OPEN SOLUTIONS INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
---------------------------------
Dated as of April 12, 1999
TABLE OF CONTENTS
Page
1. Purchase and Sale of Stock and Warrants.......................................................... 1
1.1 Sale and Issuance of Series E Preferred Stock........................................... 1
1.2 Closing................................................................................. 1
2. Representations and Warranties of the Company.................................................... 1
2.1 Organization; Good Standing; Qualification.............................................. 1
2.2 Authorization........................................................................... 2
2.3 Valid Issuance of Preferred Stock....................................................... 2
2.4 Governmental Consents .............................................................. 2
2.5 Capitalization and Voting Rights........................................................ 3
2.6 Subsidiaries .................................................................... 4
2.7 Contracts and Other Commitments......................................................... 4
2.8 Related-Party Transactions.............................................................. 4
2.9 Registration Rights..................................................................... 4
2.10 Permits................................................................................. 4
2.11 Compliance with Other Instruments....................................................... 5
2.12 Litigation.............................................................................. 5
2.13 Disclosure.............................................................................. 5
2.14 Offering................................................................................ 5
2.15 Title to Property and Assets............................................................ 6
2.16 Financial Statements.................................................................... 6
2.17 Changes................................................................................. 6
2.18 Patents and Trademarks.................................................................. 6
2.19 Manufacturing and Marketing Rights...................................................... 7
2.20 Employees; Employee Compensation........................................................ 7
2.21 Proprietary Information and Inventions Agreements....................................... 7
2.22 Tax Returns, Payments, and Elections.................................................... 8
2.23 Insurance............................................................................... 8
2.24 Environmental and Safety Laws........................................................... 8
2.25 Indemnification......................................................................... 8
3. Representations and Warranties of the Investors.................................................. 8
3.1 Authorization........................................................................... 9
3.2 Purchase Entirely for Own Account....................................................... 9
3.3 Reliance Upon Investor's Representations................................................ 9
3.4 Receipt of Information.................................................................. 9
3.5 Investment Experience................................................................... 9
3.6 Accredited Investor..................................................................... 9
3.7 Restricted Securities................................................................... 10
3.8 Legends................................................................................. 10
Page
4. Conditions of Investor's Obligations at Closing.................................................. 10
4.1 Representations and Warranties.......................................................... 10
4.2 Performance............................................................................. 10
4.3 Compliance Certificate.................................................................. 10
4.4 Qualifications.......................................................................... 10
4.5 Proceedings and Documents............................................................... 11
4.6 Board of Directors...................................................................... 11
4.7 Opinion of Company Counsel.............................................................. 11
4.8 Investor's Rights Agreement............................................................. 11
4.9 Management Rights Letter................................................................ 11
5. Conditions of the Company's Obligations at Closing............................................... 11
5.1 Representations and Warranties.......................................................... 11
5.2 Qualifications.......................................................................... 11
5.3 Investors' Rights Agreement............................................................. 12
5.4 Mutual Release Agreement................................................................ 12
5.5 Strategic Alliance Agreement............................................................ 12
6. Right To Put Securities....................................................................... 12
6.1 Definitions............................................................................. 12
6.2 Right to Put............................................................................ 14
6.3 Method of Exercise...................................................................... 14
6.4 Time of Exercise........................................................................ 14
6.5 Closing Date............................................................................ 14
6.6 Closing Procedures...................................................................... 14
7. Miscellaneous.................................................................................... 14
7.1 Entire Agreement........................................................................ 14
7.2 Survival of Warranties.................................................................. 14
7.3 Successors and Assigns.................................................................. 15
7.4 Governing Law........................................................................... 15
7.5 Counterparts............................................................................ 15
7.6 Titles and Subtitles.................................................................... 15
7.7 Notices................................................................................. 15
7.8 Finder's Fees........................................................................... 15
7.9 Attorneys' Fees......................................................................... 16
7.10 Amendments and Waivers.................................................................. 16
7.11 Severability............................................................................ 16
SCHEDULE A Schedule of Exceptions
EXHIBIT A Restated Certificate of Incorporation
EXHIBIT B Amended and Restated Investors' Rights Agreement
EXHIBIT C List of Common Stock Shareholders and Number of
Shares Held by Each Common Stock Shareholder
EXHIBIT D Opinion of Company Counsel
EXHIBIT E Form of Proprietary Information and Inventions Agreements
EXHIBIT F Form of Management Rights Letter
EXHIBIT G Form of Mutual Release Agreement
EXHIBIT H Form of Strategic Alliance Agreement
EXHIBIT I Form of Notice of Put
OPEN SOLUTIONS INC.
