REGISTRATION RIGHTS AGREEMENT
REGISTRATION RIGHTS AGREEMENT, dated as of August 12, 1999 among
Information Management Associates, Inc., a Connecticut corporation (the
"Company") and Wand Equity Portfolio II L.P. and Wand Affiliates Fund L.P.
(collectively, the "Holder").
1. Introduction. The Company is a party to the separate Senior
Subordinated Convertible Promissory Note and Warrant Purchase Agreement, the
Senior Subordinated Convertible Promissory Note and the Common Stock Purchase
Warrant (the "Note and Warrant Agreements"), each dated August 12, 1999, with
the Holder, pursuant to which the Company has agreed, among other things, to
issue 5,000 shares of its Series C Convertible Preferred Stock (the "Preferred
Stock") upon maturity on April 30, 2000 of its 9% Senior Subordinated
Convertible Promissory Note if entire amount of principal payable under note has
not been repaid by such date, and 425,000 shares of Common Stock upon the
exercise by the Holder of its Warrant, each in the manner and subject to the
terms provided for therein This Agreement shall become effective upon the
issuance of such securities to such parties pursuant to the Note and Warrant
Agreements. Certain capitalized terms used in this Agreement are defined in
section 3 hereof; references to sections shall be to sections of this agreement.
2. Registration under Securities Act, etc.
2.1 Registration on Request.
(a) Request. Upon the written request of the Holder, requesting
that the Company effect the registration under the Securities Act of all or part
of Holder's Registrable Securities and specifying the intended method of
disposition thereof, the Company will promptly give written notice of such
requested registration to all registered holders of Registrable Securities, and
thereupon the Company will, subject to the terms of this Agreement, effect the
registration under the Securities Act of:
(i) the Registrable Securities which the Company has been so
requested to register by Holder for disposition in accordance with the
intended method of disposition stated in such request; and
(ii) all shares of Common Stock which the Company may elect to
register in connection with the offering of Registrable Securities pursuant
to this section 2.1,
all to the extent requisite to permit the disposition (in accordance with the
intended methods thereof as aforesaid) of the Registrable Securities and the
additional shares of Common Stock, if any so to be registered.
(b) Registration Statement Form. Registrations under this
section 2.1 shall be on such appropriate registration form of the Commission (i)
as shall be selected by the Company and as shall be reasonably acceptable to the
Holder and (ii) as shall permit the disposition of such Registrable Securities
in accordance with the intended method or methods of disposition specified in
its request for such registration. If, in connection with any registration under
section 2.1 which is proposed by the Company to be on Form S-3 or any similar
short form registration statement which is a successor to Form S-3, the managing
underwriters, if any, shall advise the Company in writing that in their opinion
the use of another permitted form is of material importance to the success of
the offering, then such registration shall be on such other permitted form.
(c) Expenses. The Company will pay all Registration Expenses in
connection with any registration requested pursuant to this section 2.1 by
Holder prior to the time at which two such registrations shall have been
effected. The Registration Expenses (and underwriting discounts and commissions
and transfer taxes, if any) in connection with each other registration requested
under this section 2.1 shall be allocated pro rata among all Persons on whose
behalf securities of the Company are included in such registration, on the basis
of the respective amounts of the securities then being registered on their
behalf.
(d) Effective Registration Statement. A registration requested
pursuant to this section 2.1 shall not be deemed to have been effected (i)
unless a registration statement with respect thereto has become effective,
provided that a registration which does not become effective after the Company
has filed a registration statement with respect thereto solely by reason of the
refusal to proceed of Holder (other than a refusal to proceed based upon the
advice of counsel relating to a matter with respect to the Company) shall be
deemed to have been effected by the Company at the request of Holder unless
Holder shall have elected to pay all Registration Expenses in connection with
such registration, (ii) if, after it has become effective, such registration
becomes subject to any stop order, injunction or other order or requirement of
the Commission or other governmental agency or court for any reason, or (iii)
the conditions to closing specified in the purchase agreement or underwriting
agreement entered into in connection with such registration are not satisfied,
other than by reason of some act or omission by Holder.
(e) Selection of Underwriters. If a requested registration
pursuant to this section 2.1 involves an underwritten offering, the underwriter
or underwriters thereof shall be selected by the Holder and shall be reasonably
acceptable to the Company, which shall not unreasonably withhold its acceptance
of any such underwriters.
(f) Priority in Requested Registrations. If a requested
registration pursuant to this section 2.1 involves an underwritten offering, and
the managing underwriter shall advise the Company in writing (with a copy to
each holder of Registrable Securities requesting registration) that, in its
opinion, the number of securities requested to be included in such registration
exceeds the number which can be sold in such offering within a price range
acceptable to the Holder, the Company will include in such registration, to the
extent of the number which the Company is so advised can be sold in such
offering, (i) first, Registrable Securities requested to be included in such
registration by Holder, (ii) second, securities the Company proposes to sell and
other securities of the Company included in such registration by the holders
thereof.
