Exhibit 10.36
STOCK PURCHASE AGREEMENT
DATED AS OF OCTOBER 31, 1996
AMONG
INFORMATION MANAGEMENT ASSOCIATES, INC.,
WAND/IMA INVESTMENTS II L.P.
AND
WAND/IMA INVESTMENTS III L.P.
STOCK PURCHASE AGREEMENT
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STOCK PURCHASE AGREEMENT dated as of October 31, 1996 (the
"Agreement") by and between WAND/IMA INVESTMENTS II L.P., a Delaware limited
partnership ("Wand/XXX XX"), WAND/IMA INVESTMENTS III L.P., a Delaware limited
partnership ("Wand/IMA III", Wand/XXX XX and Wand/IMA III being hereinafter
referred to individually as a "Purchaser" and collectively as the "Purchasers")
and INFORMATION MANAGEMENT ASSOCIATES, INC. (the "Company").
WHEREAS, the Purchasers are purchasing pursuant to this Agreement
4,350 newly issued shares of Series B Senior Preferred Stock, no par value,
having a stated value of $1,000 per share and such other terms as are set forth
in Exhibit A attached hereto and which are convertible into Common Stock, no par
value, of the Company at an initial conversion price of $16.00 per share on the
terms and conditions set forth herein.
NOW, THEREFORE, in consideration of the premises and the mutual
representations, warranties, covenants and agreements hereinafter set forth, the
parties hereto hereby agree as follows:
ARTICLE 1. ISSUANCE OF SHARES AND RELATED MATTERS
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1.1 The Sale. Subject to the terms and conditions of this Agreement,
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the Company hereby agrees to issue and sell to the Purchasers, and each
Purchaser hereby agrees to purchase from the Company, on the date of the Closing
(as hereinafter defined), the number of newly issued shares of Series B Senior
Preferred Stock set forth opposite such Purchaser's name on Schedule 1.1
attached hereto (the "Senior Preferred Shares"), free and clear of all liens,
claims, liabilities, restrictions or other encumbrances at a purchase price of
$1,000.00 per share (the "Purchase Price").
1.2 Delivery of Shares. On the Closing Date (as hereinafter
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defined), the Company will deliver to the Purchasers, against payment of the
Purchase Price, certificates representing the Senior Preferred Shares purchased
by such Purchaser .
ARTICLE 2. CLOSING
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The closing for the consummation of the transactions contemplated by
this Agreement (the "Closing") shall take place at the offices of LeBoeuf, Lamb,
Xxxxxx & XxxXxx, L.L.P., Hartford, Connecticut, at 10:00 a.m. on November 1,
1996 or at such other
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time or place as the parties hereto shall mutually agree (the "Closing Date").
ARTICLE 3. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
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The Company hereby represents and warrants to the Purchaser as follows:
3.1 Authority and Validity. The execution, delivery and performance of
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this Agreement and the consummation of all the transactions contemplated hereby
have been duly and validly authorized by all necessary corporate action on the
part of the Company. This Agreement has been duly and validly executed and
delivered by the Company and is the valid and binding obligation of the Company,
enforceable in accordance with its terms, except as such enforcement may be
affected or limited by bankruptcy, insolvency, moratorium or other similar laws
affecting the enforcement of creditors' rights generally and by applicable
principles of equitable remedies. Neither the execution, delivery and
performance of this Agreement, nor the consummation of the transactions
contemplated hereby or compliance by the Company with any of the provisions
hereof will (i) conflict with or result in a breach of any material provision of
its Certificate of Incorporation or By-laws; (ii) violate or conflict with the
terms of any material agreement to which the Company is a party or by which it
is bound; or (iii) violate any law, statute, rule or regulation or judgement,
order, writ, injunction or decree of any court, administrative agency or
governmental body applicable to the Company.
3.2 Organization and Standing; Corporate Power. The Company is a
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corporation duly organized and existing under the laws of the State of
Connecticut and is in good standing under such laws. The Company has requisite
corporate power and authority to own, lease and operate its properties and
assets, and to carry on its business as presently conducted. The Company has
all requisite corporate power and authority to enter into and perform all of its
obligations under this Agreement.
3.3 Subsidiaries. On the date hereof, the Company has one wholly owned
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subsidiary, Information Management Associates Limited, a United Kingdom company,
and no other subsidiaries.
3.4 Qualification. Attached as Schedule 3.4 is a true and complete list
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of all jurisdictions in which the Company is duly qualified as a foreign
corporation authorized to do business, or has a pending application for such
qualification. The Company is in good standing in each such jurisdiction in
which it is so qualified except as described in Schedule 3.4 attached hereto.
The jurisdictions identified in Schedule 3.4 are the only jurisdictions in which
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the nature of the Company's activities or the character of the properties it
owns or leases makes such qualification
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necessary, other than those jurisdictions in which the failure to be so
qualified would not have a material adverse effect on the financial condition,
assets, liabilities (absolute, accrued, contingent or otherwise), reserves,
business, operations or prospects of the Company.
