement of Financial Accounting Standards No. 115, "Accounting for
Certain Investments in Debt and Equity Securities" ("SFAS 115"). All of the
cash equivalents and short-term investments are treated as available-for-sale
under SFAS 115.
Investments in fixed rate interest earning instruments carry a degree of
interest rate risk. Fixed rate securities may have their fair market value
adversely impacted due to a rise in interest rates. Due in part to these
factors, the Company's future investment income may fall short of
expectations due to changes in interest rates or the Company may suffer losses
in principal if forced to sell securities which have seen a decline in market
value due to changes in interest rates. The Company's investment securities are
held for purposes other than trading. The investment securities had maturities
of less than one year. The weighted-average interest rate on investment
securities at September 30, 1999 was approximately 4.5%. The fair value of
securities held at September 30, 1999 was $1.4 million.
32
<PAGE>
PART II. OTHER INFORMATION
ITEM 1: LEGAL PROCEEDINGS -
(a) On May 19, 1999 the Company filed a Demand for Arbitration with the
American Arbitration Association in Peoria, Illinois asserting that Affina
Corporation f/k/a Ruppman Marketing Technologies, Inc. ("Ruppman") breached
its written software license agreement and consulting services agreements
with the Company by failing to make payment in the amounts of $893,150 in
software license and maintenance fees and $636,931.43 in consulting
services fees (Information Management Associates, Inc. v. Affina
Corporation f/k/a Ruppman Marketing Technologies, Inc., No. 51Y 117
00225399)(the "Demand"). On or about June 24, 1999, Ruppman filed its
answer to the Demand denying all claims made by the Company and filed a
counterclaim alleging negligent misrepresentation, breach of contract,
breach of express warranties and violations of the Illinois Consumer and
Deceptive Practices Act (the "Counterclaim"). On or about July 23, 1999 the
Company responded to the Counterclaim denying all claims made therein and
raising several special defenses. On or about August 6, 1999, Ruppman
amended its counterclaim, dismissing its claims under the Illinois Consumer
and Deceptive Practices Act and adding a claim for violation of the
Connecticut Unfair Practices Act. The Company believes that it will prevail
in its claims set forth in the Demand. The Company believes that Ruppman's
Counterclaim is without merit and intends to vigorously oppose the
Counterclaim. Nevertheless, the final outcome of any legal proceeding is
subject to a great many variables and cannot be predicted with any degree
of certainty. In the event that the Counterclaim is ultimately decided in
favor of Ruppman, damages and associated costs could have a material
adverse effect on results of the Company's operations.
From time to time, the Company is involved in litigation in the normal
course of business relating to claims arising out of its operations. The
Company is not currently involved in any litigation except as discussed
above which, in management's opinion, would have a material adverse effect
on its business, operating results or financial condition.
Item 2: Exhibits and Reports on Form 8-K
(a) Exhibits
10.1 Contribution Agreement
10.2 Assignment and Assumption Agreement between buyingedge.com
inc. and Information Management Associates, Inc.
10.3 Assignment and Assumption Agreement between buyingedge.com
inc. and MarketNet, LLC
10.4 Series A Preferred Stock Purchase Agreement
10.5 Rights Agreement
10.6 Right of First Refusal Agreement
10.7 Senior Subordinated Convertible Promissory Note and Warrant
Purchase Agreement
10.8 Senior Subordinated Convertible Promissory Note
10.9 Common Stock Purchase Warrant with Wand Equity Portfolio Fund
II L.P. and Wand Affiliates Fund L.P.
10.10 Common Stock Purchase Warrant with @ Ventures III, L.P.
10.11 Common Stock Purchase Warrant with Wand Equity Portfolio Fund
II, L.P.
10.12 Common Stock Purchase Warrant with Amicus Capital, LLC
10.13 Common Stock Purchase Warrant with CMG@Ventures III, LLC
10.14 Common Stock Purchase Warrant with Madrona Investment Group,
LLC
10.15 Common Stock Purchase Warrant with Wand Affiliates Fund L.P.
10.16 Common Stock Purchase Warrant with @Ventures Investors, LLC
33
<PAGE>
10.17 Common Stock Purchase Option Agreement with @Ventures III, L.P.
10.18 Common Stock Purchase Option Agreement with Wand Equity
Portfolio Fund II, L.P.
10.19 Common Stock Purchase Option Agreement with Amicus Capital, LLC
10.20 Common Stock Purchase Option Agreement with CMG@Ventures III,
LLC
10.21 Common Stock Purchase Option Agreement with Madrona Investment
Group, LLC
10.22 Common Stock Purchase Option Agreement with Wand Affiliates
Fund L.P.
10.23 Common Stock Purchase Option Agreement with @Ventures
Investors, LLC
10.24 buyingedge.com inc. 1999 Employee and Consultant Stock Option
Plan
10.25 Sublease between Centura Software Corporation and
buyingedge.com inc.
10.26 First Amendment to Sublease between Centura Software
Corporation and buyingedge.com inc.
10.27 Registration Rights Agreement with Wand Equity Portfolio II
L.P. and Wand Affiliates Fund L.P.
(b) Reports on Form 8-K
(1.) Report on Form 8-K filed September 23, 1999 (Item 4. Change in
Registrant's Certifying Accountants')
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
<TABLE>
<S> <C> <C>
Dated: November 22, 1999 /s/ Albert R. Subbloie, Jr. President, Chief Executive
--------------------------- Officer and Director
Albert R. Subbloie, Jr. (Principal Executive (Officer)
Dated: November 22, 1999 /s/ John A. Piontkowski Chief Financial Officer
--------------------------- (Principal Financial and
John A. Piontkowski Accounting Officer)
</TABLE>
34
<PAGE>
Exhibit 10.1
CONTRIBUTION AGREEMENT
by and among
buyingedge.com inc.
INFORMATION MANAGEMENT ASSOCIATES, INC.
and
MARKETNET, L.L.C.
Dated as of May 25, 1999
<PAGE>
TABLE OF CONTENTS
-----------------
<TABLE>
<CAPTION>
Page
----
<S> <C>
Section 1. Definitions........................................................................ 1
Section 2. Capital Contributions.............................................................. 5
Section 3. Taxes.............................................................................. 6
Section 4. Obligations of the Contributors and the Company.................................... 6
Section 5. Representations and Warranties..................................................... 6
Section 6. Patent Applications................................................................ 9
Section 7. Conditions to the Obligations of IMA............................................... 9
Section 8. Conditions to the Obligations of MarketNet......................................... 10
Section 9. Conditions to the Obligations of the Company....................................... 10
Section 10. Survival of Representations and Warranties; Indemnification, Etc................... 11
Section 11. Further Assurances................................................................. 13
Section 12. Miscellaneous...................................................................... 13
Section 12. Miscellaneous...................................................................... 13
</TABLE>
EXHIBITS
Exhibit A - Assumed IMA Liabilities
Exhibit B - Assumed MarketNet Liabilities
Exhibit C - IMA Consumer Electronic Commerce Products
Exhibit D - IMA Contracts
Exhibit DD - IMA Equipment
Exhibit DDD - IMA Trademark Interests
Exhibit E - MarketNet Contracts
Exhibit F - MarketNet Products
Exhibit G - Form of IMA Assignment and Assumption Agreement
Exhibit H - Form of MarketNet Assignment and Assumption Agreement
Exhibit I - Form of Software Licensing, Marketing and Noncompetition
Agreement
Exhibit J - Form of Registration Rights Agreement
Exhibit K - Form of Services Agreement
Exhibit L - Form of Space Sharing Agreement
i
<PAGE>
CONTRIBUTION AGREEMENT
----------------------
THIS CONTRIBUTION AGREEMENT is made effective as of May 25, 1999 (the
"Agreement"), by and among INFORMATION MANAGEMENT ASSOCIATES, INC. a Connecticut
corporation, ("IMA"), MARKETNET, L.L.C., a Delaware limited liability company
("MarketNet") (collectively IMA and MarketNet are referred to herein as the
"Contributors") and buyingedge.com inc., a Connecticut corporation (the
"Company").
W I T N E S S E T H:
-------------------
WHEREAS, the Contributors desire to make capital contributions (the
"Capital Contributions") to the Company of certain assets and liabilities in
exchange for shares of the Common Stock of the Company, no par value ("Common
Stock"). IMA will receive 7,990,000 shares of the Common Stock for its Capital
Contribution and MarketNet will receive 510,000 shares of the Common Stock for
its Capital Contribution;
WHEREAS the parties intend the Capital Contributions hereunder to be tax-
free contributions to the Company under the Code;
WHEREAS, immediately after the Capital Contributions, the Contributors will
own all of the issued and outstanding the Common Stock in the Company;
WHEREAS, in connection with the Capital Contributions, the Company,
MarketNet and IMA will enter into certain related agreements, including a
Services Agreement between the Company and IMA, a Space Sharing Agreement
between the Company and IMA, a Software Licensing, Marketing and Noncompetition
Agreement between the Company and IMA, a Registration Rights Agreement among the
Company, IMA and MarketNet and a Tax Allocation Agreement between the Company
and IMA (collectively, the "Related Agreements"); and
WHEREAS, each of IMA, MarketNet and the Company have this Agreement by all
requisite corporate or limited liability company action.
NOW, THEREFORE, in consideration of the premises and the representations,
warranties and the agreements hereinafter contained, the receipt and sufficiency
of which are hereby acknowledged, the parties hereto agree as follows:
Section 1. Definitions. The terms defined in this Section 1, wherever
-----------
used in this Agreement, shall have the following meanings for all purposes of
this Agreement.
"Assumed IMA Liabilities" means (i) all executory obligations under
-----------------------
the IMA Contracts and (ii) the other obligations and liabilities set forth on
Exhibit A hereto.
- ---------
"Assumed MarketNet Liabilities" means the obligations and liabilities
-----------------------------
set forth on Exhibit B hereto.
---------
"Closing" shall have the meaning set forth in Section 2(f) hereof.
-------
<PAGE>
"Closing Date" shall have the meaning set forth in Section 2(f)
-------------
hereof.
"Code" means the Internal Revenue Code of 1986, as amended, and the
----
rules and regulations promulgated thereunder.
"Common Stock" shall have the meaning set forth in the recitals above.
------------
"Computer Code" means computer programming code. Except as otherwise
-------------
specified, Computer Code shall include both Object Code and Source Code.
"Derivative Work" means a work that is based upon one or more
----------------
preexisting works, such as a revision, modification, translation, abridgement,
condensation, expansion, or an y other form in which such preexisting works may
be recast, transformed, or adapted, and which, if prepared without authorization
of the owner of the copyright in such preexisting work, would constitute a
copyright infringement. For purposes of this Agreement, a Derivative Work shall
also include any compilation that incorporate such preexisting work.
"Development Documentation" means all Documentation used in
-------------------------
conjunction with Source Code in the development process.
"Documentation" means all written materials (and machine-readable text
-------------
subject to display and printout) that relate to and/or describe particular
Computer Code. Except as otherwise specified, Documentation shall include
Development Documentation and User Documentation.
"GAAP" shall mean United States generally accepted accounting
----
principles as promulgated by the Financial Accounting Standards Board.
"IMA Assignment and Assumption Agreement" shall have the meaning set
---------------------------------------
forth in Section 2(a) hereof.
"IMA Consumer Electronic Commerce Products" means the forms of
-----------------------------------------
Computer Code and Documentation listed in Exhibit C attached hereto.
---------
"IMA Contracts" means the contracts, agreements, and other obligations
-------------
relating to the IMA Consumer Electronic Commerce Products listed on Exhibit D.
---------
"IMA Copyright Interests" means all the interests currently held by
-----------------------
IMA in registered or unregistered copyrights and copyright registrations in the
United States in and to the IMA Consumer Electronic Commerce Products, and any
renewal or extension thereof, and any normal rights pertaining thereto,
including the right to sue for, settle or release any past, present or future
infringement thereof.
"IMA Derivative Product" means a computer program product in Source
----------------------
Code or Object Code form, together with related Documentation, which is either a
Derivative Work or a copy of any IMA Consumer Electronic Commerce Product;
provided, however,
2
<PAGE>
that any product that, when its Computer Code is fully combined with other
Computer Code to render it operational, contains less than twenty-five percent
(25%) of the Computer Code of the module or modules of the IMA Consumer
Electronic Commerce Product from which it may have been derived shall not be
deemed a copy or Derivative Work of the IMA Consumer Electronic Commerce Product
for this purpose.
"IMA Equipment" means the computer equipment and peripherals listed on
-------------
Exhibit DD.
- ----------
"IMA Excluded Assets" shall have meaning as set forth in Section 2(b)
-------------------
hereof.
"IMA Other Interests" means the interests, other than the IMA
-------------------
Copyright Interests and the IMA Patent Interests, that IMA may own or have the
right to sublicense hereunder in (1) any idea, design, concept, technique,
invention, discovery, or improvement, whether or not patentable, but including,
without limitation, patents, patent applications, trade secrets, and know-how,
that are embodied in or evidenced by the IMA Consumer Electronic Commerce
Products or any IMA Derivative Products, or required to be used or practiced in
order to exercise the rights and licenses granted hereunder; and (2) pictorial,
graphic, or audio/visual works, including, without limitation, icons, screens,
characters, data formats, and reports created as a result of execution of the
IMA Consumer Electronic Commerce Products or any IMA Derivative Products,
whether such pictorial, graphic, or audio/visual works are created by use of the
IMA Consumer Electronic Commerce Products or any IMA Derivative Products alone
or with other programming or through other means.
"IMA Patent Interests" means the interests now owned by IMA or
--------------------
existing and filed or hereafter acquired or arising and filed to any patents,
patent applications and patentable interests (including, without limitation,
inventions and improvements) in and to the IMA Consumer Electronic Commerce
Products, in the United States and foreign jurisdictions.
"IMA Trademark Interests" means the unregistered trademarks, federal
-----------------------
trademark applications and registered domain names listed on Exhibit DDD.
-----------
"Lien or Liens" shall mean any mortgage, lien, security interest,
-------------
pledge, negative pledge, encumbrance, assessment, title retention agreement,
restriction or restraint on transfer, defect of title, charge in the nature of a
lien or security interest, or option (whether consensual, statutory or
otherwise).
"MarketNet Contracts" means the contracts, agreements, and other
-------------------
obligations relating to the MarketNet Products listed on Exhibit E.
---------
"MarketNet Copyright Interests" means all the interests currently held
-----------------------------
by MarketNet in registered or unregistered copyrights and copyright
registrations in the United States in and to the MarketNet Products, and any
renewal or extension thereof, and any normal rights pertaining thereto,
including the right to sue for, settle or release any past, present or future
infringement thereof.
3
<PAGE>
"MarketNet Derivative Product" means a computer program product in
----------------------------
Source Code or Object Code form, together with related Documentation, which is
either a Derivative Work of or a copy of any MarketNet Product; provided,
however, that any product that, when its Computer Code is fully combined with
other Computer Code to render it operational, contains less than twenty-five
percent (25%) of the Computer Code of the module or modules of the MarketNet
Product from which it may have been derived shall not be deemed a copy or
Derivative Work of the MarketNet Product for this purpose.
"MarketNet Other Interests" means the interests, other than the
-------------------------
MarketNet Copyright Interests and the MarketNet Patent Interests, that
MarketNet may own or have the right to sublicense hereunder in (1) any idea,
design, concept, technique, invention, discovery, or improvement, whether or not
patentable, but including, without limitation, patents, patent applications,
trade secrets, and know-how, that are embodied in or evidenced by the MarketNet
Products or any MarketNet Derivative Products, or required to be used or
practiced in order to exercise the rights and licenses granted hereunder; and
(2) pictorial, graphic, or audio/visual works, including, without limitation,
icons, screens, characters, data formats, and reports created as a result of
execution of the MarketNet Products or any MarketNet Derivative Products,
whether such pictorial, graphic, or audio/visual works are created by use of the
MarketNet Products or any MarketNet Derivative Products alone or with other
programming or through other means.
"MarketNet Patent Interests" means the interests now owned by
--------------------------
MarketNet or existing and filed or hereafter acquired or arising and filed to
any patents, patent applications and patentable interests (including, without
limitation, inventions and improvements) in and to the MarketNet Products, in
the United States and foreign jurisdictions.
"MarketNet Products" means the forms of Computer Code and
------------------
Documentation listed in Exhibit F attached hereto.
---------
"Object Code" means the machine-readable form of the Computer Code.
-----------
"Permitted Liens" means: (i) Liens for current taxes not yet
---------------
delinquent for which appropriate reserves in accordance with GAAP have been
created; (b) statutory liens imposed by law which are incurred in the ordinary
course of business for obligations not yet due to carriers, warehousemen,
laborers and materialmen.
"Source Code" means the human-readable form of the Computer Code,
-----------
including all comments and any procedural Computer Code such as job control
language.
"Transferred Assets" means, collectively, the Transferred IMA Assets
------------------
and the Transferred MarketNet Assets.
"Transferred IMA Assets" means the IMA Patent Interests, the IMA
----------------------
Copyright Interests, the IMA Contracts, copies of the IMA Consumer Electronic
Commerce Products, the IMA Equipment, the IMA Trademark Interests and shall not
include the IMA Excluded Assets.
4
<PAGE>
"Transferred MarketNet Assets" means the MarketNet Patent Interests,
----------------------------
the MarketNet Copyright Interests, the MarketNet Contracts, the MarketNet Other
Interests and copies of the MarketNet Products.
"User Documentation" means all Documentation in the form of
------------------
instructions and manuals provided to end-user customers.
Section 2. Capital Contributions.
---------------------
(a) On the terms and subject to the conditions of this
Agreement, effective as of the date first written above, IMA hereby agrees to
transfer, convey and assign or cause to be transferred, conveyed and assigned to
the Company all of its right, title, interest in and to the Transferred IMA
Assets. As consideration for the transfer of the Transferred IMA Assets to the
Company, the Company shall (i) issue and cause to be delivered to IMA 7,990,000
shares of the Common Stock in IMA's name, and (ii) assume the Assumed IMA
Liabilities. IMA and the Company shall execute and deliver an Assignment and
Assumption Agreement in the form of Exhibit G hereto (the "IMA Assignment and
---------
Assumption Agreement"), together with such other documents or instruments of
transfer as reasonably required by the Company or IMA, as the case may be, to
evidence such contribution, the transfer and assignment of the Transferred IMA
Assets and the assumption of the Assumed IMA Liabilities on the Closing Date.
(b) Anything contained in this Agreement to the contrary, there
are expressly excluded from the assets conveyed and assigned to the Company by
IMA the following: (i) the IMA Other Interests; and (ii) intellectual property
rights in software products other than the IMA Consumer Electronic Commerce
Products, all of which are hereby expressly reserved by IMA. For convenience of
reference, the assets, properties and rights referred to in this Section 2(b)
which are being retained by IMA are hereinafter collectively referred to as the
"IMA Excluded Assets."
(c) IMA may make and retain no more than ten (10) additional
copies of the IMA Consumer Electronic Commerce Products and IMA Derivative
Products for nonproductive archival purposes. IMA shall protect the Source Code
version of any IMA Consumer Electronic Commerce or IMA Derivative Products with
the same degree of care as it provides for its own or similar products.
(d) Notwithstanding any other provision of this Agreement, IMA
reserves and retains for its own benefit that right to use and disclose, for any
purpose whatsoever, the ideas, concepts, know-how, and techniques embodied in or
disclosed by the IMA Consumer Electronic Commerce Products or any IMA Derivative
Products.
(e) On the terms and subject to the conditions of this
Agreement, effective as of the date first written above, MarketNet hereby agrees
to transfer, convey and assign or cause to be transferred, conveyed and assigned
to the Company all of its right, title, interest in and to the Transferred
MarketNet Assets. As consideration for the transfer of the Transferred MarketNet
Assets to the Company, the Company shall (i) issue and cause to be delivered to
MarketNet 510,000 shares of the Common Stock in MarketNet's name and (ii) assume
5
<PAGE>
the Assumed MarketNet Liabilities. MarketNet and the Company shall execute and
deliver an Assignment and Assumption Agreement in the form of Exhibit H hereto
---------
(the "MarketNet Assignment and Assumption Agreement"), together with such other
documents or instruments of transfer as reasonably required by the Company or
MarketNet, as the case may be, to evidence such contribution and the transfer
and assignment of the Transferred MarketNet Assets and the assumption of the
Assumed MarketNet Liabilities on the Closing Date.
(f) The closing of the transactions contemplated hereby (the
"Closing") shall, unless another date or place is agreed to in writing by the
parties hereto, at the offices of LeBoeuf, Lamb, Greene & MacRae, L.L.P., 225
Asylum Street, Hartford, CT. 06103 at 10:00 a.m. local time on May 25, 1999
(the "Closing Date").
Section 3. Taxes.
-----
(a) Federal Income Tax Treatment of the Capital Contributions.
---------------------------------------------------------
The parties intend that the Capital Contributions by the Contributors to the
Company will be treated as tax-free contributions under the Code. All provisions
of this Agreement shall be interpreted and construed so as to effectuate such
treatment, and the parties shall take appropriate action to ensure such
treatment.
(b) Transfer Taxes. Each of MarketNet and IMA will pay 50% of
--------------
all sales, use, transfer and documentary taxes and recording and filing fees
applicable to the transfer of the Transferred Assets to the Company, and hold
the Company harmless from payment of any and all sales, use, transfer and
documentary taxes applicable to the transfer of the Transferred Assets.
Section 4. Obligations of the Contributors and the Company. The
-----------------------------------------------
Contributors and Company agree not to take any action or position, or file any
election or return which would cause the Capital Contributions not to be treated
as a tax-free reorganization under the Code.
Section 5. Representations and Warranties.
------------------------------
(a) IMA represents and warrants to MarketNet and the Company as
follows:
(1) Corporate Power and Authority. IMA has the requisite
-----------------------------
power and authority to execute, deliver and perform this Agreement and to
contribute to the Company the Transferred IMA Assets. The execution, delivery
and performance of this Agreement and the consummation of the transactions
contemplated hereby have been duly authorized by all necessary action (corporate
or otherwise) on the part of IMA. This Agreement constitutes the legal, valid
and binding obligation of IMA, enforceable against IMA in accordance with its
terms, except as such enforcement may be limited by applicable bankruptcy,
insolvency, moratorium or similar laws affecting the enforcement of creditors'
rights generally.
(2) Validity of Contemplated Transactions. The execution,
-------------------------------------
delivery and performance of this Agreement by IMA and the consummation of the
transactions contemplated hereby do not and will not (a) violate, breach or
contravene any of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of IMA, (b) violate or
6
<PAGE>
constitute a default under, any material contract by which IMA or its property
is bound, or (c) violate any material provision of law.
(3) Title to Contributed Assets. IMA is in possession of
---------------------------
and has good, valid and marketable title to, or has a valid leasehold interest
in or valid rights under contract to use, all the Transferred IMA Assets. All
the Transferred IMA Assets are free and clear of all Liens, except Permitted
Liens.
(4) Investment Representation. IMA is an "accredited
-------------------------
investor" within the meaning of Rule 501 of the Securities Act of 1933, as
amended (the "1933 Act"). IMA is acquiring the Common Stock issuable by the
Company hereunder for investment and not with a view to, or for sale in
connection with, any "distribution," as such term is used in Section 2(11) of
the 1933 Act, of any shares of Common Stock in violation of the 1933 Act. IMA
understands that (i) the Common Stock issuable hereunder will be "restricted
securities" within the meaning of Rule 144 promulgated under the 1933 Act; (ii)
such securities must be held indefinitely and that no transfer of such
securities may be made by IMA unless (A) the sale of such securities has been
registered under the 1933 Act and any applicable state securities laws, or (B)
an exemption from registration is available under the 1933 Act and applicable
state securities laws; and (iii) that the certificates representing the Common
Stock will bear a customary restrictive legend as to the foregoing matters.
(b) MarketNet represents and warrants to IMA and the Company as
follows:
(1) Corporate Power and Authority. MarketNet has the
-----------------------------
requisite power and authority to execute, deliver and perform this Agreement and
to contribute to the Company the Transferred MarketNet Assets. The execution,
delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby have been duly authorized by all necessary
action (corporate or otherwise) on the part of MarketNet. This Agreement
constitutes the legal, valid and binding obligation of MarketNet, enforceable
against MarketNet in accordance with its terms, except as such enforcement may
be limited by applicable bankruptcy, insolvency, moratorium or similar laws
affecting the enforcement of creditors' rights generally.
(2) Validity of Contemplated Transactions. The execution,
-------------------------------------
delivery and performance of this Agreement by MarketNet and the consummation of
the transactions contemplated hereby do not and will not (a) violate, breach or
contravene any of the terms, conditions or provisions of the Articles of
Organization or limited liability company agreement of MarketNet, (b) violate or
constitute a default under, any material contract by which MarketNet or its
property is bound, or (c) violate any material provision of law.
(3) Title to Contributed Assets. MarketNet is in possession
---------------------------
of and has good, valid and marketable title to, or has a valid leasehold
interest in or valid rights under contract to use, all the Transferred MarketNet
Assets. All the Transferred MarketNet Assets are free and clear of all Liens,
except Permitted Liens.
7
<PAGE>
(4) Investment Representation. MarketNet is an "accredited
--------------------------
investor" within the meaning of Rule 501 of the Securities Act of 1933, as
amended (the "1933 Act"). MarketNet is acquiring the Common Stock issuable by
the Company hereunder for investment and not with a view to, or for sale in
connection with, any "distribution," as such term is used in Section 2(11) of
the 1933 Act, of any shares of Common Stock in violation of the 1933 Act.
MarketNet understands that (i) the Common Stock issuable hereunder will be
"restricted securities" within the meaning of Rule 144 promulgated under the
1933 Act; (ii) such securities must be held indefinitely and that no transfer of
such securities may be made by MarketNet unless (A) the sale of such securities
has been registered under the 1933 Act and any applicable state securities laws,
or (B) an exemption from registration is available under the 1933 Act and
applicable state securities laws; and (iii) that the certificates representing
the Common Stock will bear a customary restrictive legend as to the foregoing
matters.
(c) The Company represents and warrants to IMA and MarketNet as
follows:
(1) Corporate Power and Authority. The Company has the requisite
-----------------------------
power and authority to execute, deliver and perform this Agreement and to accept
the Transferred Assets. The execution, delivery and performance of this
Agreement and the consummation of the transactions contemplated hereby have been
duly authorized by all necessary action (corporate or otherwise) on the part of
the Company. This Agreement constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms, except as such
enforcement may be limited by applicable bankruptcy, insolvency, moratorium or
similar laws affecting the enforcement of creditors' rights generally.
(2) Validity of Contemplated Transactions. The execution,
-------------------------------------
delivery and performance of this Agreement by the Company and the consummation
of the transactions contemplated hereby do not and will not (a) violate, breach
or contravene any of the terms, conditions or provisions of the Certificate of
Incorporation or Bylaws of the Company, (b) violate or constitute a default
under, any material contract by which the Company or its property is bound, or
(c) violate any material provision of law.
(3) Capitalization. The Company's authorized capital stock
--------------
consists of 10,000,000 shares of common stock, no par value ("Common Stock"),
none of which is issued and outstanding. Except for stock options for an
aggregate of 1,250,000 shares granted to employees and consultants of the
Company or its Affiliates pursuant to the Company's 1999 Employee and Consultant
Stock Option Plan, there are no outstanding options, warrants or rights to
acquire any capital stock of the Company and there are no outstanding securities
that are convertible into or exchangeable for capital stock of the Company. The
Contributors will collectively own all of the issued and outstanding shares of
the Common Stock of the Company as of the closing of the transactions
contemplated by the Agreement. On the Closing Date 7,990,000 shares of the
Common Stock will be issued to IMA and 510,000 shares of the Common Stock will
be issued to MarketNet.
Section 6. Patent Applications. MarketNet and IMA acknowledge and agree
-------------------
that certain technology and intellectual property rights were acquired from IMA
by MarketNet pursuant to an Asset Purchase Agreement dated as of December 31,
-----------
1997 and that MarketNet
8
<PAGE>
subsequently developed certain additional intellectual property after January 1,
1998 utilizing the services of IMA's research and development staff on a
consulting basis. MarketNet is transferring all of its technology and
intellectual property rights to the Company pursuant to this Agreement,
including without limitation all such technology and intellectual property
rights acquired from IMA and developed by MarketNet. Certain of the intellectual
property developed by MarketNet utilizing the services of IMA's research and
development department is the subject of United States patent application No.
09/084,810 ("Application Number 09/084,810") filed in the name of IMA, as
nominee for MarketNet. MarketNet and IMA agree that Application Number
09/084,810 is beneficially owned by MarketNet and that MarketNet is transferring
all of its right, title and interest in and to Application Number 09/084,810 to
the Company pursuant to this Agreement. Accordingly, MarketNet hereby directs
IMA, as its nominee with respect to Application Number 09/084,810, on and after
the Closing, to execute and deliver to the Company and file with all appropriate
authorities, including the United States Patent and Trademark Office, all
instruments of assignment, notices, certificates, and other documents necessary
to effectively transfer ownership of Application Number 09/084,810 to the
Company.
Section 7. Conditions to the Obligations of IMA. The obligations of
------------------------------------
IMA to perform this Agreement are subject to the satisfaction of the following
conditions unless waived by IMA in writing:
(a) Representations and Warranties. The representations and warranties of
------------------------------
the Company and MarketNet set forth in Sections 5(c) and 5(b) hereof shall be
true and correct in all material respects as of the date of this Agreement and
as of the Closing as though made on and as of the Closing, and IMA shall have
received certificates signed by an officer of the Company and MarketNet,
respectively, to that effect at the Closing.
(b) Performance of Obligations of the Company and MarketNet. Each of the
-------------------------------------------------------
Company and MarketNet shall have performed all obligations required to be
performed by it prior to or at the Closing under this Agreement, and IMA shall
have received a certificate signed by an officer of each of the Company and
MarketNet, respectively, to that effect at the Closing.
(c) Assignment and Assumption Agreement. IMA shall have received a duly
-----------------------------------
executed IMA Assignment and Assumption Agreement in substantially the form of
Exhibit G attached hereto.
- ---------
(d) Software Licensing, Marketing and Noncompetition Agreement. The
----------------------------------------------------------
Company shall have executed and delivered the Software Licensing, Marketing and
Noncompetition Agreement in substantially the form of Exhibit I attached hereto.
---------
(e) Registration Rights Agreement. The Company shall have executed and
-----------------------------
delivered the Registration Rights Agreement in substantially the form of Exhibit
-------
J attached hereto.
- -
(f) Services Agreement. The Company shall have executed and delivered the
------------------
Services Agreement in substantially the form of Exhibit K attached hereto.
---------
9
<PAGE>
(g) Space Sharing Agreement. The Company shall have executed and delivered
-----------------------
the Space Sharing Agreement in substantially the form of Exhibit L.
---------
Section 8. Conditions to the Obligations of MarketNet. The obligations
------------------------------------------
of MarketNet to perform this Agreement are subject to the satisfaction of the
following conditions unless waived by MarketNet in writing.
(a) Representations and Warranties. The representations and warranties of
------------------------------
the Company and IMA set forth in Sections 5(c) and 5(a) hereof shall be true and
correct in all material respects as of the date of this Agreement and as of the
Closing as though made on and as of the Closing, and MarketNet shall have
received certificates signed by an officer of each of the Company and IMA to
that effect at Closing.
(b) Performance of Obligations of the Company and IMA. Each of the Company
-------------------------------------------------
and IMA shall have performed all obligations required to be performed by it
prior to or at the Closing under this Agreement, and MarketNet shall have
received certificates signed by an officer of each of the Company and MarketNet
to that effect at the Closing.
(c) Assignment and Assumption Agreement. MarketNet shall have received a
-----------------------------------
duly executed MarketNet Assignment and Assumption Agreement in substantially the
form of Exhibit H, attached hereto.
------- -
(d) Registration Rights Agreement. The Company shall have executed and
-----------------------------
delivered the Registration Rights Agreement in substantially the form of Exhibit
-------
J attached hereto.
- -
Section 9. Conditions to the Obligations of the Company. The
--------------------------------------------
obligations of the Company to perform this Agreement are subject to the
satisfaction of the following conditions unless waived by the Company in
writing:
(a) Representations and Warranties. The representations and warranties of
------------------------------
IMA and MarketNet set forth in Sections 5(a) and 5(b), respectively hereof shall
be true and correct in all material respects as of the date of this Agreement
and as of the Closing as though made on and as of the Closing, and the Company
shall have received certificates signed by an officer of each of IMA and
MarketNet to that effect at the Closing.
(b) Performance of Obligations of IMA and MarketNet. Each of IMA and
-----------------------------------------------
MarketNet shall have performed all obligations required to be performed by it
prior to or on the Closing under this Agreement and the Company shall have
received certificates signed by an officer of each of IMA and MarketNet to that
effect at the Closing.
(c) Assumption Agreement. The Company shall have received the IMA
--------------------
Assignment and Assumption Agreement and the MarketNet Assignment and Assumption
Agreement in substantially the forms of Exhibit G and Exhibit H attached hereto,
--------- ---------
duly executed by IMA and MarketNet, respectively.
10
<PAGE>
(d) Software Licensing, Marketing and Noncompetition Agreement. IMA shall
----------------------------------------------------------
have executed and delivered the Software Licensing, Marketing and Noncompetition
Agreement in substantially the form of Exhibit I attached hereto.
----------
(e) Services Agreement. IMA shall have executed and delivered the Services
------------------
Agreement in substantially the form of Exhibit K attached hereto.
---------
(f) Space Sharing Agreement. IMA shall have executed and delivered the
-----------------------
Space Sharing Agreement in substantially the form of Exhibit L attached hereto.
---------
Section 10. Survival of Representations and Warranties; Indemnification,
------------------------------------------------------------
Etc.
- ---
(a) Survival. All representations and warranties of the parties made in
--------
this Agreement or pursuant to this Agreement, including, without limitation, all
representations and warranties made on any Exhibit or Schedule hereto or
document delivered hereunder, shall survive the Closing until the second
anniversary of the Closing (the "Survival Date") but thereafter shall expire and
no party shall be entitled to make a claim for indemnification with respect to
such representations and warranties unless a claim with respect thereto shall
have been made in writing against the party responsible for indemnification
hereunder on or prior to the Survival Date; provided that the foregoing
limitation shall not apply to the representations and warranties made in
Sections 5(a)(3), 5(b)(3) and 5(c)(3), which shall survive until the expiration
------- ------- -------
of all applicable statutes of limitation. All representations and warranties
hereunder shall be deemed to be material and relied upon by the parties with or
to whom the same were made, not withstanding any investigation or inspection
made by or on behalf of such party or parties.
(b) Indemnification by IMA. IMA hereby agrees to indemnify and to hold
----------------------
the Company and MarketNet harmless from, against and in respect of any and all
losses, liabilities actions, suits, proceedings, claims, demands, assessments,
judgments, costs and out-of-pocket expenses, including, without limitation,
reasonable legal fees and expenses suffered or incurred (collectively,
"Losses"), suffered or incurred by the Company or MarketNet by reason of (i) any
untrue representation, breach of warranty or non-fulfillment of any covenant or
agreement by IMA contained in this Agreement or in any certificate, document or
instrument delivered to the Company or MarketNet pursuant hereto or in
connection herewith and (ii) any liability or obligation of IMA not expressly
assumed by the Company pursuant to this Agreement.
(c) Indemnification by MarketNet. MarketNet hereby agrees to indemnify and
----------------------------
hold the Company and IMA harmless from, against and in respect of any and all
Losses by reason of (i) the Company or IMA from any untrue representation,
breach of warranty or non-fulfillment of any covenant or agreement by MarketNet
contained in this Agreement or in any certificate, document or instrument
delivered to the Company or IMA pursuant hereto or in connection herewith and
(ii) any liability or obligation of MarketNet not expressly assumed by the
Company pursuant to this Agreement.
(d) Indemnification by the Company. The Company hereby agrees to indemnify
------------------------------
and hold each of IMA and MarketNet harmless from, against and in respect of any
and all Losses, suffered or incurred by IMA or MarketNet by reason of (i) any
untrue representation; breach of
11
<PAGE>
warranty or non-fulfillment of any covenant or agreement by the Company
contained in this Agreement or in any certificate, document or instrument
delivered to IMA or MarketNet pursuant hereto or in connection herewith and (ii)
any IMA Assumed Liability or any MarketNet Assumed Liability.
(e) Matters Involving Third Parties.
--------------------------------
(i) If any third party shall notify any party hereto (the
"Indemnified Party") with respect to any matter (a "Third Party Claim")
----------------- -----------------
which may give rise to a claim for indemnification against any other party
hereto (the "Indemnifying Party") under this Section 10, then the
------------------
Indemnified Party shall promptly notify each Indemnifying Party thereof in
writing; provided, however, that no delay on the part of the Indemnified
-----------------
Party in notifying any Indemnifying Party shall relieve the Indemnifying
Party from any obligation hereunder unless (and then solely to the extent)
the Indemnifying Party thereby is prejudiced.
(ii) Any Indemnifying Party will have the right to defend the
Indemnified Party against the Third Party Claim with counsel of its choice
reasonably satisfactory to the Indemnified Party so long as (A) the
Indemnifying Party notifies the Indemnified Party in writing within 15 days
after the Indemnified Party has given notice of the Third Party Claim that
the Indemnifying Party will indemnify the Indemnified Party from and
against the entirety of any Losses the Indemnified Party may suffer
resulting from, arising out of, relating to, in the nature of, or caused by
the Third Party Claim, (B) the Indemnifying Party provides the Indemnified
Party with evidence reasonably acceptable to the Indemnified Party that the
Indemnifying Party will have the financial resources to defend against the
Third Party Claim and fulfill its indemnification obligations hereunder,
(C) the Third Party Claim involves only money damages and does not seek an
injunction or other equitable relief, (D) settlement of, or an adverse
judgment with respect to, the Third Party Claim is not, in the good faith
judgment of the Indemnified Party, likely to establish a precedential
custom or practice materially adverse to the continuing business interests
of the Indemnified Party, and (E) the Indemnifying Party conducts the
defense of the Third Party Claim actively and diligently.
(iii) So long as the Indemnifying Party is conducting the defense of
the Third Party Claim in accordance with Sectio10(e)(ii) above, (A) the
Indemnified Party may retain separate co-counsel at its sole cost and
expense and participate in the defense of the Third Party Claim, (B) the
Indemnified Party will not consent to the entry of any judgment or enter
into any settlement with respect to the Third Party Claim without the prior
written consent of the Indemnifying Party (not to be withheld
unreasonably), and (C) the Indemnifying Party will not consent to the entry
of any judgment or enter into any settlement with respect to the Third
Party Claim without the prior written consent of the Indemnified Party (not
to be withheld unreasonably).
12
<PAGE>
(iv) In the event any of the conditions in Section 10(e)(ii) above is
or becomes unsatisfied, however, (A) the Indemnified Party may defend
against, and consent to the entry of any judgment or enter into any
settlement with respect to, the Third Party Claim in any manner it
reasonably may deem appropriate (and the Indemnified Party need not consult
with, or obtain any consent from, any Indemnifying Party in connection
therewith), (B) the Indemnifying Party will reimburse the Indemnified Party
promptly and periodically for the costs of defending against the Third
Party Claim (including reasonable attorneys' fees and expenses), and (C)
the Indemnifying Party will remain responsible for any Losses the
Indemnified Party may suffer resulting from, arising out of, relating to,
in the nature of, or caused by the Third Party Claim to the fullest extent
provided in this Section 10.
(f) Disclaimer. Except as expressly provided in this Agreement, neither
----------
IMA nor MarketNet makes any representation or warranty, express or implied, with
respect to the IMA Transferred Assets or the MarketNet Transferred Assets,
including, but not limited to, any implied warranty of merchantability or
fitness for a particular purpose.
Section 11. Further Assurances. In case at any time after the Closing,
------------------
any further action is necessary to carry out the purposes of this Agreement,
each of the parties will take such further action (including the execution and
delivery of such further instruments and documents) as any other party
reasonably may request, all the sole cost and expense of the requesting party
(unless the requesting party is entitled to indemnification therefor under
Section 10 above).
Section 12. Miscellaneous.
-------------
(a) Modification; Waiver. This Agreement may be modified only by a
--------------------
written instrument executed by the parties to this Agreement. Any of the terms
and conditions of this Agreement may be waived in writing at any time on or
prior to the Closing Date by the party entitled to the benefits of such terms
and conditions.
(b) Further Actions. Each party shall execute and deliver such
---------------
certificates and other documents and take such other actions as may reasonably
be requested by the other parties in order to consummate or implement the
transactions contemplated by this Agreement.
(c) Assignment. This Agreement shall be binding upon and inure to the
----------
benefit of the parties and their respective successors and permitted assigns,
but shall not be assignable, by operation of law or otherwise, by any party
without the prior written consent of the other parties.
(d) Counterparts. This Agreement may be executed in counterparts, all
------------
of which shall constitute one and the same instrument.
(e) Entire Agreement. This Agreement constitutes the entire agreement
----------------
among the parties with respect to the subject matter hereof.
(f) Severability. If any provision of this Agreement is invalid,
------------
illegal or incapable of being enforced by any rule of law or public policy, such
provision shall be deemed
13
<PAGE>
severable and all other provisions of this Agreement shall nevertheless remain
in full force and effect.
(g) Headings. Section headings in this Agreement are included herein
--------
for convenience of reference only and shall not constitute a part of this
Agreement for any other purpose.
(h) Governing Law. This Agreement shall be governed by and construed
-------------
in accordance with the laws of the State of Connecticut without regard to the
conflicts of law principles of such State.
(i) Termination. Anything contained in this Agreement to the contrary
-----------
notwithstanding, this Agreement may be terminated at any time prior to the
Closing Date by the mutual written consent of the Contributors and the Company.
In the event this Agreement shall be terminated pursuant to this Section 12(i),
all further obligations of the parties under this Agreement shall terminate
without further liability of any party to this Agreement; provided, however,
-------- -------
that nothing herein shall relieve any party from liability for its willful
breach of this Agreement.
[SIGNATURE PAGE FOLLOWS]
14
<PAGE>
THIS AGREEMENT has been signed by each of the parties hereto as of the
date of first set forth above.
INFORMATION MANAGEMENT ASSOCIATES, INC
a Connecticut corporation
By:___________________________________
Name: Gary R. Martino
Title: Assistant Secretary
MARKETNET, L.L.C.
a Delaware limited liability company
By:___________________________________
Name: Victor Nesi
Title: Member
buyingedge.com inc.
By:___________________________________
Name: Gary R. Martino
Title: President
[SIGNATURE PAGE TO CONTRIBUTION AGREEMENT]
<PAGE>
Exhibit A
---------
Assumed IMA Liabilities
1. All liabilities and obligations arising after the Closing Date under
the IMA Contracts.
2. Accounts payable relating to computer equipment contributed to
buyingedge.com inc.
<PAGE>
Exhibit B
----------
Assumed MarketNet Liabilities
1. All liabilities and obligations arising after the Closing Date under
the MarketNet Contracts.
<PAGE>
Exhibit D
---------
IMA Contracts
1. Independent Contractor Services Agreement between IMA and Digitools,
Inc. effective October 1, 1997, and IMA's interest in said contract
was transferred to MarketNet as of December 31, 1997.
2. Development Agreement between American Business Information, Inc. and
IMA. effective December 16, 1997, and IMA's interest in said contract
was transferred to MarketNet as of December 31, 1997.
3. American Business Information License Agreement between American
Business Information, Inc. and Information Management Associates, Inc.
dated December 12, 1997, and IMA's interest in said contract was
transferred to MarketNet as of December 31, 1997.
4. Professional Services Agreement between Advanced Technology Solutions,
Inc. and Information Management Associates, Inc. dated April 9, 1999.
5. Third Party Consulting Services Agreement between John Sawa and
Information Management Associates, Inc. dated March 10, 1999.
6. Third Party Consulting Services Agreement between Tyrell Software
Corporation and Information Management Associates, Inc. dated January
27, 1999.
7. Master Service Agreement between Frontier Global Center and
Information Management Associates, Inc. dated May 14, 1999.
8. Master Lease Agreement (No. 552335) between Apple Commercial Credit
and Information Management Associates, Inc. dated March 23, 1999,
including: Equipment Schedule No. 552335; Equipment Schedule No.
553521; Service Contract (Banctec Service Corp. - Order No. 223294018
& 223294786); Parts Support Agreement (Dell - Order No. 223294018 &
223294786).
<PAGE>
Exhibit C
---------
IMA Consumer Electronic Commerce Products
1. Computer software code developed by IMA for the consumer electronic
commerce website designated as buying edge, including a form based
messaging response system, a web navigation system, a vendor database and a
product database.
<PAGE>
Exhibit DD
----------
Equipment Contributed to buyingedge.com by Information Management
Associates, Inc.
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------------------------
IMA Tag # Serial Number Make/Model Location/Assigned to
- ----------------------------------------------------------------------------------------------------------------------
<S> <C> <C> <C>
- ----------------------------------------------------------------------------------------------------------------------
Sun E250 Application Server Frontier/Global Center - NY
- ----------------------------------------------------------------------------------------------------------------------
Network Appliance Netapp F740 Configured Filer Frontier/Global Center - NY
- ----------------------------------------------------------------------------------------------------------------------
Sun E250 Development Server Irvine
- ----------------------------------------------------------------------------------------------------------------------
2162 0000321-C-12800-85G-3074 Dell Latitude 233 Laptop (Edison Jr. - runs Linux) Shelton
- ----------------------------------------------------------------------------------------------------------------------
2188 1V8ABYG3929T Compaq 233 Laptop (for demo kit) Shelton
- ----------------------------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------------------------
000668 Dell Dimension 400 Desktop Tony Urgo
- ----------------------------------------------------------------------------------------------------------------------
000772 BC096525536 Gateway - Solo 2200 Chris DeBenedictis
- ----------------------------------------------------------------------------------------------------------------------
002068 BC197232545 Gateway Laptop (Old Model) Chris DeBenedictis
- ----------------------------------------------------------------------------------------------------------------------
002073 007866968 Gateway P266 - LPMI Tower Tracy Hartzler
- ----------------------------------------------------------------------------------------------------------------------
002074 0007866968 Gateway 2000 - 266 Desktop Mike Horng
- ----------------------------------------------------------------------------------------------------------------------
002077 BG8BN Dell M200 - MMS Tracy Hartzler
- ----------------------------------------------------------------------------------------------------------------------
002085 0007990908 Gateway Solo 2200 Laptop Paul Schmidt
- ----------------------------------------------------------------------------------------------------------------------
002089 0008138058 Gateway 2000 - 266 Desktop Brett Rayno
- ----------------------------------------------------------------------------------------------------------------------
002101 HD098030649 Gateway Laptop (Old Model) Chris DeBenedictis
- ----------------------------------------------------------------------------------------------------------------------
002106 CC3SV Dell Latitude 233 Laptop Tracy Hartzler
- ----------------------------------------------------------------------------------------------------------------------
002143 00060888-12800-83T-0417 Dell Latitude 233 Laptop Nick Dowling
- ----------------------------------------------------------------------------------------------------------------------
002154 0009321C-12800-841-0307 Gateway Solo 2200 Laptop Jacques Wagemaker
- ----------------------------------------------------------------------------------------------------------------------
002156 000-9321C-12800-85G Dell Latitude 233 Laptop Paul Speranza
- ----------------------------------------------------------------------------------------------------------------------
002172 0009321C-12800-861-3129 Dell Latitude 233 Laptop Joe Avallone
- ----------------------------------------------------------------------------------------------------------------------
002183 G5DF2 Dell Dimension 400 Desktop Matt Delligatti
- ----------------------------------------------------------------------------------------------------------------------
002196 G5DF3 Dell Dimension 400 Desktop Foster Bass
- ----------------------------------------------------------------------------------------------------------------------
002197 G5DF5 Dell Dimension 400 Desktop Craig Sanborn
- ----------------------------------------------------------------------------------------------------------------------
002199 G5DF4 Dell Dimension 400 Desktop Carter Communale
- ----------------------------------------------------------------------------------------------------------------------
002244 ZFL69 Dell Latitude 233 Laptop James Fini
- ----------------------------------------------------------------------------------------------------------------------
002224 XA840236DLU Apple G3-350 Desktop Patrick Neeman
- ----------------------------------------------------------------------------------------------------------------------
002612 000669021280081H118 Dell Latitude 233 Laptop Paul White
- ----------------------------------------------------------------------------------------------------------------------
Missing 0006392596 Gateway P5 166 - ATX Tower Tracy Hartzler
- ----------------------------------------------------------------------------------------------------------------------
Missing TB3X6-HDJWP-XC9PC- (Generic Clone) 233 Desktop Toby Gustafson
II374Y-HHWQ3
- ----------------------------------------------------------------------------------------------------------------------
</TABLE>
<PAGE>
Exhibit DDD
-----------
Trademarks: "BUYINGEDGE" - Serial Number 75/671876
- ---------- Application Filing Date: March 31, 1999
"VENDOREDGE" - Serial Number 75/671877
Application Filing Date: March 31, 1999
Domain Name Registrations:
- -------------------------
BUYINGEDGE.COM BUYING-EDGE.NET
VENDOREDGE.COM BUYEDGE.ORG
SELLEREDGE.COM BUY-EDGE.ORG
SUPPORTEDGE.NET BUY-EDGE.COM
BUYINGEDGEPILOT.COM BUY-EDGE.NET
BUYINGEDGEPILOT.ORG BUYEREDGE.ORG
BUYINGEDGEPILOT.NET BUYEREDGE.NET
BUYINGEDGESUCKS.ORG BUYINGEDGE.NET
BUYINGEDGE-SUCKS.ORG BUYINGEDGE.ORG
BUYINGEDGE-SUCKS.COM VENDOREDGE.NET
BUYINGEDGE-SUCKS.NET VENDOREDGE.ORG
BUYINGEDGESUCKS.NET VENDOR-EDGE.COM
BUYINGEDGESUCKS.COM VENDOR-EDGE.NET
BUYINGEDGE.COM VENDOR-EDGE.ORG
BUYINGEDGE.NET BUYEDGE.NET
BUYINGEDGE.ORG SUPPORTEDGE.COM
BUYING-EDGE.COM SUPPORTEDGE.ORG
BUYING-EDGE.ORG
<PAGE>
Exhibit E
---------
MarketNet Contracts
1. Independent Contractor Services Agreement between IMA and Digitools,
Inc. effective October 1, 1997, and IMA's interest in said contract
was transferred to MarketNet as of December 31, 1997.
2. Development Agreement between American Business Information, Inc. and
IMA. effective December 16, 1997, and IMA's interest in said contract
was transferred to MarketNet as of December 31, 1997.
3. American Business Information License Agreement between American
Business Information, Inc. and Information Management Associates, Inc.
dated December 12, 1997, and IMA's interest in said contract was
transferred to MarketNet as of December 31, 1997.
<PAGE>
Exhibit F
---------
MarketNet Products
1. Computer software code for Query processing based search engine based on
industry codes.
<PAGE>
Exhibit G
---------
Form of IMA Assignment and Assumption Agreement
<PAGE>
Exhibit H
---------
Form of MarketNet Assignment and Assumption Agreement
<PAGE>
Exhibit I
---------
Form of Software Licensing, Marketing and Noncompetition Agreement
<PAGE>
Exhibit J
---------
Form of Registration Rights Agreement
<PAGE>
Exhibit K
---------
Form of Services Agreement
<PAGE>
Exhibit L
---------
Form of Space Sharing Agreement
<PAGE>
Exhibit 10.2
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") by and between
INFORMATION MANAGEMENT ASSOCIATES, INC., a Connecticut corporation ("Assignor")
and buyingedge.com inc., a Connecticut corporation (the "Assignee") is made
effective as of the 25th day of May, 1999.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the terms of that certain Contribution Agreement dated
as of May 25, 1999 (the "Contribution Agreement"), by and among Assignor,
Assignee and MarketNet, L.L.C., a Delaware limited liability company
("MarketNet"), the Assignor has agreed to contribute to Assignee certain assets
(the "Contribution") in exchange for shares of the Common Stock of the Assignee
and the assumption by Assignee of certain liabilities of Assignor.
NOW THEREFORE, in consideration of the respective contributions, agreements
and other good and valuable consideration contemplated in the Contribution
Agreement, the receipt and sufficiency of which are hereby acknowledged, and the
agreements of the parties hereinafter set forth, it is agreed to between the
parties as follows:
1. Assignment. The Assignor hereby assigns and transfers the IMA Transferred
----------
Assets to Assignee.
2. Assumption. Assignee hereby expressly assumes all of the Assumed IMA
----------
Liabilities.
3. Binding on Successors. This Agreement shall be binding upon and inure to
---------------------
the benefit of the parties hereto, their successors in interest and
assigns.
4. Effective Time. This Assignment and Assumption Agreement shall become
--------------
effective as of the date hereof.
5. Capitalized Terms. Capitalized terms used herein but not defined herein
-----------------
shall have the respective meanings assigned to such terms in the
Contribution Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as
of the date first set forth above.
ASSIGNOR:
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:___________________________________
Name:
Title:
ASSIGNEE:
buyingedge.com inc.
By:___________________________________
Name: Gary R. Martino
Title: Assistant Secretary
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
Exhibit 10.3
ASSIGNMENT AND ASSUMPTION AGREEMENT
THIS ASSIGNMENT AND ASSUMPTION AGREEMENT (this "Agreement") by and between
MARKETNET, L.L.C., a Delaware limited liability company ("Assignor") and
buyingedge.com inc., a Connecticut corporation (the "Assignee") is made
effective as of the 25th day of May, 1999.
W I T N E S S E T H:
- - - - - - - - - -
WHEREAS, pursuant to the terms of that certain Contribution Agreement dated
as of May 25, 1999 (the "Contribution Agreement"), by and among Assignor,
Assignee and Information Management Associates, Inc., a Connecticut Corporation
("IMA"), the Assignor has agreed to contribute to Assignee certain assets (the
"Contribution") in exchange for shares of the Common Stock of the Assignee and
the assumption by Assignee of certain liabilities of Assignor.
NOW THEREFORE, in consideration of the respective contributions, agreements
and other good and valuable consideration contemplated in the Contribution
Agreement, the receipt and sufficiency of which are hereby acknowledged, and the
agreements of the parties hereinafter set forth, it is agreed to between the
parties as follows:
1. Assignment. The Assignor hereby assigns and transfers the MarketNet
----------
Transferred Assets to Assignee.
2. Assumption. Assignee hereby expressly assumes all of the Assumed MarketNet
----------
Liabilities.
3. Binding on Successors. This Agreement shall be binding upon and inure to
---------------------
the benefit of the parties hereto, their successors in interest and
assigns.
4. Effective Time. This Assignment and Assumption Agreement shall become
--------------
effective as of the date hereof.
5. Capitalized Terms. Capitalized terms used herein but not defined herein
-----------------
shall have the respective meanings assigned to such terms in the
Contribution Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this
Agreement as of the date first set forth above.
ASSIGNOR:
MARKETNET, L.L.C.
By:___________________________________
Name: Victor Nesi
Title: Member
ASSIGNEE:
buyingedge.com inc.
By:___________________________________
Name: Gary R. Martino
Title: Assistant Secretary
[SIGNATURE PAGE TO ASSIGNMENT AND ASSUMPTION AGREEMENT]
<PAGE>
Exhibit 10.4
buyingedge.com inc.
Series A Preferred
Stock Purchase Agreement
Dated as of August 12, 1999
<PAGE>
buyingedge.com inc.
SERIES A PREFERRED STOCK PURCHASE AGREEMENT
THIS AGREEMENT is made as of August 12, 1999, by and between buyingedge.com
inc., a Connecticut corporation, with headquarters at One Corporate Drive, Suite
400, Shelton, CT 06484 (the "Company"), and each of the investors listed on
Schedule 1.2 hereto (as such Schedule may be updated from time to time)
- ------------
(collectively, the "Purchasers"). In consideration of mutual promises, covenants
and conditions hereinafter set forth, the parties hereby agree as follows:
1. Authorization and Sale of the Shares.
------------------------------------
1.1 Authorization; Filing of Restated Articles of Incorporation. On
-----------------------------------------------------------
or prior to the Closing (as defined below), the Company shall have authorized
the issuance and sale at the Closing (as defined below) pursuant to the terms
and conditions hereof of up to 5,319,149 shares of its Series A Preferred Stock
(the "Preferred Shares"), having the rights, restrictions, privileges and
preferences as set forth in the form of the Amended and Restated Certificate of
Incorporation of the Company (the "Restated Certificate") attached hereto as
Exhibit A. The Company shall adopt and file the Restated Certificate with the
- ---------
Secretary of State of Connecticut on or before the Closing.
1.2 Sale and Issuance of the Preferred Shares. Subject to the terms
-----------------------------------------
and conditions hereof, at the Closing the Company will issue and sell to each
Purchaser and each Purchaser will purchase from the Company the number of
Preferred Shares set forth opposite such Purchaser's name on Schedule 1.2
------------
attached hereto for a consideration of $1.88 per share (the "Purchase Price").
2. Closing; Delivery.
-----------------
2.1 Closing Date. The closing (the "Closing") of the purchase and
------------
sale of the Preferred Shares to the Purchasers shall take place at the offices
of Gray Cary Ware & Freidenrich LLP, 400 Hamilton Avenue, Palo Alto, California
94301 at 10:00 a.m. on August 12, 1999, or at such other time and place as the
Company and the Purchasers may agree. The date of the Closing shall be referred
to as the "Closing Date."
2.2 Delivery. Subject to the terms of this Agreement, at the
--------
Closing, the Company shall deliver to each of the Purchasers a certificate (or
certificates) registered in such Purchaser's name representing the number of
Preferred Shares purchased against payment of the Purchase Price therefor by
check payable to the Company, wire transfer per the Company's instructions or
any combination of the foregoing payable to the Company.
2.3 Use of Proceeds. The Company shall use the proceeds upon the
---------------
sale of the Preferred Shares for working capital purposes. All outstanding
stockholder debt and deferred compensation will be converted into equity, and
hence considered paid-in capital, prior to the
<PAGE>
Closing except for the liabilities and obligations set forth on Schedule 2.3.
3. Representations and Warranties of the Company. In order to induce
---------------------------------------------
the Purchasers to purchase the Preferred Shares, the Company makes the following
representations and warranties which are true, correct and complete in all
respects on the date hereof and shall be true, correct and complete in all
respects as of the Closing, subject to the exceptions set forth on the
Disclosure Schedule attached hereto as Exhibit B (the "Disclosure Schedule").
---------
3.1 Organization, Good Standing and Power. The Company is a
-------------------------------------
corporation duly organized, validly existing and in good standing under the laws
of the State of Connecticut and has all requisite corporate power and authority
to own its properties and to carry on its business as currently conducted. The
Company is duly licensed or qualified to do business as a foreign corporation in
each jurisdiction where the failure to do so would constitute a Material Adverse
Change (as defined in Section 3.6 below).
3.2 Authorization. The Company has all necessary corporate power and
-------------
has taken or will take prior to the Closing all necessary corporate action
required for the due authorization, execution, delivery and performance by the
Company of this Agreement, the Rights Agreement (the "Rights Agreement")
referred to in Section 5.1 and the Right of First Refusal Agreement (the "Right
of First Refusal Agreement") referred to in Section 5.1 (collectively, the
"Related Agreements") and any other agreements or instruments to be executed by
the Company in connection herewith or therewith and the consummation of the
transactions contemplated herein or therein, and for the due authorization,
issuance and delivery of the Preferred Shares. The issuance of the Preferred
Shares does not require any further corporate action and is not and will not,
except as provided in the Related Agreements, be subject to any preemptive
right, right of first refusal or the like. This Agreement, the Related
Agreements and the other agreements and instruments to be executed by the
Company in connection herewith or therewith will each, when executed by the
Company, be a valid and binding obligation of the Company enforceable in
accordance with its respective terms, except as such enforceability may be
limited by (i) applicable bankruptcy, insolvency, reorganization, moratorium or
other similar federal or state laws affecting the rights of creditors, (ii)
rules of law governing specific performance, injunctive relief or other
equitable remedies (whether considered in a proceeding at law or in equity) or
(iii) indemnification provisions to the extent limited by statutes, judicial
decisions or public policy considerations.
