Exhibit 10.15
INFOSAFE SYSTEMS, INC.
Formation and Stock Purchase Agreement
AGREEMENT dated as of April 16, 1997, among Xxxxxxx Xxxxxxx ("MC"), Xxxxxxx
Xxxxxx ("MG"), (collectively sometimes "M&M"), and Infosafe Systems, Inc.
("IS"), a Delaware Corporation with offices at 000 Xxxxxxx Xxxxxx, Xxx Xxxx, XX
00000 (each of the above sometimes a "Party" and collectively the "Parties").
M&M have developed a program for providing business-to-business electronic
commerce services, and ancillary consulting and implementation services,
primarily using the Internet, all as set out in the Strategic Plan dated January
1997 (Exhibit 1 a), "Quick Start Initiatives 1997" (Exhibit l(b)), and the
memorandum of "Engineering Tasks and Sales" (Exhibit 1c) (all constituting the
"Intended Activity") . IS wishes to participate in the Intended Activity and the
Parties are therefore entering into this Formation and Stock Purchase Agreement.
1. Formation of Internet Commerce Corporation.
The parties will promptly cause a Delaware Corporation to be formed
under the name Internet Commerce Corporation ("ICC"), with authorized
capital of 10 million shares of Common Stock, par value $ .01 per share
("Shares") and 5 million shares of preferred stock, the terms and
preferences to be fixed by the Directors at the time of issue
("Preferred"). The Articles of Incorporation and the Bylaws of ICC
shall be in the forms attached as Exhibits 11(a) and 11(b) and are
approved by all Parties. Promptly after its formation, ICC shall become
a signatory and thus a Party to this Agreement.
2. Purchase and Issuance of Shares.
a) M&M will contribute and assign to ICC all their assets and
business relating to the Intended Activity, including their
rights under the Agreement of March 31, 1997, with the
"Xxxxxxxx Group" (Exhibit III), and their rights to utilize
the Business Plan of January 1997, particularly their rights
to deal with certain customers named therein on a preferential
basis and their rights to use of the name "Internet Commerce
Corporation", and all their rights to ICC New York. In
addition, M&M will contribute the sum of $1,000 to the capital
of ICC. In consideration for their contributions, ICC will
issue to MG 60,000 Shares, and to MC 40,000, all of which
shall be fully paid and nonassessable.
b) IS will subscribe to purchase 500,000 Shares for an aggregate
consideration of $500,000, of which $ 100,000 will be paid
simultaneously with the execution of Assignments and
contribution of $1,000 by M&M under a) above. The balance will
be represented by a non-interest bearing demand Note of IS
which is expected to be paid from time to time by IS against
the cash requirements of ICC, substantially in accordance with
the EDI Fastart Operating Cash Budget attached
as Exhibit IV, including payment of up to $6,000 for legal
expenses of M&M in connection with the preparation for, and
participation in the transactions contemplated by this
Agreement and payment of an aggregate of $30,000 to Xxxxxxx
Xxxxxx for introducing the Parties.
3. Investment Intent and Share Certificates.
The Parties each represent that it is purchasing the Shares for its own
account and for investment purposes only. Each Party acknowledges that
it may not sell or otherwise dispose of the Shares or any interest
therein without registration under the Securities Act of 1933 or
pursuant to an exemption therefrom and agrees that the certificates
representing its Shares will bear an appropriate legend to the
foregoing effect and that the Shares are subject to other voting and
transfer restrictions under this Agreement.
4. Other Financial Relationships between ICC and IS.
a) Under a Cost-Sharing Convention to be entered into by ICC and
IS, IS will provide logistic and administrative support,
available "in house", to ICC at the rate of $24,000 per month,
which will be accrued for six months as shown on Exhibit III
and reviewed as to amount and method of payment at the end of
that period. The initial $ 144,000 will not be paid until a
Qualified Public Offering has been effected for ICC.
b) ICC and IS will enter into a Tax Convention governing the
allocation of tax responsibilities in light of the filing of
consolidated tax returns while IS continues to own at least
80% of ICC. ICC will adopt the calendar year for tax purposes.
c) The fiscal year of ICC will commence on August 1 of each year.
ICC shall keep adequate records and books of account in
accordance with GAAP consistently applied, reflecting all
financial transactions of ICC and in which, for each fiscal
year, all proper reserves for depreciation, depletion,
obsolescence, amortization, taxes, bad debts and other
purposes in connection with its business shall be made.