3.5 Capitalization. The authorized capital stock of the Company is
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5,000,000 shares of common stock, no par value ("Common Stock") of which
1,893,773 shares are issued and outstanding, and 500,000 shares of preferred
stock, no par value, of which 4,500 shares are issued and outstanding, excluding
the Senior Preferred Shares being issued to the Purchasers pursuant to this
Agreement. All issued and outstanding shares have been duly authorized and
validly issued, are fully paid and non-assessable. When authorized and issued,
the Senior Preferred Shares will not be subject to any preemptive rights or
rights of first refusal. The Senior Preferred Shares, when issued in compliance
with the provisions of this Agreement, will be validly issued, fully paid and
non-assessable and will be free of any liens or encumbrances; provided, however,
that the Senior Preferred Shares will be subject to restrictions on transfer
imposed under applicable state and federal securities laws. The shares of
Common Stock issuable upon conversion of the Senior Preferred Shares (the
"Conversion Shares") have been duly authorized by all necessary corporate action
on the part of the Company and have been duly reserved for issuance. When the
Conversion Shares are issued such shares will be validly issued, fully paid and
nonassessable and the issuance of such shares will not be subject to any
preemptive rights or rights of first refusal. Set forth on Schedule 3.5 attached
hereto is a list, as of the date hereof of all holders of outstanding Common
Stock of the Company and all outstanding warrants, stock options and rights to
purchase Common Stock. Other than as set forth in Schedule 3.5, the Company has
no outstanding shares of capital stock and no outstanding warrants, stock
options or rights to purchase any capital stock.
3.6 Indebtedness of the Company. Schedule 3.6 correctly describes all
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secured and unsecured indebtedness of the Company for borrowed money outstanding
or for which the Company has commitments, on the date of this Agreement. Except
as disclosed in Schedule 3.6, the Company is not in default with respect to any
such indebtedness or any instrument or agreement relating thereto.
3.7 Disclosure. Neither this Agreement, the Schedules hereto, nor the
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officers' certificates delivered in connection with the Closing contains (in
each case, as of its date) any untrue statement of a material fact or omits to
state a material fact necessary in order to make the statements contained herein
or therein not misleading.
3.8 Intellectual Property. The Company owns or has valid rights to use
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all Intellectual Property Rights used in or necessary to conduct the Company's
business as heretofore conducted
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or planned to be conducted in the foreseeable future, except for Intellectual
Property Rights which are not material to the conduct of the Company's business.
3.9 Environmental Matters. The Company is in compliance with the
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provisions of all federal, state and local laws relating to pollution or
protection of the environment applicable to it or to real property owned or
leased by it or to the ownership, use, operation or occupancy thereof, except
for violations or liabilities which individually or in the aggregate could not
reasonably be expected to have a material adverse effect on the Company.
Neither the Company nor any Person has engaged in any activity in violation of
any provision of any federal, state or local law relating to pollution or
protection of the environment, which violation could reasonably be expected to
have a material adverse effect on the Company. The Company has no liability,
absolute or contingent, under any federal, state or local law relating to
pollution or protection of the environment, except for liabilities which
individually or in the aggregate could not reasonably be expected to have a
material adverse effect on the Company.
3.10 Financial Statements. The unaudited consolidated balance sheet and
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related statement of operations of the Company as of December 31, 1995 and the
unaudited consolidated balance sheet and related statement of operations of the
Company as of September 30, 1996 (collectively, the "Financial Statements"),
which have been provided to the Purchasers, fairly present the Company's assets,
liabilities, financial position and results of operations on a consolidated
basis as of the respective dates of such statements and for the periods then
ended, and were prepared in accordance with generally accepted accounting
principles, consistently applied (subject, in the case of unaudited statements,
to normal year-end audit adjustments). As of the date of this Agreement, there
is no fact (other than any matters of a general economic or political nature
which do not affect the Company uniquely) known to the Company which materially
adversely affects or in the future may (so far as the Company can now reasonably
foresee) materially adversely affect the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, business
operations or prospects of the Company which has not been set forth in this
Agreement or the Schedules hereto.
3.11 Changes. Except as set forth in Schedule 3.11 hereto, since
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September 30, 1996, there has not been:
(a) any change in the Company's assets, liabilities, condition (financial
or otherwise) or business which individually or in the aggregate is materially
adverse to the Company, or which is not in the ordinary course of business;
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(b) any damage, destruction or loss, whether or not covered by insurance,
materially and adversely affecting the Company's business or assets or other
properties;
(c) any issuance or sale by the Company of any shares of its capital stock
or other securities; and
(d) any other event or condition which has materially and adversely
affected the Company's business.
3.12 Litigation, Etc. Except as set forth on Schedule 3.12, there is no
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litigation or government investigation or proceeding either existing, pending
or, to the Company's knowledge, threatened against the Company or affecting any
of the Company's properties or assets, in any court or before or by any federal,
state, municipal or other governmental authority, or which affects this
Agreement or any action taken or to be taken by the Company hereunder.
3.13 Compliance with Other Instruments, etc. The Company is not in
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violation of any term of its Certificate of Incorporation or By-Laws, and the
Company is not in violation of any term of any agreement or instrument to which
it is a party or by which it is bound or any term of any applicable law,
ordinance, rule or regulation of any governmental authority or any term of any
applicable order, judgment or decree of any court, arbitrator or governmental
authority, the consequences of which violation could reasonably be expected to
have a material adverse effect on the financial condition, assets, liabilities
(absolute, accrued, contingent or otherwise), reserves, business, operations or
prospects of the Company.
