EXHIBIT 10.12
This Warrant and any shares acquired upon the exercise of this Warrant
have not been registered under the Securities Act of 1933, as amended,
and may not be transferred, sold or otherwise disposed of except while
such a registration is in effect or pursuant to an exemption from
registration under such Act.
INFORMATION MANAGEMENT ASSOCIATES, INC.
Common Stock Purchase Warrant
NEW YORK, NEW YORK
No. W-3 December 21, 1990
Information Management Associates, Inc., a Connecticut corporation
(the "Company"), for value received, hereby certifies that Xxxxxx X. Xxxx, or
registered assigns, is entitled to purchase from the Company 2,381 duly
authorized, validly issued, fully paid and nonassessable shares of Common Stock,
no par value per share (the "Common Stock") of the Company at the purchase price
per share of $9, at any time or from time to time prior to 5:00 P.M., New York
City time, on December 21, 2000, all subject to the terms, conditions and
adjustments set forth below in this Warrant.
This Warrant is one of several Common Stock Purchase Warrants (the
"Warrants", such term to include any such warrants issued in substitution
therefor) originally issued in connection with the issue and sale by the Company
of 15% Senior Subordinated Notes due 1997, pursuant to the Note and Warrant
Purchase Agreement (the "Purchase Agreement"), dated December 21, 1990, between
the Company and Wand/IMA Investments, L.P., a Delaware limited partnership (the
"Purchaser"). Certain capitalized
terms used in this Warrant are defined in section 14; references to an "Exhibit"
are, unless otherwise specified, to one of the Exhibits attached to this Warrant
and references to a "section" are, unless otherwise specified, to one of the
sections of this Warrant.
1. Exercise of Warrant. 1.1. Manner of Exercise. This Warrant may be
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exercised by the holder hereof, in whole or in part, during normal business
hours on any Business Day, by surrender of this Warrant to the Company at its
office maintained pursuant to subdivision (a) of section 12.2, accompanied by a
subscription in substantially the form attached to this Warrant (or a reasonable
facsimile thereof) duly executed by such holder and accompanied by payment, in
cash, by certified or official bank check payable to the order of the Company,
or in the manner provided in section 1.5 (or by any combination of such
methods), in the amount obtained by multiplying (a) the number of shares of
Common Stock (without giving effect to any adjustment thereof) designated in
such subscription by (b) $9, and such holder shall thereupon be entitled to
receive the number of duly authorized, validly issued, fully paid and
nonassessable shares of Common Stock (or Other Securities) determined as
provided in sections 2 through 4.
1.2. When Exercise Effective. Each exercise of this Warrant shall be
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deemed to have been effected immediately prior to the close of business on the
Business Day on which this Warrant shall have been surrendered to the Company as
provided in section 1.1, and at such time the Person or Persons in whose name or
names any certificate or certificates for shares of Common Stock (or Other
Securities) shall be issuable upon such exercise as provided in section 1.3
shall be deemed to have become the holder or holders of record thereof.
1.3. Delivery of Stock Certificates, etc. As soon as practicable after
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each exercise of this Warrant, in whole or in part, and in any event within five
Business Days thereafter, the Company at its expense (including the payment by
it of any applicable issue taxes) will cause to be issued in the name of and
delivered to the holder hereof or, subject to section 9, as such holder (upon
payment by such holder of any applicable transfer taxes) may direct,
(a) a certificate or certificates for the
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number of duly authorized, validly issued, fully paid and nonassessable
shares of Common Stock (or Other Securities) to which such holder shall be
entitled upon such exercise plus, in lieu of any fractional share to which
such holder would otherwise be entitled, cash in an amount equal to the
same fraction of the Market Price per share on the Business Day next
preceding the date of such exercise, and
(b) in case such exercise is in part only, a new Warrant or Warrants
of like tenor, calling in the aggregate on the face or faces thereof for
the number of shares of Common Stock equal (without giving effect to any
adjustment thereof) to the number of such shares called for on the face of
this Warrant minus the number of such shares designated by the holder upon
such exercise as provided in section 1.1.
1.4. Company to Reaffirm Obligations. The Company will, at the time of
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each exercise of this Warrant, upon the request of the holder hereof,
acknowledge in writing its continuing obligation to afford to such holder all
rights (including, without limitation, any rights to registration of the shares
of Common Stock or Other Securities issued upon such exercise) to which such
holder shall continue to be entitled after such exercise in accordance with the
terms of this Warrant, provided that if the holder of this Warrant shall fail to
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make any such request, such failure shall not affect the continuing obligation
of the Company to afford such rights to such holder.
1.5. Payment by Application of Notes. Upon any exercise of this
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Warrant, the holder hereof may, at its option, instruct the Company, by written
notice accompanying the surrender of this Warrant at the time of such exercise,
to apply to the payment required by section 1.1 all or any part of the unpaid
principal amount of any one or more Notes at the time held by such holder, in
which case the Company will accept the principal amount specified in such notice
in satisfaction of a like amount of such payment. In case less than the entire
unpaid principal amount of any Note shall be so specified, the principal amount
so specified shall be credited, as of the date of such exercise, against the
required prepayments of principal then remaining unpaid on such
3
Note in the inverse order of their maturity dates. Upon any partial application
of a Note, the Company at its expense shall forthwith issue and deliver to or
upon the order of the holder thereof a new Note or Notes in principal amount
equal to the unpaid principal amount of such surrendered Note which has not been
applied against such payment, such new Note or Notes to be dated and to bear
interest from the date to which interest has been paid on such surrendered Note.
Within two Business Days after receipt of any such notice, the Company will pay
to the holder of the Notes giving such notice, in the manner provided in the
Notes and in the Purchase Agreement, all unpaid interest on the principal amount
so specified in such notice, accrued to the date of the exercise of such
Warrant.
2. Adjustment of Common Stock Issuable Upon Exercise. 2.1. General;
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Warrant Price. The number of shares of Common Stock which the holder of this
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Warrant shall be entitled to receive upon each exercise hereof shall be
determined by multiplying the number of shares of Common Stock which would
otherwise (but for the provisions of this section 2) be issuable upon such
exercise, as designated by the holder hereof pursuant to section 1.1, by a
fraction of which (a) the numerator is $9 and (b) the denominator is the Warrant
Price in effect on the date of such exercise. The "Warrant Price" shall
initially be $9 per share, shall be adjusted and readjusted from time to time as
provided in this section 2 and, as so adjusted or readjusted, shall remain in
effect until a further adjustment or readjustment thereof is required by this
section 2.
2.2. Adjustment of Warrant Price.
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2.2.1. Issuance of Additional Shares of Common Stock. In case the
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Company at any time or from time to time after the date hereof shall issue or
sell Additional Shares of Common Stock (including Additional Shares of Common
Stock deemed to be issued pursuant to section 2.3 or 2.4) without consideration
or for a consideration per share less than the greater of the Current Market
Price and the Warrant Price in effect immediately prior to such issue or sale,
then, and in each such case, subject to section 2.8, such Warrant Price shall be
reduced, concurrently with such issue or sale, to a price (calculated to the
nearest .001 of a cent) determined by multiplying such Warrant Price by a
fraction
4
(a) the numerator of which shall be (i) the number of shares of Common
Stock outstanding immediately prior to such issue or sale plus (ii) the
number of shares of Common Stock which the aggregate consideration received
by the Company for the total number of such Additional Shares of Common
Stock so issued or sold would purchase at the greater of such Current
Market Price and such Warrant Price, and
(b) the denominator of which shall be the number of shares of Common
Stock outstanding immediately after such issue or sale,
provided that, for the purposes of this section 2.2.1, (w) immediately after any
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Additional Shares of Common Stock are deemed to have been issued pursuant to
section 2.3 or 2.4, such Additional Shares shall be deemed to be outstanding,
(x) treasury shares shall not be deemed to be outstanding, (y) if all or any
part of the 7,500 shares issued to Xxxxxx Xxxxx or Xxxx Xxxxxxx pursuant to
restricted stock awards on December 20, 1990 shall be forfeited, and cease to be
outstanding (whether because of cancellation or by virtue of becoming treasury
shares) then this section shall not apply to the issue of up to the number of
shares forfeited, as adjusted to account for any intervening stock dividend,
stock split, reclassification, recapitalization or other similar event and (z)
no adjustment of the Warrant Price pursuant to this section 2.2.2 shall be
required as a consequence of the issuance or sale of the Common Stock upon
exercise of the Options to acquire 5% of the Common Stock issued to employees
pursuant to section 2.3.