2.2 Incidental Registration.
(a) Right to Include Registrable Securities. If the Company at
any time proposes to register any of its securities under the Securities Act
(other than by a registration on Form S-4 or S-8, or any successor or similar
forms and other than pursuant to section 2.1), whether or not for sale for its
own account, it will each such time give prompt written notice to Holder of its
intention to do so and of the Holders rights under this section 2.2. Upon the
written request of any such holder made within 30 days after the receipt of any
such notice (which request shall specify the Registrable Securities intended to
be disposed of by Holder and the intended method of disposition thereof), the
Company will, subject to the terms of this Agreement, effect the registration
under the Securities Act of all Registrable Securities which the Company has
been so requested to register by the holders thereof, to the extent requisite to
permit the disposition (in accordance with the intended methods thereof as
aforesaid) of the Registrable Securities so to be registered, by inclusion of
such Registrable Securities in the registration statement which covers the
securities which the Company proposes to register, provided that if, at any time
after giving written notice of its intention to register any securities and
prior to the effective date of the registration statement filed in connection
with such registration, the Company shall determine for any reason either not to
register or to delay registration of such securities, the Company may, at its
election, give written notice of such determination to the Holder and,
thereupon, (i) in the case of a determination not to register, shall be relieved
of its obligation to register any Registrable Securities in connection with such
registration (but not from its obligation to pay the Registration Expenses in
connection therewith), without prejudice, however, to the rights of any holder
or holders of Registrable Securities entitled to do so to request that such
registration be effected as a registration under section 2.1, and (ii) in the
case of a determination to delay registering, shall be permitted to delay
registering any Registrable Securities, for the same period as the delay in
registering such other securities. No registration effected under this section
2.2 shall relieve the Company of its obligation to effect any registration upon
request under section 2.1, nor shall any such registration hereunder be deemed
to have been effected pursuant to section 2.1. The Company will pay all
Registration Expenses in connection with each registration of Registrable
Securities requested pursuant to this section 2.2.
(b) Priority in Incidental Registrations. If (i) a registration
pursuant to this section 2.2 involves an underwritten offering of the securities
so being registered, whether or not for sale for the account of the Company, to
be distributed (on a firm commitment basis) by or through one or more
underwriters of recognized standing under underwriting terms appropriate for
such a transaction, (ii) the Registrable Securities so requested to be
registered for sale for the account of Holder are not also to be included in
such underwritten offering (either because the Company has not been requested so
to include such Registrable Securities pursuant to section 2.4(b) or, if
requested to do so, is not obligated to do so under section 2.4(b), and (iii)
the managing underwriter of such underwritten offering shall inform the Company
and Holder requesting such registration by letter of its belief that the number
of securities requested to be included in such registration is less than the
number which can be sold in (or during the time of) such offering, then the
Company will include in such registration, to the extent of the number which the
Company is so advised can be sold in (or during the time of) such offering, (i)
first, Registrable Securities the registration of which shall have been
requested by the Holder, (ii) second, securities proposed by the Company to be
sold for its own account.
2.3 Registration Procedures. If and whenever (a) the Company is
required to effect the registration of any Registrable Securities under the
Securities Act as provided in sections 2.1 and 2.2 or (b) Holder so requests in
connection with any other proposed registration by the Company under the
Securities Act, the Company shall, as expeditiously as possible:
(i) prepare and (within 60 days after the end of the period
within which requests for registration may be given to the Company or in
any event as soon thereafter as possible) file with the Commission the
requisite registration statement to effect such registration (including
such audited financial statements as may be required by the Securities Act
or the rules and regulations promulgated thereunder) and thereafter cause
such registration statement to become and remain effective, provided
however that the Company may discontinue any registration of its securities
which are not Registrable Securities (and, under the circumstances
specified in section 2.2(a), its securities which are Registrable
Securities) at any time prior to the effective date of the registration
statement relating thereto, provided further that before filing such
registration statement or any amendments thereto, the Company will furnish
to the counsel selected by the Holder which are to be included in such
registration copies of all such documents proposed to be filed, which
documents will be subject to the review of such counsel;
(ii) prepare and file with the Commission such amendments
and supplements to such registration statement and the prospectus used in
connection therewith as may be necessary to keep such registration
statement effective and to comply with the provisions of the Securities Act
with respect to the disposition of all securities covered by such
registration statement until such time as all of such securities have been
disposed of in accordance with the intended methods of disposition by the
Holder;
(iii) furnish to the Holder covered by such registration
statement and each underwriter, if any, of the securities being sold by
such holder such number of conformed copies of such registration statement
and of each such amendment and supplement thereto (in each case including
all exhibits), such number of copies of the prospectus contained in such
registration statement (including each preliminary prospectus and any
summary prospectus) and any other prospectus filed under Rule 424 under the
Securities Act, in conformity with the requirements of the Securities Act,
and such other documents, as such holder and underwriter, if any, may
reasonably request;
(iv) use its best efforts to register or qualify all
Registrable Securities and other securities covered by such registration
statement under such other securities laws or blue sky laws of such
jurisdictions as any seller thereof and any underwriter of the securities
being sold by such seller shall reasonably request, to keep such
registrations or qualifications in effect for so long as such registration
statement remains in effect, and take any other action which may be
reasonably necessary or advisable to enable such seller and underwriter to
consummate the disposition in such jurisdictions of the securities owned by
such seller, except that the Company shall not for any such purpose be
required to qualify generally to do business as a foreign corporation in