3.14 Use of Proceeds. The Company will use the proceeds from the sale of
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the Senior Preferred Shares for general corporate purposes.
3.15 No Violations of Securities Laws. Subject to the accuracy of the
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Purchasers' representations in Section 4 hereof, the offer and sale of the
Senior Preferred Shares hereunder are and will be exempt from the registration
and prospectus delivery requirements of the Securities Act of 1933 (the
"Securities Act") and are and will be exempt from the registration, permit or
qualification requirements of all applicable state securities laws or such
requirements have been or will be satisfied. The Company has not offered or
sold the Senior Preferred Shares to anyone other than the Purchasers. Neither
the Company nor any person acting on its behalf has taken any action which would
require the registration of the Senior Preferred Shares under Section 5 of the
Act, including, without limitation, engaging in any form of general
solicitation.
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3.16 Brokers or Finders Fees, Etc. Except for the financial advisory
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fee payable to Wand Partners Inc. in the amount of $100,000, no agent, broker,
investment banker, person or firm acting on behalf of the Company or under its
authority is or will be entitled to any broker's or finder's fee or any other
commission or similar fee in connection with the sale of the Senior Preferred
Shares contemplated hereby.
ARTICLE 4. REPRESENTATIONS AND WARRANTIES OF THE PURCHASERS
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Each of the Purchasers hereby severally represents and warrants to
the Company as follows:
4.1 Investment. The Purchaser is acquiring the Senior Preferred
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Shares for investment for its own account and not with a view to, or for resale
in connection with, any distribution thereof. The Purchaser understands that the
Senior Preferred Shares have not been registered under the Securities Act by
reason of a specific exemption from the registration provisions of the
Securities Act which depends upon, among other things, the bona fide nature of
the Purchaser's investment intent as expressed herein.
4.2 Resale. The Purchaser acknowledges that the Senior Preferred
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Shares must be held indefinitely unless the Senior Preferred Shares are
subsequently registered under the Securities Act or an exemption from such
registration is available. Each certificate representing (i) the Senior
Preferred Shares, and (ii) any other securities issued in respect of the Senior
Preferred Shares upon conversion, including the conversion shares, or upon any
stock split, stock dividend, recapitalization, merger, consolidation or similar
event, shall (unless otherwise permitted by law) be stamped or otherwise
imprinted with a legend in the following form (in addition to any legend
required under applicable state securities laws, rules or regulations):
THESE SECURITIES HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF
1933 OR UNDER THE CONNECTICUT UNIFORM SECURITIES ACT. THEY MAY NOT BE
SOLD, OFFERED FOR SALE, PLEDGED OR HYPOTHECATED IN THE ABSENCE OF AN
EFFECTIVE REGISTRATION STATEMENT AS TO THE SECURITIES UNDER SAID ACTS
EXCEPT PURSUANT TO AN OPINION OF COUNSEL SATISFACTORY TO THE COMPANY
THAT SUCH REGISTRATION IS NOT REQUIRED.
4.3 Accredited Investor. Each and every person or entity having an
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ownership interest in the Purchasers, other than Xxxxxxx X. Xxxxxxxxx, Xxxxxxx
X. Xxxxxxxxx and Xxxx Esiri, is an "accredited investor" as that term is used in
Rule 501 promulgated under the Securities Act. Each of Xxxxxxx X. Xxxxxxxxx,
Xxxxxxx X. Xxxxxxxxx and Xxxx Esiri is a sophisticated investor having such
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knowledge and experience in financial and business matters that he is capable of
evaluating the merits and risks of an investment in the Senior Preferred Shares.
The Purchasers, Xxxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxx Esiri have
each received and had a reasonable opportunity to review information meeting the
requirements of Rule 502(b)(2) promulgated under the Securities Act, including,
without limitation, the information specified in Schedule 3.11 attached hereto.
4.4 Access to Information. Each Purchaser acknowledges that each of
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such Purchaser, Xxxxxxx X. Xxxxxxxxx, Xxxxxxx X. Xxxxxxxxx and Xxxx Esiri has
received such information and made such investigation and analysis as it or he
deems appropriate of the business and prospects of the Company and has been
afforded an opportunity to meet with and ask questions of and receive answers
from, management of the Company.
ARTICLE 5. CONDITIONS TO OBLIGATIONS OF THE PURCHASERS
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The obligations of the Purchasers to perform this Agreement are
subject to the satisfaction of the following conditions unless waived by the
Purchasers:
5.1 Opinion of Counsel. The Purchasers shall have received a
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favorable opinion, addressed to each of them, dated the date of Closing and
satisfactory in substance and form to the Purchasers, from LeBoeuf, Lamb, Xxxxxx
& XxxXxx, L.L.P., special counsel for the Company, substantially in the form set
forth in EXHIBIT B and covering such matters incident to the transactions
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contemplated by this Agreement as the Purchasers' counsel may reasonably
request.
5.2 Representations. The representations made by the Company in
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Section 3 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date.