2.2.2. Extraordinary Dividends and Distributions. In case the Company
-----------------------------------------
at any time or from time to time after the date hereof shall declare, order, pay
or make a dividend or other distribution (including, without limitation, any
distribution of other or additional stock or other securities or property or
Options by way of dividend or spin-off, reclassification, recapitalization or
similar corporate rearrangement) on the Common Stock, other than (a) a dividend
payable in Additional Shares of Common Stock or (b) for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual cash
dividend not in excess of the amount equal to the taxable income of the Company
for the preceding calendar year multiplied by the maximum marginal federal
income tax rate on individuals for the preceding calendar
5
year, then, and in each such case, subject to section 2.8, the Warrant Price in
effect immediately prior to the close of business on the record date fixed for
the determination of holders of any class of securities entitled to receive such
dividend or distribution shall be reduced, effective as of the close of business
on such record date, to a price (calculated to the nearest .001 of a cent)
determined by multiplying such Warrant Price by a fraction
(x) the numerator of which shall be the Current Market Price in effect
on such record date or, if the Common Stock trades on an ex-dividend basis,
on the date prior to the commencement of ex-dividend trading, less the
amount of such dividend or distribution (as determined in good faith by the
Board of Directors of the Company) applicable to one share of Common Stock,
and
(y) the denominator of which shall be such Current Market Price
provided that, in the event that the amount of such dividend applicable to one
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share of Common Stock as so determined is equal to or greater than such Current
Market Price or in the event that such fraction is less than 1/2, in lieu of the
foregoing adjustment, adequate provision shall be made so that the holder of
this Warrant shall receive a pro rata share of such dividend based upon the
maximum number of shares of Common Stock at the time issuable to such holder
(determined without regard to whether the Warrant is exercisable at such time).
2.3. Treatment of Options and Convertible Securities. In case the
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Company at any time or from time to time after the date hereof shall issue,
sell, grant or assume, or shall fix a record date for the determination of
holders of any class of securities entitled to receive, any Options (except for
Options issued or issuable to employees of the Company entitling such employees
to acquire up to a maximum of 5% of the Common Stock on a fully diluted basis
determined at the time of the issuance or grant of these employee options) or
Convertible Securities, then, and in each such case, the maximum number of
Additional Shares of Common Stock (as set forth in the instrument relating
thereto, without regard to any provisions contained therein for a subsequent
adjustment of such number) issuable upon the exercise of such Op-
6
tions or, in the case of Convertible Securities and Options therefor, the
conversion or exchange of such Convertible Securities, shall be deemed to be
Additional Shares of Common Stock issued as of the time of such issue, sale,
grant or assumption or, in case such a record date shall have been fixed, as of
the close of business on such record date (or, if the Common Stock trades on an
ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), provided that such Additional Shares of Common Stock shall not be
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deemed to have been issued unless the consideration per share (determined
pursuant to section 2.5) of such shares would be less than the greater of the
Current Market Price and the Warrant Price in effect on the date of and
immediately prior to such issue, sale, grant or assumption or immediately prior
to the close of business on such record date (or, if the Common Stock trades on
an ex-dividend basis, on the date prior to the commencement of ex-dividend
trading), as the case may be, and provided, further, that in any such case in
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which Additional Shares of Common Stock are deemed to be issued
(a) no further adjustment of the Warrant Price shall be made upon the
subsequent issue or sale of Convertible Securities or shares of Common
Stock upon the exercise of such Options or the conversion or exchange of
such Convertible Securities, except in the case of any such Options or
Convertible Securities which contain provisions requiring an adjustment,
subsequent to the date of the issue or sale thereof, of the number of
Additional Shares of Common Stock issuable upon the exercise of such
Options or the conversion or exchange of such Convertible Securities by
reason of (x) a change of control of the Company, (y) the acquisition by
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any Person or group of Persons of any specified number or percentage of the
Voting Securities of the Company or (z) any similar event or occurrence,
-
each such case to be deemed hereunder to involve a separate issuance of
Additional Shares of Common Stock, Options or Convertible Securities, as
the case may be;
(b) if such Options or Convertible Securities by their terms provide,
with the passage of time or otherwise, for any increase in the
consideration payable to the Company, or decrease in the number of
Additional Shares of Common Stock issuable, upon the exercise, conversion
or exchange thereof (by change
7
of rate or otherwise), the Warrant Price computed upon the original issue,
sale, grant or assumption thereof (or upon the occurrence of the record
date, or date prior to the commencement of ex-dividend trading, as the case
may be, with respect thereto), and any subsequent adjustments based
thereon, shall, upon any such increase or decrease becoming effective, be
recomputed to reflect such increase or decrease insofar as it affects such
Options, or the rights of conversion or exchange under such Convertible
Securities, which are outstanding at such time;
(c) upon the expiration (or purchase by the Company and cancellation
or retirement) of any such Options which shall not have been exercised or
the expiration of any rights of conversion or exchange under any such
Convertible Securities which (or purchase by the Company and cancellation
or retirement of any such Convertible Securities the rights of conversion
or exchange under which) shall not have been exercised, the Warrant Price
computed upon the original issue, sale, grant or assumption thereof (or
upon the occurrence of the record date, or date prior to the commencement
of ex-dividend trading, as the case may be, with respect thereto), and any
subsequent adjustments based thereon, shall, upon such expiration (or such
cancellation or retirement, as the case may be), be recomputed as if:
(i) in the case of Options for Common Stock or Convertible
Securities, the only Additional Shares of Common Stock issued or sold
were the Additional Shares of Common Stock, if any, actually issued or
sold upon the exercise of such Options or the conversion or exchange
of such Convertible Securities and the consideration received therefor
was the consideration actually received by the Company for the issue,
sale, grant or assumption of all such Options, whether or not
exercised, plus the consideration actually received by the Company
upon such exercise, or for the issue or sale of all such Convertible
Securities which were actually converted or exchanged, plus the
additional consideration, if any, actually received by the Company
upon such conversion or exchange, and
8
(ii) in the case of Options for Convertible Securities, only the
Convertible Securities, if any, actually issued or sold upon the
exercise of such Options were issued at the time of the issue, sale,
grant or assumption of such Options, and the consideration received by
the Company for the Additional Shares of Common Stock deemed to have
then been issued was the consideration actually received by the
Company for the issue, sale, grant or assumption of all such Options,
whether or not exercised, plus the consideration deemed to have been
received by the Company (pursuant to section 2.5) upon the issue or
sale of such Convertible Securities with respect to which such Options
were actually exercised;
(d) no readjustment pursuant to subdivision (b) or (c) above shall
have the effect of increasing the Warrant Price by an amount in excess of
the amount of the adjustment thereof originally made in respect of the
issue, sale, grant or assumption of such Options or Convertible Securities;
and
(e) in the case of any such Options which expire by their terms not
more than 30 days after the date of issue, sale, grant or assumption
thereof, no adjustment of the Warrant Price shall be made until the
expiration or exercise of all such Options, whereupon such adjustment shall
be made in the manner provided in subdivision (c) above.
2.4. Treatment of Stock Dividends, Stock Splits, etc. In case the
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Company at any time or from time to time after the date hereof shall declare or
pay any dividend on the Common Stock payable in Common Stock, or shall effect a
subdivision of the outstanding shares of Common Stock into a greater number of
shares of Common Stock (by reclassification or otherwise than by payment of a
dividend in Common Stock), then, and in each such case, Additional Shares of
Common Stock shall be deemed to have been issued (a) in the case of any such
dividend, immediately after the close of business on the record date for the
determination of holders of any class of securities entitled to receive such
dividend, or (b) in the case of any such subdivision, at the close of business
on the day immediately prior to the day upon which such corporate action becomes
effective.
