Exhibit 10.17
OPEN SOLUTIONS INC.
SERIES F PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES F PREFERRED STOCK PURCHASE AGREEMENT (this
"AGREEMENT") is made as of the 17th day of March, 2000, by and among Open
Solutions Inc., a Delaware corporation (the "COMPANY"), and the investors listed
on SCHEDULE A hereto (herein individually "INVESTOR" and collectively
"INVESTORS").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1. SALE AND ISSUANCE OF SERIES F PREFERRED STOCK.
(a) The Company shall adopt and file with the
Secretary of State of Delaware on or before the Closing (as defined below) a
Restated Certificate of Incorporation in the form attached hereto as EXHIBIT A
(the "RESTATED CERTIFICATE").
(b) Subject to the terms and conditions of this
Agreement, the Investors shall purchase at the Closing and the Company shall
sell and issue to the Investors at the Closing an aggregate of 2,145,923 shares
("SHARES") of the Company's Series F Preferred Stock ("SERIES F PREFERRED
STOCK"), each Investor to purchase such number of Shares as are set forth
opposite such Investor's name on SCHEDULE A hereto for the purchase price of
$9.32 per share.
1.2. CLOSING.
(a) The purchase and sale of the Series F Preferred
Stock shall take place at the offices of Xxxxxxx & Xxxxxxx LLP, One American
Row, Hartford, Connecticut on the 16th day of March, 2000, or at such other time
and place as the Company and Investors shall mutually agree, either orally or in
writing (which time and place are designated as the "CLOSING").
(b) At the Closing, the Company shall deliver to each
Investor a certificate representing the shares of Series F Preferred Stock that
each Investor is purchasing under this Agreement, against payment of the
purchase price therefor by wire transfer of immediately available funds.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY. The
Company hereby represents and warrants to each Investor that, except as set
forth on SCHEDULE B (the "SCHEDULE OF EXCEPTIONS") hereto specifically
identifying the relevant subparagraph(s) hereof, which exceptions shall be
deemed to be representations and warranties as if made hereunder:
2.1 ORGANIZATION; GOOD STANDING; QUALIFICATION. The
Company is a corporation duly organized, validly existing, and in good standing
under the laws of the State of Delaware, has all requisite corporate power and
authority to own and operate its properties and assets and to carry on its
business as now conducted and as proposed to be conducted, to execute and
deliver this Agreement and the Amended and Restated Investors' Rights Agreement,
of even date herewith, among the Company, each Investor party thereto and
certain other stockholders of the Company, in substantially the form attached
hereto as EXHIBIT B (the "RIGHTS AGREEMENT"), to issue and sell the Series F
Preferred Stock and the Common Stock issuable upon conversion thereof, and to
carry out the provisions of this Agreement, the Rights Agreement and the
Restated Certificate. The Company is qualified to transact business as a foreign
corporation in the State of Connecticut.
2.2. AUTHORIZATION. All corporate or other action on the
part of the Company, its officers, directors and stockholders necessary for the
authorization, execution, and delivery of this Agreement and the Rights
Agreement, the performance of all obligations of the Company hereunder and
thereunder and the authorization, issuance (or reservation for issuance) and
delivery of the Series F Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Series F Preferred Stock, has been taken
or will be taken prior to the Closing, and this Agreement and the Rights
Agreement, constitute valid and legally binding obligations of the Company,
enforceable in accordance with their respective terms, except (i) as limited by
applicable bankruptcy, insolvency, reorganization, moratorium, and other laws of
general application affecting enforcement of creditors' rights generally, (ii)
as limited by laws relating to the availability of specific performance,
injunctive relief, or other equitable remedies, and (iii) to the extent the
indemnification provisions contained in the Rights Agreement may be limited by
applicable federal or state securities laws.
2.3. VALID ISSUANCE OF PREFERRED STOCK. The Series F
Preferred Stock which is being purchased by the Investors hereunder, when
issued, sold and delivered in accordance with the terms of this Agreement for
the consideration expressed herein, will be duly and validly issued, fully paid
and nonassessable, and will be free of restrictions on transfer other than
restrictions on transfer (i) under this Agreement, (ii) under the Rights
Agreement, and (iii) under applicable state and federal securities laws. The
Common Stock issuable upon conversion of the Series F Preferred Stock (the
"CONVERSION SHARES") purchased under this Agreement have been duly and validly
reserved for issuance and, upon issuance in accordance with the terms of the
Restated Certificate shall be duly and validly issued, fully paid, and
nonassessable and will be free of restrictions on transfer other than
restrictions on transfer under this Agreement and the Rights Agreement and under
applicable state and federal securities laws.
2.4. GOVERNMENTAL CONSENTS. No consent, approval,
qualification, order or authorization of, or filing with, any local, state, or
federal governmental authority is required on the part of the Company in
connection with the Company's valid execution, delivery, or performance of this
Agreement and the Rights Agreement, or the offer, sale or issuance of the Series
F Preferred Stock by the Company or the issuance of Common Stock upon conversion
thereof, except (i) the filing of the Restated Certificate with the Secretary of
State of the State of Delaware and (ii) such filings as have been made prior to
the applicable Closing, except that any
2
notices of sale required to be filed with the Securities and Exchange Commission
under Regulation D of the Securities Act of 1933, as amended (the "SECURITIES
ACT"), or such post-closing filings as may be required under applicable state
securities laws, which will be timely filed within the applicable periods
therefor by special counsel for the Company.
