Exhibit 10.62
Information Management Associates, Inc.
0000 Xxxx Xxxxxx
Xxxxxxxx, XX 00000
December 21, 1990
Wand/IMA Investments, L.P.
00 Xxxxxxxxxxx Xxxxx
Xxxxx 00-00
Xxx Xxxx, Xxx Xxxx 00000
Dear Sirs:
Pursuant to section 4.10 of the Note and Warrant Purchase
Agreement, dated December 21, 1990, by and between Information Management
Associates, Inc., a Connecticut corporation (the "Company") and Wand/IMA
Investments, L.P. (the "Purchase Agreement") and in order to induce you to
purchase $1,600,000 aggregate principal amount of 15% Senior Subordinated Notes
due 1997 of the Company ("Notes") and certain warrants ("Warrants") to purchase
shares of the Company's common stock, no par value, the Company and Xx. Xxxx X.
Xxxxxxx, Mr. Xxxxxx Poludnewycz, Xx. Xxxx X. Xxxxxxx, Xx. Xxxxxx X. Xxxxxxxx,
Xx. Xxxxxxx Xxxxxx, Xx. Xxxxxx Xxxxxx and Xx. Xxxxxx X. Xxxxx (collectively, the
"Shareholders") agree with you as follows:
1. Board of Directors. (a) So long as any of the Notes are
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outstanding or, if no Notes are outstanding and any Warrants or Registrable
Securities (as defined in the Warrants) are outstanding, so long as there has
not been an Initial Public Offering (as defined in the Warrants), the Company
and each of the Shareholders shall take all action within their respective
powers, including, but not limited to, the voting of capital stock of the
Company, required to cause the Board of Directors of the Company to at all times
have one member designated by you. Further, the Company and each of the
Shareholders shall take all action within their respective powers, including,
but not limited to, the voting of capital stock of the Company, required to
cause the Board of Directors of
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* Capitalized terms not defined herein shall, unless otherwise indicated,
have the meanings assigned to them in the Purchase Agreement.
the Company to at all times have a second and additional member designated by
you (i) if any Note is outstanding, after the occurrence and during the
continuance of any Default or Event of Default under the Notes as set forth in
section 13 of the Purchase Agreement or (ii) if no Notes are outstanding but any
Warrant or Registrable Security is outstanding and there has not been an Initial
Public Offering, after the occurrence and during the continuance of any Default
or Event of Default pursuant to sections 8, 9.1(i), 9.2, 9.4, 9.5, 9.6 or 9.8 of
the Purchase Agreement.
(b) No action shall be taken at any meeting of the
Company's Board of Directors, whether held in person or by telephone, unless
each director shall receive at least five Business Days' notice of such meeting.
Any notice of a meeting of the Company's Board of Directors must state all
material action proposed to be taken at such meeting and any material action not
described in the notice of meeting shall not be taken at such meeting if the
director or directors designated by you are absent therefrom. Additionally,
reasonably detailed minutes will be taken of all meetings of the Company's Board
of Directors and any committees of the Board and such minutes will be promptly
circulated to each director of the Company after each meeting. All such minutes
of meetings shall be approved by the directors appointed by you before they are
entered into the Company's minute books.
(c) The powers of the Company's Board of Directors shall
not be delegated to an executive committee.
(d) The Company's Board of Directors shall be composed of
no more than seven directors.
2. S Corporation Status and Taxes. (a) If for any reason,
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other than as provided in paragraph (b) of this section, the Company fails to
qualify as an S corporation, within the meaning of Section 1361(a)(1) of the
Internal Revenue Code of 1986, as amended (the "Code"), for any taxable year or
the Internal Revenue
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Service ("IRS") revokes or otherwise terminates the Company's status as an S
corporation for any taxable year, then each Shareholder agrees promptly to apply
to the IRS for a refund of taxes paid with respect to any and all dividends or
other distributions received from the Company (other than any bonuses received
in accordance with the terms of the Bonus Plan and other than any compensation
received for personal services as an officer, director, or employee of the
Company in accordance with section 9.8(c) of the Purchase Agreement)
attributable to periods for which the Company's status as an S corporation is
disallowed ("Distributed Amounts") and will remit back to the Company the amount
of such Distributed Amounts.
(b) If, as a direct and sole consequence of entering into
this Agreement or the Purchase Agreement or the Warrant, the Company fails to
qualify as an S corporation within the meaning of Section 1361(a)(1) of the Code
for any taxable year, then each Shareholder shall remit back to the Company all
Distributed Amounts other than the portion of Distributed Amounts which equals
the federal income taxes payable by such Shareholder with respect to the
Distributed Amounts received, as calculated by taking into account any and all
deductions that the Shareholder may be authorized to take under applicable
federal income tax law by virtue of the Shareholder's obligation to remit
Distributed Amounts back to the Company.