9
2.5. Computation of Consideration. For the purposes of this section 2,
----------------------------
(a) the consideration for the issue or sale of any Additional Shares
of Common Stock shall, irrespective of the accounting treatment of such
consideration,
(i) insofar as it consists of cash, be computed at the net amount
of cash received by the Company,
(ii) insofar as it consists of property (including securities)
other than cash, be computed at the fair value thereof at the time of
such issue or sale, as determined in good faith by the Board of
Directors of the Company, and
(iii) in case Additional Shares of Common Stock are issued or
sold together with other stock or securities or other assets of the
Company for a consideration which covers both, be the portion of such
consideration so received, computed as provided in clauses (i) and
(ii) above, allocable to such Additional Shares of Common Stock, all
as determined in good faith by the Board of Directors of the Company;
(b) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.3, relating to Options and Convertible Securities,
shall be deemed to have been issued for a consideration per share
determined by dividing
(i) the total amount, if any, received and receivable by the
Company as consideration for the issue, sale, grant or assumption of
the Options or Convertible Securities in question, plus the minimum
aggregate amount of additional consideration (as set forth in the
instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such consideration to
protect against dilution) payable to the Company upon the exercise in
full of such Options or the conversion or exchange of such Convertible
Securities or, in the case of Options for Convertible Securities, the
exercise of such Options for Convertible Securi-
10
ties and the conversion or exchange of such Convertible Securities, in
each case computing such consideration as provided in the foregoing
subdivision (a),
by
(ii) the maximum number of shares of Common Stock (as set forth
in the instruments relating thereto, without regard to any provision
contained therein for a subsequent adjustment of such number to
protect against dilution) issuable upon the exercise of such Options
or the conversion or exchange of such Convertible Securities; and
(c) Additional Shares of Common Stock deemed to have been issued
pursuant to section 2.4, relating to stock dividends, stock splits, etc.,
shall be deemed to have been issued for no consideration.
2.6. Adjustments for Combinations, etc. In case the outstanding shares
---------------------------------
of Common Stock shall be combined or consolidated, by reclassification or
otherwise, into a lesser number of shares of Common Stock, the Warrant Price in
effect immediately prior to such combination or consolidation shall,
concurrently with the effectiveness of such combination or consolidation, be
proportionately increased.
2.7. Dilution in Case of Other Securities. In case any Other
------------------------------------
Securities shall be issued or sold or shall become subject to issue or sale upon
the conversion or exchange of any stock (or Other Securities) of the Company (or
any issuer of Other Securities or any other Person referred to in section 3) or
to subscription, purchase or other acquisition pursuant to any Options issued or
granted by the Company (or any such other issuer or Person) for a consideration
such as to dilute, on a basis consistent with the standards established in the
other provisions of this section 2, the purchase rights granted by this Warrant,
then, and in each such case, the computations, adjustments and readjustments
provided for in this section 2 with respect to the Warrant Price shall be made
as nearly as possible in the manner so provided and applied to determine the
amount of Other Securities from time to time receivable upon the exercise of the
11
Warrants, so as to protect the holders of the Warrants against the effect of
such dilution.
2.8. Minimum Adjustment of Warrant Price. If the amount of any
-----------------------------------
adjustment of the Warrant Price required pursuant to this section 2 would be
less than one percent (1%) of the Warrant Price in effect at the time such
adjustment is otherwise so required to be made, such amount shall be carried
forward and adjustment with respect thereto made at the time of and together
with any subsequent adjustment which, together with such amount and any other
amount or amounts so carried forward, shall aggregate at least one percent (1%)
of such Warrant Price.
3. Consolidation, Merger, etc. 3.1. Adjustments for Consolidation,
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Merger, Sale of Assets, Reorganization, etc. In case the Company after the date
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hereof (a) shall consolidate with or merge into any other Person and shall not
be the continuing or surviving corporation of such consolidation or merger, or
(b) shall permit any other Person to consolidate with or merge into the Company
and the Company shall be the continuing or surviving Person but, in connection
with such consolidation or merger, the Common Stock or Other Securities shall be
changed into or exchanged for stock or other securities of any other Person or
cash or any other property, or (c) shall transfer all or substantially all of
its properties or assets to any other Person, or (d) shall effect a capital
reorganization or reclassification of the Common Stock or Other Securities
(other than a capital reorganization or reclassification resulting in the issue
of Additional Shares of Common Stock for which adjustment in the Warrant Price
is provided in section 2.2.l or 2.2.2), then, and in the case of each such
transaction, proper provision shall be made so that, upon the basis and the
terms and in the manner provided in this Warrant, the holder of this Warrant,
upon the exercise hereof at any time after the consummation of such transaction,
shall be entitled to receive (at the aggregate Warrant Price in effect at the
time of such consummation for all Common Stock or Other Securities issuable upon
such exercise immediately prior to such consummation), in lieu of the Common
Stock or Other Securities issuable upon such exercise prior to such consummation
the highest amount of securities, cash or other property to which such holder
would actually have been entitled as a shareholder upon
12
such consummation if such holder had exercised the Rights represented by this
Warrant immediately prior thereto.
3.2. Assumption of Obligations. Notwithstanding anything contained in
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the Warrants or in the Purchase Agreement to the contrary, the Company will not
effect any of the transactions described in clauses (a) through (d) of section
3.1 unless, prior to the consummation thereof, each Person (other than the
Company) which may be required to deliver any stock, securities, cash or
property upon the exercise of this Warrant as provided herein shall assume, by
written instrument delivered to, and reasonably satisfactory to, the holder of
this Warrant, (a) the obligations of the Company under this Warrant (and if the
Company shall survive the consummation of such transaction, such assumption
shall be in addition to, and shall not release the Company from, any continuing
obligations of the Company under this Warrant) and (b) the obligation to deliver
to such holder such shares of stock, securities, cash or property as, in
accordance with the foregoing provisions of this section 3, such holder may be
entitled to receive, and such Person shall have similarly delivered to such
holder an opinion of counsel for such Person, which counsel shall be reasonably
satisfactory to such holder, stating that this Warrant shall thereafter continue
in full force and effect and the terms hereof (including, without limitation,
all of the provisions of this section 3) shall be applicable to the stock,
securities, cash or property which such Person may be required to deliver upon
any exercise of this Warrant or the exercise of any rights pursuant hereto.
Nothing in this section 3 shall be deemed to authorize the Company to enter into
any transaction not otherwise permitted by the Purchase Agreement.
4. Other Dilutive Events. In case any event shall occur as to which
---------------------
the provisions of section 2 or section 3 are not strictly applicable but the
failure to make any adjustment would not fairly protect the purchase rights
represented by this Warrant in accordance with the essential intent and
principles of such sections, then, in each such case, the Company shall appoint
a firm of independent certified public accountants of recognized national
standing (which may be the regular auditors of the Company), which shall give
their opinion upon the adjustment, if any, on a basis consistent with the
essential intent and principles established in sections 2 and 3, necessary to
preserve, without dilution, the purchase
13
rights represented by this Warrant. Upon receipt of such opinion, the Company
will promptly mail a copy thereof to the holder of this Warrant and shall make
the adjustments described therein.
5. No Dilution or Impairment. The Company will not, by amendment of
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its certificate of incorporation or through any consolidation, merger,
reorganization, transfer of assets, dissolution, issue or sale of securities or
any other voluntary action, avoid or seek to avoid the observance or performance
of any of the terms of this Warrant, but will at all times in good faith assist
in the carrying out of all such terms and in the taking of all such action as
may be necessary or appropriate in order to protect the rights of the holder of
this Warrant against dilution or other impairment. Without limiting the
generality of the foregoing, the Company (a) will not permit the par value of
any shares of stock receivable upon the exercise of this Warrant to exceed the
amount payable therefor upon such exercise, (b) will take all such action as may
be necessary or appropriate in order that the Company may validly and legally
issue fully paid and nonassessable shares of stock on the exercise of the
Warrants from time to time outstanding, (c) will not take any action which
results in any adjustment of the Warrant Price if the total number of shares of
Common Stock (or Other Securities) issuable after the action upon the exercise
of all of the Warrants would exceed the total number of shares of Common Stock
(or Other Securities) then authorized by the Company's certificate of
incorporation and available for the purpose of issue upon such exercise, and (d)
will not issue any capital stock of any class which is preferred as to dividends
or as to the distribution of assets upon voluntary or involuntary dissolution,
liquidation or winding-up, unless the rights of the holders thereof shall be
limited to a fixed sum or percentage of par value or a sum determined by
reference to a formula based on a published index of interest rates, an interest
rate publicly announced by a financial institution or a similar indicator of
interest rates in respect of participation in dividends and to a fixed sum or
percentage of par value in any such distribution of assets.