2.5. CAPITALIZATION AND VOTING RIGHTS. The authorized
capital of the Company consists, or will consist prior to the Closing, of:
(a) PREFERRED STOCK. Eight Million Eight Hundred
Thirty-Six Thousand Six Hundred Sixty-Five (8,836,665) shares of Preferred Stock
(the "PREFERRED STOCK"), One Million (1,000,000) shares of which have been
designated Series A-1 Preferred Stock, all of which are issued and outstanding,
Five Hundred Eighty-Three Thousand Three Hundred Thirty-Three (583,333) shares
of which have been designated Series A-2 Preferred Stock, all of which are
issued and outstanding, One Million Seven Hundred Thirty-Six Thousand Two
Hundred Fifty (1,736,250) shares of which have been designated Series B
Preferred Stock, One Million Six Hundred Twenty-Seven Thousand Nine Hundred
Seventeen (1,627,917) of which are issued and outstanding, One Million Three
Hundred Seventy-Five Thousand (1,375,000) shares of which have been designated
Series C Preferred Stock, One Million Two Hundred Sixty-Three Thousand Eight
Hundred Eighty-Nine (1,263,889) of which are issued and outstanding, One Million
Two Hundred Fifty Thousand (1,250,000) shares of which have been designated
Series D Preferred Stock, Eight Hundred Thirty-Three Thousand Thirty-Three
(833,333) of which are issued and outstanding, Seven Hundred Forty-Six Thousand
One Hundred Fifty-Seven (746,157) shares of which have been designated Series E
Preferred Stock, Seven Hundred Forty Six Thousand One Hundred Fifty-Seven
(746,157) of which are issued and outstanding, and Two Million One Hundred
Forty-Five Thousand Nine Hundred Twenty-Five (2,145,925) shares of which
have been designated Series F Preferred Stock, none of which have been issued.
(b) COMMON STOCK. Forty Million (40,000,000) shares
of common stock ("COMMON STOCK"), of which Two Million Eight Hundred Seventy
Thousand Nine Hundred Twenty-Seven (2,870,927) shares are issued and
outstanding.
(c) The outstanding shares of Common Stock and
Preferred Stock are owned by the stockholders and in the numbers specified in
EXHIBIT C hereto.
(d) The outstanding shares of Common Stock and
Preferred Stock have been issued in accordance with the registration or
qualification provisions of the Securities Act and any relevant state securities
laws or pursuant to valid exemptions therefrom.
(e) Except for (A) the conversion privileges of the
Series A-1 Preferred Stock, the Series A-2 Preferred Stock, the Series B
Preferred Stock, the Series C Preferred Stock, the Series D Preferred Stock, the
Series E and the Series F Preferred Stock, (B) the rights provided in Section
2.9 of the Rights Agreement, (C) the options to purchase an aggregate of
1,792,149 shares of Common Stock outstanding under the Company's 1994 Stock
Option Plan (the "OPTION PLAN") and (D) warrants to purchase 108,333 shares of
Series B
3
Preferred Stock, warrants to purchase 111,111 shares of Series C Preferred Stock
and warrants to purchase 416,667 shares of Series D Preferred Stock, there are
not outstanding any options, warrants rights (including conversion or preemptive
rights and rights of first refusal) or agreements for the purchase or
acquisition from the Company of any shares of its capital stock. A total of
2,234,074 shares of Common Stock are reserved for issuance under the Option
Plan, 441,925 of which shares are not yet subject to any outstanding options.
Except for the Rights Agreement, the Company is not a party or subject to any
agreement or understanding, and, to the best of the Company's knowledge, there
is no agreement or understanding between any persons that affect or relate to
the voting or giving of written consents with respect to any security or the
voting by a director of the Company.
2.6. SUBSIDIARIES. The Company does not own or control,
directly or indirectly, any interest in any other corporation, association, or
other business entity. The Company is not a participant in any joint venture,
partnership, or similar arrangement.
2.7. CONTRACTS AND OTHER COMMITMENTS. The Company does not
have any contract, agreement, lease, commitment, written or oral, absolute or
contingent, other than (i) contracts for the purchase of supplies and services
that were entered into in the ordinary course of business and that do not
involve more than $50,000, and do not extend for more than one (1) year beyond
the date hereof, (ii) sales contracts entered into in the ordinary course of
business that do not involve more than $50,000, and (iii) contracts terminable
at will by the Company on no more than ninety (90) days notice without cost or
liability to the Company and that do not involve any employment or consulting
arrangement and are not material to the conduct of the Company's business. For
the purpose of this paragraph, employment and consulting contracts and contracts
with labor unions, and license agreements and any other agreements relating to
the acquisition or disposition of the Company's technology, shall not be
considered to be contracts entered into in the ordinary course of business.
2.8. RELATED-PARTY TRANSACTIONS. No employee, officer, or
director of the Company or member of his or her immediate family thereof is
indebted to the Company, nor is the Company indebted (or committed to make loans
or extend or guarantee credit) to any of them. To the best of the Company's
knowledge, none of such persons has any direct or indirect ownership interest in
any firm or corporation with which the Company is affiliated or with which the
Company has a business relationship, or any firm or corporation that competes
with the Company, except that employees, officers or directors of the Company
and members of their immediate families may own stock in publicly traded
companies that may compete with the Company. To the best of the Company's
knowledge, no officer or director or any member of their immediate families is,
directly or indirectly, interested in any material contract with the Company.
