Exhibit 10.6
Right of First Refusal Agreement
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THIS RIGHT OF FIRST REFUSAL AGREEMENT (the "Agreement") is made as of
August 12, 1999, by and among xxxxxxxxxx.xxx 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.
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RECITALS
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A. IMA currently own shares of the Company's Common Stock (the "Common
Stock"), as set forth on Exhibit B.
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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
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terms have the following meanings:
"Qualified IPO" means the first underwritten sale of Company
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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
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Transferor.
"Offered Shares" means all Shares proposed to be transferred under
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Section 1(f) by a Transferor.
"Right of First Refusal" means the right of first refusal provided
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to IMA and the
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Series A Investors in Section 3 of this Agreement.
"Shares" means and includes all shares of Common Stock and Preferred
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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,
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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
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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
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Offered Shares.
Notice of Proposed Transfer. Before a Transferor may effect any Transfer
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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
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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.
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The Company and the Non-Transferors' Right. With respect to any
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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
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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-
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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
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(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
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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
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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
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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
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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
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procedures in this Agreement.
Multiple Series, Class or Type of Shares. If the Offered Shares consists
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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
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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.
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Right of First Refusal Legend. IMA and the Series A Investors
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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
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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-
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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.
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Termination. The Company's, IMA's and the Series A Investors' Right
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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.
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Waiver. The application of the Company's, IMA's and the Series A
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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.
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Notices, Etc. All notices, requests, consents, reports and demands
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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
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or to such other address as may be furnished in writing to the other parties
hereto.
Binding on Successors and Assigns; Inclusion Within Certain
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Definitions. This Agreement, and the rights and obligations of the parties
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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
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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
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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
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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
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to use
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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
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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
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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]
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IN WITNESS WHEREOF, the parties hereto have executed this Right of First
Refusal Agreement as of the date first written above.
THE COMPANY
xxxxxxxxxx.xxx inc.
By:
Title:
Address:
Information Management Associates, Inc.
By:
Title:
Address:
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
THE INVESTORS
CMG@VENTURES III, LLC
By:
Name: Xxxx Xxxxxxxx
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Title: General Partner
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Address: 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
@VENTURES III, L.P.
By:
Name: Xxxx Xxxxxxxxxxxx
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Title: General Partner
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Address: 0000 Xxxxxx Xxxx
Xxxxx Xxxx, XX 00000
@VENTURES INVESTORS, LLC
By:
Name: Xxxx Xxxxxxxx
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Title: General Partner
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Address: 000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
WAND EQUITY PORTFOLIO FUND II L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
WAND AFFILIATES FUND L.P.
By:
Name:
Title:
Address: c/o Wand Partners LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
MADRONA INVESTMENT GROUP L.L.C.
By:
Name:
Title:
Address: 0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
AMICUS CAPITAL, LLC
By:
Name:
Title:
Address: 000 Xxx Xxxxxxxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
SIGNATURE PAGE TO RIGHT OF FIRST REFUSAL AGREEMENT
EXHIBIT A
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THE INVESTORS
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Name and Address
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CMG@Ventures III, LLC
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attn.: Xxxx Xxxxxxxx
@Ventures III, L.P.
0000 Xxxxxx Xxxx
Xxxxx Xxxx, Xxxxxxxxxx 00000
Fax: (000) 000-0000
Attn.: Xxxx Xxxxxxxxxxxx
@Ventures Investors, LLC
000 Xxxxxxxxxx Xxxxxx, 0xx Xxxxx
Xxxxxxx, XX 00000
Fax: (000) 000-0000
Attn.: Xxxx Xxxxxxxx
Wand Equity Portfolio Fund II L.P.
c/o Wand Partners LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Wand Affiliates Fund L.P.
c/o Wand Partners LLC
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Madrona Investment Group L.L.C.
0000 Xxxxxx Xxxxxx
Xxxxx 0000
Xxxxxxx, XX 00000
Amicus Capital, LLC
000 Xxx Xxxxxxxxxxx, Xxxxx Xxxxx
Xxx Xxxxxxxxx, XX 00000
EXHIBIT B
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SHAREholdings of Information Management Associates, Inc.
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Common Stock Preferred Stock
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Information Management Associates, Inc. 9,698,106 0