any jurisdiction wherein it would not but for the requirements of this
subdivision (iv) be obligated to be so qualified or to consent to general
service of process in any such jurisdiction;
(v) use its best efforts to cause all Registrable
Securities covered by such registration statement to be registered with or
approved by such other governmental agencies or authorities as may be
necessary to enable the to consummate the disposition of such Registrable
Securities;
(vi) furnish to the Holder a signed counterpart, addressed
to the Holder and the underwriters, if any, of:
(x) an opinion of counsel for the Company, dated the effective date of such
registration statement (or, if such registration includes an underwritten public
offering, an opinion dated the date of the closing under the underwriting
agreement), reasonably satisfactory in form and substance to such seller, and
(y) a "comfort" letter (or, in the case of any such Person which does not
satisfy the conditions for receipt of a "comfort" letter specified in Statement
on Auditing Standards No. 72, an "agreed upon procedures" letter), dated the
effective date of such registration statement (and, if such registration
includes an underwritten public offering, a letter of like kind dated the date
of the closing under the underwriting agreement), signed by the independent
public accountants who have certified the Company's financial statements
included in such registration statement,
covering substantially the same matters with respect to such
registration statement (and the prospectus included therein) and, in
the case of the accountants' letter, with respect to events subsequent
to the date of such financial statements, as are customarily covered
in opinions of issuer's counsel and in accountants' letters delivered
to the underwriters in underwritten public offerings of securities
(with, in the case of an "agreed upon procedures" letter, such
modifications or deletions as may be required under Statement on
Auditing Standards No. 35) and, in the case of the accountants'
letter, such other financial matters, and, in the case of the legal
opinion, such other legal matters, as such seller (or the
underwriters, if any) may reasonably request;
(vii) notify the Holder and the managing underwriter or
underwriters, if any, promptly and confirm such advice in writing
promptly thereafter:
(v) when the registration statement, the prospectus or any
prospectus supplement related thereto or post-effective amendment to the
registration statement has been filed, and, with respect to the registration
statement or any post-effective amendment thereto, when the same has become
effective;
(w) of any request by the Commission for amendments or
supplements to the registration statement or the prospectus or for additional
information;
(x) of the issuance by the Commission of any stop order
suspending the effectiveness of the registration statement or the initiation of
any proceedings by any Person for that purpose;
(y) if at any time the representations and warranties of the
Company made as contemplated by section 2.4 below cease to be true and correct;
(z) of the receipt by the Company of any notification with
respect to the suspension of the qualification of any Registrable Securities for
sale under the securities or blue sky laws of any jurisdiction or the initiation
or threat of any proceeding for such purpose; and
(viii) notify at any time when a prospectus relating
thereto is required to be delivered under the Securities Act, upon
discovery that, or upon the happening of any event as a result of
which, the prospectus included in such registration statement, as then
in effect, includes an untrue statement of a material fact or omits to
state any material fact required to be stated therein or necessary to
make the statements therein not misleading in the light of the
circumstances then existing, and at the request of the Holder promptly
prepare and furnish to such seller and each underwriter, if any, a
reasonable number of copies of a supplement to or an amendment of such
prospectus as may be necessary so that, as thereafter delivered to the
purchasers of such securities, such prospectus shall not include an
untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading in the light of the circumstances then
existing;
(ix) use its best efforts to obtain the withdrawal of any
order suspending the effectiveness of the registration statement at
the earliest possible moment;
(x) otherwise use its best efforts to comply with all
applicable rules and regulations of the Commission, and make available
to its security holders, as soon as reasonably practicable, an
earnings statement covering the period of at least twelve months, but
not more than eighteen months, beginning with the first day of the
Company's first fiscal quarter after the effective date of such
registration statement, which earnings statement shall satisfy the
provisions of Section 11(a) of the Securities Act and Rule 158
thereunder, and will furnish to each such seller at least five
business days prior to the filing thereof a copy of any amendment or
supplement to such registration statement or prospectus and shall not
file any thereof to which the Holder shall have reasonably objected on
the grounds that such amendment or supplement does not comply in all
material respects with the requirements of the Securities Act or of
the rules or regulations thereunder;
(xi) make available for inspection by a representative or
representatives of the holders of Registrable Securities, any
underwriter participating in any disposition pursuant to the
registration statement and any attorney or accountant retained by such
selling holders or underwriter (each, an "Inspector"), all financial
and other records, pertinent corporate documents and properties of the
Company (the "Records"), and cause the Company's officers, directors
and employees to supply all information reasonably requested by any
such Inspector in connection with such registration in order to permit
a reasonable investigation within the meaning of Section 11 of the
Securities Act;
(xii) provide and cause to be maintained a transfer agent
and registrar for all Registrable Securities covered by such
registration statement from and after a date not later than the
effective date of such registration statement;
(xiii) enter into such agreements and take such other
actions as Holder shall reasonably request in order to expedite or
facilitate the disposition of such Registrable Securities;
(xiv) use its best efforts to list all Registrable
Securities covered by such registration statement on any securities
exchange on which any of the Registrable Securities are then listed;
and
(xv) use its best efforts to provide a CUSIP number for the
Registrable Securities, not later than the effective date of the
registration statement.
The Company may require the Holder to furnish the Company such information
regarding itself and the distribution of such securities as the Company may from
time to time reasonably request in writing.
The Company will not file any registration statement or amendment
thereto or any prospectus or any supplement thereto (including such documents
incorporated by reference and proposed to be filed after the initial filing of
the registration statement) to which the Holder or the underwriter or
underwriters, if any, shall reasonably object, provided that the Company may
file such document in a form required by law or upon the advice of its counsel.