SERIES E PREFERRED STOCK PURCHASE AGREEMENT
THIS SERIES E PREFERRED STOCK PURCHASE AGREEMENT (this
"Agreement") is made as of the 12th day of April, 1999, by and between Open
Solutions Inc., a Delaware corporation (the "Company"), and HNC Software Inc., a
Delaware corporation (the "Investor").
THE PARTIES HEREBY AGREE AS FOLLOWS:
1. PURCHASE AND SALE OF STOCK.
1.1. SALE AND ISSUANCE OF SERIES E 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 Investor shall purchase at the Closing and the Company shall
sell and issue to the Investor at the Closing 746,157 shares ("Shares") of the
Company's Series E Preferred Stock ("Series E Preferred Stock") for the purchase
price of $8.00 per share.
1.2. CLOSING.
(a) The purchase and sale of the Series E
Preferred Stock shall take place at the offices of Xxxx and Xxxx LLP, 00 Xxxxx
Xxxxxx, Xxxxxx, Xxxxxxxxxxxxx on the 12th day of April, 1999, or at such other
time and place as the Company and Investor 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 the Investor a certificate representing the shares of Series E Preferred
Stock that the 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 the Investor that, except as set forth
on SCHEDULE A (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, the Investor 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 E 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 E Preferred Stock being sold hereunder and the Common
Stock issuable upon conversion of the Series E 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 E
Preferred Stock which is being purchased by the Investor 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 E 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
E 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 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
Investor.
2.5. CAPITALIZATION AND VOTING RIGHTS. The authorized
capital of the Company consists, or will consist prior to the Closing, of:
(a) PREFERRED STOCK. Six Million Six Hundred
Ninety Thousand Seven Hundred Forty (6,690,740) 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, and Seven Hundred Forty-Six Thousand One Hundred
Fifty-Seven (746,157) shares of which have been designated Series E Preferred
Stock, none of which have been issued.
(b) COMMON STOCK. Twenty Million (20,000,000)
shares of common stock ("Common Stock"), of which Two Million Two Hundred
Thirty-Six Thousand Thirteen (2,236,013) shares are issued and outstanding.
(c) The outstanding shares of Common Stock and
Preferred Stock are owned by the shareholders 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 and
the Series E Preferred Stock, (B) the rights provided in Section 2.9 of the
Rights Agreement, (C) the options to purchase an aggregate of 1,589,696 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
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
2,868,988 shares of Common Stock are reserved for issuance under the Option
Plan. 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.
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 the Investor
with all the information reasonably available to it without undue expense that
such Investor has requested for deciding whether to purchase the Series E
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.
2.14. OFFERING. Subject in part to the truth and accuracy
of the Investor's representations set forth in this Agreement, the offer, sale
and issuance of the Series E 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
the Investor (i) its audited financial statements for the Company's fiscal year
ending December 31, 1997, and (ii) its unaudited financial schedules (balance
sheet and profit and loss statement) as at and for the year ended December 31,
1998 (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, 1998, 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, 1998, 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 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, service marks, 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, service marks, 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 currently effective 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.
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 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. The
Investor hereby represents and warrants that:
3.1. AUTHORIZATION. The 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 the Investor in reliance upon such Investor's representation to the
Company, which by Investor's execution of this Agreement the Investor hereby
confirms, that the Series E 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, the 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. The
Investor understands that the Series E 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. The Investor believes it has
received all the information it considers necessary or appropriate for deciding
whether to purchase the Series E Preferred Stock hereunder. The 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 E 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 the Investor to rely thereon.
3.5. INVESTMENT EXPERIENCE. The 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 E Preferred Stock. The Investor also represents it has not been
organized solely for the purpose of acquiring the Series E Preferred Stock.
3.6. ACCREDITED INVESTORS. The Investor represents to the
Company that it is an Accredited Investor as defined in Regulation D under the
Securities Act.