2.9. REGISTRATION RIGHTS. Except as provided in the Rights
Agreement, the Company is not obligated to register under the Securities Act any
of its presently outstanding securities or any of its securities that may
subsequently be issued.
4
2.10. PERMITS. The Company has all franchises, permits,
licenses, and any similar authority necessary for the conduct of its business as
now being conducted by it, the lack of which could materially and adversely
affect the business, properties, prospects or financial condition of the Company
and believes it can obtain, without undue burden or expense, any similar
authority for the conduct of its business as planned to be conducted. The
Company is not in default in any material respect under any of such franchises,
permits, licenses or other similar authority.
2.11. COMPLIANCE WITH OTHER INSTRUMENTS. The Company is not
in violation or default in any material respect of any provision of its Restated
Certificate or Bylaws or in any material respect of any provision of any
mortgage, indenture, agreement, instrument or contract to which it is a party or
by which it is bound or, to the best of its knowledge, of any federal or state
judgment, order, writ, decree, statute, rule or regulation applicable to the
Company. The execution, delivery and performance by the Company of this
Agreement or the Rights Agreement and the consummation of the transactions
contemplated hereby and thereby will not result in any such violation or be in
material conflict with or constitute, with or without the passage of time or
giving of notice, either a material default under any such provision or an event
that results in the creation of any material lien, charge or encumbrance upon
any assets of the Company or the suspension, revocation, impairment, forfeiture,
or nonrenewal of any material permit, license, authorization, or approval
applicable to the Company, its business or operations, or any of its assets or
properties.
2.12. LITIGATION. There is no action, suit, proceeding or
investigation pending or currently threatened in writing against the Company
that questions the validity of this Agreement or the Rights Agreement or any of
the transactions contemplated hereby, or the right of the Company to enter into
such agreements, or to consummate the transactions contemplated hereby or
thereby, or that might result, either individually or in the aggregate, in any
material adverse change in the assets, business properties, prospects or
financial condition of the Company, or in any material change in the current
equity ownership of the Company. The foregoing includes, without limitation, any
action, suit, proceeding, or investigation pending or currently threatened
involving the prior employment of any of the Company's employees, their use in
connection with the Company's business of any information or techniques
allegedly proprietary to any of their former employers, their obligations under
any agreements with prior employers, or negotiations by the Company with
potential backers of, or investors in, the Company or its proposed business. The
Company is not a party to, or to the best of its knowledge, named in any order,
writ, injunction, judgment or decree of any court or government agency or
instrumentality. There is no action, suit or proceeding by the Company currently
pending or that the Company currently intends to initiate.
2.13 DISCLOSURE. The Company has provided each Investor
with all the information reasonably available to it without undue expense that
such Investors have requested for deciding whether to purchase the Series F
Preferred Stock. Neither this Agreement nor any other written statement or
certificate made or delivered in connection herewith contains any untrue
statement of a material fact or omits to state a material fact necessary to make
the statements herein or therein not misleading.
5
2.14 OFFERING. Subject in part to the truth and accuracy
of the Investors' representations set forth in this Agreement, the offer, sale
and issuance of the Series F Preferred Stock as contemplated by this Agreement
are exempt from the registration requirements of the Securities Act, and neither
the Company nor any authorized agent acting on its behalf will take any action
hereafter that would cause the loss of such exemption.
2.15 TITLE TO PROPERTY AND ASSETS. The Company owns its
property and assets free and clear of all mortgages, liens, loans and
encumbrances, except such encumbrances and liens which arise in the ordinary
course of business and do not materially impair the Company's ownership or use
of such property or assets. With respect to the property and assets it leases,
the Company is in compliance with such leases and, to the best of its knowledge,
holds a valid leasehold interest free of any liens, claims or encumbrances.
2.16 FINANCIAL STATEMENTS. The Company has delivered to
each Investor (i) its unaudited financial statements for the Company's fiscal
year ending December 31, 1999, and (ii) its unaudited financial schedules
(balance sheet and profit and loss statement) as at and for the month ending
January 31, 2000 (collectively, the "FINANCIAL STATEMENTS"). The Financial
Statements have been prepared in accordance with generally accepted accounting
principles applied on a consistent basis throughout the periods indicated and
with each other, except that the unaudited statements may not contain all
footnotes required by generally accepted accounting principles. The Financial
Statements fairly present the financial condition and operating results of the
Company as of the dates, and for the periods, indicated therein, subject, in the
case of the unaudited Financial Statements, to normal year-end audit
adjustments. Except as set forth in the Financial Statements, the Company has no
material liabilities, contingent or otherwise, other than (i) liabilities
incurred in the ordinary course of business subsequent to December 31, 1999 and
(ii) obligations under contracts and commitments incurred in the ordinary course
of business and not required under generally accepted accounting principles to
be reflected in the Financial Statements, which, in both cases, individually or
in the aggregate, are not material to the financial condition or operating
results of the Company. Except as disclosed in the Financial Statements, the
Company is not a guarantor or indemnitor of any indebtedness of any other
person, firm or corporation. The Company maintains and will continue to maintain
a standard system of accounting established and administered in accordance with
generally accepted accounting principles.
2.17 CHANGES. To the best of the Company's knowledge,
since December 31, 1999, there has not been any event or condition of any type
that has materially and adversely affected the business, properties, prospects
or financial condition of the Company.