3.3 Government Approvals. No consent, approval, license or
--------------------
authorization of, or designation, declaration or filing with, any court or
governmental authority is or will be required on the part of the Company in
connection with the execution, delivery and performance by the Company of this
Agreement, any of the Related Agreements and any other agreements or instruments
executed by the Company in connection herewith or therewith, or in connection
with the issuance of the Preferred Shares the failure of which would cause a
Material Adverse Change except for (i) those which have already been made or
granted, (ii) those required to be made pursuant to (a) Section 25102(f) of the
California Corporate Securities Law of 1968, as amended, and the rules
thereunder (the "Law"), or (b) the securities laws of any other state in which
the Preferred Shares will be issued or sold hereunder and (iii) any applicable
state securities commissions as specifically provided for in the Rights
Agreement described in Section 5.1(f).
<PAGE>
3.4 Capitalization. The authorized capital stock of the Company as
--------------
of the Closing Date is Twenty Million (20,000,000) shares of Common Stock and
Five Million Five Hundred Thousand (5,500,000) shares of Preferred Stock, of
which Five Million Five Hundred Thousand (5,500,000) have been designated Series
A Preferred Stock (the "Series A Shares"). There are issued and outstanding
8,500,000 shares of the Company's Common Stock, and no Series A Shares
immediately prior to the Closing. The holders of record of the currently issued
and outstanding shares of Common Stock immediately prior to the Closing are as
set forth in Section 3.4 of the Disclosure Schedule. All such issued and
outstanding shares have been duly authorized and validly issued, are fully paid
and nonassessable, and were issued in compliance with all applicable state and
federal laws concerning the issuance of securities. Except as set forth in the
Related Agreements and in Section 3.4 of the Disclosure Schedule, there are no
other outstanding rights, options, warrants, conversion rights or agreements for
the purchase or acquisition from the Company of any shares of its capital stock
(and a list of holders of such outstanding rights, options, warrants, conversion
rights and agreements for the purchase or acquisition from the Company of any
shares of its capital stock is set forth in Section 3.4 of the Disclosure
Schedule), except that the Company has (i) reserved 4,816,183 shares of its
Common Stock for issuance under the Company's 1999 Stock Option Plan to its
employees, consultants, directors or officers, of which options to purchase
1,555,000 shares of Common Stock are issued and outstanding, and (ii) reserved
5,319,149 shares of its Common Stock for issuance upon conversion of the Series
A Shares into Common Stock of the Company. Except as set forth in Section 3.4
of the Disclosure Schedule, the Company is not a party or subject to any
agreement or understanding between any persons or entities which affects or
relates to the voting or giving of written consents with respect to any
securities or by any director of the Company, except as provided for in the
Related Agreements.
3.5 Subsidiaries. The Company has neither any subsidiaries nor any
------------
joint-venture relationships nor any investment or other equity or equity-like
interest in, or any outstanding loan or advance to or from, any person, for the
liabilities and obligations set forth on Schedule 2.3 and including, without
limitation, any officer, director or shareholder of the Company except for the
liabilities and obligations set forth on Schedule 2.3 and travel, meal and
similar reimbursement obligations created in the ordinary course of business.
3.6 Financial Information. The Company has attached hereto as
---------------------
Schedule 3.6 to the Disclosure Schedule the unaudited financial statements of
- ------------
the Company for the period commencing on May 25, 1999 and ended July 31, 1999
(the "Unaudited Financial Statements"). The Unaudited Financial Statements are
in accordance with the books and records of the Company and present fairly in
accordance with generally accepted accounting principles, the financial
condition and results of operations of the Company as of the dates and for the
periods shown, subject to year end adjustments which will not be material, and
subject to the absence of footnotes otherwise required. The Company has no
liability, contingent or otherwise, that is not adequately reflected in or
reserved against in the Unaudited Financial Statements that could materially and
adversely affect the financial condition of the Company. Since the date of the
Unaudited Financial Statements, (i) there has been no Material Adverse Change
(as defined below) in the business, assets, liabilities, condition (financial or
otherwise) or operations of the Company or its predecessor except for changes in
the ordinary course of business which,
<PAGE>
individually or in the aggregate, have not been materially adverse and (ii) none
of the business, financial condition, operations, property or affairs of the
Company has been materially adversely affected by any occurrence or development,
individually or in the aggregate, whether or not insured against. "Material
Adverse Change" means any change in, or effect on, the business, conditions,
affairs or operations of the Company (including all subsidiaries, if any) or in
any of its properties or assets, or any material impairment of the right or
ability of the Company (including all subsidiaries, if any) to carry on its
business as now conducted or as currently proposed to be conducted in the future
(the "Business") (x) that is, or is reasonably likely to be, materially adverse
to the results of the operations or the financial condition of the Company (or
any subsidiary) or the Business or (y) that requires or is reasonably likely to
require the expenditure of Twenty Five Thousand Dollars ($25,000) or more,
individually or in the aggregate.
3.7 Events Subsequent to the Date of the Financial Statements.
---------------------------------------------------------
Except as disclosed on the Disclosure Schedule, since July 31, 1999, the Company
has not (i) issued any capital interest, stock, bond or other security,
including stock options or warrants; (ii) borrowed any amount or incurred or
become subject to any liability (absolute, accrued or contingent), except (A)
liabilities under contracts entered into in the ordinary course of business, (B)
travel, meal and similar reimbursement obligations created in the ordinary
course of business (C) none of which, individually or in the aggregate, exceed
Ten Thousand Dollars ($10,000) and other than liabilities created in the
ordinary course of business; (iii) discharged or satisfied any lien or
encumbrance or incurred or paid any obligation or liability (absolute, accrued
or contingent) other than current liabilities shown on the Unaudited Financial
Statements and current liabilities incurred since July 31, 1999, in the ordinary
course of business; (iv) declared or made any payment or distribution to
shareholders or purchased or redeemed any shares of its capital stock, capital
interest or other securities; (v) mortgaged, pledged or subjected to lien any of
its assets, tangible or intangible, other than liens of current real property
taxes not yet due and payable or mechanics' or materialmen's or similar inchoate
liens relating to amounts not yet due and payable; (vi) sold, assigned or
transferred any of its tangible assets except in the ordinary course of
business, or canceled any debt or claim, except in the ordinary course of
business; (vii) sold, assigned, transferred or granted any license with respect
to any patent, trademark, trade name, service mark, copyright, trade secret or
other intangible asset, except pursuant to license or other agreements entered
into in the ordinary course of business; (viii) suffered any loss of property or
waived any right of substantial value whether or not in the ordinary course of
business; (ix) made any change in officer compensation other than in the
ordinary course of business; (x) made any material change in the manner of
business or operations of the Company; (xi) entered into any transaction except
in the ordinary course of business or as otherwise contemplated hereby; or (xii)
entered into any commitment (contingent or otherwise) to do any of the
foregoing.
3.8 Litigation. There is no litigation or governmental proceeding
----------
pending or, to the best knowledge of the Company, threatened against the Company
or affecting any of the Company's properties or assets, or against any officer,
key employee or stockholder of the Company in his capacity as such, nor, to the
best knowledge of the Company, has there occurred any event that questions the
validity of this Agreement and the Related Agreements or any action taken or to
be taken in connection herewith, including in each case, without limitation,
actions pending or, to the best knowledge of the Company, threatened, involving
the prior employment of
<PAGE>
any of the Company's employees, the use in connection with the Business of any
information or techniques allegedly proprietary to any of its former employees,
or their obligations under any agreements with prior employers. There is no
governmental investigation pending or, to the best knowledge of the Company,
threatened against the Company or its predecessor or affecting any of the
Company's properties or assets, or against any officer, key employee or
shareholder of the Company or its predecessor in his capacity as such. Neither
the Company, nor, to the best of its knowledge, any officer, key employee or
stockholder of the Company, in his capacity as such, is in default with respect
to any order, writ, injunction, decree, ruling or decision of any court,
commission, board or other government agency which may materially and adversely
affect the Business or assets of the Company. There is no action, suit,
proceeding or investigation by the Company currently pending or which the
Company currently intends to initiate.
3.9 Compliance with Laws and Other Instruments. The Company is, as
------------------------------------------
of the Closing Date, in compliance with all of the provisions of this Agreement
and of its Restated Certificate and in all material respects with the provisions
of (i) each judgment, decree and judicial order by which it is bound or to which
it or any of its properties are subject and, to its knowledge, each statute,
rule or regulation applicable to the Company and (ii) each mortgage, indenture,
lease, license, other agreement or instrument by which it is bound or to which
it or any of its properties are subject. Neither the execution, delivery or
performance of this Agreement and the Related Agreements, nor the offer,
issuance, sale or delivery of the Preferred Shares in accordance with the
provisions of this Agreement and the Restated Certificate, with or without the
giving of notice or passage of time, or both, will violate, or result in any
breach of, or constitute a default under, or result in the imposition of any
encumbrance in any material respect upon any asset of the Company pursuant to
any provision of the Company's Restated Certificate, or, to the knowledge of the
Company, any statute, rule or regulation applicable to the Company, or any
judgment, decree, judicial order, mortgage, indenture, lease, license or other
agreement or instrument by which the Company is bound or to which the Company or
any of its properties are subject, or, to the best knowledge of the Company,
will cause the Company to lose the benefit of any material right or privilege it
currently enjoys or cause any person who is expected to normally do business
with the Company to discontinue to do so on substantially the same basis.
3.10 Taxes. The Company has filed all tax returns (including
-----
statements of estimated taxes owed) required to be filed within the applicable
periods for such filings and has paid all taxes required to be paid (other than
those contested in good faith for which adequate reserves have been
established), and has established adequate reserves (net of estimated tax
payments already made) for the payment of all taxes payable in respect of the
period subsequent to the last periods covered by such returns. There is no
pending dispute with any taxing authority relating to any of such returns, and
the Company has not received notice of any proposed liability for any tax to be
imposed upon the properties or assets of the Company. No deficiencies for any
tax are currently assessed against the Company, and no tax returns of the
Company have ever been audited, and, to the actual knowledge of the Company,
there is no such audit pending or threatened. There is no tax lien, whether
imposed by any federal, state or local taxing authority, outstanding against the
assets, properties or business of the Company or its predecessor, except such
liens for taxes not yet due and payable as may accrue in the ordinary course of
business and for which the Company has established reasonable reserves and as
would not, in any case, constitute a Material Adverse
<PAGE>
Change. For the purposes of this Agreement, the term "tax" shall include all
federal, state and local taxes, including income, franchise, property, sales,
withholding, payroll and employment taxes.
3.11 Real Property.
-------------
The Company uses certain office space leased by Information Management
Associates, Inc., a Connecticut corporation ("IMA") pursuant to the Space
Sharing Agreement, by and between the Company and IMA, dated as of May 25, 1999
(the "Space Sharing Agreement"). The Company neither owns nor leases any other
real property. A copy of the Space Sharing Agreement has been provided to
special counsel to the purchasers.
3.12 Personal Property. Except for property sold or otherwise
-----------------
disposed of in the ordinary course of business since July 31, 1999, the Company
owns free and clear of any liens or encumbrances, all of the personal property
reflected as owned by the Company in the balance sheet contained in the
Unaudited Financial Statements, and all other material items of personal
property acquired by the Company through the date hereof except for (i) those
set forth on Schedule 3.12, (ii) liens for current taxes not yet due and
payable; and (iii) such liens or imperfections of title as do not severally or
in the aggregate, materially detract from the value of such property. All
material items of such personal property are in good operating condition, normal
wear and tear excepted.
3.13 Patents, Trademarks, etc.
-------------------------
(a) Set forth on Schedule 3.13 is a list of all patents, patent
-------------
rights, patent applications, trademarks, trademark applications, service marks,
service mark applications, trade names and registered copyrights, and all
applications for such that are in the process of being prepared, owned by or
registered in the name of the Company, or of which the Company is a licensor or
licensee or in which the Company has any right, except licenses to commercially
available software legally in the possession of the Company and having a
purchase price of less than $2,000 per copy. The Company owns and possesses
sufficient right, title and interest in and to, or has obtained licenses to use,
all software, software tools, works of authorship, copyrights, know-how, trade
secrets and registered trade names (and, to the best knowledge of the Company,
owns and possesses sufficient right, title and interest in and to, or has
obtained licenses to use, all patentable inventions and common law tradenames)
used in or necessary for the conduct of its Business, free and clear of all
liabilities, charges, liens, pledges, mortgages, restrictions, adverse claims,
security interests, rights of others and encumbrances (including, without
limitation, distribution rights) (all of which are referred to as "Proprietary
Rights"), except, in each case, where such failure would not constitute a
Material Adverse Change. The foregoing representation as it relates to Third
Party Technology (as defined herein) is limited to the Company's interest
pursuant to the Third Party Licenses (as defined herein), all of which are, to
the best knowledge of the Company, valid and enforceable and in full force and
effect and which grant the Company such rights to Third Party Technology as are
employed in or necessary to the Business. Schedule 3.13 contains (i) an
-------------
accurate and complete description of all registered and unregistered trademarks
and trade names owned or licensed to the Business, and a list of all licenses
and other agreements relating thereto and (ii) a list of all licenses and other
agreements
<PAGE>
with third parties (the "Third Party Licenses") relating to any software,
copyrights, works of authorship, technology, know-how or processes that the
Company is licensed or otherwise authorized by such third parties to use,
market, distribute or incorporate into products distributed by the Company,
except licenses to commercially available software legally in the possession of
the Company and having a purchase price of less than $2,000 per copy (such
software, technology, know-how and processes are collectively referred to as the
"Third Party Technology"). All of the copyrights in any of the Company's
Products (including but not limited to any works distributed with such products)
used by the Company in connection with the Business are owned by the Company, or
licensed to the Company, and are in full force and effect, and the consummation
of the transactions contemplated hereby will not alter or impair any such
rights. No claims have been asserted against the Company, and to the best
knowledge of the Company (actual knowledge in the case of common law trademarks
and tradenames and patents), there are no claims that are reasonably likely to
be asserted against the Company or that have been asserted against others by any
person challenging the Company's use or distribution of any trademarks,
tradenames, copyrights, works of authorship, trade secrets, software,
technology, know-how or processes utilized by the Company (including, without
limitation, the Third Party Technology) or challenging or questioning the
validity or effectiveness of any license or agreement relating thereto
(including, without limitation, the Third Party Licenses). The use of any
trademarks, tradenames, copyrights, works of authorship, software, technology,
know-how or processes by the Company in its Business does not infringe on the
rights of, constitute misappropriation of, or in any way involve unfair
competition with respect to, any proprietary information or intangible property
right of any third person or entity, including, without limitation, any patent,
trade secret, copyright, trademark or tradename in a manner that would have a
Material Adverse Change, either individually or in the aggregate; provided,
--------
however, that such representation is made only to the Company's actual knowledge
- -------
with respect to common law trademarks and tradenames, technology, patent or
similar intangible property right where infringement is possible without
wrongful taking and where no readily accessible and exhaustive search process
would serve to have warned the Company.
(b) To the best knowledge of the Company, all designs,
drawings, specifications, source code, object code, documentation, flow charts
and diagrams incorporated in any of the Company's Proprietary Rights (the
"Company Components") constitute original creations of and were written,
developed and created solely and exclusively by employees of IMA without the
assistance of any third party or entity or were created by, or with the
assistance of, third parties who assigned ownership of or licensed their rights
to the Company in valid and enforceable agreements. The Company has at all times
used its best efforts to treat its trade secrets as confidential and has not
disclosed or otherwise dealt with such items in such a manner as to cause the
loss of such trade secrets by release into the public domain.
(c) To the best knowledge of the Company, no employee of the
Company is in violation of any term of any employment contract, patent
disclosure agreement, confidentiality agreement or any other contract or
agreement relating to the relationship of any such employee with the Company or,
to the best knowledge of the Company, any other party because of the nature of
the Business.
3.14 Agreements of Directors, Officers and Employees. To the best
-----------------------------------------------
knowledge of the
<PAGE>
Company, no director, officer or employee of or consultant to the Company is in
violation of any restrictive covenants contained in any employment contract,
non-competition agreement, non-disclosure agreement, patent disclosure or
assignment agreement or other contract or agreement relating to the right of any
such director, officer, employee or consultant to be employed or engaged by the
Company because of the nature of the Business, or relating to the use of trade
secrets or proprietary information of others.
3.15 Governmental Approvals. The Company has all the permits,
----------------------
licenses, orders, franchises and other rights and privileges of all federal,
state, local or foreign governmental or regulatory bodies necessary for the
Company to conduct its business as presently conducted, except, in each case,
where such failure would not constitute a Material Adverse Change. All such
permits, licenses, orders, franchises and other rights and privileges are in
full force and effect except, in each case, where such failure would not
constitute a Material Adverse Change and, to the best knowledge of the Company,
no suspension or cancellation of any of them is threatened, and none of such
permits, licenses, orders, franchises or other rights and privileges will be
materially adversely affected by the Closing.
3.16 Contracts and Commitments. All contracts, obligations or
-------------------------
commitments to which the Company is a party or by which it is bound (including
purchase orders to the Company or placed by the Company) which involve
obligations of, or payments to, the Company in excess of Five Thousand Dollars
($5,000) and all agreements between the Company and its officers, directors,
consultants and employees are set forth on the list attached hereto as Schedule
--------
3.16 (the "Contracts"), copies of which have been delivered to special counsel
- ----
to the Purchasers. All of the Contracts are valid and binding obligations of
the Company and in full force and effect in all material respects and
enforceable by the Company in accordance with their respective terms in all
material respects, except as such enforceability may be limited by (i)
applicable bankruptcy, insolvency, reorganization, moratorium or other similar
federal or state laws affecting the rights of creditors, (ii) rules of law
governing specific performance, injunctive relief or other equitable remedies
(whether considered in a proceeding at law or in equity) or (iii)
indemnification provisions to the extent limited by statutes, judicial decisions
or public policy considerations. The Company is not in material default under
any of such Contracts. To the best knowledge of the Company, no other party to
any of the Contracts is in material default thereunder.
3.17 Securities Act. The Company has complied and will comply with
--------------
all applicable federal or state securities laws in connection with the issuance
and sale of the Preferred Shares, and, in reliance on the representations and
warranties of the Purchasers in Section 4 hereof, the Company hereby asserts
that (i) the offer, sale and issuance of the Preferred Shares in conformity with
the terms of this Agreement will not result in a violation of the requirements
of Section 5 of the Securities Act of 1933, as amended (the "Act"), or the
qualification or registration requirements of the Law or other applicable blue
sky laws and (ii) neither the Company nor, to the best knowledge of the Company,
anyone acting on its behalf has offered any of the Preferred Shares, or similar
securities, or solicited any offers to purchase any of such securities, in such
a manner as to bring the issuance and sale of the Preferred Shares under the
registration provisions of the Act.
3.18 Registration Rights. The Company has not granted or agreed to
-------------------
grant any rights
<PAGE>
relating to registration of its capital stock under the Act or state securities
laws other than those contained in this Agreement and the Related Agreements.
3.19 Insurance Coverage. Schedule 3.19 to the Disclosure Schedule
------------------ -------------
contains an accurate summary of the insurance policies currently maintained by
IMA under which the Company is covered. There are currently no claims in excess
of Ten Thousand Dollars ($10,000) in the aggregate pending against the Company
under any insurance policies currently in effect and covering the property,
business or employees of the Company, and all premiums due and payable with
respect to the policies maintained by the Company have been paid to date.
3.20 Employee Matters. Except as set forth in Schedule 3.20 hereof,
---------------- -------------
the Company does not have in effect, and its assets are not subject to, any
employment agreements, consulting agreements, deferred compensation, pension or
retirement agreements or arrangements, bonus, incentive or profit-sharing plans
or arrangements, or labor or collective bargaining agreements, written or oral.
The Company is in compliance, in all material respects, with all applicable laws
and regulations relating to labor, employment, fair employment practices, terms
and conditions of employment, and wages and hours. Each officer, employee and
consultant of the Company has executed the Company's standard form Inventions
and Proprietary Information Agreement, the form of which is attached hereto as
Exhibit C. Management, employees and consultants are subject to non-disclosure
- ---------
and employee secrecy agreements, as appropriate, with the Company. Except as
set forth in Schedule 3.20 hereof, the Company is not aware that any officer,
-------------
director or employee of the Company 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 in any material way with the use of his or her best efforts to
promote the interests of the Company, conflict with the Business or prevent any
such employee from assigning inventions to the Company. Neither the execution
nor delivery of this Agreement or the Related Agreements, nor the carrying on of
the Company's business as proposed, will, to the Company's best 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 of such employees is now obligated. Furthermore, the Company does not
believe that it will be necessary for the Company to utilize any inventions of
any of its employees made prior to their employment by the Company except in
cases where obtaining a license to do such is expected to be routine and license
fees are not material to the Business.
3.21 Labor Agreements and Actions. The Company is not bound by or
----------------------------
subject to (and none of its assets or properties are bound by or subject to) any
contract, commitment or arrangement with any labor union, and no labor union has
requested or, to the best knowledge of the Company, has sought to represent any
of the employees, representatives or agents of the Company. There is no strike
or other labor dispute involving the Company pending, or to the knowledge of the
Company threatened, which could constitute a Material Adverse Change, nor is the
Company aware of any labor organization activity involving its employees.
Except as disclosed on the Disclosure Schedule, the Company is not aware that
any officer or key employee, or that any group of key employees, intends to
terminate his, her or its employment with the Company, nor does the Company have
a current intention to terminate the employment of any of the foregoing.
Subject to general principles related to wrongful termination of employees, the
employment of each officer and employee of the Company is terminable at the will
of the
<PAGE>
Company.
3.22 No Brokers or Finders. No person has or will have, as a result
---------------------
of the transactions contemplated by this Agreement, any right, interest or claim
against or upon the Company for any commission, fee or other compensation as a
finder or broker because of any act or omission by the Company.
3.23 Transactions with Affiliates. Except as disclosed on the
----------------------------
Disclosure Schedule, there are no loans, leases or other continuing transactions
involving more than $5,000 (in the aggregate) annually between the Company, any
officer or director of the Company or any person owning five percent (5%) or
more of the voting power of the Company on the one hand and any respective
family member or affiliate of such officer, director or stockholder on the other
hand.
3.24 Assumptions, Guarantees, Etc. of Indebtedness of Other Persons.
--------------------------------------------------------------
The Company has not assumed, guaranteed, endorsed or otherwise become directly
or contingently liable on or for any indebtedness of any other person, except
guarantees by endorsement of negotiable instruments for deposit or collection or
similar transactions in the ordinary course of business.
3.25 Disclosures. Neither this Agreement, any Schedule or Exhibit to
-----------
this Agreement, the Related Agreements, or the Unaudited Financial Statements
contains any untrue statement of material fact or, when taken as a whole, omits
to state any material fact necessary to make the statements contained herein or
therein not misleading.
3.26 Year 2000 Compatibility. All of the Company's products
-----------------------
(including products currently under development) that are intended to do so,
actually record, store, process and calculate and present calendar dates falling
on and after January 1, 2000, and calculate any information dependent on or
relating to such dates in the same manner and with the same functionality, data
integrity and performance as the products record, store, process, calculate and
present calendar dates on or before December 31, 1999, or calculate any
information dependent on or relating to such dates (collectively, "Year 2000
Compliant"). All of the Company's material products will lose no functionality
with respect to the introduction of records containing dates falling on or after
January 1, 2000. All of the Company's internal computer systems, including,
without limitation, its accounting systems, are Year 2000 Compliant.
4. Representations and Warranties of Purchasers and Restrictions on
----------------------------------------------------------------
Transfer Imposed by the Securities Act.
- --------------------------------------
4.1 Representations and Warranties by the Purchasers. Each of the
------------------------------------------------
Purchasers, severally and not jointly, represents and warrants to the Company as
follows:
(a) Investment Intent. This Agreement is made with each
-----------------
Purchaser in reliance upon such Purchaser's representations to the Company,
evidenced by such Purchaser's execution of this Agreement, that such Purchaser
is acquiring the Preferred Shares and the Common Stock issuable upon conversion
of the Preferred Shares (collectively the "Securities") for investment for such
Purchaser's own account and not with a view to, or for resale in connection
with, any distribution or public offering thereof within the meaning of the Act
and the Law (or other
<PAGE>
applicable blue sky laws). Each Purchaser has the full right, power and
authority to enter into and perform this Agreement and the Related Agreements,
and this Agreement and the Related Agreements constitute valid and binding
obligations upon it enforceable in accordance with their terms, except as such
enforceability may be limited by (i) applicable bankruptcy, insolvency,
reorganization, moratorium or other similar federal or state laws affecting the
rights of creditors, (ii) rules of law governing specific performance,
injunctive relief or other equitable remedies (whether considered in a
proceeding at law or in equity) or (iii) indemnification provisions to the
extent limited by statutes, judicial decisions or public policy considerations.
(b) Shares Not Registered. Each Purchaser understands and
---------------------
acknowledges that the offering of the Preferred Shares pursuant to this
Agreement will not be registered under the Act or qualified under the Law (or
other applicable blue sky laws) on the grounds that the offering and sale of
securities contemplated by this Agreement are exempt from registration under the
Securities Act and exempt from qualification pursuant to the applicable
provisions of the Law (and the relevant provisions of other applicable blue sky
laws), and that the Company's reliance upon such exemptions is predicated upon
such Purchaser's representations set forth in this Agreement. Each Purchaser
acknowledges and understands that the Securities must be held indefinitely
unless the Securities are subsequently registered under the Act and qualified
under the Law (or other applicable blue sky laws) or an exemption from such
registration and such qualification is available.
(c) No Transfer. Each Purchaser covenants that in no event will
-----------
it dispose of any of the Securities (other than in conjunction with an effective
registration statement for the Securities under the Act) unless and until (i)
such Purchaser shall have notified the Company of the proposed disposition and
shall have furnished the Company with a statement of the circumstances
surrounding the proposed disposition and (ii) if reasonably requested by the
Company, such Purchaser shall have furnished the Company with an opinion of
counsel reasonably satisfactory in form and substance to the Company to the
effect that (x) such disposition will not require registration under the Act and
(y) appropriate action necessary for compliance with the Act, the Law and any
other applicable state, local or foreign law has been taken.
(d) Permitted Transfers. Notwithstanding the provisions of
-------------------
subsection (b) above, no registration statement or opinion of counsel shall be
necessary for a transfer by such Purchaser, if it is a partnership, to an
affiliate or a partner of such partnership or a former partner of such
partnership who leaves such partnership after the date hereof, or to the estate
of any such partner or former partner or the transfer by gift, will or intestate
succession of any partner to his spouse or lineal descendants or ancestors, if
the transferee agrees in writing to be bound by the terms of this Agreement and
the Related Agreements to the same extent as if he were an original Purchaser
hereunder provided that the Company shall receive written notice of such
transfer within thirty (30) days of its completion, and provided further that
such transferee executes and delivers all documentation necessary to establish
that such transaction is not a "sale" within the meaning of the Act.
Specifically the Company hereby acknowledges and agrees that @Ventures may
transfer any portion of its Series A Preferred Shares, or any Common Stock
issued upon conversion thereof, to any of its related funds or entities so long
as the @Ventures funds or entities to which shares are transferred shall agree
in writing to be subject to the terms
<PAGE>
hereof to the same extent as if it were an original Purchaser. This paragraph is
subject to the Rights Agreement of even date herewith.
(e) Knowledge and Experience. Each Purchaser (i) has such
------------------------
knowledge and experience in financial and business matters as to be capable of
evaluating the merits and risks of such Purchaser's prospective investment in
the Securities, (ii) has the ability to bear the economic risks of such
Purchaser's prospective investment, (iii) has been furnished with and has had
access to such information as such Purchaser has considered necessary to make a
determination as to the purchase of the Securities together with such additional
information as is necessary to verify the accuracy of the information supplied,
(iv) has had all questions which have been asked by such Purchaser
satisfactorily answered by the Company and (v) has not been offered the
Securities by any form of advertisement, article, notice or other communication
published in any newspaper, magazine, or similar media or broadcast over
television or radio, or any seminar or meeting whose attendees have been invited
by any such media.
(f) Accredited Investor. Each Purchaser is an "accredited
-------------------
investor" within the meaning of Rule 501 promulgated by the Securities and
Exchange Commission ("SEC") under the Act.
(g) Authorization. All action on the part of each of the
-------------
Purchaser's partners, board of directors, and shareholders, as applicable,
necessary for the authorization, execution, delivery and performance of this
Agreement and the Related Agreements by each Purchaser, the purchase of and
payment for the Preferred Shares and the performance of all of each Purchaser's
obligations hereunder and under the Related Agreements has been taken or will be
taken prior to the Closing. This Agreement and the Related Agreements, when
executed and delivered by each Purchaser, shall constitute valid and binding
obligations of the Purchasers, enforceable in accordance with their terms,
subject to laws of general application relating to bankruptcy, insolvency and
the relief of debtors and rules of law governing specific performance,
injunctive relief or other equitable remedies; provided, however, that the
-------- -------
Purchaser makes no representation as to the enforceability of the
indemnification provisions contained in the Rights Agreement.
(h) Holding Requirements. Each Purchaser understands that if
--------------------
the Company does not (i) register its Common Stock with the SEC pursuant to
Section 12 of the Securities Exchange Act of 1934, as amended ("Exchange Act"),
(ii) become subject to Section 15(d) of the Exchange Act, (iii) supply
information pursuant to Rule 15c2-11 thereunder or (iv) have a registration
statement covering the Securities (or a filing pursuant to the exemption from
registration under Regulation A of the Act covering the Securities) under the
Securities Act in effect when it desires to sell the Securities, such Purchaser
may be required to hold the Securities for an indeterminate period. Each
Purchaser also understands that any sale of the Securities that might be made by
such Purchaser in reliance upon Rule 144 under the Act may be made only in
limited amounts in accordance with the terms and conditions of that rule.
4.2 Legends. Each certificate representing the Securities shall be
-------
endorsed with the following legends:
(a) Federal Legend. THE SECURITIES REPRESENTED BY THIS
--------------
<PAGE>
CERTIFICATE HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS
AMENDED (THE "ACT"), AND ARE "RESTRICTED SECURITIES" AS DEFINED IN RULE 144
PROMULGATED UNDER THE ACT. THE SECURITIES MAY NOT BE SOLD OR OFFERED FOR SALE OR
OTHERWISE DISTRIBUTED EXCEPT (i) IN CONJUNCTION WITH AN EFFECTIVE REGISTRATION
STATEMENT FOR THE SHARES UNDER THE ACT OR (ii) PURSUANT TO AN OPINION OF
COUNSEL, SATISFACTORY TO THE COMPANY, THAT SUCH REGISTRATION OR COMPLIANCE IS
NOT REQUIRED AS TO SAID SALE, OFFER OR DISTRIBUTION.
(b) Other Legends. Any other legends required by the Law or
-------------
other applicable state blue sky laws. The Company need not register a transfer
of legended Securities, and may also instruct its transfer agent not to register
the transfer of the Securities, unless the conditions specified in each of the
foregoing legends are satisfied.
4.3 Removal of Legend and Transfer Restrictions. Any legend endorsed
-------------------------------------------
on a certificate pursuant to subsection 4.2 and the stop transfer instructions
with respect to such legended Securities shall be removed, and the Company shall
issue a certificate without such legend to the holder of such Securities if such
Securities are registered under the Act and a prospectus meeting the
requirements of Section 10 of the Act is available or if such holder satisfies
the requirements of Rule 144(k) and, where reasonably deemed necessary by the
Company, the holder of the Securities provides the Company with an opinion of
counsel for such holder, reasonably satisfactory to the Company, to the effect
that (i) such holder meets the requirements of Rule 144(k) or (ii) a public
sale, transfer or assignment of such Securities may be made without
registration.
4.4 Rule 144. Each Purchaser is aware of the adoption of Rule 144 by
--------
the SEC promulgated under the Act, which permits limited public resales of
securities acquired in a nonpublic offering, subject to the satisfaction of
certain conditions. Each Purchaser understands that under Rule 144, the
conditions include, among other things, the availability of certain current
public information about the issuer and the resale occurring not less than one
(1) year after the party has purchased and paid for the securities to be sold.
5. Conditions to Closing.
---------------------
5.1 Conditions to Each Purchaser's Obligations at the Closing. The
---------------------------------------------------------
obligation of each Purchaser to purchase the Preferred Shares at the Closing is
subject to the fulfillment to each Purchaser's satisfaction, on or prior to the
Closing Date, of the following conditions, any of which may be waived in
accordance with the provisions of Section 7.3 hereof.
(a) Representations and Warranties Correct, Performance of
------------------------------------------------------
Obligations. The representations and warranties made by the Company in Section
3 hereof, when read together with Exhibit B, shall be true and correct when
---------
made, and shall be true and correct in all respects on the Closing Date with the
same force and effect as if they had been made on and as of said date. The
Company's Business and assets shall not have been subject to any Material
Adverse Change prior to the
<PAGE>
Closing Date.
(b) Consents and Waivers. The Company shall have obtained in a timely
--------------------
fashion any and all consents, permits and waivers necessary or appropriate for
consummation of the transactions contemplated by this Agreement.
Board of Directors; Board Committees. The Board of Directors shall be
------------------------------------
set at five (5) members and shall initially consist of Gary R. Martino, Albert
R. Subbloie, Jr., Eric Jeck, Brad Garlinghouse and a director to be identified
after the Closing. The Compensation Committee of the Board of Directors shall
consist of Albert R. Subbloie, Brad Garlinghouse and a non-management director.
The Audit Committee of the Board of Directors shall consist of Brad Garlinghouse
and two other non-management directors.
No Material Adverse Change. The business, properties, assets or
--------------------------
condition (financial or otherwise) of the Company shall not have been materially
adversely affected since the date of this Agreement, whether by fire, casualty,
act of God or otherwise, and there shall have been no other changes in the
Business of the Company that would have a Material Adverse Change.
Filing of the Restated Certificate. The Restated Certificate shall
----------------------------------
have been filed with the Secretary of State of the State of Connecticut.
Rights Agreement. The Company and each Purchaser shall have executed
----------------
the Rights Agreement attached hereto as Exhibit D.
---------
Right of First Refusal Agreement. The Company, each Purchaser and IMA
--------------------------------
(as defined in the Right of First Refusal Agreement) shall have executed the
Right of First Refusal Agreement attached hereto as Exhibit E.
---------
Compliance Certificate. The Company shall have delivered a
----------------------
Certificate, executed by the President of the Company and dated the Closing
Date, certifying to the fulfillment of the conditions specified in subsections
(a) and (b) of this Section 5.1.
Opinion of Counsel. The Purchasers shall have received an opinion from
------------------
LeBoef, Lamb, Greene & MacRae, L.L.P., the Company's counsel, in substantially
the form attached hereto as Exhibit F.
---------
Proprietary Information and Inventions Agreement. Each officer,
------------------------------------------------
employee and consultant of the Company and Subsidiaries shall have executed the
Company's standard Proprietary Information and Inventions Agreement.
Option Reserve. The Company shall have reserved an aggregate of
--------------
1,555,000 shares of Common Stock for issuance upon the exercise of options
granted under the Company's 1999 Stock Option Plan.
IMA Warrant. At the Closing, IMA, a Connecticut corporation ("IMA"),
-----------
shall have issued to the Purchasers listed on schedule 5.1(l) warrants for an
aggregate amount of
<PAGE>
five percent (5%) of IMA's capital stock on a fully diluted basis. The warrant
shall have an exercise price of $4.00 per share and shall be in form attached
hereto as Exhibit G.
---------
Option for IMA Shares. At the Closing, IMA shall have issued an
---------------------
option to the Purchasers pursuant to which the Purchasers may acquire an
aggregate of __________ shares of IMA Common Stock at a purchase price of $6.20
per share provided that the Purchasers shall simultaneously redeem all of their
Series A Shares for a redemption price equal to the liquidation value thereof.
A form of the option, which may be exercised any time prior to August 12, 2002
is attached hereto as Exhibit H.
---------
Conditions to Obligations of the Company at the Closing. The Company's
-------------------------------------------------------
obligation to sell and issue the Preferred Shares at the Closing is subject to
the fulfillment to the satisfaction of the Company on or prior to the Closing
Date of the following conditions, any of which may be waived in accordance with
the provisions of Section 7.3 hereof:
(a) Representations and Warranties Correct. The representations
--------------------------------------
and warranties made by the Purchasers in Section 4 hereof shall be true and
correct when made, and shall be true and correct on the Closing Date with the
same force and effect as if they had been made on and as of said date.
(b) Conditions Fulfilled. The conditions set forth in
--------------------
subsections (b), (d), (e), (f), (g), (j) and (k) of Section 5.1 shall have been
fulfilled.
(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 Agreement and the Related
Agreements (except for such as may be properly obtained subsequent to the
Closing).
(d) Payment of Purchase Price. Purchasers shall have delivered
-------------------------
the Purchase Price to the Company as provided for in Section 2.2 of this
Agreement.
Post Closing Obligations of the Company. Within sixty (60) days of the
---------------------------------------
Closing the Company covenants to use its best efforts to obtain the consent of
its Board of Directors and its shareholders to reincorporate the Company to the
State of Delaware and to effectuate such reincorporation.
6. Termination.
-----------
6.1 Termination by Mutual Written Consent. This Agreement may be
-------------------------------------
terminated, and the transactions contemplated hereby abandoned, at any time
prior to the Closing by the written agreement of the Company and the Purchasers.
6.2 Termination for Breach. This Agreement may be terminated and the
----------------------
transactions contemplated hereby may be abandoned at any time before the Closing
(or any date to which the Closing may have been extended by the written
agreement of the parties obligated to perform on such Closing) by any party
obligated to perform on the Closing if the conditions for its benefit set forth
in Sections 5.1 and 5.2, as the case may be, have not been satisfied on or prior
to the
<PAGE>
Closing and if the conditions for the benefit of the other parties have been
satisfied or waived, and if such performing party shall have given written
notice of termination to the non-performing party.
6.3 Termination for Delay. Unless earlier terminated in accordance
---------------------
with Section 6.1 or 6.2, this Agreement may be terminated and the transactions
contemplated hereby may be abandoned by the Company or the Purchasers if the
Closing does not occur by August 18, 1999; provided, however, that the right to
-------- -------
terminate this Agreement under this Section 6.3 shall not be available to any
party whose failure to fulfill any obligation under this Agreement has been the
cause of, or resulted in, the failure of the Closing to occur on or before such
date.
6.4 Rights After Termination. Upon termination of this Agreement
------------------------
under this Section 6, the parties shall be released from all obligations arising
hereunder, except as to any liability for misrepresentations, breach or default
in connection with any warranty, representation, covenant, duty or obligation
given, occurring or arising prior to the date of termination if the non-
breaching party has detrimentally relied thereon.
7. Miscellaneous.
-------------
7.1 Survival of Representations. The representations, warranties,
---------------------------
covenants and agreements made herein or in any certificates or documents
executed in connection herewith shall survive the execution and delivery hereof
and the closing of the transaction contemplated hereby.
7.2 Parties in Interest. Except as otherwise set forth herein, all
-------------------
covenants, agreements, representations, warranties and undertakings contained in
this Agreement shall be binding on and shall inure to the benefit of the
respective successors and assigns of the parties hereto (including transferees
of any of the Preferred Shares). The parties agree to maintain in confidence
the terms of the purchase of the Preferred Shares hereunder, except that (i) the
Purchaser may disclose such terms to its existing investors in the ordinary
course, (ii) the Company may disclose such terms to its shareholders in the
ordinary course, and (iii) the Purchasers and the Company may disclose the
general terms of the transactions contemplated hereby (parties, valuation, money
received, general structure, etc.) to potential employees, vendors, business
partners, customers, and business press and (iv) IMA may make any disclosures
that in its judgment are required by applicable securities laws.
7.3 Amendments and Waivers. Amendments or additions to this
----------------------
Agreement may be made, agreements with any decision of the Company may be made,
and compliance with any term, covenant, agreement, condition or provision set
forth herein may be omitted or waived (either generally or in a particular
instance and either retroactively or prospectively) upon the written consent of
the Company and the holders of a majority of the Preferred Shares (or Common
Stock issued upon conversion of the Preferred Shares). Prompt notice of any
such amendment or waiver shall be given to any person who did not consent
thereto. This Agreement (including the Schedules and Exhibits annexed hereto,
which are an integral part of this Agreement) constitutes the full and complete
agreement of the parties with respect to the subject matter hereof.
<PAGE>
7.4 Notices. All notices, requests, consents, reports and demands
-------
shall be in writing and shall be hand delivered, sent by facsimile or other
electronic medium, or mailed, postage prepaid, to the Company or to the
Purchasers at the address set forth below each party's signature to this
Agreement or to such other address as may be furnished in writing to the other
parties hereto.
7.5 Expenses. Each party hereto will pay its own expenses in
--------
connection with the transactions contemplated hereby; provided, however, that if
-------- -------
and only if the acquisition of the Preferred Shares is consummated, the Company
shall pay all reasonable costs and expenses of the Purchasers in connection with
the investigation, preparation, execution and delivery of this Agreement (and
due diligence related thereto) and the other instruments and documents to be
delivered hereunder and the transactions contemplated hereby and thereby,
including the reasonable fees and disbursements of special counsel to the
Purchasers, not to exceed $30,000 in the aggregate for all such costs and
expenses.
7.6 Counterparts. This Agreement and any Exhibit hereto may be
------------
executed in multiple counterparts, each of which shall constitute an original
but all of which shall constitute but one and the same instrument. One or more
counterparts of this Agreement or any Exhibit hereto may be delivered via
telecopier, with the intention that they shall have the same effect as an
original counterpart hereof.
7.7 Effect of Headings. The article and section headings herein are
------------------
for convenience only and shall not affect the construction hereof.
7.8 Adjustments. All provisions of this Agreement shall be
-----------
automatically adjusted to reflect any split of capital interests (in the nature
of a stock split), distribution of additional capital interests to the existing
holders of capital interests (in the nature of a stock dividend) or other such
form of recapitalization.
7.9 Governing Law. This Agreement shall be deemed a contract made
-------------
under the laws of Connecticut and together with the rights and obligations of
the parties hereunder, shall be construed under and governed by the laws of
Connecticut.
7.10 Entire Agreement. This Agreement and the other documents
----------------
delivered pursuant hereto constitute the full and entire understanding and
agreement between the parties with regard to the subjects hereof and thereof and
they supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
7.11 Severability. In case any provision of this Agreement shall be
------------
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Series A
Preferred Stock Purchase Agreement as of the date first written above.
buyingedge.com inc.
a Connecticut corporation
By:
Gary R. Martino, Chief Executive Officer
Address: One Corporate Drive, Suite 400
Shelton, CT 06484
Signature Page to Series A Preferred Stock Purchase Agreement
<PAGE>
PURCHASERS:
----------
CMG@VENTURES III, LLC
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
@VENTURES III, L.P.
By:
Name: Brad Garlinghouse
Title: General Partner
Address: 3000 Alpine Road
Menlo Park, CA 94028
@VENTURES INVESTORS, LLC
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
Signature Page to Series A Preferred Stock Purchase Agreement
<PAGE>
Wand Equity Portfolio Fund II L.P.
By:
Name:_____________
Title:____________
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
Wand Affiliates Fund L.P.
By:
Name:_____________
Title:____________
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
Madrona Investment Group L.L.C.
By:
Name:_____________
Title:____________
Address: 1000 Second Avenue
Suite 3700
Seattle, WA 98104
Amicus Web
By:
Name:_____________
Title:____________
Signature Page to Series A Preferred Stock Purchase Agreement
<PAGE>
Address: 188 The Embarcadero, Third Floor
San Francisco, CA 94105
Signature Page to Series A Preferred Stock Purchase Agreement
<PAGE>
EXHIBIT A
---------
Amended and Restated Certificate of Incorporation
of buyingedge.com inc.
<PAGE>
EXHIBIT B
---------
buyingedge.com inc. Disclosure Schedule
<PAGE>
EXHIBIT C
---------
Form of buyingedge.com inc. Agreement Regarding Confidentiality & Proprietary
Information
<PAGE>
EXHIBIT D
---------
Rights Agreement
<PAGE>
EXHIBIT E
---------
Right of First Refusal Agreement
<PAGE>
EXHIBIT F
---------
Opinion of Company Counsel
<PAGE>
EXHIBIT G
---------
Form of Warrant
<PAGE>
Schedule 1.2
------------
Schedule of Purchasers
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
No. of Series A
Name Preferred Shares Aggregate Purchase Price
- -------------------------------------------------------------------------------
<S> <C> <C>
CMG@Ventures III, LLC 799,176 $ 1,502,450.88
- -------------------------------------------------------------------------------
@Ventures III, L.P. 3,136,463 $ 5,896,550.44
- -------------------------------------------------------------------------------
@Ventures Investors, LLC 80,319 $ 150,999.72
- -------------------------------------------------------------------------------
Wand Equity Portfolio Fund II L.P. 531,915 $ 1,000,000.20
- -------------------------------------------------------------------------------
Wand Affiliates Fund L.P. 531,915 $ 1,000,000.20
- -------------------------------------------------------------------------------
Madrona Investment Group L.L.C. 106,383 $ 200,000.04
- -------------------------------------------------------------------------------
Amicus Capital, LLC 132,979 $ 250,000.52
- -------------------------------------------------------------------------------
TOTALS $10,000,002.00
- -------------------------------------------------------------------------------
</TABLE>
<PAGE>
Schedule 3.6
------------
Unaudited Financial Statements for buyingedge.com inc.
<PAGE>
Schedule 3.11
-------------
Real Property of buyingedge.com inc.
<PAGE>
Schedule 3.13
-------------
Intellectual Property of buyingedge.com inc.
<PAGE>
Schedule 3.16
-------------
Contracts and Commitments of buyingedge.com inc.
<PAGE>
Schedule 3.19
-------------
buyingedge.com inc. Insurance Policies
<PAGE>
Schedule 3.20
-------------
buyingedge.com inc. Employee Matters
<PAGE>
Schedule 5.1(l)
---------------
<TABLE>
<CAPTION>
- ------------------------------------------------------------------------------
Purchasers Warrant Shares Option Shares
- ------------------------------------------------------------------------------
<S> <C> <C>
CMG@Ventures III, LLC 93,311 242,331
- ------------------------------------------------------------------------------
@Ventures III, L.P. 366,209 951,056
- ------------------------------------------------------------------------------
@Ventures Investors, LLC 9,378 24,355
- ------------------------------------------------------------------------------
Wand Equity Portfolio Fund II L.P. 62,106 161,290
- ------------------------------------------------------------------------------
Wand Affiliates Fund L.P. 62,106 161,290
- ------------------------------------------------------------------------------
Madrona Investment Group L.L.C. 12,421 32,258
- ------------------------------------------------------------------------------
Amicus Capital, LLC 15,526 40,323
- ------------------------------------------------------------------------------
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
1. Authorization and Sale of the Shares 1
1.1 Authorization; Filing of Restated Articles of Incorporation 1
1.2 Sale and Issuance of the Preferred Shares 1
2. Closing; Delivery 1
2.1 Closing Date 1
2.2 Delivery 1
2.3 Use of Proceeds 1
3. Representations and Warranties of the Company 2
3.1 Organization, Good Standing and Power 2
3.2 Authorization 2
3.3 Government Approvals 2
3.4 Capitalization 2
3.5 Subsidiaries 3
3.6 Financial Information 3
3.7 Events Subsequent to the Date of the Financial Statements 4
3.8 Litigation 4
3.9 Compliance with Laws and Other Instruments 5
3.10 Taxes 5
3.11 Real Property 6
3.12 Personal Property 6
3.13 Patents, Trademarks, etc 6
3.14 Agreements of Directors, Officers and Employees 7
3.15 Governmental Approvals 8
3.16 Contracts and Commitments 8
3.17 Securities Act 8
3.18 Registration Rights 8
3.19 Insurance Coverage 8
3.20 Employee Matters 9
3.21 Labor Agreements and Actions 9
3.22 No Brokers or Finders 9
3.23 Transactions with Affiliates 10
3.24 Assumptions, Guarantees, Etc. of Indebtedness of Other Persons 10
3.25 Disclosures 10
3.26 Year 2000 Compatibility 10
4. Representations and Warranties of Purchasers and Restrictions on
Transfer Imposed by the Securities Act 10
4.1 Representations and Warranties by the Purchasers 10
4.2 Legends 12
4.3 Removal of Legend and Transfer Restrictions 13
</TABLE>
<PAGE>
TABLE OF CONTENTS
(continued)
<TABLE>
<CAPTION>
Page
----
<S> <C>
4.4 Rule 144 13
5. Conditions to Closing 13
5.1 Conditions to Each Purchaser's Obligations at the Closing 13
5.2 Conditions to Obligations of the Company at the Closing 15
6. Termination 15
6.1 Termination by Mutual Written Consent 15
6.2 Termination for Breach 15
6.3 Termination for Delay 15
6.4 Rights After Termination 16
7. Miscellaneous 16
7.1 Survival of Representations 16
7.2 Parties in Interest 16
7.3 Amendments and Waivers 16
7.4 Notices 16
7.5 Expenses 16
7.6 Counterparts 17
7.7 Effect of Headings 17
7.8 Adjustments 17
7.9 Governing Law 17
7.10 Entire Agreement 17
7.11 Severability 17
</TABLE>
<PAGE>
Exhibit 10.5
Rights Agreement
----------------
This Rights Agreement (the "Agreement") is entered into as of August 12,
1999, by and among buyingedge.com inc., a Connecticut corporation (the
"Company"), Information Management Associates, Inc., a Connecticut corporation
("IMA"), and MarketNet, L.L.C., a Delaware limited liability company
("MarketNet"), and the individuals or entities listed on Schedule I hereto (the
"Investors"). All outstanding shares of the Company of any class or series held
by any shareholder, whether currently owned or acquired in the future, are
referred to herein as the "Shares."
RECITALS
--------
A. WHEREAS, the Company proposes to issue shares of Series A Preferred
Stock (the "Series A Preferred Stock") to the Investors pursuant to that certain
Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") by and
among the Company and the Investors of even date herewith;
B. WHEREAS, IMA, MarketNet and the Company have entered into the
Registration Rights Agreement dated May 25, 1999 pursuant to which the Company
granted certain registration rights to IMA and MarketNet (the "Prior Rights
Agreement").
C. WHEREAS, to induce the Investors to enter into the Purchase Agreement,
the Company, IMA, MarketNet and the Investors have agreed to enter into this
Agreement to provide for certain rights, privileges and preferences in favor of
the Investors, IMA and Marketnet.
AGREEMENT
---------
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
Certain Definitions. Terms used in this Article I, and not otherwise
-------------------
defined, shall have the meanings assigned to them in the Purchase Agreement.
The following terms shall have the following respective meanings:
"Commission" shall mean the Securities and Exchange Commission or any
----------
other federal agency at the time administering the Securities Act.
"Conversion Stock" means the Common Stock issued or issuable upon
----------------
conversion of the Series A Preferred Stock.
"Exchange Act" shall mean the Exchange Act of 1934, as amended, or any
------------
similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
1
<PAGE>
"Holder" shall mean any party holding Registrable Securities and any
------
person holding Registrable Securities to whom the rights under this Article I
have been transferred in accordance with Section 11 of this Article I.
"Initiating Holders" shall mean any Holder or Holders of at least
------------------
twenty-five percent (25%) of the Registrable Securities.
"Qualified IPO" means the first underwritten sale of the Company's
-------------
securities to the public pursuant to a registration statement under the
Securities Act in which the Company receives gross proceeds of not less than
$20,000,000 and the offering price per share is at least $7.52, which price
shall be proportionally adjusted to take into account any stock splits, stock
dividends, recapitalization or similar event occurring after August 12, 1999 or
upon a vote of a majority of the Series A Preferred Stock.
"Registrable Securities" means (i) the Conversion Stock or (ii) stock
----------------------
issued in respect of the stock referred to in (i) as a result of a stock split,
stock dividend, recapitalization or the like, and in the case of (i) and (ii)
which has not been sold to the public or pursuant to Rule 144 promulgated under
the Securities Act, excluding in all cases, however, (x) any securities for
which the registration rights have terminated pursuant to Section 13 hereof and
(y) any Registrable Securities transferred by any person in a transaction in
which the rights under this Article I are not assigned in accordance with this
Agreement. Furthermore, solely for purposes of Sections 2, 3 and 5-13 of
Article I of this Agreement, the term "Registrable Securities" shall include
shares of Common Stock held by IMA and MarketNet.
The terms "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 the
effectiveness of such registration statement.
"Registration Expenses" shall mean all expenses, except as included in
---------------------
Selling Expenses or as otherwise stated below, incurred by the Company in
complying with Sections 2, 3 and 4 of this Article I, including, without
limitation, all registration, qualification and filing fees, printing expenses,
escrow fees, fees and disbursements of counsel for the Company, blue sky fees
and expenses, 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) and the reasonable fees
and disbursements of one special counsel for all Holders in the event of each
registration provided for in Sections 2, 3 and 4 of this Article I.
"Securities Act" shall mean the Securities Act of 1933, as amended, or
--------------
any similar federal statute and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time.
"Selling Expenses" shall mean all underwriting discounts, selling
----------------
commissions and stock transfer taxes applicable to the securities registered by
the Holders.
Requested Registration.
----------------------
Request for Registration. Subject to the provisions of Section 2(b)
------------------------
below, if at any
2
<PAGE>
time after the earlier of (i) six (6) months after the effective date of the
Qualified IPO or (ii) August 12, 2002, the Company shall receive from Initiating
Holders a written request that the Company effect any registration with respect
to any of their Registrable Securities in which the anticipated aggregate
proceeds is at least $5,000,000, the Company will:
promptly give written notice of the proposed registration,
qualification or compliance to all other Holders; and
as soon as practicable, use commercially reasonable efforts to
effect such registration, qualification or compliance (including, without
limitation, appropriate qualification under applicable blue sky or other state
securities laws and appropriate compliance with applicable regulations issued
under the Securities Act and any other governmental requirements or regulations)
as may be so requested and as would permit or facilitate the sale and
distribution of all or such portion of such Registrable Securities as are
specified in such request, together with all or such portion of the Registrable
Securities of any Holder or Holders joining in such request as are specified in
a written request received by the Company within twenty (20) days after receipt
of such written notice from the Company; provided, however, that the Company
-------- -------
shall not be obligated to take any action to effect any such registration,
qualification or compliance pursuant to this Section 2:
In any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
Within ninety (90) days of the effective date of any
registration statement pertaining to securities of the Company (other than a
registration of securities in a Rule 145 transaction or with respect to an
employee benefit plan), provided that the Company is actively employing in good
faith all reasonable efforts to cause such registration statement to become
effective;
After the Company has effected three (3) such registrations
pursuant to this Section 2(a), and such registrations have been declared
effective under the Securities Act; or
If the Company shall furnish to such Initiating Holders a
certificate, signed by the President of the Company, stating that in the good
faith judgment of the Board of Directors it would be detrimental to the Company
or its shareholders for a registration statement to be filed in the near future,
then the Company's obligation to use its commercially reasonable efforts to
register, qualify or comply under this Section 2 shall be deferred for a period
not to exceed one hundred twenty (120) days from the date of receipt of the
written request from the Initiating Holders; provided, however, that the Company
-------- -------
may not utilize this right more than once in any twelve (12) month period.
Subject to the foregoing clauses through , the Company shall file a
registration statement covering the Registrable Securities so requested to be
registered as soon as practicable
3
<PAGE>
after receipt of the request or requests of the Initiating Holders.
Underwriting. In the event that a registration pursuant to this
------------
Section 2 is for a registered public offering involving an underwriting, the
Company shall so advise the Holders as part of the notice given pursuant to
Section 2(a)(i) of this Article I. In such event, the right of any Holder to
participate in such registration shall be conditioned upon such Holder's
participation in the underwriting arrangements required by this Section 2(b),
and the inclusion of such Holder's Registrable Securities in the underwriting to
the extent requested shall be limited to the extent provided herein.
The Company shall (together with all Holders proposing to distribute their
securities through such underwriting) enter into an underwriting agreement in
customary form with the managing underwriter selected for such underwriting by
the Company and a majority in interest of the Initiating Holders.
Notwithstanding any other provision of this Section 2, if the managing
underwriter determines that marketing factors require limitation of the number
of shares to be underwritten, the managing underwriter may limit the Registrable
Securities to be included in such registration. The Company shall so advise all
Holders and other holders, if any, distributing their securities through such
underwriting and the number of shares of securities that may be included in the
registration and underwriting (other than on behalf of the Company) shall be
allocated among all Holders and such other holders (provided that such other
holders have contractual rights to participate in such registration which are
not subordinate to the Holders) in proportion, as nearly as practicable, to the
respective amounts of Registrable Securities or other securities requested to be
included in such registration by such Holders and such other holders; provided,
--------
however, in no event shall the amount of Registrable Securities of the Holders
- -------
included in the offering be reduced below fifty percent (50%) of the total
amount of securities included in such offering (such 50% to be allocated among
the participating Holders pro rata based on the amount of Registrable Securities
--- ----
owned by each Holder). No Registrable Securities excluded from the underwriting
by reason of the managing underwriter's marketing limitation shall be included
in such registration. To facilitate the allocation of shares in accordance with
the above provisions, the Company or the managing underwriter may round the
number of shares allocated to any Holder to the nearest one hundred (100)
shares.
If any Holder of Registrable Securities disapproves of the terms of the
underwriting, such person may elect to withdraw therefrom by written notice to
the Company, the managing underwriter and the Initiating Holders delivered at
least twenty (20) days prior to the anticipated effective date of the
registration statement. The Registrable Securities and/or other securities so
withdrawn shall also be withdrawn from registration, and such securities shall
not be transferred in a public distribution prior to ninety (90) days after the
effective date of such registration, or such other longer period (not to exceed
one hundred and eighty (180) days) of time as the managing underwriter may
require.
If the managing underwriter has not limited the number of Registrable
Securities to be underwritten, the Company may include securities for its own
account (or for the account of other purchasers) in such registration if the
managing underwriter so agrees and if the number of Registrable Securities that
would otherwise have been included in such registration and underwriting will
not thereby be limited.
4
<PAGE>
If, pursuant to the provisions of this Section 2, the Company attempts to
register Registrable Securities and a majority in interest of the Holders that
requested such registration subsequently withdraw from such offering and, as a
result, the offering of any Registrable Securities does not occur, then such
withdrawal shall be deemed a demand registration for purposes of this Section 2
unless either (i) the withdrawal is due to material adverse information which
was previously not known to the Holders or (ii) the Registration Expenses of the
Company are fully reimbursed by the Holders.
Company Registration.
--------------------
Notice of Registration. If at any time or from time to time the
----------------------
Company shall determine to register any of its securities, either for its own
account or the account of a security holder or holders, other than (i) a
registration relating solely to employee benefit plans, (ii) a registration
relating solely to a Commission Rule 145 transaction, (iii) a registration
effected pursuant to Sections 2 or 4 of this Article I or (iv) a registration on
any registration form that does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of Registrable Securities, the Company
will:
promptly give to each Holder written notice thereof; and
include in such registration (and any related qualification under
blue sky laws or other compliance requirements), and in any underwriting
involved therein, all the Registrable Securities specified in a written request
or requests, made within fifteen (15) days after receipt of such written notice
from the Company, by any Holder.