5. ICC Stock Option Plan.
a) The Parties will vote as shareholders for the adoption of an
ICC Stock Option Plan, under which ICC will reserve a total of
350,000 Shares for issuance of options to officers, employees,
directors and consultants as incentives to promote the
interests and business of ICC. 75,000 of such Options will be
reserved for IS personnel affiliated with ICC, and the M&M
Directors will vote for the award of such Options as
designated by IS. Option agreements will be in the same form
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as those issued under the IS Stock Option Plan, modified as
appropriate by the vesting provisions of Sections 5 d and e
below.
b) Qualified Stock Options will he granted to MG for an aggregate
amount of 120,000 Shares, exercisable while employed by ICC
for six years at an option price of $1.10 per Share. Of these
Options, 60,000 will be classified as A Options and 60,000
will be classified as B Options. For the purposes of this
paragraph 5 b, "while employed" shall mean while MG is
employed under the employment agreement referred to in Section
7b below, or any extension thereof, or, if not extended by
ICC, so long as MG is ready, willing and able to perform the
duties described in the employment agreement, on the same
terms and conditions, month-to-month or for any given term,
through April 15, 2003, as may be desired by ICC (except if
employment is terminated prior to that date "for cause" as
defined in the employment agreement, or if MG is in violation
of Section 4 or 5 of that agreement). This provision does not
create an obligation on the part of ICC to employ MG beyond
the term of the employment agreement, and MG acknowledges
that, if employment does not continue for any reason, the
options may not be "qualified" for tax purposes at the time of
exercise.
c) Qualified Stock Options will be granted to MC for an aggregate
amount of 80,000 Shares exercisable while employed by ICC for
six years at an option price of $1.00 per Share. Of these
Options, 40,000 will be classified as A Options and 40,000
will be classified as B Options. For the purposes of this
paragraph 5 c, "while employed" shall mean while MC is
employed under the employment agreement referred to in Section
7b below, or any extension thereof, or, if not extended by
ICC, so long as MC is ready, willing and able to perform the
duties described in the employment agreement, on the same
terms and conditions, month-to-month or for any given term,
through April 15, 2003, as may be desired by ICC (except if
employment is terminated prior to that date "for cause" as
defined in the employment agreement, or if MC is in violation
of Section 4 or 5 of that agreement). This provision does not
create an obligation on the part of ICC to employ MC beyond
the term of the employment agreement, and MC acknowledges
that, if employment does not continue for any reason, the
options may not be "qualified" for tax purposes at the time of
exercise.
d) The 100,000 A Options will vest in two equal tranches; the
first will vest provided that revenues of ICC are at least $
10,000,000 in any of the first three fiscal years of ICC,
commencing August 1,1997, and the second will vest, together
with any shares of the first tranche not already vested,
provided that revenues of LCC are at least $ 30,000,000 in any
of the first five fiscal years of ICC.
(i) In order to establish reasonable control over costs
associated with generating revenue for purposes of this
provision, without the express written agreement of IS,
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monthly operating costs of ICC, excluding contract work for
third parties will not exceed $100,000 per month, including
the support referred to in 4 a) above, until third party
funding of at least $1,000,000 has been obtained
for ICC. All operating contracts and arrangements, other than
contract work for third parties or as expressly approved by IS
in writing, shall be reasonably calculated to provide gross
profit margins of at least 50% and to achieve break-even cash
flow within 150 days of their respective inception dates.
(ii) In addition to salaries to be provided under employment
agreements described in Section 7b below, in the event of
exercise of any of the A Options by the holders, ICC will pay
such holder a bonus calculated to cover the "after-tax" cost
of exercising any A options actually exercised.
e) The B Options will also vest in two equal tranches; the first
will vest provided that ICC has net income (determined in
accordance with GAAP by the independent accountants of IS) of
at least $4,000,000 in any of the first three fiscal years of
ICC, and the second will vest together with any shares of the
first tranche not already vested, provided that ICC has net
income of at least $12,000,000 in any of the first five fiscal
years of ICC.
6. Anti-Dilution Assurance.
The Parties will cooperate in an effort to arrange a minimum of
$1,000,000 of third-party financing for ICC. IS agrees that, until a
minimum of $1,000,000 has been contributed as additional capital to
ICC, after the initial contribution by IS of $500,000 and the accrual
of IS logistic support for six months, the aggregate of 100,000 Shares
received by M&M at the time of ICC formation as provided for in this
Agreement will not represent less than 10% of total capitalization of
ICC, including any convertible securities to be considered for this
purpose as if converted, but excluding Shares resulting from any
exercise of Options granted under the ICC Stock Option Plan other than
the A Options. Similarly, IS agrees that the aggregate of 100,000 A
Options to be granted to M&M as provided in 5b and c above will not
represent less than 10% of such capitalization. IS will take any and
all necessary steps, including contribution of Shares owned by it, as
may be necessary to carry out the provisions of this Section 6.