(c) In the case of (a) or (b), each Shareholder shall
remit back to the Company the applicable Distributed Amounts (i) to the extent
to which a Shareholder may be entitled to a refund, within 10 business days
after receipt of any such refund and (ii) to the extent of any remainder, within
30 days after the Company's notice to such Shareholder, but in no event more
than one year after such revocation, termination or failure to qualify.
(d) Each Shareholder represents and warrants that such
Shareholder has paid all required taxes arising out of the Company's election to
qualify as an S corporation for federal income tax purposes and that such
Shareholder will continue to pay all such taxes in a timely manner as they
become due and payable.
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(e) The parties hereto acknowledge that you are a third
party beneficiary of the obligations of the Shareholders pursuant to this
Section 2.
3. Take-Along Rights. (a) Promptly after any Shareholder (the
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"Selling Shareholder") determines to offer for sale or otherwise dispose of (a
"sale"), all or any portion of the Common Stock of the Company owned by such
Selling Shareholder to any Person other than an Affiliate (as defined in section
8 of this Agreement) of such Selling Shareholder (a "Third Party Purchaser"),
and if as a consequence of such sale the Shareholders as a group would in the
aggregate own less than 65% of the Common Stock on a fully diluted basis, then
the Selling Shareholder shall give written notice (a"Take-Along Notice") to you
at your address for notices under the Purchase Agreement, specifying the name of
the Third Party Purchaser, the number of shares of Common Stock intended to be
sold, the purchase price, all other relevant terms and conditions of such sale,
and whether such sale will result in a Change in Control (as defined in section
16(a) of the Warrants). You and Xxxxxx X. Xxxx shall have the option (the
"Take-Along Option") to sell up to such number of shares of Common Stock
determined in accordance with paragraph (b) of this section (the "Other Included
Shares"), at the same price and on the same terms received by the Selling
Shareholder. The Take-Along Option shall be exercised by you by delivering a
written notice to the Selling Shareholder (an "Exercise Notice"), within five
Business Days of the delivery of the Take-Along Notice, indicating your election
to exercise the Take-Along Option and specifying the number of shares of Common
Stock to be included. A Take-Along Notice or Exercise Notice shall be deemed
delivered for purposes of this Agreement (i) if given by telex or telecopy,
when such telex or telecopy is transmitted to the recipient's telex or telecopy
number and the appropriate answer back or acknowledgment of receipt is received
or (ii) if given by mail, 72 hours after such notice is deposited in the U.S.
mail with first class postage pre-paid. Failure by you to deliver an Exercise
Notice to the Selling Shareholder within such five Business Day period shall be
deemed an election by you not to exercise the Take-Along Option with respect to
such Take-Along Notice. The delivery of an Exercise Notice to the Selling
Shareholder shall constitute a binding agreement by you to sell up to the number
of shares of Common Stock specified in such Exercise Notice at the price and on
the
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terms stated in the Take-Along Notice, unless such Exercise Notice is revoked by
a written instrument delivered in the manner specified above to the Selling
Shareholder at least 24 hours prior to the time that the Selling Shareholder
enters into a legally binding commitment to sell such shares of Common Stock.
The Selling Shareholder shall not sell shares of Common Stock to a Third Party
Purchaser unless all Other Included Shares, if any have been elected pursuant to
this Agreement, are included in such sale in accordance with this section.
(b) You shall have the right to sell pursuant to each Take-Along
Option described in paragraph (a) of this section up to the number of shares of
Common Stock determined by the formula below:
A = Y x [ Z ]
---
[ T ]
where, on the date you exercise the Take-Along Option, A equals the number of
shares of Common Stock you may include in such sale, Y equals the number of
shares of Common Stock on a fully diluted basis you are entitled to receive upon
exercise in full of all of your Warrants, Z equals the number of shares of
Common Stock which the Selling Shareholder proposes to sell to a Third Party
Purchaser, and T equals the total number of shares of Common Stock outstanding
on a fully diluted basis.
(c) If and to the extent that at the end of 30 days following
the date on which a Take-Along Notice was given pursuant to paragraph (a) of
this section, the Selling Shareholder has not completed the sale of the number
of shares of Common Stock proposed to be sold as set forth in such Take-Along
Notice, the Take-Along Option with respect thereto and the Selling Shareholder's
right to sell such shares of Common Stock shall cease until such time as a
subsequent Take-Along Notice is delivered to you in accordance with paragraph
(a) of this section. Notwithstanding anything to the contrary contained herein,
the Selling Shareholder shall have no obligation to you to consummate any sale
as to which it gives a Take-Along Notice.