Underwriting. If the registration of which the Company gives notice
------------
is for a registered public offering involving an underwriting, the Company shall
so advise the Holders as a part of the written notice given pursuant to Section
3(a)(i) above. In such event, the right of any Holder to participate in such
registration shall be conditioned upon such Holder's participation in such
underwriting to the extent provided herein. All Holders proposing to distribute
their securities through such underwriting shall (together with the Company and
any other holders distributing their securities through such underwriting) enter
into an underwriting agreement in customary form with the managing underwriter
selected for such underwriting by the Company, but subject to the reasonable
approval of the Company's Board of Directors. Notwithstanding any other
provision of this Section 3, if the managing underwriter determines that
marketing factors require limitation of the number of shares to be underwritten,
the managing underwriter may limit the Registrable Securities to be included in
such registration. The Company shall so advise all Holders and other holders
distributing their securities through such underwriting and the number of shares
of securities that may be included in the registration and underwriting (other
than on behalf of the Company) shall be allocated among all Holders and such
other holders (provided that such other holders have contractual rights to
participate in such registration which are not subordinate to the Holders) in
proportion, as nearly as practicable, to the respective amounts of Registrable
Securities or other securities requested to be included in such registration by
such Holders and such other holders; provided, however, in no event shall the
-------- -------
amount of Registrable Securities of the Holders included in the offering be
reduced below twenty-five
5
<PAGE>
percent (25%) of the total amount of securities included in such offering (such
25% to be allocated among the participating Holders pro rata based on the amount
--- ----
of Registrable Securities owned by each Holder), unless (i) such offering is the
Qualified IPO in which case the Holders may be excluded entirely if the managing
underwriter makes the determination described above and all other holders of the
Company's securities are first excluded entirely or (ii) the Holders holding a
majority of the Registrable Securities consent in writing to such a reduction.
To facilitate the allocation of shares in accordance with the above provisions,
the Company may round the number of shares allocated to any Holder or holder to
the nearest one hundred (100) shares. If any Holder or holder disapproves of the
terms of any such underwriting, he may elect to withdraw therefrom by written
notice to the Company and the managing underwriter delivered at least twenty
(20) days prior to the anticipated effective date of the registration statement.
Any securities excluded or withdrawn from such underwriting shall be withdrawn
from such registration, and shall not be transferred in a public distribution
prior to ninety (90) days after the effective date of the registration statement
relating thereto, or such other longer period (not to exceed one hundred and
eighty (180) days) of time as the managing underwriter may require.
Registration Rights of Officers and Directors. Upon any sale by
---------------------------------------------
the Company of shares of its Common Stock to the public in a firmly underwritten
public offering, any officer or director designated by the Company's Board of
Directors shall be entitled to include any of his shares of Common Stock in any
registration by the Company under this Section 3, provided that in the case of
an officer or director who chooses to include any of his securities in such
registration, such officer or director shall continue to serve the Company as an
officer or director on the effective date of such registration statement, and
such officer or director agrees to be bound by all other provisions of this
Agreement and participate in any such registration on the same basis as each
Holder in accordance with all applicable provisions of this Agreement (such
persons are collectively referred to as "Employee-Holders"); provided, however,
-------- -------
that such officer or director shall have the number of shares that it or he may
register limited by the managing underwriter before any Holder's Registrable
Securities are so limited.
Registration on Form S-3.
------------------------
If Holders of at least 30% of the Registrable Securities request
that the Company file a registration statement on Form S-3 (or any successor
form to Form S-3) for a public offering of shares of the Registrable Securities
the reasonably anticipated aggregate price to the public of which, net of
underwriting discounts and commissions, would exceed $5,000,000, and the Company
is a registrant entitled to use Form S-3 to register the Registrable Securities
for such an offering, the Company shall use reasonable efforts to cause such
Registrable Securities to be registered for the offering on such form and to
cause such Registrable Securities to be qualified in such jurisdictions as the
Holders may reasonably request. The substantive provisions of Section 2(b) of
this Article I shall be applicable to each registration initiated under this
Section 4.
Notwithstanding the foregoing, the Company shall not be obligated
to take any action pursuant to this Section 4:
with respect to more than one registration on For S-3 in any
12 month period;
6
<PAGE>
if Form S-3 (or a successor form) is not available for such
offering;
in any particular jurisdiction in which the Company would be
required to execute a general consent to service of process in effecting such
registration, qualification or compliance unless the Company is already subject
to service in such jurisdiction and except as may be required by the Securities
Act;
if the Company, within fourteen (14) days of the receipt of the
request of the Holders, gives notice of its bona fide intention to effect the
filing of a registration statement with the Commission within sixty (60) days of
receipt of such request (other than with respect to a registration statement
relating to a Rule 145 transaction, an offering solely to employees or any other
registration which is not appropriate for the registration of Registrable
Securities);
within one hundred twenty (120) days of the effective date of any
registration referred to in Sections 2 and 3 of this Article I, provided that
the Company is actively employing in good faith all reasonable efforts to cause
such registration statement to become effective; or
if the Company shall furnish to such Holders a certificate,
signed by the President of the Company, stating that in the good faith judgment
of the Board of Directors it would be seriously detrimental to the Company or
its shareholders for a registration statement to be filed in the near future,
then the Company's obligation to use reasonable efforts to register, qualify or
comply under this Section 4 shall be deferred for a period not to exceed one
hundred twenty (120) days from the date of receipt of the written request from
the Holder or Holders; provided, however, that the Company may not utilize this
-------- -------
right more than once in any twelve (12) month period.
Limitations on Subsequent Registration Rights. From and after the date
---------------------------------------------
date hereof, without the approval of the holders of a majority of the
Registrable Securities, the Company shall not enter into any agreement granting
any holder or prospective holder of any securities of the Company registration
rights equal to or superior to those of the Holders. Upon obtaining such
approval, the Company will grant the Holders any rights of first refusal or
registration rights granted to subsequent purchasers of the Company's equity
securities to the extent such subsequent rights are superior, in the good faith
judgment of the Company's Board of Directors, to those rights granted in
connection with the issuance of the Series A Preferred Stock to the Holders.
Nothing in this Section 5 shall be deemed to restrict the Company's right to
grant registration rights to individual Employee-Holders pursuant to Section
3(c) of this Article I, or registration rights to other purchasers of the
Company's securities that are not superior to, and in no way interfere with,
those registration rights granted to the Holders.
Expenses of Registration. Except as otherwise provided herein, all
------------------------
Registration Expenses incurred in connection with all registrations pursuant to
Sections 2, 3 and 4 of this Article I shall be borne by the Company. Unless
otherwise stated, all Selling Expenses relating to securities registered on
behalf of the Holders shall be borne by the Holders of such securities pro rata
on the basis of the number of shares so registered.
7
<PAGE>
Registration Procedures. In the case of each registration, qualification
-----------------------
or compliance effected by the Company pursuant to this Article I, the Company
will keep each Holder advised in writing as to the initiation of each
registration and as to the completion thereof. At its expense, the Company will:
Prepare and file with the Commission a registration statement with
respect to such securities and use its best efforts to cause such registration
statement to become and remain effective until the distribution described in the
registration statement has been completed.
Furnish to the Holders participating in such registration and to the
underwriters of the securities being registered such reasonable number of copies
of the registration statement, preliminary prospectus, final prospectus and such
other documents as such Holders and underwriters may reasonably request in order
to facilitate the public offering of such securities.
Prepare and file with the Commission 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.
Use its 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.
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 of such offering.
Use its best efforts to 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.
Use its best efforts to furnish, at the request of any Holder
requesting registration of Registrable Securities pursuant to this Article I, on
the date that such Registrable Securities are delivered to the underwriters for
sale in connection with a registration pursuant to this Article I, if such
securities are being sold through underwriters, or, if such securities are not
being sold through underwriters, on the date that the registration statement
with respect to such securities becomes effective, (i) an opinion, dated 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 to
the Holders requesting registration of Registrable Securities and (ii) a letter,
dated such date, from the independent certified public accountants of the
Company, in form and substance as is customarily
8
<PAGE>
given by independent certified public accountants to underwriters in an
underwritten public offering, addressed to the underwriters, if any, and to the
Holders requesting registration of Registrable Securities.
Indemnification.
---------------
To the extent permitted by law, the Company will indemnify each
Holder, each of its officers and directors and partners, and each person
controlling such person within the meaning of Section 15 of the Securities Act,
with respect to which registration, qualification or compliance has been
effected pursuant to this Article I, and each underwriter, if any, and each
person who controls any underwriter within the meaning of Section 15 of the
Securities Act, against all expenses, claims, losses, damages or liabilities (or
actions in respect thereof), including any of the foregoing incurred in
settlement of any litigation, commenced or threatened, arising out of or based
on any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any omission (or alleged
omission) to state therein a material fact required to be stated therein or
necessary to make the statements therein, in light of the circumstances in which
they were made, not misleading, or any violation by the Company of the
Securities Act or any rule or regulation promulgated under the Securities Act
applicable to the Company in connection with any such registration,
qualification or compliance, and the Company will reimburse each such Holder,
each of its officers and directors and partners, and each person controlling
such Holder, each such underwriter and each person who controls any such
underwriter, for any legal and any other expenses reasonably incurred in
connection with investigating, preparing or defending any such claim, loss,
damage, liability or action, provided that the indemnity agreement contained in
this Section 8(a) shall not apply to amounts paid in settlement of any such
claim, loss, 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 to any such Holder in any such case to the
extent that any such claim, loss, damage, liability or action arises out of or
is based on (i) any untrue statement or omission (or alleged untrue statement or
omission), made in reliance upon and in conformity with written information
furnished to the Company by such Holder, any of its officers and directors and
partners, controlling person of such Holder, underwriter or controlling person
of such underwriter and stated to be specifically for use therein or the
preparation thereby or (ii) use or delivery by such Holder, controlling person
or underwriter of a prospectus other than the most current prospectus made
available to such Holder, controlling person or underwriter by the Company.
To the extent permitted by law, each Employee-Holder will, if
Registrable Securities held by such Employee-Holder are included in the
securities as to which such registration, qualification or compliance is being
effected, indemnify the Company, each of its directors and officers, each
Holder, each of its officers and directors and partners and each person
controlling such other Holder within the meaning of Section 15 of the Securities
Act, each underwriter, if any, of the Company's securities covered by such a
registration statement, each person who controls the Company or such underwriter
within the meaning of Section 15 of the Securities Act, and each other such
Employee-Holder against all expenses, claims, losses, damages and liabilities
(or actions in respect thereof), including any of the foregoing incurred in
9
<PAGE>
settlement of any litigation, commenced or threatened, arising out of or based
on (i) any untrue statement (or alleged untrue statement) of a material fact
contained in any registration statement, prospectus, offering circular or other
document, or any amendment or supplement thereto, incident to any such
registration, qualification or compliance, or based on any 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 (ii) use or delivery
by such Employee-Holder of a prospectus other than the most current prospectus
made available to such Employee-Holder by the Company, and will reimburse the
Company, such Holder, each of its directors, officers, partners, and each person
controlling such Holder or the Company, each such underwriter and each person
who controls any such underwriter for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, other document, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein or the
preparation thereby. Notwithstanding the foregoing, the liability of each
Employee-Holder under this subsection (b) shall be limited to an amount equal to
the aggregate net proceeds received by such Employee-Holder from the shares sold
by such Employee-Holder in the offering in question, unless such liability
arises out of, or is based on willful conduct by, such Employee-Holder.
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, qualification or compliance is being effected, indemnify the
Company, each of its directors and officers, each underwriter, if any, of the
Company's securities covered by such a registration statement, each person who
controls the Company or such underwriter within the meaning of Section 15 of the
Securities Act, and each other such Holder, each of its officers and directors
and partners and each person controlling such other Holder within the meaning of
Section 15 of the Securities Act, against all expenses, claims, losses, damages
and liabilities (or actions in respect thereof), including any of the foregoing
incurred in settlement of any litigation, commenced or threatened, arising out
of or based on (i) any untrue statement (or alleged untrue statement) of a
material fact contained in any registration statement, prospectus, offering
circular or other document, or any amendment or supplement thereto, incident to
any such registration, qualification or compliance, or based on any 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 (ii) use or
delivery by such Holder of a prospectus other than the most current prospectus
made available to such Holder by the Company, and will reimburse the Company,
such Holder, each of its directors, officers, partners, and each person
controlling such Holder or the Company, each such underwriter and each person
who controls any such underwriter for any legal and any other expenses
reasonably incurred in connection with investigating, preparing or defending any
such claim, loss, damage, liability or action, in each case to the extent, but
only to the extent, that such untrue statement (or alleged untrue statement) or
omission (or alleged omission) is made in such registration statement,
prospectus, offering circular, other document, amendment or supplement in
reliance upon and in conformity with written information furnished to the
Company by such Holder and stated to be specifically for use therein or the
preparation thereby. Notwithstanding
10
<PAGE>
the foregoing, the liability of each Holder under this subsection (c) shall be
limited to an amount equal to the aggregate net proceeds received by such Holder
from the shares sold by such Holder in the offering in question, unless such
liability arises out of, or is based on willful conduct by, such Holder.
Each party entitled to indemnification under this Section 8 (the
"Indemnified Party") shall give notice to the party required to provide
indemnification (the "Indemnifying Party") promptly after such Indemnified Party
has actual knowledge of any claim as to which indemnity may be sought, and shall
permit the Indemnifying Party to assume the defense of any such claim or any
litigation resulting therefrom, provided that counsel for the Indemnifying
Party, who shall conduct the defense of such claim or litigation, shall be
approved by the Indemnified Party (whose approval shall not be withheld
unreasonably), and the Indemnified Party may participate in such defense at such
party's expense; provided however, that the Indemnified Party shall have the
-------- -------
right to retain its own counsel, with 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 not be appropriate due to actual or
potential differing interests between such Indemnified Party and any other party
represented by such counsel in such proceeding, and provided further that the
failure of any Indemnified Party to give notice as provided herein shall relieve
the Indemnifying Party of its obligations under this Section 8 to the extent
(but only to the extent) that the failure to give such notice is materially
prejudicial to an Indemnifying Party's ability to defend such action, and
provided further that the Indemnifying Party shall not assume the defense for
matters as to which there is a conflict of interest or material separate and
different defenses. 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.
Information by Holder. The Holders of securities included in any
---------------------
registration shall furnish to the Company such information regarding such
Holders, the Registrable Securities held by them and the distribution proposed
by such Holders as the Company may request in writing and as shall be required
in connection with any registration, qualification or compliance referred to in
this Article I.
Rule 144 Reporting. With a view to making available the benefits of
------------------
certain rules and regulations of the Commission which may at any time permit the
sale of the Registrable Securities to the public without registration, after
such time as a public market exists for the Common Stock of the Company, the
Company agrees to use its best efforts to:
Make and keep public information available, as those terms are
understood and defined in Rule 144 under the Securities Act, at all times after
the effective date that the Company becomes subject to the reporting
requirements of the Securities Act or the Exchange Act.
Use its best efforts to file with the Commission in a timely manner
all reports and other documents required of the Company under the Securities Act
and the Exchange Act (at any time after it has become subject to such reporting
requirements);
11
<PAGE>
So long as a Holder owns any Registrable Securities, furnish to the
Holder forthwith upon request a written statement by the Company as to its
compliance with the reporting requirements of said Rule 144 (at any time after
ninety (90) days after the effective date of the first registration statement
filed by the Company for an offering of its securities to the general public),
and of the Securities Act and the Exchange Act (at any time after it has become
subject to such reporting requirements), a copy of the most recent annual or
quarterly report of the Company, and such other reports and documents of the
Company and other information in the possession of or reasonably obtainable by
the Company as the Holder may reasonably request in availing itself of any rule
or regulation of the Commission allowing the Holder to sell any such securities
without registration.
Transfer of Registration Rights. The rights to cause the Company to
-------------------------------
register securities granted to the Holders under Sections 2, 3 and 4 of this
Article I and the rights set forth in Articles II and III herein may be assigned
to a transferee or assignee reasonably acceptable to the Company in connection
with any transfer or assignment of Registrable Securities by the Holder provided
that the transferor provides the Company with written notice of the proposed
transfer, the transferee agrees in writing to be bound by the provisions of this
Article I and all of the terms and conditions contained in the Purchase
Agreement and: (i) the transferee either acquires all of the transferor's
Registrable Securities not sold to the public or the transferee acquires 100,000
shares (adjusted for stock splits) of the transferor's Registrable Securities
not sold to the public or (ii) the transferee is a partner, shareholder,
affiliated entity or related fund of the Holder.
Standoff Agreement. Each Holder hereby agrees in connection with any
------------------
public offering of the Company's securities that, upon request of the Company or
the underwriters managing any underwritten offering of the Company's securities,
that such Holder will not sell, make any short sale of, loan, grant any option
for the purchase of, or otherwise transfer or dispose of or reduce such Holder's
market risk with respect to any Registrable Securities or other shares of stock
of the Company then owned by such Holder (other than those included in the
registration) without the prior written consent of the Company or such
underwriters, as the case may be, for such period of time as determined by the
Company and its underwriters (not to exceed a period commencing upon the date of
the final prospectus for such registration and ending one hundred eighty (180)
days thereafter); provided, that the executive officers and directors of the
Company and their affiliates who own stock of the Company and any shareholder
holding more than one percent (1%) of the outstanding voting securities of the
Company are also bound by such restrictions. Each Holder agrees to execute any
confirmation of such stand-off agreement that may be reasonably requested by the
underwriters.
Termination. Any registration rights granted pursuant to this Article II
-----------
shall terminate with respect to any Holder upon the earlier of: (i) five (5)
years after the closing date of the Qualified IPO or (ii) after the Qualified
IPO, when all remaining Registrable Securities held or entitled to be held by
such Holder could be sold under Rule 144 (or similar or successor rule) during
any three (3) month period.
12
<PAGE>
RIGHT OF FIRST REFUSAL
----------------------
Right of Purchase. The Company hereby grants to each Investor, so long as
-----------------
such Investor shall own, of record or beneficially, or have the right to acquire
from the Company, any Registrable Securities, the right to purchase all or part
of such Investor's pro rata share of New Securities (as defined in Section 2 of
--- ----
Article II) which the Company, from time to time, proposes to sell and issue to
any person or entities (each an "Additional Investor"). A pro rata share, for
--- ----
purposes of this preemptive right, is the ratio of the number of shares of
Registrable Securities the Investor owns or has the right to acquire from the
Company to the total number of shares of Registrable Securities (calculated as
if converted into Common Stock) and Common Stock then outstanding.
Definition of New Securities. "New Securities" shall mean any capital
----------------------------
stock of the Company, whether now authorized or not, and any rights, options or
warrants to purchase capital stock, and securities of any type whatsoever that
are, or may become convertible into or exchangeable for capital stock, issued on
or after the date hereof; provided that the term "New Securities" does not
-------- ----
include: (i) Registrable Securities (as defined in Article I); (ii) the
aggregate number of stock options (or shares of Common Stock) permitted under
Article IV(B)(6)(b)(i)(A) of the Amended and Restated Certificate of
Incorporation of the Company (the "Amended Certificate"); (iii) capital stock
issued pursuant to Article IV(B)(6)(b)(i)(B) or (C) of the Amended Certificate;
(iv) capital stock issued in connection with bona fide acquisitions, mergers,
strategic partnerships or similar transactions, the terms of which are approved
by the Company's Board of Directors, including at least one of the directors
appointed by the holders of Series A Preferred Stock; (v) capital stock issued
upon conversion or exercise of securities outstanding as of the date hereof
(including Series A Preferred Stock) (or capital stock issuable upon conversion
of such capital stock); and (vi) securities offered by the Company to the public
pursuant to a registration statement filed under the Securities Act.
Notice from the Company. In the event the Company proposes to
-----------------------
undertake an issuance of New Securities, it shall give each Investor entitled to
a preemptive right hereunder written notice of its intention, describing the
type of New Securities and the price and the terms upon which the Company
proposes to issue the same. Such Investor shall have twenty (20) business days
from the date any such notice is given to agree to purchase up to its pro rata
--- ----
share of such New Securities (and any over-allotment amount pursuant to the
operation of Section 4 hereof) for the price and upon the terms specified in the
notice by giving written notice to the Company and stating therein the quantity
of New Securities to be purchased.
Over-Allotment. In the event an Investor fails to exercise his or its
--------------
pro rata share within said twenty (20) day period, the Company will give the
Investors who did so agree (the "Electing Investors") notice of the number of
shares that were not subscribed for. Such notice may be by telephone if
followed by written confirmation (facsimile permitted) within two (2) business
days. The Electing Investors shall have ten (10) business days from the date of
such notice to agree to purchase pro rata (as defined in Section 1 above) all of
--- ----
the New Securities not purchased by the non-purchasing Investors.
13
<PAGE>
Sale by the Company. In the event the Investors fail to exercise in full
-------------------
their preemptive right (after giving effect to the over-allotment provision of
Section 4 hereof), the Company shall have ninety (90) days thereafter to sell
the New Securities with respect to which the Investors' Right of First Refusal
was not exercised, at a price and upon terms no more favorable to the Additional
Investor thereof than specified in the Company's original notice to the
Investors. To the extent the Company does not sell all the New Securities
offered within said ninety (90) day period, the Company shall not issue or sell
such New Securities without first again offering such securities in the manner
provided by this Article II.
Termination of Rights. The rights granted under this Article II will
---------------------
terminate (and shall not apply in connection with): (i) immediately prior to
the Qualified IPO; (ii) upon the acquisition of all or substantially all the
assets of the Company; or (iii) upon a merger, consolidation or other
reorganization in which the Company is not the surviving corporation or which
constitutes a Liquidation, as that term is defined in the Amended Certificate.
OTHER COVENANTS
---------------
Affirmative Covenants of the Company. The Company covenants and agrees
------------------------------------
that it will observe the following covenants on and after the date hereof and
until such covenants terminate in accordance with Section 3 herein.
Accounts and Reports. The Company will, and will cause any of its
--------------------
subsidiaries to, maintain a standard system of accounts in accordance with
generally accepted accounting principles consistently applied, and the Company
will, and will cause each of its subsidiaries to, keep full and complete
financial records. The Company will furnish to each Investor the information
set forth in this Section 1(a):
Within ninety (90) days after the end of each fiscal year, a copy
of the consolidated and consolidating balance sheet of the Company and its
subsidiaries as at the end of such year, together with consolidated and
consolidating statements of income, shareholders' equity and cash flow of the
Company and its subsidiaries for such year, setting forth in each case in
comparative form the corresponding figures for the preceding fiscal year, all in
reasonable detail and duly certified by independent public accountants of
national recognition selected by the Board of Directors of the Company;
Within thirty (30) days after the end of each calendar month, a
preliminary consolidated and consolidating balance sheet of the Company and its
subsidiaries as of the end of such month and preliminary consolidated and
consolidating statements of income, shareholders' equity and cash flow for such
month and for the period commencing at the end of the previous fiscal year and
ending with the end of such month, setting forth in each case in comparative
form the corresponding figures for the corresponding period of the preceding
fiscal year, all in reasonable detail;
14
<PAGE>
At least thirty (30) days prior to the end of each fiscal year, a
copy of the operating plan and budget for the next fiscal year required under
Section 1(d) of this Article III, in a form acceptable to the Investors;
Promptly upon receipt thereof, any written report, so called
"management letter," and any other communication submitted to the Company or any
subsidiary by its independent public accountants relating to the business,
prospects or financial condition of the Company and its subsidiaries; and
Promptly after the commencement thereof, notice of (i) all
actions, suits and proceedings before any court or governmental department,
commission, board, bureau, agency or instrumentality, domestic or foreign,
affecting the Company (or any subsidiary) which, if successful, would represent
a Material Adverse Change as defined in the Purchase Agreement; and (ii) all
material defaults by the Company or any subsidiary (whether or not declared)
under any agreement for money borrowed (unless waived or cured within applicable
grace periods).
Maintenance of Key Man Insurance. Unless otherwise determined by the
--------------------------------
unanimous consent of the Board of Directors, the Company will, at its expense,
(i) use commercially reasonable efforts to obtain within 90 days after the date
of this Agreement, and to maintain a life insurance policy with a responsible
and reputable insurance company payable to the Company on the life of Gary R.
Martino, the Company's Chief Executive Officer, in the face amount of
$2,000,000, or such other amount as the Board of Directors (including at least
one of the directors elected by the Holders of Series A Preferred Stock) may
determine, with the beneficiary of such policy (or policies) to be the Company
and (ii) will maintain the policy and will not cause or permit any assignment of
the proceeds of the policy and will not borrow against the policy. The Company
will add one designee of the Investors as a notice party to the policy, and will
request that the issuer of the policy provide such designee with ten (10) days'
notice before the policy is terminated (for failure to pay premium or otherwise)
or assigned, or before any change is made in the designation of the beneficiary
thereof.
Inspection. At any reasonable time during normal business hours
----------
and from time to time, but not more frequently than once per calendar quarter
for the Investors and transferees of the Investors, the Company (and each of its
subsidiaries) will permit any Investor, or any transferee thereof, or any of
such Investor's agents or representatives of the foregoing, to examine and make
copies of and extracts from the records and books of account of and visit the
properties of the Company (and any of its subsidiaries) and to discuss the
Company's affairs, finances and accounts with any of its officers or directors;
provided that any person or persons exercising rights under this Section 1(c)
- -------- ----
shall (i) use all reasonable efforts to ensure that any such examination or
visit results in a minimum of disruption to the operations of the Company and
(ii) agree in writing to keep any proprietary information of the Company
disclosed to such person in the course of such inspection confidential in a
manner consistent with prudent business practices and treatment of such person's
or persons' own confidential information and not use such proprietary
information for any purpose other than in connection with such Investor's or
such transferee's ownership of an interest in the Company. The rights granted
under this Section 1(c) shall be in addition to any rights that any Investor may
have under applicable law in its capacity as an owner of equity capital of the
Company.
15
<PAGE>
Board Approval. At least thirty (30) days prior to the end of each
--------------
fiscal year, the Company will prepare and submit to its Board of Directors for
its approval prior to such year end an operating plan and budget, cash flow
projections and profit and loss projections, all itemized in reasonable detail
for the immediately following year.
Financings. The Company will promptly provide to the Board of
----------
Directors the details and terms of, and any brochures or investment memoranda
prepared by the Company, related to any possible financing of any nature for the
Company (or any of its subsidiaries), whether initiated by the Company or any
other person.
Board of Directors Matters. The Directors shall schedule regular
--------------------------
meetings, which initially shall be not less frequently than once every month
unless otherwise agreed to by a majority of the members of the Board of
Directors, which majority shall include the directors designated by @Ventures
under the Amended Certificate. The Company shall reimburse all directors for
all direct out-of-pocket expenses reasonably and customarily incurred by such
directors in attending such meetings. In addition to approving all material
transactions, policies and other matters normally approved by a board of
directors under applicable state law, the Board of Directors shall approve each
of the following: (i) significant (as defined from time to time by the
Company's Board of Directors) distribution, licensing or other arrangements or
contracts, (ii) new indebtedness, other than bank borrowing in the ordinary
course of business, (iii) material changes in executive compensation, (iv) the
Company's annual operating plan and budget (as provided for in Section 1(d) of
this Article III herein), (v) capital expenditures in excess of amounts
indicated in the annual plan or capital budget, (vi) searches for new senior
executive officers and (vii) the granting of stock options.
Board Size and Composition. Provisions for the size and composition
of the Company's Board are set forth in the Amended Certificate and the
Company's Bylaws, as the case may be.
Compensation Committee. The Company will establish and maintain a
----------------------
Compensation Committee of the Board of Directors. The Compensation Committee
will make recommendations to the full Board of Directors for such matters as
management compensation, Company benefit plans, and matters relating to the
Company's option plans. The Compensation Committee will consist of three
members of the Board of Directors, including a representative of IMA, the
director appointed by @Ventures and an outside director.
Audit Committee. The Company will establish and maintain an Audit
---------------
Committee which will consist of the director appointed by @Ventures and two
other non-management directors.
Employee Matters. The Company shall have each officer, director,
----------------
employee and consultant of the Company execute the Company's standard form of
proprietary information and inventions agreement, which form shall be reasonably
acceptable to the Investors. The Company will use commercially reasonable
efforts to prevent any employee from violating the proprietary information and
inventions agreement entered into between the Company and each of its employees.
The Company shall use commercially reasonable efforts to ensure that the
Company's
16
<PAGE>
employees, during the term of their employment with the Company, do not engage
in activities which would result in a conflict of interest with the Company. The
form of proprietary information and inventions agreement shall contain a
provision which provides that each employee shall not compete with the Company
for one (1) year following termination from the Company.
(K) Directors' and Officers' Indemnification Insurance. The Company
--------------------------------------------------
shall purchase and maintain directors' and officers' indemnification insurance,
provided that the Board of Directors (including at least one of the directors
elected by the holders of Series A Preferred Stock) determines that such
insurance can be obtained and maintained on commercially reasonable terms. The
Company will indemnify each of the directors to the maximum extent permitted
under Connecticut law.
(l) Vesting of Common Stock. Future issuances of Common Stock to
-----------------------
employees and consultants will vest at the rate of twenty five percent (25%)
after one year and 1/48 per month thereafter, although the Board may elect to
modify this vesting schedule in certain cases.
2. Negative Covenants of the Company. Without limiting any other
---------------------------------
covenants and provisions hereof, the Company covenants and agrees that it will
observe the following covenants on and after the date hereof:
(a) Dealings with Affiliates. Without the approval of its Board of
------------------------
Directors, including the approval of at least one of the directors appointed by
the holders of Series A Preferred Stock, the Company will not enter into any
transaction, including, without limitation, any loans or extensions of credit or
royalty agreements, with any officer or director of the Company or any
subsidiary or holder of any class of capital interest or capital stock of the
Company, or any member of their respective immediate families or any corporation
or other entity directly or indirectly controlled by one or more of such
officers, directors, members or shareholders or members of their immediate
families, except for (i) advances in reasonable amounts made to employees of the
Company or any subsidiary for valid business purposes, provided that such
advances are repaid to the Company within ninety (90) days, (ii) salaries
approved by the Compensation Committee of the Board of Directors, (iii) grants
of options to purchase shares of Common Stock approved by the Compensation
Committee of the Board of Directors, and (iv) reimbursements of business-related
expenses upon receipt by the Company of appropriate supporting documentation and
(v) transactions pursuant to the Services Agreement, dated as of May 25, 1999
(the "Services Agreement"), a Space Sharing Agreement, dated as of May 25, 1999
(the "Space Sharing Agreement"), a Software Licensing, Marketing and Non-
Competition Agreement, dated as of May 25, 1999 (the "Marketing Agreement") and
a Registration Rights Agreement, dated as of May 25, 1999 (the "Registration
Rights Agreement").
(b) Stock Options. The Company will not issue shares of its capital
-------------
stock to any employee, consultant or director of the Company or any subsidiary
and will not grant any options, rights or warrants to acquire capital stock in
the Company to any employee, consultant or director of the Company or any
subsidiary, except that up to an aggregate of 4,816,183 options, which have been
reserved under the Company's 1999 Employee and Consultant Stock Option Plan and
1999 Stock Option Plan (or as the Board of Directors may approve an increase in
such reserve, provided that at least one of the directors appointed by the
holders of Series A Preferred Stock
17
<PAGE>
approves such increase), may be issued to directors or employees of, or
consultants to, the Company upon approval by the Company's Board of Directors;
provided that such options are issued pursuant to agreements the form of which
has been approved by the Board of Directors.
(c) Compensation; Consulting and Other Agreements. Except as
---------------------------------------------
approved by the Company's Board of Directors, the Company shall not pay to its
management or consultants compensation in excess of that compensation
customarily paid to management and consultants in companies of similar size, of
similar maturity, in similar business and located in a similar geographic area,
all as determined by the Compensation Committee of the Board of Directors, which
determination shall be conclusive with respect to the provisions of this Section
2(c).
3. Termination of Article III. The rights and restrictive covenants
--------------------------
contained in this Article III will terminate (and will not apply in connection
with): (i) immediately prior to the Qualified IPO or (ii) upon the acquisition
of all or substantially all the assets of the Company.
GENERAL PROVISIONS
------------------
1. Specific Enforcement. Each Investor expressly agrees that the other
--------------------
Investors and the Company may be irreparably damaged if this Agreement is not
specifically enforced. Upon a breach or threatened breach of the terms,
covenants and/or conditions of this Agreement by any Investor, the other
Investors and the Company shall, in addition to all other remedies, each be
entitled to apply for a temporary or permanent injunction, and/or a decree for
specific performance, in accordance with the provisions hereof.
2. Notices. All notices, requests, consents, reports and demands shall
-------
be in writing and shall be deemed to be given if hand delivered, sent by
facsimile or other electronic medium, (including e-mail) or deposited in the
U.S. Mail or with a nationally recognized overnight courier, postage prepaid,
and addressed to the Company or the Investors at the address set forth on
Schedule I hereto or to such other address as may be furnished in writing to the
other parties hereto.
3. Entire Agreement and Amendments. This Agreement constitutes the
-------------------------------
entire agreement of the parties with respect to the subject matter hereof.
Neither this Agreement nor any provision hereof may be waived, modified, amended
or terminated except by a written agreement signed by the parties hereto;
provided, however, that the Company and the Investors holding, in the aggregate,
- -------- -------
fifty percent (50%) in interest of the Registrable Securities held by all
Investors may effect any such waiver, modification, amendment or termination on
behalf of all of the other Investors, holders and other parties hereto or
beneficiaries hereof, so long as the effect of any such waiver, modification,
amendment or termination affects all Investors on a comparable basis. Each of
the Investors represents that such Investor is not a party to any other
agreement that would prevent such Investor from performing Investor's
obligations hereunder. No waiver of any breach or default hereunder shall be
considered valid unless in writing, and no such waiver shall be deemed to be a
waiver of any subsequent breach or default of the same or similar nature.
4. Governing Law; Successors and Assigns. This Agreement shall be
-------------------------------------
governed by the
18
<PAGE>
internal laws of the State of Connecticut without giving effect to the conflicts
of laws principles thereof and, except as otherwise provided herein, shall be
binding upon the heirs, personal representatives, executors, administrators,
successors and assigns of the parties, including without limitation, any
successor corporation to the business, employees and assets of the parties
hereto.
5. Severability. If any provision of this Agreement shall be held to be
------------
illegal, invalid or unenforceable, such illegality, invalidity or
unenforceability shall attach only to such provision and shall not in any manner
affect or render illegal, invalid or unenforceable any other provision of this
Agreement, and this Agreement shall be carried out as if any such illegal,
invalid or unenforceable provision were not contained herein.
6. Captions. Captions are for convenience only and are not deemed to be
--------
part of this Agreement.
7. Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
8. Termination of Prior Rights Agreement. IMA, MarketNet and the Company
-------------------------------------
hereby agree that any and all rights granted to IMA and MarketNet under the
Prior Rights Agreement are terminated and superseded in their entirety by the
rights contained in this Agreement.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
19
<PAGE>
IN WITNESS WHEREOF, this Rights Agreement has been executed as of the date
and year first above written.
COMPANY:
buyingedge.com inc.
By:
Name:_
Title:
PRIOR RIGHTS HOLDERS
Information Management Associates, Inc.
By:
Name:_
Title:
MarketNet, L.L.C.
By:
Name:_
Title:
SIGNATURE PAGE TO RIGHTS AGREEMENT
<PAGE>
INVESTORS:
CMG@VENTURES III, LLC
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
@VENTURES III, L.P.
By:
Name: Brad Garlinghouse
Title: General Partner
Address: 3000 Alpine Road
Menlo Park, CA 94028
@VENTURES INVESTORS, LLC.
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
SIGNATURE PAGE TO RIGHTS AGREEMENT
<PAGE>
WAND EQUITY PORTFOLIO FUND II L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
WAND AFFILIATES FUND L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
MADRONA INVESTMENT GROUP L.L.C.
By:
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, WA 98104
SIGNATURE PAGE TO RIGHTS AGREEMENT
<PAGE>
AMICUS CAPITAL, LLC
By:
Name:
Title:
Address: 188 The Embarcadero, Third Floor
San Francisco, CA 94105
SIGNATURE PAGE TO RIGHTS AGREEMENT
<PAGE>
Schedule I
----------
INVESTORS
---------
Name and Address
----------------
CMG@Ventures III, LLC
100 Brickstone Square, 5th Floor
Andover, MA 01810
Fax: (978) 684-3672
Attn.: Andy Hajducky
@Ventures III, L.P.
3000 Alpine Road
Menlo Park, California 94028
Fax: (650) 233-0506
Attn.: Brad Garlinghouse
@Ventures Investors, LLC
100 Brickstone Square, 5th Floor
Andover, MA 01810
Fax: (978) 684-3672
Attn.: Andy Hajducky
Wand Equity Portfolio Fund II L.P.
c/o Wand Partners LLC
630 Fifth Avenue
Suite 2435
New York, NY 10111
Wand Affiliates Fund L.P.
c/o Wand Partners LLC
630 Fifth Avenue
Suite 2435
New York, NY 10111
Madrona Investment Group L.L.C.
1000 Second Avenue
Suite 3700
Seattle, WA 98104
Amicus
188 The Embarcadero, Third Floor
San Francisco, CA 94105
<PAGE>
Exhibit 10.6
Right of First Refusal Agreement
--------------------------------
THIS RIGHT OF FIRST REFUSAL AGREEMENT (the "Agreement") is made as of
August 12, 1999, by and among buyingedge.com Inc., a Connecticut corporation
(the "Company"), Information Management Associates, Inc., a Connecticut
corporation ("IMA"), and holders of the Company's Series A Preferred Stock (the
"Series A Investors") listed on Exhibit A attached hereto.
---------
RECITALS
--------
A. IMA currently own shares of the Company's Common Stock (the "Common
Stock"), as set forth on Exhibit B.
---------
B. The Series A Investors have agreed to acquire, in the aggregate,
5,319,149 shares of Series A Preferred Stock ("Series A Preferred Stock") of the
Company, pursuant to the Series A Preferred Stock Purchase Agreement entered
into by and among the Series A Investors and the Company (the "Purchase
Agreement").
C. The Purchase Agreement provides that, as a condition to the Series
A Investors' obligations to purchase shares of the Company's Series A Preferred
Stock, the Company, IMA and the Series A Investors will enter into this
Agreement.
D. To induce the Series A Investors to enter into the Purchase Agreement,
the Company, IMA and Series A Investors have agreed to enter into this Agreement
in order to grant to IMA and the Series A Investors certain rights of first
refusal with respect to the capital stock of the Company currently owned by them
and any other capital stock of the Company hereafter owned or acquired by them,
all on the terms and conditions set forth in this Agreement.
NOW, THEREFORE, in consideration of the mutual promises herein contained,
and other consideration, the receipt and adequacy of which hereby is
acknowledged, the parties hereto agree as follows:
1. Certain Definitions. For purposes of this Agreement, the following
-------------------
terms have the following meanings:
"Qualified IPO" means the first underwritten sale of Company
-------------
securities to the public pursuant to a registration statement under the
Securities Act of 1933, as amended (the "Act"), in which the Company receives
gross proceeds of not less than $20,000,000 (prior to underwriting commissions
and expenses) and a public offering price per share of at least $7.52, which
price shall be proportionally adjusted to take into account any stock splits,
stock dividends, recapitalization or similar events occurring after the date of
this Agreement.
"Non-Transferors" IMA and the Series A Investors, excluding the
---------------
Transferor.
"Offered Shares" means all Shares proposed to be transferred under
--------------
Section 1(f) by a Transferor.
"Right of First Refusal" means the right of first refusal provided
----------------------
to IMA and the
1
<PAGE>
Series A Investors in Section 3 of this Agreement.
"Shares" means and includes all shares of Common Stock and Preferred
------
Stock of the Company issued and outstanding at the relevant time plus (i) all
shares of Common Stock and Preferred Stock of the Company that may be issued
upon exercise of any options, warrants and other rights of any kind that are
then exercisable, and (ii) all shares of Common Stock and Preferred Stock of the
Company that may be issued upon conversion of (A) any convertible securities,
including, without limitation, preferred stock and debt securities then
outstanding, which are by their terms then convertible into or exchangeable for
Common Stock and Preferred Stock of the Company or (B) any such convertible
securities issuable upon exercise of options, warrants or other rights that are
then exercisable.
"Transfer" means and includes any sale, assignment, encumbrance,
--------
hypothecation, pledge, conveyance in trust, gift, transfer by bequest, devise or
descent, or other transfer or disposition of any kind, including, but not
limited to, transfers to receivers, levying creditors, trustees or receivers in
bankruptcy proceedings or general assignees for the benefit of creditors,
whether voluntary or by operation of law, directly or indirectly, except:
(i) any transfer of Shares by IMA or the Series A Investors
made: (A) pursuant to a merger or consolidation of the Company with or into
another corporation or corporations; (B) pursuant to the winding up and
dissolution of the Company; (C) at, and pursuant to, the Qualified IPO; (D) to
one another pursuant to this Agreement or (E) by IMA pursuant to a merger,
consolidation, sale of substantially all of the assets or similar transaction
which results in the shareholders of IMA immediately prior to such transaction
not holding at least 50% of the voting stock of the surviving or continuing
entity;
(ii) any transfer by IMA or a Series A Investor of up to an
aggregate of 5% of the Shares held by such shareholder;
(iii) any transfer by a Series A Investor to an affiliated fund
or entity, or, if the Series A Investor is a partnership, to a partner or former
partner of the Series A Investor;
(iv) any transfer approved by IMA and the majority in interest
of the Series A Investors;
provided, however that any such transferee or other recipient receiving Shares
- -------- -------
pursuant to a transfer governed by paragraphs (i), (iii), or (iv) of this
Section 1(f) will execute a counterpart of this Agreement and become bound
thereby in the same manner as IMA and the Series A Investors.
"Transferor" IMA or the Series A Investor proposing to transfer the
----------
Offered Shares.
Notice of Proposed Transfer. Before a Transferor may effect any Transfer
---------------------------
of any Shares, such Transferor must give at the same time to the Company and the
Non-Transferors a written notice signed by the Transferor (the "Transferor's
Notice") stating (a) such Transferor's bona fide intention to transfer such
Offered Shares; (b) the number of Offered Shares; (c) the name, address
2
<PAGE>
and relationship to the Transferor, if any, of each proposed purchaser or other
transferor; and (d) the bona fide cash price or, in reasonable detail, other
consideration, per share for which the Transferor proposes to transfer or sell
such Offered Shares (the "Offered Price"). Upon the request of the Company or
the Non-Transferors, the Transferor will promptly furnish such information to
the Company and the Non-Transferors as may be reasonably requested to establish
that the offer and proposed Transfer are bona fide.
Right of First Refusal.
----------------------
The Company and the Non-Transferors' Right. With respect to any
------------------------------------------
Transfer by a Transferor, the Company and the Non-Transferors shall have the
Right of First Refusal to purchase all or part of the Offered Shares,
exercisable as set forth in subsections (b) and (c) hereof.
Exercise of the Company's Right of First Refusal. The Company's
------------------------------------------------
Right of First Refusal may be exercised as follows:
The Company shall have the opportunity to purchase all or any
part of the Offered Shares.
If the Company desires to purchase all or any part of the Offered
Shares, the Company must, within the twenty (20) day period (the "Company
Refusal Period") commencing on the date of the Transferor's Notice, give written
notice to the Transferor of the Company's election to purchase the Offered
Shares. In the event that the Company elects not to purchase all of the Offered
Shares, the remaining shares of Offered Shares may be purchased by the Non-
Transferors as set forth in Section 3(c) below.
Upon the expiration of the Company Refusal Period, the Company
will give written notice (the "Company's Expiration Notice") to the Transferor
and to the Non-Transferors specifying either (A) that all or a portion of the
Offered Shares was subscribed by the Company exercising its Right of First
Refusal or (B) that the Company waived its right to purchase any of the Offered
Shares. Notwithstanding any failure by the Company to deliver a Company's
Expiration Notice, a failure by the Company to exercise its Right of First
Refusal within the Company Refusal Period shall be deemed a waiver of such
right.
Exercise of the Non-Transferors' Right of First Refusal. The Non-
-------------------------------------------------------
Transferors' Right of First Refusal may be exercised as follows:
In the event the Company does not purchase all of the Offered
Shares, each Non-Transferor shall have the opportunity to purchase such Non-
Transferor's pro rata share of the remaining Offered Shares. For purposes of
this Section 3, a Non-Transferor's pro-rata share shall be determined by
dividing the number of Shares held by the Non-Transferor by the total number of
Shares held by all Non-Transferors.
If any Non-Transferor, or its assignees who are affiliates of
such Non-Transferor, desires to purchase the remaining Offered Shares, such Non-
Transferor must, within a fifteen (15) day period (the "Non-Transferor Refusal
Period") commencing on the later date of
3
<PAGE>
(A) the Company's Expiration Notice or (B) by the 20th day after the
Transferor's Notice, give written notice (the "Non-Transferor Notice") to the
Transferor and to the Company of such Non-Transferor's election to purchase its
pro-rata share of the remaining Offered Shares. In the event that any Non-
Transferor elects not to purchase such Non-Transferor's pro-rata share of the
remaining Offered Shares, such Non-Transferor shall, prior to the expiration of
the Non-Transferor Refusal Period, give written notice (the "Non-Transferor
Expiration Notice") to the Transferor that the Non-Transferor is waiving such
Non-Transferor's right to purchase all such Offered Shares under this Section
3(c). Any remaining Offered Shares that a Non-Transferor is entitled to purchase
but does not purchase may be purchased pro rata by the other Non-Transferor's.
Notwithstanding any failure by a Non-Transferor to deliver a Non-Transferor
Expiration Notice, a failure by a Non-Transferee to exercise such Non-
Transferor's Right of First Refusal within the Non-Transferor Refusal Period
shall be deemed a waiver of such right.
Purchase Price. The purchase price for the Offered Shares to be
--------------
purchased by the Company or the Non-Transferors exercising their Right of First
Refusal under this Agreement will be the Offered Price, but will be payable as
set forth in Section 3(c) hereof. If the Offered Price includes consideration
other than cash, the cash equivalent value of the non-cash consideration will be
determined by the Board of Directors of the Company in good faith, which
determination will be binding upon the Company, the Non-Transferors and the
Transferor absent fraud or error.
Payment. Payment of the purchase price for the Offered Shares
-------
purchased by the Company or by a Non-Transferor exercising such Non-Transferor's
Right of First Refusal will be made within (A) ten (10) days after the date of
the Non-Transferor's Expiration Notice or (B) by the 36th day after the
Transferor's Notice, whichever is later. Payment of the purchase price will be
made by the exercising Company or Non-Transferor (i) by check or wire transfer
of immediately available funds, (ii) by cancellation of all or a portion of any
outstanding indebtedness of the Transferor to the Company or Non-Transferor, as
applicable, or (iii) by any combination of the foregoing.
Rights as a Shareholder. If the Company or the Non-Transferors
-----------------------
exercise their Rights of First Refusal to purchase the Offered Shares, then,
upon consummation of such purchase, the Transferor will have no further rights
as a holder of the Offered Shares except the right to receive payment for the
Offered Shares from the Company or the Non-Transferors in accordance with the
terms of this Agreement, and the Transferor will forthwith cause all
certificate(s) evidencing such Offered Shares to be surrendered to the Company
for transfer to the Company or to the Non-Transferors.
Transferor's Right to Transfer. If the Company or the Non-Transferors
------------------------------
have not elected to purchase all or part of the Offered Shares, then the
Transferor may Transfer that portion of the Offered Shares permitted to be sold
by the Transferor, to any person named as a purchaser or other transferee in the
Transferor's Notice, at the Offered Price or at a higher price, provided that
such Transfer (i) is consummated within ninety (90) days after the date of the
Transferor's Notice and (ii) is in accordance with all the terms of this
Agreement. Any proposed Transfer on terms and conditions more favorable than
those described in the Transferor's Notice, as well as any subsequent proposed
Transfer of any of the Offered Shares by the Transferor, shall again be subject
to this Agreement and shall require full compliance by the Transferor with the
4
<PAGE>
procedures in this Agreement.
Multiple Series, Class or Type of Shares. If the Offered Shares consists
----------------------------------------
of more than one series or class or type of stock, the Company and the Non-
Transferor's have the right to purchase hereunder each such series, class or
type.
Refusal to Transfer. Any attempt by a Transferor to Transfer any Shares
-------------------
in violation of any provision of this Agreement will be void. The Company will
not be required (i) to Transfer on its books any Shares that have been sold,
gifted or otherwise transferred in violation of this Agreement, or (ii) to treat
as the owner of such Shares, or to accord the right to vote or pay dividends to
any purchaser, donee or other transferee to whom such Shares may have been so
transferred.
Restrictive Legend and Stop-Transfer Orders.
-------------------------------------------
Right of First Refusal Legend. IMA and the Series A Investors
-----------------------------
understand and agree that the Company will cause the legend set forth below, or
a legend substantially equivalent thereto, to be placed upon any certificate(s)
or other documents or instruments evidencing ownership of Shares by IMA and the
Series A Investors:
THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
RIGHTS OF FIRST REFUSAL AS SET FORTH IN A RIGHT OF FIRST REFUSAL
AGREEMENT ENTERED INTO BY THE HOLDER OF THESE SHARES, THE COMPANY
AND CERTAIN SHAREHOLDERS OF THE COMPANY. A COPY OF SUCH AGREEMENT
IS ON FILE AT THE PRINCIPAL OFFICE OF THE COMPANY. SUCH RIGHTS OF
FIRST REFUSAL ARE BINDING ON CERTAIN TRANSFEREES OF THESE SHARES.
Stop Transfer Instructions. IMA and the Series A Investors agree, to
--------------------------
ensure compliance with the restrictions referred to herein, that the Company may
issue appropriate "stop transfer" certificates or instructions and that, if the
Company Transfers its own securities, it may make appropriate notations to the
same effect in its records.
No Adverse Effect. The exercise or non-exercise of the rights of the Non-
-----------------
Transferors hereunder to participate in one or more sales of Offered Shares made
by a Transferor shall not adversely affect their rights to participate in
subsequent sales of Offered Shares by a Transferor.
Termination and Waiver.
----------------------
Termination. The Company's, IMA's and the Series A Investors' Right
-----------
of First Refusal will terminate upon the earliest to occur of (i) the closing of
a Qualified IPO, (ii) the dissolution of the Company, or (iii) the effective
date of a consolidation or merger of the Company with or into another
corporation as a result of which the shares of the Company immediately prior to
such transaction represent or are exchanged for less than 50% of the voting
power of the capital stock or earning power of the stock of the surviving
corporation immediately after such transaction.
5
<PAGE>
Waiver. The application of the Company's, IMA's and the Series A
------
Investors' Right of First Refusal as to any proposed Transfer by any Transferor
of any Shares may be waived in advance of or after such Transfer by the written
agreement of the Company, IMA and Series A Investors holding at least 50% of the
Series A Preferred Stock (on an as-converted to Common Stock basis) and the
Common Stock issued upon conversion thereof then held by all Series A Investors.
The Company, IMA or the Series A Investors will have the absolute right to
exercise or refrain from exercising any right or rights that such party may have
by reason of this Agreement, including, without limitation, the right to
purchase Offered Shares, and the Company, IMA or the Series A Investors will not
incur any liability to any other party hereto with respect to exercising or
refraining from exercising any such right or rights. Any waiver by a party of
rights hereunder will be effective only if evidenced by a written instrument
executed by such party or its authorized representative.
Miscellaneous Provisions.
------------------------
Notices, Etc. All notices, requests, consents, reports and demands
------------
shall be in writing and shall be deemed to be given if hand delivered, sent by
facsimile or other electronic medium, or deposited in the U.S. Mail or with a
nationally recognized overnight courier, postage prepaid, addressed to the
Company, IMA and the Series A Investors at the addresses set forth on Exhibit A
---------
or to such other address as may be furnished in writing to the other parties
hereto.
Binding on Successors and Assigns; Inclusion Within Certain
-----------------------------------------------------------
Definitions. This Agreement, and the rights and obligations of the parties
- -----------
hereunder, will inure to the benefit of, and be binding upon, their respective
successors, assigns, heirs, executors, administrators and legal representatives.
Any permitted transferee of a Transferor who is required to become a party
hereto will be considered a "Transferor" for purposes of this Agreement and any
permitted transferee of Shares held by IMA or a Series A Investor will be
considered a Series A "Investor" for purposes of this Agreement.
Severability. If any provision of this Agreement is held to be
------------
invalid, illegal or unenforceable in any respect, such provision will be
enforced to the maximum extent possible and such invalidity, illegality or
unenforceability will not affect any other provision of this Agreement, and this
Agreement will be construed as if such invalid, illegal or unenforceable
provision had (to the extent not enforceable) never been contained herein.
Amendment. This Agreement may be amended only by a written
---------
instrument executed by the Company, IMA and the Series A Investors holding at
least 50% of the Series A Preferred Stock (on an as-converted to Common Stock
basis) and the Common Stock issued upon conversion thereof then held by all
Series A Investors.
Governing Law. This Agreement will be governed by and construed
-------------
in accordance with the laws of the State of Connecticut as such laws are applied
to agreements between Connecticut residents entered into and to be performed
entirely within Connecticut without regard to conflict of law principles.
Obligation of Company; Binding Nature of Exercise. The Company agrees
-------------------------------------------------
to use
6
<PAGE>
its best efforts to enforce the terms of this Agreement, to inform IMA and the
Series A Investors of any breach hereof (to the extent the Company has knowledge
thereof) and to use reasonable efforts to assist IMA and the Series A Investors
in the exercise of their rights and the performance of their obligations
hereunder. Any exercise of the Right of First Refusal will be binding upon the
party so exercising, and may not be withdrawn without the written consent of the
Transferor, except that such exercise may be withdrawn unilaterally by the
exercising party if there is any legal prohibition as to a party's consummation
of its purchase or sale hereunder.
Counterparts. This Agreement may be executed in any number of
------------
counterparts, each of which when so executed and delivered will be deemed an
original, and all such counterparts together will constitute one and the same
instrument.
Entire Agreement. This Agreement constitutes the entire agreement
----------------
of the parties with respect to the specific subject mater hereof and supersedes
in their entirety all other agreements or understandings between or among the
parties hereto with respect to such specific subject matter.
[REMAINDER OF PAGE INTENTIONALLY LEFT BLANK]
7
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Right of First
Refusal Agreement as of the date first written above.
THE COMPANY
buyingedge.com inc.
By:
Title:
Address:
Information Management Associates, Inc.
By:
Title:
Address:
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
<PAGE>
THE INVESTORS
CMG@VENTURES III, LLC
By:
Name: Andy Hajducky
---------------
Title: General Partner
----------------
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
@VENTURES III, L.P.
By:
Name: Brad Garlinghouse
-----------------
Title: General Partner
----------------
Address: 3000 Alpine Road
Menlo Park, CA 94028
@VENTURES INVESTORS, LLC
By:
Name: Andy Hajducky
-----------------
Title: General Partner
------------------
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
<PAGE>
WAND EQUITY PORTFOLIO FUND II L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
WAND AFFILIATES FUND L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
MADRONA INVESTMENT GROUP L.L.C.
By:
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, WA 98104
AMICUS CAPITAL, LLC
By:
Name:
Title:
Address: 188 The Embarcadero, Third Floor
San Francisco, CA 94105
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
<PAGE>
EXHIBIT A
---------
THE INVESTORS
-------------
Name and Address
----------------
CMG@Ventures III, LLC
100 Brickstone Square, 5th Floor
Andover, MA 01810
Fax: (978) 684-3672
Attn.: Andy Hajducky
@Ventures III, L.P.
3000 Alpine Road
Menlo Park, California 94028
Fax: (650) 233-0506
Attn.: Brad Garlinghouse
@Ventures Investors, LLC
100 Brickstone Square, 5th Floor
Andover, MA 01810
Fax: (978) 684-3672
Attn.: Andy Hajducky
Wand Equity Portfolio Fund II L.P.
c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
Wand Affiliates Fund L.P.
c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
Madrona Investment Group L.L.C.
1000 Second Avenue
Suite 3700
Seattle, WA 98104
Amicus Capital, LLC
188 The Embarcadero, Third Floor
San Francisco, CA 94105
<PAGE>
EXHIBIT B
---------
SHAREholdings of Information Management Associates, Inc.
--------------------------------------------------------
<TABLE>
<CAPTION>
Common Stock Preferred Stock
------------ ---------------
<S> <C> <C>
Information Management Associates, Inc. 9,698,106 0
</TABLE>
<PAGE>
Exhibit 10.7
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE
AND WARRANT PURCHASE AGREEMENT
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE AND WARRANT PURCHASE
AGREEMENT dated as of August 12, 1999 by and among Information Management
Associates, Inc., a Connecticut corporation (the "Company"), on the one hand,
Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P. (collectively, with
their respective successors and assigns, the "Investors"), on the other hand.
WHEREAS, the Investors wish to purchase from the Company and the Company
wishes to sell to the Investors the Company's 9% Senior Subordinated Convertible
Promissory Note in the principal face amount of $5,000,000 (the "Note")
according to the terms and subject to the conditions set forth in this Agreement
and in the Note; and
WHEREAS, the Investors wish to purchase from the Company and the Company
wishes to sell to the Purchasers warrants (the "Warrants") initially exercisable
for up to an aggregate of 425,000 shares of the common stock, without par value,
of the Company (the "Common Stock"), according to the terms and subject to the
conditions set forth in this Agreement and in the Warrants;
NOW, THEREFORE, in consideration of the premises and the mutual covenants
contained in this Agreement, the parties agree as follows:
ARTICLE I
THE NOTE AND THE WARRANTS
SECTION 1.01 Issuance, Sale and Delivery of the Note and Warrants. In
----------------------------------------------------
accordance with the terms hereof, the Company agrees to issue and sell to the
Investors and the Investors hereby agree to purchase from the Company, the Note
and the Warrants for an aggregate purchase price of $5,000,000. The Note shall
have such terms and conditions and shall be substantially in the form set forth
in Exhibit A attached hereto; and the Warrants shall have such terms and
---------
conditions and shall be substantially in the form as set forth in Exhibit B
---------
attached hereto.
SECTION 1.02 Closing. The closing shall take place at the offices of
-------
Skadden, Arps, Slate, Meagher & Flom, LLP, 919 Third Avenue, New York, New York
10022-3897, at 10:00 a.m., New York time, on August 12, 1999, or at such other
location, date and time as may be agreed upon between the Investors and the
Company (such closing being called the "Closing" and such date and time being
called the "Closing Date"). At the Closing, the Company shall issue and deliver
to the Investors the Note in substantially the form attached hereto as Exhibit A
---------
and Warrants in substantially the form attached hereto as Exhibit B, in
---------
definitive form, in the name of the Investors. As payment in full for the Note
and Warrants being purchased by the Investors
1
<PAGE>
under this Agreement, and against delivery of the Note and Warrants therefor as
aforesaid, on the Closing Date the Investors shall transfer an aggregate of
$5,000,000 to the account of the Company by wire transfer.
SECTION 1.03 Warrant Shares. Shares of Common Stock to be issued to
--------------
the Investor upon the exercise of the Warrants shall be referred to herein as
the "Warrant Shares."
SECTION 1.04 Character of the Warrants. The Company and the
-------------------------
Investors, having adverse interests and as a result of arm's length bargaining,
agree that (i) neither of the Investors nor any of their affiliates has rendered
or has agreed to render any services to the Company in connection with this
Agreement or the issuance of the Note and Warrants; and (ii) the Warrants, when
issued, shall not be issued as compensation. The Company and the Investors
agree that the aggregate fair market value of the Warrants is equal to $425,000.