3.7. RESTRICTED SECURITIES. The 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, the 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 the Company has no present plans to make such information
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 THE INVESTOR'S OBLIGATIONS AT
CLOSING. The obligations of the Investor under subparagraph 1.1(b) of 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 the Investor to be effective against the 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 Investor 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.
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 Investor's special counsel, which shall have received all such
counterpart original and certified or other copies of such documents as it may
reasonably request.
4.6. BOARD OF DIRECTORS. The size of the Board of
Directors of the Company shall initially be fixed at ten (10) directors. The
directors shall consist of (i) Xxxxxx X. Xxxxxx, Xxxxxxxx X. Xxxxxxxx, Xxxxxxx
X. Xxxxx and Xxxxxx X. Xxxxxx, as elected by the holders of Common Stock voting
separately as a single class, (ii) Xxxxxxx X. Xxxxxxx, Xxxxx X. Xxxxxx,
Xxxxxxx X. Xxxxxxxx, Xxxxxx X. XxXxx and Xxxxxxx X. Thiemannn, as elected by the
holders of Preferred Stock voting separately as a single class, and (iii)
Xxxxxxx X. Xxxxxxxx, as elected by the holders of Common Stock and Preferred
Stock voting together as a single class.
4.7. OPINION OF COMPANY COUNSEL. The Investor shall
have received from Xxxx and Xxxx 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 all
holders of Preferred Stock of the Company (other than the Investor) 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 the Investor an executed Management Rights Letter in the form attached hereto
as EXHIBIT F.
4.10 MUTUAL RELEASE AGREEMENT. The Company shall have
executed and delivered to the Investor a Mutual Release Agreement in the form
attached hereto as EXHIBIT G.
4.11. STRATEGIC ALLIANCE AGREEMENT. The Company shall have
executed and delivered to the Investor a Strategic Alliance Agreement in the
form attached hereto as EXHIBIT H.
5. CONDITIONS OF THE COMPANY'S OBLIGATIONS AT CLOSING.
The obligations of the Company to the Investor under this Agreement are subject
to the fulfillment on or before the Closing of each of the following conditions
by the Investor:
5.1. REPRESENTATIONS AND WARRANTIES. The representations
and warranties of the 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. The Investor shall have
entered into the Rights Agreement in the form attached hereto as EXHIBIT B.
5.4 MUTUAL RELEASE AGREEMENT. The Investor shall have
executed and delivered to the Company a Mutual Release Agreement in the form
attached hereto as EXHIBIT G.
5.5 STRATEGIC ALLIANCE AGREEMENT. The Investor shall have
executed and delivered to the Company a Strategic Alliance Agreement in the form
attached hereto as EXHIBIT H.
6. RIGHT TO PUT SECURITIES
6.1. DEFINITIONS. For purposes of this Section 6:
CHANGE IN CONTROL - shall mean (i) a sale of all or
substantially all of the assets or business of the Company; (ii) a sale or other
transfer by the stockholders of the Company to a single entity or person (or to
a group of entities or persons acting in concert), in one or a series of related
transactions, of more than 50% of the outstanding shares of capital stock of the
Company entitled to vote for the election of directors, (including securities
convertible into such voting shares of the Company); or (iii) a merger or
consolidation of the Company into or with any other entity or entities if, as a
result thereof, more than 50% of the voting shares of the entity surviving such
merger or consolidation is held by persons or entities which are not
shareholders of the Company immediately prior to such event.
CONNECTICUT PRESENCE - shall mean that the Company, together
with 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, and (iii)
conducts a majority of its operations (including manufacturing and production),
directly or through subcontractors, in the State of Connecticut.