(d) The Selling Shareholder and you shall each pay a pro rata
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share of fees, expenses and commissions charged by any broker or agent executing
the sale of shares of Common Stock pursuant to a Take-Along
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Option described in paragraph (a) of this section.
(e) If you (i) fail to deliver good and marketable title to
any or all of the Other Included Shares or (ii) fail to pay any fees, costs or
expenses required to be paid pursuant to this Agreement, you shall hold harmless
and indemnify the Selling Shareholder against all losses, claims, damages,
liabilities and expenses (including attorneys' fees) arising out of or in
connection with any such failure.
(f) The failure by you to exercise a Take-Along Option in
connection with any particular sale shall not affect your right to exercise a
Take-Along Option with respect to any subsequent sale.
(g) Any sale of shares of Common Stock by any Shareholder to
any Affiliate of such Shareholder shall be null and void unless and until such
Affiliate agrees in writing to be bound by the obligations of his transferor
hereunder and the restrictions of transfer set forth herein with respect to the
shares of Common Stock so to be acquired.
(h) The rights and obligations applying to you under this
paragraph 3 shall also apply to Xxxxxx X. Xxxx.
4. Survival of Representations and Incorporation by Reference of
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Covenants. In order to induce you to purchase the Notes and the Warrants, the
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Company hereby makes and confirms each and every representation and warranty
made by the Company in the Purchase Agreement to the same extent as if set forth
herein in their entirety and, notwithstanding the execution and delivery of this
Agreement and the Purchase Agreement, any investigation at any time made by you
or on your behalf, the purchase of the Notes and Warrants by you under the
Purchase Agreement and any disposition or payment of the Notes, any disposition
or exercise of the Warrants or any disposition of any shares of Common Stock
issued upon exercise of any Warrants. In addition, the covenants set forth in
the Purchase Agreement are hereby incorporated by reference in their entirety to
the same extent as if set forth herein in their entirety. Such covenants shall
remain in full force and effect so long as any Notes are outstanding. If no
Notes are outstanding and any Warrants or Registrable Securities (as defined in
the Warrants) are
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outstanding, the covenants set forth in section 8, 9.1(i), 9.2, 9.4, 9.5, 9.6
and 9.8 shall remain in full force and effect so long as there has not been an
Initial Public Offering. Notwithstanding the foregoing provisions of this
section 4, no holder of any Warrants or any Common Stock issued upon exercise of
Warrants or any Common Stock issued upon exercise of Warrants who also owns any
Note may, during the continuance of any period of suspension of remedies
pursuant to section 10.2(c) of the Purchase Agreement, institute any proceedings
to collect any money damages in excess of (i) in the case of the Warrants, the
aggregate purchase price of such Warrants (such price to be determined by
reference to the Schedule of Purchasers in the Purchase Agreement) and (ii) in
the case of the Common Stock, the aggregate exercise price paid pursuant to the
Warrants to acquire such Common Stock.
5. Financial Advisory Fees. The Company herewith agrees to pay to you
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in cash on or before January 15 in each of 1992, 1993, 1994 and 1995 an annual
financial advisory fee of $20,000. The Company further agrees that, if the
Company's EBIT (as defined in the Special Warrants) on a cumulative basis for
the period commencing January 1, 1991 and ending December 31, 1993 (computed by
reference to the Company's audited financial statements for each of the three
fiscal years in this period) is less than $8,117,000, the Company shall, on or
before each of March 31, 1996 and March 31, 1997, pay you in cash an annual
financial advisory fee in the amount shown in Column B below:
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Column A Column B
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Cumulative EBIT Achieved from
January 1, 1991 through and
including December 31, 1993 Annual Financial Advisory Fee
(in thousands, after rounding) payable in 1996 (in thousands)
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$4,540 or less $57.5
4,541 - 4,938 51.6
4,939 - 5,335 46.0
5,336 - 5,732 40.2
5,733 - 6,130 34.5
6,131 - 6,527 28.75
6,528 - 6,924 23.0
6,925 - 7,321 17.25
7,322 - 7,719 11.5
7,720 - 8,116 5.75
8,117 or higher None
6. Refinancing of Mortgage.
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Xx. Xxxx X. Xxxxxxx, Mr. Xxxxxx Poludnewycz and Xx. Xxxxxx X. Xxxxxxxx,
constituting all of the partners of Information Management Associates, a
Connecticut general partnership having its principal place of business in
Trumbull, Connecticut (the "Partnership"), hereby agree with you that they will
cause the Partnership not to extend, renew, modify or refinance the loan
evidenced by the Secured Promissory Notice, dated July 22, 1987, from the
Partnership to Shawmut Home Bank, as predecessor to Connecticut National Bank,
as modified by the Agreement, dated September 25, 1990, among the Partnership,
the Company and Connecticut National Bank (the "Loan"), if the then outstanding
principal amount of the Loan would be increased as a result thereof.