5.3 Authorization. All action necessary to authorize the execution,
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delivery and performance of this Agreement and the consummation of the
transactions contemplated hereby shall have been duly and validly taken by the
Company and the Company shall have full power and right to consummate the
transactions contemplated hereby.
5.4 Acceptance by Counsel to the Purchasers. The form and substance
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of all legal matters contemplated hereby and of all papers delivered hereunder
shall be acceptable to counsel to the Purchasers.
5.5 Government Consents, Authorizations, Etc. All consents,
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authorizations, orders or approvals of, and filings or registrations with, any
federal, state, local or foreign
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governmental commission, board or other regulatory body which are required for
or in connection with the execution, delivery and performance of this Agreement
by the Company, and the consummation of the transactions contemplated hereby
shall have been duly obtained or made.
5.6 No Litigation or Legislation. No federal, state, local or
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foreign statute, rule or regulation shall have been enacted or litigation,
proceeding, government inquiry or investigation commenced or threatened which
prohibits, restricts or delays the consummation of the transactions contemplated
by this Agreement or any of the conditions to the consummation of such
transactions or adversely affects the desirability of consummating the
transactions contemplated hereby.
5.7 No Material Adverse Change. In the judgment of Purchasers, no
--------------------------
material adverse change shall have occurred in the financial condition, assets,
liabilities (absolute, accrued, contingent or otherwise), reserves, business,
operations or prospects of the Company since September 30, 1996.
5.8 Consents and Permits. The Company shall have received all
--------------------
consents, permits and other authorizations as may be required pursuant to any
agreement, order or decree to which the Company is a party or to which it is
subject, in connection with the transactions contemplated by this Agreement.
The Company shall have provided copies to the Purchasers of all such consents,
permits and authorizations.
ARTICLE 6. CONDITIONS TO OBLIGATIONS OF THE COMPANY
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The obligations of the Company to perform this Agreement are subject
to the satisfaction of the following conditions unless waived by the Company:
6.1 Representations. The representations made by Purchasers in
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Section 4 hereof shall be true and correct when made, and shall be true and
correct on the Closing Date with the same force and effect as if they had been
made on and as of said date.
6.2 Legality. At the time of Closing the sale of the Senior
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Preferred Shares to the Purchasers shall be legally permitted by all laws and
regulations to which the Purchasers and the Company are subject.
6.3 Acceptance by Counsel to the Company. The form and substance of
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all legal matters contemplated herein and of all papers delivered hereunder
shall be acceptable to counsel to the Company.
ARTICLE 7. SURVIVAL OF REPRESENTATIONS AND WARRANTIES; INDEMNIFICATION, ETC.
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7.1 Survival. All representations and warranties made by any party
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to this Agreement, including, without limitation, all representations and
warranties made on any Schedule or Exhibit attached hereto or document delivered
hereunder, shall survive the Closing and the consummation of the transactions
contemplated hereby.
7.2 Company's Agreement to Indemnify. The Company hereby agrees to
--------------------------------
indemnify and save the Purchasers harmless from and against, for and in respect
of, any and all damages, losses, obligations, liabilities, claims, actions or
causes of action, encumbrances, costs, and expenses (including, without
limitation, reasonable attorneys' fees) arising from the untruth, inaccuracy or
breach or nonfulfillment of any representation, warranty, covenant or agreement
of the Company, contained in or made pursuant to this Agreement, including any
Exhibit or Schedule attached hereto or certificate delivered hereunder.
ARTICLE 8. RESTRICTION ON TRANSFERABILITY
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8.1 Restriction; Procedure for Transfer. The Senior Preferred Shares
-----------------------------------
shall not be transferable except upon the conditions specified in this Section
8, which conditions are intended to ensure compliance with the Securities Act
and applicable state securities laws.
8.2 Notice of Proposed Transfer. Prior to any proposed transfer of
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any of the Senior Preferred Shares (other than a transfer pursuant to
registration under the Securities Act), the holder thereof shall give written
notice to the Company of such holder's intention to effect such transfer. Each
such notice shall describe the manner and circumstances of the proposed transfer
in sufficient detail, and shall be accompanied by a written opinion of legal
counsel who shall be reasonably satisfactory to the Company, addressed to the
Company, to the effect that the proposed transfer of the Senior Preferred Shares
may be effected without registration under the Securities Act.
ARTICLE 9. REGISTRATION UNDER SECURITIES ACT, ETC.
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9.1 Registration on Request.
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(a) Request. At any time or from time to time upon the written request
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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
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(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 9.1(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 9.1; and
(iv) subject to the priority provisions of Section 9.1(f),
shares of Common Stock held by other Persons having registration
rights
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 9.1(a) shall not require the Company to effect more
than two registrations of Registrable Securities and, provided further, that the
total number of registrations which the Company is required to effect on request
hereunder and under all other agreements between the Company and any or all of
Wand/IMA I, Wand/XXX XX or Wand/IMA III, including the Warrants, shall not
exceed three.
(b) Registration Statement Form. Registrations under this Section 9.1
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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
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connection with each registration requested pursuant to this Section 9.1.
Underwriting discounts and commissions and transfer taxes, if any, in
connection with each such registration statement shall be allocated pro
rata among all Persons on whose behalf securities of the Company
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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 9.1 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
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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 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 9.1 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 9.1 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 be included by such holders
and (ii) second, securities the Company proposes to sell and other
--
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securities of the Company included in such registration by the holders
thereof.