2.18 PATENTS AND TRADEMARKS. The Company owns or possesses
sufficient legal rights to all patents, trademarks, servicemarks, trade names,
copyrights, trade secrets, software, licenses, information, proprietary rights
and processes necessary for the conduct of its business as now conducted and as
proposed to be conducted without any conflict with or infringement of the rights
of others. The Schedule of Exceptions contains a complete list of patents and
pending patent applications of the Company. Except for agreements with its own
employees or
6
consultants, substantially in the form referenced in paragraph 2.21 below, there
are no outstanding options, licenses, or agreements of any kind relating to the
foregoing, nor is the Company bound by or a party to any options, licenses or
agreements of any kind with respect to the patents, trademarks, servicemarks,
trade names, copyrights, trade secrets, software, licenses, information,
proprietary rights and processes of any other person or entity. The Company has
not received any communications alleging that the Company has violated or, by
conducting its business as proposed, would violate any of the patents,
trademarks, servicemarks, trade names, copyrights, trade secrets or other
proprietary rights of any other person or entity. The Company is not aware that
any of its employees is obligated under any contract (including licenses,
covenants or commitments of any nature) or other agreement, or subject to any
judgment, decree or order of any court or administrative agency, that would
interfere with the use of such employee's best efforts to promote the interests
of the Company or that would conflict with the Company's business as proposed to
be conducted. Neither the execution nor delivery of this Agreement, nor the
carrying on of the Company's business by the employees of the Company, nor the
conduct of the Company's business as proposed, 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 of such employees is now
obligated. The Company does not believe it is or will be necessary to use any
inventions of any of its employees (or persons it currently intends to hire)
made prior to their employment by the Company.
2.19 MANUFACTURING AND MARKETING RIGHTS. The Company has
not granted rights to manufacture, produce, assemble, license, market, or sell
its products to any other person and is not bound by any agreement that affects
the Company's exclusive right to develop, manufacture, assemble, distribute,
market, or sell its products.
2.20 EMPLOYEES; EMPLOYEE COMPENSATION. There is no strike,
labor dispute or union organization activities pending or threatened between the
Company and its employees. None of the Company's employees belongs to any union
or collective bargaining unit. To the best of its knowledge, the Company has
complied in all material respects with all applicable state and federal equal
employment opportunity and other laws related to employment. To the best of the
Company's knowledge, no employee of the Company is or will be in violation of
any judgment, decree or order, or any term of any employment contract, patent
disclosure agreement or other contract or agreement relating to the relationship
of any such employee with the Company or any other party because of the nature
of the business conducted or to be conducted by the Company or to the
utilization by the employee of his best efforts with respect to such business.
The Company is not party to or bound by any employment contract, deferred
compensation agreement, bonus plan, incentive plan, profit sharing plan,
retirement agreement, or other employee compensation agreement. The Company is
not aware that any officer or key employee, or that any group of key employees,
intends to terminate their employment with the Company, nor does the Company
have a present intention to terminate the employment of any 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 Company.
7
2.21 PROPRIETARY INFORMATION AND INVENTIONS AGREEMENTS.
Each employee, officer and consultant of the Company has executed a Proprietary
Information and Inventions Agreement substantially in the form or forms attached
hereto as EXHIBIT E. The Company, after reasonable investigation, is not aware
that any of its employees, officers or consultants are in violation thereof, and
the Company will use its best efforts to prevent any such violation.
2.22 TAX RETURNS, PAYMENTS, AND ELECTIONS. The Company has
filed all tax returns and reports, or has filed for extension to file such
returns and reports, as required by law. These returns and reports are true and
correct in all material respects. The Company has paid all taxes and other
assessments due, except those contested by it in good faith. The Company has not
elected pursuant to the Internal Revenue Code of 1986, as amended ("CODE"), to
be treated as an S corporation or a collapsible corporation pursuant to Section
341(f) of Section 1362(a) of the Code, nor has it made any other elections
pursuant to the Code (other than elections which relate solely to methods of
accounting, depreciation or amortization) that would have a material effect on
the business, properties, prospects or financial condition of the Company. The
Company has never had any tax deficiency proposed or assessed against it and has
not executed any waiver of any statute of limitations on the assessment or
collection of any tax or governmental charge. None of the Company's federal
income tax returns and none of its state income or franchise tax or sales or use
tax returns has ever been audited by governmental authorities. Since the date of
the Financial Statements, the Company has made adequate provisions on its books
of account for all taxes, assessments and governmental charges with respect to
its business, properties and operations for such period. The Company has
withheld or collected from each payment made to each of its employees, the
amount of all taxes (including, but not limited to, federal income taxes,
Federal Insurance Contribution Act taxes and Federal Unemployment Tax Act taxes)
required to be withheld or collected therefrom, and has paid the same to the
proper tax receiving officers or authorized depositaries.
2.23 INSURANCE. The Company has in full force and effect
fire and casualty insurance policies, with extended coverage, sufficient in
amount (subject to reasonable deductibles) to allow it to replace any of its
properties that might be damaged or destroyed. The Company does not now have
products liability insurance but may in the future in the judgment of the
Company's Board of Directors obtain such insurance in amounts customary for
companies similarly situated.
2.24 ENVIRONMENTAL AND SAFETY LAWS. The Company is not in
violation of any applicable statute, law, or regulation relating to the
environment or occupational health and safety, and to the best of its knowledge,
no material expenditures are or will be required in order to comply with any
such existing statute, law, or regulation.
2.25 INDEMNIFICATION. The Restated Certificate provides
for the indemnification of officers and directors of the Company to the fullest
extent permitted by law.