7. Intellectual Property Rights.
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Xxxxxx X. Xxxxxxxx, Xxxx X. Xxxxxxx and Xxxxxx Poludnewycz, as all of
the partners of the Partnership, hereby represent that the Transfer Agreement
(as defined in the Purchase Agreement) has been duly authorized and executed by
the Partnership and by each of them, as partners, and such Transfer Agreement is
enforceable against the Partnership and each of them, as partners, according to
its terms. Each of such partners further undertakes individually and as partners
to cause the Partnership to take all such further actions and to execute and
file all
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such further documents to implement the transfer of the Intellectual
Property Rights to the Company as contemplated by the Purchase Agreement.
8. Definitions.
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An "Affiliate" shall mean (i) in any case, any Person who, directly or
indirectly, is in Control of, is Controlled by, or is under common Control with,
another Person, (ii) in your case, any of your general or limited partners,
(iii) in the case of an individual, his spouse, his issue, his estate, and any
trust entirely for the benefit of his spouse and/or issue and (iv) in the case
of the Company, as defined in section 15.1 of the Purchase Agreement.
9. Termination. All provisions of this Agreement shall terminate upon
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the earliest to occur of (i) the date when no Notes, Warrants or Registrable
Securities are outstanding and (ii) if no Notes are outstanding and any Warrants
or Registrable Securities are outstanding, that date on which an Initial Public
Offering occurs. This Agreement shall in any event terminate ten years from the
date hereof unless extended in compliance with the laws of the State of
Connecticut.
10. Miscellaneous Provisions.
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10.1 Amendment. This Agreement may be altered or amended only with the
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written consent of all of the parties hereto.
10.2 Specific Performance. The parties recognize that the obligations
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imposed on them in section 1 and section 3 of this Agreement are special, unique
and of extraordinary character, and that in the event of breach by any party,
damages will be an insufficient remedy; consequently, it is agreed that the
parties hereto may have specific performance (in addition to damages) as a
remedy for the enforcement of section 1 and section 3 of this Agreement, without
proving damages.
10.3 Assignment. Except as otherwise expressly provided herein, the
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terms and conditions of this Agreement shall inure to the benefit of and be
binding upon the respective successors of the parties hereto, provided however,
that the rights stated in paragraphs 1 and 3 of this Agreement may be assigned
or otherwise
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transferred only to an Affiliate. The other rights provided to you
by this Agreement are transferable with the Notes, Warrants and Registrable
Securities.
10.4 Shares Subject to this Agreement. All shares of Common Stock of
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the Company now owned or hereafter acquired by any of the Shareholders shall be
subject to the terms of this Agreement.
10.5 Legend. Certificates evidencing shares of capital stock shall bear
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such legends as the Company shall reasonably deem necessary to protect the
rights of the parties hereunder.
10.6 Counterparts. This Agreement may be executed in two or more
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counterparts and each counterpart shall be deemed to be an original and which
counterparts together shall constitute one and the same agreement of the parties
hereto.
10.7 Section Headings. Headings contained in this Agreement are
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inserted only as a matter of convenience and in no way define, limit or extend
the scope or intent of this Agreement or any provisions hereof.
10.8 Choice of Law. THIS AGREEMENT SHALL BE GOVERNED BY THE INTERNAL
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LAWS OF THE STATE OF CONNECTICUT.
10.9 Entire Agreement. This Agreement contains the entire understanding
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of the parties hereto respecting the subject matter hereof and supersedes all
prior agreements, discussions and understandings.
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IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the
date and year first above written.
By: /s/ Xxxxxx X. Xxxxx
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Xxxxxx X. Xxxxx
By: /s/ Xxxx Xxxxxxx
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Xxxx Xxxxxxx
By: /s/ Andrei Poludnewycz
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Andrei Poludnewycz
By: /s/ Xxxx X. Xxxxxxx
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Xxxx X. Xxxxxxx
By: /s/ Al Subbloie
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Al Subbloie
By: /s/ Xxxxxxx Xxxxxx
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Xxxxxxx Xxxxxx
By: /s/ Xxxxxx Xxxxxx
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Xxxxxx Xxxxxx
INFORMATION MANAGEMENT
ASSOCIATES, INC.
By: /s/ Xxxx X. Xxxxxxx
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Name: Xxxx X. Xxxxxxx
Title: Treasurer
The foregoing Agreement is
hereby agreed to as of the
date thereof.
Wand/IMA Investments, L.P.
By: [SIGNATURE APPEARS HERE]
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Name:
Title:
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