9.2 Incidental Registration.
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(a) Right to Include Registrable Securities. If the Company at any
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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 9.1), 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 9.2. 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
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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 9.1, and
(ii) in the case of a determination to delay registering, shall be
--
permitted to delay registering any Registrable Securities, for the same
period as the delay in registering such other securities. No registration
effected under this Section 9.2 shall relieve the Company of its obligation
to effect any registration upon request under Section 9.1. The Company will
pay all Registration Expenses in connection with each registration of
Registrable Securities requested pursuant to this Section 9.2.
(b) Priority in Incidental Registrations. If (i) a registration
------------------------------------ -
pursuant to this Section 9.2 involves an
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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
9.4(b) or, if requested to do so, is not obligated to do so under Section
9.4(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 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.
9.3 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 9.1 and 9.2 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 and approval of such counsel;
-14-
(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 9.1, the
-
expiration of 180 days after such registration statement becomes effective,
or (ii) in the case of a registration pursuant to Section 9.2, 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 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;
-15-
(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 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 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
-16-
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;
(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 equity securities
covered by such registration statement on any securities exchange on which
any of such equity 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 9.3, 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 9.3 and, if so directed by the Company, will deliver to the Company (at
the Company's expense) all copies, other than permanent file copies,
-17-
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 periods mentioned in paragraph (ii) of
this Section 9.3 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 9.3.
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 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
to be 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.
9.4 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 9.1, 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 9.6. 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
-18-
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.
(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 9.2 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 9.2 and subject to the
provisions of Section 9.2(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 or securities which shall have exercised, in
respect of such underwritten offering, registration rights comparable to the
rights under Section 9.2 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 or securities so requested to be included
would interfere with the successful marketing of the securities (other than such
Registrable Securities and other shares or securities so requested to be
included) by the underwriters (such writing to state the basis of such belief
and approximate number of such Registrable Securities and shares or 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 or
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
and shares or 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 shares or securities, so that the resultant
aggregate number of such Registrable Securities and of such other shares or
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
-19-
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
9.1 or 9.2 has become effective, except as part of such underwritten
registration, whether or not such holder participates in such
registration.
(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 9.1 or 9.2 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.
9.5 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
-20-
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.
9.6 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 Article 9, the Company will indemnify and hold
harmless the holder of any Registrable Securities covered by such
registration statement, any partner or affiliate of such holder and
their respective directors, officers, stockholders, agents and
employees, 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, expenses or
liabilities, joint or several, to which such holder or any such
partner, affiliate, director, officer, stockholder agent, employee or
underwriter or controlling person may become subject under the
Securities Act or otherwise, insofar as such losses, claims, damages,
expenses 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 partner, affiliate,
director, officer, stockholder, agent, employee, 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, damage, 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
-21-
with written information furnished to the Company through an
instrument duly executed by such holder specifically stating that it
is for use in the preparation thereof and, provided further that the
-------- -------
Company shall not be liable to any Person who participates as an
underwriter, in the offering or sale of Registrable Securities or to
any other Person, if any, who controls such underwriter within the
meaning of the Securities Act, in any such case to the extent that any
such loss, claim, damage, liability (or action or proceeding in
respect thereof) or expense arises out of such Person's failure to
send or give a copy of the final prospectus, as the same may be then
supplemented or amended, within the time required by the Securities
Act to the Person asserting 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 any such partner,
affiliate, director, officer, stockholder, agent, employee,
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 Article 9, 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 9.6) the Company, each director of the Company, each officer
of the Company and each other person, if any, who controls the Company
within the meaning of the Securities Act, with respect to any
statement or alleged statement in or omission or alleged omission from
such registration statement, any preliminary prospectus, final
prospectus or summary prospectus contained therein, or any amendment
or supplement thereto, if such statement or alleged statement or
omission or alleged omission was made in reliance upon and in
conformity with written information furnished to the Company through
an instrument duly executed by such seller specifically stating that
it is for use in the preparation of such registration statement,
preliminary prospectus, final prospectus, summary prospectus,
amendment or supplement. Such indemnity shall remain in full force and
effect, regardless of any investigation made by or on behalf of the
Company or any such director, officer or controlling person and shall
survive the transfer of such securities by such seller.
(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 9.6, such indemnified party will, if a claim in
respect thereof is to be made
-22-
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 9.6, except to the extent that the
indemnifying party is actually prejudiced by such failure to give
notice. In case any such action is brought against an indemnified
party, unless in such indemnified party's reasonable judgment a
conflict of interest between such indemnified and indemnifying parties
may exist in respect of such claim, the indemnifying party shall be
entitled to participate in and to assume the defense thereof, jointly
with any other indemnifying party similarly notified, to the extent
that the indemnifying party may wish, with counsel reasonably
satisfactory to such indemnified party, and after notice from the
indemnifying party to such indemnified party of its election so to
assume the defense thereof, the indemnifying party shall not be liable
to such indemnified party for any legal or other expenses subsequently
incurred by the latter in connection with the defense thereof other
than reasonable costs of investigation. No indemnifying party shall,
without the consent of the indemnified party, consent to entry of any
judgment or enter into any settlement of any such action which does
not include as an unconditional term thereof the giving by the
claimant or plaintiff to such indemnified party of a release from all
liability in respect to such claim or litigation. No indemnified party
shall consent to entry of any judgment or enter into any settlement of
any such action the defense of which has been assumed by an
indemnifying party without the consent of such indemnifying party.