The Holder agrees by acquisition of such Registrable Securities that, upon
receipt of any notice from the Company of the occurrence of any event of the
kind described in subdivision (viii) of this section 2.3, such holder will
forthwith discontinue the Holder's disposition of Registrable Securities
pursuant to the registration statement relating to such Registrable Securities
until the Holder's receipt of the copies of the supplemented or amended
prospectus contemplated by subdivision (viii) of this section 2.3 and, if so
directed by the Company, will deliver to the Company (at the Company's expense)
all copies, other than permanent file copies, then in such holder's possession
of the prospectus relating to such Registrable Securities current at the time of
receipt of such notice.
If any such registration statement refers to any holder of Registrable
Securities by name or otherwise as the holder of any securities of the Company,
then the Holder shall have the right to require (i) the insertion therein of
language, in form and substance satisfactory to the Holder, to the effect that
the holding by the Holder of such securities is not to be construed as a
recommendation by the Holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that the Holder
will assist in meeting any future financial requirements of the Company, or (ii)
in the event that such reference to the Holder by name or otherwise is not
required by the Securities Act or any similar federal statute then in force, the
deletion of the reference to the Holder.
2.4 Underwritten Offerings.
(a) Requested Underwritten Offerings. If requested by the
underwriters for any underwritten offering by the Holder pursuant to a
registration requested under section 2.1, the Company will enter into an
underwriting agreement with such underwriters for such offering, such agreement
to be satisfactory in substance and form to the Company, the Holder and the
underwriters, and to contain such representations and warranties by the Company
and such other terms as are generally prevailing in agreements of this type,
including, without limitation, indemnities to the effect and to the extent
provided in section 2.7. The Holder will cooperate with the Company in the
negotiation of the underwriting agreement and will give consideration to the
reasonable suggestions of the Company regarding the form thereof, provided that
nothing herein contained shall diminish the foregoing obligations of the
Company. The Holder of the Registrable Securities to be distributed by such
underwriters shall be parties to such underwriting agreement and may, at their
option, require that any or all of the representations and warranties by, and
the other agreements on the part of, the Company to and for the benefit of such
underwriters shall also be made to and for the benefit of the Holder and that
any or all of the conditions precedent to the obligations of such underwriters
under such underwriting agreement be conditions precedent to the obligations of
the Holders. Any such holder of Registrable Securities shall not be required to
make any representations or warranties to or agreements with the Company or the
underwriters other than representations and warranties contained in a writing
furnished by the Holder expressly for use in such registration statement or
agreements regarding the Holder, the Holder's Registrable Securities and the
Holder's intended method of distribution.
(b) Incidental Underwritten Offerings. If the Company at any
time proposes to register any of its securities under the Securities Act as
contemplated by section 2.2 and such securities are to be distributed by or
through one or more underwriters, the Company will, if requested by the Holder
Securities as provided in section 2.2 and subject to the provisions of section
2.2(b), use its best efforts to arrange for such underwriters to include all the
Registrable Securities to be offered and sold by the Holder among the securities
to be distributed by such underwriters, provided that if the managing
underwriter of such underwritten offering shall inform the Holder requesting
such registration and the holders of any other securities which shall have
exercised, in respect of such underwritten offering, registration rights
comparable to the rights under section 2.2 by letter of its belief that
inclusion in such underwritten distribution of all or a specified number of such
Registrable Securities or of such other securities so requested to be included
would interfere with the successful marketing of the securities (other than such
Registrable Securities and other securities so requested to be included) by the
underwriters (such writing to state the basis of such belief and the approximate
number of such Registrable Securities and shares of other securities so
requested to be included which may be included in such underwritten offering
without such effect), then the Company may, upon written notice to the Holder
and of such other shares of securities so requested to be included, exclude from
such underwritten offering (i) first, pro rata, (if and to the extent stated by
such managing underwriter to be necessary to eliminate such effect) the number
of such other securities requested to be included of which registration shall
have been requested by each holder thereof other than Holder whose registration
rights were granted by the Company after the date hereof, (ii) second, (if and
to the extent stated by such managing underwriter to be necessary to eliminate
such effect after reducing the number of securities to be registered under (i))
pro rata, the number of Registrable Securities or other securities requested to
be included of which registration shall have been requested by the Holder and
each holder thereof whose registration rights were granted by the Company on or
before the date hereof and (iii) third, (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect after reducing the
number of securities to be registered under (i) and (ii)) the number of
Registrable Securities the registration of which shall have been requested by
Holder, so that the resultant aggregate number of such Registrable Securities
and of such other shares of securities so requested to be included which are
included in such underwritten offering shall be equal to the approximate number
of shares stated in such managing underwriter's letter. The holders of
Registrable Securities to be distributed by such underwriters shall be parties
to the underwriting agreement between the Company and such underwriters and may,
at their option, require that any or all of the representations and warranties
by, and the other agreements on the part of, the Company to and for the benefit
of such underwriters shall also be made to and for the benefit of such holders
of Registrable Securities and that any or all of the conditions precedent to the
obligations of such underwriters under such underwriting agreement be conditions
precedent to the obligations of such holders of Registrable Securities. Any such
holder of Registrable Securities shall not be required to make any
representations or warranties to or agreements with the Company or the
underwriters other than representations, warranties or agreements regarding such
holder, such holder's Registrable Securities and such holder's intended method
of distribution and any other representation required by law.