3 REPRESENTATIONS AND WARRANTIES OF THE INVESTORS. Each
Investor hereby represents and warrants that:
8
3.1 AUTHORIZATION. Each Investor represents that it has
full power and authority to enter into this Agreement and the Rights Agreement
and that this Agreement and the Rights Agreement constitute its valid and
legally binding obligation.
3.2 PURCHASE ENTIRELY FOR OWN ACCOUNT. This Agreement is
made with each Investor in reliance upon such Investor's representation to the
Company, which by each Investor's execution of this Agreement each Investor
hereby confirms, that the Series F Preferred Stock to be purchased by such
Investor under this Agreement, and the Common Stock issuable upon conversion
thereof, (collectively, the "SECURITIES") will be acquired for investment for
such Investor's own account, not as a nominee or agent, and not with a view to
the resale or distribution of any part thereof, and that such Investor has no
present intention of selling, granting any participation in, or otherwise
distributing the same. By executing this Agreement, each Investor 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 of the Securities.
3.3 RELIANCE UPON INVESTOR'S REPRESENTATIONS. Each
Investor understands that the Series F Preferred Stock is not, and any Common
Stock acquired on conversion thereof at the time of issuance may not be,
registered under the Securities Act on the ground that the sale provided for in
this Agreement and the issuance of securities hereunder is exempt from
registration under the Securities Act pursuant to section 4(2) thereof, and that
the Company's reliance on such exemption is predicated on the Investor's
representations set forth herein.
3.4 RECEIPT OF INFORMATION. Each Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series F Preferred Stock hereunder. Each Investor
further represents that it has had an opportunity to ask questions and receive
answers from the Company regarding the terms and conditions of the offering of
the Series F Preferred Stock hereunder and the business, properties, prospects
and financial condition of the Company and to obtain additional information (to
the extent the Company possessed such information or could acquire it without
unreasonable effort or expense) necessary to verify the accuracy of any
information furnished to it or to which it had access. The foregoing, however,
does not limit or modify the representations and warranties of the Company in
Section 2 of this Agreement or the right of each Investor to rely thereon.
3.5 INVESTMENT EXPERIENCE. Each Investor represents that
it is experienced in evaluating and investing in securities and acknowledges
that it is able to fend for itself, can bear the economic risk of its
investment, and has such knowledge and experience in financial or business
matters that it is capable of evaluating the merits and risks of the investment
in the Series F Preferred Stock. Each Investor also represents it has not been
organized solely for the purpose of acquiring the Series F Preferred Stock.
3.6 ACCREDITED INVESTORS. Each Investor represents to the
Company that it is an Accredited Investor as defined in Regulation D under the
Securities Act.
9
3.7 RESTRICTED SECURITIES. Each Investor understands that
the securities may not be sold, transferred, or otherwise disposed of without
registration under the Securities Act or an exemption therefrom, and that in the
absence of an effective registration statement covering the Securities or an
available exemption from registration under the Securities Act, the Securities
must be held indefinitely. In particular, each Investor is aware that the
Securities may not be sold pursuant to Rule 144 promulgated under the Securities
Act unless all of the conditions of that Rule are met. Among the conditions for
use of Rule 144 (other than paragraph (k) of Rule 144) is the availability of
current information to the public about the Company. Such information is not now
available and may never become available.
3.8 LEGENDS. It is understood that the Securities may
bear one or all of the following legends:
(a) "These securities have not been registered under
the Securities Act of 1933. They may not be sold, offered for sale, pledged or
hypothecated in the absence of a registration statement in effect with respect
to the securities under such Act or an opinion of counsel reasonably
satisfactory to the Company that such registration is not required or unless
sold pursuant to Rule 144 of such Act."
(b) Any legend required by federal law or the laws of
any state as applicable.
4 CONDITIONS OF EACH INVESTOR'S OBLIGATIONS AT CLOSING.
The obligations of each Investor under this Agreement are subject to the
fulfillment on or before the Closing of each of the following conditions, the
waiver of which must be set forth in a writing signed by an Investor to be
effective against such Investor:
4.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the Company contained in Section 2 shall be true on and as of
the Closing with the same effect as though such representations and warranties
had been made on and as of the date of such Closing.
4.2 PERFORMANCE. The Company shall have performed and
complied with all agreements, obligations and conditions contained in this
Agreement that are required to be performed or complied with by it on or before
the Closing.
4.3 COMPLIANCE CERTIFICATE. The Chief Executive Officer
of the Company shall deliver to the Investors at the Closing a certificate
certifying that the conditions specified in paragraphs 4.1 and 4.2 have been
fulfilled.
4.4 QUALIFICATIONS. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required prior to the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
10
4.5 PROCEEDINGS AND DOCUMENTS. All corporate and other
proceedings in connection with the transactions contemplated at the Closing and
all documents incident thereto shall be reasonably satisfactory in form and
substance to Investors' special counsel, which shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request, including, without limitation, the following:
(a) The Restated Certificate, as adopted by the
Company, filed with and certified by the Secretary of State of the State of
Delaware;
(b) A certificate, as of the most recent practicable
dates prior to the Closing, as to the corporate good standing of the Company
issued by the Secretary of State of the State of Delaware;
(c) By-laws of the Company, certified by its
Secretary as of the Closing Date;
(d) Resolutions of the Board of Directors and
stockholders of the Company, authorizing and approving all matters in connection
with this Agreement and the transactions contemplated hereby and required to be
authorized by the Board of Directors or such stockholders, as the case may be,
certified by the Secretary of the Company as of the Closing.