7. Directors and Management.
a) Until a public offering of securities of ICC having a gross
offering price to the public of at least $5,000,000 has been
consummated ("Qualified Public Offering"), so long as they
retain ownership of at least 80% of their initially subscribed
shares, namely 80,000 shares in the case of M&M and 400,000
shares in the case of IS, the Parties shall vote their shares
to elect and maintain a Board of five directors, two of whom
shall be nominated by M&M and three of whom shall be nominated
by IS. A quorum of the Board shall consist of a majority of
the directors in office and the Board shall act by majority
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vote of the whole Board, except that any majority must include
a director nominated by M&M where the action to be taken
involves: amendment of the Articles of Incorporation;
amendment of the Bylaws; amendment of the 1997 Stock Option
Plan or adoption any other stock option plan or other equity
incentive plan; merger or sale of ICC or substantially all its
assets. Notwithstanding the above, the Parties shall continue
to vote their Shares for Directors in the same manner so long
as they retain ownership of 80% of their originally subscribed
shares and M&M continue to be employed by ICC. The initial
officers shall include: Xxxxxx Xxxxxx - CEO and President,
Xxxx Xxxxxx - CFO and Chief Legal Officer and Xxxxxxx Xxxxxxx
Controller.
b) ICC will enter into employment agreements with Xxxxxxx Xxxxxx,
Xxxxxxx Xxxxxxx and Xxxxx Xxxxxxx in substantially the forms
attached as Exhibits V a, b and c.
8. Sale or Transfer of Shares-by Parties.
Except for the transfer of an aggregate of 6,000 shares by M&M to
Xxxxxxx Xxxxxx, or transfers to others already shareholders or to
members of the immediate family of a Party, prior to a Qualified Public
Offering a Party shall not sell or transfer, by gift or otherwise, all
or any of their Shares except in compliance with the terms of this
Agreement or by the laws of inheritance or descent.
a) Notice of Proposed Transfer or Sale. If M&M or IS desires to
sell or transfer any of their shares or any interest therein,
voluntarily or by operation of law, that Party ("Offeror")
shall deliver notice to ICC. The Notice must specify the
proposed bona fide Transferee, the amount of shares, the
consideration to be paid and any other material terms and
conditions.
b) Approval of Transferee. The Offer or must first obtain a
written approval of the proposed Transferee from the Board of
Directors of ICC, which approval must include the votes of a
Director nominated by M&M. Approval shall not be unreasonably
withheld or delayed and any denial of approval (within 30
days) shall be based on a good-faith determination by the
Board that the proposed transferee is a competitor or is
otherwise not a suitable investor in ICC.
c) Right of First Refusal. From the date that approval has been
obtained under b) above, the Offeror shall offer ICC and the
other Parties a 30 day option to agree to acquire all the
Shares offered, at the same price and on the same terms and
conditions offered by the approved Transferee. Any agreement
to acquire all the Shares offered must be consummated within
thirty days of the agreement to acquire, or any longer period
if one is specified for the approved Transferee. If the option
is not exercised in whole by the offerees, pro rata or in some
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other proportions, then, for thirty days thereafter, the
Offeror may consummate the sale to the approved Transferee on
the original terms and conditions. If the sale is not
so consummated, then the proposed sale may not be consummated
without renewed compliance with all provisions of this Section
8c.
d) Market Strand-off. If required by the manager of underwriters
effecting a first Qualified Public Offering for ICC, M&M will
agree not to sell any Shares owned by them for the same period
after the effective date of such an Offering as is agreed to
by IS.
e) Transferees are Parties. If a sale or transfer is consummated
to any transferee under this section 8, the Transferee is
deemed to have acquired the Shares subject to all terms and
conditions of this Agreement and the Transferee shall execute
an instrument satisfactory to ICC by which he assumes and
agrees to be bound by all those terms and conditions.
f) Change of Control. In the event that a third party
unaffiliated with any of the Parties acquires the power to
elect a majority of the directors of ICC within five years,
then the A Options held by M&M shall immediately vest.
g) Exchange of ICC for IS Shares. In the event that any of the A
or B Options held by M&M vest within five years, and ICC does
not effect a Qualified Public Offering within twelve months
after such vesting, then M&M shall have the right to exchange
their ICC Shares for shares of the Common Stock of IS. The
exchange ratio shall be negotiated in good faith by the
parties; if they are unable to reach agreement after 60 days,
either IS or M&M may require that the issue of the exchange
ratio to be determined on the basis of a fair market value be
submitted in New York City to arbitration in accordance with
the then obtaining rules of the American Arbitration
Association.