(c) Participation in Underwritten Offerings. No Person may
participate in any underwritten offering hereunder unless such Person (i) agrees
to sell such Person's securities on the basis provided in any underwriting
arrangements approved, subject to the terms and conditions hereof, by the
Company and Holder and (ii) completes and executes all questionnaires,
indemnities, underwriting agreements and other documents (other than powers of
attorney) required under the terms of such underwriting arrangements.
Notwithstanding the foregoing, no underwriting agreement (or other agreement in
connection with such offering) shall require any holder of Registrable
Securities to make any representations or warranties to or agreements with the
Company or the underwriters other than representations and warranties contained
in a writing furnished by such holder expressly for use in the related
registration statement or agreements regarding such holder, such holder's
Registrable Securities and such holder's intended method of distribution and any
other representation required by law. Without limiting the generality of the
foregoing, each Holder agrees in connection with any public offering of the
Company's securities that, upon request of the Company or the underwriters
managing any underwritten offering of the Company's securities, that such Holder
will not sell, make any short sale of, loan, grant any option for the purchase
of, or otherwise transfer or dispose of or reduce such Holder's market risk with
respect to any Registrable Securities or other shares of stock of the Company
then owned by such Holder (other than those included in the registration)
without the prior written consent of the Company or the managing underwriters,
as the case may be, for such period of time determined by the Company and the
underwriters (not to exceed a period commencing on the date of the final
prospectus for such registration and ending 90 days thereafter). Each Holder
agrees to execute any confirmation of such lock-up agreement that may be
reasonably requested by the underwriters.
2.5 Preparation; Reasonable Investigation. In connection with the
preparation and filing of each registration statement under the Securities Act
pursuant to this Agreement, the Company will give the Holders registered under
such registration statement, their underwriters, if any, and their respective
counsel and accountants, the opportunity to participate in the preparation of
such registration statement, each prospectus included therein or filed with the
Commission, and each amendment thereof or supplement thereto, and will give each
of them such access to its books and records and such opportunities to discuss
the business of the Company with its officers and the independent public
accountants who have certified its financial statements as shall be necessary,
in the opinion of Holders' and such underwriters' respective counsel, to conduct
a reasonable investigation within the meaning of the Securities Act.
2.6 Indemnification.
(a) Indemnification by the Company. In the event of any
registration of any securities of the Company under the Securities Act, the
Company will, and hereby does agree to, indemnify and hold harmless (i) in the
case of any registration statement filed pursuant to section 2.1 or 2.2, the
holder of any Registrable Securities covered by such registration statement, its
directors and officers, each other Person who participates as an underwriter in
the offering or sale of such securities and each other Person, if any, who
controls the Holder or any such underwriter within the meaning of the Securities
Act, and (ii) in the case of any registration statement of the Company, the
holder of any Registrable Securities, its directors and officers and each other
Person, if any, who controls such holder within the meaning of the Securities
Act, against any losses, claims, damages or liabilities, joint or several, to
which the Holder or any such director or officer or underwriter or controlling
person may become subject under the Securities Act or otherwise, insofar as such
losses, claims, damages or liabilities (or actions or proceedings, whether
commenced or threatened, in respect thereof) arise out of or are based upon any
untrue statement or alleged untrue statement of any material fact contained in
any registration statement under which such securities were registered under the
Securities Act, any preliminary prospectus, final prospectus or summary
prospectus contained therein, or any amendment or supplement thereto, or any
omission or alleged omission to state therein a material fact required to be
stated therein or necessary to make the statements therein not misleading, and
the Company will reimburse the Holder and each such director, officer,
underwriter and controlling person for any legal or any other expenses
reasonably incurred by them in connection with investigating or defending any
such loss, claim, liability, action or proceeding, provided that the Company
shall not be liable in any such case to the extent that any such loss, claim,
damage, liability (or action or proceeding in respect thereof) or expense arises
out of or is based upon an untrue statement or alleged untrue statement or
omission or alleged omission made in such registration statement, any such
preliminary prospectus, final prospectus, summary prospectus, amendment or
supplement in reliance upon and in conformity with written information furnished
to the Company through an instrument duly executed by such holder specifically
stating that it is for use in the preparation thereof and, provided further that
the Company shall not be liable to any Person who participates as an underwriter
in the offering or sale of Registrable Securities or to any other Person, if
any, who controls such underwriter within the meaning of the Securities Act, in
any such case to the extent that any such loss, claim, damage, liability (or
action or proceeding in respect thereof) or expense arises out of such Person's
failure to send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities Act to the
Person asserting the existence of an untrue statement or alleged untrue
statement or omission or alleged omission at or prior to the written
confirmation of the sale of Registrable Securities to such Person if such
statement or omission was corrected in such final prospectus. Such indemnity
shall remain in full force and effect regardless of any investigation made by or
on behalf of the Holder or any such director, officer, underwriter or
controlling person and shall survive the transfer of such securities by the
Holder.