(d) Other Indemnification. Indemnification similar to that
---------------------
specified in the preceding subdivisions of this Section 9.6 (with
appropriate modifications) shall be given by the Company and each
seller of Registrable Securities with respect to any required
registration or other qualification of securities under any Federal or
state law or regulation of any governmental authority, other than the
Securities Act.
(e) Indemnification Payments. The indemnification required by this
------------------------
Section 9.6 shall be made by periodic payments of the amount thereof
during the course of the investigation or defense, as and when bills
are received or expense, loss, damage or liability is incurred.
(f) Contribution. If for any reason the indemnification provided
------------
for in the preceding paragraphs of this Section 9 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
-23-
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 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 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 9.6(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.
9.7 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.
9.8 Rule 144. If the Company shall have filed a registration
--------
statement pursuant to the requirements of section 12 of the Exchange Act or a
registration statement pursuant to the requirements of the Securities Act, the
Company shall timely file the reports required to be filed by it under the
Securities Act and the Exchange Act (including but not limited to the reports
under sections 13 and 15(d) of the Exchange Act referred to in subparagraph (c)
of Rule 144 adopted by the Commission under the Securities Act) and the rules
and regulations adopted by the Commission thereunder (or, if the Company is not
required to file such reports, it will, upon the request of any holder of
-24-
Registrable Securities, make publicly available other information in order to
meet the conditions set forth in subparagraph (c)(2) of Rule 144 under the
Securities Act) and will take such further actions as any holder of Registrable
Securities may reasonably request, all to the extent required from time to time
to enable such holder to sell Registrable Securities without registration under
the Securities Act within the limitation of the exemptions provided by (a) Rule
144 under the Securities Act, as such Rule may be amended from time to time, or
(b) any similar rule or regulation hereafter adopted by the Commission. Upon the
request of any holder of Registrable Securities, the Company will deliver such
holder a written statement as to whether it has complied with the requirements
of this Section 9.8.
ARTICLE 10. DEFINITIONS
----------- -----------
As used herein, unless the context otherwise requires, the following
terms have the following meanings:
Affiliate: With respect to the Company and its Subsidiaries, (a) any
---------
Person (other than the Company or another of its Subsidiaries) which, directly
or indirectly, is in Control of, is Controlled by, or is under common Control
with, the Company, or (b) any Person who is a director, officer or beneficial
owner of at least 10% of the common equity (i) of the Company, (ii) of any
Subsidiary of the Company or (iii) of any Person described in clause (a) above
other than a Subsidiary of the Company. "Affiliate" shall include Xx. Xxxx X.
Xxxxxxx, Mr. Xxxxxx Poludnewycz and Xx. Xxxxxx X. Xxxxxxxx and any Person which
is, directly or indirectly, controlled by any of the foregoing. "Affiliate"
shall not include the Purchasers, Wand/IMA I or any of their respective partners
or affiliates, directors, officers, stockholders, agents or employees thereof,
including, without limitation, Xxxxx X. Xxxxxxx and Xxxxxx X. Xxxx.
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 Section 3.5 hereof, 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
-25-
the payment of dividends and distributions on any shares entitled to preference.
Company: As defined in the introduction to this Agreement, such term
-------
to include any corporation which shall succeed to or assume the obligations of
the Company hereunder.
Control: The possession, directly or indirectly, of the power,
-------
whether or not exercised, to direct or cause the direction of the management or
policies of any Person, whether through the ownership of voting securities, by
contract, or otherwise; "Controlling" and "Controlled" shall have meanings
correlative to the foregoing.
Copyrights: Registered or unregistered United States or foreign
----------
copyrights (including but not limited to copyrights in computer programs,
related documentation, and data bases) and United States and foreign copyright
registrations, and applications for registration and all renewals and extensions
thereof.
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.
Governmental Authority: Any nation or government, any state or other
----------------------
political subdivision thereof any entity exercising executive, legislative,
judicial, regulatory or administrative functions of or pertaining to government.
Initial Public Offering: An Initial Public Offering shall mean the
-----------------------
first time a registration statement filed under the Securities Act with the
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 Commission) respecting an offering, whether primary or
secondary, of Common Stock is declared effective by the Commission.
Initiating Holders: Any holder or holders of Registrable Securities
------------------
holding at least 40% of the Registrable Securities (by number of shares) and
initiating a request pursuant to Section 9.1 for the registration of all or part
of such holder's or holders' Registrable Securities.
Intellectual Property Rights: All Trademarks, Patents, Copyrights,
----------------------------
Know-How and Technical Information.
-26-
Know-How and Technical Information: Computer programs, related
----------------------------------
documentation and databases, data, plans, trade secrets, technologies,
processes, specifications, know-how, operating experience and information
(business, economic and technical) relating to the foregoing.
NASD: The National Association of Securities Dealers, Inc.