The parties agree not to take any action that is inconsistent with such agreed
value and, without limitation, agree to file all tax returns and reports
consistent with such value.
ARTICLE II
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to the Investors that, except as
set forth in the Disclosure Schedule attached as Schedule I (which Disclosure
----------
Schedule makes explicit reference to the particular representation or warranty
as to which exception is taken, which in each case shall constitute the sole
representation and warranty as to which such exception shall apply; except that
any disclosure as to which it shall be obvious from the face thereof shall also
apply to any other representation and warranty):
SECTION 2.01 Organization, Qualifications and Corporate Power.
------------------------------------------------
(a) The Company is a corporation duly incorporated, validly existing
and in good standing under the laws of the State of Connecticut and is duly
licensed or qualified to transact business as a foreign corporation and is in
good standing in each jurisdiction in which the nature of the business
transacted by it or the character of the properties owned or leased by it
requires such licensing or qualification in order to avoid a Material Adverse
Effect (as herein defined). As used herein, "Material Adverse Effect" means a
material adverse effect on the financial condition, assets, liabilities, results
of operations or prospects of the Company. The Company has the corporate power
and authority to own and hold its properties and to carry on its business as now
conducted and as proposed to be conducted, to execute, deliver and perform this
Agreement, the Note, the Warrants and that certain Registration Rights Agreement
with the Investors in the form attached as Exhibit C (the "Registration Rights
---------
Agreement," and collectively with this Agreement, the Note and the Warrants, the
"Transaction Documents").
(b) The Company's subsidiaries are listed on Schedule I (the
"Subsidiaries"). Except for the Subsidiaries, the Company does not (i) own of
record or beneficially, directly or indirectly, (A) any shares of capital stock
or securities convertible into capital stock of any other corporation or (B) any
participating interest in any partnership, joint venture or other non-corporate
business enterprise or (ii) control, directly or indirectly, any other entity.
2
<PAGE>
SECTION 2.02 Authorization of Agreements, Etc.
--------------------------------
(a) The execution and delivery by the Company of the Transaction
Documents, the performance by the Company of its obligations thereunder and the
issuance and delivery of the Warrant Shares have been duly authorized by all
requisite corporate action and will not violate any provision (i) of the
Certificate of Incorporation of the Company, as amended or the By-laws of the
Company, as amended, (ii) of law, any order of any court or other agency of
government, or (iii) of any indenture, agreement or other instrument to which
the Company or any of its properties or assets is bound, or conflict with,
result in a breach of or constitute (with due notice or lapse of time or both) a
default under any such indenture, agreement or other instrument (except for
conflicts, breaches or defaults under clauses (ii) and (iii) which would not,
individually or in the aggregate, have a Material Adverse Effect), or result in
the creation or imposition of any lien, charge, restriction, claim or
encumbrance of any nature whatsoever upon any of the properties or assets of the
Company.
(b) The shares of Common Stock issuable upon exercise of the Warrants
have been duly reserved for issuance upon such exercise and, when so issued,
will be duly authorized, validly issued, fully paid and nonassessable shares of
Common Stock with no personal liability attaching to the ownership thereof and
will be free and clear of all liens, charges, restrictions, claims and
encumbrances imposed by or through the Company except as set forth in the
Registration Rights Agreement. Neither the issuance, sale or delivery of the
Warrant Shares is subject to any preemptive right of stockholders of the Company
or to any right of first refusal or other right in favor of any person.
SECTION 2.03 Validity. This Agreement has been duly executed and
--------
delivered by the Company and constitutes the legal, valid and binding obligation
of the Company, enforceable in accordance with its terms. The other Transaction
Documents, when executed and delivered in accordance with this Agreement, will
constitute the legal, valid and binding obligations of the Company, enforceable
in accordance with their respective terms.
SECTION 2.04 Authorized Capital Stock. The authorized capital stock
------------------------
of the Company consists of 20,000,000 shares of Common Stock and 500,000 shares
of Preferred Stock. Immediately prior to the Closing, 9,698,106 shares of
Common Stock will be validly issued and outstanding, fully paid and
nonassessable and no shares of Preferred Stock are issued and outstanding. The
Company has granted non-qualified stock options which will vest over the next
four years pursuant to a stock option grant plan. 2,101,954 shares have been
granted in accordance with such plan, 1,016,156 shares have vested under such
plan and 750,787 shares are authorized by not yet awarded. All shares of Common
Stock issued pursuant to such plan are validly issued and outstanding, fully
paid and nonassessable. The designations, powers, preferences, rights,
qualifications, limitations and restrictions in respect of the authorized
capital stock of the Company are as set forth in the Certificate of
Incorporation, a copy of which is attached as Exhibit D and all such
---------
designations, powers, preferences, rights, qualifications, limitations and
restrictions are valid, binding and enforceable and in accordance with all
applicable laws. Except as provided for in the Certificate of Incorporation or
as set forth in the attached Schedule II, the Company has no obligation
-----------
(contingent or other) to purchase, redeem or
3
<PAGE>
otherwise acquire any of its equity securities or any interest therein or to pay
any dividend or make any other distribution in respect thereof. To the best of
the Company's knowledge there are no voting trusts or agreements, stockholders'
agreements, pledge agreements, buy-sell agreements, rights of first refusal,
preemptive rights or proxies relating to any securities of the Company (whether
or not the Company is a party thereto). All of the outstanding securities of the
Company were issued in compliance with all applicable Federal and state
securities laws.
SECTION 2.05 Events Subsequent to the Date of the Balance Sheet.
--------------------------------------------------
Except as disclosed in filings made by the Company with the Securities and
Exchange Commission ("Public Filings"), since March 31, 1999, the Company has
not (i) made any material change in the manner of business or operations of the
Company, (ii) entered into any transaction except in the ordinary course of
business consistent with past practice or as otherwise contemplated hereby,
(iii) taken any action that could have a Material Adverse Effect or (iv) entered
into any commitment (contingent or otherwise) to do any of the foregoing.
SECTION 2.06 Litigation; Compliance with Law.
-------------------------------
(a) There is no (i) action, suit, claim, proceeding or investigation
pending or, to the best of the Company's knowledge, threatened against or
affecting the Company, at law or in equity, or before or by any Federal, state,
municipal or other governmental department, commission, board, bureau, agency
or instrumentality, domestic or foreign, (ii) arbitration proceeding relating to
the Company pending under collective bargaining agreements or otherwise or (iii)
governmental inquiry pending or, to the best of the Company's knowledge,
threatened against or affecting the Company (including without limitation any
inquiry as to the qualification of the Company to hold or receive any license or
permit) that could (in the case of any matter described in clauses (i), (ii), or
(iii)) have a Material Adverse Effect. The Company is not in default with
respect to any order, writ, injunction or decree known to or served upon the
Company of any court or of any Federal, state, municipal or other governmental
department, commission, board, bureau, agency or instrumentality, domestic or
foreign. There is no action or suit by the Company pending, threatened or
contemplated against others that could have Material Adverse Effect.
(b) The Company has complied with all laws, rules, regulations and
orders applicable to its business, operations, properties, assets, products and
services; the Company has all necessary permits, licenses and other
authorizations required to conduct its business as conducted and as proposed to
be conducted, and the Company has been operating its business pursuant to and in
compliance with the terms of all such permits, licenses and other
authorizations, in each case where the failure to be in compliance or to possess
such a permit, license or other authorization would, individually or in the
aggregate, have a Material Adverse Effect.
(c) There is no existing law, rule, regulation or order, and the
Company is not aware of any proposed law, rule, regulation or order, whether
Federal, state, county or local, which would prohibit or restrict the Company
from, or otherwise materially adversely affect the Company in, conducting its
business in any jurisdiction in which it is now conducting business or in which
it proposes to conduct business.
SECTION 2.07 Proprietary Information of Third Parties.
----------------------------------------
4
<PAGE>
(a) No third party has claimed or, to the best of the Company's
knowledge, has reason to claim that any person employed by or affiliated with
the Company has (i) violated or may be violating any of the terms or conditions
of his employment, non-competition or non-disclosure agreement with such third
party, (ii) disclosed or may be disclosing or utilized or may be utilizing any
trade secret or proprietary information or documentation of such third party or
(iii) interfered or may be interfering in the employment relationship between
such third party and any of its present or former employees. No third party has
requested information from the Company which suggests that such a claim might be
contemplated.
(B) To the best of the Company's knowledge, none of the execution or
delivery of this Agreement, or the carrying on of the business of the Company by
any officer, director or key employee of the Company, or the conduct or proposed
conduct of the business of the Company, will 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 such person is obligated.
SECTION 2.08 Patents, Trademarks, Etc.
-------------------------
(a) Set forth in Schedule I is a list and brief description of all
----------
domestic and foreign patents, patent rights, patent applications, trademarks,
trademark applications, internet domain names, service marks, service mark
applications, trade names owned by the Company. The Company owns or possesses
adequate licenses or other rights to use all patents, patent applications,
trademarks, trademark applications, service marks, service mark applications,
trade names, internet domain names, copyrights, manufacturing processes,
formulae, trade secrets, customer lists, know how and rights of publicity and
privacy with respect to likenesses and data pertaining to real persons
(collectively, "Intellectual Property") used in or necessary to the conduct of
its business as conducted and as proposed to be conducted. No claim is pending
or, to the best of the Company's knowledge, threatened to the effect that the
operations of the Company infringe upon or conflict with the asserted rights of
any other person under any Intellectual Property or that any third party is
infringing upon or conflicting with the asserted rights of the Company under any
Intellectual Property.
(b) All patents, registrations and applications for Intellectual
Property that are set forth in Schedule I (i) are valid and enforceable, and
have been duly maintained, (ii) are standing in the record ownership of the
Company (or all documents needed to bring title to such Intellectual Property
into the name of the Company have been filed and all recording fees paid) and
(iii) have not lapsed, expired or been abandoned, and are not the subject of any
opposition, interference, cancellation proceeding or other legal or governmental
proceeding before any governmental entity in any jurisdiction that could have a
Material Adverse Effect on the Company. No claim is pending or to the best of
the Company's knowledge threatened to the effect that any such Intellectual
Property owned or licensed by the Company, or which the Company otherwise has
the right to use, is invalid or unenforceable by the Company, and there is no
basis for any such claim (whether or not pending or threatened). The Company is
not, nor will it be as a result of the execution and delivery of this Agreement
or the performance of its obligations under this Agreement, in breach of any
license, sublicense or other agreement relating
5
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to Intellectual Property.
SECTION 2.09 Title to Properties. The Company has good, clear and
-------------------
valid title to its properties and assets reflected on the Balance Sheet or
acquired by it since the date of the Balance Sheet (other than properties and
assets disposed of in the ordinary course of business since the date of the
Balance Sheet), and all such properties and assets are free and clear of
mortgages, pledges, security interests, liens, charges, claims, restrictions and
other encumbrances (including without limitation, easements and licenses),
except for any security interest which will be granted in favor of any lender
that provides senior debt financing not to exceed $8,000,000, for which the
Company is currently negotiating and liens for or current taxes not yet due and
payable and minor imperfections of title, if any, not material in nature or
amount and not materially detracting from the value or impairing the use of the
property subject thereto or impairing the operations or proposed operations of
the Company, including, without limitation, the ability of the Company to secure
financing using such properties and assets as collateral. To the best of the
Company's knowledge after due inquiry, there are no condemnation, environmental,
zoning or other land use regulation proceedings, either instituted or planned to
be instituted, which would adversely affect the use or operation of the
Company's properties and assets for their respective intended uses and purposes,
or the value of such properties, and the Company has not received notice of any
special assessment proceedings which would affect such properties and assets.
SECTION 2.10 Insurance. The Company holds valid policies covering
---------
all of the insurance required to be maintained by it under Section 5.03.
SECTION 2.11 Taxes. The Company has filed all tax returns, Federal,
-----
state, county and local, required to be filed by it and the Company has paid all
taxes shown to be due by such returns as well as all other taxes, assessments
and governmental charges which have become due or payable, including without
limitation all taxes which the Company is obligated to withhold from amounts
owing to employees, creditors and third parties. The Company has established
adequate reserves for all taxes accrued but not yet payable. Except as set
forth in Schedule I, all tax elections of any type which the Company has made
----------
as of the date hereof are set forth in the financial statements referred to in
Section 2.05. The Federal income tax returns of the Company have never been
audited by the Internal Revenue Service. No deficiency assessment with respect
to or proposed adjustment of the Company's Federal, state, county or local taxes
is pending or, to the best of the Company's knowledge, threatened. There is no
tax lien (other than for current taxes not yet due and payable), whether imposed
by any Federal, state, county or local taxing authority, outstanding against the
assets, properties or business of the Company.
SECTION 2.12 Material Contracts. The Company, and to the best of the
------------------
Company's knowledge, each other party thereto has in all material respects
performed all the obligations required to be performed by them to date (or each
non-performing party has received a valid, enforceable and irrevocable written
waiver with respect to its non-performance), have received no notice of default
and are not in default (with due notice or lapse of time or both) under any
agreement, instrument, commitment, plan or arrangement to which the Company is a
party or by which it or its property may be bound, which the default would,
individually or in the aggregate,
6
<PAGE>
have a Material Adverse Effect. The Company has no present expectation or
intention of not fully performing all its obligations under each such agreement,
instrument, commitment, plan or arrangement, and the Company has no knowledge of
any breach or anticipated breach by the other party to any material agreement,
instrument, commitment, plan or arrangement to which the Company is a party. The
Company is in compliance with all of the terms and provisions of its Certificate
of Incorporation and By-laws, as amended.
SECTION 2.13 Loans and Advances. Except as set forth on Schedule I,
------------------ ----------
the Company does not have any outstanding loans or advances to any person and is
not obligated to make any such loans or advances, except, in each case, for
advances to employees of the Company in respect of reimbursable business
expenses anticipated to be incurred by them in connection with their performance
of services for the Company.
SECTION 2.14 Assumptions, Guaranties, Etc. of Indebtedness of Other
------------------------------------------------------
Persons. The Company has not assumed, guaranteed, endorsed or otherwise become
- -------
directly or contingently liable on any indebtedness of any other person
(including, without limitation, liability by way of agreement, contingent or
otherwise, to purchase, to provide funds for payment, to supply funds to or
otherwise invest in the debtor, or otherwise to assure the creditor against
loss), except for guaranties by endorsement of negotiable instruments for
deposit or collection in the ordinary course of business.
SECTION 2.15 Significant Customers and Suppliers. No customer or
-----------------------------------
supplier which was significant to the Company during the past two year period
has terminated, materially reduced or threatened to terminate or materially
reduce its purchases from or provision of products or services to the Company,
as the case may be.
SECTION 2.16 Governmental Approvals. Subject to the accuracy of the
----------------------
representations and warranties of the Investors set forth in Article III, no
registration or filing with, or consent or approval of or other action by, any
Federal, state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company of
any of the Transaction Documents or the issuance and delivery of the Warrant
Shares, other than (i) filings pursuant to Regulation D promulgated by the
Securities and Exchange Commission and state securities laws (all of which
filings have been made by the Company, other than those which are required to be
made after the Closing and which will be duly made on a timely basis) in
connection with the sale of the Note and the Warrants, and (ii) with respect to
the Registration Rights Agreement, the registration of the shares covered
thereby with the Commission and filings pursuant to state securities laws.
SECTION 2.17 Disclosure. Neither this Agreement, nor any Schedule or
----------
Exhibit to this Agreement, nor any of the Public Filings (as of the respective
dates thereof) (collectively, the "Disclosure Materials"), contains an untrue
statement of a material fact or omits a material fact necessary to make the
statements contained herein or therein not misleading in the light of the
circumstances in which they were made except in the case of the Public Filings
for statements that have been superseded or corrected in any subsequent Public
Filing.
7
<PAGE>
SECTION 2.18 Offering of the Note and Warrants. Neither the Company
---------------------------------
nor any person acting on its behalf has taken or will take any action
(including, without limitation, any offer, issuance or sale of any security of
the Company under circumstances which might require the integration of such
security with the Note and Warrants under the Securities Act or the rules and
regulations of the Commission thereunder), so as to subject the offering,
issuance or sale of the Note and Warrants to the registration provisions of the
Securities Act.
SECTION 2.19 Brokers. The Company has no contract, arrangement or
-------
understanding with any broker, finder or similar agent with respect to the
transactions contemplated by this Agreement, and/or recent proposed investment
transactions within the prior 12 months.
SECTION 2.20 Knowledge. As used herein, the knowledge of the Company
---------
means the actual knowledge after reasonable investigation as of the Closing Date
of any officer or employee of the Company in a position to have knowledge and
information based on the nature and function of such person's position with the
Company.
ARTICLE III
REPRESENTATIONS AND WARRANTIES AND COVENANTS OF THE INVESTORS
SECTION 3.01 Investor Representations and Warranties. Each Investor
---------------------------------------
severally represents and warrants to the Company that:
(a) it is an "accredited investor" within the meaning of Rule 501
under the Securities Act and was not organized for the specific purpose of
acquiring the Note or the Warrants;
(b) it has sufficient knowledge and experience in investing in
companies similar to the Company in terms of the Company's stage of
development so as to be able to evaluate the risks and merits of its
investment in the Company and it is able financially to bear the risks
thereof;
(c) it has had an opportunity to discuss the Company's business,
management and financial affairs with the Company's management;
(d) the Note, Warrants and Warrant Shares being purchased by it are
being acquired for its own account for the purpose of investment and not
with a view to or for sale in connection with any distribution thereof;
(e) it understands that (i) the Note, the Warrants and the Warrant
Shares have not been registered under the Securities Act by reason of their
issuance in a transaction exempt from the registration requirements of the
Securities Act, (ii) the Note, the Warrants and Warrant Shares must be held
indefinitely unless a subsequent disposition thereof is registered under
the Securities Act or is exempt from such registration, (iii) the Warrant
Shares will bear a legend to such effect and (iv) the Company will make a
notation on its transfer books to such effect;
(f) all action on the part of each of the Investor's partners, board
of directors,
8
<PAGE>
shareholders and members, as applicable, necessary for the authorization,
execution, delivery and performance of the Transaction Documents by each
Investor, the purchase of and payment for the Note and the Warrants and the
performance of all of each Investor's obligations under the Transaction
Documents has been taken or will be taken prior to Closing. The Transaction
Documents, when executed and delivered be each Investor, shall constitute
valid and binding obligations of each Investor, enforceable in accordance
with their terms, subject to laws of general application relating to
bankruptcy, insolvency and the relief of debtors and rules of law governing
specific performance, injunctive relief or other equitable remedies;
provided, however, that the Investors make no representations as the
enforceability of the indemnification provisions contained in the
Registration Rights Agreement.
SECTION 3.02 Investor Covenants. Each Investor severally covenants to the
------------------
Company that in no event will it dispose of any of the Note or the Warrants or
the Warrant Shares (other than in conjunction with an effective registration
statement for such securities under the Act or other than to an affiliate of
either Investor) unless and until such Investor shall have notified the Company
of the proposed disposition and shall have furnished the Company with an opinion
of counsel reasonably satisfactory in form and substance to the Company to the
effect that (x) such disposition will not require registration under the Act and
(y) appropriate action necessary for compliance with the Act, and any other
applicable securities laws of any jurisdiction has been taken.
ARTICLE IV
CONDITIONS TO THE OBLIGATIONS OF THE INVESTORS
The obligations of the Investors to purchase and pay for the Note and
Warrants being purchased by it on the Closing Date are subject to the
satisfaction, on or before the Closing Date, of the following conditions; which
may be waived or modified only at the option of the Investors:
(a) Opinion of Company's Counsel. The Investors shall have received
----------------------------
from LeBoeuf, Lamb, Greene & MacRae, counsel for the Company, an opinion dated
the Closing Date, in form and scope satisfactory to the Investors and counsel to
the Investors, subject to customary qualifications, to the effect that:
(i) The Company is a corporation validly existing and in good
standing under the laws of Connecticut. The Company has the corporate power
and authority to own and hold its properties and to carry on its business
as currently conducted and as proposed to be conducted. The Company has the
corporate power and authority to execute, deliver and perform each of the
Transaction Documents and to issue and deliver the Warrant Shares.
(ii) All of the Transaction Documents have been duly authorized,
executed and delivered by the Company and constitute the legal, valid and
binding
9
<PAGE>
obligations of the Company, enforceable in accordance with their respective
terms (subject, as to enforcement of remedies, to the discretion of courts
in awarding equitable relief and to applicable bankruptcy, reorganization,
insolvency, moratorium and similar laws affecting the rights of creditors
generally), except that such counsel need not express any opinion as to the
validity or enforceability of the indemnification and contribution
provisions of the Registration Rights Agreement.
(iii) The execution and delivery by the Company of the
Transaction Documents, the performance by the Company of its obligations
thereunder and the issuance and delivery of the Warrant Shares, will not
violate any provision of law, the Certificate of Incorporation or By-laws,
as amended, of the Company, or, to the knowledge of such counsel, any
material provision of any order of any court or other agency of government
or any material indenture, agreement or other instrument known to such
counsel to which the Company or any of its properties or assets is bound,
or conflict with, result in a breach of or constitute (with due notice or
lapse of time or both) a default under any such indenture, agreement or
other instrument, or result in the creation or imposition of any lien,
charge, restriction, claim or encumbrance of any nature whatsoever upon any
of the properties or assets of the Company. In rendering the foregoing
opinion, such counsel may rely on a certificate as to certain facts from an
officer of the Company, may assume full disclosure to the Investors of all
material facts and, with respect to performance by the Company of its
obligations under the Registration Rights Agreement, may assume compliance
by the Company at such time with the registration requirements of the
Securities Act and with applicable state securities laws and may disclaim
any opinion as to the validity or enforceability of the indemnification and
contribution provisions of the Registration Rights Agreement.
(iv) The authorized capital stock of the Company consists of
20,000,000 shares of Common Stock, without par value and 500,000 shares of
Preferred Stock, without par value. Immediately prior to the Closing, no
shares of Preferred Stock will be issued and outstanding. The designations,
powers, preferences, rights, qualifications, limitations and restrictions
in respect of the authorized capital stock of the Company are as set forth
in the Certificate of Incorporation, and all such designations, powers,
preferences, rights, qualifications, limitations and restrictions are
valid, binding and enforceable and in accordance with all applicable laws
(subject, as to enforcement, to the discretion of courts in awarding
equitable relief and to applicable bankruptcy, reorganization, insolvency,
moratorium and similar laws affecting the rights of creditors generally).
(v) The shares of Common stock issuable upon exercise of the
Warrants have been duly authorized and reserved by all required corporate
action and when issued and paid for in accordance with the terms of the
Warrants, will be validly issued, fully paid and nonassessable with no
personal liability attaching to the ownership thereof. Neither the
issuance, sale or delivery of the shares of Common stock issuable upon
exercise of the Warrants is subject to any preemptive right of stockholders
of the Company arising under law or the Certificate of Incorporation or By-
laws of the Company, each as amended, or, to the knowledge of such counsel,
to any contractual right of first refusal or other right in favor of any
person.
(vi) Except as described in Schedule I, LeBoeuf, Lamb, Greene &
----------
10
<PAGE>
MacRae, L.L.P. has not been engaged by the Company to give substantive
legal advice with respect to any (A) action, suit, claim, proceeding or
investigation pending or threatened against or affecting the Company, at
law or in equity, or before or by any Federal, state, municipal or other
governmental department, commission, board, bureau, agency or
instrumentality, domestic or foreign, (B) arbitration proceeding relating
to the Company pending under collective bargaining agreements or (C)
governmental inquiry pending or threatened against or affecting the Company
(including, without limitation, any inquiry as to the qualification of the
Company to hold or receive any license or permit). To the knowledge of such
counsel, the Company is not in default with respect to any order, writ,
injunction or decree known to such counsel of any court or of any Federal,
state, municipal or other governmental department, commission, board,
bureau, agency or instrumentality, domestic or foreign.
(viii) Assuming the accuracy of the representations and
warranties of the Investors set forth in Article III, no registration or
filing with, and no consent or approval of, or other action by any Federal,
state or other governmental agency or instrumentality is or will be
necessary for the valid execution, delivery and performance by the Company
of the Transaction Documents or the issuance and delivery of the Warrant
Shares, other than filings pursuant to Regulation D promulgated by the
Securities and Exchange Commission and state securities laws (all of which
filings, other than those which are required to be made after the Closing,
have been made by the Company). In rendering the foregoing opinion with
respect to performance by the Company of its obligations under the
Registration Rights Agreement, such counsel may assume compliance by the
Company at such time with the registration requirements of the Securities
Act and with applicable state securities laws.
(ix) To the knowledge of such counsel, none of the outstanding
shares of Common Stock is the subject of any recission claim alleging that
such shares have been issued in violation with the registration
requirements of the Act or any applicable state securities laws. The shares
of Preferred Stock, when issued and paid for in accordance with the terms
of this Agreement and the shares of Common Stock issuable upon exercise of
the Warrant, when issued and paid for in accordance with the terms of the
Warrants, will be issued in compliance with the registration requirements
of the Act and all applicable state securities laws.
(b) Representations and Warranties to be True and Correct. The
-----------------------------------------------------
representations and warranties contained in Article II shall be true, complete
and correct on and as of the Closing Date with the same effect as though such
representations and warranties had been made on and as of such date, and the
President and Chief Financial Officer of the Company shall have certified to
such effect to the Investors in writing.
(c) Performance; Closing Certificate Deliveries. The Company shall
-------------------------------------------
have performed and complied with all agreements contained herein required to be
performed or complied with by it prior to or at the Closing Date, and the
President and Chief Financial Officer
11
<PAGE>
of the Company shall have delivered a certificate to the Investors confirming in
writing to such effect and to the further effect that all of the conditions set
forth in this Article IV have been satisfied.
(d) All Proceedings to be Satisfactory. All corporate and other
----------------------------------
proceedings to be taken by the Company in connection with the transactions
contemplated hereby and all documents incident thereto shall be reasonably
satisfactory in form and substance to the Investors and counsel to the
Investors, and the Investors and counsel to the Investors shall have received
all such counterpart originals or certified or other copies of such documents as
they reasonably may request.
(e) Supporting Documents. The Investors and counsel to the Investors
--------------------
shall have received copies of the following documents:
(i) (A) the Certificate of Incorporation, certified as of a
recent date by the Secretary of State of the State of Connecticut and (B) a
certificate of said Secretary dated as of a recent date as to the due
incorporation and good standing of the Company.
(ii) a certificate of the Secretary or an Assistant Secretary of
the Company dated the Closing Date and certifying: (A) that attached
thereto is a true and complete copy of the By-laws of the Company as in
effect on the date of such certification; (B) that attached thereto is a
true and complete copy of all resolutions adopted by the Board of Directors
or the shareholders of the Company authorizing the execution, delivery and
performance of the Transaction Documents and the reservation, issuance and
delivery of the shares of Common Stock to be issued upon exercise of the
Warrants, and that all such resolutions are in full force and effect and
are all the resolutions adopted in connection with the transactions
contemplated by the Transaction Documents; (C) that the Certificate of
Incorporation have not been amended since the date of the last amendment
referred to in the certificate delivered pursuant to clause (i)(B) above;
and (D) to the incumbency and specimen signature of each officer of the
Company executing any of the Transaction Documents, and any certificate or
instrument furnished pursuant hereto, and a certification by another
officer of the Company as to the incumbency and signature of the officer
signing the certificate referred to in this clause (ii); and
(iii) such additional supporting documents and other information
with respect to the operations and affairs of the Company as the Investors
or counsel to the Investors reasonably may reasonably request.
(f) Registration Rights Agreement. The Company shall have executed
-----------------------------
and delivered the Registration Rights Agreement.
(g) Fairness Opinion. The Company shall have received a favorable
----------------
fairness opinion with respect to the transaction contemplated by this Agreement
and the Transaction
12
<PAGE>
Documents from SoundView Technology Group, Inc.
(h) Approval by Investors' Advisory Committee. The Investors'
-----------------------------------------
Advisory Committee shall have approved of the transaction contemplated by this
Agreement and the Transaction Documents.
(i) Transaction Fee. The Company shall have paid (i) a $100,000
---------------
transaction fee to the Investors and (ii) an amount calculated by multiplying
(a) the amount by which the per share price of Common Stock at the end of
-
trading on August 12, 1999 exceeds $3.25 or, if the per share price of Common
Stock at the end of trading on August 12, 1999 is equal to or less than $3.25,
zero by (b) 425,000.
-
(j) Fees of Investors' Counsel. The Company shall have paid in
--------------------------
accordance with Section 6.01 the fees and disbursements of Skadden, Arps, Slate,
Meagher & Flom, LLP, counsel to the Investors.
(k) Due Diligence Review. Representatives of the Investors and
--------------------
counsel to the Investors shall have satisfactorily completed a comprehensive
business and legal due diligence review of the Company.
All such documents shall be reasonably satisfactory in form and substance to the
Investors and counsel to the Investors.
ARTICLE V
COVENANTS OF THE COMPANY
The Company covenants and agrees with the Investors that until the
repayment of all amounts due and payable under the Note:
SECTION 5.01 Reserve for Warrant Shares. The Company shall at all times
--------------------------
reserve and keep available out of its authorized but unissued shares of Common
Stock, for the purpose of effecting the exercise of the Warrants and otherwise
complying with the terms of this Agreement, such number of its duly authorized
shares of Common Stock as shall be sufficient to effect the exercise of the
Warrants or otherwise to comply with the terms of this Agreement (the "Reserved
Shares"). If at any time the number of authorized but unissued shares of Common
Stock shall not be sufficient to effect the exercise of the Warrants or
otherwise to comply with the terms of this Agreement, the Company will forthwith
take such corporate action as may be necessary to increase its authorized but
unissued shares of Common Stock to such number of shares as shall be sufficient
for such purposes. The Company will obtain any authorization, consent, approval
or other action by or make any filing with any court or administrative body that
may be required under applicable state securities laws in connection with the
issuance of shares of Common Stock upon the exercise of the Warrants. The
Company will not issue any of its current or future authorized but unissued
Reserved Shares without the written consent of the Investors, except
13
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upon the exercise of the Warrants in accordance with the terms thereof.
SECTION 5.02 Corporate Existence. The Company shall maintain its
-------------------
corporate existence, rights and franchises in full force and effect.
SECTION 5.03 Properties, Business, Insurance. The Company shall maintain
-------------------------------
insurance on its properties and business, with financially sound and reputable
insurers, insurance against such casualties and contingencies and of such types
and in such amounts as is customary for companies similarly situated, which
insurance shall be deemed by the Company to be sufficient. The Company shall not
cause or permit any assignment or change in beneficiary and shall not borrow
against any such policy.
SECTION 5.04 Inspection, Consultation and Advice. The Company shall
-----------------------------------
permit a representative of the Investors, at the Investors' expense, to visit
and inspect any of the properties of the Company, examine their books and take
copies and extracts therefrom, discuss the affairs, finances and accounts of the
Company with their officers, employees and public accountants (and the Company
hereby authorizes said accountants to discuss with such representative such
affairs, finances and accounts), and consult with and advise the management of
the Company as to their affairs, finances and accounts, all at reasonable times
and upon reasonable prior notice. The Investors agree that they shall keep all
information regarding the Company or the Subsidiaries obtained by the Investors
or their representatives confidential and shall not disclose such information to
any other person or use such information for any purpose other than monitoring
their investment. The Investors further agree not to use such information in any
way that would be a violation of federal securities laws.
SECTION 5.05 Restrictive Agreements Prohibited. The Company shall not
---------------------------------
become a party to any agreement which by its terms restricts the Company's
performance of any of the Transaction Documents or the Certificate of
Incorporation.
SECTION 5.06 Compliance with Laws. The Company shall comply with all
--------------------
applicable laws, rules, regulations and orders, noncompliance with which would
have a Material Adverse Effect.
SECTION 5.07 Dividends and Distributions. The Company will not declare or
---------------------------
pay any dividends, or purchase, redeem, retire, or otherwise acquire for value
any of its capital stock (or any rights, options or warrant to purchase such
shares) now or hereafter outstanding, return any capital to its stockholders as
such, or make any distribution of assets to its stockholders as such, provided,
--------
however, that nothing herein contained shall prevent the Company from:
- -------
(i) effecting a stock split (except for a reverse stock split) or
declaring or paying any dividends consisting of shares of Common Stock to the
holders of shares of Common Stock;
(ii) complying with any specific provisions of the terms of the Note,
the
14
<PAGE>
Warrants or this Agreement;
(iii) repurchasing any stock at cost pursuant to restricted stock
agreements with employees, consultants, directors, and others under restricted
stock agreements previously approved by the board of directors and disclosed to
the Investors; and
(iv) making annual distributions to its stockholders in an amount
sufficient to cover such stockholder's tax liabilities resulting from the
ownership of Common Stock of the Company.
SECTION 5.08 Merger or Disposition. The Company shall not without the
---------------------
prior written approval of the Investors merge or consolidate with, or sell,
assign, lease or otherwise dispose of or voluntarily part with the control of
(whether in one transaction or in a series of transactions) substantially all of
its assets (whether now owned or hereafter acquired), except for sales or other
dispositions of assets in the ordinary course of business provided, however,
-------- -------
that the Company may merge another entity into it or otherwise acquire such
entity so long as the Company is the surviving entity, the holders of voting
stock of the Company immediately prior to such merger are the holders of not
less than 100% of the voting stock of the merged or acquired company immediately
following such merger, such merger or acquisition will be accretive to the
Company's earnings, such merger or acquisition does not result in the violation
of any of the provisions of this Agreement and no such violation exists at the
time of such merger or acquisition. The provisions of this Section 5.08 shall
not apply to any merger, consolidation, sale, assignment lease or other
transaction or series of transactions wherein the Company disposes of a majority
of its assets or voting stock in exchange for cash or other assets that would
yield a realized return to the Investor of two times Investors' Investment
Amount and would yield an internal rate of return to the Investors of 35%
compounded annually on the total of the Investors' Investment Amount. For
purposes of this Section 5.08 immediately below, "Investment Amount" shall equal
the sum of $5,000,000, plus (i) all interest and other amounts payable by the
Company to the Investors under the terms of the Note; and (ii) the fair market
value (determined by reference to the per share amount of consideration paid by
the acquiring company for the Common Stock of the Company) of all shares of
Common Stock issuable upon exercise of the Warrants.
SECTION 5.09 Material Adverse Effect. The Company will not take any
-----------------------
action which will have a Material Adverse Effect on the rights, preferences or
privileges afforded the Investors under the Transaction Documents.
SECTION 5.10 Termination of Covenants. Unless sooner terminated, all of
------------------------
the covenants set forth in this Article V shall terminate and be of no further
force or effect as to the Investors when the Company has repaid the Note in full
along with all interest and other payments required thereunder.
ARTICLE VI
MISCELLANEOUS
SECTION 6.01 Expenses. Each party hereto will pay its own expenses
--------
in
15
<PAGE>
connection with the transactions contemplated hereby, whether or not such
transactions shall be consummated, provided, however, that the Company shall pay
the reasonable fees and disbursements of Investors' counsel, Skadden, Arps,
Slate, Meagher & Flom LLP, in connection with such transactions, which shall in
no event exceed $40,000.
SECTION 6.02 Bank Agreements. If the Company's senior creditor bank so
---------------
requests, the Investors shall enter into an Intercreditor Agreement and
Subordination Agreement with such bank, with respect to the Company's
indebtedness obligations in favor of the Investors under the terms of the Note,
with such terms and conditions to be reasonably satisfactory to the Investors.
SECTION 6.03 Survival of Agreements. All covenants, agreements,
----------------------
representations and warranties made in any of the Transaction Documents or any
certificate or instrument delivered to the Investors at the Closing pursuant to
or in connection with any of the Transaction Documents, shall survive the
execution and delivery of all of the Transaction Documents and the issuance and
delivery of the Warrant Shares, and all statements contained in any certificate
or other instrument delivered by the Company hereunder or thereunder or in
connection herewith or therewith shall be deemed to constitute representations
and warranties made by the Company. All such representations and warranties
shall terminate and cease to be in effect on the first anniversary of the
Closing.
SECTION 6.04 Brokerage. Each party hereto will indemnify and hold
---------
harmless the others against and in respect of any claim for brokerage or other
commissions relative to this Agreement or to the transactions contemplated
hereby, based in any way on agreements, arrangements or understandings made or
claimed to have been made by such party with any third party.
SECTION 6.05 Parties in Interest. All representations, covenants and
-------------------
agreements contained in this Agreement by or on behalf of any of the parties
hereto shall bind and inure to the benefit of the respective successors and
assigns of the parties hereto whether so expressed or not. Without limiting the
generality of the foregoing, all representations, covenants and agreements
benefitting the Investors shall inure to the benefit of any and all subsequent
holders from time to time of Warrant Shares.
SECTION 6.06 Notices. All notices, requests, consents and other
-------
communications hereunder shall be in writing and shall be delivered in person,
mailed by certified or registered mail, return receipt requested, or sent by
telecopier or telex, addressed as follows:
(a) if to the Company, at Information Management Associates, One
Corporate Drive, Suite #414, Shelton, Connecticut 06484, Attention: President,
with a copy to Thomas L. Fairfield, Esq., LeBoeuf, Lamb, Greene & MacRae,
L.L.P., 225 Asylum Street, Hartford, Connecticut, 06103; and
(b) if to the Investors, at Wand Partners LLC, 630 Fifth Avenue,
Suite 2435, New York, New York 10111, with a copy to Marcia Nirenstein, Esq.,
Skadden, Arps, Slate, Meagher & Flom, LLP, 1440 New York Avenue, N.W.,
Washington, D.C. 20005.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
SECTION 6.07 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of New York.
16
<PAGE>
SECTION 6.08 Entire Agreement. This Agreement, including the Schedules
----------------
and Exhibits hereto, constitutes the sole and entire agreement of the parties
with respect to the subject matter hereof. All Schedules and Exhibits hereto are
hereby incorporated herein by reference.
SECTION 6.09 Counterparts. This Agreement may be executed in two or more
------------
counterparts, each of which shall be deemed an original, but all of which
together shall constitute one and the same instrument.
SECTION 6.10 Amendments. This Agreement may not be amended or modified,
----------
and no provisions hereof may be waived, without the written consent of the
Company and each of the Investors.
SECTION 6.11 Severability. If any provision of this Agreement shall be
------------
declared void or unenforceable by any judicial or administrative authority, the
validity of any other provision and of the entire Agreement shall not be
affected thereby.
SECTION 6.12 Titles and Subtitles. The titles and subtitles used in this
--------------------
Agreement are for convenience only and are not to be considered in construing or
interpreting any term or provision of this Agreement.
SECTION 6.13 Certain Defined Terms. As used in this Agreement, the term
---------------------
"person" shall mean an individual, corporation, trust, partnership, joint
------
venture, unincorporated organization, government agency or any agency or
political subdivision thereof, or other entity.
17
<PAGE>
IN WITNESS WHEREOF, the Company and the Investors have executed this
Agreement as of the day and year first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By:____________________________
Name:__________________________
[Corporate Seal] Title:___________________________
Attest:
_______________________________
Secretary
INVESTORS:
WAND EQUITY PORTFOLIO II L.P.
By:____________________________
Name: _________________________
Title:_________________________
WAND AFFILIATES FUND L.P.
By:____________________________
Name:__________________________
Title:_________________________
18
<PAGE>
SCHEDULE I
----------
Disclosure Schedule
-------------------
19
<PAGE>
SCHEDULE II
-----------
Capitalization
--------------
20
<PAGE>
Exhibit 10.8
SENIOR SUBORDINATED CONVERTIBLE PROMISSORY NOTE
THIS NOTE AND ANY SHARES ACQUIRED UPON CONVERSION OF THIS NOTE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
---
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE TIME
OF SUCH OFFERING, SALE OR TRANSFER.
INFORMATION MANAGEMENT ASSOCIATES, INC.
9% Senior Subordinated Convertible Promissory Note
Due April 30, 2000
US$5,000,000 August 12, 1999
New York, New York
Information Management Associates, Inc., a Connecticut corporation
("IMA"), hereby promises upon the terms and subject to the provisions of this 9%
---
Senior Subordinated Convertible Promissory Note (the "Note") to pay to the order
----
of Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P. (collectively,
"Holder", which term shall include any holder in due course or assignee of this
------
Note or such other party as the Holder from time to time may designate in
writing), the principal amount of Five Million Dollars (US$5,000,000), together
with the accrued interest on the unpaid balance of said principal amount, in the
amounts and in the manner set forth in this Note.
This Note is issued pursuant to and is entitled to the benefits of
that certain Senior Subordinated Promissory Note and Warrant Purchase Agreement
dated as of the date hereof between IMA and the Holder (as such agreement may be
amended, supplemented, modified, extended or restated from time to time, the
"Purchase Agreement"). No provision of this Note or the Purchase Agreement
------------------
shall alter or impair the obligation of IMA, which is absolute and
unconditional, to pay the principal of and interest on this Note at the place,
at the respective times, at the rates, and in the currency herein prescribed.
<PAGE>
Definitions. As used herein, the following terms shall have the
-----------
following meanings:
"Conversion Price" shall mean $1,000.00 per share of Preferred Stock.
----------------
"Default Rate" shall mean 11% per annum.
------------
"Indebtedness" means, without duplication: (i) all obligations for
------------
borrowed money or for the deferred purchase price of property or services (other
than trade payables incurred in the ordinary course of business consistent with
past practice), (ii) all obligations evidenced by bonds, notes, debentures or
other similar instruments or securities, (iii) all indebtedness created or
arising under any sale and leaseback arrangement, conditional sale or other
title retention agreement with respect to property owned or acquired (whether or
not the rights and remedies of the seller or lender under such agreement in the
event of default are limited to repossession or sale of such property), (iv) all
rental obligations under capital leases, (v) all obligations, contingent or
otherwise, in respect of letters of credit, bankers acceptances or similar
instruments, (vi) all obligations under interest rate swap agreements, interest
rate cap or collar agreements or any other similar agreement or arrangement
designed to provide protection against fluctuations in interest rates, (vii) all
guarantees (direct or indirect) and all other contingent obligations in respect
of, or obligations to purchase or otherwise acquire or to assure payment of,
indebtedness of others and (viii) indebtedness of others secured by any lien
upon property, whether or not assumed.
"Maturity Date" shall mean April 30, 2000.
-------------
"Preferred Stock" has the meaning set forth in Section 5(a).
---------------
"Residual Amount" has the meaning set forth in Section 5(a).
---------------
"Senior Indebtedness" means all Indebtedness of IMA that, by its
-------------------
terms, ranks senior in priority of payment to all other Indebtedness of IMA.
1. Payment of Interest. Interest shall accrue on the unpaid principal
-------------------
amount of this Note from the date hereof at the rate of 9% per annum (the
"Interest Rate"), compounded quarterly, calculated on the basis of a 360-day
-------------
year and the actual number of days the principal is outstanding. Interest on
the outstanding principal balance hereof shall be due and payable in arrears on
October 31, 1999,
<PAGE>
January 31, 1999 and April 30, 2000. If any payment to be made by IMA shall
become due on a day other than a Business Day, such payment shall be made on the
next succeeding Business Day and such extension of time shall be included in
computing any interest with respect to such payment. Any overdue interest will
accrue interest at the Default Rate, calculated on the basis of a 360-day year
and the actual number of days any unpaid interest is outstanding. Any overdue
interest, plus any accrued interest thereon, shall be payable on demand of
Holder.
2. Payment of Principal upon Maturity. Subject to the provisions of
----------------------------------
Sections 5, 6 and 7 hereof, IMA shall pay to Holder on the Maturity Date the
entire principal amount of this Note plus any accrued interest.
3. Principal and Interest Payments. All sums due to Holder in connection
-------------------------------
with this Note shall be calculated and payable in lawful currency of the United
States of America, in immediately available funds, at Holder's place of business
at 630 Fifth Avenue, Suite 2435, New York, New York 10111 or at such other place
as Holder might from time to time direct. All payments to be made by IMA shall
be made without any deduction, setoff, counterclaim or withholding whatsoever
and free and clear of any taxes.
4. Representations and Warranties.
------------------------------
(a) Ranking. IMA acknowledges and agrees that its obligations
-------
hereunder constitute Senior Indebtedness ranking pari passu in priority of
payment with all other Senior Indebtedness of IMA; provided, that Holder
acknowledges that the obligations of IMA hereunder shall be subordinate to
IMA's obligations to a bank or other financial institution in an amount not
to exceed $8,000,000.
(b) Solvency. IMA is, and after giving effect to the indebtedness
--------
evidenced hereby, will be solvent, with capital that is not unreasonably
small in relation to its business or any contemplated or undertaken
transaction, and has assets having a value both at fair valuation and a
present fair saleable value greater than the amount that will be required
to pay its probable liability on its existing debts as they become due.
5. Conversion.
----------
(a) Automatic Conversion and Conversion Price. Subject to the terms
-----------------------------------------
and provisions of this Section 5, any principal outstanding and, at the
option of the Holder, any accrued and unpaid interest payable under this
Note that has not been paid on or prior to 5:00 p.m., Eastern Standard
Time, on April 30, 2000 shall be automatically converted into fully paid
and nonassessable shares of Series C Convertible Preferred Stock of IMA
<PAGE>
("Preferred Stock") at the Conversion Price, subject to adjustment as set
----------------
forth below. In no event, however, shall such conversion cause this Note
to convert into a number of shares of voting stock of IMA that would
represent more than 19.9% of the voting power of the issued and outstanding
voting stock of IMA as of the Closing Date. For purposes of this
calculation, the issued and outstanding voting stock of IMA as of the
Closing Date shall exclude and voting stock issuable pursuant to options,
warrants or convertible securities. In the event that conversion of the
entire principal amount payable under this Note would result in the Holder
owning in excess of 19.9% of the voting power of the issued and outstanding
voting stock of IMA as of the Closing Date, the entire principal amount
shall not be converted into Preferred Stock. Only the principal amount
that would, when converted, result in the Holder owning exactly 19.9% of
the voting power of issued and outstanding voting stock of IMA as of the
Closing Date shall be converted into Preferred Stock subject to the terms
of this Section 5. The remaining principal amount due and payable under
this Note ("Residual Amount") shall be cancelled upon issuance of a new
---------------
Senior Subordinated Promissory Note with the Residual Amount as the
principal amount, in the form attached hereto as Exhibit A (the
---------
"Replacement Note").
----------------
(b) Deliveries Upon Conversion. Upon conversion, Holder shall
--------------------------
surrender the Note to IMA, and IMA shall simultaneously issue and deliver
to Holder a certificate or certificates for the number of full shares of
Preferred Stock issuable upon conversion, together with payment in lieu of
any fraction of a share, as provided in Section 5(c) and, if applicable,
the Replacement Note.
(c) Fractions of Shares. No fractional shares of Preferred Stock
-------------------
shall be issued upon conversion of the Note. Instead, IMA shall pay a cash
adjustment (rounded to the nearest cent) in respect of such fraction in an
amount equal to the same fraction of the Conversion Price.
(d) Adjustment of Conversion Price. In the event that, subsequent to
------------------------------
the date hereof, the outstanding shares of the Common Stock shall have been
changed into a different number of shares or a different class as a result
of a stock split, reverse stock split, stock dividend, subdivision,
reclassification, combination, exchange, recapitalization or other similar
transaction, the number of shares of Common Stock (on an as converted
basis) otherwise deliverable to Holder in accordance with the terms of this
Note shall be appropriately adjusted.
<PAGE>
(e) Notice of Adjustments of Conversion Price. Whenever the
-----------------------------------------
Conversion Price is adjusted as herein provided, IMA shall compute the
adjusted Conversion Price in accordance with Section 5(d) and shall deliver
to Holder a certificate setting forth the adjusted Conversion Price and
showing in reasonable detail the facts upon which such adjustment is based.
(f) Reservation of Preferred Stock. IMA shall cause to be reserved
------------------------------
and kept available at all times a sufficient number of shares of Preferred
Stock to satisfy the conversion requirements of the Note. IMA shall take
all such action as may be necessary to insure that all shares of Preferred
Stock issued upon conversion of the Note will be duly issued, fully paid
and nonassessable.
(g) Taxes on Conversions. IMA will pay any and all transfer, stamp
--------------------
and other similar taxes that may be payable in respect of the issuance or
delivery of shares of Preferred Stock upon conversion of the Note. IMA
shall not, however, be required to pay any tax that may be payable in
respect of any transfer involved in the issuance and delivery of shares of
Preferred Stock in a name other than that of Holder, and no such issue or
delivery shall be made unless and until the person requesting such issuance
has paid to IMA the amount of any such tax, or has established to the
satisfaction of IMA that such tax has been paid.
6. Prepayments. IMA shall have the right to prepay the Note in whole,
-----------
including all accrued interest, but not in part, at its option prior to the
Maturity Date without penalty or premium. Interest shall accrue to and include
the date on which payment is made.
7. Events of Default.
-----------------
(a) Definition. The following shall be an "Event of Default" under
---------- ----------------
this Note:
(i) IMA shall fail to make any payment of principal of or
interest on this Note when the same shall become due and payable,
whether on the Maturity Date or otherwise;
(ii) IMA shall fail to perform or observe any other covenant or
agreement (not specified in clause (i) above) to be
<PAGE>
performed by it hereunder or under the Purchase Agreement within
fifteen days of the date written notice of such failure is given to
IMA;
(iii) (A) IMA shall commence any case, proceeding or
action (x) under any existing or future law of any jurisdiction,
domestic or foreign, relating to bankruptcy, insolvency,
reorganization or relief of debtors, seeking to have an order for
relief entered with respect to it, or seeking to adjudicate it
bankrupt or insolvent, or seeking reorganization, arrangement,
adjustment, winding-up, liquidation, dissolution, composition or
other relief with respect to its debts, or (y) seeking appointment of
a receiver, trustee, custodian or other similar official for it or for
all or any substantial part of its assets, (B) IMA shall make a
general assignment for the benefit of its creditors, (C) there shall
be commenced against IMA any case, proceeding or other action of a
nature referred to in clause (A) above which shall not have been
vacated or discharged within 90 days from the commencement thereof, or
(D) a court shall enter a decree or order for relief in any
involuntary case under Title 11 of the United States Code, as amended
from time to time, or any applicable bankruptcy or similar law now or
hereafter in effect, which decree or order is not stayed, vacated,
discharged, or bonded pending appeal within 90 days from the entry
thereof; or
(iv) IMA shall default in the payment when due (whether by
scheduled maturity, required prepayment, acceleration, demand or
otherwise) of any amount owing in respect of any Indebtedness in the
aggregate principal amount of $500,000 or more; or IMA shall default
in the performance or observance of any obligation or condition with
respect to any such Indebtedness or any other event shall occur or
condition exist, if the effect of such default, event or condition is
to accelerate the maturity of any such Indebtedness or to permit
(without regard to any required notice or lapse of time) the holder or
holders thereof, or any trustee or agent for such holders, to
accelerate the maturity of any such Indebtedness, or any such
Indebtedness shall become or be declared to be due and payable prior
to its stated maturity other than as a result of a regularly scheduled
payment.
(b) Remedies. If an Event of Default shall occur and be continuing,
--------
then Holder may, upon written notice to IMA, declare all amounts owing
under this Note to be immediately due and payable. If the Holder
<PAGE>
declares all amounts owing under this Note to be immediately due and
payable, and such amounts due are not repaid within 20 business days from
the date of the demand, Holder may, at its sole discretion, immediately
convert the Note into Preferred Stock in accordance with Section 5 hereof.
The Holder shall also have all other rights in respect of this Note
following the occurrence and during the continuance of an Event of Default
which are available pursuant to applicable law or in equity.
8. No Presentment. IMA, for itself and any guarantors hereof, and their
--------------
successors and assigns, waives diligence, presentment, demand, protest and
notice thereof or of dishonor or nonpayment of this Note and all other notice or
demands in connection with the delivery, acceptance, performance, default or
enforcement of this Note, and waives any right to be released by reason of any
failure to act to enforce the provisions of the Note, extension of time or
change in the terms of payment.
9. Severability. In case any provision of this Note shall be invalid,
------------
illegal or unenforceable, such provision shall be severable from the rest of
this Note and the validity, legality and enforceability of the remaining
provisions shall not, in any way be affected or impaired thereby.
10. Cancellation. After all unpaid principal and interest owed on this
------------
Note has been paid in full or the Note has been converted at the Maturity Date,
this Note shall be surrendered to IMA for cancellation and shall not be
reissued.
11. Transfer Restrictions. This Note or the obligations represented
---------------------
hereby shall not be transferable by IMA without Holder's prior written consent.
12. Governing Law. THIS NOTE SHALL BE GOVERNED BY, AND SHALL BE CONSTRUED
-------------
IN ACCORDANCE WITH, THE LAWS OF THE STATE OF NEW YORK.
13. Submission to Jurisdiction. ANY LEGAL ACTION OR PROCEEDING WITH
--------------------------
RESPECT TO THIS NOTE MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK OR OF
THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND, BY
EXECUTION AND DELIVERY OF THIS NOTE, THE COMPANY HEREBY ACCEPTS FOR ITSELF AND
IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE JURISDICTION OF
THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. EACH PARTY HERETO
HEREBY IRREVOCABLY
<PAGE>
CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF THE AFOREMENTIONED COURTS IN
ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES THEREOF TO SUCH PARTY BY
REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN RECEIPT REQUESTED, TO SUCH
PARTY AT ITS ADDRESS SPECIFIED IN SECTION 14. THE PARTIES HERETO HEREBY
IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY IRREVOCABLY WAIVES ANY
OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION TO THE LAYING OF VENUE
OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT MAY NOW OR HEREAFTER
----- --- ----------
HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN SUCH RESPECTIVE
JURISDICTIONS.
14. Notices. All notices, requests, consents and other communications
-------
hereunder shall be in writing and shall be delivered in person, mailed by
certified or registered mail, return receipt requested, or sent by telecopier or
telex, addressed as follows:
(a) if to the IMA, at Information Management Associates, One Corporate
Drive, Suite #414, Shelton, Connecticut 06484, Attention: President, with a
copy to Thomas L. Fairfield, Esq., LeBoeuf, Lamb, Greene & MacRae, L.L.P., 225
Asylum Street, Hartford, Connecticut 06103; and
(b) if to the Holder, at Wand Partners, Inc., 630 Fifth Avenue, Suite
2435, New York, New York 10110, with a copy to Marcia Nirenstein, Esq., Skadden,
Arps, Slate, Meagher & Flom, LLP, 1440 New York Avenue, N.W., Washington, D.C.
20005.
or, in any such case, at such other address or addresses as shall have been
furnished in writing by such party to the others.
15. Collection of Fees and Expenses. IMA hereby agrees to pay all costs
-------------------------------
and expenses, including reasonable attorneys' fees, in connection with the
enforcement or collection of this Note.
16. Lost Documents. Upon receipt by IMA of evidence satisfactory to it of
--------------
the loss, theft, destruction or mutilation of this Note or any Note exchanged
for it, and (in case of loss, theft or destruction) an indemnity satisfactory to
it, and upon reimbursement to IMA of all reasonable expenses incidental thereto,
and upon surrender and cancellation of such Note, if mutilated, the Company will
make and deliver in liue of such Note a new Note of like tenor an unpaid
principal amount and dated as of the original date of the Note.
17. Benefit. This Note shall be binding upon and inure to the benefit of
-------
the parties hereto and their legal representatives, successors and assigns.
<PAGE>
18. Usury Savings Clause. Anything herein to the contrary
--------------------
notwithstanding, if during the period for which interest is computed hereunder,
the amount of interest computed on the basis provided for in this Note, together
with all fees, charges and other payments which are treated as interest under
applicable law, as provided for herein or in any other document executed in
connection herewith, would exceed the amount of such interest computed on the
basis of the Highest Lawful Rate (as defined below), the Company shall not be
obligated to pay, and the Holder shall not be entitled to charge, collect,
reserve or take, interest in excess of the Highest Lawful Rate, and during any
such period the interest payable hereunder shall be computed on the basis of the
Highest Lawful Rate. As used herein, "Highest Lawful Rate" means the maximum
non-usurious rate of interest, as in effect from time to time, which may be
charged, contracted for, reserved, received or collected by the Holder in
connection with this Note under applicable law.
19. Descriptive Headings. The descriptive headings of this Note are
--------------------
inserted for convenience only and do not constitute a part of this Note.
<PAGE>
IN WITNESS WHEREOF, IMA has executed and delivered this Note on the
date first written above.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By:
Name:
Title:
<PAGE>
Exhibit 10.9
COMMON STOCK PURCHASE WARRANT
THIS WARRANT AND ANY SHARES ISSUED UPON EXERCISE OF THIS WARRANT HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT"), OR ANY
---
STATE SECURITIES LAWS AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED
UNLESS REGISTERED UNDER THE ACT AND ALL APPLICABLE STATE SECURITIES LAWS OR
UNLESS AN EXEMPTION FROM SUCH REGISTRATION REQUIREMENTS IS AVAILABLE AT THE
TIME OF SUCH OFFERING, SALE OR TRANSFER.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
New York, New York
No. W-1 August 12, 1999
Information Management Associates, Inc. (the "Company"), a Connecticut
corporation, for value received, hereby certifies that Wand Equity Portfolio
Fund II L.P. and Wand Affiliates Fund L.P., or their registered assigns
(collectively, the "Holder"), are entitled to purchase from the Company the
number of duly authorized, validly issued, fully paid and nonassessable shares
of common stock, without par value of the Company (the "Common Stock") set forth
opposite their names on Exhibit A hereto, at the purchase price per share equal
to the higher of (i) $3.25 or (ii) the last sale price of the Company's Common
Stock reported as of the close of trading on the NASDAQ National Market on
August 12, 1999, at any time or from time to time prior to 5:00 P.M., New York
City time, on August 11, 2007 (or such later date as may be determined pursuant
to section 18), all subject to the terms, conditions and adjustments set forth
below in this Warrant.
This Warrant is the Common Stock Purchase Warrant (the "Warrant", such
term to include any such warrants issued in substitution therefor) originally
issued in connection with the Senior Subordinated Convertible Promissory Note
and Warrant Purchase Agreement, dated August 12, 1999, by and among the Company
and the Holder, and the issue by the Company of a 9% Senior Subordinated
Convertible Note, dated August 12, 1999, to the Holder. The Warrant originally
so issued evidences rights to purchase an aggregate of 425,000 shares of Common
Stock subject to adjustment as provided herein. Certain capitalized terms used
in this Warrant are defined in section 13; references to an "Exhibit" are,
unless otherwise specified, to one of the Exhibits attached to this Warrant and
references to a "section" are, unless otherwise specified, to one of the
sections of this Warrant.
1
<PAGE>
1. Exercise of Warrant.
-------------------
1.1 Manner of Exercise. This Warrant may be exercised by the Holder,
------------------
in whole or in part, during normal business hours on any Business Day, by
surrender of this Warrant to the Company at its principal office, accompanied by
a subscription in substantially the form attached to this Warrant (or a
reasonable facsimile thereof) duly executed by the Holder and accompanied by
payment, in cash, by certified or official bank check payable to the order of
the Company or by wire transfer, in lawful money of the United States of
America, or in the manner provided in section 1.5 or section 1.6 (or by any
combination of such methods), in the amount obtained by multiplying (a) the
-
number of shares of Common Stock (without giving effect to any adjustment
thereof) designated in such subscription by (b) $3.25, and such holder shall
-
thereupon be entitled to receive the number of duly authorized, validly issued,
fully paid and nonassessable shares of Common Stock (or Other Securities)
determined as provided in sections 2 through 4.