(b) Indemnification by the Holder. In the even that any
Registrable Securities are included in any registration statement filed pursuant
to section 2.3, the Holder will and hereby does agree to indemnify and hold
harmless (in the same manner and to the same extent as set forth in subdivision
(a) of this section 2.6) the Company, each director of the Company, each officer
of the Company and each other person, if any, who controls the Company within
the meaning of the Securities Act, with respect to any statement or alleged
statement in or omission or alleged omission from such registration statement,
any preliminary prospectus, final prospectus or summary prospectus contained
therein, or any amendment or supplement thereto, if such statement or alleged
statement or omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through an
instrument duly executed by such seller specifically stating that it is for use
in the preparation of such registration statement, preliminary prospectus, final
prospectus, summary prospectus, amendment or supplement. Such indemnity shall
remain in full force and effect, regardless of any investigation made by or on
behalf of the Company or any such director, officer or controlling person and
shall survive the transfer of such securities by the Holder.
(c) Notices of Claims, etc. Promptly after receipt by an
indemnified party of notice of the commencement of any action or proceeding
involving a claim referred to in the preceding subdivisions of this section 2.6,
such indemnified party will, if a claim in respect thereof is to be made against
an indemnifying party, give written notice to the latter of the commencement of
such action, provided that the failure of any indemnified party to give notice
as provided herein shall not relieve the indemnifying party of its obligations
under the preceding subdivisions of this section 2.6, except to the extent that
the indemnifying party is actually prejudiced by such failure to give notice. In
case any such action is brought against an indemnified party, unless in such
indemnified party's reasonable judgment a conflict of interest between such
indemnified and indemnifying parties may exist in respect of such claim, the
indemnifying party shall be entitled to participate in and to assume the defense
thereof, jointly with any other indemnifying party similarly notified, to the
extent that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the indemnifying
party to such indemnified party of its election so to assume the defense
thereof, the indemnifying party shall not be liable to such indemnified party
for any legal or other expenses subsequently incurred by the latter in
connection with the defense thereof other than reasonable costs of
investigation. No indemnifying party shall, without the consent of the
indemnified party, consent to entry of any judgment or enter into any settlement
of any such action which does not include as an unconditional term thereof the
giving by the claimant or plaintiff to such indemnified party of a release from
all liability, or a covenant not to xxx, in respect to such claim or litigation.
No indemnified party shall consent to entry of any judgment or enter into any
settlement of any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
specified in the preceding subdivisions of this section 2.6 (with appropriate
modifications) shall be given by the Company and each seller of Registrable
Securities with respect to any required registration or other qualification of
securities under any Federal or state law or regulation of any governmental
authority, other than the Securities Act.
(e) Indemnification Payments. The indemnification required by
this section 2.6 shall be made by periodic payments of the amount thereof during
the course of the investigation or defense, as and when bills are received or
expense, loss, damage or liability is incurred.
(f) Contribution. If the indemnification provided for in the
preceding subdivisions of this section 2.6 is unavailable to an indemnified
party in respect of any expense, loss, claim, damage or liability referred to
therein, then each indemnifying party, in lieu of indemnifying such indemnified
party, shall contribute to the amount paid or payable by such indemnified party
as a result of such expense, loss, claim, damage or liability (i) in such
proportion as is appropriate to reflect the relative benefits received by the
Company on the one hand and the holder or underwriter, as the case may be, on
the other from the distribution of the Registrable Securities or (ii) if the
allocation provided by clause (i) above is not permitted by applicable law, in
such proportion as is appropriate to reflect not only the relative benefits
referred to in clause (i) above but also the relative fault of the Company on
the one hand and of the holder or underwriter, as the case may be, on the other
in connection with the statements or omissions which resulted in such expense or
loss. The relative fault of the Company on the one hand and of the holder or
underwriter, as the case may be, on the other shall be determined by reference
to, among other things, whether the untrue or alleged untrue statement of a
material fact or omission to state a material fact relates to information
supplied by the Company, by the holder or by the underwriter and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission, provided that the foregoing contribution
agreement shall not inure to the benefit of any indemnified party if
indemnification would be unavailable to such indemnified party by reason of the
provisions contained in the first sentence of subdivision (a) of this section
2.6, and in no event shall the obligation of any indemnifying party to
contribute under this subdivision (f) exceed the amount that such indemnifying
party would have been obligated to pay by way of indemnification if the
indemnification provided for under subdivisions (a) or (b) of this section 2.6
had been available under the circumstances.
The Company and the Holders agree that it would not be just and
equitable if contribution pursuant to this subdivision (f) were determined by
pro rata allocation (even if the Holders and any underwriters were treated as
one entity for such purpose) or by any other method of allocation that does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages and liabilities referred to in the
immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth in the preceding sentence and subdivision (c) of this
section 2.6, any legal or other expenses reasonably incurred by such indemnified
party in connection with investigating or defending any such action or claim.
Notwithstanding the provisions of this subdivision (f), no Holder or
underwriter shall be required to contribute any amount in excess of the amount
by which (i) in the case of any such holder, the net proceeds received by Holder
from the sale of Registrable Securities or (ii) in the case of an underwriter,
the total price at which the Registrable Securities purchased by it and
distributed to the public were offered to the public exceeds, in any such case,
the amount of any damages that the Holder or underwriter has otherwise been
required to pay by reason of such untrue or alleged untrue statement or
omission. No Person guilty of fraudulent misrepresentation (within the meaning
of Section 11(f) of the Securities Act) shall be entitled to contribution from
any person who was not guilty of such fraudulent misrepresentation.