----
New Securities: Any Common Stock or preferred stock of the Company,
--------------
or any warrants, options or other rights to acquire Common Stock or preferred
stock(other than stock options granted to employees), or any securities
(including any debt instruments) of any other type that are convertible into
said Common Stock or preferred stock, issued after the date hereof; provided
that "New Securities" does not include (i) Common Stock issued pursuant to
currently outstanding warrants or stock options; or (ii) the issuance by the
Company of Common Stock or preferred stock, or options, rights or warrants to
acquire Common Stock or preferred stock or any other security (including any
debt instruments) convertible into Common Stock or preferred stock in connection
with an acquisition by the Company of the stock or assets of another person or
the merger or consolidation by the Company with or into another corporation.
Patents: United States and foreign patents and patent applications,
-------
certificates of invention, utility models, and all renewals, extensions,
reissues, divisions, continuations and continuations-in-part thereof.
Person: An individual, a partnership, a joint venture, a corporation,
------
a trust, an unincorporated organization, an association or any other entity or a
government or any department or agency thereof.
Registrable Securities: (a) the shares of Common Stock issuable upon
----------------------
conversion of the Senior Preferred Stock purchased pursuant to this 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 certificates 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
-27-
disposition of them immediately thereafter shall not require registration or
qualification of them (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 9, 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.
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.
Senior Preferred Shares: As defined in Section 1.1 of this Agreement.
-----------------------
Subsidiary: With respect to any Person, any corporation with respect
----------
to which more than 50% of the outstanding shares of stock of each class having
ordinary voting power (other than stock having such power only by reason of the
happening of a contingency) is at the time owned by such Person or by one or
more Subsidiaries of such Person or by such Person and one or more Subsidiaries
of such Person.
Trademarks: All registered and unregistered trademarks, service
----------
marks, corporate names, tradenames, logos, designs, product or business
identifiers and trade dress together, in each case, with the good will of the
business symbolized thereby, and United States, state and foreign trademark or
servicemark registrations or applications for registration and all amendments,
renewals and extensions thereof.
Transfer: Any sale, assignment, pledge or other disposition of any
--------
security, or of any interest therein, which
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could constitute a "sale" as that term is defined in section 2(3) of the
Securities Act.
Wand/IMA I: Wand/IMA Investments, L.P., a Delaware limited
----------
partnership.
Warrants: The Common Stock Purchase Warrants No. W-3, No. W-4 and W-5
--------
issued by the Company to Xxxxxx X. Xxxx, Wand/IMA I and Wand Partners Inc.,
respectively.
ARTICLE 11. MISCELLANEOUS
----------- -------------
11.1 Preemptive Rights.
-----------------
(a) The Company hereby grants to each Purchaser the preemptive rights
to purchase such Purchaser's Proportionate Interest (as defined below) in
any issuance or sale of New Securities which the Company may, from time to
time, propose to issue or sell at a price per share of (i) less than $16.00
(subject to appropriate adjustment in the event of any increase or decrease
in the number of outstanding shares of Common Stock by virtue of any stock
split, stock dividend, reverse stock split, reclassification or
combination) in the case of Common Stock or (ii) having a conversion price
or option or warrant exercise price of less than $16.00 (subject to
appropriate adjustment in the event of any increase or decrease in the
number of outstanding shares of Common Stock by virtue of any stock split,
stock dividends, reverse stock split, reclassification or combination) in
the case of securities convertible into or exercisable for, Common Stock.
For purposes of this Section 11.1, a Purchaser's Proportionate Interest in
such an issuance or sale shall mean that portion of such issuance or sale
which, if purchased by such Purchaser under this Section 11.1, would allow
such Purchaser to own the same percentage of the issued and outstanding
Common Stock of the Company after giving effect to such issuance or sale as
such Purchaser owned immediately prior to such issuance or sale (calculated
on a fully-diluted basis as if all outstanding warrants, options, rights
and securities convertible into or exchangeable for Common Stock had been
exercised in full, but without regard to the adjustment provisions of any
outstanding securities).
(b) The value of any non-cash "consideration" shall be determined in
good faith by the Board of Directors of the Company.
(c) In the event the Company proposes to undertake an issuance or sale
of New Securities for consideration of less than $16.00 per share as
described in clause (a) above, the Company shall give the Purchasers
written notice of the Company's intention, describing the type of New
Securities,
-29-
the price, the maximum amount to be issued or sold and the general terms upon
which the Company proposes to issue or sell the same. Each Purchaser shall
have thirty (30) days from the date of such notice to agree (by written notice
to the Company) to purchase its Proportionate Interest in such issuance or
sale upon such price and terms.
(d) The preemptive rights hereunder shall not apply to any public
offering of the Common Stock or securities convertible into or exchangeable
for Common Stock of the Company pursuant to a registration statement filed
under the Securities Act with the Commission which is declared effective by
the Commission.
(e) During the period of 60 days after the expiration of the notice
period to which the Purchasers are entitled hereunder, the Company shall be
permitted to sell or enter into an agreement (pursuant to which the sale or
other transaction shall be closed, if at all, within 60 days from the date of
said agreement) to sell the New Securities at a price and upon general terms
no more favorable to the purchasers thereof than specified in the Company's
notice to the Purchasers under clause (c) above.