1.2 When Exercise Effective. Each exercise of this Warrant shall be
-----------------------
deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3 Delivery of Stock Certificates, etc. As soon as practicable
-----------------------------------
after each exercise from time to time of this Warrant, in whole or in part, and
in any event within five Business Days thereafter, the Company at its expense
(including the payment by it of any applicable issue taxes) will cause to be
issued in the name of and delivered to the holder hereof or, subject to section
9, as such holder (upon payment by such holder of any applicable transfer taxes)
may direct,
(a) a certificate or certificates for the number of shares of Common
Stock (or Other Securities) to which such holder shall be entitled upon
such exercise plus, in lieu of any fractional share to which such holder
would other wise be entitled, cash in an amount equal to the same fraction
of the Market Price per share on the Business Day next preceding the date
of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this
2
<PAGE>
Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
All shares of Common Stock issued upon the exercise of this Warrant shall be
validly issued, fully paid and nonassessable.
1.4 Company to Reaffirm Obligations. The Company will, at the time
-------------------------------
of each exercise of this Warrant, upon the request of the Holder, acknowledge in
writing its continuing obligation to afford to the Holder all rights to which
such Holder shall continue to be entitled after such exercise in accordance with
the terms of this Warrant, provided that if the Holder shall fail to make any
--------
such request, such failure shall not affect the continuing obligation of the
Company to afford such rights to the Holder.
1.5 Payment by Application of Shares Otherwise Issuable. Upon any
---------------------------------------------------
exercise of this Warrant, the Holder may, at its option, instruct the Company,
by written notice accompanying the surrender of this Warrant at the time of such
exercise, to apply to the payment required by section 1.1 such number of the
shares of Common Stock otherwise issuable to such holder upon such exercise as
shall be specified in such notice, in which case an amount equal to the excess
of the aggregate Current Market Price of such specified number of shares on the
date of exercise over the portion of the payment required by section 1.1
attributable to such shares shall be deemed to have been paid to the Company
and the number of shares issuable upon such exercise shall be reduced by such
specified number.
2. Adjustment of Common Stock Issuable Upon Exercise.
-------------------------------------------------
2.1 General; Warrant Price. The number of shares of Common Stock
----------------------
which the Holder of this Warrant shall be entitled to receive upon each exercise
hereof shall be determined by multiplying the number of shares of Common Stock
which would otherwise (but for the provisions of this section 2) be issuable
upon such exercise, as designated by the holder hereof pursuant to section 1.1,
by the fraction of which (a) the numerator is $3.25 and (b) the denominator is
- -
the Warrant Price in effect on the date of such exercise. The "Warrant Price"
shall initially be $3.25 per share, shall be adjusted and readjusted from time
to time as provided in this section 2 and, as so adjusted or readjusted, shall
remain in effect until a further adjustment or readjustment thereof is required
by this section 2.
2.2 Adjustment of Warrant Price.
---------------------------
2.2.1 Issuance of Additional Shares of Common Stock. In case the
---------------------------------------------
Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock
3
<PAGE>
deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the lesser of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
(a) the numerator of which shall be (i) the number of shares of Common
-
Stock outstanding immediately prior to such issue or sale plus (ii) the
--
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the lesser of such Current Market
Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (x) immediately after any
- -------- -
Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
and (y) treasury shares shall not be deemed to be outstanding.
-
2.2.2 Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than a dividend
payable in Additional Shares of Common Stock, then, and in each such case,
subject to section 2.8, the Warrant Price in effect immediately prior to the
close of business on the record date fixed for the determination of holders of
any class of securities entitled to receive such dividend or distribution shall
be reduced, effective as of the close of business on such record date, to a
price (calculated to the nearest .001 of a cent) determined by reducing such
Warrant Price by the amount of such dividend or distribution (as determined in
good faith by the Board of Directors of the Company) applicable to one share of
Common Stock.
2.3 Treatment of Options and Convertible Securities. In case the
-----------------------------------------------
Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth
4
<PAGE>
in the instrument relating thereto, without regard to any provisions contained
therein for a subsequent adjustment of such number) issuable upon the exercise
of such Options or, in the case of Convertible Securities and Options therefor,
the conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commence ment of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
--------
deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the lesser of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
-------- -------
which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
- -
any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
-
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be; provided, that, no such further adjustment shall be made
-------- ----
if such event or occurrence results in an adjustment to the Warrant Price
under the other provisions hereof that equitably accounts for such event or
occurrence.
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change of rate or otherwise), the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon any such increase or
5
<PAGE>
decrease becoming effective, be recomputed to reflect such increase or
decrease insofar as it affects such Options, or the rights of conversion or
exchange under such Convertible Securities, which are outstanding at such
time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or
such cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
6
<PAGE>
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4 Treatment of Stock Dividends, Stock Splits, etc. In case the
------------------------------------------------
Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
-
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
-
on the day immediately prior to the day upon which such corporate action becomes
effective.
2.5 Computation of Consideration. For the purposes of this section
----------------------------
2,
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net
amount of cash received by the Company, without deducting any expenses
paid or incurred by the Company or any commissions or compensations
paid or concessions or discounts allowed to underwriters, dealers or
others performing similar services in connection with such issue or
sale,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company (subject to confirmation by a firm of
independent certified public accountants of recognized standing
approved by the Holder), and
7
<PAGE>
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company
(subject to confirmation by a firm of independent public accountants
of recognized standing approved by the Holder);
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securities and the conversion
or exchange of such Convertible Securities, in each case computing
such consideration as provided in the foregoing subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6 Adjustments for Combinations, etc. In case the outstanding
----------------------------------
shares of Common Stock shall be combined or consolidated, by reclassification or
8
<PAGE>
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7 Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8 Minimum Adjustment of Warrant Price. If the amount of any
-----------------------------------
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. Consolidation, Merger, etc.
--------------------------
3.1 Adjustments for Consolidation, Merger, Sale of Assets,
-----------------------------------------------------
Reorganization, etc. In case the Company after the date hereof (a) shall
- -------------- -
consolidate with or merge into any other Person and shall not be the continuing
or surviving corporation of such consolidation or merger, or (b) shall permit
-
any other Person to consolidate with or merge into the Company and the Company
shall be the continuing or surviving Person but, in connection with such
consolidation or merger, the Common Stock or Other Securities shall be changed
into or exchanged for stock or other securities of any other Person or cash or
any other property, or (c) shall transfer all or substantially all of its
-
properties or assets to any other Person, or (d) shall effect a capital
-
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.1 or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the
9
<PAGE>
manner provided in this Warrant, the holder of this Warrant, upon the exercise
hereof at any time after the consummation of such transaction, shall be entitled
to receive (at the aggregate Warrant Price in effect at the time of such
consummation for all Common Stock or Other Securities issuable upon such
exercise immediately prior to such consummation), in lieu of the Common Stock or
Other Securities issuable upon such exercise prior to such consummation, the
highest amount of securities, cash or other property to which such holder would
actually have been entitled as a shareholder upon such consummation if such
holder had exercised the rights represented by this Warrant immediately prior
thereto, subject to adjustments (subsequent to such consummation) as nearly
equivalent as possible to the adjustments provided for in sections 2 through 4.
3.2 Assumption of Obligations. Notwithstanding anything contained in
-------------------------
this Warrant to the contrary, the Company will not effect any of the
transactions described in clauses (a) through (d) of section 3.1 unless, prior
to the consummation thereof, each Person (other than the Company) which may be
required to deliver any stock, securities, cash or property upon the exercise of
this Warrant as provided herein shall assume, by written instrument delivered
to, and reasonably satisfactory to, the Holder, (a) the obligations of the
-
Company under this Warrant (and if the Company shall survive the consummation of
such transaction, such assumption shall be in addition to, and shall not release
the Company from, any continuing obligations of the Company under this Warrant),
and (b) the obligation to deliver to the Holder such shares of stock,
-
securities, cash or property as, in accordance with the foregoing provisions of
this section 3, the Holder may be entitled to receive, and such Person shall
have similarly delivered to the Holder an opinion of counsel for such Person,
which counsel shall be reasonably satisfactory to such holder, stating that this
Warrant shall thereafter continue in full force and effect and the terms hereof
(including, without limitation, all of the provisions of this section 3) shall
be applicable to the stock, securities, cash or property which such Person may
be required to deliver upon any exercise of this Warrant or the exercise of any
rights pursuant hereto.
4. Other Dilutive Events. In case any event shall occur as to which
---------------------
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (such firm to be subject to the approval of the Holder), which shall
give their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase rights represented by this Warrant.
Upon receipt of such opinion, the Company will promptly mail a copy thereof to
the Holder and shall make the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment
-------------------------
10
<PAGE>
of its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
-
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
-
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
-
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of the Warrant would exceed the total number of shares of Common Stock (or Other
Securities) then authorized by the Company's certificate of incorporation and
available for the purpose of issue upon such exercise, and (d) will not issue
-
any capital stock of any class which is preferred as to dividends or as to the
distribution of assets upon voluntary or involuntary dissolution, liquidation or
winding-up, unless the rights of the holders thereof shall be limited to a fixed
sum or percentage of par value or a sum determined by reference to a formula
based on a published index of interest rates, an interest rate publicly
announced by a financial institution or a similar indicator of interest rates in
respect of participation in dividends and to a fixed sum or percentage of par
value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
-------------------------------------
adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and cause independent certified public accountants of recognized
national standing (such firm to be subject to the approval of The Holder)
selected by the Company to verify such computation and prepare a report setting
forth such adjustment or readjustment and showing in reasonable detail the
method of calculation thereof and the facts upon which such adjustment or
readjustment is based, including a statement of (a) the consideration received
-
or to be received by the Company for any Additional Shares of Common Stock
issued or sold or deemed to have been issued, (b) the number of shares of Common
-
Stock outstanding or deemed to be outstanding, and (c) the Warrant Price in
-
effect immediately prior to such issue or sale and as adjusted and readjusted
(if required by section 2) on account thereof. The Company will forthwith mail
a copy of each such report to The Holder and will, upon the written request at
any time of the Holder, furnish to the Holder a like report setting forth the
Warrant Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its
11
<PAGE>
principal office and will cause the same to be available for inspection at such
office during normal business hours by The Holder or any prospective purchaser
of a Warrant designated by the holder thereof.
7. Notices of Corporate Action. In the event of:
---------------------------
(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than a regular periodic dividend
payable in cash out of earned surplus in an amount not exceeding the amount
of the immediately preceding cash dividend for such period) or other
distribution, or any right to subscribe for, purchase or otherwise acquire
any shares of stock of any class or any other securities or property, or to
receive any other right, or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or winding-
up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
-
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
--
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 30 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock (or
----------------------------
Other Securities) required to be reserved for purposes of exercise of this
Warrant require registration with or approval of any governmental authority
under any federal or state law (other than the Securities Act) before such
shares may be issued upon exercise, the Company will, at its expense and as
expeditiously as possible, use its best efforts to cause such shares to be duly
registered or approved, as the case may be. At any such time as Common Stock is
listed on any national securities exchange,
12
<PAGE>
the Company will, at its expense and as expeditiously as possible, use its best
efforts to cause such shares to be duly registered or approved, as the case may
be. At any such time as Common Stock is listed on any national securities
exchange, the Company will, at its expense, obtain promptly and maintain the
approval for listing on each such exchange, upon official notice of issuance,
the shares of Common Stock issuable upon exercise of the then outstanding
Warrants and maintain the listing of such shares after their issuance; and the
Company will also list on such national securities exchange, will register under
the Exchange Act and will maintain such listing of, any Other Securities that at
any time are issuable upon exercise of the Warrants, if and at the time that any
securities of the same class shall be listed on such national securities
exchange by the Company.
9. Restrictions on Transfer.
------------------------
9.1. Restrictive Legends. Except as otherwise permitted by this
-------------------
section 9, each Warrant (including each Warrant issued upon the transfer of any
Warrant) shall be stamped or otherwise imprinted with a legend in substantially
the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933, as
amended, and may not be transferred, sold or otherwise disposed of except
while a registration under such Act is in effect or pursuant to an
exemption therefrom under such Act. This Warrant and such shares may be
transferred only in compliance with the conditions specified in this
Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the absence
of such registration or an exemption therefrom under such Act. Such shares
may be transferred only in compliance with the conditions specified in
certain Common Stock Purchase Warrants issued by Information Management
Associates, Inc. A complete and correct copy of the form of such Warrant
is available for inspection at the principal office of Information
Management Associates, Inc. or at the office or agency maintained by
Information Management Associates, Inc. as provided in such Warrant and
will be furnished to the holder of such shares upon written request and
without charge."
Any certificate issued at any time in exchange or substitution for any
certificate bearing such legend (except a new certificate issued upon completion
of a public
13
<PAGE>
distribution pursuant to a registration statement under the Act) shall also bear
such legend unless the holder of such certificate delivers to the Company an
opinion of counsel reasonably acceptable to the Company that an exemption from
registration under the Act is available with respect to Common Stock issued upon
exercise of this Warrant.
10. Availability of Information. The Company will comply with the
---------------------------
reporting requirements of Sections 13 and 15(d) of the Exchange Act and will
comply with all other public information reporting requirements of the
Commission (including Rule 144 adopted by the Commission under the Securities
Act) from time to time in effect and relating to the availability of an
exemption from the Securities Act for the sale of any Common Stock. The Company
will furnish to each holder of any Warrants, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and copies of all regular and periodic reports and all registration statements
and prospectuses filed by the Company with any securities exchange or with the
Commission.
11. Reservation of Stock, etc. The Company will at all times
--------------------------
reserve and keep available, solely for issuance and delivery upon exercise of
the Warrants, the number of shares of Common Stock (or Other Securities) from
time to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
12. Registration and Transfer of Warrants, etc.
-------------------------------------------
12.1. Warrant Register; Ownership of Warrants. The Company will keep
---------------------------------------
at its principal office a register in which the Company will provide for the
registration of Warrants and the registration of transfers of Warrants. The
Company may treat the Person in whose name any Warrant is registered on such
register as the owner thereof for all other purposes, and the Company shall not
be affected by any notice to the contrary, except that, if and when any
Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes. Subject to section 9, a Warrant, if properly assigned, may be
exercised by a new holder without a new Warrant first having been issued.
12.2. Transfer and Exchange of Warrants. Upon surrender of any
---------------------------------
Warrant for registration of transfer or for exchange to the Company at its
principal office, the Company at its expense will (subject to compliance with
section 9, if applicable) execute and deliver in exchange therefor a new Warrant
or Warrants of like tenor, in the name of such holder or as such holder (upon
payment by such holder
14
<PAGE>
of any applicable transfer taxes) may direct, calling in the aggregate on the
face or faces thereof for the number of shares of Common Stock called for on the
face or faces of the Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant,
upon delivery of an indemnity bond in such reasonable amount as the Company may
determine or, in the case of any such mutilation, upon the surrender of such
Warrant for cancellation to the Company at its principal office, the Company at
its expense will execute and deliver, in lieu thereof, a new Warrant of like
tenor.
13. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
---------------------------------
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) up 2,101,954 shares (as constituted on such date) issued upon the
exercise of options granted or to be granted under the Company's stock
option plans as in effect on the date hereof or under any other employee
stock option or purchase plan or plans adopted or assumed after such date
that represent 20% of the fully-diluted ownership of the Company,
(c) shares issued upon the exercise of the common stock purchase
warrants and options to be issued to CMG @Ventures III, LLC, @Ventures
Investors, LLC., @Ventures Foreign Fund III, L.P., Wand Equity Portfolio II
L.P. and Wand Affiliates Fund L.P. in connection with the purchase of such
entities of preferred stock in the Company's buyingedge.com inc.
Subsidiary.
(d) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clauses (a),
(b) and (c) by reason of adjustments required pursuant to anti-dilution
provisions applicable to such securities as in effect on the date hereof,
but only if and to the extent that such adjustments are required as the
result of the original issuance of the Warrants, and
(e) such additional number of shares as may become issuable upon
15
<PAGE>
the exercise of any of the securities referred to in the foregoing clauses
(a), (b) and (c) by reason of adjustments required pursuant to anti-
dilution provisions applicable to such securities as in effect on the date
hereof, in order to reflect any subdivision or combination of Common Stock,
by reclassification or otherwise, or any dividend on Common Stock payable
in Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in the City of New York are authorized by
law to be closed. Any reference to "days" (unless Business Days are specified)
shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
------------
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term
-------
to include any corporation which shall succeed to or assume the obligations of
the Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of
----------------------
stock (other than Common Stock) or other securities directly or indirectly
convertible into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average
--------------------
daily Market Price during the period of the most recent 20 days, ending on such
date, on which the national securities exchanges were open for trading, except
that if no Common Stock is then listed or admitted to trading on any national
securities exchange or quoted in the over-the-counter market, the Current Market
Price shall be the Market Price on such date.
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
Market Price: On any date specified herein, the amount per share
------------
of the Common Stock, equal to (a) the last sale price of such Common Stock,
-
regular
16
<PAGE>
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common
-
Stock is not then listed or admitted to trading on any national securities
exchange but is designated as a national market system security by the NASD, the
last trading price of the Common Stock on such date, or (c) if there shall have
-
been no trading on such date or if the Common Stock is not so designated, the
average of the closing bid and asked prices of the Common Stock on such date as
shown by the NASD automated quotation system, or (d) if such Common Stock is not
-
then listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the value as determined by a firm of independent public
accountants of recognized standing selected by the Board of Directors of the
Company, and approved by the Holder, as of the last day of any month ending
within 30 days preceding the date as of which the determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
----
Note: The 9% Senior Subordinated Convertible Promissory Note, due
----
April 30, 2000, of the Company originally issued in the aggregate principal
amount of $5 million, such term to include any such notes issued in substitution
for such note.
Options: Rights, options or warrants to subscribe for, purchase
-------
or otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a limited liability
------
company, a partnership, an organization, a business, an individual, a government
or political subdivision thereof or a governmental agency.
Securities Act: The Securities Act of 1933, or any similar
--------------
federal statute, and the rules and regulations of the Commission thereunder, all
as the same shall be in effect at the time.
17
<PAGE>
Transfer: Any sale, assignment, pledge or other disposition of
--------
any security, or of any interest therein, which could constitute a "sale" as
that term is defined in section 2(3) of the Securities Act.
Warrant Price: As defined in section 2.1.
-------------
Warrants: As defined in the introduction to this Warrant.
--------
14. Remedies. The Company stipulates that the remedies at law
--------
of the holder of this Warrant in the event of any default or threatened default
by the Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
15. No Rights or Liabilities as Stockholder. Nothing contained
---------------------------------------
in this Warrant shall be construed as conferring upon the Holder any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
16. Notices. All notices and other communications under this
-------
Warrant shall be in writing and shall be delivered, or mailed by registered or
certified mail, return receipt requested, by a nationally recognized overnight
courier, postage prepaid, addressed (a) if to any holder of any Warrant, at the
-
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
-
its President at its principal office, provided that the exercise of any Warrant
--------
shall be effective in the manner provided in section 1.
17. Amendments. This Warrant and any term hereof may be changed,
----------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought.
18. Expiration. The Company will give the holder of this
----------
Warrant not less than six weeks nor more than two months notice of the
expiration of the right to exercise this Warrant. The right to exercise this
Warrant shall expire at 5:00 P.M., New York City time, on August 11, 2007,
unless the Company shall fail to give such notice as aforesaid, in which event
the right to exercise this Warrant shall not expire until a date six weeks after
the date on which the Company shall give the holder hereof notice of the
expiration of the right to exercise this Warrant.
18
<PAGE>
19. Descriptive Headings. The headings in this Agreement are for
--------------------
purposes of reference only and shall not limit or otherwise affect the meaning
hereof.
20. GOVERNING LAW. THIS WARRANT SHALL BE CONSTRUED AND ENFORCED
IN ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAW
OF THE STATE OF NEW YORK.
21. Judicial Proceedings; Waiver of Jury. Any judicial proceeding
------------------------------------
brought against the Company with respect to this Warrant may be brought in any
court of competent jurisdiction in the State of New York or of the United States
of America for the Southern District of New York and, by execution and delivery
of this Agreement, the Company (a) accepts, generally and unconditionally, the
-
nonexclusive jurisdiction of such courts and any related appellate court, and
irrevocably agrees to be bound by any judgment rendered thereby in connection
with this Warrant, subject to any rights of appeal, and (b) irrevocably waives
-
any objection the Company may now or hereafter have as to the venue of any such
suit, action or proceeding brought in such a court or that such court is an
inconvenient forum. The Company hereby waives personal service of process and
consents that service of process upon it may be made by certified or registered
mail, return receipt requested, at its address specified or determined in
accordance with the provisions of section 16, and service so made shall be
deemed completed on the third Business Day after such service is deposited in
the mail or, if earlier, when delivered. Nothing herein shall affect the right
to serve process in any other manner permitted by law or shall limit the right
of any holder of any Warrant to bring proceedings against the Company in the
courts of any other jurisdiction. THE COMPANY HEREBY WAIVES TRIAL BY JURY IN
ANY JUDICIAL PROCEED ING INVOLVING, DIRECTLY, OR INDIRECTLY, ANY MATTER
(WHETHER SOUNDING IN TORT, CONTRACT OR OTHERWISE) IN ANY WAY ARISING OUT OF,
RELATED TO, OR CONNECTED WITH THIS WARRANT OR THE RELATIONSHIP ESTABLISHED
HEREUNDER.
INFORMATION MANAGEMENT
ASSOCIATES INC.
By:
Title:
19
<PAGE>
FORM OF SUBSCRIPTION
--------------------
[To be executed only upon exercise of Warrant]
To Information Management Associates, Inc.
The undersigned registered holder of the within Warrant hereby irrevocably
exercises such Warrant for, and purchases thereunder, ______/*/ shares of Common
Stock of Information Management Associates, Inc. and herewith makes payment of
$_______________ therefor, and requests that the certificates for such shares be
issued in the name of, and delivered to _________________, whose address is
_____________________________________.
Dated:
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
(Street Address)
(City)(State)(Zip Code)
___________________________
/*/ Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
partial exercise, a new Warrant or Warrants will be issued and delivered,
representing the unexercised portion of the Warrant, to the holder
surrendering the Warrant.
20
<PAGE>
FORM OF ASSIGNMENT
------------------
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within Warrant
hereby sells, assigns and transfers unto _____________________ the right
represented by such Warrant to purchase ___________ shares of Common Stock of
Information Management Associates, Inc. to which such Warrant relates, and
appoints ________________ Attorney to make such transfer on the books of
Information Management Associates, Inc. maintained for such purpose, with full
power of substitution in the premises.
Dated:
(Signature must conform in all respects to name
of holder as specified on the face of Warrant)
(Street Address)
(City)(State)(Zip Code)
Signed in the presence of:
21
<PAGE>
EXHIBIT A
<TABLE>
<CAPTION>
- -------------------------------------------------------------------------------
Name of Company Number of Shares
- -------------------------------------------------------------------------------
<S> <C>
Wand Equity Portfolio II L.P. 401,752
- -------------------------------------------------------------------------------
Wand Affiliates Fund L.P. 23,248
- -------------------------------------------------------------------------------
</TABLE>
22
<PAGE>
Exhibit 10.10
Form of Warrant
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
Warrant to Purchase Stock.
- -------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, @Ventures III,
L.P. (the "Warrant Holder") is entitled, effective as of August 12, 1999,
subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 366,209 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The
Exercise Price of this Warrant and the number of Shares issuable upon exercise
of this Warrant shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's Common Stock.
<PAGE>
Adjustment for Other Dividends and Distributions. In case the Company shall make
or issue, or shall fix a record date for the determination of eligible holders
entitled to receive, a dividend or other distribution with respect to the Shares
payable in securities of the Company then, and in each such case, the Warrant
Holder, on exercise of this Warrant at any time after consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such date,
the securities of the Company to which such Warrant Holder would have been
entitled upon such date if such Warrant Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in this
Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
------------------------------------------------------------
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's capital stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's capital stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and assets receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or assets to which such Warrant Holder would have been entitled upon
such consummation is such Warrant Holder had exercised this Warrant immediately
prior to the consummation of such capital reorganization, consolidation, merger,
or sale, all subject to further adjustment as provided in this Section 1(c); and
in each such case, the terms of this Warrant shall be applicable to the shares
of stock or other securities or assets receivable upon the exercise of this
Warrant after such consummation.
Manner of Exercise.
- ------------------
Exercise Agreement. This Warrant may be exercised, in whole or in part, on any
- ------------------
business day on or prior to the Expiration Date. To exercise this Warrant, the
Warrant Holder must surrender to the Company this Warrant and deliver to the
Company: (i) a duly executed exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company form time to
- ---------
time (the "Warrant Exercise Agreement"); and (ii) payment in full of the
Exercise Price for the number of Shares to be purchased upon exercise hereof.
Upon partial exercise, this Warrant shall be surrendered, and a new Warrant of
the same tenor for purchase of the number of remaining Shares not previously
purchased shall be issued by the Company to the Warrant Holder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
Limitations on Exercise. This Warrant may not be exercised for fewer than 1,000
- -----------------------
Shares unless it is exercised for all Shares as to which this Warrant is then
exercisable.
Payment. The Warrant Exercise Agreement shall be accompanied by full payment of
- -------
the Exercise Price for the Shares being purchased in cash (by check), or where
permitted law:
<PAGE>
by cancellation of indebtedness of the Company to the Warrant Holder;
subject to the provisions of Section 3 below relating to compliance with
applicable securities laws, provided that a public market for the Company's
stock exists, (1) through a "same-day-sale" commitment from the Warrant Holder
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to sell a portion of the Shares so purchased to pay
for the Exercise Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment form the Warrant Holder and an NASD Dealer
whereby the Warrant Holder irrevocably elects to exercise this Warrant and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company.
by "Net Exercise," in which case the Company shall deliver to the Warrant Holder
(without payment of any additional Exercise Price) that number of shares equal
to the quotient obtained by dividing;
the value of the Shares purchased upon exercise at the time of exercise (such
value to be determined by subtracting (i) the aggregate Exercise Price for such
Shares as in effect immediately prior to exercise from (ii) the aggregate Fair
Market Value (as defined in Section 11 below) for such Shares immediately prior
to the exercise of this Warrant), by
the Fair Market Value of one (1) Share immediately prior to exercise; or
by any combination of the foregoing.
Tax Withholding. Prior to the issuance of the Shares upon exercise of this
- ---------------
Warrant, the Warrant Holder must pay or provide for any applicable federal or
state withholding obligations of the Company.
Issuance of Shares. Provided that the Exercise Agreement and payment have been
- ------------------
received by the Company as provided above, the Company shall issue the Shares
(adjusted as provided herein) registered in the name of the Warrant Holder, the
Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
Compliance with Laws and Regulations. The exercise of this Warrant and the
- ------------------------------------
issuance and transfer of Shares shall be subject to compliance by the Company
and the Warrant Holder with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
Transfer and Exchange. This Warrant and the rights hereunder may not be
- ---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless registered under the Act and applicable state
<PAGE>
securities laws or the Warrant Holder provides the Company with an opinion of
Counsel reasonably satisfactory to the Company to the effect that such transfer
complies with all applicable securities laws, except that, Warrant Holder shall
------ ----
be able to transfer its shares and its rights under this Agreement to a
transferee, provided that the transferee is an affiliate, partner, limited
partner, member, shareholder or a lineal descendant of such partner, limited
partner, member or shareholder. If a transfer of all or part of this Warrant is
permitted as provided in the preceding sentence, then the Company shall deliver
to Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
- -----------------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and in the amount to the Company or, in the case
of mutilation, or surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
Repurchase on Sale, Merger, or Consolidation of the Company.
- -----------------------------------------------------------
"Acquisition". For the purpose of this Warrant, "Acquisition" means any sale,
-----------
license, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
Assumption of Warrant. If upon the closing of any Acquisition the successor
- ---------------------
entity assumes the obligations of this Warrant, then this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company
shall use reasonable efforts to cause the surviving corporation to assume the
obligations of the Warrant.
Nonassumption. If upon the closing of any Acquisition the successor entity does
- -------------
not assume the obligations of his Warrant and Holder has not otherwise exercised
this Warrant in full, then the unexercised portion of this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the acquisition on the same terms as
other holders of the same class of securities of the Company.
Purchase Right. Notwithstanding the foregoing, if in any acquisition the Company
- --------------
receives consideration consisting solely of cash or cash equivalents, then, at
the election of Holder, the Company shall purchase the unexercised portion of
this Warrant for cash upon the closing of any Acquisition for an amount equal to
(a) the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
<PAGE>
Representations and Warranties. The Company hereby represents and warrants to
- ------------------------------
the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
The Company is a corporation validly existing and in good standing under the
laws of the state of Connecticut.
The consummation by the Company of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, loan agreement or any other agreement or instrument to which the
Company is a party.
Piggyback Registration Rights.
- -----------------------------
Company Obligation. If the Company shall determine to register any of its
- ------------------
securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
---
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Warrant Holder written
notice thereof and include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, the number of
shares specified in a written request made by the Warrant Holder within fifteen
(15) days after receipt of such written notice from the Company, except as set
forth in Section 8(b) below.
Underwritten Public Offering. If the registration for which the Company gives
- ----------------------------
notice is for a registered public offering involving an underwriting, the right
of any Warrant Holder to registration shall be conditioned upon the Warrant
Holder's participation in such underwriting and the inclusion of such Warrant
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Warrant Holder and all other
shareholders entitled to have securities included in such registration in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
<PAGE>
Expenses. All expenses of the registration shall be borne by the Company, except
- --------
underwriting discounts and selling commissions applicable to the sale of any of
Warrant Holder's Warrant Stock and any other securities of the Company being
sold in the same registration by other shareholders, which shall be borne by the
Warrant Holder and such other shareholders pro rata on the basis of the number
of their shares registered.
Information Rights. So long as the Holder holds this Warrant and/or any of the
- ------------------
Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
Reservation of Stock. On and after the Commencement Date, the Company will
- --------------------
reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Legends. This Warrant and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Compliance with Securities Laws on Transfer. This Warrant and the Shares
- -------------------------------------------
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws or an available exemption by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
<PAGE>
Notices. All notices and other communications from the Company to the Holder, or
- -------
vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
Waiver. This Warrant and any term hereof may be changed, waived, discharged or
- ------
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Attorneys' Fees. In the event of any dispute between the parties concerning the
- ---------------
terms and provisions of this Warrant , the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
Entire Agreement. This Warrant and the other documents delivered pursuant hereto
- ----------------
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
Governing Law. The validity of the issuance of the Shares shall be governed by
- -------------
The Connecticut Business Corporation Act, as amended from time to time. In all
other respects, this Warrant shall be governed by and construed in accordance
with the laws of the State of Connecticut, without giving effect to its
principles regarding conflicts of law which might cause the application of the
laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
@Ventures III, L.P.
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.11
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
Warrant to Purchase Stock.
- -------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, Wand Equity
Portfolio Fund II L.P. (the "Warrant Holder") is entitled, effective as of
August 12, 1999, subject to the terms and conditions of this Warrant, to
purchase from Information Management Associates, Inc., a Connecticut company
(the "Company"), up to a total of 117,417 shares of Common Stock, (the "Common
Stock"), of the Company (the "Shares") at the price of $4.00 per share (the
"Exercise Price") at any time or from time to time during the period commencing
on the date hereof until 5:00 p.m. Eastern Time on August 12, 2002 (the
"Expiration Date"). This Warrant must be exercised, if at all, on or before the
Expiration Date. Unless the context otherwise requires, the term "Shares" shall
mean and include the stock and other securities and property at any time
receivable or issuable upon exercise of this Warrant. The term "Warrant" as
used herein, shall include this Warrant and any warrants delivered in
substitution or exchange therefor as provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The
Exercise Price of this Warrant and the number of Shares issuable upon exercise
of this Warrant shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's Common Stock.
Adjustment for Other Dividends and Distributions. In case the Company shall make
or issue, or
<PAGE>
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Shares payable in
securities of the Company then, and in each such case, the Warrant Holder, on
exercise of this Warrant at any time after consummation, effective date or
record date of such event, shall receive, in addition to the Shares (or such
other stock or securities) issuable on such exercise prior to such date, the
securities of the Company to which such Warrant Holder would have been entitled
upon such date if such Warrant Holder had exercised this Warrant immediately
prior thereto (all subject to further adjustment as provided in this Warrant).
Adjustment for Capital Reorganization, Consolidation, Merger. If any capital
- ------------------------------------------------------------
reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of the Company's capital stock will be
entitled to receive stock, securities or assets with respect to or in exchange
for the Company's capital stock, and in each such case the Warrant Holder, upon
the exercise of this Warrant, at any time after the consummation of such capital
reorganization, consolidation, merger, or sale, shall be entitled to receive, in
lieu of the stock or other securities and assets receivable upon the exercise of
this Warrant prior to such consummation, the stock or other securities or assets
to which such Warrant Holder would have been entitled upon such consummation is
such Warrant Holder had exercised this Warrant immediately prior to the
consummation of such capital reorganization, consolidation, merger, or sale, all
subject to further adjustment as provided in this Section 1(c); and in each such
case, the terms of this Warrant shall be applicable to the shares of stock or
other securities or assets receivable upon the exercise of this Warrant after
such consummation.
Manner of Exercise.
- ------------------
Exercise Agreement. This Warrant may be exercised, in whole or in part, on any
- ------------------
business day on or prior to the Expiration Date. To exercise this Warrant, the
Warrant Holder must surrender to the Company this Warrant and deliver to the
Company: (i) a duly executed exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company form time to
- ---------
time (the "Warrant Exercise Agreement"); and (ii) payment in full of the
Exercise Price for the number of Shares to be purchased upon exercise hereof.
Upon partial exercise, this Warrant shall be surrendered, and a new Warrant of
the same tenor for purchase of the number of remaining Shares not previously
purchased shall be issued by the Company to the Warrant Holder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
Limitations on Exercise. This Warrant may not be exercised for fewer than 1,000
- -----------------------
Shares unless it is exercised for all Shares as to which this Warrant is then
exercisable.
Payment. The Warrant Exercise Agreement shall be accompanied by full payment of
- -------
the Exercise Price for the Shares being purchased in cash (by check), or where
permitted law:
<PAGE>
by cancellation of indebtedness of the Company to the Warrant Holder;
subject to the provisions of Section 3 below relating to compliance with
applicable securities laws, provided that a public market for the Company's
stock exists, (1) through a "same-day-sale" commitment from the Warrant Holder
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to sell a portion of the Shares so purchased to pay
for the Exercise Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment form the Warrant Holder and an NASD Dealer
whereby the Warrant Holder irrevocably elects to exercise this Warrant and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company.
by "Net Exercise," in which case the Company shall deliver to the Warrant Holder
(without payment of any additional Exercise Price) that number of shares equal
to the quotient obtained by dividing;
the value of the Shares purchased upon exercise at the time of exercise (such
value to be determined by subtracting (i) the aggregate Exercise Price for such
Shares as in effect immediately prior to exercise from (ii) the aggregate Fair
Market Value (as defined in Section 11 below) for such Shares immediately prior
to the exercise of this Warrant), by
the Fair Market Value of one (1) Share immediately prior to exercise; or
by any combination of the foregoing.
Tax Withholding. Prior to the issuance of the Shares upon exercise of this
- ---------------
Warrant, the Warrant Holder must pay or provide for any applicable federal or
state withholding obligations of the Company.
Issuance of Shares. Provided that the Exercise Agreement and payment have been
- ------------------
received by the Company as provided above, the Company shall issue the Shares
(adjusted as provided herein) registered in the name of the Warrant Holder, the
Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
Compliance with Laws and Regulations. The exercise of this Warrant and the
- ------------------------------------
issuance and transfer of Shares shall be subject to compliance by the Company
and the Warrant Holder with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
Transfer and Exchange. This Warrant and the rights hereunder may not be
- ---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless registered under the Act and applicable state
<PAGE>
securities laws or the Warrant Holder provides the Company with an opinion of
Counsel reasonably satisfactory to the Company to the effect that such transfer
complies with all applicable securities laws, except that, Warrant Holder shall
------ ----
be able to transfer its shares and its rights under this Agreement to a
transferee, provided that the transferee is an affiliate, partner, limited
partner, member, shareholder or a lineal descendant of such partner, limited
partner, member or shareholder. If a transfer of all or part of this Warrant is
permitted as provided in the preceding sentence, then the Company shall deliver
to Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
- -----------------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and in the amount to the Company or, in the case
of mutilation, or surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
Repurchase on Sale, Merger, or Consolidation of the Company.
- -----------------------------------------------------------
"Acquisition". For the purpose of this Warrant, "Acquisition" means any sale,
------------
license, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
Assumption of Warrant. If upon the closing of any Acquisition the successor
- ---------------------
entity assumes the obligations of this Warrant, then this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company
shall use reasonable efforts to cause the surviving corporation to assume the
obligations of the Warrant.
Nonassumption. If upon the closing of any Acquisition the successor entity does
- -------------
not assume the obligations of his Warrant and Holder has not otherwise exercised
this Warrant in full, then the unexercised portion of this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the acquisition on the same terms as
other holders of the same class of securities of the Company.
Purchase Right. Notwithstanding the foregoing, if in any acquisition the Company
- --------------
receives consideration consisting solely of cash or cash equivalents, then, at
the election of Holder, the Company shall purchase the unexercised portion of
this Warrant for cash upon the closing of any Acquisition for an amount equal to
(a) the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
<PAGE>
Representations and Warranties. The Company hereby represents and warrants to
- ------------------------------
the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
The Company is a corporation validly existing and in good standing under the
laws of the state of Connecticut.
The consummation by the Company of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, loan agreement or any other agreement or instrument to which the
Company is a party.
Piggyback Registration Rights.
- -----------------------------
Company Obligation. If the Company shall determine to register any of its
- ------------------
securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
---
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Warrant Holder written
notice thereof and include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, the number of
shares specified in a written request made by the Warrant Holder within fifteen
(15) days after receipt of such written notice from the Company, except as set
forth in Section 8(b) below.
Underwritten Public Offering. If the registration for which the Company gives
- ----------------------------
notice is for a registered public offering involving an underwriting, the right
of any Warrant Holder to registration shall be conditioned upon the Warrant
Holder's participation in such underwriting and the inclusion of such Warrant
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Warrant Holder and all other
shareholders entitled to have securities included in such registration in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
<PAGE>
Expenses. All expenses of the registration shall be borne by the Company, except
- --------
underwriting discounts and selling commissions applicable to the sale of any of
Warrant Holder's Warrant Stock and any other securities of the Company being
sold in the same registration by other shareholders, which shall be borne by the
Warrant Holder and such other shareholders pro rata on the basis of the number
of their shares registered.
Information Rights. So long as the Holder holds this Warrant and/or any of the
- ------------------
Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
Reservation of Stock. On and after the Commencement Date, the Company will
- --------------------
reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Legends. This Warrant and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Compliance with Securities Laws on Transfer. This Warrant and the Shares
- -------------------------------------------
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws or an available exemption by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
<PAGE>
Notices. All notices and other communications from the Company to the Holder, or
- -------
vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
Waiver. This Warrant and any term hereof may be changed, waived, discharged or
- ------
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Attorneys' Fees. In the event of any dispute between the parties concerning the
- ---------------
terms and provisions of this Warrant , the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
Entire Agreement. This Warrant and the other documents delivered pursuant hereto
- ----------------
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
Governing Law. The validity of the issuance of the Shares shall be governed by
- -------------
The Connecticut Business Corporation Act, as amended from time to time. In all
other respects, this Warrant shall be governed by and construed in accordance
with the laws of the State of Connecticut, without giving effect to its
principles regarding conflicts of law which might cause the application of the
laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
Wand Equity Portfolio Fund II L.P.
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.12
Form of Warrant
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
Warrant to Purchase Stock.
- -------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, Amicus
Capital, LLC (the "Warrant Holder") is entitled, effective as of August 12,
1999, subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 15,526 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The
Exercise Price of this Warrant and the number of Shares issuable upon exercise
of this Warrant shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's Common Stock.
<PAGE>
Adjustment for Other Dividends and Distributions. In case the Company shall make
or issue, or shall fix a record date for the determination of eligible holders
entitled to receive, a dividend or other distribution with respect to the Shares
payable in securities of the Company then, and in each such case, the Warrant
Holder, on exercise of this Warrant at any time after consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such date,
the securities of the Company to which such Warrant Holder would have been
entitled upon such date if such Warrant Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in this
Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
------------------------------------------------------------
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's capital stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's capital stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and assets receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or assets to which such Warrant Holder would have been entitled upon
such consummation is such Warrant Holder had exercised this Warrant immediately
prior to the consummation of such capital reorganization, consolidation, merger,
or sale, all subject to further adjustment as provided in this Section 1(c); and
in each such case, the terms of this Warrant shall be applicable to the shares
of stock or other securities or assets receivable upon the exercise of this
Warrant after such consummation.
Manner of Exercise.
- ------------------
Exercise Agreement. This Warrant may be exercised, in whole or in part, on any
- ------------------
business day on or prior to the Expiration Date. To exercise this Warrant, the
Warrant Holder must surrender to the Company this Warrant and deliver to the
Company: (i) a duly executed exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company form time to
- ---------
time (the "Warrant Exercise Agreement"); and (ii) payment in full of the
Exercise Price for the number of Shares to be purchased upon exercise hereof.
Upon partial exercise, this Warrant shall be surrendered, and a new Warrant of
the same tenor for purchase of the number of remaining Shares not previously
purchased shall be issued by the Company to the Warrant Holder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
Limitations on Exercise. This Warrant may not be exercised for fewer than 1,000
- -----------------------
Shares unless it is exercised for all Shares as to which this Warrant is then
exercisable.
Payment. The Warrant Exercise Agreement shall be accompanied by full payment of
- -------
the Exercise Price for the Shares being purchased in cash (by check), or where
permitted law:
<PAGE>
by cancellation of indebtedness of the Company to the Warrant Holder;
subject to the provisions of Section 3 below relating to compliance with
applicable securities laws, provided that a public market for the Company's
stock exists, (1) through a "same-day-sale" commitment from the Warrant Holder
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to sell a portion of the Shares so purchased to pay
for the Exercise Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment form the Warrant Holder and an NASD Dealer
whereby the Warrant Holder irrevocably elects to exercise this Warrant and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company.
by "Net Exercise," in which case the Company shall deliver to the Warrant Holder
(without payment of any additional Exercise Price) that number of shares equal
to the quotient obtained by dividing;
the value of the Shares purchased upon exercise at the time of exercise (such
value to be determined by subtracting (i) the aggregate Exercise Price for such
Shares as in effect immediately prior to exercise from (ii) the aggregate Fair
Market Value (as defined in Section 11 below) for such Shares immediately prior
to the exercise of this Warrant), by
the Fair Market Value of one (1) Share immediately prior to exercise; or
by any combination of the foregoing.
Tax Withholding. Prior to the issuance of the Shares upon exercise of this
- ---------------
Warrant, the Warrant Holder must pay or provide for any applicable federal or
state withholding obligations of the Company.
Issuance of Shares. Provided that the Exercise Agreement and payment have been
- ------------------
received by the Company as provided above, the Company shall issue the Shares
(adjusted as provided herein) registered in the name of the Warrant Holder, the
Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
Compliance with Laws and Regulations. The exercise of this Warrant and the
- ------------------------------------
issuance and transfer of Shares shall be subject to compliance by the Company
and the Warrant Holder with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
Transfer and Exchange. This Warrant and the rights hereunder may not be
- ---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless registered under the Act and applicable state
<PAGE>
securities laws or the Warrant Holder provides the Company with an opinion of
Counsel reasonably satisfactory to the Company to the effect that such transfer
complies with all applicable securities laws, except that, Warrant Holder shall
------ ----
be able to transfer its shares and its rights under this Agreement to a
transferee, provided that the transferee is an affiliate, partner, limited
partner, member, shareholder or a lineal descendant of such partner, limited
partner, member or shareholder. If a transfer of all or part of this Warrant is
permitted as provided in the preceding sentence, then the Company shall deliver
to Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
- -----------------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and in the amount to the Company or, in the case
of mutilation, or surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
Repurchase on Sale, Merger, or Consolidation of the Company.
- -----------------------------------------------------------
"Acquisition". For the purpose of this Warrant, "Acquisition" means any sale,
-----------
license, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
Assumption of Warrant. If upon the closing of any Acquisition the successor
- ---------------------
entity assumes the obligations of this Warrant, then this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company
shall use reasonable efforts to cause the surviving corporation to assume the
obligations of the Warrant.
Nonassumption. If upon the closing of any Acquisition the successor entity does
- -------------
not assume the obligations of his Warrant and Holder has not otherwise exercised
this Warrant in full, then the unexercised portion of this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the acquisition on the same terms as
other holders of the same class of securities of the Company.
Purchase Right. Notwithstanding the foregoing, if in any acquisition the Company
- --------------
receives consideration consisting solely of cash or cash equivalents, then, at
the election of Holder, the Company shall purchase the unexercised portion of
this Warrant for cash upon the closing of any Acquisition for an amount equal to
(a) the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
<PAGE>
Representations and Warranties. The Company hereby represents and warrants to
- ------------------------------
the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
The Company is a corporation validly existing and in good standing under the
laws of the state of Connecticut.
The consummation by the Company of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, loan agreement or any other agreement or instrument to which the
Company is a party.
Piggyback Registration Rights.
- -----------------------------
Company Obligation. If the Company shall determine to register any of its
- ------------------
securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
---
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Warrant Holder written
notice thereof and include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, the number of
shares specified in a written request made by the Warrant Holder within fifteen
(15) days after receipt of such written notice from the Company, except as set
forth in Section 8(b) below.
Underwritten Public Offering. If the registration for which the Company gives
- ----------------------------
notice is for a registered public offering involving an underwriting, the right
of any Warrant Holder to registration shall be conditioned upon the Warrant
Holder's participation in such underwriting and the inclusion of such Warrant
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Warrant Holder and all other
shareholders entitled to have securities included in such registration in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
<PAGE>
Expenses. All expenses of the registration shall be borne by the Company, except
- --------
underwriting discounts and selling commissions applicable to the sale of any of
Warrant Holder's Warrant Stock and any other securities of the Company being
sold in the same registration by other shareholders, which shall be borne by the
Warrant Holder and such other shareholders pro rata on the basis of the number
of their shares registered.
Information Rights. So long as the Holder holds this Warrant and/or any of the
- ------------------
Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
Reservation of Stock. On and after the Commencement Date, the Company will
- --------------------
reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Legends. This Warrant and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Compliance with Securities Laws on Transfer. This Warrant and the Shares
- -------------------------------------------
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws or an available exemption by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
<PAGE>
Notices. All notices and other communications from the Company to the Holder, or
- -------
vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
Waiver. This Warrant and any term hereof may be changed, waived, discharged or
- ------
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Attorneys' Fees. In the event of any dispute between the parties concerning the
- ---------------
terms and provisions of this Warrant , the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
Entire Agreement. This Warrant and the other documents delivered pursuant hereto
- ----------------
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
Governing Law. The validity of the issuance of the Shares shall be governed by
- -------------
The Connecticut Business Corporation Act, as amended from time to time. In all
other respects, this Warrant shall be governed by and construed in accordance
with the laws of the State of Connecticut, without giving effect to its
principles regarding conflicts of law which might cause the application of the
laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
Amicus Capital, LLC
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.13
Form of Warrant
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
1. Warrant to Purchase Stock.
-------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, CMG@Ventures
III, LLC (the "Warrant Holder") is entitled, effective as of August 12, 1999,
subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 93,311 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number
-------------------------------------------------
and character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Exercise Price of this Warrant and the number of
Shares issuable upon exercise of this Warrant shall each be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.
<PAGE>
(ii) Adjustment for Other Dividends and Distributions. In
case the Company shall make or issue, or shall fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the Shares payable in securities of the Company
then, and in each such case, the Warrant Holder, on exercise of this Warrant at
any time after consummation, effective date or record date of such event, shall
receive, in addition to the Shares (or such other stock or securities) issuable
on such exercise prior to such date, the securities of the Company to which such
Warrant Holder would have been entitled upon such date if such Warrant Holder
had exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation,
-----------------------------------------------------
Merger. If any capital reorganization of the capital stock of the Company, or
- ------
any consolidation or merger of the Company with or into another corporation, or
the sale of all or substantially all of the Company's assets to another
corporation shall be effected in such a way that holders of the Company's
capital stock will be entitled to receive stock, securities or assets with
respect to or in exchange for the Company's capital stock, and in each such case
the Warrant Holder, upon the exercise of this Warrant, at any time after the
consummation of such capital reorganization, consolidation, merger, or sale,
shall be entitled to receive, in lieu of the stock or other securities and
assets receivable upon the exercise of this Warrant prior to such consummation,
the stock or other securities or assets to which such Warrant Holder would have
been entitled upon such consummation is such Warrant Holder had exercised this
Warrant immediately prior to the consummation of such capital reorganization,
consolidation, merger, or sale, all subject to further adjustment as provided in
this Section 1(c); and in each such case, the terms of this Warrant shall be
applicable to the shares of stock or other securities or assets receivable upon
the exercise of this Warrant after such consummation.
2. Manner of Exercise.
------------------
(a) Exercise Agreement. This Warrant may be exercised, in whole
------------------
or in part, on any business day on or prior to the Expiration Date. To exercise
this Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
---------
Company form time to time (the "Warrant Exercise Agreement"); and (ii) payment
in full of the Exercise Price for the number of Shares to be purchased upon
exercise hereof. Upon partial exercise, this Warrant shall be surrendered, and
a new Warrant of the same tenor for purchase of the number of remaining Shares
not previously purchased shall be issued by the Company to the Warrant Holder.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the Shares issuable upon such exercise shall
be treated for all purposes as the holder of record of such Shares as of the
close of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised
-----------------------
for fewer than 1,000 Shares unless it is exercised for all Shares as to which
this Warrant is then exercisable.
(c) Payment. The Warrant Exercise Agreement shall be accompanied
-------
by full payment of the Exercise Price for the Shares being purchased in cash (by
check), or where permitted law:
<PAGE>
(i) by cancellation of indebtedness of the Company to
the Warrant Holder;
(ii) subject to the provisions of Section 3 below
relating to compliance with applicable securities laws, provided that a public
market for the Company's stock exists, (1) through a "same-day-sale" commitment
from the Warrant Holder and a broker-dealer that is a member of the National
Association of Securities Dealers (an "NASD Dealer") whereby the Warrant Holder
irrevocably elects to exercise this Warrant and to sell a portion of the Shares
so purchased to pay for the Exercise Price and whereby the NASD Dealer
irrevocably commits upon receipt of such Shares to forward the Exercise Price
directly to the Company, or (2) through a "margin" commitment form the Warrant
Holder and an NASD Dealer whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to pledge the Shares so purchased to the NASD Dealer
in a margin account as security for a loan from the NASD Dealer in the amount of
the Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt
of such Shares to forward the Exercise Price directly to the Company.
(iii) by "Net Exercise," in which case the Company
shall deliver to the Warrant Holder (without payment of any additional Exercise
Price) that number of shares equal to the quotient obtained by dividing;
1) the value of the Shares purchased upon
exercise at the time of exercise (such value to be determined by subtracting (i)
the aggregate Exercise Price for such Shares as in effect immediately prior to
exercise from (ii) the aggregate Fair Market Value (as defined in Section 11
below) for such Shares immediately prior to the exercise of this Warrant), by
2) the Fair Market Value of one (1) Share
immediately prior to exercise; or
(iv) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon
---------------
exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and
------------------
payment have been received by the Company as provided above, the Company shall
issue the Shares (adjusted as provided herein) registered in the name of the
Warrant Holder, the Warrant Holder's authorized assignee, or the Warrant
Holder's legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this Warrant and
------------------------------------
the issuance and transfer of Shares shall be subject to compliance by the
Company and the Warrant Holder with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may not
---------------------
be transferred, in
<PAGE>
whole or in part, without the Company's prior written consent, which consent
shall not be unreasonably withheld, and may not be transferred unless registered
under the Act and applicable state securities laws or the Warrant Holder
provides the Company with an opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer complies with all applicable securities
laws, except that, Warrant Holder shall be able to transfer its shares and its
------ ----
rights under this Agreement to a transferee, provided that the transferee is an
affiliate, partner, limited partner, member, shareholder or a lineal descendant
of such partner, limited partner, member or shareholder. If a transfer of all or
part of this Warrant is permitted as provided in the preceding sentence, then
the Company shall deliver to Holder certificates for the Shares acquired and, if
this Warrant has not been fully exercised or converted and has not expired, a
new Warrant representing the Shares not so acquired.
5. Replacement of Warrants. On receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of
this Warrant and, in the case of loss, theft or destruction, on delivery of an
indemnity agreement reasonably satisfactory in form and in the amount to the
Company or, in the case of mutilation, or surrender and cancellation of this
Warrant, the Company at its expense shall execute and deliver, in lieu of this
Warrant, a new warrant of like tenor.
6. Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
(a) "Acquisition". For the purpose of this Warrant,
-----------
"Acquisition" means any sale, license, or other disposition of all or
substantially all of the assets (including intellectual property) of the
Company, or any reorganization, consolidation, or merger of the Company where
the holders of the Company's securities before the transaction beneficially own
less than 50% of the outstanding voting securities of the surviving entity after
the transaction.
(b) Assumption of Warrant. If upon the closing of any
Acquisition the successor entity assumes the obligations of this Warrant, then
this Warrant shall be exercisable for the same securities, cash, and property as
would be payable for the Shares issuable upon exercise of the unexercised
portion of this Warrant as if such Shares were outstanding on the record date
for the Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of the Warrant.
(c) Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
(d) Purchase Right. Notwithstanding the foregoing, if in any
--------------
acquisition the Company receives consideration consisting solely of cash or cash
equivalents, then, at the election of Holder, the Company shall purchase the
unexercised portion of this Warrant for cash upon the closing of any Acquisition
for an amount equal to (a) the fair market value of any consideration that would
have been received by Holder in consideration of the Shares had Holder exercised
the
<PAGE>
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
7. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the
purchase right represented by this Warrant, and all securities, if any, issuable
upon conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The Company is a corporation validly existing and in good
standing under the laws of the state of Connecticut.
(c) The consummation by the Company of the transactions
contemplated hereby will not conflict with or result in a breach or violation of
any of the terms or provisions of, or constitute a default under, any statute,
any indenture, mortgage, loan agreement or any other agreement or instrument to
which the Company is a party.
8. Piggyback Registration Rights.
-----------------------------
(a) Company Obligation. If the Company shall determine to
------------------
register any of its securities either for its own account or the account of a
shareholder(s) exercising demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a transaction pursuant to Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), or a registration on any registration form which does
---
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Warrant Stock, the Company will promptly give to the
Warrant Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by the Warrant
Holder within fifteen (15) days after receipt of such written notice from the
Company, except as set forth in Section 8(b) below.
(b) Underwritten Public Offering. If the registration for which
----------------------------
the Company gives notice is for a registered public offering involving an
underwriting, the right of any Warrant Holder to registration shall be
conditioned upon the Warrant Holder's participation in such underwriting and the
inclusion of such Warrant Holder's Warrant Stock in the underwriting pursuant to
an underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section, if
the underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten the underwriter may
exclude some or all of the Warrant Stock with the number of shares that may be
included in the registration and underwriting being allocated among the Warrant
Holder and all other shareholders entitled to have securities included in such
registration
<PAGE>
in proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
(c) Expenses. All expenses of the registration shall be borne by the
--------
Company, except underwriting discounts and selling commissions applicable to the
sale of any of Warrant Holder's Warrant Stock and any other securities of the
Company being sold in the same registration by other shareholders, which shall
be borne by the Warrant Holder and such other shareholders pro rata on the basis
of the number of their shares registered.
9. Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
10. Reservation of Stock. On and after the Commencement Date, the Company
--------------------
will reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
11. Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
12. Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws or an available exemption by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material
<PAGE>
question as to the availability of current information as referenced in Rule
144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
13. Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder, as the case
may be, in writing by the Company or such Holder from time to time.
14. Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
15. Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant , the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
16. Entire Agreement. This Warrant and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
17. Governing Law. The validity of the issuance of the Shares shall be
-------------
governed by The Connecticut Business Corporation Act, as amended from time to
time. In all other respects, this Warrant shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
its principles regarding conflicts of law which might cause the application of
the laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
CMG@Ventures III, LLC
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.14
Form of Warrant
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
1. Warrant to Purchase Stock.
-------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, Madrona
Investment Group L.L.C. (the "Warrant Holder") is entitled, effective as of
August 12, 1999, subject to the terms and conditions of this Warrant, to
purchase from Information Management Associates, Inc., a Connecticut company
(the "Company"), up to a total of 12,421 shares of Common Stock, (the "Common
Stock"), of the Company (the "Shares") at the price of $4.00 per share (the
"Exercise Price") at any time or from time to time during the period commencing
on the date hereof until 5:00 p.m. Eastern Time on August 12, 2002 (the
"Expiration Date"). This Warrant must be exercised, if at all, on or before the
Expiration Date. Unless the context otherwise requires, the term "Shares" shall
mean and include the stock and other securities and property at any time
receivable or issuable upon exercise of this Warrant. The term "Warrant" as used
herein, shall include this Warrant and any warrants delivered in substitution or
exchange therefor as provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number
-------------------------------------------------
and character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
(i) Adjustment for Stock Splits, Stock Dividends,
Recapitalizations, etc. The Exercise Price of this Warrant and the number of
Shares issuable upon exercise of this Warrant shall each be proportionally
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of the Company's Common Stock.
<PAGE>
(ii) Adjustment for Other Dividends and Distributions. In case the
Company shall make or issue, or shall fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the Shares payable in securities of the Company then, and in each
such case, the Warrant Holder, on exercise of this Warrant at any time after
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of the Company to which such Warrant
Holder would have been entitled upon such date if such Warrant Holder had
exercised this Warrant immediately prior thereto (all subject to further
adjustment as provided in this Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If any
------------------------------------------------------------
capital reorganization of the capital stock of the Company, or any consolidation
or merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of the Company's capital stock will be
entitled to receive stock, securities or assets with respect to or in exchange
for the Company's capital stock, and in each such case the Warrant Holder, upon
the exercise of this Warrant, at any time after the consummation of such capital
reorganization, consolidation, merger, or sale, shall be entitled to receive, in
lieu of the stock or other securities and assets receivable upon the exercise of
this Warrant prior to such consummation, the stock or other securities or assets
to which such Warrant Holder would have been entitled upon such consummation is
such Warrant Holder had exercised this Warrant immediately prior to the
consummation of such capital reorganization, consolidation, merger, or sale, all
subject to further adjustment as provided in this Section 1(c); and in each such
case, the terms of this Warrant shall be applicable to the shares of stock or
other securities or assets receivable upon the exercise of this Warrant after
such consummation.
2. Manner of Exercise.
------------------
(a) Exercise Agreement. This Warrant may be exercised, in whole or in
------------------
part, on any business day on or prior to the Expiration Date. To exercise this
Warrant, the Warrant Holder must surrender to the Company this Warrant and
deliver to the Company: (i) a duly executed exercise agreement in the form
attached hereto as Exhibit A, or in such other form as may be approved by the
---------
Company form time to time (the "Warrant Exercise Agreement"); and (ii) payment
in full of the Exercise Price for the number of Shares to be purchased upon
exercise hereof. Upon partial exercise, this Warrant shall be surrendered, and
a new Warrant of the same tenor for purchase of the number of remaining Shares
not previously purchased shall be issued by the Company to the Warrant Holder.
This Warrant shall be deemed to have been exercised immediately prior to the
close of business on the date of its surrender for exercise as provided above,
and the person entitled to receive the Shares issuable upon such exercise shall
be treated for all purposes as the holder of record of such Shares as of the
close of business on such date.
(b) Limitations on Exercise. This Warrant may not be exercised for fewer
-----------------------
than 1,000 Shares unless it is exercised for all Shares as to which this Warrant
is then exercisable.