2.7 Adjustments Affecting Registrable Securities. The Company will
not effect or permit to occur any combination or subdivision of shares which
would adversely affect the ability of the Holder to include such Registrable
Securities in any registration of its securities contemplated by this section 2
or the marketability of such Registrable Securities under any such registration.
3. Definitions. As used herein, unless the context otherwise
requires, the following terms have the following respective meanings:
Commission: The Securities and Exchange Commission or any other
federal agency at the time administering the Securities Act.
Common Stock: As defined in section 1.
Company: As defined in the introductory paragraph of this Agreement.
Exchange Act: The Securities Exchange Act of 1934, or any similar
Federal statute, and the rules and regulations of the Commission
thereunder, all as the same shall be in effect at the time. Reference
to a particular section of the Securities Exchange Act of 1934 shall
include a reference to the comparable section, if any, of any such
similar Federal statute.
Note and Warrant Agreements: As defined in section 1.
Person: A corporation, an association, a partnership, an organization,
business, an individual, a governmental or political subdivision
thereof or a governmental agency.
Registrable Securities: Any shares of Common Stock issued to Holder
pursuant to the conversion or exercise of the Preferred stock, without
par value of the Company and the Common Stock purchase warrants of the
Company issued pursuant to the Note and Warrant Agreements including
any such shares which have been assigned, sold, transferred or
otherwise disposed of to a permitted assignee of Holder, and any
securities issued or issuable with respect to any Common Stock
referred to above by way of stock dividend or stock split or in
connection with a combination of shares, recapitalization, merger,
consolidation or other reorganization or otherwise. As to any
particular Registrable Securities, once issued such securities shall
cease to be Registrable Securities when (a) a registration statement
with respect to the sale of such securities shall have become
effective under the Securities Act and such securities shall have been
disposed of in accordance with such registration statement, (b) they
shall have been distributed to the public pursuant to Rule 144 (or any
successor provision) under the Securities Act, (c) subsequent
disposition of them shall not require registration or qualification of
them under the Securities Act or any similar state law then in force
pursuant to the exemption contained in Rule 144(k) or any successor
rule, or (d) they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
performance of or compliance with section 2, including, without
limitation, all registration, filing and NASD fees, all stock exchange
listing fees, all fees and expenses of complying with securities or
blue sky laws, all word processing, duplicating and printing expenses,
messenger and delivery expenses, the fees and disbursements of counsel
for the Company and of its independent public accountants, including
the expenses of any special audits or "cold comfort" letters required
by or incident to such performance and compliance, the fees and
disbursements of any single counsel and accountants retained by the
Holder, premiums and other costs of policies of insurance for the
benefit of the Company or its Board of Directors against liabilities
arising out of the public offering of the Registrable Securities being
registered and any fees and disbursements of underwriters customarily
paid by issuers or sellers of securities, but excluding underwriting
discounts and commissions and transfer taxes, if any, provided that,
in any case where Registration Expenses are not to be borne by the
Company, such expenses shall not include salaries of Company personnel
or general overhead expenses of the Company, auditing fees, premiums
or other expenses relating to liability insurance required by
underwriters of the Company or other expenses for the preparation of
financial statements or other data normally prepared by the Company in
the ordinary course of its business or which the Company would have
incurred in any event.
Securities Act: The Securities Act of 1933, or any similar Federal
statute, and the rules and regulations of the Commission thereunder,
all as of the same shall be in effect at the time. References to a
particular section of the Securities Act of 1933 shall include a
reference to the comparable section, if any, of any such similar
Federal statute.
4. Rules 144 and 144A. So long as the Company shall not have filed a
registration statement pursuant to section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall, at any time and from time to time, upon the request of the Holder
and upon the request of any Person designated by the Holder as a prospective
purchaser of any Registrable Securities, furnish in writing to the Holder or
such prospective purchaser, as the case may be, a statement as of a date not
earlier than 12 months prior to the date of such request of the nature of the
business of the Company and the products and services it offers and copies of
the Company's most recent balance sheet and profit and loss and retained
earnings statements, together with similar financial statements for such part of
the two preceding fiscal years as the Company shall have been in operation, all
such financial statements to be audited to the extent audited statements are
reasonably available, provided that, in any event the most recent financial
statements so furnished shall include a balance sheet as of a date less than 16
months prior to the date of such request, statements of profit and loss and
retained earnings for the 12 months preceding the date of such balance sheet,
and, if such balance sheet is not as of a date less than 6 months prior to the
date of such request, additional statements of profit and loss and retained
earnings for the period from the date of such balance sheet to a date less than
6 months prior to the date of such request. If the Company shall have filed a
registration statement pursuant to the requirements of section 12 of the
Exchange Act or a registration statement pursuant to the requirements of the
Securities Act, the Company shall timely file the reports required to be filed
by it under the Securities Act and the Exchange Act and the rules and
regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, will, upon the request of any holder of
Registrable Securities, make publicly available other information) and will take
such further action as any holder of Registrable Securities may reasonably
request, all to the extent required from time to time to enable such holder to
sell Registrable Securities without registration under the Securities Act within
the limitation of the exemptions provided by (a) Rule 144 under the Securities
Act, as such Rule may be amended from time to time, or (b) any similar rule or
regulation hereafter adopted by the Commission. Upon the request of any holder
of Registrable Securities, the Company will deliver to such holder a written
statement as to whether it has complied with the requirements of this Section 4.