6. Accountants' Report as to Adjustments. In each case of any
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adjustment or readjustment in the shares of Common Stock (or Other Securities)
issuable upon the exercise of this Warrant, the Company at its expense will
14
promptly compute such adjustment or readjustment in accordance with the terms of
this Warrant and prepare a report setting forth such adjustment or readjustment
and showing in reasonable detail the method of calculation thereof and the facts
upon which such adjustment or readjustment is based, including a statement of
(a) the consideration received or to be received by the Company for any
Additional Shares of Common Stock issued or sold or deemed to have been issued,
(b) the number of shares of Common Stock outstanding or deemed to be
outstanding, and (c) the Warrant Price in effect immediately prior to such issue
or sale and as adjusted and readjusted (if required by section 2) on account
thereof. The Company will forthwith mail a copy of each such report to each
holder of a Warrant and will, upon the written request at any time of any holder
of a Warrant, furnish to such holder a like report setting forth the Warrant
Price at the time in effect and showing in reasonable detail how it was
calculated. The Company will also keep copies of all such reports at its office
maintained pursuant to subdivision (a) of section 12.2 and will cause the same
to be available for inspection at such office during normal business hours by
any holder of a Warrant or any prospective purchaser of a Warrant designated by
the holder thereof. Upon the written request at any time of any holder of a
Warrant, the Company will cause independent certified public accountants of
recognized national standing (which may be the regular auditors of the Company)
selected by the Company to verify the Company's computations of adjustment or
readjustment of terms of the Warrant (other than any computation of the fair
value of property as determined in good faith by the Board of Directors) and
related reports.
7. Notices of Corporate Action. In the event of
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(a) any taking by the Company of a record of the holders of any class
of securities for the purpose of determining the holders thereof who are
entitled to receive any dividend (other than, for so long as the Company
qualifies as an S corporation for federal income tax purposes, an annual
cash dividend not in excess of the amount equal to the taxable income of
the Company for the preceding calendar year multiplied by the maximum
federal income tax rate on individuals for the preceding calendar year) or
other distribution, or any right
15
to subscribe for, purchase or otherwise acquire any shares of stock of any
class or any other securities or property, or to receive any other right,
or
(b) any capital reorganization of the Company, any reclassification or
recapitalization of the capital stock of the Company or any consolidation
or merger involving the Company and any other Person or any transfer of all
or substantially all the assets of the Company to any other Person, or
(c) any voluntary or involuntary dissolution, liquidation or
winding-up of the Company,
the Company will mail to each holder of a Warrant a notice specifying (i) the
date or expected date on which any such record is to be taken for the purpose of
such dividend, distribution or right, and the amount and character of such
dividend, distribution or right, and (ii) the date or expected date on which any
such reorganization, reclassification, recapitalization, consolidation, merger,
transfer, dissolution, liquidation or winding-up is to take place and the time,
if any such time is to be fixed, as of which the holders of record of Common
Stock (or Other Securities) shall be entitled to exchange their shares of Common
Stock (or Other Securities) for the securities or other property deliverable
upon such reorganization, reclassification, recapitalization, consolidation,
merger, transfer, dissolution, liquidation or winding-up. Such notice shall be
mailed at least 45 days prior to the date therein specified.
8. Registration of Common Stock. If any shares of Common Stock
----------------------------
required to be reserved for purposes of exercise of this Warrant require
registration with or approval of any governmental authority under any federal or
state law (other than the Securities Act and applicable state securities laws)
before such shares may be issued upon exercise, the Company will, at its expense
and as expeditiously as possible, use its best efforts to cause such shares to
be duly registered or approved, as the case may be. At any such time as Common
Stock is listed on any national securities exchange, the Company will, at its
expense, obtain promptly and maintain the approval for listing on each such
exchange, upon official notice of issuance, the shares of Common Stock issuable
upon exercise of the then outstanding Warrants and maintain the listing of such
shares after their issuance; and
16
the Company will also list on such national securities exchange, will register
under the Exchange Act and will maintain such listing of, any Other Securities
that at any time are issuable upon exercise of the Warrants, if and at the time
that any securities of the same class shall be listed on such national
securities exchange by the Company.
9. Restrictions on Transfer. 9.1. Restrictive Legends. Except as
------------------------ -------------------
otherwise permitted by this section 9, each Warrant (including each Warrant
issued upon the transfer of any Warrant) shall be stamped or otherwise imprinted
with a legend in substantially the following form:
"This Warrant and any shares acquired upon the exercise of this
Warrant have not been registered under the Securities Act of 1933 and
may not be transferred in the absence of such registration or an
exemption therefrom under such Act. This Warrant and such shares may
be transferred only in compliance with the conditions specified in
this Warrant."
Except as otherwise permitted by this section 9, each certificate for Common
Stock (or Other Securities) issued upon the exercise of any Warrant, and each
certificate issued upon the transfer of any such Common Stock (or Other
Securities), shall be stamped or otherwise imprinted with a legend in
substantially the following form:
"The shares represented by this certificate have not been registered
under the Securities Act of 1933 and may not be transferred in the
absence of such registration or an exemption therefrom under such Act.
Such shares may be transferred only in compliance with the conditions
specified in certain Common Stock Purchase Warrants issued by
Information Management Associates, Inc. pursuant to the Note and
Warrant Purchase Agreement, dated December 21, 1990, between
Information Management Associates, Inc. and Wand/IMA Investments, L.P.
A complete and correct copy of the form of such Warrant is available
for inspection at the principal office of Information Management
Associates, Inc. and will be furnished to the
17
holder of such shares upon written request and without charge."
9.2. Notice of Proposed Transfer; Opinions of Counsel. Prior to any
------------------------------------------------
transfer of any Restricted Securities which are not registered under an
effective registration statement under the Securities Act, the holder thereof
will give written notice to the Company of such holder's intention to effect
such transfer and to comply in all other respects with this section 9.2. Each
such notice (a) shall describe the manner and circumstances of the proposed
transfer in sufficient detail to enable counsel to render the opinions referred
to below, and (b) shall designate counsel for the holder giving such notice. The
holder giving such notice will submit a copy thereof to the counsel designated
in such notice, which counsel shall be experienced in securities law matters. If
in the opinion of such counsel the proposed transfer may be effected without
registration of such shares of Restricted Securities under the Securities Act,
the transferring holder's holder shall thereupon be entitled to transfer such
shares in accordance with the terms of the notice delivered by such holder to
the Company. Each certificate representing such shares issued upon or in
connection with such transfer shall bear the restrictive legends required by
section 9.1, unless in the opinion of the transferring holder's counsel and
counsel to the Company (which counsel shall be experienced in securities laws
matters) such restrictive legends are not required or advisable.
The holder of the Restricted Securities seeking transfer thereof will pay the
reasonable fees and disbursements of counsel (other than house counsel) for any
holder of Restricted Securities in connection with all opinions rendered by such
counsel pursuant to this section 9.2 and pursuant to section 9.3.
9.3. Termination of Restrictions. The restrictions imposed by this
---------------------------
section 9 upon the transferability of Restricted Securities shall cease and
terminate as to any particular Restricted Securities (a) when such securities
shall have been effectively registered under the Securities Act, or (b) when, in
the opinions of both counsel for the holder thereof and counsel for the Company
(each of whom shall be experienced in securities laws matters), such
restrictions are no longer required in order to insure compliance with the
Securities Act.
18
Whenever such restrictions shall cease and terminate as to any Restricted
Securities, the holder thereof shall be entitled to receive from the Company,
without expense (other than applicable transfer taxes, if any), new securities
of like tenor not bearing the applicable legends required by section 9.1.
10. Availability of Information. 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 will comply with the reporting requirements of
Sections l3 and 15(d) of the Exchange Act and will comply with all other public
information reporting requirements of the Commission from time to time in effect
and relating to assuring the availability of an exemption from the Securities
Act for the sale of any Restricted Securities pursuant to Rule 144 or any
comparable or similar rule promulgated by the Commission under the Securities
Act. The Company will also cooperate with each holder of any Restricted
Securities in supplying such information as may be necessary for such holder to
complete and file any information reporting forms presently or hereafter
required by the Commission as a condition to the availability of an exemption
from the Securities Act for the sale of any Restricted Securities. The Company
will furnish to each holder of any Warrants, promptly upon their becoming
available, copies of all financial statements, reports, notices and proxy
statements sent or made available generally by the Company to its stockholders,
and, upon the written request of any holder, copies of all regular and periodic
reports and all registration statements and prospectuses filed by the Company
with any securities exchange or with the Commission.