(c) Payment. The Warrant Exercise Agreement shall be accompanied by full
-------
payment of the Exercise Price for the Shares being purchased in cash (by check),
or where permitted law:
<PAGE>
(i) by cancellation of indebtedness of the Company to the Warrant
Holder;
(ii) subject to the provisions of Section 3 below relating to
compliance with applicable securities laws, provided that a public market for
the Company's stock exists, (1) through a "same-day-sale" commitment from the
Warrant Holder and a broker-dealer that is a member of the National Association
of Securities Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably
elects to exercise this Warrant and to sell a portion of the Shares so purchased
to pay for the Exercise Price and whereby the NASD Dealer irrevocably commits
upon receipt of such Shares to forward the Exercise Price directly to the
Company, or (2) through a "margin" commitment form the Warrant Holder and an
NASD Dealer whereby the Warrant Holder irrevocably elects to exercise this
Warrant and to pledge the Shares so purchased to the NASD Dealer in a margin
account as security for a loan from the NASD Dealer in the amount of the
Exercise Price, and whereby the NASD Dealer irrevocably commits upon receipt of
such Shares to forward the Exercise Price directly to the Company.
(iii) by "Net Exercise," in which case the Company shall deliver
to the Warrant Holder (without payment of any additional Exercise Price) that
number of shares equal to the quotient obtained by dividing;
1) the value of the Shares purchased upon exercise at the
time of exercise (such value to be determined by subtracting (i) the aggregate
Exercise Price for such Shares as in effect immediately prior to exercise from
(ii) the aggregate Fair Market Value (as defined in Section 11 below) for such
Shares immediately prior to the exercise of this Warrant), by
2) the Fair Market Value of one (1) Share immediately prior
to exercise; or
(iv) by any combination of the foregoing.
(d) Tax Withholding. Prior to the issuance of the Shares upon
---------------
exercise of this Warrant, the Warrant Holder must pay or provide for any
applicable federal or state withholding obligations of the Company.
(e) Issuance of Shares. Provided that the Exercise Agreement and
------------------
payment have been received by the Company as provided above, the Company shall
issue the Shares (adjusted as provided herein) registered in the name of the
Warrant Holder, the Warrant Holder's authorized assignee, or the Warrant
Holder's legal representative, and shall deliver certificates representing the
Shares with the appropriate legends affixed thereto.
3. Compliance with Laws and Regulations. The exercise of this Warrant
------------------------------------
and the issuance and transfer of Shares shall be subject to compliance by the
Company and the Warrant Holder with all applicable requirements of federal and
state securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
4. Transfer and Exchange. This Warrant and the rights hereunder may not
---------------------
be transferred, in
<PAGE>
whole or in part, without the Company's prior written consent, which consent
shall not be unreasonably withheld, and may not be transferred unless registered
under the Act and applicable state securities laws or the Warrant Holder
provides the Company with an opinion of Counsel reasonably satisfactory to the
Company to the effect that such transfer complies with all applicable securities
laws, except that, Warrant Holder shall be able to transfer its shares and its
------ ----
rights under this Agreement to a transferee, provided that the transferee is an
affiliate, partner, limited partner, member, shareholder or a lineal descendant
of such partner, limited partner, member or shareholder. If a transfer of all or
part of this Warrant is permitted as provided in the preceding sentence, then
the Company shall deliver to Holder certificates for the Shares acquired and, if
this Warrant has not been fully exercised or converted and has not expired, a
new Warrant representing the Shares not so acquired.
5. Replacement of Warrants. On receipt of evidence reasonably satisfactory
-----------------------
to the Company of the loss, theft, destruction or mutilation of this Warrant
and, in the case of loss, theft or destruction, on delivery of an indemnity
agreement reasonably satisfactory in form and in the amount to the Company or,
in the case of mutilation, or surrender and cancellation of this Warrant, the
Company at its expense shall execute and deliver, in lieu of this Warrant, a new
warrant of like tenor.
6. Repurchase on Sale, Merger, or Consolidation of the Company.
-----------------------------------------------------------
(a) "Acquisition". For the purpose of this Warrant, "Acquisition"
-----------
means any sale, license, or other disposition of all or substantially all of the
assets (including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
(b) Assumption of Warrant. If upon the closing of any Acquisition the
-------------------
successor entity assumes the obligations of this Warrant, then this Warrant
shall be exercisable for the same securities, cash, and property as would be
payable for the Shares issuable upon exercise of the unexercised portion of this
Warrant as if such Shares were outstanding on the record date for the
Acquisition and subsequent closing. The Warrant Price shall be adjusted
accordingly. The Company shall use reasonable efforts to cause the surviving
corporation to assume the obligations of the Warrant.
(c) Nonassumption. If upon the closing of any Acquisition the
-------------
successor entity does not assume the obligations of his Warrant and Holder has
not otherwise exercised this Warrant in full, then the unexercised portion of
this Warrant shall be deemed to have been automatically converted pursuant to
Section 1.2 and thereafter Holder shall participate in the acquisition on the
same terms as other holders of the same class of securities of the Company.
(d) Purchase Right. Notwithstanding the foregoing, if in any
--------------
acquisition the Company receives consideration consisting solely of cash or cash
equivalents, then, at the election of Holder, the Company shall purchase the
unexercised portion of this Warrant for cash upon the closing of any Acquisition
for an amount equal to (a) the fair market value of any consideration that would
have been received by Holder in consideration of the Shares had Holder exercised
the
<PAGE>
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
7. Representations and Warranties. The Company hereby represents and
------------------------------
warrants to the Holder as follows:
(a) All Shares which may be issued upon the exercise of the purchase
right represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
(b) The Company is a corporation validly existing and in good standing
under the laws of the state of Connecticut.
(c) The consummation by the Company of the transactions contemplated
hereby will not conflict with or result in a breach or violation of any of the
terms or provisions of, or constitute a default under, any statute, any
indenture, mortgage, loan agreement or any other agreement or instrument to
which the Company is a party.
8. Piggyback Registration Rights.
-----------------------------
(a) Company Obligation. If the Company shall determine to register
------------------
any of its securities either for its own account or the account of a
shareholder(s) exercising demand registration rights, other than a registration
relating solely to employee benefit plans, or a registration relating solely to
a transaction pursuant to Rule 145 promulgated under the Securities Act of 1933,
as amended (the "Act"), or a registration on any registration form which does
---
not permit secondary sales or does not include substantially the same
information as would be required to be included in a registration statement
covering the sale of the Warrant Stock, the Company will promptly give to the
Warrant Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by the Warrant
Holder within fifteen (15) days after receipt of such written notice from the
Company, except as set forth in Section 8(b) below.
(b) Underwritten Public Offering. If the registration for which the
----------------------------
Company gives notice is for a registered public offering involving an
underwriting, the right of any Warrant Holder to registration shall be
conditioned upon the Warrant Holder's participation in such underwriting and the
inclusion of such Warrant Holder's Warrant Stock in the underwriting pursuant to
an underwriting agreement in customary form with the underwriter or underwriters
selected by the Company. Notwithstanding any other provision of this Section,
if the underwriter reasonably determines that marketing factors require a
limitation on the number of shares to be underwritten the underwriter may
exclude some or all of the Warrant Stock with the number of shares that may be
included in the registration and underwriting being allocated among the Warrant
Holder and all other shareholders entitled to have securities included in such
registration
<PAGE>
in proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
(c) Expenses. All expenses of the registration shall be borne by the
--------
Company, except underwriting discounts and selling commissions applicable to the
sale of any of Warrant Holder's Warrant Stock and any other securities of the
Company being sold in the same registration by other shareholders, which shall
be borne by the Warrant Holder and such other shareholders pro rata on the basis
of the number of their shares registered.
9. Information Rights. So long as the Holder holds this Warrant and/or
------------------
any of the Shares, the Company shall deliver to the Holder (a) promptly after
mailing, copies of all notices or other written communications to the
shareholders of the Company, (b) within ninety (90) days after the end of each
fiscal year of the Company, the annual audited financial statements of the
Company certified by independent public accountants of recognized standing and
(c) within forty-five (45) days after the end of each of the first three
quarters of each fiscal year, the Company's quarterly, unaudited financial
statements.
10. Reservation of Stock. On and after the Commencement Date, the Company
--------------------
will reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
11. Legends. This Warrant and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
12. Compliance with Securities Laws on Transfer. This Warrant and the
-------------------------------------------
Shares issuable upon exercise of this Warrant (and the securities issuable,
directly or indirectly, upon conversion of the Shares, if any) may not be
transferred or assigned in whole or in part without compliance with applicable
federal and state securities laws or an available exemption by the transferor
and the transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material
<PAGE>
question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
13. Notices. All notices and other communications from the Company to the
-------
Holder, or vice versa, shall be deemed delivered and effective when given
personally or mailed by first-class registered or certified mail, postage
prepaid, at such address as may have been furnished to the Company or the
Holder, as the case may be, in writing by the Company or the Holder, as the case
may be, in writing by the Company or such Holder from time to time.
14. Waiver. This Warrant and any term hereof may be changed, waived,
------
discharged or terminated only by an instrument in writing signed by the party
against which enforcement of such change, waiver, discharge or termination is
sought.
15. Attorneys' Fees. In the event of any dispute between the parties
---------------
concerning the terms and provisions of this Warrant , the party prevailing in
such dispute shall be entitled to collect from the other party all costs
incurred in such dispute, including reasonable attorneys' fees.
16. Entire Agreement. This Warrant and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof.
17. Governing Law. The validity of the issuance of the Shares shall be
-------------
governed by The Connecticut Business Corporation Act, as amended from time to
time. In all other respects, this Warrant shall be governed by and construed in
accordance with the laws of the State of Connecticut, without giving effect to
its principles regarding conflicts of law which might cause the application of
the laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
Madrona Investment Group L.L.C.
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.15
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
Warrant to Purchase Stock.
-------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, Wand
Affiliates Fund L.P. (the "Warrant Holder") is entitled, effective as of August
12, 1999, subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 6,795 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The
Exercise Price of this Warrant and the number of Shares issuable upon exercise
of this Warrant shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's Common Stock.
Adjustment for Other Dividends and Distributions. In case the Company shall make
or issue, or
<PAGE>
shall fix a record date for the determination of eligible holders entitled to
receive, a dividend or other distribution with respect to the Shares payable in
securities of the Company then, and in each such case, the Warrant Holder, on
exercise of this Warrant at any time after consummation, effective date or
record date of such event, shall receive, in addition to the Shares (or such
other stock or securities) issuable on such exercise prior to such date, the
securities of the Company to which such Warrant Holder would have been entitled
upon such date if such Warrant Holder had exercised this Warrant immediately
prior thereto (all subject to further adjustment as provided in this Warrant).
Adjustment for Capital Reorganization, Consolidation, Merger. If any capital
- ------------------------------------------------------------
reorganization of the capital stock of the Company, or any consolidation or
merger of the Company with or into another corporation, or the sale of all or
substantially all of the Company's assets to another corporation shall be
effected in such a way that holders of the Company's capital stock will be
entitled to receive stock, securities or assets with respect to or in exchange
for the Company's capital stock, and in each such case the Warrant Holder, upon
the exercise of this Warrant, at any time after the consummation of such capital
reorganization, consolidation, merger, or sale, shall be entitled to receive, in
lieu of the stock or other securities and assets receivable upon the exercise of
this Warrant prior to such consummation, the stock or other securities or assets
to which such Warrant Holder would have been entitled upon such consummation is
such Warrant Holder had exercised this Warrant immediately prior to the
consummation of such capital reorganization, consolidation, merger, or sale, all
subject to further adjustment as provided in this Section 1(c); and in each such
case, the terms of this Warrant shall be applicable to the shares of stock or
other securities or assets receivable upon the exercise of this Warrant after
such consummation.
Manner of Exercise.
- ------------------
Exercise Agreement. This Warrant may be exercised, in whole or in part, on any
- ------------------
business day on or prior to the Expiration Date. To exercise this Warrant, the
Warrant Holder must surrender to the Company this Warrant and deliver to the
Company: (i) a duly executed exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company form time to
- ---------
time (the "Warrant Exercise Agreement"); and (ii) payment in full of the
Exercise Price for the number of Shares to be purchased upon exercise hereof.
Upon partial exercise, this Warrant shall be surrendered, and a new Warrant of
the same tenor for purchase of the number of remaining Shares not previously
purchased shall be issued by the Company to the Warrant Holder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
Limitations on Exercise. This Warrant may not be exercised for fewer than 1,000
- -----------------------
Shares unless it is exercised for all Shares as to which this Warrant is then
exercisable.
Payment. The Warrant Exercise Agreement shall be accompanied by full payment of
- -------
the Exercise Price for the Shares being purchased in cash (by check), or where
permitted law:
<PAGE>
by cancellation of indebtedness of the Company to the Warrant Holder;
subject to the provisions of Section 3 below relating to compliance with
applicable securities laws, provided that a public market for the Company's
stock exists, (1) through a "same-day-sale" commitment from the Warrant Holder
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to sell a portion of the Shares so purchased to pay
for the Exercise Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment form the Warrant Holder and an NASD Dealer
whereby the Warrant Holder irrevocably elects to exercise this Warrant and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company.
by "Net Exercise," in which case the Company shall deliver to the Warrant Holder
(without payment of any additional Exercise Price) that number of shares equal
to the quotient obtained by dividing;
the value of the Shares purchased upon exercise at the time of exercise (such
value to be determined by subtracting (i) the aggregate Exercise Price for such
Shares as in effect immediately prior to exercise from (ii) the aggregate Fair
Market Value (as defined in Section 11 below) for such Shares immediately prior
to the exercise of this Warrant), by the Fair Market Value of one (1) Share
immediately prior to exercise; or
by any combination of the foregoing.
Tax Withholding. Prior to the issuance of the Shares upon exercise of this
- ---------------
Warrant, the Warrant Holder must pay or provide for any applicable federal or
state withholding obligations of the Company.
Issuance of Shares. Provided that the Exercise Agreement and payment have been
- ------------------
received by the Company as provided above, the Company shall issue the Shares
(adjusted as provided herein) registered in the name of the Warrant Holder, the
Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
Compliance with Laws and Regulations. The exercise of this Warrant and the
- ------------------------------------
issuance and transfer of Shares shall be subject to compliance by the Company
and the Warrant Holder with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
Transfer and Exchange. This Warrant and the rights hereunder may not be
- ---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless registered under the Act and applicable state
<PAGE>
securities laws or the Warrant Holder provides the Company with an opinion of
Counsel reasonably satisfactory to the Company to the effect that such transfer
complies with all applicable securities laws, except that, Warrant Holder shall
------ ----
be able to transfer its shares and its rights under this Agreement to a
transferee, provided that the transferee is an affiliate, partner, limited
partner, member, shareholder or a lineal descendant of such partner, limited
partner, member or shareholder. If a transfer of all or part of this Warrant is
permitted as provided in the preceding sentence, then the Company shall deliver
to Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
- -----------------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and in the amount to the Company or, in the case
of mutilation, or surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
Repurchase on Sale, Merger, or Consolidation of the Company.
- -----------------------------------------------------------
"Acquisition". For the purpose of this Warrant, "Acquisition" means any sale,
- -------------
license, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
Assumption of Warrant. If upon the closing of any Acquisition the successor
- ---------------------
entity assumes the obligations of this Warrant, then this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company
shall use reasonable efforts to cause the surviving corporation to assume the
obligations of the Warrant.
Nonassumption. If upon the closing of any Acquisition the successor entity does
- -------------
not assume the obligations of his Warrant and Holder has not otherwise exercised
this Warrant in full, then the unexercised portion of this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the acquisition on the same terms as
other holders of the same class of securities of the Company.
Purchase Right. Notwithstanding the foregoing, if in any acquisition the
- --------------
Company receives consideration consisting solely of cash or cash equivalents,
then, at the election of Holder, the Company shall purchase the unexercised
portion of this Warrant for cash upon the closing of any Acquisition for an
amount equal to (a) the fair market value of any consideration that would have
been received by Holder in consideration of the Shares had Holder exercised the
unexercised portion of this Warrant immediately before the record date for
determining the shareholders entitled to participate in the proceeds of the
Acquisition, less (b) the aggregate Warrant Price of the Shares, but in no event
less than zero.
<PAGE>
Representations and Warranties. The Company hereby represents and warrants to
- ------------------------------
the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
The Company is a corporation validly existing and in good standing under the
laws of the state of Connecticut.
The consummation by the Company of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, loan agreement or any other agreement or instrument to which the
Company is a party.
Piggyback Registration Rights.
- -----------------------------
Company Obligation. If the Company shall determine to register any of its
- ------------------
securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
---
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Warrant Holder written
notice thereof and include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, the number of
shares specified in a written request made by the Warrant Holder within fifteen
(15) days after receipt of such written notice from the Company, except as set
forth in Section 8(b) below.
Underwritten Public Offering. If the registration for which the Company gives
- ----------------------------
notice is for a registered public offering involving an underwriting, the right
of any Warrant Holder to registration shall be conditioned upon the Warrant
Holder's participation in such underwriting and the inclusion of such Warrant
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Warrant Holder and all other
shareholders entitled to have securities included in such registration in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
<PAGE>
Expenses. All expenses of the registration shall be borne by the Company,
- --------
except underwriting discounts and selling commissions applicable to the sale of
any of Warrant Holder's Warrant Stock and any other securities of the Company
being sold in the same registration by other shareholders, which shall be borne
by the Warrant Holder and such other shareholders pro rata on the basis of the
number of their shares registered.
Information Rights. So long as the Holder holds this Warrant and/or any of the
- ------------------
Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
Reservation of Stock. On and after the Commencement Date, the Company will
- --------------------
reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Legends. This Warrant and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Compliance with Securities Laws on Transfer. This Warrant and the Shares
- -------------------------------------------
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws or an available exemption by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
<PAGE>
Notices. All notices and other communications from the Company to the Holder,
- -------
or vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
Waiver. This Warrant and any term hereof may be changed, waived, discharged or
- ------
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Attorneys' Fees. In the event of any dispute between the parties concerning
- ---------------
the terms and provisions of this Warrant , the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
Entire Agreement. This Warrant and the other documents delivered pursuant
- ----------------
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof.
Governing Law. The validity of the issuance of the Shares shall be governed by
- -------------
The Connecticut Business Corporation Act, as amended from time to time. In all
other respects, this Warrant shall be governed by and construed in accordance
with the laws of the State of Connecticut, without giving effect to its
principles regarding conflicts of law which might cause the application of the
laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
Wand Affiliates Fund L.P.
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.16
Form of Warrant
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN
OPINION OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE
EFFECT THAT ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND
ANY APPLICABLE STATE SECURITIES LAWS.
INFORMATION MANAGEMENT ASSOCIATES, INC.
WARRANT TO PURCHASE COMMON STOCK
Void after August 12, 2002
Warrant to Purchase Stock.
- -------------------------
(a) Warrant to Purchase Shares. This warrant (the "Warrant")
--------------------------
certifies that for good and valuable consideration duly received, @Ventures
Investors, LLC (the "Warrant Holder") is entitled, effective as of August 12,
1999, subject to the terms and conditions of this Warrant, to purchase from
Information Management Associates, Inc., a Connecticut company (the "Company"),
up to a total of 9,378 shares of Common Stock, (the "Common Stock"), of the
Company (the "Shares") at the price of $4.00 per share (the "Exercise Price") at
any time or from time to time during the period commencing on the date hereof
until 5:00 p.m. Eastern Time on August 12, 2002 (the "Expiration Date"). This
Warrant must be exercised, if at all, on or before the Expiration Date. Unless
the context otherwise requires, the term "Shares" shall mean and include the
stock and other securities and property at any time receivable or issuable upon
exercise of this Warrant. The term "Warrant" as used herein, shall include this
Warrant and any warrants delivered in substitution or exchange therefor as
provided herein.
(b) Adjustment of Exercise Price and Number of Shares. The number and
-------------------------------------------------
character of Shares issuable upon exercise of this Warrant (or any shares of
stock or other securities or property at the time receivable or issuable upon
exercise of this Warrant) and the Exercise Price therefor are subject to
adjustment upon occurrence of the following events:
Adjustment for Stock Splits, Stock Dividends, Recapitalizations, etc. The
Exercise Price of this Warrant and the number of Shares issuable upon exercise
of this Warrant shall each be proportionally adjusted to reflect any stock
dividend, stock split, reverse stock split, combination of shares,
reclassification, recapitalization or other similar event altering the number of
outstanding shares of the Company's Common Stock.
<PAGE>
Adjustment for Other Dividends and Distributions. In case the Company shall make
or issue, or shall fix a record date for the determination of eligible holders
entitled to receive, a dividend or other distribution with respect to the Shares
payable in securities of the Company then, and in each such case, the Warrant
Holder, on exercise of this Warrant at any time after consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such date,
the securities of the Company to which such Warrant Holder would have been
entitled upon such date if such Warrant Holder had exercised this Warrant
immediately prior thereto (all subject to further adjustment as provided in this
Warrant).
(c) Adjustment for Capital Reorganization, Consolidation, Merger. If
------------------------------------------------------------
any capital reorganization of the capital stock of the Company, or any
consolidation or merger of the Company with or into another corporation, or the
sale of all or substantially all of the Company's assets to another corporation
shall be effected in such a way that holders of the Company's capital stock will
be entitled to receive stock, securities or assets with respect to or in
exchange for the Company's capital stock, and in each such case the Warrant
Holder, upon the exercise of this Warrant, at any time after the consummation of
such capital reorganization, consolidation, merger, or sale, shall be entitled
to receive, in lieu of the stock or other securities and assets receivable upon
the exercise of this Warrant prior to such consummation, the stock or other
securities or assets to which such Warrant Holder would have been entitled upon
such consummation is such Warrant Holder had exercised this Warrant immediately
prior to the consummation of such capital reorganization, consolidation, merger,
or sale, all subject to further adjustment as provided in this Section 1(c); and
in each such case, the terms of this Warrant shall be applicable to the shares
of stock or other securities or assets receivable upon the exercise of this
Warrant after such consummation.
Manner of Exercise.
- ------------------
Exercise Agreement. This Warrant may be exercised, in whole or in part, on any
- ------------------
business day on or prior to the Expiration Date. To exercise this Warrant, the
Warrant Holder must surrender to the Company this Warrant and deliver to the
Company: (i) a duly executed exercise agreement in the form attached hereto as
Exhibit A, or in such other form as may be approved by the Company form time to
- ---------
time (the "Warrant Exercise Agreement"); and (ii) payment in full of the
Exercise Price for the number of Shares to be purchased upon exercise hereof.
Upon partial exercise, this Warrant shall be surrendered, and a new Warrant of
the same tenor for purchase of the number of remaining Shares not previously
purchased shall be issued by the Company to the Warrant Holder. This Warrant
shall be deemed to have been exercised immediately prior to the close of
business on the date of its surrender for exercise as provided above, and the
person entitled to receive the Shares issuable upon such exercise shall be
treated for all purposes as the holder of record of such Shares as of the close
of business on such date.
Limitations on Exercise. This Warrant may not be exercised for fewer than 1,000
- -----------------------
Shares unless it is exercised for all Shares as to which this Warrant is then
exercisable.
Payment. The Warrant Exercise Agreement shall be accompanied by full payment of
- -------
the Exercise Price for the Shares being purchased in cash (by check), or where
permitted law:
<PAGE>
by cancellation of indebtedness of the Company to the Warrant Holder;
subject to the provisions of Section 3 below relating to compliance with
applicable securities laws, provided that a public market for the Company's
stock exists, (1) through a "same-day-sale" commitment from the Warrant Holder
and a broker-dealer that is a member of the National Association of Securities
Dealers (an "NASD Dealer") whereby the Warrant Holder irrevocably elects to
exercise this Warrant and to sell a portion of the Shares so purchased to pay
for the Exercise Price and whereby the NASD Dealer irrevocably commits upon
receipt of such Shares to forward the Exercise Price directly to the Company, or
(2) through a "margin" commitment form the Warrant Holder and an NASD Dealer
whereby the Warrant Holder irrevocably elects to exercise this Warrant and to
pledge the Shares so purchased to the NASD Dealer in a margin account as
security for a loan from the NASD Dealer in the amount of the Exercise Price,
and whereby the NASD Dealer irrevocably commits upon receipt of such Shares to
forward the Exercise Price directly to the Company.
by "Net Exercise," in which case the Company shall deliver to the Warrant Holder
(without payment of any additional Exercise Price) that number of shares equal
to the quotient obtained by dividing;
the value of the Shares purchased upon exercise at the time of exercise (such
value to be determined by subtracting (i) the aggregate Exercise Price for such
Shares as in effect immediately prior to exercise from (ii) the aggregate Fair
Market Value (as defined in Section 11 below) for such Shares immediately prior
to the exercise of this Warrant), by
the Fair Market Value of one (1) Share immediately prior to exercise; or
by any combination of the foregoing.
Tax Withholding. Prior to the issuance of the Shares upon exercise of this
- ---------------
Warrant, the Warrant Holder must pay or provide for any applicable federal or
state withholding obligations of the Company.
Issuance of Shares. Provided that the Exercise Agreement and payment have been
- ------------------
received by the Company as provided above, the Company shall issue the Shares
(adjusted as provided herein) registered in the name of the Warrant Holder, the
Warrant Holder's authorized assignee, or the Warrant Holder's legal
representative, and shall deliver certificates representing the Shares with the
appropriate legends affixed thereto.
Compliance with Laws and Regulations. The exercise of this Warrant and the
- ------------------------------------
issuance and transfer of Shares shall be subject to compliance by the Company
and the Warrant Holder with all applicable requirements of federal and state
securities laws and with all applicable requirements of any stock exchange
and/or over-the-counter market on which the Company's Common Stock may be listed
at the time of such issuance or transfer.
Transfer and Exchange. This Warrant and the rights hereunder may not be
- ---------------------
transferred, in whole or in part, without the Company's prior written consent,
which consent shall not be unreasonably withheld, and may not be transferred
unless registered under the Act and applicable state
<PAGE>
securities laws or the Warrant Holder provides the Company with an opinion of
Counsel reasonably satisfactory to the Company to the effect that such transfer
complies with all applicable securities laws, except that, Warrant Holder shall
------ ----
be able to transfer its shares and its rights under this Agreement to a
transferee, provided that the transferee is an affiliate, partner, limited
partner, member, shareholder or a lineal descendant of such partner, limited
partner, member or shareholder. If a transfer of all or part of this Warrant is
permitted as provided in the preceding sentence, then the Company shall deliver
to Holder certificates for the Shares acquired and, if this Warrant has not been
fully exercised or converted and has not expired, a new Warrant representing the
Shares not so acquired.
Replacement of Warrants. On receipt of evidence reasonably satisfactory to the
- -----------------------
Company of the loss, theft, destruction or mutilation of this Warrant and, in
the case of loss, theft or destruction, on delivery of an indemnity agreement
reasonably satisfactory in form and in the amount to the Company or, in the case
of mutilation, or surrender and cancellation of this Warrant, the Company at its
expense shall execute and deliver, in lieu of this Warrant, a new warrant of
like tenor.
Repurchase on Sale, Merger, or Consolidation of the Company.
- -----------------------------------------------------------
"Acquisition". For the purpose of this Warrant, "Acquisition" means any sale,
-----------
license, or other disposition of all or substantially all of the assets
(including intellectual property) of the Company, or any reorganization,
consolidation, or merger of the Company where the holders of the Company's
securities before the transaction beneficially own less than 50% of the
outstanding voting securities of the surviving entity after the transaction.
Assumption of Warrant. If upon the closing of any Acquisition the successor
- ---------------------
entity assumes the obligations of this Warrant, then this Warrant shall be
exercisable for the same securities, cash, and property as would be payable for
the Shares issuable upon exercise of the unexercised portion of this Warrant as
if such Shares were outstanding on the record date for the Acquisition and
subsequent closing. The Warrant Price shall be adjusted accordingly. The Company
shall use reasonable efforts to cause the surviving corporation to assume the
obligations of the Warrant.
Nonassumption. If upon the closing of any Acquisition the successor entity does
- -------------
not assume the obligations of his Warrant and Holder has not otherwise exercised
this Warrant in full, then the unexercised portion of this Warrant shall be
deemed to have been automatically converted pursuant to Section 1.2 and
thereafter Holder shall participate in the acquisition on the same terms as
other holders of the same class of securities of the Company.
Purchase Right. Notwithstanding the foregoing, if in any acquisition the Company
- --------------
receives consideration consisting solely of cash or cash equivalents, then, at
the election of Holder, the Company shall purchase the unexercised portion of
this Warrant for cash upon the closing of any Acquisition for an amount equal to
(a) the fair market value of any consideration that would have been received by
Holder in consideration of the Shares had Holder exercised the unexercised
portion of this Warrant immediately before the record date for determining the
shareholders entitled to participate in the proceeds of the Acquisition, less
(b) the aggregate Warrant Price of the Shares, but in no event less than zero.
<PAGE>
Representations and Warranties. The Company hereby represents and warrants to
- ------------------------------
the Holder as follows:
All Shares which may be issued upon the exercise of the purchase right
represented by this Warrant, and all securities, if any, issuable upon
conversion of the Shares, shall, upon issuance, be duly authorized, validly
issued, fully paid and nonassessable, and free of any liens and encumbrances
except for restrictions on transfer provided for herein or under applicable
federal and state securities laws.
The Company is a corporation validly existing and in good standing under the
laws of the state of Connecticut.
The consummation by the Company of the transactions contemplated hereby will not
conflict with or result in a breach or violation of any of the terms or
provisions of, or constitute a default under, any statute, any indenture,
mortgage, loan agreement or any other agreement or instrument to which the
Company is a party.
Piggyback Registration Rights.
- -----------------------------
Company Obligation. If the Company shall determine to register any of its
- ------------------
securities either for its own account or the account of a shareholder(s)
exercising demand registration rights, other than a registration relating solely
to employee benefit plans, or a registration relating solely to a transaction
pursuant to Rule 145 promulgated under the Securities Act of 1933, as amended
(the "Act"), or a registration on any registration form which does not permit
---
secondary sales or does not include substantially the same information as would
be required to be included in a registration statement covering the sale of the
Warrant Stock, the Company will promptly give to the Warrant Holder written
notice thereof and include in such registration (and any related qualification
under blue sky laws), and in any underwriting involved therein, the number of
shares specified in a written request made by the Warrant Holder within fifteen
(15) days after receipt of such written notice from the Company, except as set
forth in Section 8(b) below.
Underwritten Public Offering. If the registration for which the Company gives
- ----------------------------
notice is for a registered public offering involving an underwriting, the right
of any Warrant Holder to registration shall be conditioned upon the Warrant
Holder's participation in such underwriting and the inclusion of such Warrant
Holder's Warrant Stock in the underwriting pursuant to an underwriting agreement
in customary form with the underwriter or underwriters selected by the Company.
Notwithstanding any other provision of this Section, if the underwriter
reasonably determines that marketing factors require a limitation on the number
of shares to be underwritten the underwriter may exclude some or all of the
Warrant Stock with the number of shares that may be included in the registration
and underwriting being allocated among the Warrant Holder and all other
shareholders entitled to have securities included in such registration in
proportion, as nearly as practicable, to the respective amounts of securities
which they had requested to be included in such registration (provided, however,
that if the registration is for the account of shareholders exercising demand
registration rights, the number of shares that may be included by the Warrant
Holder shall be cut back entirely before any limitation on the number of shares
that may be included by such shareholders).
<PAGE>
Expenses. All expenses of the registration shall be borne by the Company, except
- --------
underwriting discounts and selling commissions applicable to the sale of any of
Warrant Holder's Warrant Stock and any other securities of the Company being
sold in the same registration by other shareholders, which shall be borne by the
Warrant Holder and such other shareholders pro rata on the basis of the number
of their shares registered.
Information Rights. So long as the Holder holds this Warrant and/or any of the
- ------------------
Shares, the Company shall deliver to the Holder (a) promptly after mailing,
copies of all notices or other written communications to the shareholders of the
Company, (b) within ninety (90) days after the end of each fiscal year of the
Company, the annual audited financial statements of the Company certified by
independent public accountants of recognized standing and (c) within forty-five
(45) days after the end of each of the first three quarters of each fiscal year,
the Company's quarterly, unaudited financial statements.
Reservation of Stock. On and after the Commencement Date, the Company will
- --------------------
reserve from its authorized and unissued Securities a sufficient number of
shares to provide for the issuance of Warrant Stock upon the exercise or
conversion of this Warrant and shall reserve from its authorized and unissued
Common Stock a sufficient number of shares to provide for the issuance of Common
Stock upon the conversion of the Warrant Stock. Issuance of this Warrant shall
constitute full authority to the Company's officers who are charged with the
duty of executing stock certificates to execute and issue the necessary
certificates for shares of Warrant Stock issuable upon the exercise or
conversion of this Warrant.
Legends. This Warrant and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Compliance with Securities Laws on Transfer. This Warrant and the Shares
- -------------------------------------------
issuable upon exercise of this Warrant (and the securities issuable, directly or
indirectly, upon conversion of the Shares, if any) may not be transferred or
assigned in whole or in part without compliance with applicable federal and
state securities laws or an available exemption by the transferor and the
transferee (including, without limitation, the delivery of investment
representation letters and legal opinions reasonably satisfactory to the
Company). The Company shall not require any Holder to provide an opinion of
counsel if the transfer is to an affiliate of a Holder or if there is no
material question as to the availability of current information as referenced in
Rule 144(c), Holder represents that it has complied with Rule 144(d) and (e) in
reasonable detail, the selling broker represents that it has complied with Rule
144(f), and the Company is provided with a copy of Holder's notice of proposed
sale. Reference to Rule 144 shall mean Rule 144 promulgated by the Securities
and Exchange Commission under the Securities Act of 1933, as amended, as the
same may be modified, amended, supplemented or superseded.
<PAGE>
Notices. All notices and other communications from the Company to the Holder, or
- -------
vice versa, shall be deemed delivered and effective when given personally or
mailed by first-class registered or certified mail, postage prepaid, at such
address as may have been furnished to the Company or the Holder, as the case may
be, in writing by the Company or the Holder, as the case may be, in writing by
the Company or such Holder from time to time.
Waiver. This Warrant and any term hereof may be changed, waived, discharged or
- ------
terminated only by an instrument in writing signed by the party against which
enforcement of such change, waiver, discharge or termination is sought.
Attorneys' Fees. In the event of any dispute between the parties concerning the
- ---------------
terms and provisions of this Warrant , the party prevailing in such dispute
shall be entitled to collect from the other party all costs incurred in such
dispute, including reasonable attorneys' fees.
Entire Agreement. This Warrant and the other documents delivered pursuant hereto
- ----------------
constitute the full and entire understanding and agreement between the parties
with regard to the subjects hereof and thereof.
Governing Law. The validity of the issuance of the Shares shall be governed by
- -------------
The Connecticut Business Corporation Act, as amended from time to time. In all
other respects, this Warrant shall be governed by and construed in accordance
with the laws of the State of Connecticut, without giving effect to its
principles regarding conflicts of law which might cause the application of the
laws of any other jurisdiction.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By:
Name:
Title: President & Chief Executive Officer
@Ventures Investors, LLC
By:
Name:
Title:
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates, Inc. pursuant to the
terms of the attached Warrant, and tenders herewith payment of the purchase
price in full, together with all applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Warrant Holder)
By:
Title:
<PAGE>
Exhibit 10.17
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and @Ventures III, L.P., an investor ("Holder")
in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
-----------------------------
a. FOR VALUE RECEIVED, subject to the terms and conditions herein
set forth, IMA hereby grants to Holder an option (the "Option") to purchase up
to Nine Hundred Fifty-One Thousand Fifty-Six (951,056) shares of IMA's common
stock (the "Shares") at a per share price equal to $6.20 per share, for an
aggregate purchase price of Five Million Eight Hundred Ninety-
1
<PAGE>
Six Thousand Five Hundred Forty-Seven Dollars and Twenty Cents ($5,896,547.20)
(the "Purchase Price").
b. The number of Shares issuable upon exercise of the Option and the
Purchase Price to be paid by Holder upon exercise of the Option shall each be
appropriately adjusted to reflect any stock dividend, stock split, reverse stock
split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of IMA's capital stock.
c. In case IMA shall make or issue, or fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA, or any
consolidation or merger of IMA with or into another corporation, or sale of all
or substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
--------------------------------
a. Holder may exercise this Option by the surrender of the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Exhibit A and Exhibit B, respectively, duly completed and executed at the
- --------- ---------
principal office of IMA, accompanied by payment in full of the Purchase Price in
cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised immediately
prior to the close of business on the date Holder surrenders the Notice of
Exercise and Investment Representation Statement to IMA as provided above, and
the persons or entities to receive the Shares issuable upon such exercise shall
be treated for all purposes as a stockholder of IMA as of the close of business
on such date.
c. As promptly as practicable after such date, IMA shall issue and
deliver to the
2
<PAGE>
persons entitled to receive the Shares a certificate or certificates for the
number of full Shares issuable upon exercise.
d. The Option must be exercised for the total number of Shares then
issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
-------------------------------------------
a. Concurrent with its exercise of the Option, Holder shall redeem
(the "Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
b. If, at the time of the Redemption, buyingedge.com does not have
the financial resources to redeem all of Holder's shares of Series A Stock, IMA
hereby covenants to transfer to buyingedge.com to the extent it may make such
transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in accordance
with the provision of Article IV(B)(3) of buyingedge.com's Certificate of
Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from buyingedge.com
from the Redemption of the Series A Stock to pay the Purchase Price for the
Shares and agrees to instruct buyingedge.com to transfer the full amount of the
redemption price for the Series A Stock directly to IMA in payment of the
exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished from
---------------------
any Shares acquired by Holder upon exercise of this Option, shall not entitle
Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
--------------------
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
-----------------------------
a. If IMA shall determine to register any of its securities either
for its own account or for the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction pursuant to
Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"),
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the Shares, IMA
shall promptly give to Holder written notice thereof and
3
<PAGE>
include in such registration (and any related qualification under blue sky
laws), and in any underwriting involved therein, the number of shares specified
in a written request made by Holder within fifteen (15) days after receipt of
such written notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is for a
registered public offering involving an underwriting, the right of Holder to
registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA, except
underwriting discounts and selling commissions applicable to the sale of any of
Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or assigned by
------------------
Holder hereof in whole or in part, to an affiliated or related entity of Holder,
provided that, if a party acquires Series A Stock from Holder constituting less
than all Series A Stock held by Holder, then this Option shall be partially
transferable to such party only with respect to the number of Shares that equals
the same proportion of the total number of Shares initially covered hereby as
the number of shares of Series A Stock represents to the total number of shares
of Series A Stock initially issued to Holder, which amounts shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably
4
<PAGE>
satisfactory to IMA that the registration does not require registration under
the Act and the securities law applicable with respect to any other applicable
jurisdiction.
9. Termination. The Option shall terminate and no longer be exercisable
-----------
at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
-------------
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be executed in
------------
multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
12. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be found
------------
by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
@Ventures III, L.P.
By:
Name: Brad Garlinghouse
Title: General Partner
Address: 3000 Alpine Road
Menlo Park, CA 94028
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.18
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and Wand Equity Portfolio Fund II L.P., an
investor ("Holder") in the capital stock of buyingedge.com, a Connecticut
corporation ("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
Grant of Option to Buy Shares.
- -----------------------------
FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, IMA
hereby grants to Holder an option (the "Option") to purchase up to Three Hundred
Four Thousand Nine Hundred Thirty Five (304,935) shares of IMA's common stock
(the "Shares") at a per share price equal to $6.20 per share, for an aggregate
purchase price of One Million Eight Hundred Ninety
1
<PAGE>
Thousand Five Hundred Ninety Seven Dollars ($1,890,597) (the "Purchase Price").
The number of Shares issuable upon exercise of the Option and the Purchase Price
to be paid by Holder upon exercise of the Option shall each be appropriately
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of IMA's capital stock.
In case IMA shall make or issue, or fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the shares payable in securities of IMA, then, and in each such case,
Holder, on exercise of the Option at any time after the consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such date,
the securities of IMA to which Holder would have been entitled upon such date if
Holder had exercised this Option immediately prior thereto (all subject to
adjustment as provided for herein).
If any capital reorganization of the capital stock of IMA, or any consolidation
or merger of IMA with or into another corporation, or sale of all or
substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
Exercise of Option to Buy Shares.
- --------------------------------
Holder may exercise this Option by the surrender of the Notice of Exercise and
Investment Representation Statement in the forms attached hereto as Exhibit A
---------
and Exhibit B, respectively, duly completed and executed at the principal office
---------
of IMA, accompanied by payment in full of the Purchase Price in cash, or by
check or wire transfer in next day available funds.
This Option shall be deemed to have been exercised immediately prior to the
close of business on the date Holder surrenders the Notice of Exercise and
Investment Representation Statement to IMA as provided above, and the persons or
entities to receive the Shares issuable upon such exercise shall be treated for
all purposes as a stockholder of IMA as of the close of business on such date.
As promptly as practicable after such date, IMA shall issue and deliver to the
persons entitled to receive the Shares a certificate or certificates for the
number of full Shares issuable upon exercise.
The Option must be exercised for the total number of Shares then issuable upon
exercise of the
2
<PAGE>
Option.
Redemption of buyingedge.com Series A Stock.
- -------------------------------------------
Concurrent with its exercise of the Option, Holder shall redeem (the
"Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
If, at the time of the Redemption, buyingedge.com does not have the financial
resources to redeem all of Holder's shares of Series A Stock, IMA hereby
covenants to transfer to buyingedge.com to the extent it may make such transfer
pursuant to applicable law, within five (5) business days of its receipt of the
Notice of Exercise, sufficient funds to enable buyingedge.com to legally
consummate the Redemption through stock purchase, loan or other method as IMA
shall determine and which shall permit buyingedge.com to redeem such shares.
The Redemption of the Series A Stock shall occur in accordance with the
provision of Article IV(B)(3) of buyingedge.com's Certificate of Incorporation,
as amended to date.
Holder shall use the proceeds it receives from buyingedge.com from the
Redemption of the Series A Stock to pay the Purchase Price for the Shares and
agrees to instruct buyingedge.com to transfer the full amount of the redemption
price for the Series A Stock directly to IMA in payment of the exercise price of
this Option.
No Stockholder Rights. This Option, by itself, as distinguished from any Shares
- ---------------------
acquired by Holder upon exercise of this Option, shall not entitle Holder to any
of the rights of a stockholder of IMA.
Reservation of Stock. IMA shall reserve from its authorized and unissued Common
- --------------------
Stock a sufficient number of shares to provide for the issuance of the Shares
upon Holder's exercise of the Option. Issuance of this Option shall constitute
full authority of IMA's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for the
Shares issuable upon exercise of the Option.
Piggyback Registration Rights.
- -----------------------------
If IMA shall determine to register any of its securities either for its own
account or for the account of a stockholder(s) exercising demand registration
rights, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a transaction pursuant to Rule 145 promulgated
under the Securities Act of 1933, as amended (the "Act"), or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Shares, IMA shall promptly give
to Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by Holder
within fifteen (15) days after receipt of such written notice from IMA, except
as set forth in subsection (b) below.
3
<PAGE>
If the registration for which IMA gives notice is for a registered public
offering involving an underwriting, the right of Holder to registration shall be
conditioned upon Holder's participation in such underwriting and the inclusion
of Holder's Shares in the underwriting pursuant to an underwriting agreement in
customary form with the underwriter(s) selected by IMA. Notwithstanding any
other provision of this Section, if the underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
underwriter may exclude some or all of the Shares with the number of shares that
may be included in the registration and underwriting being allocated among
Holder and all other stockholders entitled to have securities included in such
registration in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration
(provided, however, that if the registration is for the account of stockholders
exercising demand registration rights, the number of shares that may be included
by Holder shall be cut back entirely before any limitation on the number of
shares that may be included by such stockholders).
All expenses of the registration shall be borne by IMA, except underwriting
discounts and selling commissions applicable to the sale of any of Holder's
Shares and any other securities of IMA being sold in the same registration by
other stockholders, which shall be borne by Holder and such other stockholders
pro rata on the basis of the number of shares being registered.
Legends. This Option and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Transfer of Option. This Option may only be transferred or assigned by Holder
- ------------------
hereof in whole or in part, to an affiliated or related entity of Holder,
provided that, if a party acquires Series A Stock from Holder constituting less
than all Series A Stock held by Holder, then this Option shall be partially
transferable to such party only with respect to the number of Shares that equals
the same proportion of the total number of Shares initially covered hereby as
the number of shares of Series A Stock represents to the total number of shares
of Series A Stock initially issued to Holder, which amounts shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
registration does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction.
Termination. The Option shall terminate and no longer be exercisable at 5:00
- -----------
p.m., Connecticut time, on August 12, 2002.
Miscellaneous. This Agreement shall be governed by the laws of Connecticut as
- -------------
such laws are
4
<PAGE>
applied to contracted entered into and performed entirely in Connecticut. The
headings in this Agreement are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Neither this Agreement nor
any term hereof may be changed or waived orally, but only by an instrument in
writing signed by IMA and Holder. All notices and other communications shall be
hand delivered, sent by facsimile or other electronic medium, or mailed, postage
prepaid, to IMA or Holder at the address et forth below each party's signature
to this Agreement or to such other address as may be furnished in writing to the
other parties hereto.
Counterparts. This Agreement and any exhibit hereto may be executed in multiple
- ------------
counterparts, each of which shall constitute an original but all of which shall
constitute but one and the same instrument. One or more counterparts of this
Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
Entire Agreement. This Agreement and the other documents delivered pursuant
- ----------------
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and they supersede, merge
and render void every other prior written and/or oral understanding or agreement
among or between the parties hereto.
Severability. In case any provision of this Agreement shall be found by a court
- ------------
of law to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option
Agreement as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
Wand Equity Portfolio Fund II L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.19
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and Amicus Capital, LLC, an investor ("Holder")
in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
Grant of Option to Buy Shares.
- -----------------------------
FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, IMA
hereby grants to Holder an option (the "Option") to purchase up to Forty
Thousand Three Hundred Twenty-Three (40,323) shares of IMA's common stock (the
"Shares") at a per share price equal to $6.20 per share, for an aggregate
purchase price of Two Hundred Fifty Thousand Two Dollars
1
<PAGE>
and Sixty Cents ($250,002.60) (the "Purchase Price").
The number of Shares issuable upon exercise of the Option and the Purchase Price
to be paid by Holder upon exercise of the Option shall each be appropriately
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of IMA's capital stock.
In case IMA shall make or issue, or fix a record date for the determination of
eligible holders entitled to receive, a dividend or other distribution with
respect to the shares payable in securities of IMA, then, and in each such case,
Holder, on exercise of the Option at any time after the consummation, effective
date or record date of such event, shall receive, in addition to the Shares (or
such other stock or securities) issuable on such exercise prior to such date,
the securities of IMA to which Holder would have been entitled upon such date if
Holder had exercised this Option immediately prior thereto (all subject to
adjustment as provided for herein).
If any capital reorganization of the capital stock of IMA, or any consolidation
or merger of IMA with or into another corporation, or sale of all or
substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
Exercise of Option to Buy Shares.
- --------------------------------
Holder may exercise this Option by the surrender of the Notice of Exercise and
Investment Representation Statement in the forms attached hereto as Exhibit A
---------
and Exhibit B, respectively, duly completed and executed at the principal office
---------
of IMA, accompanied by payment in full of the Purchase Price in cash, or by
check or wire transfer in next day available funds.
This Option shall be deemed to have been exercised immediately prior to the
close of business on the date Holder surrenders the Notice of Exercise and
Investment Representation Statement to IMA as provided above, and the persons or
entities to receive the Shares issuable upon such exercise shall be treated for
all purposes as a stockholder of IMA as of the close of business on such date.
As promptly as practicable after such date, IMA shall issue and deliver to the
persons entitled to receive the Shares a certificate or certificates for the
number of full Shares issuable upon exercise.
The Option must be exercised for the total number of Shares then
issuable upon exercise of the
2
<PAGE>
Option.
Redemption of buyingedge.com Series A Stock.
- -------------------------------------------
Concurrent with its exercise of the Option, Holder shall redeem (the
"Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
If, at the time of the Redemption, buyingedge.com does not have the financial
resources to redeem all of Holder's shares of Series A Stock, IMA hereby
covenants to transfer to buyingedge.com to the extent it may make such transfer
pursuant to applicable law, within five (5) business days of its receipt of the
Notice of Exercise, sufficient funds to enable buyingedge.com to legally
consummate the Redemption through stock purchase, loan or other method as IMA
shall determine and which shall permit buyingedge.com to redeem such shares.
The Redemption of the Series A Stock shall occur in accordance with the
provision of Article IV(B)(3) of buyingedge.com's Certificate of Incorporation,
as amended to date.
Holder shall use the proceeds it receives from buyingedge.com from the
Redemption of the Series A Stock to pay the Purchase Price for the Shares and
agrees to instruct buyingedge.com to transfer the full amount of the redemption
price for the Series A Stock directly to IMA in payment of the exercise price of
this Option.
No Stockholder Rights. This Option, by itself, as distinguished from any Shares
- ---------------------
acquired by Holder upon exercise of this Option, shall not entitle Holder to any
of the rights of a stockholder of IMA.
Reservation of Stock. IMA shall reserve from its authorized and unissued Common
- --------------------
Stock a sufficient number of shares to provide for the issuance of the Shares
upon Holder's exercise of the Option. Issuance of this Option shall constitute
full authority of IMA's officers who are charged with the duty of executing
stock certificates to execute and issue the necessary certificates for the
Shares issuable upon exercise of the Option.
Piggyback Registration Rights.
- -----------------------------
If IMA shall determine to register any of its securities either for its own
account or for the account of a stockholder(s) exercising demand registration
rights, other than a registration relating solely to employee benefit plans, or
a registration relating solely to a transaction pursuant to Rule 145 promulgated
under the Securities Act of 1933, as amended (the "Act"), or a registration on
any registration form which does not permit secondary sales or does not include
substantially the same information as would be required to be included in a
registration statement covering the sale of the Shares, IMA shall promptly give
to Holder written notice thereof and include in such registration (and any
related qualification under blue sky laws), and in any underwriting involved
therein, the number of shares specified in a written request made by Holder
within fifteen (15) days after receipt of such written notice from IMA, except
as set forth in subsection (b) below.
3
<PAGE>
If the registration for which IMA gives notice is for a registered public
offering involving an underwriting, the right of Holder to registration shall be
conditioned upon Holder's participation in such underwriting and the inclusion
of Holder's Shares in the underwriting pursuant to an underwriting agreement in
customary form with the underwriter(s) selected by IMA. Notwithstanding any
other provision of this Section, if the underwriter determines that marketing
factors require a limitation on the number of shares to be underwritten, the
underwriter may exclude some or all of the Shares with the number of shares that
may be included in the registration and underwriting being allocated among
Holder and all other stockholders entitled to have securities included in such
registration in proportion, as nearly as practicable, to the respective amounts
of securities which they had requested to be included in such registration
(provided, however, that if the registration is for the account of stockholders
exercising demand registration rights, the number of shares that may be included
by Holder shall be cut back entirely before any limitation on the number of
shares that may be included by such stockholders).
All expenses of the registration shall be borne by IMA, except underwriting
discounts and selling commissions applicable to the sale of any of Holder's
Shares and any other securities of IMA being sold in the same registration by
other stockholders, which shall be borne by Holder and such other stockholders
pro rata on the basis of the number of shares being registered.
Legends. This Option and the Shares (and the securities issuable, directly or
- -------
indirectly, upon conversion of the Shares, if any) shall be imprinted with a
legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
Transfer of Option. This Option may only be transferred or assigned by Holder
- ------------------
hereof in whole or in part, to an affiliated or related entity of Holder,
provided that, if a party acquires Series A Stock from Holder constituting less
than all Series A Stock held by Holder, then this Option shall be partially
transferable to such party only with respect to the number of Shares that equals
the same proportion of the total number of Shares initially covered hereby as
the number of shares of Series A Stock represents to the total number of shares
of Series A Stock initially issued to Holder, which amounts shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
registration does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction.
Termination. The Option shall terminate and no longer be exercisable at 5:00
- -----------
p.m., Connecticut time, on August 12, 2002.
Miscellaneous. This Agreement shall be governed by the laws of Connecticut as
- -------------
such laws are
4
<PAGE>
applied to contracted entered into and performed entirely in Connecticut. The
headings in this Agreement are for purposes of convenience and reference only,
and shall not be deemed to constitute a part hereof. Neither this Agreement nor
any term hereof may be changed or waived orally, but only by an instrument in
writing signed by IMA and Holder. All notices and other communications shall be
hand delivered, sent by facsimile or other electronic medium, or mailed, postage
prepaid, to IMA or Holder at the address et forth below each party's signature
to this Agreement or to such other address as may be furnished in writing to the
other parties hereto.
Counterparts. This Agreement and any exhibit hereto may be executed in multiple
- ------------
counterparts, each of which shall constitute an original but all of which shall
constitute but one and the same instrument. One or more counterparts of this
Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
Entire Agreement. This Agreement and the other documents delivered pursuant
- ----------------
hereto constitute the full and entire understanding and agreement between the
parties with regard to the subjects hereof and thereof and they supersede, merge
and render void every other prior written and/or oral understanding or agreement
among or between the parties hereto.
Severability. In case any provision of this Agreement shall be found by a court
- ------------
of law to be invalid, illegal or unenforceable, the validity, legality and
enforceability of the remaining provisions of this Agreement shall not in any
way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
Amicus Capital, LLC
By:
Name:
Title:
Address: 188 The Embarcadero, Third Floor
San Francisco, CA 94105
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.20
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and CMG@Ventures III, LLC, an investor
("Holder") in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
-----------------------------
a. FOR VALUE RECEIVED, subject to the terms and conditions herein set
forth, IMA hereby grants to Holder an option (the "Option") to purchase up to
Two Hundred Forty-Two Thousand Three Hundred Thirty-One (242,331) shares of
IMA's common stock (the "Shares") at a per share price equal to $6.20 per share,
for an aggregate purchase price of One
1
<PAGE>
Million Five Hundred Two Thousand Four Hundred Fifty-Two Dollars and Twenty
Cents ($1,502,452.20) (the "Purchase Price").
b. The number of Shares issuable upon exercise of the Option and the
Purchase Price to be paid by Holder upon exercise of the Option shall each be
appropriately adjusted to reflect any stock dividend, stock split, reverse stock
split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of IMA's capital stock.
c. In case IMA shall make or issue, or fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA, or any
consolidation or merger of IMA with or into another corporation, or sale of all
or substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
--------------------------------
a. Holder may exercise this Option by the surrender of the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Exhibit A and Exhibit B, respectively, duly completed and executed at the
- --------- ---------
principal office of IMA, accompanied by payment in full of the Purchase Price in
cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised immediately
prior to the close of business on the date Holder surrenders the Notice of
Exercise and Investment Representation Statement to IMA as provided above, and
the persons or entities to receive the Shares issuable upon such exercise shall
be treated for all purposes as a stockholder of IMA as of the close of business
on such date.
c. As promptly as practicable after such date, IMA shall issue and
deliver to the
2
<PAGE>
persons entitled to receive the Shares a certificate or certificates for the
number of full Shares issuable upon exercise.
d. The Option must be exercised for the total number of Shares then
issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
-------------------------------------------
a. Concurrent with its exercise of the Option, Holder shall redeem
(the "Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
b. If, at the time of the Redemption, buyingedge.com does not have the
financial resources to redeem all of Holder's shares of Series A Stock, IMA
hereby covenants to transfer to buyingedge.com to the extent it may make such
transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in accordance with
the provision of Article IV(B)(3) of buyingedge.com's Certificate of
Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from buyingedge.com from
the Redemption of the Series A Stock to pay the Purchase Price for the Shares
and agrees to instruct buyingedge.com to transfer the full amount of the
redemption price for the Series A Stock directly to IMA in payment of the
exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished from
---------------------
any Shares acquired by Holder upon exercise of this Option, shall not entitle
Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
--------------------
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
-----------------------------
a. If IMA shall determine to register any of its securities either
for its own account or for the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction pursuant to
Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"),
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the Shares, IMA
shall promptly give to Holder written notice thereof and
3
<PAGE>
include in such registration (and any related qualification under blue sky
laws), and in any underwriting involved therein, the number of shares specified
in a written request made by Holder within fifteen (15) days after receipt of
such written notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is for a
registered public offering involving an underwriting, the right of Holder to
registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA, except
underwriting discounts and selling commissions applicable to the sale of any of
Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or assigned by
------------------
Holder hereof in whole or in part, to an affiliated or related entity of Holder,
provided that, if a party acquires Series A Stock from Holder constituting less
than all Series A Stock held by Holder, then this Option shall be partially
transferable to such party only with respect to the number of Shares that equals
the same proportion of the total number of Shares initially covered hereby as
the number of shares of Series A Stock represents to the total number of shares
of Series A Stock initially issued to Holder, which amounts shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably
4
<PAGE>
satisfactory to IMA that the registration does not require registration under
the Act and the securities law applicable with respect to any other applicable
jurisdiction.
9. Termination. The Option shall terminate and no longer be exercisable at
-----------
5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
-------------
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be executed in
------------
multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
12. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be found
------------
by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
CMG@Ventures III, LLC
------------
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.21
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and Madrona Investment Group L.L.C., an
investor ("Holder") in the capital stock of buyingedge.com, a Connecticut
corporation ("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
-----------------------------
a. FOR VALUE RECEIVED, subject to the terms and conditions herein
set forth, IMA hereby grants to Holder an option (the "Option") to purchase up
to Thirty-Two Thousand Two Hundred Fifty-Eight (32,258) shares of IMA's common
stock (the "Shares") at a per share price equal to $6.20 per share, for an
aggregate purchase price of One Hundred Ninety-Nine
1
<PAGE>
Thousand Nine Hundred Ninety-Nine Dollars and Sixty Cents ($199,999.60) (the
"Purchase Price").
b. The number of Shares issuable upon exercise of the Option and the
Purchase Price to be paid by Holder upon exercise of the Option shall each be
appropriately adjusted to reflect any stock dividend, stock split, reverse stock
split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of IMA's capital stock.
c. In case IMA shall make or issue, or fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA, or any
consolidation or merger of IMA with or into another corporation, or sale of all
or substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
--------------------------------
a. Holder may exercise this Option by the surrender of the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Exhibit A and Exhibit B, respectively, duly completed and executed at the
- --------- ---------
principal office of IMA, accompanied by payment in full of the Purchase Price in
cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised immediately
prior to the close of business on the date Holder surrenders the Notice of
Exercise and Investment Representation Statement to IMA as provided above, and
the persons or entities to receive the Shares issuable upon such exercise shall
be treated for all purposes as a stockholder of IMA as of the close of business
on such date.
c. As promptly as practicable after such date, IMA shall issue and
deliver to the
2
<PAGE>
persons entitled to receive the Shares a certificate or certificates for the
number of full Shares issuable upon exercise.
d. The Option must be exercised for the total number of Shares then
issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
-------------------------------------------
a. Concurrent with its exercise of the Option, Holder shall redeem
(the "Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
b. If, at the time of the Redemption, buyingedge.com does not have
the financial resources to redeem all of Holder's shares of Series A Stock, IMA
hereby covenants to transfer to buyingedge.com to the extent it may make such
transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in accordance
with the provision of Article IV(B)(3) of buyingedge.com's Certificate of
Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from buyingedge.com
from the Redemption of the Series A Stock to pay the Purchase Price for the
Shares and agrees to instruct buyingedge.com to transfer the full amount of the
redemption price for the Series A Stock directly to IMA in payment of the
exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished from
---------------------
any Shares acquired by Holder upon exercise of this Option, shall not entitle
Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
--------------------
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
-----------------------------
a. If IMA shall determine to register any of its securities either
for its own account or for the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction pursuant to
Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"),
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the Shares, IMA
shall promptly give to Holder written notice thereof and
3
<PAGE>
include in such registration (and any related qualification under blue sky
laws), and in any underwriting involved therein, the number of shares specified
in a written request made by Holder within fifteen (15) days after receipt of
such written notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is for a
registered public offering involving an underwriting, the right of Holder to
registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA, except
underwriting discounts and selling commissions applicable to the sale of any of
Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or assigned
------------------
by Holder hereof in whole or in part, to an affiliated or related entity of
Holder, provided that, if a party acquires Series A Stock from Holder
constituting less than all Series A Stock held by Holder, then this Option shall
be partially transferable to such party only with respect to the number of
Shares that equals the same proportion of the total number of Shares initially
covered hereby as the number of shares of Series A Stock represents to the total
number of shares of Series A Stock initially issued to Holder, which amounts
shall be proportionately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably
4
<PAGE>
satisfactory to IMA that the registration does not require registration under
the Act and the securities law applicable with respect to any other applicable
jurisdiction.