PUT PRICE - shall mean (a) in the case of a Put under Section
6.4(a), the greater of (i) eight dollars ($8.00) (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 40% compounded annual rate of return on such amount
from the date hereof through the date of the Put Closing (as hereinafter
defined), provided that if the Put Closing takes place more than three (3) years
from the date hereof, the compounded annual rate of return shall be calculated
from the date hereof through the third anniversary of the date hereof, or (ii)
the Aggregate Market Value on the Put Date; or (b) in the case of a Put under
Section 6.4(b), the greater of (i) eight dollars ($8.00) (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 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 Preferred Stock (and/or Common Stock) held by the Investor exercising its
rights under this Section 6 and (ii) the number of shares of 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:
(a) if the Series E Preferred Stock (or Common Stock) is not traded in
such manner that the quotations referred to in clause (b) below are available
for the period required hereunder, 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;
(b) the average of the daily closing prices per share for the 30
consecutive business days ending no more than 15 business days before the Put
Date (as adjusted for any stock dividend, split, combination or reclassification
that took effect during such 30 business day period). The closing price per
share for each day shall be the last reported sales price regular way or, in
case no such reported sales took place on such day, the average of the last
reported bid-and-asked prices regular way, in either case on the principal
national securities exchange on which the Series E Preferred Stock (or Common
Stock) is listed or admitted to trading, or if the Series E Preferred Stock (or
Common Stock) is not at the time listed or admitted for trading on any such
exchange, then such price as shall be equal to the average of the last reported
bid and asked prices, as reported by the National Association of Securities
Dealer's Automated Quotations System ("NASDAQ") on such day, or if, on any day
in question, the security shall not be quoted on NASDAQ, then such price shall
be equal to the average of the last reported bid-and-asked prices on such day as
reported by The National Quotation Bureau Incorporated or any similar reputable
quotation and reporting service, if such quotation is not reported by The
National Quotation Bureau Incorporated.
TERMINATION DATE - shall mean the earlier of (i) the date on
which Connecticut Innovations, Incorporated ("CII") no longer holds any Series C
Preferred Stock, Conversion Shares, Warrants or Warrant Shares, and (ii) the
first date after an IPO and the expiration or termination of the term of any
related "lock-up" agreement applicable to the Series C Preferred Stock,
Conversion Shares, or the Warrant Shares, on which all Series C Preferred Stock,
Conversion Shares and Warrant Shares then held by CII may be offered and sold by
CII to any number of offerees and purchasers pursuant to (A) Rule 144(k) under
the Securities Act of 1933 (or any similar rule hereafter adopted by the
Securities and Exchange Commission), or (B) an effective registration statement
filed under the Securities Act of 1933.
6.2. RIGHT TO PUT. On the terms and conditions herein set
forth, the 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.
6.3. METHOD OF EXERCISE. On the terms and conditions
herein set forth, the 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 I.
6.4. TIME OF EXERCISE. The rights of the Investor to Put
its Securities shall become exercisable at any time prior to the Termination
Date and following (a) the Company's failure to maintain a Connecticut Presence
(as defined herein) or (b) so long as the Company is not subject to the
requirements of Sections 12(g) or 15(d) of the Securities Exchange Act of 1934,
a Change in Control.
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 Investor
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 Investor the Put Price for such securities in cash, certified or bank
check, or by wire transfer. The Company may elect to pay to the Investor 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
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. The 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.
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 the 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 the 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 E
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.
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, addressed to the Investor to the attention of the President of
the Investor at the address indicated for the Investor on the signature page
hereto, with a copy to Xxxxxxx X. Xxxxxxxx, Esq., Fenwick & West, LLP, Two Xxxx
Xxxx Xxxxxx, Xxxxx 000, Xxxx Xxxx, XX 00000, 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 Xxxx X. Xxxxxx, Esq., Xxxx and Xxxx LLP, 00 Xxxxx Xxxxxx, Xxxxxx, XX 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.
The 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 the 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.
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 E 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 the Investor under Section 6 hereof
may not be waived or amended without the written consent of such Investor.
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.
IN WITNESS WHEREOF, the parties have executed this Agreement
as of the date first above written.
OPEN SOLUTIONS INC.
By: /s/ Xxxx X. Xxxxxxxx
--------------------------------
Name: Xxxxxxxx X. Xxxxxxxx
Title: Chairman and CEO
Address: 000 Xxxxxxx Xxxxx Xxxxx
Xxxxxxxxxxx, XX 00000
HNC SOFTWARE INC.
By: /s/ Xxxxxxx X. Xxxxxx
--------------------------------
Name: Xxxxxxx X. Xxxxxx
Title: Vice President, Finance
and Administration and
Secretary
Address: 0000 Xxxxxxxxxxx Xxxxx Xxxx
Xxx Xxxxx, XX 00000