11. Reservation of Stock, etc. The Company will at all times reserve
-------------------------
and keep available, solely for issuance and delivery upon exercise of the
Warrants, the number of shares of Common Stock (or Other Securities) from time
to time issuable upon exercise of all Warrants at the time outstanding. All
shares of Common Stock (or Other Securities) issuable upon exercise of any
Warrants shall be duly authorized and, when issued upon such exercise, shall be
validly issued and, in the case of shares, fully paid and nonassessable with no
liability on the part of the holders thereof.
19
12. Ownership, Transfer and Substitution of Warrants. l2.1. Ownership
------------------------------------------------ ---------
of Warrants. The Company may treat the person in whose name any Warrant is
-----------
registered on the register kept at the office of the Company maintained pursuant
to subdivision (a) of section 12.2 as the owner and holder thereof for all
purposes, notwithstanding any notice to the contrary, except that, if and when
any Warrant is properly assigned in blank, the Company may (but shall not be
obligated to) treat the bearer thereof as the owner of such Warrant for all
purposes, notwithstanding any notice to the contrary. Subject to section 9, a
Warrant, if properly assigned, may be exercised by a new holder without a new
Warrant first having been issued.
12.2. Office; Transfer and Exchange of Warrants.
-----------------------------------------
(a) The Company will maintain an office where notices, presentations
and demands in respect of this Warrant may be made upon it. Such office
shall be maintained at 0000 Xxxx Xxxxxx, Xxxxxxxx, XX 066ll, until such
time as the Company shall notify the holders of the Warrants of any change
of location of such office.
(b) Upon the surrender of any Warrant, properly endorsed, for
registration of transfer or for exchange at the office of the Company
maintained pursuant to subdivision (a) of this section 12.2, the Company at
its expense will (subject to compliance with section 9, if applicable)
execute and deliver to or upon the order of the holder thereof a new
Warrant or Warrants of like tenor, in the name of such holder or as such
holder (upon payment by such holder of any applicable transfer taxes) may
direct, calling in the aggregate on the face or faces thereof for the
number of shares of Common Stock called for on the face or faces of the
Warrant or Warrants so surrendered.
12.3. Replacement of Warrants. Upon receipt of evidence reasonably
-----------------------
satisfactory to the Company of the loss, theft, destruction or mutilation of any
Warrant and, in the case of any such loss, theft or destruction of any Warrant
held by a Person other than the Purchaser or any institutional investor, upon
delivery of indemnity reasonably satisfactory to the Company in form and amount
20
or, in the case of any such mutilation, upon surrender of such Warrant for
cancellation at the office of the Company maintained pursuant to subdivision (a)
of section 12.2, the Company at its expense will execute and deliver, in lieu
thereof, a new Warrant of like tenor.
13. Registration under Securities Act, etc.
---------------------------------------
13.1. Registration on Request.
-----------------------
(a) Request. At any time or from time to time on the earlier of (x)
-------
December 21, 1995 or (y) the occurrence of an Initial Public Offering, upon
the written request of one or more Initiating Holders, requesting that the
Company effect the registration under the Securities Act of all or part of
such Initiating Holders' Registrable Securities and specifying the intended
method of disposition thereof, the Company will promptly give written
notice of such requested registration to all holders of Registrable
Securities, and thereupon the Company will use its best efforts to effect
the registration under the Securities Act of
(i) the Registrable Securities which the Company has been so
requested to register by such Initiating Holders for disposition in
accordance with the intended method of disposition stated in such
request, and
(ii) all other Registrable Securities the holders of which shall
have made a written request to the Company for registration thereof
within 30 days after the giving of such written notice by the Company
(which request shall specify the intended method of disposition of
such Registrable Securities), and
(iii) subject to the priority provisions of section 13.1(f), all
shares of Common Stock which the Company may elect to register in
connection with the offering of Registrable Securities pursuant to
this Section 13.1; and
(iv) subject to the priority provisions of section 13.1(f),
shares of Common Stock held by other Persons having registration
rights
21
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, provided that the
provisions of this section 13.1(a) shall not require the Company to effect more
than two registrations of Registrable Securities.
(b) Registration Statement Form. Registrations under this section 13.1
---------------------------
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 holders of more than 50% (by number of shares) of the Registrable
Securities so to be registered and (ii) as shall permit the disposition of
--
such Registrable Securities in accordance with the intended method or
methods of disposition specified in their request for such registration.
The Company agrees to include in any such registration statement all
information which holders of Registrable Securities being registered shall
reasonably request.
(c) Expenses. The Company will pay all Registration Expenses in
--------
connection with the first registration requested pursuant to this section
13.1 and the holders will pay all Registration Expenses in connection with
the second registration pursuant to this section 13.1. Registration
Expenses (and underwriting discounts and commissions and transfer taxes, if
any) in connection with the second registration statement 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 13.1 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 the Initiating Holders (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
22
have been effected by the Company at the request of such Initiating Holders
unless the Initiating Holders shall have elected to pay all Registration
Expenses in connection with such registration, (ii) if, after it has become
--
effective, such registration is interfered with by 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 such Initiating Holders.
(e) Selection of Underwriters. If a requested registration pursuant to
-------------------------
this section 13.1 involves an underwritten offering, the underwriter or
underwriters thereof shall be selected by the holders of at least a
majority (by number of shares) of the Registrable Securities as to which
registration has been requested and shall be acceptable to the Company,
which shall not unreasonably withhold its acceptance of such underwriters.
(f) Priority in Requested Registrations. If a requested registration
-----------------------------------
pursuant to this section 13.1 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 (including securities of the Company which are not Registrable
Securities) exceeds the number which can be sold in such offering within a
price range acceptable to the holders of a majority of the Registrable
Securities requested to be included in such registration, 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, pro rata among
the holders thereof requesting such securities requested to be included by
such holders and (ii) second, securities the Company proposes to sell and
other securities of the Company included in such registration by the
holders thereof.
23
13.2. 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 13.1), whether or not for
sale for its own account, it will each such time give prompt written notice
to all holders of Registrable Securities of its intention to do so and of
such holders' rights under this section 13.2. 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 such holder and the intended method of disposition thereof),
the Company will use its best efforts to 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 each holder of Registrable Securities 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 13.1,
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
24
other securities. No registration effected under this section 13.2 shall
relieve the Company of its obligation to effect any registration upon
request under section 13.1. The Company will pay all Registration Expenses
in connection with each registration of Registrable Securities requested
pursuant to this section 13.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this section 13.2 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 holders of
Registrable Securities 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 13.4(b) or, if requested to
do so, is not obligated to do so under section 13.4(b)), and (iii) the
---
managing underwriter of such underwritten offering shall inform the Company
and holders of the Registrable Securities requesting such registration by
letter of its belief that the distribution of all or a specified number of
such Registrable Securities concurrently with the securities being
distributed by such underwriters would interfere with the successful
marketing of the securities being distributed by such underwriters (such
writing to state the basis of such belief and the approximate number of
such Registrable Securities which may be distributed without such effect),
then the Company may, upon written notice to all holders of such
Registrable Securities, reduce pro rata (if and to the extent stated by
such managing underwriter to be necessary to eliminate such effect) the
number of such Registrable Securities the registration of which shall have
been requested by each holder of Registrable Securities so that the
resultant aggregate number of such Registrable Securities so included in
such registration shall be equal to the number of shares stated in such
managing underwriter's letter.