4.6 BOARD OF DIRECTORS. The maximum size of the Board of
Directors of the Company shall initially be fixed at ten (10) directors. The
number of directors immediately following the Closing shall be ten (10),
consisting of (i) Xxxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx and Xxxxxxx X. Xxxxx as
elected by the holders of Common Stock voting separately as a single class, (ii)
Xxxx Xxxxx, Xxxxx X. Xxxxxx, Xxxxxxx X. Xxxxxxxx, Xxxxxx X. XxXxx, Xxxxxxx X.
Xxxxxxx and Xxxxx Xxxx as elected by the holders of Preferred Stock voting
separately as a single class, and (iii) Xxxxx Xxxxxxxxx, Xx., as elected by the
holders of Common Stock and Preferred Stock voting together as a single class.
4.7 OPINION OF COMPANY COUNSEL. Each Investor named
therein shall have received from Xxxxxxx & Xxxxxxx LLP, special counsel for the
Company, an opinion, dated the date of the Closing, in substantially the form
attached hereto as EXHIBIT D.
4.8 INVESTORS' RIGHTS AGREEMENT. The Company and certain
holders of Preferred Stock of the Company (including certain of the Investors
and all of the holders of the Company's currently outstanding Preferred Stock)
shall have entered into the Rights Agreement in the form attached hereto as
EXHIBIT B.
4.9 MANAGEMENT RIGHTS LETTER. The Company shall deliver
to each Investor identified therein an executed Management Rights Letter in the
form attached hereto as EXHIBIT F.
4.10 AMENDMENT OF EXISTING PUT RIGHTS. Each holder of
outstanding Preferred Stock or Common Stock, or warrants to purchase any
Preferred Stock or Common Stock, that shall have a contractual right to require
the Company to repurchase such holder's shares of
11
Preferred Stock or Common
Stock or such holder's warrants, whether upon the happening of a contingency or
otherwise, shall have agreed to amend such rights in the manner set forth in the
Rights Agreement.
4.11 2000 STOCK PLANS. The stockholders of the Company
shall have approved each of the Company's 2000 Stock Incentive Plan, 2000
Employee Stock Purchase Plan and 2000 Non-Employee Director Stock Option Plan,
each to become effective as of the closing of an IPO.
5 CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investors under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions
by each Investor:
5.1 REPRESENTATIONS AND WARRANTIES. The representations
and warranties of each Investor contained in Section 3 shall be true on and as
of the Closing with the same effect as though such representations and
warranties had been made on and as of the Closing.
5.2 QUALIFICATIONS. All authorizations, approvals, or
permits, if any, of any governmental authority or regulatory body of the United
States or of any state that are required prior to the lawful issuance and sale
of the Securities pursuant to this Agreement shall be duly obtained and
effective as of the Closing.
5.3 INVESTORS' RIGHTS AGREEMENT. Each Investor identified
therein shall have entered into the Rights Agreement in the form attached hereto
as EXHIBIT B.
6. RIGHT TO PUT SECURITIES
6.1 DEFINITIONS. For purposes of this Section 6:
CONNECTICUT PRESENCE - shall mean that the Company, and each
of its subsidiaries, and their successors and assigns (i) maintains its
principal place of business in the State of Connecticut, (ii) bases a numerical
majority of the sum of its employees in the State of Connecticut (excluding
sales and consulting personnel), and (iii) conducts a majority of its operations
(including manufacturing and production but excluding sales and consulting
operations), directly or through subcontractors, in the State of Connecticut;
PROVIDED THAT, for purposes of determining whether the Company has failed to
maintain a Connecticut Presence, the assets, revenues and employees of any
business acquired by the Company on an arm's length basis from a non-affiliate
of the Company (provided such acquired business had been operating for at least
one year prior to the acquisition) shall be excluded and disregarded; PROVIDED
FURTHER, that it is understood that the Company shall not be deemed to have
failed to maintain a Connecticut Presence if the Company ceases to maintain a
Connecticut Presence by virtue of an acquisition of the Company in connection
with which each of CII and CII-Xxxxxxx (each as defined hereinafter) receives a
liquidation distribution with respect to, or cash, securities or other property
in exchange for, all of the Securities held by CII and CII-Xxxxxxx on
substantially the same terms as other holders of Securities.
12
COVENANT PERIOD - shall mean the period beginning upon the
closing of an IPO and terminating upon the earlier of the date upon which all
Securities then held by CII and CII-Xxxxxxx may be offered and sold by CII or
CII-Xxxxxxx, as applicable, to any number of offerees and purchasers pursuant to
(i) Rule 144(k) under the Securities Act of 1933 (or any similar rule hereafter
adopted by the Securities and Exchange Commission), or (ii) an effective
registration statement filed under the Securities Act.
PUT PRICE - shall mean the greater of (i) nine dollars and
thirty-two cents ($9.32) (as adjusted for stock dividends, stock splits and
similar corporate events, for the Preferred Stock and/or Common Stock which is
the subject of a Notice of Put) multiplied by the number of shares of Preferred
Stock (and/or Common Stock) which are the subject of a Notice of Put, plus a
twenty-five percent (25%) compounded annual rate of return on such amount from
the date hereof through the date of the Put Closing (as hereinafter defined), or
(ii) the Aggregate Market Value on the Put Date.