9. Representations and Warranties of M&M.
M&M jointly and severally represent and warrant to IS that:
a) They have full power to enter into this Agreement and the
Employment Agreements attached as Exhibits V a and b, without
violation of any prior agreement or commitments;
b) The Agreement of March 31, 1997 (Exhibit III) among ICC
(former), the Xxxxxxxx Group and M&M is valid, binding and in
full force and effect;
c) They have good title and the right to transfer to ICC the
assets listed in Section 2a hereunder, free and clear of any
encumbrances;
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d) The Documents constituting Exhibits I a, b and c represent the
good faith ,best efforts description of the Intended Activity
as M&M contemplate it to be conducted and of the business area
in general. To their best knowledge, the Exhibits are
factually accurate in all material respects. All projections
contained in the Exhibits are reasonable and are based on all
necessary material assumptions, each of which is reasonable
and justifiable, and neither MG nor MC knows of any reason
that any of them cannot be reasonably fulfilled; provided,
however, that the foregoing does not constitute, and they
disclaim, any promise or guaranty, as to the accuracy of any
such projections or expectations.
e) There are no claims, actions, suits, or other proceedings
pending or to the best knowledge of M&M, threatened against or
affecting, any of them which might reasonably be expected to
adversely affect the conduct or results of the Intended
Activity.
10. Representations and Warranties of IS.
IS represents and warrants to M&M that:
a) IS is a corporation duly organized, validly existing and in
good stranding under the laws of the State of Delaware and has
all requisite corporate power to carry on its business and to
own and operate its properties;
b) When approved by its Board of Directors, IS will have full
power to enter into, execute, deliver and perform this
Agreement.
11. Miscellaneous.
a) Further Actions. Each Party shall from time to time take such
actions (including, without limitation, voting their Shares,
adoption of Articles of Incorporation and Bylaws and electing
directors) and deliver such additional documents as may be
reasonably necessary to effectuate the purposes of this
Agreement.
b) Modification. This Agreement sets forth the entire
understanding of the parties with respect to the subject
matter hereof, supersedes any existing agreements among them
concerning the subject matter, and may be modified only by a
written document duly executed by each Party.
Notices. Any notice or other communication required or permitted to be given
hereunder shall be in writing and shall be mailed by certified mail, return
receipt requested, sent by telecopy or facsimile transmission (with receipt
confirmed), or delivered against receipt to the Party to whom it is to be given
at the address of such Party set forth below (or to such other address as the
Party shall have furnished in writing to all other Parties):
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M&M;
C/O Xxxxxxx Xxxxxx
000 Xxxxx Xxxxxx
Xxx. 00X
Xxx Xxxx, XX 00000
C/O Xxxxxxx Xxxxxxx
00 Xxxxxxxx Xxxx
Xxxxxxxxxx, XX 00000
Infosafe Systems, Inc.
000 Xxxxxxx Xxxxxx, Xxxxx 000
Xxx Xxxx, XX 00000
Fax no: (000) 000-0000.
d) Binding Effect and Benefit. The provisions of this Agreement
shall be binding on and inure to the benefit of the parties
hereto and their respective successors and permitted assigns.
e) Severability and Governing Law. If any provision hereof is
held invalid such invalidity shall not affect the other
provisions that may be given effect without the invalid
provision and, to this end, the provisions hereof shall be
deemed severable. The Agreement shall be governed by and
construed in accordance with the laws of the State of New York
without giving effect to the rules governing conflicts of law.
f) Brokers and Finders. Each Party further represents and
warrants to the others that, as a consequence of any action by
the Party or any person affiliated with such Party, and except
for a fee of $30,000 to be paid by ICC to Xxxxxxx Xxxxxx, and
6,000 Shares to be transferred to him by M&M, no broker,
finder or other person is entitled to any finder's or
brokerage fee or commission in connection with the
transactions contemplated by this Agreement. Each Party agrees
to indemnify and hold harmless each of the others from and
against any claim arising by any breach of the aforesaid
representation and warranty.
IN WITNESS WHEREOF, the Parties hereto have duly executed this
Agreement as of the day and year first written above.
INFOSAFE SYSTEMS, INC.
By: /s/ Xxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxxx
-------------------- ------------------- --------------------
Xxxxxx Xxxxxx, Xxxxxxx Xxxxxx Xxxxxxx Xxxxxxx
CEO & President
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CONFIRMED:
INTERNET COMMERCE CORPORATION
By: /s/ Xxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxx /s/ Xxxxxxx Xxxxxxx
-------------------- ------------------- --------------------
Xxxxxx Xxxxxx, Xxxxxxx Xxxxxx Xxxxxxx Xxxxxxx
CEO & President
Address:
Internet Commerce Corporation
000 Xxxxxxx Xxx.
Xxxxx 000
Xxx Xxxx, XX 00000
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