25
13.3. Registration Procedures. If and whenever the Company is required
-----------------------
to use its best efforts to effect the registration of any Registrable Securities
under the Securities Act as provided in sections 13.1 and 13.2 the Company
shall, as expeditiously as possible:
(i) prepare and (within 90 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 use its reasonable best efforts to cause such
registration statement to become and remain effective for the time
period required by this Agreement, provided, that before filing such
--------
registration statement or any amendments thereto the Company will
furnish to the counsel selected by the holders of Registrable
Securities 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 the earlier of such time
as all of such securities have been disposed of in accordance with the
intended methods of disposition by the seller or sellers thereof set
forth in such registration statement or (i) in the case of a
-
registration pursuant to section 13.1, the expiration of 180 days
after such registration statement becomes effective, or (ii) in the
--
case of a registration pursuant to section 13.2, the expiration of 90
days after such registration statement becomes effective, it being
understood that following the expiration of the relevant time period,
the Company shall
26
have no further obligation to maintain the effectiveness of such
registration statement;
(iii) furnish to each seller of Registrable Securities covered by
such registration statement 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 seller may reasonably request in order to
facilitate the public sale or other disposition of the Registrable
Securities owned by such Seller;
(iv) use its reasonable 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
27
seller or sellers thereof to consummate the disposition of such
Registrable Securities;
(vi) furnish to each seller of Registrable Securities a
signed counterpart, addressed to such seller (and the
underwriters, if any) of
(x) an opinion of counsel for the Company, dated the
effective date of such registration statement (and, 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, dated the effective date of such
registration statement (and, if such registration includes an
underwritten public offering, a letter 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
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 each seller of Registrable Securities covered
by such registration statement at any time when a prospectus
relating to a registered offering thereof 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
28
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 under which they were made, and at the request of
any such seller 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 under
which they were made;
(viii) 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 full calendar month after the effective date of
such registration statement, which earnings statement shall
satisfy the provisions of Section 11(a) of the Securities Act,
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 any such seller 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;
29
(ix) enter into such agreements and take such other actions
as sellers of such Registrable Securities holding 51% of the
shares so to be sold shall reasonably request in order to
expedite or facilitate the disposition of such Registrable
Securities;
(x) use its reasonable 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.
The Company may require each seller of Registrable Securities as to which any
registration is being effected to furnish the Company such information regarding
such seller and the distribution of such securities as the Company may from time
to time reasonably request in writing.
Each holder of Registrable Securities 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 (vii) of this
section 13.3, such holder will forthwith discontinue such holder's disposition
of Registrable Securities pursuant to the registration statement relating to
such Registrable Securities until such holder's receipt of the copies of the
supplemented or amended prospectus contemplated by subdivision (vii) of this
section 13.3 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. In the event the
Company shall give any such notice, the period mentioned in paragraph (ii) of
this section 13.3 shall be extended by the length of the period from and
including the date when each seller of any Registrable Securities covered by
such registration statement shall have received such notice to the date on which
each such seller has received the copies of the supplemented or amended
prospectus contemplated by paragraph (vii) of this section 13.3.
If any such registration or comparable statement refers to any
holder of Registrable Securities by name or otherwise as the holder of any
securities of the
30
Company then such holder shall have the right to require (i) the insertion
-
therein of language, in form and substance satisfactory to such holder, to the
effect that the holding by such holder of such securities is not construed as a
recommendation by such holder of the investment quality of the Company's
securities covered thereby and that such holding does not imply that such holder
will assist in meeting any future financial requirements of the Company, or (ii)
--
in the event that such reference to such holder by name or otherwise is not
required by the Securities Act or any similar federal statute or the rules and
regulations promulgated thereunder then in force, the deletion of the reference
to such holder.
13.4. Underwritten Offerings.
----------------------
(a) Requested Underwritten Offerings. If requested by the underwriters
--------------------------------
for any underwritten offering by holders of Registrable Securities pursuant
to a registration requested under section 13.1, 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, each
such 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 13.7. The holders of the
Registrable Securities 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 holders of 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
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
31
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.
(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 13.2 and such securities are to be distributed by
or through one or more underwriters, the Company will, if requested by any
holder of Registrable Securities as provided in section 13.2 and subject to
the provisions of section 13.2(b), use its best efforts to arrange for such
underwriters to include all the Registrable Securities to be offered and
sold by such holder among the securities to be distributed by such
underwriters, provided that if the managing underwriter of such
--------
underwritten offering shall inform the holders of the Registrable
Securities requesting such registration and the holders of any other shares
of securities which shall have exercised, in respect of such underwritten
offering, registration rights comparable to the rights under section 13.2
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
shares of securities so requested to be included would interfere with the
successful marketing of the securities (other than such Registrable
Securities and other shares of 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 all holders of such Registrable Securities and of such
other shares of securities so requested to be included, exclude pro rata
from such underwritten offering (if and to the extent stated by such
managing underwriter to be necessary to eliminate such effect) the number
of such Registrable Securities
32
and shares of such other securities so requested to be included the
registration of which shall have been requested by each holder of
Registrable Securities and by the holders of such other securities, 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) Holdback Agreements.
-------------------
(i) Each holder of Registrable Securities agrees by acquisition
of such Registrable Securities, if so required by the managing
underwriter, not to effect any public sale or distribution of any
equity securities of the Company, during the seven days prior to and
the 90 days after any underwritten registration pursuant to section
13.1 or 13.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
33
(ii) The Company agrees (x) if so required by the managing
-
underwriter not to effect any public sale or distribution of its
equity securities or securities convertible into or exchangeable or
exercisable for any of such securities during the seven days prior to
and the 90 days after any underwritten registration pursuant to
section 13.1 or 13.2 has become effective, except as part of such
underwritten registration and except pursuant to registrations on Form
S-4 and S-8, or any successor or similar forms thereto, and (y) to
-
cause each holder of its equity securities or any securities
convertible into or exchangeable or exercisable for any of such
securities, in each case purchased from the Company at any time after
the date of this Agreement (other than in a public offering) to agree
not to effect any such public sale or distribution of such securities
during such period.
13.5. 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 of Registrable
Securities 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 such holders' and such
underwriters' respective counsel, to conduct a reasonable investigation within
the meaning of the Securities Act.
13.6. Indemnification.
---------------
(a) Indemnification by the Company. In the event of any registration
------------------------------
of any securities of the Company under the Securities Act pursuant to this
Section 13, the Company will indemnify and hold harmless the holder of any
Registrable Securities covered by such registration statement, its direc-
34
tors, officers, agents, employees, general partners, limited partners,
each other Person who participates as an underwriter in the offering or
sale of such securities and each other Person, if any, who controls such
holder or any such underwriter within the meaning of the Securities Act,
against any losses, claims, damages or liabilities, joint or several, to
which such holder or Requesting Holder or any such director, officer,
agent, employee, general partner, limited partner 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 such holder, and each such director, officer, agent,
employee, general partner, limited partner, underwriter and controlling
person for any reasonable 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
35
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 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 such holder or such Requesting Holder
or any such director, officer, agent, employee, general partner, limited
partner, underwriter or controlling person and shall survive the transfer
of such securities by such holder.
(b) Indemnification by the Sellers. In the event of any registration
------------------------------
of Registrable Securities under the Securities Act pursuant to this Section
13, each seller of Registrable Securities will (severally and not jointly)
indemnify and hold harmless (in the same manner and to the same extent as
set forth in subdivision (a) of this section 13.7) 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 such seller.
36
(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 13.7, 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
13.7, 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 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.
37
(d) Other Indemnification. Indemnification similar to that specified
---------------------
in the preceding subdivisions of this section 13.7 (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 13.7 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 for any reason the indemnification provided for
------------
in the preceding paragraphs of this Section 13 is unavailable to an
indemnified party or is insufficient to hold it harmless as contemplated by
the preceding clauses (a) and (b), then the 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 loss, claim, damage,
liability or expense in such proportion as is appropriate to reflect not
only the relative benefits received by the indemnified party and the
indemnifying party, but also the relative fault of the indemnified party
and the indemnifying party in connection with the actions which resulted in
such loss, claim, damage, liability or expense, as well as any other
relevant equitable considerations. The relative fault of such indemnifying
party and indemnified party shall be determined by reference to, among
other things, whether any action in question, including any untrue or
alleged untrue statement of a material fact or omission or alleged omission
to state a material fact, has been made by, or relates to information
supplied by, such indemnifying party or indemnified party, and the parties'
relative intent, knowledge, access to information and opportunity to
correct or prevent such action. The amount paid or payable by a party as a
result of the losses, claims, damages, liabilities and expenses referred to
above shall be deemed to include any legal or other fees or expenses
reasonably incurred
38
by such party in connection with any investigation or proceeding.
The parties hereto agree that it would not be just and equitable if
contribution pursuant to this Section 13(f) were determined by pro rata
allocation or by any other method of allocation which does not take into
account the equitable considerations referred to in the immediately
preceding paragraph. 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. No holder of Registrable Securities shall be
required to contribute in an amount greater than the dollar amount of
proceeds received by such holder with respect to the sale of such holder's
Registrable Securities.