9. Termination. The Option shall terminate and no longer be exercisable
-----------
at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
-------------
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be executed
------------
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
12. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be found
------------
by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
Madrona Investment Group L.L.C.
By:
Name:
Title:
Address: 1000 Second Avenue
Suite 3700
Seattle, WA 98104
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.22
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and Wand Affiliates Fund L.P., an investor
("Holder") in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered into
a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of even
date herewith (the "Series A Financing") pursuant to which buyingedge.com has
agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
-----------------------------
FOR VALUE RECEIVED, subject to the terms and conditions herein set forth, IMA
hereby grants to Holder an option (the "Option") to purchase up to Seventeen
Thousand Six Hundred Forty Five (17,645) shares of IMA's common stock (the
"Shares") at a per share price equal to $6.20 per share, for an aggregate
purchase price of One Hundred Nine Thousand Three Hundred
1
<PAGE>
Ninety Nine Dollars ($109,399) (the "Purchase Price").
The number of Shares issuable upon exercise of the Option and the Purchase Price
to be paid by Holder upon exercise of the Option shall each be appropriately
adjusted to reflect any stock dividend, stock split, reverse stock split,
combination of shares, reclassification, recapitalization or other similar event
altering the number of outstanding shares of IMA's capital stock.
c. In case IMA shall make or issue, or fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA, or any
consolidation or merger of IMA with or into another corporation, or sale of all
or substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
--------------------------------
a. Holder may exercise this Option by the surrender of the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Exhibit A and Exhibit B, respectively, duly completed and executed at the
- --------- ---------
principal office of IMA, accompanied by payment in full of the Purchase Price in
cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised immediately
prior to the close of business on the date Holder surrenders the Notice of
Exercise and Investment Representation Statement to IMA as provided above, and
the persons or entities to receive the Shares issuable upon such exercise shall
be treated for all purposes as a stockholder of IMA as of the close of business
on such date.
c. As promptly as practicable after such date, IMA shall issue and
deliver to the persons entitled to receive the Shares a certificate or
certificates for the number of full Shares issuable upon exercise.
2
<PAGE>
d. The Option must be exercised for the total number of Shares then
issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
-------------------------------------------
a. Concurrent with its exercise of the Option, Holder shall redeem
(the "Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
b. If, at the time of the Redemption, buyingedge.com does not have
the financial resources to redeem all of Holder's shares of Series A Stock, IMA
hereby covenants to transfer to buyingedge.com to the extent it may make such
transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in accordance
with the provision of Article IV(B)(3) of buyingedge.com's Certificate of
Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from buyingedge.com
from the Redemption of the Series A Stock to pay the Purchase Price for the
Shares and agrees to instruct buyingedge.com to transfer the full amount of the
redemption price for the Series A Stock directly to IMA in payment of the
exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished from
---------------------
any Shares acquired by Holder upon exercise of this Option, shall not entitle
Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
--------------------
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
-----------------------------
a. If IMA shall determine to register any of its securities either
for its own account or for the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction pursuant to
Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"),
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the Shares, IMA
shall promptly give to Holder written notice thereof and include in such
registration (and any related qualification under blue sky laws), and in any
underwriting involved therein, the number of shares specified in a written
request made by Holder within fifteen (15) days after receipt of such written
notice from IMA, except as set forth in
3
<PAGE>
subsection (b) below.
b. If the registration for which IMA gives notice is for a
registered public offering involving an underwriting, the right of Holder to
registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA, except
underwriting discounts and selling commissions applicable to the sale of any of
Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or assigned by
------------------
Holder hereof in whole or in part, to an affiliated or related entity of Holder,
provided that, if a party acquires Series A Stock from Holder constituting less
than all Series A Stock held by Holder, then this Option shall be partially
transferable to such party only with respect to the number of Shares that equals
the same proportion of the total number of Shares initially covered hereby as
the number of shares of Series A Stock represents to the total number of shares
of Series A Stock initially issued to Holder, which amounts shall be
proportionately adjusted to reflect any stock dividend, stock split, reverse
stock split, combination of shares, reclassification, recapitalization or
similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
registration does not require registration under the Act and the securities law
applicable with respect to any other applicable jurisdiction.
4
<PAGE>
9. Termination. The Option shall terminate and no longer be exercisable
-----------
at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
-------------
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be executed in
------------
multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
12. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be found
------------
by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
Wand Affiliates Fund L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
630 Fifth Avenue, Suite 2435
New York, NY 10111
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.23
SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT
OF 1933, AS AMENDED (THE "ACT"), OR UNDER THE SECURITIES LAWS OF CERTAIN STATES.
THESE SECURITIES ARE SUBJECT TO RESTRICTIONS ON TRANSFERABILITY AND RESALE AND
MAY NOT BE TRANSFERRED OR RESOLD EXCEPT AS PERMITTED UNDER THE ACT AND THE
APPLICABLE STATE SECURITIES LAWS, PURSUANT TO REGISTRATION THEREUNDER OR
EXEMPTIONS FROM SUCH REGISTRATION REQUIREMENTS. INVESTORS SHOULD BE AWARE THAT
THEY MAY BE REQUIRED TO BEAR THE FINANCIAL RISKS OF THIS INVESTMENT FOR AN
INDEFINITE PERIOD OF TIME. THE ISSUER OF THESE SECURITIES MAY REQUIRE AN OPINION
OF COUNSEL IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER TO THE EFFECT THAT
ANY PROPOSED TRANSFER OR RESALE IS IN COMPLIANCE WITH THE ACT AND ANY APPLICABLE
STATE SECURITIES LAWS.
OPTION AGREEMENT
This OPTION AGREEMENT (the "Agreement") is entered into as of this 12th day
of August, 1999 by and between Information Management Associates, Inc., a
Connecticut corporation ("IMA"), and @Ventures Investors, LLC, an investor
("Holder") in the capital stock of buyingedge.com, a Connecticut corporation
("buyingedge.com").
RECITALS
WHEREAS, buyingedge.com, Holder and certain other parties have entered
into a Series A Preferred Stock Purchase Agreement (the "Purchase Agreement") of
even date herewith (the "Series A Financing") pursuant to which buyingedge.com
has agreed to sell shares of its Series A Preferred Stock to Holder and certain
other investors;
WHEREAS, as a condition to the closing of the Series A Financing, IMA has
agreed to grant an option to Holder to acquire shares of IMA's capital stock;
WHEREAS, to induce Holder to enter into the Purchase Agreement, IMA,
buyningedge.com and Holder have agreed to enter into this Agreement to provide
Holder with the right to purchase shares of capital stock of IMA.
NOW, THEREFORE, in consideration of the foregoing and of the mutual
promises and covenants contained herein, the parties agree as follows:
AGREEMENT
1. Grant of Option to Buy Shares.
-----------------------------
a. FOR VALUE RECEIVED, subject to the terms and conditions herein
set forth, IMA hereby grants to Holder an option (the "Option") to purchase up
to Twenty-Four Thousand Three Hundred Fifty-Five (24,355) shares of IMA's common
stock (the "Shares") at a per share price equal to $6.20 per share, for an
aggregate purchase price of One Hundred Fifty-One
1
<PAGE>
Thousand One Dollars ($151,001) (the "Purchase Price").
b. The number of Shares issuable upon exercise of the Option and the
Purchase Price to be paid by Holder upon exercise of the Option shall each be
appropriately adjusted to reflect any stock dividend, stock split, reverse stock
split, combination of shares, reclassification, recapitalization or other
similar event altering the number of outstanding shares of IMA's capital stock.
c. In case IMA shall make or issue, or fix a record date for the
determination of eligible holders entitled to receive, a dividend or other
distribution with respect to the shares payable in securities of IMA, then, and
in each such case, Holder, on exercise of the Option at any time after the
consummation, effective date or record date of such event, shall receive, in
addition to the Shares (or such other stock or securities) issuable on such
exercise prior to such date, the securities of IMA to which Holder would have
been entitled upon such date if Holder had exercised this Option immediately
prior thereto (all subject to adjustment as provided for herein).
d. If any capital reorganization of the capital stock of IMA, or any
consolidation or merger of IMA with or into another corporation, or sale of all
or substantially all of IMA's assets to another corporation shall be effected in
such a way that holders of IMA's capital stock will be entitled to receive
stock, securities or assets with respect to or in exchange for IMA's capital
stock, in each such case Holder shall, upon the exercise of the Option, at any
time after the consummation of such capital reorganization, consolidation,
merger or sale, be entitled to receive, in lieu of the stock or other securities
and assets receivable upon the exercise of the Option prior to such
consummation, the stock or other securities and assets to which Holder would
have been entitled upon such consummation if Holder had exercised the Option
immediately prior to the consummation of such capital reorganization,
consolidation, merger or sale, all subject to further adjustment as provided for
herein, and in each such case, the terms of the Option shall be applicable to
the shares of stock or other securities and assets receivable upon the exercise
of the Option after such consummation.
2. Exercise of Option to Buy Shares.
--------------------------------
a. Holder may exercise this Option by the surrender of the Notice of
Exercise and Investment Representation Statement in the forms attached hereto as
Exhibit A and Exhibit B, respectively, duly completed and executed at the
- --------- ---------
principal office of IMA, accompanied by payment in full of the Purchase Price in
cash, or by check or wire transfer in next day available funds.
b. This Option shall be deemed to have been exercised immediately
prior to the close of business on the date Holder surrenders the Notice of
Exercise and Investment Representation Statement to IMA as provided above, and
the persons or entities to receive the Shares issuable upon such exercise shall
be treated for all purposes as a stockholder of IMA as of the close of business
on such date.
c. As promptly as practicable after such date, IMA shall issue and
deliver to the persons entitled to receive the Shares a certificate or
certificates for the number of full Shares
2
<PAGE>
issuable upon exercise.
d. The Option must be exercised for the total number of Shares then
issuable upon exercise of the Option.
3. Redemption of buyingedge.com Series A Stock.
-------------------------------------------
a. Concurrent with its exercise of the Option, Holder shall redeem
(the "Redemption") all shares of buyingedge.com's Series A Preferred Stock (the
"Series A Stock") that it or any of its affiliates or related entities owns.
b. If, at the time of the Redemption, buyingedge.com does not have
the financial resources to redeem all of Holder's shares of Series A Stock, IMA
hereby covenants to transfer to buyingedge.com to the extent it may make such
transfer pursuant to applicable law, within five (5) business days of its
receipt of the Notice of Exercise, sufficient funds to enable buyingedge.com to
legally consummate the Redemption through stock purchase, loan or other method
as IMA shall determine and which shall permit buyingedge.com to redeem such
shares.
c. The Redemption of the Series A Stock shall occur in accordance
with the provision of Article IV(B)(3) of buyingedge.com's Certificate of
Incorporation, as amended to date.
d. Holder shall use the proceeds it receives from buyingedge.com
from the Redemption of the Series A Stock to pay the Purchase Price for the
Shares and agrees to instruct buyingedge.com to transfer the full amount of the
redemption price for the Series A Stock directly to IMA in payment of the
exercise price of this Option.
4. No Stockholder Rights. This Option, by itself, as distinguished
---------------------
from any Shares acquired by Holder upon exercise of this Option, shall not
entitle Holder to any of the rights of a stockholder of IMA.
5. Reservation of Stock. IMA shall reserve from its authorized and
--------------------
unissued Common Stock a sufficient number of shares to provide for the issuance
of the Shares upon Holder's exercise of the Option. Issuance of this Option
shall constitute full authority of IMA's officers who are charged with the duty
of executing stock certificates to execute and issue the necessary certificates
for the Shares issuable upon exercise of the Option.
6. Piggyback Registration Rights.
-----------------------------
a. If IMA shall determine to register any of its securities either
for its own account or for the account of a stockholder(s) exercising demand
registration rights, other than a registration relating solely to employee
benefit plans, or a registration relating solely to a transaction pursuant to
Rule 145 promulgated under the Securities Act of 1933, as amended (the "Act"),
or a registration on any registration form which does not permit secondary sales
or does not include substantially the same information as would be required to
be included in a registration statement covering the sale of the Shares, IMA
shall promptly give to Holder written notice thereof and include in such
registration (and any related qualification under blue sky laws), and in any
3
<PAGE>
underwriting involved therein, the number of shares specified in a written
request made by Holder within fifteen (15) days after receipt of such written
notice from IMA, except as set forth in subsection (b) below.
b. If the registration for which for which IMA gives notice is for a
registered public offering involving an underwriting, the right of Holder to
registration shall be conditioned upon Holder's participation in such
underwriting and the inclusion of Holder's Shares in the underwriting pursuant
to an underwriting agreement in customary form with the underwriter(s) selected
by IMA. Notwithstanding any other provision of this Section, if the underwriter
determines that marketing factors require a limitation on the number of shares
to be underwritten, the underwriter may exclude some or all of the Shares with
the number of shares that may be included in the registration and underwriting
being allocated among Holder and all other stockholders entitled to have
securities included in such registration in proportion, as nearly as
practicable, to the respective amounts of securities which they had requested to
be included in such registration (provided, however, that if the registration is
for the account of stockholders exercising demand registration rights, the
number of shares that may be included by Holder shall be cut back entirely
before any limitation on the number of shares that may be included by such
stockholders).
c. All expenses of the registration shall be borne by IMA, except
underwriting discounts and selling commissions applicable to the sale of any of
Holder's Shares and any other securities of IMA being sold in the same
registration by other stockholders, which shall be borne by Holder and such
other stockholders pro rata on the basis of the number of shares being
registered.
7. Legends. This Option and the Shares (and the securities issuable,
-------
directly or indirectly, upon conversion of the Shares, if any) shall be
imprinted with a legend in substantially the following form:
THIS SECURITY HAS NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933, AS AMENDED, AND MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED WITHOUT
AN EFFECTIVE REGISTRATION THEREOF UNDER SUCH ACT OR PURSUANT TO RULE 144 OR AN
OPINION OF COUNSEL THAT SUCH REGISTRATION IS NOT REQUIRED.
8. Transfer of Option. This Option may only be transferred or assigned
------------------
by Holder hereof in whole or in part, to an affiliated or related entity of
Holder, provided that, if a party acquires Series A Stock from Holder
constituting less than all Series A Stock held by Holder, then this Option shall
be partially transferable to such party only with respect to the number of
Shares that equals the same proportion of the total number of Shares initially
covered hereby as the number of shares of Series A Stock represents to the total
number of shares of Series A Stock initially issued to Holder, which amounts
shall be proportionately adjusted to reflect any stock dividend, stock split,
reverse stock split, combination of shares, reclassification, recapitalization
or similar event altering the number of outstanding shares of IMA's or
buyingedge.com's capital stock, provided, however, that the transferor provides,
at IMA's request, an opinion of counsel reasonably satisfactory to IMA that the
registration does not require registration under the Act and the
4
<PAGE>
securities law applicable with respect to any other applicable jurisdiction.
9. Termination. The Option shall terminate and no longer be exercisable
-----------
at 5:00 p.m., Connecticut time, on August 12, 2002.
10. Miscellaneous. This Agreement shall be governed by the laws of
-------------
Connecticut as such laws are applied to contracted entered into and performed
entirely in Connecticut. The headings in this Agreement are for purposes of
convenience and reference only, and shall not be deemed to constitute a part
hereof. Neither this Agreement nor any term hereof may be changed or waived
orally, but only by an instrument in writing signed by IMA and Holder. All
notices and other communications shall be hand delivered, sent by facsimile or
other electronic medium, or mailed, postage prepaid, to IMA or Holder at the
address et forth below each party's signature to this Agreement or to such other
address as may be furnished in writing to the other parties hereto.
11. Counterparts. This Agreement and any exhibit hereto may be executed
------------
in multiple counterparts, each of which shall constitute an original but all of
which shall constitute but one and the same instrument. One or more counterparts
of this Agreement or any Exhibit hereto may be delivered via facsimile, with the
intention that they shall have the same effect as an original counterpart
hereof.
12. Entire Agreement. This Agreement and the other documents delivered
----------------
pursuant hereto constitute the full and entire understanding and agreement
between the parties with regard to the subjects hereof and thereof and they
supersede, merge and render void every other prior written and/or oral
understanding or agreement among or between the parties hereto.
13. Severability. In case any provision of this Agreement shall be
------------
found by a court of law to be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions of this Agreement shall
not in any way be affected or impaired thereby.
5
<PAGE>
IN WITNESS WHEREOF, the parties hereto have executed this Option Agreement
as of the date first written above.
Information Management Associates, Inc.
a Connecticut corporation
By:
Address:
@Ventures Investors, LLC
By:
Name: Andy Hajducky
Title: General Partner
Address: 100 Brickstone Square, 5th Floor
Andover, MA 01810
6
<PAGE>
Exhibit A
---------
NOTICE OF EXERCISE
TO: Information Management Associates, Inc.
1. The undersigned hereby elects to purchase ________________ shares of the
Common Stock of Information Management Associates pursuant to the terms of
the attached Option Agreement to which this Exhibit A is attached, and
---------
tenders herewith payment of the purchase price in full, together with all
applicable transfer taxes, if any.
2. Please issue a certificate or certificates representing said shares of the
Common Stock in the name of the undersigned or in such other name as is
specified below:
__________________________________
(Name)
__________________________________
(Address)
(Date) (Name of Option Holder)
By:
Title:
7
<PAGE>
Exhibit B
---------
INVESTMENT REPRESENTATION STATEMENT
Shares of
Information Management Associates, Inc.
In connection with the purchase of the above-listed securities, the undersigned
hereby represents to Information Management Associates, Inc. ("IMA") as follows:
(a) The securities to be received upon the exercise of the Option (the
"Securities") will be acquired for investment for its own account, not as a
nominee or agent, and not with a view to the sale or distribution of any
part thereof, and the undersigned has no present intention of selling,
granting participation in or otherwise distributing the same, but subject,
nevertheless, to any requirement of law that the disposition of its
property shall at all times be within its control. By executing this
Statement, the undersigned further represents that it does not have any
contract, undertaking, agreement or arrangement with any person to sell,
transfer, or grant participation to such person or to any third person,
with respect to any Securities issuable upon exercise of the Option.
(b) The undersigned understands that the Securities issuable upon exercise of
the Option at the time of issuance may not be registered under the Act, and
applicable state securities laws, on the ground that the issuance of such
securities is exempt pursuant to Section 4(2) of the Act and state law
exemptions relating to offers and sales not by means of a public offering,
and that IMA's reliance on such exemptions is predicated on the
undersigned's representations set forth herein.
(c) The undersigned agrees that in no event will it make a disposition of any
Securities acquired upon the exercise of the Option unless and until (i) it
shall have notified IMA of the proposed disposition and shall have
furnished IMA with a statement of the circumstances surrounding the
proposed disposition, and (ii) it shall have furnished IMA with an opinion
of counsel satisfactory to IMA and IMA's counsel to the effect that (A)
appropriate action necessary for compliance with the Act and any applicable
state securities laws has been taken or an exemption from the registration
requirements of the Act and such laws is available, and (B) the proposed
transfer will not violate any of said laws.
(d) The undersigned acknowledges that an investment in IMA is highly
speculative and represents that it is able to fend for itself in the
transactions contemplated by this Statement, has such knowledge and
experience in financial and business matters as to be capable of evaluating
the merits and risks of its investments, and has the ability to bear the
economic risks (including the risk of a total loss) of its investment. The
undersigned represents that it has had the opportunity to ask questions of
IMA concerning IMA's business and assets and to obtain any additional
information which it considered necessary to verify the accuracy of or to
amplify IMA's disclosures, and has had all questions which have been asked
by it satisfactorily answered by IMA.
<PAGE>
(e) The undersigned acknowledges that the Securities issuable upon exercise of
the Option must be held indefinitely unless subsequently registered under
the Act or an exemption from such registration is available. The
undersigned is aware of the provisions of Rule 144 promulgated under the
Act which permit limited resale of shares purchased in a private placement
subject to the satisfaction of certain conditions, including, among other
things, the existence of a public market for the shares, the availability
of certain current public information about IMA, the resale occurring not
less than one year after a party has purchased and paid for the security to
be sold, the sale being through a "broker's transaction" or in transactions
directly with a "market makers" (as provided by Rule 144(f)) and the number
of shares being sold during any three-month period not exceeding specified
limitations.
Dated:
(Typed or Printed Name)
By:
(Signature)
(Title)
<PAGE>
Exhibit 10.24
BUYINGEDGE.COM INC.
1999 EMPLOYEE AND CONSULTANT STOCK OPTION PLAN
I. ESTABLISHMENT OF PLAN; DEFINITIONS
1. Purpose. The purpose of the buyingedge.com inc. 1999 Employee
-------
and Consultant Stock Option Plan is to provide an incentive to Employees and
Consultants of buyingedge.com inc. (the "Corporation") and its Affiliates who
are in a position to contribute materially to the long-term success of the
Corporation and/or its Affiliates, to increase their interest in the welfare of
the Corporation and its Affiliates, and to aid in attracting and retaining
Employees and Consultants of outstanding ability.
2. Definitions. Unless the context clearly indicates otherwise, the
-----------
following terms shall have the meanings set forth below:
a. "Affiliate" shall mean any "parent corporation" or
"subsidiary corporation" of the Corporation each as defined respectively in
Sections 424(e) and (f) of the Code.
b. "Board" shall mean the Board of Directors of the Corporation.
c. "Cause" shall mean, as determined by the Board, repeated
failure to properly perform assigned duties, gross negligence,
insubordination, commission of a felony, or any act injurious to the
Corporation involving dishonesty or breach of any duty of confidentiality
or loyalty.
d. "Change of Control" shall mean a change of control of the
Corporation of a nature that would be required to be reported in response to
Item 6(e) of Schedule 14A of Regulation 14A under the Securities Exchange Act of
1934 (the "Exchange Act"), whether or not the Corporation is subject to the
Exchange Act at such time; provided, however, that without limiting the
-------- -------
generality of the foregoing, a "Change of Control" will in any event be deemed
to occur if and when (i) there shall be consummated (x) any consolidation,
reorganization or merger of the Corporation in which the Corporation is not the
continuing or surviving corporation or pursuant to which shares of the Stock
would be converted into cash, securities or other property, other than a merger
of the Company in which holders of the Stock immediately prior to the merger
have the same proportionate ownership of common stock of the surviving
corporation immediately after the merger, or (y) any sale, lease, exchange or
other transfer (in one transaction or a series of related transactions) of all,
or substantially all, of the assets of the Corporation, or (ii) the shareholders
of the Corporation shall approve any plan or proposal for
<PAGE>
liquidation or dissolution of the Corporation, or (iii) any person (as such term
is used in Sections 13(d) and 14(d)(2) of the Exchange Act, including any
"group" (as defined in Section 13(d)(3) of the Exchange Act) (other than the
Grantee or any group controlled by the Grantee)) shall become the beneficial
owner (within the meaning of Rule 13d-3 under the Exchange Act) of thirty
percent (30%) or more of the outstanding Stock (other than pursuant to a plan or
arrangement entered into by such person and the Corporation) and such person
discloses its intent to effect a change of the control or ownership of the
Company in any filing with the Securities and Exchange Commission, or (iv)
within any twenty-four (24) consecutive month period beginning on or after May
25, 1999, the persons who were directors of the Corporation immediately before
the beginning of such period (the "Incumbent Directors") shall cease (for any
reason other than death, disability or retirement) to constitute at least a
majority of the Board or the board of directors of any successor to the
Corporation, provided that, any director who was not a director as of May 25,
1999 shall be deemed to be an Incumbent Director if such director was elected to
the Board by, or on the recommendation of or with the approval of, at least two-
thirds of the directors who then qualified as Incumbent Directors either
actually or by prior operation of this definition unless such election,
recommendation or approval was the result of any actual or threatened election
contest of the type contemplated by Regulation 14a-11 promulgated under the
Exchange Act or any successor provision.
d. "Code" shall mean the Internal Revenue Code of 1986, as it
may be amended from time to time.
e. "Consultant" shall mean any consultant of the Corporation or
any of its Affiliates.
f. "Corporation" shall mean buyingedge.com, Inc., a Connecticut
corporation.
g. "Disability" shall mean, as determined by the Board, a
medically determinable physical or mental condition which causes an
Employee to be unable to engage in any substantial gainful activity and
which can be expected to result in death or to be of long, continued and
indefinite duration.
h. "Employee" shall mean any employee, including officers, of
the Corporation or any of its Affiliates, as determined under the Code and
the Treasury Regulations thereunder.
i. "Fair Market Value" shall mean on any date, (i) if the Stock
is not listed on a national securities exchange or quoted on the National
Association of Securities Dealers Automated Quotation System ("Nasdaq"),
the fair market value of the Stock on that date as determined by the Board,
or (ii) if the Stock is listed on a national securities exchange or is
quoted on Nasdaq, the closing price reported on the composite tape for
issues listed on such exchange on such date, or the closing price or the
average of the
-2-
<PAGE>
closing dealer "bid" and "asked" prices of the Stock on the date of grant
as quoted by Nasdaq, or if no trades shall have been reported for such
date, on the next preceding date on which there were trades reported;
provided that if no quotations shall have been made within the 10 business
days preceding such date, the Fair Market Value shall be determined by the
Board as provided in clause (i) above.
j. "Good Reason" shall mean, with respect to a Grantee's
termination of employment or termination of consultancy, a voluntary
termination within six months following a Change of Control due to (a) a
substantial reduction of the Grantee's duties or responsibilities as
compared to his duties and responsibilities immediately prior to the Change
of Control; (b) a reduction in Grantee's rate of compensation; or (c) a
relocation of Grantee's place of employment or consultancy to a location
more than 75 miles from either of the Company's current places of business
at One Corporate Drive, Shelton, Connecticut or 18101 Von Karman Ave.,
Suite 1100, Irvine, California.
k. "Grantee" shall mean an Employee or Consultant granted a
Stock Option under this Plan.
l. "Incentive Stock Option" shall mean a Stock Option granted
pursuant to the Incentive Stock Option provisions set forth in Part II of
this Plan.
m. "Non-Qualified Stock Option" shall mean a Stock Option
granted pursuant to the Non-Qualified Stock Option provisions set forth in
Part III of this Plan.
n. "Option Period" shall mean the term of the Stock Option as
fixed by the Board.
o. "Plan" shall mean the buyingedge.com inc. 1999 Employee and
Consultant Stock Option Plan as set forth herein and as amended from time
to time.
p. "Stock" shall mean authorized but unissued shares of the
Common Stock of the Corporation, no par value, or reacquired shares of the
Corporation's Common Stock.
q. "Stock Option" shall mean an option, which shall include Non-
Qualified Stock Options and Incentive Stock Options, granted pursuant to
the Plan to purchase shares of Stock.
r. "Stock Option Agreement" shall mean the written instrument
evidencing the grant of one or more Stock Options under the Plan and which
contains the terms and conditions applicable to such grant. A form of
Incentive Stock Option Agreement is attached hereto as Exhibit A and a form
---------
of Non-Qualified Stock Option Agreement is attached hereto as Exhibit B.
---------
-3-
<PAGE>
s. "Ten Percent Shareholder" shall mean an Employee or a
Consultant who at the time a Stock Option is granted thereto owns stock
possessing more than ten percent (10%) of the total combined voting power
of all classes of stock of the Corporation or of any of its Affiliates.
t. "Unvested Portion" shall have the meaning set forth in Part
IV, paragraph 2.
3. Shares of Stock Subject to the Plan. There are hereby reserved
-----------------------------------
for issuance under the Plan 2,500,000 shares of Stock. Subject to the
provisions of Paragraph 1 of Part IV, the Stock which may be issued pursuant to
Stock Options authorized to be granted under the Plan and the Stock which is
subject to outstanding but unexercised Stock Options under the Plan shall not
exceed 2,500,000 shares of Stock in the aggregate. If a Stock Option shall
expire and terminate for any reason, in whole or in part, without being
exercised, the number of shares of Stock as to which such expired or terminated
Stock Option shall not have been exercised may again become available for the
grant of Stock Options.
There shall be no terms and conditions in a Stock Option which provide
that the exercise of an Incentive Stock Option reduces the number of shares of
Stock for which an outstanding Non-Qualified Stock Option may be exercised; and
there shall be no terms and conditions in a Stock Option which provide that the
exercise of a Non-Qualified Stock Option reduces the number of shares of Stock
for which an outstanding Incentive Stock Option may be exercised.
4. Administration of the Plan. The Plan shall be administered by
--------------------------
the Board. Subject to the express provisions of the Plan, the Board shall have
authority to grant Stock Options under the Plan, to interpret the Plan, to
prescribe, amend, and rescind rules and regulations relating to it, to determine
the terms and provisions of Stock Option Agreements, and to make all other
determinations necessary or advisable for the administration of the Plan. Any
controversy or claim arising out of or related to the Plan shall be determined
unilaterally by and at the sole discretion of the Board. Any determination,
decision or action of the Board in connection with the construction,
interpretation, administration, implementation or maintenance of the Plan shall
be final, conclusive and binding upon all Grantees and all person(s) claiming
under or through any Grantees. In addition, the Board shall have the authority
to delegate any of its duties and responsibilities under the Plan to such
committee(s) as it shall determine including any such delegation necessary for
the Plan's compliance with the requirements of Rule 16b-3 promulgated by the
Securities and Exchange Commission, as amended ("Rule 16b-3") and Section 162(m)
of the Code.
5. Amendment or Termination. The Board may, at any time, alter,
------------------------
amend, suspend, discontinue, or terminate the Plan; provided, however, that any
such action shall not adversely affect the right of any Grantee to any Stock
Option previously granted.
-4-
<PAGE>
6. Effective Date and Duration of the Plan. The Plan shall become
---------------------------------------
effective on May 25, 1999, subject to the approval by the shareholders of the
Corporation. The Plan shall terminate ten years from the date it becomes
effective, and no Stock Option may be granted under the Plan thereafter, but
such termination shall not affect any Stock Option theretofore granted.
II. INCENTIVE STOCK OPTION PROVISIONS
1. Granting of Incentive Stock Options.
-----------------------------------
a. Only Employees of the Corporation or its Affiliates shall be
eligible to receive Incentive Stock Options under the Plan.
b. When granting an Incentive Stock Option, the Board shall
determine the purchase price of the Stock subject thereto, provided, that
the purchase price of each share of Stock subject to an Incentive Stock
Option shall not be less than 100% of the Fair Market Value of a share of
the Stock on the date the Incentive Stock Option is granted; and provided,
further, that the purchase price of each share of Stock subject to an
Incentive Stock Option granted to a Ten Percent Shareholder shall not be
less than 110% of the Fair Market Value of a share of the Stock on the date
the Incentive Stock Option is granted.
c. No Incentive Stock Option shall be exercisable more than ten
years from the date the Incentive Stock Option was granted; provided,
however, that an Incentive Stock Option granted to a Ten Percent
Shareholder shall not be exercisable more than five years from the date the
Incentive Stock Option was granted.
d. The Board shall determine and designate from time to time
those Employees who are to be granted Incentive Stock Options and specify
the number of shares subject to each Incentive Stock Option.
e. Notwithstanding any other provisions hereof, the aggregate
Fair Market Value (determined at the time the option is granted) of the
Stock with respect to which Incentive Stock Options are exercisable for the
first time by an Employee during any calendar year (under all such plans of
the Corporation and its Affiliates) shall not exceed $100,000.
f. The Board, in its sole discretion, shall determine whether
any particular Incentive Stock Option shall become exercisable in one or
more installments, specify the installment dates, and, within the
limitations herein provided, determine the total period during which the
Incentive Stock Option is exercisable. Further, the Board may make such
other provisions as may appear generally acceptable or desirable to the
Board or necessary to qualify its grants under the provisions of Section
422 of the Code.
-5-
<PAGE>
g. The Board may grant at any time new Incentive Stock Options
to an Employee who has previously received Incentive Stock Options or other
options whether such prior Incentive Stock Options or other options are
still outstanding, have previously been exercised in whole or in part, or
are canceled in connection with the issuance of new Incentive Stock
Options. The purchase price of the new Incentive Stock Options may be
established by the Board without regard to the existing Incentive Stock
Options or other options.
h. During any calendar year, no Employee may be granted
Incentive Stock Options with respect to more than 400,000 shares of Stock.
2. Exercise of Incentive Stock Options. The purchase price of Stock
-----------------------------------
subject to an Incentive Stock Option shall be payable on exercise of the
Incentive Stock Option in cash or by check, bank draft or postal or express
money order. The Board, in its discretion, may permit a Grantee to make partial
or full payment of the purchase price by the surrender of Stock owned by the
Grantee prior to the date of exercise. Shares of Stock surrendered in payment
of the purchase price as provided above shall be valued at the Fair Market Value
thereof on the date of exercise. Surrender of such Stock shall be evidenced by
delivery of the certificate(s) representing such shares in such manner, and
endorsed in such form, or accompanied by stock powers endorsed in such form, as
the Board may determine.
In the absence of any other action by the Board, or as otherwise set
forth in the applicable Stock Option Agreement, all Incentive Stock Options
shall become exercisable in equal installments over a period of four years
calculated from the date of grant.
3. Termination of Employment. Except as provided otherwise in the
-------------------------
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this paragraph 3):
a. If a Grantee's employment with the Corporation and all
Affiliates is terminated (other than for Cause or voluntary termination
prior to retirement at or after age 65 or death), including termination by
reason of retirement at or after age 65, or by reason of Disability only
those Incentive Stock Options held by the Grantee which were immediately
exercisable at the date of the termination of Grantee's employment shall be
exercisable by the Grantee following the termination of Grantee's
employment. Such Incentive Stock Options must be exercised within three
months after such termination of employment (but in no event after
expiration of the Option Period) or they shall be forfeited.
b. If a Grantee's employment with the Corporation and all
Affiliates is terminated for Cause or if the Grantee shall have voluntarily
terminated employment other than by retirement at or after age 65, all then
outstanding Incentive Stock Options
-6-
<PAGE>
held by the Grantee shall expire immediately and such Incentive Stock
Options shall not be exercisable after the date of the termination of
Grantee's employment.
c. If a Grantee's employment with the Corporation and all
Affiliates is terminated by death, only those Incentive Stock Options held
by the Grantee which were immediately exercisable at the date of the
Grantee's death shall be exercisable by the representative of the Grantee's
estate or beneficiaries thereof to whom the Incentive Stock Options have
been transferred. Such Incentive Stock Options must be exercised by the
earlier of (i) three months from the date of the Grantee's death or (ii)
the expiration of the Option Period, or they shall be forfeited.
d. The Board may grant a bona fide leave of absence to any
Grantee and, for purposes hereunder, such Grantee shall be deemed to be
continued to be employed with the Corporation or its Affiliates during such
leave of absence.
III. NON-QUALIFIED STOCK OPTION PROVISIONS
1. Granting of Non-Qualified Stock Options.
---------------------------------------
a. Employees and Consultants of the Corporation or its
Affiliates shall be eligible to receive Non-Qualified Stock Options under
the Plan.
b. The Board shall determine and designate from time to time
those Employees and Consultants who are to be granted Non-Qualified Stock
Options and specify the number of shares subject to each Non-Qualified
Stock Option.
c. The Board may grant at any time new Non-Qualified Stock
Options to an Employee or Consultant who has previously received Non-
Qualified Stock Options or other options, whether such prior Non-Qualified
Stock Options or other options are still outstanding, have previously been
exercised in whole or in part, or are canceled in connection with the
issuance of new Non-Qualified Stock Options.
d. When granting a Non-Qualified Stock Option, the Board shall
determine the purchase price of the Stock subject thereto.
e. The Board, in its sole discretion, shall determine whether
any particular Non-Qualified Stock Option shall become exercisable in one
or more installments, specify the installment dates and, within the
limitations herein provided, determine the total period during which the
Non-Qualified Stock Option is exercisable. Further, the Board may make
such other provisions as may appear generally acceptable or desirable to
the Board.
-7-
<PAGE>
f. No Non-Qualified Stock Option shall be exercisable more than
ten years from the date such option is granted.
g. During any calendar year, no Employee may be granted Non-
Qualified Stock Options with respect to more than 400,000 shares of Stock.
2. Exercise of Non-Qualified Stock Options. The purchase price of
---------------------------------------
Stock subject to a Non-Qualified Stock Option shall be payable on exercise of
the Non-Qualified Stock Option in cash or by check, bank draft or postal or
express money order. The Board, in its discretion, may permit a Grantee to make
partial or full payment of the purchase price by the surrender of Stock owned by
the Grantee prior to the date of exercise. Shares of Stock surrendered in
payment of the purchase price as provided above shall be valued at the Fair
Market Value thereof on the date of exercise, surrender of such to be evidenced
by delivery of the certificates(s) representing such shares in such manner, and
endorsed in such form, or accompanied by stock powers endorsed in such form, as
the Board may determine.
In the absence of any other action by the Board or as otherwise set
forth in the applicable Stock Option Agreement, all Non-Qualified Stock Options
shall become exercisable in equal installments over a period of four years
calculated from the date of grant.
3. Termination of Employment. Except as provided otherwise in the
-------------------------
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this paragraph 3):
a. If a Grantee's employment with the Corporation and all
Affiliates is terminated (other than for Cause or voluntary termination
prior to retirement at or after age 65 or death), including termination by
reason of retirement at or after age 65 or by reason of Disability, only
those Non-Qualified Stock Options held by the Grantee which were
immediately exercisable at the date of the termination of Grantee's
employment shall be exercisable by the Grantee following the termination of
Grantee's employment. Such Non-Qualified Stock Options must be exercised
within three months after such termination of employment (but in no event
after expiration of the Option Period) or they shall be forfeited.
b. If a Grantee's employment with the Corporation and all
Affiliates is terminated for Cause or if the Grantee shall have voluntarily
terminated employment other than by retirement at or after age 65, all then
outstanding Non-Qualified Stock Options held by the Grantee shall expire
immediately and such Non-Qualified Stock Options shall not be exercisable
after the date of the termination of Grantee's employment.
c. If a Grantee's employment with the Corporation and all
Affiliates is terminated by death, only those Non-Qualified Stock Options
held by the Grantee which were immediately exercisable at the date of death
shall be exercisable by the representative
-8-
<PAGE>
of the Grantee's estate or beneficiaries thereof to whom the Non-Qualified
Stock Options have been transferred. Such Non-Qualified Stock Options must
be exercised by the earlier of (i) three months from the date of the
Grantee's death or (ii) the expiration of the Option Period, or they shall
be forfeited.
d. The Board may grant a bona fide leave of absence to any
Grantee and, for purposes hereunder, such Grantee shall be deemed to
continue to be employed for purposes of continuing such Grantee's
employment with the Corporation or its Affiliates during such leave of
absence.
4. Termination of Consultancy. Except as provided otherwise in the
--------------------------
applicable Stock Option Agreement (in which case the provisions of the Stock
Option Agreement shall control over the provisions of this paragraph 4):
a. If a Grantee's consulting engagement with the Corporation and
all Affiliates is terminated (other than for Cause or voluntary termination
or death), only those Non-Qualified Stock Options held by the Grantee which
were immediately exercisable at the date of termination of the Grantee's
consulting engagement shall be exercisable by the Grantee following the
termination of the Grantee's consulting engagement. Such Non-Qualified
Stock Options must be exercised within three months after such termination
of the Grantee's consulting engagement (but in no event after expiration of
the Option Period) or they shall be forfeited.
b. If a Grantee's consulting engagement with the Corporation and
all Affiliates is terminated for Cause or if the Grantee shall have
voluntarily terminated his or her consulting engagement, all then
outstanding Non-Qualified Stock Options held by the Grantee shall expire
immediately and such Non-Qualified Stock Options shall not be exercisable
after the date of termination of the Grantee's consulting engagement.
c. If a Grantee's consulting engagement with the Corporation and
all Affiliates is terminated by death, only those Non-Qualified Stock
Options immediately exercisable at the date of the Grantee's death shall be
exercisable by the representative of the Grantee's estate or beneficiaries
thereof to whom the Non-Qualified Stock Options have been transferred.
Such Non-Qualified Stock Options must be exercised by the earlier of (i)
three months from the date of the Grantee's death or (ii) the expiration of
the Option Period, or they shall be forfeited.
-9-
<PAGE>
IV. GENERAL PROVISIONS
1. Recapitalization Adjustments.
----------------------------
a. In the event of any change in capitalization affecting the
Stock, including, without limitation, a stock dividend or other
distribution, stock split, reverse stock split, recapitalization,
consolidation, subdivision, split-up, spin-off, split-off, combination or
exchange of shares or other form of reorganization or recapitalization, or
any other change affecting the Stock, the Board shall authorize and make
such proportionate adjustments, if any, as the Board deems appropriate to
reflect such change, including, without limitation, with respect to the
aggregate number of shares of Stock for which Stock Options in respect
thereof may be granted under the Plan, the number of shares of Stock
covered by each outstanding Stock Option, and the purchase price per share
of Stock in respect of outstanding Stock Options.
b. Any provision hereof to the contrary notwithstanding, in the
event the Corporation is a party to a merger or other reorganization,
outstanding Stock Options shall be subject to the agreement of merger or
reorganization. Such agreement may provide, without limitation, for the
assumption of outstanding Stock Options by the surviving corporation or its
parent, for their continuation by the Corporation (if the Corporation is a
surviving corporation) for accelerated vesting and accelerated expiration
or for settlement in cash.
2. Change of Control. Notwithstanding anything to the contrary
-----------------
contained in the Plan or in any Stock Option Agreement, except as provided by
the Board upon the grant of an Option, upon the occurrence of a Change of
Control, (i) thirty percent (30%) of the unvested portion of all then
outstanding Stock Options held by any Grantee (the "Unvested Portion") shall
automatically become immediately vested and exercisable and (ii) an additional
thirty percent (30%) of the Unvested Portion held by any Grantee as of the date
of the Change of Control shall become vested if, within six (6) months following
a Change of Control (A) the Grantee's employment or consultancy with the Company
or its Affiliate shall be involuntary terminated by the Company without Cause or
(B) the Grantee's employment or consultancy with the Company or its Affiliate
shall be terminated by the Grantee for Good Reason.
3. General.
-------
a. Each Stock Option shall be evidenced by a Stock Option
Agreement.
b. The granting of a Stock Option in any year shall not give the
Grantee any right to similar grants in future years or any right to be
retained as an Employee or Consultant of the Corporation or any Affiliate,
and all Employees and Consultants shall remain subject to discharge or
removal to the same extent as if the Plan were not in effect.
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<PAGE>
c. No Employee or Consultant, and no beneficiary or other person
claiming under or through him, shall have any right, title or interest by
reason of any Stock Option to any particular asset or assets of the
Corporation, or any share or shares of Stock allocated or reserved for the
purposes of the Plan or subject to any Stock Option except as set forth
herein. The Corporation shall not be required to establish any fund or
make any other segregation of assets to assure the exercise of any Stock
Option.
d. No Stock Option or right under the Plan shall or may be sold,
exchanged, assigned, pledged, encumbered, or otherwise hypothecated or
disposed of except by will or the laws of descent and distribution, and a
Stock Option shall be exercisable during the Grantee's lifetime only by the
Grantee or his conservator.
e. Notwithstanding any other provision of the Plan or agreements
made pursuant thereto, the Corporation's obligation to issue or deliver any
certificate or certificates for shares of Stock under a Stock Option, and
the transferability of Stock acquired by exercise of a Stock Option, shall
be subject to all of the following conditions:
(1) Any registration or other qualification of such shares
under any state or federal law or regulation, or the maintaining in
effect of any such registration or other qualification which the Board
shall, in its absolute discretion upon the advice of counsel, deem
necessary or advisable;
(2) The obtaining of any other consent, approval, or permit
from any state or federal governmental agency which the Board shall,
in its absolute discretion upon the advice of counsel, determine to be
necessary or advisable; and
(3) Each stock certificate issued pursuant to a Stock Option
shall bear such legends which the Corporation shall determine, in its
absolute discretion, are necessary or advisable, or which in the
opinion of counsel to the Corporation are required under applicable
federal or state securities laws.
f. All payments to Grantees or to their legal representatives
shall be subject to any applicable tax, community property, or other
statutes or regulations of the United States or of any state having
jurisdiction thereof. The Grantee may be required to pay to the
Corporation the amount of any withholding taxes which the Board, in its
sole discretion, deems necessary to be withheld in order to comply with any
applicable statutes or regulations with respect to a Stock Option or its
exercise. In the event that such payment is not made when due, the
Corporation shall have the right to deduct, to the extent permitted by law,
from any payment or settlement of any kind otherwise due to such person all
or part of the amount required to be withheld. If the Board, in its sole
discretion, permits shares of Stock to be used to satisfy any such tax
withholding, such Stock shall be valued based upon the Fair Market Value of
such Stock as of the date the
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<PAGE>
tax withholding is required to be made, such date to be determined by the
Board. The Corporation shall not be required to issue Stock until such
obligations are satisfied.
g. In the case of a grant of a Stock Option to any Employee or
Consultant of an Affiliate of the Corporation, the Corporation may, if the
Board so directs, issue or transfer the shares, if any, covered by the
Stock Option to the Affiliate, for such lawful consideration as the Board
may specify, upon the condition or understanding that the Affiliate will
transfer the shares to the Employee or Consultant in accordance with the
terms of the Stock Option specified by the Board pursuant to the provisions
of the Plan.
h. A Grantee entitled to Stock as a result of the exercise of a
Stock Option shall not be deemed for any purpose to be, or have rights as,
a shareholder of the Corporation by virtue of such exercise, except to the
extent a stock certificate is issued therefor and then only from the date
such certificate is issued. No adjustments shall be made for dividends or
distributions or other rights for which the record date is prior to the
date such stock certificate is issued, except as otherwise provided herein.
The Corporation shall issue any stock certificates required to be issued in
connection with the exercise of a Stock Option with reasonable promptness
after such exercise.
i. The grant or exercise of Stock Options granted under the Plan
shall be subject to, and shall in all respects comply with, applicable
Connecticut corporate law relating to such grant or exercise.
j. Should the participation of any Employee or Consultant in the
Plan be subject to Section 16 of the Securities Exchange Act of 1934 or any
successor statute ("Section 16"), it is the express intent of the
Corporation that, notwithstanding anything to the contrary contained in the
Plan, the Plan and Stock Options granted under the Plan shall satisfy and
be interpreted in a manner to achieve the result that the applicable
requirements of Rule 16b-3 shall be satisfied with respect to such
Employees and Consultants, with the result that such Employees and
Consultants shall be entitled to the benefits of Rule 16b-3 or other
applicable exemptive rules under Section 16. If any provision of the Plan
or of any Stock Option would otherwise frustrate or conflict with the
intent of the Corporation expressed in the immediately preceding sentence,
to the extent possible, such provision shall be interpreted and deemed
amended so as to avoid such conflict, and, to the extent of any remaining
irreconcilable conflict with such intent, the provision shall, solely with
respect to Employees and Consultants subject to Section 16, be deemed void.
k. It is the express intent of the Corporation that,
notwithstanding anything to the contrary contained in the Plan, the Plan
and Stock Options granted under the Plan shall satisfy and be interpreted
in a manner to achieve the result that Stock Options granted under the Plan
shall constitute "performance-based" compensation within the meaning of
Section 162(m) of the Code. If any provision of the Plan or of any Stock
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<PAGE>
Option would otherwise frustrate or conflict with the intent of the
Corporation expressed in the immediately preceding sentence, to the extent
possible, such provision shall be interpreted and deemed amended so as to
avoid such conflict, and, to the extent of any remaining irreconcilable
conflict with such intent, the provision shall, solely with respect to
Employees subject to Section 162(m) of the Code, be deemed void.
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<PAGE>
Exhibit 10.25
SUBLEASE
--------
THIS SUBLEASE ("Sublease") is dated for references purposes only as of
September 1, 1999, and is made by and between CENTURA SOFTWARE CORPORATION, a
California corporation ("Sublessor"), and BUYINGEDGE.COM INC., a Connecticut
corporation ("Sublessee"). Sublessor and Sublessee hereby agree as follows:
1. Recitals: This Sublease is made with reference to the fact that Westport
--------
Joint Venture, formerly known as Westport Investments, a California general
partnership ("Master Lessor"), as Landlord, and Sublessor, as Tenant, entered
that certain lease dated as of October 14, 1996, as amended by that certain
Amendment No. 1 to Lease, dated as of January 12, 1998 (collectively, the
"Master Lease") with respect to that improved real property containing a
two-story building consisting of approximately 48,384 rentable square feet
("Building"), commonly known as 975 Island Drive, Redwood City, California 94065
("Premises"), as more particularly described in the Master Lease. A copy of the
Master Lease is attached hereto as Exhibit "A" and incorporated by reference
herein. Approximately 23,472 square feet of the Premises is currently subleased
to Nextel of California, Inc. ("Nextel") pursuant to a Sublease dated July 20,
1998 ("Nextel Sublease"). In order to accommodate Nextel's desire to
sub-sublease a portion of its premises, Sublessor has agreed to enter into a
direct sublease with Sublessee for the portion of the premises which Nextel is
relinquishing, with Nextel continuing to sublease the remaining portion of its
premises pursuant to the Nextel Sublease, as amended by First Amendment to
Sublease of even date herewith ("First Amendment").
2. Premises: Sublessor hereby subleases to Sublessee, and Sublessee hereby
--------
subleases from Sublessor, a portion of the Premises, located on the second floor
of the Building, consisting of approximately twelve thousand (12,000) rentable
square feet ("Subleased Premises"). The parties acknowledge that the Subleased
Premises does not include Sublessor's QA lab, which consists of approximately
720 rentable square feet and is located adjacent to the Subleased Premises. The
Subleased Premises consists of that portion of the Premises that is being
relinquished by Nextel pursuant to the First Amendment to Sublease. Because
Nextel and Sublessee have not yet agreed with specificity as to the exact amount
of rentable space to be relinquished by Nextel, and, in turn, taken by
Sublessee, Sublessor and Sublessee agree that an Addendum to Sublease, in the
form attached hereto, shall be entered into when Nextel and Sublessee have so
agreed. Until the Addendum is executed by Sublessor and Sublessee, Sublessee
shall continue making all rental and other payments due hereunder on the basis
of 12,000 square feet of rentable space. In the event that Subleased Premises
are agreed to be less than 12,000 square feet of rentable space, Sublessee shall
not be entitled to any refund or reimbursement from Sublessor for any sums paid
or owing by Sublessee pursuant to this Sublease on the basis of the square
footage of the Subleased Premises, including Monthly Base Rent or Additional
Rent, for any period prior to the effective date of the Addendum to Sublease. In
all events, and irrespective of what Nextel and Sublessee agree, the total
rentable square footage of the Subleased Premises and Nextel's premises under
the Nextel Sublease (as amended) shall equal 23,472 rentable square feet, and
Sublessor shall not be bound by any agreement between Sublessee and Nextel to
the contrary.
<PAGE>
3. Term:
A. Term. The term of this Sublease ("Term") shall be for that period
----
consisting of approximately three (3) years, commencing on the date that the
Master Lessor consents to this Sublease ("Commencement Date"), and ending on
August 31, 2002 ("Expiration Date"), unless this Sublease is sooner terminated
pursuant to its terms or the Master Lease is sooner terminated pursuant to its
terms.
B. No Option to Extend. The parties acknowledge that Sublessee has no
-------------------
option to extend the Term of this Sublease.
C. Early Possession. If Sublessor permits Sublessee to occupy the
----------------
Subleased Premises prior to the Commencement Date, such occupancy (i) shall be
subject to all of the provisions of this Sublease and (ii) shall not advance the
termination date of this Sublease.
4. Rent:
----
A. Monthly Base Rent. Sublessee shall pay to Sublessor as Bent Rent for
-----------------
the Subleased Premises equal monthly installments as follows:
Months Base Rent
------ ---------
Month 1 (September 1, 1999 - $2.90 per rentable square foot,
September 30, 1999) or Thirty-Four Thousand Eight
Hundred and No/100 Dollars
($34,800.00) per month
During the remainder of the Term, the Monthly Base Rent payable hereunder
shall be increased annually on October 1st of each calendar year during the Term
by an amount equal to the increase in the Consumer Price Index published
immediately before the adjustment date in question over the Consumer Price Index
published immediately before the prior adjustment date (or, immediately before
the Commencement Date, as appropriate). In no event will the increase in Monthly
Base Rent as a result of the adjustment set forth herein be more than six
percent (6%) per year. The term "Consumer Price Index" shall refer to the
Consumer Price Index, All Urban Consumers, subgroup "All Items", for the San
Francisco-Oakland-San Jose metropolitan area (Base Year, 1982-84 = 100), which
is presently being published monthly by the United States Department of Labor,
Bureau of Labor Statistics. However, if the Consumer Price Index is changed so
that the Base Year is altered from that used as of the Commencement Date, or if
the methodology currently used to determine the Consumer Price Index is
materially changed, in Sublessor's reasonable determination, then the Consumer
Price Index shall be converted in accordance with the conversion factor
published by the United States Department of Labor, Bureau of Labor Statistics,
to obtain the same results that would have been obtained had such change not
occurred. If no conversion factor is available, or if the Consumer Price Index
is otherwise changed, revised or discontinued for any reason, there shall be
substituted in lieu thereof, and the term "Consumer Price Index" shall
thereafter refer to, the most nearly comparable official price index of the
United States government in order to obtain substantially the same result as
would have been obtained had the original Consumer Price
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<PAGE>
Index not been discontinued, revised or changed, which alternative index shall
be selected by Sublessor in its reasonable discretion. In no event shall Monthly
Base Rent decrease on any adjustment date or be less than Monthly Base Rent for
the calendar month immediately preceding the month in which Monthly Base Rent is
adjusted in accordance with the foregoing provisions.
As used herein, "month" shall mean a period beginning on the first (1st)
day of a calendar month and ending on the last day of that month. Monthly Base
Rent shall be paid on or before the first (1st) day of each month. Rent (as
defined in Paragraph 4.B. below) for any period during the Sublease Term hereof
which is for less than one month of the Sublease Term shall be a prorata portion
of the monthly installment based on a 30-day month. Rent shall be payable
without notice or demand and without any deduction, offset, or abatement, in
lawful money of the United States of America. The Rent shall be paid directly to
Sublessor at 975 Island Drive, Redwood Shores, California 94065, Attn: Chief
Financial Officer, or such address as may be designated in writing by Sublessor.
B. Additional Rent. In addition to Monthly Base Rent, Sublessee shall
---------------
pay to Sublessor Sublessee's percentage share ("Percentage Share", as defined
below) of any amounts payable by Sublessor to Master Lessor pursuant to the
Master Lease, including, without limitation, Additional Rent (consisting of
Taxes, insurance premiums, expenses and charges) as defined in Section 4.D. of
the Master Lease. Sublessee's "Percentage Share" shall be twenty-four and eight
tenths - percent (24.8%), which Percentage Shares was determined by dividing the
total rentable area of the Subleased Premises by the total rentable area of the
Premises. Sublessee also shall pay to Sublessor as additional rent, within five
(5) days after receipt of Sublessor's invoices therefor, Sublessee's Percentage
Share of Sublessor's costs for water, gas, electricity, sewer, waste pick-up and
any other utilities serving the Subleased Premises. Sublessee shall be
responsible for payment of its own janitorial service and telephone,
telecommunications and data communications charges. All monies required to be
paid by Sublessee under this Sublease (except for Monthly Base Rent, as defined
in Paragraph 4.A. above) shall be deemed additional rent ("Additional Rent").
Monthly Base Rent and Additional Rent hereinafter collectively shall be referred
to as "Rent." Sublessee and Sublessor agree, as a material part of the
consideration given by Sublessee to Sublessor for this Sublease, that Sublessee
shall pay Sublessee's Percentage Share of all costs, expenses, taxes, insurance,
maintenance and other charges of every kind and nature arising out of this
Sublease or the Master Lease in connection with the Subleased Premises, such
that Sublessor shall receive, as a net consideration for this Sublease, the
Monthly Base Rent payable under Paragraph 4.A. hereof.
C. Payment of First Month's Rent. Upon the execution of this Sublease by
-----------------------------
Sublessee and Sublessor and the execution of Master Lessor's consent to this
Sublease, Sublessee shall pay to Sublessor the sum of Thirty-Four Thousand Eight
Hundred and No/100 Dollars ($34,800.00), which shall constitute Monthly Base
Rent for the first month of the Term. In the event the Commencement Date is
other than the first day of the month, Sublessor shall credit any excess rent
paid for the first month of the Term, if any, toward the Base Rent owing for the
second month of the Term in accordance with the proration formula set forth in
paragraph 4.A. above.
D. Acknowledgment. As between Sublessor and Sublessee, and
--------------
notwithstanding anything to the contrary contained in Article 4 of the Master
Lease, Sublessee's obligations with
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<PAGE>
respect to the payment of Rent under this Sublease shall be limited to the
obligations set forth in this Paragraph 4.
5. Security Deposit: Upon execution of this Sublease by Sublessee,
----------------
Sublessee shall deposit with Sublessor the sum of Sixty-Nine Thousand Six
Hundred and No/100 Dollars ($69,600.00), referred to herein as the "Security
Deposit." The Security Deposit shall be held by Sublessor as security for the
performance of Sublessee's obligations under this Sublease. Sublessor may (but
shall have no obligation to) use the Security Deposit or any portion thereof to
cure any breach or default by Sublessee under this Sublease, to fulfill any of
Sublessee's obligations under the Sublease, or to compensate Sublessor for any
damage it incurs as a result of Sublessee's failure to perform any of
Sublessee's obligations hereunder. In such event, Sublessee shall pay to
Sublessor on demand an amount sufficient to replenish the Security Deposit to
the full amount required under this Sublease. If at the expiration or
termination of this Sublease, Sublessee is not in default, has otherwise fully
performed all of Sublessee's obligations under this Sublease, and after
Sublessee has vacated the Subleased Premises, then within thirty (30) days
following the expiration or termination of this Sublease Sublessor shall return
to Sublessee the Security Deposit or the balance thereof then held by Sublessor
and not applied as provided above. Sublessor may commingle the Security Deposit
with Sublessor's general and other funds. Sublessor shall not be required to pay
interest on the Security Deposit to Sublessee. Provided that Sublessee has not
been in default hereunder at any time prior to the first day of the thirteenth
(13th) calendar month of the Sublease Term, Sublessor shall credit the sum of
Thirty-Four Thousand Eight Hundred and No/100 Dollars ($34,800.00) from the
Security Deposit to Monthly Base Rent owing for said thirteenth (13th) calendar
month of the Sublease Term.