5. Amendments and Waivers. This Agreement may be amended and the
Company may take any action herein prohibited, or omit to perform any act herein
required to be performed by it, only if the Company shall have obtained the
written consent to such amendment, action or omission to act, of Holder. The
Holder shall be bound by any consent authorized by this section 5, whether or
not such Registrable Securities shall have been marked to indicate such consent.
6. Nominees for Beneficial Owners. In the event that any Registrable
Securities are held by a nominee for the beneficial owner thereof, the
beneficial owner thereof may, at its election, be treated as the holder of such
Registrable Securities for purposes of any request or other action the Holder
pursuant to this Agreement or any determination of any number or percentage of
shares of Registrable Securities held by the Holder contemplated by this
Agreement. If the beneficial owner of any Registrable Securities so elects, the
Company may require assurances reasonably satisfactory to it of such owner's
beneficial ownership of such Registrable Securities.
7. Notices. Except as otherwise provided in this Agreement, all
notices, requests and other communications to any Person provided for hereunder
shall be in writing and shall be given to such Person in the manner set forth in
the applicable Note and Warrant Agreement. Each such notice, request or other
communication shall be effective (i) if given by mail, 72 hours after such
communication is deposited in the mails with first class postage prepaid,
addressed as aforesaid or (ii) if given by any other means (including, without
limitation, by air courier), when delivered at the address specified above,
provided that any such notice, request or communication to the Holder shall not
be effective until received.
8. Assignment. This Agreement shall be binding upon and inure to the
benefit of and be enforceable by the parties hereto and their respective
successors and assigns. In addition, and whether or not any express assignment
shall have been made, the provisions of this Agreement which are for the benefit
of the parties hereto other than the Company shall also be for the benefit of
and enforceable by any subsequent holder of at least 100,000 shares of
Registrable Securities.
9. Descriptive Headings. The descriptive headings of the several
sections and paragraphs of this Agreement are inserted for reference only and
shall not limit or otherwise affect the meaning hereof.
10. GOVERNING LAW. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN
ACCORDANCE WITH, AND THE RIGHTS OF THE PARTIES SHALL BE GOVERNED BY, THE LAWS OF
THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF CONFLICTS OF LAWS.
11. Counterparts. This Agreement may be executed simultaneously in
any number of counterparts, each of which shall be deemed an original, but all
such counterparts shall together constitute one and the same instrument.
12. Entire Agreement. This Agreement embodies the entire agreement
and understanding between the Company and each other party hereto relating to
the subject matter hereof and supersedes all prior agreements and understandings
relating to such subject matter.
13. SUBMISSION TO JURISDICTION. ANY LEGAL ACTION OR PROCEEDING WITH
RESPECT TO THIS AGREEMENT MAY BE BROUGHT IN THE COURTS OF THE STATE OF NEW YORK
OR OF THE UNITED STATES OF AMERICA FOR THE SOUTHERN DISTRICT OF NEW YORK, AND,
BY EXECUTION AND DELIVERY OF THIS AGREEMENT, THE COMPANY HEREBY ACCEPTS FOR
ITSELF AND IN RESPECT OF ITS PROPERTY, GENERALLY AND UNCONDITIONALLY, THE
JURISDICTION OF THE AFORESAID COURTS AND APPELLATE COURTS FROM ANY THEREOF. EACH
PARTY HERETO HEREBY IRREVOCABLY CONSENTS TO THE SERVICE OF PROCESS OUT OF ANY OF
THE AFOREMENTIONED COURTS IN ANY ACTION OR PROCEEDING BY THE MAILING OF COPIES
THEREOF TO SUCH PARTY BY REGISTERED OR CERTIFIED MAIL, POSTAGE PREPAID, RETURN
RECEIPT REQUESTED, TO SUCH PARTY AT ITS ADDRESS SPECIFIED IN SECTION 7. THE
PARTIES HERETO HEREBY IRREVOCABLY WAIVE TRIAL BY JURY, AND THE COMPANY HEREBY
IRREVOCABLY WAIVES ANY OBJECTION, INCLUDING, WITHOUT LIMITATION, ANY OBJECTION
TO THE LAYING OF VENUE OR BASED ON THE GROUNDS OF FORUM NON CONVENIENS, WHICH IT
MAY NOW OR HEREAFTER HAVE TO THE BRINGING OF ANY SUCH ACTION OR PROCEEDING IN
SUCH RESPECTIVE JURISDICTIONS.
14. Severability. If any provision of this Agreement, or the
application of such provisions to any Person or circumstance, shall be held
invalid, the remainder of this Agreement, or the application of such provision
to Persons or circumstances other than those to which it is held invalid, shall
not be affected thereby.
IN WITNESS WHEREOF, the parties have caused this Agreement to be
executed and delivered by their respective officers thereunto duly authorized as
of the date first above written.
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By /s/ Xxxxxx Xxxxxxxx, Xx.
--------------------------------
Name: Xxxxxx Xxxxxxxx, Xx.
Title: President and CEO
WAND EQUITY PORTFOLIO II L.P.
By: WAND PARTNERS LLC, General Partner
By /s/ Xxxx X. Xxxxxx
--------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Member
WAND AFFILIATES FUND L.P.
By: WAF PARTNERS LLC, General Partner
By /s/ Xxxx X. Xxxxxx
--------------------------------
Name: Xxxx X. Xxxxxx
Title: Managing Member