AGGREGATE MARKET VALUE - shall mean on any date the product of
(i) the Current Market Value (as hereinafter defined) on such date of each share
of Series F Preferred Stock (and/or Common Stock) held by the Investor
exercising its rights under this Section 6 and (ii) the number of shares of
Series F Preferred Stock (and/or Common Stock) which are the subject of a Notice
of Put. The term "CURRENT MARKET VALUE" on any date shall be the per share value
determined in good faith by the Board of Directors of the Company or, if such
determination cannot be made or is reasonably objected to by the Investor within
thirty (30) days of its notification thereof, then the value determined by a
nationally recognized independent investment banking firm (which has no past or
present relationship with the Company or the Investor) selected in good faith by
the Board of Directors of the Company, or if such selection cannot be made or is
reasonably objected to by the Investor within thirty (30) days of its
notification thereof, then the per share value determined by a nationally
recognized independent investment banking firm selected by the American
Arbitration Association in Hartford, Connecticut in accordance with its rules.
TERMINATION DATE - shall mean the earlier of (i) the date on
which each of Connecticut Innovations, Incorporated ("CII") or Connecticut
Innovations/Xxxxxxx LLC ("CII-XXXXXXX") no longer holds any Securities, (ii)
upon the closing of a firm commitment underwritten public offering of the
Company's Common Stock pursuant to a registration statement under the Securities
Act of 1933, as amended (an "IPO") and (iii) upon the closing of an acquisition
of the Company in connection with which each of CII and CII-Xxxxxxx receives a
liquidation distribution with respect to, or cash, securities or other property
in exchange for, all of the Securities held by CII and CII-Xxxxxxx on
substantially the same terms as other holders of Securities.
6.2 RIGHT TO PUT. On the terms and conditions herein set
forth, each Investor shall have the right to sell to the Company, and the
Company agrees to purchase from such Investor, all of such Investor's Securities
(as defined in Section 3.2) which are the subject of a Notice of Put (the "PUT")
for the Put Price.
13
6.3 METHOD OF EXERCISE. On the terms and conditions
herein set forth, each Investor may exercise its rights hereunder to sell all or
part of its Securities by delivering to the Company a notice of Put (a "NOTICE
OF PUT") in the form attached hereto as EXHIBIT G. Upon receipt of a Notice of
Put, the Company shall as promptly as practical, and any event within five (5)
business days thereafter, notify each holder of outstanding shares of Series F
Preferred Stock of the Put therein described.
6.4 TIME OF EXERCISE. The rights of each Investor to Put
its Securities shall become exercisable at any time prior to the Termination
Date and following the Company's failure to maintain a Connecticut Presence (as
defined herein).
6.5 CLOSING DATE. The closing, (the "PUT CLOSING"), of
the purchase and sale of Securities pursuant to this Section 6 hereof shall be
held on the date, (the "PUT CLOSING DATE"), which is the sixtieth (60th)
business day after delivery of a Notice of Put.
6.6 CLOSING PROCEDURES. At the Put Closing, the Investors
exercising their rights under this Section 6 will deliver to the Company the
securities which are covered by the Notice of Put, and the Company will deliver
to such Investors the Put Price for such securities in cash, certified or bank
check, or by wire transfer. The Company may elect to pay to the Investors the
Put Price as follows: in equal annual installments of principal in the amount of
one-third of the Put Price each, the first such installment to be paid at the
Put Closing, plus interest on the outstanding balance, payable with each
installment of principal calculated at a fixed rate per annum equal to
twenty-five (25%) percent. Each Investor shall, at the Company's request,
represent and warrant to the Company that (i) it owns the securities which are
covered by the Notice of Put free and clear of all liens, charges and
encumbrances, and (ii) it has the power and authority to transfer such
securities to the Company and to consummate the Put.
6.7 COVENANT TO MAINTAIN CONNECTICUT PRESENCE.
Notwithstanding termination of the Put, solely for the benefit of CII and
CII-Xxxxxxx, the Company covenants and agrees that it shall, at all times during
the Covenant Period, maintain a Connecticut Presence. The parties hereto
acknowledge and agree that the sole remedies available to any holder of
Securities for the breach of the covenant contained in this Section 6.7 shall be
(i) the release, pursuant to the terms of the applicable "lock-up" agreement, of
CII and CII-Xxxxxxx from the restrictions set forth therein, and (ii) temporary,
preliminary and permanent injunctive relief, if granted by any court of
competent jurisdiction.
6.8 SUBORDINATION. Notwithstanding anything herein to the
contrary, the obligation of the Company to pay the Put Price upon exercise of
the Put Right is expressly subordinate to the prior right of the holders of the
Company's Series F Preferred Stock to require the redemption of some or all of
the outstanding shares of such Series F Preferred Stock in accordance with
Article III, B., Section 5 of the Company's Restated Certificate of
Incorporation and the Company shall not be obligated to, and shall not, make any
payment of any Put Price during any Redemption Exercise Period (as defined in
the Company's Restated Certificate of Incorporation) or at any time after any
such Redemption Exercise Period until the Company shall
14
have satisfied its obligations to affect any redemption election made during
such Redemption Exercise Period.
7. MISCELLANEOUS.
7.1 ENTIRE AGREEMENT. This Agreement and the documents
referred to herein constitute the entire agreement among the parties and no
party shall be liable or bound to any other party in any manner by any
warranties, representations, or covenants except as specifically set forth
herein or therein.