(f) The preemptive rights described in this Section 11.1 are personal to
the Purchasers and may not be assigned or transferred, whether by agreement or
by operation of law or otherwise, and any attempted transfer shall be void.
(g) Upon the sale or transfer to any person of New Securities as to
which the preemptive rights hereunder shall not have been exercised, such New
Securities shall thereafter be transferable free of the preemptive rights
provided hereunder.
(h) The preemptive rights hereunder shall terminate upon the date on
which a registration statement relating to an Initial Public Offering is
declared effective by the Commission.
11.2 Amendment, Modification and Waiver. This Agreement shall
----------------------------------
not be altered or otherwise amended except pursuant to an instrument in writing
signed by the Purchasers and the Company, and any obligation owed to a party
under this Agreement may only be waived in a writing signed by such party. The
waiver by any party hereto of a breach of any provision of this Agreement shall
not operate or be construed as a waiver of any subsequent breach.
11.3 Expenses; Transfer Taxes, Etc. All fees, costs and expenses
-----------------------------
incurred by the Company in connection with, relating to or arising out of the
execution, delivery and performance of this Agreement and the consummation of
the transactions contemplated
-30-
hereby shall be borne by the Company. The Company shall pay all sales, use and
excise taxes and all registration, recording or transfer taxes which may be
payable in connection with the transactions contemplated by this Agreement.
11.4 Binding Effect; Benefits; Parties in Interest. This
---------------------------------------------
Agreement shall be binding upon, inure to the benefit of, and be enforceable by,
the respective successors, assigns, heirs and legal representatives of the
parties hereto; provided, however, that this Agreement shall not be assignable
-------- -------
by the Company or the Purchasers without the prior written consent of the other.
11.5 Entire Agreement. This Agreement (including the Schedules
----------------
attached hereto), and the other writings referred to herein or delivered
pursuant hereto contain the entire understanding of the parties with respect to
the subject matter hereof and supersede all prior agreements and understandings
with respect to such subject matter.
11.6 Headings. The Section and paragraph headings contained in
--------
this Agreement are for reference purposes only and shall not affect in any way
the meaning or interpretation of this Agreement.
11.7 Notices. All notices, claims, certificates, requests,
-------
demands and other communications hereunder shall be in writing and shall be
deemed to have been duly given if delivered by hand, mailed (by first-class
mail, postage prepaid), transmitted by telex or telecopier or sent by air
courier guaranteeing overnight delivery as follows:
If to the Company, to:
Information Management Associates, Inc.
Xxx Xxxxxxxxx Xxxxx
Xxxxx 000
Xxxxxxx, XX 00000
Attn: Xx. Xxxx X. Xxxxxxx
With a copy to:
Xxxxxx X. Xxxxxxxxx, Esq.
LeBoeuf, Lamb, Xxxxxx & XxxXxx, L.L.P.
Xxxxxxx Square
000 Xxxxxx Xxxxxx
Xxxxxxxx, XX 00000
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If to Wand/XXX XX, to:
Wand/IMA Investments II L.P.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxxxx
With a copy to:
Xxxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
If to Wand/IMA III, to:
Wand/IMA Investments III L.P.
000 Xxxxx Xxxxxx, Xxxxx 0000
Xxx Xxxx, XX 00000
Attn: Xx. Xxxxx X. Xxxxxxx
With a copy to:
Xxxxx X. Xxxxx, Esq.
Skadden, Arps, Slate, Xxxxxxx & Xxxx
000 Xxxxx Xxxxxx
Xxx Xxxx, XX 00000
or to such other address as the party to whom notice is to be given may have
furnished to the other party in writing in accordance herewith. Any such
communication shall be deemed to have been given, in the case of personal
delivery, on the date of delivery and in the case of mailing five (5) days after
such mailing.
11.8 Counterparts. This Agreement may be executed in any number
------------
of counterparts, and each such counterpart hereof shall be deemed to be an
original instrument, but all such counterparts together shall constitute but one
agreement.
11.9 Governing Law. This Agreement shall be governed by and
-------------
construed in accordance with the laws of the State of Connecticut.
11.10 Gender. Any reference to the masculine gender shall be
------
deemed to include the feminine and neuter genders unless the context otherwise
requires.
-32-
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed and delivered on the date first above written.
THE COMPANY:
INFORMATION MANAGEMENT ASSOCIATES,
INC.
By: /s/ Xxxx X. Xxxxxxx
--------------------------------
Xxxx X. Xxxxxxx
Chairman of the Board and
Chief Financial Officer
THE PURCHASERS:
WAND/IMA Investments II L.P.
By Wand Partners Inc., as General
Partner
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
WAND/IMA Investments III L.P.
By Wand Partners Inc., as General
Partner
By: /s/ Xxxxx X. Xxxxxxx
---------------------------------
Name: Xxxxx X. Xxxxxxx
Title: President
-33-
Schedule 1.1
------------
Number of Series B Purchase
Name of Purchaser Preferred Shares Price
----------------- ---------------- -----
Wand/IMA Investments II 354 $354,000
L.P.
Wand/IMA Investments III 3,996 $3,996,000
L.P.
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