13.7. Other Registration Rights
-------------------------
The Company shall not enter into any agreement or arrangement to provide any
Person with registration rights that are inconsistent with the registration and
other rights provided hereunder to holders of the Warrants.
14. Definitions. As used herein, unless the context otherwise
-----------
requires, the following terms have the following respective meanings:
Additional Shares of Common Stock: All shares (including treasury
---------------------------------
shares) of Common Stock issued or sold (or, pursuant to section 2.3 or 2.4,
deemed to be issued) by the Company after the date hereof, whether or not
subsequently reacquired or retired by the Company, other than
(a) shares issued upon the exercise of the Warrants,
(b) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, but only if
and to the extent that such adjustments are required as the result of the
original issuance of the Warrants, and
39
(c) such additional number of shares as may become issuable upon the
exercise of any of the securities referred to in the foregoing clause (a)
by reason of adjustments required pursuant to antidilution provisions
applicable to such securities as in effect on the date hereof, in order to
reflect any subdivision or combination of Common Stock, by reclassification
or otherwise, or any dividend on Common Stock payable in Common Stock.
Business Day: Any day other than a Saturday or a Sunday or a day on
------------
which commercial banking institutions in the City of New York or the state of
Connecticut are authorized by law to be closed. Any reference to "days" (unless
Business Days are specified) shall mean calendar days.
Commission: The Securities and Exchange Commission or any other
----------
federal agency at the time administering the Securities Act.
Common Stock: As defined in the introduction to this Warrant, such
------------
term to include any stock into which such Common Stock shall have been changed
or any stock resulting from any reclassification of such Common Stock, and all
other stock of any class or classes (however designated) of the Company the
holders of which have the right, without limitation as to amount, either to all
or to a share of the balance of current dividends and liquidating dividends
after the payment of dividends and distributions on any shares entitled to
preference.
Company: As defined in the introduction to this Warrant, such term to
-------
include any corporation which shall succeed to or assume the obligations of the
Company hereunder in compliance with section 3.
Convertible Securities: Any evidences of indebtedness, shares of stock
----------------------
(other than Common Stock) or other securities directly or indirectly convertible
into or exchangeable for Additional Shares of Common Stock.
Current Market Price: On any date specified herein, the average daily
--------------------
Market Price during the period of the most recent 20 days, ending on such date,
on which the national securities exchanges were open for trading, except that if
no Common Stock is then listed or admitted to trading on any national securities
exchange or quoted
40
in the over-the-counter market, the Current Market Price shall be the Market
Price on such date.
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.
Independent Financial Expert: means a nationally recognized investment
----------------------------
banking firm, ranking in the top twenty (as determined by the Securities
Industries Association, Inc. or a similar securities information data company)
as lead manager for primary common stock offerings in the year prior to the year
in which it is called upon to give independent financial advice to the Company
as described herein and that does not (and whose directors, officers, employees
and Affiliates do not) have a direct or indirect financial interest in the
Company or any of its Affiliates, that has not been, since the beginning of the
year prior to the year in which it is called upon to give independent financial
advice to the Company as described herein, and at the time it is called upon to
give independent financial advice to the Company is not (and none of whose
directors, officers, employees or Affiliates is) a promoter, director or officer
of the Company or any of its Affiliates and that does not provide any advice or
opinions to the Company or any of its Affiliates except as an Independent
Financial Expert. The Company will bear the expense of compensation of the
Independent Financial Expert for services or opinions it may provide in that
capacity.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
Securities Exchange Commission (other than a registration statement on Form S-8,
or any successor form thereto, with respect to the issuance of Common Stock (or
securities convertible into or exchangeable for Common Stock or rights to
acquire Common Stock) granted or to be granted to employees, officers or
directors of the Company pursuant to any employee stock option plan, unless as a
result thereof the Company would be required to file reports with respect to any
of its equity securities with the Securities Exchange Commission) respecting an
offering, whether primary or secondary, of Common Stock is declared effective by
the Securities Exchange Commission.
41
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 66 2/3% of the Registrable Securities (by number of shares or,
in the case of any debt securities which may be Other Securities, 66 2/3% of the
outstanding principal amount of such securities) and initiating a request
pursuant to section 13.1 for the registration of all or part of such holder's or
holders' Registrable Securities.
Market Price: On any date specified herein, the amount per share of
------------
the Common Stock, equal to (a) the last sale price of such Common Stock, regular
way, on such date or, if no such sale takes place on such date, the average of
the closing bid and asked prices thereof on such date, in each case as
officially reported on the principal national securities exchange on which such
Common Stock is then listed or admitted to trading, or (b) if such Common Stock
is not then listed or admitted to trading on any national securities exchange
but is designated as a national market system security by the NASD, the last
trading price of the Common Stock on such date, or (c) if there shall have been
no trading on such date or if the Common Stock is not so designated, the average
of the closing bid and asked prices of the Common Stock on such date as shown by
the NASD automated quotation system, or (d) if such Common Stock is not then
listed or admitted to trading on any national exchange or quoted in the
over-the-counter market, the higher of (x) the book value thereof as determined
by any firm of independent public accountants of recognized standing selected by
the Board of Directors of the Company as of the last day of any month ending
within 60 days preceding the date as of which the determination is to be made or
(y) the fair value thereof determined in good faith by the Board of Directors of
the Company as of a date which is within 18 days of the date as of which the
determination is to be made.
NASD: The National Association of Securities Dealers, Inc.
----
Notes: The 15% Senior Subordinated Notes, due December 1997, of this
-----
Company originally issued in the aggregate principal amount of $1.6 million
pursuant to the Purchase Agreement, such term to include any such notes issued
in substitution for such notes.
42
Options: Rights, options or warrants to subscribe for, purchase or
-------
otherwise acquire either Additional Shares of Common Stock or Convertible
Securities.
Other Securities: Any stock (other than Common Stock) and other
----------------
securities of the Company or any other Person (corporate or otherwise) which the
holders of the Warrants at any time shall be entitled to receive, or shall have
received, upon the exercise of the Warrants, in lieu of or in addition to Common
Stock, or which at any time shall be issuable or shall have been issued in
exchange for or in replacement of Common Stock or Other Securities pursuant to
section 3 or otherwise.
Person: A corporation, an association, a partnership, an organization,
------
a business, an individual, a government or political subdivision thereof or a
governmental agency.
Purchase Agreement: As defined in the introduction to this Warrant.
------------------
Purchaser: As defined in the introduction to this Warrant.
---------
Registrable Securities: (a) any shares of Common Stock or Other
----------------------
Securities issued or issuable upon exercise of the Warrants originally issued in
connection with the issue and sale by the Company of the Notes pursuant to the
Purchase Agreement and (b) any securities issued or issuable with respect to any
securities referred to in the foregoing subdivision 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 or similar provision) under the Securities Act, (c) they
shall have been otherwise transferred, new certificates for them not bearing a
legend restricting further transfer shall have been delivered by the Company and
subsequent disposition of them shall not require registration or qualification
of them
43
(other than by the issuer, an underwriter or an affiliate [as such term is
defined in the Securities Act and the regulations promulgated thereunder] of the
issuer) under the Securities Act or any similar state law then in force, or (d)
-
they shall have ceased to be outstanding.
Registration Expenses: All expenses incident to the Company's
---------------------
performance of or compliance with section 13, including, without limitation, all
registration, filing and NASD 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 reasonable fees and disbursements of any
counsel and accountants retained by the holder or holders of more than 51% of
the Registrable Securities being registered, premiums and other costs of
policies of insurance (if any) against liabilities arising out of the public
offering of the Registrable Securities being registered or officers and
directors insurance 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.
Restricted Securities: All of the following: (a) any Warrants bearing
---------------------
the applicable legend or legends referred to in section 9.1, (b) any shares of
Common Stock (or Other Securities) which have been issued upon the exercise of
Warrants and which are evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section and (c) unless the
context otherwise requires, any shares of Common Stock (or Other Securities)
which are at the time issuable upon the exercise of Warrants and which, when so
issued, will be evidenced by a certificate or certificates bearing the
applicable legend or legends referred to in such section.
Securities Act: The Securities Act of 1933, 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.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest
44
therein, which could constitute a "sale" as that term is defined in section 2(3)
of the Securities Act.
Value Report: A valuation report rendered by an Independent Financial
------------
Expert pursuant to Section 15 or Section 16 of this Agreement.
Warrant Price: As defined in section 2.1.
-------------
Warrants: As defined in the introduction to this Warrant.