7.2 SURVIVAL OF WARRANTIES. The warranties,
representations and covenants of the Company and each Investor contained in or
made pursuant to this Agreement shall survive the execution and delivery of this
Agreement and the Closing and shall in no way be affected by any investigation
of the subject matter thereof made by or on behalf of any Investor or the
Company.
7.3 SUCCESSORS AND ASSIGNS. Except as otherwise provided
herein or in the Rights Agreement, the terms and conditions of this Agreement
shall inure to the benefit of and be binding upon the respective successors and
assigns of the parties (including transferees of any shares of Series F
Preferred Stock sold hereunder or any Common Stock issued upon conversion
thereof). Nothing in this Agreement, express or implied, is intended to confer
upon any party other than the parties hereto or their respective successors and
assigns any rights, remedies, obligations, or liabilities under or by reason of
this Agreement, except as expressly provided in this Agreement.
7.4 GOVERNING LAW. This Agreement shall be governed by
and construed under the laws of the State of Connecticut without regard to
principles of conflicts of law.
7.5 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.
7.6 TITLES AND SUBTITLES. The titles and subtitles used
in this Agreement are used for convenience only and are not to be considered in
construing or interpreting this Agreement.
7.7 NOTICES. Unless otherwise provided, any notice
required or permitted under this Agreement shall be given in writing and shall
be deemed effectively given upon personal delivery to the party to be notified
by hand or professional courier service or five days after deposit with the
United States Post Office, by registered or certified mail, postage prepaid, if
to the Investor(s), addressed to the Investor(s) to the attention of the
designated person of the Investor(s) at the address indicated for the
Investor(s) on the signature page hereto, with a copy to Xxxxxxxxx X. Xxxxxxx,
Esq., Xxxxx & Xxxxxxxxx LLP, 3200 National City Center, 0000 Xxxx Xxxxx Xxxxxx,
Xxxxxxxxx, Xxxx 00000-0000, and if to CII or CII-Xxxxxxx, with a copy to Xxxxx
X. Xxxxxxxx, Esq., Xxxxxx Xxxxx & Xxxxxxxx, P.C., Xxx Xxxxx Xxxxxx, Xxxxxxxx,
Xxxxxxxxxxx, 00000,
15
and if to the Company, addressed to the Company to the attention of the Chief
Executive Officer of the Company at the address indicated for the Company on the
signature page hereto, with a copy to Xxxxxxx X. Xxxxxxx, Esq., Xxxxxxx &
Xxxxxxx LLP, Xxx Xxxxxxxx Xxx, Xxxxxxxx, Xxxxxxxxxxx, 00000, or at such other
address as such party may designate by ten (10) days' advance written notice to
the other party.
7.8 FINDER'S FEES. Each party represents that it neither
is nor will be obligated for any finders' fee or commission in connection with
this transaction.
Each Investor agrees to indemnify and to hold harmless the
Company from any liability for any commission or compensation in the nature of a
finders' fee (and the costs and expenses of defending against such liability or
asserted liability) for which such Investor or any of its officers, partners,
employees, or representatives is responsible.
The Company agrees to indemnify and hold harmless each
Investor from any liability for any commission or compensation in the nature of
a finders' fee (and the costs and expenses of defending against such liability
or asserted liability) for which the Company or any of its officers, employees
or representatives is responsible.
7.9 ATTORNEYS' FEES. If any action at law or in equity is
necessary to enforce or interpret the terms of this Agreement, the Rights
Agreement, or the Restated Certificate, the prevailing party shall be entitled
to reasonable attorneys' fees, costs and necessary disbursements (by application
to the court in which the action was conducted and as determined by such court)
in addition to any other relief to which such party may be entitled. Whether or
not the transactions contemplated by this Agreement close, the Company agrees to
pay for the reasonable legal expenses of one counsel for the Purchasers (to be
designated by Crystal Internet Venture Fund II (BVI) Crystal Vision L.P.) and to
reimburse the Purchasers for their reasonable expenses incurred in connection
with their due diligence review of the Company, in an aggregate amount not to
exceed $30,000, PROVIDED THAT if the transactions contemplated by this Agreement
do not close because the Purchasers elect not to proceed without good reason,
then the Company shall not be required to pay such expenses.
7.10 AMENDMENTS AND WAIVERS. Any term of this Agreement
may be amended and the observance of any term of this Agreement may be waived
(either generally or in a particular instance and either retroactively or
prospectively), only with the written consent of the Company and the holders of
more than 50% of the Common Stock (that has not been sold to the public) issued
or issuable upon conversion of the Series F Preferred Stock. Any amendment or
waiver effected in accordance with this paragraph shall be binding upon the
holder of any securities purchased under this Agreement at the time outstanding
(including securities into which such securities have been converted), the
future holder of all such securities, and the Company. Notwithstanding the
foregoing, the rights of any Investor under Section 6 hereof may not be waived
or amended without the written consent of such Investor.
16
7.11 SEVERABILITY. If one or more provisions of this
Agreement are held to be unenforceable under applicable law, such provision
shall be excluded from this Agreement and the balance of the Agreement shall be
interpreted as if such provision were so excluded and shall be enforceable in
accordance with its terms.
[Remainder of page intentionally left blank. Next page is signature page.]
17
IN WITNESS WHEREOF, the parties have executed this Agreement as of the
date first above written.
OPEN SOLUTIONS INC.
By:
---------------------------------------
Name:
Title:
Address: 000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
INVESTOR:
By:
----------------------------------------
Name:
Title:
Address:
INVESTOR:
By:
----------------------------------------
Name:
Title:
Address:
18