6. Late Charge: If Sublessee fails to pay Sublessor any amount due
-----------
hereunder within five (5) days after the due date, Sublessee shall pay to
Sublessor upon written demand a late charge equal to ten percent (10%) of the
delinquent amount. In addition, Sublessee shall pay to Sublessor interest on all
amounts due, at the rate of ten percent (10%) per annum or the maximum rate
allowed by law, whichever is less (the "Interest Rate"), from the due date to
and including the date of the payment. The parties agree that the foregoing late
charge represents a reasonable estimate of the cost and expense which Sublessor
will incur in processing each delinquent payment. Sublessor's acceptance of any
interest or late charge shall not waive Sublessee's default in failing to pay
the delinquent amount.
7. Repairs: Sublessor shall deliver the Subleased Premises to Sublessee in
-------
its "as-is," broom clean condition, except that (i) the building systems and
sub-systems serving the Subleased Premises shall be in good working condition on
the Commencement Date; and (ii) the restrooms serving the Premises and the
Subleased Premises were in compliance with all applicable building codes,
including the Americans with Disabilities Act of 1990 ("ADA") in effect on
September 22, 1998. Except as set forth in this Paragraph, Sublessee shall
accept the Subleased Premises in its then-existing, "as is" condition, and, so
long as the building systems and sub-systems serving the Subleased Premises are
in the condition required by the preceding sentence on the Commencement Date and
the restrooms were in the condition required by the preceding sentence on
September 22, 1998, after the Commencement Date Sublessor shall have no
obligation whatsoever to make or pay the cost of any alterations, improvements
or repairs to the Subleased Premises, including, without limitation, any
improvement or repair required to comply with any law, regulation, building code
or ordinance
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<PAGE>
(including, without limitation, the ADA). Sublessee shall look solely to the
Master Lessor for performance of any repairs required to be performed by Master
Lessor under the terms of the Master Lease.
8. Indemnity:
---------
A. Sublessee's Indemnification. Except to the extent caused by
---------------------------
Sublessor's negligence or willful misconduct, Sublessee shall indemnify,
protect, defend with counsel reasonably acceptable to Sublessor and hold
harmless Sublessor from and against any and all claims, liabilities, judgment,
causes of action, damages, costs and expenses (including reasonable attorneys'
and experts' fees), caused by or arising in connection with: (i) the use,
occupancy or condition of the Subleased Premises, or (ii) the negligence or
willful misconduct of Sublessee or its employees, contractors, agents, or
invitees, or (iii) a breach of Sublessee's obligations under this Sublease; or
(iv) a breach of Sublessee's obligations under the Master Lease; or (iv) any
Hazardous Material (as defined in Section 50 of the Master Lease) used, stored,
released, disposed, generated or transported by Sublessee, its agents,
employees, contractors or invitees in, on or about the Premises and the
Subleased Premises.
B. Sublessor's Indemnification. Except to the extent caused by
---------------------------
Sublessee's negligence or willful misconduct, Sublessor shall indemnify,
protect, defend with counsel reasonably acceptable to Sublessee and hold
Sublessee harmless from and against any and all claims, liabilities, judgments,
causes of action, damages, costs, and expenses (including reasonable attorneys'
and experts' fees), caused by or arising in connection with: (i) a breach of
Sublessor's obligations under this Sublease; or (ii) a breach of Sublessor's
obligations as Tenant under the Master Lease to the extent those obligations are
not assumed by Sublessee under this Sublease; or (iii) the negligence or willful
misconduct of Sublessor, its employees, contractors, agents or invites occurring
on or about the Subleased Premises; or (iv) Hazardous Materials used, stored or
disposed of by Sublessor in, on or about the Premises and the Subleased
Premises.
The foregoing indemnifications shall survive the expiration or earlier
termination of this Sublease.
9. Right to Cure Defaults. If Sublessee fails to pay any sum of money to
----------------------
Sublessor, or fails to perform any other act on its part to be performed
hereunder, then Sublessor may, but shall not be obligated to, upon two (2) days'
prior notice to Sublessee, make such payment or perform such act. All such sums
paid, and all costs and expenses of performing any such act, shall be deemed
Additional Rent payable by Sublessee to Sublessor upon demand, together with
interest thereon at the Interest Rate from the date of the expenditure until
repaid.
10. Assignment and Subletting:
-------------------------
A. Conditions to Assignment and Subletting. Except in accordance with
---------------------------------------
the terms of Sections 19 and 49 of the Master Lease, Sublessee may not assign
this Sublease, sublet the Subleased Premises, transfer any interest of Sublessee
therein, or permit any use of the Subleased Premises by another party
("Transfer"), and Sublessee shall obtain the prior written consent of Sublessor,
which shall not be unreasonably withheld, and Master Lessor to any proposed
Transfer. Sublessee acknowledges that Sublessor shall have the right, as set
forth in Section 19 of the Master
-5-
<PAGE>
Lease, to terminate this Sublease as to all or any portion of the Subleased
Premises described in any request by Sublessee for a consent to Transfer. A
consent to one Transfer shall not be deemed to be a consent to any subsequent
Transfer. Any Transfer without such consent shall be void and shall, at the
option of Sublessor, terminate this Sublease. As a condition of granting its
consent to any assignment or subletting, Sublessor may require that Sublessee
pay to Sublessor, as Additional Rent, fifty percent (50%) of all Excess Rents
received by Sublessee. As used herein, the term "Excess Rents" shall mean all
Rents and other consideration payable by a subtenant or assignee to Sublessee in
connection with the Transfer, less the cost incurred by Sublessee as set forth
in Section 49.A. of the Master Lease. Sublessor's waiver or consent to any
assignment or subletting shall be ineffective unless set forth in writing, and
Sublessee shall not be relieved from any of its obligations under this Sublease,
unless the consent expressly so provides. Notwithstanding anything to the
contrary contained in this Sublease or in the Master Lease, Sublessee, without
obtaining Sublessor's prior written consent, shall have the right to Transfer
this Sublease to a parent, subsidiary or affiliate of Sublessee (collectively,
"Affiliate"), whether by merger, succession or consolidation, or a joint venture
or partnership in which Sublessee, or its Affiliate, is a general partner;
provided, however, that nothing in this sentence shall be deemed to relieve
Sublessee of the obligation to obtain Master Lessor's consent pursuant to the
provisions of Sections 19 and 49 of the Master Lease.
B. Disclosure Required by Master Lease. Sublessee acknowledges
-----------------------------------
and shall be bound by the following, which is included in this Sublease pursuant
to the provisions of Section 49.C. of the Master Lease:
"If Landlord and Tenant jointly and voluntarily elect, for any reason
whatsoever, to terminate the Master Lease prior to the scheduled Master
Lease termination date, then this Sublease (if then still in effect)
shall terminate concurrently with the termination of the Master Lease.
Subtenant expressly acknowledges and agrees that (1) the voluntary
termination of the Master Lease by Landlord and Tenant and the resulting
termination of this Sublease shall not give Subtenant any right or power
to make any legal or equitable claim against Landlord, including,
without limitation, any claim for interference with contract or
interference with prospective economic advantage, and (2) Subtenant
hereby waives any and all rights it may have under law or at equity
against Landlord to challenge such an early termination of the Sublease,
and unconditionally releases and relieves Landlord, and its officers,
directors, employees and agents from any and all claims, demands and/or
causes of action whatsoever (collectively, "Claims"), whether such
matters are known or unknown, latent or apparent, suspected or
unsuspected, foreseeable or unforeseeable, which Subtenant may have
arising out of or in connection with any such early termination of this
Sublease. Subtenant knowingly and intentionally waives any and all
protection which is or may be given by Section 1542 of the California
Civil Code which provides as follows: 'A general release does not extend
to claims which the creditor does not know or suspect to exist in his
favor at the time of executing the release, which is known by him must
have materially affected his settlement with debtor.'
The terms of this Sublease are therefore subject to early termination.
Subtenant's initials here below evidence (a) Subtenant's consideration
of and agreement to this early termination provisions, (b) Subtenant's
acknowledgment that, in determining the
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<PAGE>
net benefits to be derived by Subtenant under the terms of this
Sublease, Subtenant has anticipated the potential for early termination,
and (c) Subtenant's agreement to the general waiver and release of
Claims above."
Initials: ____________________ ____________________
Sublessee Sublessor
Notwithstanding anything to the contrary contained in this Sublease or the
Master Lease, Sublessor shall not jointly and voluntarily elect to terminate the
Master Lease prior to the scheduled Master Lease termination date, and Sublessor
shall indemnify, protect, defend and hold Sublessee harmless from and against
any and all actual, direct and foreseeable (but not punitive) claims,
liabilities, judgments, causes of action, damages, costs, and expenses
(including actual but reasonable moving costs and any reasonable increase in
rent per square foot required to be paid by Sublessee for substantially similar
replacement premises [limited in size to the square footage of the Subleased
Premises, and located in the geographical vicinity of the Subleased Premises],
and reasonable attorneys' and experts' fees), caused by or arising in connection
with such voluntary termination. The foregoing shall not apply to the "Tenant's"
right to terminate in the event of destruction, pursuant to Section 24 of the
Master Lease, or the "Tenant's" right to terminate in the event of eminent
domain, pursuant to Section 25 of the Master Lease, but Sublessor shall not
exercise its rights to terminate the Master Lease in such events without the
prior written consent of Sublessee, which shall not be unreasonably withheld or
delayed.
11. Use: Sublessee may use the Subleased Premises only for the uses
---
permitted in Section 1 of the Master Lease and for no other purpose without the
prior written consent of Master Lessor. Notwithstanding the foregoing, Sublessee
also may use the Subleased Premises for business purposes related to the
operation of an internet company and for no other purposes. With respect to
Hazardous Materials as defined in Section 50.A. of the Master Lease, Sublessor
shall comply with the provisions of Section 50 of the Master Lease. Upon demand,
Sublessee shall pay to Sublessor all taxes or charges imposed by applicable
governmental authorities against the Subleased Premises or Sublessor (including,
without limitation, assessments imposed as a consequence of the occurrence,
storage, use or disposal of Hazardous Materials by Sublessee, its agents,
employees, contractors or invitees in or about the Subleased Premises).
Sublessee shall not do or permit anything to be done in or about the Subleased
Premises which would (i) injure the Subleased Premises, or (ii) vibrate, shake,
overload, or impair the efficient operation of the Subleased Premises or the
sprinkler systems, heating ventilating or air conditioning equipment, or
utilities systems located therein. Subject to Paragraph 29 of this Sublease,
Sublessee shall not store any materials, supplies, finished or unfinished
products, or articles of any nature outside of the Subleased Premises. Sublessee
shall comply with all reasonable rules and regulations promulgated from time to
time by Master Lessor.
12. Effect of Conveyance: As used in this Sublease, the term
--------------------
"Sublessor" means the holder of the lessee's interest under the Master Lease. In
the event of any transfer of said Lessee's interest, the Sublessor shall be and
hereby is entirely relieved of all covenants and obligations of the Sublessor
hereunder, and it shall be deemed and construed, without further agreement
between the parties, that the transferee has assumed and shall carry out all
covenants and obligations thereafter to be performed by Sublessor hereunder.
Sublessor shall transfer and deliver any security of
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<PAGE>
Sublessee to the transferee of said lessee's interest in the Master Lease, and
thereupon the Sublessor shall be discharged from any further liability with
respect thereto.
13. Delivery and Acceptance: If Sublessor is unable to deliver possession
-----------------------
of the Subleased Premises to Sublessee on or before the Commencement Date for
any reason whatsoever, then this Sublease shall not be void or voidable, nor
shall Sublessor be liable to Sublessee for any loss or damage; provided,
however, in such event, Rent shall abate until Sublessor delivers possession of
the Subleased Premises to Sublessee. The foregoing notwithstanding, if for any
reason Sublessor cannot deliver possession of the Subleased Premises by October
15, 1999, or if the Master Lessor fails to consent to this Sublease by such
date, then Sublessee shall have the right to terminate this Sublease. By taking
possession of the Subleased Premises, Sublessee shall conclusively be deemed to
have accepted the Subleased Premises in their as-is, then-existing condition,
subject to the provisions of Paragraph 7 hereof.
14. Improvements. No alteration of improvements shall be made to the
------------
Subleased Premises except in accordance with this Sublease and the Master Lease,
and with the prior written consent of both Master Lessor and Sublessor, with
Sublessor's consent not to be unreasonably withheld. Notwithstanding the
foregoing, Sublessee shall have the right to make alterations costing less than
Fifty Thousand and No/100 Dollars ($50,000.00), cumulatively, in any year of the
Term which do not affect the structure, roof, building systems or sub-systems or
exterior of the Building without obtaining Sublessor's prior consent; provided,
however, that nothing in this sentence shall be deemed to relieve Sublessee of
the obligation to obtain Master Lessor's consent pursuant to the provisions of
Section 9 the Master Lease. Upon the expiration or earlier termination of this
Sublease, Sublessee shall be responsible for removing any alterations or
improvements installed in the Subleased Premises by Sublessee unless Master
Lessor notifies Sublessee in writing that such alterations or improvements may
remain.
15. Waiver of Subrogation and Release: Sublessor and Sublessee hereby
---------------------------------
release each other from any injury to persons, damage to property, or loss of
any kind which is caused by or results from any risk insured against under any
valid and collectable insurance policy carried by either party, which contains a
waiver of subrogation by the insurer; provided, however, that such liability
shall be released only to the extent that the damages are covered by such
insurance, and only if the insurance permits such partial release. This release
shall be in effect only so long as the applicable insurance policy contains a
clause to the effect that this release shall not affect the right of the insured
to recover under such policy. Each party shall use its best efforts to cause
each insurance policy obtained by it to provide that the insurer waives all
right of recovery against the other party and its agents and employees in
connection with any damage or injury covered by such policy, and each party
shall notify the other party if it is unable to obtain such a waiver of
subrogation Sublessor shall not be liable to Sublessee, nor shall Sublessee be
entitled to terminate this Sublease or to abate Rent, for any reason, including,
without limitation: (i) failure or interruption of any utility system or
service; or (ii) failure of Master Lessor to maintain the Subleased Premises as
may be required under the Master Lease. Notwithstanding the foregoing to the
contrary, to the extent that basic rent or additional rent is abated for
Sublessor with respect to the Subleased Premises pursuant to the terms of the
Master Lease, Sublessee's Rent obligations with respect t the Subleased Premises
also shall be abated. Sublessor and Sublessee are corporations, and the
obligations of Sublessor and Sublessee
-8-
<PAGE>
shall not constitute the personal obligations of the officers, directors,
trustees, partners, joint venturers, members, owners, stockholders or other
principals or representatives of such corporations.
16. Default: Sublessee's performance of each of its obligations under
-------
this Sublease constitutes a condition as well as a covenant, and Sublessee's
right to continue in possession of the Subleased Premises is conditioned upon
such performance. In addition, Sublessee shall be in material default of its
obligations under this Sublease if Sublessee is responsible for the occurrence
of any of the events of default set forth in Section 22 of the Master Lease.
17. Remedies: In the event of any default by Sublessee under this
--------
Sublease including, without limitation, a default pursuant to Section 22 of the
Master Lease), Sublessor shall have all remedies provided by applicable law,
including, without limitation, all rights pursuant to Section 22 of the Master
Lease and under California Civil Code Sections 1951.2 and 1951.4. Sublessor may
resort to its remedies cumulatively or in the alternative.
18. Surrender: On or before the Expiration Date, Sublessee shall remove
---------
all of its trade fixtures and all alterations and improvements made by Sublessee
to the Subleased Premises which the Master Lessor requires to be removed,
subject to the provisions of Paragraph 14, and shall surrender the Subleased
Premises to Sublessor in the condition required by Section 8 of the Master
Lease, free of Hazardous Materials stored, used or disposed of by Sublessee. If
the Subleased Premises are not so surrendered, then Sublessee shall be liable to
Sublessor for all costs incurred by Sublessor in returning the Subleased
Premises to the required condition, plus interest thereon at the Interest Rate.
Sublessee shall indemnify, defend, protect and hold harmless Sublessor against
any and all direct, actual and foreseeable (but not punitive) claims,
liabilities, judgments, causes of action, damages, costs and expenses (including
attorneys' and experts' fees) resulting from Sublessee's delay in surrendering
the Subleased Premises, including, without limitation, any claim made by any
succeeding tenant founded on or resulting from such failure to surrender,
limited, however, to the actual damages incurred by Sublessor pursuant to
Article 8 of the Master Lease as a result of Sublessee's delay in surrender.
19. Brokers: Sublessee represents to Sublessor that it has dealt with
-------
no real estate brokers, finders, agents or salesmen in connection with this
transaction, except BT Commercial Real Estate and Sublessee agrees to pay any
commission owing to BT Commercial. Because the Master Lessor does not permit
sub-subleases, Sublessor and Sublessee acknowledge that Nextel Communications,
Inc. which occupied the Subleased Premises prior to the hereof under a sublease,
engaged The Staubach Company to find a subtenant for the Subleased Premises.
Neither Sublessor nor Sublessee are responsible for any commission or fee owing
to The Staubach Company or BT Commercial Real Estate, which commission is to be
paid by Nextel. Sublessee agrees to hold Sublessor harmless from and against all
claims for brokerage commissions, finder's fees, or other compensation made by
any agent, broker, salesman or finder other than The Staubach Company and BT
Commercial as a consequence of its actions or dealings with such agent, broker,
salesman, or finder.
20. Notices: Unless five (5) days' prior written notice is given in the
-------
manner set forth in this Paragraph, the address of the Sublessor for all
purposes connected with this Sublease shall be at
-9-
<PAGE>
975 Island Drive, Redwood City, CA 94065, Attention: CFO, and the address of the
Sublessee shall be as follows:
(i) at the Subleased Premises c/o Gary R. Martino
(ii)
buyingedge.com Inc.
One Corporate Drive, Suite 400
Shelton, Connecticut 06484
Attention: Michael McGroarty, General Counsel
Facsimile No.: (203) 929-6770
(iii) With a copy to: Backus, Bland & Weber LLP
1055 West 7th Street, 20th Floor
Los Angeles, CA 90017
Robert Weber, Jr., Esq.
Facsimile No.: (203) 833-7997
All notices, demands, or communications in connection with this Sublease shall
be considered received when (i) personally delivered, or (ii) if properly
addressed and either sent by nationally recognized overnight courier or
deposited in the mail (registered or certified, return receipt for acceptance or
rejection. All notices given to the Master Lessor under the Master Lease shall
be considered received only when delivered in accordance with the Master Lease
to all parties hereto at the addresses set forth below their signatures at the
end of this Sublease and to Master Lessor at the address set forth in the Master
Lease.
21. Severability: If any term of this Sublease is held to be invalid or
------------
unenforceable by any court of competent jurisdiction, then the remainder of this
Sublease shall remain in full force and effect to the fullest extent possible
under the law, and shall not be affected or impaired.
22. Amendment: This Sublease may not be amended except by the written
---------
agreement of all parties hereto.
23. Attorney's Fees: If either party brings any action or legal
---------------
proceeding with respect to this Sublease, the prevailing party shall be entitled
to recover reasonable attorneys' fees, experts' fees, and court costs.
Notwithstanding the foregoing and in addition thereto, Sublessor shall be
entitled to immediate receipt from Sublessee, for each breach hereof, of such
reasonable attorneys' fees as may be incurred in connection with each notice or
demand delivered to Sublessee. Sublessee agrees that such sum constitutes
reimbursement to Sublessor of the reasonable cost of the preparation and
delivery of each notice caused by Sublessee's breach.
24. Other Sublease Terms:
--------------------
A. Incorporation By Reference. The terms and conditions of this
--------------------------
Sublease shall include various Sections of the Master Lease, which are
incorporated into this Sublease as if fully set forth, except that: (i) each
reference in such incorporated Sections to "Lease" shall be deemed a reference
to "Sublease"; (ii) each reference to the "Premises" shall be deemed a reference
to the
-10-
<PAGE>
"Subleased Premises"; (iii) each reference to "Landlord" and "Tenant" shall be
deemed a reference to "Sublessor" and "Sublessee", respectively; (iv) with
respect to work, services, repairs, restoration, provision of insurance or the
performance of any other obligation of Master Lessor under the Master Lease, the
sole obligation of Sublessor shall be to request the same in writing from Master
Lessor as and when requested to do so by Sublessee, and to use Sublessor's
diligent good faith efforts (without requiring Sublessor to spend more than a
nominal sum) to obtain the Master Lessor's performance; (v) with respect to any
obligation of Sublessee to be performed under this Sublease, whenever the Master
Lease grants to Sublessor a specified number of days to perform its obligations
under the Lease, Sublessee shall have (3) fewer days to perform the obligation,
including, without limitation, curing any defaults (provided, however, that the
foregoing reduction of time to cure shall not apply to cure periods for the
payment of Base Rent or Additional Rent); and (vi) with respect to any approval
required to be obtained from the "Landlord" under the Master Lease, such consent
must be obtained from both the Master Lessor and the Sublessor and the approval
of Sublessor may be withheld, if the Master Lessor's consent is not obtained.
The following paragraphs of the Master Lease are hereby incorporated into
this Sublease:
The last two sentences of the "Witnesseth" recital;
---------------------------------------------------
Section 1;
----------
Section 4.D. and 4.E, except that the reference to "Landlord" in
--------------------
parenthetical (ii) in the second sentence of Section 4.D. shall mean only Master
Lessor;
Section 5, except that references to "Landlord" in this Section shall mean
---------
only Master Lessor;
Section 6, except that (i) the references to "218" parking spaces shall
---------
mean only Master Lessor;
Section 7, except that the words "calculated on a square footage or other
---------
equitable basis as calculated by Landlord" in the second and third lines of this
Section hereby are deleted;
Section 8, except that the first and second sentences of this Section
---------
hereby are deleted;
Sections 9 through 14;
---------------------
Section 15, except that references to "Landlord" in the first paragraph of
----------
this Section shall mean only Master Lessor;
Section 16 through 19;
---------------------
Section 20, except that references to "Landlord" in this Section shall mean
----------
only Master Lessor;
Sections 21 through 23, except that the reference to "Landlord" in the last
----------------------
sentence of Section 21 shall mean only Master Lessor;
-11-
<PAGE>
Sections 24 and 25, except that (i) references to "Landlord" in these
------------------
Sections shall mean only Master Lessor, and (ii) Sublessee may exercise the
termination rights set forth in these Sections only with the prior written
consent of Sublessor, which shall not be unreasonably withheld or delayed;
Sections 26 through 31, except that references to "Landlord" in Section 27
----------------------
shall mean only Master Lessor;
Sections 33 through 37, except that although the Landlord's address shall
----------------------
be as set forth in this Section, the addresses for Sublessor and Sublessee shall
be as set forth in Paragraph 20 of this Sublease;
Section 39 and 40, except that (i) the references to "Landlord" in Section
-----------------
39 shall mean only Master Lessor;
Section 45 through 49;
---------------------
Section 50, except that references to "Landlord" in Section 50.F and 50.G.
----------
shall mean only Master Lessor;
Section 52, except that the reference to "100%" in the last sentence of
----------
this Section shall be replaced with "24.8%";
Section 53-55, except that (i) references to "Landlord" in the first
-------------
sentence of Section 55 shall mean only master Lessor; and (ii) the reference to
"$48,384" shall be replaced with "$12,000.00";
Sections 57 through 59, except that references to "Landlord" in Section 58
----------------------
shall mean only Master Lessor;
Section 61; and
----------
Recitals and Section 2 of Amendment No. 1 to Lease.
---------------------------------------------------
B. Assumption of Obligations: This Sublease is and all times shall be
-------------------------
subject and subordinate to the Master Lease and the rights of Master Lessor
thereunder. Sublessee hereby expressly assumes and agrees: (i) to comply with
all provisions of the Master Lease with respect to the Subleased Premises; (ii)
to perform all the obligations on the part of the "Tenant" to be performed under
the terms of the Master Lease with respect to the Subleased Premises during the
term of this Sublease; and (iii) to hold Sublessor free and harmless of and from
all liability, judgments, costs, damages, claims, demands, and expenses
(including reasonable attorneys' and experts' fees) arising out of Sublessee's
failure to comply with or to perform Sublessee's obligations hereunder or the
obligations of the "Tenant" under the Master Lease as herein provided or to act
or omit to act in any manner which will constitute a breach of the Master Lease.
25. Condition Precedent: This Sublease and Sublessor's and Sublessee's
-------------------
obligations hereunder are conditioned upon obtaining the written consent of the
Master Lessor and the execution of the First Amendment by Nextel. If the
foregoing conditions precedent have not been satisfied
-12-
<PAGE>
within sixty (60) days after the latest of the dates of execution of this
Sublease by Sublessor and Sublessee, then either Sublessor or Sublessee may
terminate this Sublease by giving the other written notice, and Sublessor shall
return to Sublessee all sums paid to Sublessor in connection with Sublessee's
execution hereof.
26. Signage: Subject to the provisions of the Master Lease, Sublessee,
-------
at its sole cost, shall be entitled to (a) use the bottom one-third (1/3) of the
signage for the Premises, which consists of a small monument sign in front of
the Building, and (b) to place its company logo and name on the second floor
wall facing the Building lobby in a size no larger than Sublessor's sign which
is located behind the receptionist desk on the first floor of the Building.
27. Furniture: During the Term Sublessee shall have the right to lease
---------
Sublessor's cubicles and conference room furniture located in the Premises
(collectively, "Furniture"). Sublessee shall pay to Sublessor as Additional Rent
the sum of One Thousand and No/100 Dollars ($1,000.00) per month for the use of
the Furniture. Sublessee shall use the Furniture in its as-is condition, without
warranty from Sublessor of any kind, and shall return the Furniture to Sublessor
upon the expiration or earlier termination of this Sublease in the condition
received, ordinary wear and tear excepted. Sublessor shall have no obligation to
repair or replace the Furniture.
28. Hazardous Materials: Sublessee acknowledges and agrees to be bound
-------------------
by the provisions of Section 50 of the Master Lease regarding Hazardous
Materials. Sublessee further acknowledges receipt from Sublessor of the
documentation referenced in Section 50.F. of the Master Lease, and that it has
read and understood the contents thereof. To the extent that Sublessor is
indemnified by the Master Lessor in accordance with the provisions of Section
50.G. of the Master Lease, Sublessee shall be the beneficiary of such
indemnification.
29. Waiver of Lien Rights: Sublessor hereby waives any lien rights
---------------------
which it may have against Sublessee's furniture, fixtures and equipment which
may be located at the Subleased Premises (collectively, "Sublessee's Property")
and disclaims any interest therein. Sublessor further agrees that Sublessee's
Property shall be exempt from execution, foreclosure, sale, levy, attachment or
distress for any rent due or to become due hereunder. Subject to the provisions
of Section 22 of the Master Lease, Sublessor agrees that Sublessor shall have no
interest in Sublessee's Property and that Sublessee may remove Sublessee's
Property from the Subleased Premises at any time.
30. Guaranty: Upon its execution of this Sublease, Sublease shall
--------
deliver to Sublessor the Guaranty, attached hereto as Exhibit "B" and
-----------
incorporated by reference herein, executed by its parent corporation,
Information Management Associates, Inc., a Connecticut corporation.
-13-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Sublease on the day and
year first above written.
SUBLESSEE: SUBLESSOR:
BUYINGEDGE.COM INC., CENTURA SOFTWARE CORPORATION,
a Connecticut corporation a California corporation
By: _____________________________ By: ____________________________
Its: _____________________________ Its: ____________________________
-14-
<PAGE>
EXHIBIT "A"
-----------
MASTER LEASE
[to be attached]
-15-
<PAGE>
Exhibit 10.26
FIRST AMENDMENT TO SUBLEASE
THIS FIRST AMENDMENT TO SUBLEASE ("Amendment") is dated for references
purposes only as of September 1, 1999, and is made by and between CENTURA
SOFTWARE CORPORATION, a California corporation ("Sublessor"), and BUYINGEDGE.COM
INC. a Connecticut corporation ("Sublessee"), and is made with reference to the
following facts:
RECITALS
A. Conditioned on the full execution hereof, Sublessor and Sublessee
intend to enter into a Sublease dated September 1, 1999 ("Sublease")
concurrently herewith. Any capitalized terms not otherwise defined herein shall
have the meanings ascribed thereto in the Sublease.
B. Based on a review of the financial information submitted by
Sublessee to Sublessor, Sublessor is requiring that Sublessee deliver an
absolute irrevocable standby letter of credit as an additional Security Deposit.
Sublessee desires to deliver the letter of credit to Sublessor in order to
induce Sublessor to enter into the Sublease with Sublessee.
NOW, THEREFORE, for good and valuable consideration, the parties agree
as follows:
1. Letter of Credit.
----------------
(a) By no later than October 12, 1999, Sublessee shall deliver to
Sublessor an unconditional, irrevocable, transferable and negotiable standby
letter of credit (the "L/C") in an amount equal to $110,000.00 ("Face Amount"),
issued by a bank or trust company ("Issuer") and in form and content acceptable
to Sublessor, in its sole and absolute discretion, as additional security for
the performance of Sublessee's obligations under the Sublease. The L/C shall be
maintained throughout the period from the date it is required to be delivered to
Sublessor through thirty (30) days after the end of the Term or earlier
termination of the Sublease. An L/C in the form attached hereto as Schedule I is
----------
hereby approved by Sublessor. The L/C shall name Sublessor as beneficiary
thereunder and provide that draws, including partial draws, at Sublessor's
election, will be honored upon the delivery to the Issuer of a certificate
signed by Sublessor, or its authorized agent, that Sublessee has committed an
Event of Default under the Sublease. The L/C shall also provide that it will be
automatically extended upon each renewal date unless the Issuer thereof delivers
to Sublessor, no later than thirty (30) days prior to the stated expiration date
of the L/C, written notice of Issuer's intent not to extent or renew the L/C.
Upon any Event of Default by Sublessee under the Sublease, including
specifically Sublessee's failure to pay rent or to abide by its obligations
under Paragraphs 8 and 10 of the Master Lease, Sublessor shall be entitled to
draw upon said L/C by issuance of Sublessee's sole written demand to the Issuer.
Any such draw shall be without waiver of any rights Sublessor may have under the
Sublease or at law or in equity as a result of the default. During any period
that Sublessee is required to maintain the L/C, Sublessee shall, at lease thirty
(30) days prior to any expiration or termination of the L/C, provide Sublessor
either with written confirmation that the existing L/C will be automatically
extended and renewed or with a new L/C that satisfies all of the requirements
for the L/C in this Paragraph 1. If any portion of the L/C is drawn by Sublessor
after an Event of Default by Sublessee, Sublessee shall within five (5) business
days after written demand by Sublessor restore the L/C to the amount of the L/C
then-required under this Paragraph 1. In addition, upon an assignment of the
Sublease by Sublessor (including consolidations, mergers, or other entity
changes), Sublessee, at its sole cost and expense and upon ten (10) business
days'
<PAGE>
notice, shall, concurrent with Sublessor's delivery to Sublessee of the
then outstanding L/C, deliver to any such transferees, successor, or assigns a
replacement L/C on identical terms (except for the stated beneficiary) from the
same Issuer or another bank or trust company acceptable to Sublessor, in
Sublessor's sole discretion, naming the new Sublessor as the beneficiary
thereof. Sublessee's failure to perform or observe any of the covenants set
forth in this Paragraph 1 for any reason shall entitle Sublessor to draw on the
full amount of the L/C and shall constitute an Event of Default (defined below)
under the Sublease without the requirement of any notice from Sublessor. Any
amount(s) drawn under the L/C shall be held or used by Sublessor as an
additional Security Deposit in accordance with the terms of Paragraph 5 of the
Sublease.
(b) If as of the first (1st) and second (2nd) anniversary dates
following the Commencement Date, no prior or current Event of Default has
occurred, and no event or condition exists or has occurred which the passage of
time or delivery of notice by Sublessor, or both, would constitute a default,
upon the written request of Sublessee, Sublessor shall promptly authorize in
writing consecutive reductions to the principal amount of the L/C in the amount
of $36,666.66 so that the Face Amount is reduced to $73,333.33 on the first
anniversary date and to $36,666.66 on the second anniversary date.
(c) For all purposes under the Sublease, an "Event of Default" shall be
deemed to have occurred if any of the events of default specified in Paragraph
22 of the Master Lease occurs and such default continues beyond any applicable
notice and grace period provided for therein.
2. Voluntary Agreement: The parties hereto have read this Amendment,
-------------------
and on advice of counsel, they have freely and voluntarily entered into this
Amendment.
3. Attorneys' Fees: If either party commences an action against the
---------------
other part arising out of or in connection with this Amendment, the prevailing
party shall be entitled to recover from the other party reasonable attorneys'
fees and costs of suit as provided in Paragraph 23 of the Sublease.
4. Successors: This Amendment shall be binding on and inure to the
----------
benefit of the parties hereto and their respective heirs, successors and
assigns.
5. Conflict: In the event of any conflict between the provisions of
--------
the Sublease and this Amendment, the provisions hereof shall prevail.
<PAGE>
IN WITNESS WHEREOF, this Amendment has been duly executed by the
parties on the dates set forth below opposite their respective signatures.
SUBLESSEE: SUBLESSOR:
BUYINGEDGE.COM INC., CENTURA SOFTWARE CORPORATION,
a Connecticut corporation a California corporation
By: ____________________________ By: _____________________________
Printed Printed
Name: __________________________ Name: ___________________________
Its: ___________________________ Its: ____________________________
Date: __________________________ Date: ___________________________
<PAGE>
SCHEDULE I
APPROVED LETTER OF CREDIT
[Letterhead of Approved Issuing Bank]
RE: IRREVOCABLE COMMERCIAL LETTER OF CREDIT NO. ________
TO: CENTURA SOFTWARE CORPORATION ("Sublessor")
975 Island Drive
Redwood City, California 94065
Gentlemen:
We hereby issue our Irrevocable Commercial Letter of Credit in your favor, for
the account of buyingedge.com Inc., a Delaware corporation ("Sublessee"), in the
amount of One Hundred Ten Thousand and No/100 Dollars ($110,000.00). This amount
is available to you on presentation of your sight draft drawn upon us referring
to the above letter of credit number, date and amount being drawn hereunder,
accompanied by the signed statement of you or your authorized agent that the
amount drawn hereunder is being drawn pursuant to the terms of that certain
Sublease dated for reference purposes as of September 1, 1999, as amended by
that First Amendment to Sublease of the same date between Sublessee, as
subtenant, and Sublessor, as sublandlord, or certain premises located on the
second floor of 975 Island Drive, Redwood City, California 94065 ("Sublease").
Any draft presented for payment must be presented on or before _____________
[term should be at least one year], the date this Letter of Credit expires.
Partial drawings are permitted.
If you assign or otherwise transfer your interest in the Sublease (including
consolidations, mergers or other entity changes), you shall have the right to
transfer this Letter of Credit to your transferee(s), successors or assigns.
We hereby certify that this is an unconditional and irrevocable Letter of Credit
and agree that a draft drawn under and in compliance with the terms hereof will
be honored upon presentation at our office at ________________________ [it must
be a location easily accessible to us]
Except to the extent inconsistent with the express provisions hereof, this
Letter of Credit is subject to and governed by Uniform Customs and Practice for
Documentary Credits (1993 Revision) International Chamber of Commerce
publication number 500.
[Name of Bank]
<PAGE>
Exhibit 10.27
REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 12, 1999 among
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
(collectively, the "Holder").
1. Introduction. The Company is a party to the separate Senior
------------
Subordinated Convertible Promissory Note and Warrant Purchase Agreement, the
Senior Subordinated Convertible Promissory Note and the Common Stock Purchase
Warrant (the "Note and Warrant Agreements"), each dated August 12, 1999, with
the Holder, pursuant to which the Company has agreed, among other things, to
issue 5,000 shares of its Series C Convertible Preferred Stock (the "Preferred
Stock") upon maturity on April 30, 2000 of its 9% Senior Subordinated
Convertible Promissory Note if entire amount of principal payable under note has
not been repaid by such date, and 425,000 shares of Common Stock upon the
exercise by the Holder of its Warrant, each in the manner and subject to the
terms provided for therein This Agreement shall become effective upon the
issuance of such securities to such parties pursuant to the Note and Warrant
Agreements. Certain capitalized terms used in this Agreement are defined in
section 3 hereof; references to sections shall be to sections of this agreement.
2. Registration under Securities Act, etc.
---------------------------------------
2.1 Registration on Request.
-----------------------
(a) Request. Upon the written request of the Holder, requesting
-------
that the Company effect the registration under the Securities Act of all or part
of Holder's Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all registered holders of Registrable Securities, and
thereupon the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by Holder for disposition in accordance with the intended
method of disposition stated in such request; and
<PAGE>
(ii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities pursuant
to this section 2.1,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered.
(b) Registration Statement Form. Registrations under this section
---------------------------
2.1 shall be on such appropriate registration form of the Commission (i) as
-
shall be selected by the Company and as shall be reasonably acceptable to the
Holder and (ii) as shall permit the disposition of such Registrable Securities
--
in accordance with the intended method or methods of disposition specified in
its request for such registration. If, in connection with any registration under
section 2.1 which is proposed by the Company to be on Form S-3 or any similar
short form registration statement which is a successor to Form S-3, the managing
underwriters, if any, shall advise the Company in writing that in their opinion
the use of another permitted form is of material importance to the success of
the offering, then such registration shall be on such other permitted form.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with any registration requested pursuant to this section 2.1 by
Holder prior to the time at which two such registrations shall have been
effected. The Registration Expenses (and underwriting discounts and commissions
and transfer taxes, if any) in connection with each other registration requested
under this section 2.1 shall be allocated pro rata among all Persons on whose
--- ----
behalf securities of the Company are included in such registration, on the basis
of the respective amounts of the securities then being registered on their
behalf.
(d) Effective Registration Statement. A registration requested
--------------------------------
pursuant to this section 2.1 shall not be deemed to have been effected (i)
-
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
- --------
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company at the request of Holder unless
Holder shall have elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective, such registration
--
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for
<PAGE>
any reason, or (iii) the conditions to closing specified in the purchase
---
agreement or underwriting agreement entered into in connection with such
registration are not satisfied, other than by reason of some act or omission by
Holder.
(e) Selection of Underwriters. If a requested registration
-------------------------
pursuant to this section 2.1 involves an underwritten offering, the underwriter
or underwriters thereof shall be selected by the Holder and shall be reasonably
accept able to the Company, which shall not unreasonably withhold its acceptance
of any such underwriters.
(f) Priority in Requested Registrations. If a requested
-----------------------------------
registration pursuant to this section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Holder, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
-
registration by Holder, (ii) second, securities the Company proposes to
--
sell and other securities of the Company included in such registration by the
holders thereof.
2.2 Incidental Registration.
-----------------------
(a) Right to Include Registrable Securities. If the Company at
---------------------------------------
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or similar
forms and other than pursuant to section 2.1), whether or not for sale for its
own account, it will each such time give prompt written notice to Holder of its
intention to do so and of the Holders rights under this section 2.2. Upon the
written request of any such holder made within 30 days after the receipt of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by Holder and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any time
--------
after giving written notice of its intention to register any securities and
<PAGE>
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not
to register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
-
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under section 2.1, and (ii) in the
--
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under section 2.1, nor shall any such registration hereunder be deemed
to have been effected pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 2.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so requested to be
--
registered for sale for the account of Holder are not also to be included in
such underwritten offering (either because the Company has not been requested so
to include such Registrable Securities pursuant to section 2.4(b) or, if
requested to do so, is not obligated to do so under section 2.4(b), and (iii)
---
the managing underwriter of such underwritten offering shall inform the Company
and Holder requesting such registration by letter of its belief that the number
of securities requested to be included in such registration is less than the
number which can be sold in (or during the time of) such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in (or during the time of) such offering, (i)
-
first, Registrable Securities the registration of which shall have been
requested by the Holder, (ii) second, securities proposed by the Company to be
--
sold for its own account.
2.3 Registration Procedures. If and whenever (a) the Company is
-----------------------
required to effect the registration of any Registrable Securities under the
Securities Act as provided in sections 2.1 and 2.2 or (b) Holder so requests in
connection with any other proposed registration by the Company under the
Securities Act, the Company shall, as expeditiously as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to the Company or in
any event as soon thereafter as possible) file with the Commission the
<PAGE>
requisite registration statement to effect such registration (including
such audited financial statements as may be required by the Securities Act
or the rules and regulations promulgated thereunder) and thereafter cause
such registration statement to become and remain effective, provided
--------
however that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances
specified in section 2.2(a), its securities which are Registrable
Securities) at any time prior to the effective date of the registration
statement relating thereto, provided further that before filing such
--------
registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the Holder which are to be included in such
registration copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments and
supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
Holder;
(iii) furnish to the Holder covered by such registration
statement and each underwriter, if any, of the securities being sold by
such holder such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such holder and underwriter, if any, may
reasonably request;
(iv) use its best efforts to register or qualify all Registrable
Securities and other securities covered by such registration statement
under such other securities laws or blue sky laws of such jurisdictions as
any seller thereof and any underwriter of the securities being sold by such
seller shall reasonably request, to keep such registrations or
qualifications in effect for so long as such registration statement remains
in effect, and take any other action which may be reasonably necessary or
<PAGE>
advisable to enable such seller and underwriter to consummate the
disposition in such jurisdictions of the securities owned by such seller,
except that the Company shall not for any such purpose be required to
qualify generally to do business as a foreign corporation in any
jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
--
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable Securities
covered by such registration statement to be registered with or approved by
such other governmental agencies or authorities as may be necessary to
enable the to consummate the disposition of such Registrable Securities;
(vi) furnish to the Holder a signed counterpart, addressed to
the Holder and the underwriters, if any, of:
(x) an opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten
public offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such seller, and
(y) a "comfort" letter (or, in the case of any such Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in Statement
on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, a letter of like kind dated the date
of the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement,
covering substantially the same matters with respect to such registration
statement (and the prospectus included therein) and, in the case of the
accountants' letter, with respect to events subsequent to the date of such
financial statements, as are customarily covered in opinions of issuer's
counsel and in accountants' letters delivered to the underwriters in
underwritten public offerings of securities (with, in the case of an
"agreed upon procedures" letter, such modifications or deletions as may be
required under Statement on Auditing Standards No. 35) and, in the case of
the accountants' letter, such other financial matters, and, in the case of
the legal opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(vii) notify the Holder and the managing underwriter or
underwriters, if any, promptly and confirm such advice in writing promptly
thereafter:
<PAGE>
(v) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the registration
statement or any post-effective amendment thereto, when the same has become
effective;
(w) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for additional
information;
(x) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings by any Person for that purpose;
(y) if at any time the representations and warranties of the
Company made as contemplated by section 2.4 below cease to be true and correct;
(z) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose; and
(viii) notify at any time when a prospectus relating thereto
is required to be delivered under the Securities Act, upon discovery that,
or upon 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 any material fact
required to be stated therein or necessary to make the statements therein
not misleading in the light of the circumstances then existing, and at the
request of the Holder promptly prepare and furnish to such seller and each
underwriter, if any, a reasonable number of copies of a supplement to or an
amendment of such prospectus as may be necessary so that, as thereafter
delivered to the purchasers of such securities, such prospectus shall not
include an untrue statement of a material fact or omit 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;
(ix) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at the
earliest possible moment;
<PAGE>
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available to
its security holders, as soon as reasonably practicable, an earnings
statement covering the period of at least twelve months, but not more than
eighteen months, beginning with the first day of the Company's first fiscal
quarter after the effective date of such registration statement, which
earnings statement shall satisfy the provisions of Section 11(a) of the
Securities Act and Rule 158 thereunder, and will furnish to each such
seller at least five business days prior to the filing thereof a copy of
any amendment or supplement to such registration statement or prospectus
and shall not file any thereof to which the Holder shall have reasonably
objected on the grounds that such amendment or supplement does not comply
in all material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(xi) make available for inspection by a representative or
representatives of the holders of Registrable Securities, any underwriter
participating in any disposition pursuant to the registration statement and
any attorney or accountant retained by such selling holders or underwriter
(each, an "Inspector"), all financial and other records, pertinent
corporate documents and properties of the Company (the "Records"), and
cause the Company's officers, directors and employees to supply all
information reasonably requested by any such Inspector in connection with
such registration in order to permit a reasonable investigation within the
meaning of Section 11 of the Securities Act;
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such registration
statement from and after a date not later than the effective date of such
registration statement;
(xiii) enter into such agreements and take such other
actions as Holder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xiv) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then listed; and
(xv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration
<PAGE>
statement.
The Company may require the Holder to furnish the Company such information
regarding itself and the distribution of such securities as the Company may from
time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the Holder or the underwriter or
underwriters, if any, shall reasonably object, provided that the Company may
--------
file such document in a form required by law or upon the advice of its counsel.
The Holder agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the occurrence of any event of the
kind described in subdivision (viii) of this section 2.3, such holder will
forthwith discontinue the Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until the Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of this section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such holder's possession
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
If any such registration statement refers to any holder of Registrable
Securities by name or otherwise as the holder of any securities of the Company,
then the Holder shall have the right to require (i) the insertion therein of
-
language, in form and substance satisfactory to the Holder, to the effect that
the holding by the Holder of such securities is not to be construed as a
recommendation by the Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that the Holder
will assist in meeting any future financial requirements of the Company, or
(ii) in the event that such reference to the Holder by name or otherwise is not
--
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to the Holder.
2.4 Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the
--------------------------------
underwriters for any underwritten offering by the Holder pursuant to a
registration requested under section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, the Holder and the
underwriters, and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation,
<PAGE>
indemnities to the effect and to the extent provided in section 2.7. The Holder
will cooperate with the Company in the negotiation of the underwriting agreement
and will give consideration to the reasonable suggestions of the Company
regarding the form thereof, provided that nothing herein contained shall
--------
diminish the foregoing obligations of the Company. The Holder of the Registrable
Securities to be distributed by such underwriters shall be parties to such
underwriting agreement and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of the Holder and that any or all of the conditions precedent to
the obligations of such underwriters under such underwriting agreement be
conditions precedent to the obligations of the Holders. Any such holder of
Registrable Securities shall not be required to make any representations or
warranties to or agreements with the Company or the underwriters other than
representations and warranties contained in a writing furnished by the Holder
expressly for use in such registration statement or agreements regarding the
Holder, the Holder's Registrable Securities and the Holder's intended method of
distribution.
(b) Incidental Underwritten Offerings. If the Company at any time
---------------------------------
proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the Holder
Securities as provided in section 2.2 and subject to the provisions of section
2.2(b), use its best efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by the Holder among the securities
to be distributed by such underwriters, provided that if the managing
--------
underwriter of such underwritten offering shall inform the Holder requesting
such registration and the holders of any other securities which shall have
exercised, in respect of such underwritten offering, registration rights
comparable to the rights under section 2.2 by letter of its belief that
inclusion in such underwritten distribution of all or a specified number of such
Registrable Securities or of such other securities so requested to be included
would interfere with the successful marketing of the securities (other than such
Registrable Securities and other securities so requested to be included) by the
underwriters (such writing to state the basis of such belief and the approximate
number of such Registrable Securities and shares of other securities so
requested to be included which may be included in such underwritten offering
without such effect), then the Company may, upon written notice to the Holder
and of such other shares of securities so requested to be included, exclude from
such underwritten offering (i) first, pro rata, (if and to the extent stated by
- --------
such managing underwriter to be necessary to eliminate such effect) the number
of such other securities requested to be included of which registration shall
have been requested by each holder thereof other than Holder whose
<PAGE>
registration rights were granted by the Company after the date hereof, (ii)
--
second, (if and to the extent stated by such managing underwriter to be
necessary to eliminate such effect after reducing the number of securities to be
registered under (i)) pro rata, the number of Registrable Securities or other
--------
securities requested to be included of which registration shall have been
requested by the Holder and each holder thereof whose registration rights were
granted by the Company on or before the date hereof and (iii) third, (if and to
---
the extent stated by such managing underwriter to be necessary to eliminate such
effect after reducing the number of securities to be registered under (i) and
(ii)) the number of Registrable Securities the registration of which shall have
been requested by Holder, so that the resultant aggregate number of such
Registrable Securities and of such other shares of securities so requested to be
included which are included in such underwritten offering shall be equal to the
approximate number of shares stated in such managing underwriter's letter. The
holders of Registrable Securities to be distributed by such underwriters shall
be parties to the underwriting agreement between the Company and such
underwriters and may, at their option, require that any or all of the
representations and warranties by, and the other agreements on the part of, the
Company to and for the benefit of such underwriters shall also be made to and
for the benefit of such holders of Registrable Securities and that any or all of
the conditions precedent to the obligations of such underwriters under such
underwriting agreement be conditions precedent to the obligations of such
holders of Registrable Securities. Any such holder of Registrable Securities
shall not be required to make any represen tations or warranties to or
agreements with the Company or the underwriters other than representations,
warranties or agreements regarding such holder, such holder's Registrable
Securities and such holder's intended method of distribution and any other
representation required by law.
(c) Participation in Underwritten Offerings. No Person may
---------------------------------------
participate in any underwritten offering hereunder unless such Person (i) agrees
-
to sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
Company and Holder and (ii) completes and executes all questionnaires,
--
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no under writing agreement (or other agreement
in connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law. Without limiting the generality of the
foregoing, each Holder agrees in connection with any public offering of the
Company's securities that, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, that such Holder
will not sell, make any short sale of,
<PAGE>
loan, grant any option for the purchase of, or otherwise transfer or dispose of
or reduce such Holder's market risk with respect to any Registrable Securities
or other shares of stock of the Company then owned by such Holder (other than
those included in the registration) without the prior written consent of the
Company or the managing underwriters, as the case may be, for such period of
time determined by the Company and the underwriters (not to exceed a period
commencing on the date of the final prospectus for such registration and ending
90 days thereafter). Each Holder agrees to execute any confirmation of such
lock-up agreement that may be reasonably requested by the underwriters.
2.5 Preparation; Reasonable Investigation. In connection with the
-------------------------------------
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Holders' and such underwriters' respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act, the Company will, and
hereby does agree to, indemnify and hold harmless (i) in the case of any
-
registration statement filed pursuant to section 2.1 or 2.2, the holder of any
Registrable Securities covered by such registration statement, its directors and
officers, each other Person who participates as an underwriter in the offering
or sale of such securities and each other Person, if any, who controls the
Holder or any such underwriter within the meaning of the Securities Act, and
(ii) in the case of any registration statement of the Company, the holder of any
--
Registrable Securities, its directors and officers and each other Person, if
any, who controls such holder within the meaning of the Securities Act, against
any losses, claims, damages or liabilities, joint or several, to which the
Holder or any such director or officer or underwriter or controlling person may
become subject under the Securities Act or otherwise, insofar as such losses,
claims, damages or liabilities (or actions or proceedings, whether commenced or
threatened, in respect thereof) arise out of or are based upon any
<PAGE>
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse the Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
--------
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon any untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such holder specifically
stating that it is for use in the preparation thereof and, provided further that
--------
the Company shall not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities or to any other Person, if
any, who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by the
Holder.
(b) Indemnification by the Holder. In the even that any Registrable
-----------------------------
Securities are included in any registration statement filed pursuant to section
2.3, the Holder will and hereby does agree to indemnify and hold harmless (in
the same manner and to the same extent as set forth in subdivision (a) of this
section 2.6) the Company, each director of the Company, each officer of the
Company and each other person, if any, who controls the Company within the
meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement,
<PAGE>
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement. Such indemnity shall remain in full force and effect, regardless of
any investigation made by or on behalf of the Company or any such director,
officer or controlling person and shall survive the transfer of such securities
by the Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
----------------------
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement
of such action, provided that the failure of any indemnified party to give
--------
notice as provided herein shall not relieve the indemnifying party of its
obligations under the preceding subdivisions of this section 2.6, except to
the extent that the indemnifying party is actually prejudiced by such failure to
give notice. In case any such action is brought against an indemnified party,
unless in such indemnified party's reasonable judgment a conflict of interest
between such indemnified and indemnifying parties may exist in respect of such
claim, the indemnifying party shall be entitled to participate in and to assume
the defense thereof, jointly with any other indemnifying party similarly
notified, to the extent that the indemnifying party may wish, with counsel
reasonably satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to assume the
defense thereof, the indemnifying party shall not be liable to such indemnified
party for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action 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, or a covenant not to sue, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this section 2.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
section 2.6 shall be made by periodic payments of the amount thereof during
<PAGE>
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the
------------
preceding subdivisions of this section 2.6 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
-
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or under writer, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
--
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense or
loss. The relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the holder or by the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct
or prevent such statement or omission, provided that the foregoing contribution
--------
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
provisions contained in the first sentence of subdivision (a) of this section
2.6, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this section 2.6
had been available under the circumstances.
The Company and the Holders agree that it would not be just and equitable
if contribution pursuant to this subdivision (f) were determined by pro rata
--- ----
allocation (even if the Holders and any underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any such holder, the net proceeds received by Holder
-
from the
<PAGE>
sale of Registrable Securities or (ii) in the case of an underwriter, the total
--
price at which the Registrable Securities purchased by it and distributed to the
public were offered to the public exceeds, in any such case, the amount of any
damages that the Holder or underwriter has otherwise been required to pay by
reason of such untrue or alleged untrue statement or omission. No Person guilty
of fraudulent misrepresentation (within the meaning of Section 11(f) of the
Securities Act) shall be entitled to contribution from any person who was not
guilty of such fraudulent misrepresentation.
2.7 Adjustments Affecting Registrable Securities. The Company will
--------------------------------------------
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the Holder to include such Registrable
Securities in any registration of its securities contemplated by this section
2 or the marketability of such Registrable Securities under any such
registration.
3. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in section 1.
------------
Company: As defined in the introductory paragraph of this Agreement.
-------
Exchange Act: The Securities Exchange Act of 1934, or any similar
------------
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any such
similar Federal statute.
Note and Warrant Agreements: As defined in section 1.
---------------------------
Person: A corporation, an association, a partnership, an
------
organization, business, an individual, a governmental or political
subdivision thereof or a governmental agency.
Registrable Securities: Any shares of Common Stock issued to Holder
----------------------
<PAGE>
pursuant to the conversion or exercise of the Preferred stock, without
par value of the Company and the Common Stock purchase warrants of the
Company issued pursuant to the Note and Warrant Agreements including
any such shares which have been assigned, sold, transferred or
otherwise disposed of to a permitted assignee of Holder, and any
securities issued or issuable with respect to any Common Stock
referred to above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement
-
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they
-
shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) subsequent
-
disposition of them shall not require registration or qualification of
them under the Securities Act or any similar state law then in force
pursuant to the exemption contained in Rule 144(k) or any successor
rule, or (d) they shall have ceased to be outstanding.
-
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with section 2, including, without
limitation, all registration, filing and NASD fees, all stock exchange
listing fees, all fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, the fees and
disbursements of any single counsel and accountants retained by the
Holder, premiums and other costs of policies of insurance for the
benefit of the Company or its Board of Directors against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that,
--------
in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel
or general overhead expenses of the Company, auditing fees,
<PAGE>
premiums or other expenses relating to liability insurance required
by underwriters of the Company or other expenses for the preparation
of financial statements or other data normally prepared by the Company
in the ordinary course of its business or which the Company would have
incurred in any event.
Securities Act: The Securities Act of 1933, or any similar Federal
--------------
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal statute.
4. Rules 144 and 144A. So long as the Company shall not have filed
------------------
a registration statement pursuant to section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall, at any time and from time to time, upon the request of the
Holder and upon the request of any Person designated by the Holder as a
prospective purchaser of any Registrable Securities, furnish in writing to the
Holder or such prospective purchaser, as the case may be, a statement as of a
date not earlier than 12 months prior to the date of such request of the nature
of the business of the Company and the products and services it offers and
copies of the Company's most recent balance sheet and profit and loss and
retained earnings statements, together with similar financial statements for
such part of the two preceding fiscal years as the Company shall have been in
operation, all such financial statements to be audited to the extent audited
statements are reasonably available, provided that, in any event the most recent
--------
financial statements so furnished shall include a balance sheet as of a date
less than 16 months prior to the date of such request, statements of profit and
loss and retained earnings for the 12 months preceding the date of such balance
sheet, and, if such balance sheet is not as of a date less than 6 months prior
to the date of such request, additional statements of profit and loss and
retained earnings for the period from the date of such balance sheet to a date
less than 6 months prior to the date of such request. If the Company shall have
filed a registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
-
Act, as such Rule may be amended from time to time, or (b) any similar rule or
-
regulation hereafter adopted by the Commission.
<PAGE>
Upon the request of any holder of Registrable Securities, the Company will
deliver to such holder a written statement as to whether it has complied with
the requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended and the
----------------------
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of Holder. The
Holder shall be bound by any consent authorized by this section 5, whether or
not such Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any
------------------------------
Registrable Securities are held by a nominee for the beneficial owner thereof,
the beneficial owner thereof may, at its election, be treated as the holder of
such Registrable Securities for purposes of any request or other action the
Holder pursuant to this Agreement or any determination of any number or
percentage of shares of Registrable Securities held by the Holder contemplated
by this Agreement. If the beneficial owner of any Registrable Securities so
elects, the Company may require assurances reasonably satisfactory to it of such
owner's beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all
-------
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person in the manner set forth in
the applicable Note and Warrant Agreement. Each such notice, request or other
communication shall be effective (i) if given by mail, 72 hours after such
-
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
--
limitation, by air courier), when delivered at the address specified above,
provided that any such notice, request or communication to the Holder shall not
- --------
be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to
----------
the benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express
assignment shall have been made, the provisions of this Agreement which are for
the benefit of the parties hereto other than the Company shall also be for the
benefit of and enforceable by any subsequent holder of at least 100,000 shares
of Registrable Securities.
9. Descriptive Headings. The descriptive headings of the several
--------------------
sections and paragraphs of this Agreement are inserted for reference only and
shall
<PAGE>
not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
-------------
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF
LAWS.
11. Counterparts. This Agreement may be executed simultaneously in
------------
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
12. Entire Agreement. This Agreement embodies the entire agreement
----------------
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
--------------------------
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF.
EACH PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF
ANY OF THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF
COPIES THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED MAIL, POST AGE PREPAID,
RETURN RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7.
THE PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY
HEREBY IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY
OBJECTION TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON
----- ---
CONVENIENS, WHICH IT MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH
- ----------
ACTION OR PROCEEDING IN SUCH RESPECTIVE JURISDICTIONS.
14. Severability. If any provision of this Agreement, or the
------------
<PAGE>
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By______________________________
Name:
Title:
WAND EQUITY PORTFOLIO II L.P.
By: WAND PARTNERS LLC, General Partner
By______________________________
Name:
Title:
WAND AFFILIATES FUND L.P.
By: WAF PARTNERS LLC, General Partner
By______________________________
Name:
Title:
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<S> <C>
<PERIOD-TYPE> 9-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> SEP-30-1999
<CASH> 12,866
<SECURITIES> 0
<RECEIVABLES> 16,359
<ALLOWANCES> 4,659
<INVENTORY> 0
<CURRENT-ASSETS> 28,000
<PP&E> 12,204
<DEPRECIATION> 7,862
<TOTAL-ASSETS> 36,366
<CURRENT-LIABILITIES> 19,043
<BONDS> 0
0
0
<COMMON> 58,507
<OTHER-SE> (50,256)
<TOTAL-LIABILITY-AND-EQUITY> 36,366
<SALES> 30,201
<TOTAL-REVENUES> 30,201
<CGS> 12,587
<TOTAL-COSTS> 12,587
<OTHER-EXPENSES> 33,304
<LOSS-PROVISION> 2,617
<INTEREST-EXPENSE> (336)
<INCOME-PRETAX> (16,026)
<INCOME-TAX> 228
<INCOME-CONTINUING> (15,926)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (15,926)
<EPS-BASIC> (1.64)
<EPS-DILUTED> (1.64)
</TABLE>