--------
15. Determinations of Value By the Board of Directors. Wherever this
-------------------------------------------------
Agreement provides for the Board of Directors to make a good faith determination
of value, the procedures set forth in this section 15 shall be applicable. The
Company shall promptly (but in no event more than ten Business Days thereafter)
provide written notice (the "Valuation Notice") to each Warrant holder of each
determination of value or fair value made by the Board of Directors pursuant to
the terms of this Agreement. The Valuation Notice shall state the Board's
conclusions as to value, the purpose of the valuation (including designation of
the provision of this Agreement requiring the determination), and a summary of
the method used by the Board to reach its conclusions.
If requested in writing by any holder or holders of Registrable
Securities holding at least a majority of the Registrable Securities within 30
days of the date of the Valuation Notice, the Company will appoint, at the
Company's expense, an Independent Financial Expert to review and render a Value
Report concerning the Board of Directors Valuation. The conclusions of the
Independent Financial Expert shall be final and binding on the Company and the
Registrable Holders.
16. Company Obligation to Repurchase.
--------------------------------
(a) Repurchase Option. Any holder or holders of Registrable Securities
-----------------
holding at least a majority of the Registrable Securities may require the
Company to repurchase (the "Repurchase Option") all or any part of the
Registrable Securities if on or before December 21, 1996, there has not
been an Initial Public Offering.
(b) Repurchase Option Price. Upon an election
-----------------------
45
by a holder or holders of Warrants pursuant to section 16(a), the Company
shall repurchase the Warrants designated by holders desiring to effect the
repurchase at a price equal to or greater than (i) the value of the Common
Stock into which the Warrant is exercisable less (ii) the Warrant Price
then in effect and relating to such number of shares of Common Stock (such
net price being the "Repurchase Price"). The value of such Common Stock
shall be determined by an Independent Financial Expert (to be selected as
provided below in section 16(d)) using one or more valuation methods that
the Independent Financial Expert in its professional judgment determines to
be most appropriate but without giving effect to the discount for any lack
of liquidity of the Common Stock or to the fact that the Company may have
no class of equity securities registered under the Securities Exchange Act
of 1934. The Independent Financial Expert shall deliver, promptly upon
completion, to the Company and to each of the holders exercising the
Repurchase Option a Value Report stating the method of valuation considered
or used and the value of said Common Stock as of the Valuation Date and
containing a statement as to the nature and scope of the examination or
investigation upon which the determination of value was made.
The Independent Financial Expert shall consult with management of the
Company in order to allow management to provide information and data
relevant to, and comment on the proposed value of, such Independent
Financial Expert's report to the Company. The Independent Financial Expert
may revise its Value Report based on such consultation provided that the
final value shall reflect both the initial valuation and the determination
to revise it. If the Independent Financial Expert becomes aware of any
material changes since the Valuation Date in the business or financial
conditions or prospects of the Company, such Independent Financial Expert
shall specify such material changes in the Value Report.
(c) Valuation Date. The "Valuation Date" with respect to any
--------------
Repurchase Option shall mean the date five Business Days prior to the date
of the holder's or holders' written notice to the Company of the election
to exercise the Repurchase Option stated in this section 16.
46
(d) Procedures.
----------
(i) Any holder or holders electing a Repurchase Option pursuant
to Section 16(a) shall give written notice of such election (the
"Repurchase Notice") to the Company. The Repurchase Notice shall
include the name of the holders electing the Repurchase Option (the
"Electing Holders") and the number of shares (by holder) that the
Company shall be required at that time to repurchase.
(ii) Within five Business Days of its receipt of the Repurchase
Notice, the Company shall give written notice to each Electing Holder
of the Company's choice of an Independent Financial Expert to prepare
the Value Report. Within five Business Days after the date of this
notice, Electing Holders owning a majority of the shares identified in
the Repurchase Notice shall notify the Company in writing (the
"Holders' IFE Notice") of their approval or disapproval of the
Company's initial choice of Independent Financial Expert and, in the
event of disapproval, such holders shall propose an alternative firm
as Independent Financial Expert. Within two Business Days after its
receipt of the Holders' IFE Notice, the Company shall notify the
Electing Holders of its approval or disapproval of their selection. If
the Company does not accept the Independent Financial Expert chosen by
the Electing Holders, then the two Independent Financial Experts
previously selected pursuant to this section shall promptly be
requested by the Company and the Electing Holders to jointly select a
firm to act as Independent Financial Expert to prepare the Value
Report. Their joint selection, which shall be made within five
Business Days, shall be final and binding upon both the Company and
the Electing Holders.
(iii) The Company shall consult and cooperate with the selected
Independent Financial Expert to facilitate the final delivery of its
Value Report no later than sixty calendar days after the date of the
Repurchase Notice. The
47
Value Report shall be final and binding upon both the Company and the
Electing Holders.
(iv) The Company shall pay the Repurchase Price in immediately
available funds to the holder or holders electing the Repurchase
Option within sixty calendar days of the delivery of the Value Report.
17. Remedies. The Company stipulates that the remedies at law of the
--------
holder of this Warrant in the event of any default or threatened default by the
Company in the performance of or compliance with any of the terms of this
Warrant are not and will not be adequate and that, to the fullest extent
permitted by law, such terms may be specifically enforced by a decree for the
specific performance of any agreement contained herein or by an injunction
against a violation of any of the terms hereof or otherwise.
18. No Rights or Liabilities as Stockholder. Nothing contained in this
---------------------------------------
Warrant shall be construed as conferring upon the holder hereof any rights as a
stockholder of the Company or as imposing any obligation on such holder to
purchase any securities or as imposing any liabilities on such holder as a
stockholder of the Company, whether such obligation or liabilities are asserted
by the Company or by creditors of the Company.
19. Notices. All notices and other communications under this Warrant
-------
shall be in writing and shall be mailed by registered or certified mail, return
receipt requested, addressed (a) if to any holder of any Warrant, at the
registered address of such holder as set forth in the register kept at the
principal office of the Company, or (b) if to the Company, to the attention of
its President at its office maintained pursuant to subdivision (a) of section
12.2, provided that the exercise of any Warrant shall be effective in the manner
--------
provided in section 1.
20. Miscellaneous. This Warrant and any term hereof may be changed,
-------------
waived, discharged or terminated only by an instrument in writing signed by the
party against which enforcement of such change, waiver, discharge or termination
is sought. This Warrant shall be construed and enforced in accordance with and
governed by the laws of the State of New York. The section headings
48
in this Warrant are for purposes of convenience only and shall not constitute a
part hereof.
INFORMATION MANAGEMENT ASSOCIATES, INC.
By: /s/ Xxxxxx X. Xxxxxxxx
----------------------
Xxxxxx X. Xxxxxxxx
President
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FORM OF SUBSCRIPTION
--------------------
[To be executed only upon exercise of Warrant]
To Information Management Associates, Inc.
The undersigned registered holder of the within Warrant hereby
irrevocably exercises such Warrant for, and purchases thereunder, _____* shares
of Common Stock of Information Management Associates, Inc. and herewith makes
payment of $ therefor, and requests that the certificates for such shares
be issued in the name of, and delivered to , whose address is .
Dated:
----------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
---------------
* Insert here the number of shares called for on the face of this Warrant
(or, in the case of a partial exercise, the portion thereof as to which
this Warrant is being exercised), in either case without making any
adjustment for Additional Shares of Common Stock or any other stock or
other securities or property or cash which, pursuant to the adjustment
provisions of this Warrant, may be delivered upon exercise. In the case of
a partial exercise, a new Warrant or Warrants will be issued and
delivered, representing the unexercised portion of the Warrant, to the
holder surrendering the Warrant.
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FORM OF ASSIGNMENT
------------------
[To be executed only upon transfer of Warrant]
For value received, the undersigned registered holder of the within
Warrant hereby sells, assigns and transfers unto the right represented by
such Warrant to purchase shares of Common Stock of Information Management
Associates, Inc. to which such Warrant relates, and appoints Attorney to
make such transfer on the books of Information Management Associates, Inc.
maintained for such purpose, with full power of substitution in the premises.
Dated:
------------------------------------
(Signature must conform in all
respects to name of holder as
specified on the face of Warrant)
-----------------------------------
(Street Address)
-----------------------------------
(City) (State) (Zip Code)
Signed in the presence of:
----------------------------
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